Howard v Telstra Corporation Ltd [2003] NSWCA 188 | Case summary

Held per Davies AJA, (Santow JA and Young CJ in Eq agreeing):

MacDougall v Curlevski is distinguished from the present case because in that case the defendant had decided for forensic purposes not to call available evidence at the arbitration but to reserve such evidence for use at the trial if a rehearing was requested. In the present case it was simply considered unnecessary to call the additional witnesses. The facts did not suggest there was any deliberate holding back of evidence for a strategic purpose.
Morgan v Johnson is also distinguished from the present case because in that case there was the additional element of a settlement offer that was made by the defendant and rejected by the plaintiff. No settlement offer was made in the present case.
The principles which a court will apply on an appeal from a discretionary decision of a trial judge are clearly laid down in authorities such as Australian Coal and Shale Employees' Federation v The Commonwealth (1953) 94 CLR 621 at 626-8; House v The King (1936) 55 CLR 499 at 504, 505; and Lovell v Lovell (1950) 81 CLR 513 at 518-9.
The effect of the trial judge's order was to deprive the appellant, a successful plaintiff, of the costs of any hearing of his action, indeed to make him pay the costs of both the arbitration and the trial. The mere failure to call witnesses at the arbitration who were later called at the trial cannot justify this result. His Honour's order was perverse, that is to say, unreasonable and plainly unjust.
Having regard to the circumstances, a fair and just order would be that the appellant pay the costs of the arbitration and that the respondent pays the costs otherwise incurred in the proceedings below. The parties should abide by their own costs for the appeal.

