[1936] HCA 40
Knight v F.P. Special Assets Ltd (1992) 174 CLR 178
[1992] HCA 28
Latoudis v Casey (1990) 170 CLR 134
[1990] HCA 59
Mahenthirarasa v State Rail Authority of NSW (No 2) (2008) 72 NSWLR 73
[2008] NSWCA 201
Milne v Attorney General for the State of Tasmania (1956) 95 CLR
Source
Original judgment source is linked above.
Catchwords
[1936] HCA 40
Knight v F.P. Special Assets Ltd (1992) 174 CLR 178[1992] HCA 28
Latoudis v Casey (1990) 170 CLR 134[1990] HCA 59
Mahenthirarasa v State Rail Authority of NSW (No 2) (2008) 72 NSWLR 73[2008] NSWCA 201
Milne v Attorney General for the State of Tasmania (1956) 95 CLR[1956] HCA 48
Norbis v Norbis (1986) 161 CLR 513
Wright v Apthorpe [2020] NSWCA 300 | Case summary | Zoe
[1986] HCA 17
Oshlack v Richmond River Council (1998) 193 CLR 72
Judgment (10 paragraphs)
[1]
Background circumstances
In 2008 the plaintiff, Kenneth Apthorpe, then aged 18, was employed as a labourer by a roofing contractor, Burtwin Pty Ltd ("Burtwin"). On 18 September 2008 he was working on a residential construction. Overall control of the site was in the hands of a builder, JS Petty Pty Ltd (in liquidation). Also working on the site was a fascia and guttering contractor, Christopher Wright ("the applicant") and a scaffolding contractor, H.T.E. (Aust) Pty Ltd ("HTE").
On 18 September 2008 Mr Apthorpe suffered injuries when he fell from a scaffolding tower platform which had been erected by HTE at a height of 6 metres from the ground. Timber planks provided a bridge between the scaffolding platform and the roof of the house, where Mr Apthorpe was working removing tiles. Mr Apthorpe used the planks in the course of his work.
On 15 September 2008 the applicant removed the planks in order to facilitate the fascia and guttering work that he was doing. They were then repositioned (the primary judge found by employees of HTE) but not secured. The primary judge found that the most likely cause of Mr Apthorpe's fall was that, as he walked on the planks in their unsecured state, they became unbalanced and dislodged as a result of which Mr Apthorpe fell through a gap in the planks to the ground.
Mr Apthorpe commenced proceedings in the District Court claiming damages for personal injury. He named four defendants to the proceedings:
QBE Insurance (Australia) Limited ("QBE"), as insurer of JS Petty Pty Ltd, the building contractor which was by then in liquidation (first defendant);
HTE, the scaffolding contractor (second defendant);
the applicant, the fascia and guttering contractor (third defendant);
Burtwin, the roof tiling contractor and Mr Apthorpe's employer (fourth defendant).
The claims against the first to third defendants were governed by the Civil Liability Act 2002 (NSW); the claim against Burtwin was governed by the Workers Compensation Act 1987 (NSW). The defendants filed cross-claims against one another seeking, under the provisions of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), apportionment of any liability found against them.
The pleadings are not before this Court. It is apparent, however, that each defendant denied negligence and (other than QBE) asserted contributory negligence on the part of Mr Apthorpe. The applicant pleaded, (and maintained until the second day of the trial when he abandoned it), a defence under the Limitation Act 1969 (NSW). The details of that defence are not available to this Court.
Mr Apthorpe's claims came on for hearing before Levy SC DCJ (the primary judge) commencing on 25 February 2019 and proceeded over the following three days, and on 14 March 2019.
On 18 April 2019, the primary judge found that each defendant was liable to Mr Apthorpe in negligence. He rejected the defences of contributory negligence. He assessed the damages to which Mr Apthorpe was entitled under the Workers Compensation Act and the Civil Liability Act. After the parties made the necessary calculations for the purposes of s 151Z(2) of the Workers Compensation Act, he gave judgment for Mr Apthorpe in the sum of $605,216: Apthorpe v QBE Insurance (Australia) Limited & Ors [2019] NSWDC 135.
The primary judge dealt with the various cross-claims by apportioning liability as follows:
(i) QBE (first defendant): 25%;
(ii) HTE (second defendant): 40%;
(iii) the applicant (third defendant): 25%; and
(iv) Burtwin (fourth defendant): 10%.
He reserved the question of costs. A contested hearing on that issue took place on 14 June 2019. It is apparent that a good deal of material was placed before the primary judge. Most of that material has not been made available to this Court. On 9 August 2019 the primary judge ordered:
"(1) [Mr Apthorpe]'s costs of his claim against [Burtwin] are to be paid by [Burtwin] on the ordinary basis;
(2) [Mr Apthorpe]'s costs of and incidental to the limitation defence pleaded by [the applicant], are to be paid by [the applicant] on the indemnity basis;
(3) [Mr Apthorpe]'s costs of his claim against [QBE], [HTE] and [the applicant] are to be paid by those defendants on the ordinary basis to 20 December 2018, in the same proportions as the proportionate liability findings made against those defendants;
(4) [The applicant] is to pay its [sic - his] own costs incurred in the proceedings;
(5) [QBE] and [HTE] are to pay their own costs incurred in the proceedings to 20 December 2018;
(6) [The applicant] is to pay the costs incurred by [QBE] and [HTE] in the proceedings from 21 December 2018 on the indemnity basis; and
(7) Liberty to apply on 7 days' notice if further or other orders are required."
Apthorpe v QBE Insurance (Aust) Limited & Ors [2019] NSWDC 390.
On 30 August 2019, by agreement, the orders were amended under the Slip Rule. Order 1 was varied to read:
"As between [Mr Apthorpe] and [Burtwin], no order as to costs with the intent that each party pay their own costs."
