| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : PECENKA -v- MINISTER FOR HEALTH [2010] WADC 163 (S) CORAM : SLEIGHT DCJ HEARD : 25-28 & 31 MAY, 1-4, 8-11 & 22-25 JUNE, 29 NOVEMBER & 10 DECEMBER 2010 DELIVERED : 2 NOVEMBER 2010 SUPPLEMENTARY
DECISION : 17 DECEMBER 2010 FILE NO/S : CIV 144 of 2006 BETWEEN : VIKTORIA PECENKA Plaintiff
AND
MINISTER FOR HEALTH
Defendant
Catchwords: Finalising award of damages for successful right arm/shoulder injury claim - Costs - Plaintiff successful on one of three causes of action - Factual overlap and intermix of evidence on all three claims - Calderbank offer - Whether rejection of offer reasonable - Claim that costs awarded be set off against liability under judgment - Turns on its own facts
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Legislation: Rules of the Supreme Court 1971 O 66 r 1, O 66 r 2, O 66 r 50 Result: Subject to adjustment for disbursements the plaintiff pay 15% of the costs of the defendant to be taxed
Costs awarded be set off against judgment amount Representation: Counsel:
Plaintiff : Mr G Cridland on 25-28 & 31 May, 1-4, 8-11 & 22-25 June & 10 December 2010; Mr J Hammond on 29 November 2010; plaintiff in person on 29 November 2010 & 10 December 2010
Defendant : Mr R Hooker
Solicitors:
Plaintiff : Hammond Legal
Defendant : Talbot Olivier
Case(s) referred to in judgment(s):
Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Patricia Margaret Hannell as Executor of the Estate of David Richard Hannell (Dec) [2007] WASCA 158 (S)
David Weiping Chen v Kim Man Chan (No 2) [2009] VSCA 233
Duncan & Weller Pty Ltd v Mendelson [1989] VR 386
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Grbavac v Hart [1997] 1 VR 154
Macketic v Osmanbasic & Anor [2001] WADC 106
Mount Lawley Pty Ltd v Western Australian Planning Commission [2006] WASC 82 (S)
Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569
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1 SLEIGHT DCJ: This supplementary decision relates to two outstanding issues:
Ms Pecenka's legal representation 2 Since I delivered my reasons for judgment on 2 November 2010 a problem arose concerning Ms Pecenka's legal representation. At the trial Ms Pecenka's counsel was Mr Cridland on instructions from solicitors Hammond Legal. On 29 November 2010 Hammond Legal made an application for a declaration that it cease to act for Ms Pecenka. The grounds for the application were essentially that the solicitor/client relationship had broken down to the point that Hammond Legal could no longer act for Ms Pecenka. In response to this application I made an order that Hammond Legal cease to act for Ms Pecenka subject to: Award of damages 3 In the action commenced by the plaintiff, Ms Pecenka, there were three separate causes of action pursued. These are identified in [6] - [8] of my reasons for judgment delivered on 2 November 2010. 4 The three separate causes of action were: 1. A claim for damages for a right arm/shoulder injury. (Page 4)
5 Ms Pecenka was successful on her claim for damages for a right arm/shoulder injury but was unsuccessful on the two psychiatric injury claims. As mentioned above, on 2 November 2010 I reserved the final award of damages to seek clarification from counsel of the amount of special damages that had been agreed in relation to the right arm/shoulder injury claim. I have now been informed that the only amount that was agreed between the parties by way of special damages relating to the right arm/shoulder injury claim is the sum of $765.75. Other than this agreed amount there is insufficient evidence before me to award any additional amount. Accordingly, the amount of special damages to be awarded is $765.75, making a total award of $20,765.75.
