Kenneally v Pouras & Ors

Case [2007] SASC 303

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

KENNEALLY v POURAS & ORS

[2007] SASC 303

Reasons for Decision of The Honourable Justice White

17 August 2007

PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PAYMENT INTO COURT, AND OFFERS TO SETTLE OR CONSENT TO JUDGMENT

Infant plaintiff's action for damages settled part way through trial - compromise approved by Court - application by the plaintiff pursuant to the terms of the compromise for an order that costs be paid on an indemnity basis or, in the alternative, as between solicitor and client - nature of Court's discretion in awarding costs - whether settlement meant that plaintiff had succeeded in establishing liability so as to be able to take advantage of a Rules of Court offer - whether the arrangements entered into by the plaintiff to fund litigation are relevant to the basis for an award of costs - whether conduct of the defendants in the course of settlement negotiations had been unreasonable.

Held:  application refused - no grounds established to warrant the award of costs on a basis other than as between party and party.

Evidence Act 1929 (SA) s 67C; Evidence Act 1995 (Cth) s 131; Supreme Court Act 1935 (SA) s 40; Supreme Court Rules 1987 r 35, r 11, r 40, r 41; Supreme Court Civil Rules 2006 r 8, r 263, r 264, referred to.
Re Wilcox; ex parte Venture Industries Pty Ltd (1996) 72 FCR 151; Colgate-Palmolive Ltd v Cussons Pty Ltd (1993) 46 FCR 225, applied.
Marks v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128, not followed.
Moyes v J & L Developments Pty Ltd (No 3) [2007] SASC 268; Casley-Smith v FS Evans & Sons Pty Ltd (No 6) (1989) 148 LSJS 483; John S Hayes & Associates Pty Ltd v Kimberley-Clark Australia Pty Ltd (1994) 52 FCR 201; Flinders Diamonds Ltd v Tiger International Resources Inc (No 2) (2006) 244 LSJS 435, discussed.
Karvelas v Chikirow (1976) 11 ACTR 22; Halligan v Lawson (1993) 9 SR (WA) 166; Morris v McEwen (2005) 92 SASR 281; Rayner v Pethick (2006) 243 LSJS 471, considered.

KENNEALLY v POURAS & ORS
[2007] SASC 303

Civil

  1. WHITE J: The plaintiff has applied for an order that the costs of action which the defendants are to pay to her consequent upon an agreed settlement of her claim for damages should be on an indemnity basis or, in the alternative, on a solicitor and client basis.

  2. The plaintiff was born on 21 April 1994 at the Western Community Hospital (“WCH”).  Her claim was that at the time of her birth she had contracted a Group B Streptococcal (“GBS”) infection and, later, hypoglycaemia, both of which had gone undetected and untreated until she was about 24 hours old.  It was alleged that these had caused neurological damage resulting in a left sided…

Continue reading Kenneally v Pouras & Ors

Sign in free to access the full text

Details
AGLC
Kenneally v Pouras & Ors [2007] SASC 303
Case
[2007] SASC 303
Decision Date

CaseChat Overview and Summary

The case of Kenneally v Pouras & Ors involved an infant plaintiff, Michaela Claire Kenneally, who sought damages from the defendants, Dr Pouras and the Women's and Children's Health (WCH). The dispute centred around the settlement of the claim partway through the trial and the subsequent application for costs. The Supreme Court of South Australia was tasked with determining the legal issues regarding the nature of the court's discretion in awarding costs, whether the settlement implied the plaintiff had established liability to benefit from a Rules of Court offer, and the relevance of the plaintiff's funding arrangements for the litigation in the award of costs. Additionally, the court had to consider whether the defendants' conduct during settlement negotiations was unreasonable.

The court found that the plaintiff's offer to accept 95% of her damages as assessed, plus her costs of action, was effective and could attract the operation of Rule 41 of the Supreme Court Rules 1987. The defendants' submissions that the offer was ineffective due to the absence of contributory negligence allegations or because it did not address the defendants individually were rejected. The court emphasised the importance of the settlement regime established by Rules 40 and 41, which encourages sensible negotiations and provides sanctions for unreasonable refusals or failures to accept reasonable offers. The court also highlighted that the plaintiff's failure to file a Rule 41 offer concerning quantum, despite being advised it was open to her, weakened her claim for solicitor/client costs.

