Plaintiff v Defendant

COSTS - Negligence - Plaintiff successful at trial - Defendant's application that plaintiff pay costs associated with late abandonment of certain aspects of claim - Whether departure from general rule that costs follow the event justified - Mok v Minister for Immigration (No 2) [1993] FCA 650; (1993) 47 FCR 81; Ritter v Godfrey [1920] 2 KB 47 considered.

1 The plaintiff in this matter, Mr Saleh Khodr ('the plaintiff') brought an action in negligence against the defendant in respect of injuries which he sustained when he was the victim of an assault in Port Philip Prison ('the prison') in 2011. The plaintiff was a prisoner in the prison at the time. The defendant was the operator of the prison under contract with the state government.

2 After a 14 day trial, the jury unanimously found for the plaintiff, assessed damages at $363,167, and applied a reduction of 25% for contributory negligence. The parties agree that after reducing the jury's assessment by 25% for contributory negligence and adding interest, which is agreed at $10,000, judgment should be entered in the sum of $282,375.

3 The parties agree that Part 9C of the Corrections Act 1986 ('the Act') applies to the award of damages to the plaintiff so as to require that the award be paid into a quarantine fund. The purpose of the quarantine fund is to allow victims of prisoners' crimes the opportunity to recover, from the fund, compensation owed by the prisoner to the victim. However, the amount paid into the quarantine fund is not to include any amount specified by the Court as awarded or agreed in respect of medical costs or legal costs. There are three issues in dispute between the parties in relation to the application of Part 9C of the Act, namely:

(a) Should the amounts to be specified for medical costs and legal costs be reduced by 25% for contributory negligence?

(b) Do damages awarded for future care come within the definition of 'medical costs'?

(c) Do the legal costs reserved from quarantine include all of Mr Khodr's costs, or are they limited only to the costs as between parties?

4 The parties are in dispute as to the appropriate orders for costs of the trial, in light of the abandonment, during trial, of certain parts of the plaintiff's claim. There was also limited dispute as to certification of counsel's fees.

Application of Part 9C and s 104T of the Act

5 Section 104T of the Act provides:

Determination of amounts for medical and legal costs

(1) An award of damages for a civil wrong must specify the amounts, if any, awarded or agreed in respect of -

(a) existing and future medical costs; and

(b) legal costs.

(2) If the parties to an agreement between the State and a prisoner for the payment of damages for a civil wrong are unable to agree on any amount to be specified under subsection (1), the court must specify the amounts to be specified in the agreement for the purposes of that subsection and the agreement is varied accordingly.

The matters to be considered by a court in making an award are dealt with by s 104U, which relevantly provides:

(2) The court must not make the award or approve the agreement unless the court is satisfied -

(a) that section 104T(1) has been complied with; and

(b) that, in all the circumstances, the amounts specified for the purposes of section 104T(1) are appropriate portions of the total amount payable under the award or agreement having regard to -

(i) the claim; and

(ii) the loss or damage suffered by the prisoner; and

(iii) the need to ensure as far as possible that victims are not deprived of an opportunity to enforce a successful claim for damages against a prisoner.

(3) If legal costs are to be assessed and paid under an order made on taxation, the legal costs are taken under this Part to be specified in the award of damages.

Payment of the awarded damages is governed by s 104V, which relevantly provides:

(1) The amount of any award of damages to a prisoner in respect of a civil wrong must be paid by the State to the Secretary immediately after the damages are awarded.

(2) The amount to be paid under subsection (1) does not include any amount specified in the award of damages made or approved by the court as attributable to -

(a) existing and future medical costs; and

(b) legal costs.

(3) An amount paid to the Secretary under subsection (1) -

(a) must be held in trust for the prisoner by the Secretary during the quarantine period and until the final payment is made out of the prisoner compensation quarantine fund in accordance with this Part; and

(b) may be paid out of the prisoner compensation quarantine fund only as authorised by this Part.

6 Section 104T(1) requires that I specify the amounts awarded or agreed in respect of existing and future medical costs and legal costs. I am not required to specify the makeup of the balance of the award. Pursuant to s 104U(2)(b), I must be satisfied the amounts specified are 'appropriate portions of the total amount payable' having regard to the three factors listed in the subsection.

7 Part 9C was introduced into the Act by the Corrections Amendment Act 2008 ('the Amendment Act'). The purpose of the Amendment Act is contained in s 1, which provides:

The main purpose of this Act is to amend the Corrections Act 1986 to provide for the creation of prisoner compensation quarantine funds for the purpose of paying into those funds certain damages awarded to prisoners and to provide for the payment out of those funds of certain amounts recoverable by victims and others from prisoners.

