Nair-Smith v Perisher Blue Pty Ltd

Costs 3The parties filed detailed submissions on costs. They also each filed and treated as read affidavits from their respective solicitors. They did not wish to be heard orally. 4The starting point for the argument as to costs is that Dr Nair-Smith has succeeded in her claim against Perisher. This would usually warrant an order for costs in her favour on the ordinary basis. However she seeks indemnity costs based on the failure of Perisher to accept various offers made by her from time to time throughout the (long) history of the proceedings. Perisher resists that application and seeks various costs orders in its favour. I will deal with Dr Nair-Smith's offers first.

Dr Nair-Smith's offers 5The first offer relied on was contained in a letter from Dr Nair-Smith's solicitors dated 19 October 2006. It offered to settle the proceedings for the sum of $30,000.00 plus costs and was expressed to be "without prejudice save as to costs". The offer was clearly not an offer of compromise under the rules. The parties debated whether it amounted to an effective "Calderbank offer" (Calderbank v Calderbank [1975] 3 WLR 586). Perisher contended that it did not sufficiently indicate an intention that, in the event of a more favourable result following the non-acceptance of the offer, a special order for costs would be sought (referring to Messiter v Hutchinson (1987) 10 NSWLR 525). 6It is unnecessary to consider this further as, in any event, I would not exercise any discretion I had to award indemnity costs in Dr Nair-Smith's favour based on this offer. As explained in the affidavit from Perisher's solicitor, Mr Brookes, at the time the offer was made Dr Nair-Smith had barely articulated a claim for economic loss, and had not provided proper particulars of her case or provided any adequate medical evidence to support the claim she was making. 7The second offer was made on 31 May 2007. It purported to be an offer of compromise in the amount of $20,000.00, "plus costs". It was conceded that it did not satisfy the requirements of the rules (which were unaffected by Uniform Civil Procedure Rules (Amendment No 59) 2013 which took effect on 7 June 2013, and thus were not relevantly different to those considered in Whitney v Dream Developments Pty Ltd [2013] NSWCA 188). However on behalf of Dr Nair-Smith it was submitted that, because it was generally understood in the profession that such an offer did amount to an offer of compromise, that was sufficient to enliven the Court's discretion to make a special order as to costs. Such a proposition is obviously untenable. Otherwise the second offer was not effective as a Calderbank offer. There is nothing in the offer or the evidence as to the surrounding circumstances to suggest that Dr Nair-Smith proposed to rely upon that offer on the question of costs "irrespective of its effectiveness as an offer" of compromise under the rules (Whitney at [43] per Bathurst CJ). 8Third, Dr Nair-Smith relies on an offer made on 7 August 2012. The offer was headed "Offer of Compromise" and provided for a verdict and judgment for Dr Nair-Smith in the sum of $550,000.00. It was expressed to be open for acceptance until 4:00pm on 16 August 2012. It did not address the question of costs and, in that respect, was compliant with the regime for offers of compromise then in force as discussed in Whitney. 9Perisher noted that the offer was only open for acceptance for a period of eight calendar days. As the offer was made less than two months prior to the trial, it had to be open for such time as was "reasonable in the circumstances" (Uniform Civil Procedure Rules 2005 ("UCPR") 20.26(7)(b)). At this point the parties had been bitterly fighting each other for years. They were only a month away from trial and had served voluminous materials on each other. Subject to the point made below, they were familiar with the nature of each other's case. In context, I am satisfied that eight days was reasonable. 10Perisher complained that Dr Nair-Smith did not serve her schedule of damages until 22 August 2012 (and that it only calculated damages based on the CLA). In response Dr Nair-Smith points to UCPR 20.26(5) which provides: "(5) If a plaintiff makes an offer, no order may be made in favour of the defendant on the ground that the plaintiff has not supplied particulars or documents, or has not supplied sufficient particulars or documents, unless: (a) the defendant has informed the plaintiff in writing of that ground within 14 days after receiving the offer, or (b) the court orders otherwise." 