Covington-Thomas v Cth of Australia [No 3]

[2007] NSWSC 1062

CITATION:	Covington-Thomas v Cth of Australia [No 3] [2007] NSWSC 1062
HEARING DATE(S):	30/10/06-31/10/06 01/11/06-03/11/06 06/11/06-07/11/06 10/11/06 13/11/06-14/11/06 16/11/06-17/11/06 20/11/06-23/11/06 28/11/06-29/11/06 01/12/06 12/12/06-13/12/06 02/03/07 22/03/07 03/04/07 11/04/07 17/05/07 28/05/07-30/05/07 21/06/07 25/07/07 02/08/07 24/08/07 17/09/07-18/09/07
JUDGMENT DATE :	25 September 2007
JURISDICTION:	Common Law
JUDGMENT OF:	Kirby J
DECISION:	(1) I order indemnity costs in favour of the plaintiff from 13/10/06 in accordance with Pt 42 r 42.14(2), such costs to include provision for Senior Counsel and two Juniors; (2) I order that interest should accrue on the plaintiff's costs as agreed or assessed from 28 days after the filing and serving of a bill of costs for assessment; (3) I order a stay of the orders made in Covington-Thomas v Commonwealth of Australia [No 2] [2007] NSWSC 1059 on the following conditions: (i) that the defendant lodge an appeal in compliance with the rules and prosecute such appeal with despatch; and (ii) that the defendant pay the plaintiff's solicitors, within 28 days, the sum of $750,000.
CATCHWORDS:	NEGLIGENCE - Melbourne/Voyager Collision - claim for damages - verdict found for plaintiff 2.8.07 - application for indemnity costs - application for the costs of a second junior counsel - application for an order that interest be paid on service of bill - application for a stay pending appeal.
LEGISLATION CITED:	Limitation Act 1969
CASES CITED:	Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 Covington-Thomas v Cth of Australia [2000] NSWSC 2 Commonwealth of Australia v Stankowski [2005] NSWCA 106
PARTIES:	Peter Norman Covington-Thomas (Plaintiff) Commonwealth of Australia (Defendant)
FILE NUMBER(S):	SC 21243/95
COUNSEL:	G Melick SC/W Walsh/Ms K Sant (Plaintiff) C Barry QC/M Dicker (Defendant)
SOLICITORS:	James Taylor (Plaintiff) Australian Government Solicitor - Cth (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

JUSTICE DAVID KIRBY

Tuesday 25 September 2007

21243/95 PETER NORMAN COVINGTON-THOMAS v
COMMONWEALTH OF AUSTRALIA [No 3]

JUDGMENT (Applications following verdict)

1 KIRBY J: After the verdict the following applications were made:

· First, an application by the plaintiff for indemnity costs.

· Secondly, an application by the plaintiff that such costs include Senior Counsel and two Juniors.

· Thirdly, an application by the plaintiff that an order be made that interest accrue on such costs 21 days after the filing of the plaintiff's bill of costs for assessment.

· Fourthly, an application by the defendant that there be a stay pending appeal.

2 Let me deal with each application in turn.

Application for indemnity costs.

3 An offer of compromise was hand delivered by the plaintiff's solicitor on 12 October 2006. It was in the sum of $710,000 inclusive of statutory repayments, plus party and party costs to be agreed or assessed (but not affecting any existing costs order in favour of either party). The offer was expressed to remain open until 4.00 pm 26 October 2006, being the Thursday before the commencement of the trial (Monday 30 October 2006). In other words, the offer allowed the defendant 14 days.

4 Part 20, rule 20.26(7) includes the following provision in respect of making an offer of compromise:

"Pt 20 r 20.26
(7) The following provisions apply if an offer is limited as to the time it is open for acceptance:
(a) the closing date for acceptance of the offer must not be less than 28 days after the date on which the offer is made, in the case of an offer made 2 months or more before the date set down for commencement of the trial,
(b) the offer must be left open for such time as is reasonable in the circumstances, in the case of an offer made less than 2 months before the date set down for commencement of the trial."

