Marshall v O'Flaherty

The parties' submissions

1. Mr Turnbull SC, in the written submissions supplied to the court on 8 November 2022, noted the finding that it was reasonable for the plaintiff to rely upon his solicitors in respect of the limitation period and instituting proceedings but submitted that, whether the defendant consented to or did not even attend the hearing of the matter, the plaintiff was required to incur all of the costs that he did in order to obtain the appropriate leave, in circumstances where his solicitor had been dilatory. He stated that the defendant was entitled to conduct the case as he wished, and that the responsibility for the costs incurred lay should be sheeted home to the plaintiff's solicitor's dilatory conduct. This meant that the success of the application was irrelevant as the plaintiff was seeking an indulgence (the "indulgence principle"). Consequently, despite the plaintiff's success, he ought to be ordered to pay the costs of the application conformably with the general approach of the courts to dilatory conduct resulting in applications of this kind.
2. The plaintiff submits that the appropriate costs order is the order already made by Taylor SC DCJ. Costs should follow the event and there is a reasonable expectation that a successful party would recover the costs against the unsuccessful party. Although applications of this kind by a plaintiff seeking the indulgence of an extension of time had, during the previous century, resulted in courts requiring costs to be paid by the party seeking such an indulgence, there is no longer any such general rule: Smith v Grant (2006) 67 NSWLR 735 at 753 ([77] - [79]). While the need for indulgence was a factor, it should be seen in the context of how the application was conducted by the parties. In these proceedings, the conduct of the defendant in opposing all issues in the manner that they did was entirely unreasonable and did not favour the application of any "indulgence" factor. Such an approach had been endorsed in Stein v Ryden [2022] NSWCA 212, in that costs orders were made in favour of the plaintiff, including the costs of the hearing below.
3. In reply, the defendant challenged the intention that every issue had been taken, submitting that it was "frankly astonishing" (submissions, at [11]) that the plaintiff had conducted the claim in such a dilatory fashion and repeating that the court cannot grant leave to commence proceedings unless the court is satisfied with the full and satisfactory explanation, which would have taken the same amount of time, whether opposed or not. As for the defendant's motion to strike out the summons, this was in response to the plaintiff's delay and also to the failure to resolve the matter as required by s 89A of the PIC Act. None of what occurred happened because of any "defalcation" (submissions, at [18]) by the defendant and as the onus lay on the plaintiff, the defendant was entitled to oppose the plaintiff being granted leave. Other claims made by the plaintiff in submissions were described as being "simply untrue" (submissions, at [24]) or "just wrong" (submissions, at [30]).
4. In brief oral submissions, Mr Turnbull SC reiterated the matters set out in paragraphs 41 and 42 of his submissions to Taylor SC DCJ. He emphasised that, where a party sought an indulgence from the court, the fact that there was no hard and fast rule to the effect that the party seeking the indulgence must pay for it, was not the end of the matter; it was nevertheless a powerful argument when the court exercises its costs discretion.
5. It is clear from the judgment and submission that most, if not all, of the issues before Taylor SC DCJ were hotly contested. The issues considered by his Honour included whether or not the plaintiff had "first made an application to the PIC" (at [20] ff), whether the explanation was "full" (where the defendant had submitted, as Taylor SC DCJ noted in his judgment, that it "frankly beggars belief that he was not told about the time limits applicable to the matter") and whether the 25% threshold had been reached in circumstances where there was some doubt as to the MAS certificate.
6. Not everything was challenged. Submissions as to the satisfactoriness of the explanation were treated by his Honour as being abandoned, in that no further argument was put on this topic. There appears to have been a similar abandonment of the challenge to the monetary threshold at some stage during the hearing.

The costs orders sought by the defendant

1. The question for determination is whether the costs order made by Taylor SC DCJ should stand or whether the fact that the plaintiff needed an indulgence from the court was such a significant matter that a costs order should be made in favour of the defendant.
2. Mr Turnbull SC did not advance any submissions to me as to the alternative order he identified in oral submissions, namely an order that each party pay its own costs.

