Old v Miniter

District Court of NSW|2020-09-04

Ex tempore Judgment

The principal judgment in these professional negligence proceedings concerned a contested hearing which occupied a total of eight hearing days. The case concerned allegations of harm the plaintiff claimed he sustained due to negligence involving orthopaedic surgery. The principal judgment was delivered on 31 July 2020, Old v Miniter [2020] NSWDC 401.
By decision in the substantive proceedings, the plaintiff succeeded in establishing a relevant breach of the duty of care that was owed to him by the defendant. Judgment was entered in favour of the defendant because the plaintiff had failed to establish a causal connection between that found breach of duty of care and the harm that he claimed to have suffered.
At the time judgment was delivered, the issue of costs was reserved so that the parties could be heard as to the appropriate order for costs - s 98 and s 99 of the Civil Procedure Act 2005 (NSW) ("CL Act"); Old v Miniter [2020] NSWDC 401, at paragraphs [57] and [544].
On 31 July 2020, the hearing of those costs issues was stood over for argument today, 4 September 2020. The ex tempore reasons that now follow deal with those costs issues.

Evidence on the costs issues

The parties relied upon late filed affidavit evidence. At 3.03pm on 3 September 2020, the solicitor for the plaintiff, Mr Leslie Abboud, electronically filed his own affidavit sworn on that date setting out reasons why a mediation did not take place as was ordered by the Judicial Registrar on 4 June 2019. At 9.42pm on 3 September 2020 the solicitor for the defendant, Mr Nicholas Regener, electronically filed his affidavit sworn on that date setting out the defendant's perspective as to why a mediation did not take place as ordered. Those affidavits came to the attention of the Court this morning. The respective deponents were not required for cross-examination on those affidavits.

