Coombes v Roads and Traffic Authority (No 2)

[2007] NSWCA 70

New South Wales

Court of Appeal

CITATION:	Coombes v Roads and Traffic Authority & Ors (No 2) [2007] NSWCA 70 This decision has been amended. Please see the end of the judgment for a list of the amendments.
JUDGMENT DATE:	29 March 2007
JUDGMENT OF:	Beazley JA at 1; Ipp JA at 87; Basten JA at 88
DECISION:	1. Order Bombala Council to pay the costs of the RTA incurred by the RTA on the appellant’s claim against the RTA at trial and on appeal, those costs to be paid by Bombala Council directly to the RTA; 2. Declare that the costs of the appellant ordered by this Court be paid by Bombala Council, including the appellant’s costs of prosecuting her claim against the RTA, both at trial and on appeal; 3. Order that the costs of the appellant at trial be paid by Bombala Council on a solicitor/client basis; 4. Order that the costs of the appellant on the appeal be paid by Bombala Council on a party/party basis; 5. Verdict for the RTA on its Amended Notice of Cross-Claim against Bombala Council; 6. Order Bombala Council to pay the RTA’s costs of the RTA’s Amended Notice of Cross-Claim at trial and on appeal; 7. Verdict for the RTA on Bombala Council’s Notice of Second Cross-Claim; 8. Order Bombala Council to pay the RTA’s costs of Bombala Council’s Notice of Second Cross-Claim at trial and on appeal; 9. Verdict for the third respondent on the third respondent’s Notice of Third Cross-Claim at trial and on appeal; 10. Order Bombala Council to pay the third respondent’s costs of the third respondent’s Notice of Third Cross-Claim at trial and on appeal.
CATCHWORDS:	Costs – Bullock or Sanderson order – liability of unsuccessful defendant for costs of successful defendant – whether fair to impose costs - failure to admit responsibility where responsibility should have been known - Costs – costs on appeal – no fresh offer of compromise between trial and appeal – no unreasonable or delinquent conduct - whether court should exercise discretion to make indemnity costs order on appeal – indemnity costs order not made - Costs – offer of compromise – offer limited to liability – whether offer capable of acceptance – verdict no less favourable to plaintiff than offer of compromise - Costs - procedure – offer made pursuant to District Court Rules 1973 (NSW) – trial decision delivered before commencement of Uniform Civil Procedure Rules 2005 (NSW) – whether savings provisions of Uniform Civil Procedure Act 2005 (NSW) apply - whether Court should make order otherwise than in accordance with Uniform Civil Procedure Rules
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) s 3, Sch 6 cl 5, Sch 6 cl 5(2), Sch 6 cl 10(b) District Court Rules 1973 (NSW) Pt 19A, Pt 19A r 2, Pt 19A r 3(7), Pt 19A r 10, Pt 39A r 25, Pt 39 r 25(4), Pt 39A r 25(4A) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 5 Supreme Court Act 1970 (NSW) s19 Supreme Court Rules 1970 (NSW) Pt 22, Pt 22 r 3(2), Pt 31 r 2, Pt 52A r 22 Uniform Civil Procedure Rules 2005 (NSW) Pt 42 Div 3, rr 20.26, 28.2, 42.1, 42.14
CASES CITED:	Almeida v Universal Dye Works Pty Ltd (No 2) [2001] NSWCA 156 Balesfire Pty Ltd t/as the Gutter Shop & Ors v Jamie Adams & Ors [2006] NSWCA 112 Baresic v Slingshot Holdings Pty Limited & Anor (No 2) [2005] NSWCA 160 Bullock v London General Omnibus Co [1907] 1 KB 264 Fowdh v Fowdh (Court of Appeal, 4 November 1993, unreported) Herbert by her tutor Meehan v Tamworth City Council (No. 4) (2004) 60 NSWLR 476 James Hardie & Co Pty Ltd v Seltsam Pty Limited (1998) 196 CLR 53; [1998] HCA 78 Moore v Woodforth (No 2) [2003] NSWCA 46 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Roads and Traffic Authority of New South Wales, Council of the Shire of Evans and Pioneer Road Services Pty Limited v Palmer (No 2) [2005] NSWCA 140 Sanderson v Blyth Theatre Co [1903] 2 KB 533 South Sydney Council v Morris (No 3) [2001] NSWCA 200 South Eastern Sydney Area Health Service v King (No 2) [2006] NSWCA 73 Suresh v Jacon Industries Pty Ltd (No. 2) [2005] NSWCA 270 Sved v Council of the Municipality of Woollahra (1998) NSW ConvR 55-842 Vale v Eggins (No 2) [2007] NSWCA 12 Wardle v Kick & Ors [2006] NSWSC 327 Whitehouse Properties Pty Ltd v Bond Brewing (NSW) Ltd (1992) 28 NSWLR 17
PARTIES:	Anne Marie Coombes (Appellant) Roads & Traffic Authority (First Respondent) Bombala Council (Second Respondent) Stephen John Frece (Third Respondent)
FILE NUMBER(S):	CA CA 40744/05
COUNSEL:	H J Marshall SC; E Beilby (Appellant) D T Miller (First Respondent) D Davies SC; N Polin; A Horvath (Second Respondent) W Fitzsimmons; C Mulvey (Third Respondent)
SOLICITORS:	Beilby Poulden Costello (Appellant) Moray & Agnew (First Respondent) Phillips Fox (Second Respondent) QBE Insurance Limited (Third Respondent)
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 2269/02
LOWER COURT JUDICIAL OFFICER:	Armitage DCJ
LOWER COURT DATE OF DECISION:	25 May 2005

- 31 -

CA 40744/05

BEAZLEY JA
IPP JA
BASTEN JA

29 March 2007

ANNE MARIE COOMBES

v

ROADS AND TRAFFIC AUTHORITY & ORS (No 2)

Judgment

1 BEAZLEY JA: The Court gave judgment in this matter on 17 August 2006, allowing the appeal against the second respondent (Bombala Council) and dismissing the appeal against the first respondent (the Roads and Traffic Authority) (the RTA) and the third respondent. The Court ordered that in respect of the appellant’s claim against Bombala Council, the Council pay the appellant’s costs of the appeal and of the hearing at first instance. The Court ordered the appellant to pay the third respondent’s costs. It directed the appellant, Bombala Council and the RTA to file written submissions as to the costs of the RTA at trial and on appeal.

2 The parties have filed their submissions. In addition to seeking orders relating to the costs of the RTA, the appellant also seeks a variation of the costs order made by the Court at the time it delivered judgment so as to seek an order for indemnity costs from Bombala Council on the trial and on appeal because she made an offer of compromise prior to trial and submits that her offer was more favourable to Bombala Council than the Court’s determination.

3 The appellant also submits that Bombala Council should pay the costs of the RTA and the third respondent on a party/party basis by the making of a Bullock or Sanderson Order: Bullock v London General Omnibus Co [1907] 1 KB 264; Sanderson v Blyth Theatre Co [1903] 2 KB 533. The difference between these two types of orders depends upon how payment under the order is directed to be made. In a Bullock Order, the unsuccessful defendant is ordered to pay the plaintiff the costs the plaintiff is ordered to pay the successful defendant. Under a Sanderson Order, the unsuccessful defendant is ordered to pay directly to the successful defendant those costs that the plaintiff is ordered to pay.

