Ghunaim v Bart

District Court Act 1973 LEGISLATION CITED: Workers Compensation Further Amendment Act 2001 District Court Rules 1973

Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 Franklins Ltd v Burns [2005] NSWCA 54 Ghunaim v Bart [2004] NSWCA 29 CASES CITED: Leichhardt Municipal Council v Green [2004] NSWCA 341 MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 236 Multicon Engineering Pty Ltd v Federal Airports Corp (1996) 138 ALR 425 South Eastern Sydney Area Health Service v King [2006] NSWCA 2

PARTIES: Ali Ghunaim (Appellant) Wilhelm Bart (Respondent)

SOLICITORS: Appellant unrepresented Sparke Helmore (Respondent)

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41024/02 DC 1275/01

GILES JA IPP JA McCOLL JA

Monday 24 April 2006 GHUNAIM v BART [No 2] Judgment 1 GILES JA: I agree with McColl JA. 2 IPP JA: I agree with McColl JA. 3 McCOLL JA: The Court delivered judgment in this matter on 24 February 2004: Ghunaim v Bart [2004] NSWCA 28. 4 The appeal was allowed to the extent that the appellant challenged the trial judge's finding that he had been guilty of contributory negligence. The effect of allowing that part of the appeal was to increase the verdict Rein DCJ had entered in the appellant's favour from $262,533.21 to $308,862.03 net of workers compensation payments. The parties were given liberty to apply on two days notice in respect of the calculation of the verdict and judgment, such liberty to be exercised no later than fourteen days after its date. 5 Although solicitors for both parties originally sought to exercise that liberty within the time limited, those attempts foundered - at least in the short term. Difficulties undoubtedly stemmed from the fact that the appellant appears to have changed his solicitors after the appeal was heard and on 13 July 2005 the solicitor who had acted for him on the appeal filed a notice of ceasing to act. No new solicitors have filed a notice of appearance on his behalf. 6 Pursuant to the original exercise of liberty to apply, the respondent seeks to have the order for costs of the trial made by Rein DCJ varied on the basis of a Calderbank offer which was more favourable than the amount awarded to the appellant. 7 According to an affidavit of service sworn by Terence Brightman, the appellant has been served with the papers the Court is asked to consider. He wrote to the Registrar seeking an extension of time to respond and saying he was obtaining a solicitor. A firm of solicitors apparently acting in his interest sought a copy of the respondent's submissions which were faxed to them but they subsequently advised that they were not acting on his behalf. No submissions have been received from the appellant himself, and the matter falls to be determined on the basis of the matters before the Court on the appeal and the respondent's affidavit and submission.

Costs order made by Rein DCJ 8 On 17 July 2001 the respondent served an Offer of Compromise which was not accepted by the appellant. The appellant did not better that Offer of Compromise in the amount Rein DCJ awarded him. Accordingly it was common ground before his Honour that, pursuant to DCR Pt 39A r 6, the appellant was entitled to a costs order against the respondent for his costs in respect of the claim up to and including 17 July 2001 and that thereafter the appellant should pay the respondent's costs on a party-party basis. His Honour, in due course, made that order (Black 289H) although the date of the offer of compromise is erroneously recorded in the transcript of the order as "17 July 2002" rather than "17 July 2001".

The Calderbank Offer 9 The Court of Appeal's decision was more favourable to the appellant than the Offer of Compromise. The respondent accepts that it will be necessary, therefore, for Rein DCJ's costs order to be revised. He submits, however, that in undertaking that exercise, the Court should take into account a Calderbank offer made on 11 June 2002, the first day of the hearing before Rein DCJ. That offer was made in the following circumstances. 10 On the first day of the trial Mr Murray QC, who appeared for the appellant, gave the respondent the appellant's damages schedule, apparently as a part of settlement discussions, but no doubt intending, in the absence of settlement, to hand the document to the trial judge. The schedule sought $847,211 excluding costs and, after deduction of the worker's compensation pay back left a "clear" figure of $668,736. 11 The respondent made a counter offer of $350,000 inclusive of costs and clear of workers compensation and, absent acceptance, sought a counter offer inclusive of costs. 12 The appellant responded with an offer of $780,000 inclusive of costs and clear of workers compensation, which the respondent rejected, restating its original offer. The appellant's response was an offer of $730,000 inclusive of costs but clear of workers compensation payments. 13 It was at that stage that the respondent made his Calderbank offer. 14 The evidence as to the making of that Calderbank offer appears in the affidavit of the respondent's solicitor, Greg Guest. He says the offer was made in a handwritten note given to Mr Murray whereupon (par 30): "Mr Murray QC took the letter, dismissed it and flicked it onto the Bar table"