11It is difficult to see how this rule could be invoked against Perisher when the offer that was made expired prior to the fourteen day period. However, subject to the point next considered, I do not consider that the fact Dr Nair-Smith did not serve her schedule of damages until 22 August 2012 affected Perisher's ability to consider and respond to the offer that was made. Other than the matter considered next, it was very well aware of the metes and bounds of Dr Nair-Smith's case by August 2012. 12These matters lead to the conclusion that the power to award indemnity costs has arisen in respect of this offer of compromise. Ordinarily it would follow that by the operation of UCPR 42.15A Dr Nair-Smith would obtain an order for her costs of the proceedings up to and including 7 August 2012 on the ordinary basis, and an order for her costs on an indemnity basis on and from 8 August 2012. 13However Perisher contends that the Court should "otherwise order" under UCPR 42.15A(2). In addition to the points just noted, it relies on the fact that Dr Nair-Smith only exceeded her offer because she was able to recover damages at common law whereas at the time of the offer and throughout the hearing in September 2012 she was conducting her case on the basis that the amount of damages she could recover was regulated by the CLA. In Nair-Smith (No 2) I calculated her damages on the assumption that her claim was regulated by the CLA at approximately $412,000,00 which, even with the addition of interest, would not exceed the third offer. 14In response Dr Nair-Smith contended that it was "disingenuous" to contend that she led Perisher to believe that her claim for damages would be conducted in accordance with the CLA, and that otherwise it was necessary for Perisher to demonstrate "exceptional circumstances" to justify the Court otherwise ordering under UCPR 42.15A (citing Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109; Nominal Defendant v Hawkins [2011] NSWCA 93). 15Subject to the matter noted in [17], I accept Perisher's contention that in the immediate period prior to as well as during the trial both parties were operating on the assumption that the quantum of damages recoverable by Dr Nair-Smith was governed by the CLA. When the case was opened senior counsel for Dr Nair-Smith acknowledged that the "Civil Liability Act applies to this matter", although it was not clear whether that statement was said to relate to her cause of action for a breach of the term implied by s 74(1) of the Trade Practices Act 1975 (Cth ) (the "TPA") as well as that in negligence. However, neither in the oral or written submissions was there any suggestion made on behalf of Dr Nair-Smith that the quantum of her claim was not regulated by the CLA. 16The possibility that it was not so regulated only emerged when the judgment in Nair-Smith (No 1) was published. In that judgment I addressed the competing submissions as to whether the terms of Dr Nair-Smith's lift ticket had excluded the term implied by s 74(1) (Nair-Smith (No 1) at [87]ff). This led to a consideration by the Court of the operation of s 74(2A) of the TPA which purports to pick up the CLA's restriction on the awarding of damages (Nair-Smith (No 1) at [102]). I observed that s 74(2A) was enacted after Dr Nair-Smith's accident (see Treasury Legislation Amendment (Professional Standards) Act 2004 (Cth) No 118 of 2004) (Nair-Smith (No 1) at [102] and [121]). Thus this threw up an issue about how, prior to the amendment, the CLA could operate to limit the damages recoverable for a breach of a term of a contract implied by a federal statute. Those matters were not addressed by the parties. In Dr Nair-Smith's case, the submissions referred to provisions of the Australian Consumer Law which came into effect on 1 January 2011 and post-dated the events of this case by more than seven years (Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010, s 2). 17It is the case that after the publication of the judgment in Nair-Smith (No 1), Perisher did not seek to argue that Dr Nair-Smith should not recover damages assessed at common law because it was inconsistent with the manner in which she had conducted her case to that point or was otherwise outside the pleaded case. However, that does not affect my conclusion that, as at the time of the third offer and the hearing in September 2012, both parties were conducting the matter on the basis that the quantum of damages recoverable by Dr Nair-Smith was regulated by the CLA. 18Is this a basis for otherwise ordering under UCPR 42.15A? As submitted on behalf of Dr Nair-Smith, the cases indicate that there must be some feature(s) which are exceptional or special to warrant a