MELVILLE v. TADROS [1999] NSWCA 162

JUDGMENT 1 POWELL JA: This is the hearing of an application for leave to appeal and, if leave be granted, of an appeal, from an order as to costs made by McLoughlin A-DCJ on 26 June 1998 in proceedings which had been brought by the Opponent, seeking to recover from the Claimant damages in respect of injuries and other losses which he (the Opponent) claimed to have suffered as the result of a collision between the truck which he (the Opponent) was driving, and a semi-trailer which was being driven by the Claimant on 27 May 1994. 2 In those proceedings, liability was admitted by the Claimant, so that the matter went for trial ultimately on the question of quantum alone. However, in order that one might more readily appreciate the problem which has arisen, it is necessary to give a little more detail of the history of the proceedings than might otherwise be regarded as necessary. 3 The proceedings appear to have been commenced in this Court prior to the amendment to s.143 of the District Court Act, 1973 which came into operation in about July 1997. In those proceedings, the Opponent was originally represented by a firm of solicitors, Gerard Malouf & Partners. In November 1996, at a time when that firm was still on the record as the Opponent's solicitors but at a time when, so the Opponent has informed the Court this morning, he had delivered to another firm of solicitors, John B Hajje & Associates, an authority to act for him and to uplift his file from Gerard Malouf & Partners, the Claimant's solicitors forwarded to Gerard Malouf & Partners an offer of compromise made in accordance with the provisions of SCR Pt 22, that offer being for the payment to the Opponent of $60,000.00 plus costs and "clear of all payments made by the Transport Accident Commission (sic) up to date". 4 The Opponent has informed the Court today that he was not aware of, and certainly never saw, that offer of compromise; however, he added that, even if he had been aware of the offer of compromise, he would have rejected it. 5 The Opponent's statement that he was not aware of, and had not seen, that offer of compromise is a little puzzling, for, on 23 January 1997 - by which time the Claimant's solicitors had become aware of the fact that the Opponent had retained John B Hajje & Associates as his solicitors - the Claimant's solicitors wrote to that firm, advising them of the fact that the matter had been listed for arbitration in this Court in March 1997, and, at the same time, enclosing a copy of the offer of compromise which had been served on Gerard Malouf & Partners in November 1996. 6 After the amendment to s.143 the District Court Act, 1973 the proceedings, in company with many other such matters, were listed before Abadee J for the purpose of considering whether or not they should be transferred to the District Court. Initially, so it seems, the Opponent appeared in person and, having advised Abadee J that his new solicitors had still not obtained the file, sought an adjournment of the matter, at which time - so Mr Hooke, who appears today for the Claimant, has told us - his Honour vacated the appointed arbitration and granted the adjournment, albeit ordering the Opponent to pay the Claimant's costs of that day. Ultimately, however, his Honour did order that the proceedings be transferred to the District Court. 7 The Opponent claims that that transfer was "illegal", a claim which, I am sure, is made because he does not understand the provisions of the relevant legislation. It is sufficient here to record that s. 143(5)(a) of the District Court Act (1973) provides that this Court shall make an order for transfer "unless in the case of a motor accident claim (this Court) is satisfied that the amount to be awarded to the plaintiff in the case, if successful would be likely to exceed $1,000,000.00 and that the case involves complex legal issues or issues of general public importance". In the light of the verdict found by McLoughlin A-DCJ, it is apparent that these proceedings were not such as to enliven the discretion retained by this Court under s. 143(5) of the District Court Act 1973. 8 After the matter had been transferred to the District Court, the Claimant's solicitors, on 4 March 1998, forwarded to Messrs Harpers, the third firm of solicitors who had been retained by the Opponent in relation to these proceedings, a further offer of compromise, that offer being "in the sum of $75,000.00 plus proved out of pocket expenses up to date plus costs to be agreed or taxed". It would appear that, on this occasion, the Opponent became aware of the offer of compromise and either formally rejected it or, in any event, did not accept it. 9 The proceedings appear to have been listed before McLoughlin A-DCJ on 26 May 1998, at which time, so it would seem, the Opponent had, yet again, terminated the retainer of his solicitors and at which time he appeared before his Honour in person. In the absence of the transcript, it is not possible to know how far the hearing of the proceedings went on 26 May 1998 but it is clear that, however far the hearing had proceeded, it was then adjourned, first, to 19 June, and, after 19 June, to 26 June 1998, on which latter two days, as it would appear, the Opponent was represented by counsel. 