HIS HONOUR: This is an argument about costs. This is the 21st year in which I shall have observed that nothing excites the zeal, the ardour and the passion of the legal profession than an argument about costs. The current proceedings were listed for hearing for five days. The hearing and submissions took ten days. I commenced giving judgment on the afternoon of Monday 1 June 2015, the morning having been spent in conducting a call over. I finished giving judgment at 12.25pm on Thursday 4 June 2015. The solicitors then acting for the parties advised me that they wished to have an argument about costs but they were not prepared to present that argument themselves. I then listed the matter for the convenience of counsel yesterday afternoon commencing at 2pm. The argument finished about 4.30pm. I have returned to the Bench this morning in order to rule on the question of costs.
On Thursday 4 June 2015 I gave a verdict and judgment for the plaintiff against the defendant for $12,890. When I returned to the bench yesterday I pointed out to counsel that I had omitted to include in the damages an item which was conceded as properly payable to the plaintiff if he recovered damages for false imprisonment, although the quantum of that out of pocket expense was disputed. Before embarking upon the hearing of the argument about costs I exercised my power under UCPR r 36.17 and set aside the judgment entered on 4 June 2015 and then gave judgment for the plaintiff for $18,590, the further sum of money being $5,000 plus interest of $700.
The plaintiff made both an offer of compromise, complying with the rules, in the sum of $10,000. Almost at the same time, the defendant made an offer pursuant to Calderbank v Calderbank [1975] 3 All ER 333 in the same sum. The offer of compromise was initially communicated by the plaintiff to the defendant at 4.53pm on 8 May 2015 by email. The Calderbank offer was made one minute later by the same means. Both the offer of compromise and the Calderbank offer were also served in more conventional ways by service through the document exchange.
The hearing commenced on Monday 18 May 2015. The offer of compromise and the Calderbank offer were made on the Friday before the Friday preceding the Monday on which the trial commenced. The offers were open for acceptance until 4pm on Friday, 15 May 2015, the Friday preceding the Monday on which the trial was listed for hearing. In other words, the defendant had available to it almost one week, that is, almost five working days, on which to seek instructions to accept or reject the plaintiff's offers. The plaintiff's offers were not accepted. There was implied rejection of those offers by the defendant's making a counter offer on Tuesday, 12 May 2015 at 3.18pm by facsimile transmission.
A submission has been made by the defendant that the offer of compromise was not open for a reasonable time. I must reject that submission. The question of the reasonableness of the time in which an offer of compromise is open for acceptance was discussed by Basten JA, with whom Giles and Tobias JJA concurred, in Kooee Communications Pty Limited v Primus Telecommunications Pty Limited (No 2) [2008] NSWCA 85 commencing at [15] and concluding at [21]. Commencing at [20] his Honour said this:
"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.
[21] In relation to the first factor, it should be accepted that by the day before the hearing, in commercial litigation involving experienced counsel and solicitors, the legal representatives would have been able to give the client an immediate assessment of:
(a) the approximate costs incurred to date;
(b) the likely length of the trial;
(c) the approximate amount of costs assessed on an indemnity basis if the matter proceeded to trial, and
(d) the most likely outcome, which may involve a range as to quantum.
It should also be accepted that someone with authority to bind the client would have been available to give instructions based on legal advice as to the preferable response."
The current proceedings could not be described as "commercial litigation." However, the Court has a pious expectation that the State of New South Wales is an experienced litigant and that as experienced solicitors and counsel had been retained the four matters discussed by Basten JA could be readily communicated by the legal representatives of the defendant to whoever it might be who gives instructions for the settlement or otherwise of cases of this nature. Clearly both the solicitors and counsel were preparing the matter and the prompt response by the defendant's solicitors to the plaintiff's offer of compromise indicates to me that time was available to the defendant to consider the whole case and to respond to the plaintiff's offer of compromise. The time specified in the offer of compromise for its acceptance was a reasonable time and I am unable to accede to the defendant's submission in that regard.
