Plaintiff A and B v Bird; Plaintiff C v Bird; Plaintiff D v Bird

Supreme Court of NSW|2020-11-25|Before: Schmidt AJ

Judgment

Judgment on the plaintiffs' claims in relation to assault and negligence while B and D attended the Footprints childcare centre was given in October 2020: Plaintiff A and B v Bird; Plaintiff C v Bird; Plaintiff D v Bird [2020] NSWSC 1379. This judgment deals with the dispute as to the appropriate costs orders.
The usual order under the Uniform Civil Procedure Rules 2005 (NSW) is that costs follow the event, which would be orders in favour of the plaintiffs, as to costs agreed or assessed: Rule 42.1. The mothers and their children seek indemnity costs orders, Mr Bird, Ms Clancy and Little Pigeon Pty Ltd not having accepted offers of compromise which were made before the hearing: Rule 42.14.
While there is no issue that the plaintiffs each obtained a judgment no less favourable than the terms of the offer which they made, the defendants contend that the Court should not order them to pay indemnity costs for the period after the offers were made. Whether the Court should so order otherwise than provided in Rule 42.14(1), is in issue.
Also in issue was whether the defendants should bear the cost of expert reports on which the plaintiffs did not rely and how earlier costs orders should be dealt with.

The parties' cases

It was agreed that the question of costs should be resolved on the papers. The plaintiffs relied on the affidavits of their solicitors Ms Buchanan sworn on 29 October and 10 November 2020, which I have marked exhibits C 1 and C2 and Mr Guenette sworn on 6 November, which I have marked exhibit C 3.
Mr Bird did not lead any evidence on costs. Little Pigeon and Ms Clancy relied on the affidavit of the plaintiff's solicitor Ms Breda sworn 15 April 2015, which I have marked exhibit C 4. Mr Bird supported the case which they advanced.
The parties filed written submissions which I have marked for identification:

Plaintiffs 10 November submissions - mfi 4
Little Pigeon and Ms Clancy's 12 November submissions - mfi 5
Mr Birds 12 November submissions - mfi 6
Plaintiff's reply submissions - mfi 7

The children and their mothers contend that having made offers of compromise in accordance with the Rules which were not accepted and having obtained judgement for amounts no less favourable, indemnity costs orders should be made in their favour and that the question of the disputed expert's reports is a matter for a costs assessor.
The defence case is that costs should be awarded on the ordinary basis, with the exception of the costs incurred in obtaining liability reports from Dr Tronc, Dr Blanco and Mr Molloy. Having objected to those reports when served, as a matter of fairness, they should not bear the costs incurred, given that they were not relied on at trial in the plaintiff's case.
Further, that earlier costs orders should be noted in the final orders "as a matter of prudence".

Earlier costs orders

I can see no reason for the adoption of the unusual approach urged for the defendants.
Each order made stands on its own to be taken into account by the parties when seeking to agree the final quantification of their costs and if no agreement is reached, by an assessor during any assessment process.
Noting the earlier orders made can have no impact on either process.

The expert reports which were not relied on at the 2020 hearing

The case advanced for the mothers and their children was that the question of the costs of the disputed expert liability reports was a matter for a costs assessor, not the Court to determine.
I do not agree.
It is the Court which is given the discretion to determine by whom, to whom and to what extent costs are to be paid: s 98(1)(b) Civil Procedure Act 2005 (NSW). That includes the discretion to refuse a costs order to a successful party, or to limit recoverable costs, including where costs have been unnecessarily incurred: s 99 and Rule 42.4.
The overriding purpose of the Civil Procedure Act is to facilitate the just quick and cheap resolution of the real issues in the proceedings. There was no issue that the defendants had objected to the reports. Why they were not tendered was not revealed. But it can be sensibly inferred that it was concluded that they did not need to be relied on, in order to satisfy the onus of establishing the cases advanced. Had they been considered necessary to establish those cases, no doubt they would have been tendered
In those circumstances I am satisfied that the Court cannot justly order the defendants to bear the costs which the plaintiffs incurred in obtaining the disputed expert reports, on which they did not rely at trial.

