Sharp v Emicon Pty Ltd

Supreme Court of NSW|2015-02-19|Before: Harrison J

Judgment

HIS HONOUR: I published my reasons for judgment in the principal proceedings on 12 August 2014: see Sharp v Emicon Pty Ltd [2014] NSWSC 1072. These reasons deal with the outstanding question of costs of those proceedings.
Briefly, Mr Sharp successfully recovered damages from his employer Coastwise Constructions in the sum of $754,317 for injuries and associated losses sustained as the result of falling three storeys through partly constructed roof timbers in the course of his employment. He originally sued only the head contractor Emicon Pty Ltd as the occupier in charge of the building site where he was injured. He later sued Coastwise as his employer and Staiger Pty Ltd which was the scaffolder that constructed the platform from which he was working when he fell. He was unsuccessful in his claims against Emicon and Staiger. Emicon was released from the proceedings during the hearing and agreed to pay its own costs. It is therefore not an interested party in the remaining costs dispute. I concluded that Staiger was not liable to Mr Sharp and gave judgment in its favour.

Costs as between Mr Sharp and Coastwise

Mr Sharp and Coastwise are in dispute about whether Mr Sharp is entitled to his costs of the proceedings as a successful plaintiff, having regard to the terms of the Workplace Injury Management and Workers Compensation Act 1998 and the Workers Compensation Regulation 2010. The presently relevant provisions of the Act and Regulation are as follows:

Workplace Injury Management and Workers Compensation Act 1998 332 Definitions (1) In this Part: "costs" includes: (a) costs actually incurred or to be incurred by a person claiming compensation or work injury damages, and (b)... (c) costs incurred in relation to any proceedings in respect of a claim, and (d)... (e)... (f) such other costs as may be prescribed by the regulations. ... (2) Expressions used in this Division have the same meanings as they have in Part 3.2 of the Legal Profession Act 2004 , except as provided by this section. 333 Costs to which Part applies This Part applies to and in respect of costs payable on a party and party basis, on a practitioner and client basis or on any other basis, unless this Part or the regulations otherwise provides. 334 Part prevails over Legal Profession Act 2004 This Part, and the regulations under this Part, prevail to the extent of any inconsistency between them and the Legal Profession Act 2004 or the regulations under that Act. 335 Assessment of costs An assessment of costs is to be made so as to give effect to the provisions of this Part (whether or not the assessment is made under Division 11 of Part 3.2 of the Legal Profession Act 2004). 336 Exclusion of matters from this Part The regulations may make provision for or with respect to excluding any class of matters from any or all of the provisions of this Part. 346 Costs (1) This section applies to costs (including disbursements) payable by a party in or in relation to a claim for work injury damages, including court proceedings for work injury damages. (2) The regulations may make provision for or with respect to the awarding of costs to which this section applies. The regulations may provide for the awarding of costs on a party and party basis, on a practitioner and client basis, or on any other basis. (3) A party is not entitled to an award of costs to which this section applies, and a court may not award such costs, except as prescribed by the regulations under this Act or by the rules of the court concerned. (4) In the event of any inconsistency between the provisions of the regulations under this section and rules of court, the provisions of the regulations prevail to the extent of the inconsistency. Workers Compensation Regulation 2010 104 Costs where claimant no less successful than claimant's final offer If a claimant obtains an order or judgment on a claim that is no less favourable to the claimant than the terms of the claimant's final offer of settlement in mediation under the 1998 Act as certified by the mediator under section 318B of the 1998 Act, the court is to order the insurer to pay the claimant's costs on the claim assessed on a party and party basis. 105 Costs where claimant less successful than insurer's final offer or insurer found not liable (1) If a claimant obtains an order or judgment on a claim that is less favourable to the claimant than the terms of the insurer's final offer of settlement in mediation under the 1998 Act as certified by the mediator under section 318B of the 1998 Act, the court is to order the claimant to pay the insurer's costs on the claim assessed on a party and party basis. (2) If a claimant does not obtain an order or judgment on a claim (that is, if the court finds the insurer has no liability for the claim), the court is to order the claimant to pay the insurer's costs on the claim assessed on a party and party basis. 106 Costs in other cases Except as provided by this Subdivision, the parties to court proceedings for work injury damages are to bear their own costs. 109 Multiple parties Where 2 or more defendants are alleged to be jointly or jointly and severally liable to the claimant and rights of contribution or indemnity appear to exist between the defendants, this Subdivision does not apply to an offer of settlement unless: (a) in the case of an offer made by the claimant-the offer is made to all the defendants and is an offer to settle the claim against all of them, and (b) in the case of an offer made to the claimant: (i) the offer is to settle the claim against all the defendants concerned, and (ii) where the offer is made by 2 or more defendants-by the terms of the offer the defendants who made the offer are jointly or jointly and severally liable to the claimant for the whole amount of the offer."