Added to the orders was:
"[8] [The applicant] is to pay the costs incurred by [Mr Apthorpe] in the proceedings from 21 December 2018 on the indemnity basis."
The present challenge is as to order 6 as originally made, and additional order [8], that is, the orders that the applicant pay the costs of Mr Apthorpe, and those of QBE and HTE, on the indemnity basis from 21 December 2018. The QBE and HTE costs in question were their own costs from 21 December 2018 and Mr Apthorpe's costs that those defendants were ordered to pay from that date, on the indemnity basis. There is no challenge to the order that the applicant pay Mr Apthorpe's costs of and incidental to the limitation defence on the indemnity basis.
The proceedings against Burtwin are completed. Burtwin is not involved in the present application.
An appeal (if leave were granted) is governed by s 75A of the Supreme Court Act 1970 (NSW).
To succeed in his application for leave to appeal the applicant faces three hurdles. First, it is well established that leave to appeal will be granted only in matters that involve issues of principle, questions of public importance or circumstances where it is reasonably clear that an injustice has occurred by reason of error in the judgment, going beyond what is merely arguable: The Age Company Ltd & Ors v Liu [2013] NSWCA 26 at [13] per Bathurst CJ (Beazley and McColl JJA agreeing). Second, as the decision was a discretionary one, the applicant must identify error (more than merely arguable) of one of the kinds mentioned in House v The King (1936) 55 CLR 499; [1936] HCA 40. Third, a decision on costs is a decision as to practice and procedure, in relation to which this Court exercises particular caution in granting leave to appeal: Re Will of Gilbert (1946) 46 SR (NSW) 318; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177; [1981] HCA 39.
To be clear, the effect of the orders made by the primary judge was:
(i) the applicant was to pay, on the indemnity basis, the costs incurred by Mr Apthorpe in preparing to respond to the limitation defence;
(ii) until 20 December 2018 the applicant, QBE and HTE were to bear Mr Apthorpe's costs, to be assessed on the ordinary basis, in proportion to their liability as found in the principal proceedings;
(iii) from 21 December 2018, the applicant was to bear the costs QBE and HTE were ordered to pay to Mr Apthorpe, to be assessed on the indemnity basis; and
(iv) from 21 December 2018 the applicant was to bear Mr Apthorpe's costs to be assessed on an indemnity basis.
The first and second of these are not subject to challenge. As can be deduced from the orders, the primary judge held the applicant responsible for all costs incurred from 21 December 2018, and responsible in a way that justified not only requiring him to pay the costs of all parties (except Burtwin) incurred in the litigation after that date, but to do so on the indemnity basis. The foundation for that conclusion lies in settlement negotiations that commenced as early as February 2018 when Mr Apthorpe made "an opening offer" to all defendants to settle the proceedings for the sum of $743,587. That prompted discussion among Burtwin, QBE and HTE concerning their respective liabilities and their contributions to a settlement figure. A complication arose because Mr Apthorpe's claim against Burtwin was to be assessed under a different compensatory regime (the Workers Compensation Act) from that by which the liabilities of the other three defendants were to be assessed (the Civil Liability Act). Correspondence in evidence shows that all defendants, excluding the applicant, worked cooperatively towards resolution of the proceedings. The applicant, through his solicitors, "remained aloof" (to adopt the language used by the primary judge at [65]) from the negotiations.
On 5 March 2018 Burtwin made an offer to all other defendants to contribute to a settlement of $60,000, inclusive of workers compensation payments and costs. It noted that, at that date, payments made under the Workers Compensation Act amounted to $254,762.21.
By 14 May 2018, QBE and HTE had, effectively, agreed each to contribute 25% to such part of any award of damages as was to be calculated under the Civil Liability Act. They attempted to have the applicant agree to a similar contribution. They gave notice that, in the event that the offers were not accepted, they would be relied upon on the question of costs, on the principles stated in Calderbank v Calderbank [1975] 3 All ER 333.
The only response then made on behalf of the applicant (so far as the evidence goes) was that the offers were meaningless in the absence of the agreement of all defendants and the plaintiff.
On 8 October 2018 Mr Apthorpe served on all defendants an offer of compromise, pursuant to UCPR r 20.26, to settle the proceedings for verdict and judgment in the sum of $743,587.00.
It seems that (although the documentation provided to the court is, in this respect, deficient) at some point, possibly in the course of a mediation, the applicant offered to contribute a lump sum of $50,000 inclusive of costs. Discussions continued, and agreement was reached with Burtwin as to the contribution it would make. Thereafter (from at least 12 November 2018) QBE and HTE agreed that, jointly, they would contribute 67% of the Civil Liability Act damages on the proviso that the applicant agree to contribute the remaining 33%. Up to this point no amount of offer had been agreed; the negotiations between defendants were as to the apportionment of their respective liabilities.
By letter of 12 November 2018, Mr McGrath, the solicitor for QBE (but plainly speaking for Burtwin and HTE), conveyed the proposal to Ms Andrew, the applicant's solicitor, and advised her:
"We are therefore making this offer of contribution by way of Calderbank letter pursuant to the principles of Calderbank v Calderbank.
If this offer is rejected by your client or is allowed to lapse, we reserved (sic) the first, second and fourth defendants' rights to tender a copy of this letter on an application for either a Bullock or Sanderson order on an indemnity basis from the date of this offer. This will of course include all of the costs of the hearing."
The offer was expressed to remain open until close of business on 30 November 2018, on which date it was to lapse, not to be reinstated.
Having had no response to that letter by 30 November 2018, Mr McGrath wrote to Ms Andrew, stating his assumption that the applicant intended to allow the Calderbank offer to lapse as it was expressed to expire on that day.
