Council of the City of Canterbury v Milich

Judgment 1BASTEN JA: This matter involved an application for leave to appeal against the refusal of the trial judge, Davies J, to make an indemnity costs order in favour of the applicant, based on an offer of compromise which had not been accepted. At the conclusion of the hearing, the Court made orders dismissing the application with costs and reserving its reasons. These are my reasons for joining in the orders of the Court. 2Mr Milich (the plaintiff) brought proceedings in negligence in the Common Law Division against the Council of the City of Canterbury ("the Council") and his employer, Ready Workforce Pty Ltd ("the employer"). The employer was a labour hire company which provided the services of Mr Milich to the Council. Mr Milich had suffered injury to both his lower back and his upper back and shoulders. The trial judge, Davies J, upheld his claim against the Council in respect of the injury to his upper back and shoulders, but not that to his lower back. As he undoubtedly had a degenerative condition of his lower back, that finding required the apportionment, the trial judge held, not only of medical expenses and loss and damage, but also of worker's compensation payments. Both defendants were found liable in negligence, but no damages were recoverable from the employer because the plaintiff's level of permanent impairment did not reach 15%: Workers Compensation Act 1987 (NSW), s 151H; Milich v The Council of the City of Canterbury [2012] NSWSC 59 at [133]. It remained necessary to determine whether the indemnity with respect to compensation payments already made was available to the employer under s 151Z of the Workers Compensation Act: Milich v The Council of the City of Canterbury (No 2) [2012] NSWSC 450. The trial judge held that it was. 3The final orders made by Davies J on 31 October 2012 included a judgment in favour of the plaintiff as against the Council in the sum of $232,315.80 and awarded an amount of $124,697.26 on the employer's cross-claim against the Council, based on the employer's statutory right of indemnity against a third party tort-feasor: Milich v The Council of the City of Canterbury (No 3) [2012] NSWSC 1280. In the course of making final orders with respect to costs, the trial judge considered the effect of an offer of compromise made by the Council. 4On 12 January 2011 the Council made an offer of $320,000, which Mr Milich did not accept. If the final judgement was not more favourable to Mr Milich than the terms of the offer, the general rule would have allowed Mr Milich his costs up to the date of the offer, but would have required that he pay the Council's costs on an indemnity basis from the day following that on which the offer was made: Uniform Civil Procedure Rules 2005 (NSW), r 42.15. On its face, the judgment obtained by Mr Milich against the Council was substantially below the amount of the offer. However, Mr Milich argued that he had in fact obtained a final result more favourable than the offer, once allowance was made for repayment of worker's compensation made in respect of the injury for which he obtained damages. The trial judge accepted that argument, with the result that Mr Milich obtained his costs of the whole of the proceedings against the Council, assessed on a party and party basis. It was against that order that the Council sought leave to appeal. 5In his third judgment, the trial judge identified three questions which arose in respect of the orders for costs. They were set out at [4] in the following terms: "The issues in relation to costs were these: (a) whether in the outcome the Plaintiff obtained an order or judgment on the claim not less favourable to the Plaintiff than the terms of the offer; (b) whether the Notice of Offer of Compromise complied with the Rules by reason of the reference to the offer of the Defendant to pay the Plaintiff's costs; (c) whether the provisions of r 42.34 UCPR operated to deny the Plaintiff costs by reason of the fact that the proceedings were in this Court." 6Nothing turns on the third question: the trial judge was satisfied that r 42.34 was engaged (it commenced on 10 September 2010) but was also satisfied that the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted. Absent such satisfaction, it appears to be the intention of the rule that there will be no order for costs if the judgment in proceedings in the Supreme Court is for an amount of less than $500,000. There is no appeal against the finding of the trial judge in this respect and it is not necessary to consider the operation of the rule, nor seek to analyse the grammar of sub-r (2). 7The second question identified by Davies J was whether the offer complied with the rules. Because he had already determined that the plaintiff had obtained a more favourable result, he said he did not need to determine if the offer complied. Nevertheless, he expressed the view that it did, following the decision of this Court in Vieira v O'Shea (No 2) [2012] NSWCA 121, and later decisions of judges in the Division to the same effect: at [16]. The issue raised in the Court below as to whether the offer complied with r 20.26 of the UCPR, as in force at the date the offer was made and at the date of judgment, turned on the operation of sub-r (2) which relevantly stated that "[a]n offer must be exclusive of costs". The offer in the present case was an offer for payment of a fixed sum together with an agreement by the Council to "pay the Plaintiff's party/party costs as agreed or assessed". 