FOWDH v FOWDH

(1) (By the Court): The appeal being on a discretionary matter relating to costs, it was for the appellant to show a relevant error of law or of fact finding or the consideration of irrelevant matters.

Wentworth v Rogers and Anor (No 3) (1986) 6 NSWLR 642 (CA) applied;

(2) (By Mahoney AP and Meagher JA; Kirby ACJ dissenting): No or no sufficient error of law, of fact finding, or of the consideration of irrelevant matter was shown to warrant disturbance of the Master's exercise of discretion having regard to the change of the plaintiff's case between the offer and trial. Maitland Hospital v Fisher (1991) 27 NSWLR 721 (CA) referred to - Discussion of the policy governing indemnity costs and of the provision otherwise to order under Pt52 R17(4) SCR.

Held: (By the Court): The reference was irregular but (Meagher JA contra) the appeal should, in the circumstances, be dealt with on its merits.

Supreme Court Act 1970, s76, s101(2)(c), and s104. Supreme Court Rules Pt22 R2, and R3; Pt52 R17(1), R17(2), R17(4).

Kirby ACJ The present proceedings were removed into this Court by order of Ireland J, made on 22 July 1993. Two questions are raised. One is the procedure which has been adopted of referring an appeal from a Master to the Court of Appeal. The other, the reference being accepted by the Court of Appeal, is the consideration of the substance of the challenge to the Master's decision to refuse indemnity costs and to "otherwise order', despite proof that the preconditions of Pt52 R17 SCR for an order for indemnity costs had been duly made out.

Recovery of a judgment greater than an offer of compromise

It is convenient to start with the relevant facts. Mrs Suzanne Fowdh (whom I shall describe as the appellant) was injured as long ago as 3 March 1984. The injury arose in a motor vehicle accident. She sued Mr Ala El Din Fowdh and Mr William Rowe (the respondents) alleging negligence on their parts. Negligence

was admitted. A defence of contributory negligence was pleaded, arising from the alleged failure of the appellant to wear a safety belt. That defence was dismissed at trial. It is not now relevant.

The proceedings were commenced in the Supreme Court. They took a very long time to come to trial. During 1991, the appellant was submitted to various tests both for her own medical experts and for those retained by the solicitors for the insurers of the respondents. The date when the proceedings would be set down for trial approached. On 21 March 1991, medical reports were served by the appellant upon the respondents' solicitors in accordance with the Rules. Final particulars were provided on 28 March 1991. On 8 April 1991, also in accordance with the Rules, the appellant offered to accept, by way of compromise, a judgment in the sum of $275,000 together with costs. By its terms, the offer was specified to be open for twenty eight days after it was made. The offer was not accepted within that time.

In May, and again in August 1991, the appellant was submitted to medical examinations conducted on behalf of the respondents. It is now known that reports were provided to the respondents' solicitor following those examinations. One such report (by Dr Mellick), in August 1991, suggested that an MRI scan might usefully be performed upon the appellant. This was duly done on 6 February 1992. Copy of the report was provided on 24 February 1992. This, in turn, was sent to Dr Mellick who provided a further report to the solicitor for the respondents on 9 March 1992.

In March 1992 it seems that the appellant's solicitor again offered to settle the proceedings for $325,000 inclusive of costs. The solicitor had no recollection of making such an offer and nothing really turns on it. Certainly, the respondents made their first offer of compromise on 6 May 1992. It was made in the sum of only $165,000 plus costs. There is some dispute as to what then happened. As recorded by the Master:

"The defendants assert that the plaintiff's lowest offer was $320,000, (sic) inclusive of costs. This is disputed by the plaintiff. On behalf of the plaintiff, it is asserted that a final offer of compromise was made on the second day of the hearing, for a sum of $300,000, inclusive of costs."

The hearing referred to began on 31 August 1992 before Master Malpass. It continued over four sitting days. As recorded by the Master, there was a considerable dispute relating to the extent of the appellant's disabilities, pain and dislocation of life. There was also a dispute concerning the extent to which her disabilities were attributable to the accident of March 1984.

