Dickson v Northern Lakes Rugby League Sport & Recreation Club Inc & Anor

District Court of NSW|2019-09-06

Introduction

On 23 August 2019, I published my reasons for giving verdicts and judgments to the defendants [1] . I ordered that the plaintiff pay the defendants' costs. I also ordered that there be liberty to apply on 7 days' notice.
The defendants apply for a variation of this costs order. Specifically, they seek an order that: "The plaintiff is to pay the Defendants' costs: 1. on the ordinary basis up to 20 July 2018; and 2. on an indemnity basis from 21 July 2018."
The application for variation is predicated upon service, on behalf of the defendants, of an offer of compromise on 20 July 2018, in conjunction (on the same date) with a Calderbank letter.
The plaintiff opposes this application. He says that the offers of settlement contained within both the offer of compromise and the Calderbank letter did not amount to real, or genuine offers to settle, but amounted merely to an invitation to the plaintiff to capitulate with the real intention being to position the defendants to seek a (partial) order for indemnity costs in the event, which has now materialised, that judgments were recovered by either or both of the defendants. He says it was not unreasonable, in the circumstances, for him to have rejected the offers of settlement.
Written submissions have been received from the parties in respect to this application; followed by oral addresses.

Ms Tingey's evidence

In support of this application, the defendants relied upon the affidavit of Ms Claire Tingey, a solicitor employed by the defendant's solicitors, Wotton & Kearney (W+K) sworn 5 September 2019.
In circumstances where no application is made for any costs of the defendants incurred prior to the commencement of the proceeding, it may be thought unnecessary for me to refer to that part of Ms Tingey's affidavit which is directed to conduct by or on behalf of the defendant parties prior to the commencement of the proceeding on 17 November 2017. Nevertheless, it is pertinent to note that Ms Tingey deposed to a statement being obtained from the second defendant on 1 August 2017 as part of an investigation report dated 27 October 2017. Ms Tingey added that she herself spoke to the second defendant in May and June 2018 in order 'to assess his credibility' and to determine whether his evidence accorded with the written statement obtained by investigators. She came away, as a result of her conferences, with a view that his evidence was persuasive. She noted that when, in early July 2018, W+K gave advice to the first defendant's insurer, part of the advice was to the effect that the second defendant's actions would not likely be found to have been performed with the intention of causing injury to the plaintiff. I emphasise that this was only part of the advice provided to the insurer at this time, but note the aspect of timing that it was in connection with the advice to the insurer of 3 July 2018 that W+K recommended that an offer of compromise be made on a 'walk away' basis.
Ms Tingey deposed that in the period from 17 November 2017 through to 20 July 2018, the first and second defendants had incurred professional costs in the sum of $20,230.50 and disbursements in the sum of $5,241.41 (plus GST). Ms Tingey catalogued the work that was performed by or on behalf of the defendants in this period. This included communications that her firm had had with the insurer for the first defendant. Specifically, she deposed to advice provided by W+K to the insurer that although the defendants could successfully defend the proceeding, an attempt should be made to resolve the proceeding on a compromise basis; including the forgiveness of costs which the defendants had incurred, up to July 2018.
On 20 July 2018, W+K sent a letter, by email, to the solicitors for the plaintiff (BE Legal). The letter had two principal features. First, it enclosed an offer of compromise of that date, stipulating that it was open for acceptance for a period of 28 days. This offer expressly purported to be made in accordance with the provisions of r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW). The terms of the offer of compromise were: 1. Judgment for the First and Second Defendant; 2. No order as to costs.
Secondly, the letter (expressed to be made 'without prejudice save as to costs') indicated that if the offer of compromise was found to be invalid, then the letter would be relied upon as a Calderbank letter. The offer in the Calderbank letter was also stipulated to be open for 28 days (ie 5pm, 17 August 2018). Notice was expressly provided that if the plaintiff did not accept the offer of settlement contained in either the offer of compromise or the Calderbank letter, the defendants would seek an order for indemnity costs from the date of the offer or the date of the Calderbank letter.
The Calderbank letter provided some commentary, from the defendants' perspective, as to why they thought that the plaintiff's claim would fail. Five reasons were identified: 1. The first defendant was not the second defendant's employer. Accordingly, it would not be found to be vicariously liable for Mr Fletcher's actions; 2. The Civil Liability Act 2002 (CLA) would apply as there was 'no evidence' to suggest that Mr Fletcher's actions were carried out with the intention to cause injury to the plaintiff. 3. Rugby league is a significant and high-impact body sport which would be considered a dangerous activity for the purposes of section 5K of the CLA. The risk of injury arising from participation in rugby league, through tackling, would be found to be an 'obvious risk', given that tackling is an integral part of rugby league and involved high-impact forces. The risk of harm was more than trivial and had a real chance of materialising. Recent case law supported the above analysis and, on this basis, s 5K provided a complete defence to the plaintiff's claim; 4. the defendants would not be liable in negligence for harm suffered to the plaintiff as a result of the materialisation of an obvious risk of a dangerous recreational activity pursuant to s 5L of the CLA. 5. The defendants would not be liable in negligence for harm suffered to the plaintiff as a result of the materialisation of an inherent risk pursuant to s 5I of the CLA. Rugby league is a physical contact sport and injuries (of all kinds) are inevitable. Tackles resulting in injury occur and are an inherent risk of the sport. Again, recent case law supports the defendants' position.
As noted, it was because of these enumerated reasons that the defendants opined that the plaintiff's claim would fail and W+K added that, in the event that the claim failed, the defendants would look to recover the costs of defending the proceedings from the plaintiff. Nevertheless, in the interests of compromise and for the avoidance of further costs being incurred, the defendants were prepared to settle the plaintiffs claim on the basis of the judgement in their favour with each party to bear their own costs of the proceeding. This was, in conventional terms, a 'walk away' offer.
No response was given by the plaintiff to these offers until reasons for judgment were given.

