Alexander, Phillipa --- "Costs update: Costs hurdles in workplace injury damages claims in New South Wales" [2015] PrecedentAULA 82; (2015) 131 Precedent 58

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COSTS HURDLES IN WORKPLACE INJURY DAMAGES CLAIMS IN NSW

By Phillipa Alexander

While costs generally follow the event, a successful plaintiff in proceedings for workplace injury damages can recover party:party costs only in certain circumstances.

Section 346 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) (WIM) 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.

Sub-sections 346(3) and (4) provide:

‘(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.’

Therefore the court only has jurisdiction to award costs as provided by the Workers Compensation Regulation 2010 (NSW) or by the rules of court, with the Regulations prevailing over the rules.

The Supreme Court of New South Wales has recently denied a plaintiff his costs against the unsuccessful defendant in Sharp v Emicon Pty Ltd.^[1] The plaintiff recovered damages of $754,317 from his employer, Coastwise Constructions Pty Ltd, for serious injuries sustained in the course of his employment when he fell three storeys from scaffolding on which he was working. The plaintiff initially issued proceedings against the head contractor, Emicon Pty Ltd, as the occupier in charge of the building site. Emicon issued a cross-claim against Coastwise as the plaintiff's employer and Staiger Pty Ltd, which had constructed the scaffolding platform on which the plaintiff was working. Coastwise and Staiger also cross-claimed against each other. The plaintiff then joined Coastwise and Staiger as defendants.

The plaintiff's claim against Emicon was dismissed by consent during the trial with Emicon agreeing to pay its own costs. The plaintiff's claim against Staiger was unsuccessful and the plaintiff was ordered to pay Staiger's costs. Staiger's claim for costs on an indemnity basis from the date of its offer of compromise for a verdict and judgment in favour of Staiger was rejected on the basis that the plaintiff'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.’^[2]

The plaintiff sought a Bullock or Sanderson order against Coastwise in respect of the costs he had to pay Staiger. This was rejected by the Court on the basis that there was nothing in the conduct of Coastwise that made it proper to order it to pay Staiger's costs, notwithstanding that it was reasonable for the plaintiff to have sued Staiger as a separate defendant and that the decision to join Staiger may have been influenced or encouraged by Coastwise's cross-claim against Staiger.^[3]

Harrison J also opined that a Bullock or Sanderson order may in fact not be available under the legislation.^[4] Section 322 WIM 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’. Harrison J considered the costs the plaintiff had been ordered to pay to Staiger to fall within either or both of these limbs of the definition of costs. Regulation 106 of the Workers Compensation Regulation 2010 (NSW) (WCR) provides:

‘Except as provided by this subdivision, the parties to court proceedings for work injury damages are to bear their own costs.’

Harrison J held that as the plaintiff's costs liability to Staiger fell within either or both of the limbs of the definition of ‘costs’, they would be part of the plaintiff's costs contemplated by the undefined expression ‘own costs’ in regulation 106 WCR, and as such would be costs to be borne by the plaintiff. His Honour held that as a party to court proceedings for work injury damages, the plaintiff would not be entitled to recover those costs from Coastwise.^[5]

If this is an unintended consequence of the legislation, it may be that Subdivision 2 of Division 3 WCR requires amendment to allow for Bullock or Sanderson orders to be made where appropriate.

The plaintiff also sought a costs order against Coastwise, which was refused. Coastwise relied on regulation 106 WCR in arguing that the plaintiff should bear his own costs. The plaintiff sought to rely on regulation 109 to avoid the operation of regulation 106. Regulation 109 provides:

‘Where two 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 two 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.’

The plaintiff's statement of claim against Emicon was issued on 20 September 2011. Emicon's cross-claim against Coastwise and Staiger was issued on 10 November 2011. The plaintiff's notice of the claim for work injury damages on Coastwise was served on 5 September 2012. A mediation between the plaintiff and Coastwise took place on 22 April 2013. The plaintiff's solicitor informed Emicon and Staiger of the mediation but they did not attend. At the mediation, the plaintiff made an offer of settlement to Coastwise in the sum of $800,000.

Coastwise contended that, at the date of the mediation, the work injury damages claim did not involve any ‘defendant’ other than Emicon and therefore regulation 109 did not apply. This was accepted by the court, notwithstanding that for the purposes of Part 6 WIM dealing with court proceedings for work injury damages, the definition of ‘defendant’ in s311 WIM ‘means the person against whom proceedings for the recovery of work injury damages are commenced or are to be commenced’. At the date of the mediation, a notice of claim had already been issued to Coastwise as a ‘defendant’.

