Brymount Pty Limited t/as Watson Toyota v Cummins & Anor; Young Shire Council v Cummins & Anor

District Court Rules 1973 (NSW) LEGISLATION CITED: Supreme Court Act 1970 (NSW) Supreme Court Rules 1970 (NSW)

Brymount Pty Limited t/as Watson Toyota v Cummins & Anor; Young Shire Council v Cummins & Anor (No.2) [2005] NSWCA 69 Fotheringham v Fotheringham (No.2) (1999) 46 NSWLR 194 Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 Leichhardt Municipal Council v Green [2004] NSWCA 341 CASES CITED: Maitland Hospital v Fisher (No.2) (1992) 27 NSWLR 721 Moore v Woodforth (No.2) [2003] NSWCA 46 Oshlack v Richmond River Council (1998) 193 CLR 72 South Sydney Council v Morris (No.3) [2001] NSWCA 200

Anita Baresic (Appellant) PARTIES: Slingshot Holdings Pty. Limited (First Respondent) Funtime Industries Pty. Limited (Second Respondent)

L. T. Grey (Appellant) COUNSEL: B McMahon (S) (Respondent)

McClellands (Appellant) SOLICITORS: McMahons National Lawyers (Respondents)

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40344/04 DC 5698/02

MASON P BEAZLEY JA BRYSON JA

12 May 2005 BARESIC v SLINGSHOT HOLDINGS PTY LIMITED & ANOR (NO.2) JUDGMENT

1 MASON P. I agree with Beazley JA. 2 BEAZLEY JA: In this matter, the appellant, who was successful on the appeal, seeks orders that costs of the trial and the appeal be assessed on a solicitor-client basis and indemnity basis, respectively. Facts and Procedural History 3 The appellant suffered a severe neck injury on 21 March 2001 whilst riding on an amusement park ride called a "slingshot", which was operated by the respondents. The appellant commenced proceedings in the District Court claiming that her injuries were due to the respondents' negligence. On 8 April 2004, Gibson DCJ delivered judgment in which her Honour held that the respondents had not acted negligently in their operation of the "slingshot" machine. 4 The appellant successfully appealed to the Court of Appeal ([2004] NSWCA 464, 15 December 2004). Gibson DCJ's orders were set aside and a verdict was entered in favour of the appellant in the sum of $318,267.06. The respondents were ordered to pay the appellant's costs at first instance and of the appeal, however, the parties were ordered to file written submissions in relation to the basis upon which costs should be paid. Costs of the Trial

5 Prior to the trial, the parties engaged in arbitration proceedings. The arbitrator made an award in favour of the appellant in the sum of $318,267.06. At trial, the parties agreed to limit the issues for the Court's consideration to whether the respondents were liable in negligence. The respondents accepted that if they were found to have acted negligently in the operation of the "slingshot" machine then the appellant was entitled to damages corresponding with the amount assessed by the arbitrator. 6 The hearing in the District Court commenced on 1 December 2003. On 3 December 2003 it was adjourned until 20 February 2004. On 16 January 2004, the appellant made an offer of compromise to the respondents in the amount of $275,000.00 plus costs, in exchange for a verdict for the appellant. This offer was approximately $43,000.00 less than the amount awarded at the arbitration. The compromise offer was made pursuant to Part 19A of the District Court Rules (DCR). The DCR make it clear that there is a policy in the courts to encourage the early settlement of claims: see DCR Pt.39A R.25(1A). 7 The respondents did not accept the appellant's compromise offer. 8 The consequences of failing to accept an offer of compromise made pursuant to the DCR, in circumstances where the party that made the offer ultimately receives a judgment no less favourable than the amount offered, are set out in Part 39A. Relevantly, Pt.39A R.25(4A) states: "Where an offer is made by a plaintiff less than 28 days before the hearing of the action commences, and the offer is not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court in an exceptional case and for the avoidance of substantial injustice otherwise orders, the plaintiff shall be entitled to an order against the defendant for the plaintiff's costs in respect of the claim assessed on a solicitor and client basis." 9 For the purposes of Pt 39A r.25(4A), where the offer was made during trial proceedings, then, unless the court otherwise orders, the date from which such an order as to costs takes effect is one day after the compromise offer was made: see Pt 39A r.25(5).

