Ainger v Coffs Harbour City Council (No 2)

[2007] NSWCA 212

New South Wales

Court of Appeal

CITATION:	Ainger v Coffs Harbour City Council (No 2) [2007] NSWCA 212 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	On the papers
JUDGMENT DATE:	16 August 2007
JUDGMENT OF:	Mason P at 1; McColl JA at 2; Hunt AJA at 46
DECISION:	1. Costs of the claimant of the first trial to be paid by the opponent on a solicitor/client basis; 2. No order as to the costs of the motion.
CATCHWORDS:	COSTS – costs of appeal – offer of compromise made by plaintiff before trial under DCR Pt 39A r 25 – plaintiff sought indemnity costs for trial and appeal – whether offer relevant to costs of appeal –neither DCR or SCR apply – costs order in discretion of the court – court considers circumstances at time offer made – no fresh offer made between trial and appeal – discretion to order costs of appeal on an indemnity basis turned on demonstrating unreasonable or delinquent conduct on the part of the party against whom order sought – no such conduct demonstrated – motion for indemnity costs of appeal refused - COSTS – costs of trial – application of UCPR to offer of compromise made under DCR Pt 39A r 25 – costs awarded on a solicitor/client basis - COSTS – offers of compromise – relevance of change in legal outlook to reasonableness of rejection of offer – principles.
LEGISLATION CITED:	Civil Procedure Act 2005 Suitors’ Fund Act 1951 District Court Rules 1973 Supreme Court Rules 1970 Uniform Civil Procedure Rules 2005
CASES CITED:	Ainger v Coffs Harbour City Council [2005] NSWCA 424 Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160 Benham v Gambling [1941] AC 157 Brodie v Singleton Shire Council; Ghantous v Hawkesbury Shire Council [2001] HCA 29; (2001) 206 CLR 512 Brymount Pty Limited t/a Watson Toyota v Cummins and Anor; Young Shire Council v Cummins and Anor (No 2) [2005] NSWCA 69 Coombes v Roads and Traffic Authority (RTA) (No 2) [2007] NSWCA 70 Cumper v Pothecary [1941] 2 KB 58 Ettingshausen v Australian Consolidated Press (1995) 38 NSWLR 404 Hillier v Sheather (1995) 36 NSWLR 414 Horseshoe Pastoral Company Pty Ltd v Murray Smith (trading as South Coast Tile & Slate Company) (Court of Appeal, 7 November 1995, unreported) Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242 Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 Maricic v Dalma Formwork (Australia) Pty Ltd (No 2) [2006] NSWCA 237 Moore v Woodforth (No 2) [2003] NSWCA 46 Morgan v Johnson (1998) 44 NSWLR 578 Mulligan v Coffs Harbour City Council [2005] HCA 63; (2005) 223 CLR 486 Mutual Life and Citizens’ Assurance Co Ltd v Evatt [1968] HCA 74; (1968) 122 CLR 556 Newcastle City Council v Lindsay [2004] NSWCA 198 NSW Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Port Stephens Shire Council v Tellamist Pty Ltd (No 2) [2004] NSWCA 415 R T & Y E Falls Investments Pty Ltd v State of New South Wales (No 2) [2007] NSWCA 86 Rolls Royce Industrial Power (Pacific) Ltd (Formerly John Thompson (Australia) Pty Ltd) v James Hardie & Co Pty Ltd (Pacific) Limited [2001] NSWCA 461; (2001) 53 NSWLR 626 South Eastern Sydney Area Health Service v King [2006] NSWCA 2 South Sydney Council v Morris (No 3) [2001] NSWCA 200 Southern Area Health Service v Brown (No 2) [2004] NSWCA 19 State of New South Wales v Burton [2006] NSWCA 43 Suresh v Jacon Industries Pty Ltd (No 2) [2005] NSWCA 270 Temora Shire Council v Stein [2004] NSWCA 236 Thompson v Woolworths (Queensland) Pty Ltd [2005] HCA 19; (2005) 221 CLR 234 Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 Webb v South Australia (1982) 56 ALJR 912
PARTIES:	Suzanne Lynda Ainger - Appellant Coffs Harbour City Council - Respondent
FILE NUMBER(S):	CA 40713 of 2004
SOLICITORS:	MBT Lawyers - Appellant Moray & Agnew - Respondent
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 125/01
LOWER COURT JUDICIAL OFFICER:	Twigg DCJ
LOWER COURT DATE OF DECISION:	9 August 2004

