Chantelle Dawn Burford (by Her Next Friend Ian Allan McFarlane) v Clifford Edward Allan No. SCGRG 90/1125 Judgment No. 5976 Number of Pages 9 Procedure Costs
[1997] SASC 5976
•11 February 1997
COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA MATHESON J
CWDS
Procedure - costs - allocatur for trial and appeal costs of plaintiff quadriplegic girl awarded over $6 million damages - application and cross application for review - whether taxing master should have allowed cost of attendance of world authority from USA to give evidence - whether taxing master had power to allow litigation loan interest - consideration of ss30, 40 and 114 of the SupremeCourt Act - whether award of interest on costs post judgment appropriate in the circumstances - application and cross application allowed in part.Hunt v R M Douglas Roofing Ltd [1988] 3 All ER 823; Osborne v Kelly (1993) 61 SASR 308, applied.
HRNG ADELAIDE, 12 December 1996 (hearing), 11 February 1997 (decision) #DATE 11:2:1997 #ADD 19:2:1997
Counsel for plaintiff : Mr R A Cameron with him Mr R K Genders
Solicitors for plaintiff : Genders &; Partners
Counsel for defendant : Mr S Walsh QC with him Mr P Norman
Solicitors for defendant : Andersons Solicitors
ORDER
Cross application allowed.
JUDGE1 MATHESON J
1. This is an application to review three of the decisions made by his Honour Judge Kelly in the course of a taxation of costs. The plaintiff is a permanent quadriplegic as a result of the injuries she sustained when a bicycle she was riding on 17 June 1986 was struck by a car driven by the defendant. She was aged seven at the date of the accident. On 24 September 1992 I gave judgment for her against the defendant for $5,765,318.47. That award was increased on appeal to $6,323,698.47, although the quantum of the award has no relevance to this application. The defendant was ordered to pay the plaintiff's costs of the trial and the appeal. Judge Kelly taxed the plaintiff's bill of costs as between party and party, and allowed the sum of $412,890.07, excluding any taxing fee that might apply. That sum included the sum of $38,528.62 for a witness fee, travelling and other expenses for Dr Harold Fodstad of New York. He is a world authority on phrenic nerve pacers. It was made up as follows:
"DATE SERVICE FEE $
17/5/92 Fee for giving evidence plus
travel time and preparations. Amounts to US$21,000.00
A28,052.36
18/3/92 Airfare, business class, New York
to Adelaide and return. Amounts to US$ $6812
A8,959.66.
9/5/92 to 15/5/92
Hilton International Accommodation
[in Adelaide] A1,516.60
TOTAL 38,528.62"
2. His Honour also allowed $14,000 for what he described as "litigation loan interest", and $85,000 for what he described as "interest on costs generally".The defendant now seeks the following orders:
"1. An order that the decision of Judge Kelly dated the 1st day of
August 1996 as supplemented on the 13th day of August 1996
allowing the fees of Dr Fodstad including travel and accommodation
be set aside and the allowance disallowed.
3. An order that the decision of Judge Kelly dated the 11th day of
September 1996 allowing Litigation Loan interest be set aside and
the allowance disallowed.
4. An order that the decision of Judge Kelly dated the 11th day of
September 1996 allowing Interest upon Costs generally be set aside
and the allowance disallowed.
5. An order providing for the costs of this application."
3. The application is brought pursuant to r.101.21 of the Rules of the Supreme Court which reads:
"(1) A party dissatisfied with the certificate or allocatur made
after reconsideration pursuant to the preceding two Rules may
within fourteen days from the date of the certificate or
allocatur, apply to a Judge in Chambers for an order to review the
taxation as to the item or part of an item, the subject of
dissatisfaction.
(2) The application shall be heard and determined by a Judge upon
the evidence which has been brought in before the Master, and
further evidence shall not be received upon the hearing of the
application unless the Judge so orders.
(3) The certificate or allocatur of the taxing officer is final
and conclusive as to all matters which have not been objected to
in accordance with these Rules."
4. The plaintiff has filed a cross application in which she seeks orders:
"1. That the decision of Judge Kelly dated 11th September 1996
disallowing interest on costs generally for a period of 10 months
be set aside and in lieu thereof interest be allowed for that
period.
2. Extending the time within which to bring this application
pursuant to Supreme Court Rules 6.02(1)
3. Costs."
5. As far as the claim for Dr Fodstad is concerned, his Honour gave some reasons on 1 August 1996. He said:
"I am asked to review on this taxation, my ruling that the fees of
Dr. Fodstad be allowed in full. Quantum is not in issue. It is
simply whether in the circumstances of this case the costs of
calling a 'world authority on phrenic nerve pacers' (I use the
words of Matheson J in his judgment) from the USA is justified on
a party/party basis.
