FOTHERINGHAM v. FOTHERINGHAM (No. 2) [1999] NSWCA 21

Court of Appeal (NSW)|1999-05-04|Before: Spigelman CJ, Mason P, Powell JA, Beazley JA, Stein JA

New South Wales Court of Appeal CITATION : FOTHERINGHAM v. FOTHERINGHAM (No. 2) [1999] NSWCA 21 revised - 02/06/99 FILE NUMBER(S) : CA 40777/96 HEARING DATE(S) : Written Submissions only JUDGMENT DATE : 4 May 1999

PARTIES : Robert James Fotheringham v. Annette Fotheringham JUDGMENT OF : Spigelman CJ at 1; Mason P at 2; Powell JA at 3; Beazley JA at 31; Stein JA at 32

LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT FILE NUMBER(S) : 4161/94 LOWER COURT JUDICIAL OFFICER : Master Macready

COUNSEL : M. B. Evans (Appellant) M. R. Errington (Respondent) SOLICITORS : Conditsis & Associates (Gosford) by their City Agents Tress Cocks & Maddox (Appellant) Taperell Rutledge (Gosford) by their City Agents Pike Pike & Fenwick (Respondent) CATCHWORDS : Appeal and New Trial - De Facto Relationship Act 1984 - Offer of compromise made by plaintiff - Order by Master in favour of plaintiff in amount in excess of offer - Order for costs on indemnity basis in favour of plaintiff - Appeal by defendant - Appeal upheld and order of Master reduced but not below amount of offer - Plainitff seeks order for costs of appeal on indemnity basis; Costs - Departing from general rule - Indemnity costs - Offer of compromise made by plaintiff before trial - Award at trial exceeds amount of offer - Order for indemnity costs of trial - Appeal by defendant - Appeal upheld and award reduced but not below amount of offer - Plaintiff seeks order for costs of appeal on an indemnity basis Supreme Court Act 1970 s.76 SCR Pt 22 rr 1A 3 Pt 52A rr 4 11 ACTS CITED : 22 33 Australian Consolidated Press Limited v. Ettingshausen ( Court of Appeal 13 October 1993 (unreported) Ettingshausen v. Australian Consolidated Press Limited ((1995) 38 NSWLR 404) Commercial Union Assurance Company of Australia v. Pelosi (No. 2) (Court of Appeal 27 February 1996 (unreported)) Ditton v. Whitton (Court of Appeal 5 September 1997 (unreported)) DECISION : Order that Respondent pay Appellant's costs of Appeal

18 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40777/96 ED 4161/94

SPIGELMAN CJ MASON P POWELL JA BEAZLEY JA STEIN JA

JUDGMENT 1 SPIGELMAN CJ: I agree with the orders proposed by Powell JA and with his reasons. I also agree with the additional remarks of Stein JA.

2 MASON P: I agree with the orders proposed by Powell JA and with his reasons. I also agree with the additional reasons of Stein JA.

