Alexander, Phillipa --- "Costs column: Costs in Civil Liability Act matters" [2017] PrecedentAULA 37; (2017) 140 Precedent 47

• As held by the Supreme Court in Sanderson Motors Pty Ltd v Lindsay Bennelong Developments Pty Ltd,16 s35A CLA does not require the plaintiff to join the concurrent wrongdoers for a costs order to be made against the defendant in this regard.

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COSTS IN CIVIL LIABILITY ACT MATTERS

By Phillipa Alexander

Proceedings under the Civil Liability Act 2002 (NSW) (CLA) can give rise to a number of costs issues. The starting point is s98 of the Civil Procedure Act 2005 (NSW) (CPA) which provides that, subject to the rules of court, costs are in the discretion of the court including by whom, to whom, and to what extent costs are to be paid. Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r42.1 provides that, if the court makes any order as to costs, it should be on the basis that costs follow the event unless the circumstances justify some other order.

COSTS OF ISSUES

Consideration of costs that follow the event is not limited to the ‘event’ in a technical pleading sense,^[1] and has been held to extend to all disputed questions of law and fact.^[2] Depending on the nature of the litigation, the 'event' may be categorised in more than one way, although it generally refers to the event of the claim or cross-claim in terms of the practical result of a particular claim.^[3]

The usual approach taken by the court is for an order for costs to reflect the outcome of the proceedings as a whole, irrespective of whether or not the party has succeeded on any particular issue. As held by Hodgson JA in Commonwealth of Australia v Gretton:^[4]

‘Underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs.’

In Wright by his tutor Wright v Optus Administration Pty Limited,^[5] Glenn Wright claimed damages from Optus Administration Pty Ltd (Optus) for psychological injury as a result of an attempt by a co-worker to murder him by attempting to throw him from the roof of Optus's premises at Gordon. The co-worker had formed the desire to kill someone and randomly chose Mr Wright as his intended victim. Both Mr Wright and the co-worker were employed by labour-hire companies that had supplied their services to Optus. Mr Wright suffered a non-compensable head injury and developed chronic, severe post-traumatic stress disorder. He sued Optus as occupier of the premises at which the attempted murder occurred and the entity responsible for his presence at those premises. A cross-claim was brought by Optus against Mr Wright's employer, IPA Personnel Pty Ltd (IPA), which cross-claimed against Optus for indemnity for workers compensation payments which had been made to Mr Wright. At first instance, judgment was entered against Optus in favour of Mr Wright for $3,922,116.09. Judgment was given for IPA on Optus's cross-claim and for IPA on its cross-claim.

On appeal by Optus,^[6] Basten JA and Hoeben JA held that Optus did not owe the plaintiff a duty not to cause him mental harm, taking into account that s32 CLA imposes restrictions on the circumstances in which a person owes a duty of care to another with respect to ‘mental harm’ as defined in s27 CLA. The appeal was upheld, judgment was entered in favour of Optus and the plaintiff was ordered to pay Optus’s costs of the trial (excluding the costs associated with the cross-claims).

Gleeson JA in dissent held that that Optus was liable to Mr Wright. His Honour held that while in his opinion Optus had had some success in relation to reducing the amounts for two heads of damage, most of the time spent by the parties on both oral and written submissions was directed to liability issues on which he considered Optus had failed. The reductions in damages achieved by Optus were only about 3.5 per cent of the total judgment sum.

Gleeson JA considered one possible approach to costs was to make orders whereby each party pays a percentage of the other party’s costs, as explained in Calvo v Ellimark Pty Ltd (No. 2) [2016] NSWCA 197 at [11]:

‘...such a regime requires the determination of both parties’ solicitor:client costs, and effectively doubles the possibility for further dispute. In an area where, if one thing is clear, it is that a broad-brush approach is to be applied, the same substantive result can and in most cases should, be attained by an order that only part of a party’s costs be paid by the other party.’^[7]

However, in the circumstances of the present case, Gleeson JA held that justice required that Optus bear a significant proportion of Mr Wright’s costs of the appeal and considered an appropriate order would be that Optus pay 95 per cent of Mr Wright’s costs of the appeal.^[8]

Where an issue is clearly dominant or separable, a court may deprive the successful party of the costs relating to that issue on which the successful party did not succeed. The circumstances in which a party may be deprived of costs or a portion of the costs were reviewed in detail in Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No. 2).^[9] Factors identified by Slattery J included:

• where the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument;

• if an appellant loses on a separate issue argued on the appeal, which has increased the time taken in hearing the appeal; and

• where there is a mixed outcome in the proceedings.