4 The RTA supports the order for costs sought by the appellant as it relates to its costs. Alternatively, the RTA seeks orders against Bombala Council for its costs of the trial and of the appeal. It also seeks final orders in relation to the cross-claim between it and Bombala Council, together with the costs of the cross-claim.

5 Bombala Council resists the orders for costs in favour of the appellant on an indemnity basis and further contends that there is no basis for the making of costs orders, either by way of a Bullock or Sanderson Order or otherwise, in favour of either the RTA or the third respondent.

6 The issues which arise from the submissions made by the parties may be summarised as follows:

a) Should Bombala Council pay the costs of the RTA?

b) Should Bombala Council pay the costs of the third respondent that the Court has ordered to be paid by the appellant?

c) Should the appellant’s costs include its costs of prosecuting its claim and the appeal against the RTA and the third respondent?

d) Should Bombala Council pay the appellant’s costs on an indemnity basis?

e) What orders and costs orders should be made on the cross-claims?

Should Bombala Council pay the RTA’s costs?

7 In its judgment on the appeal, the Court did not make an order as to the RTA’s costs. As it succeeded on the appeal, it should have its costs. In the normal course, the appellant would be ordered to pay those costs. The question is whether Bombala Council should be made to bear those costs, by the Court making either a Bullock or Sanderson Order.

8 Bombala Council submits that it ought not to be made responsible for any costs by way of a Bullock or Sanderson Order. It correctly summarised the law in relation to the making of either type of order, recognising that the question to be determined was whether “it was fair to impose some liability on it for the costs of the successful defendant”: see Sved v Council of the Municipality of Woollahra (1998) NSW ConvR 55-842 at 56,605.

9 Bombala Council accepts that it was reasonable for the appellant to have brought the proceedings against the RTA but contends that there was nothing in its conduct that makes it fair to impose on it liability for the RTA's costs. It relies upon a number of authorities in this Court where an appellant had sued more than one defendant, was successful against one defendant and not the others, and where the Court held that the unsuccessful defendant should not be liable for the costs incurred by the appellant against the successful defendant. A brief review of those cases follows.

10 In Roads and Traffic Authority of New South Wales, Council of the Shire of Evans and Pioneer Road Services Pty Limited v Palmer (No 2) [2005] NSWCA 140, Giles JA (Spigelman CJ and Handley JA agreeing) stated at [35]:

“It may have been reasonable for the plaintiff in her own interests to join the RTA as a defendant, but I do not think that there was conduct which made it just that the Council and still less Pioneer, created any circumstances of uncertainty as to who was the proper defendant. They were not obliged to concede liability or make admissions in order to remove the RTA from contention, there being a respectable argument that the RTA was liable and there is no reason to think that short of effective capitulation by the Council and Pioneer the plaintiff would not have maintained her claim against the RTA. In my opinion, conduct has not been shown such as to make it fair to impose on the Council and Pioneer liability for the costs of the RTA.”

11 In Wardle v Kick & Ors [2006] NSWSC 327 McClellan CJ at CL said at [122]:

“A Sanderson or a Bullock order should not be made on the basis of conduct that merely consists in the making of general legal arguments about who was in fact in control of the site where the appellant's accident occurred …”

12 In Almeida v Universal Dye Works Pty Ltd (No 2) [2001] NSWCA 156 Priestley JA said:

“[9] What was submitted for Mrs Almeida was that the conduct of Universal which justified the orders she was seeking was the position of Universal vis-a-vis the other two respondents and the uncertainty that their relationships created as to whether it was safe to do other than proceed against all three. The specific incidents of conduct relied on were that Universal had accepted the quotation for the roofing work done by Mr Almeida’s employer, that Universal and Newtown had a common directorship and that Mr Montebello had conducted business on behalf of all three respondents with Mr de Sylva the person in charge of the work being done at the time Mr Almeida fell to his death.

…

[13] Looked at from the point of view of the plaintiff, she was faced with the task of proving that some party was an occupier of the factory roof, either in an undefined sense or in a statutory sense; she had joined what she had some reason to believe was the company which had contracted to have the work done, the company lessee, and the company owner of the premises. The questions of occupation and whether Universal was the head contractor were put in issue by Universal. This alone would in my opinion have been sufficient conduct on the part of Universal to warrant the making of the [costs] orders against it which Mrs Almeida now seeks.”

13 Almeida was referred to by the Court in Balesfire Pty Ltd t/as the Gutter Shop & Ors v Jamie Adams & Ors [2006] NSWCA 112. There, the respondent had denied being the relevant contractor (when in fact it was) and had joined other parties by way of cross-claim alleging that fault on their part had materially contributed to the appellant’s injury. The appellant then joined those parties as defendants. It also vigorously agitated the cross-claims on the appeal. The Court refused to interfere with the Bullock Order made by the trial judge.

14 Bombala Council contends that its conduct was not of the same order as was exhibited by the first defendant in Balesfire and submitted, therefore, that there was no basis upon which a Bullock or Sanderson Order should be made against it. In relation to the costs of the appeal, it relies additionally upon the settlement of the matter between the appellant and the RTA and the approach it took to the settlement as a further basis as to why it should not be subject to a Bullock or Sanderson Order in respect of the costs of the appeal.

15 The appellant contends, however, that Bombala Council should be liable for the RTA’s costs. She relies upon the fact that during the course of the hearing of the appeal, Bombala Council conceded that it had been responsible for placing and maintaining chevrons and barriers at the site of the roadworks: judgment at [89]. The appellant submitted that had this concession been made earlier, it would not have been necessary to maintain the action against the RTA and the third respondent. Accordingly, she contends that Bombala Council should be liable for the costs she would otherwise be liable to bear in respect of her unsuccessful claims against those parties.

16 The appellant points out that she had sought a concession from the RTA and Bombala Council at an early stage of the proceedings, by letter dated 3 June 2002, as to who was responsible for the roadworks but no concession had been forthcoming from either party. Prior to that, there had been correspondence between the appellants and the RTA and in particular, a letter dated 1 May 2002 from the appellant's solicitors to the RTA's solicitors which, relevantly, was in the following terms:

“[I]n the event that [Bombala Council] confirms that it was responsible for the road works we will no doubt have instructions to discontinue against your client immediately. As soon as we received some response from [Bombala Council] confirming your instructions we will notify you immediately. We would ask in the meantime that your client take no further steps to incur costs on our undertaking to take no steps adverse to your client without reasonable notice.”

17 Thereafter, the letter of 3 June 2002 upon which the appellant relies, was sent to each respondent seeking a formal admission as to who was the party responsible for the roadworks. The terms of that letter were as follows:

“We have commenced proceedings against both [the RTA] and [Bombala Council] on the basis that we are uncertain as to which party has responsibility for the particular roadwork being carried out at the time of our client’s accident.