Mr Kranz's evidence

Mr Kranz is the solicitor for the plaintiff. Mr Kranz annexed to an affidavit a letter he had sent to W+K dated 20 June 2018. That letter indicated that the plaintiff proposed to rely upon the expert evidence of Mr Warren Ryan; as well as identifying the medical experts that the plaintiff would rely upon.
Mr Kranz confirmed receipt of the offer of compromise and the Calderbank letter on 20 July 2018. He deposed that at the time of service of those offers no evidence, either with respect to liability or quantum, had been served on the defendant's behalf as at 20 July 2018. He goes further on to say that at no stage (I infer prior to the commencement of the hearing) was any evidence served on the defendants' behalf in respect to liability, be it lay evidence or expert evidence.
Mr Kranz also confirmed that on 9 August 2018, he received instructions from the plaintiff to reject the offer of compromise and Calderbank letter. I note, however, that Mr Kranz did not disclose the content of any advice supplied to the plaintiff or explanation from the plaintiff as to the reasons for such rejection of the offers.
Mr Kranz deposed to receiving various medico-legal reports in connection with the plaintiff's personal injuries between July and August 2018 and his receipt of the expert liability report from Mr Ryan in January 2019. The latter report was served, along with various medico-legal reports, on 31 January 2019.
Mr Kranz reiterated that prior to the commencement of this hearing in August 2019 no 'liability evidence' had been served on the half of the defendants. Specifically, he emphasised that prior to the hearing commencing in August 2019 that neither he nor Mr Gross QC had available to them any statements made by or on the half of the second defendant in relation to causing the injury. He deposed that Mr Gross QC and himself were, however, aware of the second defendant's guilty plea to the disciplinary charge brought against him in connection with the tackle that he made on the plaintiff.
Mr Kranz deposed that had he received evidence from the defendants' solicitor regarding liability, he would have been able to have properly considered the offer of compromise and Calderbank letter.