10 Having considered the matter, His Honour delivered an ex tempore judgment in which he found a verdict for the Opponent in the sum of $57,816 against which he "gave credit" to the Claimant for the sum of $4,791 which sum I assume represents "payments made by the Transport Accident Commission". 11 His Honour having found that verdict, the Claimant then sought a special order for costs, informing his Honour of the two offers of compromise which had been made to the opponent. His Honour also records that, "Late May 1998 an offer was made in similar terms and it was understood by the solicitors for the defendant it would be left open", an observation which I am unable in the circumstances to understand. 12 His Honour then dealt with the application which had been made on behalf of the Claimant in the following terms: "Counsel for the plaintiff tells me that his understanding was that when he and the solicitors instructing him came into the matter in June of this year if an offer was put by his client, the plaintiff, in terms of the previous offer, it may well be accepted. The difficulty in this matter is that the plaintiff on the number of occasions is unrepresented. He has the psychological problems which I have found which in part relate to the effects of this action and in my view it is appropriate that the defendant has some benefit from the offers of compromise they have made. In my view that benefit is obtained by the making of the order which I make in the following terms: I order the defendant to pay the plaintiff's costs of the action up until 28 November 1996. I order the plaintiff to pay the defendant's costs of action until 10 June 1998, thereafter I order the defendant to pay the plaintiff's costs of action." 13 Three observations might be made on his Honour's judgment, they being, first, that "the psychological problems" to which his Honour referred, would appear to have been post-traumatic stress disorder which led to depression but which, as I understand it, had no effect whatsoever on the Opponent's intellectual faculties; second, that, as is apparent from what I have earlier said, the Opponent was legally represented at the time when each offer of compromise was made; and, third, that 10 June 1998 - unless it represents the date on which legal advisers once more came into the matter on behalf of the Opponent - is a date which appears to have been plucked by his Honour out of the air, and is inexplicable. 14 The Claimant seeks to have the order made by his Honour set aside and, in lieu, to have it ordered that the Claimant pay the Opponent's costs of the proceedings up to and including 28 November 1996 and that the Opponent pay the Claimant's costs of the proceedings thereafter. The Claimant seeks, in addition, an order that, if leave be granted, and the appeal be upheld, he have his costs of this application and the appeal. 15 As it seems to me, there is a problem in acceding without more to the claimant's application. 16 As I have recorded, the first offer of compromise was made while the proceedings were still in this Court, that offer being made in accordance with the provisions of SCR Pt 22 and, as required (SCR Pt 22 r 1A(2)(a)) specifically noted that fact. Offers of compromise in the District Court are provided for in DCR Pt 19 which provides, in similar, fashion, to SCR Pt 22 that an offer of compromise shall (inter alia) "bear a statement to the effect that the offer is made in accordance with this Part". The second offer of compromise, made after the matter had been transferred to the District Court, did comply with the provisions of DCR Pt 19. 17 The consequence to which a plaintiff in this Court, who fails to accept an offer of compromise made by a defendant pursuant to SCR Pt 22, may become subject are provided for in SCR Pt 52A r22. The consequences to which a plaintiff in the District Court, who fails to accept an offer of compromise made by a defendant pursuant to DCR Pt 19A, may become subject are provided for in DCR Pt 39A r 25. At the time of the making of the first offer, the provisions of SCR Pt 52A r 22 and DCR Pt 39A r 25 were, in substance, the same, namely, that if such a plaintiff, at trial, received a verdict not more favourable than the terms of the offer, then, unless the Court otherwise ordered, the plaintiff was to receive his costs up to and including the date on which the offer was made but was to pay to the defendant his costs thereafter. However, in respect of offers in proceedings in the District Court made since 1 January 1998 - as was the second offer of compromise - that Court's power to order otherwise is now restricted to "an exceptional case and for the avoidance of substantial injustice". 18 Neither s.143 of the District Court Act 1973 nor the Practice Note No. 41 issued by the Chief Judge after the coming into force of the 1997 amendments to the District Court Act 1973 nor the District Court Rules provides, in express terms, that proceedings taken in this Court shall be deemed to have been taken in accordance with the provisions of the District Court Act 1973 and the District Court Rules. 