Ms Pecenka's application and submissions on costs 6 Ms Pecenka seeks an order that the issue of costs of the action be adjourned until after the hearing of an appeal which she has lodged against my judgment in this matter. In my opinion there is no reason why final costs orders should not be made. It is important that final orders are made so that all matters can be raised by the parties on the hearing of any appeal. 7 Ms Pecenka also submitted that the costs orders should not require her to pay any costs to the defendant. Further, and in the alternative, any costs ordered to be paid by her should not include an order that the costs be set off against her entitlement for damages. The submissions presented by Ms Pecenka were largely based upon a contention that I should take into account her impecunious circumstances compared with the defendant's financial resources. I am not aware of any authority which allows me to take into account the relative financial positions of the parties. To do so would only encourage impecunious litigants to pursue unreasonable causes of action. The potential for costs to be awarded against unsuccessful litigants remains an important restraint against unreasonable litigious behaviour. (Page 5)
The defendant's application and submissions on costs
(i) Orders sought 8 The defendant seeks the following orders as to costs: 1. That the plaintiff pay the defendant's costs of the action from 10 January 2010 to be taxed on an indemnity basis (this order is sought on the basis of an offer on 10 January 2010 made by the defendant's solicitors to Ms Pecenka's then solicitors. It is contended the offer was in its nature a Calderbank offer, the rejection of which by Ms Pecenka was unreasonable in the circumstances). 2. The defendant pay 10% of the costs of the plaintiff up to and including 21 January 2010. 3. The payment of the judgment amount by the defendant and the defendant's liability to Ms Pecenka for costs be set off against Ms Pecenka's liability for the defendant for costs. 9 In the alternative to 2 and 3 above the defendant seeks the following orders: (ii) Calderbank offer 10 The alleged Calderbank offer presented by the defendant was contained in a letter from Talbot Olivier to Ms Pecenka's then solicitors Leonard Cohen Legal dated 13 January 2010. 11 The offer was to pay Ms Pecenka $100,000, inclusive of legal costs, subject to a number of conditions as follows: (Page 6)
3. Ms Pecenka forward a letter confirming her resignation. 4. Ms Pecenka agree to bring no further action against the Minister for Health, RiskCover or any other party in relation to the injuries allegedly sustained by her which are the subject of the District Court action. 5. If required, Ms Pecenka sign a deed of release containing a non-disclosure clause with respect to the settlement and/or the terms of the settlement. 12 The nature of a Calderbank offer was considered by Templeman J in the matter of Mount Lawley Pty Ltd v Western Australian Planning Commission [2006] WASC 82 (S). I believe the following principles emerge from that decision: (i) A Calderbank offer is seen as an alternate to an offer under O 24A. Order 24A r 10(5) provides: Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the court otherwise orders, the court shall be entitled to an order against the defendant for his costs in respect of the claim up to and including the date the offer was made, taxed on a party-party basis and the defendant shall be entitled to an order against the plaintiff for his costs in respect of the claim thereafter taxed on a party-party basis. (ii) The disadvantage from the perspective of the offeror of using a Calderbank offer rather than an offer under O 24A, is that the court's discretion as to costs cannot be fettered by the fact that a favourable Calderbank offer has been rejected. Although the circumstances in which the offer was made and rejected will be relevant to the exercise of the cost discretion, the principle that costs follow the event will be applied, unless the plaintiff acted unreasonably in rejecting the offer. (iii) Where a Calderbank offer is rejected, but proves to have been more favourable to the offeree than the result of the trial, the offeror will usually seek his costs on an indemnity (or solicitor/client) basis from the date in which the offer was made. (Page 7)