STATUTORY PROVISIONS & PRINCIPLES

By s 98 of the Civil Procedure Act 2005 (NSW), costs are in the full discretion of the Court. That includes whether the costs are to be wholly or partly paid on the ordinary basis, or on an indemnity basis (s 98(1)(c)). Further, by r 42.2, ordinarily, the plaintiff would be required to pay the defendants' costs on the ordinary basis.
The defendants/applicants submit that in light of their success and the content of their offer of compromise of 20 July 2018, by the operation of provisions made in Division 3 of Part 42 of the UCPR and specifically r 42.15A, they are entitled to a costs order departing from the ordinary position. As a fall-back, if their 'rules offer' is invalid, they rely upon Calderbank principles to achieve the same result. Although the general rule is that 'costs follow the event', when it comes to 'rules offers', the "event" is redefined as to whether or not the offeror (the defendant) obtained a better result than that proposed in the offer: Walker v Harwood [2017] NSWCA 228 per Baston JA (Payne JA agreeing) at [19].

Offers of compromise

Rule 20.26 of the UCPR sets out the requirements for rules offers. The respondent does not submit that the defendants/applicants' offer of compromise dated 20 July 2018 did not comply with the requirements of this rule, so I will proceed on the basis that it validly complied with the requirements. That being so, this application can be determined on the basis of principles relating to rules offers; without reference to the principles which attend Calderbank offers.
Rule 42.15A relevantly provides: 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 judgement on the claim no less favourable to the defendant than the terms of the offer; 2. Unless the court orders otherwise: 1. the defendant is entitled to an order against the plaintiff for the defendants 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 2. 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: 1. 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 .. (emphasis supplied)
I have italicized part of this rule to emphasise that where r 42.15A is engaged, the defendant, as offeror has a 'conditional entitlement' to indemnity costs, unless the Court exercises its discretion to order otherwise: Hillier v Sheather (1995) 36 NSWLR 414. The offeree, upon whom the onus for the order under r 42.15A(2) lies [7] , does not need to establish 'exceptional' circumstances before the Court exercises the discretion to 'otherwise order': Leach v Nominal Defendant (QBE Insurance (Aust) Ltd (No.2) [2014] NSWCA 391 per McColl JA (with whom Gleeson JA and Sackville AJA agreed) at [47] ('Leach No.2'). It has been said that, for the purposes of r 42.15A, the plaintiff must provide the Court with a 'rational basis' to displace the operation of the rule which favours the defendant (Bates v Cooke (No.2) [2014] NSWSC 1322).
It is well established that the offer of compromise procedure under rule 20.26 is not be used simply as a strategy to trigger an ultimately successful party's automatic award of costs on an indemnity basis. The underlying purpose of the rules implicitly requires that an offer reflect some real element of compromise. As was said by Giles J (as his Honour then was) in Hobartsville Stud v Union Insurance Co (1991) 25 NSWLR 358 at 368, to 'compromise' means that a party gives something away. His Honour also recognised that in particular cases it may be difficult to decide whether or not a purported offer of compromise is truly a compromise. In Shellharbour City Council v Johnson (No.2) (2006) 67 NSWLR 308, Hunt AJA (with the agreement of Beazley JA and Tobias JA) approved of these observations of Giles J in Hobartsville Stud.
In Leach (No.2), McColl JA indicated (at [48]) that it was not possible to be exhaustive about what circumstances might make it exceptional for the Court to exercise its discretion to 'otherwise order.' Whether there was a real element of compromise had to be determined objectively, but also prospectively; at the time it was made; and not with the benefit of hindsight: Leach (No.2) at [42]. Her Honour accepted that the reasonableness of the offeree's rejection is a relevant, but not determinative consideration: Uniting Church in Australia Property Trust (NSW) t/as Northaven Retirement Village v Takacs (No.2) [2008] NSWCA 172.
I think it is fair to say that Courts are suspicious, when considering whether an offer contains a genuine element of compromise when the only element of compromise is to costs: see, for example, Leichardt Municipal Council v Green [2004] NSWCA 341 per Bryson J at [59]. But it is well-established that 'walk-away' offers may be the subject of valid offers of compromise: see r 20.26(3)(a)(1). Quite apart from the terms of the rule, however, 'walk away offers' may engage costs protections under Court rules as they involve a defendant foregoing the possibility of obtaining a favourable costs order, which is a valuable entitlement: Loulach Developments Pty Ltd v RMS (No.2) [2019] NSWSC 601 per Leeming JA at [10]. However it has been said that, in this particular category of case, the claim would 'have to approach something of the character of being frivolous or vexatious for that to be the case': Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [31]. If it were otherwise, the public policy of encouraging settlement would rarely be served in an 'all or nothing' case: Robb Evans v European Bank Ltd (No.2) [2009] NSWCA 170 per Basten JA (with whom Campbell JA agreed) at [18].

