Wardle v Kick & Ors

Wardle v Kick & Ors - [2006] NSWSC 327 - NSWSC 2006 case summary — Zoe

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Control of hang gliding 3 The headland at Long Reef has been used for many years for hang gliding. The topography apparently provides air currents which enable the craft to be launched and flown out and around the headland. The area is also used for the flying of model aeroplanes, particularly gliders which are radio controlled. The headland sits at the extreme eastern point of the Long Reef golf course which is used regularly for competition and social events. The area also provides a well-known walking track for local people and others visiting the area. 4 Hang gliding is a form of aviation and is controlled by Civil Aviation Orders made under the Civil Aviation Act 1988. Effective administration of hang gliding activities is carried out by the Hang Gliding Federation of Australia. Pilots in command of hang gliders must be the holder of a Certificate issued by the Hang Gliding Federation of Australia. 5 The Hang Gliding Federation of Australia maintains an Operations Manual. That manual provides standards and rules for operations, pilot certification and for pilot training. The aim of the manual is to ensure that hang gliding operations are carried out in accordance with the requirements of the Civil Aviation Act and the relevant Regulations and orders. 6 The third defendant is the Northern Beaches Hang Gliding Club Incorporated which is a member of the Hang Gliding Federation of Australia, the fourth defendant. The first defendant was a member of the Club. The Club as delegate of the Federation was responsible for certifying the first defendant. It was also responsible for the management of hang gliding activities on the Long Reef site. 7 The first defendant was granted a Restricted Hang Gliding Pilot's Certificate following assessment of his competence by an examination on 9 June 1996. He was assessed as competent to carry out all the tasks which were identified on a standard form. These include his ability to "find stall point and return to trim speed without undue height loss" and "standard aircraft type circuit and 'S' turn landing approach accuracy" and various other matters. 8 The Operations Manual of the Federation is a complex document. It provides a statement of objectives of the Federation including training, coaching and instruction in hang gliding. It also has the objective to "promote, coordinate and regulate safety standards and procedures, engineering standards and procedures, flying and proficiency standards and all other matters relating to the safety and protection of members, participants, spectators and property." 9 An affiliated club, such as the third defendant, is to be responsible to the Federation for the supervision and control of hang gliders within that Club's area. Clubs are also responsible to members for the retention and development of sites, the appointment of safety officers to assist with the supervision and control of operations and various other matters. 10 Section 3 of the Manual provides the Regulations. As I have indicated, hang gliding is subject to the regulatory regime provided under the Civil Aviation Act 1988. A safety system is set out in s 5, which contains a statement of aims and objectives. That statement is in the following terms: "Given that a level of safety that is acceptable is defined by the Management Board then the basic objectives and functions of the HGFA Safety System can then be defined as follows: (a) OPERATIONAL OBJECTIVE - To develop, implement and improve standards and procedures necessary to ensure: (i) the safe operation of hang gliders, paragliders and weightshift microlights; and (ii) that accidents are reported and the cause of accidents are investigated; and that action is initiated to: s reduce hazards; and s revise standards where required." 11 A Management Objective is also provided being "to measure and analyse the achieved level of safety to ensure that standards and procedures necessary for the safe operation of hang gliders; paragliders and weightshift microlights are implemented in a satisfactory manner." 12 The Operations Manual provides various prescriptive obligations of persons who fly hang gliders. They are a repetition of relevant orders made by the Civil Aviation Safety Authority. Civil Aviation Order 95.8 makes detailed provision in relation to the flying of hang gliders. Clause 4.7 provides maximum height levels and height levels under different conditions. Clause 4.7(h) provides the minimum level at which a hang glider may be flown over a city, town or populous area. Clause 4.7(i) provides that except as provided for in subclause (j) (which applies to the launching phase of a hang glider) a hang glider must not be flown: "… at a height lower than 100 feet within a horizontal distance of 25 metres from: (i) a public road; (ii) persons other than those persons directly associated with the operation of hang gliders at the launch or landing sites; or (iii) a dwelling except with the permission of the occupier." 13 Subclause (j) provides that during the launching phase the hang glider may not come closer "than a horizontal distance of 25 metres from persons other than those persons directly associated with the operation of hang gliders provided those other persons are behind the line passing through the launch point at right angles to the intended direction of flight." 14 Provision is made in 5.4 of the Mmanual for the Responsibility of Pilots, Clubs, Duty Pilots and Safety Officers. In respect of which the following is stated: 5.4.1 Pilots 5.4.1.1 Pilot Responsibilities. The responsibilities of individual HGFA pilots are as follows: (a) The safety of their flying equipment; (b) The safety of their operations, both in the air and on the ground; (c) Where the pilot is the holder of a Restricted Pilot's Certificate, before flying, seek advice from a Duty Pilot or Safety Officer as to the suitability of the site and prevailing conditions for Restricted Pilot operations; (d) When new to a site or inexperienced in the prevailing conditions, seeking advice from the Duty Pilot or Safety Officer; and providing proof of qualifications and HGFA membership; and (e) When an accident or incident occurs, the pilot/s involved (or a witness where appropriate) must notify the HGFA Operations Manager of the occurrence … ." 15 Clause 5.4.2.1 provides for Club Responsibilities. They are: "To ensure appropriate control and management of sites under the control of individual clubs, responsibilities of the incorporated club are as follows: (a) To appoint Safety Officers and Senior Safety Officer/s; (b) Determine when the scale of operations at a site warrant the appointment of a Duty Pilot, and arrange for a roster of Duty Pilots and/or Safety Officers to control hang gliding and paragliding activities on the site; (c) To formulate and implement plans for the reduction of hazards to both pilots and members of the public; (d) To provide advice to pilots of limited experience at the site or in the prevailing weather conditions; (e) To notify landowners, AirServices Australia, RAAF Briefing Office or other people where operations at a site require such notification; … " 16 Provision is also made in relation to the reporting and investigation of accidents. 17 Clause 5.4.3 makes provision in relation to Duty Pilots. A Duty Pilot is required to be nominated when the scale of operations at a club site necessitate or when Restricted Pilot Certificate holders are operating and in other circumstances. The Duty Pilot has responsibilities provided in clause 5.4.3.3 which include: "(a) provide advice to pilots on request; (b) assist Restricted Pilot Certificate holders on request; (c) make inquiries at random from pilots as to their qualifications to fly the particular site, and the currency of their membership of the HGFA; (d) notify the Club executive or Senior Safety Officer of dangerous activities or incidents where disciplinary action should be taken; and (e) where there are mixed operations, work with Duty Pilots from other airport/strip users to ensure safe operating procedures are established." 18 Provision is also made for the appointment of Safety Officers. The duties and responsibilities of Safety Officers include acting as Duty Pilot on request or assisting a Duty Pilot where necessary (clause 5.4.5.2). 19 Provision is also made for the appointment of Senior Safety Officers who are to have responsibility for the overall management of the safety operations. 20 Clause 6.2 provides for the control of operations on hang gliding sites. Under these provisions the requirement for a Duty Pilot, inter alia, when Restricted Pilot Certificate holders are operating is confirmed. Provision is made for the Duty Pilot to wear identification and he or she is to have "the authority to control, direct and coordinate operations that are conducted in accordance with Civil Aviation Orders, this manual, and in accordance with any conditions set down by the owner of the site." 21 There are two fundamental matters arising from these provisions which are relevant to the resolution of the present case. Firstly, the obligation is placed on the pilot of a hang glider not to fly lower than 100 feet within a horizontal distance of 25 metres from persons not directly associated with the operation of the hang glider. In my view and for reasons which I discuss below, this clause was clearly breached by the first defendant resulting in the accident. The second matter of significance is that responsibility for the safe operation of the site is provided in the Club with the authority of the Hang Gliding Federation of Australia. I am also satisfied that the Club breached this obligation by failing to control where gliders could fly and providing a safe landing area away from pedestrians.