3 POWELL JA: The facts which gave rise to the appeal the decision in which has led to the present application are recorded in the Judgments which were delivered by the Court, as then constituted (Powell, Beazley and Stein JJA), on 28 August 1998, when dealing with the principal question then in issue on the appeal, and need not be recounted in detail. For present purposes, it is sufficient to record that, in his appeal, the Appellant sought to have set aside, as excessive, an order made by Master Macready pursuant to the provisions of s.20 of the De Facto Relationship Act 1984 ("the De Facto Act") on 19 December 1996 for the payment by the Appellant to the Respondent of the sum of $125,000.00. At the time of making that order the Master further ordered that the Appellant pay the Respondent's costs of the proceedings such costs to be assessed on a party/party basis until 31 October 1996 - the date on which the Respondent had served a notice of compromise upon the Appellant - and such costs thereafter to be assessed upon an indemnity basis. 4 At the conclusion of the hearing of the appeal, counsel for the Respondent - who did not then refer to any authorities in support of his submission - submitted that, even if the appeal were to be upheld, the Respondent would still be entitled to received her costs of the appeal on an indemnity basis so long as the sum which was substituted for that determined by the Master exceeded that - $70,000.00 - for which the Respondent had earlier offered to compromise the proceedings. 5 In the event, all members of the Court as then constituted were of the view that the Master had erred in the exercise of his discretion and that, accordingly, the appeal should be upheld and a lesser sum should be substituted for the $125,000.00 which had been determined by the Master; however, while I was of the view that that lesser sum should be $70,000.00, each of Beazley and Stein JJA was of the view that the appropriate sum was $90,000.00. This being so, it became necessary for the Court to deal with the submission as to costs which had bee made by counsel for the respondent at the conclusion of the hearing of the appeal. 6 At the time when the Court delivered its decision on the principal question in issue on the appeal, I expressed the view - based upon the decision of the Court in Commercial Union Assurance Company of Australia v. Pelosi (No. 2) ("Pelosi") (Court of Appeal 27 February 1996 (unreported)) that counsel's submission was not correct. However, Beazley JA - with whose comments on this question Stein JA agreed - drew attention to another decision of the Court, Ditton v. Whitton ("Ditton") (Court of Appeal 5 September 1997 (unreported)), which she considered to be inconsistent with the Court's decision in Pelosi and expressed the view, first, that the Court should not make any order in respect of the application for indemnity costs without the benefit of further argument; and, second, that, if the Respondent wished to pursue her application, leave to reargue Pelosi might need first to be given. 7 In the event, the Court, by majority, directed that, unless the Respondent were, within 14 days, to provide written submissions as to why an order other than that the Respondent pay the Appellant's costs of the appeal and receive a certificate under the Suitors Fund Act should be made, that order would be made. 8 Within the time so limited, counsel for the Respondent filed further submissions which, first, sought leave to reargue Pelosi, and, second - upon the assumption that such leave would be given - submitted that Pelosi was wrongly decided. 9 Those further submissions having been filed, the matter was referred to Mason P, who determined that the Respondent's application should be dealt with by a Court of five, that Court to comprise two judges nominated by him together with the Court as originally constituted, and that Court - if the parties were to agree, as they did - to deal with the application on the basis of the parties' written submissions and without further oral argument. 10 Before turning to record, and to consider, the parties' submissions, it is as well that I record the terms of what appear to me, or have been said by counsel, to be the relevant provisions of the Supreme Court Act ("the Act") and of the Rules of Court ("SCR"). They are as follow:

The Act 76 (1) Subject to this Act and the rules and subject to any other Act - (a) costs shall be in the discretion of the Court; (b) the Court shall have full power to determine by whom and to what extent costs are to be paid; ……… (2) In subsection (1) the expression 'costs' includes - (a) costs of or incidental to proceedings in the Court, including the administration of estates and trusts; (b) in the case of an appeal to the Court, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal; ………
SCR Part 22 "……… 1A (1) An order of compromise is made to a party under this Division by serving a notice of the offer on the party. ……… 3 (1) An offer may be made at any time before the time prescribed by subrule (8) in respect of the claim to which it relates. ……… (3) An offer may be expressed to be limited as to the time it is open to be accepted but the time expressed shall not be less than 28 days after it is made. ……… (5) An offeree may accept the offer by serving notice of acceptance in writing on the offeror before - (a) the expiration of the time specified in accordance with subrule (3) or, if no time is specified, the expiration of 28 days after the offer is made; or (b) the time prescribed by subrule (8) in respect of the claim to which the offer relates, whichever is sooner. ……… (8) The time prescribed for the purposes of subrules (1) and (5) and Part 52A rule 22(3) is - (a) where the trial is before a jury - after the Judge begins to sum up to the jury; (b) where the proceedings have been referred under Section 76B(1) of the Act for determination pursuant to the Arbitration (Civil Actions) Act 1983 - after the conclusion of the arbitration hearing; or (c) in any other case - after the Judge or master gives his decision or begins to give his reasons for decision on a judgment (except an interlocutory judgment)." Part 51AA " ………. 2 (1) The provisions of Parts other than this Part apply, so far as applicable, to proceedings in the Court of Appeal. (2) For the purposes of subrule (1) - (a) a person who commences proceedings in the Court of Appeal, as appellant or otherwise, shall be a plaintiff; and (b) a person against whom proceedings are commenced in the Court of Appeal, as respondent to an appeal or otherwise, shall be a defendant; (c) a notice of appeal shall be an originating process."

