Damirdjian, A v Nominal Defendant & Zaya; Damirdjian, C v Nominal Defendant & Zaya

Facts relevant to costs

1. On 21 December 2021, Mr Damirdjian obtained a judgment in his favour in the amount of $375,000, but only as against the second defendant. Beforehand, on 26 March 2014, the Nominal Defendant had served him with an offer of compromise that complied with UCPR r 20.26.
2. That offer invited Mr Damirdjian to accept a verdict and judgment in favour of the Nominal Defendant without any order as to costs. That offer was not accepted and lapsed after 28 days. The Nominal Defendant obtained the benefit of a more favourable outcome in the ultimate judgment in that case, arguing that prima facie, as costs should follow the event, it was entitled to an order for costs in its favour, subject to an agreed limiting proviso that excluded costs incurred before 6 September 2017.
3. On 21 December 2021, Ms Damirdjian obtained a judgment in her favour in the amount of $467,621.20, also only as against the second defendant. Beforehand, on 3 November 2020, the plaintiff had served both defendants with an offer of comprise that complied with UCPR r 20.26.
4. The offer by Ms Damirdjian was in the sum of $325,500. That offer was not accepted and it lapsed after 28 days. Ms Damirdjian failed in her claim against the Nominal Defendant but she obtained the benefit of a more favourable judgment against the second defendant.
5. The outcome of each set of proceedings has given rise to a costs dispute.
6. The antecedent facts concerning the course of the litigation are sufficiently set out in the primary judgments cited at [1] above, and do not require further identification in these reasons.

Evidence

1. In addition to the evidence and findings identified in the two principal judgments referred to at [1] above, the parties relied upon compendious affidavit evidence.
2. The evidence relied upon by the plaintiffs in respect of the costs argument comprised a 433 paragraph affidavit by their solicitor, Sareeya Misitano, affirmed on 9 February 2022. That affidavit annexed 165 pages of material which provided insight into the background of some procedural events recorded in the transcript of the proceedings. The second defendant took objection to some aspects of the affidavit that amounted to submissions. There was no need for a formal ruling on those objections as the matters referred to as submissions were adopted by counsel for the plaintiffs as part of the plaintiffs' submissions on costs.
3. The first defendant relied upon the chronology of events that occurred in the litigation as set out in the affidavit of its solicitor, Frances Allen, affirmed on 9 February 2022.
4. The second defendant did not present any affidavit evidence on the costs issues.
5. The plan for oral submissions on costs to proceed on 11 February 2022 by means of an AVL connection could not be achieved because of emergent technical issues. Consequently, the parties were required to forward written outlines of their submissions, including any responsive replies, according to a timetable. On 25 February 2022 the parties spoke to their written submissions. Further written submissions in reply concluded on 4 March 2022.
6. The respective submissions are summarised in the paragraphs that now follow.

