Paul Martin HOGAN v THE TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF SYDNEY

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

020164/98 Paul Martin HOGAN v THE TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF SYDNEY and Anor

JUDGMENT 1 BELL J: On 27 March 2003, following a trial lasting three weeks, the jury returned a verdict awarding the plaintiff the sum of $1,200,000 damages to compensate him for loss and injury suffered as the result of being wrongfully strapped on the right hand while at school on 16 March 1984. I stood the proceedings over to the following day to give the parties an opportunity make submissions on the question of what, if any, amount should be included in the sum for which judgment is given by way of interest pursuant to s 94 of the Supreme Court Act 1970 and on the question of costs. 2 Liability was not an issue at the trial. The proceedings were an assessment of damages. The parties were agreed that the jury should be asked a single question, namely, in what amount did it assess the plaintiff's damages. 3 The plaintiff's case was that he suffered continuing disability in the right hand and arm as the result of the strapping. The condition is described as complex regional pain syndrome. He also suffered from an associated psychiatric condition described as a pain disorder. As the result of the combination of these conditions he had not been able to pursue his chosen career path. It had been his intention to complete a degree in civil engineering and to obtain employment as a site engineer with a "tier one construction company", progressing to the position of project manager. As the result of his injury he was not able to deal with the physical demands, or the stress, of employment in the construction industry. He obtained a degree in civil engineering and thereafter undertook post-graduate studies. He succeeded in obtaining a doctorate in the field of water engineering. His decision to pursue post-graduate study was made with a view to obtaining employment within the university or government sector. Either of these environments was likely to be less stressful than project management. He commenced employment with the CSIRO in 2000. As the result of his disability he was not able to maintain full-time employment. He negotiated with the CSIRO to work on a part-time basis, twenty hours per week. 4 In the opinion of the expert medical witnesses called in the plaintiff's case part-time work for twenty hours per week was a reasonable assessment of his capacity to earn income for the remainder of his working life. 5 It was the defendants' case that any injury suffered by the plaintiff because of the strapping was relatively minor and had resolved not later than 1987. In Mr Harrison SC's submission the plaintiff had suffered no economic loss and was entitled to a modest award of general damages.

6 Mr Semmler QC contended that it was apparent from the verdict that the jury accepted that the plaintiff had suffered significant economic loss. It was reasonable for me to approach the matter upon the basis that the amount of the verdict referable to past economic loss was that quantified in his case. He submitted that the jury might well have settled on a lesser figure than the plaintiff had sought for future economic loss acknowledging the uncertainty that attends any attempt to predict the course of future events. On this approach it was submitted that I would assess the verdict as including the amount of $275,845.00 as compensation for past economic loss. Mr Katehos, an accountant, calculated this figure. Mr Katehos assumed that, but for his injury, the plaintiff would have earned income from 1 July 1991 to 5 March 2003 as a project engineer with a tier one construction company at the rates set out in the schedule, Ex "TT". He calculated the total earnings, net of income tax, and then deducted the plaintiff's actual earnings (including scholarship allowances), net of tax, over the period to arrive at the sum of $275,845.00. It was not in issue that interest calculated in conformity with Sch J of the Supreme Court Rules 1970 (the SCR) on that sum to the date of judgment is $87,560.00.

7 Mr Harrison submitted that the verdict reflected that the plaintiff had suffered and would suffer economic loss but that his loss was not to be assessed upon the assumptions that Mr Katehos had made. In his submission it would be appropriate for me to determine the component of past economic loss pro-rata by reference to the overall claim that the plaintiff advanced. The plaintiff sought liquidated damages in the amount of $2,421,953.00 together with claims for general, aggravated and exemplary damages. Ignoring the latter claims, the amount that he sought in respect of past economic loss represented 11.39 percent of the total liquidated claim. If one were to allow the sum of $200,000 for general damages, the claim for past economic loss represented 10.52 percent of the aggregated sum of $2,621,953. Were one to allow a further amount of $100,000 for aggravated and exemplary damages, the amount claimed in respect of past economic loss represented 10.13 percent of the aggregated sum of $2,721,953.00.