The "indulgence principle"

1. It used to be the case that the party seeking the indulgence would have to pay the costs unless opposition was "wholly unreasonable": Holt v Wynter (2000) 49 NSWLR 128; [2000] NSWCA 143 at [121]: "[121] I set out hereunder the orders that I propose. In relation to costs ordinarily a successful applicant, who has allowed him or herself to get out of time, should pay the costs of the application unless the respondent's opposition was wholly unreasonable. Although Judge Cantrill was satisfied that the evidence explained and excused the applicant from any responsibility for the delay, the fact remains that one or more of the solicitors she retained were responsible for the delay. The respondent was not. In the circumstances, particularly having in mind the question raised about the availability of medical records, I do not regard the respondent's decision to resist the application as unreasonable."
2. However, in Smith v Grant (2006) 67 NSWLR 735, the Court stated: "77 In the District Court, the defendant submitted that, because the claimant was seeking an indulgence, by way of leave to commence proceedings out of time, even if successful, pursuant to Part 39A, r 32 of the District Court Rules (as then in force) she should pay the defendant's costs. His Honour rejected that submission and ordered that costs of the application be costs in the cause. The reason for his rejection was as follows: "In my view there is no evidence to support the attitude by the insurer in forcing this matter into a court system when the whole purpose of this legislation is to bring about expedition in relation to settlement and ease in relation to the determination of matters." 78 On the application for leave to appeal, the insurer complained that this criticism was without merit. It ignored the fact that the application for assessment under the CARS process was made well after the expiration of the limitation period and also ignored the fact that the insurer's application for exemption had been upheld and the certificate of exemption had not been challenged. 79 While these complaints may be justified, they raise no issue of substance. There is no inflexible rule that a party seeking leave to file out of time must pay the costs of the application. There is no suggestion his Honour was not aware of the relevant rule. The rule in question has now been repealed. The grant of leave should not extend to this order. 80 With respect to the costs in this Court, the defendant conceded that, if the application for leave to appeal were unsuccessful, he should pay Ms Grant's costs. Leave has been granted, but the appeal has been unsuccessful. It follows that the Appellant must pay the Respondent's costs of the appeal and of the application for leave to appeal." [Emphasis added]
3. This is often referred to as the "indulgence principle". In Fordham v Fordyce [2007] NSWCA 129, this was explained by Young CJ in Eq as follows: "50 Mr Simpkins, for the claimants, has put considerable store on what he has called "The Indulgence Principle", by which he means that, where a person seeks an indulgence of a court, that person should pay the opponent's reasonable costs unless the latter was based unreasonably. As I stated during argument, I doubt whether there is such an overarching principle. In saying this I do not doubt that in various standard situations, particularly in applications in the Equity Division, a person seeking a boon pursuant to statute or general rules of equity normally needs to pay the costs. However, I doubt whether one can conflate those cases into some overarching principle. 51 Mr Simpkins relied on what Campbell J said in Nardell Coal Corporation v Hunter Valley Coal Processing (2003) 178 FLR 400 particularly at 435-436. However, the illustrations given by Campbell J in that case do not convince me that there is some usual principle which is applied unless it is inappropriate to do so in a particular case. It may be that there is such a principle in cases under the old Two Guinea Rule in equity where applicants seeking to modify restrictions imposed by restrictive covenants had to tender two guineas to the other side so the opposing solicitor could investigate the case. It may be that there is some standard guideline in the exercise of discretion in other cases, but I do not think one can say there is an overarching principle known as "The Indulgence Principle" which is to apply unless it is inappropriate. 