The aim is simply to provide victims the opportunity to bring a claim once they have been made aware of the existence of an asset that might be available to enforce a successful civil suit.[1]

And in relation to the amounts to be paid into the quarantine fund the Minister said:

Following a successful claim or settlement the award or damages may compensate a prisoner in relation to a number of different components, including:

medical costs;

loss of earning capacity;

pain and suffering;

loss of bodily function;

amounts referrable to a breach of rights and/or entitlements (e.g., discrimination claims and breach of privacy claims et cetera);

loss of reputation in the case of defamation;

punitive damages to punish the defendant; and

the replacement value of damaged or lost property.

It is not appropriate under the bill to quarantine all types of payments. Accordingly, the bill will not affect damages payable in relation to medical costs and the cost of future care. In addition, the scheme does not capture the payment of legal costs awarded against the state of Victoria or a private prison operator.[2]

8 There is nothing in Part 9C which directs that an amount specified for medical costs or legal costs be reduced for contributory negligence. A finding of contributory negligence is not one of the factors which s 104U(2)(b) directs be taken into account when determining the appropriate portion of the award specified for medical costs or legal costs. I note that s 104U(2)(b) speaks of the 'appropriate portions' rather than an appropriate proportion. The use of the word 'portion' is significant. A portion is a part of any whole, whereas proportion is the comparative relationship between things. If it were intended that amounts to be specified for medical costs and legal costs are required to be reduced proportionately to take account of a finding of contributory negligence, then different wording would be required in s 104U(2)(b). In my view, I am not required by ss 104T and 104U to reduce amounts specified for medical costs and legal expenses for contributory negligence.

9 In closing address counsel for the plaintiff put a total claim for special damages, summarised as follows:

There is no doubt that the jury did not award the total sum. It is not possible to say what part of the sum was awarded, other than to note that the parties agreed on one item: that is, the cost of initial osseointegration surgery of $115,000.

10 Counsel for the plaintiff submit that there should be paid to the plaintiff from the award the sum of $140,000 for future medical expenses. I take that to be a submission that that is the amount which should be specified for future medical costs pursuant to s 104T(1)(a).

11 It appears from the second reading speech that it was intended that the cost of future care form part of the medical costs not paid into the quarantine fund. Mr Khodr will require care in future as a consequence of the injury caused by the assault. A greater level of care is likely to be required around the time he undergoes serious procedures such as the osseointegration surgery. Some at least of the future care is likely to be provided in a medical setting. I consider that the amount I specify for medical costs should include some allowance for the future cost of care. The amount which the plaintiff seeks to have specified for medical costs includes the osseointegration surgery at a cost of $115,000 and the allowance for travelling to Sydney for surgery, rehabilitation and the carpal tunnel surgery of $10,000. I consider these amounts to be appropriate. I consider $15,000 to be an appropriate further amount to allow for medical costs, for future care. Having regard to the factors in s 104U(2)(b) of the Act I specify the amount of $140,000 as an appropriate portion of the awarded damages for future medical costs.

12 The parties have agreed on the mechanism to be used to repay to the Health Insurance Commission the amount for past medical expenses paid on the Medicare system. I will make orders reflecting that agreement.

13 Counsel for the plaintiff submit that I should order that after taxation of costs the amount of the plaintiff's solicitor-client costs be paid from the portion of the plaintiff's awarded damages held in the quarantine fund. There is no provision in Part 9C for such an order to be made. The scheme of the Part is that the amount held in the quarantine fund be made available first to victims and, only after that process of possible claims by victims is complete, is the balance, if any, paid out to the prisoner. Once the awarded damages have been paid into the quarantine fund, money may only be paid out of the fund in accordance with Part 9C of the Act.

(a) Whether legal costs in s 104T(1)(b) can include the legal costs owed by Mr Khodr to his lawyers; and

(b) If yes to (a), what if any order should be made by me in respect of those costs.

award of damages means damages -

(a) awarded pursuant to a judgment of a court; or

(b) paid or payable in accordance with an agreement between the parties to the agreement;

damages includes any form of monetary compensation.

Damages are the compensation for loss sustained as a consequence of injury. Legal costs are the expenses of litigation. I conclude that the 'legal costs' in s 104T(1) are not part of the awarded damages, but that on making an award of damages the Court must specify the amount awarded or agreed for legal costs after first taking into account the s 104U(2)(b) factors.