Coastwise relies upon reg 106 and maintains that it applies to the circumstances here. Coastwise has submitted that at the date of the mediation the work injury damages claim by Mr Sharp did not involve any other defendant so that reg 109 does not operate to exclude the operation of that part of the Regulation that includes reg 106. If that is correct, reg 106 would have continued to apply and to affect Mr Sharp's ability to recover costs. Mr Sharp would in those circumstances be required to bear his own costs and would not be entitled to look to Coastwise for payment.
Mr Sharp's statement of claim was originally issued only against Emicon on 20 September 2011. Emicon thereafter filed a cross claim on 10 November 2011 against Coastwise and Staiger. Mr Sharp's notice of the claim for work injury damages against Coastwise was served on 5 September 2012. A Workers Compensation Mediation between him and Coastwise took place on 22 April 2013. Mr Sharp's solicitors advised the legal representatives of Emicon and Staiger about the mediation and asked them to attend in order to facilitate resolution of the matter. That invitation was not taken up and the mediation did not resolve Mr Sharp's work injury claim against Coastwise.
Coastwise has contended that "at the date of the mediation, the work injury damages claim did not involve any other defendant." That submission places emphasis upon the fact that Mr Sharp had not by the date of the mediation joined either Coastwise or Staiger as a defendant sued by him, even though each had been joined on a cross claim issued by Emicon. Coastwise and Staiger were not joined to the proceedings as defendants until they were sued by Mr Sharp when he filed his amended statement of claim on 13 June 2013. (On 1 July 2013 Coastwise filed a cross claim against Emicon and Staiger. On 10 July 2013 Staiger filed a cross claim against Emicon and Coastwise).
Mr Sharp has submitted that, as at the date of the mediation, there were "multiple parties" to the proceedings "within the meaning of reg 109, there being at least two defendants, namely Emicon and Coastwise, with respect to which parties it was alleged they were jointly or severally liable to [Mr Sharp]". Regulation 109 does not in terms refer to "multiple parties" but instead refers only to "two or more defendants." Emicon was the only defendant in the proceedings at the date of the mediation. Coastwise was not yet a defendant and Mr Sharp's contention suggesting the contrary is literally and factually incorrect.
Coastwise contends that as Mr Sharp did not recover damages in excess of the offer of $800,000 made by him at the mediation, and did not make an offer to which reg 109 applied, inasmuch as Emicon was at that time the only defendant, reg 106 applies and Mr Sharp must bear his own costs.
Mr Sharp has submitted that his offer of settlement at the mediation did not comply with reg 109 "as it did not fulfil the stipulated requirements of the regulation" and that reg 106 does not apply. I take that submission to be based upon the proposition that the offer was not made to "all defendants" as contemplated by reg 109(a). However, as there was only one defendant at the time of the mediation, that submission has no substance.

