Bogle v Kasan

[2013] NSWSC 295

Supreme Court

New South Wales

Medium Neutral Citation:

Bogle v Kasan [2013] NSWSC 295

Hearing dates:

29/01/13, 01/02/13

Decision date:

08 March 2013

Jurisdiction:

Common Law

Before:

Button J

Decision:

The Court orders that:

(1A) The defendant's application of 1 February 2013 be dismissed with costs.

(1) Pursuant to section 76 of the Civil Procedure Act 2005, the settlement of the plaintiff's claim is approved.

(2) Judgment for the plaintiff against the defendant in the sum of $495,000 plus costs as agreed or assessed ("the Judgment").

The Court notes that:

(3) The defendant will be at liberty to deduct and pay out of the Judgment any moneys repayable by the plaintiff to any person or body, whether in respect of social services, health services or otherwise, concerning which any demand or notice has been served on or given to the defendant or its solicitors or the insurers.

(4) No interest will be payable in respect of the Judgment if the Judgment is paid within 28 days after whichever of the following events occurs last:

(i) Entry of Judgment by the Court, or

(ii) Receipt by the defendant of a final notice of reimbursement in accordance with the Health and Other Services (Compensation)Act 1995 as amended and a duly completed Medicare Australia Notice and Details of Settlement form signed by the plaintiff's solicitor, or

(iii) Where the defendant or its insurer has been or is notified that there may be moneys owing to Centrelink (Department of Social Security), receipt by the defendant of a final notice from Centrelink informing it of the amount of the payback or of the fact that no moneys are repayable.

(5)

(a) No interest shall be payable in respect of costs if the costs are paid within 28 days after whichever of the following events occurs last:

(i) The costs being agreed, or

(ii) Receipt by the defendant of a written notice of the assessment of costs, or

(iii) Receipt by the defendant of a written document signed by the plaintiff authorising and directing payments of the costs, and

(b) If interest becomes payable in accordance with 5(a), the interest will only be calculated from the date which is 28 days after the last event.

The Court directs that:

(6) The Judgment sum, after deduction of any amounts payable to Centrelink or Medicare Australia, is to be paid into Court pending further orders as to the investment and management of that sum.

(7) Costs are to be paid directly to the plaintiff's solicitors in accordance with an Authority to Receive satisfactory to the defendant.

(8) The confidential material placed before the Court on behalf of the plaintiff will be retained in the court file in an envelope marked "Only to be opened by order of a Judge".

Catchwords:

COSTS - Calderbank offer - offeree settled for similar amount many months later - state of expert evidence changed - whether any justification to depart from usual costs orders - whether rejection of Calderbank offer unreasonable in the circumstances - usual costs order made

PRACTICE AND PROCEDURE - application for approval of settlement of proceedings - reasonableness of settlement dependent on outcome of costs order - settlement reasonable in light of proposed costs order

Legislation Cited:

Civil Procedure Act 2005

Cases Cited:

Fisher by her tutor Fisher v Marin [2008] NSWSC 1357
Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344
Permanent Trustee v Mills [2007] NSWSC 336; (2007) 71 NSWLR 1
Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124
Vale v Eggins (No 2) [2007] NSWCA 12

Category:

Principal judgment

Parties:

Wei-Ping Bruce Bogle by his tutor Yu-Ping Li (plaintiff)
Dr Pravin Kasan (defendant)

Representation:

Counsel:
D Graham SC (plaintiff)
M Fordham SC (defendant)
Solicitors:
Caroll & O'Dea Lawyers (plaintiff)
TressCox Lawyers (defendant)

File Number(s):

2011/404823

Judgment

1. The plaintiff is a 14 year old boy. When he was born, he suffered physical injuries that have led to disabilities. He sued by his tutor, who is his mother. The original statement of claim sought relief in the nature of damages. That claim was later particularised to be in the amount of $1,275,788.20. The defendant, who was the obstetrician who had the care of the mother of the plaintiff at the time, accepts that he is liable in negligence.