16 The term 'legal costs' is not defined in the Act. There is nothing in the Act which restricts the term such that it should be taken only to relate to those costs as between parties. In my view, the term 'legal costs' as it appears in the Act is sufficiently broad to include the legal costs owed by Mr Khodr to his lawyers for representation in this proceeding.

17 The purpose of the Amending Act and of Part 9C of the Act is reflected in the s 104U(2)(b)(iii) factor to which I must have regard when specifying the amount for legal costs. A victim might be deprived of the opportunity to recover from a damages award to a prisoner if too large a portion of the damages awarded to the prisoner is specified for legal costs. A victim will have no opportunity to recover from a quarantine fund if no claim for damages is prosecuted by the prisoner.

18 Claims for damages for personal injuries damages by prisoners such as Mr Khodr will often be difficult. Certainly Mr Khodr's claim was hard fought by the defendant, and could easily have failed. Mr Khodr is a pensioner, and is very unlikely to be able to pay his legal costs other than by payment from his award of damages. If the costs properly payable by Mr Khodr to his solicitors are not paid from the award prior to it being paid into the quarantine fund, then payment to the solicitors will either be delayed or might never be made. I note the submission for the defendant that the Act must be construed in such a way that the solicitor for the plaintiff, when seeking to recover their costs from the quarantine fund, will be in the position of an unsecured creditor over whose claims the claims of victims of the plaintiff's crimes against the fund would take priority. This was so, it was submitted, because the primary purpose of the Act is to ensure that funds remain on trust for the victims of the plaintiff's crimes, as provided for by s 104U(2)(b)(iii). This approach would act as a very powerful disincentive to lawyers considering taking on difficult cases such as Mr Khodr's case. Such a disincentive would act to the significant disadvantage of potential victims of prisoners because proceedings for the recovery of damages might never be pursued, and part of an award of damages might therefore not be available to satisfy victims' claims. In my view, the purpose of the Amending Act will be advanced by specifying, in an appropriate case, a portion of the total awarded damages as the legal costs of the solicitors for the plaintiff.

19 An application by a prisoner or by the solicitor for a prisoner that the Court make an award specifying legal costs owed by the prisoner to his or her solicitor should be made after settlement or verdict, at the time the Court is making orders as to the awarded damages required by s 104T(1). I envisage that such an application could be made in the same manner, and based on a similar sort of material, as applications for an award of costs which are regularly made pursuant to s 134AB(31) of the Accident Compensation Act 1985. What would be required is sworn evidence of the solicitor which sufficiently quantified the costs of Mr Khodr in excess of the costs as between parties, and an affidavit of Mr Khodr confirming his understanding of those matters. The time may now have passed for such an application to be made in this proceeding. However, I will reserve liberty to apply to the plaintiff and his solicitors in case they wish to pursue the matter.

20 The defendant refers to counsel for the plaintiff's decision at trial to abandon certain aspects of the case pleaded in the Further Amended Statement of Claim filed on 14 October 2016, being the document containing the case to which the defendant was required to respond at trial. In the Further Amended Statement of Claim, and in the opening to the jury, the case for the plaintiff was put in two ways: first, that the defendant breached its duty to the plaintiff by placing him in a unit in the prison which housed a number of the plaintiff's co-offenders; and second, that the defendant should have reacted more quickly to the developing dispute which culminated in Mr Khodr being assaulted and thrown from a balcony in the unit. Just prior to final addresses, counsel for the plaintiff indicated that the case was no longer being pursued on the first basis.

21 The defendant submits that this abandoned aspect comprised a significant part of the plaintiff's case, and that because that aspect of the case was pleaded and pursued by the plaintiff the defendant was required to incur considerable expense in making relevant enquiries, obtaining instructions, preparing witnesses, and calling evidence at trial. It was submitted that the fact that the case in question was abandoned at such a late stage prevented the defendant from mitigating its loss by curtailing the evidence and shortening the trial. The defendant names eight witnesses who gave evidence at trial, who it says would either not have been required to give evidence at all in light of the abandoned case, or whose evidence would have been reduced. It is submitted that the length of the trial would thereby have been reduced by at least six days, and that the time taken by the jury in its deliberations could also, quite possibly, have been reduced.

22 Counsel for the defendant submits that in the circumstances it is appropriate that the Court make orders as follows:

(a) The plaintiff is not entitled to any costs relating to the abandoned claims from 11 August 2016 when he knew or ought to have known that those aspects of the claim could not be made out;

(b) The plaintiff's costs of the 14 day trial should be reduced by 50% (as this should have been a trial of no longer than 7 days);

(c) The plaintiff's costs in relation to his claim against the former first defendant, the State of Victoria, against whom he discontinued his claim in September 2016, are separate and are not recoverable from the defendant;

(d) That the plaintiff pay the defendant's costs in relation to those aspects of his claim on a standard basis and from 11 August 2016 on an indemnity basis or alternatively, the defendant's assessed costs in relation to those matters shall be set off against the plaintiff's claim for costs;

(e) The plaintiff pay or set off 50% of the costs of the transcript and jury fees (as this should have been a trial of no longer than 7 days' duration).