Arguments

The defendant submitted that at the very least, the usual order for costs should prevail so that his costs in defending the proceedings should be paid by the plaintiff as the plaintiff has failed to recover any damages - UCPR r 42.1.
The defendant also relied upon historical offers of compromise served on the plaintiff in various ways, at various times, comprising formal offers made pursuant to UCPR r 20.26 and pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 33; Messiter v Hutchinson (1987) 10 NSWLR 525.
Those offers of compromise, and the respective settlement positions, are set out in the material annexed to the affidavits referred to above, and do not require further analysis except as to what will shortly follow. Ultimately both of the offers made by the defendant lapsed without acceptance from the plaintiff.
In my view, as foreshadowed to the parties on 31 July 2020, an order for costs on the general basis that costs should follow the event, would appear to be inappropriate in this case.
That preliminary view was made apparent on 31 July 2020 when the parties were required, pursuant to order 6 made on that day, to present indicative bills of costs identifying the total of their respective costs incurred up until 30 September 2019, and their total costs from that date until the conclusion of the trial. That order was made in light of matters that occurred at trial.
In the principal judgment, the issue of procedural default of both parties in failing to pursue alternative dispute resolution as ordered, was identified at paragraphs [54] to [57] of my reasons: "[54] On 4 June 2019, a pre-trial interlocutory order was made by the Judicial Registrar requiring that the parties participate in an informal settlement conference, or a mediation, to be held by 30 September 2019. [55] Astonishingly, for a case of this kind, not only was there a failure of compliance with that order, but the parties failed to bring the fact of such non-compliance to the attention of either the List Judge or the Judicial Registrar in accordance with the Court's Standard Orders and prevailing practice, so that appropriate remedial orders could have been considered. [56] After that default was critically examined in the course of the hearing, the parties took up the suggestion that an intra-trial mediation should take place, following which, the proceedings remained unresolved. [57] No adverse inferences arise from the fact that mediation did not result in a resolution of the proceedings. Affidavit evidence was required to explain the circumstances in which that procedural default occurred. The costs consequences of those circumstances were reserved to be revisited after the substantive issues have been determined, if that course became necessary."
In my view, the circumstances identified at paragraph [55] of the principal judgment, as cited above, involved procedural delinquency on the part of each party. As a result, the parties were asked to identify and to quantify the total costs which they had each incurred from the inception of the proceedings until 30 September 2019, and then from that date until the end of the trial.
The effect of the affidavit evidence is that in the knowledge that the trial of the proceedings was listed to commence on 28 October 2019, for reasons best known to the legal representatives of the parties, they seemed to have waited until 19 September 2019 before turning their minds to the need to comply with the case management orders made by the Judicial Registrar on 4 June 2019 regarding arrangements aimed at alternative dispute resolution.
In those events, on 19 September 2019 the secretary of the plaintiff's solicitor initiated the alternative dispute resolution process by contacting the solicitor for the defendant to seek to make arrangements. The response from the solicitor for the defendant was to indicate a preparedness to mediate, but on terms that seemed unpromising. Correspondence then ensued, potential mediators were suggested and available dates were identified.
On 19 September 2019, at the conclusion of the interchanges between solicitors concerning proposed mediation arrangements, the solicitor for the defendant indicated "that at this stage the defendant will only be making offers in line with previous offers made in this matter", as cited at paragraph [7] above.
The affidavit of Mr Abboud reveals the reasons why a pre-trial mediation did not take place. In that regard his affidavit stated: "6. On 19 September 2020, Ms Sangeeta Sharmin replied via email noting that the Defendant was agreeable to a mediation but would not be making any monetary offers. 7. On 19 September 2020 at 4:40pm, Ms Sarah Gilmore forwarded this correspondence to me in order to bring it to my attention and requested that I provide instructions as to how the Plaintiff would like to proceed. I responded to Ms Gilmore noting that we would not be proceeding. Annexed hereto and marked with the letter "A" is a copy of this email correspondence. 8. I made this determination and communicated our intention not to proceed to Ms Gilmore because it was my belief that a mediation is a compulsory process which requires parties to attend in good faith. Ms Sharman's email correspondence indicated that the Defendant was not of this same position. 9. This correspondence did not indicate to me that the Defendant was making any genuine attempt to resolve this case through alternative dispute processes. 10. In these circumstances, I believed that mediation arrangements would incur unnecessary costs for my client and thus be prejudicial. It was my belief that I was protecting my clients (sic) interests by making this determination."
Beforehand, the solicitor for the plaintiff had attempted to negotiate a settlement. On 24 July 2019 at 10.50am the plaintiff's solicitor sent an email to the defendant's solicitor offering to settle the case for $600,000 plus costs. That offer also lapsed without an acceptance from the defendant.
As a result of those cumulative events, the matter proceeded to trial. Pursuant to the orders made on 31 July 2020, evidence was placed before the Court as to the costs that have been incurred in the proceedings as a result of the matter going to trial. Within those estimates it is possible to differentiate between the costs that were incurred by the respective parties up until 30 September 2019 and the costs that were incurred beyond that date.
I now turn to a consideration of Exhibits "A" and "B", and Exhibit "1", which identify those costs.
The effect of those exhibits is that on the plaintiff's behalf, legal costs up until 30 September 2019 were incurred in the sum of $109,576.52, and his total legal costs incurred to the conclusion of the trial were in the sum of $234,230.67, a difference of $124,654.15
For the defendant, up until 30 September 2019, legal costs of $87,077.39 were incurred, and to the conclusion of the trial, total costs of $144,077.60 were incurred, yielding a difference of $57,000.21.
In my view the parties did not fully or adequately pursue available opportunities to seek to contain those costs to a just minimum, within the spirit of s 56 of the CL Act.
In my view, the case called for a mediation to take place, if for no other reason than to provide the defendant's legal representatives, in the face of their entrenched stance on settlement, with the opportunity to explain to the plaintiff, in the presence of his own legal representatives, the reasons as to why no monetary offer would be forthcoming from the defendant. That course could possibly have persuaded the plaintiff to take a more pragmatic approach in either reducing his financial expectations in relation to an amount that might have attracted the defendant to a commercial settlement position, or alternatively, to abandon his case in the face of a steadfast refusal on the part of the defendant to negotiate on account of the content of the expert evidence that had been served.
In my view, in the described circumstances, the orders made by the Judicial Registrar provided the parties with an important opportunity to pursue alternative dispute resolution. This was no doubt the principal reason behind the orders made by the Judicial Registrar on 4 June 2019, which were in the spirit of s 56 of the CL Act where the duty of the Court and the practitioners was to seek to facilitate a just, quick and cheap resolution of the proceedings.
I now turn to the relevant legislative and legal principles by which the present cost issues should be considered and determined.

