South Western Sydney Local Health District v Gould (No 2)

The appeal concerned an application for special costs orders following a District Court proceeding and a subsequent appeal. The plaintiff, South Western Sydney Local Health District, sought to recover costs from the defendant, Mr. Gould, on an indemnity basis from a certain date, arguing that an offer of compromise made by the defendant was not accepted. The defendant, in turn, sought to recover his costs on an indemnity basis from the same date. The Court of Appeal was asked to determine whether the defendant's offer of compromise warranted a special order as to costs and whether a gross sum costs order was appropriate.

The central legal issue was whether the defendant's offer of compromise, made pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 20.26, was of such a nature that it justified a departure from the ordinary rule that costs follow the event. Specifically, the court had to consider if the offer was a genuine attempt to resolve the litigation and if its rejection by the plaintiff was unreasonable, thereby warranting an order for indemnity costs in favour of the defendant from the date the offer was made. The court also considered the appropriateness of a gross sum costs order in the circumstances.

The Court of Appeal found that the defendant's offer of compromise was a genuine offer that ought to have been accepted by the plaintiff. The court reasoned that the plaintiff's rejection of the offer was unreasonable, particularly in light of the subsequent outcome of the litigation. Applying the principles governing offers of compromise, the court determined that the defendant was entitled to an order for indemnity costs from the date of the offer. The court also found that a gross sum costs order was not appropriate in this instance. Consequently, the plaintiff was ordered to pay the defendant’s costs in the District Court proceeding on an ordinary basis until 25 May 2015, and thereafter on an indemnity basis. The appellant’s costs of the appeal were also ordered to be paid on an indemnity basis, including the costs of the motion.