CA 40713/04
DC 125/01

MASON P
McCOLL JA
HUNT AJA

Thursday 16 August 2007

Suzanne Lynda AINGER v COFFS HARBOUR CITY COUNCIL (No 2)

Judgment

1 MASON P: I agree with McColl JA.

2 McCOLL JA: Suzanne Ainger, the claimant, was injured on 22 December 1998 when she tripped and fell on the footpath in Beach Street, Woolgoolga. She brought proceedings against the opponent, Coffs Harbour City Council, which was responsible for the care, control and management of the footpath and also against Bomac Engineering (NSW) Pty Limited which had undertaken reconstruction works on the footpath earlier that year (the “reconstruction works”). In the course of the hearing her counsel asked the primary judge, his Honour P A Twigg QC, to enter a verdict in favour of Bomac with no order as to costs. The proceedings then continued against the opponent, however Bomac remained a party because the opponent had cross-claimed against it.

3 The claim failed. The primary judge entered a verdict against the claimant for the opponent and Bomac, and a verdict for Bomac on the cross-claim. He ordered her to pay the costs incurred by both defendants except those agreed not to be paid. He assessed the damages he would otherwise have awarded the appellant at $56,844 which he would have reduced by 50% on account of the appellant’s contributory negligence. Accordingly, if the appellant had succeeded, her damages would have been $28,422.

4 The claimant appealed to this Court which allowed the appeal on liability and damages. The matter was remitted to the District Court for hearing on damages only: Ainger v Coffs Harbour City Council [2005] NSWCA 424 (Ainger No 1). The Court ordered the respondent to pay the costs of the trial before Twigg DCJ (the “first trial”) and the costs of the appeal and to have a certificate under the Suitors’ Fund Act 1951 if otherwise entitled.

5 The damages hearing proceeded before Sidis DCJ. Her Honour awarded the claimant $249,262.58 and ordered the opponent to pay the claimant’s costs of the damages hearing on an indemnity basis. The indemnity costs order was based on an Offer of Compromise served by the claimant on 5 April 2004 in which the claimant offered to compromise the proceedings in the sum of $53,000 plus costs. The judgment has been satisfied.

6 The claimant now moves this Court for an order that the opponent pay the costs of the first trial, of the appeal and of this motion on a “solicitor and client (Indemnity)” basis. There is no suggestion that the Court of Appeal’s orders have been entered and, accordingly, it is at least theoretically open to the Court to entertain the motion: UCPR 36.16.

Statement of the case

7 On 5 April 2004 the claimant’s solicitors forwarded to the opponent’s solicitor an Offer of Compromise (the “Offer”) made in accordance with Pt 19A of the District Court Rules 1973. A like offer was forwarded to the solicitors for Bomac. It was common ground that the Offer was made more than 28 days before the hearing of the first trial commenced. It was open for acceptance until 3 May 2004.

8 The Offer was not accepted by either recipient. It was not renewed following its expiry on 3 May 2004. During the period between the delivery of judgment in Ainger No 1 and the damages hearing various offers of settlement were exchanged between the parties. For the claimant’s part the last offer, made the day before the damages hearing, was $440,000 plus costs. For the opponent’s part the highest offer was $130,000 plus costs which was open until 5pm on 10 May 2006 in circumstances where Sidis DCJ had set the matter down for judgment the following day at 9.30am.

9 After the judgment was satisfied correspondence passed between the solicitors for the claimant and the opponent in which the claimant contended that the opponent should pay her costs of the first trial and of the appeal on an indemnity basis having regard to the terms of the Offer and the damages she had recovered. The opponent refused to accede to that order, contending that its failure to accept the Offer had been reasonable and, accordingly, that an order for indemnity costs of the first trial and of the appeal was not warranted.