The defendant says, however, that this is not an appropriate case in which to award indemnity costs to the plaintiff commencing, as the defendant claims them, from 8 May 2015. The plaintiff's case involved four causes of action. As the case was opened by learned senior counsel for the plaintiff, the principal causes of action were false imprisonment and malicious prosecution. The torts of assault and battery and detinue were relatively minor. The plaintiff informally, during the evidence, abandoned the case in detinue and formally abandoned it in submissions. That was proper. There was no evidence of one of the elements of that tort. The cause of action in assault and battery was technical and I awarded damages for assault and battery in the sum of $500. I rejected outright the plaintiff's claim for malicious prosecution but held that the plaintiff's arrest was unlawful and that therefore the period of detention thereafter amounted to wrongful imprisonment and assessed compensatory damages as being $9,500 to which a sum was added for interest and to which later I added a sum on account of part of the plaintiff's costs of successfully defending the prosecution of him in the Local Court plus some interest on that sum, so that the total amount of damages amounted to $18,590. The plaintiff has bettered the offer of compromise.
One of the authorities to which I have been referred points out that to better the offer of compromise by some 13% was a significant advancement of the position adopted by the person making the offer. However, it must be borne in mind that many of the cases on the question of costs involve commercial litigation where millions of dollars are involved, and at the lower scale, hundreds of thousands of dollars. Here I am dealing with sums of only $10,000 and $18,590, not particularly large sums of money. Ordinarily cases of that nature would not come before this Court. However, the Local Court of New South Wales has no jurisdiction to hear and determine cases in proceedings for wrongful arrest, false imprisonment and malicious prosecution: Local Court Act 2007, s 33(1)(b). There are only two fora in which the plaintiff could prosecute all of his alleged rights, this Court and the Supreme Court. Although the amount of damages which the plaintiff recovered was relatively small, he was forced by the legislation to bring his claim in this Court and that, of course, means that the normal process of this court must be engaged and acted upon.
The defendant says, however, that under UCPR r 42.14, the Court has a discretion contained in the opening clause of subrule (2). The interpretation of that rule has been much discussed and is the subject of conflicting dicta. The first dictum to which I should refer is that of Hodgson JA in Nominal Defendant v Hawkins [2011] NSWCA 93; (2011) 58 MVR 362. The relevant discussion commences at [47] of the judgment. His Honour went on to say this:
"56. I accept the submission for Mr Hawkins that, despite the change of wording in the rule, it is not enough to justify ordering otherwise for a person who refused an offer of compromise to show that he/she acted reasonably in doing so. Generally, exceptional circumstances are required.
57. I note that in the Uniting Church v Takacs (No 2) [2008] NSWCA 172, Basten JA (in dissent) suggested at [33] that the justification for making orders otherwise in relation to indemnity costs should properly be found in considerations that would be deemed relevant for the purpose of otherwise ordering in relation to the general rule that costs follow the event. I think that may set the standard too high; and it does seem a little at odds with what was said and done in South Eastern Sydney Area Health Service v King ."
The matter was revisited in Barakat v Bazdarova [2012] NSWCA 140 by Tobias AJA which whom Bathurst CJ and Whealy JA concurred. The relevant part of the judgment commences at [42], where after reviewing, including Nominal Defendant v Hawkins, his Honour went on to say this:
"48. There appears therefore, to be a conflict of opinion in this Court as to whether a court can otherwise order for the purpose of the indemnity costs rule in the absence of exceptional circumstances. The textual difference between the old District Court rule in Pt 39A, rule 25(4), (4A) and (6) and the current UCPR r 42.14(2), 42.15(2) and 42, 5A(2) highlighted in Regency Media would seem to favour the appellants' submission in the present case. But the exceptional circumstances requirement was adopted with respect to SCR Pt 52A.22(4) which is essentially in identical terms to UCPR r 42.14(2).