Shortly after this correspondence was received on 30 November 2018, a partner in Ms Andrew's office responded, confirming that the applicant would not accept the proposal conveyed in the letter and saying:
"We are not instructed to move our feet and that was affirmed after some further conferences this week with [senior counsel]."
On 21 December 2018, in a last effort to persuade the applicant to join in negotiations, the solicitor for HTE (Mr Nguyen) (but clearly speaking for all other defendants for this purpose) wrote to the applicant's solicitors, relevantly in the following terms:
"We understand that the Plaintiff's claim can settle for the sum of $450,000 plus costs of $200,000, clear of the statutory workers compensation payback.
We further understand that the workers compensation insurer has agreed to waive the entirety of the workers compensation payback and contribute the additional sum of $30,000 all-inclusive towards the settlement of the claim.
In the circumstances, all that it will take for the claim to be settled is a contribution from your client of the sum of $206,666.67 all-inclusive, being one third of the balance of the Plaintiff's settlement sum payable by the First, Second and Third Defendants.
With your client's continuing refusal to make that contribution we regard that conduct as being unreasonable having regard to the six day Hearing fixed to commence on 25 February 2019 and your client's exposure to liability.
We further regard your client's refusal to make the contribution to be the sole reason for the claim proceeding to the six day Hearing and the parties incurring the costs of this Hearing and to Judgment.
We place you and your client on notice that should you achieve an outcome no better than the one third (1/3) contribution we will rely upon this letter on the question of costs, including your client being responsible for the whole of the costs of all of the parties to the Hearing on an indemnity basis."
On the same day, by email, Mr Nguyen sent a copy of the letter to another solicitor in Ms Andrew's office (Mr Morgan), noting that he understood that Ms Andrew was on annual leave. A partner of the firm (Mr Stoddart) replied, saying:
"Thank you for your letter. There are obvious difficulties with the nature of the application you foreshadow, but it is obviously something that can be dealt with at the conclusion of the Hearing.
In the view of Senior Counsel and my view we consider that our present offer to contribute reflects our exposure and we are content to proceed. …".
This last correspondence was, apparently by oversight, not included in the materials provided to the primary judge. It was tendered and provisionally admitted on the hearing of the present application, with the question of its admission reserved. The correspondence was tendered in response to a submission made on behalf of HTE to the effect that the applicant's solicitors had failed to respond to the 21 December letter. Although objection was taken to the admission of the correspondence by all respondents, no prejudice arising from its admission was identified. Counsel for HTE withdrew the submission that prompted the tender.
In my opinion, in the absence of any identified prejudice, and in order that the factual record be complete, I propose that the two emails be admitted. As will be seen, they do not bear upon the outcome of the application.
The hearing commenced on 25 February 2019. On 26 February Mr Nguyen wrote to Ms Andrew and other legal representatives of the respondents. He conveyed an offer made by Mr Apthorpe to settle the proceedings for $450,000 clear of workers compensation payments, plus costs of $375,000 (a total of $825,000), and expressing the opinion that the offer was reasonable and ought to be accepted. He said that QBE and HTE had each offered to contribute 35% of the balance of the proposed settlement figure after Burtwin's contribution (that is $278,250). These offers were open until 10 am on 28 February. Mr Nguyen invited the applicant to contribute $238,500 (30% of the balance). He advised that, if the applicant did not accept the offer and did not achieve a better outcome, all parties would tender the letter on an application for an order that he pay the costs henceforth on an indemnity basis, and that the applicant pay any liability for costs to Mr Apthorpe incurred by the QBE and HTE. Mr Nguyen pointed out, in some detail, the costs consequences of the trial proceeding.
Mr Nguyen concluded:
"11. Noting the effect of the offer above, that the proceedings can resolve if your client contributes $238,500, by our reckoning your client will need to achieve an apportionment of liability to him of less than 20% in order to obtain a better outcome than acceptance of this offer.
12. This offer is made pursuant to Calderbank v Calderbank and is open for the [applicant]'s acceptance by 10.00 am on Thursday, 28 February 2019. Should it expire it will not be made again."
The following day (27 February) Ms Andrew rejected the offer. At some point that is not discernible from the materials before this Court, the applicant's proffered contribution became $100,000.
Settlement negotiations apparently proceeded to 28 February 2019 (the last day of the February hearing dates). On 4 March Mr Nguyen again wrote to Ms Andrew and other legal representatives, setting out the position as it then existed. He noted that Mr Apthorpe was prepared to reduce his offer from $825,000 ($450,000 plus $375,000 costs) to $786,500 clear of workers compensation and inclusive of costs. He said that Burtwin had offered to contribute the workers compensation payments plus $30,000 and that, as at 28 February, Burtwin remained willing to waive workers compensation payback and contribute a further $30,000; the applicant was willing to contribute $100,000 all inclusive; HTE and QBE were each willing to contribute $278,250 all inclusive; but that:
"7 Once the Plaintiff agreed to reduce his offer that left a gap of $100,000 all-inclusive. The [applicant] indicated that it would contribute one third of that gap [thus increasing his offer to $133,000]. We indicated that we would obtain instructions to do the same. At that point, [QBE] withdrew its earlier offer and stated that it would contribute $100,000 all-inclusive towards a settlement.
8 That of course meant that the settlement negotiations came to an end.
9 We regard the conduct of both [QBE] and [the applicant] as being wholly unreasonable. We do not think the positions adopted reflect the risks in the case and they certainly do not pay regard to the ongoing costs, not to mention the use of Court resources requiring further hearing time and the requirement of the Court to prepare what no doubt will be detailed reasons for judgment.
10 Accepting the likelihood that the Plaintiff will be awarded $750,000 and the costs by that time will be $450,000, [QBE's] contribution presently is a little over 8% and the [applicant]'s contribution is a little over 11%. Neither is remotely realistic. There are insurers involved for both parties and frankly they should be behaving in a more commercial manner.
