Edwards v Butler (No 2) - [2005] SADC 6

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
EDWARDS v BUTLER (No 2)
Judgment of His Honour Judge Robertson
4 February 2005
PROCEDURE - COSTS
Judgment for damages arising from personal injuries - "Calderbank" letter - Judgment exceeds Calderbank offer - application by Defendant to deny Plaintiff's party and party costs - refusal to consider adequacy of offer in exercise of discretion - application by Defendant for costs on three discrete issues - order that Plaintiff receive party and party costs - order that Defendant receive costs on the discovery issue.
Rule 40 of the District Court Rules 1992, referred to.
Reid v Kerr (1974) 9 SASR 367; Pirrotta v Citibank Ltd (1998) 72 SASR 259; Cretazzo v Lombardi (1975) 13 SASR 4, applied.
Dolan v Australian and Overseas Telecommunications Corporation (1993) 114 ALR 231, considered.

EDWARDS v BUTLER (No 2)
[2005] SADC 6
JUDGE ROBERTSON
CIVIL
Nature of the Applications

On 23 December 2004, judgment was pronounced in favour of the Plaintiff for the sum of $360,681 for damages for personal injuries arising from the Defendant’s breach of contract and negligence. The Plaintiff seeks party and party costs against the Defendant. The Defendant submits that the Plaintiff should be denied her costs or alternatively that there should be some overall reduction of her costs. Further, in the alternative, the Defendant submits that if the Plaintiff is to have her costs then the Defendant is entitled to his costs in respect to three discrete issues upon which the Defendant submits he was successful.
Relevant principles
In the case of a successful party to litigation, the ordinary rule is that such a party receives party and party costs. This principle is embodied in Rule 101.02 of the District Court Rules 1992 (“the Rules of Court”) which provides that “costs to follow the event unless otherwise ordered”.(See also Pirrotta v Citibank Ltd (1998) 72 SASR 259 at 264.)Whilst this is the ordinary rule the discretion of a Court to award costs is unfettered.
First submission – Issue of the Calderbank Letter
The Trial commenced on 6 November 2003. By letter dated 5 November 2003 and faxed to the Solicitors for the Plaintiff, the Defendant offered to resolve the Plaintiff’s claim by payment of the sum of $350,000 inclusive of interest plus costs and disbursements. The informal offer was contained in a letter which is often described as a “Calderbank letter” (sometimes herein called “the Calderbank offer”).
Mr Livesey, Counsel for the Defendant, submitted that despite Judgment for the Plaintiff exceeding the amount of the offer, the proximity of the amount of Judgment to the offer is a relevant factor in the exercise of the discretion to award costs. As an extension of that submission, Mr Livesey submitted that because of the circumstances prevailing at the time of the offer in that there were complex issues of facts and law, including a difficult liability issue, the Defendant’s offer was adequate. He submitted that, expressed another way, it was unreasonable for the Plaintiff to reject the offer. It was submitted by Mr Livesey that if I reached the conclusion that the Defendant’s offer was adequate despite the Plaintiff receiving a Judgment for greater than the amount of the offer, the discretion should be exercised to deny the Plaintiff her costs of the action or reduce the amount awarded to her.
During the course of argument, reference was made to a number of authorities dealing with a Calderbank letter and how an offer contained in a Calderbank letter should be treated in the exercise of a Court’s discretion regarding costs. It can be concluded from the decision of Pirrotta v Citibank Ltd (supra) that where an informal offer contained in a Calderbank letter is made by a Defendant and the Judgment sum awarded is less than the amount offered, then that informal offer is a significant factor to be weighed by a Court when considering issues of costs. However, that is not the case here. The Judgment exceeded the offer. In those circumstances the observations made by the Full Court regarding the role played by a Calderbank offer in the exercise of the discretion are not relevant to the issues here.