49. I note that the issue has been flagged in three first instance decisions, namely, by Davies J in Jovanovski v Billbergia Pty Ltd (No 2) [2010] NSWSC 617 at [5]; Gzell J in Dargan v United Super Pty Ltd (No 2) [2011] NSWSC 1527 at [4]; and by Ward J in George v Webb [2012] NSWSC 86 at [39] - [40]. However, each of those cases was able to be decided without having to deal with the issue. Regency Media has also been referred to in this Court on three recent occasions but not with respect to the issue raised at [15] of the judgment in that case.
50. In my view it is unnecessary in the circumstances of the present case to confuse the issue further by determining which line of authority to follow, that is, whether exceptional circumstances are required before the Court may "otherwise order", for the purpose of UCPR r 42.14(2). This is because I do not accept that any of the circumstances relied upon by the appellants constitute exceptional circumstances or, for that matter, circumstances which, even though not exceptional, would justify depriving the respondent of indemnity costs."
More recently McColl JA with whom Gleeson JA and Sackville AJA concurred, said in Leach v The Nominal Defendant [2014] NSWCA 391 this:
"46 There is a conflict in decisions of this court as to whether exceptional circumstances are required before the court may exercise the discretion to "order otherwise" in relation to an unaccepted offer of compromise or whether that discretion has to be exercised having regard to all the circumstances of the case: Commissioner of Taxation v Moodie [2014] NSWCA 59; (2014) 282 FLR 453 (at [64]) per McColl JA.
47. An "exceptional circumstances" test could be seen as a gloss on the language of the relevant rules their text does not admit. That suggestion was discounted by Hely J in relation to the like power to "otherwise order[s]" in O 23, r 11(4) of the Federal Court Rules 1979 (Cth) (as then in force): Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281 (at [17]). Rather, his Honour was of the view that such language merely "convey[s] that the prima facie position should only be departed from for proper reasons which, in general, only arise in an exceptional case". In my view his Honour's observation sufficiently encapsulates the approach to be adopted in the present case.
48. It is impossible exhaustively to state the circumstances in which the court's discretion to "order otherwise" might be exercised: New South Wales Insurance Ministerial Corporation v Reeve (at 102). The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: Morgan v Johnson (at 582). However that does not mean that reasonableness of the rejection is an irrelevant consideration: see Seven Network Ltd v News Ltd (at [64] - [67]); Uniting Church in Australia Property Trust (NSW) t/as Northaven Retirement Village v Takacs (No 2) [2008] NSWCA 172 (at [15]) per Hodgson JA (McColl JA agreeing); cf Basten JA (at [32] - [33])."
That case concerned a "walk away offer", an offer where the offeror expresses its willingness to settle on the ground that each party bears its own costs. The current matter was not one of those. In that case her Honour held that the offer did involve an element of compromise but only on the question of costs. It offered the appellant nothing by way of damages on account of what were obviously severe injuries. Her Honour observed that it did not serve the public policy of encouraging settlement and therefore that it was not unreasonable for the appellant not to accept the offer.
It appears to me that in construing the discretion contained in subrule (2) that I should be guided by the observation of Hodgson JA in Nominal Defendant v Hawkins that the justification for making orders otherwise in relation to indemnity costs should probably be found in considerations that would be deemed relevant for the purpose of otherwise ordering in relation to the general rule that costs follow the event. To gloss the words by stating that the power should only be used in exceptional circumstances or in an exceptional case is applying verbiage applicable to earlier versions of the rule which required "exceptional circumstances." There is nothing in the current rule to suggest that there is any such restriction.
