Porter v Lachlan Shire Council No 2

[2006] NSWCA 252

NEW SOUTH WALES COURT OF APPEAL

CITATION:      Porter v. Lachlan Shire Council (No.2) [2006]  NSWCA 252

FILE NUMBER(S):
40227/05

HEARING DATE(S):            Dealt with on written submissions in Chambers

DECISION DATE:     14/09/2006

PARTIES:
James Stanley Porter - appellant
Lachlan Shire Council - respondent

JUDGMENT OF:      Beazley JA Giles JA Hodgson JA   

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S):        955/04

LOWER COURT JUDICIAL OFFICER:     Garling DCJ

COUNSEL:
Mr. B.J. Gross QC with Mr. D. Williams for appellant
Mr. D. Davies SC with Mr. S.McCarthy for respondent

SOLICITORS:
Matthews Williams, Parkes for appellant
Phillips Fox, Sydney for respondent

CATCHWORDS:
APPEAL
COSTS - Calderbank offer by defendant respondent - Whether appellant's refusal unreasonable - Whether indemnity costs should be ordered.

LEGISLATION CITED:

DECISION:
The costs payable by the appellant from 13 May 2005 be paid on an indemnity basis.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40227/05
DC 955/04

BEAZLEY JA
GILES JA
HODGSON JA

Thursday 14 September 2006

PORTER V. LACHLAN SHIRE COUNCIL (NO.2)

Judgment

1. BEAZLEY JA:  I have had the advantage of reading in draft the reasons of both Giles JA and Hodgson JA.

2. I agree with Giles JA that the respondent should have its costs on an indemnity basis from 13 May 2005.  Unfortunately for the appellant at trial, the witness upon whom he expected to be able to rely to prove knowledge in the respondent of the hole or depression in the footpath, did not give evidence to that effect.  Without that direct evidence, his case against the respondent was difficult.  I agree with Giles JA that the offer made by the respondent involved a real and significant element of compromise which should, in the exercise of discretion, be reflected in costs.

3. GILES JA:  The appellant was unsuccessful in proceedings against the respondent in the District Court, and was ordered to pay the respondent’s costs.  He appealed.  For reasons published on 24 May 2006, the appeal was dismissed and the appellant was ordered to pay the respondent’s costs of the appeal. 

4. The respondent applied for an order that its costs from 13 May 2005 be paid on an indemnity basis.  Directions were given for written submissions.  At least through his solicitors, the appellant was on notice of the application.  His solicitors were unable to obtain instructions, and submissions have not been received from the appellant.  The application should be decided in their absence.

5. The application was founded on an offer made by the respondent by a letter dated 14 April 2005, expressed to be made pursuant to the principles in Calderbank v Calderbank (1976) Fam 93. The respondent offered to bear its own costs incurred in respect of the District Court proceedings and the Court of Appeal proceedings to date if the appellant did not proceed with his appeal. The offer was open for acceptance until 5 pm on 12 May 2005.

6. The Calderbank offer did not entitle the respondent to costs on an indemnity basis, but in the exercise of the Court’s discretion costs on that basis from 13 May 2005 could be ordered if the appellant’s failure to accept the offer was unreasonable:  see the more detailed discussion of the principles in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, Leichhardt Municipal Council v Green [2004] NSWCA 341 and Chapman v Caska [2005] NSWCA 113.

7. There was a significant element of compromise in the offer: the respondent offered to give up the costs of the District Court proceedings to which it was entitled, and the appellate costs to which it would become entitled if the appeal was unsuccessful. If the appeal were successful, the appellant could have recovered damages provisionally assessed by the trial judge at $113,029, although there was a cross-appeal which could have led to a new trial and which challenged the assessment of damages. It was, however, a difficult appeal, requiring that the appellant overcome the trial judge’s application of s 45 of the Civil Liability Act 2002 either as a matter of construction or as to the trial judge’s finding that the respondent did not have actual knowledge of the risk which materialised. As appears from the reasons of 24 May 2006, the appellant’s submissions in this respect were not accepted and, while it can not be said that the appellant’s contentions were without substance, they held little prospect of acceptance.

8. In my opinion, the prospects of success in the appeal were such that it was unreasonable for the appellant not to accept the respondent’s offer, thereby alleviating his own existing and likely costs burden and avoiding the incurring of further costs on his own part and, more particularly, on the part of the respondent. The appellant was entitled to maintain his appeal, but if he wished to do so it should not have been at the expense of the respondent through the respondent incurring costs not recoverable on the ordinary basis of an order for costs. With the utmost respect to Hodgson JA, whose reasons I have had the advantage of reading in draft, I do not think that the question of the application of s 45 of the Civil Liability Act was more than arguable, and I am not persuaded that it was a point of general importance which the respondent or its insurer should have paid to have decided.

9. In my opinion, the further order should be made that the costs payable by the appellant from 13 May 2005 be paid on an indemnity basis.

10. HODGSON JA:  On 24 May 2006, this Court dismissed the appeal in this matter and ordered the appellant to pay the respondent’s costs of the appeal.  The respondent has now applied for an order that these costs be on an indemnity basis as from 13 May 2005. 

11. The basis of the application is an offer made by the respondent to the appellant on 14 April 2005, open for acceptance until 12 May 2005.  The offer was that the respondent bear its own costs of the District Court proceedings and the Court of Appeal proceedings to date, if the appellant discontinued its appeal; and the offer was stated to be pursuant to the principles of Calderbank v. Calderbank [1976] Fam. 93.

12. The respondent contends that this was a genuine compromise that was being offered; that it was unreasonable for the appellant not to accept it; and that accordingly, the Court should exercise its discretion in favour of ordering indemnity costs. 

13. I note first that it would not have assisted the respondent to have used the offer of compromise procedure provided by the Rules then in force.  While the procedure was available in proceedings in the Court of Appeal, offers of compromise by defendants (whether they be appellants or respondents) did not support orders for costs on an indemnity basis:  see Maitland Hospital v. Fisher (No.2) (1992) 27 NSWLR 721 at 726-7. (The position is now different under r.42.15 of the Uniform Civil Procedure Rules 2005.)

14. However, it is open to the Court to order indemnity costs, if it considers the appellant’s failure to accept the offer unreasonable. 

15. In this particular case, in my opinion such an order should not be made, for four reasons: 

    (1)The Rules do not provide for this consequence, where a plaintiff does not abandon a case because of a defendant’s offer of compromise which offers to forego costs previously ordered in the defendant’s favour.

    (2)The appeal raised a point not previously decided, which had support from the literal wording of the relevant statute, albeit that this Court considered the intention disclosed by the statute to be otherwise; and the appeal was reasonably arguable. 

    (3)In those circumstances, I do not think it can be said that the appellant/plaintiff unreasonably caused the respondent to incur the costs of the appeal.

    (4)The respondent, and presumably its insurer, has by this appeal secured a judicial determination in its favour of a point of some general advantage to it. 

16. For those reasons, I would not change the order previously made.

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LAST UPDATED:            14/09/2006