11 We intend to rely upon this letter on the question of costs to support a submission that [QBE] and/or [the applicant] pay all of the costs of the litigation from last Thursday, 28 February 2019 unless they achieve a better outcome than their present contributions."
[2]
The primary judgment
In the light of this chronology, the primary judge accepted that, until 20 December 2018 and having regard to the complexity of the litigation, costs should be awarded in favour of Mr Apthorpe to be assessed on the ordinary basis, and, thereafter, to be assessed on the indemnity basis. He said:
"65 In my view, [the applicant's] conduct of the proceedings, by which he effectively remained aloof from entering into meaningful settlement negotiations with a plaintiff, who was clearly willing to negotiate on reasonable terms, was an unreasonable position to adapt [sic - adopt].
66 As a consequence, the case did not settle, and the plaintiff was obliged to incur substantial costs, including the costs of the spectre of having his counsel having to sit and watch over the internecine dispute between the defendants in order to protect his own interests in the litigation.
…
68 In my view, having regard to the authorities cited at [51] above, the plaintiff must be compensated as to costs for the consequences of the unreasonable position adopted on behalf of [the applicant]: s 56 of the Civil Procedure Act."
In relation to the costs of QBE and HTE, he, again, considered that the unreasonable attitude taken by the applicant was:
"70 … the most probable cause of the case remaining unresolved so as to require [QBE] and [HTE] to incur the undoubtedly expensive costs that were a consequence of the plaintiff's case proceeding to judgment.
71 The pivotal circumstance which led to that scenario was [the applicant's] refusal to adopt a reasonable approach to attempting to negotiate a settlement position with the other defendants who were plainly otherwise amenable to that course. This was also in circumstances where the plaintiff was plainly amenable to such a course. In my view, [the applicant's] position as so described was unreasonable in the circumstances and it was delinquent to the obligations of a party as required by s 56 of the Civil Procedure Act. On the basis of the authorities cited at [51] above, [QBE] and [HTE] must be adequately compensated for the [applicant's] delinquency in its response to settlement opportunities."
The authorities referred to at [51] included Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, to which it will be necessary to return. Also mentioned were Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37]-[39], Mahenthirarasa v State Rail Authority of NSW (No 2) (2008) 72 NSWLR 273; [2008] NSWCA 201 at [8]-[9] and Latoudis v Casey (1990) 170 CLR 534 at 542; [1990] HCA 59.
[3]
The proposed grounds of appeal
By amended draft notice of appeal the applicant identifies six proposed grounds of appeal, as follows:
"1. The trial judge failed to take into account and apply the general rule embodied in pt.42.r.42.2 of the UCPR to the effect that costs payable by a person are to be assessed on the ordinary basis unless the court otherwise orders.
2. The trial judge erred in taking into account an irrelevant consideration namely the fact that "substantial" or "undoubtedly expensive" costs would be incurred by the respondents after 21 December 2018.
3. The trial judge failed to take into account relevant considerations.
4. His Honour erred in concluding that indemnity costs orders were available to "the party affected", whereas the authorities he relied upon were directed towards the costs entitlement of a "successful party".
5. In relation to [HTE] and [QBE], the trial judge failed to take into account the fact that the effect of his orders were in the nature of Sanderson and Bullock orders in circumstances where there was no justification for such orders.
6. The trial judge erred in concluding that the conduct of the appellant was so unreasonable or delinquent as to warrant an indemnity costs order in favour of all other parties to the litigation after 21 December 2018."
I have concluded that, in order to lay to rest an apparent misconception concerning the construction of one provision of the Uniform Civil Procedure Rules, leave to appeal should be granted with respect to proposed ground 1, but that the remaining proposed grounds are of insufficient substance to warrant a grant of leave. Those proposed grounds will be dealt with with commensurate brevity.
While, for the reason given above, I would grant leave to appeal on ground 1, for the reasons that follow, I would reject that ground.
[4]
Relevant statutory provisions
Before proceeding to consider the proposed grounds of appeal it is convenient to note some relevant statutory provisions. Section 56 of the Civil Procedure Act 2005 (NSW) relevantly provides:
"(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.
(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.
(4) …
(5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs.
(6) …"
Section 98(1) of the Civil Procedure Act, which provides:
"98 Courts powers as to costs
(1) Subject to rules of court and to this or any other Act -
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or an indemnity basis."
Uniform Civil Procedure Rules r 20.26 makes detailed provision for any party by notice in writing to make an offer of compromise; r 20.32 makes provision for a party who "stands to be held liable to another party… to contribute towards any debt or damages which may be recovered against the second party", to make an offer to contribute. Rules 42.1 and 42.2 deal further with costs and need to be spelled out in full. Rule 42.1 provides:
"42.1 General rule that costs follow the event
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."
Rule 42.2 provides:
"42.2 General rule as to assessment of costs
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."
Rule 42.18 provides:
42.18 Offer to contribute
If a party has made an offer to contribute, as referred to in rule 20.32, the court must take into account both the fact and the amount of the offer in exercising its discretion as to costs.
Rules 42.14, 42.15 and 42.15A deal with the consequences that follow where offers of compromise made under r 20.26 have been made.
[5]
Ground 1
No respondent took issue with the proposition contained in ground 1, that r 42.2 states a "general rule" to the effect that, unless the court otherwise orders, costs are to be assessed on the ordinary basis. So stated, the proposition is correct. However, analysis of the argument that proceeded demonstrates a misapprehension as to the nature and effect of r 42.2. The misapprehension is that r 42.2 operates as a direction to the court that confines the exercise of the s 98(1) discretion; put differently, r 42.2 creates a presumption which must be displaced before an order may be made that costs be paid on other than the ordinary basis; put differently again, the default position is that costs must be ordered to be paid on the ordinary basis (unless some other order is made). This is the underlying premise of ground 1.
