Zhang v Popovic

Supreme Court of NSW|2016-05-05|Before: Adamson J

The application by NTI that Mr Tabuso pay its costs of the joinder of ROC

By notice of motion filed on 28 April 2016, NTI applied for the following orders: 1. That John Tabuso pay the costs of NTI incurred and thrown away by reason of the joinder of the Seventh Defendant to these proceedings excepting to the extent that any such costs are ordered to be paid by another party to the proceedings. 2. That John Tabuso pay the costs of this application.
I was informed at the short hearing on 5 May 2016 (before further written submissions were provided) that Mr Tabuso may have been an undischarged bankrupt. However, since that time I have been informed that it is agreed between respective counsel for NTI and Mr Tabuso that NTI does not require leave to proceed against Mr Tabuso under s 58 of the Bankruptcy Act 1966 (Cth). Although Mr King SC, who appeared with Mr Palmer for the plaintiff, indicated on 5 May 2016 that the plaintiff was considering filing a notice of motion to the same effect as that filed by NTI, the plaintiff did not ultimately press any such motion. Accordingly, the only extant motion is that of NTI referred to above.
NTI submitted that an order should be made against Mr Tabuso pursuant to s 98 of the Civil Procedure Act on the bases that he had played an active role in the litigation; his wrongful conduct caused NTI to join ROC; and he ought, accordingly, bear the cost of the joinder. NTI also submitted that although Mr Tabuso might not have been directly involved with all the consequences of his initial falsehood (such as the subsequent amendment to the statement of claim by the filing of the sixth amended statement of claim) he, as it were, set the ball rolling and should be held liable for all the consequences.
Mr Afshar, who appeared on behalf of Mr Tabuso, submitted that NTI had failed to discharge its onus of establishing the requisite matters that would form a proper basis for making a non-party costs order. Mr Afshar identified the following relevant findings from the principal judgment (some of which are set out in the reasons above): 1. The accident took place on 16 September 2007. 2. In May 2008 Mr Tabuso told a WorkCover inspector that Hoxton had installed the clevis mounts although this work was probably done by Interfreight ([29], [69]-[71] of the principal judgment). 3. On about 2 June 2009 NTI instructed its solicitor, Mr Hedges in relation to the question of its liability under the NTI Fleet Motor Policy (the Policy). 4. On about 17 September 2010 NTI was joined to the proceedings. It admitted that the Policy covered the liability of the first three defendants but refused indemnity on the basis of various exclusion clauses ([5] of the principal judgment). 5. In November 2010 Mr Tabuso told Mr Steven Hall, a welding inspector retained by NTI, that Hoxton had installed the clevis mounts. Mr Hall had difficulty reconciling Mr Tabuso's statements at the site visit with photographs of the trailer Mr Hall reported his disquiet to NTI in the following terms: I am not fully convinced that the bracket produced by the owner [John Tabuso] has not been removed and replaced additionally to what had been mentioned at the time of the site visit. The bracket may have been removed and reused by the various companies carrying [out] the work on the trailer or by the owner himself if the bracket had in fact broken off in the time before the said accident involving Mr Zhang." ([81] of the principal judgment). 1. On 18 January 2013 the plaintiff was granted leave to join ROC. He alleged that ROC had negligently installed the clevis mount and was therefore responsible for the failed weld. 2. ROC served evidence that it had not installed the clevis mount. The plaintiff thereafter sought leave to amend his pleading to allege that ROC was negligent in failing to ensure that the clevis mount was secure and sound before it installed the hydraulic system for the elevation of the ramp on it. Leave was granted, as a result of which the plaintiff filed the sixth amended statement of claim on 4 November 2015. 3. The accident was caused by the failure of the clevis mount ([46] and [66]). 4. Neither Mr Sanchez, nor Mr Tabuso was a credible witness. 5. NTI defended the proceedings on several bases, but principally on the basis that its liability was excluded by the Policy. This was independent of any involvement of Mr Tabuso.

The relevant principles that apply to costs orders against non-parties

The discretion to order costs against a non-party is within s 98 of the Civil Procedure Act. The power is to be exercised judicially. Although guidance can be obtained from the authorities, the statements of principle ought not be read as a gloss on the wording of s 98, which confers a general discretion. The interests of justice are a relevant consideration: Yu v Cao [2015] NSWCA 276 at [138] and [139]. The exercise of the power to award costs against a non-party is regarded as exceptional: Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 185.
It is open to me to have regard, in exercising the costs discretion, to my findings in the principal judgment: Yu v Cao at [147].
Where the person against whom a costs order is sought was a witness in the proceedings, the following principle is relevant (as derived from Symphony Group Plc. v Hodgson [1994] QB 179 per Balcombe LJ at 193 (approved in Yu v Cao at [148]): (7) Again, the normal rule is that witnesses in either civil or criminal proceedings enjoy immunity from any form of civil action in respect of evidence given during those proceedings. One reason for this immunity is so that witnesses may give their evidence fearlessly … In so far as the evidence of a witness in proceedings may lead to an application for the costs of those proceedings against him or his company, it introduces yet another exception to a valuable general principle.
Mr Tabuso was, relevantly, little more than a witness who gave untruthful evidence (that ROC had installed the clevis mount) since by the time he gave the version which implicated ROC, Interfreight had been deregistered. NTI had a strong forensic interest in Mr Tabuso's evidence being accepted. It had to hand all, or substantially all, of the material which was ultimately used by Mr Cavanagh SC, who appeared with Ms Dinkha for ROC, to discredit Mr Tabuso in cross-examination. Notwithstanding the obvious inconsistencies in Mr Tabuso's accounts, NTI took the forensic chance that Mr Tabuso's evidence would be accepted and that ROC would be found to be liable on the basis of his evidence.
It is telling that, even after ROC's evidence had been served, NTI repeated the allegations made by the plaintiff in his sixth amended statement of claim against ROC on the basis of the alternative case, which presupposed that Mr Tabuso's evidence that ROC had installed the clevis mount would not be accepted.
I am not persuaded that it is in the interests of justice to order Mr Tabuso to pay NTI's costs incurred and thrown away by the joinder of ROC.