1. The proceedings were recently settled for a substantially lesser sum. Two issues remain for determination by me.

1. The first is whether the settlement should be approved pursuant to s 76 of the Civil Procedure Act 2005 ("the Act"), in light of the fact that the age of the plaintiff means that he is a minor, as defined in the s 3(1) of the Act.

1. The second issue is whether the usual approach of costs following the event should be varied in this case pursuant to s 98 of the same Act, in light of the delivery of a letter containing a Calderbank offer from the defendant to the plaintiff many months before the settlement now before me.

1. The two issues are intertwined. That is because the position of the tutor, the solicitor for the plaintiff, and senior counsel for the plaintiff is that the settlement should not be approved unless it includes the usual order that the defendant is to pay the costs of the plaintiff. That is on the basis that, if any alternative order were made, the sum of money resulting to the benefit of the plaintiff would be insufficient.

1. Both parties submitted that the question of costs must necessarily be determined before the question of the approval. They adopted that approach whilst accepting that there were some conceptual difficulties with it. I accept the joint submission that it is necessary to determine the question of costs before determining the question of whether to approve the settlement.

Costs

1. As I have said, this dispute turns upon a letter containing a Calderbank offer ("the letter") that was sent by the solicitors for the defendant on 30 November 2011 and received by the solicitors for the plaintiff on 1 December 2011. The entire text of the body of that letter is as follows:

"We confirm that the defendant will settle this claim for $500,000 plus costs. This offer will remain open until 1 February 2012.

In the event that the plaintiff does not accept this offer and the matter proceeds to hearing, we will tender this letter in support of an application for indemnity costs from today's date, see Calderbank v Calderbank (1975) 3 WLR 586."

1. The letter attains its significance from the fact that the matter has been settled for $495,000 (whether that sum is inclusive of costs to the plaintiff forms part of the dispute between the parties).

1. Before the hearing, senior counsel for the defendant indicated that he would seek orders with the following effect: the defendant to pay the costs of the plaintiff on the ordinary basis up until 30 November 2011, and the plaintiff to pay the costs of the defendant incurred after that date on an indemnity basis. However, at the hearing, senior counsel for the defendant indicated that that submission was abandoned, in light of the age of the plaintiff. His primary submission at the hearing was that the costs order should be that the defendant pay the costs of the plaintiff on the ordinary basis up until 30 November 2011, and that the plaintiff pay the costs of the defendant after that date on the ordinary basis. His ancillary submission was that, if his primary submission was not accepted, the Court should order that, after 30 November 2011, each party pay his own costs.

1. The position of senior counsel for the plaintiff was that, in short, there was no reason to depart from the usual rule of costs following the event.

1. I shall turn to a detailed analysis of the submissions of both parties in a moment. In order to explain those submissions fully, it is necessary for me to provide a brief chronology of the relevant procedural steps taken in the matter. That background is established by voluminous affidavit evidence that it is not necessary for me to particularise.

Chronological background

1. The following is based very substantially on an agreed chronology helpfully provided by the parties.

1. On 1 March 2011, the defendant received from the plaintiff a report of Dr Ling of 6 January 2011. Dr Ling is a consultant physician in spinal and rehabilitation medicine who was retained by the plaintiff.

1. On 25 May 2011, the defendant received from the plaintiff two reports of Dr Korda dated 2 June 2010 and 28 April 2011. Doctor Korda is a specialist in obstetrics and gynaecology who was retained by the plaintiff.

1. On 25 August 2011, the defendant received a report from the plaintiff of Ms Mullen of 11 November 2010. Ms Mullen is an occupational therapist who was retained by the plaintiff.

1. On 29 November 2011, the plaintiff served a schedule of damages on the defendant.

1. On 30 November 2011, an informal settlement conference took place. As I have indicated above, that was also the date of the letter of the defendant that offered $500,000 plus costs and is the centrepiece of the dispute.