The applicants' submissions

The Applicants submit that the offer of compromise contained a real and genuine element of compromise. This was the amount of legal costs that they had incurred up to the date of the offer amounting to the sum of approximately $25,000. By the offer of compromise, they were offering to forego this valuable entitlement.
The applicants submit that the onus falls upon the respondent as to why the Court might exercise discretion to 'otherwise order' under rule 42.15A(2).

The respondent's submissions

As indicated at the outset, the respondent submits that the offer of compromise was not a true or genuine offer of compromise; but merely an invitation for the plaintiff to capitulate and was a device to set up an application for indemnity costs in the event that judgment was entered for the defendants.
He submits that he did not act unreasonably in rejecting the offer on the basis of what was known to him at the time. His claim was not frivolous or vexatious. The costs foregone by the applicants were not 'significant'. It was reasonable for the respondent to reject the offer of compromise at the time the offer of compromise was made in circumstances where, by July 2018: 1. The plaintiff had signalled that an expert report on liability from Mr Ryan would be served; 2. no expert liability report had been served on the defendants' behalf; 3. the defendants' solicitors had video evidence showing the subject tackle; and 'must have been aware' of features in the McCracken litigation whereby Mr Ryan's evidence of the 'spear tackle' in that particular litigation had opined that the tackler had intended to perform an act with the intention of causing injury and that Mr Ryan's opinion had been accepted by the trial judge in that case; 4. the plaintiff had suffered major injuries; 5. the video evidence demonstrated a gross departure from the standards of reasonable care in playing rugby league; 6. the plaintiff and his legal advisers did not have any information from the second defendant would 'exculpate' any finding of intention (to injure the plaintiff); 7. the maximum penalty imposed upon the second defendant in the disciplinary charge provided further basis for rejecting the offer.

The applicants' submissions in reply

In reply, the applicants say that at the point when the offer was made, the respondent had no basis to think that, absent a concession from the second defendant when giving evidence, that there was no basis for the respondent to think that it could establish the necessary intention to injure the respondent. They say that although it was unclear precisely what Mr Ryan might say, as at July 2018, it was speculative to think that Mr Ryan might say anything that could advance the plaintiff's case in this regard: certainly, they say, it would have been wrong to posit that Mr Ryan, acting as an expert witness in accordance with a code of conduct, would not turn his mind to whether views that Mr Ryan had expressed in the McCracken litigation might apply to the circumstances of this case.
The only other matters that might have supported a plausible view that the second defendant had the intention was the video recording and the second defendant's guilty plea to the disciplinary charge. Against this, at the time the offers were served, they had an emphatic statement from W+K that there was 'no evidence' of the second defendant's intention to injure.
They say that it is illogical for the respondent to submit that he did not have any evidence to suggest that the second defendant might be able to exculpate himself from any inference that he had an available intention to injure.