departure from the ordinary operation of the rule. Perisher relied on Fowdh v Fowdh [1993] NSWCA 100 in which the Court of Appeal upheld a decision of a Master to otherwise order in circumstances that Mahony AP characterised as involving a plaintiff "present[ing] her evidence, mak[ing] an offer of compromise, then ... succeed[ing] at the trial upon a relevantly different case" (at 10 to 11). The relevantly different case was that which arose out of medical evidence that emerged at the trial. Meagher JA agreed that the Master's order should not be disturbed and appeared to do so for the reasons given by Mahoney AP. Kirby ACJ dissented. Similarly in Vale v Eggins (No 2) [2007] NSWCA 12 the fact that at the time an offer was made a defendant had in their possession a number of medical reports that had not been served was held to warrant the Court not ordering indemnity costs in respect of a plaintiff who did not obtain a superior result to the offer of compromise (at [22] per Beazley JA, with whom McColl JA agreed at [26], contra Bryson JA). Of course this case involves not so much a relevantly different case but a relevantly different legal environment for calculating damages compared with that considered by the parties when the third offer was made. 19In Hillier v Sheather (1995) 36 NSWLR 414 at 423, Kirby P accepted that in considering whether to exercise the discretion to otherwise order the Courts "will not overlook the particular features of the case and the difficulty of putting an accurate estimate on its value in advance of the litigation" but added that the "general considerations of chance and risk" were appreciated in enacting the rules concerning offers of compromise. Generally the materialisation of a known adverse risk in litigation is not a matter that warrants the exercise of the power conferred by UCPR 42.15A to otherwise order. However the rule is fundamentally directed to encouraging settlement and that objective is in part sought to be achieved by imposing financial burdens on parties who incorrectly assess the risks they face in pursuing or defending litigation. This objective is not furthered when the common legal framework upon which any such assessment has been undertaken by the parties at the time offers have been made subsequently alters. The judgment in Nair-Smith (No 2) reveals that an assessment of the value of Dr Nair-Smith's case on the commonly assumed basis that the CLA was applicable warranted the rejection of the third offer. 20Subject to considering the points raised by Perisher and certain agreed costs orders, the appropriate order is that Perisher pay Dr Nair-Smith's costs of the proceedings on the ordinary basis. At this point I note that Perisher also submitted that the Court should otherwise order under UCPR 42.15A because of the "contumacious disregard [by Dr Nair-Smith] of her obligations as a litigant under the [Civil Procedure Act 2005] and UCPR". The complaints that this submission related to covered the same territory as the matters I will consider next but I note that to an extent there have previously been a number of costs orders made against Dr Nair-Smith and the parties have resolved some aspects of costs that have been reserved. Thus, at least to that extent, the "disregard" Dr Nair-Smith is said to have displayed has already been addressed. None of the costs orders that I will make will interfere with those previous orders.

The agreed costs orders 21The parties presented me with a set of consent orders relating to the costs of various interlocutory hearings or mentions in both the District Court and this Court. The form of some of those orders was to make the costs of certain directions hearings "costs in the cause". This form of order is usually made at an interlocutory stage and has the effect that a determination of which party is to pay the relevant costs is to abide the outcome of the proceedings. However the outcome is now known and the party who is to bear them is the loser, Perisher. Its obligation to pay those costs is subsumed by order 6 below. 22The parties also agreed that Dr Nair-Smith was to pay certain costs of a vacated hearing in the District Court which was scheduled to occur from 2 to 6 February 2009 and two notices of motion filed on behalf of Dr Nair-Smith that were returnable on 2 February 2009. This is reflected in orders 2 and 3. The events of February 2009 are addressed further below. 23It should also be noted that the parties did not agree that Dr Nair-Smith could recover the costs of senior counsel in respect of a directions hearing in this Court on 5 September 2011. This will be a matter for assessment.