Part 52A " ……… 4 (1) The powers and discretions of the Court under section 76 of the Act (which relates to costs generally) shall be exercised subject to and in accordance with this Part. ……… 11 If the Court makes any order as to costs, the Court shall, subject to this Part, order that the costs follow the event, except where it appears to the Court that some other order should be made as to the whole or any part of the costs. ……… 22 ……… (3) Subrules (4)-(6) apply to an offer which has not been accepted at the time prescribed by Part 22 rule 3(8). (4) Where an offer is made by a plaintiff and 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 otherwise orders, the plaintiff shall, subject to rule 33, be entitled to an order against the defendant for the plaintiff's costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to his costs incurred before and on that day, assessed on a party party basis. ……… (6) Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall, subject to rule 33, be entitled to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim thereafter assessed on a party and party basis. ………" 11 The grounds upon which, in the Respondent's further submissions, it was sought to found a grant of leave to reargue Pelosi were: "3. … (a) there is a conflict between the decision in Ditton … following Ettingshausen v. Australian Consolidated Press Limited (1995) 38 NSWLR 404 on the one hand and … Pelosi on the other; and (b) the matter is one of general importance." 12 In seeking to develop the first of these grounds, the Respondent's further submissions continued: "6. In Ettingshausen it was held (at 410-411) that an appellant was entitled to rely on an offer of compromise filed in a first trial in a re-trial ordered by the Court of Appeal (limited as to damages). The Court held that an offer made in accordance with the Rules, which is not accepted, endures until the final hearing and determination of the claim to which the offer relates. It is unnecessary for a plaintiff (in the position of the Respondent in this case) to have revived or renewed such offer. That this is so flows from the interpretation of the Rules. 7. In Ditton v. Whitton an offer of compromise filed in the District Court (under Rules of the Court which are for practical purposes identical to Part 22 of the Supreme Court Rules) could be relied on by the respondent to the appeal as the basis for an order for indemnity costs. The principle by Cole JA (sic) (with whom Stein JA and Beazley JA agreed) was that an offer of compromise maintains until the disposition of the claim which is the subject of the proceedings. Applying Ettingshausen, it has application not just (sic) the initial trial but also to the Court of Appeal proceedings and to any subsequent trial. 8. As held by Beazley JA in this case (page 2 of Her Honour's Judgment) an application of the principle expounded in Ettingshausen and Ditton v. Whitton would mean that the respondent would have indemnity costs not just of the trial but also of the appeal. 9. This result would not flow if the Court applied the decision in Commercial Union Assurance Company of Australia v. Pelosi (No. 2). 10. It is respectfully submitted that the decision of Sheller JA in Pelosi is incorrect. 11. The basis of His Honour's decision in Pelosi was to accept, on the basis of Ettingshausen that the plaintiff's offer of compromise remained available for her to rely upon in the Court of Appeal. However, the basis of His Honour's decision seems to be found on page 4 at about point 4 that the Court has an absolute and unfettered discretion as to costs. His Honour (with whom Handley and Powell JJA agreed) was of the opinion that in the circumstances of that case (analogous to the present) that discretion should be exercised in favour of the appellant, notwithstanding the offer of compromise. It seems that the basis of His Honour's decision was that the reasonable expectation of an appellant who is successful on an appeal in reducing the amount of a verdict or an award is that his, her or its costs should be paid. 12. It is respectfully submitted that His Honour in coming to this view ignored the clear words of Part 52A Rule 22 which must, it is respectfully submitted, form the basis of any such 'reasonable expectation' of an appellant. 13. That is to say, it is with greatest respect submitted that His Honour's judgment in Pelosi contained a non sequitur. Absent an offer of compromise in accordance with Part 22 in the application of Part 52A of the Rules, a plaintiff who succeeds in obtaining a verdict against a defendant might have a 'reasonable expectation' of recovering his, her or its costs. However, such 'reasonable expectation' must be modified by an application of the Rules. For example, in a De Facto Relationships Act action verdict is obtained less than $40,000 (sic) then in accordance with Part 52A Rule 34 the plaintiff should have no 'reasonable expectation' of obtaining an order for costs. Similarly, in this case, once the offer of compromise is in place then the appellant should only have a 'reasonable expectation' of recovering costs if he was successful in reducing the verdict on appeal below $70,000. It is respectfully submitted that his Honour's judgment in Pelosi in effect ignores the decision of this Court in Ettingshausen. His Honour seems to distinguish Ettingshausen by applying it to questions of new trial and not appeals. It is respectfully submitted that there is, in truth, no distinction in principle between these two events."