In Calcagno v SGIC (a ruling I made on 13 July 1992) I said:
'This ruling relates to the employment by parties of interstate
experts and who claim their fees upon taxation as between party
and party. In my opinion no hard and fast rule can apply to all
circumstances but speaking generally I make these observations.
- 1.The party seeking such costs ought to demonstrate:
a) The proper enquiries have been made within this State as to
those holding the necessary qualifications and expertise in the
particular field. If there be none such, or clearly none that
would either be acceptable to the Court in terms of knowledge,
qualifications or expertise, or lack considerable reputation
amongst their peers, then an allowance may be made for an
interstate expert who does not suffer those disabilities.
b) That in some way the party would have been prejudiced by being
restricted to South Australian resident experts in similar manner
to one above and thus force to employ outside the State.If the
above cannot be demonstrated and I do not think it has been
demonstrated in this case, then any charges over and above what a
South Australian expert might have charged ought to be
disallowed.'
I think that view is apposite to the circumstances of this case.
I find that proper enquiries were made within this and at least
one other State (Dr Yeo) when it became clear that overseas input
was required. No one, in my view, (and this includes Dr McCulloch
who actually inserted the pacer) had sufficient expertise to
inform the Court on the likely [life] expectancy of the plaintiff,
her future needs and the efficacy of the particular pacer which
was the subject of Dr Fodstad's evidence. He was uniquely placed
in giving evidence on these topics by virtue of his wide
experience, an experience not shared by Dr McCulloch nor any other
practitioner within Australia. In my view it would have been
potentially prejudicial to the plaintiff if she had relied on his
experience and expertise alone. Dr Fodstad's experience was far
and away superior to that of Dr McCulloch. It is one thing to
have performed these phrenic nerve implants (possibly only one or
two at the time of the plaintiff's operation). It is quite
another to rely on that expertise when faced with the advice of
other medical people (particularly Dr Yeo) to employ the services
of an expert, world renowned and with vastly more experience in
the field. It was certainly not unreasonable of the plaintiff to
choose that world authority in preference to Dr McCulloch, the
former having the widest experience in matters involving life
expectancy of these particular patients and detailed knowledge of
the requirements of such patients for the future. Dr McCulloch
simply did not have this experience because there were a very
limited number of people in Australia with the plaintiff[']s
particular problems.
Dr Fodstad was able to give a world view of life expectancy and
future care and the best treatment of people like the plaintiff.
Dr McCulloch simply was not in that position. It must be
remembered that this was a case where the plaintiff sought to have
the effect of the decision in Beasley v Marshall distinguished
largely on the need for future care in the home as distinct from
an institution. Dr Fodstad was a physician, neuro surgeon and
psychiatrist and was uniquely placed by virtue of his experience
and knowledge in those fields to support that desire which was
finally vindicated by the decision of the trial judge.
I think the plaintiff acted reasonably in the necessary conduct of
her case in the employment of Dr Fodstad and that the latter's
costs of attending her and giving evidence in the trial [are]
properly recoverable on a party/party basis."
6. Judge Kelly supplemented these reasons on 13 August. He said:
"Since my earlier remarks I have received communication from the
solicitors for the defendant pointing out that quantum is in issue
in this matter whereas on page 2 of those remarks I said 'quantum
is not an issue'. By those words I did not intend to convey that
quantum had not been argued. It was originally, at some length,
and briefly, last time. I was satisfied that the doctors' charges
were not shown to be excessive, bearing in mind he was a world
authority in his field and conducted his practice in the USA
where, I presumed (there being no evidence to the contrary) that
such charges were consistent with that fact. No further evidence
to the contrary was placed before me on the review. That is the
reason I commented - 'quantum is not an issue'."
7. In his submission to the learned Judge, counsel for the plaintiff said in relation to Dr Fodstad's fees:
"The plaintiff makes no concession whatsoever for the fees charged
by Dr Fodstad. The plaintiff was one of only 3 children in
Australia who had undergone a phrenic nerve placer implant. This
is a means of artificial ventilation for people who can not
breathe voluntarily by themselves. The plaintiff's inability to
spontaneously breathe by herself, and the mechanical aids required
to overcome this condition, has major ramifications for the
considerations of life expectancy and the need for future nursing
care. On both these questions Dr Harold Fodstad is a world
authority having been personally responsible (as a neurosurgeon)
for the surgical implantation of in excess of 40 phrenic nerve
pacers. The plaintiff's advisers had made enquiries to determine
the expertise of doctors in Australia to assist with evidence
regarding the phrenic nerve pacer and its likely effects on life
expectancy and the need for nursing care. Because so few patients
have been implanted with a phrenic nerve pacer in Australia, there
was no doctor who had performed more than one operation, and
therefore the 'expertise' concerning this procedure and its long
term follow-up was absent in Australia. Dr John Yeo (regarded
throughout Courts in Australia as the foremost spinal
rehabilitation authority in Australia) recommended to the
plaintiff's advisers that they contact Dr R Edward Carter at the
Texas Institute of Rehabilitation and Research in Houston USA.