The effect of Mr Livesey’s argument is that where an offer is proximate to, but less than the Judgment amount, a Court is entitled to consider the adequacy of the offer, in the exercise of the discretion, in a similar way to that which the Court is entitled to do under Rule 40.05(b) of the District Court Rules 1992 (“the Rules of Court”). That Rule provides (inter alia) that where a Court considers a filed offer to be adequate, it may limit the successful Plaintiff’s costs to a period ending fourteen days after the serving of the offer and order the Defendant recover costs thereafter in circumstances where the Judgment amount exceeds the amount of the offer. The first limb of the submission of Mr Livesey goes further than the terms of Rule 40.05(b) in that it seeks an order that the Plaintiff be denied all of her costs.
It was open to the Defendant to offer to consent to Judgment pursuant to Rule 40 of the Rules of Court. If he had done so then Rule 40.05 would have been relevant to the issue of costs. However, he did not make such an offer. No reasons have been provided as to why a formal “Rules” offer was not made.
In my opinion it would be wrong in principle, to conclude that a Court should consider the adequacy of the Calderbank offer, where that offer is less than the Judgment, is a relevant factor in determining whether to award the successful Plaintiff her costs. If a formal offer had been made pursuant to Rule 40, then the Plaintiff would have been on notice by Rule 40.05, that even if the Judgment amount exceeded the formal offer, she may be denied part of the costs if the Court formed the opinion that the amount offered was adequate. In other words the ground rules between the parties would have been clearly laid down by Rule 40 and the Plaintiff would have needed to take into account all of the provisions of Rule 40.
On the other hand, it would be quite unjust to the Plaintiff to conclude that the adequacy of the Calderbank offer is a relevant factor in determining whether she is entitled to receive her costs or have her costs be reduced. The Plaintiff was not on notice that it was a matter she needed to take into account in evaluating the offer. In considering the Calderbank offer, the only factor which the Plaintiff would have been on notice is that if the Judgment amount was less than the offer then that would be a significant factor to be placed in the scales in the exercise of the Court’s discretion regarding the issue of costs.
It follows from what I have said that in the circumstances the adequacy of the Calderbank offer is not a matter that requires consideration in the exercise of the Court’s discretion.
I mentioned earlier that Mr Livesey submitted that “the adequacy of the offer” submission could be expressed another way, namely, that it was unreasonable for the Plaintiff not to accept the offer. I doubt whether the letter proposition is an alternative to the adequacy of the offer proposition. In any event, I am of the opinion that it is not a relevant factor to consider whether it was unreasonable for the Plaintiff to fail to accept the offer. The Plaintiff was not on notice that if she did not accept the offer and the amount awarded was in excess of the offer, but proximate thereto, that a factor to be taken into account in determining whether costs should follow the event, would be whether it was unreasonable for her to fail to accept the offer. This submission by Counsel for the Defendant, has opened up an entirely new dimension (as has the adequacy submission) with regard to a Calderbank offer. It is a dimension which has no justification in principle.
Finally, I should indicate that even if the adequacy of the Calderbank offer is a relevant factor in the exercise of the discretion, I am of the opinion that at the time of the making of the offer it was not adequate. Prior to the commencement of the Trial most of the opinions of experts regarding the Plaintiff’s on-going pain indicated that the extent of that pain would cause her difficulty in obtaining and maintaining employment. These opinions were provided by experts to be called by either the Plaintiff or the Defendant. Such opinions must have indicated to the Defendant and his legal advisers that the Plaintiff’s claim for loss of earning capacity was a large one. Likewise, the Plaintiff and her legal advisers would have reached a similar conclusion. During the Trial, some experts withdrew their opinions regarding the extent of the Plaintiff’s pain and as a result this adversely affected the opinions regarding the extent of the Plaintiff’s loss of earning capacity.
In my opinion, on the basis of the state of expert opinions at the time of Trial, the offer made by the Defendant’s Solicitors in the Calderbank letter was not adequate. In reaching that conclusion, I have taken into account that liability was a live and complex issue which necessarily involved risks for the Plaintiff.
Furthermore, I am also of the opinion, for the same reasons, that the Plaintiff was not unreasonable in refusing to accept the offer. In reaching this view I have taken into account that the issue of liability was live and complex and that it would have been necessary for the Plaintiff to assess the risks involved in establishing liability.