The case law is clear that where there are severable issues and a party is unsuccessful on some of those severable issues, the party which raised those issues should pay the other party's costs, even if the first party was successful in obtaining a judgment in its favour. Learned counsel for the defendant, Mr Hutchings, referred me to the decision inter alia of Barrett J (as he then was) in LMI v Baulderstone (No 2) [2002] NSWSC 72 in which his Honour said this:
"34. Caution must be exercised in seeking to split up cases into successful and unsuccessful components from the parties' respective viewpoints. That caution is enjoined in the judgment of Mahoney JA in Waters v P C Henderson (Australia) Pty Ltd (unreported, NSWCA, 6 July 1994). Such an exercise may, however, be undertaken in an appropriate case and, in that respect, it is pertinent to note the following observations of Hamilton J in Madden v McConnell [2001] NSWSC 1051 (13 November 2001) concerning the general rule that costs should follow the event:
'This rule will be departed from only for good reason. In general terms, the fact that the moving party obtains only some of the relief originally sought does not detract from the proposition that the event is in the moving party's favour, albeit it fails on other issues. There is a rule, however, that, where there are quite discrete issues and the time taken on each at the hearing can be identified or realistically estimated, then the costs may flow in opposite ways according to the different events and an order may be made which will encompass those opposing flows: see generally Supreme Court Rules 1970 Pt 52 r 11; Hughes v Western Australian Cricket Association (1986) ATPR 40-748; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261; Waters v P C Henderson (Australia) Pty Ltd 6 July 1994 NSWCA unreported; Ronnoc Finance Ltd v Spectrum Network Systems Ltd 19 November 1997 NSWSC Santow J unreported; and my own decisions in Domino Hire Pty Ltd v Pioneer Park Pty Ltd (In Liq) [2000] NSWSC 313; JDM Investments Pty Ltd v Todbern Pty Ltd [2000] NSWSC 432; Ell v Cisera [2000] NSWSC 961; and Cumming v Sands [2001] NSWSC 507.'
35. Also apposite are the following observations of Toohey J in Hughes v Western Australian Cricket Association (1986) ATPR 40-748:
'1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v Godfrey [1920] 2 KB 47.
2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v Farquhar [1893] 1 QB 564.
3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the party's costs of them. In this sense, 'issue' does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v Lombardi (1975) 13 SASR 4 at 12.'
36. I refer also to what was said by Gummow, French and Hill JJ in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261:
'Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation. His Honour's determination that in this case there should be no order as to costs was explicitly based upon his rough assessment of the time occupied at trial by the various issues in dispute. No reason for overturning the exercise of that discretion has been demonstrated and the court is satisfied that the appeal fails on this ground also.'
37. Also instructive is the following comment by Hodgson CJ in Eq in Permanent Trustee Aust Ltd v FAI General Insurance Co Ltd (unreported, NSWSC, 3 June 1998):
'... I am not dealing here with a situation where there are separate claims for a different relief, such as two claims by a plaintiff for different relief, or a claim by a plaintiff and a cross-claim by a defendant. In those cases, it is generally fairly clear that the overall winner will get the general costs of the action, but will be liable to pay costs to the extent that they were increased by the separate claim on which he or she was unsuccessful.'
38. There is some question whether the "overall winner" should suffer an order for costs in respect of the issue on which success was not achieved unless that issue was raised and pursued unreasonably. In Mok v Minister for Immigration (No 2) [1993] FCA 650; (1993) 47 FCR 81, Kealy J said:
"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."
39. In Rosniak v Government Insurance Office (1997) 41 NSWLR 608, however, Mason P (with whom Clarke AJA agreed), referring to this statement in Mok, said that "no such principle exists in the sense of a fixed proposition of law". His Honour continued:
'In a proper case, and this was one, the party that is successful overall may be ordered to pay the costs of a discrete issue.'
40. The Court of Appeal's later treatment of the same issue in Westpac Banking Corporation v Tanzone Pty Ltd [2000] NSWCA 77 contains no suggestion that the qualification suggested in Mok should be applied and I do not regard the comments of Stein JA (with whom Davies AJA agreed) in Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Coy Pty Ltd [2001] NSWCA 461 (12 December 2001) about what was said by Hodgson CJ in Eq as supporting any such qualification."