We are concerned not to unnecessarily incur legal expenses. Could you please take your client’s instructions as to whether or not it is prepared to admit paragraph 3 of the Statement of Claim forthwith so that we can release the other party.” (Emphases added)

18 Paragraph 3 of the Statement of Claim alleged that either the RTA or Bombala Council had the “care, control and management” of the Monaro Highway, on which the accident occurred, and was “carrying out the road works” at the accident scene. The pleading continued in paras 4, 5 and 6 as follows:

“4. At all material times, [the RTA] had responsibility for the care, control and management of the Highway at the accident scene.

5. In the alternative, [Bombala Council] had the said responsibility.

6. In carrying out road works in the vicinity of the accident scene, [the RTA] or, alternatively, [Bombala Council], had created a traffic diversion or detour.”

19 The second respondent’s solicitors responded on 11 June 2002, stating:

“Our client was carrying out the particular road works at the time of your client’s accident under contract with the [first respondent] and consequently operating under the [first respondent’s] General Conditions of Contract.

Accordingly, we are instructed not to admit paragraph 3 of the Statement of Claim.”

20 This response was forwarded by the appellant’s solicitors to the RTA’s solicitors, with the comment that:

“In the absence of any admission from either [respondent] we will regretfully be advised to proceed against both parties and seek an appropriate costs order in the event of a successful outcome for the [appellant].”

21 The RTA replied on 25 June 2002 that:

“We can understand why [Bombala Council] would be reluctant to admit the terms of paragraph 3 of the Statement of Claim as pleaded but it is disappointing that they would respond to your request in terms which seek to implicate our client.” (Emphasis added).

22 Neither of these responses was particularly helpful or necessarily responsive to the appellant’s request, nor did it assist the appellant in achieving her aim of limiting her claim to one against the party responsible for the particular roadworks being carried out at the time of the appellant’s accident. Accordingly, the appellant maintained her claim against both the RTA and Bombala Council.

23 Subsequently, Bombala Council pleaded to paras 3 and 5 in its Notice of Grounds of Defence as follows:

“In relation to paragraph 3 and 5, in so far as it is pleaded against [Bombala Council], [Bombala Council] admits the Monaro Highway near Rockton was within the boundaries of its shire but otherwise denies this paragraph.”

24 Bombala Council did not plead to para 4 and did not admit para 6.

25 The position was, as found by this Court in its principal judgment at [99], that Bombala Council was the roads authority for the Highway where the accident occurred and was responsible for the design of the Traffic Control Plan. Indeed, on the appeal, there was no dispute as to this. It was so designated by statute. The RTA’s statutory function was to make decisions as to what road work was to be carried out. Having made the decision to carry out these roadworks, its role, as a matter of contract between it and Bombala Council was confined to approving the design drawing for the Traffic Control Plan and carrying out a final inspection of the roadworks on completion. It had no other relevant role. Bombala Council also carried out the roadworks as has been indicated.

26 Bombala Council argued that the order sought by the appellant should not be made, contending that it did not encourage or cause the appellant to proceed against the RTA. It also submitted that, even had the concession made on appeal, namely, that it was responsible for the placement of the barriers, been made earlier, there was no certainty that the appellant would have released the RTA from the proceedings because the claims made by the appellant were broader than the negligent placement and maintenance of barriers, and included failing to prepare an adequate Traffic Control Plan (TCP).

27 The Court found that Bombala Council had the care, control and management of the highway in the vicinity of the accident and was responsible for carrying out of the roadworks. Those were the matters alleged in para 3 of the Statement of Claim of which the appellant sought an early admission. She informed both Bombala Council and the RTA that if that admission was made, the appellant would release the other party. Whilst the appellant based her claim against both parties more widely, that is neither unexpected nor unreasonable. The correspondence of 1 May 2002 and 3 June 2002 made her position clear. If she could ascertain who, as between the RTA and Bombala Council, was responsible for the roadworks, she would have discontinued against the other party. As Bombala Council failed to make the admission, the appellant maintained her action against both parties.

28 In my opinion, the correspondence supports the conclusion that Bombala Council’s failure to make the admission was the reason the appellant maintained her action against the RTA. That admission could have been made as Bombala Council should have been aware that it was responsible for the roadworks to the exclusion of the RTA. Indeed, that was a matter about which there should have been no doubt, for the reasons I have mentioned. That being so, I am of the opinion that Bombala Council ought to bear the consequences of not making an admission and an order should be made against Bombala Council in relation to the RTA’s costs at trial.

29 That then leaves for consideration the costs of the appeal.

30 Bombala Council again contends that it did not create any uncertainty as to who was responsible for the accident site. It also says that although it had a respectable argument that the RTA was responsible having regard to the decision in Palmer (No 2) and that although the trial judge had held that the state of the design of the roadworks represented negligence on the part of either it or the RTA, his Honour had abstained from deciding which respondent was liable. This kept that question ‘alive’ from its point of view and demonstrated that its own position was not unreasonable. Bombala Council also contends that it was not obliged to concede liability where there was no reason to think that, short of effective capitulation by it and the third respondent, the appellant would not have maintained her claims on the appeal against the RTA.

31 In my opinion, this argument should be answered in the same way as I have answered Bombala Council's contentions in relation to the costs of the trial. Nothing further needs to be said.

32 Bombala Council further relies upon the events of 15 and 16 May 2006, immediately prior to the hearing of the matter, in support of its position that it should not be liable for the RTA’s costs of the appeal. On 15 May 2006, Bombala Council was informed that the appellant and the RTA had resolved the appeal as between themselves on the basis that the verdict in favour of the RTA would stand with each party bearing her and its own costs. Bombala Council and the third respondent were asked to consent to those Orders. Bombala Council did not consent but indicated to the RTA that it need not incur the cost of attending the appeal as the cross-claims were not being ventilated on the appeal. That is a matter to which I need to return.

33 Bombala Council submitted that its conduct was reasonable in not consenting to the orders sought by the appellant and the RTA because the trial judge had not determined whether the RTA owed a duty of care to the appellant; it, Bombala Council, had a respectable argument that it was not liable in relation to the accident; and it was not under any obligation to concede liability or to make any admissions. It submitted that in addition, the cross-claims had been dismissed and there was no appeal in respect of their dismissal. It pointed out that this Court had directed that argument was to proceed on the cross-claims which thereby obliged the RTA to take an active part on the appeal. It was submitted that this was not as a result of any conduct by it.

34 The position, however, was not quite as simple as conveyed in this submission. When the matter came before the Court on 17 May 2006, senior counsel for Bombala Council pointed out that there were significant difficulties with the Court acting upon the settlement between the appellant and the RTA. He submitted that the Court would need to deal with the question of both duty of care and breach of duty as against all of the respondents, because no cross-appeal had been filed, as the trial judge had not dealt with contribution issues. Senior counsel submitted that, had the trial judge dealt with the question of contribution between the respondents, Bombala Council could have filed a cross-appeal "which would have kept alive our position against the RTA”. He said that it was not able to file a cross-appeal because of the way the trial judge had proceeded, and indicated to the Court that the settlement between the appellant and the RTA threatened to shut it out forever from pursuing its cross-claim against the RTA.

