Gangi v Boral Resources

Supreme Court of NSW|2013-08-09|Before: Schmidt J

Judgment 1In a judgment given on 17 May 2013, I concluded that there should be judgment for the plaintiff, Mr Gangi (see Gangi v Boral Resources (NSW) Pty Limited (No 2) [2013] NSWSC 569). He did not succeed in establishing all of the damages which he had pursued. The parties later agreed that the amount of the order to be made in his favour was $396,290. 2Costs remain in issue. Mr Gangi seeks an order that the defendant pay his costs, including all reserved costs and as to those incurred after 11 March 2011 in relation to liability issues, on an indemnity basis. The reserved costs are primarily those associated with the adjournment of the hearing in April 2012 (see Gangi v Boral Resources (NSW) Pty Limited [2012] NSWSC 398). 3The defendant, Boral, resists those orders. It submits that Mr Gangi should be ordered to bear his own costs and that in the alternative, it should have to bear only the costs of that part of the case relating to liability, on the ordinary basis. 4Mr Gangi relied on an affidavit sworn by his solicitor Ms Sicurella, which explained the course that the proceedings had taken. That included advice given to Boral in November 2011 that Mr Gangi would seek an indemnity costs order in relation to liability issues, unless Boral admitted it owed him a duty of care and had liability for his injuries. 5Boral relied on an affidavit sworn by its solicitor Mr Davidson, who had reviewed the transcript and estimated that approximately 24% of the hearing time was spent on damages. 6On 1 March 2013, Boral advised that it would not admit liability. It still had not, however, obtained an expert's report on liability, even though the matter was listed for hearing on 10 April 2012 and it had been directed on 29 September 2011 to serve its expert report by 11 November 2011. That was after earlier directions given by the Registrar had not been complied with. That situation has to be considered in circumstances where after the collapse of the plant which injured Mr Gangi, Boral had obtained expert advice as to the cause of the collapse, over which it sought privilege in these proceedings. This was dealt with at [185] - [195] of the principal judgment. 7On 16 March 2012 an adjournment application made by Boral was resolved and I made further agreed directions, which were not all complied with by the parties. On Boral's part, lay witness statements were served late and its expert's report was not served until 3 April 2012, together with a proposed amended defence. As events unfolded the 10 April hearing had to be adjourned, in circumstances where I concluded that Boral's defence had not been pleaded as Rule 14.14 of the Civil Procedure Rules 2005 required, so that Mr Gangi could deal with what had been so belatedly revealed. It is clear that significant additional cost and delay resulted from Boral's approach. 8In the result after the hearing in 2013, while Mr Gangi succeeded on his liability case, he did not establish all of the damages which he claimed, in large part because I was unable to accept aspects of his evidence. 9Costs are not awarded to punish an unsuccessful party, but to indemnify the successful party for expenses which would not have been incurred, if the unsuccessful litigation had not been pursued (see Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 543). The usual order under the Rules is that costs follow the event, at least in so far as they have been reasonably incurred (see Rule 42.1 and Oshlack v Richmond river Council [1998] HCA 11; (1998) 193 CLR 72 at [97])). There is no question that the Court has a discretion to depart from such an order under s 98 of the Civil Procedure Act, if that is what justice demands in the circumstances of a particular case. 10It is also well settled that where a successful party has failed on matters which took up a significant part of the trial, it may be appropriate to deprive that party of a costs order in relation to those matters (see for example Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306). 11Where there is a mixed outcome, the just order as to costs requires the exercise of the Court's discretion having regard to matters of impression and evaluation (see James v Surf Road Nominees Pty Limited [No 2] [2005] NSWCA 296).