8In Old v McInnes and Hodgkinson [2011] NSWCA 410 this Court held that a document which contained an offer to settle a claim in a specified amount, but included a separate agreement to pay costs, was in violation of sub-rule (2) and was inconsistent with the power of the Court under r 42.13A to order otherwise. In Vieira, the Court, adopting a purposive approach, found such an offer to be in conformity with the rule. Vieira was understood to be inconsistent with Old, but a five judge bench which had been constituted in order to resolve the inconsistency, held that there was none: Whitney v Dream Developments Pty Ltd [2013] NSWCA 188 at [31]. If that were the case, there can have been no error on the part of the trial judge in following Vieira. However, the conclusion reached in Whitney, in terms of a relevantly identical offer, was to the contrary. As the applicant accepted, this Court is bound to apply the rules as construed in Whitney. Further, the reasons of the Chief Justice at [39] actually identified this case as wrongly decided, thus effectively foreclosing the applicant's proposed appeal, absent leave to reopen Whitney. 9Although no notice had been given in accordance with the Practice Note, due in part to the fact that judgment was delivered in Whitney only two weeks before the hearing of this application, counsel for the applicant sought leave to challenge the correctness of the decision in Whitney. It was accepted that such a step would involve the vacation of the hearing of the leave application, which would fail, absent reconsideration of Whitney. Senior counsel outlined briefly the tenor of the proposed submission. 10The principal argument focused upon the supposed inconsistency between an offer which made provision for costs in the event that it was accepted, and r 42.13A, which also made provision for costs in such an event. Counsel referred to the fact that, as in force at the relevant time, r 20.26(12) provided that a notice of offer "that purports to exclude, modify or restrict the operation of r 42.14 or r 42.15 is of no effect for the purposes of this Division". It was significant, he submitted, that no reference was made in that sub-rule to r 42.13A, which governed costs in the event that an offer were accepted. 11In concluding that an offer to pay costs in any event was inconsistent with the existence in r 42.13A(2) of a residual discretion of the court to otherwise order, the Court in Whitney made no reference to the significance (or otherwise) of the absence of that rule from r 20.26(12). The purpose of r 20.26(12) appears to be to ensure that an offer of compromise does not purport to vary rules which operate in the event that the offer is not accepted. Further, it suggests that an offer can constitute an offer for the purposes of the rule even though it contained such a term. That understanding would support a view that it was the actual amount proffered in settlement of a claim that was to be "exclusive of costs". 12The "offer" made in this case, purportedly pursuant to r 20.26(1), was "an offer ... to compromise any claim in the proceedings, either in whole or in part, on specified terms". The amount of the offer related to the claim in damages and was exclusive of costs, as appeared from the separate statement as to payment of costs. The statement in relation to costs reflected the usual effect of r 42.13A, which operated if the offer were accepted, although it did not specify the basis of assessment. On one view it may have been taken as an agreement not to invite the Court to order otherwise, which the Court had power to do under r 42.13A. 13The arguments in favour of granting the applicant leave to reopen Whitney were threefold. First, there is the apparent injustice caused to the applicant in having proceedings pending in this Court effectively disposed of without an opportunity to be heard. 14Secondly, there is some irony in the fact that judgment was delivered in Whitney on 25 June 2013, while on 7 June 2013, the rule had been amended to remove the requirement formerly contained in sub-r (2), so that it now provides that an offer "must not include an amount for costs and must not be expressed to be inclusive of costs": r 20.26(2)(c). Thus, the offer in question would be in conformity with the rule as amended, but the amendments do not apply to an offer made before the commencement of the rule: Uniform Civil Procedure Rules (Amendment No 59) 2013, inserting Schedule 12, cl 1. The effect of Whitney is, however, retrospective. The result is that the offer made by the Council in the present case is now to be treated as not in conformity with r 20.26 at the time it was made. 15Thirdly, there is something to be said for the view that r 20.26(12), by a process of reasoning not adverted to in Whitney, would support a contrary conclusion. 