Davis v Swift (No 2)

[2015] NSWCA 137

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Davis v Swift (No 2) [2015] NSWCA 137
Hearing dates:	On the papers
Decision date:	21 May 2015
Before:	Meagher JA at [1]; Leeming JA at [32]; Adamson J at [33]
Decision:	1.The respondent pay the appellant’s costs of the proceedings in the District Court up to and including 26 April 2013 assessed on the ordinary basis. 2.The appellant pay the respondent’s costs of the proceedings in the District Court after 26 April 2013 assessed on the ordinary basis. 3.The respondent pay 50% of the appellant’s costs of the appeal.
Catchwords:	COSTS – Offer of Compromise – compliance with Uniform Civil Procedure Rules, r 20.26 (as in force in November 2012) – whether Offer sufficiently indicated that it was inclusive of “interim payments” made under ss 83 and 84A of the Motor Accidents Compensation Act 1999 (NSW) COSTS – Calderbank Letter – whether a genuine offer of compromise – whether pre-trial Calderbank offer justified departure from the general rule that appeal costs are primarily determined by the issues in and outcomes of the appeal
Legislation Cited:	Civil Procedure Act 2005 (NSW), ss 3(1), 98, 101, Motor Accidents Compensation Act 1999 (NSW), ss 83, 84A Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.1, 42.2, 51.49
Cases Cited:	Baresic v Slingshot Holdings Pty Ltd & Anor (No 2) [2005] NSWCA 160 Bathurst Regional Council as Trustee for the Bathurst City Council Crown Reserves Reserve Trusts v Thompson (No 2) [2012] NSWCA 420 Cheng v Geussens (No 2) [2014] NSWCA 254 Commonwealth of Australia v Gretton [2008] NSWCA 117 Davis v Swift [2014] NSWCA 458; 69 MVR 375 Grace v Thomas Street Café Pty Ltd (No 2) [2008] NSWCA 72 Leichhardt Municipal Council v Green [2004] NSWCA 341 Marshall v Megna (No 2) [2013] NSWCA 456 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 Taheri v Vitek (No 2) [2014] NSWCA 344 Whitney v Dream Developments Pty Ltd [2013] NSWCA 188; 84 NSWLR 311
Category:	Costs
Parties:	Carolyn Davis (Appellant) Deborah Swift (Respondent)
Representation:	Counsel: R McIlwaine SC with R E Quickenden (Appellant) P R Cummings SC (Respondent) Solicitors: Brazel Moore Lawyers (Appellant) Moray & Agnew (Respondent)
File Number(s):	2013/200886
Decision under appeal	Court or tribunal: District Court of NSW Citation: [2013] NSWDC 99 Date of Decision: 4 June 2013 Before: Gibson DCJ File Number(s): 2009/332923

Judgment

1. MEAGHER JA: The Court delivered judgment in this appeal on 22 December 2014: Davis v Swift [2014] NSWCA 458; 69 MVR 375. At that time orders were made for the exchange of written submissions in the event that the parties could not agree as to the costs of the appeal and those in the District Court. The parties could not agree and those submissions have been received.

The outcome of the appeal

2. The appellant’s (plaintiff) claim to damages for injuries sustained in a motor accident was dismissed by the primary judge. In this Court the appellant challenged the findings that the respondent was not negligent and that any damages to which she was entitled, on the basis that the accident was a “blameless motor accident”, should be reduced by 100% for contributory negligence. She also challenged the primary judge’s assessments of various heads of damage. Some of those challenges were conceded by the respondent. Those as to future out-of-pocket expenses, non-economic loss, past economic loss and future economic loss were contested.

3. The appellant failed on the first issue, succeeded on the second (this Court by majority concluding that her damages should be reduced by 80%) and failed on the assessment issues which were contested. In the result, judgment was entered in favour of the appellant for $37,343. It was ordered that judgment take effect on 4 June 2013, the date on which the judgment appealed from was given. It followed that interest was payable on so much of the amount of that judgment as was from time to time unpaid, in accordance with s 101 of the Civil Procedure Act 2005 (NSW) (CPA).