On 17 September 1992 Master Malpass delivered his judgment. He found in favour of the appellant without diminution for contributory negligence. The total amount of the damages awarded to her was $288,500. The Master made the usual order that the respondents pay the appellant's [party and party] costs.

Naturally, in reaching his assessment, Master Malpass was unaware of the formal offers of compromise or of the subsequent private negotiations between the representatives of the parties. Clearly enough, these had demonstrated that the appellant and the respondents were quite a long way apart in their respective assessments of the amounts which it was expected that the appellant would recover.

Master Malpass rejected the application for indemnity costs which the appellant made. He did so in separate reasons published by him on 23 October 1992. He referred to the discretionary nature of the jurisdiction invoked; the

terms of the relevant Rules of Court; the authority of this Court in Maitland Hospital v Fisher [No 2], (1992) 27 NSWLR 721 (CA); and the facts relevant to the application, as he perceived them. He concluded:

"In my view, the defendants have acted realistically having regard to the information that was available to them. I do not consider that their failure to accept the plaintiff's offer was unreasonable.

It seems to me, when regard is had to all the relevant facts and circumstances, justice between the parties is best served if I make the otherwise order sought by the defendants. I consider that the defendants have discharged the onus of demonstrating the entitlement to such an order. In my view, this is not a case where justice would be served if I made the order sought by the plaintiff."

The result was that the motion for indemnity costs was dismissed. The appellant was ordered to pay the costs occasioned by it.

The appellant was dissatisfied with this decision. She lodged an appeal which, in accordance with the Act and Rules was brought before a single judge of the Common Law division. The Supreme Court Act 1970, s104 provides that "subject to the rules, an appeal shall not lie to the Court of Appeal from any decision.... of the Court... constituted by a master...". That subsection is to be read with Pt60 R9 ff SCR. The assignment of the appeal against the Master's cost order to a single judge was thus entirely appropriate and conformable with the applicable legislation.

The appeal was assigned within the Common Law Division to be heard by Ireland J. His Honour, by order, "removed" it into this Court. His short reasons for doing so appear to indicate that he felt that this was appropriate, given that the "Master was sitting in his role as a judge of this Court". In these circumstances he felt that it was "incongruous" for a single judge to review the Master. He purported to "reserve" the appeal for determination by the Court of Appeal by reference to Ptl2 R2 SCR. This is clearly inapplicable, at least unless the relevant judge in a Division of the Supreme Court "states [a] question to be decided or determined and is satisfied that special circumstances exist which render it desirable to make an order".

It does not seem that this was the procedure adopted by Ireland J. There is no statement of a question to be decided by this Court. Nor is there any indication of the "special circumstances" which would render the action desirable in the circumstances, save for the status of the Master. That status, alone, cannot be a relevant reason, given that the legislation expressly contemplates that the line of appeal in a case such as this lies from the Master to a single judge.

Removal was inappropriate: but appeal should be decided Neither "removal" nor "reference" nor transfer to the Court of Appeal was available or appropriate. For my own part, I can understand (and sympathise with) the feelings expressed by Ireland J. They reflect, to some extent, the change in the function and status of Masters of the Supreme Court which has occurred over the years since s104 of the 1970 Act was enacted. Perhaps it should be the case that appeals, in cases such as the present even on decisions concerning costs, incidental to the determination of proceedings in the Division which might have been heard by a judge, should lie from a Master to the Court of Appeal under conditions akin to those governing appeals from judges. See eg Supreme Court Act 1970, s101(2)(c). However that may be, it is not the present law.

It would have been helpful, therefore, for this Court, in the present case, to have had the consideration of the matter by a judge of the Common Law Division. Nevertheless, for several reasons it appeared to me that the matter should not be remitted to the Division (as Meagher JA favoured). The amount involved is comparatively small. The case was referred to this Court despite the objections of the appellant and without any request by the respondents. If a mistake has occurred, it has occurred within the Court and should not further burden the parties. Costs had already been accumulated in two listings of the matter in the Court of Appeal. The parties were represented by their counsel to argue the appeal. Upon the submissions of the appellant, there was an arguable point of general principle raised by the appeal. This was the suggested disinclination of Masters and trial judges to give wholehearted effect to the indemnity cost rules found in Pt52 R17(4) SCR. It was suggested that this case was but the latest instance of such disinclination. And that it would be timely for this Court to indicate the need for primary decision makers to give proper effect to the Rule, according to its terms.