23 The plaintiff, in reply, submits that he pursued a case claiming that there was negligence on the part of the defendant which was a cause of him being assaulted and suffering injury. That case succeeded, and the usual order for costs should follow. Further, it was submitted that it is common for a particular of negligence to be alleged and then not pursued at trial, and that the forensic decision in respect of the abandonment of certain aspects of the pleaded claim was made reasonably after the hearing of the evidence at trial and did not constitute a basis on which the plaintiff should be deprived of his costs. The plaintiff submits that only two of the witnesses called by the defendant were called exclusively in respect of the question of the risk to the plaintiff in placing him in the unit with co-offenders, and that the evidence of all the other witnesses called was relevant to the matters which ultimately went to the jury. The removal of those two from the list of witnesses called would have done little, it is said, to reduce the duration of the trial.

24 Finally, the plaintiff relies on the following statement of Keely J in Mok v Minister for Immigration (No 2):[4]

In my opinion the court's power to order a successful applicant to pay the costs in respect of an issue raised by the applicant, on which the applicant has failed, ought to be exercised only where the court, on a consideration of all the circumstances, has concluded that the raising of that issue by the applicant was so unreasonable that it is fair and just to make the order. In expressing that opinion I am of course, not attempting to fetter in any way the judicial discretion of the court.

I accept that the statement of Keely J in Mok should not be regarded as a fixed proposition of law.[5]

25 I have an unfettered discretion in relation to the award of costs. However, the exercise of that discretion should take into account the settled practice that costs follow the event, and the circumstances which have been found to justify movement away from that position to order that Mr Khodr as successful litigant not receive part of his costs,[6] or to go even further and order that Mr Khodr pay part of the defendant's costs of the proceeding.[7]

26 For a number of reasons I conclude that the plaintiff, as the successful party in the proceeding, is entitled to his costs without reduction. First, the plaintiff has succeeded on the only claim that he made, that is, that there was negligence on the part of the defendant which was a cause of the assault and his injuries. Second, the line between the two ways in which the plaintiff put his case is not so bright as suggested by counsel for the defendant. The evidence of most of the witnesses called by the defendant was, at least in part, relevant to the case which succeeded. It is likely that the jury concluded that one or both of Mr Khodr's co-offenders, who were in the same unit in the prison, played a role in the assault. Third, the defendant's reliance on three letters dated 11 August 2016, 2 September 2016 and 29 September 2016 from the solicitors for the defendant to the solicitors for the plaintiff is misplaced. Each letter contained a very lengthy exposition by the solicitors for the defendant of the weakness of all aspects of the plaintiff's case. In terms of the assessment of the weakness of the plaintiff's case, there was no differentiation between the abandoned aspects of the case and the aspects of the case which ultimately succeeded. All aspects of the plaintiff's case were said to be completely without merit. Each letter concluded with a communication of the defendant's offer to settle the whole proceeding on the basis that the proceeding be withdrawn with no order as to costs. The content of these letters serves to emphasise the difficulty faced by the plaintiff and his advisers at that point in making a judgment as to which aspects of the way in which the case was put might, after the calling of evidence at trial, have merit, and which might not. Fourth, the evidence given at trial took the issue of liability significantly beyond the point discussed in those three letters. The evidence at trial led to one aspect of the plaintiff's claim in negligence becoming stronger, and another becoming weaker. It is not unusual that this occur. In my view, it is expecting too much to require that the lawyers for the plaintiff predict in advance of the trial which aspect of the claim in negligence will become stronger and which will weaken to the point that it should be abandoned. Every aspect of the plaintiff's claim was hard fought. For these reasons, I conclude that in the circumstances of this case it is appropriate that I exercise my discretion by ordering that the plaintiff, as the successful party, have his costs of the proceeding.

27 Counsel for the plaintiff sought certification of fees for senior and junior counsel as follows:

(b) One and a half days' preparation for trial, including conferences;

It was submitted that an appropriate fee for senior counsel was $8,800 inclusive of GST, and that the fee for junior counsel should be 50% of the fee of senior counsel.