1. On 15 December 2011, the plaintiff filed a statement of claim.

1. On 23 December 2011, the plaintiff served an offer of compromise of $805,000 plus costs.

1. On 25 January 2012, the defendant admitted breach of duty of care.

1. On 1 February 2012, the Calderbank offer of the defendant expired.

1. On 5 March 2012, the plaintiff filed a statement of particulars.

1. On 7 August 2012, the defendant admitted causation.

1. On 13 August 2012, the defendant served upon the plaintiff a report of Dr Dalton dated 24 July 2012. Dr Dalton is a consultant in rehabilitation medicine. Speaking very generally, that report queried whether all of the disabilities of the plaintiff were in truth caused by the underlying condition said to be caused by the defendant, or whether some of them were a result of other factors. On the same day, the defendant served an offer of compromise of $350,000 plus costs.

1. On 22 August 2012, the defendant informed the plaintiff that he was to undergo nerve conduction studies on 12 September 2012.

1. On 21 September 2012, the report of Dr Tisch was prepared at the request of the solicitors for the plaintiff. Dr Tisch is a neurologist, and the report related to the nerve conduction studies.

1. On 10 October 2012, Professor Brew prepared a report at the request of the solicitors for the plaintiff. Professor Brew is a neurologist, and the report referred to the reports of Dr Ling, Dr Dalton and Dr Tisch. Without undertaking a detailed analysis of the medical terminology contained in it, the report was to the effect that the opinion of Dr Dalton was not without force.

1. On 26 November 2012, the plaintiff made an offer to settle the matter for $650,000 plus costs.

1. On 21 December 2012, the plaintiff served an offer of compromise of $495,000 plus costs.

1. On 15 January 2013, the defendant made an offer of $400,000 plus costs.

1. On 16 January 2013, the plaintiff received a joint report of Dr Dalton and Dr Ling.

1. On 21 January 2013, the plaintiff received a letter of 18 January 2013 to the effect that the defendant accepted the offer of compromise of $495,000, but did not agree to paying the plaintiff's costs. On the same date, the plaintiff received a second letter of 18 January 2013 to the effect that the defendant had accepted the offer of compromise of the plaintiff, but was also instructed to seek costs.

Submissions of the defendant

1. Because the defendant is, in effect, the moving party in seeking to persuade me not to make the usual costs order, I called upon senior counsel for the defendant first at the hearing. It is also convenient to recount his submissions first in this judgement.

1. He submitted that three fundamental propositions apply to the determination of the question.

1. The first was that he bore the onus of persuading the court to move away from the usual position of costs following the event.

1. The second was that the defendant must demonstrate that there was a genuine offer of compromise. In light of the fact that senior counsel for the plaintiff accepted that that proposition was not in dispute, the submissions on behalf of the defendant were truncated, and I propose to approach that factor in this judgment on the basis that it has been made out.

1. The third was that the defendant must demonstrate that it was unreasonable for the plaintiff not to accept the offer at the time it was made.

1. Senior counsel for the defendant submitted, in short, that it was indeed unreasonable for the plaintiff not to have accepted the offer at the time it was made. He pointed to the fact that the statement of claim was filed during that time, thereby demonstrating that the plaintiff was sufficiently apprised of the facts to commence proceedings. During that time, breach of duty was admitted by the defendant. Without seeking to apply the wisdom of hindsight, he submitted that the offer made by the defendant was a remarkably accurate prediction of the ultimate resolution of the dispute by way of settlement. And yet, due to the refusal of the plaintiff to accept the offer, his client had been put to 12 months' worth of unnecessary expense.

1. He submitted that the fact that the letter referred to the matter proceeding to a hearing, and as things turned out that had not occurred, was of no moment. He sought to construe the rules to demonstrate that that distinction could not, at least in this case, be drawn. In any event, he submitted that any discretionary order under s 98 of the Act could hardly turn on so refined a distinction. The fact was, he submitted, that the defendant was making perfectly clear by the letter that if the offer were not accepted, and thereafter the matter was resolved by way of success for the plaintiff in a lesser sum, the defendant would seek his costs from the date of the letter.