Accordingly, for the reasons which I have expressed, I reject the submissions made on behalf of the Defendant that the Plaintiff should not receive her costs of action. For the same reasons, I also reject the alternative submission that there should be some overall reduction in her costs.
Second submission – Three Discrete Issues
I now turn to the second submission of the Defendant, being that the Defendant receive costs in relation to three discrete issues which arose in the Trial or alternatively that the Plaintiff be denied her costs with respect to those three issues.
The three issues were:
1.The Plaintiff’s claim for future medical expenses;
2.Refusal of the application by the Plaintiff made during the course of the Trial, for further and better discovery of the Defendant’s client record cards;
3.The recall of some of the expert witnesses to allow them to view the first surveillance videos taken of the Plaintiff and to give evidence in relation thereto.
(i) Relevant principles
As I mentioned earlier, an award of costs is at the discretion of the Court. Whilst the ordinary rule is that costs follow the event, it is accepted that in the exercise of the Court’s discretion, a Court may deny a successful Plaintiff costs on specific issues arising in the Trial and indeed award costs relating to those issues in favour of a Defendant.
It was acknowledged by the Full Court in Cretazzo v Lombardi (1975) 13 SASR 4 that it is within the proper exercise of the discretion for a Court to order that an unsuccessful party receive costs on specific issues arising during the course of the Trial. However, Jacobs J (at p.16) sounded a note of caution:
“But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however, doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the Judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.”

(ii) Future Medical Expenses
The Plaintiff’s claim for future medical expenses was for costs of medication, psychologist’s consultations and costs of general practitioner consultations. It was pointed out by Mr Livesey that the Plaintiff’s total claim for future medical expenses amounted to approximately $140,000 whereas the Plaintiff was awarded approximately $10,000. The Plaintiff was successful with respect to her claims for the costs of future psychologist consultations and general practitioner consultations. The amount awarded for general practitioners consultations was less than the amount claimed. The Plaintiff was also successful in her claim for the supply of future medication for all medications claimed, except for the analgesic Neurontin, although the amounts awarded were less than the amounts claimed.
The Plaintiff claimed a little over $100,000 for the future supply of Neurontin. The large sum claimed arose because Neurontin is not included in the Pharmaceutical Benefits Scheme and therefore no Government assistance is provided to reduce the cost of the medication. I held that the cost of the treatment by the Plaintiff arising from consumption of Neurontin was unreasonable as the evidence indicated that the Plaintiff only received a small benefit from the consumption of the drug. I therefore denied the Plaintiff the costs of the medication.
I am not prepared to order that the Defendant receive the costs associated with the claim for future medical expenses or order that the Plaintiff not receive her costs in relation to this issue for two reasons. First, the Plaintiff has been successful on all her claims under this head of damage, albeit for lesser amounts than were claimed, save for the costs of Neurontin. Secondly, with regard to the Neurontin claim, whilst it was by far the largest of the claims made under this head, the time devoted to it was minimal. The evidence relating to the claim was sparse. A little more time was devoted to the claim in the final addresses, however, compared with the overall time taken up with the addresses, it was of very limited duration.
(iii)Further and better discovery of the Defendant’s client record cards
On 18 December 2003, during the course of the Trial, the Plaintiff made an application for further and better discovery pursuant to Rule 58A.04 of the Rules of Court in which she sought discovery of the Defendant’s client record cards (“the cards”) for the period from October 1997 to 13 January 1999. The application was restricted to cards which recorded clients receiving treatment to the neck and shoulder and/or clients who had received treatment to the middle or lower back. Some time was spent in the presentation by submissions of both Counsel for the Plaintiff and Counsel for the Defendant. I refused the application on the basis that it was tantamount to a fishing exercise. It is the costs of this application which the Defendant seeks.
