These reasons for decision deal with an application by the defendant, Bunnings Group Ltd, for an order for indemnity costs against the plaintiff. The application follows the handing down of the court's judgment after the completion of the final hearing in the proceedings: Baker v Bunnings Group Ltd [2020] NSWDC 310. The plaintiff was held to be unsuccessful in her claim in negligence against the defendant. These reasons assume a familiarity with the judgment handed down on 18 June 2020 ("the Judgment").
In its Amended Notice of Motion filed in court with leave on 31 July 2020, the defendant seeks the following orders which are stated to be sought following the setting aside or variation of the order for costs made by the court in the defendant's favour on the ordinary basis on 18 June 2020:
"1. The plaintiff is to pay the costs of the defendant of the proceedings up to and including 13 June 2020 2019 on an ordinary basis as agreed or assessed.
2. The plaintiff is to pay the costs of the defendant of the proceedings from 14 June 2020 2019, including the costs of and associated with this Motion, on an indemnity basis as agreed or assessed."
In support of the orders sought in the Amended Notice of Motion, the defendant read two affidavits of Michael James Cooper dated 30 June 2020 and 1 July 2020, respectively. Annexed to the earlier affidavit is a letter dated 13 June 2019 from the solicitors for the defendant to the solicitors for the plaintiff which was emailed to them on that date serving an Offer of Compromise dated 13 June 2019. The Offer of Compromise dated 13 June 2019 is stated to be made in accordance with Part 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") and on its face complies with the requirements for a valid offer of compromise pursuant to Part 20.26 and Part 42.15A of the UCPR. A similar offer of compromise was sent by the solicitors for the defendant by letter dated 27 November 2019. The latter Offer is relevant as it was served at or about the date on which the defendant's occupational therapist report was served, being a report of Ms Hammond. The real issue in dispute between the parties is whether an order for indemnity costs as sought should be made in the defendant's favour or whether the court should "otherwise" order within Part 42.15A(2) of the UCPR.
The following matters should be noted in relation to the proceedings:
1. The plaintiff filed her Statement of Claim on 8 October 2018;
2. The defendant filed its Defence on 20 December 2018, denying liability. It was pleaded that the kerb in question was an "obvious risk";
3. A number of medical and allied health reports relied on by the parties at the final hearing were served in 2020. These include the third report of Dr Bodel, the fourth report of Dr Bodel, the third report of Dr Porteous, the report of Ms Skibby, the report of Dr Cromer and the joint recorded opinions of Ms Hammond and Ms Skibby;
4. The plaintiff relied on a report of Mr John Dimopoulos, engineer, dated 28 February 2019 which asserted, contrary to the court's findings, that the kerb near where the plaintiff tripped was damaged and defective: Judgment paragraphs 114-121 and 215-216. Mr Dimopoulos had inspected the accident area for the purposes of his report;
5. The evidence in chief of the lay witnesses was given orally. There were no affidavits or statements in evidence. The defendant called four lay witnesses who were current employees of the defendant. Their evidence was of some significance to the court's findings of fact (paragraph 211 of the Judgment) and its findings as to liability (paragraphs 229-230 of the Judgment). The fact these witnesses were to be called, and the substance of their expected evidence, was not referred to in either covering letter to the Offers;
6. The Offers of Compromise were made about 12 months and six months before the final hearing and thus the plaintiff had no time pressure in considering them;
7. Further documents were produced during the final hearing by the defendant pursuant to a subpoena dated 25 October 2018: see the affidavit of Mr Cooper dated 11 May 2020 explaining the late production: see Exhibit 2 in the proceedings. A number of additional investigation reports relating to accidents at the Bunnings retail premises were produced pursuant to the subpoena during the final hearing. None of these showed an accident at the relevant area but were of some help in confirming a system of reporting of and recording accidents.
Section 98(1)-(4) of the Civil Procedure Act 2005 (NSW) provides as follows:
"98 Courts powers as to costs
(1) Subject to rules of court and to this or any other Act -
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.