16Despite these considerations, the factors weighing against a grant of leave to reopen Whitney are overwhelming. First, the decision is to be found in a judgment of a five-judge bench especially convened to resolve uncertainty as to the operation of the rule in question. Although it may be true to say that the Supreme Court Act 1970 (NSW) gives no more authority to a judgment delivered by five judges than to one delivered by three, it is to ignore the practical reality that, absent an egregious and manifest error, it is unlikely that the Court would overturn a recent decision of a Court so constituted, on a point which was fully argued. 17Secondly, the consequence of the decision in Whitney for the applicant does not turn on the fact that reference was made to the judgment now sought to be appealed in the reasons in Whitney. The general principle that judgments of the Court determine points of law for all purposes, and not merely prospectively, means that there will frequently be consequences for other cases, including those pending but not determined. 18Thirdly, the change in the rule means that Whitney will have diminishing effect over time and that its effect will be entirely retrospective, that is in relation to offers of compromise which had been made not only prior to delivery of judgment, but prior to 7 June 2013. The desirability of certainty in resolving the diminishing category of cases to which the old rule applies greatly outweighs the degree of uncertainty which would be created if leave were granted to reopen Whitney. 19Fourthly, the result of reopening would by no means be a forgone conclusion. The very fact that there had been conflicting judgments, both in this Court and in the Divisions, demonstrates that minds reasonably differ as to the correct construction of the rule. To the extent that an intermediate court of appeal will follow its own earlier decisions unless satisfied that they are "clearly wrong", or adopting preferable language, where there was "compelling reason" not to follow the earlier decision - see R v XY [2013] NSWCCA 121 at [30] - it is clear that reasonable minds have differed on the question and this test is unlikely to be satisfied. 20For these reasons, the Court declined to grant leave to reopen Whitney and, in accordance with the position accepted by senior counsel for the applicant in that event, dismissed the application for leave to appeal, with costs. 21It remains to note one further aspect of the application. The point sought to be raised by the applicant (prior to Whitney) related to the first point identified at [4] above, namely, the manner in which the trial judge had determined whether or not the offer was more favourable to the plaintiff than the final judgment. The applicant submitted that the correct approach was to compare the amount of the offer with the amount of the judgment, disregarding any amount to be deducted for repayment of workers compensation received by the plaintiff. Although the applicant invited the Court to consider that issue in any event, there were a number of reasons for declining that invitation. 22First, anything the Court said would be unnecessary for the resolution of the application and, accordingly, issues would arise in the future as to the weight to be given to it. Secondly, Mr Milich was not represented at the hearing of the application, his solicitor having filed a notice of ceasing to act, at which point it seems likely that counsel who had appeared for him at trial, had returned their briefs. Why these steps were taken is not known, but in the somewhat unusual circumstance that a successful party in the court below has been left without legal representation in this Court, there would have been no legally competent contradictor to the submissions put by the applicant. 23Thirdly, and more generally, there appeared to be issues in respect of the offer which had not been fully canvassed either below or in written submissions in this Court. Thus, at the time that the Council made its offer to Mr Milich, it must have known that he had received workers compensation and that, if found liable, the statutory indemnity in s 151Z of the Workers Compensation Act would operate in favour of the employer in relation to any damages payable by the Council itself. Indeed, it seems likely that the employer's cross-claim was already on foot. The terms of the offer were, "verdict for the plaintiff in the sum of $320,000". It may be that the terms of the offer were carefully formulated so that it was not an offer "to pay" a fixed amount to the plaintiff, as is commonly found in offers of compromise. The proper construction of the offer and its effect according to its terms were matters which required consideration, which had not yet been devoted to them. 24Accordingly, no determination is made as to the correctness of the assessment made by the trial judge in this respect. 25BARRETT JA: My reasons for joining in the orders of 10 July 2013 refusing leave to appeal and requiring the applicant to pay the respondent's costs correspond with those of Basten JA. 26WARD JA: I agree with Basten JA as to the reasons that leave should not be granted to challenge the correctness of the decision in Whitney. I also agree that it is not appropriate, in the circumstances outlined by his Honour, to consider the correctness of the conclusion by the trial judge that the order or judgment obtained by the plaintiff was not less favourable to the plaintiff than the terms of the offer made by the Council.