The response on behalf of Mr Apthorpe was that the primary judge did not overlook the "general rule" and did not refer to it because "it was obvious that it applied unless the court otherwise ordered". The response on behalf of QBE was that rr 42.1 and 42.2 "create only a starting point for the exercise of the Court's discretion". QBE cited the decision of Hallen J in Evans v Braddock (No 2) [2015] NSWSC 518 at [49] purportedly as authority for the proposition that the exercise of the Court's discretion,
"… will ordinarily begin with the making of an order that the successful party's costs be paid by the unsuccessful party on the ordinary basis, unless that outcome is displaced by some other discretionary factor."
That is not an accurate reflection of what Hallen J said: the words "on the ordinary basis" are an interpolation and do not appear in [49] of his Honour's judgment (which is, in fact, a lengthy extract from his earlier decision in Walsh v Walsh (No 2) [2013] NSWSC 1281).
In its response to ground 1, HTE focussed on r 20.32, providing for offers of contribution between co-defendants, and r 42.18, requiring a court to take into account the fact and the quantum of any such offer of contribution.
No respondent contested the underlying proposition of the applicant, that r 42.2 was directed to the manner in which a court is required to exercise the s 98(1) discretion. In my opinion that proposition is fundamentally wrong.
The consequence of the interpretation placed on r 42.2 by the applicant (and impliedly accepted by the respondents) is that a judge exercising the s 98(1) costs discretion must justify any order other than an order that costs be assessed on the ordinary basis. That the respondents did not contest the applicant's interpretation of r 42.2 does not mean that this court should accept it. As I have said, in my opinion, for the reasons that follow, it is wrong.
[6]
Grounds 2 and 3
Notwithstanding the above, I accept that the s 98(1) discretion is required to be exercised judicially, and that entails consideration of all relevant circumstances, and exclusion of all irrelevant circumstances.
By ground 2 the applicant complains that, in taking into account the fact that "substantial" or "undoubtedly expensive" costs would be incurred by the respondents after 21 December 2018, the primary judge erred by taking into account an irrelevant consideration.
The primary judge made three references to the incurring of "substantial" or "undoubtedly expensive" costs that would be incurred by the respondents after 21 December 2018. At [62] he said that Mr Apthorpe was bound to succeed in the litigation, and did so, "thereby incurring substantial costs …"; at [66] he said that, as a consequence of the applicant's unreasonable conduct, the case did not settle and Mr Apthorpe was obliged to incur "substantial costs"; and at [70] he said that the position adopted by the applicant was the most probable cause of the failure of the case to settle, thus requiring QBE and HTE to incur "the undoubtedly expensive costs" of the case proceeding to judgment.
The applicant submits that this is an irrelevant consideration. His argument depended entirely on a single sentence of the decision of this Court in Brighten v Traino (No 2) [2019] NSWCA 203, in which the court (Basten, Gleeson and Brereton JJA) said, at [12]:
… "[N]o doubt it could be assumed that thereafter significant costs would be incurred, but that is not a relevant consideration in determining whether to grant indemnity costs from 17 October 2018."
Under consideration in that case were the potential costs consequences of an unaccepted offer of compromise (of the appeal) made under the relevant Rules. For reasons it gave, the Court found that there were proper reasons for departing from the prima facie position under the relevant Rule. It was in that context, and that context only, that the Court observed that the quantum of potential costs was not a relevant consideration. It did not explain why that was so. In my opinion, whatever the position in relation to costs following an unaccepted offer of compromise, that "substantial" or "expensive" costs are likely to be incurred is a consideration that is not irrelevant to the exercise of the s 98(1) discretion. I would not grant leave to appeal on ground 2.
[7]
Ground 4
By ground 4 the applicant attacks a single sentence in the primary judgment at [47], in which the primary judge, noting that the purpose of an order for indemnity costs is "not to punish the delinquent party", but is intended to "more adequately compensate the party affected". The primary judge cited Oshlack at [11] and [44] as support for the proposition.
The applicant seized on the words "the party affected". That, he contended, was a misrepresentation of what was said in Oshlack.
At [11] of Oshlack the High Court merely recounted a submission made on behalf of the respondent in reliance on the earlier decision in Milne, that, as a general rule, "a wholly successful defendant should receive his costs unless good reason is shown to the contrary". At [44] the High Court said:
"It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a 'solicitor and client' basis or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part."
The proposition advanced on behalf of the applicant was that neither in Oshlack nor in the other cases cited by the primary judge at [51] was reference made to "the party affected". Rather, the references were all to "unsuccessful parties".
Except for Mr Apthorpe, the applicant pointed out, the parties who were given the benefit of indemnity costs orders were all "unsuccessful parties" who would not ordinarily be entitled to costs orders in their favour. The submission was that the effect of the primary judge's order was "to punish the [applicant] as an unsuccessful party rather than to compensate a successful party and accordingly, the discretion exercised by the trial judge miscarried".
I would refuse leave to appeal on this ground. The term "unsuccessful party" or "unsuccessful defendant" was applicable in Oshlack because only two parties were involved. One was successful, one was unsuccessful. But an order for indemnity costs is readily adaptable to multi-party litigation where parties other than the one who is successful are affected by the "delinquency" of another party. All the primary judge did in using the term "party affected" was to adapt the language used so that it encompasses, properly, the relevant circumstances. There was no error in this respect.
[8]
Ground 5
By ground 5 the applicant contends that the orders made by the primary judge operate, in effect, as orders made in the application of the principles stated in Sanderson v Blyth Theatre Co [1903] 2 KB 533 and/or Bullock v London General Omnibus Co [1907] 1 KB 264.
