Barrett v Lets Go Adventures Pty Ltd

The relevant statutory provisions and principles

1. The relevant provisions are ss 60 and 98 Civil Procedure Act 2005 (NSW) and rr 42.4, 42.5, 42.13 and 42.14 Uniform Civil Procedure Rules 2005 (NSW) ("UCPR").
2. In Oshlack v Richmond River Council (1998) 193 CLR 72, McHugh J noted that, while the discretion to award indemnity costs is broad, it must be exercised judiciously and not capriciously. In particular, such orders should not be made to punish a litigant.
3. As the plaintiff concedes that the offer of compromise was not valid, and not expressed in the alternative to be a Calderbank offer, it is not necessary to set out the relevant principles on these issues. Both counsel addressed me on the basis that if an offer of compromise was invalid and a Calderbank letter contained insufficient information, that meant that the offer could not be considered sufficient. However, even an invalid offer can be sufficient to trigger costs: Lowe v Lowe (No 3) [2015] NSWSC 1800.
4. The principles relevant to Calderbank offers are set out in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [38]-[46] and Illawarra Hotel Co Pty Ltd v Walton Construction Pty Ltd (No 2) [2013] NSWCA 211 at [17].

The application under s 341 Legal Profession Act 2004 (NSW)

1. Applications for indemnity costs may be made under s 341 Legal Profession Act where, in order to avoid the costs cap in personal injury proceedings, a plaintiff asks the court to otherwise order (generally by way of an application for indemnity costs). For the court to otherwise order, it is generally necessary to establish that some aspect of the case was unsatisfactorily conducted by the defendant.
2. The circumstances under which an indemnity costs order will be made pursuant to s 341 discussed in Port Stephens Council v Theodorakis (No 2) (2006) 67 NSWLR 299, where Giles JA (at [6]) drew gave the following analogy to describe the difference between merely losing the case and having a hopeless case as follows: "Although the party failed in the case, it may have been "a damnednice thing - the nearest run thing you ever saw in your life", as Wellingtonsaid of Waterloo, and the action to advance the case could well have beenreasonably necessary in the endeavour to advance it. Napoleon lost atWaterloo, but his deployment of his forces must at least for the most part have been reasonably necessary in the endeavour to win the battle."
3. The precise parameters of s 341 are uncertain. Giles JA and Bryson JA came to differing conclusions as to its ambit, and neither judge referred to the costs provisions under the Civil Procedure Act 2005 (NSW) in the course of their respective judgments.
4. In Boyle v Coppock & Anor; Ek v Coppock & Anor [2014] NSWDC 244, Levy SC DCJ refers to this decision in the context of the underlying principles in s 56 Civil Procedure Act 2005 (NSW) and a Calderbank offer, but without linking the two. Levy SC DCJ made an order for indemnity costs by reason of the bringing of an application for summary dismissal that was "entirely misconceived" (at [7]) and not brought for the determination of the real issues in the proceedings (at [8]). In the course of so doing, his Honour underlined the importance of the principles in Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116.
5. Those principles are important in relation to this application. The New South Wales Court of Appeal has repeatedly affirmed, referring to Nowlan v Marson Transport Pty Ltd, that "trial by ambush", particularly by defendants in personal injury proceedings, is not an acceptable was to conduct litigation. While the essence of the adversarial system means that forensic tactics are to be expected, parties to litigation are nevertheless expected to take a "cards on the table" approach: Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80 at [60]; Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208 at [205]; Zisis v Knighton [2008] NSWCA 42 at [50].
6. More recently, the Court of Appeal referred to the relevance of proportionality issues under s 60 concerning costs in eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (2015) 90 NSWLR 451, but the relationship (if any) between proportionality and settlement offers remains uncertain.