Should a costs order be made in favour of the plaintiff? 12In this case Rule 42.34 is also relevant. It provides: "42.34 Costs order not to be made in proceedings in Supreme Court unless Court satisfied proceedings in appropriate court (1) This rule applies if: (a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and (b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants. (2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted." 13Boral relies on this rule to submit that no order should be made in Mr Gangi's favour. 14These proceedings were commenced on 19 October 2010. Mr Gangi's case was that the Court would be satisfied that commencement of the proceedings in this Court was then warranted. The claim then pressed was in excess of the $750,000 jurisdictional limit of the District Court, some $1,197,496 being sought for future economic loss and $188,550 for past economic loss, as well as other heads of damage. Continuation of the proceedings was argued also to have warranted, given that medical evidence was served which, if accepted in full, would have resulted in a verdict exceeding the District Court's jurisdictional limit. At trial, damages in an amount of $1,097,890 were finally pressed. 15It was further submitted that given the complexity of the question of liability, the matter was more than suitable for this Court. Nothing was admitted by the defendant in that regard, with the result extensive expert evidence being called and considerable investigation of the underpinning facts required at trial. 16It was also submitted to be relevant that neither party had applied to have the matter transferred to the District Court, by application under s 146 of the Civil Procedure Act. 17Boral's case was that this Court was not the appropriate forum for the claim, particularly given that Mr Gangi had failed to make out the entirety of his case, having been found to have exaggerated and misled medical examiners. It was also submitted to be relevant that the District Court's jurisdictional limit can be increased up to $1,125,000, if objection is not taken by the defendant, prior to three months before the hearing commences (see s 51(4) of the District Court Act 1973). 18It is relevant to note that it was also argued for Boral, however, that Mr Gangi had succeeded on what was not a straightforward liability case. There were significant factual disputes and the liability experts also had significant differences of opinion. In the result, its defence was not so hopeless as to warrant the orders sought by Mr Gangi, in relation to indemnity costs. 19Weighing these considerations in the balance, together with two other relevant considerations, it seems to me that the plaintiff should have a costs order, notwithstanding the provision made in Rule 42.34(1). 20It seems to me that the common ground between the parties as to the psychological injury which Mr Gangi suffered cannot be overlooked when considering the case which he brought and the claims for physical injuries which he pursued. I discussed this in the principal judgment at [196] and [212]. 21The dictates of justice also do not permit the obvious and very significant difference in the financial and other resources of the two parties to these proceedings to be overlooked. That is relevant in this context not only because the liability case was a difficult one, as both parties submitted, but because it sheds light on Boral's approach to the proceedings and the significance of its various failures to adhere to the requirements of the Rules and the Court's directions and orders. Its approach clearly did not accord with what its obligations under s 56 of the Civil Procedure Act required at particular times. 22When the proceedings were commenced, damages in excess of the District Court's extended jurisdiction were pursed by Mr Gangi. His claims were supported by expert evidence. There was never any suggestion by either party at any stage that the matter was one which ought to be transferred to the District Court, not even when Boral came to consider that the damages being pursued were excessive. It certainly never suggested that the matter should be transferred to the District Court, or that it would consent to any increase in the jurisdictional limit of that Court. 23Also relevant is that the way in which the case was conducted by Boral prior to hearing was no doubt a considerable distraction for those advising Mr Gangi. That, presumably, reflected the complex liability case, but did not explain its failures to adhere to its obligations under various directions and orders which the Court made, which led to the adjournment of the April 2012 hearing. 24The matters dealt with in the 10 April judgment as to that adjournment, provide another reason for concluding that a costs order should be made in favour of Mr Gangi, in the circumstances there dealt with, notwithstanding what Rule 42.34(1) contemplates. 25In the result, I am satisfied that it should be concluded that the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted and that the discretion given in Rule 42.34 should be exercised in Mr Gangi's favour, so that he is not deprived of a costs order in these proceedings.

Costs thrown away by the adjournment 26The defence was filed on 11 March 2011. In May 2011 the defendant was directed to file and serve a statement of issues in dispute by 17 June 2011. It did not do so until February 2012, despite later directions that the issues be filed by 6 October 2011. Expert evidence was initially due to be served in September 2011 and then directed to be served in November, but it was not served until April 2012, after Mr Russell's statement was served. That and other statements, on which Boral's defence hinged, were also served out of time. 27The adjournment of the April 2012 hearing was the result of Boral's failures, particularly the late service of the crucial evidence from Mr Russell and its expert, and by the failure to specifically plead aspects of its defence, as to the cause of the collapse of the plant. 28That also led to a successful application by Mr Gangi when the hearing commenced, for leave to amend the statement of claim, in circumstances where I also observed at [25] - [28]: "25 Despite not having served Mr Russell's statement, the defendant instructed its expert, Mr Taylor, to make assumptions consistent with Mr Russell's statement. Mr Taylor's report should have been served in September 2011, had the Registrar's directions been complied with. It was also not served within the further timetable which the parties agreed in March 2012, having only been served the week before the hearing. When the plaintiff agreed to that timetable, obviously he was not aware of what was to be revealed when the defendant's evidence was served. The defendant's approach meant that neither Mr Russell's statement, nor Mr Taylor's report had been considered by the plaintiff's expert, Mr Appleyard, prior to the hearing. 26 Also to be considered was that despite the directions which had been given that the expert evidence would be received concurrently, the defendant did not instruct Mr Taylor to consider or respond to Mr Appleyard's report. Plainly, if the Court's directions were to be complied with, the experts had to consider each others reports in order, firstly, to produce a report identifying what they agreed and disagreed and secondly, so that they could give their evidence concurrently at the hearing. 27 Instructing Mr Taylor to consider Mr Appleyard's report, was not, as the defendants only complained when the hearing commenced, to give the plaintiff a further opportunity to lead evidence in chief from his expert, but for the parties to ensure that they had complied with the Court's directions, as they were obliged to do, so that the experts they had retained could assist the Court in resolving the matters over which the parties had joined issue. One of those issues is plainly what caused the collapse of the hopper in question. It always remains, of course, a matter for a party to determine whether or not it will call expert evidence. What it cannot do, having foreshadowed an intention to call such evidence, is to ignore the applicable practice note, which envisages that such expert evidence will be given concurrently, let alone the directions and orders which the Court has made as to how such evidence will be received in the particular case. 28 Prior to the hearing, despite having been given liberty to approach, the defendant never approached, so that its various departures from the directions given at various times could be considered and dealt with. At the hearing the defendant finally argued not only that the matter should proceed on the existing pleadings and evidence, despite its failure to adhere to the requirements of the Rules and the Court's directions, but also that its objections to Mr Appleyard's report, of which it had not notified the plaintiff prior to the hearing as it had also been directed to do, should be heard and determined before it was required to call any of its evidence and before the experts met to produce a joint report." 29In the result, in my view, there can be no question that the plaintiff must have an order for the costs thrown away by the adjournment of the 2012 hearing.