The parties’ submissions in relation to costs

4. The appellant’s primary submission is that the respondent should be ordered to pay her costs of the proceedings in the District Court and of the appeal on the “ordinary basis”: see CPA, s 3(1). The appellant also seeks an order for the payment of interest on a sum described as that to which she “was actually entitled from 3 August 2013 [sic] until paid”. No such order is necessary because of the order made as to when the judgment takes effect in accordance with CPA, s 101. For that reason (and because the matters on which the Court invited written submissions were limited to costs) the application for this second order is rejected.

5. The respondent makes two submissions in response. The first depends on the efficacy of an Offer of Compromise dated 2 November 2012 whereby she offered to pay the sum of $58,000, that offer to be implemented by the filing of consent orders in the District Court, which included that there be judgment for the plaintiff (appellant) in that amount. Those consent orders also included terms recording agreements or acknowledgements between the parties. One provided for the repayment by the respondent’s insurer from the judgment sum of Medicare and Centrelink payments which had been received by the appellant. Another addressed the date on which the respondent was to pay the judgment sum and another again the date from which interest on that sum should be payable. The respondent contends that this Offer complied with Uniform Civil Procedure Rules 2005 (UCPR), r 20.26 (as then in force) so as to attract the operation of the cost rules in UCPR Pt 42, Div 3. Relying upon those rules the respondent says she should pay the appellant’s costs of the District Court proceedings on an ordinary basis up to 2 November 2012 and that the appellant should pay the respondent’s costs of those proceedings from 3 November 2012, on an indemnity basis. The respondent also submits that, taking into account that Offer and the outcome of the proceedings on appeal, the appellant also should pay her costs of the appeal on the ordinary basis.

6. In response to this first submission, the appellant contends that the Offer of Compromise did not comply with UCPR, r 20.26 (as then in force) because, in circumstances where the respondent had made interim payments to the appellant, the notice of offer did not state whether the offer made was in addition to those payments, as required by UCPR, r 20.26(3)(b).

7. The respondent’s alternative submission depends on the efficacy of a Calderbank offer made by letter dated 12 April 2013. That offer remained open for acceptance until 4pm on Friday 26 April 2013 in circumstances where the hearing was to commence on the following Monday, 29 April 2013. The respondent argues that the appellant’s refusal to accept that offer was unreasonable and contends that whilst she should be ordered to pay the appellant’s costs of the District Court proceedings on the ordinary basis up to 12 April 2013, the appellant should be ordered to pay her costs on an indemnity basis from 13 April 2013. The respondent maintains her earlier submission that the appellant also should pay her costs of the appeal on the ordinary basis.

The Offer of Compromise

8. It is necessary first to deal with the argument concerning the efficacy of the Offer of Compromise. At the time of that offer the respondent’s insurer had made hospital and medical payments to or on behalf of the appellant totalling $6,257.18. Those payments were described as made in satisfaction of that insurer’s obligation under s 83 of the Motor Accidents Compensation Act 1999 (NSW) (MAC Act). That obligation arises where the insured’s liability to a claimant has been admitted or determined. Sub-section 83(5) provides that any such payment made before the claimant obtains judgment for damages is “to the extent of its amount, a defence to proceedings” brought against the insured. Accordingly, the amount for which judgment is given should be in addition to the amount of any such payments. The insurer also made two further payments to the appellant. The amounts paid were $1,800 in July 2009 and $10,000 in November 2011. The former payment was made by the respondent’s insurer “as a s 84A payment”. Section 84A(3) is in the same terms as s 83(5). The latter payment was made on the basis that the appellant execute a deed, which included a clause stating that “I further acknowledge that this sum is to be deducted from any verdict or settlement with respect to that claim”.

9. The term “interim payment” in UCPR, r 20.26(3)(b) is not defined in those Rules or the CPA. It describes a payment which is made on account of a claimed liability that has not become the subject of a monetary judgment. Each of the payments made answers that description.