8 In Vardanega v Concrete & Terrazzo Pty Limited & Ors (unreported) NSWCA, 22 October 1979, the Court considered the approach to be taken by a trial judge in deciding whether to include a sum by way of interest in the judgment sum in a case where the jury had not been asked to state the amount of the verdict that was referable to past losses. Reynolds JA in that case observed: "The second submission is that unless a judge seeks from a jury a dissection of the amounts which go to comprise its total verdict he is deprived of the material which is necessary to exercise his discretion judicially. The submission, extended to the full, would deprive a judge of the power to award any interest in a case where no dissection of the jury's verdict had been sought and obtained. This proposition cannot be accepted. It is true that a judge should not speculate as to the probable or possible combination of figures which go to make up a lump sum verdict, but there is no reason why a judge, having heard the evidence and the verdict, could not in proper cases draw sound inferences as to the minimum amount which was awarded for past losses and act accordingly." 9 I do not find that the minimum amount awarded in respect of past economic loss was the sum of $275,845.00. Consistent with the verdict, and taking into account the evidence, I approach the matter upon the basis that the plaintiff's capacity to earn income has been significantly impaired by reason of his injuries and that the extent of the incapacity is continuing and will impair him for the balance of his working life. The measure of the impairment of his capacity is not the difference between his actual and projected earnings at the CSIRO and the income projections contained in Ex "TT".

10 In all the circumstances I am persuaded that the approach proposed by the defendants is an appropriate one. It preserves the proportion between the claims for past and future economic loss for which the plaintiff contended but recognises that the extent of his economic loss both in the past and continuing is not to be gauged upon an acceptance of the assumptions propounded in his case. 11 Mr Semmler submitted that I would view the award as including a component for general damages in the amount of $200,000. In his submission I should conclude that $100,000.00 of this sum represented past general damages. Mr Harrison submitted that $200,000 was too high for general damages. He accepted as reasonable that any figure assessed by way of general damages should be apportioned fifty percent as to the past and fifty percent as to the future. 12 I am persuaded that $200,000 is an appropriate sum for general damages taking into account the evidence of the plaintiff's medical witnesses as to the diminished quality of his life. I approach the consideration of interest on past general damages on the basis that the award includes a component of $100,000 in this respect. Mr Semmler informed me (without demur) that interest on this sum calculated at half the four percent rate over the whole of the nineteen years from the date of injury to judgment amounts to $38,000. I propose to include this sum in the figure for which judgment is given. 13 I approach the question of interest on past economic loss upon the view that this component of the plaintiff's case represented 10.52 percent of his claim assuming the aggregate claim included $200,000 for general damages. I thus quantify past economic loss as the sum of $126,240. I was informed (again, without demur) that interest on this sum calculated in accordance with Schedule J to the Supreme Court Rules 1970 (the SCR) is $40,067.46. I propose to include this sum in the figure for which judgment is given. 14 I turn now to a consideration of the order for costs. Mr Semmler submitted that I would order the defendant to pay the plaintiff's costs on a party and party basis up to 16 July 2002 and, thereafter, that I would order the defendants to pay the plaintiff's costs on an indemnity basis. In support of this submission he relied on a letter by the plaintiff's solicitors (T D Kelly & Co) addressed to the defendants' solicitors (Makinson & d'Apice) expressed to be in accordance with the principles set out in Calderbank v Calderbank (1975) 3 All ER 333, dated 16 July 2002. By that letter T D Kelly & Co offered to compromise the plaintiff's claim upon the following terms: "That the Trustees of the Roman Catholic Church for the Archdiocese of Sydney and Denis Fricot pay to Paul Martin Hogan, $720,000 inclusive of costs made up as follows $360,000 plus $360,000 in costs, in answer to Paul Martin Hogan's cause of action."

The offer was expressed to remain open until 4:00 pm Wednesday 31 July 2002.