(iv) The judgment whether a Calderbank offeree acted reasonably in rejecting the offer must be made in hindsight. In making that judgment, it is not to the point that the offeree believed, when the offer was made, that he or she would better it at trial. It is irrelevant whether the offeree reaches his or her decision unaided or on the basis of legal or other expert advice. (v) There is a principle that an offeree does not unreasonably reject a Calderbank offer if there is some reasonable doubt about its value (see Duncan & Weller Pty Ltd v Mendelson [1989] VR 386, 401; Grbavac v Hart [1997] 1 VR 154, 155). (vi) It is not necessary for a Calderbank offeror to explain the basis on which his offer is made. The offeree needs only to know what the offer is worth. In making that assessment, the offeree must do the best it can to estimate the likely outcome of the taxation of costs. 13 In deciding whether the rejection of a Calderbank offer was unreasonable a court will ordinarily have regard to the following: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it. (see Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 [16]) 14 It is not disputed that Ms Pecenka rejected the offer of settlement contained in the letter dated 13 January 2010 by going to trial. However in my opinion the rejection of this offer cannot be said to be unreasonable (Page 8)
in light of the ultimate recovery she made. This is because the offer was not simply an offer to settle the action but was conditional on other matters: 1. Firstly, that rather than judgment being entered by consent the action be dismissed with no order as to costs. 2. Further, that Ms Pecenka would forward a letter confirming her resignation. 3. Further, that Ms Pecenka agree to take no further action, not only against the Minister for Health, and RiskCover but also against 'any other party'. 4. Finally, Ms Pecenka, if required, was to enter into a deed of release containing a non-disclosure clause. 15 It is impossible to know what monetary value ought to be attached to these additional conditions. The defendant was obtaining an advantage, if the settlement had been agreed to, of not only settling the action but also obtaining other benefits. Importantly, in my view, the offer contained a right to insist that Ms Pecenka sign a deed of release containing a non-disclosure provision. In my reasons for judgment I found that Ms Pecenka was driven by a need to clear what she perceived to be a slur on her reputation (see [232] of my reasons for judgment). This motivation was understandable given my finding that, although Ms Pecenka had been accused by the defendant of deliberately damaging the pasteuriser machine and deliberately injuring herself, she had not done either of these things (see [278], [322] and [323] of my reasons for judgment). In such circumstances I believe it was not unreasonable for her to reject the offer of the defendant which would have denied her the opportunity to correct the slur on her character as a result of these allegations. Accordingly, in my opinion, the rejection of the offer by Ms Pecenka should not trigger a discretion to award costs (indemnity costs or otherwise) in favour of the defendant.
(iii) The alternative costs orders sought by the defendant 16 The defendant seeks varies adjustments to the order for costs on the argued premise that the two psychiatric claims were separate causes of action and occupied the majority of the court's time. 17 Order 66 r 1 of the Rules of the Supreme Court 1971 provides a general rule that costs are at the discretion of the court but the court (Page 9)
should generally order that the successful party to any action or matter recover his costs. This general rule is subject to a number of qualifications, including the following: (a) Pursuant to O 66 r 1(3) where a party, though generally successful in an action has, by the introduction of some issues or issues on which he or she has failed, increases the costs, the court may order such party to pay the costs of such issue or issues. (b) Pursuant to O 66 r 2(a) and subject to any special order, where the statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and to the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought. 18 To a certain extent the operation of O 66 r 1(3) and O 66 r 2(a) overlap. However, O 66 r 1(3) is primarily concerned with the situation where the successful party has unsuccessfully raised discrete legal or evidentiary issues during the trial. O 66 r 2(a) is concerned with a mixed result on separate causes of action. In this matter the issue of costs is primarily concerned with the operation of O 66 r 2(a). 19 The operation of O 66 r 2(a) was considered by Anderson J in Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569. At (574 – 5) his Honour stated as follows (excluding cited authorities): In my opinion the approach required by the rules of this court is that, once it is seen that separate causes of action are involved, and that the plaintiff has succeeded on only one or some, the defendant is prima facie entitled to his costs on the other or others. However, in my experience, this court will not make such an order as of course. The court will always look at the realities of the case and attempt to do substantial justice. As it may be that, although it is strictly correct to say that different causes of action are involved, there may have been only one contest in substance. This will often be so when all causes of action arise out of the one course of dealings, the one transaction or the same facts. Where that is the situation there will usually be one order for the general costs of the action, moulded as necessary to ensure that, however rough and ready it may be, substantial justice is done.However, even in such cases it may be shown the successful party has in some relevant way misconducted himself or that the issues or causes of action on which the successful party has failed (Page 10)
