Amaca Pty Limited v Harry Daines Pty Limited  NSWCA 317
This case is the appeal from the unreported decision of the Dust Diseases Tribunal ('DDT') of 19 April 2011 on which I reported in the May 2011 Edition of Legal Directions. The Court of Appeal dismissed Amaca's application for leave to appeal and made some comments as to when a party who had achieved a 'result' but not a judgment will not be entitled to recover costs.
Mr Nicholson sued Amaca in the Dust Diseases Tribunal and alleged that he had developed asbestos disease in the course of his employment by Daines as a consequence of inhaling dust from Amaca's asbestos cement building products. Amaca filed and served a cross claim against Daines seeking contribution and / or indemnity pursuant to s5 of the Law Reform (Miscellaneous) Provisions Act.
The proceedings were subject to the Claims Resolution Process prescribed by the Dust Diseases Tribunal Regulation ('CRP'). The Regulation operates to make a 'rough and ready' apportionment between Amaca and Daines in accordance with a prescribed scheme and on the assumption that both were in breach of a duty of care owed to the plaintiff. That apportionment is binding on the parties for the purpose of paying the plaintiff's settlement or verdict although not binding upon them for the purpose of the apportionment.
Either Amaca or Daines could have disputed the apportionment determined in accordance with the CRP but, in order to avoid an indemnity costs order it is necessary for the disputing party to materially improve its position from the result arising from the CRP.
Ultimately Mr Nicholson settled with Amaca on a significantly compromised basis. Daines objected to the entry of judgment in favour of Amaca on the cross claim but consented to make the contribution in accordance with the Regulation.
At all times Daines had disputed that it was liable to contribute because, it said, it was not in breach of a duty of care owed to the plaintiff. Daines maintained that its employment with the plaintiff did not require him to be exposed to asbestos dust and fibre and, if he was exposed as alleged, that amounted to exposure outside the course of his employment. If that argument succeeded there was potential for Amaca to be held liable to the plaintiff but fail on the cross claim.
Despite its dispute as to liability, Daines was content to pay its proportion of the settlement and not agitate the cross claim further.
Amaca sought its costs of the cross claim. Before O'Meally, the DDT argued that it was entitled to judgment on the basis that it had achieved a 'substantial result' (being the contribution paid by Daines following the CRP) and, it followed from the entitlement to a judgment, that it was also entitled to costs of the cross claim.
Daines successfully resisted Amaca's application for a judgment relying on Court of Appeal Authority (Millard) to the effect that the CRP did not entitle a cross claimant to a judgment on a cross claim but rather only required the cross defendant to contribute by operation of the Regulation.
Daines submitted the appropriate order in the light of the fact that Amaca did not propose to further agitate its cross claim was for the cross claim to be dismissed. Thereafter Daines submitted that the question of the appropriate costs order should be considered by UCPR Rule 42.20 which states the usual position to be that the cross claimant would pay the cross defendant's costs however Daines submitted that the trial judge should exercise his discretion in the circumstances to make no order as to costs.
That submission was based upon observations made by McHugh J of the High Court of Australia in Ex Parte Lai Qin to the effect that in the absence of a decision on the merits, a capitulation by one or other of the parties, or where one party has not acted reasonably, the appropriate order following a settlement would usually be 'No order as to costs'.
Amaca sought leave to appeal.
On appeal Amaca made a different argument to that which had been pursued in first instance. Its primary argument was that Daines had capitulated by not disputing the contribution and as such on a proper exercise of the discretion provided in Rule 42, O'Meally from the DDT ought to have ordered Daines to pay Amaca's costs of the cross claim.
The Court of Appeal noted the fundamental difficulty in Amaca's application for leave to appeal was that it asserted the trial judge had failed to properly exercise his discretion in circumstances to award costs in a fashion which was not argued. Sackville AJA opined that:
'The discretion conferred on the primary judge cannot be said to have miscarried when he was not invited to take into account the matters now relied upon by Amaca.'
Although that observation seems to the writer to have been fatal to Amaca's application for leave, the court helpfully provided some guidance as to how costs in this situation ought to be assessed.
The court did not accept that Daines' decision not to dispute the contribution and thus force Amaca to run its cross claim amounted to capitulation. The court noted that Daines' position amounted to a compromise, it being contribution at less than the letter of Amaca's claim (being, on one prayer for relief - a claim for indemnity) and also noted that in order to succeed in establish capitulation Amaca would bear an onus of establishing the reason why Daines decided to pay. There was no evidence to support the submission that Daines accepted that Amaca's case against it would succeed, indeed, the court noted from the correspondence between the parties that Daines maintained that Amaca would not succeed.
The court accepted that the risks arising from litigation generally were taken into account in Daines' compromise of its position.
The court noted with approval the following statement of McHugh J of the High Court in Ex Parte Lai Qin:
The Court of Appeal held that both Amaca and Daines had acted reasonably in the confines of the statutory regime giving rise to the contribution and as such the order there be no order as to costs made by the primary judge was appropriate.
The decision is of interest to parties subject to apportionment via a statutory scheme. This 'rough and ready' apportionment in schemes exists in a number of areas of practice including dust diseases and some aspects of building legislation.
This decision indicates that when considering costs, absent unreasonable conduct by one party in causing the other to unnecessarily incur costs, or evidence that one party has capitulated because the case brought by or against it is untenable or overwhelming (which situation would usually result in a judgment), it is difficult to persuade a court to make a costs order in favour of one party against another. The underlying tenor of the decision is that settlement style apportionments imposed by statutory schemes should result in 'settlement type' costs orders - being that each party will be liable for their own costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.