9 JULY 2003 ROGER HOWARD v TELSTRA CORPORATION LTD Draft Judgment 1 SANTOW JA: I agree with Davies AJA and the further observations of Young CJ in Eq. 2 YOUNG CJ in EQ: I have read the reasons of Davies AJA. I agree with them, but wish to make some further observations. 3 Mr Williams, SC who appeared with Mr McGuire for the appellant strongly suggested that the culture of the District Court is such that counsel and solicitors are virtually forced not to call all available witnesses and suffer censure if their arbitration does not finish within a day. 4 Mr Fitzsimmons for the respondent challenged that view. 5 Whether it be correct or not, there is no excuse for any lawyer representing a party not to place before an arbitrator or judge all the evidence which needs to be called in order, forensically, to obtain a verdict. 6 It can never be an excuse for losing a case because of insufficient evidence for a lawyer to say that because he or she thought that the judge would disapprove of a case taking too long or that it was expensive to bring witnesses from far away, necessary evidence was not called. 7 The suggestions were made by the appellant to cast doubt in our mind as to whether the assertions made in previous authorities that District Court arbitrations are in reality seen by anybody as in practice being the final hearing. The answer to that suggestion is that if they are not now, they should be treated as such again in the future. 8 Turning now to the cost order made by Robison DCJ, it would seem that his Honour placed too much emphasis on the policy laid down in the authorities referred to by Davies AJA and insufficient to the general rule as to costs in the District Court which appears as Part 39A rule 9, that, ordinarily, the exercise of the discretion as to costs will result in the winner of the litigation getting costs and the loser paying them. 9 In the instant case, the "winner", as a result of his Honour's costs order will probably end up paying out in costs more than his verdict. Such a result only has to be stated to be seen as perverse. 10 Mr Fitzsimmons said, when the argument left minutiae and turned to the real point, that he conceded that the order that the trial judge should have made as to costs was that the appellant receive his costs of the arbitration together with the costs of the witnesses Mrs Howard and Mr Collins. 11 Mr Fitzsimmons said that, unfortunately, whilst he was the respondent's counsel at the trial in the District Court, he was not present when the argument as to costs was run. He had only recently become aware that the trial judge had made the order for costs he in fact made when the proper order was that which he now conceded. 12 Whilst accepting what Mr Fitzsimmons says, this correction of error really comes too late. The matter could have been raised when this court was considering leave to appeal last February, despite the observations of the President on page 87 of the Red Appeal Book: it was not then raised nor was it raised in the written submissions. This court must deal with the matter on the basis that the trial judge meant what he actually ordered. 13 The order as made being clearly perverse, this Court must exercise the discretion afresh. The two possibilities are the order now conceded by Mr Fitzsimmons and that proposed by Davies AJA. The latter seems to me to be the proper order. 14 Finally, I join in with Davies AJA that the principles noted in the cases cited in his judgment must not be taken too far. Part 39A rule 31 of the District Court Rules does not cover the present situation directly. There is a principle that parties must put their best foot forward in District Court arbitrations and that cost penalties may be suffered if they do not. However, in the end result, the order for costs must be fair and just in all the circumstances of each particular case. 15 DAVIES AJA: This is an appeal by leave from the judgment of a judge of the District Court of New South Wales on a question of costs. Leave was granted by Mason P and Heydon JA on 6 February 2003. 16 The appellant, Roger Howard, had in May 1998 injured his shoulder when he tripped over a cable which he alleged had been laid across his driveway by a Mr Kevin Abrahams, an employee of the respondent, Telstra Corporation Ltd. Mr Howard's claim for damages was instituted in the District Court. It was referred out to arbitration under the Arbitration (Civil Actions) Act 1983. The only witness as to liability called in the arbitration was Mr Howard. The arbitrator found that Mr Howard's case needed corroboration or supplementary material to support it. Accordingly, he dismissed Mr Howard's claim. Subsequently, an order was made for the matter to be reheard in the District Court. Section 18(3) of the Arbitration (Civil Actions) Act then applied. The provision provided: "the action … shall be heard and determined by the Court as if it had never been referred to an arbitrator". On the rehearing, Mr Howard called two additional witnesses, his wife and a neighbour, Mr Collins. Telstra Corporation Ltd called Mr Abrahams. The learned trial judge believed Mr Howard and his witnesses. He gave judgment in favour of Mr Howard. 17 His Honour ordered that the defendant, Telstra Corporation Ltd, pay Mr Howard's costs up to and including 19 November 2001, the day before the arbitration but that Mr Howard thereafter pay the costs of Telstra Corporation Ltd. His Honour purported to follow MacDougall v Curlevski (1996) 40 NSWLR 430, and Morgan v Johnson (1998) 44 NSWLR 578. 18 The trial judge said at pp 68-9 of the appeal book:- "At the end of the day the court does have a discretion in relation to costs. Although it could not be said that the arbitration itself was a charade, it would seem to me reasonable to conclude that there was evidence available but not called, namely the evidence of Mr Collins and Mrs Howard. Each of whom supported the plaintiff in their evidence in this case before me. Specific reference was made to this by the arbitrator as I said. … As it was said in Morgan v Johnson, it is incumbent upon the parties to put the best foot forward at arbitration. It could not be said that the plaintiff in this case put his best foot forward. Whilst it is not necessary to comment on the correctness or otherwise of the arbitrator's decision, it would appear from what was said in the award that the decision had a considerable basis to it given the reservations the arbitrator had. That, of course, was not the view I formed when I heard all of the available evidence, evidence which was available at the time of the arbitration, and clearly the question of time which has been spent by this court in hearing a matter that could have been determined completely at arbitration is an important issue and there is, in my view, a question of degree which can be taken into account when considering the proper exercise of a discretion such as this. … I must say I am left wondering why those two witnesses were not called at the arbitration, those two witnesses who were so important to the plaintiff's case and given I have found the plaintiff to be truthful and reliable, that assessment was also taken into account considering the evidence of those supporting witnesses who gave it and that assisted this court in the assessment of the plaintiff as well. So all of those factors have been taken into account. … The defendant is to pay the plaintiff's costs up to and including 19 November 2001. The plaintiff is to pay the defendant's costs thereafter." 