Ferenczfy v JohnsonDiversey Australia Pty Ltd (No 2) - [2012] SADC 33

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
FERENCZFY v JOHNSONDIVERSEY AUSTRALIA PTY LTD (No 2)
[2012] SADC 33
Judgment of His Honour Judge Nicholson
22 March 2012
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES
Plaintiff filed an offer to settle the proceedings some 25 days before trial and received an award of damages well in excess of that offer.
HELD: After exercising the discretion inherent in 1987 District Court Rule 41, plaintiff entitled to her costs of the proceedings on a solicitor and client basis. Final orders for judgment and other consequential costs orders entered.
Evidence Act 1929 s67C, referred to.
Ferenczfy v JohnsonDiversey Australia Pty Ltd [2012] SADC 22; Shaw v Jarldorn (1999) 76 SASR 28; Whitehead v Maas (1991) 56 SASR 362; Lushington v SGIC (1993) 168 LSJS 467, considered.

FERENCZFY v JOHNSONDIVERSEY AUSTRALIA PTY LTD (No 2)
[2012] SADC 33
This is an addendum to the principle judgment in this matter delivered on 1 March 2012.[1]
Paragraph [269]
[1] [2012] SADC 22.

In the judgment delivered on 1 March 2012 in this matter (the “initial judgment”) total gross wages received until date of termination had been initially calculated at $69,533 (paragraphs [267]-[268] of the initial judgment). However, after giving further consideration to the matter raised at paragraph [269] of the initial judgment, that figure is to be amended to $57,136 in accordance with exhibit P52.
After hearing from counsel for the plaintiff, I am satisfied, for the reasons he gave, that this is the correct figure to be included under this heading. Counsel for the defendant did not have instructions to concede the point but put no submissions in opposition.
The figure for past economic loss therefore is to be calculated in accordance with the formula, ($57,136 + $7,886 + $167,649) x 70% which equals $162,870 (paragraphs [273] and [305] of the initial judgment).
This leads to a consequential change to the calculation of past loss of superannuation entitlements (paragraph [275]ff of the initial judgment). The new calculation is ($57,136 + $9,857 + $209,561) x 70% x 9%. This gives a new figure for past loss of superannuation entitlements of $17,423 (paragraphs [276] and [305] of the initial judgment).
Notwithstanding the terms of footnote 215 in the initial judgment, no adjustment to any of the other initial calculations, including interest, is called for.
It follows (see paragraph [305] of the initial judgment) that the plaintiff is entitled to an award of damages in the amount of $432,260.
Costs
Counsel for the intervener, Woolworths (South Australia) Pty Ltd, has sought an order that the defendant pay his client’s costs of the intervention on a party and party basis. Such an order was not opposed and I will make that order. In addition, the plaintiff concedes that she should pay the defendant’s costs of and incidental to the adjournment of the trial, part heard, on 11 May 2010. During submissions, counsel for the defendant submitted that this should be on a solicitor and client basis. I am not satisfied that there is any basis for a costs order, in this respect, other than on a party and party basis.
The plaintiff has sought an order that the defendant pay her costs for the whole of the action (apart from the adjournment costs) on a solicitor and client basis. An order that the plaintiff’s costs are to be assessed on a solicitor and client, rather than a party and party, basis was opposed by the defendant.
The plaintiff, in seeking this special costs order, relies on an offer to settle the litigation filed on 7 April 2010, some 25 days or so prior to commencement of the trial. The plaintiff offered to settle the action for an amount (in her favour) of $340,000 inclusive of medical expenses but in addition to costs and disbursements to be agreed or taxed.
Even after ignoring interest which has accrued after the date of the offer, the amount offered by the plaintiff and not accepted by the defendant falls well short of the judgment sum to which the plaintiff, ultimately, has been found entitled.
The offer was filed purportedly pursuant to DCR 6R 187. However, it is common ground that it is the 1987 rules (and, in particular, DCR 41) that apply to this litigation. Nevertheless, the principles applicable to the consideration of such a rules offer under either the old or the current rules of court do not materially differ, in the circumstances of this case.
Where an offer in this form is made more than 21 days prior to the trial which offer is not accepted by the defendant, usually, without more, a court would exercise its discretion to grant the order sought. However, there remains a discretion in the court not to so order where it thinks proper.
The function of and approach to the application of DCR 41 were explained by Doyle CJ in Shaw v Jarldorn.[2]
The rule expressly contemplates that a defendant who does not accept an offer that the plaintiff ultimately betters, will pay the whole of the plaintiff’s costs of action as between solicitor and client. It is part of the ordinary operation of the rule that it affects the amount to be paid by way of costs in respect of steps in the action that precede the making of the offer. That is an aspect of the incentive, deliberately created, to respond to an offer, rather than to continue to litigate in the hope of achieving a better outcome. In this respect the operation of the rule can be said to be penal, in the manner that the predecessor rule was described in Whitehead v Maas (1991) 56 SASR 362 at 367. But this operation of the rule cannot, of itself, be a reason to order otherwise. It is part of the very scheme of the rule.
A defendant who does not accept an offer made by a plaintiff will, of necessity, only know after judgment if the defendant was right to fight on rather than to accept the offer. But once again, the rule operates on the premise that if an offer is made by the plaintiff, the defendant will weigh up the advantages and disadvantages of not accepting the offer. In weighing up those advantages and disadvantages, the defendant must take into account the ordinary risks of litigation, including the fact that in a damages claim in particular it is usually impossible to predict with any precision the amount of damages that will be awarded. And such a defendant must also bear in mind that if matters of fact that will affect the amount of damages are in issue, a decision on those matters can go one way or the other. For those reasons it will not usually be to the point, in submitting that the Court should order otherwise, for the defendant to submit that there were reasons why it might not have anticipated the Court awarding as much as it did.
