Seary v White

District Court of NSW|2008-02-15|Before: Mr P

CITATION: Seary v White (No 5 - Costs) [2008] NSWDC 21

Defendant to pay the plaintiff's costs of the substantive proceedings, on the ordinary basis, incurred before 11.00am on 20 June 2007, together with any additional costs incurred by her by reason of the adjournment of the hearing from 24 August to 14 November 2007. DECISION: 2. Plaintiff to pay defendant's costs of the substantive proceedings, on an indemnity basis, incurred after 11.00am on 20 June 2007, excluding any additional costs incurred by him by reason of the adjournment of the hearing from 24 August to 14 November 2007 3. Plaintiff to pay one-half of the defendant's costs of the costs applications, on the ordinary basis. The plaintiff is to bear her own costs of the costs applications.

Motor Accidents Compensation Act 1999: s 151, s 152 LEGISLATION CITED: UCPR: r 20.26 and r 42.15 Civil Procedure Act 2005: s 56(1)

Brittain v Commonwealth (No 2) [2006] NSWSC 528 at [12] Commonwealth of Australia v Smith [2005] NSWCA 478 at [217] Cook v Hawes [2002] NSWCA 120 Dunstan v Rickwood (No 2) [2007] NSWCA 266 at [50] Fordham v Fordyce [2007] NSWCA 129 at [50] G R Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263 Hally v Dennis (1955) 95 CLR 661 at 664 Keddy v Foxall [1955] VR 320 at 323-4 Knight v Clifton [1971] Ch 700 Lahoud v Lahoud [2006] NSWSC 126 at [23] Legal Services Commissioner v Dempsey [2007] QSC 270 at [30] - [33] Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19] CASES CITED: Lollis v Loulatzis [2008] VSC 35 at [29] London Welsh Estates Ltd v Phillip (1931) 144 LT 693 Maitland v Fisher [No 2] (1992) 27 NSWLR 721 at 725 Ng v Chong [2005] NSWSC 385 at [13] - [15] Oshlack v Richmond River Council [1998] HCA 11 at [40] and [69] Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 13 at [100] Peter Willis v Health Communications Network Ltd (No 2) [2008] NSWCA 2 at [20] Re: Nardell Coal Corporation (In liq) v Hunter Valley Coal Processing [2003] NSWSC 642 at [145]. San v Rumble (No 2) [2007] NSWCA 259 at [13] - [14] South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [90] Smith v Grant [2006] NSWCA 244 at [79] TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd [2008] NSWCA 9 at [95] Vale v Eggins (No 2) [2007] NSWCA

PARTIES: Elizabeth Anne Seary (Plaintiff) Glen White (Defendant)

COUNSEL: Mr P Webb SC and Mr Sewell (Plaintiff) Mr K Rewell SC (Defendant)

SOLICITORS: Wyatt Attorneys (Plaintiff) TL Lawyers (Defendant)

JUDGMENT Introduction

Elizabeth Seary was injured in a motor accident on 13 November 2002, and commenced proceedings against the defendant alleging negligence. The defendant admitted breach of duty, and the hearing of her claim proceeded before me, limited to the assessment of damages, over some 10 days, namely 18, 19, 20, 21, 22 June, 23, 24 August, and 14, 15, 16 November 2007. I delivered Reasons for Judgment on 8 February 2008, in which the damages were assessed. On 15 February 2008 I entered a verdict in her favour for $569,912.00 and directed the entry of judgment accordingly. Counsel for the parties then made their respective submissions as to the proper order for costs.

Usually, the plaintiff would be entitled to an order for costs in her favour: r 42.1 of the UCPR. However, the defendant sought a departure from the usual rule that costs follow the event because he served an offer of compromise in the sum of $600,000.00 on 19 June 2007, the second day of the trial. Because the judgment was less favourable than the offer, the defendant sought orders awarding him indemnity costs from 11.00am on 20 June 2007, and limiting the plaintiff's costs to the period prior to that time, on the ordinary basis: r 42.15.