Therefore, despite the irregularity of procedure, the Court embarked upon the hearing of the appeal. Accordingly, I address myself to the complaints of the appellant.

Error of Principle has occurred in "otherwise" ordering In my respectful view, it is pointless to say that this is an appeal about the determination of a matter concerning costs which involved the exercise of discretion by the Master. Of course it did. So much was never denied by the appellant. This Court does not lose its jurisdiction in such a case. It must continue to perform the functions assigned to it by Parliament. Such appeals are not put out of court simply because of their character as challenges to discretionary decisions at first instance. It remains a question whether the discretionary decision has nevertheless miscarried in such a way as to authorise and require the intervention of this Court notwithstanding the limitations imposed upon appellate interference in discretionary decision making particularly with respect to costs. We are not blind to the possibility that errors can occur in such cases. Wrongs will sometimes be done which it is within the power of this Court to cure and which, in appropriate cases, it should proceed to cure. That is the nature of a legal system which assures a higher standard of justice by permitting a second look at primary decisions. If Parliament had intended a mechanical rejection of all appeals against interlocutory and costs orders, it would have said so. Parties would then have been spared wasted time, expenses and hopes. But Parliament did not so provide.

Because the appellant accepted that the decision of Master Malpass was discretionary, the only basis upon which she could seek the intervention of this Court on appeal was if she could bring herself within the well known principles controlling appellate review of discretionary decision making. Such principles are collected in Re the Will of FB Gilbert (Deceased) (1946) 46 SR(NSW) 318 (FC) 323; 63 WN (NSW) 176 at 179. See also Wentworth v Rogers and Anor (No 3) (1986) 6 NSWLR 642 (CA) 644 ff. They were recently reconsidered in two cases. In Crisp v Keng, Court of Appeal, Unreported, 27 September 1993, the Court (by majority) refused to intervene. But in Garrard and Ors v Email Furniture Pty Ltd, Court of Appeal, Unreported, 8 October 1993, the Court unanimously found errors of principle. It set aside the primary judge's decision related to costs and substituted its own. Relevantly, it was therefore necessary in

this case for the appellant to show a manifest error of law or of fact finding or the consideration of the irrelevant matters or the failure to take into account relevant matters.

With respect, it is altogether too superficial to reject the case simply because it is a challenge to the exercise of a discretion on costs. To take this approach ignores the arguments which the appellant advanced and the role of this Court.

Put shortly, the appellant complained that all of the foregoing errors of principle occurred in this case:

(1) A manifest error of law occurred because the Master failed to give effect to the plain purpose of the rule as it modifies and controls the general discretionary powers of the court on costs contained in the Supreme Court Act 1970, s76. Specifically, it was suggested, he failed to give adequate or proper attention to the "obvious purpose" of the Rule as stated above (at 724) viz. "to facilitate the proper compromise of litigation" and to impose upon the parties the reasonable consideration of an offer of compromise. The obligation to consider seriously offers of compromise is not one to be taken lightly. The purpose of the Rule (which is not without potential problems which were acknowledged in Fisher) is to encourage not only the saving of private costs and time but also the saving of public costs and the expeditious disposal of litigation in the Supreme Court. Unless primary judges give meaning and application to the Rule, in accordance with its terms and obvious purpose, the operation of the Rule will be frustrated and its effectiveness denied. In short, this was what the appellant suggested was happening. The decision of the Master in this case was simply the latest example of a resistance by the primary decision makers of the Court to the philosophy which the Rule embraces.