19 This approach applied comments made by the members of the Court in MacDougall v Curlevski. At pp 433-4 Priestley A-P said:- "As Kirby P made clear in Quach it is open to a party to follow a course of the kind chosen by the defendants in the present case. There is no provision or practice, so far as I am aware, that can, as a matter of law , preclude a party from deciding what evidence that party will call in a District Court action referred to an arbitrator. The position adopted by the Court in Quach , as explained by Kirby P, which in my opinion is a sound one, is that although a party may choose such a course as was followed in Quach and analogously in the present case, if that course either caused or might have caused waste of public and private time and cost, then the fact that the party had chosen that course was something proper to take into account in considering the costs of the arbitration and the re-hearing; that is, a party adopts such a course at the party's risk as to the costs consequences. Further, in my opinion, the court considering the costs questions is entitled to take into account, in deciding what the consequences of such a course should be, the desirability of actions referred to arbitrators for determination being determined once and for all by the arbitrator. The whole scheme of referred actions in the District Court is aimed at speedier and cheaper decision of disputes, which by definition of the conditions subject to which actions may be referred to arbitration, are suitable for such decision. The scheme is not one designed to provide successive hearings by arbitrator and judge as a regular matter in which the first trial is to be regarded as a practice run, but rather one where the first trial is intended to be the final trial, subject to the re-hearing safeguard in the occasional, out of the ordinary, case. It seems to me, therefore, quite legitimate for courts in making costs orders, to promote, in appropriate cases, the use of the referred action system in what in my opinion is the intended way." 20 At p 438, Cole AJ said:- "In exercising its discretion regarding costs of a re-hearing and of the arbitration, the court must give consideration to the provisions of the rules to which I have referred, as well as matters generally affecting costs. It is clear that neither the Act nor the Rules compels a party to call evidence before an arbitrator or on a re-hearing. However where the court, here the District Court, has directed that an arbitration occur in an action before it, and a party decides for forensic purposes not to call available evidence at that arbitration but to reserve such available evidence for use at the trial if a re-hearing is requested, such action is likely to result in increased costs and delay. It is contrary to the intention and spirit of the legislation to which I have referred, enacted to reduce delay and reduce costs, that a party should act otherwise than by conducting the arbitration as though it were, as it is intended to be, a hearing of the action. That means that a party should call its evidence. If it does not do so and additional costs are thus involved, it can be expected that judges in exercising their unfettered discretion regarding costs of the hearing, and of the arbitration, will have regard to the factor of additional cost so incurred. If the trial judge forms the view that, had the withheld evidence been called at the arbitration, the result of the arbitration was likely to have been different, and the subsequent court proceedings thus were likely to be unnecessary, that is a factor which it is permissible to consider in the exercise of the discretion as to costs. That accords with the philosophy underlying the decision of this Court in Quach v Mustafa ." 21 At p 444 Simos AJA said:- "That failure to call evidence before the arbitrator also produced the result that that a further hearing before the trial judge took place when that further hearing might well have been avoided if the evidence had been called before the arbitrator. In those circumstances it was, in my opinion, open to the learned trial judge to conclude that the order for costs against the appellants should include, not only the costs of the arbitration, but also the costs of the hearing before the learned trial judge." 22 In MacDougall v Curlevski, the defendants had called no evidence before the arbitrator but had had available to call as a witness and called before the Court on the rehearing a bar manager whose evidence was accepted. The defendant had decided for forensic purposes not to call available evidence at the arbitration but to reserve such evidence for use at the trial if a rehearing was requested. That approach was contrary to the intention and spirit of the legislation and resulted in the incurring of the costs of the further hearing which could have been avoided had the bar manager's evidence been called before the arbitrator. Priestley JA, at 434, said that the order of the District Court Judge was severe but within the discretionary range open to him. 23 In Morgan v Johnson, it was made clear that the approach enunciated in MacDougall v Curlevski was not limited to a case in which a party had deliberately, for forensic purposes, decided not to call evidence at the arbitration which was available to be called. At 597-8, Mason P said:- "Before us the defendant submitted that there is a significant difference between the situation of a defendant who makes a deliberate tactical decision not to call available evidence at an arbitration (as in Quach and MacDougall ) and the situation in the present case where the importance of the additional evidence, or the need to call additional evidence, was not appreciated until during the hearing of the arbitration and after it had concluded. This is said to be quite a different situation to a party deliberately holding back evidence which it knows to be important in such a way as to render the arbitration "a form of litigious charade": Quach (at 10), per Kirby P. I agree that there is a distinction, although ultimately it is a matter of degree. In any event it would be wrong to treat Quach and MacDougall as establishing that the relevant rule must invariably be displaced whenever available evidence was not used. It is certainly true that the parties are entitled to conduct the re-hearing in such manner as they think fit but, as Quach and