Consideration

In my opinion, it was not unreasonable for the plaintiff to reject the offer of compromise in the circumstances and at the time that it was made.
Although every case turns on its own facts, I note that, co-incidentally, many of the factors considered by the Court of Appeal in Leach No.2 apply here.
First, the value of the entitlement foregone at the time - legal costs up to $26,000 - was not overtly significant, having regard to the substantial prospect of what the plaintiff might recover in damages - if he established liability - on his claim. As Leeming J noted in Loulach at [10], 'walk away' rules offers are more apt to engage Court rules at the later stage, in the preparation of the matter for trial, where the parties and their lawyers are more likely to be in a position to make a fully formed assessment of their prospects for success and by which time, they have incurred very substantial costs. In this case, at the time that the offer of compromise had been served, no defences had, as yet, been filed. That only occurred in December 2018. Here, if I accept, as I do, Ms Tingey's evidence, the bulk of the work done prior to early July 2018, when W+K advised the first defendant's insurer, was assistance in the internal investigation into what had occurred; completion of steps to close the pleadings and the issue of court processes to obtain documents from third parties. Towards the end of the period, W+K was notified of the nature of the (liability and medico-legal) evidence likely to be served against it and W+K needed to consider this. But there was plainly a great deal of work to be done; which explains why the advice was given and instructions sought to make an offer of compromise more than a year before the eventual commencement date of the hearing. For example, no evidence on damages had seriously been contemplated or prepared.
Secondly, the plaintiff's liability case could hardly be said to be vexatious and frivolous. But for the Court's finding that s 3B(1)(a) of the CLA was not engaged, so as to take the claim out of the reach of the provisions of Part 1A of the CLA, the reasons for judgment plainly indicate that the plaintiff would have succeeded in establishing an actionable claim in negligence against the second defendant in common law. Further, although this is a matter of lesser weight, it was not wholly unreasonable for the plaintiff, and his lawyers, to anticipate that this Court would follow the course that had been chartered by the trial judge in the McCracken litigation whereby a spear tackle was found to satisfy s 3B(1)(a) of the CLA, even if, objectively, the findings made by the trial judge in that case (influenced as those findings were by the same liability expert, Mr Ryan, engaged by the plaintiff in this case) might have been taken to amount to no more than obiter dicta.
It is true that, objectively, the plaintiff and his advisers could not, or perhaps should not, have assumed that this Court would transpose findings of subjective intention made in the McCracken litigation against the second defendant in the circumstances of the subject tackle in this case. It is also true that, objectively, a guilty plea to a disciplinary charge to an offence that contained no element of intention to injure did not advance the plaintiff's position very far. But those matters do not, of themselves, displace my view that the plaintiff could not but have had some confidence that he would be able to establish liability. Contrary to what was submitted, what was depicted on the video could assist the plaintiff to establish an intention to injure on a basis of the law - reasonably arguable - that recklessness may be enough to establish intention at the time the offer was made. At any rate, as I said in my reasons, recklessness remains of 'evidentiary' value to proving intention. [8] I also consider that there was a real prospect, which was actually or constructively known by the applicant, that the plaintiff would serve evidence from Mr Ryan who might, again, adopt, if not adapt, his view from McCracken, that coaching instructions to players about tackling might also assist a case of intention (to injure).
Objectively, the real, and indeed, decisive factual question on liability was whether the plaintiff could prove that the second defendant had the intention to injure him. The answer to this question was not something for which the plaintiff could predict with any level of certainty: it depended in large part on how the second defendant gave his evidence. Because of the practice of the Court in personal injury cases (where evidence in chief is given orally - not on affidavit), this was not a question about which the plaintiff had any information before the hearing commenced in August 2019. On the other hand, as Ms Tingey's evidence indicates, the applicants were able, at the time they served their offer, to confer with the second defendant and were able to form an assessment of him and derive a quiet confidence that his credibility could be accepted by the Court. This is, of course, what ultimately occurred. But at the time the offer of compromise was served, the plaintiff did not have that advantage. There was, to that extent, an imbalance in the information available to the parties as to the dispositive question at the trial. I do not regard the applicant's response - that the respondent could take procedural steps to obtain such evidence from the second defendant - as convincing. I accept the submission of Queens Counsel for the respondent that, until the hearing, the respondent was 'operating blind' when it came to the issue of the second defendant's intention.