For the appellant, this was a clear case for the application of the rule. The appellant had offered to accept a compromise. The compromise was sufficiently lower than the amount recovered to represent a true "compromise". It was not a demand for the entire amount claimed. Cf Tickell v Trifleska Pty Ltd and Anor (1991) 25 NSWLR 353 (SC). Assuming that it is necessary, as part of the scheme envisaged by Pt52 R17(4) SCR for the plaintiff to offer to accept by way of "compromise" something less than her full entitlements (a matter which does not need to be decided in this case) the judgment ultimately obtained by the plaintiff in this case was sufficiently higher than the sum offered by way of compromise as to constitute the offer in this case one properly described as "an offer of compromise". The contrary could scarcely be seriously argued. Indeed, the Master accepted that it was so. For a person in the position of the appellant the margin of difference between the offer made and the judgment recovered ($13,000) was significant. As events proved, the appellant's offer was framed with considerable accuracy and realism.

It was less than she recovered. So far as the appellant was concerned, she had fulfilled her part in earning the application of the Rule. Whilst a discretion remained to deny a qualified plaintiff of the benefit of the Rule, like any discretion it had to be exercised for the purpose for which it was conferred. This was not to preserve the old principles on costs but to ensure against the occasional (and by inference exceptional) circumstances where proper and relevant considerations excused the defendant from accepting the offer made. That refusal not only extended the litigation and ran up costs (some portion of them to be borne by the plaintiff/appellant unless a special order was secured). It also delayed the receipt by the appellant of her lawful entitlement. It took up the public time of the Court and its numerous officers in disposing of her claim. It

necessarily displaced other cases not so susceptible to settlement from an early hearing. All of these represent the disadvantages, delays and costs to which the indemnity costs rule was directed. In such circumstances, the appellant argued that the exercise of discretion by the Master in this case was manifestly erroneous and unreasonable. With every respect to the learned Master, I see much force in this submission. However, it is unnecessary to decide the case on that basis. The appellant had additional grounds of complaint.

(2) The appellant also contended that the Master had erred in his fact finding and had based the exercise of his discretion upon erroneous factual premises. In his reasons, the Master inferred that a relevant consideration in determining whether the respondents' refusal of the compromise offer was that a [MRI] scan was performed on 6 February 1992. It is understandable how this mistake occurred. In a report of Dr Mellick, dated 9 March 1992, the date of the scan was incorrectly stated as being on 6 February 1992. In fact, the scan was arranged by Professor J Lance and performed on 6 February 1991. Thus, when the offer of compromise was made on 8 April 1991, the scan had been concluded. A report upon it was undoubtedly available to the respondents' advisers. A fact thought relevant by the Master to justify and excuse the delay or non acceptance of the formal offer when made, was therefore irrelevant and inapplicable.

(3) The appellant further pointed to a number of considerations which appeared to have affected the Master's exercise of discretion but which were strictly irrelevant to that decision:

(i) The first was the store placed by the Master upon the fact that the appellant's offer was open only for twenty eight days. However, the appellant was simply seeking, by her offer, to bring herself within the terms of Pt52 R7(1) SCR. That subrule, in turn, incorporates the form and requirements of an "offer of compromise" as provided by Pt22 R3(5) SCR. That sub rule, in its turn, expressly states, in para(a), that the offeree may accept before "the expiration of the time specified in accordance with subR(3) or,... 28 days after the offer is made." Pt22 R3(3) provides:

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.

It must be assumed from the foregoing that the rule maker contemplated that, in the normal case, twenty eight days would be a sufficient time within which a party could receive advice from its lawyers, consider its position, give instructions and respond to an offer of compromise. If further time were needed, it would always be open to a party to ask for further time. A refusal to extend further time (if an extension were reasonable in the circumstances) would itself be a matter relevant to the exercise of the discretion under Pt52 R17(4) SCR. In the event, there was no application for an extension of time in this case. The offer was simply ignored. The Master appears to have thought that twenty eight days was insufficient time. But, with respect to him, it was the time provided by the Rules of Court with which the appellant was obliged to conform if she hoped to attract legal consequences under the Rules for the ordering of indemnity costs;

(ii) To the extent that the Master took into account the further negotiations which took place between the parties, as relevant to the discretion to order "otherwise" than Pt52 R17(4) ordinarily provides, he appears to have overlooked the fact that the best proposal made by the respondents to settle the case was in the sum of $165,000 plus costs. That offer was made as late as 6 May 1992. This offer was clearly in a different league. It fell far short of the offer of the appellant.