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Liability of the Third Defendant 27 I am of the opinion that the plaintiff's claim against the third defendant also succeeds. The Club was in control of the gliding site and had responsibility to ensure its safe operation. The plaintiff gave evidence that on occasions he had observed craft both take off and land on the site and I infer that it was being operated in that manner on this occasion. No one was called from the Club to give evidence. 28 There were few problems in using the site for takeoffs which would generally involve running with the craft toward the ocean and becoming airborne out over the cliff. Landing is a different matter. Although I was initially told that landing was to take place on the beaches the evidence makes plain that this was not the case. 29 The position where the accident occurred was in the area which was being occupied by hang gliders for preparation and take off on the relevant day. I am satisfied it was also being used for landing. It should not have been. Apart from being in breach of clause 4.7(i), given the unpredictability of low flying aircraft attempting a landing, to allow that to occur in a location where many pedestrians were present is inherently unsafe. If the duty pilot did not require all landings to take place at a remote location he or she should have taken steps to exclude pedestrians from an area where low flying aircraft or aircraft attempting a landing were likely to be encountered. 30 I am satisfied that the Club did not take any steps to exclude the public and make the landing area safe. It would have been a simple matter to designate an area and with temporary signage or other indicators provide an "exclusion zone" which could be enforced by the Club. By failing to take these measures, or any measures, the Club breached its duty to care for the safety of members of the public. 31 It was submitted that the third defendant was negligent by failing to supervise the first defendant when he was in the air. The argument was that although a novice pilot he was allowed to fly for just over an hour when the third defendant should have known he was not competent to be in the air. The knowledge of his lack of competence is said to be apparent by the report of Mr Park made after the incident where he said he "had grave concerns about Darren's ability to control his glider." 32 I do not accept this submission. The first defendant was certified to fly with a restricted certificate. Although after the event his competence or apparent lack of it was evaluated there is no evidence to suggest that any special attention should have been given to his flying before the accident on the relevant day. There is no evidence that the weather conditions or any other feature meant that special control over the first defendant's flying was necessary. 33 It was also submitted against the third defendant that by reason of the demonstrated incapacity of the first defendant to competently fly his aircraft, I should find that by certifying the first defendant with a restricted capacity to fly, the third defendant was negligent. I cannot make that finding. The evidence before me discloses a proper process of examination and certification on a restricted basis. If the first defendant had obeyed the relevant order his lack of experience would have been immaterial because the glider would not have been close to pedestrians. No doubt from time to time newly certified pilots get into difficulties. This is recognised by the orders which confine the location in which the aircraft may fly but this does not mean that certification was negligently provided.

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The claim against the Council 36 Warringah Shire Council has been joined as the second defendant in these proceedings and sued pursuant to cross claims. The Council is the trustee of the reserve which includes the headland. The foundation for the case sought to be brought against the Council is a report from Viner Robinson Jarman Pty Limited which was prepared by Mr Derek Viner in December 1990. I understand Mr Viner is an engineer. In that report Mr Viner records the fact that the concern has been raised about the risk of injury from the use of the Long Reef headland by different groups including golfers, walkers on the coastal headland route, hang glider pilots and model glider pilots. In that report Mr Viner offers a number of opinions and suggests that provision be made for a defined landing area on the golf course for hang glider pilots. His suggestion is that the Hang Glider Pilots Association be involved in defining such an area, subject to whether or not the golf course would be prepared to give up some of its leased area for this purpose. The recommendation for the provision of such a landing area appears to derive from a concern which Mr Viner had that there may be a conflict between the golf course players and glider pilots. 37 Mr Viner also expressed concern about the Bicentenary Walkway which had been provided by the Council around the headland. In particular he was concerned about the relationship of that walkway to the southern boundary and the risk of walkers being hit by golf balls. Mr Viner discusses the possibility of providing signage and the redirection of the Bicentenary Walkway suggesting that "walkers on the bicentenary walkway could be directed up to and away from the headland on the northern side of it. This action would also have some benefit in making it more likely, in my belief, that the restrictions proposed on the use of the model glider site on the south of the headland would be more inclined to be adhered to." In his conclusions and recommendations Mr Viner says: "Discussions should be held with the hang-glider pilots association and golf club to establish reasonable practices by hang-glider pilots and the nature of the restrictions which should be imposed on their use of the site. The golf course southern boundary should move to the top of the cliff and the walkway and model glider area be closed on this side of the headland." 38 As I have previously indicated the plaintiff was struck by the hang glider when he was walking in a position to the east of the permanent obelisk on the Long Reef headland. Since the accident occurred a pathway has been constructed to the west of that obelisk in a position where the plaintiff may not have been struck if he had been walking on the new path. It is submitted that the Council, having been alerted to the problem of a potential conflict between walkers and hang glider pilots, should have responded by constructing the pathway in that location and accordingly, by failing to do so breached the duty of care which it owed to members of the public. It is further submitted that the Council should have erected signs warning walkers of the presence of hang gliders and by failing to do so breached its duty of care. 39 I do not accept these submissions. 40 The presence of hang gliders on the Long Reef headland was notorious and would have been known to any person contemplating walking along the pathway. Indeed, it would be one of the reasons why people choose to make that walk. It would be impossible having started on that walk not to appreciate, particularly on a Sunday afternoon, that hang glider activity was taking place in that area. Obviously if the hang glider failed to observe appropriate safety constraints or inadvertently lost control the potential for an accident was present. 41 A perusal of Mr Viner's report does not, in my opinion, support the plaintiff's submissions. Mr Viner was concerned with the prospect of hang gliders landing on the headland adjacent to or within the golf course. His suggestion was that a designated landing area should be provided to facilitate this operation. He does not appear to have been particularly concerned about the prospect of collision with pedestrians although no doubt he was aware of this potential. The solution which he suggests of providing a designated landing area in this location would not in my opinion have been acceptable. The obligation upon the glider pilots was to find an area to land their craft with safety, probably on remote areas of the beaches away from the headland. By this means the prospect of a collision with walkers on the headland would be entirely eliminated. By encouraging hang gliders to hover about the headland and land in a designated area, perhaps in part of the golf course, would encourage the possibility of conflict between the gliders and pedestrians with a heightened risk of accident. As the orders make plain such a facility could not have been provided in any event. Providing a landing area of that nature would have allowed for hang gliders to fly within a hundred feet of the ground and in close proximity to pedestrians or golfers. In Swain v Waverley Municipal Council (2005) 220 CLR 517 at 520 Gleeson CJ said: "In legal formulations of the duty and standard of care, the central concept is reasonableness. The duty is usually expressed in terms of protecting another against unreasonable risk of harm, or of some kind of harm; the standard of conduct necessary to discharge the duty is usually expressed in terms of what would be expected of a reasonable person, both as to foresight of the possibility of harm, and as to taking precautions against such harm. Life is risky. People do not expect, and are not entitled to expect, to live in a risk-free environment. The measure of careful behaviour is reasonableness, not elimination of risk. Where people are subject to a duty of care, they are to some extent their neighbours' keepers, but they are not their neighbours' insurers." 42 Beyond these matters it is important to appreciate that the responsibility for the safe operation of the hang glider activities on this site was not vested in the Council. That obligation fell upon the Hang Gliding Federation of Australia, the relevant activity being controlled by the affiliated club. In my opinion the Council was reasonably entitled to adopt the view that it was the responsibility of the Hang Gliding Federation to ensure that the existing regulations providing for the safety of passers-by were obeyed and if necessary additional rules would be prescribed to ensure the safe flying of craft. 43 The case against the Council was primarily made by the other defendants. In essence the submission was that because the Council was aware of a potential conflict between pedestrians and hang gliders it should have taken steps to minimise the risk to pedestrians, either by erecting signs or by creating pathways away from the headland. Because the Council was the trustee of the reserve which included the headland it was submitted that it had the capacity to take steps which would have avoided the accident. 44 I do not accept this submission. Although the Council was the trustee of the relevant land I do not believe there was an obligation upon it to have taken particular steps as suggested by the other defendants. Furthermore, it is not plain to me that if a sign had been erected it would have made the slightest difference on this occasion. The headland has so many natural attractions and provides a source of enjoyment for so many people that the erection of a sign indicating that hang gliders may be in the area would have been redundant and of no practical utility. As far as the construction of a pathway in a location westward of the obelisk (where it has now been constructed) is concerned it is possible that that may have avoided the particular accident. The assumption is, of course, that the plaintiff and others would have walked on the pathway and would not have left it in order to obtain a better view of the ocean and the other activities taking place on the headland. I doubt if that assumption is realistic. Accordingly, it is not clear that even if the path had been constructed in a different location an accident such as that which occurred would have been avoided.