13 By contrast, the Appellant's submissions were as follows: "6. The respondent submits that Pelosi is incorrect. That may depend upon how Pelosi is interpreted. It is submitted that Pelosi could stand as authority for one of two propositions: (a) that an offer of compromise made prior to trial will not operate to render a party liable to the costs of an appeal, let alone those costs on an indemnity basis, where that party is successful in the appeal, even though the outcome of the appeal results in that party obtaining a judgment or order no less favourable than the offer unless a fresh offer is made in relation to the appeal; (b) in considering the question of costs on an appeal where the appellant has been successful, the Court has a discretion to award costs to the successful appellant, regardless of whether the outcome of the appeal has resulted in a judgment or order no less favourable to the appellant than an offer of compromise made at some time prior to the trial at first instance in the matter. It would appear that in submitting that Pelosi is incorrect, the respondent takes it to be authority for proposition (a) above. 7. The basis for the Court's reasoning in Pelosi is expressed at the foot of page 4 of the judgment of Sheller JA. His Honour's reasoning rests on the rationale behind the rules relating to offers of compromise, that is to say 'the purpose of the rule is to promote settlements'. With that purpose in mind, Sheller JA then went on to say, at page 5, that he could see 'no reason why it should not be required to proffer an offer on the basis of which it would be prepared to compromise an appeal rather than relying on an offer made in the quite different circumstances existing before trial.' 8. It is submitted that His honour's reasoning on this point should be accepted. The circumstances which operate at the time of an appeal, and indeed after judgment at first instance, can be quite different from those which obtain at the time an offer is made prior to trial. 9. The approach proposed by the respondent, that is to say an approach whereby the Court would be bound to order indemnity costs against a successful appellant in any case in which the outcome of the appeal was no less favourable than an offer of compromise made prior to the trial at first instance would be unduly restrictive of the Court's discretion and, with respect, would fail to take into account the matters considered by Sheller JA in his judgment. 10. In the absence of any procedure for separate offers of compromise in appeal proceedings there is no opportunity to promote a compromise settlement of the appeal. The Pelosi question, if it can be called that, only arises where a defendant brings an appeal against a judgment at first instance which judgment was 'no less favourable' than an offer of compromise. There are many other circumstances which can arise in an appeal and in which the prospect of making an offer of compromise in relation to the appeal proceedings would be advantageous. 11. It is also submitted, with great respect, that it is reasonable to ask whether it is appropriate to penalise an appellant who brings an appeal to correct an error made by the trial judge, and succeeds in demonstrating that there is such an error. In the absence of rules or recognised principles concerning separate offers of compromise on an appeal, a respondent who might be fully aware of the defects in the judgment at first instance is under no compunction on the appeal and can sit back, lying low and saying nothing, while the appellant prosecutes the appeal. 12. If a respondent elects to contest an appeal rather than accepting some compromise, or perhaps seeking a compromise, the appellant is entitled to hold a reasonable expectation that it will be rewarded its costs of that contest. Sheller JA was not in error in using that expression. 13. If the correct principle to be drawn from Pelosi is that stated in 6(b) above, there is no irreconcilable inconsistency between Pelosi and Ettingshausen and Ditton v. Whitton." 14 Notwithstanding the provisions of SCR Pt 51AA r 2(2) (which apply to appeals, such as this, commenced in the Court of Appeal prior to 1 September 1997 - as to appeals commenced in the Court of Appeal on or after 1 September 1997 see SCR Pt 51 r 3(2)) the decision of this Court in Maitland Hospital v. Fisher (No. 2) ((1992) 27 NSWLR 721; see also Nominal Defendant v. Gardikiotis (No. 2) 23 June 1994 (unreported)) would seem to establish that, in the application of SCR Pt 52A r 22 (which Part came into effect on 1 July 1994 - as to the relevant rules as to costs previously applying see SCR Pt 51 r 17) the words "plaintiff" and "defendant" have their ordinary meaning rather than the special meaning provided for in SCR Pt 51AA r 2(2). 