35 This was correct. If Bombala Council wished to maintain its cross-claim against the RTA then it could not consent to, or indeed stand by so as to permit a verdict in the RTA’s favour as was agreed to in the settlement between the appellant and the RTA. Otherwise, there would be an order, the effect of which would have been to encompass, implicitly, a finding that the RTA either did not owe a duty of care to the appellant and/or did not breach any duty of care.

36 Bombala Council, having consented to such an order, would have been ‘estopped’ from claiming contribution against the RTA. This is not the occasion, nor is it necessary, to discuss the form of estoppel that would have operated. Bombala Council thus wished to preserve its position: see generally James Hardie & Co Pty Ltdv SeltsamPty Limited (1998) 196 CLR 53; [1998] HCA 78.

37 It followed, and senior counsel for Bombala Council expressly submitted when this matter was raised at the commencement of the appeal, that the Court was required to deal with the issues of duty of care and breach of duty as between the appellant and all of the respondents. That was established by James Hardie & Co Pty Ltd v Seltsam and was the way the Court was required to proceed if Bombala Council wished to maintain its claim against the RTA. This, of course, was different from the position that Bombala Council’s solicitors had sought to urge upon the RTA’s solicitors the previous day, namely, that the RTA need not appear on the appeal: see [32] above.

38 This Court also took the view that if it was determining the issue of duty of care and breach of, relevantly, Bombala Council and the RTA, it also ought to deal with the question of contribution between them. It was not suggested by any of the parties that that course was not appropriate.

39 Accordingly, the reason that the appellant was required to pursue her appeal against the RTA was because Bombala Council wanted to pursue its cross-claim and claim for contribution against the RTA. Had Bombala Council been prepared to concede that the RTA was not liable in negligence or alternatively was not responsible because of the terms of the solicitor/client clause in the contract between them which governed the carrying out of these roadworks, it would not have been necessary for the appellant to maintain the appeal against the RTA.

40 Bombala Council submitted that it had a reasonable basis to maintain its cross-claim against the RTA. I do not agree. I have already referred to the question as to who was responsible for the roadworks. In so far as the indemnity clause in the contract was concerned there was already a decision of a trial judge contrary to Bombala Council’s argument.

41 Further, it appears that Bombala Council's maintenance of its argument in relation to the solicitor/client clause was based in part upon its own uncertainty as to which contract or which contractual provision applied. It conceded, however, that if the relevant indemnity provision was that contained in a document known as the ‘Yellow Book’, then the indemnity clause required it to indemnify the RTA, should the RTA be found liable in negligence to the appellant: see principal judgment at [130]-[135]. Bombala Council’s confusion as to the correct contract was of its own making. The appellant should not be made responsible, in the sense of being liable for costs of the RTA, for Bombala Council’s uncertainty about its own contractual relationship. In my opinion, an order that Bombala Council be liable for the RTA’s costs of the appeal ought to be made.

42 I consider that the order that Bombala Council pay the RTA’s costs of the trial and the appeal should be by way of a Sanderson Order. That order is more direct and will eliminate administrative and procedural steps that are unnecessary.

Should Bombala Council pay the costs of the third respondent that the Court has ordered to be paid by the appellant?

43 The trial judge held that the third respondent was negligent in driving at a speed of 40-45km per hour on the curve where the accident occurred in circumstances where there was an advisory speed sign of 35km per hour. However, his Honour did not accept that had the third respondent been travelling at 35km per hour the severity of the accident and extent of the appellant’s injuries would have been less. On appeal, the appellant contended that the trial judge had failed to deal with that part of her case in which she alleged that had the third respondent been travelling more slowly, the appellant might have been able to avoid the collision.

44 This Court did not interfere with the verdict in favour of the third respondent, because it was of the view that there had been no substantial wrong or miscarriage involved in his Honour’s determination: principal judgment at [151]-[152]. The Court ordered the appellant to pay the third respondent’s costs of the appeal and otherwise confirmed the order, including the order for costs in favour of the third respondent made by the trial judge.

45 The appellant now claims that a Bullock or Sanderson Order ought to be made to include the costs of the third respondent that she has been ordered to pay. This application is made notwithstanding an offer of compromise by the third respondent on 1 October 2002. That offer of compromise was in the following terms:

“The accident occurred in circumstances where your client took a detour at some road works on the Monaro Highway. She assumed that the detour allowed two lanes of one way traffic travelling in the direction in which she was travelling. In fact the detour involved two way traffic. A collision occurred on a right hand bend with your client on the wrong side of the road. There is absolutely no evidence that our insured was doing anything other than travelling on his correct side of the road and at an appropriate speed. As your client alleges, the collision took place on a blind bend and again there is no evidence to indicate that our client should have seen [the appellant] earlier or in someway failed to keep a proper lookout.

In these circumstances I submit that your client has no prospect of obtaining a verdict against the third defendant.

I have instructions to put to you the following offer:

That the

(i) [Appellant] agree to a verdict in favour of the third respondent.

(ii) That each party pay their own costs.

(iii) That the [third respondent] agree to forego the benefit of the costs order made in its favour at the hearing of the recent notice of motion.

Please note that this offer will remain open until 4.00pm on 30 October next. At that stage the offer will not be re-opened. This offer is made strictly without prejudice but on condition that you are advised that my client intends to rely upon this letter to seek costs on an indemnity basis if the question of costs should arise between the parties.”

46 The appellant submits that, having regard to the position taken by Bombala Council in not admitting liability for the signage, the appellant was in a forensic position whereby she was compelled to maintain the action against the third respondent, should her action against Bombala Council fail. It was submitted that had the Council admitted responsibility for the signage, the third respondent could have been released from the action, with the issue for determination then being whether the action of the Council in relation to signage and control of the site was causative of the accident.

47 Bombala Council submits that there is no basis for making the order sought by the appellant in respect of the third respondent’s costs. It points out that the Court has already made an order in respect of costs, but that in any event, the case against the third respondent was distinct from the claim brought against the Council and did not contain any common factual matters to the claims brought against the RTA and the Council. It also points out that it did not issue any cross-claim against the third respondent, a factor which has, on the other authorities, been one of the relevant factors which the Court has taken into account in determining whether to make a Bullock or Sanderson Order.

48 I would reject the appellant’s application in respect of the costs of the third respondent. The appellant at no time put Bombala Council on notice that if the Council admitted responsibility for the road signage, that she would discontinue against the third respondent. The case against the third respondent was conducted on a different evidentiary basis to the cases conducted against the RTA and Bombala Council. It is not necessarily apparent that, had the Council admitted responsibility for the placement of the signage, the appellant would have discontinued against the third respondent. Indeed, there are reasons to think that such a course would not have been taken. The appellant’s approach to Bombala Council to admit responsibility for the roadworks did not include a request for an admission of liability in negligence. Even had the concession as to responsibility for the roadworks been made, the appellant still had to prove that the manner in which the roadworks had been carried out, including the placement of signage, was negligent. Indeed, even on the appeal when the appropriate concession was made, the question of liability remained in issue. It is unlikely, in those circumstances, that the appellant would have withdrawn her case against the third respondent in circumstances where she maintained that he was driving in an unsafe manner. The absence of any mention of the claim against the third respondent in the correspondence with Bombala Council is indicative of this.