No indemnity costs order 30Boral denied that it owed Mr Gangi a duty of care, or that it had breached any duty which it owed him. In November 2011, the Mr Gangi's solicitor wrote, asking Boral to admit the existence of its duty of care and negligence, advising that if such admissions were not made and the plaintiff succeeded, he would seek indemnity costs from the time of the filing of the March 2011 defence. That advice was given in circumstances where Boral had taken expert advice as to the cause of the collapse of the plant, but had claimed privilege over the advice, which it never served. 31It is well settled that an indemnity costs order may be made in circumstances where a party has maintained proceedings that it should have known had no real prospects of success. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397 at 400 - 401, Woodward J, discussed the case where an action had been commenced or continued in circumstances where "the applicant, properly advised, should have known that he had no chance of success". His Honour said at 401: "In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law." 32Here it was also submitted for Mr Gangi to be relevant that Boral's conduct of the proceedings had also resulted in unreasonable delay and expense. It was argued that this also warranted an indemnity costs order. Had the Court's directions and orders been complied with, the trial would have proceeded at a much earlier time. 33Other circumstances in which an indemnity costs order may be made were discussed by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 at pages 233 - 234: "... it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis." 34These authorities must now be considered in the context of the provisions made in ss 56 - 60 of the Civil Procedure Act. 35While I am satisfied that the circumstances are such that Mr Gangi should have a costs order in his favour, I do not consider that a basis upon which it can be concluded that there should be an indemnity costs order in his favour on the liability question, has been established. 36Given the dispute between the experts, discussed at length in the principal judgment, it cannot be concluded that this is a case where Boral, properly advised, should have known that it had no chance of success on liability, notwithstanding the adverse inference that I drew in relation to its failure to rely on the expert advice it obtained after the collapse of the plant. 37Nor has it been established that it conducted its defence, for some ulterior motive, or because of some wilful disregard of the known facts. Mr Gangi accepted that privilege was available to be claimed over the expert advice Boral did not tender. What it contained is not known. While I concluded that an inference could be drawn that the information which so came to Boral's hands after the collapse, over which it claimed privilege, would not have assisted its case, that its defence involved 'wilful disregard of the known facts' has not been established.

Should Mr Gangi be deprived of any of his costs? 38There is no question that a party may be deprived of costs incurred in relation to matters on which the case advanced failed, even though otherwise successful (see James v Surf Road Nominees (No 2) [2005] NSWCA 296). As discussed by Hodgson JA in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121]: "In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach." 39In Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 it was further explained (at [6] - [7]): "6 Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which the appellant was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). 7 As the appellants submit, the commencing position is that costs follow the event so that a successful party is entitled to costs. In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 (at [24]). A similar approach is adopted in the Court of Appeal. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 (at [27])." 40Boral submitted that Mr Gangi had substantially failed in his claim for damages. This was the result of adverse credit findings. It was apparent that Mr Gangi had exaggerated his symptoms in an attempt to mislead medical examiners and the Court. He should not be rewarded for that approach, by the costs order which he sought. 41It seems to me that this submission has some force and that justice demands that there be some reduction in the costs order which would otherwise be made in his favour, to reflect Boral's success in resisting this aspect of Mr Gangi's case. In my assessment the just way in which to reflect that Mr Gangi failed to make out a signficant part of his case on damages, is to reduce the costs which he can recover from Boral by a percentage. 42In assessing that percentage, consideration has to be given to the claims advanced, the measure of success which Boral had in resisting that aspect of Mr Gangi's case and what I have said as to its own approach to the proceedings and how that unnecessarily increased costs. 43Having taken the evidence led on costs into account, in undertaking the exercise discussed in James v Surf Road Nominees Pty Limited [No. 2], including Mr Davidson's unchallenged estimated that the hearing on damages occupied some 24% of the hearing, I have concluded that Mr Gangi's costs should be reduced by 18%. That reflects that there was no issue as to the psychological injury which he had suffered or that he had suffered various physical injuries. It was the ongoing physical injury after a certain time and into the future, on which Mr Gangi's case was not entirely accepted. This reduction in my assessment fairly reflects the impact of that failure on the costs which he should, in justice, receive in these proceedings.

Orders 44For the reasons given, I order that Boral is to bear 82% of Mr Gangi's costs of the proceedings as agreed or assessed.

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: 20 September 2013

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