Another feature of the rule is that it permits the plaintiff to make or revise an offer up to 21 days before the start of the trial. In this respect the rule necessarily contemplates that a plaintiff can make a late offer, and that a plaintiff who betters such a late offer is ordinarily entitled to the costs of the whole action as between solicitor and client.
The rule operates by reference to the making of an offer by the plaintiff. The rule obviously assumes that within 21 days of the offer the defendant will make an assessment of that offer, and, taking into account the information available to the defendant, and the risks and vicissitudes of litigation, will decide whether to accept the offer or not. In deciding whether to exercise the power to order otherwise, things that happened earlier in the course of the litigation will be of limited, if any, relevance. The Court decides whether to order otherwise by reference to the offer made and when made by the plaintiff. Difficulty experienced by the defendant in assessing the plaintiff’s offer is simply a usual aspect of litigation. That is not to say that earlier events will always be irrelevant. Something might have happened which means that when the offer is made the defendant could not be expected to make a proper assessment of the offer. Like Perry J, I incline to the view that only something such as a breach of the rules, affecting disclosure of information, would be relevant on this basis. Ordinarily the Court will assess things as at the time of the offer without regard to what has happened earlier. Likewise, events that occur after the offer is made will be of limited weight, unless they demonstrate that the amount of the judgment that the plaintiff ultimately recovers was materially affected by subsequent events that the defendant could not reasonably have anticipated. And, in that context, I emphasise that both the defendant and the plaintiff will be assumed to anticipate the ordinary risks and vicissitudes of litigation. In deciding not to accept an offer a defendant makes the judgment that it will run the risk of the plaintiff equalling or bettering the offer. A defendant who makes that choice cannot reasonably complain if, as a result of the ordinary risks and vicissitudes of litigation, the defendant’s judgment is proven to be unsound.
[2] (1999) 76 SASR 28 at [5]-[8].
The Chief Justice also observed[3] that the power to “order otherwise” conferred on the court an unfettered discretion but that it would be proper to so exercise the discretion only if there is good reason to do so. In this respect, the court may take into account circumstances “which although they may include consideration of whether or not the defendant has been unreasonable, are not limited to such consideration”.[4]
[3] At [4].
[4] See Lushington v SGIC (1993) 168 LSJS 467 at 468 per Burley DCJ and Shaw v Jarldorn generally.
I have been assisted in my consideration of the matter by the oral submissions from counsel for both parties and the written submissions provided on behalf of both parties. Counsel for the plaintiff sought to read, in support of the application, an affidavit of Peter James Jackson sworn 14 March 2012. The defendant objected to the whole of the affidavit on the grounds that various parts offended s67C of the Evidence Act 1929 and were irrelevant and that the balance was, in any event, irrelevant. I deferred ruling on the objection until after hearing the parties’ submissions on the costs application itself.
The defendant’s central argument was to the effect that the defendant had the right to test the plaintiff’s case, that the issues of liability and damages both posed particular difficulties in this case and, that, by reference to various findings in the principle judgment in the matter, the defendant was justified in challenging the plaintiff’s case. In short, the defendant argued that the plaintiff was seriously at risk both with respect to liability and quantum and that the defendant acted prudently in assessing its prospects of defeating the claim as being strong.[5]
[5] See the defendant’s written submissions at paragraph [9].
I accept that the defendant was faced with a difficult task in this respect. However, in my view, the fact that a defendant will be faced with such difficult decision making is necessarily embraced by the terms of DCR 41 and the policy underlying it. It is this very situation that typically will confront the parties to litigation that does not settle but proceeds to trial. The Chief Justice put it this way.[6]
All of these points may be said to be fairly obvious. I make them merely to emphasise that while the power to order otherwise is a wide one, it is to be exercised in the context of a rule that operates in the manner that I have identified, and in the context of a process of litigation that necessarily involves risks for each party. Putting it bluntly, once a plaintiff makes an offer that attracts the operation of r 41, the defendant who does not accept that offer accepts the risk of the plaintiff bettering the offer, and obtaining an order for the whole of the costs of the action as between solicitor and client. Having regard to the purpose of the rule and the manner in which it operates, it will only be in limited circumstance that a defendant will be able to demonstrate that it is proper for the Court to order that the plaintiff should not recover costs as between solicitor and client.
[6] Shaw at paragraph [9].
Nothing put forward on behalf of the defendant has persuaded me that it would be proper for me to exercise the residual discretion to refuse the plaintiff’s application for solicitor and client costs. As such, I do not need to and have not relied on the Jackson affidavit and it is unnecessary for me to rule on the defendant’s objection.
I make the following orders:
(1)Judgment for the plaintiff against the defendant for damages in the amount of $432,260 inclusive of interest.
(2)The plaintiff is to pay the defendant’s costs of and incidental to the adjournment of the trial, part heard, on 11 May 2010 on a party and party basis.
(3)Subject to order (2) the defendant is to pay the plaintiff’s costs for the whole of the action on a solicitor and client basis.
(4)The defendant is to pay the intervener’s (Woolworths (South Australia) Pty Ltd) costs of the intervention on a party and party basis.