49 The appellant further contends that had she not been confused into thinking that she was travelling on a one-way road, it was unlikely that the accident would have occurred. It was submitted that Bombala Council’s negligence thereby caused the accident. However, for the reasons given, I do not consider that a Bullock or Sanderson Order ought to be made.

50 Accordingly, I am of the opinion that no basis has been made out for disturbing the costs order made by this Court against the appellant in favour of the third respondent so as to make Bombala Council liable for the payment of those costs.

Should the appellant’s costs ordered to be paid by Bombala Council include her costs of prosecuting both the claim and the appeal against the RTA and the third respondent?

51 The question whether the appellant’s costs ordered to be paid by the second respondent should include her costs of prosecuting her claim and the appeal against the first and third respondent raises the question whether the appellant was justified in bringing the claim against those parties.

52 Bombala Council did not argue in its written submissions that the appellant’s costs should not include her costs of bringing the proceedings against the RTA. Much of the evidence was common to both claims and the same considerations to which I have referred in relation to the RTA’s costs apply to this question. I consider that the appellant should be entitled to those costs.

53 The position is different in respect of the third respondent for the reasons I have given. In my opinion, Bombala Council should not be liable for the appellant’s costs insofar as they relate to the claim and the appeal against the third respondent.

Should Bombala Council pay the appellant’s costs on an indemnity basis?

54 The appellant made an offer of compromise which was served on each of the respondents on 9 March 2005. The terms of the offer of compromise were:

“The [appellant] hereby offers to compromise her claim against the first, second and third [respondents] by virtue of a verdict for the [appellant] with damages to be reduced by 25% plus costs as taxed or agreed.”

55 Bombala Council responded to the effect that it was not a reasonable offer capable of acceptance.

56 I do not agree. The offer was capable of acceptance. This Court has recognised that an offer of compromise may be made limited to liability: Vale v Eggins (No 2) [2007] NSWCA 12. See also see Whitehouse Properties Pty Ltd v Bond Brewing (NSW) Ltd (1992) 28 NSWLR 17 at 21-22.

57 Whitehouse involved a claim for possession, damages, mesne profits, interest and costs. An offer of compromise was made in a specified sum but which did not resolve all issues in the proceedings. Handley JA (Priestley and Clarke JJA agreeing) held that it was not necessary that an offer of compromise, to be an effective offer under Pt 22 of the Supreme Court Rules, 1970 (NSW) (the SCR) would result in the entry of judgment in the matter.

58 His Honour pointed out that an offer under Pt 22 permitted the compromise of “any claim in the proceeding”. His Honour noted that “claim” was not defined in the Supreme Court Act 1970 (NSW) (the Supreme Court Act). Nor is it defined in the Civil Procedure Act 2005 (NSW) (the Civil Procedure Act). This is relevant because, for the reasons stated below, the Civil Procedure Act, and the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR) govern the outcome of the offer to compromise in this case.

59 Although “claim” was not defined in the Supreme Court Act, s 19 defined “claim for relief” as including “a claim for the determination of any question or matter which may be determined by the Court” and “any other claim … justiciable in the Court” (emphasis added). This definition is replicated in s 3 of the Civil Procedure Act. The determination of liability and of contributory negligence each involves the determination of a “question” in proceedings.

60 Handley JA also observed that under Pt 31 r 2 of the Supreme Court Rules a trial judge may order the separate determination of issues. His Honour considered that in Whitehouse the trial judge could have ordered the separate determination of the issue in respect of which the offer of compromise had been made. Had a separate question been determined, the Court would have recorded the result of the determination by way of a declaration of the rights of the parties. Handley JA considered that it followed that the result of the acceptance of the offer of compromise in that case could similarly have been embodied in a declaratory judgment entered pursuant to Pt 22 r 3(2). Rule 28.2 of the UCPR is the corresponding provision to Pt 31 r 2 of the Supreme Court Rules.

61 A court may order that a trial proceed on liability only and that damages be determined separately. That is sometimes done formally pursuant to an order for the separate determination of a question, although there are instances where the matter proceeds in that manner without a formal order being made. That, however, is not the point of the present discussion. The point is that liability, including contributory negligence, may be determined separately and appropriate relief ordered, including by way of declaratory relief. Indeed, that is a common outcome in appeals to this Court where a trial judge in a negligence claim has entered a verdict or judgment for a defendant and not assessed damages. If the appeal is successful, the Court frequently orders that there be judgment on liability and the matter is remitted to the District Court for “damages to be assessed”.

62 Further, Handley JA considered that it was implicit in the terms of the offer made in that case that the claims for damages and mesne profits were withdrawn if the offer was accepted, notwithstanding that they were not mentioned. This reinforces that an offer of compromise may relate to some but not all questions or claims in proceedings and the extent of the offer may be a matter of construction of the terms of the offer.

63 In this case, the effect of the offer was to provide for a verdict for the appellant, with damages to be assessed subject to a 25 per cent reduction for contributory negligence, plus costs. The order that would have resulted was in the terms of the effect of the offer which I have just explained. As I have also explained, such an order is not unusual and may be made under, relevantly, the UCPR. Had the offer been accepted, the matter could have proceeded to trial for the assessment of damages only, with a significant saving in court time and costs.

Operation of the Uniform Civil Procedure Rules

64 The offer of compromise was made pursuant to Pt 19A of the District Court Rules 1973 (NSW) (the DCR). Part 39A r 25(4) of the DCR made provision for the consequences which attend upon an offer of compromise made by a plaintiff 28 days or more before the hearing of an action commences and where the offer is rejected by the defendant. In those circumstances, where the plaintiff obtained an order or judgment “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 was entitled to an order against the defendant for costs assessed on a solicitor/client basis.

65 The appellant has succeeded in obtaining an order against Bombala Council without any reduction for contributory negligence. She has thus succeeded in obtaining an order which is no less favourable than the offer she made.

66 In my opinion, as the offer was one that was capable of acceptance, the appellant should have the benefit of the rules governing the making of offers of compromise. Although the offer was made under the DCR, as I explain below, the relevant rule that now governs the costs order that should be made is r 42.14 of the UCPR. Rule 42.14 does not replicate the terms of Pt 39A r 25(4). It is closer in its terminology to Pt 52A r 22 of the SCR which did not specify the conditions governing the making of an order other than that specified in the rule. However, Pt 52A r 22 has been interpreted as attracting the same principles as the express provisions of Pt 39A r 25(4) of the DCR: see Fowdh v Fowdh (Court of Appeal, 4 November 1993, unreported); Vale v Eggins (No 2).

67 Here, there was no exceptional circumstance and matter of substantial injustice that would require the Court to make any different order other than that dictated by the rule. There is a question, however, whether any allowance should be made for the fact that only liability was determined by the trial judge, notwithstanding that the trial was conducted on the basis that both liability and damages were in issue. Evidence was called and the appellant was cross-examined as to her injuries and ongoing disabilities and medical reports were tendered. No oral evidence was called from the medical witnesses retained by the parties.

68 The trial judge refrained from assessing damages, as he considered that if the appellant successfully appealed on the question of liability, the issue of assessment of her damages should be approached by another judicial officer whose mind was not affected by the adverse view that the trial judge had taken in relation to her credit on the question of causation. His Honour’s view on credit related to apparent inconsistencies in the appellant’s evidence.