Costs as between Mr Sharp and Staiger

Staiger succeeded in defending the claim made against it by Mr Sharp. Staiger also succeeded in the proceedings between it and Coastwise in the sense that I dismissed the cross claims between them. Staiger seeks an order for costs with respect to its cross claim against Coastwise. Coastwise has submitted that there should be no order of the dismissed cross claims.
However, Staiger seeks costs against Mr Sharp having successfully defended his proceedings against it: see UCPR 42.1. Staiger submits that as the successful party, costs should follow the event. Staiger also contends that as it succeeded in defending both Mr Sharp's primary claim against it as well as the cross claim by Coastwise, Mr Sharp should be ordered to pay Staiger's costs of both aspects of the proceedings, unless it appears that some other order should be made.
Mr Sharp did not advance any contentions that he should not be ordered to pay Staiger's costs of his failed proceedings against it. I hasten to observe that Mr Sharp's submissions in this respect included a recitation of the circumstances in which Staiger was joined as a cross defendant and in which it later became a defendant sued by him, and that his claim against Staiger was an adoption of Emicon's allegations against Staiger in the original cross claim. Be all that as it may, Mr Sharp did not adumbrate in clear or persuasive terms why it appears that some order other than the usual order should be made.
It does not appear to me that there is any reason to depart from the usual order. Mr Sharp should pay Staiger's costs of successfully defending his claim against it. I do not consider that Mr Sharp should be ordered to pay Staiger's costs referable to either of the cross claims between Staiger and Coastwise, quite apart from the obvious effect upon such an order of my conclusion on the following issue.

Costs of the cross claims between Coastwise and Staiger

I consider that there should be no order with respect to the costs of these cross claims, to the intent that each of Coastwise and Staiger should pay or bear its own costs. Each made a decision in the context of this litigation to sue the other for contribution or indemnity, and in each case before they had been joined as a defendant. Each cross claim failed. There are different reasons that led to the dismissal of the cross claims. None informs the making of any special order for costs to the benefit of one or to the detriment of the other. The costs incurred by these parties to the cross claims should lie where they fall.

