Black Head Bowling Club Ltd v Harrower (No 2)

[2023] NSWCA 317

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Black Head Bowling Club Ltd v Harrower (No 2) [2023] NSWCA 317

Hearing dates:

On the papers

Date of orders:

15 December 2023

Decision date:

15 December 2023

Before:

Payne JA and Simpson AJA at [1];
Adamson JA at [33]

Decision:

(1)    The notice of motion filed 23 November 2023 is dismissed.

(2)    Black Head Bowling Club Ltd is to pay Mr Edstein’s costs of the notice of motion.

Catchwords:

JUDGMENTS AND ORDERS – amending, varying and setting aside – variation of costs order – variation sought – where principal appeal judgment addressed all issues raised on costs – where after principal judgment delivered appellant sought to make submissions on a point not raised on appeal – whether variation should be allowed

COSTS – costs of trial – where eighth respondent liable on ordinary basis for appellants’ costs of one issue on appeal – whether costs should instead be on partial indemnity basis – where offer did not comply with UCPR r 20.26 – whether eighth respondent unreasonably rejected Calderbank offer

Legislation Cited:

Supreme Court Act 1970 (NSW) s 38

Uniform Civil Procedure Rules 2005 (NSW) rr 1.5(1), 20.26, 36.16, 36.17, 42.1, 42.2, Sch 1

Cases Cited:

Black Head Bowling Club Ltd v Harrower [2023] NSWCA 267

Calderbank v Calderbank [1975] 3 All ER 333

Hunter v Roberts (No 2) [2019] NSWCA 235

Oshlack v Richmond River Council (1998) 193 CLR 72

Roads and Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140

South Wales v Hollingsworth (No 2) [2023] NSWCA 283

Category:

Costs

Parties:

Black Head Bowling Club Ltd (Appellant)
Tamica Harrower (First Respondent/First Cross-Appellant)
Robert Bishop (Second Respondent/Second Cross-Appellant)
Bradley Bishop (Third Respondent/Third Cross-Appellant)
Junior Henderson by his tutor Tamica Harrower (Fourth Respondent/Fourth Cross-Appellant)
Keira Henderson by her tutor Tamica Harrower (Fifth Respondent/Fifth Cross-Appellant)
Shiralee Walker (Sixth Respondent/Sixth Cross-Appellant)
Nathan Walker (Seventh Respondent/Seventh Cross-Appellant)
John Thomas Edstein (Eighth Respondent/Cross Respondent)
Insurance Australia Limited t/as CGU Insurance Limited (ACN 000 016 722) (Ninth Respondent)

Representation:

Counsel:
D Lloyd SC / C Coventry (Appellant)
J M Morris SC / M A Gerace SC / A T Green (First to Seventh Respondents/First to Seventh Cross-Appellants)
P A Collins / J Chen (Eighth Respondent/Cross Respondent)

Solicitors:
McInnes Wilson Lawyers (Appellant)
Marsdens Law Group (First to Seventh Respondents/First to Seventh Cross-Appellants)
LMI Legal (Eighth Respondent/Cross Respondent)

File Number(s):

2022/328002

Publication restriction:

Nil

JUDGMENT

1. PAYNE JA AND SIMPSON AJA: On 9 November 2023 this Court made the following orders in the principal proceedings Black Head Bowling Club Ltd v Harrower [2023] NSWCA 267:

“In respect of the appeal by the Club:

(1)   Allow the appeal by the Club on ground 6 only.

(2)   Otherwise dismiss the appeal.

(3)   Order that Mr Edstein pay the Club’s costs of ground 6 of the appeal.

(4)   Order that the Club pay the costs of the first to seventh respondents to the appeal (the plaintiffs below), other than the costs of grounds 4 and 6.

(5)   Each party bear their own costs of ground 4 of the appeal.

In respect of the cross-appeal by the first to seventh respondents (the plaintiffs below):

(6)   Allow the cross-appeal by the first to seventh respondents (the plaintiffs below).

(7)   Dismiss the ‘Notice of Contention – Cross Appeal’ filed by Mr Edstein on 21 March 2023.

(8)   Order that Mr Edstein pay the first to seventh respondents’ (the plaintiffs below) costs of the cross-appeal.

In both cases:

(9)   Set aside orders 2 and 3 made by the primary judge on 27 October 2022 and order 2 made by the primary judge on 3 February 2023 of and in lieu thereof make the following orders:

(a)   Judgment be entered in favour of the plaintiffs against the second defendant, Mr Edstein.