15 Mr Harrison drew my attention to a line of authority in support of the proposition that the mere refusal of a Calderbank offer does not of itself warrant an order for indemnity costs. I accept that to be the case. I approach the matter in conformity with the observations of Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]: "The Council was also entitled to orders that the Third Party Defendants pay its costs unless the court otherwise ordered: Pt 39 r 1A. The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank (1976) Fan 93), where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offerees failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure: see for example, John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 52 FLR 201; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FLR 235." 16 It was open to the plaintiff to make an offer of compromise in accordance with the provisions of Pt 22 of the Supreme Court Rules 1970. In the event that offer was not accepted by the defendants and the plaintiff obtained judgment on his claim in an amount no less favourable to him in the terms of the offer, he would have been entitled to an order against the defendants for costs to be taxed on an indemnity basis from the day the offer was made unless the Court otherwise ordered. That was not done. I accept Mr Harrison's submission that it is incumbent upon the plaintiff to establish that this is an appropriate case in which to depart from the ordinary rule that costs follow the event and are payable on a party and party basis. 17 The defendants submitted that their failure to accept the offer contained in the letter of 16 July was not unreasonable. In this respect they point to the circumstance that the offer was made on a costs inclusive basis. Although it was stated that $360,000 represented damages and $360,000 represented costs the offer was only capable of acceptance as an entire amount of $720,000. In the defendants' submission the offer was uncertain. Correspondence passing between T D Kelly & Co and Makinson d'Apice following the letter of 16 July 2002 was in evidence on the application. 18 On 18 July 2002 Makinson & d'Apice wrote to TD Kelly & Co, in these terms: "Our client is unable to consider your client's offer unless some detail is provided about the make-up of the costs offer of $360,000.00. In that regard, we repeat the observations made in prior correspondence that: 1. Our clients have a threshold objection to your client's Bill of Costs. That is that your client is not entitled to recover more than what the Legal Aid Commission has paid for his costs in proceedings/motions etc. for which he has been legally aided. You have not provided us with details of what the Legal Aid Commission has paid for your client's costs despite requests being made by us for that information. Therefore, it is not possible to quantify your client's party/party costs in the absence of such information. 2. Does the offer for costs set off the costs orders which have been made in our client's favour? We assume that it does not, given the amount. As you are aware from correspondence, we have served four bills of costs on you in which costs have been claimed of $115,224.63. Furthermore, your client's offer does not specify whether it is inclusive or exclusive of the amount owing to our client pursuant to the order made by the President of the Court of Appeal on 7 February 2002. As you are aware from our correspondence dated 8 July 2002, we quantified the amount owing pursuant to that order, as at 4 July 2002, as being $334,875.23. Of course interest has accrued since 4 July 2002 at a daily rate of $66.14." 19 To the above T D Kelly & Co replied on 22 July 2002, relevantly, in these terms: "We refer to our letter of 16 July last and your letter of 18 July. The offer is $720,000 inclusive of costs made up of $360,000 plus $360,000 in costs. We understand this offer to be clear. We do not agree that your clients are unable to consider this offer as it stands. In any event, we confirm that this offer accounts for: (a) Adverse costs orders against our client, which you claim as $115,224.63. The figure for such adverse costs orders will need to be agreed or assessed. (b) The component of interest as demanded by your clients pursuant to the order of the President on 7 February 2002. This interest component requires agreement. In relation to paragraph 1 of your letter, we again reiterate that we are at a loss to understand your clients' position, as it is clear what your clients will be liable to pay if accepting the offer. In any event we provide the following: The Legal Aid Commission is in receipt of a bill of $442,238.57. You are in possession of the same bill being party/party costs of our client. We note your concerns about what our client is entitled. We note your clients conceded $268,249.86 of this bill in their objections to our client's bill of party/party costs. Hence the $268,249.86 is included in the $360,000 offer of costs and is not in addition to this amount. This offer of $360,000 shall be relied upon if the matter proceeds as to the question of costs." 20 Makinson & d'Apice responded to the above on 26 July 2002 stating: "Without being offensive, the offer made by your client is not clear and your letter dated 22 July 2002 does not assist us in clarifying the offer. We comment on both the proposed verdict figure and the proposed cost figure: 1. Verdict figure Does the amount of $360,000.00 include the balance owing by your client to our client as a consequence of the President of the Court of Appeals order on 7 February 2002? The balance owing amounts to $268,249.86 and interest of nearly $68,000.00, i.e. approximately $336,000.00. The interest component is not a matter for agreement as the Order made by the President specifies how the interest component is to be calculated. Accordingly, is the effect of your client's offer that our clients would have to pay, assuming the total amount owing pursuant to the President's Order is, as at today's date $336,000.00, a further $24,000.00 in order to achieve a settlement? If not, please advise otherwise. Costs We assume your letter dated 22 July 2002 is stating that the sum of $360,000.00 offered for costs is a net offer in that it sets off our clients' claim for costs which has been quantified at $115,224.63. If this is correct, given the threshold objection and the other objections which have been made to your clients' Bill of Costs, it seems to us to be an excessive offer for costs. If it is not correct, please explain why the respective costs orders have not been set off in the offer for costs. Otherwise, it is not relevant that the Legal Aid Commission has been served with your Bill of Costs in the sum of $442,238.57. We repeat that the principle of party/party costs is that your client cannot recover from our clients more than what has been paid for his legal costs by the Legal Aid Commission. We understand that bills have been submitted to the Legal Aid Commission for work done and that such bills have been paid by the Legal Aid Commission. We do not know what the secret is. Why can you simply not tell us the amounts the Legal Aid Commission has paid, when such amounts were paid and what the amounts were for? This would cure the ongoing issue about the quantum of your clients entitlement to costs." 21 On 31 July 2002 T D Kelly & Co wrote back saying, inter alia: "Obviously our offer of 16 July 2002, if accepted, would have the following components deducted from the $720,000 and your clients liable to pay the balance. (a) Adverse costs orders against our client. These costs will need to be agreed or assessed as we do not agree to your claim of $115,224.63. (b) The component of interest demanded by your clients pursuant to the order of the President on 7 February 2002. This figure will need to be calculated and an agreement reached on the final figure for interest. (c) $268,249.86 retained by our client." 22 T D Kelly & Co's letter of 31 July 2002 was sent to Makinson & d'Apice by facsimile on the afternoon of 31July 2002. 23 I was informed that Makinson & d'Apice did not seek any extension of time in which to consider the offer as clarified by the letter of 31 July nor did T D Kelly & Co offer to do so. There the matter lapsed. 24 Mr Harrison referred me to the decision of the Court in Uniting Church of Australia (NSW Synod) v Legge [2002] NSWCA 307; 55 NSWLR 293 in support of his submission that the plaintiff's offer had not been a reasonable one. In his submission the terms of the offer were first made clear in the letter of 31 July. Mr Harrison's submission in this respect did not depend upon the complaints made by Makinson & d'Apice about the plaintiff's status as a legally assisted person and the associated request for information as to payments made to him by the Legal Aid Commission. Mr Harrison contended that the terms of the T D Kelly & Co letter of 22 July were ambiguous in that the assertion that "this offer accounts for" both the costs orders made against the plaintiff and the payment by him of the interest as ordered by the Court of Appeal on 7 February did not serve to make clear that both sums were to be deducted from the total. The first unambiguous offer was first said to have been made on 31 July. This allowed something of the order of two hours for Makinson & d'Apice to inform the defendants of it and take instructions as to their response to it. 25 I do not accept that there is merit to the submission that the plaintiff's offer of 16 July, as clarified by the letter of 22 July, was an uncertain one. I consider that a fair reading of the letter of 22 July did serve to make clear that the amount of any costs orders against the plaintiff (as agreed or assessed) and the interest to be paid by him to the defendants as the result of the order made in the Court of Appeal on 7 February were to be deducted from the total sum.