The latter, on the other hand, as events were to prove, was realistic. It was sufficiently lower than the amount recovered by judgment as to attract the prima facie application of the Rule;

(iii) As well, the Master does not appear to have given weight to the fact that, in the relevant disputes between the medical witnesses recounted in his principal judgment, he preferred the views expressed by the witnesses retained for the respondents. In other words, he proceeded to his estimation of the damages of the appellant not upon the basis of the appellant's own evidence but upon the footing that the case was to be approached substantially upon the basis that the respondents asserted.

On this basis, it is even more clearly demonstrated that the offer made by the respondents was not realistic and that the offer made by the appellant (given her own approach to the case) was a true offer of compromise. In such circumstances, to achieve the object of the Rule as to indemnity costs it is clear that the exercise of discretion in this case would have to be approached upon the footing that the respondents failed realistically to assess their own case. See Stollznow v Calvert [1980] 2 NSWLR 749 (CA) 751. They failed in the light of that assessment, to consider appropriately the offer put forward for the appellant. It is that obligation which this Court in Fisher (at 724 f) stated as being one of the important objectives which the rule was seeking to promote; and (iv) In so far as the Master expressed the opinion that "it would have been reasonable for the defendants to entertain the view that they had good prospects of success on the disputed quantum items" so much may be allowed. As I have already stated, the failure of the respondents (defendants) was to assess the case properly and reasonably upon the footing that their expectations of success would be borne out and then to allow something for the risks that they might not be.

The foregoing errors of fact finding and consideration of irrelevant matters (or failure properly to consider relevant matters) authorises this Court to intervene in the Master's decision. The box in which are found discretionary and costs orders is not locked. The key is not thrown away. True, this Court, in the discharge of its functions, should approach the opening of that box with circumspection for the reasons explained by Jordan CJ in his familiar words in Gilbert. But it is not futile to challenge discretionary and costs orders in this Court where errors of law, fact finding and consideration of irrelevant material can be demonstrated. The Court will more readily provide its relief where it appears that the primary decision maker, who is exercising decision making powers conferred by or under statute, has failed to do so, as the statutory rule contemplates. It will be evident from the foregoing that I am of the view that that is what has happened here.

The Rule governing the entitlement to indemnity costs following a plaintiff's offer of compromise must be implemented by all judicial officers. Ordering "otherwise" must be seen in the context of the Rule and the achievement of its purposes. As a true exception, the power to so order should not be allowed to derogate from the successful operation of the policy found in the Rule. Courts must be obedient to that policy for it is made under the authority of Parliament.

There was no suggestion that the matter should be remitted for reconsideration to the Common Law Division. Nor was any ground shown as to why the discretion, which miscarried before the Master, should not be exercised by this Court. I believe that, to save further costs and delays, this Court should proceed

to consider the motion for indemnity costs as the law requires, freed from the error and consideration of extraneous circumstances which I respectfully believe affected the primary decision here.

Approaching the matter in that way (and keeping the object of the Rule in mind) the simple facts are that the appellant (plaintiff) made an offer properly described as one of compromise. She did so formally and in compliance with the Rules of this Court. She allowed the time provided by the Rules for acceptance. The offer was simply ignored. No request was made, still less declined, to extend time for consideration of the offer of compromise. The offer made to the respondents, even upon its own material was unrealistic. As events were to prove, the offer made by the appellant was sensible and realistic. The refusal to accept it extended this litigation by two and a half years, if these proceedings are also counted. Very considerable costs were run up. They should not be a burden on the appellant.

Unless the courts give appropriate effect to the indemnity costs Rule, offers of compromise will continue to be treated lightly and without the seriousness which the Rule is designed to promote.