were unreasonably raised by that party. This would bring into operation different principles. 20 In the Permanent Building Society case there were three separate causes of action. The plaintiff was successful in only one of the causes of action. The plaintiff's success was described by Anderson J at (575) as being a 'modest degree of success'. However, Anderson J found each cause of action was based upon the same legal principles of a breach of fiduciary duty and the facts relevant to each cause of action were quite extensively intermixed. His Honour also found that the two causes of action in which the plaintiff was unsuccessful were not unreasonably raised. 21 The broad approach taken in Permanent Building Society's case is consistent with the authorities concerning O 66 r 1(3) which suggest the exercise of the power by the court to order an adjustment of costs in such circumstances in which O 66 r 1(3) applies should be approached broadly and be based on an overall impression rather than any attempt at a mathematically precise formulation (see Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Patricia Margaret Hannell as Executor of the Estate of DavidRichard Hannell (Dec) [2007] WASCA 158 (S) [6]). 22 Further, the court should also take into account the complications which it considers will arise in the taxation of costs, as a part of its consideration of the overall interests of justice: David Weiping Chen v Kim Man Chan (No 2) [2009] VSCA 233 [10] (Maxwell P, Redlich JA and Forrest AJA). On the basis of this principle the defendant argues that it would be unacceptably difficult for a taxing officer to identify the allowance to be made for each cause of action if orders were made that Ms Pecenka be awarded costs on the right arm/shoulder injury claim and the defendant costs on the two psychiatric injury claims. Instead the defendant submits I should make the orders sought that Ms Pecenka be awarded only 10% of her costs of the action and the defendant 90% of its costs. This apportionment is based on the contention that the defendant should recover a substantially greater sum for costs than Ms Pecenka. It is submitted the degree of success achieved by the defendant vastly outweighs the level of success achieved by Ms Pecenka. In support of this contention the defendant relies upon the following: (a) In the Particulars of Damages filed by Ms Pecenka, she claimed $927,574 but she was awarded slightly over $20,000. (Page 11)
23 In my opinion this contention fails to take into account that the relevant cost scales, commencing with the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2006, are based upon hourly and daily rates for work performed, not the quantum of the claim. The quantum of the claim may provide a guide as to the reasonableness of the hours claimed and also, where discrete items of damages are disallowed, O 66 r 1(3) of the Rules of the Supreme Court may become relevant. However, the driving force behind the costs that may be allowed on taxation will be the complexity of relevant issues and the time spent on them. (b) Further, it is contended that the majority of time spent by witnesses giving oral evidence at trial concerned factual issues related to the plaintiff's psychiatric injuries as this was the real heart of the plaintiff's grievance. 24 In part support of this contention, a calculation was made by the defendant's solicitors as to the number of occasions the word 'shoulder' was mentioned during the evidence and it has been calculated that on only 8.4% of transcript pages does the word appear. However in my opinion, such an analysis of the transcript is likely to be misleading as the circumstances of the injury were extensively canvassed during the trial without the word 'shoulder' being mentioned. For example, considerable evidence was given concerning the operation of the pasteuriser machine, history of its use, inspection of the pasteuriser machine by various witnesses and conclusions reached concerning a fault in the pasteuriser machine. 