Hatziandoniou v Ruddy [2015] NSWCA 277 | Case summary

Hatziandoniou v Ruddy [2015] NSWCA 277 | Case summary | Zoe

Judgment

BASTEN JA: On 14 August 2015 the Court delivered judgment on an appeal, setting aside the judgment below in favour of the respondent: Hatziandoniou v Ruddy [2015] NSWCA 234. The appellant was the plaintiff in District Court proceedings seeking damages against the respondent (the defendant in those proceedings) for injury suffered in a motor vehicle accident. At trial, the appellant failed on liability, but the trial judge made a notional assessment of damages. On the appeal, this Court held that the trial judge was in error in rejecting an opinion of an expert proffered by the appellant in support of his claims as to how the accident occurred. A limited challenge to the assessment of damages was rejected. Because the questions of liability were determined on a false basis, it was necessary to remit the issues of liability (including contributory negligence) for determination at a further trial.
The matter is back before the Court to deal with questions of costs. So far as the costs of the appeal are concerned, I agree with Simpson JA that the appellant should have an order in his favour for payment of those costs by the respondent. Because there is no final judgment on the claim for damages, the offers of compromise made in this Court cannot be determined and must be disregarded, in accordance with r 51.48(2)(a) of the Uniform Civil Procedure Rules 2005 (NSW). An application for variation of that order may be made in due course before the trial judge, once the final outcome is known. Accordingly at this stage, the costs of the appeal are to be assessed on the ordinary basis.
There remains a question as to the costs of the first trial. While costs generally follow "the event", the event being success or failure on the claim for damages, that outcome is not yet known. One course, that is usually taken in this Court, is to set aside the order of the trial judge with respect to the costs of the first trial and remit that question for determination by the judge conducting the further trial.
There are circumstances in which that course may be inappropriate. The appellant submitted that this was such a case, the first trial having miscarried as a result of an objection taken by the respondent to the appellant's expert evidence, which was upheld, but should have been rejected. That error, it was submitted, "was borne of the respondent's misconceived, and with respect, obstructionist objection, to manifestly legitimate opinion evidence."
Morgan v John Fairfax & Sons Limited (1988) 13 NSWLR 208 concerned a defamation action in which the trial judge acceded to the defendant's application to discharge the jury at the end of a lengthy trial, on the basis of statements made by plaintiff's counsel in closing address. This Court held that the jury should not have been discharged, but a new trial was necessary. The Court ordered that the costs of the first trial were to be the plaintiff's costs in the proceedings. In other words, even if the plaintiff ultimately lost, he would not have to pay the defendant's costs of the first trial.
In Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 Campbell JA (with whom Mason P and Beazley JA agreed in this regard) noted, of a similar submission, at [61]: "Counsel for the Monies submitted that a principle like that in Morgan should result in the plaintiffs receiving the costs of the first trial, because the Commonwealth made submissions that were accepted by Dowd J, but that this Court has now held ought not be accepted. I do not accept that every occasion when counsel makes a submission that a trial judge accepts, but a Court of Appeal subsequently does not accept and where a new trial is ordered, is one where the need for a new trial arises from conduct of the party who made the submissions of a type that warrants that party bearing either the costs of the first trial or its own costs of the first trial, depending on what happens in the second trial. If that were so, the common practice of appellate courts ordering a new trial, and that the costs of the first trial be costs in the second trial, would not exist. In Morgan, submitting that the jury should be discharged was conduct that deliberately aimed at aborting the first trial. For counsel for one party to merely make submissions, that a trial judge accepts, does not involve engaging in conduct of that kind."
There is no basis in the present case to characterise the objection to the evidence of the plaintiff's expert as "obstructionist", or as "misconceived", if by those characterisations the appellant sought to lay the blame for the judge's order at the feet of the respondent. Rather, the objection and the judge's erroneous ruling were within the ordinary hazards of litigation. The respondent has also suffered loss as a result of the determination of this Court on the appeal. Part of that loss may be borne by the Suitors' Fund, and he should have a certificate under the Suitors' Fund Act 1951 (NSW) with respect to the costs of the appeal. It does not follow that the respondent should also bear the costs of the first trial.