2. Set aside the orders of Master Malpass dated 23 October 1992;

3. In lieu thereof order that, to the costs orders made by the Master on 17 September 1992, there be added the order:

Order the defendants to pay the plaintiffs costs of the proceedings after 8 April 1991, taxed on an indemnity basis, in addition to her costs incurred before and on that day, taxed on a party and party basis.

4. Order the respondents to pay the costs of the appeal, including those of the proceedings in the Common Law Division before Ireland J but certify that they are to have, if otherwise so qualified, in respect of such costs, a certificate under the Suitors' Fund Act 1951.

5. Order the defendants to pay the costs of the motion for indemnity costs before Master Malpass.

Mahoney JA In my opinion, the appeal from Master Malpass should be dismissed.

The plaintiff was injured in 1984. She commenced her proceeding in 1986. Judgment was given in her favour in 1992. The present dispute is over the costs. The Master gave the plaintiff her costs. She applied for indemnity costs: Pt52 R17(4). The Master refused the application. She appealed to a judge. The judge referred the appeal to this Court. I agree with Kirby ACJ that this Court should decide the dispute, otherwise the litigation may be further prolonged.

In my opinion: the Master's decision was a discretionary decision; the grounds on which an appeal may be brought against a discretionary decision are limited: a fortiori, if the decision is one as to costs; the Master made no error which would warrant his decision being reversed; if he did err, this Court should come to the same decision. (a) If, within Pt52 R17(4), a plaintiff makes an offer of settlement, the defendant does not accept it and the plaintiff obtains a "no less favourable" order, the plaintiff is entitled to indemnity costs "unless the court otherwise orders". The decision whether to "otherwise order" is pre eminently a discretionary one. It is one related to the quantum of costs and the principles on which they are to be determined.

(b) The basis on which this Court should consider an appeal against a discretionary decision of the present kind is well settled. The cases were authoritatively discussed by Kitto J in Australian Coal and Shale Employees Federation v Commonwealth (1956) 94 CLR 621 at 626 to 628; see Stanley v Morris (1966) 40 ALJR 34 at 41.

"T shall not repeat the references I made in Lovell v Lovell (1950) 81 CLR 513 at 532 to 534 to cases of the highest authority which appear to me to establish that the true principle limiting the manner in which appellate jurisdiction is exercised in respect of decisions involving discretionary judgment is that there is a strong presumption in favour of the correctness of the decision appealed from, and that that decision should therefore be affirmed unless the court of appeal is satisfied that it is clearly wrong. A degree of satisfaction sufficient to overcome the strength of the presumption may exist where there has been an error which consists in acting upon a wrong principle, or giving weight to extraneous or irrelevant matters, or failing to give weight or sufficient weight to relevant considerations, or making a mistake as to the facts. Again, the nature of the error may not be discoverable, but even so it is sufficient that the result is so unreasonable or plainly unjust that the appellate court may infer that there has been a failure properly to exercise the discretion which the law reposes in the court of first instance: House v The King (1936) 55 CLR 499 at 504, 505. So, too, in my opinion, the exercise of the discretion to review a taxation of costs is subject to no narrower principle than that which was stated by Bovill CJ and Brett J in Hill v Peel (1870) LR 5 CP 172: 'A very wide discretion must necessarily be left to the taxing officer, which must be exercised by him after a careful consideration of the particular circumstances of each case; and where, after properly considering the matter, the master has arrived at a decision, it lies upon those who impeach his decision to satisfy the court that he is wrong. Where a principle is involved, the court will always entertain the question, and, if necessary, give directions to the master; but where it is a question of whether the master has exercised his discretion properly, or it is only a question as to the amount to be allowed, the court is generally unwilling to interfere with the judgment of its officer, whose peculiar province it is to investigate and to judge of such matters, unless there are very strong grounds to show that the officer is wrong in the judgment which he has formed'."

"T take it to be true that the decision of the taxing officer as to quantum is generally speaking final, and that it must be a very exceptional case in which the court will even listen to an application to review such a decision: In the Estate of Ogilvie (1910) P 243 at 245."

