SA DECISION IS A WARNING TO CO-DEFENDANTS UNWILLING TO NEGOTIATE ON SETTLEMENT OFFERS
June 7, 2017
Oliver v ACN 007 870 484 Pty Limited & 7 Ors (No.3)  SADC 52 (His Honour Judge Gilchrist – District Court of South Australia – 19 May 2017)
This decision is relevant to defendants seeking contribution from joint and severally liable tortfeasors when faced with a settlement offer in circumstances where the co-defendant / cross-defendant will not participate in negotiations and/or agree that the settlement offer is reasonably accepted. The decision not to accept a ‘reasonable’ settlement offer may be held to amount to a failure to mitigate loss such that the recalcitrant contributing party could be held liable to pay its share of the rejected offer rather than the quantum of a later higher settlement or verdict.
Mr Oliver developed mesothelioma allegedly as a result of the negligence of his employer Myer and BI (Contracting) Pty Limited (BI), being a company that sprayed asbestos containing fire rating material in Myer’s premises. Mr Oliver was exposed to asbestos dust and fibre both as a consequence of BI’s product and other ‘non-BI’ products in the course of employment by Myer.
Prior to trial, Mr Oliver served an offer of compromise in the sum of $420,000 plus costs. Myer wrote to BI advising that it considered that the $420,000 offer was reasonable and should be accepted. Myer sought that BI agree to this proposal; BI did not.
The case proceeded to trial and, partway through the hearing, Myer settled for a payment of $485,000 plus costs. Contribution Proceedings continued between Myer and BI.
In the hearing of the Contribution Proceedings, issues arose as to the appropriate apportionment of liability between Myer and BI, whether the settlement figure reached as between Mr Oliver and Myer was reasonable and, even if the settlement figure reached was reasonable, whether BI’s liability to contribute should be limited to a contribution toward $420,000 plus costs on the basis that Myer had failed to mitigate its loss by not accepting that lower offer.
Ultimately Judge Gilchrist considered that on the facts of the exposure the appropriate apportionment between BI and Myer was 70% / 30% respectively. His Honour also concluded that the settlement at $485,000 plus costs was reasonable, because Mr Oliver’s expectation in damages exceeded $485,000 plus costs.
The most significant aspect for consideration by frequent litigants in multi-defendant cases is His Honour’s assessment of BI’s mitigation argument. His Honour held that Myer had failed to mitigate its loss by not accepting the offer of $420,000 plus costs. Myer’s conduct in writing to BI asserting that to be a reasonable settlement figure was taken by His Honour to be a clear indication that Myer considered that figure to be a sensible settlement (and bearing in mind His Honour’s view as to the potential damages recoverable by Mr Oliver as exceeding $485,000 plus costs, correctly so).
His Honour rejected Myer’s argument that its conduct in not negotiating with Mr Oliver was reasonable in light of ‘liability issues’ [namely, requiring Mr Oliver to establish the fact of employment and exposure in the course of employment to succeed]. His Honour found the defence to be of no real substance and was not persuaded by that argument, noting Mr Oliver’s pleaded case was quite specific as to the employment period, he testified in a forthright and compelling fashion as to employment and exposure, and Myer ultimately did not call any evidence to contradict Mr Oliver’s evidence on these points.
Although accepting that a prior opportunity to settle for less than the sum ultimately agreed upon will not always amount to a failure to mitigate loss, in the circumstances of Myer’s case, His Honour found the decision not to accept $420,000 plus costs was a failure to mitigate. Consequently, the appropriate order against BI was to contribute 70% to $420,000 plus 70% to the plaintiff’s costs incurred up to the timing of that offer, rather than contribution to the ultimate settlement payment of $485,000.
His Honour’s decision is made in the face of the fact that, on one view, Myer rather than BI was the sensible party. Myer endeavoured to obtain a concession by BI that payment of $420,000 plus costs was a reasonable settlement. At that stage of the negotiations, BI had taken the view that the plaintiff’s case was worth significantly less. On another view, BI’s conduct in refusing to recognise the appropriateness of the settlement figure was unreasonable conduct which impeded Myer’s desire to resolve the claim.
Had Myer done so in the absence of BI’s agreement and before the hearing of the plaintiff’s evidence, it would have been at significant tactical risk in the conduct of the contribution proceedings. In South Australia, Murphy determined that the original plaintiff’s affidavit is not admissible in Contribution Proceedings, as the absence of an opportunity to cross-examine the now deceased witness amounts to sufficient prejudice to exclude that document. Thus settlement without a mechanism to permit BI to cross-examine the primary witness [Mr Oliver] on liability and quantum would create significant difficulty for Myer in discharging its onuses against BI. Naturally, Myer could not be certain of Mr Oliver testifying after a settlement, as he may be unavailable, either by a lack of inclination to do so or death from mesothelioma.
Accordingly, a defendant who settles or runs to a verdict is at significant risk of failing to obtain a contribution to the settlement / judgment figure if it has not accepted an earlier, lower, offer, albeit that acceptance of that earlier offer would have put the rejecting party at a forensic disadvantage in pursuing the contribution proceedings.
The decision of Judge Gilchrist displays a different approach to the position arguable in NSW following the Ruling of Curtis DDTJ in QBE Insurance (Australia) Ltd v CSR Limited  NSWDDT 7 (9 April 2009). In that case, CSR frustrated settlement at a mediation. The plaintiff made an offer which QBE wished to accept but did not, due to CSR refusing to contribute in accordance with an interim apportionment determination. [This protocol – unique to NSW asbestos litigation – binds defendants to pay settlements or judgments in shares prescribed by a Determination and litigate contribution at a later stage.] At that time, CSR considered the value of the claim to be substantially lower than the offer QBE wished to accept. Ultimately, settlement was achieved during the trial in a higher amount than the offer and CSR agreed to contribute. QBE then successfully obtained an order that CSR pay its costs on an indemnity basis from the date of the mediation to the date of settlement. Curtis DDTJ accepted that the unreasonable attitude of CSR at the mediation left QBE in a position where it could not settle, and thus was forced to progress the matter to trial. In doing so, His Honour rejected CSR’s argument that QBE could have settled with the plaintiff and maintained Contribution Proceedings.
It will be interesting to see if Myer appeals this decision, which is likely to have a recurring impact.
Authored by Stephen Taylor-Jones, Partner, Sydney.
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