Plaintiffs' costs submissions

1. In Mr Damirdjian's case, the plaintiff sought orders that the first "and/or" the second defendant pay the plaintiff's costs of the proceedings on an ordinary basis.
2. In Ms Damirdjian's case, the plaintiff sought orders that the first "and/or" the second defendant pay the plaintiff's costs of the proceedings on an ordinary basis up to 3 November 2020, and then on an indemnity basis thereafter.
3. As identified and explained in a previous and unrelated decision which considered the utility of the expression "and/or", seeking a remedy on the basis of that bastard conjunction which gives rise to ambiguity, scope for confusion, and a lack of clarity: Vaccaro v MLC Limited [2016] NSWDC 85, at [10]. The "and/or" submission was ultimately to be taken to mean "either/or".
4. The plaintiffs' argument as to costs was that as both defendants had contested the issues concerning breach of the duty of care owed, negligence, contributory negligence, as well as damages, and as the plaintiffs "practically succeeded" in their claim against the Nominal Defendant as to all but one element of their liability cases, they should have their costs paid by both defendants. In my view, that approach is overly simplistic, and should not be accepted.
5. The plaintiffs referred to delays in finalising the proceedings "due to complications concerning investigating potential vehicles, the Medical Assessment Service process, and satisfying the procedural requirements under the Motor Accidents Compensation Act 1999 (NSW)" as "the natural exigencies of litigation" and described the delay as "not unreasonable".
6. That argument was further developed by the plaintiffs to the point of asserting that this could serve as a reasonable basis for displacing the general rule that costs should follow the event.
7. The submitted context was that the plaintiffs could not have reasonably released the Nominal Defendant from the proceedings for so long as the second defendant contested all elements of the alternative liability claim against that defendant. That position led to the initial joint application by the plaintiffs and the Nominal Defendant for an adjournment of the proceedings in 2017.
8. The plaintiffs submitted that the disputed issue of the identity of the driver of the vehicle at fault was "only a side issue", and that they had little choice but to commence proceedings against the second defendant, and to then continue the proceedings against both defendants: Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 2(1)(c). The plaintiffs claimed that the asserted "side issue" justified the Court taking a different approach to that of costs simply following the event.
9. Therefore, the plaintiffs sought a costs order against the Nominal Defendant along the lines discussed in Sanderson v Blyth Theatre Company [1903] 2 KB 533. In my view, that too was an oversimplification of the circumstances that unfolded in this litigation.
10. On the issue of the Nominal Defendant's offer of compromise, the plaintiffs argued that offer was in effect an offer to capitulate, and it was therefore not a genuine offer of compromise: Leichhardt Municipal Council v Green [2004] NSWCA 341.
11. The argued basis for that position was that doubts and uncertainty arising from the evidence given by a witness at the accident scene, Mrs Douglas, as to the involvement of an unidentified vehicle, created and left doubts about the proper identity of the vehicle at fault, which it was argued, justified the plaintiffs retaining the Nominal Defendant as a party to the proceedings even after the second defendant had been joined.
12. The plaintiffs further argued that if the driver of the vehicle at fault had complied with the legal obligation to stop after the subject accident, the proceedings against the Nominal Defendant would have been completely avoided, thereby warranting the making of an order that the second defendant should bear all of the plaintiffs' costs, including the costs incurred in the claim against the Nominal Defendant.
13. The obvious difficulty with that argument was that it was not satisfactorily shown that when the driver of the vehicle found to be at fault executed the U-turn in front of Mr Damirdjian, that driver had an actual awareness of the ensuing accident in which Mr Damirdjian's motorcycle hit the roadway. An actual impact between the plaintiff's motorcycle and that vehicle was never proven.
14. The plaintiffs made an alternative submission that their costs should be proportionally borne by the defendants in the proportion 75 per cent 25 per cent on the issue of identity of the driver of the vehicle at fault. I do not accept that submission. The Nominal Defendant justifiably described as heroic the plaintiffs' costs submissions that sought to avoid the consequences of a loss against that defendant.