25 I reject the submission of the defendant that the majority of the time spent by witnesses giving oral evidence at the trial concerned Ms Pecenka's psychiatric injury claims. In my opinion there was a significant factual overlap and intermix of evidence on all three claims. This is demonstrated by the fact that the right arm/shoulder injury claim occurred shortly after Ms Pecenka received a letter dated 4 October 2000 informing her of management's adverse findings against her on complaints made against Ms Pecenka by Mrs Petrowsky. In my opinion the history of the first psychiatric claim provided important contextual evidence and was relevant to the assessment of the credibility of Ms Pecenka and other key witnesses concerning the injury to Ms Pecenka's right arm/shoulder. However, I conclude that the full extent of the evidence of the first psychiatric injury claim would not have been presented if the claim of Ms Pecenka had been confined solely to the right arm/shoulder injury (for example, the evidence of Mr Tuttle and Mrs Brien as to management's (Page 12)
response to the cross-allegations made by Ms Pecenka and Mrs Petrowsky). Also there were pleaded issues and submissions presented to me which were unique to the first psychiatric claim. 26 In relation to the second psychiatric claim there was again a significant factual overlap and intermix of evidence relevant to both the right arm/shoulder injury claim and this second psychiatric claim. In both claims it was relevant to consider the circumstances of the claim made by Ms Pecenka that her right arm/shoulder had been injured and her use of the pasteuriser machine leading up to the injury. However, again I conclude that some of the evidence on the second psychiatric claim was unique to it (for example, again the evidence of Mr Tuttle and Mrs Brien as to management's response to the allegations that Ms Pecenka had deliberately damaged the pasteuriser machine and deliberately injured herself). Also there were pleaded issues and submissions which were unique to the second psychiatric claim. 27 As a starting point, if an award was to be made solely upon the number of causes of action on which the plaintiff Ms Pecenka was successful and the number of causes of actions upon which the defendant was successful, it would lead to an order that the defendant pay one-third of Ms Pecenka's costs and Ms Pecenka pay two-thirds of the defendant's costs. However, in my opinion this apportionment requires adjustment to take into account the significant factual overlap and intermix of evidence between the cause of action on which Ms Pecenka was successful and those two causes of actions where she was unsuccessful. Taking a broad approach I conclude that as a starting point Ms Pecenka should be entitled to 55% of her costs of the action. This is on the basis that I conclude that her costs of the action should be reduced by 45%, being costs attributable to factual and legal issues unique to her claim on the two psychiatric claims, that is, irrelevant to the right arm/shoulder injury claim. Taking a similar broad approach I believe the defendant should be entitled to 70% of its costs of the action. This is on the basis that I conclude that its costs of the action should be reduced by 30%, being costs attributable to factual and legal issues unique to the right arm/ shoulder claim by Ms Pecenka. 28 The taxation of Ms Pecenka's costs is likely to present her with considerable difficulties. The taxation of costs of a lengthy trial can be very complex, involving both difficult legal and accounting issues. Ms Pecenka is currently unrepresented. The taxation of her costs will be immeasurably more difficult by the fact that it appears she no longer has a working relationship with her former solicitors, Hammond Legal. Given these difficulties I believe I should make orders which reduce the burden (Page 13)
of the taxation process. With this in my mind I believe justice is best served by making one single order for costs. Again, taking a broad approach, I believe it is reasonable to assume the total taxed costs of both parties would be the same. The difference in the percentages I have mentioned above [55% and 70%] is 15% in favour of the defendant. Accordingly, subject to an adjustment for disbursements, I believe I should make a single order that Ms Pecenka pay 15% of the defendant's costs. 29 I believe that in taxing costs no allowance should be included in the disbursements of the defendant for the evidence of Dr Connaughton who gave evidence on behalf of the defendant in relation to the right arm/shoulder injury claim. However, I am prepared to allow the defendant the full disbursements relating to the evidence of Dr Terace. Likewise, I believe an order in Ms Pecenka's favour should be made for the disbursements relating to the evidence presented through the witnesses Mr Honey and Dr Carroll [both of whom gave evidence on the right arm/shoulder claim] and two-thirds of the disbursements relating to the evidence of Dr Webster [who gave evidence on all three causes of action].