15 This notwithstanding, and despite the fact that, in both Maitland Hospital v. Fisher (No. 2) (supra) and Nominal Defendant v. Gardikiotis (No. 2) (supra), this Court made orders for the payment of the costs of the relevant respondent, those costs to be taxed on an indemnity basis, neither decision provides any support for the case which the present respondent seeks now to advance. That this is so is, I suggest, readily demonstrated. Thus: 1. in each case, the appeal was dismissed; 2. in addition, in Nominal Defendant v. Gardikiotis (No. 2) the then respondent's cross-appeal was upheld so that she received a verdict significantly greater than that which she had received at first instance; 3. although in Maitland Hospital v. Fisher (No. 2) (supra) the respondent had, before trial, made an offer of compromise, the amount of which was less than the verdict which she received at trial, and by reason of which fact Lee AJ awarded her costs on an indemnity basis as from the date of the offer, the order made by this Court was based, not on that offer, but upon a fresh offer to compromise the appeal, the costs on an indemnity basis running from the date of the later offer; 4. in Nominal Defendant v. Gardikiotis (No. 2) (supra) the order for costs made in this Court was based upon an offer to compromise the appeal for a sum less than that which had been awarded at trial by Garling DCJ, the costs on an indemnity basis running as from the date of that offer. 16 Nor in my respectful view, does either of the decisions of this Court in Ettingshausen v. Australian Consolidated Press Limited ("Ettingshausen') ((1995) 33 NSWLR 404) and Ditton v. Whitton (5 September 1997 (unreported)) provide support for the case which the Respondent seeks now to advance. 17 So far as Ettingshausen is concerned it is to be noted: 1. in Australian Consolidated Press Limited v. Ettingshausen (Court of Appeal 13 October 1993 (unreported)) this Court upheld an appeal by the defendant in the action, set aside the verdict of $350,000 which the plaintiff had received at trial, directed a new trial limited to damages, and directed that the plaintiff pay a proportion of the defendant's costs of the appeal; 2. before the first trial, the plaintiff had offered to compromise his claim for $85,000.00 plus costs, by reason of which offer Hunt CJ at CL had ordered that the plaintiff have his costs such costs to be on an indemnity basis as from the date of the offer; 3. although making the orders to which I have referred in 1 (above) this Court did not set aside the order for costs which had been made by Hunt CJ at CL; 4. at the new trial, the jury awarded the plaintiff $100,000. 5. in the light of the verdict, the plaintiff, relying on his offer of compromise which he had made prior to the first trial, sought an order that - except to the extent that they had been dealt with by the orders made by Hunt CJ at CL and by this Court - he have his costs on an indemnity basis as from the date of service of the offer; 6. that application was refused by Badgery-Parker J upon the basis that, upon its proper construction, what was then SCR Pt 52 r 17(4) did not attach costs consequences to an offer of compromise once a claim had proceeded to a verdict at trial; 7. on appeal, this Court, by majority, ordered (inter alia): " ……… (2) The refusal of Badgery-Parker J to make an order under Pt 52 r 17(4), and his Honour's order relating to the costs of the application for indemnity costs, should be set aside; (3) The appellant should have an order against the respondent for his costs, in respect of the claim from 11 December 1992, (so far as they have not been dealt with by the order for costs made by Hunt CJ at CL at the end of the first trial, and subsequent orders made by the Court of appeal) assessed on an indemnity basis; (4) The appellant's costs of this appeal, and of the application for indemnity costs, should be paid by the respondent. The respondent, if otherwise so entitled, should have a certificate under the Suitors Fund Act 1951; ………" 18 As will be apparent, the Court, while ordering that the defendant pay the plaintiff's costs of the application to Badgery-Parker J and of the appeal did not order that those costs be assessed on an indemnity basis. 19 So far as Ditton v. Whitton is concerned, it is sufficient to note: 1. the defendant's appeal - which was limited to the trial Judge's apportionment of liability because of the plaintiff's contributory negligence - was dismissed; 2. although it seems that, when the plaintiff's application for indemnity costs was made, the Court was referred to Ettingshausen (supra), it was not referred to the earlier decision of this Court in Pelosi to which I shall refer in more detail shortly; 3. in the event, counsel for the then defendant did not offer any submission against the award of indemnity costs. 