(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to -
(a) costs up to, or from, a specified stage of the proceedings, or
(b) a specified proportion of the assessed costs, or
(c) a specified gross sum instead of assessed costs, or
(d) such proportion of the assessed costs as does not exceed a specified amount."
Part 20.26 of the UCPR provides as follows:
"20.26 Making of offer
(1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms.
(2) An offer under this rule -
(a) must identify -
(i) the claim or part of the claim to which it relates, and
(ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and
(b) if the offer relates only to part of a claim in the proceedings, must include a statement -
(i) in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or
(ii) in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and
(c) must not include an amount for costs and must not be expressed to be inclusive of costs, and
(d) must bear a statement to the effect that the offer is made in accordance with these rules, and
(e) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and
(f) must specify the period of time within which the offer is open for acceptance.
(3) An offer under this rule may propose -
(a) a judgment in favour of the defendant -
(i) with no order as to costs, or
(ii) despite subrule (2)(c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or
(b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or
(c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer.
(4) If the offeror makes an offer before the offeree has been given such particulars of the offeror's claim, and copies or originals of such documents available to the offeror, as are necessary to enable the offeree to fully consider the offer, the offeree may, within 14 days of receiving the offer, give notice to the offeror that -
(a) the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents, and
(b) in the event that rule 42.14 applies to the proceedings, the offeree will seek an order of the court under rule 42.14(2).
(5) The closing date for acceptance of an offer -
(a) in the case of an offer made two months or more before the date set down for commencement of the trial - is to be no less than 28 days after the date on which the offer is made, and
(b) in any other case - is to be such date as is reasonable in the circumstances.
(6), (7) (Repealed)
(8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer.
(9) An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides.
(10) A party may make more than one offer in relation to the same claim.
(11) Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer.
(12) A noti ce of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division."
Part 42.15A of the Uniform Civil Procedure Rules provides as follows:
"42.15A Where offer not accepted and judgment no less favourable to defendant
(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer.
(2) Unless the court orders otherwise -
(a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and
(b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis -
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made."
I find the following matters established:
1. The first offer was made by the defendant on 13 June 2019 by way of the Offer of Compromise of that date which was emailed to the solicitors for the plaintiff. A similar offer was made on 27 November 2019 in the same amount;
2. The offers were not accepted by the plaintiff;
3. The defendant has obtained an order or judgment on the claim no less favourable to the defendant than the terms of the offers;
4. With the reduction for contributory negligence, the amount offered was more than the amount the court would have awarded if liability and causation were established;
5. The requirements of Part 20.26 were satisfied as to both offers. This was conceded in argument by counsel for the plaintiff.
The relevant principles relating to whether a court should "otherwise order" should be set out.
In AB v Keanes (No 2) [2019] NSWDC 765 I stated as follows at paragraphs 15-21:
"15. In paragraph 34 of Boateng v Dharamdas, above, the court stated as follows:
"This Court would also not be in a position to decide whether an order "otherwise" should be made for the purposes of r 42.15(2). The argument before this Court identified, without fully addressing, contentions as to whether the respondent's rejection of the Offer of Compromise was reasonable. The mere fact that the rejection of an Offer of Compromise is reasonable is not enough to displace the rule but the reasonableness of the rejection remains a relevant consideration in the exercise of the court's broad discretion to "order otherwise" (The Uniting Church in Australia Property Trust (NSW) v Takacs (No 2) [2008] NSWCA 172 at [15] and [18], compare [32]-[33]; Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [48], [60] and [61])."
16. The plaintiff accepts that the onus is on the plaintiff in the light of the offers of compromise to demonstrate that the court should make an order in relation to costs different to the order contemplated by Part 42.15(2). In Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391, McColl JA stated as follows at paragraph 45:
"45. Accordingly, the question is whether, as the appellant submits, the Court should "order otherwise": UCPR 42.15A(2). The onus is on the appellant to demonstrate why the Court should depart from the consequence of his rejection of the Offer: Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 (at [35]) per McColl JA (Mason P and McClellan CJ at CL agreeing); Miwa (at [16])."
