Penrith City Council v Parks (No 2)
[2004] NSWCA 381
•1 November 2004
CITATION: Penrith City Council v Parks (No 2) [2004] NSWCA 381 HEARING DATE(S): (On written submissions) JUDGMENT DATE:
1 November 2004JUDGMENT OF: Giles JA; Cripps AJA; McClellan AJA DECISION: (1) Refuse leave to appeal as to the judge's costs order. (2) Opponent pay the claimant's costs of the appeal; (3) If otherwise entitled, the opponent have an indemnity certificate pursuant to s 6 of the Suitors Fund Act 1951. CATCHWORDS: Costs - whether order for solicitor/client costs pursuant to District Court rules inconsistent with provisions in Pt 11 Div 5B of Legal Profession Act 1987 - not inconsistent - whether inconsistent with provisions in Pt 11 Div 6 not argued - Calderbank offer made pending appeal - whether should bring enhanced costs on appeal - no enhancement. D CASES CITED: Diamond v Simpson (No 2) [2003] NSWCA 78;
Ettingshausen v Australian Consolidated Press (1995) 38 NSWLR 404;
Fotheringham v Fotheringham (No 2) (1998) 46 NSWLR 194;
Jones v Bradley (No 2) [2003] NSWCA 258;
SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 232.PARTIES :
Penrith City Council - Appellant
May Elizabeth Parks - RespondentFILE NUMBER(S): CA 40586/03 COUNSEL: M Joseph SC & N Chen - Appellant
P Frame - RespondentSOLICITORS: Tress Cocks Maddox - Appellant
Lamrocks - Respondent
LOWER COURTJURISDICTION: District Court LOWER COURT FILE NUMBER(S): DC 136/02 (Penrith) LOWER COURT
JUDICIAL OFFICER :Delaney DCJ
CA 40586/03
DC 136/02 (Penrith)Monday 1 November 2004GILES JA
CRIPPS AJA
McCLELLAN AJA
1 THE COURT: These reasons are supplementary to reasons published on 21 June 2004.
2 The opponent was injured when she tripped and fell on a concrete footpath. Delaney DCJ found that the claimant was liable and assessed damages of $76,530. There was some confusion as to what order for costs was made, to which we will come. The claimant applied for leave to appeal to this Court with respect to liability, damages, and the order for costs.
3 At the hearing of the application, which was on full submissions as if on appeal, we received argument on liability and quantum and in part on the order for costs. The confusion as to the order for costs became apparent. Depending on the decision on liability and quantum, the discretion as to costs could be re-exercised in any event. The application with respect to the order for costs was deferred for later consideration so far as necessary.
4 We refused leave to appeal with respect to liability. Leave to appeal was granted with respect to quantum and the appeal was upheld, but only as to non-economic loss and not as to future economic loss. The damages were reduced to $29,030. Directions were given for written submissions on the application with respect to the order for costs, and on the costs orders we should make.
The application with respect to the order for costs
5 The claimant’s argument at the hearing, so far as it went, presupposed an order for costs on an indemnity basis consequential upon an offer of compromise. The papers did not include the offer, the order made by the judge, or the judge’s reasons for making it. The argument was that, by force of s 198F of the Legal Profession Act 1987 (“the Act”), the judge was not able to order that the claimant pay on an indemnity basis costs incurred by the opponent prior to the making of the offer.
6 The Civil Liability Act 2002 amended the Act so as to regulate the legal costs which may be recovered in connection with any claim for damages for personal injury (see s 3). Following the amendments, s 198D provided a limitation on the costs which could be recovered when the amount of the verdict did not exceed $100,000. In that event, the costs for legal services provided were fixed at 20 per cent of the amount recovered or $10,000, whichever was the greater. By way of exception, if a reasonable offer of compromise was not accepted s 198F permitted costs to be awarded “to be assessed on an indemnity basis in respect of legal services provided after the offer is made” (emphasis added). The parties agreed that the amendments applied to the making of the judge’s order for costs. The claimant argued that the judge could only make an order for indemnity costs pursuant to s 198F, and that the order therefore had to be confined to costs incurred after the making of the offer.