Mr Hutchings pointed out that the plaintiff was wholly unsuccessful in his claim for damages for malicious prosecution and was also wholly unsuccessful in his claim for both aggravated damages and exemplary damages. Those observations are correct.
The plaintiff's case raised substantial allegations of misconduct against members of the New South Wales Police Force, which allegations were entirely unsuccessful. For example, par 10 of the statement of claim pleaded this:
"10. The information was laid with actual malice on the part of the defendant, by the police officers referred to above [Constable Irwin and Probationary Constable Trifunovic] together with Sergeant Drury, and without reasonable and probable cause (in relation to the disobey request to stop for breath test, and drive with a mid-range concentration of alcohol charges).
Particulars of Malice
(a) The defendant by the officers referred to above had actual knowledge that it was unlawful to arrest the plaintiff.
(b) On or about 14 July 2011, Annette Woods [sic], a solicitor then acting for the plaintiff and then in the employ of LAC Lawyers, made representations in writing as to the absence of any prospect of success in relation to the prosecution referred to above to the commander of the Rose Bay Local Area Command ('the representation').
(c) Having regard to the representations, the defendant failed to seek to withdraw the prosecution.
(d) The dominant purposes of the Officers Irwin and Trifunovic in causing the prosecution to be commenced and/or continued were:
(i) to punish the plaintiff:
l for what they perceived to be his mistreatment of the police at the counter of the Rose Bay Police Station at approximately 2.35am on 5 June 2011
l for his complaint about Officers Irwin and Trifunovic on and after 5 June 2011 until 3 February 2012
l for the complaints made by John Tanner arising out of the events of 5 June 2011 until 3 February 2012
(ii) to vindicate Officer Irwin's and Officer Trifunovic's conduct in arresting, charging and prosecuting the plaintiff.
The dominant purpose of Officer Drury in prosecuting the plaintiff (including by not withdrawing the prosecution) was to vindicate the conduct of Officers Irwin and Trifunovic."
In the principal judgment I accepted that the actual prosecutor was Constable Sean Irwin and that he acted in good faith on his view of the law in which he was supported by Sergeant Michael Lehmann, Inspector Andrew Sipos, and Police Traffic Services from whom advice had been obtained by Inspector Sipos. I rejected entirely each of the allegations of malice and the absence of reasonable and probable cause. I pointed out in the principal judgment that there was not a scintilla of evidence concerning Sergeant Drury whose only role was to act as if he were a legal practitioner presenting the case prosecuted by Constable Irwin in the Local Court. The allegations of such malice are grave allegations.
In his claim for aggravated damages, the plaintiff delivered these particulars:
"(a) the defendant refused to provide access to toilet facilities to the plaintiff
(b) the defendant required the plaintiff to remain in a prison cell covered in human urine of a previous inmate
(c) failure to properly respond to complaints made as to the conduct pleaded herein."
I accepted that there may have been some delay in providing toilet facilities to the plaintiff but that the plaintiff's evidence in that regard was exaggerated, overstated or hyperbolic. I accepted that there may have been a small amount of urine on the floor of the dock at the Waverley Police Station, but the plaintiff's evidence in that regard was exaggerated, overstated or hyperbolic. There was no evidence given of any complaint by the plaintiff about the urine on the floor of the dock. He did state that he asked three different people for access to a toilet and that it was given to him after he had submitted to breath testing, but he was able to hold onto the contents of his bladder while he was waiting. I did not accept that those matters entitled the plaintiff to aggravated damages.
In his claim for punitive or exemplary damages, the plaintiff delivered these particulars:
"(a) The defendant acted in contumacious disregard of the plaintiff's rights and the plaintiff was greatly distressed by the defendant's acts and [omissions] pleaded herein."
I was not satisfied on the balance of probability that either Constable Irwin or Probationary Constable Trifunovic or indeed the custody sergeant, Sergeant Savins, acted with any contumacious disregard of any of the plaintiff's rights.