17. McColl JA stated the following in paragraph 48 in relation to the reasonableness of the offer:
"It is impossible exhaustively to state the circumstances in which the court's discretion to "order otherwise" might be exercised: New South Wales Insurance Ministerial Corporation v Reeve (at 102). The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: Morgan v Johnson (at 582). However that does not mean that reasonableness of the rejection is an irrelevant consideration: see Seven Network Ltd v News Ltd (at [64] - [67]); Uniting Church in Australia Property Trust (NSW) t/as Northaven Retirement Village v Takacs (No 2) [2008] NSWCA 172 (at [15]) per Hodgson JA (McColl JA agreeing); cf Basten JA (at [32] - [33])."
18. This view was confirmed by the majority in Boateng v Dharamdas at [34].
19. In Vale v Eggins (No 2) [2007] NSWCA 12 at [22] the Court of Appeal found, in circumstances where a party had not served all the medical reports on which it relied at the time the offer of compromise was made and which were relevant to an assessment of the offer, that the failure of service in the context of that case, disentitled the offering party from obtaining an award of indemnity costs.
20. Vale, above, was cited with approval by the Court of Appeal in Fairall v Hobbs (No 2) [2017] NSWCA 133.
21. In South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [85] Hunt AJA (with whom Mason P and McColl JA agreed) stated that indemnity costs should not be awarded in that case as "it would be unfair to a defendant to make an order for indemnity costs when the evidence at the trial is different from that known to the defendant at the time of the offer.""
In Outerbridge trading as Century 21 Plateau Lifestyle Real Estate v Hall (No 2) [2020] NSWDC 8 I stated as follows in paragraphs 12-14:
"12. Where there is a valid offer of compromise made to a party, it is for the offeree to establish a proper basis for depriving the offeror of the prima facie entitlement to indemnity costs: Nominal Defendant v Hawkins [2011] NSWCA 93 at [53] and [56] per Hodgson JA (with whom Beazley JA agreed). Exceptional circumstances are not necessary to be established before the court may "otherwise order": Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [15]. The discretion to "otherwise order" should be exercised having regard to all the circumstances of the case: Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [32].
13. In Toyota Finance Australia Ltd v Gardiner (No 2) [2016] NSWCA 181 the Court of Appeal stated at [13]-[15] as follows.
"13. Rule 42.15A of the UCPR applies when a defendant has made an offer which is not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of that offer. In those circumstances, the defendant is entitled to a special costs order from the time the offer was made, unless the Court orders otherwise. This rule is applicable to appeals: UCPR rr 51.47 and 51.48.
14. The making of a valid offer of compromise does not, however, guarantee a special costs order. This is a matter for the Court's discretion.
15. It is clear that "where no significant compromise at all is made by a party to an appeal, the default position provided for in the rules will not be applied": Mega-top Cargo Pty Ltd v Moneytech Services Pty Ltd [2016] NSWCA 3 at [5]; Taheri v Vitek (No 2) [2014] NSWCA 344 at [9]-[11]."
14. In Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [40] and [43], McColl JA (with whom Gleeson JA and Sackville AJA agreed), in considering the position under Part 42.15A, stated as follows:
"40. The consequence is that a prima facie entitlement arose in favour of the respondent to have costs awarded in accordance with UCPR 42.15A: New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 (at 102) per Gleeson CJ (Clarke and Cripps JJA agreeing); Leichhardt Municipal Council v Green [2004] NSWCA 341 (at [19]) per Santow JA (Stein JA agreeing). This is because, from "the time of non-acceptance 'notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise'": Morgan v Johnson (1998) 44 NSWLR 578 (at 581-582) per Mason P (Sheller JA agreeing).