5 Part 42, rule 42.14 makes provision for the circumstance where an offer is not accepted and judgment is no less favourable to the plaintiff. It is in these terms:

"Pt 42 r 42.14
(1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer.
(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim:
(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and
(b) assessed on an indemnity basis:
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made."

6 Here the plaintiff's verdict exceeded by a significant margin the offer made on 12 October 2006. Was the time specified for acceptance of that offer reasonable in the circumstances?

7 Mr Taylor, the solicitor for the plaintiff, was called to give evidence. In cross examination he acknowledged that no statements from lay witnesses had been served upon the defendant as at 12 October 2006, nor the plaintiff's actuarial reports (which at that point had not been completed.)

8 The previous rules, in similar terms, have been examined in a number of authorities. The objective is to encourage settlement by way of compromise. The party receiving the offer is obliged to make a realistic rather than a partisan assessment of the claim. In Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721, the Court of Appeal identified the objectives of the previous rule (Pt 52 r 17) in these terms:

"1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim;
2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary ...; and
3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable against the costs thereafter incurred ..."

9 The judgment of the Court of Appeal continued: (at 725)

"The rule does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of the litigation. Where, in the particular circumstances the litigant or its advisers misjudge the prospects of success or miscalculate the outcome, their mistake may be warranted on the material which they had available. Alternatively, it may be no more than a miscalculation in a case with large imponderables where the course they took was nonetheless perfectly reasonable. Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why a discretion is retained, under the rule, for the Court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case."

10 Here, the defendant had a wealth of information at its disposal at the time the offer was made. The plaintiff had made an application for an extension of time under the Limitation Act 1969, which was heard by Master Harrison on 19 November 1999 (Covington-Thomas v Commonwealth of Australia [2000] NSWSC 2). He had been cross examined in the context of that application (MFI 48). He had also been examined by a number of medical practitioners at the request of the defendant, as set out in Chapter 5 of the judgment of 2 August 2007. Medical reports from doctors qualified by the plaintiff had been served. The matter had been set down for hearing on 23 June 2003 and adjourned on the plaintiff's application. The defendant had the report of Captain Halley of 20 May 2003, he being one of the experts called in this trial. It also had the report of Captain Toohey of 26 May 2006 dealing with economic loss and pension rights (Taylor affidavit para 4). The matter had already been to mediation before Mr Trevor Morling QC in August 2006. The mediation had been unsuccessful and the defendant had thereafter offered the plaintiff $550,000, plus costs.

11 The actuaries retained by the defendant, Lexiq, provided their report to the defendant on 20 September 2006. The defendant, indeed, had far more information than the plaintiff who had not yet been able to confer with Captain Toohey whose report was not served until 15 September 2006 (Taylor affidavit para 4). Whilst no statement had been served by the plaintiff in respect of lay witnesses he intended to call, no order had been made that such statements should be served, and it would be unusual in the absence of an order to serve such statements.

12 Mr Taylor gave evidence of discussions with the defendant's solicitor following the offer of $550,000, plus costs. According to his testimony, which was not challenged, he said that the plaintiff could not accept that sum because he was obliged to pay the costs of the aborted trial in 2003 and the appeal, estimated by the defendant to be $150,000, and to refund monies to the Department of Veterans' Affairs in respect of medical expenses and pension payments. These were estimated to be $150,000. Mr Taylor suggested therefore that the amount offered did not even cover the value of the TPI pension which Mr Covington-Thomas would lose upon settlement of his claim (T62).

13 I believe the offer of 12 October 2006 was left open for a time that was reasonable in the circumstances. It was not accepted. The plaintiff has obtained a verdict significantly more favourable than the offer. I believe it appropriate to make an order for indemnity costs in favour of the plaintiff in accordance with Pt 42 r 42.14(2).

14 In the course of the application the plaintiff referred to various other offers of comprise which were made after 12 October 2006 (MFI 47). In view of my conclusion, it is unnecessary to deal with such offers.

Application for two Juniors.