10 As the appellant was unsuccessful before the trial judge, the consequences of the respondents not having accepted the offer of compromise did not arise for consideration. However, as she was successful on the appeal she is entitled to the costs of the trial, assessed on a solicitor-client basis, from 17 January 2004, unless the Court exercises its discretion to order otherwise. The discretion is only enlivened if the Court finds exceptional circumstances and for the avoidance of substantial injustice. The respondents seek an exercise of the discretion in their favour. 11 The respondents submitted that the matter involved complex legal issues relating to the foreseeability of the risk of injury sustained by the appellant. They submitted it was reasonable that these issues be tested. However, while the factual circumstances concerning foreseeability in negligence law can be complex, it cannot be said that this case involved novel considerations of law or exceptional factual circumstances that would persuade a court to exercise its discretion under Pt.39A r.25(4A), such as might occur, for example, in a test case. Litigious proceedings often give rise to complex issues of fact and law and involve varying degrees of "imponderables": see Maitland Hospital v Fisher (No.2) (1992) 27 NSWLR 721. As this Court stated in that case (at 725), litigation is "inescapably chancy". Indeed, one of the basic reasons the Rules of both the District and Supreme Courts provide a formal procedure for making offers of compromise is to enable parties to mitigate or avert the inherently 'risky' nature of bringing matters before a court for determination: see Pt.19A DCR; Hobartville Stud Pty. Ltd. v Union Insurance Co. Ltd. (1991) 25 NSWLR 358 at 368. Hence, it would be erroneous to characterise proceedings as 'exceptional' simply because the facts or legal issues are said to be complex. 12 Secondly, the respondents submitted that the offer made by the appellant was not a true offer of compromise under Part 19A of the DCR. The basis of this contention was that because the hearing was limited to the question of the respondents' liability, it effectively removed any possibility that Gibson DCJ could assess damages to be less than the sum agreed between the parties. 13 In Leichhardt Municipal Council v Green [2004] NSWCA 341, Santow JA at [23] distinguished between a genuine offer of compromise and what his Honour described as an offer "with no real element of compromise in it, which is designed merely to trigger the costs sanctions" provided for by the Rules of Court. His Honour held at [27] that whether an offer was a "genuine" compromise offer was a question to be answered in light of the circumstances, but affirmed the statement of Giles J in Hobartville Stud (at 368) that "compromise connotes that a party gives something away", in that a party's compromise offer must reasonably reflect the relative strength and weaknesses of their particular claim. 14 In my opinion, there is nothing to indicate that the appellant's offer was other than genuine. The appellant offered a considerable discount with respect to the quantum of damages to which she was entitled, if successful on her claim. In those circumstances, it could not be said that the offer was merely advanced to enliven the costs sanctions under the Rules. 15 The respondents further submitted that had they been aware that the appellant intended to make an offer of compromise after the parties agreed on the quantum of damages they may not have entered into the agreement. However, there was no evidence that the appellant intended to make an offer of compromise at the time she agreed as to quantum. Nor was there any evidence that the respondents might not have entered into the agreement had that been the case. It must also be said that, in any event, the chronology does not support the respondents' assertion. 16 No other reason was advanced as to why an order that the respondents pay the appellant's costs in respect of the trial on a solicitor-client basis from 17 January 2004 would cause substantial injustice to the respondents. 17 It follows in my opinion, that the appellant is entitled to solicitor-client costs in respect of the District Court proceedings from 17 January 2004, with costs prior to that date being assessed on a party-party basis.

Costs of the Appeal 18 The remaining question is the basis upon which the respondents should be ordered to pay the appellant's costs in respect of the appeal. The appellant submits that the respondents should be ordered to pay these costs on an indemnity basis. 19 It was accepted by the appellant that the compromise offer of 16 January 2004 did not bind the Court of Appeal in relation to any costs order. As Heydon JA (as he then was) stated in South Sydney Council v Morris (No.3) [2001] NSWCA 200 at [10], offers of compromise made under the Rules of the District Court cease to have effect once the particular matter to which they relate leaves the jurisdiction of the District Court. Such offers of compromise remain relevant insofar as this Court can take them into account when exercising its general discretion as to costs pursuant to s.76 of the Supreme Court Act and Pt.52A of the SCR: see Fotheringham v Fotheringham (No. 2) (1999) 46 NSWLR 194; Moore v. Woodforth (No. 2) [2003] NSWCA 46 at [14]. This discretion encompasses the power to order indemnity costs: see s.76(1)(c) Supreme Court Act. 20 The SCR contemplate that, ordinarily, costs will be awarded on a party-party basis: see Pt.52A R.11. In the exercise of the Court's general discretion to award costs, an order that one party pay the other party's costs on an indemnity basis is usually predicated upon there being some unreasonable or delinquent conduct on the part of the party against whom the order is made, including the failure to accept an offer of compromise: see Oshlack v Richmond River Council (1998) 193 CLR 72 at 89. That was not the case here. The only other relevant consideration here was the existence of the trial offer of compromise: see South Sydney Council v. Morris per Heydon JA at [12]. 21 The appellant did not renew the offer or otherwise seek to compromise the appeal. The absence of any fresh offer of compromise prior to an appeal to this Court is relevant to the exercise of this Court's discretion under s.76 of the Supreme Court Act. In Moore v Woodforth (No.2), Mason P and Meagher JA held at [15] that in respect of this Court's exercise of its general discretion as to costs, a relevant consideration is "the absence of any renewal or variation of an existing offer during the pendency of [appeal] proceedings". Similarly, in Brymount Pty Limited t/as Watson Toyota v Cummins & Anor; Young Shire Council v Cummins v Anor (No.2) [2005] NSWCA 69, a case where, like this matter, the respondents received a significantly favourable judgment at trial, I expressed the opinion at [29] that an appellant is well advised to make a fresh offer of compromise in the period between the trial and appeal "if they [wish] to secure their claim for indemnity costs of the appeal'' 22 Moore v Woodforth and Brymount both concerned offers of compromise couched as "Calderbank letters". However, once proceedings move from the District Court to the Court of Appeal, there is no relevant difference between an offer under Pt 19A DCR and a Calderbank offer, insofar as costs of the appeal are concerned: see Morris v. South Sydney Council. As the appellant did not make an offer in respect of appeal proceedings in this Court, I am of the opinion that costs of the appeal should be assessed on a party-party basis. Orders 23 I would propose the following orders:-

1. That the respondents pay the appellant's costs of the District Court proceedings up to and inclusive of 16 January 2004 on a party-party basis;
2. That the respondents pay the appellant's costs of the District Court proceedings from 17 January 2004 on a solicitor-client basis; and
3. That the respondents pay the appellant's costs of the appeal on a party-party basis. 24 BRYSON JA: I agree with Beazley JA. **********

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