Perisher's application for costs 24Notwithstanding that it was wholly unsuccessful, Perisher submitted that the Court should not make a costs order in favour of Dr Nair-Smith but should make "some other order" in accordance with UCPR 42.1. It ultimately submitted that the Court should order that Dr Nair-Smith should not receive more than 60% of her costs of the proceedings on the ordinary basis and, in the alternative, she should pay 80% of Perisher's costs of the proceedings up to 13 February 2009, with Perisher paying 70% of Dr Nair-Smith's costs of the proceedings thereafter. 25A very significant part of this aspect of Perisher's submissions concerns the alleged significance of some amendments made by Dr Nair-Smith to her statement of claim in February 2009. However, I did not receive much assistance in determining what occurred at that time. The 47 paragraph affidavit sworn by Perisher's solicitor consists of 44 paragraphs devoted to the difficulties he experienced in obtaining material that enabled him to assess the first and second offers which I have referred to above. The last three paragraphs appear to be directed to what was said to be a significant change in Dr Nair-Smith's case as at February 2009. It is generally argumentative. In relation to ascertaining what exactly occurred in February 2009 all the solicitor states is "I have read [Perisher's] submissions as to costs filed 18 October 2013 and confirm [my] belief that the fact based submissions therein are true". This unhelpful aspect of the affidavit meant that somehow the Court was required to cross refer to Perisher's submissions filed on 18 October 2013 in an effort to ascertain what constitutes the "fact based submissions". 26As best as I can ascertain this appears to be a reference to paragraph 4 of Perisher's submissions dated 18 October 2013 which stated, inter alia: "The proceedings were fixed for 6 days' hearing before Toner DCJ commencing 2 February 2009 on the basis of liability and damages then pleaded. It was a different case to the case subsequently brought: see transcript of what was said by Toner J, 3/2/09, T-170.30-171.44. In February 2009 the Plaintiff refused to run at hearing as then pleaded and upon which the Judicial Registrar had received undertakings before listing; unless it could add the new claims of roll to misalignment of the chair and that the chair had been pulled to the side, rather than pulled back and let swing forward, to which case the Plaintiff had committed before Walmsley DCJ in February 2008: 2/2/09 T-23.35-25.37. The Plaintiff opposed the making of an order that she pay the Defendant's costs of the vacated February 2009 hearing before Sidis DCJ in 2010, Hall J on transfer to this Court and Fullerton J (Judgment [2011] NSWSC 878). That with the benefit of your Honour's reasons [from] 7 June 2013 the Plaintiff now concedes that she pay those costs is consistent with the Defendant's success on the issue of misalignment of the chair or misalignment of the Plaintiff." 27As neither set of submissions deigned to actually explain what occurred in February 2009, I have reviewed the transcript of the proceedings before Toner DCJ. It seems that the proceedings were fixed for hearing before Toner DCJ on 2 February 2009. On that day there were returnable two notices of motion filed on behalf of Dr Nair-Smith. One of the motions sought leave to file an amended statement of claim. The other sought the same order, as well as various orders for the provision of particulars from Perisher and leave to cross examine one of Perisher's experts via telephone. 28At the commencement of the hearing before Toner DCJ, Dr Nair-Smith's then senior counsel told his Honour that these were two "housekeeping matters" that had to be addressed. The house was obviously very messy because the housekeeping occupied the hearing days from 2 to 5 February 2009. Amongst other matters, the parties debated whether leave to amend should be granted and whether the hearing should proceed or be adjourned. Although neither party stated they wanted an adjournment it was inevitable that that was going to occur. 29Eventually, having regard to some observations that his Honour made during the course of argument on 4 February 2009, on 5 February 2009 the parties brought in some agreed short minutes which were designed to facilitate all the outstanding procedural steps and the obtaining of a further hearing in May 2009. His Honour made those orders. 30The first agreed order granted Dr Nair-Smith leave to file and serve an amended statement of claim. The short minutes also provided that the costs of the vacation of the hearing which was fixed to commence on 2 February 2009 were reserved. As explained below, the parties have now agreed that Dr Nair-Smith will pay those costs. 