10 Having failed to reach an agreement, the claimant filed the Motion with which this judgment is concerned.

The parties’ submissions

11 The claimant accepted that the fact that the Offer was made under the District Court Rules did not require this Court to apply the provisions of Pt 39A r 25 of those rules in relation to orders made by this Court: Suresh v Jacon Industries Pty Ltd (No 2) [2005] NSWCA 270 at [14] per Basten JA (Mason P and Santow JA agreeing). Nevertheless she submitted that the acceptance and non-acceptance of an offer in the District Court may be relevant to this Court’s exercise of its costs power: Suresh (at [15]).

12 The claimant submitted that the Court should accede to her application having regard to the purpose of offers of compromise, the principle that the prima facie consequence of non-acceptance of such an offer is that Pt 39A r 25 will be enforced against the non-accepting party and the fact that before the Court would displace that rule it would bear in mind the rule’s private and public purposes: see Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721; NSW Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100; Hillier v Sheather (1995) 36 NSWLR 414.

13 To the extent that the opponent relied upon the offers of settlement exchanged after the decision in Ainger No 1, the claimant submitted that those matters are irrelevant to her application.

14 The opponent submitted that given the course of the proceedings, and the events that have happened, the orders made in Ainger No 1 should not be varied. It contended that different considerations should apply with respect to the costs of the appeal and the costs of the first trial.

15 As to the costs of appeal, the opponent first contended that the order that it pay the costs of the appeal was the “usual order”: Maricic v Dalma Formwork (Australia) Pty Ltd(No 2) [2006] NSWCA 237.

16 Secondly, the opponents submitted that were the Court to revisit the appeal costs order, it should not be disturbed because its conduct in not accepting the Offer was reasonable having regard to the state of the law concerning footpath trip cases at the time it was made (the “reasonableness submissions”). It argued that the claimant’s success in Ainger No 1 turned on the statements of principle in the majority judgments in Mulligan v Coffs Harbour City Council [2005] HCA 63; (2005) 223 CLR 486 and Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422, both of which were decided by the High Court on 21 October 2005, while judgment in Ainger No 1 was reserved. The opponent pointed to the discussion (Ainger No 1 at [78] ff) about the issue of obviousness of risk and submitted that, at the time the Offer was made, the prevailing view in such cases was that summarised by Tobias JA in Newcastle City Council v Lindsay [2004] NSWCA 198 at [49]:

“It is clear from the authorities referred to that any duty to take reasonable care for the safety of pedestrians by warning them of, or protecting them from, a defect in a footpath only arises if the defect is not obvious.”

17 The opponent argued that that view was first questioned in this Court by Giles JA in Temora Shire Council v Stein [2004] NSWCA 236, a decision handed down on 21 July 2004 some two or more months after the Offer was made and while judgment in the first trial was reserved. Twigg DCJ delivered judgment on 9 August 2004.

18 The opponent also contended that it was relevant that the claimant did not renew her Offer or otherwise seek to compromise the appeal: see Moore v Woodforth (No 2) [2003] NSWCA 46 (at [15]); Brymount Pty Ltd t/as Watson Toyota v Cummins & Anor; Young Shire Council v Cummins & Anor (No 2) [2005] NSWCA 69 (at [29]); see also Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160 (at [22] – [23]).

19 The opponent submitted that the fact there was the opportunity to make an offer of compromise in relation to the appeal which was not availed of suggested that less weight should be given to the Offer than might otherwise be the case: Suresh (at [15]).

20 Insofar as the costs of the first trial were concerned the opponent submitted that if the claimant had intended to rely upon the Offer, she ought to have sought an order in her written submissions on appeal that the costs of the first trial be left for determination by the trial judge who heard the damages proceedings or applied to this Court to vary the Court’s costs orders prior to the damages hearing: see Suresh (at [11]), State of New South Wales v Burton (No 2) [2006] NSWCA 43 (at [1]) and Maricic (at [12]).

21 The opponent submitted that the fact that Sidis DCJ ordered it to pay the costs of the damages hearing on an indemnity basis was not relevant to the present application. It pointed out that there was no evidence as to why her Honour made that award. Further, the opponent submitted that if the Court was disposed to consider varying its order as to the costs of the first trial, it should also take into account its reasonableness submissions.