Indemnity costs

The matters were listed for hearing in the District Court in June 2015. McCallum J ordered the transfer of the proceedings to this Court on 22 April 2015.
There is no issue that the offers of compromise made in May 2015 were made accordance with Rule 42. Those served for A and her daughter B were in the sums respectively $575,000 and $250,000. They were not accepted and expired on 13 May 2015. The orders made in their favour in October 2020 were no less favourable, damages of $1,008,378.55 and $465,000 finally being awarded: Rule 42.14.
In such a case, unless the Court orders otherwise, a plaintiff is entitled to have costs assessed on the ordinary basis up to the day of the offer and from the beginning of the following day, on an indemnity basis: Rule 42.14(2).
What is in issue must be approached in light of what was observed in King: "83 … The onus is on the defendant to persuade the Court that indemnity costs should not be ordered. He must demonstrate the basis on which an order should be made denying the plaintiff's entitlement to indemnity costs. He must establish that he had given serious thought to the risk involved in non-acceptance of the offer, and that he had assessed the plaintiff's case properly and in the context of the rule and the achievement of its purpose - to encourage the proper compromise of litigation, in the private interests of the litigants and in the public interest of the prompt and economical disposal of litigation. Generally, exceptional circumstances are required to justify such an order denying the plaintiff's entitlement. See, generally, Fowdl v Fowdl, Court of Appeal, 4 November 1993, unreported, per Kirby P at 12, 16; Hillier v Sheather (1995) 36 NSWLR 414 at 422-423; Morgan v Johnson (1998) 44 NSWLR 578 at 581-582. 84 Although the Court may take into account the particular features of a case and the difficulty of putting an accurate estimate on its value in advance of the litigation, those considerations do not provide a basis by themselves for denying the party making the offer an order for indemnity costs: Hillier v Sheather (at 423). In Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 725, it was said that a miscalculation in a case with large imponderables, where the course taken by the party to whom the offer was made may have been perfectly reasonable, would provide a basis for denying an order, but the subsequent decision in Hillier v Sheather suggests that, whilst "large" imponderables may be a relevant factor in the particular case in denying an order for indemnity costs, in the general case a party's reasonable belief as to his own chances of success does not alone provide a basis for denying an order for indemnity costs. 85 In the present case, the respondent has submitted that the judge had wrongly considered that a belief that the appellants had reasonable grounds for defending the claim constituted exceptional circumstances disentitling her from an order for indemnity costs. However, the fact that the plaintiff's case had changed significantly between the date of the plaintiff's offer and the trial in which the judgment obtained is higher than the amount of the offer does provide a sufficient basis for an order denying the plaintiff's entitlement to indemnity costs: Maitland Hospital v Fisher [No 2] (at 725). The very nature of the situation itself demonstrates that it would be unfair to a defendant to make an order for indemnity costs when the evidence at the trial is different from that known to the defendant at the time of the offer. Whether or not this is an "exceptional" situation does not matter."
For their part the plaintiffs relied on what had earlier been observed in Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 725: "The rule does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of the litigation. Where, in the particular circumstances, the litigant or its advisers mis-judge the prospects of success or mis-calculate the outcome, their mistake may be warranted on the material which they had available. Alternatively, it may be no more than a mis-calculation in a case with large imponderables where the course they took was nonetheless perfectly reasonable. Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why a discretion is retained, under the rule, for the Court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case. It has added a new duty to the functions of legal practitioners advising litigants. It is a duty which is both protective of the interests of litigants and of the public interest in the prompt and economical disposal of litigation. It is the duty of courts, allowing for exceptions in particular cases, to give effect to the purpose of the rule: cf Larkin McDonald & Associates v Mahoney (Queensland Court of Appeal, 24 June 1992, unreported)."