Indemnity costs

Staiger seeks an order against Mr Sharp that any costs that he might be ordered to pay should include costs assessed on a part/party basis up to and including 19 September 2013 but on an indemnity basis thereafter. (Some of the submissions upon this issue refer to a different date but that is inconsequential for the reasons that follow). It is accepted by Mr Sharp and Staiger that on a day in September 2013 Staiger served an offer of compromise upon Mr Sharp offering to settle the proceedings in the following relevant terms: "1. A verdict and judgment in favour of [Staiger] against [Mr Sharp] for the whole of [his] claim against [Staiger]. 2. In accordance with UCPR 20.26(2) this offer is exclusive of costs. 3. This offer will remain open for acceptance for 28 days. 4. This offer is made in accordance with UCPR 20.26."
UCPR 20.26 provides relevantly as follows: "20.26 Making of offer (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer under this rule: (a) must identify: (i) the claim or part of the claim to which it relates, and (ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and (b) if the offer relates only to part of a claim in the proceedings, must include a statement: (i) in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or (ii) in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and (c) must not include an amount for costs and must not be expressed to be inclusive of costs, and (d) must bear a statement to the effect that the offer is made in accordance with these rules, and (e) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and (f) must specify the period of time within which the offer is open for acceptance. (3) An offer under this rule may propose: (a) a judgment in favour of the defendant: (i) with no order as to costs, or (ii) despite subrule (2) (c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or (b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or (c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer. (4)…"
The offer made by Staiger did not include an amount for costs and so clearly did not infringe the terms of UCPR 20.26(2)(c). However, why the offer went on further expressly to say that "in accordance with UCPR 20.26(2) this offer is exclusive of costs" is both curious and unclear, and also entirely unnecessary. These words arguably achieve some inadvertent, albeit considerable, significance in the present context when taken in conjunction with the fact that the offer could have provided in accordance with UCPR 20.26(3)(a)(i) for there to be no order as to costs. The clear implication appears to me to be that the offer was made in the anticipation that Mr Sharp would be required to pay or would remain liable for a claim that he pay Staiger's costs if the offer were to have been accepted. It was submitted on behalf of Staiger that the offer of compromise was expressed in terms that waived its entitlement to costs up to the date of any valid acceptance of its offer and that it offered to release Mr Sharp from having to pay what would otherwise have been an automatic obligation to pay Staiger's costs. I am unable to understand that submission unless the offer of compromise with which I have been provided differs in some material respect from the one to which these submissions relate.
Mr Sharp has submitted that Staiger's offer of compromise was invalid in these circumstances because it was no more than an invitation to him to capitulate or surrender and was effectively devoid of any element of compromise at all. I agree. This area has been considered by the Court of Appeal in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 and more recently by Hall J in Simmons v Rockdale City Council (No 2) [2014] NSWSC 1275.
In the Court of Appeal in Regency, the Court said this at [30]-[35]: "[30] The offer of $10,000 made at an early stage of these proceedings - indeed, before a defence had been filed - was an invitation to surrender, rather than any form of commercial compromise. Clearly, the offer reflected the strength of the appellant's belief in its interpretation of the contract. This belief has been fully vindicated in this Court. Nevertheless, it is difficult to characterise the offer as one of 'compromise'. Any such element of compromise was, at best, 'of limited significance'. (Hancock v Arnold supra at [15].) The offer can be accurately described as derisory. The Court should adopt the approach in Robb Evans. [31] An offer which is in substance an invitation to surrender can result in the successful triggering of the indemnity costs mechanisms under the rules. (See r 20.26(2); Leichhardt Municipal Council supra at [36]-[37], [40].) However, as Basten JA suggests in Robb Evans supra at [20], the claim or defence would have to approach something of the character of being frivolous or vexatious for that to be the case. (See also Hancock v Arnold supra at [17].) If it were otherwise, the public policy to encourage settlement would rarely be served, in an all or nothing case. These proceedings were not of that character, as indicated by the success which the respondent had at first instance. [32] The normal order for costs, even in a clear case, is that each party bears its own costs without full indemnity. If a derisory offer, of the kind made in these proceedings, could result in an order for indemnity costs, then it is likely that many, perhaps most, contract interpretation disputes would result in an indemnity costs order, if the formality of an offer in accordance with the rules had been made at an early stage. If the appellant were to succeed in the present case, it is quite likely that such an offer would accompany most statements of claim as a matter of commercial practice. The purpose of the special order - to encourage settlement - would no longer be served. An order for indemnity costs could, in our opinion, become the normal order in many commercial disputes. [33] It is often the case that the result of an interpretation issue appears quite clear in retrospect. However, an offer of compromise must be assessed, in large part, at the time it was made. (See most recently Hancock v Arnold supra at [23].) Whether what was offered was a relevant compromise, and whether its rejection was reasonable should not be assessed with the benefit of 20:20 hindsight. [34] The rival contentions on interpretation are set out in the Court's first judgment. (See Regency Media Pty Ltd supra esp at [60]-[92].) The respondent's submissions were regarded by this Court as clearly wrong. However, these proceedings did not have the degree of hopelessness, nor did they have any element of frivolity or vexation, of a character which would support an invitation to surrender being accepted as a real and genuine offer of compromise. [35] This is a case to which, with an adjustment by reference to the $10,000 offered, the observations of Bryson JA in Leichhardt Municipal Council supra at [59] apply: 'The respondent's case did not succeed, but it was not a case which could not reasonably be argued and it succeeded at first instance. The only element of compromise in the offer was as to costs: otherwise it was a call on the respondent to capitulate and give up: the element of compromise was slight, and the respondent's ultimate lack of success does not to my mind demonstrate that the reasonable course for the respondent was to capitulate, nor does anything show that the respondent was delinquent in going on with the trial or in resisting the appeal.'…"
Mr Sharp's claim was neither vexatious nor hopeless. The issue of the state of the scaffolding upon which he stood, who had constructed it, whether it had been altered and if so by whom, and its role in the mechanics of the accident, were difficult and contentious issues in the proceedings, even if they changed in emphasis somewhat late in the day. The offer of compromise was an offer to surrender at the time it was made. It was not in my view unreasonable for Mr Sharp to reject it. It was also in my view inadequate to trigger an order that Mr Sharp pay any part of Staiger's costs on an indemnity basis.