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Damages 45 Once the plaintiff had recovered from his initial injuires he was able to return to work but could not carry out the activities that he had formerly been able to undertake. He had constant pain in his leg and developed pain in his back. His left leg was constantly swollen and on occasions would lock all of a sudden and he would lose his balance. He took medication for his pain three or four days a week and he is being treated for depression. 46 Notwithstanding his difficulties the plaintiff has been able to maintain his business in which his son who was aged 16 at the date of the accident has been a considerable help. His son, who is a strong man, has been able to do the heavier work. This continued from time to time even when the son became a member of the police service. He now works full time in the business. 47 Because the plaintiff could not carry out heavy work himself he was required to refuse various jobs when they were offered to him. The offer of work usually came via a request over the telephone to quote for a particular job. At the point of that inquiry the plaintiff was able to identify whether the job was one which, if his quote was accepted, he would be physically able to carry out. One particular client known as Ant Building Company had provided him with regular work which he was unable to perform after the accident. However, although he was required to knock back some work, which I accept affected his income, he was able to take other lighter work. As the financial records show that he was generally able to maintain his income I infer that although heavy work was refused a significant amount of that prospective income was not lost. 48 On 8 February 2001 the plaintiff was measuring for a possible job supplying the glazing to a house extension at Mosman. He was coming down some stairs when his leg locked at the knee and he fell awkwardly onto the concrete steps. There was no handrail that he could take hold of. In this fall the plaintiff broke his hip and dislocated his shoulder. He was treated at North Shore Hospital and could not carry out physical work for a further seven to nine months. The accident caused him considerable pain which has not entirely dissipated. 49 In December 2002 the plaintiff was measuring for a job at Chatswood. He says that he was coming down a stepladder backwards when he suffered pain in his left leg which locked on him and he fell down off the ladder to the ground. He gave evidence that as a result of the third incident he suffered pain in his right shoulder but did not go straight to hospital. Some time later he went to his general practitioner, Dr Fox, and complained of difficulties that he believed arose from this fall. The plaintiff also indicated that he sprained his right wrist during the fall but this repaired itself without the necessity for treatment. 50 Some months after this third incident the plaintiff was identified as having a problem with the rotator cuff in his right shoulder. That problem has been attended to by arthroscopy procedures although they have not been entirely successful. The plaintiff says that his capacity to extend his right arm has been confined by the operation and it may be necessary for a further operation to alleviate this problem. 51 As a result of these events the plaintiff reports that he now has a left leg which cannot work properly, he has constant pain in his ankle and the knee locks from time to time. As a consequence the plaintiff is restricted in walking, he cannot lift heavy objects and has constant difficulty with his back and neck. His right shoulder has restricted movement. 52 The plaintiff gave evidence of his expectations in relation to the business. He says that but for the accident he may have given away work at age 65 or 70. Presently he employs his son full-time in the business and he himself does the measuring and quoting part of the business. He is able to help his son with some of the minor physical work on building sites. The plaintiff says that apart from suffering pain he is constantly miserable and "ratty" and is not enjoying life. He has physiotherapy twice a week and takes Panadol for pain relief and medication for depression. 53 The plaintiff says that before the accident he played tennis twice a week but he can no longer engage in this activity. He still swims and walks in the pool to assist in the strengthening of his leg. The plaintiff says that he is now unable to do the gardening at his home although before the accident he used to do all of this type of work. 54 The plaintiff is now aged 63 years and claims damages, inter alia, with respect to his past loss of earnings and the diminution in his future earning capacity. 55 I accept the plaintiff's evidence. He has suffered severe injuries and I am satisfied that the fall in February 2001 was as a result of the initial injury to his left leg. However, I am not persuaded that all of the difficulties which the plaintiff suffered after the fall in December 2002 can be attributed to the original accident. Although I am satisfied the plaintiff suffered a fall on that occasion he did not suffer injuries which required immediate medical attention. That fact together with the medical reports which indicate a deterioration through time in the plaintiff's right shoulder leads me to the conclusion that the difficulties with that shoulder should not be attributed to the original accident. Plainly the plaintiff's occupation has caused him to lift heavy objects from time to time and it could be expected in the ordinary course that this would result in deterioration of various of his capacities including problems with a shoulder. 56 The plaintiff suffered an intra-articular fracture of his left distal tibia with an associated higher level fibular fracture. He was taken to Mona Vale hospital where he underwent an internal fixation of the ankle fracture and stabilisation of the tibial fracture with a tibial nail. He spent six days in hospital and when discharged was confined so that his leg could not carry weight for approximately 8 to 10 weeks. By 28 August when he was reviewed by Dr Grujic his wounds had healed and the bruising and swelling was settling although he continued to have night sweats and significant discomfort. He complained of troublesome sweats and chills and was reviewed by his general practitioner. By the end of September he was undergoing regular physiotherapy and x-rays showed that the extension into the ankle joint was now united. The tibial fracture had not united. 57 His medical history thereafter shows an emerging problem in his shoulders and back. By November significant problems with his knee were apparent including a loose body within the anterior lateral compartment of the knee. In November he was admitted to Mona Vale hospital for an arthroscopy and mini arthrotomy removal of small bone fragments in his knee. Physiotherapy continued. He continued to suffer problems with his knee and problems of discomfort and swelling continued around his fracture site. When reviewed by Dr Grujic in May 1997 he was found to be progressing slowly, walking with a limp with his knee giving away on occasions. He underwent surgery to remove the tibial nail and ankle screws in March 1999 following which he made reasonable progress. By October 1999 problems of pain in his back were evident and he was prescribed medication for them. 58 Thereafter he was regularly reviewed by his general practitioner and specialists. He continues to report problems with his knee and on 8 February 2001 he fell. As I have indicated I am satisfied that that fall was caused by the locking of his knee leading to fracture of his left hip and left shoulder. The fractures required an operation and, following his discharge from hospital, physiotherapy. 59 The plaintiff continued to report problems with his shoulders and on 8 March 2001 an ultra-sound found a full thickness tear of the anterior portion of the supraspinatus on the right side. There was also an impingement of the abduction on the left side. The left side was treated by physiotherapy. At various stages since the accident the plaintiff has received cortisone injections in an attempt to alleviate the pain which has been an on-going problem. 60 In July 2001 the plaintiff underwent a left shoulder arthroscopy at Royal North Shore hospital to release the gelenohumeral joint in his left shoulder. 61 On 19 August 2002 an ultrasound of his right shoulder revealed a full thickness tear of the supraspinatus and degenerative changes in that shoulder were reported by Dr Millons. 62 The plaintiff suffered his second fall from a stepladder on 10 December 2002. He did not immediately seek medical assistance although he did so some days later. He had an x-ray of his left wrist which he says he hurt when he fell but no abnormality was identified. Thereafter the plaintiff reported continuing difficulty with his left knee and an increasing problem with his right shoulder. Ultimately the right shoulder did not respond to steroid injection and arthroscopy was necessary. The arthroscopy appears to have been successful although some further invasive repair may be necessary because the plaintiff still does not have a complete movement of the right shoulder. 63 I am satisfied that the accident was a traumatic event for the plaintiff. The injuries which he suffered occasioned him significant pain which has been on-going. He now walks with a limp and has difficulty performing many physical activities which he previously enjoyed. He cannot play tennis and has been inhibited in his capacity to do any heavy work in and around his home. He also has limited capacity to participate in the installation work of his glazing business. I am satisfied that the two subsequent falls which the plaintiff experienced were occasioned by the problems caused to his left knee by the original accident. However, as I have indicated I am not persuaded that the problems with his right shoulder can be attributed to that fall. Accordingly, I am not of the opinion that he should be compensated for the cost of the medical attention to his right shoulder. Otherwise I am satisfied that the medical expenses which he has incurred are as a result of the original accident. 64 The plaintiff claims damages under the conventional headings. In my view having regard to the nature of his injuries and the pain he has suffered he is entitled to damages by way of non-economic loss in a sum of $130,000. A claim was made for a loss of superannuation although this was not pressed and I allow no amount in that respect. The parties have been able to agree the appropriate sum for out-of-pocket expenses and I allow that in the sum of $40,075.43. 65 With respect to future medical expenses I accept that the plaintiff will require additional visits to his general practitioner as a result of the accident. I believe the claim for four visits per annum at $60 per visit to be reasonable and I allow the amount of $3,572.42. The claim for orthopaedic visits is conceded by the defendants in the sum of $1,786.21. With regard to the claim for physiotherapy, as I have indicated, there is evidence of deterioration in the plaintiff's body by reason of the normal exigencies of the plaintiff's life and his age. Physiotherapy would have been a component of his future and ongoing care had the accident not occurred. However, the need for physiotherapy has been significantly increased by the accident. The claim is based on the assumption of 2 visits per week. It is reasonable to allow for future physiotherapy in the sum of $50,000. The plaintiff is entitled to recover the costs of future medication but not for life. I will allow the sum of $5,000. A claim is made for costs of a possible future operation. I am not persuaded this will be necessary and I decline to allow anything for future surgery. 66 A claim is also made in relation to domestic services. There is some evidence that the plaintiff has required personal care and assistance and the defendants do not dispute that for a period following the first accident some allowance should be made for past domestic services. However, the defendants submit that the amount sought by the plaintiff is excessive and makes no deduction for degenerative change and does not delineate the care required because of the effects of each accident. As I am satisfied that the original accident was the cause of the subsequent accidents I am of the view that the amount claimed for personal care and assistance should be allowed even though degenerative change unrelated to the second accident was also occurring. This is the sum of $24,360. 67 A claim is also made in relation to handy man assistance and lawn mowing and gardening assistance and I am satisfied it is appropriate to allow those sums which are:

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Economic loss 69 There are difficulties in identifying the sum which should be awarded in relation to past and future economic loss. The parties tendered evidence of the financial performance of the plaintiff's business since the accident. Those figures are complicated by the fact that at the time of the accident, the business was conducted through a corporate structure. That changed in 2001 and the business thereafter was conducted as a partnership. In 1996 the plaintiff was paid $25,000 by the business which also paid $10,000 to his wife. A sum of $7,683 was also paid towards superannuation. The accounts suggest that the earnings in 1996 may have been reduced from 1995 and were probably reduced from 1994. 70 The accident occurred in the 1997 tax year. In that year the plaintiff's earnings from the business rose and continued to rise in 1998 and 1999. His earnings fell in 2000 but in 2001 the earnings from the business increased although a greater proportion was paid to his wife. After 2001 the earnings from the business have continued to diminish although when allowance is made for distributions made to his wife from the partnership the reduction is not dramatic except in the financial year 2002. 71 One explanation for the fact that the plaintiff has not suffered significant identifiable loss in earnings lies in his capacity to continue to measure and quote and, with the assistance of his son, carry on the business. His son has contributed voluntarily to the business although in recent years has been employed in it full-time. 72 There is evidence from the plaintiff's accountant which indicates that prior to the accident the plaintiff had a significant business relationship with a company known as Ant Building. The accountant gives evidence that if the plaintiff had not been injured it would have been likely that Ant Building would have continued to contribute to the plaintiff's earnings and certainly would have contributed more significantly than in fact happened. Because of the plaintiff's inability to carry out some large jobs Ant Building took its work elsewhere. There is likewise evidence that by reason of his injury he may not have been able to take full advantage of work which may have been available from a firm known as King Timber. 73 There is also evidence that during the period surrounding the Olympic Games in Sydney there was a boom in the building industry. It is suggested that because of the plaintiff's incapacity he was unable to fully benefit from that boom and has suffered some loss. There are difficulties in quantifying this aspect although I accept that he may have lost some income as a consequence of not being able to fully avail himself of the boom in the industry. 74 It is not possible to identify with precision a sum which should be allowed for diminution in earning capacity in the present case. This is not unusual see Moss v State of New South Wales [2000] NSWCA 133 at [64]-[87]. The plaintiff is now aged 63 and in my opinion if the accidents had not happened would have been looking towards completing his working life within a very few years. He gave evidence that he had contemplated retiring at either 65 or 70. Given the strenuous physical nature of the work which he previously engaged in I believe it more likely that he would have retired by the age of 65 assuming he had the financial resources to provide for his family's needs. 75 Evidence of the plaintiff's economic loss was provided by Mr Gleeson, the plaintiff's accountant. He gave evidence of the boom which surrounded the Sydney Olympics and its potential impact upon the plaintiff's business. Although I accept that there was a boom at this time and that some allowance should be made for it, I am not persuaded that the plaintiff would have benefited to the extent Mr Gleeson suggested. As a one man business there were limits upon the work which he would have been able to complete. 76 Mr Gleeson is of the opinion that by comparison of the plaintiff's business with other businesses, he may have been expected to increase his turn over by 14 percent compounded from each year since 1997. This is no better than speculation and I am not satisfied it would have occurred. Even if he had been able to increase his orders by these amounts, his capacity to service those orders and cost of meeting this demand is unknown. It may be the case that for the boom period tradesmen may have been able to increase their charges and an allowance should be made for this but I cannot otherwise accept Mr Gleeson's analysis. The businesses with which he makes comparison were not glaziers and I can see no justification for his assumption that the plaintiff's business would have performed in a similar manner. 77 The plaintiff also tendered a report prepared by David Goodman a chartered accountant. He looked at the sales and gross profit from the business in relevant years. Fundamental to his analysis of past economic loss was his acceptance that the plaintiff lost work from King Timber Supplies and Ant Building which he would, but for his injuries, have been able to undertake. I have already indicated that there are difficulties with the assumption that the plaintiff lost significant income by losing this possible business due to the relative performance of the business in the years 1994, 1995 and 1996. 78 Mr Goodman also assumed a significant loss of business through the Olympic period. He sought to quantify this by reference to average percentage increase in sales in other equivalent trade industries. I accept that the plaintiff may have benefited from the boom. However, I do not believe his one man business, as it was before the accident, could have increased the return to the plaintiff anything like that which Mr Goodman estimates. His calculations are set out in Schedule 2 to his report and show a loss of profit in 1999 of $93,344 and in 2000 of $122,917. When compared with his actual profits before the accident, the assumption that this one man business could have generated anything like these suggested additional returns cannot be accepted. Mr Goodman projects sales of $347,550 for the year 2000 which is more than double the highest actual sale reported in any year. Furthermore, he makes no allowance for an increase in operating expenses as sales increase. 79 The defendants engaged Mr Robert Kellaway, accountant, of Kellaway Cridland to address the matter of economic loss. He provided an analysis for both past and future economic loss which could have arisen from each of the three events when the plaintiff was injured. As I am satisfied that the two accidents which followed the original accident are relevantly related to the first event, the amounts which he has identified would, in my opinion, be allowable pursuant to Scenario 3 even allowing for the more recent degenerative changes in the plaintiff's shoulders. The assumptions underlying his calculations are as follows: "The plaintiff had an accident on 11 August 1996 (first accident). The plaintiff had two subsequent accidents on 8 February 2001 and 16 December 2002 (subsequent accidents). As requested I have made three calculations of economic loss, one taking into account only the first accident (Scenario 1) and the second taking into account the first accident and the second accident (Scenario 2). The third taking into account all three accidents (Scenario 3). The past economic loss for each scenario was calculated using a lost business turnover (method 1) and a lost earnings from the business (method 2), the results of each method were averaged to form a conclusion (schedule 6, 7 and 8). Method 1 calculation is at schedule 6. It has compared the difference between the actual turnover of the business and a CPI adjusted turnover to the value of any lost work substantiated by information provided. I have taken the higher of the two amounts to be the loss of turnover for that year and then applied average costs to come up with a pre tax loss. The appropriate income tax was then calculated at schedule 8 to provide an after tax amount. Substantiated losses included in the Method 1 calculation are those of King Timber and Ant Building. The Ant Building losses in the 2003 - 2005 years have been adjusted so they are net of GST. No specific documentation was available to substantiate any specific loss of sales in relation to Olympic activity. The indexation of the gross sales using the Sydney CPI figures would however allow a factor for this. Costs applied against the calculated turnover losses were taken from percentages calculated on schedule 5A. The 'other expenses' percentage calculation does not include salaries, wages or superannuation. Method 2 calculation is at schedule 7. It compares the actual combined earnings of the plaintiff and his wife to CPI adjusted amounts using an average of pre accident levels as a base. Any resulting earnings loss has then been adjusted for income tax at schedule 8. Future economic loss for each scenario was considered at schedule 9. No separate calculation was made for superannuation. Superannuation paid by the company was included in the annual average earnings and as such was included as part of the lost earnings calculation. Being a partnership superannuation forms part of the business surplus for the year and is a decision of the proprietor to allocate funds to superannuation or not. It is noted that the plaintiff was born 21 December 1943. Any future economic loss is calculated up to 21 December 2008, being date at which the plaintiff turns 65. Past and Future Economic Loss was calculated for three scenarios: Scenario 1 based only on the first accident and Scenario 2 based on the first and second accidents and; Scenario 3 based on all three accidents. Loss calculations for the above scenarios are: Scenario 1 Past Economic Loss $3,707 (schedule 8) Scenario 1 Future Economic Loss $1,673 (schedule 9) Scenario 1 Total Economic Loss $5,380 Scenario 2 Past Economic Loss $5,270 (schedule 8) Scenario 2 Future Economic Loss $8,964 (schedule 9) Scenario 2 Total Economic Loss $14,234 Scenario 3 Past Economic Loss $70,410(schedule 8) Scenario 3 Future Economic Loss $43,054 (schedule 9) Scenario 3 Total Economic Loss $113,464 " 80 The task of quantifying the plaintiff's loss has proved difficult. In my opinion the appropriate method is to identify his pre-accident income and assume it would at least have increased in accordance with the CPI. This is the approach which Mr Kellaway has adopted. I invited the defendants to provide me with a calculation which reflected that sum. Mr Kellaway's original calculation did not include any allowance for losses of what may be referred to as super profit during the 1999 and 2000 year when the building industry was in boom. 81 In my opinion, doing the best I can, an additional sum of 20 percent for each of those years should be added to the past economic loss calculation. It is also apparent that immediately following the accident and then following the further accident in the year 2001, the plaintiff was himself unable to carry out any effective activity in the business for a significant period of time. The fact that he was able to maintain his company, particularly in the year 1997, is testament to the goodwill he had generated. It is apparent that the efforts of his wife but more particularly the voluntary efforts of his son enabled the business to continue. I am satisfied that but for his injuries he could have made a greater profit during these periods. 82 Doing the best I can, I am of the opinion that an additional loss of 30 percent should be assumed in each of those two years. The calculation which has been provided by the defendant from Mr Kellaway at my invitation includes not only the losses by reference to the CPI but also includes the sums attributable to the additional losses to which I just referred. The total of all those sums, before making any allowance for contingencies is $117,000. 83 Mr Kellaway has also made an allowance based on the CPI for future economic loss. That sum is $43,000 making a total of $160,000. 84 It is necessary to deduct an allowance for the income tax which would have been payable on that loss. Again, doing the best I can from the available material, it seems to me to be appropriate to allow a total sum of $30,000 in relation to income tax. Approached in that manner, the appropriate sum which I assess in relation to past and future economic loss is $138,000. The plaintiff is entitled to interest on his past loss of earnings which the parties have calculated at $48,750. 85 Accordingly, I am satisfied that the plaintiff's damages should be assessed as follows: Non-economic loss $130,000.00 Out of pocket expenses $4,075.43 Domestic services $24,360.00 Future handyman expenses $27,968.45 Past and future economic loss $130,000.00 Handyman assistance incl window cleaning $4,560.00 Lawnmowing and gardening $5,130.00 Handyman assistance maintenance and repairs $9,120.00 Future lawnmowing $8,351.10 Future equipment $1,237.20 TOTAL $344,802

