On 21 December 2018 I gave judgment on an amended notice of motion filed by the plaintiff on 26 September 2018: Ralston and Collins v Chaffey [2018] NSWSC 1994. One of the orders I made was as follows:
3. The plaintiff is to pay the second defendant's costs of the motion.
As in that judgment, the reference herein to "the plaintiff" is a reference to Ms Ralston.
The second defendant now applies by notice of motion filed 3 January 2019 to vary that order as follows:
1. Variation of Order 3 made by Justice Davies on 21 December 2018 in Ralston and Collins v Chaffey [2018] NSWSC 1994 in relation to costs to:
"3. The plaintiff to pay the second defendant's costs of the motion on an indemnity basis."
It was agreed between the parties that the notice of motion should be dealt with by me on the papers after receipt of written submissions from each of the parties concerned. The second defendant filed its written submissions on 14 March 2019 and the plaintiff filed her submissions on 5 April 2019.
The background to this judgment is set out in my earlier judgment.
The second defendant's application was made on the grounds that the conduct of the proceedings in the particular respects found by the Court was 'unreasonable' and contrary to the obligations of parties and their lawyers under ss 56-59 of the Civil Procedure Act 2005 (NSW) (the CPA). The second defendant submitted that, in the result, the Court has not been assisted in furthering the 'overriding purpose' of the CPA, the disposition of the substantive proceedings has been unnecessarily delayed, and the second defendant has incurred a costs liability beyond what it could reasonably have expected to incur in the litigation.
The second defendant submitted that an order for indemnity basis will achieve the appropriate measure of justice for the second defendant. In that regard, the second defendant relied upon what was said by the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303; [2013] HCA 46 at [51]-[57].
Ralston and Collins v Chaffey [2019] NSWSC 793 | Case summary | Zoe
The second defendant drew attention to what was said in such cases as Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [35] and [44] and Sydney City Council v Geftlick [2006] NSWCA 280 at [90]. These cases concerned the conduct by a party of proceedings that involved "some relevant delinquency" or where the party's behaviour was "plainly unreasonable". The second defendant pointed out that the Court's power to make the order sought may be exercised where the conduct of proceedings has caused "unreasonable delay and expense" and/or has involved "departures from the procedures devised to ensure the efficient disposition of proceedings" or where a party pursues a "hopeless" or "unmeritorious" application.
The second defendant submitted that the following special or unusual features warrant the exercise of the discretion to order indemnity costs in the present case:
(a) The failure, contrary to the obligations of the plaintiff and her lawyers under ss 56-59 of the Civil Procedure Act, to obtain and serve all expert evidence in chief on which she proposed to rely in accordance with the prior orders made by the Court, this being but one aspect of the repeated failures on the part of the plaintiff to comply with the directions and orders of the Court;
(b) The improper approach to the retainer of Dr Chow and the pursuit by the plaintiff of expert reports from him (and a report from Professor Spencer) in the knowledge that Dr Chow would provide new evidence in chief on which the plaintiff was not entitled to rely. That conduct occurred when the Court and all other parties were proceeding on the basis of orders made on 4 October 2017 and on 4 April 2018 for mediation;
(c) The propounding of the application in written submissions filed in support of it on the basis that Dr Chow had been retained to respond to the opinion of Dr Sinosich in circumstances where, after cross-examination of the solicitor for the plaintiff (who confirmed that Dr Chow was never provided with the report of Dr Sinosich), the plaintiff, through her counsel, eschewed the basis hitherto articulated for the application as "misguided", and acknowledged that her application was "not an application to be allowed to rely on a report in answer to a report served by the defendant";
(d) A proper analysis of the position, including the history of repeated failures to comply with the directions and orders of the Court, the improper approach to and timing of the retainer of Dr Chow, the wide-ranging new evidence in chief provided by Dr Chow, and the inadmissibility of considerable portions of the reports of Dr Chow, should have led the plaintiff and her lawyers, acting reasonably, to conclude that the application was unmeritorious;
(e) The requisite element of "delinquency" has been demonstrated both in respect of the "facts connected with or leading up to" the interlocutory application, and the conduct of the application, involving as it did, among other things, wasted time and costs associated with multiple adjournments granted on the application of the plaintiff. (Those adjournments occurred on 28 September, 19 October and 6 December 2018.)
The plaintiff submitted that the discretion to award indemnity costs remains exceptional. The plaintiff pointed to the statement of Brennan CJ in Oshlack where his Honour said that costs were awarded to indemnify a successful party in litigation and not by way of punishment of an unsuccessful party.
The plaintiff submitted that, properly understood, the second defendant's submission that indemnity costs were justified arose only because of the combination of the plaintiff's earlier conduct of the proceedings and the notice of motion seeking leave to rely upon the further reports. In that regard, the plaintiff submitted that the earlier conduct of the proceedings was not relevant to the exercise of the discretion to award the costs of the plaintiff's notice of motion on an indemnity basis. To do so would have the effect of punishing the plaintiff for that earlier conduct. Such an award would go beyond providing the second defendant with a reasonable indemnity for its costs of the plaintiff's notice of motion.
The plaintiff submitted that the failure of the second defendant to give any notice or warning of the foreshadowed application for indemnity costs is a significant factor weighing against such an order being made. The plaintiff said that authorities such as Huntsman Chemical Co Australia Pty Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 at 249 make clear that a formal warning of an intention to claim indemnity costs make the awarding of such costs more likely.
[2]
Determination
In Oshlack Gaudron and Gummow JJ said at [44]:
It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a "solicitor and client" basis or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part.
