Victorian WorkCover Authority v Adventure Park Pty Ltd [2019] VSC 270

1 The principal issue to be determined on this application is the nature of the costs order to be made in favour of a defendant when a plaintiff discontinues its action against it.

2 In this application the discontinuing plaintiff is the Victorian WorkCover Authority ('VWA') and the defendant is Adventure Park Pty Ltd ('Adventure Park'). The proceeding being discontinued is a claim made by the VWA to recover from Adventure Park a statutory indemnity under s 138 of the Accident Compensation Act 1985 (Vic) ('the Act') for amounts it had paid to a worker under the Act ('the recovery proceeding'). Such an indemnity is available if it is proved that the injury to the worker was caused in circumstances creating a liability in a party, other than the employer, to pay damages to the worker for the injury.

3 The worker sustained an injury when he attended a work social function at a recreational facility operated by Adventure Park. He sued his employer, Local Mix Concrete ('Local Mix'), and Adventure Park, to recover damages for the injury, including for pecuniary loss ('the workers proceeding'). He alleged that each defendant had, by its negligence, caused his injury. Both Local Mix and Adventure Park denied that allegation and, alternatively, alleged the worker had been contributorily negligent. Further, there were contribution proceedings between Local Mix and Adventure Park .

4 As a consequence of the workers injury, the VWA paid the worker weekly payments of compensation for lost earnings, and medical and like expenses. The VWA initiated the recovery proceeding against Adventure Park in the County Court. After the proceeding was transferred to this court it was managed in parallel with the worker's proceeding. Just as the worker had alleged in his damages proceeding, in its recovery proceeding the VWA alleged that Adventure Park had negligently caused the injury to the worker. Adventure Park denied the allegation but maintained that, even if it was negligent, Local Mix and the worker himself contributed by their negligence to the cause of the injury. If established, causal negligence of the employer or the worker would reduce the amount by which Adventure Park was obliged to indemnify the VWA.[1]

5 It follows from the above that Adventure Park, as the defendant in the two proceedings, faced common allegations from the two plaintiffs, the worker in the damages proceeding and the VWA in the recovery proceeding. Each plaintiff alleged, and Adventure Park denied, that by its negligence Adventure Park caused the injury, loss and damage to the worker. In each case, Adventure Park alleged that the worker had contributed to the cause of the injury by his own negligence. Further, the question of the proportionate fault of Adventure Park and Local Mix was in issue in both proceedings. In the worker's proceeding, it was because of the contribution proceedings between defendants. In the recovery action, it was because the quantification of any indemnity that the VWA could recover against Adventure Park required a determination of the extent to which Adventure Park's negligence caused or contributed to the injury.

6 That said, the two proceedings are distinct factually and legally; the one, a claim in tort by an injured worker for damages, and the other, a claim for a statutory indemnity by an insurer.

7 As commonly occurs in these situations, the court listed the worker's proceeding to be tried first (before a jury), with the recovery proceeding to be heard thereafter by judge alone. The parties consented to an order that evidence in the worker's proceeding stand as evidence in the recovery proceeding. The VWA was (as is usual) represented by different lawyers to those representing the parties in the worker's proceeding and it would typically play no role in the worker's proceeding.

8 On 26 February 2019 the worker settled his claim against Local Mix and Adventure Park. The parties agreed to the dismissal of the worker's claim with no order as to costs. The defendants also agreed to the dismissal of the contribution proceedings between them, also with no order as to costs. As is common, the court was not informed of the basis of the settlement.

9 Initially, the VWA proposed to continue its claim for indemnity against Adventure Park. The recovery proceeding was fixed for trial. At that trial, the VWA would have been required to establish Adventure Park's liability toward the worker in order to succeed against Adventure Park for the indemnity. Shortly before the recovery proceeding was scheduled to be heard, the VWA announced that it proposed to discontinue its claim against Adventure Park. The court was not informed of its reason for wishing to do so and nothing is to be gained from speculating.

10 Once pleadings have closed (as is the case here), for a party to discontinue a claim against another it must either obtain the consent of the other party or the leave of the court.[2] Adventure Park consents to the VWA discontinuing its proceeding. But, while there is no dispute that upon discontinuance the VWA should pay Adventure Park's costs, the parties do not agree on the terms of the order to be made for costs. In negotiating the terms of the order for discontinuance, Adventure Park requested the VWA to undertake that if the order simply stated that the VWA pay its costs the VWA would not later argue before the Costs Court that such costs be "limited to non-common costs". Avoiding double negatives, Adventure Park wanted to be paid its full costs, not just partial costs.