Thirdly, although the question of damages was 'hived off' to await determination of the liability issues, that was only after some evidence of the extent of the plaintiff's physical injuries had been heard. It suffices to say that the facial injuries of the plaintiff were significant and the physical injuries themselves were capable of generating a substantial damages award. In terms of the prospect for damages, the plaintiff also advanced a claim for psychological injury, which, if provable, would have considerably augmented the quantum of that claim. As indicated earlier, the prospect of recovering a substantial sum of damages has to be weighed against the relatively small value of the costs entitlement which the defendants offered to forego by reason of making the offer of compromise at the time that offer was made.
Fourthly, as I have said, the liability case for the plaintiff, to a significant degree, really did pivot on the question whether he could establish that the second defendant intended to injure him. Given the strong prospect of a substantial award of damages, there was - unusually for a personal injury case - a strong element of 'all or nothing': if the plaintiff could establish the second defendant's intention to injure, as was indicated in my reasons for judgment, he would have succeeded entirely in liability (taking into account common law defences available to the defendants) and the only real issue on damages was quantum (which were likely to be quite substantial). But the only element of compromise raised in the defendants' offer of 20 July 2018 was the applicants' offer was to forego costs; relatively modest as they then were.
In the circumstances, in my opinion, the respondent has made out that circumstances are exceptional such that the Court, in its discretion, should otherwise order, thereby limiting the applicants' costs of the proceedings to be assessed on the ordinary basis.
Finally, I reiterate that in my view of my earlier finding that the offer of compromise was a valid rules offer, it was unnecessary to consider the effectiveness of the letter of 20 July 2018 under Calderbank principles. Nevertheless, I cannot forebear but observe that none of the five matters raised in that letter presented convincing explanation as to why the plaintiff should accept the offer in the terms presented in that letter. The issue of vicarious liability (point 1) was not determined in my reasons for judgment. The applicability of defences under the Civil Liability Act (points 3-5 (incl)) were not determined because the claim was eventually put in common law. As to point 2, the factual matter of the second defendant's intent to injure the plaintiff was clearly determined at trial, but viewing the offer in prospect, as at 20 July 2018, rather than in hindsight, for the reasons I have mentioned above, it was not unreasonable for the plaintiff to consider that he had a reasonable basis to think that he could make out that factual matter; whatever confidence that the defendants' lawyers and their insurer had derived from having the advantage of conferring with him and forming a view as to how well he might perform if he gave evidence. These reasons being not persuasive or compelling, it was not unreasonable for the plaintiff to reject the Calderbank offer.
Order 2 made on 23 August 2019 should not be varied. I dismiss the application to vary that order. Having heard from Counsel, I order that the defendants/ applicants pay the respondent/ plaintiff's costs of the application.

Endnotes

Dickson v Northern Lakes Rugby League Sport & Recreation Club Inc [2019] NSWDC 433 (hereafter 'the Reasons').
At [77]-[121] of the Reasons.
At [123]-[153] of the Reasons.
At [154]-[161] of the Reasons.
At [162]-[173] of the Reasons.
At [6] of the Reasons.
Caine v Lumley General Insurance Ltd (No.2) [2008] NSWCA 109 per McColl JA (with whom Mason P and McClellan CJ at CL) at [35].
[99] - [102] of the Reasons. 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: 09 September 2019

Uniform Civil Procedure Rules 2005(NSW)rr 20.26, 42.2, 42.15A.

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Judgment (11 paragraphs)

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