MacDougall point out, there may be costs consequences. If a party tenders evidence at an arbitration that is wholly unexpected then the other party can scarcely be criticised for not anticipating it or responding to it at the arbitration. Nor can the party necessarily be criticised for not seeking an adjournment at the arbitration, given that arbitrations are usually expected to finish in one day. But in the present case the issue of the plaintiff's prospects of promotion was at all times a live one, and there is no reason other than the apparent inefficiency of the defendant or his legal advisers for the matter not being dealt with vigorously at the arbitration. Due diligence would have seen the calling of some at least of the ultimately critical witnesses. In saying this I would not preclude taking into account, in a proper case, evidence that there was an actual consensus between the parties to the arbitration that they would contest in the arbitration on some limited basis. But this was not such a case. It can therefore be seen that the ultimately critical evidence was not at hand at the time of the arbitration, but could with reasonable diligence have been available and called. This distinguishes the present case from Quach , MacDougall and Green v Lovatt , but not in a degree that I consider relevant. The duty (costs wise) to put the best foot forward at arbitration in the absence of special circumstances remained." 24 However, it should be noted that, in Morgan v Johnson, there was an element additional to the failure to adduce before the arbitrator evidence which was later adduced at the trial. That element was that, on 6 November 1996, the plaintiff had rejected a reasonable settlement offer made on that day. This was the factor which led the Court to order that the defendant pay the costs up to and including 6 November 1996 but that the plaintiff pay the costs incurred thereafter. 25 In the present case, the evidence did not suggest that it was for some forensic purpose that the additional witnesses, Mrs Howard and Mr Collins, were not called before the arbitrator but simply that it was considered unnecessary to do so. The facts do not suggest that there was any deliberate holding back of evidence. However, a degree of lassitude on the part of Mr Howard's lawyers appears to have been involved, for Mrs Howard was not called even on the aspect of Mr Howard's injuries. 26 The principles which a court will apply on an appeal from a discretionary judgment of a trial judge, such as a judgment as to costs, are clearly laid down in authorities such as Australian Coal and Shale Employees' Federation v The Commonwealth (1953) 94 CLR 621 at 626-8, House v The King (1936) 55 CLR 499 at 504, 505 and Lovell v Lovell (1950) 81 CLR 513 at 518-9. I need not repeat them. 27 On the facts as found by his Honour, and applying the principle enunciated in MacDougall v Curlevski and Morgan v Johnson, it was appropriate for his Honour to make a costs order which reflected his Honour's disapproval of the failure on the part of the plaintiff to call evidence in the arbitration from Mrs Howard and Mr Collins, evidence which was necessary to support his claim. There are many differing orders which could have been made, but two costs orders which readily present themselves for consideration in a situation such as this are firstly, that the plaintiff pay the costs of the unsuccessful arbitration and the defendant pay the costs otherwise incurred in the action and, secondly, that the defendant pay the costs up to the order of the arbitrator and the plaintiff pay the costs thereafter. 28 Had his Honour made either order, I would have considered that no error of principle in his Honour's approach to the issue was demonstrated. His Honour dealt with the matter on the basis of the facts before him. He exercised his discretion. He did not apply what he considered to be an inflexible rule. 29 However, his Honour's order was that the defendant pay the costs up to and including 19 November 2001, the day before the arbitration, and that the plaintiff pay the defendant's costs thereafter. The effect of this order was to deprive Mr Howard, a successful plaintiff, of the costs of any hearing of his action, indeed to make him pay the costs of both the arbitration and the trial. The mere failure to call witnesses at the arbitration who were later called at the trial cannot justify this result. In my opinion, his Honour's order was perverse, that is to say, unreasonable and plainly unjust. In the present case, there was no deliberate decision to withhold evidence for forensic purposes, as justified the severe order in MacDougall v Curlevski. 30 In the circumstances, it is necessary for this Court to exercise the discretion afresh, to make the decision which ought to have been made in the first instance. 31 An order of the second kind which I have mentioned could be justified by his Honour's finding: "On any fair reading of the arbitrator's decision, there is an impression that one can gain that had that evidence been called before the arbitrator that may well have led to a different result or at least a real likelihood of an award in the plaintiff's favour or some prospect of resolving the matter at that time." 32 However, the result of such an order would have the somewhat curious result that Telstra Corporation Ltd would pay the costs of the arbitration in which it succeeded while Mr Howard would pay the costs of the trial in which he succeeded. In both MacDougall v Curlevski and Morgan v Johnson there were additional factors which justified the orders made. 33 Having regard to the circumstances of the present case, I consider that a fair and just order would be that Mr Howard pay the costs of the arbitration and that Telstra Corporation Ltd pay the costs otherwise incurred in the proceedings below. Other judicial minds may take a different view but that is the order which appears to me to be the fair order in the circumstances of the case. 34 I am of the view that the parties should abide their own costs of the appeal. The ground upon which the appeal has succeeded was not raised in the original notice of appeal or in counsel's written submissions. It did not emerge until close to the end of the address of the appellant's counsel. Once the error was pointed out, counsel for the respondent readily conceded the error. 35 I propose the following orders: 1. That the order as to costs below be set aside and that, in lieu thereof, it be ordered that the plaintiff, Roger Howard, pay the costs of the arbitration and that the defendant, Telstra Corporation Ltd, otherwise pay the costs of the proceedings in the District Court. 2. That the parties abide their own costs of the appeal.

Howard v Telstra Corporation Ltd

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Judgment (19 paragraphs)

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Cases Cited (5)

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