28 The defendant agreed to a daily fee for senior counsel of $8,800 and 50% for junior counsel, and to the claimed preparation of one and a half days including conferences. It was submitted that the fee for a view should be reduced to two hours, because on the afternoon the view was conducted part of the time was spent by counsel on a view of a different part of the prison relevant to an unrelated proceeding. Taking that issue into account, I will allow two hours for senior and junior counsel for the view.

29 In the written submissions delivered by the solicitors for the defendant after the hearing relating to costs, it is submitted in respect of any daily trial fee that account should be taken on taxation of any day in which counsel also held a brief to appear in another proceeding. It is not suggested that there was a failure by counsel briefed for the plaintiff to appear as required in this proceeding. Given that counsel attended as was necessary to represent the plaintiff, I will certify trial fees at the daily fee agreed.

30 On 29 September 2016, Zammit J ordered that the plaintiff pay the defendant's costs thrown away by reason of the further amendments to the Further Amended Statement of Claim, and the application to amend. The parties agree that the defendant is entitled to those costs, and that they should be set off against the award of costs that I make.

(1) Judgment is entered in favour of the plaintiff in the amount of $282,375.

(2) A sum of $140,000 is specified as the portion of the judgment sum awarded in respect of future medical costs.

(3) A sum of $28,237.50 is initially specified as the amount to be paid to the Health Insurance Commission ('the HIC') on account of existing medical costs.

(4) Once the amount for existing medical costs is fixed by the HIC and paid from the sum forwarded pursuant to Order 3, the balance repaid by the HIC is to be paid to the Secretary to the Department of Justice and Regulation pursuant to s 104V of the Corrections Act 1986.

(5) The defendant pay the plaintiff's costs of the proceeding, including any reserve costs, on a standard basis to be assessed by the Costs Court in default of agreement.

(6) The sum of costs payable to the defendant pursuant to the order of Zammit J made 29 September 2016 is to be set off against the costs awarded to the Plaintiff in Order 5.

(7) Fees for the plaintiff's counsel are certified as follows:

(a) certify for a daily fee of $8,800 (inclusive of GST) for senior counsel for 14 days of trial, one and a half days' preparation, and two hours for the view allowed at $880 per hour;

(b) certify for a daily fee of $4,400 (inclusive of GST) for junior

counsel for 14 days of trial, one and a half days' preparation, and two hours for the view allowed at $440 per hour.

(8) The plaintiff and his solicitors have liberty to apply to have specified, pursuant to s 104T(1) of the Corrections Act 1986 (Vic), the amount of legal costs to be awarded to the solicitors for the plaintiff.

I will provide the parties with an opportunity to comment on the form of the order before it is finally made.

[1] Victoria, Parliamentary Debates, Legislative Assembly, 31 July 2008, 2894 (Bob Cameron, MP).

[3] The position of the defendant, communicated after the hearing on 29 November 2016, is that Part 9C of the Act does not require that amounts to be specified for medical costs and legal costs be reduced for contributory negligence.

[4] [1993] FCA 650; (1993) 47 FCR 81 ('Mok').

[5] Rosniak v Government Insurance Office (2008) 41 NSWLR 608; LMI Australasia Pty Limited & Anor v Baulderstone Hornibrook Pty Limited & Ors (No 2) [2001] NSWSC 688; (2001) 53 NSWLR 31.

[6] Ritter v Godfrey [1920] 2 KB 47, 52. See also the useful discussion in Dal Pont, G.E. Law of Costs (LexisNexis Butterworths, 3rd ed, 2013), 8.25: 'The breadth of the courts' 'unfettered' discretion to award costs dictates that the courts may, in a case outside the ordinary, deprive a successful party of its costs, or even order a successful party to pay the costs of its opponent. The strength of the 'costs follow the event' 'rule' is highlighted by case authority that a judge who proceeds as if there were an open discretion on costs unhindered by the rule 'would almost certainly be regarded as erring in law', and acting arbitrarily rather than judicially. It is emphasised by judicial remarks branding a departure from the rule as 'extremely rare' and as an 'exceptional measure', justified only by 'special circumstances', 'substantial grounds', 'some definite principle' or for 'good reason'.'

[7] Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] VicRp 12; [1991] 1 VR 129, 155. See also Dal Pont, G.E. Law of Costs (LexisNexis Butterworths, 3rd ed, 2013), 8.62: 'An order that a successful party pay the costs of an unsuccessful opponent, it has been said, 'can rarely, if ever, be justified'. Judges have, to this end, branded the jurisdiction to make such an order as restricted to cases variously described as 'strong and exceptional', 'most exceptional', and 'very exceptional'.'