Sanderson was a case in which a plaintiff sued two defendants, one successfully, the other unsuccessfully. It was held that (where the costs had been reasonably and properly incurred by the plaintiff) the court had jurisdiction to order the unsuccessful defendant to pay costs directly to the successful defendant. A not dissimilar principle was stated in Bullock, where it was held that an unsuccessful defendant may be ordered to pay to the plaintiff costs incurred in the pursuit of the successful defendant.
In Coombes v Roads and Traffic Authority (NSW) (No 2) [2007] NSWCA 70 at [3] Beazley JA identified the difference between the two as depending on how the payment under the order is directed to be made: "In a Bullock Order, the unsuccessful defendant is ordered to pay the plaintiff the costs the plaintiff is ordered to pay the successful defendant. Under a Sanderson Order, the unsuccessful defendant is ordered to pay directly to the successful defendant those costs that the plaintiff is ordered to pay."
What is common to both is that the plaintiff has failed against one of the defendants sued. That is not this case. The plaintiff, Mr Apthorpe, succeeded (in different measures) against each defendant he sued. There is no occasion to consider whether any unsuccessful defendant should bear the costs of any successful defendant, because there was no successful defendant. This ground is misconceived and does not warrant a grant of leave.
[9]
Ground 6
The submissions under ground 6 were directed to the reasonableness (or asserted unreasonableness) of the orders. On behalf of the applicant a number of points were made. The first was that the applicant was the last party joined to the proceedings, having been added in October 2015. The relevance of that circumstance entirely escapes me. The relevant circumstances all occurred in 2018, well after the applicant became a party.
Another submission the relevance of which I found elusive was that the primary judge was satisfied (in the principal proceedings), that, after the applicant had carried out his work on the site, it was HTE's employee who probably moved or repositioned the bridging planks. The effect of that finding is reflected in the apportionment of liability made in the principal judgment, and has no bearing on the costs issue now under consideration.
The applicant also argued that the defendant:
"… is 'entitled to raise his earthworks at every reasonable point along the path of assault,"
quoting Burchett J in Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 at 169.
That may be true, and may be accepted, but a defendant in a multi-party action who declines to discharge the obligations imposed by s 56(3) of the Civil Procedure Act does so at the risk of incurring liability for the costs which follow. That risk is expressly stated in subs(5).
I am not persuaded that any unreasonableness has been shown in the determination of the primary judge. I would not grant leave to advance this ground of appeal.
Although I would grant leave to appeal with respect to ground 1, the appeal should be dismissed. These conclusions mean that it is unnecessary to address a notice of contention filed on behalf of Mr Apthorpe.
The orders I propose are:
Leave granted to appeal with respect to proposed ground 1.
Appeal dismissed.
Leave to appeal otherwise refused.
The applicant to file an appropriate notice of appeal by 4 December 2020.
The applicant to pay the respondents' costs of the proceedings.
[10]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 20 November 2020
Solicitors:
Hall & Wilcox (Applicant)
Slater + Gordon (First Respondent)
Clyde & Co (Second Respondent)
Sparke Helmore (Third Respondent)
File Number(s): 2019/277518
Publication restriction: N/A
Decision under appeal Court or tribunal: District Court of NSW
Jurisdiction: Civil
Citation: [2019] NSWDC 390
Date of Decision: 9 August 2019
Before: Levy SC DCJ
File Number(s): 2011/301709, 2014/281269
per Simpson AJA, McCallum JA agreeing:
2 Section 98(1) confers on the court a discretion as to the award of costs in the widest possible terms: at [59]. No judicially pronounced guidelines, or guidance, have been identified which confine, limit, or restrict the breadth of the discretion. The case law suggests that it is to be given a liberal construction: at [57]. It is not limited or confined by any statutory provision that has been identified, nor any judicially developed guidelines. While there is a "general rule" that, unless otherwise specified, costs are to be awarded in favour of a successful party, there is no "general rule" that a court is to take, as a starting point, that costs are to be assessed on the ordinary basis, and justify any departure from that position: at [70]-[71].
3. UCPR r 42.2 is not directed to the manner in which a court is required to exercise the discretion, but rather is directed to costs assessors. A judge exercising s 98(1) of the Act costs discretion is not required to justify any order other than an order that costs be assessed on the ordinary basis: at [52]-[54].
Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11; Milne v Attorney General for the State of Tasmania (1956) 95 CLR 460 at 477; [1956] HCA 48; Knight v F.P. Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28; Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17.
Rule 42.2 is directed, not to courts, and not to the manner in which courts are to exercise the 98(1) discretion, but, rather, to costs assessors. In this respect it does create a presumption, or a default position, but it is not one that affects the exercise of the judicial discretion.
If that construction is not obvious from the language of r 42.2, it is confirmed by reference to r 42.1, which does, clearly, operate as a direction to a court considering a costs order. A court is required, unless it appears that some other order should be made, to order that costs follow the event. Similarly, by r 42.18, a court is required to take into account both the fact of an offer of contribution under r 20.32, and the amount of the offer, in the exercise of its costs discretion. No comparable direction (to a court) is incorporated in r 42.2. Rule 42.2 does not have the effect for which the applicant contends. That is sufficient to warrant rejection of ground 1.
It remains, however, to consider whether there is, apart from r 42.2, any "general rule" of the kind for which the applicant contends. In my opinion there is not. Because the applicant put all his eggs into the r 42.2 basket, he did not address any alternative path to the proposition that the default position in the exercise of the discretion is that costs be ordered to be assessed on the ordinary basis.
Section 98(1) is expressed to be subject to the Rules, to the Civil Procedure Act, and to any other Act. No provision of the Rules (other than r 42.2), nor of the Civil Procedure Act, nor of any other Act, has been identified as bearing on the exercise of the discretion. The only other possible means of confining, limiting, or restricting the breadth of the discretion is via the development of judicially pronounced guidelines, in order to enhance the quest for consistency: Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17. No such guidelines, or guidance, have been identified. To the contrary, the case law suggests that s 98(1) is to be given a liberal construction.