10. The Offer of Compromise contained no statement as to whether the amount offered of $58,000 was in addition to each of these interim payments. For that reason, the appellant says it was not in accordance with UCPR, r 20.26. In response it is submitted that two of the terms of the offer sufficiently indicated that it was to be inclusive of the payments already made. Those terms were that there be judgment for the appellant “in the sum of $58,000” and that the appellant agree to pay “out of the judgment sum … any amount repayable by the plaintiff for workers compensation, social services, sick leave payments, make-up pay, accident pay, past medical or nursing home expenses or otherwise”. This argument as to what these terms conveyed does not take account of ss 83(5) and 84A(3) of the MAC Act. Those provisions apply if the insured defendant’s liability has been admitted or determined and do not contemplate the repayment by the claimant of any amount so paid.

11. True it is that, in relation to the payment of $10,000, there was an acknowledgement, twelve months earlier, that the amount would be deducted from any verdict. However the position remained unclear in relation to the other payments of $1,800 and $6,257.18. In those circumstances, the offer of a final judgment of $58,000, in the absence of any express statement otherwise, was to be taken as being for an amount that was in addition to the $1,800 and $6,257.18 paid or treated as paid pursuant to ss 83(5) or 84A(3). In relation to the payment of those amounts the term as to repayment of moneys from the judgment sum does not assist the respondent. Amounts repayable out of the judgment sum cannot include moneys that have been paid on the basis that they are to be in addition to it. It is not necessary to consider whether the repayment term applied to the acknowledgement in relation to the $10,000. The respondent’s submission that the terms of the Offer of Compromise read in the light of the November 2011 acknowledgement caused there to be compliance with UCPR, r 20.26 (as then in force) in respect of all of the payments made by it to the appellant must be rejected.

12. The respondent also argues faintly that the terms of the letter accompanying the Offer of Compromise satisfied r 20.26(3)(b). That letter confirmed the amount of the interim payments made as at 1 November 2012. It did not however indicate whether the offer was in addition to those payments. For that reason and, more fundamentally because it was not part of the “notice of offer”, it could not satisfy the subrule.

13. It follows that the Offer of Compromise was not in accordance with UCPR, r 20.26 and did not attract the operation of the cost rule in r 42.15.

14. The respondent submits that even if the Offer of Compromise was not in accordance with r 20.26 it can nevertheless be taken into account in the exercise of the costs discretion because the non-compliance was technical and there was no request for clarification or evidence that the absence of the statement as to the inclusion of the advance payments affected the appellant’s consideration of the offer. This submission is rejected. The respondent does not and could not rely upon the Offer of Compromise as a Calderbank offer. There was nothing in the terms of that offer or the accompanying letter which indicated that it was to be relied on in relation to costs otherwise than under the rules. In those circumstances it was not available to be taken into account as an offer of settlement in an argument as to costs. See Whitney v Dream Developments Pty Ltd [2013] NSWCA 188; 84 NSWLR 311 at [41] - [44] (Bathurst CJ) and [59] - [60] (Barrett JA).

The Calderbank letter

15. It is necessary next to address the respondent’s Calderbank letter dated 12 April 2013. That letter provided:

We refer to previous correspondence and confirm that we instructed [sic] to offer settlement of the plaintiff’s claim in the sum of $300,000.00 inclusive of out of pocket expenses plus costs.

The offer is open to be accepted until 4 pm on Friday 26 April 2013 following which it is to be withdrawn. The aforementioned offer is put on a without prejudice basis save as to costs. We propose to tender this letter in support of any application for costs.

We enclose copy schedule of out of pocket expenses paid pursuant to Section 83 as at 10 April 2013 by IAG Australia.

16. The respondent relies upon this letter as justifying an order that the appellant should pay her costs in the District Court from 13 April 2013 on an indemnity basis. Notwithstanding that this offer did not purport to be made in accordance with UCPR, r 20.26, the respondent contends for the outcome provided for by r 42.15, had that rule applied. Relying in part on the making of this offer the respondent also seeks an order for payment of her costs of the appeal on the ordinary basis, asserting that such an outcome would be consistent with the decisions of this Court in Baresic v Slingshot Holdings Pty Limited (No 2) [2005] NSWCA 160, Marshall v Megna (No 2) [2013] NSWCA 456 and Cheng v Geussens (No 2) [2014] NSWCA 254.