The facts in this case

1. It is not in dispute in this case that the plaintiff assisted a diver named Mr Moore, in circumstances which the defendant conceded (at least in relation to the underwater section of the rescue) invoke the "good Samaritan" provisions of the Civil Liability Act 2002 (NSW). The plaintiff was preoccupied with assisting Mr Moore and did not seek any medical attention for himself, and his claim for those injuries and the subsequent disabilities are the subject matter of these proceedings.
2. The plaintiff visited Mr Moore about a week after this event, to see how he was. Mr Moore told the plaintiff that he had hit his head on the defendant's boat immediately before going into the water. The plaintiff passed this information on to his expert witness, Mr Coxon, who included in his report an account of Mr Moore having hit his head on the boat just before submerging. That report was served on the defendant's solicitors, who then engaged Associate Professor Mitchell, an expert in both diving and diving related injuries, to reply to it.
3. Rather surprisingly, Associate Professor Mitchell, the defendant's expert, did not mention that Mr Moore had struck his head at all, despite providing in his report not only an analysis of the diving incident but, more relevantly, drawing on his medical expertise to opine as to what was wrong with Mr Moore and what led him to get into difficulties in the first place.
4. What the plaintiff did not know, until shortly before the trial commenced, when Mr Moore's statement was served on the plaintiff's solicitors, was that not only had Mr Moore hit his head on the defendant's boat, but he had told the defendant's employee on the boat, Mr Shorter, that this had happened and he wanted to abort the dive. Mr Shorter had not permitted him to do so, telling him instead to dive down to find the plaintiff (who had submerged before these events) to tell him this.
5. Mr Moore's statement to this effect (set out at [111] of my previous judgment) was served shortly before the hearing because Mr Moore, who suffered from a condition known as arachnoiditis, was close to death and not in a position to be cross-examined. The plaintiff initially objected to the tender but, after medical evidence was tendered, withdrew the objection.
6. In the course of the application to tender the statement by reason of Mr Moore's unavailability, the solicitors for the defendant waived privilege and, in the course of providing correspondence with Mr and Mrs Moore, revealed that they had received Mr Moore's signed statement to this effect from Mrs Moore on 15 March 2015, fifteen months before the trial.
7. That makes it even more difficult to understand why this statement was not contained in Associate Professor Mitchell's report. Not only was this information about the plaintiff hitting his head contained in the expert report from Mr Coxon that he was answering but, if he also had Mr Moore's explanation as to why he submerged after hitting his head, that was also relevant as to liability.
8. As is set out in my judgment, on 15 June 2016, the fourth day of the hearing, counsel for the plaintiff then sought (and obtained) leave to amend the statement of claim to plead the following new particular of negligence: "By the defendant's servants advising Moore to continue to dive down from the surface shortly after Moore entered the water, when the defendant's servants knew or ought to have known that Moore had been struck in the head by the bow of the vessel, at that time, and had requested to abort the dive, such advice giving rise to a risk of injury to the plaintiff insofar as Moore was at risk of both uncontrolled descent and ascent (the risk event) for which events the plaintiff would be bound to act as a good Samaritan and/or otherwise come to his aid in those events as his diving buddy, and would be at a foreseeable risk of injury, of which the plaintiff suffered."
9. This had two immediate results. First, although Mr Moore was dying, counsel for the defendant sought to call him to give evidence in chief the nature of which was unclear but probably included resiling from that part of his signed statement referring to the conversation with Mr Shorter.
10. As is set out in my judgment, after reviewing Mr Moore's medical reports (the contents of which I shall not set out, but which could never have permitted the plaintiff to give evidence, even by telephone), I refused that application.
11. Second, the solicitors for the plaintiff wrote to the solicitors for the defendant that same day, making the following offer: "We refer to the above matter and events that transpired in Court today. We further note leave was granted for the Plaintiff to rely on an amended statement of claim based on the evidence of Mr Moore. We are accordingly instructed to make the following offer: 1. Verdict for the plaintiff on breach of duty. 2. Verdict for the plaintiff on the defendant's allegation of contributory negligence. 3. Defendant to pay the plaintiff's costs in relation to the issue of breach of duty and contributory negligence on an ordinary basis to date forthwith after [sic] agreed or assessed. 4. The matter proceed to the assessment of damages only. The offer is open until 12 noon on 16th June 2016 for acceptance."
12. The letter concluded by noting that it was a Calderbank offer. It was not accepted.
13. The fact that Mr Moore confirmed he had hit his head in such circumstances also resulted in counsel for the defendant deciding to call Associate Professor Mitchell to give evidence in chief. This was unfortunate for the defendant, as he had not been required for cross-examination. Mr Reynolds, who appeared for the defendant at trial, told me that Associate Professor Mitchell had come to court to advise the defendant and not to give evidence.
14. When Associate Professor Mitchell entered the witness box, he was cross-examined briefly about his rejection of the relevance of this blow to the head, although not, unfortunately, about his failure to refer to this in his report in reply to Mr Coxon (who had referred to it), or whether he had ever had Mr Moore's statement in his possession. Even so, substantial damage was done to Associate Professor Mitchell's credibility in relation to his evidence on other issues.
15. If the defendant had never served Mr Moore's report, none of this would have happened. The question is whether, either as a result of the Calderbank offer or s 341, the defendant should be ordered to pay the plaintiff's costs on an indemnity basis from 15 June 2016.