22 Finally, as to the costs of the Motion, the opponent submitted that if the Court determined not to vary the costs orders made in Ainger No 1, the claimant ought to pay the costs of the present application as she could have avoided its costs, at least in part, by seeking an order that the costs of the first trial be determined by the trial judge in the damages hearing. Otherwise the opponent submitted that the costs of the Motion should follow the event and, if ordered, should be on a party/party basis only.

Legislative framework

23 At the time the Offer was made Pt 39A r 25 of the District Court Rules relevantly provided:

“[Pt 39A r 25] Offer of compromise

25 (1A) The objects of this rule are:

(a) to introduce an added element of risk in order to promote early settlement of actions without hearing or arbitration,

(b) to compel the parties to an action, under threat of possible penalties in costs, to arrive at an early assessment of the amount of damages, if any, recoverable by the plaintiff,

(c) to encourage the making and acceptance of reasonable offers of compromise by:

(i) providing for penalties in costs to be imposed on a party who rejects an offer of compromise and does not at the hearing or arbitration of the action achieve a position better than he would have held if he had accepted the offer of compromise, and

(ii) providing corresponding costs relief to the party making the offer,

(d) to impart as much certainty to the imposition of costs penalties referred to in object (c) as may be imparted without substantial injustice, and

(e) to provide a discretion in the Court to relieve a party from the imposition of a costs penalty, to be exercised only in an exceptional case and for the avoidance of substantial injustice.

(1B) A decision of the Court to make or refuse to make an order for costs under this rule must be made in pursuance of the objects of this rule.
…

(3) Sub rules (4)–(6) apply to an offer which has not been accepted at the time prescribed by Part 19A rule 3(8).

(4) Where and offer is made by a plaintiff 28 days or more before the hearing of the action commences, and the offer is not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court in an exceptional case and for the avoidance of substantial injustice otherwise orders, the plaintiff shall be entitled to an order against the defendant for the plaintiff's costs in respect of the claim assessed on a solicitor and client basis.
…

(11) Unless the Court otherwise orders, any application for an order for costs under subrule (4), subrule (4A) or subrule (6) must be made immediately after the order or judgment giving rise to the entitlement to the order for costs is made or given.”

24 On 15 August 2005 the civil procedure regime constituted by the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005 commenced. Part 39A of the District Court Rules was repealed. The costs consequences of offers of compromise are now dealt with in UCPR Part 42 Div 3. Rules 42.13 and 42.14 provide:

“ 42.13 Application

This Division applies to proceedings in respect of which an offer of compromise (the "offer concerned") is made under rule 20.26 with respect to a plaintiff’s claim (the "claim concerned").

42.14 Where offer not accepted and judgment no less favourable to plaintiff

(cf SCR Part 52A, rule 22; DCR Part 39A, rule 25)

(1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer.

(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.” (emphasis added)


Consideration

25 It is common ground that that the Offer was made in accordance with the District Court Rules in force in 2004 and endured until the final hearing and determination of the claim to which it related: Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404. That claim was finally determined by Sidis DCJ’s judgment.

26 In Morgan v Johnson (1998) 44 NSWLR 578 (at 581 – 582), Mason P (with whom Sheller JA agreed) summarised the rationale for the rules relating to offers of compromise as follows:

“The leading cases on the Supreme Court Rules are Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 and NSW Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100. The leading cases on the corresponding provision in the District Court Rules are Hillier v Sheather (1995) 36 NSWLR 414, Quach v Mustafa (Court of Appeal, 15 June 1995, unreported) and Houatchanthara v Bednarczyk (Court of Appeal, 14 October 1996, unreported). The following principles can be extracted:

(1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation: Maitland Hospital (at 725-726); Hillier (at 421, 431).

(2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance: Maitland Hospital (at 724).

(3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party: NSW Insurance Ministerial Corporation v Reeve (at 102); Hillier (at 422). This is because, from the time of non-acceptance ‘notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise’: Maitland Hospital (at 724); see also Hillier (at 420).

(4) Lying behind the rule is the common knowledge that ‘litigation is inescapably chancy’: Maitland Hospital (at 725). For this reason, the ordinary provision is expected to apply in the ordinary case: ibid NSW Insurance Ministerial Corporation v Reeve (at 102-103). The mere fact that it was reasonable for the 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 (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. It is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. 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 .”