thereby leading Mr Guest to believe "the offer was rejected outright". 15 The Calderbank letter offered to settle the matter in the sum of $350,000 clear of payments made to date plus costs. It remained open for acceptance until the appellant proceeded with examination-in-chief. 16 The appellant was the first witness in the case on 11 June 2002 and, according to Mr Guest, was called to give evidence at 12.35pm. Mr Guest does not say when, on 11 June 2002, he gave the Calderbank offer to Mr Murray but, according to the respondent's submissions, settlement negotiations commenced about 9.30am that morning so, at best, it was open to be accepted for two or three hours.

Respondent's submissions 17 The respondent accepts that as the Calderbank offer did not comply with the District Court Rules in respect of an offer of compromise, the question of the costs order to be made is a matter for the court's discretion. He submits the appellant's rejection of the Calderbank offer was objectively unreasonable as he was making offers which exceeded the (non-extended) jurisdictional limit of the District Court, that the Calderbank offer was reasonable as demonstrated by the fact it exceeded the final outcome and that the time within which the offer remained open was not unreasonable, having regard, in short, to Mr Murray QC's conduct in throwing the document on the Bar table which was seen as a rejection of it "out of hand". 18 As to the first point, during settlement negotiations the respondent raised with Mr Murray the fact that, not having sought his consent to file a Memorandum of Consent to extend the jurisdiction of the District Court (s 51, District Court Act 1973), the appellant's offers exceeded that court's jurisdictional limit. Mr Murray's response, apparently, was that the effect of Sch 1 to the Workers Compensation Further Amendment Act 2001 which inserted s 44(1)(d1) in the District Court Act gave the District Court unlimited jurisdiction - a proposition with which the respondent disagreed. As events transpired it was unnecessary to resolve this issue as the primary judge's award did not exceed the jurisdictional limit of the District Court of $750,000: s 44(1)(a)(ii), District Court Act. Mr Murray's view appeared to have had some currency among the Bar prior to its rejection by this Court in Franklins Ltd v Burns [2005] NSWCA 54. 19 The second point speaks for itself. As to the third point, the respondent contended that the fact that the Calderbank offer remained open for acceptance only until the appellant proceeded with examination-in-chief was not unreasonable. He submitted that the parties had engaged in settlement negotiations on 11 December 2000 at an informal settlement conference. He noted that the appellant's then solicitor's letter of 14 August 2001 communicating the rejection of the Offer of Compromise advised that the appellant "would prefer to have his matter heard before the Court". No further settlement negotiations took place between the parties until the morning of the hearing. At that stage the respondent submits, recognising he was facing a lengthy trial, he took an appropriate step to protect himself as to costs by resorting to the Calderbank offer. He notes that the appellant did not ask the trial judge for time to consider that offer nor request an extension of time for its acceptance. 20 I should also note that it appears that the matter was originally listed for an arbitration hearing on 14 December 2001, but that date was vacated by Garling DCJ because particulars provided by the appellant were deficient. Garling DCJ reserved the costs of the notice of motion vacating the arbitration date and the costs of the vacated arbitration date. The issue of the costs thereby reserved was not canvassed before Rein DCJ. 21 The respondent submits that the appropriate costs orders for the costs of the trial consequent upon this Court's decision is:

1. Set aside the costs order made by the trial judge on 17 October 2002;

2. In lieu thereof order: (i) the respondent to pay the appellant's costs on a party/party basis until 11 June 2002; (ii) the appellant to pay the respondent's costs of the notice of motion of 12 December 2001 and the costs of the vacated arbitration date of 14 December 2001;

(iii) the appellant to pay the respondent's costs on an indemnity basis from 11 June 2002.