In my view the Defendant should have his costs of this application. There was no legitimate basis for the application. As I said, in my opinion, it was a fishing exercise. It was a discrete issue and the Defendant was successful. If the application had been an interlocutory application and I had refused to make the order sought prior to the Trial, then the successful Defendant would have been entitled to his costs. I can see no reason to refuse the application by the Defendant for his costs relating to the Plaintiff’s unsuccessful application to have discovery and inspection of the Defendant’s cards.
(iv)Recalling of witnesses to view the first surveillance videos
I dealt with this issue in paragraphs 210 to 225 inclusive of the Judgment. In paragraph 223 of the Judgment, I concluded that as the first surveillance videos were a central plank in the Defendant’s case that the Plaintiff was a malingerer, the obligation was on Counsel for the Defendant to give those medical witnesses which had been called by the Plaintiff and who had given evidence the opportunity to view the films and to comment thereon. Counsel had not done so during the Trial. It was only the Defendant’s experts who had viewed the first surveillance videos and had given evidence relating thereto.
In reaching that conclusion during the Trial and in the Judgment I relied upon the observations of Wells J in Reid v Kerr (1974) 9 SASR 367 (particularly at p 373-374) where he said with respect to the role of Brown v Dunn:
“The second precept is based on the practical needs of a trial under the adversary system: a judge (or jury) is entitled to have presented to him (or them) issues of fact that are well and truly joined on the evidence; there is nothing more frustrating to a tribunal of fact than to be presented with two important bodies of evidence which are inherently opposed in substance but which, because of Browne v Dunn has not been observed, have not been brought into direct opposition, and serenely passed one another like two trains in the night.”
The effect of this present application is to seek a review of the decision I reached during the Trial and in the Judgment. In support of his submission that there was no need for him to show the Plaintiff’s expert witnesses the first surveillance videos and to put that the videos demonstrated she was malingering, Mr Livesey, Counsel for the Defendant, referred to the decision of Dolan v Australian and Overseas Telecommunications Corporation(1993) 114 ALR 231. In that decision Spender J discussed the principles arising from the decision of Browne v Dunn and concluded in the circumstances he was considering that those principles did no require the showing of video surveillance film by Counsel for the Defendant in that case. In my view the observations made by Spender J regarding the obligation to show video surveillance film were confined to the facts of that case. They do not assist in the resolution of the issue here.
I confirm the conclusion which I expressed in my Judgment (paragraph 223) that the Defendant, as part of the presentation of his case, needed to show the Plaintiff’s experts the first surveillance videos and put the Defendant’s case that the videos demonstrated that the Plaintiff was a malingerer. As I said earlier, the first surveillance videos were central to the Defendant’s case that the Plaintiff was a malingerer.
At the Trial, Counsel for the Defendant agreed to recall Dr Farrant, Dr Wright and Ms Lawton, a psychologist, for the purpose of showing the first surveillance videos and he did so. Counsel suggested to each of the witnesses that the first surveillance films demonstrated that the Plaintiff was malingering. Those witnesses expressed their opinions on that subject matter.
Whilst I made it plain to Mr Livesey, in the course of the Trial, that I felt that it was necessary for him to show the first surveillance videos to the Plaintiff’s expert witnesses, I did not order him to recall those witnesses. It was his decision to do so. I acknowledge that he never accepted that he was obliged to do so and that he reserved his position on the question of costs.
For the reasons which I have expressed, there is no basis for the Defendant’s application that he be awarded the costs of recalling these witnesses. The Defendant needed to put the first surveillance videos to those witnesses for the proper presentation of his case against the Plaintiff. In any event, as I said, the Defendant was never under any obligation to do so although his failure to do so would have been likely to have led to difficulties in the evaluation of the evidence of these expert witnesses against the evidence of those expert witnesses who had viewed the first surveillance videos and provided opinions thereon. There is also no basis for denying the Plaintiff her costs relating to the recalling of these witnesses.
Conclusion

The Plaintiff is entitled to have her party and party costs of the action paid by the Defendant save for the costs of the Plaintiff’s application for further and better discovery which costs are to be paid by the Plaintiff to the Defendant. I so order.