17. The appellant makes two submissions in response. First, it is said that the Calderbank offer was not a genuine offer of compromise. In support of that proposition it is pointed out that the offer was made 12 working days before the commencement of the trial. It is asserted that this did not “enable the appellant and her legal advisors sufficient time to determine what the appellant would actually receive from the offer. Centrelink, Medicare, unspecified costs and no reference to the advance or interim payment ($11,800) meant 28 days were necessary to properly consider the offer”. It is also said that the letter left unclear whether the offer included the terms in the Offer of Compromise dated 1 November 2012.

18. Secondly, it is submitted that even if the Calderbank letter was a genuine offer of compromise it did not justify “a special costs order for the appeal costs”. It was not made clear whether the reference to a special costs order was to an order which would provide otherwise than that costs follow the event (UCPR, r 42.1) or to one which also would provide for an assessment of costs other than on the ordinary basis (UCPR, r 42.2).

19. In relation to the costs in the District Court the question raised by the respondent’s reliance on the Calderbank letter is not limited to whether costs should be assessed on the ordinary or an indemnity basis. It is broader and includes whether the costs ordered should follow the event or whether some other order should be made. As Hodgson JA observed in Commonwealth of Australia vGretton [2008] NSWCA 117 at [118], in a case where the offer is made by the party responding to a claim, the costs order could be that after the date of the offer the claimant pay the defendant’s costs “on a party and party basis or on an indemnity basis, or could be that each party pay their own costs or could be some other order”. As his Honour then noted, in such a case it may be relevant to consider not merely whether the offeree (in this case the appellant) acted unreasonably in refusing the offer.

20. The matters relied upon by the appellant as supporting her submission that the offer was not “genuine” really go to whether it was unreasonable not to accept the offer in the time allowed. The appellant does not and could not submit that the offer was not genuine in the sense that it did not involve a real and genuine element of compromise. (See Leichhardt Municipal Council v Green [2004] NSWCA 341 at [22] – [24] (Santow JA); Taheri v Vitek (No 2) [2014] NSWCA 344 at [10] – [12]). Contrary to the appellant’s suggestion, the offer here was not uncertain and its acceptance was capable of giving rise to a binding agreement that involved a significant element of compromise on the part of the respondent. The offer was to settle for “$300,000.00 inclusive of out of pocket expenses plus costs”. The out-of-pocket expenses were identified in an attached schedule as expenses paid pursuant to s 83 of the MAC Act. The absence of any reference to the payments made under s 84A meant that the $300,000 was to be taken as excluding those two amounts. That may not have been the intention of the writer but is the construction the offer bears. The letter does not by its reference to “previous correspondence” incorporate in the offer the terms contained in the earlier Offer of Compromise.

21. Lastly, the appellant submits that the period for which the offer remained open did not provide sufficient time for her and her legal advisors to determine what she was likely to receive net of repayments and costs. That submission is not elaborated upon and also should be rejected. To understand the net economic effect of the respondent’s offer, the appellant needed details of the out-of-pocket expenses which had been paid and an estimate of the legal costs which she had incurred that were unlikely to be recovered under a costs order made on the ordinary basis. The out-of-pocket expenses were identified in the schedule attached to the letter of offer. The offer was made in the fortnight prior to the hearing. The appellant’s solicitors were well able to estimate the shortfall in legal costs which would not be recovered.

The costs orders which should be made

22. That being the position the following considerations are relevant to the order which should be made in relation to costs in the District Court. A realistic offer to compromise the claim was made before the commencement of the trial and a reasonable time was permitted for its acceptance. That offer was not accepted. There was no statement in the letter by which the offer was made that the respondent would rely upon its non-acceptance as justifying a claim to indemnity costs from the date that it expired. However, the letter did state that it would be relied upon in support of an application for costs. The letter did not contain any argument in support of the reasonableness of the offer made. However, it was sent very shortly before the final hearing and at a time when both parties are to be taken to have assessed their respective positions as to the possible outcomes of the litigation. Finally, it is not suggested that new or unexpected evidence or arguments emerged during the trial which would have required reconsideration of any earlier assessment by the parties of their respective positions.