A and B

A and B's case was that what was determinative was that the damages quantified at the time the proceedings were transferred to this Court exceeded their offers of compromise and the District Court's jurisdictional limit of $750,000. The argument advanced in relation to domestic assistance was thus submitted to be fallacious. The Court's task had to be approached prospectively, not retrospectively and the Rules turned on the result in money terms, not a parties' success on particular heads of damage.
Further, if the defendants had any doubt as to their ability to assess the potential value of the case when they received the offers, they should have served a notice under Rule 20.26(4). It provides: "(4) If the offeror makes an offer before the offeree has been given such particulars of the offeror's claim, and copies or originals of such documents available to the offeror, as are necessary to enable the offeree to fully consider the offer, the offeree may, within 14 days of receiving the offer, give notice to the offeror that - (a) the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents, and (b) in the event that rule 42.14 applies to the proceedings, the offeree will seek an order of the court under rule 42.14(2)."
The evidence established, however, that up to the time that the offers were made, no claim had been made by A for damages in relation to domestic assistance, which in 2020 was awarded in an amount of $451,771.36.
While before the offers were made the matter had been listed for hearing in June 2015 in the District Court, the expert evidence which had been served was not relied on when the matter was heard in this Court in 2020.
While reports of Dr Allnut and Dr Quadrio had also been served, evidentiary statements from A, her husband and B had not. Nor had the transcripts of the disclosures which child 1, 2, B and D had made at the time of the alleged assaults or the report of Ms Lausch, which were all relied on at the final hearing.
It must thus be accepted that the 2015 offers had to be assessed at a time when the detail of the cases A and B finally advanced had not yet been revealed. Evidence which was critical to the conclusions finally reached at the 2020 trial had by that time not been served.
In King it was concluded that significant changes in a plaintiff's case between the date of an offer and the trial provided a sufficient basis for denying the plaintiff an indemnity costs order: at [85]. But it was contended for the plaintiffs that it was relevant that King was concerned with an appeal which succeeded on a basis not argued at trial.
This submission may not be accepted.
There in issue was an application for indemnity costs based on a first offer of settlement which was rejected by the trial judge because at that time, the material served on the appellants by the respondent did not demonstrate that she would necessarily succeed. The statement of claim "did include her case based on the 1987 amendment to IRS-III, but the material served did not include much of what later became her case at the trial": at [82].
It was concluded that at the time of the first offer made in King there could be no suggestion that appellants knew of the information which the Doctor had at his disposal and of the system in place for its dissemination, on which the respondent's successful case eventually depended. The judge's reference to a reasonable belief by the appellants at the time of the first offer that they had reasonable grounds for defending the claim was therefore found to have been appropriate: at [86].
In this case it must also be accepted that there were significant changes in A and B's case after the offer was made. Not only did neither the 2014 nor 2015 statements of particulars identify any claims for domestic assistance, A's statement, that of her husband, the children's earlier disclosures and the 2019 report of Ms Lausch on which A and B's claims turned in 2020, had also not been served.
In the March 2014 particulars reference was made to unquantified amounts for out of pocket expenses for past treatment and medication for her psychiatric injuries and future treatment expenses, as well as past economic loss and for future economic loss at the rate of 3 days wages of $768 per week to age 65. On the case advanced for A and B it was relevant that this alone amounted to more than the compromise offered.
The 2015 particulars did quantify the claims for a total $871,307 in A's case, for example. This comprised non-economic loss at $229,000; past out of pocket expenses of $8,196; future treatment expenses of $25,130, past economic loss of $104,043, past superannuation $9,884, future economic loss of $423,571, future superannuation of $46,592 and breach of contract $24,891 and aggravated damages.
But the evidentiary basis on which these claims were advanced had not been revealed and the liability reports which had been served, were eventually not relied on.
It was only after the offers expired that advance rulings were sought by the plaintiffs by motion filed on 18 May 2015. That was when the admissibility of evidence of B and D's disclosures about Mr Bird in 2010 and 2011 to their mothers; their electronically recorded police interviews; and the disclosures which the four other children had made about Mr Bird in their police interviews, arose to be considered. That application was refused in Plaintiff A & B v Bird [2016] NSWSC 997.
Those documents were also attached to the tendency notices later served on the defendants in 2015. But the report of Ms Lausch, the occupational therapist on which the claims for domestic assistance was eventually advanced was not served until July 2019.
It follows that in this case any miscalculation by the defendants cannot have rested on the claims made in relation to domestic assistance, or as to what the evidence led at trial from A, her husband and B and the four children's disclosures established. On the evidence there can be no suggestion that the defendants knew of all that A and B either then had at their disposal, or later obtained from Ms Lausch, on which their successful cases were eventually advanced.
In those circumstances I am satisfied that it must be accepted that the evidentiary basis the cases which A and B finally advanced changed so significantly after the 2015 offer, that a sufficient basis has been established to deny them an order for indemnity costs.
In the circumstances it would be unfair to the defendants to make such an order, given that the claims and evidence at the trial were so different to that known to them at the time they rejected these offers.
It follows that an indemnity costs order cannot be made in favour of either A or B, it must be made on the usual basis. Had they wished to ensure that such an order would be made in their favour, justice requires that further offers of compromise were served after the evidentiary basis on which their cases were advanced, had been revealed to the defendants.

