18 AUGUST 2009
Newcastle City Council & Anor v Paul Wieland & Anor (No 2)
Judgment
1 BEAZLEY JA: I have had the opportunity of reading in draft the reasons of Ipp JA in respect of the respondents' application for an order for indemnity costs of the summons for leave to appeal and of the appeal. With respect to his Honour, there are two aspects of his reasons with which I do not agree, as I explain below. My reasons on the application for an order for an indemnity costs then follow.
2 Ipp JA has raised four reasons why an application for indemnity costs should not be ordered: (1) leave to appeal was granted on condition the appellants pay the costs of both sides of the appeal in any event; (2) the trial judge had erred in finding that the parties had entered into an agreement whereby the appellants had agreed to pay the respondents' costs of the mediation; (3) the matter raised by the appeal was a matter of general public interest in respect of which there was no decision of this Court and in respect of which there was a lack of consistency in approach in different jurisdictions in Australia; and (4) arguments that the respondents raised on appeal were rejected. The first three of these matters were raised by the appellants in their written submissions. The fourth is a matter which Ipp JA additionally considered was a basis to reject the respondents' application for indemnity costs.
3 It is convenient first for my purposes to deal with the second and fourth of these matters.
4 As to the second matter raised by Ipp JA, whilst the trial judge erred in holding that there was an initial agreement that the appellants would meet the respondents' costs of the mediation, the appellants, on their appeal, were not seeking that there be a retrial. Rather, their point was that on the proper construction of the consent orders made by the Court, the effect of the parties' agreement was to exclude the mediation costs. The appellants were unsuccessful in that challenge. Although the appellants were challenging that aspect of her Honour's reasoning, that was not the point of principle in respect of which the appeal was brought.
5 The fourth of Ipp JA's reasons, namely, that the certain arguments raised on appeal by the respondents were rejected, ought not, in this case at least, tell against the making of an order for indemnity costs. The two matters this Court rejected are contained at [22]-[23] of the principal judgment: see Newcastle City Council v Paul Wieland [2009] NSWCA 113. The first was related to the use sought to be made by the respondents of surrounding circumstances, being the fact that prior to the mediation an insurer of one of the appellants had offered to pay the costs of the mediation before a private mediator. For the reasons given at [22], the Court considered that this was an irrelevant matter in construing the parties' agreement and the consent orders. The second argument that was rejected was that the appellants knew prior to the mediation that the respondents were impecunious. This was also rejected as an irrelevant consideration.
6 Those matters were but two arguments on the appeal, which could not be said to have extended, in other but the briefest of ways, the time in which the appeal was heard, nor did it put the appellants to any particular work in order to meet the arguments. The factors, which were contained within the evidence, were either relevant or not. Both the evidence and, as I have said, the points argued were in short compass. The fact that a party is not successful on every argument is not necessarily a basis to deprive a party of portion of their costs on the ordinary basis. In this case, I do not consider that the respondents would have been deprived of portion of their costs. Why then should they, on a relatively minor aspect, be deprived of indemnity costs merely because their arguments on appeal were not successful? The question is deliberately rhetorical.
7 That leaves the other two matters raised by Ipp JA, namely, the condition upon which leave to appeal was granted, that is, subject to a condition that the appellants pay the costs of both sides of the appeal regardless of the outcome and the third matter, namely, that this issue was a matter of general public interest not previously determined by this Court and in respect of which there was a lack of consistency and approach in different jurisdictions throughout Australia. To some extent, these two matters are interrelated. Dealing with the third of the matters first, I agree with his Honour's comments that this appeal was a matter of general public interest. That was the reason Newcastle City Council, as a public body, and a not infrequent party to court proceedings, was required to pay the costs of both parties as a condition of the grant of leave to appeal.
8 However, I am not completely in agreement with his Honour that there was a lack of consistency in approach in different jurisdictions throughout Australia as to the question in issue on the appeal. Whilst it is true that there is a decision of Bergin J in Mead & Anor v Allianz Australia Insurance Ltd [2007] NSWSC 500, in which her Honour declined to construe "costs of these proceedings" as including the costs of the mediation (at [13]; principal judgment [39]), that decision turned on its facts. As Ipp JA said (at principal judgment [40]), there was nothing in the agreement to mediate in the present case that was to the same effect as that which obtained in Mead v Allianz. There are other cases that have dealt with the costs of mediation. Those cases indicate that generally each party should bear that party's own costs of a mediation: see Innovative Agricultural Products Pty Ltd & Ors v Crawshaw & Ors [1996] FCA 758 and Baulkham Hills Shire Council v Hahn [2008] NSWLEC 184. However, the issue in this case was not, as a matter of the exercise of the Court's discretion, who should pay the costs of mediation, but what was the correct construction of the Court's orders. To the extent that there are cases that deal with the question as to whether the costs of settlement negotiations form part of the costs of the proceedings, the more recent authorities supported the respondents' position: see Higgins v Nicol (No 2) (1972) 21 FLR 34 and Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629. As Ipp JA noted (at principal judgment [45]), those two decisions expose the policy considerations supporting the notion that the ordinary costs of proceedings should include the costs of mediation.
9 That leaves for consideration whether the fact that the Court granted leave to appeal on condition that the appellants pay the costs of the respondents regardless of the outcome of the appeal tells against the exercise of the Court's discretion to order that those costs be paid on an indemnity basis.