15 The affidavit of Mr Taylor of 17 September 2007 explained the circumstances in which Ms Sant of counsel was retained as a second Junior to Mr Melick SC. Mr Taylor is a sole practitioner from Victoria. His affidavit included the following:

"3. I am a sole practitioner and my office is located in Myrtleford, Victoria. I do not have the resources that the Commonwealth has. I believe that the Commonwealth has had at least two solicitors involved in the running of its case and I also believe that the Department of Defence in Canberra has an 'in house' solicitor or solicitors involved in the running of the case."

16 Mr Taylor's difficulties were, according to his affidavit, compounded by the late service of a number of medical reports and the expert report of Captain Toohey (para 4). Captain Toohey's report was vital to an assessment of the largest potential component of Mr Covington-Thomas' damages, his loss of earnings and pension rights.

17 Mr Taylor conferred with Senior Counsel on 26 September 2006, that is, approximately a month before the trial date (30.10.06). Whereas the original estimate had been three weeks, it was now thought more likely to take five or six weeks. The issues were complex and the material voluminous, the accident having occurred more than four decades before. Mr Taylor was concerned that the economic loss issues would require extensive analysis, which would have to be undertaken during the trial itself, since the documents had not been made available beforehand. The medical issues were likewise complex, both in their nature and by reason of the lengthy period involved in the claim.

18 Senior Counsel suggested the need for a second Junior. Ms Sant of counsel is also a medical practitioner. It was suggested that there should be a division of labour. She would assist Senior Counsel with the medical evidence whereas Mr Walsh of counsel would concentrate upon the issue of wage loss and pension rights (para 5).

19 The affidavit of Mr Taylor then described the difficulties that arose immediately before the hearing (para 6). I should interpolate that the trial was being case managed by McClellan CJ at CL. Justice McClellan directed, on 10 October 2006, that the plaintiff and the defendant's medical experts (Professor McFarlane and Dr Champion) confer with a view to preparing a joint report, and that the actuaries do likewise.

20 The plaintiff then subpoenaed the defendant's expert, posing for him a number of questions which they asked him to address. The defendant objected and asked that the matter be relisted before McClellan CJ at CL. The relisting occurred on 18 October 2006. The direction given by his Honour was in these terms:

"1. Def should make plain to Capt Toohey that the expectation of the court is that he will do what he can to assist the court. That means talking to the other side. If there's something he's been given in confidence he can't breach the confidence but please make plain to those instructing you that Capt Toohey is to be available to the pltf for discussions."

21 Mr Taylor arranged a meeting with Captain Toohey to take place on Friday 27 October 2006, the trial being due to commence before a jury the following Monday. The meeting was cancelled by Captain Toohey. According to Mr Taylor, the circumstances in which the cancellation took place were as follows:

"6. … On the afternoon of the 26th October 2006, I received a message on my answering service from Captain Toohey in which he said words to the effect, 'I'm ringing as a matter of courtesy. I am a bit embarrassed but I cannot … the meeting tomorrow. The lawyer from the AGS has directed me not to.'"

22 I had, by this time, been nominated as the trial Judge. I was asked by counsel for the plaintiff to list the matter urgently that afternoon to hear the plaintiff's complaint concerning the cancellation of the meeting with Captain Toohey.

23 An affidavit was filed by the solicitor for the defendant denying that she had directed Captain Toohey not to attend. Apparently Captain Toohey ordinarily had Friday off and that may have been the reason for the cancellation. However that may be, in the course of the mention I made the following comment: (T5)

"They are entitled to have a conference with him in the usual way and that is what McClellan J directed and which has been thwarted although it must be acknowledged that the issues are not entirely clear but, for whatever reason, it has not happened. If it is directed it should happen. It seems to me Captain Toohey not working on Friday, if that is the reason it did not take place, is not good enough. … "

24 Ultimately I made an order in these terms:

"The defendant should not impede the plaintiff's access to Captain Toohey and should encourage Captain Toohey to co-operate with the plaintiff to the extent of coming to Sydney if required."