Reserved costs 30 The defendant has also sought an order that the plaintiff Ms Pecenka pay any reserved costs. Order 66 r 50 of the Rules of the Supreme Court 1971 provide that where the court reserves the costs of an interlocutory matter, those costs are not allowed to a party without an order of the court. 31 I gave liberty for both parties to file supplementary written submissions on this issue so as to identify and consider what orders had been made for reserved costs. Ms Pecenka filed a supplementary submission which did not address this issue but rather reiterated submissions concerning the Calderbank offer. The defendant also filed submissions but failed to identify any interlocutory order where an order was made that costs be reserved. However, the court records of the action indicate that on 7 July 2009 Registrar Kingsley at a directions hearing reserved costs of the appearance. On that date the plaintiff Ms Pecenka was granted an extension of time in which to serve expert reports. No submissions were presented by the defendant as to why these reserved costs should be awarded to the defendant in any event, but it would seem it is strongly arguable that as the deputy registrar granted Ms Pecenka an indulgence the costs should be awarded to the defendant. 32 The written submissions of the defendant referred to an outstanding costs application before his Honour Judge Eaton. On 13 November 2009 (Page 14)
his Honour heard an application by the plaintiff Ms Pecenka to vacate trial dates which had been set from 23 November 2009 to 11 December 2009. The application was made on the basis that Ms Pecenka was unrepresented (her previous solicitors CLP Legal had obtained an order declaring that they cease to act on behalf of Ms Pecenka) and due to her mental state she was unable to represent herself. His Honour granted an order vacating the trial dates but adjourned sine die the question of whether the defendant should be granted an order that Ms Pecenka pay to the defendant any costs thrown away by the vacating of the trial dates. The matter came back before his Honour on 10 December 2009 when he heard further submissions on the issue of the application by the defendant for costs thrown away by the adjournment of the trial, but his Honour further adjourned the matter. At no time did his Honour make an order that costs be reserved. It appears the costs application remained adjourned sine die part-heard by his Honour Judge Eaton. In my opinion, it would be inappropriate for me to make an award for the costs relating to the application to vacate the trial listed to commence on 23 November 2009, the application for costs having been part-heard by his Honour Judge Eaton. 33 The submissions of the defendant also referred to a number of interlocutory applications which came before the court prior to trial when orders were made that costs be in the cause. In light of the mixed result in relation to the three causes of action and the broad approach I have taken to award the defendant 15% of its costs of the action, I believe I should further order that any costs in the cause awarded during interlocutory proceedings be treated as costs of the action of the defendant. 34 I also believe in the exercise of a the wide discretion that exists in relation to costs, I should also order that the defendant's costs of the action include the reserved costs of 7 July 2009 and the costs of appearances subsequent to the delivery of my reasons for judgment on 2 November 2010.
Application for set-off 35 It is clear on the orders that I have made in relation to costs that the judgment sum of $20,000 will be reduced or extinguished following taxation of the costs that I have ordered. There will then be a diminished sum or no sum at all to be recovered by the plaintiff, Ms Pecenka. Pursuant to O 66 r 7 of the Rules of the Supreme Court 1971 an order may be made for a set-off of costs against the judgment amount: Macketic v Osmanbasic & Anor [2001] WADC 106 (Charters DCJ). (Page 15)
36 In the circumstances of this case I believe it is appropriate that I make an order for a set-off.
Summary of costs orders 37 Accordingly, I propose the following costs orders: 1. The defendant pay the disbursements of the plaintiff Ms Pecenka relating to the preparation of expert reports and the attendance at trial as follows: 2. The plaintiff Ms Pecenka pay the disbursements of the defendant relating to the report fees and attendance at trial fees of Dr Terace. 3. The plaintiff Ms Pecenka pay 15% of the costs of the action of the defendant, if not agreed, then taxed. 4. The costs of the action of the defendant to include: 5. The costs of the action of the defendant are not to include disbursements relating to the report fees and the attendance at trial fees of Dr Connaughton. 6. The plaintiff's liability to the defendant for costs as per these orders be set off against the payment of the judgment sum payable by the defendant and the defendant's liability for the plaintiff's disbursements as per these orders. 7. Execution on the judgment be stayed until costs as per the terms of this order are agreed or failing agreement, taxed. 8. There be liberty to apply in relation to the stay order.
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