10 The respondents, as the applicants for indemnity costs, bear at least the persuasive burden and probably also the legal onus of satisfying the Court to exercise the discretion in its favour: see Evans Shire Council v Richardson (No 2) [2006] NSWCA 61. In that case, the applicant for an indemnity costs order had made an offer to the opponent to which there was no response. On the application for indemnity costs, there was no material that might have indicated to the Court why the offer was ignored or not responded to. The Court said, however, at [26]:
"Nevertheless, even in the absence of submissions on behalf of the opponent's estate, the onus lies upon the [applicant] to establish to the Court's satisfaction that, in all the circumstances, the failure of the opponent to accept the offer in question was unreasonable."
11 In this case, the appellants did not adduce evidence as to whey they rejected the offers made by the respondents. Rather, they advanced the first three of the arguments referred to by Ipp JA. Was it unreasonable for the appellants to reject either of the offers of compromise made by the respondents in circumstances where it was ordered to pay the costs of the appeal in any event? In my opinion, the following considerations are relevant. First, the amount involved was $20,000 (or $10,000 for each appellant). This is a relatively small amount in respect of which to grant leave to appeal.
12 Secondly, the matters advanced by the appellants on the hearing of the application for leave to appeal as to why leave should be granted were threefold, each of which were described as "questions of interest". First, the question as to who is liable to pay the costs of court-ordered mediation in the absence of agreement between the parties; secondly, the proper construction of the Civil Procedure Act 2005, s 28 and, thirdly, whether the expression "costs in the proceedings" includes the costs of a court-ordered mediation. In respect of this last matter, counsel for the appellants noted that that was an expression "often used in the resolution of litigation". Counsel for the appellants further informed the Court that the decision of the trial judge in the matter had attracted some interest in the profession and that questions raised by it were of some practical importance to the profession generally. Apparently, the trial judge's decision had featured in the publication "Monday briefs", issued by the President of the Law Society. The appellants further contended that the trial judge's decision had attracted some interest among costs assessors and also amongst the mediation group within the profession.
13 A party should not be drawn into litigation that has a public interest or an interest particularly relevant to one party, in this case because the question was important for the appellants' insurers, and in which it otherwise does not wish to engage, unless it is protected as to costs. In this regard, the condition upon which the Court granted leave to appeal went a considerable way to accommodating that position. However, it is well known that costs assessed on the ordinary basis are almost invariably less than the full costs a party incurs in litigation. To the extent that this Court becomes aware of these matters through cases, it is known that there can be a significant difference in between costs assessed on an ordinary basis and costs on an indemnity basis.
14 Notwithstanding that the respondents' costs (on the ordinary basis) were to be paid by the appellants in any event, the respondents were entitled to protect their position fully as to costs by making a Calderbank offer, provided of course that they satisfied the Court that they were entitled to an advantageous costs order in accordance with the principles that govern such offers.
15 The respondents were of course successful on the appeal. If the fact that leave to appeal was granted on the condition that the appellants pay the costs of the respondents, is a reason why they should not have the benefit of a Calderbank offer, they are in fact worse off than if that condition had not been imposed. That result does not appear to have the aspect of fairness about it underlies the exercise of the Court's discretion.
16 In my opinion, it was unreasonable for the appellants to reject the respondents' offers. To the extent that the public interest has been served in clarifying the law in this area, that is a good thing. Hopefully, it will be a matter which will become known to the profession. However, the very matter which was of public interest had already been brought to the attention of the profession in Judge Sidis' judgment, the result of which was circulated to every solicitor in the State through the "Monday briefs".
17 The overriding consideration for the Court in determining whether to award indemnity costs is what is fair as between the parties: Commonwealth of Australia v Gretton [2008] NSWCA 117 at [85] per Beazley JA and at [121], per Hodgson JA (Mason P agreeing with both). In my opinion, fairness between the parties, including the fact that the appellants wished to agitate the appeal for public interest purposes, is a matter in respect of which it should bear the consequences, should it have lost. One of those consequences was that there were two outstanding Calderbank offers of compromise. In my opinion, effect should be given to those and the appellants should be ordered to pay the respondents' costs of the summons for leave to appeal and the appeal on an indemnity basis.
18 HODGSON JA: I agree with the order proposed by Ipp JA, and I agree substantially with his reasons.
19 There is force in the view expressed by Beazley JA that a party should not be drawn into litigation by reason of a public interest particularly relevant to another party, unless it is protected as to costs; and I accept that this applies with particular force when leave to appeal is sought in a matter where the amount at issue is small.
20 However, that consideration is usually given effect to in such a case at the stage of the granting of leave to appeal; and if, in a particular case, it has sufficient force to justify protection to the extent of indemnity costs, an appropriate condition can then be imposed. As the exchange recorded in Ipp JA's judgment indicates (and this accords with my recollection), no application was made in this case at the stage of the leave application that protection as to costs extend to indemnity costs.
21 Accordingly, in my opinion, the application for indemnity costs in this case should be determined according to the principles that ordinarily apply in relation to Calderbank offers, that is, by having regard to the extent of the concession offered and the reasonableness or unreasonableness of the refusal.
22 In this case, the concession offered by the first Calderbank offer was small indeed, and that offered by the second offer, while more substantial, still could not be considered as proposing a significant compromise. It could not be said that the appellant acted unreasonably in not accepting these offers.
23 Accordingly, and conformably with the usual principles applying to Calderbank offers, in my opinion the application for indemnity costs should be refused with costs.