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Costs 86 The plaintiff's claim arose from the accident on 11 August 1996. On 8 April 1998 he commenced proceedings in the District Court. On 10 March 2000 he served an offer of compromise on all four defendants pursuant to Pt 19A of the District Court Rules (now contained in Div 4 of Pt 20 of the Uniform Civil Procedure Rules 2005). The offer was in the sum of $275,000 plus costs. The offer was not accepted and the matter proceeded to arbitration. On 20 April 2000 the District Court arbitrator awarded the plaintiff damages in the sum of $245,734. The second defendant was found liable for 15% of this award, with the three other defendants liable for the balance. On 22 May 2000 the first, third and fourth defendants filed an application for rehearing of the arbitrator's decision pursuant to r 11 of Pt 51A of the District Court Rules (now r 20.12 of the UCPR). On 24 August 2000 the second defendant made a Calderbank offer in terms that reflected the award made by the arbitrator, but this was not taken up. In 2001 the plaintiff suffered further injuries on 5 February and 16 December, respectively. As a consequence the matter was transferred to this Court. 87 The Court has a discretion in relation to costs which must be exercised judicially and having regard to any applicable rules. In Leichhardt Municipal Council v Green [2004] NSWCA 341 at [8], Santow JA said: "The Court has a general inherent discretion over the costs of all proceedings. That much is clear from s76 Supreme Court Act 1970 and s148B District Court Act 1973 [see now Civil Procedure Act 2005, s 98]. The discretion must of course be exercised judicially and in accordance with the rules of court, as applicable. Nevertheless such rules that have been made…have been expressed so that they guide and influence a Court's discretion without governing it: Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721. Such other common law principles as have developed operate merely as guides to how the discretion might appropriately be exercised." 88 Rule 42.1 of the Uniform Civil Procedure Rules 2005 provides that: "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." 89 Rule 42.2 states that: "Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis." 90 Accordingly, in the usual course of events the first and third defendants would be ordered to pay the plaintiff's costs on an ordinary basis, while the plaintiff would have to pay the second and fourth defendants' costs on an ordinary basis. This is the order that counsel for the first, third and fourth defendants is seeking. 91 Rule 42.12, so far as is relevant, provides that: "(1) In this rule: party A means the party on whose application a rehearing has been conducted. party B means any party to a rehearing other than party A. rehearing means a rehearing conducted under Division 3 of Part 5 of the Civil Procedure Act 2005 .

[24]

(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim: (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made." 93 Counsel for the plaintiff submits that since the award of damages made on 28 February 2006 is more favourable to the plaintiff than the plaintiff's offer of compromise on 10 March 2000, r 42.14 applies and the plaintiff is entitled to recover costs from the first and third defendants on an indemnity basis from 11 March 2000 onwards. 94 Counsel for the plaintiff acknowledges that ordinarily the second and fourth defendants would be entitled to recover their costs from the plaintiff. In relation to the second defendant, the plaintiff seeks a Sanderson order, the effect of which is to require the first and third defendants to pay the second defendants costs. In relation to the fourth defendant, it is submitted that the court should make no order as to costs because at all material times the first, third and fourth defendants were represented by the same legal team, and any separate costs incurred on behalf of the fourth defendant were minimal. If this is incorrect, the plaintiff seeks a Sanderson order in relation to the fourth defendant as well as in relation to the second defendant. The plaintiff also argues that since the judgment award is less favourable to the first and third defendants than the award made at arbitration on 20 April 2000, r 42.12 requires the Court to order that the first and third defendants pay the costs of the second and fourth defendant from 22 May 2000 (the date of filing of the application for a rehearing of the arbitrator's decision). 95 The second defendant is unconcerned whether its costs up to 22 May 2000 are paid by the plaintiff, or by the third and fourth defendants (via a Sanderson order). Like the plaintiff, the second defendant submits that r 42.12 requires the first and third defendants to pay its costs from 22 May 2000 onwards. The second defendant further submits that these costs should be awarded on an indemnity basis because the position of the first and third defendant is analogous to the position of a party who has obtained a judgment that is no better than a prior settlement offer by another party. If this is incorrect, the second defendant submits that costs should be assessed on an indemnity basis from the 25 August 2000. This submission is made on the basis that the judgment award was less favourable to the first and third defendants than the offer contained in the second defendant's Calderbank letter of 24 August 2000 (which reflected the award made by the arbitrator).