When the plaintiff's solicitors contacted Dr Carter he in turn
referred them to Dr Fodstad in New York.The Trial Judge clearly
accepted Dr Fodstad's evidence which was of substantial benefit to
him. There were no doctors in Australia who could have given
similar evidence and therefore the fees charged by a doctor of his
reputation, qualification, experience and standing can not be
judged against the fees which may otherwise have been charged by
local doctors."
8. I have no hesitation in upholding the learned Master's decision and I agree with his reasons. I also note that the defendant did not adduce any evidence to suggest that the fees and disbursements for Dr Fodstad as a visiting specialist from USA were unreasonable.
9. As to "litigation loan interest", his Honour gave the following detailed reasons:
"The plaintiff was obliged, because of her famil[y's] financial
position and the very high disbursement factor in her litigation,
to take out a litigation loan from a well known bank. I am asked
to rule on whether the interest payable on this fluctuating loan
is claimable against the defendant. I am quite sure that it is
and as a disbursement.
I simply look at reality. The cost of prosecuting a large civil
claim, as this was, more often than not involves a requirement on
the part of a plaintiff to meet the costs of disbursements such
as, and I name but a few, counsel fees, experts advice and
resultant reports, medical fees not wholly recoverable from
Medicare nor from private insurance and so on. In some cases
solicitors are not prepared to 'take the risk' and in some, not
prepared to act in the matter without provision of fees in
advance. This is a fact of life and so, an indigent and even not
so indigent plaintiff with a good case for recovery, as this was,
is potentially prejudiced in the successful prosecution of the
claim unless he/she seeks a litigation loan from a lending
institution to fund the proceedings. This comes at cost,
considerable in this case, and that cost is irrecoverable if the
defendant be right. That cannot be so. An unsuccessful defendant
who fights the indefensible fight also, in my view, takes the risk
of an award against it of interest where the successful party is
obliged to seek a loan to maintain a rightful claim. This is not
a too remote consequence (see Byrne v Hosking DCSA Master Berry
Judgement 995/85). Fairness and justice dictates that this should
be the result. Accordingly, as a matter of principle I think the
plaintiff to be entitled to be recompensed for the interest she
has had to pay on her litigation loan.
Her entitlement being there, I would exercise my discretion in her
favour and award her a sum consistent with the actual cost to her
of maintaining the loan. I come to this conclusion
notwithstanding that the defendant argues, among other things,
that the interest rate applicable to this loan is the Supreme
Court rate by reference to Section 114 of the Supreme Court Act.
I disagree. That Section is devoted and directed to claims for
interest on judgment debts. This is not related to a judgement
debt. It is, in my view, a properly claimed disbursement and one
looks at what the plaintiff necessarily had to pay by way of
commercial interest charged by the lender for the loan. The
Supreme Court rate of interest has no applicability so far as I
can see.
I turn to quantum. Overall I tend to accept the plaintiff's
solicitors approach to this and consider that an allowance of
$14,000 is fair and just under this head."
10. The relevant sections in the Supreme Court Act are as follows:
"30c (1) Unless good cause is shown to the contrary, the court
shall, upon the application of a party in favour of whom a
judgment for the payment of damages, compensation or any other
pecuniary amount has been, or is to be, pronounced, include in the
judgment an award of interest in favour of the judgment creditor
in accordance with the provisions of this section.
(2) The interest -
(a) will be calculated at a rate fixed by the court; and
(b) will be calculated in respect of a period fixed by the court
(which must, however, in the case of a judgment given on a
liquidated claim, be the period running from when the liability to
pay the amount of the claim fell due to the date of judgment
unless the court otherwise determines); and
(c) is payable in accordance with the court's determination, in
respect of the whole or part of the amount for which judgment is
given.
(3) Where a party to any proceedings before the court is entitled
to an award of interest under this section, the court may, in the
exercise of its discretion, and without proceeding to calculate
the interest to which that party may be entitled in accordance
with subsection (2) of this section, award a lump sum in lieu of
that interest.