Similarly, McHugh J, although dissenting in the outcome, said at [69]:
The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd, Devlin J formulated the relevant principle as follows:
No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.
"Misconduct" in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.
In Sydney City Council v Geftlick Tobias JA (with whom Mason P and Hodgson JA agreed) said at [90]:
Finally, in LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74, Young CJ in Eq, with whom Meagher and Hodgson JJA agreed (the latter adding some observations of his own), observed (at [108]) that the trial judge in that case had considered the decision of this Court in Nobrega v Trustees of the Roman Catholic Church of the Archdiocese of Sydney (No 2) [1999] NSWCA 133 where it was held that the test to be applied (in determining whether costs should be paid on an indemnity basis) was that the ordinary rule that costs on a party/party basis should only be departed from where the conduct of the party against whom the order is sought is "plainly unreasonable". At [119] his Honour concluded that he could see no reason why the Court should not continue to follow Nobrega on the issue of indemnity costs. So should this Court in the present case.
In my opinion, the plaintiff's conduct which led to the filing of her motion on 3 August 2018 and her subsequent conduct through her legal advisors in the conduct of that notice of motion exhibited the "relevant delinquency" or "misconduct" (as described in Oshlack) and was "plainly unreasonable" (as described in Nobrega v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 and followed in Geftlick. I accept that the matters identified by the second defendant, set out at [8] above, constitute relevant delinquency and misconduct.
In addition, a number of matters discussed in my earlier judgment support the conclusion that there has been relevant delinquency on the part of the plaintiff and that she and her legal advisors have behaved in a plainly unreasonable fashion. Those matters include, first, the failure of the plaintiff to comply with the guillotine order, made as it was by the Registrar after repeated failures by the plaintiff to comply with directions of the Court. Secondly, the report of Dr Chow was put forward as having been obtained in answer to the report of Dr Sinosich, but that proposition was subsequently denied by the plaintiff's solicitor when he gave his oral evidence, evidence that was quite inconsistent with what his affidavit had sworn.
Thirdly, the report of Dr Chow did not comply with the requirements of the Expert Witness Code and authorities on expert reports. That was subsequently accepted by those acting for the plaintiff. That in itself led to an adjournment, further delay and a modification of the application being made. It ought to have been apparent at the outset to those acting for the plaintiff that the report in its original form did not so comply.
Fourthly, the solicitor for the plaintiff who swore the affidavit to justify the application did not make himself available on two successive occasions when the matter was fixed for hearing. That led to two unnecessary adjournments of the motion. As it transpired, cross-examination of the solicitor was a crucial matter because he clarified that Dr Chow's report was never obtained as a response to that of Dr Sinosich, in the face of what had earlier been said in his affidavit and despite that being the basis of the application for leave in the first place. An associated matter was the failure of the plaintiff's solicitor to instruct Dr Chow properly, resulting in the need for an extended cross-examination about the instructions provided to Dr Chow.
I am satisfied that this delinquency and plainly unreasonable behaviour in relation to the motion caused unnecessary delay to the proceedings and expense to the second defendant.
I reject the submission of the plaintiff that her earlier conduct of the proceedings is not relevant to the exercise of the discretion to award costs of the notice of motion on an indemnity basis for a number of reasons. First, as I noted in my earlier judgment at [82], s 58 of the CPA provides that when the court makes any order for the management of the proceedings (and the order sought by the plaintiff on her motion was such an order), it must act in accordance with the dictates of justice. Relevant considerations include the degree to which a party has fulfilled its duties under s 56(3) and the degree of expedition with which that party has approached the proceedings, including the degree to which the party has been timely in its interlocutory activities. Those matters must be relevant to any costs order which results from the determination of any application for the management of the proceedings or any procedural order.
Secondly, s 56(5) enables the court to take account of any failure to comply with sub-s (3) when exercising a discretion with respect to costs.
Thirdly, s 98(1) of the CPA provides that costs are in the discretion of the Court and that the Court has full power to determine by whom and to what extent costs are to be paid. In the exercise of that discretion the matters listed in s 58(2)(b) must be relevant if they go to make up the dictates of justice in any given situation.
I do not consider that anything said by Kirby P in Huntsman Chemical stands in the way of indemnity costs being awarded in the present case. Justice Kirby said nothing more than "it would be preferable" if a warning was given that an application for indemnity costs would be made. I am entirely satisfied that if such a warning had been given in the present case it would not have made any difference to the approach of the plaintiff and her legal advisors in pursuing the application. If the plaintiff is to suggest that it would have made a difference, there ought to have been evidence put on to resist the making of an indemnity costs order for that reason. No such evidence has been filed.
It seems highly unlikely, of course, that the delinquency and plainly unreasonable conduct which I have found was that of the plaintiff personally. The proceedings are being conducted by lawyers who are likely to have taken procedural and interlocutory steps at their own initiative, albeit with the plaintiff's instructions. Section 99 of the CPA enables the Court to make costs orders against legal practitioners in the situations set out in sub-s (1) of that section. I do not consider it appropriate to make such an order, particularly because the lawyers concerned have not been given a reasonable opportunity to be heard as sub-s(2) requires. The amended costs order that I make will only refer to the parties. Who should ultimately be liable is a matter for determination between the plaintiff and her legal advisors.
[3]
Conclusion
Accordingly, I make the following order:
(1) I vary order 3 made by me on 21 December 2018 to order that the plaintiff is to pay the second defendant's costs of the motion on an indemnity basis.
[4]
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: 28 June 2019