11 That request appears to have provoked this application. Indeed, the VWA does submit that to the extent that Adventure Park incurred costs in the recovery proceeding in common with those incurred defending the worker's claim, it should not be liable to pay them. The VWA submits that its liability to pay Adventure Park's costs in the recovery proceeding should be confined to those costs that exceed Adventure Park's costs of defending the worker's proceeding: in other words, only those costs that were incurred solely and exclusively in the defence of the recovery action.

12 For its part, Adventure Park submits that there should be an unqualified order that the VWA pays its costs of the recovery proceeding, leaving it to the Costs Court, upon a taxation, to apportion any of the costs between the two proceedings on whatever appropriate basis it sees fit, without any direction one way or another from the judge.

13 On a separate matter, Adventure Park further submits that its costs should be paid on an indemnity basis from 9 July 2018 after it served the VWA with a Calderbank offer of $60,000 "all in". The VWA opposes that order.

14 Both sides agree that whatever order is made for costs, the costs should be taxed on the County Court scale up to the time when the case was transferred to the Supreme Court and thereafter on Supreme Court scale.

15 In detailed written submissions, supported by oral submissions, the VWA advanced 11 reasons why the cost order should be expressed as excluding any liability in the recovery proceeding to pay for costs incurred in common by Adventure Park in defending both proceedings. Without repeating all of them, as there was some repetition, the main points were as follows:

(a) by consenting to the dismissal of the worker's proceeding with no order as to costs, Adventure Park chose to abandon its right to recover any costs from the worker;

(b) Adventure Park had to incur the common costs in any event due to its defence of the worker's proceeding;

(c) relying upon the decision in Victorian WorkCover Authority v Roman Catholic Trusts Corporation for Archdiocese of Melbourne & Anor ('RCT'),[3] the VWA's liability to pay the common costs fell to be determined by the principles that would govern its liability to pay Adventure Park's costs as a non-party in the worker's proceeding;

(d) assuming (c) to be correct, the VWA's pursuit of the recovery proceeding did not cause or materially contribute to Adventure Park having to incur its common costs in defending the worker's proceeding, so the VWA would not have been ordered, as a non-party, to pay Adventure Park's costs of that proceeding;

(e) authorities such as Smith v Madden ('Smith')[4] recognise that costs that are globally incurred for the prosecution or defence of more than one proceeding may be apportioned or divided if they are common or mixed costs, but otherwise will be ordered to be paid in full if solely and exclusively referable to only the one proceeding;

(f) Adventure Park, as a potentially liable tortious wrongdoer, derived a collateral benefit from the scheme of the Act; and

(g) because the determination of the scope of the costs order involves questions of law, that determination should not be left to the Costs Court to decide.

16 None of those arguments, whether alone or in combination, persuade me that I should exercise my discretion to limit the order for costs to be paid by the VWA in favour of Adventure Park. I will explain why and endeavour to address the VWA's arguments to the extent it is necessary to do so.

17 As provided in s 24 of the Supreme Court Act 1986,[5] the costs of and incidental to a matter in the court, including to whom and to what extent the costs are to be paid, lies in the discretion of the court unless otherwise expressly provided by that or any other Act, or by the Rules. Rule 63.02 provides that the general discretion conferred by s 24 is to be exercised subject to and in accordance with Order 63.[6]

18 It is, of course, uncontroversial, that at common law the usual rule is that costs follow the event.[7] In relation to discontinuance, that principle is given expression by r 63.15:[8]

Unless the Court otherwise orders, a party who discontinues ... a proceeding ... shall pay the costs of the party to whom the discontinuance ... relates to the time of the discontinuance ...

19 No limitation or qualification as to the extent of the costs to be paid appears in that rule. Furthermore, r 63.30 provides that, when taxed on a standard basis (which is the usual basis),[9] 'all costs reasonably incurred and of reasonable amount shall be allowed'.[10] Again there is no limitation as to the scope of the costs covered by that order.

20 In general, the purpose of an order for costs is to indemnify, at least partially, a successful party.[11]

21 Without doubt, the court retains a discretion to depart from these general principles, in the exercise of its discretion, to meet the justice of any particular case.[12] So much is made clear by the specific qualification, '[u]nless the court otherwise orders', in r 63.15.[13] But, because the exercise of discretion with respect to costs depends on the demands of justice in each particular case, the past exercise of discretion in one case rarely, if ever, creates a rule of law that another judge must apply.[14] Rather, previous examples of the exercise of discretion, in analogous circumstances, may only assist another judge by pointing to factors that may or should be considered when exercising the discretion.