Nominal Defendant's costs submissions

1. In the case of Armin Damirdjian, the Nominal Defendant sought an order that there be no order as to costs up until 6 September 2017, and that thereafter, he pay the Nominal Defendant's costs on an indemnity basis from 7 September 2017. That position was based on an indication given in correspondence by the Nominal Defendant that it would not seek costs prior to 7 September 2017 if the plaintiffs joined the second defendant to the proceedings. The plaintiffs acted on that inducement.
2. In the case of Christina Damirdjian the Nominal Defendant sought a blanket order that she pay its costs on the ordinary basis.
3. Essentially, and pragmatically, in Mr Damirdjian's case the Nominal Defendant's costs submissions made allowance for some initial doubt and confusion on the part of the plaintiff as to the identification of the party responsible for the subject accident, hence the concession that no costs be paid in Mr Damirdjian's case before 6 September 2017.
4. However, the Nominal Defendant maintained the submission that Mr Damirdjian should pay the Nominal Defendant's costs after that date on an indemnity basis in light of the Nominal Defendant's offer of compromise because, by that date, an arguable case against the second defendant emerged, which, if accepted, would necessarily have meant that no judgment could be entered against the Nominal Defendant.
5. Consequent upon the albeit problematic evidence of Mrs Douglas, the Nominal Defendant argued that if she had been properly interviewed by the plaintiffs' representatives before she gave her evidence, the plaintiffs would not have proceeded against the Nominal Defendant.
6. That argument, which in my view involved unsupported speculation, should not be accepted. There was no evidence of the circumstances or the content of any interview with Mrs Douglas before she gave her evidence. There were several possible explanations available that might have explained the course which her evidence took, including what may be described as "the accidents of litigation", these including nervousness in the stressful situation of the courtroom, infelicity of expression, and fallible memory. A witness may not come up to proof for a variety of reasons. It is not appropriate to speculate on those matters, and without evidence, to draw the speculative inference sought by the Nominal Defendant.
7. The Nominal Defendant's costs submissions otherwise relied upon the fact that as both plaintiffs failed against the Nominal Defendant, subject to the qualification identified in Mr Damirdjian's case, therefore the usual rule should apply following that event.

Second defendant's costs submissions

1. In Armin Damirdjian's case, the second defendant Mr Zaya sought an order that he should only pay Mr Damirdjian's costs from 9 May 2020 on the ordinary basis.
2. In Christina Damirdjian's case, the second defendant Mr Zaya sought an order that he pay Ms Damirdjian's costs from 9 May 2020, also on the ordinary basis.
3. In making those submissions, the second defendant accepted liability for costs incurred against him after he was joined into the proceedings.
4. The second defendant strongly resisted the suggestion made within the plaintiffs' costs submissions that he should be responsible for costs incurred by the plaintiffs in respect of work undertaken on behalf of the plaintiffs as against the Nominal Defendant before the second defendant was joined to the proceedings, which, it was argued, would have been the effect of either Sanderson or Bullock orders.
5. The second defendant submitted that, in response to the reliance by the plaintiffs on the decision in Wright v Apthorpe [2020] NSWCA 300, at [70], (where in that case, at [58], two distinct aspects of a costs order were identified, the first being on whom the burden of costs should fall, and the second being the basis upon which the costs should be assessed), that the decision in Wright v Apthorpe does not displace the general principles identified in the second defendant's written and oral submissions.

Plaintiffs' submissions made in reply

1. Whilst the plaintiffs concede they lost as against the Nominal Defendant, they submit that as the Nominal Defendant resisted and challenged the evidence of Mrs Douglas, they could not have responsibly released that defendant from the proceedings in the context that they were pursuing an alternative late emergent case against the second defendant Mr Zaya, where that case was being fully contested.
2. Whilst the plaintiffs concede that Mr Zaya was not driving the vehicle at fault, they argued that the principle of the vicarious liability of Mr Zaya as an employer, and the statutory agency founded upon s 112(1) of the Motor Accidents Compensation Act 1999 (NSW), unassailably establishes that Mr Zaya is liable for the actions of the driver. In that context, the plaintiffs argued that their offers of compromise served on Mr Zaya were capable of acceptance both on the basis of UCPR r 20.26 and the principles identified in Calderbank v Calderbank [1975] 3 AER 333.
3. On behalf of Christina Damirdjian, it was submitted that in the case of "a simple motor vehicle accident with alternative defendants" she did her best to save costs by offering to resolve her claim for an amount that was ultimately shown to be less than the amount awarded, and this was a sufficient basis for awarding her indemnity costs as against the second defendant: s 98 of the Civil Procedure Act.
4. That proposition was further developed by arguing that the second defendant, who by subrogation was represented by an experienced insurer and experienced lawyers, did not seek particulars in relation to the offer of compromise. It was therefore submitted that the second defendant plainly understood the offer by Christina Damirdjian and made the forensic decision not to call evidence on the application by the plaintiffs to join Mr Zaya to the proceedings. The plaintiffs submitted those circumstances should have costs consequences as against the second defendant.
5. Consequently, the plaintiffs argued that the conduct of the second defendant, including the conduct of the driver prior to joinder, in addition to the conduct of the second defendant thereafter, forms a proper basis for the costs orders sought, including Sanderson and Bullock orders.
6. Finally, the plaintiffs drew upon the decision in Wright v Apthorpe, at [70] where it was stated that the authorities referred to in that decision cumulatively demonstrate that the costs discretion conferred by s 98(1) of the Civil Procedure Act is not limited or confined by any identified statutory provision or judicially developed guidelines, where each case must be determined on its intrinsic factual foundations, where precedents from different jurisdictions must be measured against the wide discretion conferred by s 98. That position is indisputable.