In conclusion, the court determined that the plaintiff's offer to accept a significant percentage of her damages did not establish liability in her favour. The court further found that the disparity between the plaintiff's initial settlement offer and the final settlement amount, along with her failure to take advantage of the court-provided mechanisms for protecting against the costs consequences of unreasonable settlement conduct, did not justify an order for indemnity or solicitor/client costs. The court's discretion was exercised in a manner that did not favour the plaintiff in this case.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Based on that history, Mr Heywood-Smith QC submitted that I should conclude that the defendants had failed to address sensibly the issue of settlement until the end of the third week of trial, and that their omission to do so was unreasonable. In Mr Heywood-Smith’s submission, the omission to consider settlement explained the absence of any earlier offer of compromise by the defendants. The plaintiff had therefore been put to the full expense of a trial which, if the defendants’ attitude had been different, could have been avoided. Before considering that submission it is appropriate to address other aspects of the plaintiff’s submissions.The Plaintiff’s Offer to Consent to Judgment As already noted, on 15 June 2006 the plaintiff filed an offer to consent to judgment expressed as follows:The plaintiff Michaela Claire Kenneally an infant by her next friend Karen Therese Kenneally subject to obtaining the approval of the Court under Rule 35.11 hereby offers to accept in satisfaction of her claim in this action ninety five per cent (95%) of the plaintiff’s damages to be assessed plus her costs of action as agreed or taxed. Mr Heywood-Smith QC submitted that the plaintiff has, by the compromise, succeeded on liability. This was so, it was said, because in seeking the approval of the compromise by the Court, no allowance had been made for risks on the issue of liability. As I understand it, Mr Heywood-Smith sought either to invoke r 41.04 in relation to the offer or, alternatively, to rely upon the absence of any response to it as indicating more generally the unreasonableness of the defendants’ consideration of settlement of the action. The defendants submitted that the plaintiff’s filed offer was ineffective. It was said that the procedure in r 41 of the Supreme Court Rules 1987 was inapplicable in a case such as the present in which no allegation of contributory negligence is made. No authority was cited in support of this proposition. I do not see any indication in r 41 of an intention that a plaintiff may file an offer to accept a stated percentage of liability only in those cases in which a defendant alleges contributory negligence. On the contrary, there is good reason to suppose that the procedure should be available in all cases in which a plaintiff recognises that there may be some risks in establishing liability. The defendants argued that the procedure could be abused, for example, by a plaintiff filing an offer making only a negligible allowance for risks (say 99 per cent) and then, if liability is established, seeking costs on a solicitor/client basis. If this did occur in circumstances indicating an abuse, it could be addressed by an exercise of the Court’s discretion. The mere possibility of this occurring does not warrant a reading down of the otherwise plain words of r 41. The defendants next submitted that the plaintiff’s offer did not address the position of the defendants individually and was therefore ineffective. Reference was made to the decision of Layton J in Flinders Diamonds Ltd v Tiger International Resources Incorporated (No 2)[12] in which it was held that the plaintiff’s filed offer, in the circumstances of that case, had to be in a form which would have permitted each of the defendants to accept it, rather than requiring them to accept it collectively and then to address issues of contribution separately. I doubt that the plaintiff’s offer in this case was incapable of being accepted separately by either Dr Pouras or the WCH, and doubt that the plaintiff’s offer was ineffective for this reason. I consider that it was open to Dr Pouras or the WCH or both to have accepted the plaintiff’s offer. As formulated the offer was not materially different from an offer to accept 95 per cent of the damages in satisfaction of the plaintiff’s claim against Dr Pouras and a contemporaneous offer to accept 95 per cent of the damages in satisfaction of her claim against the WCH. Acceptance of an offer (or offers) in those terms would still have required the issue of contribution between Dr Pouras and the WCH to be determined separately. I am not prepared to conclude that the plaintiff’s filed offer was ineffective to attract the operation of r 41.[12] [2006] SASC 180; (2006) 244 LSJS 435.

Ratio Decidendi

Legal Principle Established

I return to the plaintiff’s underlying submission, namely, that the defendants’ omission to make any offer of settlement until the end of the third week of trial had been unreasonable and had caused the plaintiff to incur costs which, in the absence of an order for indemnity or solicitor/client costs, will be unrecoverable.General Considerations One stark feature of the plaintiff’s present claim for costs is that it is made in circumstances in which, apart from the offer to accept 95 per cent of her damages to be assessed, the plaintiff has not filed any r 41 offer. Nor, with the exception of a letter written during the trial, did the plaintiff deliver a Calderbank letter to the defendants. Rules 40 and 41 of the Supreme Court Rules 1987 contain a regime established by the Court to encourage parties to engage in sensible negotiations for the settlement of the litigation. They provide an incentive for defendants (r 40) and for plaintiffs (r 41) to make reasonable offers and sanctions for those who unreasonably refuse or fail to accept a reasonable offer.[18] Mr Heywood-Smith conceded that it had been open to the plaintiff, if so advised, to file a r 41 offer concerning quantum for either an interim or final assessment, or both. If the plaintiff had done that, a simple comparison could now be made between the amount of the offer on the one hand, and the amount of the compromise on the other. The plaintiff’s failure to take advantage of the means provided by the Court by which plaintiffs may protect themselves from the costs consequences of defendants who do not engage in settlement discussions, or who do not make reasonable offers, militates very much against an order for solicitor/client costs in this case. [18] Morris v McEwen [2005] SASC 281 at [66]; (2005) 92 SASR 281 at 298. It is surprising that the defendants did not make any pre-trial offer of settlement. But regard should also be had to the offers of final settlement made by the plaintiff. The disparity between those offers and the amount of the final settlement is significant. The offer of $3.78m plus costs made in October 2005 and repeated in May 2006 was over $2m more than the amount of the compromise approved by Anderson J. Allowance should of course be made for the parties’ negotiating positions, but a reduction of over $2m is significant. Mr Heywood-Smith QC explained that the offer of $3.78m had been calculated by reference to the opinion of a therapist who was not able to be called at trial. The evidence of other therapists warranted the lower figure. I accept that that is so, but note that the defendants were not told that the plaintiff was revising her formulation until 2 June 2007, ie, two days before the commencement of the trial. If the amount of the compromise approved by Anderson J is taken as the yardstick, it cannot be said that the plaintiff herself had made a reasonable offer of settlement before reaching the court doorstep on 2 June 2007. The amount of the plaintiff’s offer makes it difficult to be confident in assessing what the outcome may have been even if the defendants had made an offer or offers which (at least in hindsight) had been reasonable.