| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : MICHAEL AARON JAMES (by his next friend RHONDA DAWN JAMES) -v- GRANT [2009] WADC 201 (S2) CORAM : MAZZA DCJ HEARD : 2-5, 8-12, 15 & 17 JUNE 2009 & 2 MARCH 2010 DELIVERED : 22 DECEMBER 2009
SUPPLEMENTARY
DECISION : 5 MARCH 2010 FILE NO/S : CIV 56 of 2006 BETWEEN : MICHAEL AARON JAMES (by his next friend RHONDA DAWN JAMES) Plaintiff
AND
CLAIRE REBECCA GRANT
Defendant
Catchwords: Costs - Indemnity costs - Special costs orders Legislation: Legal Practitioners Act 2003 s 215
Motor Vehicle (Third Party Insurance) Act 1943 s 27A
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Result: Costs awarded on party/party basis
Special costs orders made Representation: Counsel:
Plaintiff : Mr S V Forbes
Defendant : Mr D R Clyne
Solicitors:
Plaintiff : Donna Percy & Co
Defendant : K N Allan
Case(s) referred to in judgment(s):
Calderbank v Calderbank [1976] Fam 93
Gove v Black [2006] WASC 298 (S)
Heartlink v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254
Hodgkinson v Doepel & Associates Architects Pty Ltd [2006] WASC 237 (S)
Lo Presti v Ford Motor Co of Australia Ltd (No 2) [2008] WASC 12 (S)
O'Rourke v P&B Corp Pty Ltd [2008] WASC 36 (S)
SDS Corp Ltd v Pasdonnay Pty Ltd [2004] WASC 26 (S)
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1 MAZZA DCJ: On 22 December 2009 I published reasons and made findings of fact in relation to the plaintiff's claim. I then allowed the parties the opportunity to consider those reasons and make calculations in accordance with my findings. On 22 January 2010 I ordered that the defendant pay the plaintiff $7,448,455.61. The plaintiff's counsel indicated that the plaintiff wished to apply for special costs orders. I made orders requiring the parties to file written submissions. These submissions were duly filed. They were detailed and helpful. I heard oral submissions from counsel on 2 March 2010.
2 The proposed orders sought by the plaintiff were set out in a minute filed 8 February 2010. The orders sought are as follows: "1. The Plaintiff's costs of the action payable by the Defendant be payable on an indemnity basis from 4 March 2008, alternatively, from 9 July 2008, further alternatively, from 24 July 2008 save to the extent that they are of an unreasonable amount or have been unreasonably incurred. 2. The taxing officer, in taxing the bill of costs of the Plaintiff, do make reasonable allowance for the following items without regard to the limits imposed by the relevant Costs Determinations in relation to: a. fee on brief for senior counsel, i.e. first day of trial and preparation; b. counsel fee on brief, i.e. first day of trial and preparation; c. counsel fee for the second and each successive day of hearing (19(c)); d. preparation and pre-trial conferences on 9 June 2008, 9 July 2008 and 23 July 2008 and the taxing officer make reasonable allowance for preparation and attendance by both counsel and an instructing solicitor on behalf of the Plaintiff at the said pre-trial conferences; e. senior counsel's and counsel's costs of further preparation and conferences on 8 June 2009, (Page 4)
12 June 2009 and 16 June 2009 including preparation of closing submissions; f. senior counsel's and counsel's costs of preparation of submissions in relation to Public Trustee fees and MERS; g. getting up; h. attendance of a senior practitioner, a junior practitioner and a clerk at trial; i. Dr S Buckley in addition to the other experts retained on behalf of the Plaintiff. 3. There be a certificate for the transcript."