[25]

The plaintiff's offer of compromise 96 There is no dispute that the plaintiff is entitled to recover his costs from the first and third defendants on an ordinary basis. What is disputed is the plaintiff's entitlement to indemnity costs from the date of his offer of compromise. 97 As noted above, the plaintiff made an offer of compromise for $275,000 plus costs on 10 March 2000. Counsel for the first, third and fourth defendants claimed that in February 2006 the plaintiff made another offer of compromise in the order of $950,000 plus costs. However, I accept the plaintiff's submission that this offer was in fact made by way of a Calderbank letter that was not put in evidence. Accordingly, the February 2006 offer will not affect my judgment as to costs. 98 Rule 42.14 provides that where a defendant has rejected an offer of compromise and the plaintiff subsequently obtains a judgment that is no less favourable than the terms of the offer, the plaintiff is entitled to indemnity costs from the day after the offer was made unless the Court "orders otherwise." 99 The Court will only "order otherwise" in exceptional cases. This is made clear in cases such as Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19]; Hillier v Sheather (1995) 36 NSWLR 414; and Morgan v Johnson (1998) 44 NSWLR 578. Hillier and Morgan both concerned offers of compromise made by a defendant where the subsequent judgment award was less favourable to the plaintiff than the offer that was made by the defendant. Nevertheless, the rule in question in those cases has the same general purpose as r 42.14. Consequently, the following statement by Mason P in Morgan (at 582) is relevant: "(4) Lying behind the rule is the common knowledge that 'litigation is inescapably chancy': Maitland Hospital [ v Fisher (No 2) (1992) 27 NSWLR 721] (at 725). For this reason, the ordinary provision is expected to apply in the ordinary case: ibid NSW Insurance Ministerial Corporation v Reeve [(1993) 42 NSWLR 100] (at 102-103). The mere fact that it was reasonable for a litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: NSW Insurance Ministerial Corporation v Reeve (at 102). As Clarke JA expressed it in Houatchanthara [ v Bednarczyk (Court of Appeal, 14 October 1996, unreported)] (at 2-3): 'The rule lays down the general principle that should be applied, and the order provided for in that rule should only be departed from for proper reasons which, in general, only arise in an exceptional case […] The idea behind the rule is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to a plaintiff, the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow naturally from that risk.' (5) The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be borne in mind: Maitland Hospital (at 725-726). Reasons must be given for 'otherwise ordering': Hillier (at 419); Quach [ v Mustafa (Court of Appeal, 15 June 1995, unreported)." 100 The plaintiff submits that this case is not an exceptional case, and that the ordinary rule should be applied. In support of this submission, he relies on Locke v Bova & Anor [No 2] [2005] NSWSC 799, and seeks to distinguish Fowdh v Fowdh (NSWCA, 4 November 1993, unreported). By contrast, counsel for the first, third and fourth respondents argues that the subsequent injuries suffered by the plaintiff in 2001 are such as to enliven the discretion to depart from the ordinary rule. Counsel submitted that these subsequent injuries, rather than the injuries suffered in the initial incident, are the main reason why the judgment award is more favourable to the plaintiff than the plaintiff's offer of compromise - which was made before the subsequent injuries occurred. 101 In my view, this case falls squarely within the ambit of the decision in Fowdh v Fowdh (NSWCA, 4 November 1993, unreported). In that case, indemnity costs were not awarded even though the plaintiff had made an offer of compromise that was less favourable to the plaintiff than the judgment award. Events that occurred subsequent to the offer were found to have justified the exercise of the discretion not to award indemnity costs. In that case Mahoney JA (Meagher JA agreeing; Kirby ACJ in dissent) said (at 4-6): "The Master made clear the basis on which he exercised his discretion. He said: 'In my view, the defendants have acted realistically having regard to the information that was available to them. I do not consider that their failure to accept the plaintiff's offer was unreasonable. It seems to me, when regard is had to all the relevant facts and circumstances, justice between the parties is best served if I make the otherwise order sought by the defendants.' He made plain why he so decided. The offer of settlement was made on 8 April 1991. That was the point at which the defendant had to decide whether it should accept the offer; it ceased to be available twenty eight days after it was made. But after that date, two things emerged: the material that became available thereafter as to the plaintiff's condition changed significantly; and, though the matter was decided in the plaintiff's favour at the trial, the decision in her favour came not from the material available when the offer was made but from other material. Shortly before the offer of settlement, the plaintiff had served on the defendant eight medical reports (21 March 1991) and a second further amended set of particulars under Pt33 (28 March 1991). The defendant thereupon called for further examinations of the plaintiff: by Dr Ireland on 16 May 1991 and by Dr Mellick in August 1991. On 7 November 1991 the plaintiff served a third further amended set of particulars under Pt33. At about this time the reports of four further doctors were served by the plaintiff on the defendant. On 24 February 1992 a report of the radiological scan of 6 February 1991 was sent to the defendant and on 9 March 1992 Dr Mellick made a report upon it. Between March and May 1992 there were further negotiations between the parties. The hearing took place between 31 August and 3 September 1992. The Master referred to the relevance to his decision of these matters and to what took place at the trial. An important issue was the relevance of the plaintiff's complaints of mid back pain. 'The conflicting views of Professor Lance and Dr Mellick assumed a principal role'. It was on Dr Mellick that the Master principally relied. He recorded that 'the plaintiff's experts were not preferred to the experts of the defendants', that Professor Lance had changed his view during cross examination, and that it was what Dr Mellick had said that 'had significance in the assessment of the plaintiff's damages'. It was 'the medical evidence which emerged at the trial' and not what had appeared in the medical reports previously served, which had determined the matter. This, I think, is why the Master decided as he did. It is one thing for a plaintiff to present her evidence, make an offer of compromise, and to succeed at the trial on that evidence. In such a case, indemnity costs may be warranted. It is another thing for the plaintiff to present a case and make an offer of settlement, and then to succeed at the trial upon a relevantly different case. A plaintiff who has done that may not readily receive indemnity costs. I do not mean by this that minor differences between the case at offer and the case at trial will be of significance or that, if the difference be significant, a discretionary judgment for indemnity costs may not be given. But where the difference between the position at offer and the position at trial be as the Master assessed it to be, a decision to refuse indemnity costs may readily be understood." 102 In the present case the plaintiff's evidence at trial was relevantly different to the evidence that was available when the plaintiff made the offer of settlement. It cannot be said the defendants' refusal of the plaintiff's offer was unreasonable on the basis of the evidence available at the time. Indeed, it was on the basis of this evidence that the arbitrator handed down an award that was approximately $30,000 less favourable to the plaintiff than the offer that the plaintiff had previously made. It is not possible to speculate as to what the outcome might have been if the plaintiff had not suffered the injuries that he suffered in 2001. 103 The plaintiff emphasises the statement by Kirby J in Locke v Bova & Anor [No 2] [2005] NSWSC 799 at [38], where his Honour said: "However, the essence of an offer of compromise, made in a situation which is still evolving, is that each party is obliged to make an appraisal of the risks, doing the best they can on the information they have. Had the defendants accepted Dr Locke's offer of compromise, he could not have been heard to complain that he was rather too hasty in his assumption that he would be able to resume work in emergency medicine. Nor do I believe that the defendants can complain in these circumstances. There was nothing unforeseeable about the events that unfolded. It was "on the cards". It is not hindsight to suggest that it was predictable. Indeed, I believe it was more than probable, based upon the information then available." 104 In that case, Locke (the plaintiff) was a doctor who worked in emergency medicine and who - as a result of the defendant's negligence - suffered post traumatic stress disorder after witnessing his wife have a seizure. The plaintiff's offer was made on the basis that he would be able to return to his former work in emergency medicine in less than three months time. At the time of the offer there was considerable psychiatric evidence before the defendants which indicated that, notwithstanding the plaintiff's steadfast determination to return to his former work, he might not ever be able to do so. Indeed, Kirby J (at [36]) expressed his surprise that the defendant's solicitors failed to accept the offer when the risk that the plaintiff may not be able to return to his former work was so apparent. The plaintiff ultimately was unable to return to emergency medicine, and indemnity costs were awarded to the plaintiff notwithstanding that this inability was only confirmed after the offer had been made. 105 With respect, that case does not support the present plaintiff's submissions. The injuries sustained by the plaintiff in this case subsequent to the offer of settlement were not "on the cards" or "more than probable." In Locke it ought to have been obvious to the defendant that the plaintiff might not be able to return to work, and that that would have significant consequences if the defendant was unsuccessful in defending the action. In this case, while the defendants ought to have appreciated that the plaintiff might be susceptible to further injuries, it was not obvious that further injuries would in fact occur, or, if they did occur, how serious those injuries might be. The plaintiff submits that the offer of compromise included an amount for future susceptibility to injury, and that once this susceptibility to injury becomes an actual injury, the first and third defendants cannot be heard to complain. On the other hand, the first and third defendants argue that if the subsequent injuries were foreseeable, the plaintiff would not have made an offer in the amount that he did in 2000. 106 In the present case the subsequent injuries suffered by the plaintiff were not "on the cards" or "more than probable" at the relevant time. They were not foreseeable or predictable to any appropriate degree. The plaintiff's subsequent injuries made prediction of the outcome of this case "more than usually difficult" at the time the offer was made (Hillier, per Kirby P at 423). 107 I am satisfied that the plaintiff should not receive an award of indemnity costs against the first and third defendants.