27 Prior to the commencement of the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005 it was held that where an offer of compromise had been made under the District Court Rules 1973, then in determining the costs to be awarded in relation to an appeal, neither the District Court Rules 1973 relating to offers of compromise nor Pt 52A r 22(4) of the Supreme Court Rules 1970 applied. This was because Pt 39A r 25(4) gave power to the District Court and could not apply in terms to the costs of the appeal, as the offers of compromise were made under the District Court Rules, not Pt 22 r 3(5) of the Supreme Court Rules: South Sydney Council v Morris (No 3) [2001] NSWCA 200 at [10]; Baresic v Slingshot Holdings Pty Ltd & Anor (No 2) (at [18]); Suresh v Jacon Industries Pty Ltd (No 2) (at [14]) per Basten JA, Mason P and Santow JA agreeing); Coombes v Roads and Traffic Authority (RTA) (No 2) [2007] NSWCA 70 (at [79]) Beazley JA (Ipp JA agreeing). As there was, therefore, no offer of compromise the costs of the appeal were in the discretion of this Court and might be assessed on an indemnity basis: s 98(1), Civil Procedure Act.

28 However it was also held that such offers of compromise could be taken into account when the Court was exercising its (then) s 76 discretion: Baresic (at [19]); Suresh (at [15]). Further, a party who made an offer of compromise pursuant to the Rules of Court was not obliged to “revive or renew” it: Ettingshausen v Australian Consolidated Press Ltd; cf the position in respect of Calderbank letters: Moore v Woodforth (No 2). Where no fresh offer of compromise was made between the date of the judgment given at trial and the appeal, the award of the costs of the appeal is in the exercise of the court’s discretion: Coombes v Roads and Traffic Authority & Ors (No 2) (at [80]) per Beazley JA; R T & Y E Falls Investments Pty Ltd v State of New South Wales (No 2) [2007] NSWCA 86 (at [17]) per Ipp JA (Beazley and Hodgson JA agreeing).

29 Nevertheless it was said to be preferable that a party intending to seek indemnity costs should give due warning of that application before the appeal hearing: Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 at 249 – 250 per Kirby P; see Southern Area Health Service v Brown (No 2) [2004] NSWCA 19 (at [6]), although absence of prior notice did not preclude such an order being made: Horseshoe Pastoral Company Pty Ltd v Murray Smith (trading as South Coast Tile & Slate Company) (Court of Appeal, 7 November 1995, unreported.)

30 In determining whether an indemnity costs order should be made, the Court considers the circumstances at the time the offer was made: Rolls Royce Industrial Power (Pacific) Ltd (Formerly John Thompson (Australia) Pty Limited)v James Hardie & Co Pty Ltd (Pacific) Limited [2001] NSWCA 461; (2001) 53 NSWLR 626 (at [95]) per Stein JA (Davies AJA agreeing). Thus, it will be relevant to consider the strengths and weaknesses of each party’s case as they may have been apparent to the parties at the time the offer was made: South Eastern Sydney Area Health Service v King [2006] NSWCA 2 (at [90]) (Hunt AJA, Mason P and McColl JA agreeing)

31 The test of whether or not indemnity costs of a trial should be granted does not depend on whether the offeree acted reasonably in not accepting it: Port Stephens Shire Council v Tellamist Pty Ltd (No 2) [2004] NSWCA 415 (at [16]) Giles JA (Santow and Ipp JJA agreeing). However, success on a different case from that being advanced at the time of the offer could be significant: Port Stephens Shire Council v Tellamist Pty Ltd (at [16]) referring to Rolls Royce Industrial Power (Pacific) Ltd v James Hardie.

32 In Rolls Royce Stein JA considered the authorities which supported the proposition that the circumstances prevailing when the offer of compromise was made were relevant to whether indemnity costs should be ordered:

“96 There is English authority which supports this – Gaskins v British Aluminium Co Ltd [1976] 1 QB 524 and Preotta v Times Newspaper Ltd [1991] 4 All ER 46. A similar stance was adopted by Mahoney AP in Fowdh v Fowdh (unreported, NSWCA, 4 November 1993) cited by Curtis J.

97 Mahoney AP noted that after expiry of the offer and the time in which to accept it, two things emerged which significantly changed the situation.