Consideration 22 The discretion to award the respondent costs of the trial (whether on an indemnity basis or otherwise) following the Calderbank offer turns on all the circumstances of the case, including the relevant strengths and weaknesses of each party's case as they may have been apparent at the time the offer was made: South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [90] per Hunt AJA, with whom Mason P and I agreed. 23 In Leichhardt Municipal Council v Green [2004] NSWCA 341 at [46], Santow JA (with whom Bryson and Stein JJA agreed) said that the considerations which applied when determining whether, pursuant to the District Court Rules, a defendant should be awarded indemnity costs for an unaccepted offer of compromise, should also apply when determining whether a defendant should be awarded indemnity costs for an unaccepted Calderbank offer. His Honour said (at [46]) applying Multicon Engineering Pty Ltd v Federal Airports Corp (1996) 138 ALR 425, that a defendant must show that the plaintiff's rejection of the offer was "unreasonable" under the general law. The Court's discretion was to be exercised in all the circumstances of the case and "[i]ndemnity costs do not flow as a matter of course from unaccepted defendant offers". He noted (at [47]) that "the authorities emphasise the width of the discretion and the unusual nature of an award of indemnity costs in relation to Calderbank letters." 24 At the time of the trial the District Court Rules relating to Offers of Compromise enabled such an offer to be made, relevantly, at any time prior to the trial judge giving, or beginning to give, his reasons for his decision on a judgment: DCR Pt 19A r 3(1), (8). An Offer of Compromise had to be open for acceptance for at least 28 days after it was made: DCR Pt 19A r 3(3). Where an offer was made by a defendant and not accepted by the plaintiff and the plaintiff obtained an order or judgment on the claim to which the offer related not more favourable to him than the offer, the plaintiff was entitled to an order for costs against the defendant up to and including the day the offer was made assessed on a party and party basis, and the defendant was 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: DCR Pt 39A r 25(6). For the purpose of the latter sub-rule, where the defendant's offer was made on the first or a later day of the trial of the proceedings then, unless the court otherwise ordered, the plaintiff was entitled to costs in respect of the claim up to 11am on the day following the day on which the offer was made, assessed on a party and party basis, and the defendant was entitled to costs in respect of the claim thereafter assessed on a party and party basis: DCR Pt 39A r 25(7). 25 In my view the respondent has not discharged his burden of establishing that the appellant's rejection of the Calderbank offer was unreasonable. 26 The fact that the appellant was making offers which exceeded the District Court's jurisdictional limit carries little weight in circumstances where he was advised by experienced counsel. While that counsel's view of the amount he might recover has proven to be optimistic, it was not, in my view, unreasonable for him to rely on that advice in rejecting the Calderbank offer. The manner in which Mr Murray rejected the offer demonstrates the appellant's reliance. The fact that the District Court's extended jurisdiction had not been invoked did not prevent the parties settling the case for over $750,000. Had the matter proceeded to trial and had the primary judge concluded damages exceeded $750,000 he would, however, have only been able to enter a verdict of $750,000: see Franklins Ltd v Burns. 27 As to the second point while the Calderbank letter did exceed the final outcome, the differential was not great. The gross effect of this Court's award, when amounts paid to the appellant by way of workers compensation up to 11 June 2002 are taken into account, was $492,300.24 and was, therefore, less than the sum offered to the appellant in the Calderbank letter. The differential is $41,137.97 as the respondent's Calderbank offer was, effectively, $533,438.21 ($350,000 plus $183,438.21 in respect of worker's compensation payments). 28 More significant is the fact that the offer was only open for acceptance for a few hours, a period so brief it might be regarded as derisory - particularly having regard to the period for acceptance of offers of compromise mandated by the District Court Rules. In MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 236 at 240, Lindgren J described a Calderbank letter which contained only a minimal element of compromise and was open for acceptance for only one day as an "extreme case". The present Calderbank offer lies at an even greater extreme. A party should not be rewarded by an indemnity costs order in such circumstances. 29 In my view the appellant did not act unreasonably in not accepting the respondent's Calderbank offer submitted as it was on the morning of the first day of his trial and open only for a limited period. The respondent had admitted liability, although there was a live issue on contributory negligence, and, no doubt, damages. By 11 June, the appellant would have incurred the bulk of the costs of the trial in terms of preparation, and no doubt, the costs of counsel's attendance for the period of the trial. These are circumstances which can be taken into account in considering an application of this nature: see Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [22]. 30 For the same reasons, in my view the respondent should not be awarded the costs of the trial, even on a party-party basis. While the District Court Rules contemplated a favourable costs order for a party whose unaccepted offer of compromise was made on the first day of the trial (or later), again they required the offer to be open for acceptance for 28 days.

31 The Court should not entertain the respondent's application in relation to the arbitration date. That matter was not canvassed before Rein DCJ and ought not be debated on appeal for the first time. 32 I propose the following orders:

1. Set aside the costs orders made by Rein DCJ on 17 October 2002.

2. Order the respondent to pay the appellant's costs of the trial.

3. Direct the respondent to inform the appellant by letter sent to his last known address of this judgment and orders. **********

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