C and D

The position was different in the case of C and D because they made their offers after they had revealed the evidentiary basis of the cases which they pressed at trial, but in such close proximity to the hearing, that I am also satisfied that justice could not permit an indemnity costs order to be made in their favour.
Calderbank offers and offers of compromise for $200,000 plus costs were only made by C at 1.37 and 1.41 pm on Friday 4 September 2020 and for $100,000 plus costs for D at 1.46 and 2 pm that same day. That was only one business day before the trial commenced on 7 September, the offers expiring at noon on the 7th. Those offers were thus all open for less than one business day. There was no response. They were awarded damages of $508,677.71 and $455,000.
In issue was whether the offers were open for a period that was reasonable in the circumstances.
C and D contended that Ms Buchanan's affidavit evidence established that when they received the offers the defendants could not have had any doubt about quantum, but that they never gave any serious thought to settlement. Further, that what Mr Guenette deposed in his affidavit as to what the defendants were then engaged on, in preparation for the impending hearing, was not persuasive.
Ms Buchanan's evidence included that mediation had taken place on 5 December 2018. Then in October 2019, after a directions hearing, the defendants advised they were not interested in a further meditation; the defendants made no offers before the hearing; and did not seek any extension of time to consider the 4 September 2020 offers.
In his unchallenged affidavit Mr Guenette deposed: "41. Without intending to waive privilege over any communications, between 4 September 2020 and 7 September 2020, the second and third defendants' representatives were engaged in hearing preparations including: (1) Finalising and filing the second and third defendants' Defences to the Amended Statement of Claim in each of the 3 cases; (2) Reviewing and considering the joint report of the expert child psychiatrists in relation to Plaintiff D which became available on 4 September 2020; (3) Reviewing and considering the joint reports of the expert psychiatrists in relation to Plaintiff A and Plaintiff C which became available on 4 September 2020; (4) Conferring with witnesses; (5) Corresponding with the plaintiff's solicitor concerning whether or not they intended to call Plaintiff B and Plaintiff D to give evidence; (6) Corresponding with the plaintiff's solicitor in relation to the schedule of objections and the hearsay evidence of Plaintiff B, Plaintiff D, Child 1 and Child 2; (7) Preparing bundles of authorities; (8) Preparing and serving notices pursuant to s68 of the Evidence Act in relation to each matter; (9) Reviewing the Joint Court book; (10) Adding documents to the Joint Court Book, and providing tabs to the Court for insertion into the Joint Court Books; (11) Reviewing schedules of out-of-pocket expenses for Plaintiff A and Plaintiff C; (12) Reviewing amended schedules of damages (served at 7:28pm on Sunday 6 September 2020); (13) Conferring with the plaintiffs' representatives on the proposed joint chronologies in each matter; (14) Undertaking research and preparing submissions on the upcoming arguments under the Evidence Act; and (15) Preparing for cross-examination of Plaintiffs A and C."
It must be accepted that there was considerable work involved at the time the offers were received, in attending all that was still necessary to be done, in preparation for the imminent hearing.
In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85, Basten JA discussed the relevant considerations when the reasonableness of the time for which an offer is open is in issue at [20]: "In considering whether the time allowed for acceptance is 'reasonable in all the circumstances' once a trial commences, or indeed final preparation commences, three factors come into play. The first is that both parties may reasonably be expected to have a clear perception of the strengths and weaknesses of their positions, so that the reasonableness of a particular offer may be speedily assessed. Secondly, because significant costs will be accruing on a daily, even an hourly basis, there is a heightened incentive to respond within the time permitted. Thirdly, and counterbalancing the first factor, the need to address the terms of an offer, provide advice and obtain instructions will often be a significant distraction from final preparation."
This was applied in Gray v Hobson (No 2) [2018] NSWCA 131, where Dr Gray made an offer of compromise on 1 November 2016 which was open until 9.00am on Thursday 3 November, after an unsuccessful mediation on 1 November and before the commencement of the 11 day hearing on 7 November.
It was there concluded that offer was open for a period that was reasonable in the circumstances, given that when the offer was made the parties had a "clear perception of the strengths and weaknesses of their positions", having participated in a mediation; must have been well-advanced in their preparation for the hearing; and "armed with sufficient information to make a reasoned judgment of the offer": see Leda v Weerden (No 3) [2006] NSWSC 220 at [10].
Further Mr Hobson must have been in a position to assess his prospects of success as he made his own settlement offer within the period Dr Gray's offer was open and did not request any extension of the time for acceptance of the offer to enable him to give it further consideration: see Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union (NSW Branch) (No 2) (2014) 88 NSWLR 471; [2014] NSWIC 3 at [38]).
By way of comparison, in Ko v CKAS Enterprises Pty Ltd (No 2) [2019] NSWSC 209 Emmett AJA concluded that it was not unreasonable for an offer of compromise made the day before the hearing and expiring at 10am to have been refused, in proceedings raising issues considerably less complex than those which arose in this case.
That was also the result in Kooee, where the final offer of compromise was made at 11.30am on the day before the trial was due to commence and remained open until 10.00am the next day, the time of commencement of the trial of another reasonably complex dispute: at [23].
I am satisfied that the same conclusion must be arrived at in this case.
Given the complexity of all that was in issue and that the C and D's offers were made only during the course of the business day before the commencement of the hearing, at a time when they still had to deal with a number of other matters in preparation for the hearing; and that they were left open only until noon on the first day of the hearing, I am satisfied that justice also requires that costs not be awarded on an indemnity basis to C and D as the result of the offers not having been accepted.
In the result the costs orders in favour of C and D must also be made on the usual basis. Had they wished to ensure that an indemnity costs order would be made in their favour if they succeeded as they have, justice required that they not leave the making of their offers of compromise until such close proximity to the impending trial and for such a short period.

Orders

The parties should file final orders reflecting these conclusions and dealing with the other outstanding matters referred to in the submissions, within 7 days.

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: 25 November 2020

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