(4) This section does not -
(a) authorize the award of interest upon interest;
(ab) authorize the award of interest upon exemplary or punitive
damages;
(b) apply in relation to any sum upon which interest is
recoverable as of right by virtue of an agreement or
otherwise;
(c) affect the damages recoverable upon the dishonour of a
negotiable instrument;
(d) authorize the award of any interest otherwise than by consent
upon any sum for which judgment is pronounced by consent; or
(e) limit the operation of any other enactment or rule of law
providing for the award of interest.
É
40 (1) Subject to the express provisions of this Act, and to the
rules of court, and to the express provisions of any other Act
whenever passed, the costs of and incidental to all proceedings in
the court É shall be in the discretion of the court or judge, and
the court or judge shall have full power to determine by whom and
to what extent such costs are to be paid.
(2) ..."
114 (1) All money, including costs, payable under any judgment or
order shall bear interest at the rate from time to time prescribed
by the rules of court.
2) The interest shall be computed from the following times:-
(a) in the case of money other than taxed costs, from the time
specified in the judgment or order, and if no time is so specified
from the date of the judgment or order:
(b) in the case of taxed costs, from the date of the certificate
of the taxing officer by whom the costs were taxed or an earlier
date specified by the taxing officer in the certificate."
11. Counsel for the plaintiff was unable to cite any authority of a superior court in support of his Honour's decision, and in my opinion the language and ambit of the sections I have just quoted are not apt to authorise such interest. If the interest in issue had been claimed as a disbursement prior to judgment being entered, even if not precisely quantified, there may be something to be said for an allowance being made under s30c, but even then the answer is not free from doubt. I uphold the defendant's argument on this issue.
12. His Honour also gave detailed reasons on the issue of "interest on costs generally". He said:
"Here I have a discretion as to whether or not interest should be
awarded and, if it should, calculated from what date.
I have considered all of the background facts which are not really
the subject of any great dispute. It seems to me that for a
period of some 10 or so months the plaintiff's solicitors were not
as active as they should have been in progressing the taxation
process. There are two areas I would highlight. (1) The period of
four months during which Mr Roberts had the file. (2) The period
from reclamation of the file to final preparation of the bill
(some nine months).
I would have thought that in normal circumstances a bill should
have been prepared within two or three months. So, any interest
awarded should take account of this factor.
In deciding whether to award interest I have regard to the whole
course of proceedings, particularly after judgement day. Offers
were made to settle the taxation by both sides. In the case of
the plaintiff they were somewhat excessive given the final figure
and the defendants offers were, as I perceive it, significantly
below what could have been considered reasonable. I see nothing
in the circumstances surrounding these negotiations as having any
deleterious impact upon the plaintiff's claim for interest. I
think the plaintiff should have interest generally calculated from
the date of judgement but taking account of the delay of some 10
months already adverted to.
The defendant has also argued that the plaintiff's failure to seek
an interim allocatur must go against her. I disagree. This was
such a complex taxation with so much of it under heavy dispute I
cannot conceive that the plaintiff could have successfully
achieved that allocatur without something akin to a 'mini'
taxation taking place which would really defeat the purpose of
such an application. I have no doubt any such application was
likely to be heavily opposed. I do not take this factor into
account in determining the plaintiff's right to interest.Having
considered the parties submissions and calculations in respect
thereto I would allow a lump sum for interest of $85,000.00."
13. There are a number of recent English cases to the effect that a litigant who has been awarded costs is entitled to interest on those costs from the date of the judgment rather than the date the taxation of costs is completed. The House of Lords considered the question in Hunt v R M Douglas (Roofing) Ltd [1988] 3 All ER 823. In his opening remarks Lord Ackner, with whose opinion the other members of the House agreed, said at p824:"My Lords, this appeal raises an important issue with regard to costs, namely whether a litigant who has been awarded costs is entitled to interest on the amount of the costs from the date on which judgment is pronounced (referred to hereafter as 'the incipitur rule') or from the date on which the taxation of costs is completed by the issue of the taxing master's certificate (the 'allocatur rule')."
14. At p833, his Lordship said:
"... in my judgment the balance of justice favours the 'incipitur
rule' for the following reasons. [Only two are relevant here]
(1) It is the unsuccessful party to the litigation who, ex
hypothesi, has caused the costs unnecessarily to be incurred.
Hence the order made against him. Since interest is not awarded
on costs incurred and paid by the successful party before
judgment, why should he suffer the added loss of interest on costs
incurred and paid after judgment but before the taxing master
gives his certificate?
(2) Since, as the Court of Appeal rightly said in the Erven
Warnink case [1982] 3 All ER 312, payments of costs are likely
nowadays to be made to lawyers prior to taxation, then the
application of the allocatur rule would generally speaking do
greater injustice than the operation of the 'incipitur rule'.