Indemnity costs 3 The principles upon which an indemnity costs order will be made are well known and were not in dispute. They can be summarised as follows: 1. The usual costs order is that a successful party is awarded costs on a party and party basis. 2. An order for indemnity costs will be made only if there is some special or unusual feature in the case to justify departure from the usual practice. Most situations where indemnity costs are ordered involve an element of improper or unreasonable conduct on the part of the unsuccessful party or that party's legal advisor. 3. Where an offer to compromise in the form of a Calderbank offer is made, that offer is a relevant factor to an award of indemnity costs. However, rejection of an offer more favourable to the offeree than the outcome of the trial does not presumptively or, indeed, prima facie, lead to an award of indemnity costs. 4. The test which has been adopted in this State as to the circumstances where a Calderbank letter may give rise to an order for indemnity costs is, if the decision to decline the offer was so unreasonable in all of the circumstances that an order for costs on a party and party basis would not be just. 4 As to these propositions I refer to: Lo Presti v Ford Motor Co of Australia Ltd (No 2)[2008] WASC 12 (S) at [7] to [15] and Gove v Black [2006] WASC 298 (S) at [45] to [46]. (Page 5)
5 The plaintiff's application was supported by an affidavit from her solicitor Donna Irene Percy sworn 5 February 2010. The contents of the affidavit were not disputed. In that affidavit Ms Percy deposes that she wrote to the defendant's solicitor, Mr Ken Allan on 4 March 2008. In that letter, which is headed "without prejudice", Ms Percy said: 6 This offer was rejected by the defendant. Mr Allan wrote to Ms Percy on 17 March 2008 in these terms: "Please note my instructions are that the Insurance Commission is of the view that this matter should be settled by way of lump sum payment." 7 The expression "structured settlement basis", as I understand it, referred to a proposal where the defendant paid for the plaintiff's ongoing care regardless of how long or how short his life span. 8 Subsequently, on 9 July 2008 Ms Percy wrote to Mr Allan with an offer that the defendant pay the plaintiff the sum of $5.8 million plus special damages, Public Trustees' fees and costs. Then on 23 July 2008 Ms Percy wrote to Mr Allan offering to settle the case in the sum of $6 million plus special damages. Each of these letters were headed "without prejudice save as to costs". The letter of 23 July 2008 expressly referred to Calderbank v Calderbank [1976] Fam 93. The defendant rejected the offers contained in the letters of 9 and 23 July 2008. 9 It is obvious that the plaintiff in the letters dated 9 and 23 July 2008 offered to settle the case on a basis more favourable to the defendant than the outcome of the trial. 10 Mr Forbes, counsel for the plaintiff on the question of costs, submitted that the defendant's decision to reject the structured settlement offer was so unreasonable as to justify an award of costs in favour of the plaintiff on an indemnity basis. 11 With respect to Mr Forbes, I do not agree. In my opinion this is not a case for an indemnity costs order notwithstanding the offers made by the (Page 6)
plaintiff, the last of which was a Calderbank (supra) offer. Dealing with the structured settlement proposal, while there was a general understanding as to what this meant, the details were not spelt out in the correspondence. Further, I do not think, given the "once and for all" principle with respect to damages that the defendant's position was unreasonable. The defendant's position at trial with respect to the two main issues, namely life expectancy and whether or not the plaintiff should have active care during the night was supported by respectable expert opinion. The issue of life expectancy was a matter in which opinions varied widely and could legitimately differ. It was an issue, the outcome of which, was very difficult to predict. 12 In my opinion there was nothing about the way in which the case was conducted by the defendant which involved any element of improper or unreasonable conduct. Despite the offers made by the plaintiff and in particular the Calderbank offer, I have not been persuaded that it would be just in this case to require the defendant to pay the plaintiff's costs on an indemnity basis. 13 I order that the defendant pay the plaintiff's costs on a party and party basis.