98 He said:

‘… 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.’
99 See also Van Doore v Mendez (unreported, NSWSC, 30 June 1997).” (emphasis added)

33 The English cases to which Stein JA referred concerned payments into court and the ability of a party to take out such a payment after changed circumstances. Gaskins and Proetta concerned attempts by plaintiffs to take out monies paid into court after the prospects of success had diminished. However in Cumper v Pothecary [1941] 2 KB 58 (at 70) Goddard LJ observed that a change in the legal outlook brought about by a new judicial decision would be a relevant consideration to permitting a defendant to take out monies it had previously paid into court. In Cumper the House of Lords decision in Benham v Gambling [1941] AC 157 made it clear that the sum the defendant had paid into court in respect of loss of expectation of life was much larger than would be recovered in the action. After the decision in Benham the plaintiff was successful in obtaining an order that the money the defendant had paid into court be paid out to her. The Court of Appeal reversed that order, holding that it was difficult to justify such a large award having regard to the decision in Benham. It also indicated that a change in legal outlook could entitle a defendant to an order giving leave to withdraw or reduce the amount of the monies paid in.

34 I do not accept the opponent’s submission that the claimant’s success turned on, in effect, a development of the law it could not have anticipated at the time the Offer was made. The claimant’s case at trial was that the lip between an aggregate section of footpath and a line of brick pavers on which she tripped had been created by the opponent as part of the recent reconstruction works and had not been repaired during rectification works out of monies retained from the contract for such purposes. This distinguished her case from other “footpath cases”. As I pointed out (Ainger No 1 at [82]):

“Even when the highway rule (which Brodie relegated to history) prevailed, a road authority which created dangers by new work was guilty of misfeasance and responsible for any resulting damage ( Woollahra Municipal Council v Moody [1913] HCA 21; (1913) 16 CLR 353 at 358). If the danger created was such that it could have been avoided by the use of reasonable care and skill, the authority was liable upon ordinary principles of nuisance and negligence: Buckle v Bayswater Road Board [1936] HCA 65; (1936) 57 CLR 259 at 283 per Dixon J.”

35 The lip on which the claimant tripped was 10 – 15 millimetres in depth. The opponent classified height differentials of that order as mid-range trip hazards, and had a policy to repair them: see Ainger No 1 (at [90]). The Court concluded (at [95]) that this was a case of defective reconstruction works and (at [93]) that it was unreasonable for the opponent not to have repaired the lip having regard to the size of the reconstruction works and taking into account that allowance must be made for a pedestrian’s inadvertence: Brodie v Singleton Shire Council; Ghantous v Hawkesbury Shire Council [2001] HCA 29; (2001) 206 CLR 512 (at [160], [163]); Thompson v Woolworths(Queensland) Pty Limited [2005] HCA 19; (2005) 221 CLR 234; Webb v South Australia (1982) 56 ALJR 912 (at 913). While the issue of obviousness was relevant, it was not the focus of the claimant’s case which turned, as I have said, on the opponent’s creation of the risk.

36 It is also pertinent to note the legal theory that the court declares the common law and that “the common law is as much in gremio judicis as ever it was, assisted and instructed now … by all that has happened through the years of its growth: and thus in such a case the two positions of what is and of what should be are in reality coincident”: Mutual Life & Citizens’ Assurance Co Ltd v Evatt [1968] HCA 74; (1968) 122 CLR 556 (at 563) per Barwick CJ. It would, in my view, require a significant change in the law to warrant a departure from the consequences the Rules prescribe in relation to non-acceptance of offers of compromise.

Effect of the civil procedure regime

37 In Coombes v Roads and Traffic Authority & Ors (No 2) the Court considered the effect of the commencement of the civil procedure regime on offers of compromise made under the District Court Rules. The plaintiff had made an offer of compromise prior to the trial in the District Court. She lost at trial, but succeeded on appeal against Bombala Council, one of the three defendants. She sought a variation of the costs order made by the Court of Appeal at the time it delivered judgment so as to seek an order for indemnity costs from Bombala Council of the trial and on appeal because she made an offer of compromise prior to trial which she contended was more favourable to Bombala Council than the Court’s determination. As Beazley JA (with whom Ipp JA agreed) explained (at [71] – [72]) there are differences between what, for convenience, I will call the old and the new regime. Thus Pt 39A r 25(4) provided for costs to be paid on a solicitor/client basis, while UCPR 42.14 provides that costs are to be paid on an indemnity basis. Further, under Pt 39A r 25(4), the solicitor/client costs order operates in relation to the whole proceedings, while under UCPR 42.14 the period for which indemnity costs are assessed turns on date the offer is made. Beazley JA (at [77]) described the old regime as being more favourable than UCPR 42.14(2).