Sanderson or Bullock orders

Mr Sharp has asked for an order that Coastwise be ordered to pay any costs that he might be ordered to pay to Staiger as a result of his unsuccessful action against it.
The applicable principles were helpfully and conveniently summarised by Hall J in Simmons at [70]-[75] as follows: "[70] It is well established that a Bullock or Sanderson order should only be made where, in the circumstances, it was reasonable and proper for the plaintiff to join the successful defendant and where there is something in the conduct of the unsuccessful defendant that makes it appropriate to exercise the discretion. [71] The High Court considered the principles regarding the making of Bullock or Sanderson orders in Gould v Vaggelas (1985) 157 CLR 215, with Gibbs CJ finding that: '...the mere fact that the joinder of two defendants was reasonable does not mean that the unsuccessful defendant should be ordered to pay, directly or indirectly, the costs of the successful defendant. Obviously a judge should make a Bullock Order only if he considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant, and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff's error or overcaution.' (at 229-230) [72] It was further observed by Wilson J (with whom Murphy J agreed on this point) that it is permissible to make such an order '...where the costs in question have been reasonably and properly incurred by the plaintiff and between him and the unsuccessful defendant' (at 247). [73] In this respect it was also noted by Brennan J that a Bullock order can be made: '...in an action brought against two or more defendants for substantially the same damages only if the conduct of the unsuccessful defendant in relation to the plaintiff's claim against showed that the joinder of the successful defendant was reasonable and proper to ensure recovery of the damages sought.' (at 260) [74] These principles were summarised by the Court of Appeal in Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179, citing Lackersteen v Jones (No 2) (1988) 93 FLR 442, as follows: '1. It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant. 2. The causes of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other. 3. While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient. The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion. 4. Finally, in considering whether to make such an order, the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful.' (at [128]) [75] This was similarly endorsed by the Court of Appeal in Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 at [15]: 'In determining whether it is fair to make such an order, two matters are usually considered to be relevant. First, it must have been reasonable for the plaintiff to have brought the proceedings against the successful defendant… Secondly, there must be some conduct on the part of the unsuccessful defendant which would make it fair to impose liability on it for the costs of the successful defendant'…"
It does not seem to me that there is anything to be found in the conduct of Coastwise that makes it proper to order it to pay Staiger's costs. Even though it was in my view reasonable for Mr Sharp to have sued Staiger as a separate defendant, he was neither encouraged nor forced to do so because of anything that Coastwise did or refused to do. Mr Sharp's decision to sue Staiger came when it had already been joined as a party to the proceedings by Coastwise, which may have influenced or encouraged Mr Sharp to sue Staiger himself. That was, however, in all relevant respects an independent decision made by him and neither directly nor indirectly referable to the conduct of Coastwise. It does not appear that there is anything to which Mr Sharp can point, including Coastwise's cross claim against Staiger, that relevantly amounts to anything that Coastwise has "said or done", in the sense in which those words were used in Gould v Vaggelas [1985] HCA 75;(1985) 157 CLR 215, that led Mr Sharp to sue Staiger.
There is another possible reason why Coastwise should not be ordered to pay the costs Mr Sharp has been ordered to pay to Staiger. Section 322 of the Workplace Injury Management and Workers Compensation Act defines "costs" to include both "costs actually incurred or to be incurred by a person claiming compensation or work injury damages" as well as "costs incurred in relation to any proceedings in respect of a claim." The costs that I have concluded Mr Sharp must pay to Staiger would appear to me to fall within either or both of these limbs of the definition of costs. The expression "own costs" in reg 106 is not elsewhere separately defined. If Mr Sharp's costs liability to Staiger does fall within either or both of these limbs of the definition of costs, they would be part of Mr Sharp's costs, including his costs contemplated by the expression "own costs" in reg 106, and as such would be costs to be borne by him. Mr Sharp would not in such circumstances, as a party to court proceedings for work injury damages, be entitled to recover those costs from Coastwise.

Conclusions and orders

In the circumstances I consider that the following orders should be made: 1. Order the plaintiff and the second defendant respectively to bear his and its own costs of the proceedings. 2. Order the plaintiff to pay the third defendant's costs of the plaintiff's proceedings against the third defendant. 3. Make no order as to the costs of the cross claims between the second defendant and the third defendant to the intent that the parties to those cross claims shall each pay or bear its own costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 March 2015

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