Relevant legislative provisions

Section 56 of the CL Act relevantly provides: 56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. (3A) (Repealed) (4) Each of the following persons must not, by their conduct, cause a party to civil proceedings to be put in breach of a duty identified in subsection (3) - (a) any solicitor or barrister representing the party in the proceedings, (b) any person with a relevant interest in the proceedings commenced by the party. (5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs. (6) For the purposes of this section, a person has a relevant interest in civil proceedings if the person - (a) provides financial assistance or other assistance to any party to the proceedings, and (b) exercises any direct or indirect control, or any influence, over the conduct of the proceedings or the conduct of a party in respect of the proceedings.
Section 58 of the CL Act relevantly provides: 58 Court to follow dictates of justice (1) In deciding - (a) whether to make any order or direction for the management of proceedings, including - (i) any order for the amendment of a document, and (ii) any order granting an adjournment or stay of proceedings, and (iii) any other order of a procedural nature, and (iv) any direction under Division 2, and (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court - (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant - (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case.
Rule 42.1 of the UCPR relevantly provides: 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
Section 98(1) to (4) of the CL Act relevantly provides: 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act - (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to - (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount.
Section 99(1) and (2) of the CL Act relevantly provides: 99 Liability of legal practitioner for unnecessary costs (1) This section applies if it appears to the court that costs have been incurred - (a) by the serious neglect, serious incompetence or serious misconduct of a legal practitioner, or (b) improperly, or without reasonable cause, in circumstances for which a legal practitioner is responsible. (2) After giving the legal practitioner a reasonable opportunity to be heard, the court may do any one or more of the following - (a) it may, by order, disallow the whole or any part of the costs in the proceedings - (i) in the case of a barrister, as between the barrister and the instructing solicitor, or as between the barrister and the client, as the case requires, or (ii) in the case of a solicitor, as between the solicitor and the client, (b) it may, by order, direct the legal practitioner - (i) in the case of a barrister, to pay to the instructing solicitor or client, or both, the whole or any part of any costs that the instructing solicitor or client, or both, have been ordered to pay to any other person, whether or not the solicitor or client has paid those costs, or (ii) in the case of a solicitor, to pay to the client the whole or any part of any costs that the client has been ordered to pay to any other person, whether or not the client has paid those costs, (c) it may, by order, direct the legal practitioner to indemnify any party (other than the client) against costs payable by that party.
I now turn to the principles to be applied in the resolution of the costs question that has arisen.

Principles to be applied

The determination of the appropriate order for costs involves the exercise of discretion. Section 98(1)(a) of the CL Act, UCPR, rule 42.1. Generally, the exercise of the costs discretion is guided by the result of litigation. This means that a successful litigant is generally entitled to an award of costs subject to just exceptions. Such exceptions include laxity or disentitling misconduct in the litigation that contra-indicates the beneficial exercise of discretion, Oshlack v Richmond River Council (1998) HCA 11 193 CLR 72, at 66, and 67-69.
The overall requirements of justice in a particular case is a relevant and important consideration: Gray v Richards (No 2) [2014] HCA 37. In that case, at [2], the following uncontroversial statement of principle appears: "The disposition of costs is within the general discretion of the Court. Ordinarily, that discretion will be exercised so that costs are awarded to the successful party, but other factors may have a significant claim on the discretion of the Court. The disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires." [References omitted]
In the exercise of discretion on costs, that discretion is to be guided by identifiable factors: Northern Territory v Sangare [2019] HCA 25. In that case at [25] the following statement appears: "A guiding principle by reference to which the discretion is to be exercised - indeed, "one of the most, if not the most, important" principle - is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. For example, a successful defendant may be refused its costs on the ground that its conduct induced the plaintiff to believe that he or she had a good cause of action. But in the present case, there was nothing of this kind in the conduct of the appellant in relation to the litigation that might have weighed against the exercise of the discretion in its favour. There was no suggestion of any conduct on the part of the appellant, whether by unreasonable delay or a want of the cooperation required of litigants to ensure the "just resolution of the real issues in civil proceedings with minimum delay and expense", that might have been taken into account to justify refusing the appellant an order for its costs." [References omitted]
It goes without saying that when exercising a costs discretion, as with any other discretion, the exercise must be undertaken judicially and with appropriate reasons, see House v The King (1936) 55 CLR 499; [1936] HCA 40.
The principles governing the discretion as to costs must be applied whilst also having due regard to the overriding purpose in applying procedural rules to civil proceedings in accordance with the dictates of justice, s 56 to s 58 of the CL Act.
I now turn to my consideration and determination of the costs issue.

