Apportionment of defendants' costs in workers compensation litigation

The Supreme Court has recently had cause to consider how to apportion costs between two defendants, one of whom is the employer.

The problem arises because if the plaintiff is successful against his employer, the plaintiff will recover costs pursuant to schedule 7 of Workers Compensation Regulations 2010.  If the plaintiff also succeeds against another defendant, then the plaintiff will be entitled to recover costs against that defendant unfettered by the workers compensation legislation.

Previous Case Law

Surprisingly, there are very few cases which deal with this problem.  The majority of judgments dealing with two or more defendants, one of whom is an employer, simply refer to costs orders being made in favour of the plaintiff.

However, a different approach was adopted by the Court of Appeal in Chubs Constructions Pty Ltd v Chamma [2009] NSWCA 98.  In that case, the trial judge had held the employer, Chubs Constructions, to be 25% liable for the accident, with the non-employer, Soliman & Sons, to be 75% liable.  The trial judge ordered Chubs Constructions to pay 25% of the plaintiff’s costs on a party/party basis, with Soliman to pay the remaining 75%.

The trial judge also made orders that Chubs Construction was to pay the costs on an indemnity basis, a decision from which Chubs Construction appealed.  The Court of Appeal determined that issue in Chubs Constructions Pty Ltd v Chamma  [2009] NSWCA 98 holding that the plaintiff was not entitled to obtain an order for indemnity costs against his employer.  The Court of Appeal therefore ordered Chubs Construction to pay 25% of the plaintiff’s trial costs on a party/party basis.  In practical terms, this meant that Chubs Construction paid 25% of the costs which the plaintiff would otherwise have obtained under schedule 7.

Taboas v Abigroup

These issues have again come before the Court in Taboas v Abigroup Contractors Pty Ltd [2014] NSWSC 1461.  The judge found the employer, Abigroup, and the non-employer VSL Australia, to be equally liable for the accident.

It was therefore submitted for Abigroup, following Chubs v Chamma, that Abigroup should only be liable for 50% of what would otherwise have been the plaintiff’s full entitlement to costs under schedule 7.  VSL made a similar application that it should only be liable to pay 50% of the plaintiff’s costs calculated on a common law basis.

Both defendants failed in these submissions, Justice Harrison holding that the plaintiff can recover full schedule 7 costs against Abigroup, and full common law costs against VSL.  The judge explained that Abigroup would only be liable for that proportion of the plaintiff’s costs which are attributable against Abigroup, and indeed said that the fact that both defendants were sued in the one proceedings should have led to economies of scale for each of them, compared to the position if they had been sued separately.

The judge made no comment as to how the defendants should avoid duplicating each other’s costs, to ensure that the plaintiff does not receive over-compensation for his costs.

Comment

This decision was delivered on 24 April 2014, so one or both of the defendants may file an appeal against the decision.  However, as it stands, the judgment in Taboas stands as a warning to workers compensation insurers that their costs exposure in multi-defendant work injury damages litigation may not be reduced to take account of the degree of the insured’s negligence.  Rather, workers compensation insurers need to give consideration to assessing their total liabilities on the basis that their insureds may be liable for full schedule 7 costs, irrespective of the extent of the insured’s contribution to the accident.

If you have any questions regarding this article, please contact Lian Chami.

Author: David Greenhalgh