South Sydney Council v Walsh (No 2) - [2003] NSWCA 111

NEW SOUTH WALES COURT OF APPEAL

CITATION: South Sydney Council v Walsh (No 2) [2003] NSWCA 111

FILE NUMBER(S):
40501/02

HEARING DATE(S): On written submissions

JUDGMENT DATE: 22/05/2003

PARTIES:
South Sydney Council (Appellant)
William J Walsh (Respondent)

JUDGMENT OF: Ipp JA Foster AJA Bell J

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 5709/98

LOWER COURT JUDICIAL OFFICER: Coorey DCJ

COUNSEL:
G Curtin (Appellant)
J Poulos QC/H Silvester (Respondent)

SOLICITORS:
Phillips Fox (Appellant)
Sparke Helmore (Respondent)

CATCHWORDS:
COSTS - Indemnity costs in appeals - Offer of compromise - Part 19A of the District Court Rules - General principles applicable to indemnity costs in appeal. ND

LEGISLATION CITED:
Supreme Court Rules, Pt 52A r 22(4)
District Court Rules, Pt 19A

DECISION:
The appellant to pay the costs of the appeal on an indemnity basis.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40501/02
DC 5709/98
IPP JA
FOSTER AJA
BELL J
Thursday, 22 May 2003

SOUTH SYDNEY COUNCIL v WILLIAM J WALSH

Judgment (On Costs)

IPP JA: The respondent was the defendant in a District Court action brought against him by Bao Xin Yuan for damages for personal injury. The respondent settled Mr Yuan’s action for the sum of $500,000 inclusive of his costs and cross-claimed against the appellant for that sum.
The trial judge held that, had Mr Yuan sued the respondent and the appellant, both would have been liable to him as joint tortfeasors. His Honour apportioned damage on the basis that the appellant was 60% responsible and the respondent 40% responsible.
The appellant appealed against this decision and, by judgment delivered on 24 April 2003, this Court dismissed the appeal. Since then the parties have exchanged written submissions as to the costs of the appeal. The respondent contends that the appellant should pay his costs of the appeal on an indemnity basis. The appellant resists this order.
On 26 June 2001, before the completion of the trial in the District Court, the respondent served on the appellant an offer of compromise for a verdict for the respondent in the sum of $250,000 plus costs. The verdict that the respondent in fact obtained against the appellant in the District Court (60% 0f $500,000) represented an amount of $300,000 (which included an unspecified figure in respect of costs).
The respondent submitted that the offer of compromise “remains substantially less than the verdict obtained”. The appellant, in its written submissions, did not dispute that the respondent’s offer was substantially less than the verdict delivered by the trial judge.
In consequence of the respondent’s offer of compromise, the trial judge ordered that the appellant pay the respondent’s costs of the trial on a party/party basis to the date of the offer and thereafter on a solicitor/client basis.
The respondent submitted that his offer of compromise, in substance, was the same as an offer of compromise to which Pt 52A r 22(4) of the Supreme Court Rules applied. In the alternative, the respondent contended that this Court, in the exercise of its general discretion as to costs, should order that the appellant pay the costs of the appeal on an indemnity basis. It is only necessary to deal with the latter contention.
The appellant submitted that the principles ordinarily applicable to indemnity costs in appeals, as discussed in Huntsman Chemicals CoAustralia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242, were apposite. The appellant relied for this submission on Gray Constructions Pty Ltd v Hogan (No 2) [2000] NSWCA 68. The appellant contended that, on the basis of the Huntsman Chemical Co Australia Ltd principles, there was no reason not to make the usual order in regard to costs.
In Gray Constructions Pty Ltd, the appellant was the plaintiff in the District Court and was successful in its appeal against the judgment delivered by the trial judge. The appellant had made an offer of compromise pursuant to Pt 19A of the District Court Rules. That offer was less favourable to the appellant than the judgment which it ultimately obtained in consequence of its successful appeal. Accordingly, Mason P (with whom Sheller JA and Heydon JA agreed) ordered that the respondent pay the costs of the trial on a solicitor and client basis. His Honour then dealt with the appellant’s claim that the costs of the appeal be paid by the respondent on a solicitor and client basis. The learned President explained the basis of the appellant’s claim. He said:
“In effect it relies upon the respondent’s continued intransigence in resisting the appellant’s claim, including the way in which it conducted the proceedings in this Court by effectively confessing the trial judge’s error and seeking to avoid the consequences by advancing alternative grounds for supporting”.
Applying the principles referred to in Huntsman Chemicals Co Australia Ltd, the court ordered that the respondent pay the appellant’s costs of the appeal, but not on a solicitor and client basis.
No reference is made in the judgment of Mason P to any argument by the appellant based on the offer of compromise being a relevant factor for the purposes of determining the costs of the appeal. I infer from the absence of any such reference that the appellant in Gray Constructions Pty Ltd did not place any reliance on the offer of compromise. This explains why the Court did not take the offer of compromise into account and decided the question by reason of the principles referred to in Huntsman Chemicals Co Australia Ltd alone.
Accordingly, Gray Constructions Pty Ltd cannot be regarded as authority for the proposition that liability for the costs of an appeal in a case such as the present is to be determined solely by the general principles discussed in Huntsman Chemicals Co Australia Ltd.
It is now generally accepted that an offer of compromise made prior to the delivery of judgment by the trial judge continues to have cost consequences for an appeal: Ettingshausen v Australian ConsolidatedPress Limited (1995) 38 NSWLR 404 at 410; Fotheringham vFotheringham (No 2) (1999) 46 NSWLR 194 at 205.
In my view the paramount factor determinative of the costs issue is that the respondent’s offer of compromise was substantially less than the verdict obtained at trial and the appellant was entirely unsuccessful in the appeal. This is not a case where the appellant had some success on appeal, albeit insufficient to improve on the offer (cf. Moore v Woodforth (No2) [2003] NSWCA 46 and Diamond v Simpson (No 2) [2003] NSWCA 78).
In my view, the remarks of Stein JA in Diamond v Simpson (No 2) are of application. There, he said,:
“In my opinion that the law provides that an offer of compromise made at trial continues in existence for the purposes of consideration as a factor on the appeal, presents to a potential appellant a risk which must be taken into account. The underlying reason for the rules relating to offers of compromise, and this is exemplified by Ettingshausen, is encourage parties to, very strongly consider compromise and to avoid further litigation if they are able to do so”.
Although I differed from Stein JA in the result in Diamond v Simpson (No2), I did so on the ground that the appellant was substantially successful in the appeal (by some $3.2m). In the present case, as I have emphasised, the appellant was entirely unsuccessful.
In the circumstances, I would order the appellant to pay the costs of the appeal on an indemnity basis.
FOSTER AJA: I agree with Ipp JA.
BELL J: I agree with Ipp JA.

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LAST UPDATED: 22/05/2003