Consideration and determination

At the outset I identify and record that today, each party has conceded and apologised for the fact that there was a failure by the respective legal representatives to comply with the alternative dispute resolution order made by the Judicial Registrar on 4 June 2019.
In that regard, both parties have also acknowledged that there was a legal obligation upon each of them to promptly draw such failure or non-compliance to the attention of the Court so that remedial orders could have been made. That did not occur.
In determining the proper decision on costs appropriate to the circumstances I bear in mind that the purpose of a costs order is compensatory and not punitive in nature.
In my opinion, the failure of the parties to comply with the procedural orders made by the Court aimed at facilitating a just, quick and cheap resolution of the issues in dispute in this difficult, expensive and complex litigation, is an egregious circumstance that should reflect the laxity, dilatoriness and unjustifiable non-compliance by the parties with court orders.
In such circumstances a party whose conduct attracts the opprobrium of those remarks should not receive full costs compensation, as to do so would visit a manifest injustice on the unsuccessful party, s 56 and s 58(2) of the CL Act.
This is a case where both parties, through their representatives, had the unfettered opportunity of approaching the Court for orders to remedy the default. As a consequence, in my view, both parties should be held to be equally responsible for the failure to remedy that default.
Whilst the responsibility for default and for not bringing the issue of default to the attention of the Court was an equal one, the effect of applying equality to the circumstances will have different effects on the parties. I acknowledge this as a consequential effect that cannot be avoided because an order for costs is compensatory and is not intended to be punitive although one party may end up carrying a greater burden.
In the circumstances taking an overall balanced view of what occurred, also recognising that each party has had a measure of success on the central issues in dispute in the case, but where the parties have failed to comply with the case management order requiring them to pursue alternative dispute resolution aimed at limiting costs, the justice of the case demands that there should be an order limiting the costs of the successful party.
This occurs in circumstances where substantial costs were incurred after the default in compliance with the Judicial Registrar's alternate dispute resolution order.
I consider that to award to the successful party the full costs incurred after non-compliance with the orders made on 4 June 2019, would exact an unjust penalty on the unsuccessful party, notwithstanding that the unsuccessful party was also a complicit non-compliant party with respect to the Judicial Registrar's order.

Orders

I make the following orders: 1. The plaintiff is to pay the defendant's costs of the proceedings on the ordinary basis, but such costs liability should be limited to costs properly incurred by the defendant up until 30 September 2019 and not thereafter; 2. The defendant is to pay his own costs incurred in defending the proceedings after 30 September 2019; 3. The plaintiff is to pay his own costs of the proceedings; 4. For the guidance of any Costs Assessor appointed to assess liability for disputed costs, the parties should not be held responsible for any costs incurred by their legal representatives resulting from the incorrect formulation and preparation of the issues for trial by reason of a belated appreciation of the fact that the Civil Liability Act 2005 (NSW), particularly s 5O of that Act, had no application to these proceedings.

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: 10 September 2020

Civil Liability Act 2005(NSW)

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Judgment (8 paragraphs)

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