22 The law provides various mechanisms to distribute liabilities for costs when cases involve multiple claims, multiple parties or both. Where two unsuccessful parties in the same proceeding are ordered to pay the successful party's costs, which is not uncommon, their liability is ordinarily joint and several.[15] The successful party can recover fully against either, or both, but not more than the whole. The debt for costs being a joint debt, if one pays the whole or more than its share, it can recover contribution from non-paying party according to an appropriate relativity.[16] But, this is not a case involving only one proceeding, or two unsuccessful parties being ordered to pay the one successful party's costs.

23 Somewhat more pertinently, according to Dal Pont, in his book Law on Costs ('Dal Pont'), where there are separate actions involving two or more plaintiffs suing the one defendant and orders are made for both plaintiffs to pay the same defendant's costs, the court may leave it to the taxing officer to apportion the costs between the two actions.[17] Here there are two plaintiffs (the worker and the VWA) who, in separate actions, sued the same defendant (Adventure Park). But in only one action is an order to be made for the costs of the successful defendant. I will return to a further discussion of the authorities referred to by Dal Pont for this principle and its potential application in this situation.

24 Before doing so, because the VWA has placed reliance upon the decisions in Smith and RCT, it is necessary that I say something about each of them.

25 In Smith, Dixon J (in the High Court, as he then was) was called upon to determine how costs should be applied when a plaintiff succeeded on a claim and the defendant succeeded on a counterclaim, and each was ordered to pay the other's costs of the counterclaim and claim respectively. His Honour discussed and explained the different notions of "mixed costs" and "common costs". His Honour also explained the common law's approach (different to Chancery's practice) of allowing the successful claimant (e.g. plaintiff) to recover all the costs of the claim including "general costs" (being those common to both claim and counterclaim), but only allowing to the successful counterclaimant (e.g. defendant) the further or increased costs incurred to bring the counterclaim.

26 Cases such as Geatches v Anglo Coal (Moranbah North Management) Pty Ltd[18] and Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd[19] show that the principles in Smith most aptly apply to orders on successful claims and counterclaims, or the broadly analogous situation of one party obtaining an order for the general costs of the proceeding subject to the other having the costs of a specific issue or claim. Other than being helpful to elucidate the distinction between common and mixed costs, Smith has little application to the present case.

27 In RCT John Dixon J was asked to determine cost orders to be made in a situation that bears more similarity to the present. A worker had sued her employer and the Roman Catholic Trust Corporation, the operator of a school ('the school'), for damages following a workplace injury. In a separate proceeding, the VWA had sued the school to recover the statutory indemnity under s 138 of the Act. Orders were made at the commencement of the worker's case that evidence in that trial would stand as evidence in the recovery proceeding. The worker compromised her claim against her employer and, after a trial, failed in her action against the school. Her claim against the school was dismissed with costs.

28 Given the result in the worker's claim, the VWA accepted that it could not succeed in its claim for indemnity against the school and, ultimately, the judge dismissed its proceeding. In those circumstances, the school, having succeeded in both proceedings, applied for its costs against the VWA. But it applied for its costs in both proceedings. In the worker's proceeding, the school applied for its costs against the VWA as a non-party. It did so on the footing that, because of the order that the evidence in that proceeding would also stand as evidence in the recovery proceeding, there was a sufficient connection between the two proceedings to justify the order on the principles applicable to non-party cost liability.

29 In addition, or in the alternative, the school sought an order in the recovery proceeding that the costs which the VWA was liable to pay it "be extended to include common costs incurred in the workers proceeding". I pause to observe that the terms of that application might suggest that, without such an express order, a general order that a party pay another's costs would not ordinarily extend to cover some or all of the common costs incurred between that and another proceeding. I will return to this proposition below.

30 John Dixon J dismissed the school's application for an order for costs against the VWA as a non-party in the worker's proceeding. In essence, his Honour found that there was not a sufficiently material connection between the two proceedings to justify making the VWA liable to the school for its costs of defending the worker's proceeding.[20] For the same reasons given for dismissing that application, his Honour also dismissed the application to "extend" the cost order in the recovery proceeding to include common costs incurred by the school in defence of both proceedings.[21]

31 That result, no doubt, may be explained by the particular circumstances of that case, the way in which the applications were framed and argued, and the particular exercise of the judge's discretion to meet the justice of that case as he saw it. But, for reasons that follow, making an order that expressly excludes the liability of the unsuccessful party to pay any costs incurred by the successful party common to two actions, in a situation like to present, is not the usual or orthodox approach. The preferred approach, in my view - and certainly in the particular circumstances of this case - is simply to order that the VWA pay Adventure Park's costs of the recovery proceeding, leaving it to the Costs Court on a taxation to apply proper taxation principles of apportionment or division, as may be appropriate, to meet the justice of the case.