31The short minutes that were presented on 5 February 2009 did not expressly address costs thrown away by reason of the amendment. However at the time the short minutes were placed before Toner DCJ his Honour stated: "I note that within it there is an order reserving costs, and I would anticipate that there will be a substantial argument in relation to costs on aspects of this case in due course. Costs are reserved for the purposes of doing just that; in other words, focusing the attention of the parties on preparation of this case for trial. I make no comment at all as to what cost consequences might flow for what has happened to date before me other than to say that I can well understand that there will need to be substantial discussion, submissions, in relation to, perhaps, additional materials put before me for my consideration of that question. So I think that I might satisfy each of you that I am mindful of the fact that the course that has been taken by me is a pragmatic, one and I understand that neither of you have completed what you wanted to say or put before me in relation to the notices of motion which we commenced earlier this week. Does that help you, Mr Montgomery, in terms of reserving your position?" 32The written submissions that have been filed on the question of costs before me debate at considerable length whether what occurred in February 2009 represented such a change in Dr Nair-Smith's case that all of the costs incurred prior to then were wasted. One of the agreed orders placed before me involves Dr Nair-Smith agreeing that she pay Perisher's costs of the two notices of motion that I have referred to (see order 2 below). It is not clear whether that order is meant to embrace the costs thrown away by reason of the amendment that was allowed on 5 February 2009 bearing in mind that that relief was sought in both notices of motion. However, even if it does not, the reservation of the position on costs noted by Toner DCJ in the extract set out in [31] above enables the Court to make such an order even if the parties have not expressly agreed to it. Such an order is the usual form of order that is made when a party obtains leave to amend. In making such an order it means that the debate about the extent to which any of Perisher's costs incurred prior to then were wasted by reason of the amendments that were made can be conducted before an assessor if the parties cannot agree. 33Otherwise, Perisher identified three specific issues which it submitted it was either successful upon or which Dr Nair-Smith pursued in such an inadequate fashion that some alteration of her prima facie entitlement to costs was warranted. Dr Nair-Smith's submissions identified, in my view correctly, the following passages from the judgment of Einstein J in North Sydney Leagues Club Ltd v Synergy Protection Agency Pty Ltd [2011] NSWSC 804 as governing the division of costs where one party has "succeeded" on some issues but lost overall: "Apportionment [4] The effect of UCPR Pt 42 r 42.1 is that an unsuccessful party may be ordered to pay the entirety of the costs of a successful party, even though the successful party did not succeed on all issues. Special circumstances are generally required to justify some other order being made. [5] Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those in which it failed: Waters v PC Henderson (Aust) Pty Ltd (unreported, Supreme Court of New South Wales Court of Appeal, Kirby P, Mahoney JA, Priestley JA, 6 July 1994, BC 9404952). [6] Whilst the general principle is that an ultimately successful party ought not be put at risk as to costs merely by having relied upon additional issues upon which it did not succeed (on the basis that the ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case), a successful party may only get a proportion of its costs if the unsuccessful party is able to identify clearly dominant or separable issues lost by the successful party." 34The first matter pointed to by Perisher was what it said was the significant amount of costs and hearing time devoted to the issue of whether Dr Nair-Smith had moved out of alignment by the time the relevant chair had reached the loading point. 35One aspect of Dr Nair-Smith's case that was outlined on her behalf by her senior counsel before Toner DCJ in February 2009 involved a scenario whereby the lift operator pulled the back of the chair before it reached the loading point but did not just pull it straight back in alignment with the cable it was suspended from but instead "pulled it towards him and when he released it, it went forward and back at an angle" and then collided with Dr Nair-Smith. Further, it was also contended that Dr Nair-Smith did not move out of alignment at the time that the chairlift collided with her. Thus at trial her case was said to be that the operator had pulled the chair out of alignment to the side of the cable it was suspended from but by the time it reached her it had swung back to the other side of the cable, so that the right hand railing of the chair struck her between the legs (Nair-Smith (No 1) at [30] to [31]). 