Orders

I make the following orders: 1. Order the plaintiff to pay the seventh defendant's costs (including any reserved costs) of the proceedings on the ordinary basis until 10 March 2016 and on an indemnity basis thereafter. 2. Subject to (3) and (4) below, order the first, second and sixth defendants to pay the plaintiff's costs (including any reserved costs) of the proceedings. 3. Order the sixth defendant to pay the costs which the plaintiff is liable (pursuant to order (1)) to pay the seventh defendant but on the ordinary basis only. 4. Order the sixth defendant to pay the costs to which the first and second defendants are liable to pay to the plaintiff. 5. Order the sixth defendant to pay the first and second defendants' costs of the proceedings, including their cross-claims. 6. Dismiss the sixth defendant's notice of motion filed on 26 April 2016. 7. Order the sixth defendant to pay the costs of John Tabuso, the respondent to its notice of motion filed on 26 April 2016. 8. Note that the effect of orders (1) and (3) is that the plaintiff remains liable to the seventh defendant for the difference between its costs on an indemnity basis and its costs on the ordinary basis for the period from 10 March 2016.

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The judgment on liability

On 12 April 2016 I gave judgment and delivered reasons for decision on liability and indemnity in this matter: Zhang v Popovic [2016] NSWSC 407 (the principal judgment), preserving liberty to the parties to make an application for costs.
In substance, the plaintiff was successful against the first (Mr Popovic), second (Calabro) and sixth defendants (NTI). The plaintiff would have obtained judgment against the third defendant (Interfreight) had it not been wound up and deregistered. No claim was pressed against the fourth defendant, which, in any event, had been deregistered by the time of the hearing. The plaintiff failed against the seventh defendant (ROC). Mr Popovic and Calabro succeeded against NTI, their insurer.
Each of the defendants had cross-claims against the others. The effect of the orders was that Mr Popovic and Calabro succeeded in their cross-claim against NTI; all cross-claims against ROC resulted in judgment for ROC and all other cross-claims were dismissed.

ROC's application for costs

I propose to begin with the Calderbank offer and the Offer of Compromise. I am not satisfied that the Calderbank offer contains a sufficient degree of compromise to warrant alteration of the usual principles that costs on the ordinary basis follow the event.
I regard the Offer of Compromise as comprising a substantial element of compromise. The only significant argument in favour of ordering that the consequences of the plaintiff's non-acceptance of the Offer of Compromise are such as to warrant ordering "otherwise", is that it was made by one defendant only and did not deal with the whole proceedings. However, I am not persuaded that it would be appropriate to "otherwise" order. I reject the plaintiff's argument that it was reasonable for him not to accept such a substantial offer on the ground that it did not bring the proceedings to a conclusion. It was open to him to accept ROC's offer and continue to pursue his claims for damages against the other defendants: s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW); Baxter v Obacelo Pty Ltd [2001] HCA 66; 205 CLR 635.
The test of reasonableness is to be determined at the time the offer was made: Regency Media Pty Ltd v AAV Australia [2009] NSWCA 368 at [33] per Spigelman CJ. At the time the Offer of Compromise was made all of the evidence adduced by ROC had been served and therefore it was known to the plaintiff that, although no employee of ROC could recall installing the hydraulic system, none of the business records indicated that the clevis mounts had been installed by ROC and ROC maintained that it did not perform such work. Moreover there were obvious questions about the credibility of Mr Tabuso and Mr Sanchez which were, or ought to have been known, at the time the offer was made.
I cannot conclude that the reason the plaintiff did not accept the Offer of Compromise was that it did not bring proceedings to an end, although so much was alleged on behalf of the plaintiff in reply (see above). It may be that the plaintiff adjudged that the amount offered, $2.5m, was insufficient unless he were to be successful against another defendant to augment the sum. Various possibilities may be conjectured but, in the absence of evidence, I am in no position to choose between them.
I am not satisfied that the plaintiff has established that there is any reason to make an order "otherwise" under UCPR r 42.15A(2). Accordingly, ROC is entitled to an order that the plaintiff pay its costs on an ordinary basis up to 10 March 2016 and from 11 March 2016 (being the day following the day the offer was made) on an indemnity basis.

At a glance

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