I ought to have added to the particulars delivered for aggravated damages that this matter added on the morning of the first day of hearing:
"(d) Use of abusive and insulting language by Officers Irwin and Trifunovic at or around the time of the arrest of the plaintiff."
The allegation was that Constable Irwin and Probationary Constable Trifunovic insulted the plaintiff's life partner, Mr John Tanner, by calling him a "fag", an insulting term for a male homosexual. I rejected those allegations. The use of such offensive language towards members of the public would, in my view, be not only uncivil conduct but, as far as the police were concerned, evidence of vilification of a member of the public on account of his sexuality and could amount to unlawful discrimination.
Time was spent at the hearing because of the allegations which were unsuccessful. For example, the first witness called by the defendant was Ms Natalie Wynn-Williams, a former constable of police, who was working at the Rose Bay Police Station on 5 June 2011 and was one of those who dealt with the plaintiff and Mr Tanner at the counter of the Rose Bay Police Station in the early hours of 5 June 2011. Her evidence commenced at 3.33pm on Wednesday 20 May 2015 and concluded on that day. The third witness called by the defendant was Constable Sarah Walker Lear who was sworn at 2.50pm on 21 May 2015 and whose evidence took the rest of that day. It was only necessary to call all those witnesses because of the interaction between the plaintiff and police at the Rose Bay Police Station prior to Constable Irwin's observing the plaintiff's driving a motor vehicle on New South Head Road and his deciding to pull the plaintiff over because he had made an illegal right hand turn. When the plaintiff failed to stop, Constable Irwin formed the opinion that the plaintiff may have been drinking and then driving, and that is why he failed to pull over. If the only issue had been whether the arrest was lawful and the extent of the false imprisonment, it would not have been necessary to call either of those witnesses.
Substantial amounts of time were taken up in discussing what happened at the Rose Bay Police Station, viewing closed circuit television footage taken at the Rose Bay Police Station and pursuing the suggestion that there was some form of collusion by members of the Rose Bay LAC to "set up" the plaintiff by inviting him to drive when they observed that he had been drinking and was intoxicated and then to charge him with a PCA offence. I rejected that suggestion or innuendo of such collusion. Much time was also expended in pursuing the question of the "gay slurs" which were the subject not only of oral evidence but also documentary evidence.
I accept that a substantial part of the hearing was taken up by pursuing issues upon which the plaintiff was unsuccessful. Theoretically the plaintiff ought pay the defendant's costs thrown away in the defendant's successfully resisting the plaintiff's claims for malicious prosecution and for aggravated and punitive damages. However, such splitting up of the case is often difficult and especially is that so in a case of this nature, where the issues upon which the plaintiff failed raised substantive questions concerning the credit of all concerned and where the decision on such issues determined questions of credit, which were then directly relevant to issues in the case on which the plaintiff was successful. To me it would appear to be an otiose exercise to, for example, order the defendant to pay two thirds of the plaintiff's costs and to order the plaintiff to pay one-third of the defendant's costs, but then to allow the plaintiff's costs on an indemnity basis from the 8 May 2015.
In all the circumstances it appears to me that I should order otherwise pursuant to the first clause of UCPR 42.14(2). I decline to make an order for indemnity costs but allow the plaintiff his ordinary costs of the proceedings. I accede therefore to the submissions put to me by Mr Hutchings on behalf of the defendant who did not seek an apportionment of costs but merely that the Court make "an otherwise order" within the meaning of UCPR r 42.14 as in contained in [44] of his written submissions on costs, which were MFI "C2".
The order of the Court is that subject to all earlier orders as to costs the defendant is to pay the plaintiff's costs of the proceedings on the ordinary basis. Such costs are to include the costs of the costs application.
Any other orders sought?
ANDELMAN: No, your Honour.
WONG: No, your Honour.
[2]
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 August 2015