Applicable legislation and legal principles

1. Section 98 of the Civil Procedure Act 2005 (NSW) relevantly provides: "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. ..."
2. It is well settled that costs orders are intended to be compensatory, not punitive in nature: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72, at [44]. It is also well settled that costs orders are to be made according to the justice of the case: Gray v Richards [2014] HCA 40; Northern Territory v Sangare [2019] HCA 25.
3. The exercise of discretion on costs must be reasoned and must be undertaken in accordance with the dictates of justice, including taking into account the litigation conduct of the parties: s 58(2) of the Civil Procedure Act 2005 (NSW); House v The King (1936) 55 CLR 499; [1936] HCA 40. The discretion is wide, subject to considerations of reasonableness: Wright v Apthorpe, at [70].

Consideration and determination for costs orders

1. It is convenient to first consider the Nominal Defendant's claim for its costs to be paid by the unsuccessful plaintiffs.

Nominal Defendant's costs

1. In my view, the Nominal Defendant, as the successful party in each of the claims brought against it by the plaintiffs, should have its costs paid by the unsuccessful plaintiffs: UCPR r 42.1. I see no sound reason to depart from that usual rule, except for what now follows.
2. First, in the case of Armin Damirdjian, the Nominal Defendant made the reasonable concession that it would not seek costs from him in relation to costs incurred before 6 September 2017 because of the Nominal Defendant's inducement to the plaintiffs to join the second defendant in their respective proceedings.
3. Secondly, in relation to the Nominal Defendant's costs incurred from 7 September 2017, in Armin Damirdjian's case, that defendant is entitled to have its costs paid by Mr Damirdjian on the indemnity basis by reason of his non-acceptance of the Nominal Defendant's offer of compromise in risk-laden litigation where there was a real risk that his claim might fail.
4. Costs should follow the event of the Nominal Defendant's success in the litigation brought by Mr Damirdjian. That result was a more favourable outcome for the Nominal Defendant than the effect of its offer of compromise dated 24 March 2014. I do not see that offer of compromise as a request for capitulation in this case, where the plaintiff had a difficult path ahead in proving all elements of the claim against the Nominal Defendant. The Nominal Defendant's offer to forego costs incurred before 6 September 2017 must be seen to have been a reasonable one at the time it was made, especially when the plaintiffs' evidence on due inquiry and search was scant, to say the least.
5. Thirdly, in the case of Christina Damirdjian, the Nominal Defendant's costs should follow the event of her lack of success in that litigation. Therefore the plaintiff should pay the Nominal Defendant's costs in her case on the ordinary basis.