69 The evidence in relation to the appellant’s injuries and disabilities lengthened the trial, but it only did so slightly and Bombala Council has not made any submission seeking some qualification to an order for indemnity costs, should the Court make such order. In those circumstances, I do not consider it necessary to qualify the order for indemnity costs by making an allowance for the time spent on the damages aspect of the trial.

70 At this point, it should be noted that the parties used the terminology of “indemnity costs” in their various submissions.

71 As I have said, the offer of compromise was made under Pt 19A of the DCR. The costs consequences specified under Pt 39A r 25(4) entitle a party to solicitor/client costs if the conditions specified by the rule were made out. I consider the reference in the submission to “indemnity costs” was a reference to the special costs consequences specified in the rules. My experience in this Court on many such applications is that legal representatives use the phrase “indemnity costs” in that sense, when the provisions of the DCR have been under consideration. On 15 August 2005, the Civil Procedure Act 2005 (NSW) (the Civil Procedure Act) and the UCPR commenced operation. Rule 42.14 of the UCPR provides that costs under that rule are to be paid on an indemnity basis. Rule 42.14 is also different from Pt 39A r 25(4) in respect of the date at which any costs consequence operates. Under Pt 39A r 25(4), the costs consequence operates in relation to the whole proceedings.

72 This in itself is to be contrasted with the consequences that operated under the DCR where an offer was made less than 28 days before trial. In that case, Pt 39A r 25(4A) provided that the special costs order operated from the day on which the offer was made. Before that time, the rule provided that costs were to be on a party/party basis. However, under Rule 42.14(2) the costs are assessed on an indemnity basis from the beginning of the day following the offer: subr(b)(i); and otherwise on an ordinary basis up to that time: subr(a).

73 The Civil Procedure Act and the UCPR apply to proceedings commenced before the commencement of the Civil Procedure Act unless the “court before which proceedings have been commenced before the commencement of [the] Act” makes an order “dispensing with the requirements of the uniform rules in relation to the proceedings, and [that court may make] such consequential orders (including orders as to costs), as are appropriate in the circumstances”; Sch 6 cl 5 of the Civil Procedure Act: see South Eastern Sydney Area Health Service v King (No 2) [2006] NSWCA 73 at [9].

74 In this case, the District Court, before which the proceedings were commenced could not make an order under Sch 6 cl 5 of the Civil Procedure Act as the proceedings were concluded before that court prior to the commencement of the Act.

75 Part 42, Div 3 (Offers of compromise) of the UCPR applies to proceedings in respect of which an offer of compromise is made under UCPR rule 20.26 with respect to a plaintiff’s claim. However, cl 10(b) of Schedule 6 of the Civil Procedure Act provides:

“… anything done under a provision of the old legislation for which there is a corresponding provision in this Act or the uniform rules … is taken to have been done under the corresponding provision of this Act or the uniform rules, as the case requires.”

76 Clause 10(b) of Schedule 6 thus applies and the costs consequences of the offer of compromise are governed by UCPR rule 42.14. However, UCPR rule 42.14(2), which deals with the consequences of a failure by a defendant to accept an offer made by a plaintiff, as was the case here, is expressly stated to operate according to its terms “unless the court orders otherwise”. The power of the court to make an order different from that specified by the rule is not confined to any part of the rule. Rather, it operates in respect of the whole rule, and it follows, in my opinion, distributively, in respect of all parts of the rule.

77 In this case, the offer was made more than 28 days prior to trial and the trial was heard and determined before the commencement of the Civil Procedure Act. The appellant failed at trial, so that the circumstances for triggering the operation of Pt 39A r 25(4) did not occur. However, had the trial judge found in favour of the appellant, as we have determined he should have, the consequences of the non-acceptance of the offer of compromise would have been determined under Pt 39A. As I have explained above, those consequences are different from and more favourable than the consequences that flow under UCPR rule 42.14(2).

78 There is no reason, in my opinion, why the appellant should be disadvantaged by the introduction of a less favourable procedure which effectively has a substantive effect of disentitling her to a costs order to which she would otherwise have been entitled, but for the error of the trial judge. In those circumstances, I am of the opinion that this Court should make a different order from that specified in UCPR rule 42.14(2) and order that Bombala Council pay the appellant’s costs at trial on a solicitor/client basis. This is the order that I consider should have been made had the applicable rule still been Pt 39 r (25)(4).

Costs on the appeal

79 It does not automatically follow from the making of an offer of compromise prior to trial that an order for indemnity costs will be made on the appeal. The jurisprudence in this Court in relation to offers of compromise made under the DCR is now well settled. Offers of compromise made under the rules of the District Court do not have any effect once an appeal in this Court is filed; see South Sydney Council v Morris(No 3) [2001] NSWCA 200 at [10]; Baresic v Slingshot Holdings Pty Limited & Anor (No 2) [2005] NSWCA 160 at [18] and following.

80 No fresh offer of compromise was made between the date of the verdict given at trial and the appeal. In those circumstances, the award of costs is in the exercise of the Court’s discretion. Usually, costs are awarded on a party/party basis: see rule 42.1 of the UCPR. If the Court is to exercise its discretion to order costs on an indemnity basis, then usually it is necessary for some unreasonable or delinquent conduct on the part of the party against whom the order is made to be demonstrated: see Oshlack v Richmond River Council (1998) 193 CLR 72 at 89; [1998] HCA 11; Baresic v Slingshot Holdings Pty Limited at [20].

81 In Moore v Woodforth(No 2) [2003] NSWCA 46, Mason P and Meagher JA stated that it was relevant to the Court’s exercise of its general discretion as to costs that a pre-trial offer of compromise was made, but so too was the absence of any renewal or variation of that offer during the pendency of the proceedings in the Court of Appeal. Moore v Woodforth involved an offer by a defendant to a plaintiff. The consequence of a plaintiff not accepting an offer of compromise, if the relevant rule is engaged, is to deprive a plaintiff of costs. The Court observed that the appeal had been conducted on the basis that the verdict at trial was the starting point of the issues that were joined on the appeal. The plaintiff/appellant established error and was successful on the appeal. The Court considered in that circumstance, notwithstanding the generous pre-trial offer made by the defendant/respondent, the plaintiff/appellant should have his costs of the appeal.

82 In this case, no delinquency or unreasonable conduct of Bombala Council has been demonstrated. The only shift of its position between the trial and the appeal was its concession that it was responsible for the roadworks, including signage. That concession could have been made earlier. However, I do not consider that that is sufficient for this Court to make some order other than the usual order that costs be on a party/party basis.