1. He accepted that litigation, both in its conduct and its preparation, is an organic process. He also accepted that it is not uncommon for parties and their lawyers to be disappointed by experts who modify or even resile from the opinion that they originally expressed when confronted with the evidence of the experts of the opponent. But in this case he submitted that an analysis of the chronology did not demonstrate that that had occurred. He noted that there was no evidence from the tutor or the solicitor for the plaintiff detailing their responses to the expert evidence of both parties as it was received throughout 2011 and 2012. He also noted that the early report of Ms Mullen contained a suggestion that the plaintiff could "become more independent at home", thereby raising the possibility that not all of the disabilities were based on a physical injury.

1. In the alternative, he submitted that, even if one accepts that the materials from the experts subsequently altered the perception of the tutor and the legal team of the plaintiff as to the strength of the case for the plaintiff, nevertheless it was unreasonable of the plaintiff to reject the offer at the time it was made.

1. He referred to the judgment of Beazley JA (with whom McColl JA agreed, Bryson JA dissenting) in Vale v Eggins (No 2) [2007] NSWCA 12 in order to distinguish it on the simple basis that here there was no reticence on the part of the defendant with regard to his expert reports.

1. In short he submitted that 12 months' costs had been needlessly thrown away by his client as a result of the behaviour of the plaintiff, and there should be some adjustment to the usual order.

Submissions of plaintiff

1. As I have indicated, senior counsel for the plaintiff did not place in contention the question of whether or not the offer was a genuine one. His focus was on the question of whether it had been demonstrated by the defendant that the refusal to accept the offer by the defendant was unreasonable at the time. He accepted that senior counsel for the defendant had correctly formulated the issue for determination.

1. His fundamental submission was that things change in litigation. His submissions were to the effect that a case that may appear weak at first blush may gain strength on further analysis and investigation. Conversely, a case that appears extremely strong on paper may be chipped away at to the point of collapse. He emphasised that that process can occur not only at any hearing but also in the months of preparation leading up to a hearing.

1. In this case, he submitted that the decision of the plaintiff to commence proceedings in the sum originally sought was completely appropriate. At the time of rejection of the offer, the plaintiff had reports from Dr Ling, Dr Korda and Ms Mullen. There was nothing to suggest that the opinions of those expert witnesses should not be fully relied upon. He emphasised that at the time of rejection of the offer there was neither a defence nor expert evidence from the defendant available to the plaintiff.

1. After that, there was a report received from Dr Dalton that cast some doubt on whether all of their disabilities suffered by the plaintiff were, in truth, to be sheeted home to the defendant. The subsequent reports of Dr Tisch and Professor Brew increased those doubts. By the end of 2012, and even disregarding the conclave report that post-dated the settlement offer of 21 December 2012, it was apparent that the landscape had changed.

1. In short he accepted that the plaintiff settled the matter for substantially less than what was originally claimed, and very slightly less than what had been offered. But that was when the plaintiff was better armed with information obtained over many intervening months. Those events by no means demonstrate that the rejection of the offer by the plaintiff was unreasonable.

1. He also submitted, as he put it "faintly", that the letter could have no effect, because the matter had not proceeded to hearing as foreshadowed in the letter. He submitted that the recipient of such a letter is entitled to have identified with precision the pre-conditions that are said to give rise to a subsequent entitlement to costs.

1. Finally, he sought to rely on contract law with regard to offer and acceptance and implied terms to found the submission that, if the parties were not ad idem about the precise disposition of costs encompassed by the settlement for $495,000, I should nevertheless enforce the agreement on that basis that the settlement was in truth for that sum plus the plaintiff's costs.

Determination of costs

1. I accept that the parties have accurately stated the approach that requires consideration by me: see Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] and Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [10].

1. The questions that I need to determine, to adopt what was said by Basten JA (with whom McColl and Campbell JJA agreed) in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2), are whether:

"(a) there was a genuine offer of compromise, and

(b) it was unreasonable for the offeree not to accept it."

This formulation was applied with approval by Bathurst CJ (with whom Allsop P and Beazley JA agreed) in Tati v Stonewall Hotel Pty Ltd (No 2).