Plaintiffs' costs as against Mr Zaya

1. In the case of Armin Damirdjian against Mr Zaya, the second defendant, as he succeeded in that claim, as a matter of course, it follows that he should have his costs paid by that defendant on the ordinary basis, but only in relation to the costs specifically incurred by him as against Mr Zaya. No question of indemnity costs arises in that case.
2. In the case of Christina Damirdjian against Mr Zaya, the second defendant, when she served her offer of comprise on the Nominal Defendant and on the second defendant, in the sum of $325,500 on 3 November 2020 in accordance with UCPR r 20.16, this created an opportunity for each defendant to pause and reflect upon whether or not to accept that offer, or take the risk that both plaintiffs might succeed on the liability issues. This was also an occasion on which the second defendant had reasonable cause to pause and reflect upon the risk that Christina Damirdjian might be awarded damages in excess of $325,500 after a trial. Her offer to settle for that sum was plainly a genuine offer to compromise her claim.
3. Christina Damirdjian succeeded in her case against the second defendant in the sum of $467,621.20, which was a more favourable outcome for her than the effect of her offer of compromise. In those circumstances there is no sound reason to refuse her request that she be compensated for costs on the ordinary basis until 3 November 2020, and on the indemnity basis from 4 November 2020.
4. This leaves the remaining question of whether the plaintiffs are entitled to either a Sanderson or Bullock order in respect of their liability for the Nominal Defendant's costs.

Appropriateness of Sanderson / Bullock Orders

1. By the time the first tranche of the hearing commenced on 28 August 2017, at which time the Nominal Defendant was the only defendant, the plaintiffs had already incurred significant costs in the litigation, where they ran the significant risk of failure if they were unable to satisfy the essential requirement of showing they had satisfactorily pursued due inquiry and search in respect of the unidentified vehicle: s 34(1) of the MAC Act.
2. The issue of due inquiry and search in respect of the unidentified vehicle was in strong contest at that stage, and the Nominal Defendant only conceded the point after Mrs Douglas had given evidence on 28 August 2017.
3. In those circumstances, it is difficult to see how those antecedent costs incurred by the plaintiffs and the Nominal Defendant's costs of defending the plaintiffs' claims could reasonably be sheeted home to the second defendant.
4. The plaintiffs' contention was that the conduct of the unidentified driver in leaving the accident scene created a basis for suing the Nominal Defendant. This was said to be so because of the emergent possibility of suing the second defendant as owner of the vehicle, thereby making the second defendant potentially responsible for the Nominal Defendant's costs. The plaintiffs' argument along those lines must be rejected. Although the driver of the vehicle must be taken to be the agent of the second defendant by force of statute, it has not been satisfactorily shown that unidentified driver was or ought to have been aware that an accident had in fact occurred so as to create the basis for a legal obligation to stop and to provide particulars.
5. I do not accept the plaintiffs' argument that the alleged breach of obligation on the part of that driver to remain at the scene sufficiently constituted relevant conduct that triggered the basis for an order for the Nominal Defendant's costs to be paid by the second defendant. In that regard, in my view, it is conduct in the course of litigation which provides the relevant trigger for a costs order along the lines sought by the plaintiffs.
6. In this case, it has not been satisfactorily shown that either the Nominal Defendant or Mr Zaya had engaged in unreasonable litigation conduct that would, according to the dictates of justice, reasonably provide the trigger for an order for costs on an indemnity basis in respect of such conduct: s 58(2) of the Civil Procedure Act 2005.
7. In litigating against the Nominal Defendant, the plaintiffs took the risk that those claims might not succeed, and they did not succeed. That risk operated in two discrete time periods.
8. The first period was when the Nominal Defendant was the only defendant in the proceedings. The cost consequences of that risk have been identified and determined at paragraphs [50] to [54] above.
9. In the second period, where the plaintiffs each maintained their two alternative cases against the respective defendants, it was reasonable that they maintained their cases against the Nominal Defendant for so long as the second defendant Mr Zaya contested the liability issues in their respective cases against him.