36To counter this scenario, Perisher obtained a report from an engineer, Mr Charles Needham, who analysed the motion of a chair if sideways force is applied to it (Nair-Smith (No 1) at [60]). The effect of his evidence was that it was simply not possible in the time between when the lift operator intervened and the chair arrived at the loading point for it to have been pulled out of alignment towards the lift operator and then to have swung across and behind Dr Nair-Smith to enable the right hand rail to hit her between the legs if she was standing in the correct alignment at the loading point (Nair-Smith (No 1) at [60] to [61]). 37In Nair-Smith (No 1) I accepted that evidence (at [60]). I also accepted that Dr Nair-Smith must have been out of alignment at the point of collision (at [66]). However, Perisher did not satisfy me that she had moved out of alignment because of any conduct on her part and not by reason of the jostling of her companions (id). 38I do not accept Perisher's contention that a significant amount of hearing time was taken up in relation to this issue. To the contrary, it only occupied a small part of the cross examination of Dr Nair-Smith. The evidence of her companions was otherwise important in establishing her case and only a few questions were directed to Mr Needham on this topic. I consider that the most appropriate adjustment in terms of costs on this issue is to simply order that Dr Nair-Smith pay Perisher's costs of and incidental to the obtaining of a report from Mr Needham. Otherwise I do not consider that any alteration of Dr Nair-Smith's prima facie entitlement to costs is warranted on account of this matter. 39The second matter identified by Perisher as warranting an alteration of Dr Nair-Smith's prima facie entitlement to costs concerns her lack of success in recovering an amount for a form of treatment known as "prolotherapy" (see Nair-Smith (No 1) at [353]). Perisher contended that the so-called "hot tub" evidence of the expert medical practitioners which occurred on day nine of the hearing was principally occupied with assessing the claim in respect of Dr Saunders' diagnosis and the prolotherapy upon which Dr Nair-Smith relied. I do not agree. In my view it was a minor component of her damages claim and occupied a very small part of the hearing. I do not consider that it warrants any different approach in relation to costs. 40The third matter identified by Perisher as warranting a different approach in relation to costs concerns the manner in which she prosecuted her claim for economic loss. A large part of Perisher's complaints of delay, inefficiency and the withholding of documents was litigated before Fullerton J (see judgment in Nair-Smith v Perisher Blue Pty Ltd [2011] NSWSC 878). As I understand the position, Dr Nair-Smith bore the costs of that motion. Otherwise, I addressed Perisher's complaints in relation to the production of material in Nair-Smith (No 1) at [259]. There were difficulties with the availability of source documents but, when given the opportunity, Perisher did not establish that this was through any fault of Dr Nair-Smith (Nair-Smith (No 1) at [261]). 41The approach that was taken to economic loss at the hearing of the proceedings simply involved both parties tendering large volumes of economic loss reports and making brief submissions without ever identifying the respective findings of fact that they submitted should be made. Ultimately Dr Nair-Smith was successful on the question of economic loss and the methodology adopted by her accountants was accepted (Nair-Smith (No 1) at [330]). 42Given that Perisher has not been able to establish any further complaint about defaults in production by Dr Nair-Smith beyond that which it had previously established and has obtained some costs orders in respect of those defaults, I am not satisfied that Perisher has established this suggested basis for disturbing Dr Nair-Smith's prima facie entitlement to costs.

Orders 43Accordingly I order: (1)Judgment for the Plaintiff against the Defendant in the sum of $1,368,700.00. (2)The Plaintiff pay the Defendant's costs thrown away on vacation of the hearing fixed in the District Court of New South Wales on 2 to 6 February 2009 including costs of the Plaintiff's Notice of Motion dated 21 and 29 January 2009 heard before Toner DCJ commencing 2 February 2009. (3)The Plaintiff pay the Defendant's costs on the ordinary basis thrown away by reason of the amendment the subject of the grant of leave to amend on 5 February 2009. (4)Each party pay their own costs of the Directions Hearing in the District Court of New South Wales on 22 October 2009. (5)The Plaintiff pay the Defendant's costs on the ordinary basis of and incidental to obtaining reports from Mr Charles Needham. (6)Otherwise the Defendant pay the Plaintiff's costs of the proceedings on the ordinary basis.

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: 27 November 2013