1. In light of the position of the counsel for the plaintiff, I do not consider that there is any need for me to determine the first question in this case, and regard it as established.

1. I do not consider that resolution of the second question requires analysis of the correspondence that passed between the parties with regard to the settlement in accordance with principles of contractual construction.

1. Nor do I consider that that question can be resolved based upon any distinction between the hearing referred to in the letter and the fact that no hearing has actually occurred. I do not consider that any such distinction would inform my discretion pursuant to s 98 of the Act in favour of the plaintiff.

1. Nor do I consider that the defendant has established that the plaintiff can be criticised, even indirectly, for commencing proceedings for the sum originally claimed.

1. The real point seems to me that, at the time that the offer was rejected, the plaintiff had no expert material from the defendant. Once such material was received, I do not require explicit evidence from the solicitor for the plaintiff or the tutor to accept that there was an ongoing process of reflection and reappraisal of the strength of the case of the plaintiff. I consider that, in particular, the reports of Dr Dalton and Professor Brew caused the tutor and her advisers to reassess the degree to which the disabilities of the plaintiff could all be laid at the feet of the defendant.

1. Whilst it is true that the report of Ms Mullen perhaps foreshadowed the report of Dr Dalton, I do not consider that the plaintiff can be criticised for not pursuing that issue at that early stage.

1. It is true, as senior counsel for the defendant submitted, that a period of some months passed between the receipt of those reports and the settlement of the matter for $495,000. But the exigencies of litigation mean that it is often not easy to make decisions quickly. Sometimes there are simple logistical problems in that process. For example, in this case, a report from one doctor was delayed for a period by the absence of his secretary.

1. Quite apart from logistical delays, it is not appropriate for difficult personal decisions (on the part of the tutor) and difficult professional decisions (on the part of solicitors and counsel) to be taken in a rush or made under pressure.

1. Whilst it is true that it is unfortunate that the matter continued for an extra 12 months beyond the point at which it could have been resolved, the defendant has not discharged the onus of persuading me that, at the time at which the plaintiff rejected the offer contained in the letter, it was unreasonable to do so. It follows that I do not propose to deviate from the usual order that the defendant is to pay the plaintiff's costs, whether by way of the primary or ancillary submission of senior counsel for the defendant.

1. At the conclusion of the hearing, I indicated that, in order to ensure that my order as to costs in every sense correctly reflects my determination, I would indicate my decision to the parties before making orders and give them a chance to formulate the appropriate order. I did so before formulating the order below.

Approval

Background and submissions

1. As a result of my determination with regard to costs, the question is whether I should approve the settlement of the matter in favour of the plaintiff in the sum of $495,000 plus costs.

1. Whatever the outcome of the costs argument, the defendant did not seek to be heard with regard to the approval, except to submit that it is appropriate.

1. I received some evidence from the plaintiff to which it is appropriate to refer briefly. The tutor deposed in an affidavit that her main concern is the welfare of her son, and that she regards a settlement in the sum of $495,000 plus costs as in his best interests.

1. Three confidential exhibits were tendered. They were not made available to senior counsel for the defendant, and I disregarded their contents in considering the costs question. I shall not refer to them except to say that senior counsel for the plaintiff, who has been involved in the matter for some time, regards the settlement as a reasonable one and submits that the Court should approve it.

Determination of Approval

1. The test is simply whether I am satisfied that the settlement is beneficial to the interests of the plaintiff under an incapacity. The principles that underlie s 76 of the Act were discussed in the judgment of Hammerschlag J in Permanent Trustee v Mills [2007] NSWSC 336; (2007) 71 NSWLR 1 at [19]:

"The substantive principles which underpin those provisions are the following:

a. this Court has parens patriae jurisdiction which in general terms is exercised when there is some risk to a child's welfare and which supports a great variety of orders, including orders related to protection of property: AMS v AIF (1999) 199 CLR 160 at 189 per Gaudron J;

b. when a claim of an infant or other person under disability is before the Court, the Court needs, for the purpose of protecting his or her interests, full control over any settlement compromising his or her claim: Dietz v Lennig Chemicals Ltd [1969] 1 AC 170 at 189 per Lord Pearson;

c. in an action by an infant by means of a best friend or tutor whatever is done must be for the benefit of the infant, and if, in the opinion of the Court it is not so, the infant is not bound: Rhodes v Swithenbank (1889) 22 QBD 577 at 578-579. Concomitantly, the Court will not enforce a compromise against the opinion of the tutor and his or her advisers: Re Birchall (1880) 16 Ch D 41."