26 In dealing with the plaintiff's application for an order that costs be paid on an indemnity basis from the date of his offer I take into account the circumstance that at the date of making the offer liability had been determined in his favour. Wood CJ at CL ordered, as a condition of the grant of a stay pending the hearing of the defendants' appeal, that they pay to the plaintiff the sum of $500,000. There was contemporaneous medical evidence to support the plaintiff's case that he suffered sympathetic reflex dystrophy (now described more accurately as chronic regional pain syndrome) as the result of the strapping. The defendants' own medical expert accepted that in the light of Dr Wu's records it was reasonable to assume that in 1984 and 1985 the plaintiff suffered from some abnormality to the right hand following the strapping. He accepted the diagnosis of reflex sympathetic dystrophy at that time. He considered that such a condition was no longer present when he examined the plaintiff in 1999. 27 I consider that the plaintiff's offer of 16 July 2002 was a reasonable one. Taking into account the desirability of promoting the settlement of litigation, I am persuaded that the plaintiff has established that a departure from the ordinary rule as to costs is appropriate in this case. I propose to make an order for costs in the terms sought by the plaintiff. Orders 1. Verdict and judgment for the plaintiff against the defendants in the sum of $1,278,067.46.

2. The defendants are to pay the plaintiff's costs on a party and party basis up to and including 16 July 2002 and thereafter the defendants are to pay the plaintiff's costs on an indemnity basis.

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