The principle stated by Kitto J is not new. The attitude to costs which it embodies goes back 150 years and more: see generally Allsop v Lord Oxford (1833) 1 My and K 564; 39 ER 794.

The reason why a principle of this kind has been adopted and has been applied, as it has, to discretionary decisions as to costs is, I think, clear. In many cases, the basis on which costs should be quantified - and, a fortiori, the quantification of them - are matters of judgment, matters on which persons of sound judgment may differ. In such cases, a decision can be made, reversed, and reversed again, not because of perceived error in the decision but because the discretionary judgment of the subsequent appeal court produces a different result. In such a case, no better reason can be given for interference than that the appeal judge

prefers his own judgment or assessment to that of another. The law has, in my opinion, rightly, adopted the view that it will not interfere except in limited circumstances: see, eg, House v The King (1936) 55 CLR 499; Lovell v Lovell (1950) 81 CLR 513. There should be an end to the matter.

But Mr Grieve QC, for the plaintiff, submitted that if there be error, it must be set right. No one doubts that it must. But it lies on an appellant claiming error to show: that error has occurred; that the error matters; and that a different decision should be made.

(c) I do not think that the Master made any relevant error. The error in stating the date of the plaintiff's radiological scan - if it was an error and not a typing slip

• had little or nothing to do with the basis on which the Master decided the matter.

Essentially the suggestion has been that the Master stated the facts correctly but gave a wrong significance to them. I do not think that that is correct. The Master made clear the basis on which he exercised his discretion. He said: "In my view, the defendants have acted realistically having regard to the information that was available to them. I do not consider that their failure to accept the plaintiff's offer was unreasonable. It seems to me, when regard is had to all the relevant facts and circumstances, justice between the parties is best served if I make the otherwise order sought by the defendants."

He made plain why he so decided. The offer of settlement was made on 8 April 1991. That was the point at which the defendant had to decide whether it should accept the offer; it ceased to be available twenty eight days after it was made. But after that date, two things emerged: the material that became available thereafter as to the plaintiff's condition changed significantly; and, though the matter was decided in the plaintiff's favour at the trial, the decision in her favour came not from the material available when the offer was made but from other material.

Shortly before the offer of settlement, the plaintiff had served on the defendant eight medical reports (21 March 1991) and a second further amended set of particulars under Pt33 (28 March 1991). The defendant thereupon called for further examinations of the plaintiff: by Dr Ireland on 16 May 1991 and by Dr Mellick in August 1991.

On 7 November 1991 the plaintiff served a third further amended set of particulars under Pt33. At about this time the reports of four further doctors were served by the plaintiff on the defendant. On 24 February 1992 a report of the radiological scan of 6 February 1991 was sent to the defendant and on 9 March 1992 Dr Mellick made a report upon it. Between March and May 1992 there were further negotiations between the parties. The hearing took place between 31 August and 3 September 1992.

The Master referred to the relevance to his decision of these matters and to what took place at the trial. An important issue was the relevance of the plaintiff's complaints of mid back pain. "The conflicting views of Professor Lance and Dr Mellick assumed a principal role". It was on Dr Mellick that the Master principally relied. He recorded that "the plaintiff's experts were not preferred to the experts of the defendants", that Professor Lance had changed his view during cross examination, and that it was what Dr Mellick had said that "had significance in the assessment of the plaintiff's damages". It was "the medical evidence which emerged at the trial" and not what had appeared in the medical reports previously served, which had determined the matter.