Orders sought by the RTA so as “to conclude its involvement in the proceedings”

83 The RTA submits that orders and declarations ought now be made so as to finalise the claims made by and against it by way of cross-claims in the proceedings. The orders and declarations sought are in the following terms:

“1. [The RTA] submits that appropriate Orders and Declarations to conclude its involvement in the proceedings are as follows.

a. Verdict in favour of [the RTA] against [Bombala Council] in respect of [the RTA]’s Amended Notice of Cross Claim.
b. Order that the Second and Third Cross Claims (brought by [Bombala Council] and the Third Respondents respectively) as against [the RTA] be dismissed with costs.
c. Order that [Bombala Council] pay [the RTA]’s costs of and incidental to the Appeal, such costs to be assessed or agreed.
d. A Declaration that [Bombala Council] is liable pursuant to Section G, clause F.01 of the Contract between [the RTA] and [Bombala Council] to indemnify [the RTA] with respect to its costs, charges and expenses incurred in connection with the Appellant’s claim.
e. Order, pursuant to section G, Clause F.01 of the Contract, that [Bombala Council] indemnify [the RTA] from and against all costs, charges and expenses incurred by [the RTA] in connection with the Appellant’s claim, including its costs and expenses of the trial.

2. In the alternative to (e) above, this Court may consider it appropriate to make a Sanderson order in favour of [the RTA] and against [Bombala Council] with respect to [the RTA]’s costs of the trial.”

84 The orders sought in paras (a) and (b) above should be made. They reflect the decision of this Court and costs should follow the event. The order sought in (c) has already been encompassed in the orders I propose should be made as between the appellant and Bombala Council.

85 Having regard to the orders I propose, there is no necessity to make the declaration sought in (d), nor the order sought in (e). The RTA in para (2) of its written submissions, in effect, accepts that this ought to be so. Nor is it necessary to consider the question whether the solicitor/client clause in the contract between the RTA and Bombala Council is confined to claims and costs incurred by Bombala Council as it contends, or whether it extends to claims brought against the RTA.

86 Accordingly, I propose the following orders:

1. Order Bombala Council to pay the costs of the RTA incurred by the RTA on the appellant’s claim against the RTA at trial and on appeal, those costs to be paid by Bombala Council directly to the RTA;

2. Declare that the costs of the appellant ordered by this Court be paid by Bombala Council, including the appellant’s costs of prosecuting her claim against the RTA, both at trial and on appeal;

3. Order that the costs of the appellant at trial be paid by Bombala Council on a solicitor/client basis;

4 Order that the costs of the appellant on the appeal be paid by Bombala Council on a party/party basis;

5. Verdict for the RTA on its Amended Notice of Cross-Claim against Bombala Council;

6. Order Bombala Council to pay the RTA’s costs of the RTA’s Amended Notice of Cross-Claim at trial and on appeal;

7. Verdict for the RTA on Bombala Council’s Notice of Second Cross-Claim;

8. Order Bombala Council to pay the RTA’s costs of Bombala Council’s Notice of Second Cross-Claim at trial and on appeal;

9. Verdict for the third respondent on the third respondent’s Notice of Third Cross-Claim at trial and on appeal;

10. Order Bombala Council to pay the third respondent’s costs of the third respondent’s Notice of Third Cross-Claim at trial and on appeal.

87 IPP JA: I agree with Beazley JA.

88 BASTEN JA: The Appellant already has in its favour an order for costs against the Second Respondent (Bombala Council) “in respect of the claim between the Appellant and the Second Respondent”: Order 6 (17 August 2006). She has an order against her with respect to the Third Respondent’s costs of the appeal. The claim against the Third Respondent was dismissed with costs at trial and that judgment has not been set aside or varied.

89 The Appellant now seeks orders that Bombala Council pay:

(i) the Appellant’s costs of the action against the Third Respondent;

(ii) the Appellant’s costs of the action against the First Respondent;

(iii) the Appellant’s costs of the appeal in relation to the Third Respondent;

(iv) the Appellant’s costs of the appeal against the First Respondent, and

(v) such costs, in each case, to be assessed on an indemnity basis.

90 This was an accident in respect of which there were three (or possibly 4) persons who might bear part or all of the responsibility. One was the party (or parties if more than one) responsible for the signage at the commencement of the detour. The other two were the two respective drivers. The fact that the signage seen by the Appellant was found to be misleading meant that the Appellant was misled, but did not lead to any inference as to the state of mind of the Third Respondent. The claim that he drove negligently was thus separate from the claim that the signage was misleading. Because this Court has held that neither driver was negligent, the Appellant’s success against the Council means that it must bear the whole of her damages, once agreed or assessed. However, it does not follow that the Council should also pay the Appellant’s costs of her claim against the other driver, the Third Respondent. There was no conduct of the Council which induced the Appellant to sue the other driver and it should not be ordered to pay the costs of her claim against the Third Respondent, either at trial or on appeal. The Appellant will have to bear the liability for the Third Respondent’s costs, as ordered by the trial judge and, in respect of the appeal, as provided in order 7 made by this Court on 17 August 2006. It follows that she should also bear her own costs of the trial and appeal, referable to the claim against the Third Respondent.

91 In relation to the claim against the Second Respondent (Bombala Council) three issues arise, namely whether:

(i) the costs payable by the Council extend to the Appellant’s costs of the claim against the RTA;

(ii) the Council should pay the costs of the RTA for which the Appellant is liable, and

(iii) whether the Council should pay her costs of the trial or the appeal (or both) on an indemnity basis.

92 In relation to the second question, I agree that a Bullock (or Sanderson) order should be made, with the result that the Council will be responsible for the costs of the First Respondent (the RTA) which the Appellant has been ordered to pay, both in respect of the trial and the appeal. For the same reasons, the Council should bear any additional costs incurred by the Appellant in pursuing her claim against the RTA, as part of the Appellant’s costs of the trial and the appeal, for which the Council is responsible. (There is a further reason, in respect of the costs of the appeal noted at [107] below.)

Indemnity costs order

93 The final issue in respect of the application by the Appellant is the request for an order that the Council pay her costs on an indemnity basis. This application was supported by evidence of an offer of compromise served on each of the Respondents on 9 March 2005. It purported to be made in compliance with Part 19A, rr 2(1) and 10 of the District Court Rules 1973, as in force at the date it was made. If so, it was an offer to which Part 39A, r 25 (as then in force) would have applied to the extent that the outcome for the Appellant was no less favourable to her than the offer. If Part 39A, r 25(4) applied, then the Appellant would be entitled to costs “on a solicitor and client basis”, against the Council, even though she was not successful against the other defendants.

94 Three related problems arise in relation to the offer made on 9 March 2005. First, it had to be in relation to “a claim”, and the only claims made by the plaintiff were for damages arising from the negligence of each defendant. In relation to each defendant, it had thus to be an offer in relation to the only claim made against it or him, being the claim for damages. The offer made would not, if accepted, have disposed of that claim. Secondly, the offer had to be one which, in its terms, would allow any party to the compromise to “apply to the Court to enter judgment accordingly”: Pt 19A, r 3(7). Whether the offer in the present case was susceptible to that treatment raises, in my view, a difficult question. It is true that an offer can satisfy that requirement even if it were limited to questions of liability, at least where questions of liability could properly be made the subject of a separate determination: see Whitehouse Properties Pty Ltd v Bond Brewing (NSW) Ltd (1992) 28 NSWLR 17 at 22B-D (Handley JA, Priestley and Clarke JJA agreeing); and see Herbert by her tutor Meehan v Tamworth City Council (No. 4) (2004) 60 NSWLR 476 at [9] (Sperling J). No order for a separate trial was made in the present case.