7 The claimant did not with its written submissions supplement the papers in any of the respects previously mentioned. In the written submissions it complained that the judge erred “when he ordered the claimant to pay the opponent’s costs of the proceedings, on a solicitor and client basis, pursuant to Part 39A rule 25 of the District Court rules”. The change from an order for costs on an indemnity basis to an order for costs on a solicitor and client basis should be noted, although it does not seem to have impacted on the parties. It was said that Part 11 Div 5B of the Act, comprising ss 198C-198I, was a code regulating the nature and amount of costs recoverable in any claim for damages for personal injury, and that the judge could not make an order for costs outside its terms and under s 198F “was only empowered to make an order for costs to be assessed on an indemnity basis in respect of legal services provided ‘after the offer was made’.”
8 The Associate’s note on the District Court file is that the claimant was to pay the opponent’s costs “on solicitor client basis”. At our request, a copy of the offer of compromise was provided, being a letter dated 2 April 2003 by which the opponent offered ”the sum of $22,500 plus costs to be agreed or assessed and inclusive of treatment expenses incurred by date”. We still do not know the judge’s reasons for making the order for costs.
9 It appears that the judge made the order for costs with Pt 39A r 25 of the District Court Rules in mind. Part 39A r 1 provided that the Part applied subject to the Act. Part 39A r 25(4) provided that a plaintiff who obtained a judgment no less favourable than the plaintiff’s unaccepted offer of compromise was entitled, save in an exceptional case and for the avoidance of substantial injustice, to an order for costs in respect of the claim assessed on a solicitor and client basis.
10 Section 198D of the Act imposed a ceiling on the amount of costs. It did not prevent an award of costs on any given basis, although the maximum recoverable costs assessed on any basis would be 20 per cent of the amount recovered or $10,000, whichever was the greater. Section 198F permitted an award of costs which could on assessment exceed the ceiling amount, although the excess could come only from assessment on an indemnity basis in respect of legal services provided after the offer of compromise was made. This was not a code precluding an order for costs on a solicitor and client basis. Consistently with it, such an order could be made, although the costs assessed on that basis could not exceed the ceiling.
11 The judge’s order did not conflict with s 198D. It may be that solicitor and client costs would come closer to or reach the ceiling when costs on the ordinary basis would not have done so. It may be that costs on the ordinary basis would also have reached the ceiling, so that the solicitor and client basis gave the opponent nothing more. That, however, was not to the point of the claimant’s argument.
12 Nor did the judge’s order offend s 198F, since it was not an order for indemnity costs.
13 Part 11 Div 6 of the Act, regulating how costs were to be assessed, provided in substance for fair and reasonable costs (s 208F), while recognising costs on an indemnity basis (ss 208F(3), 208I). The solicitor and client basis was not mentioned. However, the assessment of fair and reasonable costs was to be made “in accordance with the operation of the rules of the relevant court or tribunal that made the order for costs” (s 208F(1A)).
14 Part 11 Div 6 was introduced by amendment to the Act in 1993. The District Court Rules were amended as from 1 January 1998 to provide in Pt 39A r 25(4) and (4A) for the sanction of solicitor and client costs for the whole of the proceedings, rather than the sanction of indemnity costs from the date of the unaccepted offer. This was a deliberate change in the incentive to make reasonable offers of compromise, see Practice Note 42 fifth paragraph. Solicitor and client costs were distinguished from costs on a party and party basis, see Pt 39A r 25(5) and (6), with solicitor and client costs expressly not to include the amount of any surcharge on costs provided by a costs agreement (Pt 39A r 5A). The claimant did not argue that the amendments to the Rules were ineffective to the extent that the regime under Pt 11 Div 6 of the Act precluded an order for costs on a solicitor and client basis.
15 The claimant’s argument was misconceived. For some reason the opponent conceded that, by virtue of ss 198D and 198F of the Act, the judge should have ordered costs on a party and party basis to the date of the offer of compromise and on an indemnity basis in respect of legal services provided thereafter. The opponent appears to have shared the misconception, and the concession should not be accepted. Leave to appeal with respect to the judge’s order for costs should be refused.
The costs orders we should make
16 The judge made the order for costs having assessed damages of $76,530. Under s 198D of the Act the ceiling for costs was $15,306, and the solicitor and client costs could go to the ceiling where it may be that costs on the ordinary basis would not have done so. The damages now being $29,030, the ceiling is $10,000.