The plaintiff opposed any special order, submitting that the offer of compromise was not validly made, or alternatively, that the court should exercise its discretion in her favour and order costs otherwise than as provided for by r 42.15.

The parties agreed that the question of costs in this matter falls to be determined under s 152 of the Motor Accidents Compensation Act 1999, and not under s 151, such that the rules of court (in this instance r 20.26 and r 42.15) apply in respect of the defendant's offer of compromise: cf San v Rumble (No 2) [2007] NSWCA 259 at [13] - [14].

The issues for determination in relation to costs are:

· whether the offer of compromise was exclusive of costs: r 20.26(2). · whether the offer of compromise was left open for such time as was reasonable in the circumstances: r 20.26(7)(b). · alternatively, if there was a valid offer of compromise, whether there was conduct on the part of the defendant to justify displacement of the presumption under r 42.15(2) such that there should be some other order.

Was the offer of compromise exclusive of costs? 6. The defendant's Offer of Compromise is Annexure B to the affidavit of Simon Chadwick made on 14 February 2008. It is unremarkable save for Clause 2b. The relevant clauses provide:

"The Defendant offers to compromise the Plaintiff's claim on the following terms:

The Defendant will consent to judgment for the Plaintiff for Six Hundred Thousand Dollars and no cents ($600,000.00) plus costs as agreed or assessed.

The defendant will deduct from the amount of the Judgment: a. Deduction will be made for payment by the Defendant or its Insurer to, for or on behalf of the Plaintiff pursuant to Section 45 of the Motor Accidents Act 1988 or Section 83 of the Motor Accidents Compensation Act 1999 or any ex gratia basis. b. The amount of any fee paid or payable to a medical practitioner as a result of non attendance by the Defendant (sic) at appointments arranged on behalf of the Defendant or his Insurer.

Interest not to run until twenty-eight (28) days after judgment or until twenty-eight (28) days after receipt by the defendant of a signed Authority to Receive whichever is the later.

This offer to remain open until close of business on Friday 22 June 2007."

No point was taken by the plaintiff that Clause 2b was meaningless because it referred to non-attendance by the defendant, not the plaintiff.

The plaintiff does contend, however, that by reason of Clause 2b, the defendant's offer of compromise was not made 'exclusive of costs' as required by r 20.26(2).

The defendant submitted firstly that Clause 2b did not offend the prohibition in r 20.26(2), because all that rule requires is that the offer not be expressed to be 'inclusive of costs'.

The rationale for the rule is well understood, it being essential that a plaintiff knows exactly how much the offer is in clear and unequivocal terms, and so that the court if subsequently called upon to adjudicate on the fairness of the offer can compare it with the amount of the judgment. The plaintiff in the present case could be in no doubt as to the amount of the offer, and indeed made no complaint to or enquiry of the defendant about the offer at the time. The plaintiff in fact made a counter-offer during the period the defendant's offer.

It is not, however, for a plaintiff to make enquiries. The responsibility lies upon the defendant to ensure that any offer made is clear and unequivocal. Nor can 20.26(2) be read in the way for which the defendant contends. The rule is very clear. It does not say that an offer 'must not be made inclusive of costs'. It says that an offer 'must be exclusive of costs'. Nor is it necessary that the costs be the plaintiff's costs, as opposed to a deduction for costs incurred by the defendant.

Costs payable in or in relation to any legal proceedings include fees, disbursements, expenses and remuneration: see the definition in s 3 of the CPA. As to what constitutes a disbursement, see Legal Services Commissioner v Dempsey [2007] QSC 270 at [30] - [33].

If indeed the defendant had incurred a liability for a disbursement as a result of non-attendance by the plaintiff at any medical appointment arranged, then in my view the defendant's offer would not have been exclusive of costs. However, there was no evidence before me of any non-attendance, and it follows that Clause 2b was in fact otiose.