38 Beazley JA held (at [75]; see also Basten JA (at [98]) that the offer of compromise was to be taken to have been made under UCPR 20.26, that being a corresponding provision to Pt 19A of the District Court Rules: see cl 10(b), Sch 6, Civil Procedure Act. While it followed (see [76]) that UCPR 42.14 governed the costs consequences of the offer of compromise, Beazley JA held (at [78]) that the plaintiff should not be disadvantaged by the introduction of the less favourable civil procedure because of the error of the trial judge. Accordingly she concluded the Court should exercise its UCPR 42.14 power to make a different order and order the Council to pay the appellant’s costs of the trial on a solicitor and client basis, the order which should have been made had the applicable rule still been Pt 39 r (25)(4). Basten JA (at [101]) would also “have been inclined to judge the conduct of the parties according to the rule which applied at the date the offer was made, and throughout its currency”.

39 In terms of the costs of the appeal, Beazley JA pointed out (at [79]) that it did not automatically follow from the making of an offer of compromise prior to trial that an order for indemnity costs would be made on the appeal. In circumstances where no fresh offer of compromise was made between the trial verdict and the appeal, the award of costs is in the exercise of the Court’s discretion. Usually, costs are awarded on a party/party basis: UCPR 42.1 and the Court’s discretion to order costs on an indemnity basis depended on demonstrating unreasonable or delinquent conduct on the part of the party against whom the order was sought: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 89; Baresic v Slingshot Holdings Pty Ltd & Anor (No 2) at [20]. As the plaintiff did not establish any such conduct, Beazley JA held (at [82]) that there was no warrant to depart from the usual party/party costs order.

40 Basten JA reached the same conclusion, holding:

“103 Where the offer is not renewed, the failure of a successful defendant to respond to a valid offer made prior to trial, will not give rise to any clear presumption that it was unreasonable not to reconsider and offer to accept the lapsed offer when a notice of appeal is filed. Having obtained a judgment in its favour, which is not to be treated as in someway conditional or as merely a preliminary determination of the rights of the parties, albeit the appeal is by way of rehearing, it would not, absent some particular consideration, be unreasonable for the defendant to continue to rely upon the judgment. At least in the present case, the conduct of the Council in not acceding to the offer made by the plaintiff with respect to liability, was not unreasonable. The Appellant should have its costs of the appeal against the Council on the usual basis.”

41 In my view it is consistent with Coombes to hold that the claimant should have her costs of the first trial on a solicitor and client basis. However as she did not make a fresh offer after the first trial pending appeal, nor foreshadow that she intended to rely upon the Offer to seek an indemnity costs order in relation to the appeal costs, nor demonstrate that the opponent had acted unreasonably or delinquently in the relevant sense, the Court should not accede to her Motion in that respect.

Costs of the motion

42 In Suresh (at [19]) Basten JA held that where the respondent had been partly successful on a matter which could have been dealt with in the written submissions on the appeal and had failed to indicate in its original submissions the orders it sought if unsuccessful, it should bear the appellant’s costs of a further application in relation to costs.

43 That was not this case. The claimant did not know until the damages hearing was determined whether she would recover an amount no less favourable than the Offer. It would have been open to her to ask this Court to remit the task of determining the appropriate costs order for the first trial to the judge who heard the damages hearing, but it was not mandatory that she do so.

44 Both parties have been partially successful in relation to the motion. In my view there should be no order as to the costs of the motion.

Orders

45 I propose the following orders:

1. Costs of the claimant of the first trial be paid by the opponent on a solicitor/client basis;

2. No order as to the costs of the motion.

46 HUNT AJA: I agree with McColl JA.

22/08/2007 - Part 39 in catchwords should be Part 39A - Paragraph(s) Catchwords - front cover sheet