19 However, DCR Pt 5 r 13 provides: "Continuance as District Court action 13. (1) Where the Supreme Court makes an order under section 143 of the Act for the transfer of any proceedings to the Court sitting at a proclaimed place - (a) a party, or a registrar of the Supreme Court, shall lodge a copy of the order and a copy of the pleadings (if any) in the proceedings with the registrar for that place; (b) when the copy or copies, as the case may be, has or have been lodged under paragraph (a), the proceedings shall - (i) cease to be proceedings in the Supreme Court; and (ii) become proceedings in the Court and be continued in the Court as if originally commenced in the Court at that proclaimed place on the day on which they were commenced in the Supreme Court; and (c) any costs payable in respect of the order, copies of the order and pleadings (if any), and work done before the making of the order shall be allowed, subject to any order of the Supreme Court, as though the proceedings had remained in the Supreme Court." 20 Practice Note No. 41 provides (inter alia) that all documents filed in a matter after transfer are to be in the format as set out in the District Court Rules, it being plain enough that pleadings and the like previously filed in this Court do not need to be amended but may be relied on in the transferred proceedings. 21 In all the circumstances, it seems to me that it is appropriate to apply, by analogy, the provisions of DCR Pt 19 and Pt 39A r 25 (as they were in November 1996) to the offer originally made in this Court and to give to that offer and the Opponent's rejection of it, the same consequences as would have flowed if the offer had in fact been made in the District Court. If this be done, and if the judgment of this Court in Hillier v Sheather ((1995) 36 NSWLR 414) be followed, then the cost consequences which flow from the making of offers and their non-acceptance or rejection apply as from the date of the making of the first offer, that is 28 November 1996. 22 For these reasons, I propose the following orders: UPON the Claimant by his counsel undertaking to the Court to have filed in this Court, and to have paid the appropriate filing fee upon, a Notice of Appeal in the form of the Draft Notice of Appeal appearing in the Court Papers. ORDER that leave be, and be deemed to have been, granted to the Claimant to file a Notice of Appeal in that form. ORDER that the Appeal be upheld. ORDER that the order for costs made by McLoughlin A-DCJ on 26 June 1998 be set aside. IN LIEU THEREOF ORDER that the Claimant pay the Opponent's costs of the proceedings in this Court up to and including 28 November 1996 and that the Opponent pay the Claimant's costs of the proceedings in this Court and in the District Court thereafter. ORDER that the Opponent pay the Claimant's costs of the Summons for Leave to Appeal and of the appeal. ORDER that, if qualified, the Opponent have a certificate under the provisions of the Suitors Fund Act 1951. 23 MASON P: I agree. Like many litigants, the opponent had and still has a perception of the extent of his legal entitlement that is at variance with the facts and conclusions found by the judge who heard the litigation as a neutral arbiter. In these circumstances the opponent cannot bring himself to accept that it was unreasonable to have rejected the settlement offers made by the claimant which, according to the opponent, fell well below the opponent's entitlement. While I have sympathy for the opponent, I cannot see how this provides a proper justification for the order appealed from. 24 In Morgan v Johnson (1998) 44 NSWLR 578, this Court was dealing with the predecessor of the current form of part 39A rule 25(6). The earlier form of the subrule was even more generous to a person in the opponent's position than is the current form of the rule. Accordingly, the principles applicable to the former rule apply a fortiori in the current situation. In Morgan at 581 I said that the principles explaining the operation of the relevant rule included the following (omitting citations): "(1) The purpose of the rule is to encourage the proper compromise of litigation in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation. (2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance. (3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party…. This is because, from the time of non-acceptance notionally the real cause and occasion of the litigation is the attitude adopted by the party which has rejected the compromise. (4) Lying behind the rule is the common knowledge that litigation is inescapably chancy." 25 The reasons given by the learned trial judge included the reference to the fact that the plaintiff before his Honour was on a number of occasions unrepresented. In fact the opponent was not unrepresented at the relevant time, nor were the conflicts and difficulties he was having with his solicitors over costs and perhaps other matters a factor in his non-acceptance of the two settlement offers. 26 In any event, I think there is a difficulty with the idea lying behind his Honour's reasons. There cannot I think be a different application of the same rules to a litigant in person than there is to a represented litigant. Equality before the law would preclude this, although it may be relevant to pay regard to genuine impediments in understanding and capacity to form a proper judgment about the settlement offer, if they are suffered by a particular litigant, whether represented or unrepresented, and to take them into account as a factor in the exercise of the ultimate judicial discretion. 27 Having said that, I do not consider that the facts of this case attracted any such situation and, as I have already indicated, I agree with the reasons of Powell JA and with the orders he proposes, and they will be the orders of the Court.

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