This finding also appears to be at odds with the decision of P Taylor SC in Nicoll v Dobeson; Nicoll v The Workers Compensation Nominal Insurer (No. 4)^[6] in which the insurer sought to recover costs under regulation 105 WCR on the basis that the claimant was less successful than the insurer's final offer of settlement. The plaintiff argued that the insurer's offer did not comply with regulation 109 WCR, as it did not offer to settle the claims against all the other ‘defendants’. The court noted that ‘defendant’ is not defined in the WCR but the application of regulation 109 depends on whether attention is directed to the form of the particular statement of claim which in this case was only against the insurer, or the substance of the matter which involved claims by the plaintiff against three other parties in separate related proceedings. The court held that substance was preferred over form and as a matter of substance there were four defendants so the insurer's offer did not satisfy regulation 109. This meant that regulation 105 did not apply to the insurer's offer and the plaintiff was not ordered to pay the insurer's costs.

Had the court in Sharp v Emicon Pty Ltd^[7] accepted that regulation 109 WCR applied, the plaintiff would also have had to convince the court to distinguish his case from the decision of the Court of Appeal in Australian Winch & Haulage Pty Ltd v Collins & Anor.^[8] In that case, the Court of Appeal held that the primary judge had erred in finding that once regulation 109 applied, the whole of the Subdivision 2 had no application. The Court of Appeal held that regulation 109 only operated to exclude offers of settlement which would have otherwise had effect under regulations 104 and 105. Regulation 106 remained applicable, with the result that each party was required to bear its own costs.

ANCILLARY PROCEEDINGS

Regulation 108 WCR provides:

‘This Subdivision does not apply to costs payable in or in relation to proceedings that are ancillary to proceedings on a claim for work injury damages, and a court is to award costs in such ancillary proceedings in accordance with the rules of the court.’

In Ortlipp v Employers Mutual NSW Limited as agent for the Workers Compensation Nominal Insurer (No. 2),^[9] the court considered whether the plaintiff's notice of motion for leave to commence proceedings under s151D of the Workers Compensation Act 1987 (WCA) was an ancillary proceeding and thus not subject to Subdivision 2 of Division 3 WCR. P Taylor SC DCJ relied on Clutha Developments Pty Ltd v Barry^[10] in holding that the application was analogous to an extension of time application, and was an ancillary proceeding. As Subdivision 2 did not apply, the plaintiff was ordered to pay the defendant's costs of the notice of motion in accordance with Rule 42.1 of the Uniform Civil Procedure Rules 2005, that costs follow the event.

PRACTICAL CONSIDERATIONS

If the plaintiff is unsuccessful on an application for leave to commence proceedings under s151D WCA, he or she may be subject to an order to pay the defendant's costs. Such costs will be limited to Schedule 7 WCR.^[11]

If an offer of settlement is made by the plaintiff as certified by a mediator under s318B WIM and the plaintiff obtains an order or judgment no less favourable than the offer, the court is to order the insurer to pay the plaintiff's costs on a party:party basis.^[12] Where there are two or more defendants, the plaintiff must ensure that the offer is made to all defendants and is an offer to settle the claim against all of them so that a defendant cannot rely on regulation 109 WCR to avoid the operation of regulation 104.

If an offer of settlement is made by an insurer as certified by a mediator under s318B WIM and the plaintiff obtains an order or judgment which is less favourable than the offer, the plaintiff will be ordered to pay the insurer's costs on a party:party basis.^[13] The plaintiff may be able to avoid such an order under regulation 109 if there are two or more defendants and the insurer's offer was not made to settle the claim against all the defendants concerned;^[14] or where an offer made by two or more defendants does not provide that those defendants are jointly and severally liable to the claimant for the whole amount of the offer.

Phillipa Alexander is a specialist in legal costs with Costs Partners. PHONE [phone] EMAIL [e-mail].

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^[1] Sharp v Emicon Pty Ltd [2015] NSWSC 175 (10 March 2015).

^[2] Ibid, per Harrison J, at 21.

^[3] Ibid, per Harrison J, at 24.

^[4] Ibid, per Harrison J, at 25.

^[5] Ibid.

^[6] Nicoll v Dobeson; Nicoll v The Workers Compensation Nominal Insurer (No. 4) [2014] NSWDC 255.

^[7] Sharp v Emicon Pty Ltd [2015] NSWSC 175 (10 March 2015).

^[8] Australian Winch & Haulage Pty Ltd v Collins & Anor [2013] NSWCA 50 (11 March 2013).

^[9] Ortlipp v Employers Mutual NSW Limited as agent for the Workers Compensation Nominal Insurer (No. 2) [2014] NSWDC 158 (21 May 2014).
^[10] Clutha Developments Pty Ltd v Barry (1989) 18 NSWLR 86.

^[11] Ortlipp v Employers Mutual NSW Limited, see note 9 above, at 23.

^[12] Regulation 104 Workers Compensation Regulation 2010.

^[13] Ibid.

^[14] Nicoll v Dobeson; Nicoll v The Workers Compensation Nominal Insurer (No 4), see note 6 above.