[26]

The arbitrator's award 108 I have already related the fact that on 20 April 2000 the District Court arbitrator awarded the plaintiff damages in the sum of $245,734. The second defendant was found liable for 15% of this award, with the other three defendants liable for the balance. The first, third and fourth defendants applied for a rehearing of the arbitrator's decision on 22 May 2000. The case did not come on for hearing before me until February 2006, some 8 years after the initial injuries and 4-5 years after the subsequent injuries. 109 Both the plaintiff and the second defendant argue that r 42.12 should apply so that the first and third defendants are liable to pay the costs of the plaintiff, the second defendant and the fourth defendant. I have some doubts whether r 42.12 applies to the fourth defendant (who, as an applicant for a rehearing, would be "Party A" for the purposes of r 42.12 - see subrule (1)), but for reasons that will become apparent nothing turns on that matter. 110 The preconditions for the application of r 42.12 have been satisfied. There has been a rehearing of a determination of an arbitrator and the determination of the Court is not "substantially more favourable" to the first and third defendants than the determination of the arbitrator. Accordingly, I "must order" the first and third defendants to pay the costs of the parties who did not apply for a rehearing, unless I certify that the "special circumstances of the case" require me to refrain from making such an order. 111 As Mason P noted in Morgan v Johnson (1998) 44 NSWLR 578 at 584, cases such as MacDougall v Curlevski (1996) 40 NSWLR 430 confirm that: "the judge deciding what costs orders should be made following the determination of action may have regard to information about what did or did not occur at arbitration." 112 This was said in the context of cases where evidence that had been withheld at arbitration was subsequently used at rehearings before a court. This was done deliberately so that the parties withholding the evidence gained a forensic advantage at trial by being able to surprise the other party with the "new" evidence. This circumstance had a bearing on the costs orders that the court ultimately made. There is a similarity in this case, in the sense that evidence that was used at the rehearing was not available at arbitration. However, unlike in Morgan and MacDougall, there can be no suggestion that the plaintiff in this case deliberately withheld evidence. Notwithstanding this, I am of the view that the Court is equally entitled to have regard to events occurring subsequent to the arbitration as it is entitled to have regard to events that did or did not occur at arbitration. Regardless of why the information was not available at arbitration, the use of information that was not available at arbitration at a rehearing will be relevant to the exercise of discretion under r 42.12. 113 It should be clear from what has been said above in relation to the plaintiff's offer of compromise that I consider that the injuries suffered by the plaintiff in 2001 are sufficient to render the circumstances of this case exceptional. The rehearing before me was not a rehearing on the same evidence that was before the arbitrator in 2000. The first and third defendants applied for a rehearing before the plaintiff sustained his further injuries. It is not known whether the award that would have been made by this Court if those injuries had not been sustained would or would not have been "substantially more favourable" to the first and third defendants. In my opinion, the injuries suffered by the plaintiff in 2001 are such that I would certify that the special circumstances of the case require me to refrain from making the order contemplated by r 42.12(2)(b). 114 Accordingly, the plaintiff - not the first and third defendants - must pay the second defendant's costs.

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The fourth defendant 115 The plaintiff submits that since the fourth defendant was at all material times represented by the same legal team as the first and third defendants, I should make no order as to the fourth defendant's costs. Counsel for the first, third and fourth defendants submits that I should make an order requiring the plaintiff to pay the fourth defendant's costs. The plaintiff accepts that this would be the usual position. 116 Counsel for the second defendant made submissions in support of the plaintiff on this issue and referred to Starks v RSM Security Pty Ltd & Ors [2004] NSWCA 351. It seems to me that Starks is applicable to the present situation. In that case, the plaintiff was head-butted by a hotel security guard. The plaintiff sued the security guard, his employer, the hotel where the incident occurred and the licensee of the hotel. The plaintiff was successful at trial against the security guard, but not against the other parties. The plaintiff appealed, and was successful against the security guard's employer but not against the hotel or the licensee. The employer, the hotel and the licensee had all been represented by the same legal team. In regard to the issue of costs, Beazley JA (Sheller JA and Grove JA agreeing) said (at [44]-[45]): "Before proposing the orders that flow from my reasons I should say something about costs. The respondents were represented by the same solicitor and counsel both in the Court below and on the appeal having been advised that they had come to an agreement for that purpose. The Court is not and does not need to be privy to that agreement or when it was made. However, it does raise a costs question because the appeal has been successful against the one respondent only. In the usual case, a successful party is entitled to costs. However, here, where the successful respondents have had the same legal representation as the unsuccessful respondent, it does not necessarily follow that costs or all the costs should follow the event. The question is then, what is the appropriate order for costs in relation to the hotel and licensee. The cases of the hotel and licensee were different from that of the employer, so that to that extent, it was necessary for additional time to be allocated to their case. However, as their argument involved the same legal principles I do not think it can be said that any substantial part of the hearing at first instance or the appeal was devoted to their case. However, the hotel and the licensee may have incurred costs in the preparation of the case that were not common to the costs that had to be incurred by the employer. To that extent, the hotel and licensee should have their costs both at first instance and on appeal. In the circumstances, I consider that the appropriate order is that the hotel and licensee should pay their own costs at first instance and of the appeal, except to the extent that they separately incurred costs that were not incurred in common with the costs of the employer." 117 The present case is analogous. Accordingly, I will make similar orders in relation to the fourth defendant as Beazley JA made in relation to the successful defendants in Starks.

[28]