This, I think, is why the Master decided as he did. It is one thing for a plaintiff to present her evidence, make an offer of compromise, and to succeed at the trial on that evidence. In such a case, indemnity costs may be warranted. It is another

thing for the plaintiff to present a case and make an offer of settlement, and then to succeed at the trial upon a relevantly different case. A plaintiff who has done that may not readily receive indemnity costs. I do not mean by this that minor differences between the case at offer and the case at trial will be of significance or that, if the difference be significant, a discretionary judgment for indemnity costs may not be given. But where the difference between the position at offer and the position at trial be as the Master assessed it to be, a decision to refuse indemnity costs may readily be understood. At the least, there is no error in the way in which the matter has been dealt with. (d) If there were error sufficient to turn the legal balance, it would be for this Court to re exercise the discretion. I would exercise it as the Master did. The Master rightly saw the case evidenced by the plaintiff at offer as relevantly different from that on which she succeeded. To order indemnity costs because the defendant did not accept an offer made on such a basis does not, in my opinion, further the purpose of Pt52 R17.

Before disposing of this appeal, one further matter should be mentioned. Both parties drew the attention of the court to the manner in which the proceeding has come before this Court. The judge before whom the appeal against the Master's decision came, took the view that "where a Master has previously sat to all intents and purposes as a judge of this Court the application to a single judge for a review of his order as to costs gives rise to special circumstances" such as warrant the matter being removed into this Court. With respect, I do not agree. It was, in my opinion, the purpose of the legislature that decisions as to costs should, on appeal, be made by a judge of the relevant Division. The Supreme Court Act 1970 s101(2)(c) provides that no appeal lies to the Court of Appeal on a question of costs except by leave. That section illustrates the purpose of the legislature in that regard. In my opinion, the appeal should have been decided by the judge.

Meagher JA The plaintiff, who is the present appellant, after her action for damages had been heard by Master Malpass on 31 August, | September, 2 September and 3 September 1992 recovered a judgment in the sum of $288,500.00, together with costs. Thereafter, she made an application before the Master for the payment of her costs on an indemnity basis. That application was made under Pt52 R17(4). That application was heard by the Master on 20 October 1992, and he gave judgment on 23 October 1992 in effect dismissing the plaintiff's application. The plaintiff is dissatisfied with the Master's decision.

This is unfortunate for the plaintiff, because in my view no error can be detected in that decision. For anyone to interfere it would, of course, be necessary to detect error, because if anything is a discretionary order in the realm of practice and procedure, it is an order for costs. I would go further in the present case. If the discretion were mine to exercise I would have come to the same decision as the Master, and for the same reasons.

After leaving the Master's hands the case has developed in a most irregular fashion. The plaintiff's dissatisfaction led her to appeal, and her appeal in due course came on for hearing before Ireland J. His Honour did not hear the appeal, but instead made the following order:

"Determine that the question of costs where a Master has previously sat to all intents and purposes as a Judge of this Court the application to a single judge for a review of his order as to costs gives rise to special circumstances such as determination of a matter under s52 R2 by reference to the Court of Appeal for a determination by the Court of Appeal.

Accordingly pursuant to that rule I order that the proceedings be removed into the Court of Appeal. Costs of these proceedings be reserved to the determination of that Court."

His Honour purported to apply "s52 R2". I do not know what this means. It obviously cannot refer either to s52(2) of the Act or to Pt52. R2 of the Rules. Nor do I conceive that his Honour intended to exercise a power under Pt12 R2 of the Rules both because such a power can only be exercised when "special circumstances" exist, and in the present case plainly no special circumstances did exist, and because s101(2)(c) provides that no appeal lies to the Court of Appeal on a question of costs except by leave. One can only conclude that his Honour purported to transfer the case to the Court of Appeal because he did not wish to hear it himself, although it was properly before him.

The order made by his Honour is all the more curious in that it was sought by neither party, and was vigorously opposed by counsel for the plaintiff. Moreover, counsel for the plaintiff submitted, which is plainly correct, that no leave would have been granted if sought, a view not challenged by counsel for the defendant.

I remain of the view, which I expressed in argument, that the only order which we should make is one remitting the matter to the Common Law Division. However, by what seems to me the exercise of misguided benevolence, my brethren were disposed to hear the appeal and we in fact did so. In this event the appeal should simply be dismissed with costs.

Counsel for the Appellant: DE Grieve QC / GO Blake Solicitors for the Appellant: Picone and Co

Solicitors for the Respondent: Solicitor for Government Insurance of New South Wales