The Nominal Defendant v Lane [2005] NSWCA 36 | Case summary

Wednesday 2 March 2005 NOMINAL DEFENDANT v LANE (No 2) Judgment 1 GILES JA: Judgment in this appeal and cross appeal was delivered on 17 November 2004 ([2004] NSWCA 405). The appellant was ordered to pay ninety per cent of the respondent's costs of the appeal and cross-appeal. The orders were entered on 29 November 2004. 2 By notice of motion filed on 22 December 2004 the respondent sought that the costs order be set aside, and that in lieu thereof the appellant be ordered to pay his costs "on a party/party basis up to and including 8 September 2003 and thereafter on an indemnity basis". He asked that so far as Pt 40 r 9 of the Rules required that the notice of motion be filed before entry of the costs order, there should be dispensation with compliance with that rule pursuant to Pt 1 r 12. He relied on the making of a Calderbank offer shortly before the commencement of the hearing in the District Court. 3 The appellant did not oppose the dispensing order. It opposed the substitution of the costs order. 4 The parties filed written submissions, and by agreement the respondent's application has been decided without an oral hearing. 5 The trial in the District Court was to commence on 22 September 2003. On 9 September 2003 the respondent's solicitors sent a Calderbank letter to the appellant's solicitors, expressed to be without prejudice save as to costs and reading - "We are instructed to put an offer of $2.3m plus costs. The offer is made as a Calderbank offer and is open to be accepted until 5.00 pm on Tuesday 16 September 2003. In the event that the offer is not accepted, we put you on notice that we will tender this letter to the court on the question of costs." 6 At that time the respondent had served the medical and expert reports on which he relied at the hearing. The offer was not accepted. 7 The hearing occupied five days. Judgment was given on 24 December 2003. After calculations were made, on 30 January 2004 Finnane DCJ ordered that the respondent have judgment for $2,688,382 and that the appellant pay the costs of the proceedings. 8 The appellant applied for and was granted a stay of proceedings pending an appeal. The respondent did not at that time apply for an order for indemnity costs in reliance on the Calderbank offer, according to the respondent's solicitor because the appellant "had indicated it would appeal the judgment". 9 The appeal was allowed in part. The cross-appeal was dismissed. The judgment for $2,688,382 was set aside, and it was ordered that there be judgment for a substituted amount to be calculated by the parties in accordance with the reasons of the Court. The parties agreed upon a substituted judgment amount of $2,601,677.40. 10 The respondent submitted that the appellant had available to it all the respondent's medical and expert evidence, sought to defeat his claim on a narrow interpretation of s 33(5) of the Motor Accidents Compensation Act 1999, and failed. He said that the Calderbank offer of $2,300,000 plus costs represented a significant compromise of his claim, and that the failure to accept the offer was unreasonable such that indemnity costs from the date of making the offer should be ordered. He made clear that the order sought was as to the costs of the trial as well as the costs of the appeal and cross-appeal. 11 Finnane DCJ had not been asked to make a special order for costs, and there was no cross-appeal on the ground of his failure to do so. The respondent's judgment was reduced, not increased, on appeal. I do not tarry with how, in those circumstances, a costs order more favourable to the respondent could be made as to the costs of the trial. For the reasons which follow, in my opinion the Calderbank offer should not bring the substituted costs order sought by the respondent. 12 The respondent claimed damages for injuries suffered in a motor vehicle accident. The vehicle was unregistered. A substantial issue was whether the proceedings had been properly brought against the appellant, turning on whether immediately before the accident the vehicle would "following the repair of minor defects" have been capable of being registered, within the meaning of s 33(5). The meaning and application of s 33(5) in this respect was not the subject of clear authority. 13 One of the expert reports went to repair of minor defects. However, material to the judge's decision as to repair of minor defects was evidence from Mr Dean, not foreshadowed through the expert report and called in the respondent's case without prior notice to the appellant. 14 There was a significant question of contributory negligence, both the respondent and the driver of the vehicle being well affected by alcohol. There was contest over the assessment of damages, the amount of which was likely to be large because the respondent had suffered brain damage. In both these areas a range of outcomes was possible. Further, that the respondent claimed for respite care as part of his damages for future care emerged only in the latter part of the hearing. The reasons of 17 November 2004 describe the unsatisfactory manner in which it emerged. 15 It is apparent, in my opinion, that there was a respectable basis for the appellant to contest liability, that it could expect a significant element of contributory negligence, and that how damages would be assessed depended upon how matters fell out at the hearing. There was much more to the proceedings than was recognised in the respondent's submissions. 16 The essential question is whether the appellant acted unreasonably in failing to accept the Calderbank offer. In SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 it was said at [37] - "37 The Council was also entitled to orders that the Third Party Defendants pay its costs unless the court otherwise ordered: Pt 39 r 1A. The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank (1976) Fam 93), where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure: see for example, John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 52 FLR 201; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FLR 235." 17 This was accepted as the correct approach to exercising the general discretion as to costs in Jones v Bradley (No 2) [2003] NSWCA 258. 18 A Calderbank offer does not give the prima facie entitlement to a more favourable assessment of costs which can come from service of an offer of compromise under Pt 19A of the District Court Rules. No explanation was given for the failure to serve an offer of compromise. It may be noted that the more favourable assessment under the rules is solicitor/client costs overall if the offer of compromise was served 28 days or more prior to the commencement of the hearing or solicitor/client costs from the date of the offer if the offer of compromise was served less than 28 days prior to the commencement of the hearing (see Pt 39A r 25(4), (4A)). Perhaps the explanation lies in a hoped-for advantage as to time and costs basis in making a Calderbank offer. 19 It is not necessary to take this further, since in any event I do not think the appellants' failure to accept the Calderbank offer warrants departure from the ordinary rule as to costs. If the appellant had accepted the Calderbank offer, it would have given up the prospect of a decision in its favour as to repair of minor defects, and thus on liability. It would also have given up the prospect of a more favourable outcome than eventuated as to contributory negligence (40 per cent, but a higher percentage could readily enough have been found within the range), and a more favourable outcome in the assessment of damages. While a not insignificant compromise when measured against the result of $2,601,677.40, the offer of $2,300,000 was generous to the respondent when measured against what might have eventuated seen as at 9 September 2003. I am quite unable to see that the appellant acted unreasonably in the circumstances in failing to accept the offer. 20 I propose that the notice of motion be dismissed with costs. 21 IPP JA: I agree with Giles JA. 22 TOBIAS JA: I agree with Giles JA. **********

The Nominal Defendant v Lane

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Judgment (12 paragraphs)

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