The plaintiff can have been in no doubt, at the time of the offer, as to the amount of the offer. She well knew that the offer was $600,000.00 plus costs. There were no amounts to be deducted from that sum for costs, and I find, therefore, that the defendant's offer was exclusive of costs as required under r 20.26(2).

Were it to be held, contrary to my view, that the defendant's offer was not exclusive of costs, I would treat the Offer of Compromise as a Calderbank offer: Dunstan v Rickwood (No 2) [2007] NSWCA 266 at [50]; Cook v Hawes [2002] NSWCA 120. Unlike an offer of compromise, a Calderbank offer does not give rise to a presumption that indemnity costs should be awarded: South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [90]. Thus, indemnity costs do not flow as a matter of course and it must be demonstrated that rejection of the offer was 'plainly unreasonable' in all the circumstances of the case: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19], Peter Willis v Health Communications Network Ltd (No 2) [2008] NSWCA 2 at [20], including the period allowed for acceptance: Ng v Chong [2005] NSWSC 385 at [13] - [15].

In my view, a clause in a Calderbank offer such as Clause 2b of the Offer of Compromise would be insufficient to justify rejection of the offer. The nature of the complaint is trivial and inconsequential in the circumstances. It had no impact on the plaintiff's decision. If it were a relevant consideration, a quick enquiry would have provided the answer. The failure of the plaintiff to accept the offer was not rendered reasonable by the insertion of Clause 2b, and I find that it would have been plainly unreasonable to reject the offer on the basis of Clause 2b.

Was the offer of compromise left open for a reasonable time?

The offer of compromise was made some time between 11.00am and 1.00pm on Tuesday 19 June 2007, being the second day of the trial. It was expressed to remain open until close of business on Friday 22 June 2007 (Clause 5) of the Offer of Compromise). The plaintiff therefore had the balance of Tuesday, all of Wednesday, all of Thursday and till close of business on Friday 22 June 2007 to accept the offer, something in excess of 3 days.

It was submitted for the plaintiff that the offer was not left open for a reasonable time in the circumstances. The written submissions stated:

"In the context of this case, which involved conflicting medical evidence on the issue of traumatic brain damage, that period of time was far too short. The offer itself was also made at a time when the Defendant had not served all his reports.

At the time the offer was made, the Defendant had indicated that he would be obtaining at least a further report from Dr Reid. Accordingly, the Offer of Compromise put the Plaintiff in the position of only having some three days to consider it at a time when the offer would lapse prior to all of the Defendant's evidence being served."

At the time of the offer, the defendant's case was well known to the plaintiff and her legal advisers and she did not need to await service of the further reports from Dr Reid or anyone else to be aware of the case made against her. Indeed the case the plaintiff was required to meet had been known for some time. Her contention that she had suffered from traumatic organic brain damage resulting in permanent cognitive defects was in issue prior to the commencement of proceedings, and during the prior period when her claim was in the CARS system. The medical evidence upon which she relied, in particular that of Dr Teychenné and Dr Rowe, was squarely confronted by the evidence served by the defendant, in particular that of Dr O'Neill and Dr Reid. I do not accept that the period for which the defendant's offer was left open was unreasonable because further expert medical evidence was to be served.

The plaintiff's written submissions went on to compare the 28 day period for offers made 2 months or more before the commencement of the trial, and to complain that the defendant failed to make the offer earlier, or later, after service of his further evidence. The written submissions were supplemented by oral submissions from senior counsel for the plaintiff who said it was a busy week, the court sat 'long hours' and everyone was tired and emotional, not just the legal representatives, but also the plaintiff and her tutor.