Sanderson Orders 118 The plaintiff seeks a Sanderson order requiring the first and third defendants to pay the costs of the second and fourth defendant on the plaintiff's behalf. Sanderson orders derive from Sanderson v Blyth Theatre Co [1903] 2 KB 533. They are essentially an order of the Court requiring an unsuccessful defendant to directly pay the costs of a successful defendant. Bullock orders - which were treated as indistinguishable from Sanderson orders in the submissions - have the same effect as Sanderson orders, but Bullock orders require the plaintiff to pay the successful defendant's costs and to recover them from the unsuccessful defendant. In Sved v Council of the Municipality of Woollahra (1998) NSW Conv R 55-852 at 55,605, Giles CJ Comm D (as his Honour then was) said: "It is not sufficient for the making of a Bullock order that it was reasonable for the plaintiff to bring the proceedings against both defendants, although sometimes the condition for making a Bullock order is stated in that way (eg Johnsons Tyne Foundry, Pty Ltd v Maffra Corporation (1948) 77 CLR 544 at 556; Altamura v Victorian Railways Commissioners (1974) VR 33 at 35). One statement of principle is that the order may be made where the costs have been reasonably and properly incurred by the plaintiff as between it and the unsuccessful defendant (eg Johnsons Tyne Foundry Pty Ltd v Maffra Corporation at 572-3; Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA Pty Ltd (1984) 157 CLR 149 at 163; Gould v Vaggelas (1984) 157 CLR 215 at 247, 229); it has also been said that the conduct of the unsuccessful defendant must have been such as to make it fair to impose some liability on it for the costs of the successful defendant, or that the conduct of the unsuccessful defendant must show that the joinder of the successful defendant was reasonable and proper to ensure of [sic] recovery of the damages sought ( Steppke v National Capital Development Commission (1978) ACTR 23 at 30-31; Gould v Vaggelas at 229; Fennell v Supervision & Engineering Services Holdings Pty Ltd (1988) 47 SASR 6 at 7-8, 15; Lackersteen v Jones (No 2) (1988) 93 FLR 442 at 449). The difference in formulations is probably more apparent than real, as reasonableness as between the plaintiff and the unsuccessful defendant will normally be demonstrated by some conduct of the unsuccessful defendant which made it proper that the successful defendant be joined or that the unsuccessful defendant should bear the costs of the successful defendant. Such conduct was found in Lackersteen v Jones (No 2) in the unsuccessful defendant denying the authority of its agent whereby the plaintiff joined the agent who became the successful defendant, and more widely has been found in the unsuccessful defendant telling that [sic] the plaintiff in one way or another that it should look to the successful defendant for its remedy ( Altamura v Victorian Railways Commissioners ; Gould v Vaggelas ; Fennell v Supervision & Engineering Services Holdings Pty Ltd )." 119 His Honour repeated this passage in Roads and Traffic Authority of NSW & Ors v Palmer (No 2) [2005] NSWCA 140 at [30], where his Honour's decision was agreed in by Spigelman CJ and Handley JA. 120 The plaintiff submits that it was reasonable to join the second defendant, and further that the conduct of the first and third defendants was such as to create uncertainty as to who to sue. The conduct relied upon by the plaintiff to show that the first and third defendants created such uncertainty starts with the cross-claim that was issued against the first, third and fourth defendant by the second defendant. However, counsel for the first, third and fourth defendant submits, and I accept, that the plaintiff joined the second defendant prior to any cross-claim being made by the other defendants, and that the second defendant issued the first cross-claim against the first defendant. The plaintiff relies on other conduct of the first and third defendants, but this conduct all occurred after the award had been made by the arbitrator on 20 April 2000. By that award, the second defendant was liable for 15% of the damages due to the plaintiff. In these circumstances, I do not think that any of the conduct relied upon by the plaintiff is sufficient to justify a Sanderson or Bullock order. To the extent that the plaintiff was uncertain as to who was a proper defendant, this uncertainty was not created by the first and third defendants. 121 The first and third defendants rely on the decision in Roads and Traffic Authority of NSW & Ors v Palmer (No 2) [2005] NSWCA 140 where at [34]-[35] Giles JA says: "The plaintiff relied on the wide view of conduct in Almeida v Universal Die Works Pty Ltd (No 2). She said that it was an RTA road, the work was funded by the RTA, the Council and Pioneer were aware of the arrangements by which control over the road works were to be judged, but the Council and Pioneer denied liability to the plaintiff and made no admissions as to control. The Council and Pioneer each cross-claimed for contribution, and at least on appeal the Council submitted that the RTA was liable to the exclusion of the Council. In these circumstances, it was said, there was conduct of the Council and Pioneer which made it not only proper but essential for the plaintiff to join the RTA as defendant and maintain her claim against it. It may have been reasonable for the plaintiff in her own interests to join the RTA as a defendant, but I do not think that there was conduct which made it just that the Council, and still less Pioneer, pay the costs payable by the plaintiff to the RTA. Neither the Council nor Pioneer created any circumstances of uncertainty as to who was the proper defendant. They were not obliged to concede liability or make admissions in order to remove the RTA from contention, there being a respectable argument that the RTA was liable, and there is no reason to think that short of effective capitulation by the Council and Pioneer the plaintiff would not have maintained her claim against the RTA. In my opinion, conduct has not been shown such as to make it fair to impose on the Council and Pioneer liability for the costs of the RTA." 122 The above passage makes it clear that a Sanderson or Bullock order should not be made on the basis of conduct that merely consists in the making of genuine legal arguments about who was in fact in control of the site where the plaintiff's accident occurred. In particular, the claim by counsel for the first, third and fourth defendant that the third defendant was a mere "invitee" on a site controlled by the second defendant is not conduct which warrants the making of such orders. 123 I decline to make a Sanderson or Bullock order against the first and third defendants.

[29]

Indemnity costs 124 As noted above, the second defendant submits that it should be awarded costs on an indemnity basis from the date when the first, third and fourth defendants filed their application to rehear the arbitrator's determination. The second defendant argues that the position of the first and third defendant is analogous to the position of a party who has obtained a judgment that is no better than a prior settlement offer by another party (see rr 42.14 and 42.15). Since I have declined to order the first and third defendant to pay the second defendant's costs pursuant to r 42.12, it is not necessary for me to consider this argument. 125 The second defendant submitted that if the above argument was incorrect, costs should nevertheless be assessed on an indemnity basis from the 25 August 2000. This submission is made on the basis that the judgment award was less favourable to the first and third defendants than the offer contained in the second defendant's Calderbank letter of 24 August 2000 (which reflected the award made by the arbitrator). Again, since I have declined to order the first and third defendants to pay the second defendant's costs, it is not necessary for me to consider the second defendant's Calderbank letter to the first and third defendants in relation to the primary dispute (as opposed to the cross-claims between them). 126 The second defendant's submissions in relation to the Calderbank letter are expressed in such a way that they only refer to the first and third defendants. Nevertheless, it would seem to be implicit that if indemnity costs are not available from the first and third defendants, then they should be sought from the plaintiff - who also received a Calderbank letter from the second defendant on 24 August 2000. The plaintiff anticipated such a claim in his submissions and sought a Sanderson order in relation to any indemnity costs awarded against him in favour of the second defendant. 127 As has been noted above, r 42.2 provides that costs should be awarded on an ordinary basis unless the court "orders otherwise." Calderbank letters were considered in Jones v Bradley (No 2) [2003] NSWCA 258, where in a joint judgment the Court said (at [5]): "'Calderbank offers' are well recognised means of making offers of settlement in circumstances where the party making the offer ultimately seeks a costs advantage if the offer is not accepted: see Calderbank v Calderbank (1975) 3 WLR 586. Such offers do not comply with the Rules of Court for making offers of compromise. Accordingly the Rules which govern costs in those circumstances do not apply and the matter remains one for the exercise of the Court's discretion." 128 In that case the Court rejected the idea that there was a prima facie presumption in favour of awarding indemnity costs against a party who has declined to accept a Calderbank offer that is more favourable to the party than the judgment award. The Court (at [8]) quoted Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]: "The making of an offer of compromise in the form of a Calderbank Letter … 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." 129 At [9] the Court said that the approach in SMEC Testing Services "is correct and is the approach that should be consistently applied when dealing with Calderbank offers." In the later case of Leichhardt Municipal Council v Green [2004] NSWCA 341, Santow JA (Bryson JA and Stein JA agreeing) said (at [46]-[47]): "It is respectfully submitted that there is no principle of law or persuasive policy reason why a defendant's unaccepted offer of compromise made by Calderbank letter should give rise to costs sanctions on any basis different to that provided by the Rules. Under the rules, such costs would only be awarded in exceptional circumstances if the Court 'otherwise orders'. For the Court to depart from the general rule there must be particular grounds on which the Court can exercise its discretion: Hillier v Sheather (1995) 36 NSWLR 414. A defendant must resort to showing that the plaintiff's rejection of the offer was "unreasonable" under the general law: Multicon Engineering Pty Limited v Federal Airports Corp (1996) 138 ALR 425. That discretion is to be exercised in all the circumstances of the case: SMEC Testing Services Pty Limited (supra) at [37] per Giles JA affirmed in Jones v Bradley (supra) at [9]. Indemnity costs do not flow as a matter of course from unaccepted defendant offers. The conclusion that indemnity costs should not be viewed as a necessary or automatic consequence of not accepting a defendants offer does not in any way deny the general discretionary power of the Court regarding costs in such circumstances. It merely recognizes that, influenced but not bound by the rules, a Court will be reticent to award such indemnity costs following defendant offers of settlement…" 130 In my view, there is nothing to suggest that in the present case the plaintiff's failure to accept the second defendant's Calderbank offer was unreasonable in the circumstances. In fact the second defendant has made no attempt to demonstrate that the plaintiff's refusal of its offer was unreasonable. It follows that I should not depart from the usual course and order the plaintiff to pay the second defendant's costs on an ordinary basis.

At a glance

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Judgment (33 paragraphs)

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Cases Cited (19)