The usual order, leaving the costs of the first trial in the discretion of the judge conducting the second trial, would allow the ultimately successful plaintiff to recover his costs of both trials, in the absence of an offer of compromise or other event warranting a different order. Separate considerations as to the costs of the first trial will only arise if the defendant were to be ultimately successful on the issue of liability. Again subject to the availability of relevant offers of compromise, the plaintiff would be at risk of an adverse costs order encompassing the costs of both trials. Although he has always been at the risk of an adverse costs order in the event of failing to establish liability, those costs would be increased because of the need for two hearings. The question (presently hypothetical) is whether that result should be ameliorated by an order of this Court, rather than by leaving the matter to the discretion of the trial judge at the further hearing.
If the defendant is ultimately successful, there is no reason to require him to pay the costs of the first trial in the circumstances outlined above. A compromise solution would be to leave the costs of the first trial where they lay, that is with no order that either pay the other's costs, each party having to bear his own costs. That would be the result of ordering that the costs of the first trial be the plaintiff's costs in the further trial.
The effect of such an order is to limit the discretion of the trial judge on the further trial. As explained by Leeming JA, one can envisage reasons why that may not be an appropriate course in this case. Such specific circumstances will not always be readily identifiable, a factor which suggests that the general approach, leaving a degree of flexibility with the second trial judge, is sound in principle. The costs of the first trial should remain in the discretion of the trial judge on remittal.
I agree with the orders proposed by Leeming JA.
LEEMING JA: I have had the advantage of reading, in draft, the judgment of Simpson JA. I agree, for the reasons her Honour gives, that contrary to the respondent's submissions, the appellant is entitled to the costs of the appeal, and that contrary to the appellant's submissions, those costs should not (at present) be ordered on an indemnity basis. I also agree that, in the event that the appellant succeeds at the second trial, then the District Court will have power, pursuant to Uniform Civil Procedure Rules 2005 (NSW), r 51.48(2) to revisit this Court's order for costs of the appeal. However, I respectfully do not agree that this Court should make an order in respect of the trial in the District Court.
At this stage, it is not clear whether, following the retrial ordered by this Court, the plaintiff/appellant or the defendant/respondent will ultimately obtain a judgment in his favour. If the plaintiff succeeds, then prima facie he will be entitled to an order for costs in his favour for both trials. However, if the defendant succeeds, he will prima facie be entitled to an order for costs in his favour for the second trial. It may still be the case that the plaintiff is entitled to a favourable costs order for the first trial, on the basis that the second trial was made necessary by the taking of an unwarranted objection by the defendant. But I would not wish unnecessarily to fetter the discretion of the primary judge at this stage.
It may be that, having regard to the way in which the second trial is conducted, a different exercise of the costs discretion will be appropriate. One possibility is that this may be one of those (relatively rare) cases where a costs order should reflect success on particular issues. Another possibility might arise by reason of the fact that it appears from the record that the defendant had also retained an expert. Suppose at the second trial, the parties agree for all of the non-expert evidence to be received on the papers, confining cross-examination to the experts, and the defendant's expert's opinions are preferred, resulting in a judgment in favour of the defendant. There might well be a basis for an argument that the costs order in favour of the defendant should include the costs of the expert, even though some of those costs were costs of the first trial. A third possibility is that the primary judge forms the view that rather than awarding the plaintiff a favourable costs order in respect of the first trial, and the defendant a favourable costs order in respect of the second trial, the appropriate order (having the advantage of avoiding the possibility of further disputation between the parties as to costs) is that there be no order as to costs.