MAXIMUM COSTS

Party:party costs have been limited to prescribed maximum amounts in ‘personal injury damages’ claims for legal services supplied from 7 May 2002. Schedule 1 to the Legal Profession Uniform Law Application Act 2014 (NSW) (LPULAA) provides that 'personal injury damages' has the same meaning as in Part 2 CLA.^[10] Most practitioners would be aware that the debate as to whether 'intentional torts', which are excluded from the application of Part 2 CLA, are also excluded from the definition of 'personal injury damages' for the purposes of the maximum costs provisions was resolved by the High Court in 2012.^[11] The High Court held that:

“‘Personal injury damages” in the 2004 Legal Profession Act means any and every form of damages that relate to personal injury to a person whether that injury results from a failure to take reasonable care or the commission of an intentional act with intent to cause injury.’^[12]

Section 61 LPULAA provides that Schedule 1 contains provisions relating to maximum costs in personal injury damages matters. Schedule 1 prescribes the maximum costs for legal services provided to a party in connection with a claim for personal injury damages, where the amount recovered on the claim does not exceed $100,000, to 20 per cent of the amount recovered or $10,000, whichever is the greater.

In the decision of Raad v VM & KTP Holdings Pty Ltd as Trustee for VM & KTP Nguyen Family Trust (No. 2),^[13] the Supreme Court considered the application of UCPR r42.34 to the plaintiff’s entitlement to costs. The plaintiff had obtained judgment for $75,547 in a negligence slip-and-fall occupier’s liability case so that the plaintiff’s costs were limited to maximum costs of $15,109 plus disbursements. UCPR r42.34 provides that where a plaintiff obtains judgment in an amount of less than $500,000 and the plaintiff would otherwise be entitled to a costs order, an order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted.

The Court considered the state of the medical evidence at the time the proceedings were transferred from the District Court, as the defendant had objected to the District Court's jurisdiction being increased, but did not object to the transfer to the Supreme Court. Up until receipt of the joint experts’ reports, the Court considered it was not unreasonable for the proceedings to have been transferred. The question was whether the continuation of the proceedings in the Supreme Court was warranted once the joint reports were received, which was two months before the trial date. The Court held that given the impending hearing date, in circumstances where the proceedings had been removed into the Supreme Court on reasonable grounds and without objection, UCPR r42.34 should not prevent the plaintiff obtaining a costs order in his favour.

The defendant then sought an order for indemnity costs on the basis of an offer of compromise served in the proceedings. While the plaintiff disputed the validity of the offer on the basis that it referred to deduction of unspecified amounts under the Health & Other Services (Compensation) Act 1995, the Court rejected this argument holding that while no deductions applied to the particular plaintiff, there was nothing in UCPR r20.26 that precluded the inclusion of such wording. The Court also held that there was no obligation for the defendant to provide particulars of the defendant’s claim to enable the plaintiff to consider fully the offer, as this requirement in UCPR r20.26(4) applies only where the plaintiff is the offeror.

VICTIM CLAIMS

Separate maximum costs provisions apply to legal services provided to a plaintiff in connection with a victim claim that is eligible to be satisfied from a victim trust fund. The

‘amount recovered’ on a claim is the full amount of the damages awarded (not just the amount ordered to be paid from a victim trust fund).^[14]

Section 26U CLA specifies that where the amount recovered on the claim does not exceed $100,000, maximum costs are fixed at 20 per cent of the amount recovered or $10,000, whichever is greater. Fixed percentages of 18 per cent, 16 per cent and 15 per cent or $20,000, $45,000 or $80,000, whichever is the greater, apply respectively where the amount recovered exceeds $100,000 but does not exceed $250,000; exceeds $250,000 but does not exceed $500,000; and exceeds $500,000.

Where the victim claim involves a personal injury damages claim, these amounts are replaced by those specified in Schedule 1 to the LPULAA,^[15] referred to above.