There are two aspects to an order of costs. They are distinct from one another. The first concerns on whom the burden of costs is to fall. In that respect there is a "general rule", stated in Milne v Attorney General for the State of Tasmania (1956) 95 CLR 460 at 477; [1956] HCA 48:
"It is a general rule that a wholly successful defendant should receive his costs…"
The common law "general rule" is formalised in r 42.1, and is reflected in what is commonly known as "the usual order as to costs" (see Oshlack, at [67], per McHugh J) or the order that "costs follow the event" (as in r 42.1). The second aspect of an order as to costs concerns the basis on which the costs are to be assessed. The "general rule" says nothing about the basis on which the costs ordered are to be assessed. That function is performed by s 98(1), which confers a discretion in the widest possible terms.
Section 98(1) is cast in terms commonly used in statutes conferring a costs discretion. Paragraphs (a) and (b) effectively reproduce s 76(1)(a) and (b) (now repealed) of the Supreme Court Act 1970 (NSW). Paragraph (c) of s 76(1), while to the same effect as par (c) of s 98(1), provided at the date of introduction:
the Court may order costs to be taxed or otherwise ascertained on a party and party basis or on any other basis.
I see no difference in substance between par (c) of s 76(1) and par (c) of s 98(1). The different language reflects differences in the terminology used with respect to the assessment of costs at different times.
In a context which need not be elucidated, the High Court said that it would not be right to give s 76 a narrow interpretation, and rejected a submission that the section:
"does no more than change the rule that the costs follow the event…".
The High Court said that the section:
"… confers a wide discretion on the Court to decide whether any and which party to proceedings shall pay costs to another party …": Wentworth v Attorney-General for the State of New South Wales (1984) 154 CLR 518 at 528; [1984] HCA 70.
Nothing was said about the par (c) discretion as to the basis on which costs may be ordered to be assessed (or ascertained).
I will return to decisions with respect to provisions that closely adhere to the language used in s 98(1). More generally, in Knight v F.P. Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28, the High Court had under consideration two Queensland provisions. Section 58 of the Supreme Court Act 1867 (Qld) provided:
The Supreme Court shall have power to award costs in all cases lawfully brought before it and not provided for otherwise than by this section.
Order 91, r.1 of the Rules of the Supreme Court of Queensland provided:
Subject to the provisions of the Judicature Act and these Rules, the costs of and incident to all proceedings in the Court, including the administration of estates and trusts, shall be in the discretion of the Court or Judge …
Of these provisions Gaudron J said at 205:
"It is contrary to long-established principle and wholly inappropriate that the grant of power to a court (including the conferral of jurisdiction) should be construed as subject to a limitation not appearing in the words of that grant … Save for a qualification … a grant of power should be construed in accordance with ordinary principles and, thus, the words used should be given their full meaning unless there is something to indicate to the contrary. Powers conferred on a court are powers which must be exercised judicially and in accordance with legal principle. This consideration leads to the qualification to which I earlier referred. The necessity for the power to be exercised judicially tends in favour of the most liberal construction, for it denies the validity of considerations which might limit a grant of power to some different body, including, for example, that the power might be exercised arbitrarily or capriciously or to work oppression or abuse."
In Norbis v Norbis, the discretion in question was not as to costs, but as to orders under s 79 of the Family Law Act 1975 (Cth), which then permitted the court to make "such orders as it thinks fit altering the interests of the parties to a marriage in the property of the parties or either of them", thus conferring "a very wide [but not unlimited] discretion on the Court" (at 521). Subsection (4) set out a number of circumstances which the court was required to take into account in the exercise of that discretion. The issue in Norbis v Norbis was the extent to which judicial decisions with respect to the exercise of the discretion could provide "guidance" to subsequent decision makers, such as to bind the exercise of the discretion.
Mason and Deane JJ (with whom, subject to an important exception, Brennan J generally agreed) recognised a tension between preservation of the width of the statutory discretion and the need for consistency in judicial adjudication (at 519). Their Honours accepted that discretionary remedies may be transformed into remedies that are granted or refused according to "well-settled principles", even, in some cases, amounting to "binding rules" (the latter proposition being the exception to Brennan J's concurrence).
The decision in Norbis v Norbis took account of the specialist nature of the jurisdiction of the Family Court, but I understand the reasoning outlined above to be of general application.
In Oshlack, to which the primary judge referred (in a different context), the statute in question was s 69(2) of the Land and Environment Court Act 1979 (NSW) (to which the Court referred as "the Court Act"), in terms relevantly identical to s 98(1). Gaudron and Gummow JJ said:
"21. The provisions of s 69 of the Court Act which confer upon the Court the discretion exercised by the primary judge attract the application of the general proposition that it is inappropriate to read a provision conferring jurisdiction or granting powers to a court by making conditions or imposing limitations which are not found in the words used. The necessity for the exercise of the jurisdiction or power by a court favours a liberal construction. Considerations which might limit the construction of such a grant to some different body do not apply.
22. The terms of s 69(2) contain no positive indication of the considerations upon which the court is to determine by whom and to what extent costs are to be paid. The power conferred by the section is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. However, subject to such considerations, the discretion conferred is, to adapt the words of Dixon J, unconfined except in so far as 'the subject matter and the scope and purpose' of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be 'definitely extraneous to any objects the legislature could have had in view.' (internal citations omitted)."
McHugh J (dissenting as to the application of the principles stated) said:
"65 Although the statutory discretion is broadly stated, it is not unqualified. It clearly cannot be exercised capriciously. Importantly, the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation. In this manner, the law has gradually developed principles to guide the proper exercise of the discretion and, in some cases, to highlight extraneous considerations which, if taken into account, will cause the exercise of the discretion to miscarry. Consistent with the aim of justice, the law could not have developed otherwise. As Mason CJ said in Latoudis [Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59]:
'[I]t does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity.'