1. That discussion was quoted with approval in the judgment of Rothman J in Fisher by her tutor Fisher v Marin [2008] NSWSC 1357 where his Honour added at [41]:

"Ultimately, the principle that I apply is whether the settlement that has currently been reached (and the amount thereof) is in the interests of the plaintiff. In that regard, bearing in mind the risk that, liability being in issue, the plaintiff would receive nothing from any hearing that may occur, the test may be described as whether the risk to the plaintiff, of losing that which is already agreed, is outweighed by the possibility of receiving more if the matter were to go to hearing."

1. Although the wishes of the tutor and the position of senior counsel for the plaintiff are not determinative, I consider that they should be given substantial weight. There is nothing to suggest that the tutor is motivated by anything other than love and concern for the best interests of the plaintiff. The standing of the advocate for the plaintiff is surely a relevant factor in my assessment of his opinion about the matter.

1. In all the circumstances, I am satisfied that, in light of my determination regarding the appropriate order as to costs, the terms of the settlement are beneficial to the interests of the plaintiff. I certainly see no basis upon which I should stand in the way of the wishes of the tutor, informed as she is by the professional opinion of a solicitor and a member of the inner Bar. Accordingly, I propose to make orders approving of the settlement of the matter in the sum of $495,000 plus costs.

Orders:

The Court orders that:

(1A) The defendant's application of 1 February 2013 be dismissed with costs.

(1) Pursuant to section 76 of the Civil Procedure Act 2005, the settlement of the plaintiff's claim is approved.

(2)   Judgment for the plaintiff against the defendant in the sum of $495,000 plus costs as agreed or assessed ("the Judgment").

The Court notes that:

(3)   The defendant will be at liberty to deduct and pay out of the Judgment any moneys repayable by the plaintiff to any person or body, whether in respect of social services, health services or otherwise, concerning which any demand or notice has been served on or given to the defendant or its solicitors or the insurers.

(4)   No interest will be payable in respect of the Judgment if the Judgment is paid within 28 days after whichever of the following events occurs last:

(i)   Entry of Judgment by the Court, or

(ii)   Receipt by the defendant of a final notice of reimbursement in accordance with the Health and Other Services (Compensation)Act 1995 as amended and a duly completed Medicare Australia Notice and Details of Settlement form signed by the plaintiff's solicitor, or

(iii)   Where the defendant or its insurer has been or is notified that there may be moneys owing to Centrelink (Department of Social Security), receipt by the defendant of a final notice from Centrelink informing it of the amount of the payback or of the fact that no moneys are repayable.

(5)   

(a)   No interest shall be payable in respect of costs if the costs are paid within 28 days after whichever of the following events occurs last:

(i)   The costs being agreed, or

(ii)   Receipt by the defendant of a written notice of the assessment of costs, or

(iii)   Receipt by the defendant of a written document signed by the plaintiff authorising and directing payments of the costs, and

(b)   If interest becomes payable in accordance with 5(a), the interest will only be calculated from the date which is 28 days after the last event.

The Court directs that:

(6)   The Judgment sum, after deduction of any amounts payable to Centrelink or Medicare Australia, is to be paid into Court pending further orders as to the investment and management of that sum.

(7)   Costs are to be paid directly to the plaintiff's solicitors in accordance with an Authority to Receive satisfactory to the defendant.

(8)   The confidential material placed before the Court on behalf of the plaintiff will be retained in the court file in an envelope marked "Only to be opened by order of a Judge".

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Decision last updated: 04 April 2013