In my view these submissions also lacked merit. I pause here to observe that the plaintiff was represented not just by senior counsel, but also by junior counsel, instructed by a competent and experienced solicitor. The plaintiff was accompanied at all times by her husband, and at least for part of the time during that week by members of her wider family. No request was made to extend the period of the offer. A comparison of the 28-day period is in my view unhelpful and it is a matter for a defendant when an offer of compromise is made and for how long it is left open, provided the time is reasonable in the circumstances.

I am unable to accept that those involved were not in a position to reflect on the offer, give it mature consideration, consider and advise on it, and decide whether or not to accept it, within 3 days. The fact that a counter-offer was made in that period militates against the proposition.

For these reasons I find that the defendant's offer of compromise was left open for a period that was reasonable in the circumstances.

Should the presumption under r 42.15(2) be displaced? 24. It follows that I am satisfied the defendant's offer of compromise was valid, such that the presumption under r 42.15 arises, to the effect that unless the court orders otherwise, the plaintiff should pay the defendant's costs on an indemnity basis from 11.00am on 20 June 2007, and defendant should only pay the plaintiff's costs for the period prior to that time, on the ordinary basis. The plaintiff submits that I should exercise my discretion and make some other order.

In my view, the exercise of the discretion under r 42.15(2) is simply the mirror image of that under r 42.1, and the same principle applies. The principle is that the presumption will only be displaced where there has been some sort of disentitling conduct on the part of the successful party: Oshlack v Richmond River Council [1998] HCA 11 at [40] and [69]; G R Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263. The disentitling conduct does not necessarily need to amount to misconduct, and may simply be any conduct 'calculated to occasion unnecessary expense': Keddy v Foxall [1955] VR 320 at 323-4. The court may have regard to the particular circumstances of the case, including the evidence adduced, the conduct of the parties and the ultimate result: Knight v Clifton [1971] Ch 700; London Welsh Estates Ltd v Phillip (1931) 144 LT 693; Hally v Dennis (1955) 95 CLR 661 at 664.

The principle is consistent with the overriding purpose in the application of the rules to facilitate the just, quick and cheap resolution of the real issues in proceedings: s 56(1) Civil Procedure Act 2005. It was aptly put recently by the Supreme Court of Victoria in Lollis v Loulatzis [2008] VSC 35 at [29], as follows:

"In my view, that principle is particularly applicable in light of the trend, in recent years, for the trial of cases to take an unduly long period of time to complete. As the consequential burden of costs to all parties is increasing exponentially, it behoves trial judges to be conscious of the principle that a losing litigant ought not to be required to bear that portion of the successful party's costs which is attributable to conduct of the successful party which has unduly protracted the length of the trial."

Thus, concepts such as 'exceptional circumstances' and 'substantial injustice' are no longer apt. Nor is it relevant that the litigation involved a high degree of difficulty, complexity or novelty: Lahoud v Lahoud [2006] NSWSC 126 at [23]; or that there were 'numerous imponderables' such as were referred to in Maitland v Fisher [No 2] (1992) 27 NSWLR 721 at 725. Litigation is indeed 'inescapably chancy'. The simple fact is that this plaintiff took the risk and lost. The proposition may be tested by asking whether, had there been no offer of compromise, the plaintiff would be entitled to costs for the whole of the trial, given that she lost on a discrete issue that consumed a large proportion of the hearing time. The answer is no: Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 13 at [100].

The plaintiff's first submission in support of the contention that I should exercise the discretion in r 42.15(2) in her favour was based on the proposition that the period for acceptance of the defendant's offer of compromise was unreasonably short. I have already considered and rejected that proposition.