20 Pelosi, in contrast to Ditton v. Whitton - which was a short ex tempore Judgment delivered following an application which, as is apparent, was in the event unopposed - was a considered Judgment of the Court (Handley, Sheller and Powell JJA) on a contested application made following the earlier delivery by the Court (then constituted by Kirby P, Handley and Sheller JJA) of Judgment on an appeal by the then defendant and a cross-appeal by the then plaintiff from a Judgment delivered by Barr AJ (as his Honour then was) in proceedings which had been brought by the then plaintiff to recover damages in respect of injuries sustained by her in a motor vehicle accident in 1989. 21 In August 1993, the plaintiff offered to compromise her claim for $1.7 million clear of all payments - later agreed to amount to $120,481 - previously made by the defendant, together with her costs of the proceedings. That offer was not accepted by the defendant. At trial, Barr AJ found a verdict for the plaintiff in the sum of $2,082,865.90, and, on 28 February 1995, directed Judgment accordingly. The parties apparently being agreed that, in the light of his Honour's assessment of damages, the plaintiff was entitled to an award of indemnity costs, on 7 April 1997 Barr AJ ordered that the plaintiff have her costs, such costs, as from 25 May 1993 - which appears to have been the date of an award made by an arbitrator pursuant to the provisions of the Arbitration (Civil Actions) Act 1983 - to be on an indemnity basis. 22 The defendant appealed, and the plaintiff cross-appealed, against Barr AJ's Judgment. On its appeal the defendant was successful in respect of some - but not all - of its grounds of appeal, while the plaintiff succeeded in respect of two of her grounds of appeal. In the result the plaintiff's verdict was reduced by $96,984 from $2,082,865.90 to $1,985,881.90 - that sum, as is apparent still exceeded the amount for which the plaintiff, in August 1993, had offered to compromise her claim. 23 So far as the costs of the appeal, and cross-appeal, were concerned, Sheller JA, who delivered the principal Judgment, said: "COSTS In my opinion although it succeeded in part on its appeal the appellant should not have an order for all its costs of the appeal. Similarly the respondent should not have an order for all the costs of her cross-appeal. A substantial part of the appellant's attack was directed to the amount allowed for future economic loss and for home care. On these grounds it failed completely. It achieved relatively small reductions in the amounts allowed for future economic loss, future medical and hospital expenses, training education and rehabilitation expenses and home alterations, construction and maintenance. All in all I am inclined to the view that this is an appropriate case to order that each party pay its or her costs of the appeal." 24 Following the delivery of the Court's Judgment, the plaintiff, relying upon the offer of compromise which she had made in August 1993, applied unsuccessfully for an order that she have her costs of the appeal on an indemnity basis. Sheller JA, who again delivered the principal Judgment, dealt with that application in the following way: "Mr. Semmler QC, who appears for Miss Pelosi, went so far as to submit that whatever the result of the appeal or the cross appeal in terms of the issues raised, if the substituted verdict exceeded the amount of the offer, his client was entitled to her costs of the appeal on an indemnity basis. I reject this submission. Although the successful party on an appeal has no right to costs unless and until the Court awards them and the Court has an absolute and unfettered discretion, which must be exercised judicially to award or not award them, the successful party in the absence of special circumstances, has a reasonable expectation of obtaining an order for the payment of costs from the unsuccessful party; see generally Donald Campbell & Co Limited v. Pollak [1927] AC 732 at 811-2. I doubt whether the fact that an offer of compromise under Pt 22 has been made should weigh in determining which party should pay the costs of the appeal. Part 52A r22 is directed, not to which party should pay the costs, but to whether the party ordered to pay the costs should pay them on an indemnity basis. In the present case if Miss Pelosi had appealed against the amount of the verdict and Commercial Union not cross appealed and the appeal had failed, the reasonable expectation of Commercial Union would be that it receive the costs of the appeal. If, in this case, there had been no cross appeal and Commercial Union had succeeded on its appeal though not to an extent sufficient to reduce the amount of the verdict the amount of the offer, it would be contrary to its reasonable expectation