…
43. In my view in the circumstances of this case, the Offer did constitute a genuine offer of compromise. The opportunity to offer any compromise for the respondent was limited. The substantive issue on appeal was an all or nothing determination on the liability issue. There was no range of verdicts as in the case of a challenge to an award of damages or to an assessment of contributory negligence or contribution between tortfeasors: cf Leichhardt Municipal v Green (at [22] - [26]); Regency Media Pty Ltd v AAV Australia Pty Ltd (at [29]). Thus the only room for compromise was in relation to costs, in which respect the respondent was prepared to forego the costs order it had been awarded by the primary judge and any costs order it might ordinarily obtain in this Court by the operation of UCPR 42.1. That constituted a "real concession": Clark v Commissioner of Taxation [2010] FCA 415 (at [90] - [92]) per Greenwood J.""
I note that in both letters from the solicitors for the defendant to the solicitors for the plaintiff, reliance is also placed on each offer being a Calderbank offer: see Calderbank v Calderbank [1975] 3 All ER 333. In AB v Keanes (No 2), above, I stated as follows at paragraphs 42-44:
"42. The first offer of compromise was served with a covering letter relying on the Calderbank principles. These were not addressed in submissions but I will consider them briefly.
43. The rejection of a Calderbank offer by a party does not necessarily mean that indemnity costs are ordered as a matter of course. The applicant for indemnity costs must demonstrate to the court that the rejection of the offer was "unreasonable" in all the circumstances of the case: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19]; Jones v Bradley (No 2) [2003] NSWCA 258 at [12]; Russell v Edwards (No 2) [2006] NSWCA 52 at [8]; Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [7].
44. In NRMA Insurance for the Nominal Defendant v Al-Bayati (No 2) [2019] NSWCA 14, the Court of Appeal stated in paragraph 10 as follows:
"[10] The party making an offer of compromise or Calderbank offer bears the onus of satisfying the court that it should exercise the costs discretion in its favour: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61; Commonwealth of Australia v Gretton [2008] NSWCA 117 at [46]; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd (No 2) [2008] NSWCA 273 at [31] ...""
The defendant submitted that there are no compelling reasons why an indemnity costs order should not be made in the light of the Offers of Compromise which were not accepted. The defendant submits, correctly, that it has bettered both Offers. It points to the Incident Report as making the plaintiff aware that the kerb was designed in the way it was in the light of other kerbs: part of Exhibit A on the application. Ms Hammond's report was served with the second offer. Dr Cromer's report had only a minor effect on quantum. Oral evidence by lay witnesses is usual in the District Court. There is no requirement to disclose the likely evidence they will give.
The plaintiff submitted:
1. The plaintiff reasonably relied on Mr Dimopoulos' report;
2. She was unaware at the time of the defendant's lay witnesses' evidence;
3. There was no covering letter to the Offers disclosing a general outline of that evidence;
4. The Incident Report referred to "wear" on the kerb;
5. Further incident reports were served during the trial but they were later and of less relevance;
6. There was a proper basis established to "otherwise order";
7. In any case, the defendant should not get its costs of the defendant's served liability reports which were rejected or the costs of the argument as to their admissibility.