Special costs orders 14 I will refer to the orders sought in par 2 of the plaintiff's minute as the application for special costs orders. 15 The plaintiff's submission is that by virtue of s 215 of the Legal Practitioner's Act 2003 ("the LPA") the Court is empowered to make special orders with respect to costs. Of course, the LPA has been repealed and replaced by the Legal Profession Act 2008. However, because the plaintiff instructed Ms Percy prior to 1 March 2009 the LPA applies. 16 Mr Clyne counsel for the defendant has raised a threshold question. The defendant's submission is that the effect of s 27A of the Motor Vehicle (Third Party Insurance) Act 1943 is to preclude the making of special costs orders. 17 Section 27A of the Motor Vehicle (Third Party Insurance) Act provides that a legal practitioner cannot make a costs agreement with a client which provides for the legal practitioner to receive any greater reward than is provided for by any costs determination that is in force. If a costs agreement is for a greater award than is provided for by the (Page 7)
relevant costs determination, the costs agreement is void and any money paid under the agreement is recoverable by the client. The defendant's submission is that if a practitioner is unable to enter into an agreement to charge more than the relevant costs determination it follows that the client should not be permitted to seek a special costs order allowing for an increase in the amount of costs set out in the relevant costs determination. 18 With respect to Mr Clyne I do not accept this submission. 19 Section 27A of the Motor Vehicle (Third Party Insurance) Act is plainly designed to ensure that no agreement is reached between solicitor and client allowing for any greater reward than is provided for in any costs determination. This section is designed to protect the interests of the client and ensure, as much as possible, that clients are not disadvantaged. Section 27A makes no reference to the Court's power to make special costs orders in appropriate circumstances. Under s 215 of the LPA the question of any increase of the costs allowable under a legal costs determination is decided by the Court and not the parties and only in the circumstances set out in s 215(2) of the LPA. The Court acts to protect the interests of all parties. 20 In my opinion s 27A of the Motor Vehicle (Third Party Insurance) Act does not act as a bar to special costs orders pursuant to s 215 of the LPA. 21 Section 215(1) and (2) of the LPA are particularly relevant to this case. The terms of those subsections are as follows: "Effect of determination (1) Subject to sections 221 and 241 of this Act and section 14 of the Legal Aid Commission Act 1976 — is regulated by a legal costs determination in force under section 210. (2) Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect (Page 8)
of a matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following — (a) order the payment of costs above those fixed by the determination; (b) fix higher limits of costs than those fixed in the determination; (c) remove limits on costs fixed in the determination; (d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or taxed." (emphasis added) 22 Before a special costs order can be made the Court must form an opinion about two matters. First is the amount of costs allowable in respect of a matter inadequate? Second does that inadequacy arise because of the "unusual difficulty, complexity or importance of the matter". 23 In considering the requirement of inadequacy, the plaintiff must demonstrate that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination: Heartlink v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 at [16]. 24 In Ms Percy's affidavit sworn 5 February 2010 at Annexure E she sets out a draft party/party bill of costs. It seems to me that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limits that would be imposed by the relevant cost determination. No argument was put to the contrary by the defendant. I make a finding that the amount of costs allowable under the relevant legal costs determination is inadequate. 25 I now turn to the second matter in s 215(2). There is an interesting question as to whether the word "unusual" qualifies only the word "difficulty" and not "complexity" or "importance". The plaintiff's submission is that the word "unusual" only qualifies the word "difficulty" (Page 9)
and not "complexity" or "importance". The defendant's submission is that word "unusual" qualifies all three words. 26 In my opinion the word "unusual" only qualifies the word "difficulty". In this regard I am bound to follow the decision of Roberts-Smith J in SDS Corp Ltd v Pasdonnay Pty Ltd [2004] WASC 26 (S) at [102] to [106] and Simmonds J in Hodgkinson v Doepel & Associates Architects Pty Ltd [2006] WASC 237 (S) at [33]. 27 Both counsel referred me to the decision of Martin CJ in O'Rourke v P&B Corp Pty Ltd [2008] WASC 36 (S) [26]. Martin CJ may on one view have decided that the word "unusual" qualifies each of "difficulty", "complexity" or "importance". Having carefully read that decision, I do not think that he was making a definitive statement as to the interpretation of s 215(2) of the LPA. Rather, he was dealing with the case as it had been presented to him by the parties whom, it appears, assumed the word "unusual" qualified each of the word "difficulty", "complexity" or "importance". I note that neither SDS Corp Ltd v Padonnay Pty Ltd (supra) nor Hodgkinson v Doepel & Associates Architects Pty Ltd (supra) were referred to in that decision. 