23. Taking these matters into account it is my view that the appellant should have her costs of the District Court proceedings paid on the ordinary basis up to and including 26 April 2013, the date upon which the Calderbank offer lapsed. The appellant should pay the respondent’s costs of those proceedings after that date on the ordinary basis. The factor which has persuaded me not to order that those costs be paid on an indemnity basis is that the respondent’s letter did not make clear that she would seek a costs order on that basis in circumstances where an offer having that consequence, “in the absence of an order otherwise” (UCPR, r 42.15(2)), could have been made under UCPR, r 20.26.

22. There remain to be considered the costs of the appeal. The general rule is that costs follow the event (UCPR, r 42.1). The application of that rule based solely on the outcome of the proceedings as a whole may not be appropriate where the successful party succeeds on some issues and fails on others and those other issues are separable and have occupied a significant part of the time and expense involved in the proceedings.

23. It may be accepted, as UCPR r 51.49 confirms, that the existence of a pre-trial offer can be taken into account in the exercise of the discretion under s 98 of the CPA to award costs in an appeal. See Grace v Thomas Street Café Pty Ltd(No 2) [2008] NSWCA 72 at [33]; Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [39]. However, as was observed in Bathurst Regional Council as Trustee for the Bathurst City Council Crown Reserves Reserve Trusts v Thompson (No 2) [2012] NSWCA 420 at [16], “the usual position is that the appeal costs should primarily be determined by the issues in and the outcome of the appeal proceedings themselves”.

24. The respondent submits, relying on the decisions in Baresic, Marshall and Cheng and UCPR, r 51.49, that the appellant should pay all of the costs of the appeal.

25. Of those three cases only Cheng involved a party that was unsuccessful on the appeal seeking an order for costs of the appeal on the basis that the outcome for the appellant was bettered by his pre-trial offer of compromise. In the others the party successful on the appeal relied on the pre-trial offer as justifying an order for costs on an indemnity basis. In each case, as will almost always be the position, the exercise of the discretion depended on a consideration of the particular circumstances: see Baresic at [20], [21]; Marshall at [35], [36]; and Cheng at [28], [31], [32].

26. In my view there is no reason in this case to depart from the usual rule which focuses on the outcome of the issues in the appeal. Having failed at first instance, it was reasonable for the appellant to challenge the primary judge’s findings that the respondent was not negligent and her Honour’s apportionment for contributory negligence. It was not submitted that the arguments made on appeal on these and the damages issues on which the appellant failed were untenable or hopeless. At the time the appeal was filed the Calderbank offer was no longer available for acceptance. And that offer was not renewed, either in the same or different terms, in the context of the appeal.

27. The subject matter of the first and second issues on appeal (negligence and the assessment of contributory negligence in relation to the “blameless motor accident” claim) overlapped. The appellant failed on the first and partially succeeded on the second. She failed on the contested damages questions. Acknowledging that the appeal did result in a judgment for the appellant, a sufficient allowance is made for the time spent and expense incurred on the issues on which the respondent succeeded by ordering that she pay 50% of the appellant’s costs of the appeal assessed on the ordinary basis.

28. By her written submissions the respondent also seeks an order by this Court staying execution of the judgment in the District Court “until costs orders have been finalised” and further orders providing for the set-off of the costs orders to be made by this Court and, in the event that after that set-off there is an amount owing to her, for the set-off of that balance against the judgment ordered by this Court. None of these were matters on which this Court invited written submissions. They concern the question whether there should be a stay of execution of a judgment in the District Court and for that reason any application should be made to that Court and supported by evidence. The application to this Court for those orders is declined.

29. The orders I propose are:

1.   The respondent pay the appellant’s costs of the proceedings in the District Court up to and including 26 April 2013 assessed on the ordinary basis.

2.   The appellant pay the respondent’s costs of the proceedings in the District Court after 26 April 2013 assessed on the ordinary basis.

3.   The respondent pay 50% of the appellant’s costs of the appeal.

32. LEEMING JA: I agree with Meagher JA.

33. ADAMSON J: I agree with Meagher JA.

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Decision last updated: 21 May 2015