66 By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs …" (Internal citations omitted)
The issue in Oshlack was whether it lay within the discretionary power of the court to decline to award a wholly successful litigant its costs. By majority (Gaudron, Gummow, Kirby JJ) it was held that it did. Gaudron and Gummow JJ said:
"40 There is no absolute rule with respect to the exercise of the power conferred by a provision such as s 69 of the Court Act that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party. Nor is there any rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party". (Internal citations omitted)
Those authorities, cumulatively, demonstrate the breadth of the discretion conferred by s 98(1). That discretion is not limited or confined by any statutory provision that has been identified, nor any judicially developed guidelines. The primary judge was not required to start with the proposition that costs were to be ordered to be assessed on the ordinary basis unless reasons for departure from that position were shown.
In my opinion, while there is a "general rule" that, unless otherwise specified, costs are to be awarded in favour of a successful party, there is no "general rule" that a court is (unless it expressly orders otherwise) to take, as a starting point, that costs are to be assessed on the ordinary basis, and justify any departure from that position.
Ground 1 of the proposed appeal is, accordingly, founded on a false premise. I would reject ground 1.
By ground 3 the applicant complains that, in respect of each respondent, the primary judge failed to take into account considerations that he was obliged to take into account. The complaints he makes vary as to the respondent in question. The applicant's essential complaint in relation to Mr Apthorpe is that the primary judge failed to take into account that the only offer of compromise made by Mr Apthorpe exceeded the amount ultimately awarded by way of damages; that there was no Calderbank or other written offer served on the applicant; that at no time did Mr Apthorpe give notice that a claim for indemnity costs would be made; that the letter of 21 December 2018 did not constitute an offer by Mr Apthorpe; and that "the reasonableness of [the applicant's] response needed to be gauged… without the benefit of hindsight" as at 21 December 2018.
I accept that, had the applicant engaged in the negotiation process as he was repeatedly invited to do by QBE and HTE, these considerations (or some of them) may well have been relevant factors. The "delinquency" identified by the primary judge was the applicant's failure to participate in settlement discussions and negotiations in a way that thwarted what were plainly genuine attempts by those two defendants to reach an agreement, and resulted in the incurring of the significant costs of a five day trial. The primary judge took the view that, in conducting himself as he did, the applicant was in breach of his obligations under s 56 of the Civil Procedure Act (at [71]). No ground of appeal challenges his Honour's reliance on that provision. In focussing on the offers made by Mr Apthorpe, the applicant sought to deflect attention from the real issue, which was his own conduct.
Recourse to the submissions made to the primary judge in relation to costs shows that, of the considerations listed in the submissions as considerations the primary judge was obliged, but failed, to take into account, only the first - the offer of compromise made by Mr Apthorpe - was mentioned. No mention was made, for example, of the absence of a Calderbank offer, or notice that indemnity costs would or might be sought. It can hardly be said that the primary judge erroneously failed to take into account considerations that were not put to him.
That leaves the discrepancy between Mr Apthorpe's offer of compromise and the ultimate outcome (which was the subject of submission). Although I accept that that was potentially a relevant consideration, and was pressed upon the primary judge as such, it was not, in my opinion, of sufficient importance in the overall assessment of the circumstances to warrant its omission from the reasoning of the primary judge as constituting error. Given the approach taken by the primary judge it could not have affected the outcome.
With respect to HTE the applicant's complaint was that the primary judge failed to take into account that the settlement offer was for an amount and in a percentage less than that for which HTE was held liable; that the amount the applicant was asked to contribute exceeded the amount for which he was ultimately held liable; that HTE was an unsuccessful defendant who was held liable for the greatest proportion of the applicant's damages and should therefore be held liable for at least a proportion of his costs; and that the letter of 21 December 2018 only gave notice of a claim for indemnity costs in the event that the applicant achieved an outcome no better than 1/3rd of the judgment amount (greater than the 25% liability for which he was held liable).
In response, HTE argued that, on analysis of the outcome, the applicant was worse off than he would have been had his offer of a contribution of $100,000 been accepted.
The transcript of argument before the primary judge does not reveal that senior counsel for the applicant put any submissions in relation to costs liability of HTE. The various complaints now made were not represented in submissions made to the primary judge, and, like the complaints in relation to Mr Apthorpe, should be rejected as not disclosing any appellable error. The present submissions again seek to deflect attention from the applicant's conduct.
With respect to QBE, the applicant complained that the primary judge failed to take into account that there was no offer from QBE in the letter of 21 December, that that letter did not constitute an offer that was capable of acceptance necessitating the agreement of all parties, that at no time prior to judgment did QBE give notice of any claim for indemnity costs and that QBE was unsuccessful in its defence.
The thrust of the applicant's submissions to the primary judge in this respect was that the outcome vindicates the applicant's refusal to participate in the settlement negotiations. The specific matters identified in the submissions to this Court were not mentioned.
I do not accept that the reasonableness of the applicant's conduct depends exclusively on the outcome of the proceedings. Negotiations are precisely that: a process of engagement towards reaching an agreed position, acceptable to all. As indicated above, that prospect was thwarted by the applicant's intransigence. That was the view taken by the primary judge. I am not prepared to conclude that he was wrong in taking that view. Had the applicant engaged, a negotiated settlement may well have eventuated. But the real question is whether it can properly be asserted that the primary judge erroneously failed to base his decision on a mathematical comparison of what would have resulted had the applicant accepted the proposal made to him by QBE and HTE. I do not think the primary judge was in error in the approach he took.
The consequence of these conclusions is that I would refuse leave to appeal on proposed ground 3.