25 This was the beginning of a long process whereby the plaintiff sought access to the defendant's expert, Captain Toohey, and the Navy's records. It is a matter dealt with in paragraph [743ff] of my judgment of 2 August 2007. The process was difficult and protracted. Despite countless applications, the problem was never satisfactorily resolved. It was an issue which ought to have been capable of resolution with goodwill on the part of the defendant. My impression was, however, that the defendant was determined to play "hard ball". I accept the statement from Mr Taylor that much of Mr Walsh's time was taken up with these issues.

26 The defendant, in response to the plaintiff's application, suggested that I should not express an opinion as to the need for additional counsel. It should be left to the expert costs assessor, who is a person appointed by the Supreme Court. Mr Melick SC responded by saying that the standard reaction of a costs assessor in such assessments is that, if you want something out of the ordinary, you need to have an indication from the trial Judge.

27 Here, I believe that the application for a second Junior is reasonable. The case was complex and the material voluminous. Much of the material was made available (if made available at all) during the trial itself and then only with difficulty. In the context of a sole practitioner, and a case of this length and complexity, a second Junior was appropriate.

Application for order for interest on costs.

28 The plaintiff drew attention to an order made by O'Keefe J in another Voyager case, Commonwealth of Australia v Stankowski [2005] NSWCA 106. The order was in these terms:

"Since the costs in an action as long as this will be an important matter, it seems to me that the interests of justice support a conclusion that the plaintiff should not be deprived (on) the interest on the amount of costs assessed. Accordingly I am of [the] opinion that the correct order to make is that interest on the amount of the costs assessed be paid by the defendant, such interest to accrue as from 21 days of the day of filing or lodgement for assessment by the plaintiff of its bill of costs, and I so order."

29 On an application to set aside that order, the Court of Appeal stated that it would not interfere with the exercise by the trial Judge of his discretion.

30 Mr Taylor's practice includes many actions by veterans against the Commonwealth arising from the Melbourne/Voyager collision. It has been his experience, according to his affidavit, that the time between judgment and the payment of costs has been unusually long, often as much as a year (para 11 and annexure 5).

31 Mr Barry QC, on behalf of the Commonwealth, said that, upon service of the bill, items which were not disputed will be paid within 28 days. The plaintiff, however, said that it can confidently predict that, in a matter as long and complex as this case, there will be many matters disputed by the Commonwealth. The plaintiff therefore pressed for the order.

32 I believe that the order is reasonable. The Commonwealth can stop interest running by paying items not in dispute within the 28 days that Mr Barry QC foreshadowed. Where an item is disputed by them and that dispute is resolved adversely to the Commonwealth, it is fair that interest should be paid.

33 I should add that, if the Commonwealth were to apply for a similar order in respect of the foreshadowed bill which they will prepare and serve as a result of the aborted trial and appeal, a similar order should be made.

34 I believe the appropriate time in respect of the order should be 28 days, rather than 21 days.

Application by the defendant for a Stay.

35 The defendant sought a stay, recognising that such an order may be made on terms. It was suggested by Mr Barry QC that an appropriate sum to pay would be $350,000. That appears to me to be far too low. I believe the appropriate amount is $750,000.

36 The order I make is that there should be a stay of the orders made by me on condition:

· first, that the defendant lodge an appeal in compliance with the rules and prosecute such appeal with despatch;

· secondly, that it pay the plaintiff's solicitors, within 28 days, the sum of $750,000.

Order.

37 I therefore make the following orders in relation to the applications following verdict:

1. I order indemnity costs in favour of the plaintiff from 13/10/06 in accordance with Pt 42 r 42.14(2), such costs to include provision for Senior Counsel and two Juniors.

2. I order that interest should accrue on the plaintiff's costs as agreed or assessed from 28 days after the filing and serving of a bill of costs for assessment.

3. I order a stay of the orders made in Covington-Thomas v Commonwealth of Australia [No 2] [2007] NSWSC 1059 on the following conditions:

(i) that the defendant lodge an appeal in compliance with the rules and prosecute such appeal with despatch; and
(ii) that the defendant pay the plaintiff's solicitors, within 28 days, the sum of $750,000.
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