The Calderbank offer

1. Senior Counsel for the defendant's principal submission was that there was insufficient information set out in the letter, this being a requirement for Calderbank letters. I do not accept that submission. The letter clearly identifies the amendment to the statement of claim as the trigger for the offer, and the events of the day would have been freshly (indeed indelibly) in the minds of the defendant's legal advisers. Nor do I accept the submission that the offer of compromise is incapable of acceptance because the word "verdict" (applicable only to jury findings) is wrong, and what should have been sought was admissions. The defendant well knew what the plaintiff meant.
2. However, I note the following difficulties in the path of the plaintiff in this application: 1. The terms of the offer require capitulation by the defendant, with a costs order assessable forthwith on liability, and in circumstances where the trial would continue for the purposes of assessment, which amounted to no compromise: Botany Bay Council v Latham (No 2) [2013] NSWCA 450. 2. Can a party make a Calderbank offer on one issue which requires the rest of the case (in this case, quantum) to proceed? While a Calderbank offer may be made during a hearing which is based on an admission of liability, and such a capitulation may result in the awarding of indemnity costs (as occurred in Sorbello v South Western Sydney Local Health Network (No 2) [2016] NSWSC 1496, but cf Ng v Chong [2005] NSWSC 385), that would only be a relevant factor in a very clear case of persisting with a hopeless defence. Mr Moore's statement certainly caused problems in relation to liability issues, but there were other issues (such as whether the plaintiff was a consumer) for which his statement would not have been the answer. 3. Although not put to me as a basis, the offer was open for about twelve hours, during a hearing, which I consider could be said to be insufficient time for consideration of the offer. However, as I was not addressed on this, I have not taken it into account.
3. A Calderbank offer will not justify an indemnity costs order unless it embodies a compromise and its rejection, in all the circumstances, was unreasonable. The relevant factors include the stage of the litigation, the amount of time left open for acceptance, the clarity of the offer, the extent of the compromise and the offeree's prospects of success.
4. The plaintiff had had Mr Moore's statement for some weeks before the trial and had initially objected to its tender. There was sufficient opportunity for the plaintiff to make a Calderbank offer during that time. The lateness of the offer and its limited time for acceptance militate against any finding that the defendant's rejection of it was unreasonable.
5. I decline to order indemnity costs as a consequence of the defendant's failure to accept the Calderbank offer.

Section 341 Legal Profession Act application

1. The plaintiff alternatively seeks an order under s 341 Legal Profession Act for indemnity costs, which would effectively remove the costs cap from these proceedings. The basis for this application is the defendant's conduct of these proceedings, which is asserted to be unreasonable in that it persisted with the case after Mr Moore's statement went into evidence.
2. This is not a case where the defence was "entirely misconceived" (Boyle v Coppock & Anor; Ek v Coppock & Anor at [7]). What the plaintiff is really saying is that the defendant knew that Mr Moore had been refused permission to abort the dive and get back in the boat, and being told instead to submerge and find Mr Moore to tell him.
3. There is a fine line between forensic tactics and sharp conduct. In the present case, the defendant had a statement in its possession by a witness providing information about the accident which were adverse to the defendant's interests. They were not obliged to serve it and it is surprising that they did, since all that had to be tendered to avoid any Jones v Dunkel inference (Jones v Dunkel (1959) 101 CLR 298) was a medical certificate. (It is also surprising that Associate Professor Mitchell does not reply to the observations of Mr Coxon to the effect that Mr Moore hit his head, but his reasons for this are unknown as he was never asked.)
4. In short, this situation arose because of forensic tactics by the defendant which went awry. The defendant made a mistake in tendering Mr Moore's statement, which it then compounded by revealing how long it had been in its possession, and in calling Associate Professor Mitchell to give evidence in chief about the amendment to the statement of claim. That is not a basis for a costs order under s 341 and I decline to make any order to that effect.

Costs

1. These proceedings were also listed for the determination of costs and interest and to hear the defendant's application for a stay. The plaintiff did all the work in relation to these applications by preparing the costs and by reasonably agreeing to the stay. The plaintiff has been successful in the litigation generally, and the application for indemnity costs was a reasonable one to make.
2. In those circumstances, the defendant should pay the plaintiff's costs in this application.

Orders 1. Plaintiff's application for indemnity costs refused. 2. For the reasons set out in paragraph 38 of this judgment, the defendant is to pay the plaintiff's costs of all applications before the court today, including the application for indemnity costs.

Amendments 22 December 2016 - Typographical error in Order 2. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 December 2016