28 The assessment of whether or not a factor is "unusual" is a value judgment and requires the plaintiff to demonstrate that this case "went beyond a usual run of issues that one encounters in the usual run of civil cases in this Court": O'Rourke v P&B Corp Pty Ltd (supra) at [23]. 29 In my opinion, this case was unusually difficult, complex and important. If I had been required to couple the words "complex" and "important" with the adjective "unusual" I would have done so. 30 The main issue for me to determine was the issue of the plaintiff's life expectancy. In order to decide this, I needed to understand the plaintiff's pre-existing Down Syndrome, the nature of his head injury and the medical problems which were caused by that injury. As I observed in my judgment at [67] the medical problems caused by his head injury were "various and complex". The question of how these medical problems impacted on the plaintiff's life expectancy was difficult to determine having regard to the considerable difference in the expert opinions. 31 It cannot be overlooked that the amount of the claim was considerable, that the trial was reasonably long and involved the consideration of a great deal of documentary material including reports, schedules and written opening and closing submissions. (Page 10)
32 The question of the plaintiff's life expectancy was unquestionably important. If I significantly underestimated the plaintiff's life expectancy, given his need for the proper care I would in effect be handing him a sentence of death. If I overestimated his life expectancy I would be handing to others a windfall. 33 In my view, having regard to the usual run of cases in this Court, this was a case where the legal costs were inadequate by reason of unusual difficulty, complexity and importance. 34 Without hesitation, I find that the two criteria in s 215(2) of the LPA have been demonstrated by the plaintiff. 35 The question that remains to be answered is whether the plaintiff has made out an entitlement to items (a) to (i) in par 2 of the minute of proposed costs orders. 36 I have carefully examined the written submissions with respect to each of these items. 37 I am mindful that I am not sitting as the taxing officer and nothing I am about to say is to impede his or her discretion. Any order that I make merely allows the taxing officer to consider the charges made beyond the scale limit. It is for the taxing officer to decide whether an item represents a reasonable charge for work necessarily or reasonably done: SDS Corp Ltd v Pasdonnay Pty Ltd at [162]. 38 I am prepared to allow items (a) and (b), based on the evidence presented in Ms Percy's affidavit, I have no doubt that each of the plaintiff's senior and junior counsel reasonably performed a great deal more work than usual in order to prepare the case. As to item (c) having regard to the complexity of the case the daily rate charged by counsel is, in my view, reasonable. As to item (d), in my opinion it was reasonable for counsel and the plaintiff's instructing solicitor to be present at the conferences on 9 June, 9 July and 23 July 2008. 39 As to item (e) in my view it was reasonable for both the plaintiff's senior and junior counsel to engage in further preparation and be present at the conferences 8, 12 and 16 June 2009 and for both counsel to be involved in the preparation of closing submissions. 40 As to item (f) the costs for preparation of the submissions in relation to Public Trustee fees and MERS was reasonable. (Page 11)
41 As to item (g), I have no doubt that the getting up in this case which was reasonably required was greater than that required in the usual run of cases of this type presented in this Court. 42 As to item (h), in my opinion it was entirely proper given the complexity of the case that a practitioner or clerk be present at the trial in addition to counsel. There were times when Ms Percy was not present. In my view it was reasonable for either a junior practitioner or a clerk to be present when Ms Percy was absent. 43 As to item (i), I did not in the end accept Dr Buckley's opinion as to life expectancy. Having said this, I think it was reasonable, having regard to his experience with head injured patients, for him to be briefed by the plaintiff. I gather, from what Ms Percy says, that no other suitably qualified expert could be found in Western Australia. As to this, I note that the defendant consulted Dr Burke in Melbourne. Having said this, I did not find his evidence to be particularly helpful at the trial and I doubt whether he should have been called at all. In the end, I am prepared to allow a special order with respect to Dr Buckley but not as to his meetings with counsel just before or during trial and his attendance at the trial.
Costs of transcript 44 I am prepared to allow a certificate for the costs of the transcript at trial. The fact that there was a running transcript was helpful to both the parties and the Court.
Orders 1. The defendant pay the plaintiff's costs of the action including the proceedings with respect to costs on a party and party basis. 2. An order as asked in par 2 of the plaintiff's minute filed 8 February 2010 save as to par 2(i) in so far as it relates to Dr Buckley. With respect to Dr Buckley the special cost order extends only to those reports and consultations prior to 1 June 2009. 3. There will be a certificate for the provision of the transcript.
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