95 In Vale v Eggins (No. 2) [2007] NSWCA 12 an offer “to compromise the issue of liability on terms that the appellant was to be held 70% responsible for the accident and the respondent 30% responsible” was treated, without discussion, as an offer which satisfied Pt 19A: at [3] and [5]. If such an offer is not accepted, and the matter goes to trial on issues of liability and damages, the appropriate costs order should, in principle, deal separately with the issues thus identified. However, that gives rise to the third difficulty, in that the costs rule relevant in the present case assumes a single order for costs “in respect of the claim”.

96 However, while Bombala Council asserted that it was “not a reasonable offer”, it did not expressly assert that it failed to comply with the rules. If the offer were not an offer for the purpose of Part 19A of the District Court Rules, it was an informal offer to compromise on the issue of liability and contributory negligence, which was not accepted by the defendants, but which was bettered by the plaintiff at trial, as a result of the finding made by this Court on her appeal. I agree with Beazley JA that the offer could reasonably have been accepted by the Council and that the plaintiff should have her costs of the trial against the Council on an appropriate basis, from 10 March 2005.

97 If the offer were treated as one complying with Part 19A of the District Court Rules, at the time it was made, it is necessary to consider the effect of repeal of those rules. Although the relevant parts of the District Court Rules have since been repealed and, from 15 August 2005, have been replaced by the Uniform Civil Procedure Rules (“the UCPR”), the consequences of a failure to accept the offer, where the determination is to be made after the commencement of the UCPR, require the application of the new rules, absent an order that the matter be dealt with under the old rules, pursuant to Schedule 6, cl 5 of the Civil Procedure Act 2005 (NSW): see South Eastern Sydney Area Health Service v King (No. 2) [2006] NSWCA 73 at [9] (Hunt AJA, Mason P and McColl JA agreeing).

98 In terms, Part 42, Division 3 (Offers of compromise) of the UCPR only applies in respect of offers made under r 20.26. However, it would seem that the general saving provision in cl 10(b) of Schedule 6 of the Civil Procedure Act will treat an offer of compromise made under the former District Court Rules as something which is “taken to have been done under the corresponding provision of … the uniform rules”, so that r 42.14 will thus be engaged.

99 One difference as to consequences depends upon the reference in the District Court Rules to “solicitor and client costs” and the reference in the UCPR to “indemnity costs”. The Appellant, in her application for such an order, referred to “indemnity costs”, presumably on the basis that the UCPR, r 42.14, applied. No party suggested a different order should have been sought and accordingly, an order for indemnity costs is appropriate.

100 A second difference flows from the fact that under District Court Rules, as in force at the date the offer was made, the order for costs assessed on a solicitor and client basis was a matter of entitlement, unless the Court “in an exceptional case and for the avoidance of substantial injustice” otherwise ordered. Under UCPR r 42.14, there is no such constraint on the Court otherwise ordering.

101 In Vale v Eggins (No. 2) Bryson JA described this as “a formidable barrier to an exception”: at [30]. However, his Honour was in dissent and it is less clear whether the majority took a similar view: c.f. Beazley JA, McColl JA agreeing, at [16]. Whatever the precise difference, it seems clear that the old rules imposed a constraint on the exercise of the discretionary power, which no longer exists. Had it been necessary to consider the consequences of this change, and had a relevant application been made, I would 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. Similarly, had an order been sought under cl 5(2) of Schedule 6 of the Civil Procedure Act I would have been inclined to order that the costs to be paid should be awarded on a “solicitor and client” basis. Neither party sought such an order and the practical consequences were probably deemed insignificant and the order should therefore be made on an indemnity basis.

Costs of appeal

102 Even a valid offer of compromise made in the course of District Court proceedings, will not be treated as an offer of compromise made in relation to the proceedings in this Court, nor, prior to the commencement of the UCPR, was this Court required to comply with Part 39A of the District Court Rules in relation to the costs of the appeal: see authorities referred to in Suresh v Jacon Industries Pty Ltd (No. 2) [2005] NSWCA 270 at [14]. Further, as noted in Suresh at [15] the authorities affirm, unequivocally, that the existence and non-acceptance of an offer of compromise in the District Court may be relevant to the independent exercise of the costs power of this Court. In such circumstances, the offer in the District Court may be treated as equivalent to a Calderbank letter, as in truth it was. In order to invoke the result prescribed by the rules (subject to any contrary order being deemed appropriate), a further offer of compromise should be made in relation to an appeal.

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.

Claims by the RTA

104 The First Respondent, the RTA, seeks additional orders based upon its claim to an indemnity in respect of the costs incurred by it in connection with the Appellant’s claim, pursuant to its agreement with the Council.

105 At the commencement of the appeal, when the Appellant sought to withdraw its appeal against the RTA, leave was refused on the basis that the Council had an outstanding cross-claim against the RTA. The Court was told that the trial judge had not determined that claim despite being urged by the parties to do so, as recorded in the primary judgment at [8].

106 There are problems in granting the RTA the relief which it now seeks. First, although it is true that his Honour did not address the substance of the arguments put on behalf of the RTA or the Council in relation to their respective cross-claims, he took that position because, the Appellant having failed, neither had a basis for seeking contribution, pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), against the other. The Council’s claim was indeed limited to that statutory basis for contribution. However, the amended cross-claim of the RTA also relied upon what it described as “indemnity pursuant to the Yellow Book”. To the extent that his Honour did not deal with that issue, he may have been in error. However, the RTA did not seek to cross-appeal.

107 Although, in relation to the Council’s cross-claim against the RTA (not presently a matter of relevance) it was said that the claim was still “outstanding” that was not true in relation to any of the cross-claims, as appears from the short minutes of order, filed by the solicitors for the RTA and signed by his Honour on 29 August 2005, the last order of which read:

“5. Each of the first, second, third and fourth cross claims is dismissed with no order as to costs.”

108 It now appears that, absent a cross-appeal, the Council had no live claim against the RTA, and hence the application to release the RTA from the appeal probably would have been granted had the Court been apprised of the true situation. This provides a further and conclusive reason why Bombala Council should bear the RTA’s costs of the appeal.

109 Finally, although the arguments with respect to the RTA’s indemnity were addressed in the judgment of this Court of 17 August 2006, at [130]-[135] none of what was said there was necessary to support the orders made by the Court on 17 August 2006, and no leave was granted to the RTA to raise, thereafter, any issue except as to its costs of the trial and the appeal. The order was concerned with court-ordered costs, not with any separate contractual claim for indemnity.

110 Accordingly, the application by the RTA should be rejected.

Conclusion

111 I would propose the following orders:

(1) Vary order 6 made on 17 August 2006 so that it now reads:

6 the Second Respondent (Bombala Council) pay –
(a) the Appellant’s costs in the District Court, including her costs with respect to the claim made against the First Respondent (the RTA), but not the costs of her claim against the Third Respondent (Mr Frece), on a party/party basis up until 10 March 2005 and thereafter on an indemnity basis; and
(b) to the Appellant the costs of the First Respondent of the trial and the appeal, which she was ordered to pay to the First Respondent.

**********

02/04/2007 - Name of counsel omitted - Paragraph(s) Cover sheet