None of the foregoing is to pre-empt the exercise of the discretion as to costs if and when it is exercised. However, if this Court makes an order as to the costs of the first trial, it detracts from the range of options available to the primary judge, who will be exercising a discretion with a clearer understanding of the facts than this Court presently has. Those possibilities tend to confirm the applicability, to my mind, of the "general rule" that, where a new trial is ordered, the costs of the first trial should be determined following the retrial: Brittain v Commonwealth of Australia (No 2) [2004] NSWCA 427; Coote v Kelly (No 2) [2013] NSWCA 457 at [4].
Finally, there is a question of the costs of the application for special costs orders. Both parties have had a measure of success, and both have advanced submissions which have been rejected. The submissions are wholly discrete, in subject matter and temporally, from the submissions on the appeal. I would propose that there be no order as to the costs of the application for special costs orders.
The formal orders I propose are: 1. Set aside the order for costs made in the District Court on 20 June 2014. 2. The respondent is to pay the appellant's costs of the appeal (assessed on the ordinary basis), excluding the costs of the application for special costs orders. 3. The costs of the first trial be in the discretion of the judge before whom the new trial is to be conducted. 4. The respondent have a certificate under the Suitors' Fund Act 1951 (NSW) with respect to the costs of the appeal.
SIMPSON JA: On 20 February 2014 a trial began in the District Court in which the appellant, Mr George Hatziandoniou, claimed damages for personal injury arising out of a collision between the motorcycle he was riding, and a horse transport truck being driven by the respondent, Michael Ruddy. During the course of the trial Mr Hatziandoniou sought to call opinion evidence from an expert mechanical and biomedical engineer. Counsel for the respondent objected to the admission of the expert evidence. A voir dire was conducted in which the expert gave evidence and was cross-examined. The trial judge upheld the objection and rejected the tender of part of the evidence. The trial proceeded and resulted in verdict and judgment for the respondent. The trial judge held that the appellant had not established the liability of the respondent for the collision. He ordered the appellant to pay the respondent's costs of the proceedings.
Notwithstanding his conclusion on liability, the trial judge, in accordance with practice, proceeded to make a determination of contributory negligence (which he assessed at 75 per cent), and to assess the damages he would have awarded had the appellant been successful. That assessment resulted in a notional award of damages in the sum $232,769.10, made up of a number of components (or heads of damages).
The appellant appealed, successfully, to this Court. He pleaded a number of grounds of appeal against the finding of liability. He pleaded three grounds of appeal against the notional assessment of damages, each relating to a different component. In written submissions filed in support of the appeal, one of those grounds (concerning the assessment of damages for non-economic loss) was abandoned. The respondent conceded another head of damages (concerning the allowance for future commercial domestic care). The respondent made a similar concession in relation to the assessment of contributory negligence at 75 per cent, which he acknowledged should have been no more than 25 per cent.
This Court upheld a principal ground of appeal on the question of liability; that ground was directed to the rejection of the opinion evidence: Hatziandoniou v Ruddy [2015] NSWCA 234. The inevitable consequence was that a new trial was ordered. It thus became unnecessary to determine the remaining grounds of appeal on liability. The Court did determine, and rejected, the sole remaining ground concerning damages.
The orders of this Court were: "(1) Appeal allowed; (2) Verdict and judgment set aside; (3) There be a new trial limited to the questions of the liability of the respondent and contributory negligence."
The appellant now seeks the following orders with respect to costs: "1. Respondent to pay the Appellant's costs of the appeal on the ordinary basis up to 16 December 2014, and then on an indemnity basis from 17 December 2014; or alternatively; 2. Respondent to pay the Appellant's costs of the appeal on the ordinary basis; and 3. Respondent to pay the Appellant's costs of the trial conducted before Delaney DCJ on the ordinary basis."
The respondent opposes any order for costs and submits that all costs should follow the outcome of the retrial.