17 It was not suggested that we should therefore re-exercise the judge’s discretion as to costs. It remained that the opponent recovered more than the amount of the offer of 2 April 2003, so that the opponent was entitled to the order made by the judge. One of the remarkable things in this case was that we were given no information as to the costs significance of the order made by the judge rather than an order for indemnity costs from 2 April 2003, or of the effect of either ceiling. Since we were not favoured with the judge’s reasons, we do not know whether the change in the ceiling was material. In the circumstances, the judge’s order for costs should be left as it is. This may work in favour of the claimant rather than the opponent.
18 On 19 September 2003 the claimant made an offer to the opponent, the proceedings by then awaiting a hearing in this Court. The offer, which was made as a Calderbank offer, was in the terms -
“1. Judgment of his Honour Delaney DCJ in the District Court be set aside.
3. The claimant/defendant pay to the opponent/plaintiff the sum of $33,500 plus costs of the District Court proceedings as agreed or assessed.”2. The claimant’s application for leave to appeal (and any response thereto or cross-appeal) be discontinued with each party to bear its own costs.
19 The offer was in some respects unclear. Was the judge’s order for costs to be set aside? Were the costs to be agreed or assessed on a solicitor and client basis? Depending on the answers, and on what costs on the ordinary basis would be, the claimant probably obtained in this Court a better result than its offer. That can not be said with confidence, and no attempt was made to demonstrate the position one way or the other.
20 The submissions as to the costs of the appeal took a curious course. The partially successful claimant said that it would await the opponent’s submissions and address them in reply. It made no mention of the Calderbank offer. The opponent’s submissions disclosed the Calderbank offer – one would have thought the claimant would have relied on it in the first instance – and gave reasons why it should not “give rise to a costs penalty”. The reasons assumed a costs penalty by way of costs on an indemnity basis. Suggesting also that the claimant had succeeded on only one of three “broad points”, the opponent said that each party should bear its costs of the appeal. In reply, the claimant said that the opponent should pay its costs of the appeal. Although saying that the appeal “was necessitated by the opponent’s failure to accept the claimant’s pre-appeal offer”, the claimant did not specifically submit that it should have costs on an enhanced basis.
21 It should be taken that the claimant asked for costs on an indemnity basis. The opponent’s reasons included that the making of a Calderbank offer did not automatically lead to an enhanced order for costs, referring amongst other cases to SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 232. In that case it was said at [37] -
- “37 The Council was also entitled to orders that the Third Party Defendants pay its costs unless the court otherwise ordered: Pt 39 r 1A. The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank (1976) Fam 93), where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure: see for example, John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 52 FLR 201; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FLR 235.”
22 SMEC Testing Services Pty Ltd v Campbelltown City Council has been materially accepted as taking the correct approach in Jones v Bradley (No 2) [2003] NSWCA 258.
23 The opponent said that the offer of compromise of 2 April 2003 continued to have relevance, referring to Diamond v Simpson (No 2) [2003] NSWCA 78 at [10]; see also Ettingshausen v Australian Consolidated Press (1995) 38 NSWLR 404 and Fotheringham v Fotheringham (No 2) (1998) 46 NSWLR 194. She said that -
- “ … in the circumstances of the case, namely the original offer of compromise that could have settled the litigation, and the respondent’s failure upon the significant issues before the court, the appropriate costs order is that each part to bear its own costs of the appeal.
24 The claimant failed to accept the offer made by the opponent before the trial. It failed in this Court on liability and future economic loss, succeeding only on non-economic loss. These matters are all relevant to whether an order for costs on an indemnity basis is appropriate. If the claimant had accepted the original offer, neither party would have incurred further costs. The opponent’s expectations were no doubt raised by the amount awarded by the trial judge, and if the claimant achieved a better result than its offer the success was relatively modest. We consider that the appropriate order is that the claimant have an order for the costs of the appeal, but confined to costs on the ordinary basis.
25 In our opinion the appropriate orders further to the orders made on 21 June 2004 are -
1. Refuse leave to appeal as to the judge’s costs order.
2. Opponent pay the claimant’s costs of the appeal.
3. If otherwise entitled, the opponent have an indemnity certificate pursuant to s 6 of the Suitors Fund Act 1951.
Last Modified: 11/01/2004
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