(b)   Mr Edstein to pay the plaintiffs damages in the agreed amount.

(c) Pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) order that Black Head Bowling Club Ltd contribute 50% and Mr John Thomas Edstein contribute 50% to the agreed sum of damages payable to the plaintiffs.”

2. The orders of this Court left untouched an order of the primary judge giving judgment for the plaintiffs against the appellant.

3. In what follows, familiarity with the principal judgment is assumed.

4. On 23 November 2023, a notice of motion was filed by the appellant, Black Head Bowling Club Ltd (“the Club”) seeking the following orders:

“1.   Vary order 9 made on 9 November 2023 as follows:

1.1   Adding an order that the second defendant, Mr Edstein, to pay the plaintiffs’ costs as agreed or assessed; and

1.2 Varying order 9(c) by inserting the words ‘and costs’ after the words ‘agreed sum of damages’; so that the order reads as follows, with the inserted words identified by underlining: ‘Pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) order that Black Head Bowling Club Ltd contribute 50% and Mr John Thomas Edstein contribute 50% to the agreed sum of damages and costs payable to the plaintiffs.’

2.   Vary order 3 made on 9 November 2023 by inserting the words ‘on the ordinary basis until 12 April 2023 and thereafter on an indemnity basis’ at the end; so that the order reads as follows, with the inserted words identified by underlining: ‘Order that Mr Edstein pay the Club’s costs of ground 6 of the appeal on the ordinary basis until 12 April 2023, and thereafter on an indemnity basis.’

3.   The eighth respondent (Mr Edstein) is to pay the appellant’s (Club’s) costs of this Notice of Motion.

4.   Such further or other orders as the Court sees fit.”

5. The Club relied on an affidavit of Keely Louise Graham sworn 23 November 2023 in support of its application.

The Club’s submissions

Mr Edstein’s alleged liability for the plaintiffs’ costs at first instance

6. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) provides that 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. The Club submitted that this general rule founds a “reasonable expectation” on the part of a successful party of being awarded costs against an unsuccessful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at [67], [134].

7. The Club submitted that there is no reason to depart from the general rule that costs should follow the event. Here, it submitted that the relevant event is the plaintiffs’ success in their claim against Mr Edstein on appeal. This Court has, in correcting the error by the primary judge, found Mr Edstein liable to pay damages to the plaintiffs.

8. The Club submitted that if Mr Edstein is liable for the plaintiffs’ costs at first instance, then this Court’s finding on apportionment should apply to the respective liabilities of the Club and Mr Edstein to pay the plaintiffs’ costs as well as their damages.

9. The Club submitted that it had sought an order in its First Cross-Claim that Mr Edstein pay the costs of the proceedings, including the plaintiffs’ costs. It was submitted that, in any event, the slip rule can be applied to determine the question of Mr Edstein’s liability for the plaintiffs’ costs at first instance: Roads and Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140 at [25]-[26].

Application for indemnity costs

10. The Club sought an amendment to the Court’s orders so that Mr Edstein is liable to pay its costs of ground 6 of the appeal on an ordinary basis up to 12 April 2023 and thereafter on an indemnity basis. The Club served Mr Edstein with an Offer of Compromise (“the Offer”) on 12 April 2023.

11. The Club accepted that the Offer did not comply with the requirements of r 20.26 of the UCPR. In particular, the offer did not identify the proposed orders for disposal of that part of the claim to which it related, and did not include the statement required by r 20.26(2)(b). that the Club submitted that the Offer was made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. As such, the Club submitted that Mr Edstein was on notice that the Club intended to rely upon the terms of the Offer.

12. The Club accepted that it bears the onus of satisfying the Court that it should exercise its discretion to order indemnity costs, given that r 42.2 of the UCPR states that costs are to be assessed on an ordinary basis unless otherwise ordered. The Club submitted that the ultimate question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule: Hunter v Roberts (No 2) [2019] NSWCA 235 at [6].

13. Here, the Club submitted that in all the circumstances, Mr Edstein’s rejection of the Offer was unreasonable. Whilst the Offer was made at an early stage of the appeal proceedings prior to the filing of any submissions, issues of Mr Edstein’s liability and apportionment had been extensively canvassed before the primary judge. The Offer was open for acceptance for 28 days, during which period the Club’s appeal submissions were filed and served. No request for an extension of time to consider the Offer was made by Mr Edstein. The Club submitted that the Offer represented a genuine compromise of the Club’s position on appeal, since the Club disputed that it was liable at all and, in the alternative, submitted that Mr Edstein should be apportioned a much greater liability than the Club.