[4]

Costs of the appeal

Prima facie, the appellant is entitled to the costs of the appeal. However, in written submissions on behalf of the respondent, it was argued that, as each party was in part successful, no order as to costs of the appeal should be made.
At the outset, it is convenient to recall what was said during the course of the appeal. Senior counsel who appeared for the respondent accepted that, if a new trial were ordered on the basis of the wrongful exclusion of the expert evidence, then he could not resist an order for the costs of "that part of the appeal".
That was a clear (and correct) concession.
In any event, analysis of the proceedings on the appeal shows that the degree to which the respondent was successful was miniscule. The appellant succeeded on the primary ground, concerning the rejection of the evidence and the consequent finding on liability. The respondent conceded error in respect of the finding of contributory negligence, and, more importantly, in respect of one head of damages. He was successful only in resisting a third ground concerning one head of damages. On my assessment, the time taken in respect of that issue was a tiny fraction of the time taken on the appeal.
The appellant should have his costs of the appeal.
However, the appellant also claims that the costs be assessed on an indemnity basis from 17 December 2014. He does so on the basis of an Offer of Compromise filed pursuant to Uniform Civil Procedure Rules 2005 (NSW) 51.47 on 17 December 2014. By that offer, the appellant offered to settle the action for the sum of $120,000 plus costs. No response was provided on behalf of the respondent to that Offer.
The appellant's argument is that the award of damages, in excess of $232,000, was undisturbed by the judgment on appeal. (In fact, as a result of the respondent's concession in relation to the costs of future care, it will be - if the appellant is ultimately successful - increased.) However, the submission is misconceived.
UCPR 42.14 provides: "(1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim: (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made."
That rule is imported into the assessment of costs in this Court by UCPR 51.48(1). Sub-rule (2) provides: "If the judgment does not permit the Court to determine whether a provision of Division 3 of Part 42 applies to an offer of compromise under rule 51.47 (for example, because the Court has ordered a retrial or remittal for assessment of damages): (a) an order for costs must disregard the offer, and (b) where the Court has ordered a retrial … (i) if the offer was made by the plaintiff below - the court below may make a further or different order under rule 42.14 with respect to the plaintiff's costs in the Court [meaning the Court of Appeal] …"
The appellant submitted that this rule did not apply because, although this Court ordered a retrial, it was limited to questions of liability and contributory negligence, and the assessment of damages made in the District Court by the primary judge stands. On his behalf it was submitted that, although recognising the possibility that a finding of contributory negligence may operate to reduce the amount of damages payable: "as at the date of Judgment in this Court, the Appellant received a far more favourable result on damages than that outlined in the Offer of Compromise."
The submission is simply wrong. The appellant did not receive "a far more favourable result"; it is not yet known what the outcome of the proceedings might be. There is no award of damages. At best, the appellant will be entitled to an award of damages if he is successful in the retrial.
As the respondent submitted, if the respondent is successful on the issue of primary liability the appellant will receive no damages. The respondent also submitted that there may be a finding of contributory negligence that reduces the damages to a level below that in the appellant's Offer of Compromise.
The latter proposition cannot be accepted in the light of senior counsel's concession that 25 per cent would be an appropriate reduction for contributory negligence. Even if that percentage were applied to the award of damages, it would not reduce the appellant's damages below the sum of $120,000.
However, the first point remains good: whether the appellant is to be awarded any damages at all depends entirely upon the outcome of the new trial.
I would accept the respondent's final and alternative submission, which is that any decision on the awarding of indemnity costs should await the outcome of the retrial. Provision is made for that by UCPR r 51.48(2).
The final matter concerns the appellant's claim for an order for costs of the District Court proceedings. On his behalf, it was conceded that, where a new trial is ordered, the "general rule" is that the costs of the first trial should be determined following the retrial. The rule, however, is not absolute: Brittain v Commonwealth of Australia (No 2) [2004] NSWCA 427; Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15.
The response of the respondent was to contend that he was entitled to take the point concerning the admissibility of the expert evidence, and (by implication) that he should not be penalised for doing so.
It is true that a party is entitled to take available points; that is no different from a defendant's legitimately contesting an action. If, however, the defence is ultimately unsuccessful, then, the defendant, in the ordinary course, bears the costs. It is no different where an unsuccessful argument is the cause of error, with a resultant new trial.
There is, in my opinion, no reason to deprive the appellant of the costs of the trial. That there is to be a new trial lies entirely at the feet of the respondent, who took a point, and lost.
The orders I propose are: (1) Set aside the order for costs in the court below; (2) The respondent is to pay the appellant's costs of the appeal (on the ordinary basis); (3) The respondent is to pay the appellant's costs of the trial in the District Court (on the ordinary basis); (4) The respondent is to have a certificate under the Suitors' Fund Act 1951 (NSW).

Hatziandoniou v Ruddy

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