52 The other matter that I wish to mention is that I am not convinced that in any event it is proper to deal with this application, an application under the Access to Neighbouring Land Act 2000, as one where the applicant is seeking an indulgence. Indeed, I do not accept that this is the correct way to approach this particular Act. … 56 All these matters together with any other matter that the court thinks fit are taken into the mix to see whether it is proper to make an order for costs one way or the other. Considering the way in which the Act is structured, it is not to be construed as the owner requiring access seeking some sort of indulgence. Nor, if there, indeed, is an overarching indulgence principle, that that is the dominant matter to be considered (unless it is inappropriate to do otherwise) when considering costs under s 27(2)." [Emphasis added]
4. Applications for extensions of time to commence personal injury proceedings come before the District Court on a regular basis. In this Court, the question of "indulgence" in relation to costs orders of this kind has been acknowledged to be a matter lying wholly within the court's discretion. In Choukor v Spiroski (No 2) [2017] NSWDC 15, Dicker SC DCJ stated at [12]: "The plaintiff in her counsel's written submissions generally adopted these submissions as correct. However, it was submitted that the authorities did not suggest that costs are otherwise than wholly within the discretion of the court nor that a plaintiff seeking the indulgence of the court should inflexibly be denied costs: Smith v Grant [2006] NSWCA 244 at [79]."
5. Similarly, in Seary v White (No 5 - Costs) [2008] NSWDC 21 Johnstone DCJ said at [32]: "I deal first with the proposition that allowing the defendant to call Dr O'Neill and Dr Reid to give oral evidence amounted to an indulgence. I disagree. It was simply an exigency of adversary litigation. Indeed, having regard to the conflicting medical evidence on the central issue in the proceedings, it was important that the key witnesses be assessed first hand, in the witness box, rather than on the papers, particularly having regard to the attacks each party made on the other's experts. But even if it were somehow to be categorised as an indulgence, it was not the sort of indulgence that would justify displacement of the presumption: Fordham v Fordyce [2007] NSWCA 129 at [50], Smith v Grant [2006] NSWCA 244 at [79]; Brittain v Commonwealth (No 2) [2006] NSWSC 528 at [12]; Commonwealth of Australia v Smith [2005] NSWCA 478 at [217]; Re: Nardell Coal Corporation (In liq) v Hunter Valley Coal Processing [2003] NSWSC 642 at [145]."
6. In Judd v Warwick (Costs) [2007] NSWDC 300, Johnstone DCJ said at [6]: "In my view the superior courts have made it clear in a number of recent judgments that the indulgence principle is not one of inflexible general application: see, for example, Fordham v Fordyce [2007] NSWCA 129 at [50], Smith v Grant [2006] NSWCA 244 at [79]; Brittain v Commonwealth (No 2) [2006] NSWSC 528 at [12]; Commonwealth of Australia v Smith [2005] NSWCA 478 at [217]; Re: Nardell Coal Corporation (In liq) v Hunter Valley Coal Processing [2003] NSWSC 642 at [145]."
7. These principles have been adopted or endorsed in some other jurisdictions (The President's Club Limited & Anor v Palmer Coolum Resort Pty Ltd & Anor (No 2) [2020] QSC 11; Halikos Hospitality Pty Ltd & Ors v Inpex Operations Australia Pty Ltd [2017] NTSC 17), but not all (Stanley v Layne Christensen Company [2006] WASCA 56).
8. However, not all judges interpret the indulgence principle in this way, or regard it as a principle of wide application in different areas of the law. In Wang v ABC Homes (NSW) Pty Ltd (No 2) [2018] NSWSC 1736, Parker J stated at [5] - [7]: "[5] The general principle that an applicant seeking an indulgence must pay the costs is well established: Nardell Coal Corp (in liq) v Hunter Valley Coal Processing (2003) 178 FLR 400; [2003] NSWSC 642 at [143]-[146]. Where a plaintiff allows the limitation period for his or her cause of action to expire and then seeks an extension of time, the plaintiff will generally be required to pay the defendant's costs of the leave application: see Holt v Wynter (2000) 49 NSWLR 128; [2000] NSWCA 143 at [121]. Frequently a party applying for leave to amend that party's pleading is required to pay the costs of the amendment