Moreover, the 'incipitur rule' provides a further necessary
stimulus for payments to be made on account of costs and
disbursements prior to taxation, for costs to be more readily
agreed and for taxation, when necessary, to be expedited, all of
which are desirable developments. Barristers, solicitors and
expert witnesses should not be expected to finance their clients'
litigation until it is completed and the taxing master's
certificate obtained. If interest is not payable on costs between
judgment and the completion of taxation, then there is an
incentive to delay payment, delay disbursements and taxation.
(3) ..."
15. I do not agree with the submission of counsel for the defendant that even since the amendment to s114(2), interest should be awarded from the date of the allocatur in the normal case. In my opinion, a taxing officer's discretion is not so fettered. It may be that if I was of the view that his Honour's decision to allow Dr Fodstad's fees and disbursements in full was erroneous, that then the closeness of the defendant's offer in settlement should have been taken into account in the defendant's favour, but that is now academic. For the reasons given by his Honour, I am not persuaded that the plaintiff's failure to seek an interim allocatur should have altered his decision.
16. As far as the plaintiff's cross application is concerned, I extend the time for filing to and to include the date thereof. I was referred to the case of Osborne v Kelly (1993) 61 SASR 308. In a judgment with which Bollen and Millhouse JJ agreed, Mohr J said at p311:
"There are differing views expressed in a number of cases as to
whether or not the plaintiff is to be deprived of interest for
some period due to his delays in prosecuting his claim. In
Batchelor v Burke (1981) 148 C.L.R. 448 Gibbs C.J. at page 455
said:- 'The interest is awarded to compensate the plaintiff for
the detriment that he has suffered by being kept out of his
money, and not to punish the defendant for having been dilatory
in settling the plaintiff's claim.' This would appear to be the
basic reasoning behind the award of interest. In the present
case it is not suggested that the appellant (defendant) was
dilatory. Rather attention was focussed on the time it took for
the action to come on for trial. King C.J. in Digging v Brunotti
(unreported judgment of 22 November 1988) in discussing the
problem said:- 'Counsel for the plaintiff submitted that
the defendant should pay interest for the period of the
adjournment because he had the use of the money during that
period. The authorities are now clear, however, that interest
is included in judgments not because the defendant has had the
use of the money but because the plaintiff is kept out of it.
It follows that if the plaintiff is kept out of the money due
to his own default, he should not be allowed interest during
that period.'
The High Court in M.B.P. (S.A.) Pty Ltd v Gogic (1991) 171
CLR 657 at p.663 repeated the principle laid down by Gibbs C.J.
in Batchelor v Burke (supra) ... In the present case there is
no doubt that the respondent was kept out of his money for
some 12 years from that date of the issue of the writ until
trial. Whatever may be the case, where it can be shown that the
delay in bringing the action to trial can be sheeted home to the
plaintiff, for denying such a plaintiff interest for some period
in my opinion the critical factor is in the words of King C.J.
in Digging v Brunotti (supra) 'the plaintiff is kept out of the
money by his own default'. In the present case whatever may be
said about the cause of the delay there is no suggestion
that the plaintiff himself was responsible for them except in
the sense that he was not capable of controlling the time taken.
Indeed from the medical evidence it seems he had only a
glimmer of understanding that proceedings were in hand and
what their purpose was. In my opinion therefore it was an error
to deprive him of the benefit of interest for the whole
period of 12 years. Using a simple multiplier I would increase
the interest component of the judgment from $50,000.00 to
$120,000.00 and allow the cross appeal for that purpose."
17. In the case at bar, his Honour disallowed interest on costs generally for a period "of some ten months or so" owing to the delay of the plaintiff's solicitors in preparing her bill of costs and having it taxed. It was never suggested, however, that there was any default on the part of the plaintiff herself who has been unable to conduct her own affairs since the accident.
18. The plaintiff had claimed $110,000 as a lump sum made up as follows, (using appropriate interest rates contained in the Third Schedule to the Supreme Court Rules):
"Period Principal Interest Simple Interest Rate
Sept 92 - Nov 93 $320,000.00 9.00 $36,000.00
Dec 93 - Feb 96 $320,000.00 7.00 $28,000.00
Mar 95 - Sep 96 $308,888.55 9.50 $46,461.99
TOTAL $110,461.99"
19. [I understand the figure of $308,888.55 was reached after deducting $11,111.45, being an amount paid by the defendant for some disbursements on 6 January 1995.]
20. I would allow the cross application and increase the amount from $85,000 to $110,000.
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