CONCURRENT TORTFEASORS

In circumstances where a defendant has identified a concurrent tortfeasor and the defendant fails to inform the plaintiff of relevant information about the identity of the person, or the circumstances that may make the other person a concurrent wrongdoer in relation to the claim, there may be costs consequences for the defendant. If the plaintiff unnecessarily incurs costs in the proceedings because the plaintiff was not aware that the other person may be a concurrent wrongdoer, s35A CLA provides that the court may order that the defendant pay all or any of those costs of the plaintiff.

As held by the Supreme Court in Sanderson Motors Pty Ltd v Lindsay Bennelong Developments Pty Ltd,^[16] s35A CLA does not require the plaintiff to join the concurrent wrongdoers for a costs order to be made against the defendant in this regard.

Conversely, where the plaintiff does join the concurrent tortfeasor, the defendant is at risk as to costs of the joinder, whether or not the plaintiff is successful.^[17]

MULTIPLE DEFENDANTS

Many CLA claims involve more than one defendant. Where a plaintiff succeeds in obtaining a costs order against more than one defendant, unless the costs order provides otherwise, each of the costs respondents will be jointly and severally liable to pay the costs concerned.^[18]

Where the plaintiff succeeds in obtaining a costs order against one defendant but not the other, unless the order specifies otherwise, the plaintiff is not required to apportion the general costs of the proceedings and is entitled to recover all costs of the proceedings, excluding costs related solely to the claim against the successful defendant.^[19]

CROSS-CLAIMS

An order for the costs of the claim or the proceedings does not automatically include the costs of a cross-claim^[20] and, for certainty, a plaintiff’s solicitor should ensure that a costs order specifies that the order includes the costs of the cross-claim.

The Court of Appeal has held that it is also within the scope of the Court’s power under CPA s98 to award costs in favour of a plaintiff against a cross-defendant not joined by that plaintiff where the cross-defendant was the effective cause of the litigation.^[21]

OFFER TO CONTRIBUTE

Where one or more of the defendants is successful against the plaintiff or in a cross-claim against another defendant, an offer to contribute under UCPR r20.32 may be made. UCPR r42.18 provides that the court must take into account both the fact and the amount of the offer in exercising its discretion as to costs. While the rule empowers the court to take into account the offer rather than mandating specific costs consequences as flow from the failure to accept an offer of compromise, the rule does not preclude a party seeking an order for indemnity costs in reliance on the offer.

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

This article has been prepared for Precedent by Costs Partners. For more information on Costs Partners, please go to www.costspartners.com.au.

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^[1] Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1425 at [25].

^[2] Cretazzo v Lombardi (1975) 13 SASR 4.

^[3] Windsurfing International Inc v Petit [1987] AIPC 90-441 at 37,861-37,862 (Waddell J).

^[4] [2008] NSWCA 117 at [121].

^[5] [2015] NSWSC 160.

^[6] Optus Administration Pty Limited v Glenn Wright by his tutor James Stuart Wright [2017] NSWCA 21 (17 February 2017).

^[7] Ibid, [352].

^[8] Ibid, [353].

^[9] [2014] NSWCA 219.

^[10] Schedule 1 clause 1 LPULAA.

^[11] See Certain Lloyds Underwriters Subscribing to Contract No. IH00AAQS v Cross [2012] HCA 56 and New South Wales v Williamson [2012] HCA 57.

^[12] New South Wales v Williamson [2012] HCA 57 at [18].

^[13] Raad v VM & KTP Holdings Pty Ltd as Trustee for VM & KTP Nguyen Family Trust (No. 2) [2016] NSWSC 1233 (7 September 2016).

^[14] Civil Liablity Act 2002 sub-s26U(5).

^[15] Civil Liablity Act 2002 sub-s26U(3).

^[16] Sanderson Motors Pty Ltd v Lindsay Bennelong Developments Pty Ltd [2014] NSWSC 846.

^[17] Hanson v Tamworth Regional Council [2011] NSWDC 72.

^[18] Rushcutters Bay Smash Repairs Pty Ltd v H McKenna Netmakers Pty Ltd [2003] NSWSC 670.

^[19] Dimos v Willets [2000] VSCA 154.

^[20] Colton v McCaughey [1969] 3 All ER.

^[21] Vameba Pty Ltd v Markson [2008] NSWCA 266.