application and the costs thrown away, even if successful. The Western Australian Court of Appeal has expressly adopted a general rule to that effect for litigation in that State: Stanley v Layne Christensen Company [2006] WASCA 56. [6] A similar principle applies in proceedings for the approval of a scheme of arrangement. Although the order approving the scheme is not, strictly speaking, an indulgence, the Court proceeds on the basis that the scheme companies had to come to Court and subject the scheme to scrutiny in any event. In such cases, the scheme companies usually have to pay the objectors' costs so long as the objectors have not behaved unreasonably: Re NRMA Insurance Ltd (No 1) (2000) 156 FLR 349; [2000] NSWSC 82 at [43]-[45]. [7] The application of the principle in a s 459S application was considered by Gleeson J in Gillion Pty Ltd v Wet Fix Holdings Pty Ltd (No 2) [2016] FCA 1483. At [10]-[16], her Honour referred to a number of previous decisions on the question."
9. While this decision does not refer to Smith v Grant, the other point that Parker J makes clear is that the statutory provisions and the nature of the orders sought were relevant factors, which I consider to be a compelling argument, Parker J went on to add: "[16] This still leaves the question whether, in the ordinary course, the costs of a successful s 459S application should be costs in the cause; or, alternatively, that the costs of the application should be the plaintiff's costs in the cause (which would deprive the defendant of any costs of the application, even if ultimately successful in the proceedings). [17] In my view, it is essential to consider the question in its statutory context. The Court only comes to exercise its power under s 459S in proceedings by a creditor to wind up the company in question, relying on failure to comply with the statutory demand under s 459Q. It is a creditor's choice to serve a statutory demand; and if the statutory demand is not complied with or set aside, it is the creditor's choice to commence winding up proceedings. In my view, this distinguishes the case from an application to extend a limitation period, where the plaintiff must go to court to obtain an extension before mounting his or her claim. An applicant under s 459S has already been brought to Court as a defendant. [18] A plaintiff who commences proceedings for the winding up of a company in insolvency under s 459Q is not guaranteed of success. Such a plaintiff must accept the risk that the defendant will be able to rebut the presumption which arises from failure to comply with the statutory demand and establish its solvency. In such a case, the plaintiff must expect that costs will follow the event and be awarded in favour of the defendant. And if the solvency issue gives rise to extensive factual disputes requiring evidence, and the costs turn out to be heavy, an unsuccessful plaintiff cannot complain: that is the sort of forensic risk which all plaintiffs must accept."
10. This demonstrates the difficulties of applying cases from other areas of the law to the concept of "indulgence" in an extension of time for the commencement of personal injury proceedings.
11. Other personal injury regimes may be comparable. For example, leave is commonly required under s 151D of the Workers Compensation Act 1987 (NSW), and it is not uncommon, where there has been opposition, to an order for the defendant to pay costs: Franco v Workers Compensation Nominal Insurer [2020] NSWSC 915. However, even applications of this kind proceed on the basis of the special relationship between the worker and the employee as well as an acknowledgement that the nature of the injury may make discoverability difficult, so caution in using this as an analogy must be exercised.
12. Taking all of the above into account, while there is no "indulgence principle", whether an indulgence has been sought is directly relevant to the costs of applications of this kind. Great care should be taken when considering whether leave sought under other legislation is in fact appropriately similar. The indulgences granted in personal injuries proceedings proceed on a different basis to other statutory schemes, as the above cases make clear. For these reasons, the conservative approach is best. The plaintiff is seeking an indulgence and I agree with Mr Turnbull SC that this is a factor of significance. It is not, however, the only factor.