Mr Edstein’s submissions

14. Mr Edstein began by challenging the jurisdiction of the Court to make the orders sought. Initially he contented himself with arguing that the Court has dealt with all issues raised by the parties and is therefore functus officio. When the Club contended that reliance was placed on UCPR rr 36.16(3A) and 36.17, he responded by arguing that the application of those rules is confined to the Supreme Court and does not extend to the Court of Appeal. He referred to r 1.5(1) and Schedule 1, where the application of the Rules in various courts is identified. No mention is made in Schedule 1 to the Court of Appeal. Accordingly, Mr Edstein argued, the Rules do not apply to the Court of Appeal.

15. The short answer to the submission is to be found in s 38 of the Supreme Court Act 1970 (NSW), which provides that, “[f]or the more efficient dispatch of business the [Supreme] Court shall be divided into” Divisions, one of which is the Court of Appeal.

16. Mr Edstein’s submission, if accepted, would have the surprising result that, not only would rr 36.16(3A) and 36.17 be inapplicable, but so also would be the whole of the Uniform Civil Procedure Rules. The submission must be rejected.

The plaintiff’s costs of the trial

17. Mr Edstein submitted that the Club never raised in its notice of appeal, written submissions or oral submissions the issue of Mr Edstein’s liability for the plaintiffs’ costs at first instance.

Application for indemnity costs

18. In relation to the Offer, Mr Edstein essentially submitted that the Court should not find that he acted unreasonably in not accepting the Offer. The “Calderbank letter” does not provide sufficient specificity as to the offer purporting to be made.

Consideration

Costs of the trial

19. The Club’s amended notice of appeal did not raise the issue now sought to be agitated. The sole ground concerning costs simply provided that:

“8   The primary judge erred in finding at J[8] of the costs judgment that it was appropriate to order the appellant to pay the costs of the eighth and ninth respondents.”

20. Significantly, no order of this kind sought was identified either as part of the principal relief claimed by the Club or in the alternative (which addressed, in effect, the position reached by a majority of the Court). The alternative orders sought by the Club were:

“3.3   In the alternative to the orders sought in paragraphs 3.1 and 3.2:

(a)   Judgment be entered in favour of the appellant against the eighth respondent on the appellant’s first cross-claim in the court below in an amount to be assessed by this court.

…

(c)   The eighth respondent to pay the appellant’s costs of the first cross-claim in the court below.

…”

21. It is correct that in the first cross-claim an order was sought for “[c]osts of the proceedings, including … costs of the plaintiffs’ claim”. This, however, was not an order sought in the amended notice of appeal and is not reflected in the order relating to costs actually sought by the Club, which we have set out immediately above. It is also true that the plaintiffs below sought an order that Mr Edstein be liable for their costs of the trial. Although permitted to advance submissions on the Club’s motion, the plaintiffs did not, by motion, seek any variation of the orders made by the Court on the appeal.

22. The Club’s written submissions did not assert that Mr Edstein should be jointly and severally liable for the plaintiffs’ costs of the trial. In oral submissions, despite the possibility of the outcome a majority of the Court ultimately reached being specifically drawn to attention of the Club, no submission was made that an order should be made making Mr Edstein jointly and severally liable for the plaintiffs’ costs of the trial.

23. The Court decided all issues which had been litigated by the Club. In the principal judgment, the question of Mr Edstein’s liability for costs of the trial was considered and expressly dealt with by Payne JA and Simpson AJA:

“59   The effect of these orders is the Club remains liable to the plaintiffs. Mr Edstein is also now liable to the plaintiffs. As between the Club and Mr Edstein, each is liable to the other for 50% of the agreed sum of damages. In relation to the costs of the trial, we have determined to set aside only order 2 of the costs orders made below. The effect of this is that the Club remains liable for the costs of the plaintiffs of the trial but is not liable for Mr Edstein’s costs. There is no order for costs as between the Club and Mr Edstein of the trial with the intention that they each bear their own costs of that part of the case.”