32 Returning to the principle referred to in para [23] above, Dal Pont cites, among other cases, Oppenshaw v Whiteheard ('Oppen[22]aw'_)_22, _Boguslawski v Gydnia Ameryka Linie (No 2) ('Bogusla[23]ki')_23 and _Leslie v Hydro-Electric Corporation ('Pe[24]er')_24. In Pester, a plaintiff, Leslie, was the personal representative of a passenger killed in an aircraft accident. Leslie sued the pilot and an electricity company in negligence for damages. Two other persons, personal representatives of other passengers killed in the same crash, brought separate actions against the same defendants. Represented by the same solicitors and counsel, all actions were tried together (on the question of liability) although not consolidated. Each succeeded against the pilot but failed against the electricity company. In each case, each plaintiff was ordered to pay the costs of the successful defendant without any limitation as to extent. On appeal, Leslie argued that the costs order, unlimited as to extent, was wrong in principle as it potentially allowed the successful defendant to recover its costs three times.

33 In rejecting it, the Full Court said the argument proceeded from the erroneous premise that the taxing master could allow the whole of costs in favour of the successful defendant as against each plaintiff, rather than carry out an apportionment of common costs which, on the authorities of Oppenshaw and Boguslawski, the court held was the correct approach. So, it was held, the court should simply order that the plaintiff pay the defendant's costs in each case, without qualification, leaving it for the taxing master to make appropriate allowances for common costs when taxing the bill.

34 Zeeming J, with whom Underwood and Wright JJ agreed, stated:

When it comes to a taxation of the second respondent's costs of the action against the appellant, principle requires that the taxing officer allow those costs incurred by the second respondent which are allowable under the Rules of the Supreme Court, O80. Insofar as those costs particularly and properly only relate to the appellant's action, generally the costs should be allowed in full. Insofar as those costs were incurred in relation to the defence of the actions generally, they should be apportioned amongst the three actions. Special considerations may apply in the event that the second respondent separately performed identical tasks in each action although such a task might have been performed once only in relation to all actions.

In essence, the appellant's complaint about the order for costs proceeds upon an imperfect appreciation of the task to be performed by the taxing officer. The possible result of which the appellant complains will not ensue if proper principles of taxation are applied. It ought to be assumed that they will be applied. The appellant has the right, conferred by O80, r102, to have the taxation reviewed by a judge.[25]

35 In summary, following this analysis of rules and principles I think that my discretion as to costs in this case should be guided by the following considerations:

(a) Upon discontinuance, unless the court otherwise orders, the discontinuing party should pay the other party's costs of the proceeding;

(b) Unless some limitation is imposed, such an order would extend to and embrace all costs reasonably incurred in the prosecution or defence of that proceeding, including any mixed costs or costs incurred in common with another proceeding;

(c) Because the court's discretion is unfettered, a judge may choose to make an order apportioning common costs, or to give directions to guide the taxation of such costs, but would generally only do so if armed with knowledge superior to that which the taxing court would have, or some other consideration of justice or expedience warranted doing so; and

(d) To the extent the costs might include some incurred in common with another proceeding, or involve mixed costs, appropriate allowances can and commonly are dealt with by the Costs Court.

36 It would be inappropriate, in my opinion, for me to make any order with respect to common costs, whether to exclude them altogether as the VWA submits I should do or to order some sort of apportionment with the costs incurred in the worker's proceeding. To do so would, first, involve an unwarranted departure from the orthodox approach that I have identified. Second, in the particular circumstances of this case, such an order would be made in a state of ignorance about the terms and effect of the settlement in the worker's proceeding. Third, and because of the second point, such an order could only be justified if, as a matter of principle, a successful defendant in a VWA recovery action can only ever be entitled to costs exclusively incurred in defending the recovery proceeding. In my view no such principle exists. Fourth, and allied to the last point, it is not correct to assume that a recovery proceeding should be regarded as merely subsidiary or appurtenant to a worker's proceeding such that any costs incurred in prosecuting it are, by definition, only supplementary to the costs incurred in the 'principal' action.