that Miss Pelosi, the unsuccessful respondent, would receive the whole of the costs of the appeal or indeed any part of them. On the other hand if she succeeded on the appeal it would be her expectation to obtain an order for costs and, in accordance with the dictum in Ettingshausen and the previous practice of this Court, an order that those costs be paid on an indemnity basis. In my judgment of 2 February 1996 I explained why I was of opinion that there should be no order as to the costs of the appeal or cross appeal. In light of the submissions that have been made I have reviewed this conclusion. In doing so I have taken account of the arguments advanced on Miss Pelosi's behalf but put them aside as not relevant to the question of how the parties should bear the costs of this appeal. I confirm the form of the order as I originally proposed it." 25 As will be apparent from what I have earlier recorded, the result for which the respondent contends in the present case mirrors that for which the then plaintiff contended unsuccessfully in Pelosi, the basis for the respondent's submissions seemingly being, first, that the Court's decision in Ettingshausen dictated that the offer which had been made by the Respondent in October 1996 continues to have the consequences provided for in SCR Pt 52A r 22; and, second, that the provisions of SCR Pt 52A r 22 are such as to dictate that, in the circumstances of this case, the Appellant was entitled to both an order that the Respondent pay her costs of the appeal and an order that those costs be assessed on an indemnity basis. 26 Let one accept that the Respondent's offer continues to be of relevance when the question of the costs of the appeal comes to be considered, in my view the provisions of the Act and the rules do not, in the present case, dictate that the Respondent should have an order for her costs of the appeal, and still less that those costs should be assessed on an indemnity basis. 27 If I may, with respect, say so, the Respondent's submissions, first, concentrate upon the provisions of SCR Pt 52A r 22 to the exclusion of the provisions of the Act and of the other provisions of the rules; and, second, appear to overlook the fact that r.22(4), upon which so much stress is laid, reserves to the relevant court a discretion as to whether or not some other order ought to be made. 28 In this regard it is to be noted: 1. s.76 of the Act makes it clear that costs - including costs of an appeal - lie in the discretion of the relevant court; 2. SCR Pt 52A r 4 provides that the powers and discretions of the relevant court under s.76 of the Act shall be exercised subject to and in accordance with the provisions of Part 52A; 3. those provisions include r 11 which accords with the common law rule that, prima facie, costs should follow the event - contrary to what appears to be the Respondent's submission, r 11 is a rule of general application and not one limited to cases in which no offer of compromise has been made; 4. as I have previously noted, r 22(4), while providing for the prima facie consequence of a defendant's failure to accept a plaintiff's offer of compromise, expressly reserves to the relevant court the power to order otherwise; 5. by the time Judgment in any matter comes to be delivered, it will no longer be open to a party to whom an offer of compromise has earlier been directed to accept that offer, it following that, in the event of the Judgment being affected by error, the only means of seeking to have that error corrected which, in the absence of a further offer of compromise, will be open to the recipient of the original offer of compromise, will be by way of appeal; 6. although the Court's discretion, being a judicial one, is not untrammelled, but one which must be exercised in the light of relevant matters and in accordance with accepted principle, it seems to me that, where an appeal has been upheld, not only is that fact a relevant one, but the provisions of r 11 would, in the normal course, justify the relevant court otherwise ordering; 7. although Sheller JA did not, in his Judgment in Pelosi , articulate his approach in quite the same way as I have done, that approach seems to me in substance to have been the same - in the light of the limited success of the then defendant and the then plaintiff on the appeal and cross-appeal, it was appropriate that there be no order as to the costs of the appeal and the cross-appeal. 29 In the present case, the Court has held that the Master erred in the order which he made at trial, and the Appellant having, in consequence, achieved a significant reduction - 28% - in the amount of that order, it seems to me appropriate for the Court, in the exercise of its discretion, to order otherwise. 30 For these reasons, I propose the following Orders:

ORDER that the Respondent pay the Appellant's costs of the appeal but, if qualified, have a certificate under the Suitors Fund Act 1951;
ORDER that the Respondent pay the Appellant's costs of the application for indemnity costs.

31 BEAZLEY JA: I agree with the orders proposed by Powell JA and with his reasons. I also agree with the additional reasons of Stein JA.

32 STEIN JA : I have had the benefit of reading the draft judgment of Powell JA with which I generally agree. 33 It seems to me that the starting point for consideration of the proper costs order in this appeal is to accept that the offer of compromise continues to have cost consequences for an appeal (Ettinghausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 410). It follows that it is a relevant factor to consider on the question of costs. It was not an extraneous consideration. 34 However, as Powell JA points out, Part 52A Rule 22(4) contains its own discretion 'unless the court otherwise orders'. This brings with it the need, where applicable, to consider all of the other circumstances relevant to exercising the discretion as to costs contained in s 76 of the Supreme Court Act 1970, (and see Part 52A rules 4 and 11). 35 In Commercial Union Assurance Company of Australia v Pelosi (No. 2) Sheller JA said: I doubt whether the fact that an offer of compromise under Pt 22 has been made should weigh in determining which party should pay the costs of the appeal. Part 52A r22 is directed, not to which party should pay the costs, but to whether the party ordered to pay the costs should pay them on an indemnity basis. In the present case if Miss Pelosi had appealed against the amount of the verdict and Commercial Union not cross appealed and the appeal had failed, the reasonable expectation of Commercial Union would be that it receive the costs of the appeal. 36 It is this passage which is said to expose the error pressed by counsel for the respondent. If taken literally, it may be seen as an over-statement. The offer of compromise remained relevant in the appeal on the question of costs. There is however, as I have mentioned, a qualification in Rule 22(4) which provides for a discretion which may be exercised. It appears to me that, properly understood, Sheller JA was saying that in the circumstances of Pelosi (No. 2) that discretion should be exercised and indemnity costs should not be ordered. 37 As Powell JA says, rule 22(4) does not dictate that the respondent should have an order for costs of the appeal, whether on a party/party or on an indemnity basis. I agree with his Honour's observation that while Sheller JA has not articulated his approach in the same way, the substance is the same given the discretion expressly present in rule 22(4). It follows that I do not think that Pelosi No. 2 was incorrectly decided. 38 I agree with the orders for costs proposed by Powell JA and his reasons therefore.

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