24. The Court there addressed all issues raised by the Club about the question of Mr Edstein’s liability for costs of the trial. There is no occasion for the use of the slip rule in UCPR r 36.17. This Court has jurisdiction to vary its judgment or order pursuant to r 36.16 of the UCPR, the Club’s notice of motion having been filed within 14 days after the judgment or order was entered. In State of New South Wales v Hollingsworth (No 2) [2023] NSWCA 283, this Court, constituted by Mitchelmore and Stern JJA and Basten AJA, said:

“17 As is well-established, the power conferred by UCPR, r 36.16 is to be exercised ‘sparingly and with caution’ having regard to the importance of the finality of litigation, and ‘does not give a licence to disgruntled litigants to re-agitate, in the hope of obtaining a more favourable outcome, issues that have been determined against them’: Majak v Rose (No 5) [2017] NSWCA 238 (‘Majak’) at [12]-[13] (Leeming and Simpson JJA, Emmett AJA).”

25. The power in r 36.16 is not intended to give litigants who chose not to advance written or oral submissions on a point raised on appeal a further opportunity to do so after judgment has been delivered and orders made. The Club had a full opportunity in writing and orally to identify the relief which it sought.

26. The decision of the majority of the Court was that the Club remains liable for the costs of the plaintiffs of the trial. There is no occasion to permit the Club now to agitate for a different outcome, making Mr Edstein jointly and severally liable for the costs of the plaintiffs of the trial, by use of the power under r 36.16. Proposed order 1 of the notice of motion should be rejected.

Indemnity costs application

27. It is well established that UCPR r 36.16 provides an avenue for dealing with costs applications of the kind made in relation to indemnity costs.

28. The “offer” said to give rise to an entitlement to indemnity costs provided (in full):

“The first defendant offers to compromise part of this claim on the following terms:

1.   The First Appellant offers to compromise the issue of liability against the First Appellant on the following terms:

(a)   Eighth Respondent: 50% responsible

(b)   First Appellant: 50% responsible

2.   This offer of compromise will close immediately following the expiry of 28 days after its receipt by the offeree or his/her legal representative.

3. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005.”

29. Although framed as an offer of compromise under the rules, the Club accepted that the Offer did not comply with UCPR r 20.26 and that, to succeed, it must persuade the Court that the Offer, if treated as one subject to the principles in Calderbank v Calderbank, would lead to an award of indemnity costs.

30. The discretion to award indemnity costs against Mr Edstein should not be exercised in favour of the Club. Shortly put, the Club has not demonstrated that Mr Edstein’s rejection of the Offer was unreasonable. In particular, and as the Club accepted, the Offer did not identify the proposed orders to be made upon acceptance of the Offer. It is not clear, even now, what precisely was being offered by the Club. The Offer stated that it offered “to compromise the issue of liability against the First Appellant”, the Club. On appeal, Mr Edstein advanced no issue of “liability against the First Appellant”. Perhaps the Offer should be understood as a contingent one. It is, as we have said, not clear to us precisely what those contingencies were. Rejection of the Offer actually made was not, in those circumstances, shown by the Club to be unreasonable.

31. Proposed order 2 of the notice of motion should not be made.

Conclusion and proposed orders

32. For the foregoing reasons, the orders we propose are:

1. The notice of motion filed 23 November 2023 is dismissed.

2. Black Head Bowling Club Ltd is to pay Mr Edstein’s costs of the notice of motion.

33. ADAMSON JA: I have had the benefit of reading the reasons of Payne JA and Simpson AJA. I agree with their Honours’ reasons except in so far as they reject the Club’s application for an order that Mr Edstein pay the plaintiffs’ costs in the proceedings in the Court below.

34. It is not necessary to address, much less determine, whether the Club’s omission to seek an order in its amended notice of appeal that Mr Edstein pay the plaintiffs’ costs of the proceedings in the Court below ought properly be characterised as an oversight. In my view, whatever may have been formally sought by the Club in the proceedings in this Court, a party (in this case, the Club) which succeeds in establishing that another party is also liable to the plaintiffs is entitled to the benefit of an order that the other party is also liable for the plaintiffs’ costs of the proceedings in the Court below. This is an aspect of the general rule in Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1 that costs follow the event. I regard this omission as precisely the kind of omission which UCPR, r 36.16 is designed to address and one which this Court ought rectify by making the order sought by the Club. However, as mine is a minority view, it is not necessary to expand on why I consider this to be the case.

Decision last updated: 15 December 2023