37 As a general proposition, that characterisation is to be doubted because the actions are quite distinct (even though involving some issues in common), do not involve identical parties and each can be brought whether or not the other exists, as amply demonstrated by the facts of this case. In this instance the VWA commenced its proceeding for recovery of what it had paid the worker even before the worker had obtained the serious injury certificate under s 134AB of the Act which permitted him to commence a common law claim.[26] Upon commencing its proceeding, the VWA signed a proper basis certificate certifying that on the factual and legal material available each allegation in its statement of claim had a proper basis.[27] From that, the court is to infer that the VWA made an independent decision about the viability of the action for recovery against Adventure Park, and decided to proceed with it when there was no guarantee the worker's action would be instituted.

38 In my opinion, the approach adopted by the Tasmanian Full Court in Pester is the appropriate approach to apply in the present case. As with the appellant's argument in that case, the VWA's argument before me proceeded from an imperfect appreciation of the task to be performed by the Cost Court on a taxation of Adventure Park's costs in the recovery proceeding. But, saying this implies no view or direction on my part as to whether the Costs Court should apportion any particular item or category of costs in this case. The Costs Court will know the particular items of cost sought by Adventure Park. It can be informed of the terms of settlement reached in the worker's proceeding, including terms as to the payment of costs (i.e. by whom, to whom and to what extent). Armed with that information, and upon such submissions as the parties choose to make, it can make any allowances for any mixed or common costs as it thinks appropriate.

39 Applying these considerations, and notwithstanding the various arguments advanced by the VWA, in my view the appropriate order as to costs is that the VWA pay Adventure Park's costs of and incidental to the proceeding.

41 Applying the principles of Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),[28] I conclude that the VWA should pay Adventure Park's costs of the proceeding from 9 July 2018 after it was served with, but refused, a Calderbank offer of $60,000 "all in". In doing so I take account of the policy considerations underlying the court's use of indemnity costs orders in such circumstances to promote cost-efficient litigation. In my view that offer represented a genuine compromise of the proceeding; it was made a time when the VWA could fairly assess its prospects of success; the offer was sufficiently clear in its terms and it foreshadowed an application for indemnity costs if the VWA rejected it.

42 In so far as the VWA relied upon the fact that the worker's proceeding was still going ahead, that the two proceedings were being jointly managed and that the VWA had no access to the worker's instructions or evidence to assess the relative strength or weakness of the recovery action, I reject those as grounds for finding that its refusal to accept the offer was reasonable. It commenced the action on its assessment that it had a proper basis to allege that Adventure Park's was negligent and that its negligence caused the worker injury. The VWA had access to, and had availed itself of, the interlocutory processes to further investigate the facts to assess its prospects of success. While there may have been further processes and evidence to be gathered before trial, that is commonly the case and is no reason of itself for precluding a conclusion that the refusal of an offer made some months in advance of the trial was unreasonable.

43 I consider it was unreasonable for the VWA to have refused that offer.

44 The orders disposing of this proceeding will be:

(a) The proceeding be discontinued by consent;

(b) The plaintiff pay the defendant's costs of and incidental to the proceeding on

(i) County Court scale to 24 November 2017 and thereafter on Supreme Court scale; and on

(ii) a standard basis until 9 July 2018 and thereafter on an indemnity basis.

[1] Accident Compensation Act 1985 (Vic) s 138(3)(b), factor X.

[2] Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 25.02(2) ('the Rules').

[3] Victorian WorkCover Authority v Roman Catholic Trusts Corporation for Archdiocese of Melbourne & Anor [2013] VSC 26 ('RTC').

[4] Smith v Madden [1946] HCA 19; (1946) 73 CLR 129.

[5] Supreme Court Act 1986 (Vic) s 24.

[7] G.E. Dal Pont, Law of Costs (LexisNexis Butterworths, 4th ed, 2018) ('Dal Pont') para [6.16], [7.2].

[11] Probiotec Ltd v University of Melbourne [2008] FCAFC 5; (2008) 244 ALR 96, [51] and Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403, 410-411 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ.

[14] McKenna v McKenna [1984] VicRp 58; [1984] VR 665, 674 (McGarvie J); Dal Pont (n 7) [6.17].

[18] [2014] QSC 106 (Henry J).

[19] [2018] WASCA 185.

[22] [1854] EngR 125; (1854) 9 Ex 383; 156 ER 163.

[23] [1951] 2 KB 328.

[24] (1997) 7 Tas R 233.

[26] VWA's writ was issued on 24 February 2016. The worker was granted a serious injury certificate on 21 June 2016, and filed a writ initiating his damages proceeding on 22 November 2016. (See affidavit of Stephen John Greenham sworn 18 March 2019).

[27] Certificate under s 42 Civil Procedure Act 2010 (Vic) signed on 29 February 2016 by solicitor for VWA.

[28] [2005] VSCA 298; (2005) 13 VR 435, especially at 441.