The next submission was that the defendant obtained further medical reports subsequent to the expiration of the offer, which changed the defendant's case, or was fresh evidence that enhanced the defendant's case, such that the offer should have been revived once that further evidence was served. Reference was made to a decision of the Court of Appeal in Vale v Eggins (No 2) [2007] NSWCA. I observe firstly that Vale was a decision made under the old rules of this court relating to offers of compromise. The new Uniform Civil Procedure Rules are substantially different. The decision in Vale is in my view important in the context of the new rules as an example of relevant disentitling conduct on the part of a successful party that justifies displacement of the presumption. In that case the defendant's solicitors failed to serve medical reports in their possession until after the Offer of Compromise had lapsed. An expert's report on liability was also obtained and served after expiry of the offer of compromise, thus requiring the plaintiff to meet a different case. The Court regarded these circumstances as sufficient to justify making some other order, notwithstanding the plaintiff recovered a judgment less favourable than the offer of compromise.

This case was quite different. The subsequent reports of Dr O'Neill and Dr Reid did not change the nature of the defendant's case. That they enhanced the defendant's case is not, in my view, a circumstance justifying the exercise of the discretion.

The plaintiff's next contention was that the defendant, by its conduct of the defence, prolonged the proceedings. There were a number of intertwined complaints:

· the defendant was at fault by not having earlier obtained and served a report from Dr Reid dealing with the methodology used by Dr Rowe for psychometric testing, a matter of contention at the trial. The report was only obtained on 21 August 2007, thus leading to the first adjournment. · additional hearing time was required because the defendant wished to call Dr O'Neill and Dr Reid to give oral evidence, when the plaintiff had not required their attendance for cross-examination and the plaintiff should not be required to pay for that 'indulgence'. · Dr Reid was not available to give evidence at the time of the trial because he was overseas, which necessitated an adjournment of the hearing after the fifth day, 22 June 2007. · when the hearing resumed on 23 August 2004, and Dr Reid and Dr O'Neill gave their oral evidence, senior counsel for the plaintiff was not in a position to cross-examine them because their new reports were only served a matter of days before the resumed hearing. Thus, a further adjournment was required to enable the plaintiff's team to prepare for cross examination whereupon Dr O'Neill and Dr Reid came back to court for that cross examination on 14 and 15 November 2007.

I deal first with the proposition that allowing the defendant to call Dr O'Neill and Dr Reid to give oral evidence amounted to an indulgence. I disagree. It was simply an exigency of adversary litigation. Indeed, having regard to the conflicting medical evidence on the central issue in the proceedings, it was important that the key witnesses be assessed first hand, in the witness box, rather than on the papers, particularly having regard to the attacks each party made on the other's experts. But even if it were somehow to be categorised as an indulgence, it was not the sort of indulgence that would justify displacement of the presumption: Fordham v Fordyce [2007] NSWCA 129 at [50], Smith v Grant [2006] NSWCA 244 at [79]; Brittain v Commonwealth (No 2) [2006] NSWSC 528 at [12]; Commonwealth of Australia v Smith [2005] NSWCA 478 at [217]; Re: Nardell Coal Corporation (In liq) v Hunter Valley Coal Processing [2003] NSWSC 642 at [145].

I accept that the calling of Dr O'Neill and Dr Reid to give oral evidence involved extra hearing time, but no additional hearing time was required by reason of any of the other matters about which the plaintiff complains. In this regard, I agree with the defendant's oral submissions that there was no duplication of evidence or other waste of time, and the trial simply proceeded as it would otherwise have done if it had continued. Some of the cross-examination was long and tortuous, but this comment may be levelled at senior counsel for both parties, and none of it was inappropriate or I would have intervened at the time.

It seems likely, however, that both parties incurred additional costs by reason of the adjournments and I need, therefore, to spend a little time reviewing why it was the adjournments were necessitated.

Sometimes things look different in hindsight. But in this case I have the benefit of my own contemporaneous reasons for the two adjournments, as set out in my interlocutory judgment of 23 August 2007. I there said:

The trial in these proceedings commenced on 18 June 2007 and then proceeded for five days until 23 June 2007 when I adjourned the matter part-heard until today.

The reason the hearing has been split in this way was because of late reports served by the plaintiff in the week prior to the trial as to which it was appropriate the defendant should have time to consider and meet, combined with the unavailability of one of the doctors, Dr Reid, overseas or about to go overseas.