The other factors to take into account

1. As Mr Kelleher SC points out, it is not whether or not an indulgence is being sought, but the manner in which the proceedings are opposed that is the key to his opposition to the application. In the present case, the defendant not only combatively made submissions opposing all relief sought, effectively on all issues, but filed a motion in response which was dismissed. It is clear from Taylor SC DCJ's judgment and the language of the submissions sent to his Honour that this was a very hard-fought application.
2. Mr Turnbull SC submitted that it was his client's right to put the plaintiff to proof and that the court had to satisfy itself that leave should be granted by carefully analysing all factual material. I do not accept this submission. While the court must be satisfied that the explanation is full and satisfactory, the court is not performing an inquisitorial hearing.
3. There is a significant difference between leaving an issue to the court and seeking the dismissal of the claim on a number of bases. This was not an application able to be disposed of in a short hearing, but an application which took almost a day and resulted in judgment being reserved for a period of time appropriate to the complexities of the arguments put before his Honour.
4. The next, and equally important, factor is the extent to which I should take into account Taylor SC DCJ's proposed costs order.
5. Judges may express views on the likely result of costs applications which, although persuasive, are no more than views. For example, in Muriniti v Kalil [2022] NSWCA 109 at [41], Brereton JA, in the course of setting aside costs orders in favour of the plaintiffs in defamation proceedings, noted that the plaintiffs had now discontinued those proceedings and made the following observations: "A notice of discontinuance was filed on 4 December 2020. The question of costs consequent on the discontinuance remains outstanding, although, prima facie, it would seem very likely that the Plaintiffs would be required to pay the Defendants' costs."
6. These are observations, not a court order. They carry considerable weight as the opinion of an appellate judge, but no more.
7. In the present case, Taylor SC DCJ went much further. He actually made the order, but granted liberty to apply, a not uncommon method used for resolving all issues in interlocutory applications; it is designed to give the parties some idea of the likely order, in the hope of avoiding the need to return for further applications to the court.
8. Mr Turnbull SC relies upon the liberty to apply which was granted. I agree that in such circumstances the principles in Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 would not apply, as the judge has invited the application, but nevertheless the order proposed is clearly the costs order that the judge hearing the application considered appropriate.
9. As one of the most experienced judges in this court, Taylor SC DCJ's judgments command respect, for their detailed and careful analysis as well as for his ability to analyse the issues. He has proposed a costs order which I feel some reluctance in departing from.
10. The third factor is that Mr Turnbull SC does not put before the court any new material. I am essentially asked to consider the material afresh. He does not submit that Taylor SC DCJ has made any kind of error, or that some recent or new factor should be considered. In other words, I am hearing the same argument as the one which persuaded his Honour to make the order that he did.
11. The fourth factor is that the order made by Taylor SC DCJ is one commonly made in these applications. There is a degree of compromise in it. While Mr Turnbull SC submitted that this left his client effectively having to pay the costs, because liability has been admitted, this clearly was a factor that Taylor SC DCJ took into account.
12. These factors all weigh in favour of leaving the costs order as determined by Taylor SC DCJ. The countervailing factors of a plaintiff seeking an indulgence and of the solicitor's delay being worthy of criticism are important but cannot outweigh the impact of a thoughtful and careful judgment resulting in a costs order which is understandable in the context of the combative nature of the application.
13. The defendant's application for costs to be paid by the plaintiff is accordingly dismissed.
14. I was not addressed on the alternate proposal of each party paying its own costs. I would, however, apply the same factors and come to the same opinion on this application as well.
15. I was not addressed as to the costs of this application but, taking into account the factors set out above, I consider that these should be included in the "costs event" of this application. Although the plaintiff has "won" the costs argument, it still arises out of the application for the indulgence and should not be the subject of a separate costs order.

Order: 1. Defendant's application to set aside order (3) of the orders made by Taylor SC DCJ on 25 October 2022 is dismissed. 2. The costs of this application are to be included in the costs order of 25 October 2022 when these costs come to be agreed or assessed.

Amendments 20 March 2023 - typographical error in the coversheet 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 March 2023