10. For that reason, in my opinion, from the time the second defendant filed his defences to the plaintiffs' claims against him on 2 September 2020, he should bear the plaintiffs' costs incurred in relation to their unsuccessful claims against the Nominal Defendant.
11. In Mr Damirdjian's case there was no relevantly valid offer of compromise on foot as against the second defendant. Therefore, those costs should be assessed on the ordinary basis.
12. In Ms Damirdjian's case, there was a relevantly valid offer of compromise on foot and the second defendant did not accept that offer. This was in circumstances where the plaintiffs had to pursue alternative defendants. Therefore, I consider that the second defendant Mr Zaya should bear her costs' liability to the Nominal Defendant on an indemnity basis from 3 November 2020: Bullock v London General Omnibus Co [1907] KB 264; Coombes v Roads and Traffic Authority (NSW) (No 2) [2007] NSWCA 70, at [3].
13. The plaintiffs jointly submitted that on account of the evidence given by Mrs Douglas they had little choice but to join the second defendant Mr Zaya to the proceedings and at the same time not release the Nominal Defendant from the proceedings. They invoked s 2(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) to support this position in that regard. That provision is as follows: "(c) Where the plaintiff is in doubt as to the person from whom the plaintiff is entitled to redress, the plaintiff may join two or more defendants, to the intent that the question as to which, if any, of the defendants is liable, and to what extent, may be determined as between all parties."
14. Section s 2(1)(c) of that Act applies where there is doubt as to the person from whom to seek redress, thus justifying the joinder of multiple parties. That was the very position in which the plaintiffs found themselves after Mrs Douglas gave evidence and the Nominal Defendant was inviting them to join Mr Zaya.
15. There is a dispute as to the timing for the commencement of the second defendant's liability for the Nominal Defendant's costs. The second defendant submitted he should not be responsible for the costs incurred by the plaintiffs in their claims against the Nominal Defendant, or the Nominal Defendant's costs in defending those claims before the second defendant was joined to the proceedings. The plaintiffs' submission is to the contrary on that point of contention.
16. As explained at [62] above, I have not accepted the plaintiffs' argument that those costs were incurred simply because the unidentified driver left the accident scene before the vehicle being driven could be identified. The question of due inquiry and search was a live issue in the alternative case.
17. In the described circumstances, I accept the second defendant's submission as summarised at paragraph [73] above. Up until the time Mrs Douglas gave her evidence on 28 August 2017, the plaintiffs were not in doubt as to from whom to seek redress within the meaning of s 2(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946. They maintained that the Nominal Defendant was liable because of the involvement of an unidentified vehicle and its owner or driver. They had no other identifiable defendant in mind.
18. Within the contemplation of s 2(1)(c), the plaintiffs' doubts as to from whom to seek redress only relevantly arose after Mrs Douglas gave her evidence. Accordingly, the plaintiffs are not entitled to either a Sanderson or a Bullock order in respect of the period before the doubts about from whom to seek redress relevantly arose.

Orders

1. In proceedings numbered 2014/4566 brought by Armin Damirdjian, I make the following orders: 1. I make no order as to costs up to 6 September 2017, but thereafter, the plaintiff is to pay the Nominal Defendant's costs on an indemnity basis; 2. The second defendant Mr Zaya is to pay the plaintiff's costs of proceedings against him on the ordinary basis; 3. The second defendant Mr Zaya is to pay the plaintiff's costs liability to the Nominal Defendant from 3 September 2020 on the ordinary basis.
2. In proceedings numbered 2014/269323 brought by Christina Damirdjian, I make the following orders: 1. The plaintiff is to pay the Nominal Defendant's costs on the ordinary basis; 2. The second defendant, Mr Zaya, is to pay the plaintiff's costs to 3 November 2020 on the ordinary basis, and from 4 November 2020, those costs are to be paid on an indemnity basis; 3. The second defendant Mr Zaya is to pay the plaintiff's costs liability to the Nominal Defendant from 3 September 2020 on the indemnity basis.
3. In each case: 1. The exhibits may be returned; 2. Liberty to apply on 7 days' notice if further or other orders are required.

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: 11 March 2022