It was intended, on resumption today, that the defendant would lead such further evidence as it wished to call to meet the matters raised in the reports served late by the plaintiff that were not raised in earlier reports.

As part of the arrangement the defendant undertook to promptly serve reports dealing with the evidence it wished to call in response to the new matters raised in the plaintiff's late reports.

The defendant served two reports. A report from Dr O'Neill dated 15 August 2007, and a report from Dr Reid dated 21 August 2007. Unfortunately these reports have only been served within the past few days.

The plaintiff submits that the defendant should not be able to rely on the reports or lead any evidence as to matters raised in them. It does not otherwise require those doctors for cross-examination on their earlier reports.

Having listened to all the argument and considering the medical evidence tendered previously in the trial and reading the two reports concerned I am satisfied, firstly, that each of these two new reports is legitimately in response to the content of the reports served late by the plaintiff before the trial. In this regard there was material in those late reports which it is legitimate to allow the defendant the opportunity to respond to in this way.

I am further satisfied that there is nothing in the two reports served by the defendant by way of material which is new or otherwise surprises the plaintiff having regard to the way the hearing has been conducted to date.

Subject to two qualifications to which I will come I therefore propose to allow the defendant to rely on the reports and to call oral evidence from the two doctors limited to matters by way of response to fresh material introduced late by the plaintiff.

The two qualifications are: (a) That those parts of the reports that are personal attacks on other doctors not being mere professional criticism or disagreement based on analysis, logic, or medical reasoning, are to be excised from the reports. (b) That I will consider any application by Mr Webb for the plaintiff to have time to take further instructions including discussions with the plaintiff's own doctors to enable Mr Webb to adequately conduct a cross-examination of Dr Reid and Dr O'Neill.

I subsequently granted the second adjournment, such that the trial was again interrupted on 24 August 2004 and did not resume until 14 November 2007.

As to the first adjournment, it is clear, therefore, that it was occasioned by a combination of circumstances that were brought about by the conduct of both parties. That being the case, I decline to exercise my discretion in favour of the plaintiff in respect of any additional costs incurred as a result of the first adjournment.

However, the second adjournment was clearly the result of the defendant's failure to serve the additional medical reports from Dr O'Neill and Dr Reid in a timely way. In my view, that is the sort of disentitling conduct on the part of the successful party that justifies displacement of the presumption.

I therefore propose to make an order in favour of the plaintiff as to any additional costs incurred as a result of the second adjournment.

Costs of the costs applications 40. The determination as to the proper orders for costs in respect of the substantive proceedings proceeded on the basis that each party sought conflicting orders. It is appropriate that the costs associated with those applications be dealt with discretely, and not form part of the orders in the substantive proceedings. The outcome of the costs applications was mixed, in that neither party has completely succeeded. In my view, however, the defendant has had the substantial success. In those circumstances it is not appropriate to require each party to bear their own costs, and I consider the proper order should be that the plaintiff pay one-half of the defendant's costs: TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd [2008] NSWCA 9 at [95].

Disposition 41. I order the defendant to pay the plaintiff's costs of the substantive proceedings, on the ordinary basis, incurred before 11.00am on 20 June 2007, together with any additional costs incurred by her by reason of the adjournment of the hearing from 24 August to 14 November 2007.

I order the plaintiff to pay the defendant's costs of the substantive proceedings, on an indemnity basis, incurred after 11.00am on 20 June 2007, excluding any additional costs incurred by him by reason of the adjournment of the hearing from 24 August to 14 November 2007.

I order the plaintiff to pay one-half of the defendant's costs of the costs applications, on the ordinary basis. The plaintiff is to bear her own costs of the costs applications.

I give the parties liberty to apply, within 7 days, in respect of these orders, on 24 hours notice to each other and to the court.

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.

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