South Western Sydney Local Health District v Gould

Offer of compromise

1. The proceedings were commenced in March 2014 and substantially heard over five days in February 2016. The appellant relies upon an offer of compromise dated 25 May 2015, slightly more than 12 months after the proceedings had commenced. The offer was to compromise the whole of the claim on terms that there be judgment for the defendant (the present appellant) with no order as to costs. Such an offer complies with UCPR r 20.26(3). The offer was accompanied by a letter which referred to the evidence served to date on behalf of the defendant and expressed the view that "the plaintiff will not succeed against the defendant with respect to liability and causation".
2. By 25 May 2015, the appellant had served two very short (two page) opinions of Associate Professor Hertsch and its first report from Associate Professor Gatus. Those reports squarely advanced opinions as to competent professional practice which were ultimately found by this Court to be dispositive.
3. It may readily be inferred that although the offer of compromise represented a "walk-away" offer, it nonetheless amounted to a genuine offer of compromise involving a real element of compromise. There is no evidence as to the costs which had been incurred by the appellant as at 25 May 2015, but they must have included the costs of preparing a defence (which is relatively detailed and could not have been prepared without close regard to the contemporaneous hospital records) and the costs of retaining at least two medical practitioners to give expert evidence. It is well settled that a walk-away offer involving a significant element of compromise is capable of engaging both the rules (UCPR r 42.15(2)(b)(ii)) and the principles in Calderbank v Calderbank [1975] 3 WLR 586: see for example Botany Bay City Council v Latham (No 2) [2013] NSWCA 450 and Taheri v Vitek (No 2) [2014] NSWCA 344 at [9]-[11]. No contrary submission is made by the respondent.
4. Accordingly, the appellant is entitled to an order that the respondent pay its costs of the trial on an ordinary basis until 25 May 2015 and thereafter on an indemnity basis.

Gross sum costs order

1. In satisfaction of its entitlement to costs, the appellant also seeks an order pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW) that its costs in the District Court be assessed in the sum of $90,000. The only evidence relied upon in support of a gross sum costs order is a paragraph in the solicitor's affidavit. There is nothing to suggest that the solicitor was involved at trial (although he may have been) - the "contact name" identified on the defence and in Professor Hertsch's report of 21 July 2014 and to whom Professor Gatus's report of 1 February 2015 is addressed is that of a different solicitor at the firm.
2. The entirety of the evidence is as follows: "In preparing this Affidavit I have made internal enquiries which have demonstrated that the Defendant's professional costs and disbursements including counsel's fees and expert's fees incurred since the commencement of proceedings in the District Court on 26 March 2014 until the District Court Judgment was handed down on 30 March 2017 total $148,783.35, comprising of: (a) Solicitor's professional fees: $61,704.90 (b) Counsel's fees: $58,272.50 (c) Other disbursements: $28,805.95."
3. Thus the $90,000 sought reflects slightly more than 60% of the appellant's actual costs and disbursements incurred at first instance. There is no evidence as to the likely amount of costs which would be recovered on assessment. There is no evidence to disclose which costs were incurred before 25 May 2015 and which costs were incurred after. There is no evidence of the hourly rates charged by solicitors or counsel. There is no evidence as to what the disbursements were. There is also no evidence to suggest that the process of assessment would be unusually arduous or time consuming or expensive. Indeed, the motion sought the same amount, whether or not the proposed indemnity costs order were to be made.
4. In Colquhoun v District Court of New South Wales (No 2) [2015] NSWCA 54 there was substantially the same dearth of evidence. This Court said at [6]-[7]: "The power to make a lump sum costs order 'should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available': Harrison v Schipp [2002] NSWCA 213; 54 NSWLR 738 at [22]; Hamod v State of New South Wales [2011] NSWCA 375 at [813]. The material supplied by the Secretary, which is a bare statement of total costs and disbursements, does not permit the Court to have any confidence that $22,000 (or some other amount) is an appropriate sum. The evidence is completely silent as to (a) the timing and nature of costs incurred, (b) the rates at which lawyers charged, and (c) the amount likely to be recoverable on assessment in the event that that took place. There is substantially less evidentiary material than what was held to be insufficient in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11. In that decision, Barrett J concluded at [56]: 'Because the material on which NGC relies upon this application is insufficient to ground a well-informed exercise of the discretion to make a gross sum costs order, the court will not make such an order; and this is so despite the matters of complexity of costs assessment and impecuniosity of the plaintiffs liable for costs that would otherwise make such an order appropriate.'"
5. True it is that the costs before the primary judge do not appear to be unreasonably high, having regard to the nature of the matter and the length of the trial, and including the series of requests at the end of 2016 for further submissions. However, there is no sufficient evidentiary basis to permit the Court to infer that $90,000 is the appropriate sum, or indeed that the $90,000 sought would be less than the amount recoverable on assessment. In those circumstances, it is not appropriate to accede to this aspect of the motion. So to do would be to run the risk of penalising the respondent. It is for the appellant to demonstrate that the gross sum costs order it seeks does not place the respondent in a worse position. This it has failed to do.

Orders

1. For those reasons, the appellant is entitled to a favourable costs order by reason of its offer of compromise but is not entitled to a gross sum costs order.
2. It was necessary for the appellant to make this application, based on an offer of compromise. Accordingly, the costs to which the appellant is entitled by reason of order 3 made on 13 April 2018 will include the costs of this application.
3. The orders of the Court are: 1. The plaintiff is to pay the defendant's costs in District Court proceeding 2014/00091004 on an ordinary basis until 25 May 2015, and thereafter on an indemnity basis. 2. The appellant's costs of the appeal payable pursuant to order 3 made on 13 April 2018 include the costs of this motion.

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: 24 July 2018