The defendant's application has a number of factors in its favour. However, in my view, in all the circumstances, the court should decline to order indemnity costs as sought and should "otherwise order" in these proceedings for the following reasons:
1. I accept that the offers were substantial ones and involved a genuine degree of compromise by the defendant;
2. However, in my view the rejection of the offers by the plaintiff was reasonable at the time they were made. There is no evidence that the plaintiff was aware of the likely evidence which would be given on behalf of the defendant including by the four lay witnesses called by the defendant who gave significant evidence. While this is not decisive it is a factor to be considered in the exercise of the discretion. The defendant could have revealed a summary of this evidence in the covering letters to the Offers. Further, the evidence served was not complete. Additionally, Ms Hammond's report was complex and required careful consideration. The plaintiff was claiming substantial non-economic damages and future commercial care costs. She was not a young woman. Her injury was serious. However, as is clear from the authorities cited, the mere fact that the rejection of an offer of compromise is reasonable is not enough to displace the usual rule but the reasonableness of the rejection remains a relevant consideration in the exercise of the court's broad discretion to "order otherwise";
3. It is accepted that the onus is on the plaintiff in the light of the Offers of Compromise to demonstrate that the court should "otherwise order";
4. In the present case, at the time the offers were made, the defendant had not served all of its medical reports including the report of Dr Cromer, endocrinologist, dated 8 April 2020 and in the case of the first offer, the report of Ms Hammond, occupational therapist. These reports were relevant to the assessment by the plaintiff of the quantum of the offer. However, I accept the defendant's submission that Dr Cromer's report had only a minor effect on the quantum of damages;
5. There was late production by the defendant of the further incident reports relating to accidents at the centre. These confirmed (together with the evidence of the lay witnesses) a system which indicated an absence of reported or known accidents at the relevant area. This was of some relevance to liability;
6. The plaintiff had the report of Mr Dimopoulos in her favour dated 28 February 2019. There was no evidence a contrary expert report had been served at the time of the offers. The report of Mr Dimopoulos was prepared on an incorrect basis. There is no reason the plaintiff should have been aware of this at the time the offers were made. The relevant Incident Report indicated a belief that the kerb was constructed with a sloping design but this was inconsistent with Mr Dimopoulos' expert report. It was also only the belief of one person on the face of the Incident Report. Mr Dimopoulos' report was relevant to the issue of liability;
7. Accordingly, the plaintiff was not fully informed of the case to be made against her and had the benefit of an expert report prepared on an incorrect basis at the time the Offers of Compromise were made.
In my view, it would be unfair to the plaintiff in those circumstances to make an order for indemnity costs when the evidence at the trial was different from that known to the plaintiff at the time of the offers and where the plaintiff was not aware of the substance of the oral evidence likely to be given at the trial by the defendant's lay witnesses. The conclusions in the report of Mr Dimopoulos as indicated above are also very relevant. Therefore, in my opinion in the exercise of my discretion I should "otherwise order" in the present case.
In my view, indemnity costs pursuant to Calderbank principles should also not be awarded. The defendant has not in my view demonstrated to the court that the rejection of the offers was "unreasonable" in all the circumstances by the plaintiff. This is substantially for the same reasons given in relation to rejecting the application pursuant to the Offers of Compromise. Differences of opinion could be reasonably taken in relation to the appropriate award for non-economic loss in the proceedings. There were also ultimately substantially different views by the occupational therapists. Further, there is no evidence before me that the plaintiff was aware of the substance of the evidence which would be likely given by the four lay witnesses for the defendant. She had in her possession the incorrect report of Mr Dimopoulos. In all those circumstances, I do not consider that the plaintiff's failure to accept the offer was unreasonable.
The defendant having failed on its application for indemnity costs, I see no reason why the usual order for costs should not be made on the Amended Notice of Motion. Having regard to my conclusions, I also do not disturb the costs order already made in favour of the defendant.
However, any assessment of costs also needs to take into account the rejected liability reports of the defendant (reports of Professor Alais and Professor Cooke). Although it is a matter for any assessor, I do not consider the costs relating to the preparation of the reports should be allowed. I do not consider that there should be any consideration of the time taken to argue their admissibility at the trial. The argument was only one aspect of evidential issues. I accept the defendant's submission on the latter point.
I therefore make the following orders:
1. The Amended Notice of Motion filed in court on 31 July 2020 is dismissed.
2. The defendant is to pay the plaintiff's costs of the Amended Notice of Motion filed on 31 July 2020 as agreed or assessed.
3. The costs order made in favour of the defendant on 18 June 2020 is confirmed.
[3]
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Decision last updated: 14 August 2020