Spence v Neilson (No 2)
[2018] ACTSC 344
•18 December 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Spence v Neilson (No 2) |
Citation: | [2018] ACTSC 344 |
Hearing Date: | Determined on written submissions |
DecisionDate: | 18 December 2018 |
Before: | Mossop J |
Decision: | See [25] |
Catchwords: | COSTS – Application for special costs order – Offer of compromise – Calderbank offer – Court Procedures Rules 2006 (ACT), r 1012 – whether defendant is entitled to a special costs order – defendant entitled to costs order consistent with r 1012 – no order as to costs of application for costs where defendant’s claim was unrealistic |
Legislation Cited: | Court Procedures Rules 2006 (ACT), rr 1012, 1012(2) |
Cases Cited: | Spence v Neilson [2018] ACTSC 273 Taheri v Vitek (No 2) [2014] NSWCA 344 |
Parties: | Colleen Spence (Plaintiff) Wendell Neilson (Defendant) |
Representation: | Counsel A Muller (Plaintiff) K Oldfield (Defendant) |
| Solicitors Slater and Gordon (Plaintiff) Ken Cush and Associates (Defendant) | |
File Number: | SC 170 of 2017 |
MOSSOP J:
Introduction
On 12 October 2018 I ordered that there be judgment for the defendant on the plaintiff’s claim for personal injuries: see Spence v Neilson [2018] ACTSC 273 (primary judgment). The plaintiff’s claim arose out of varicose vein stripping surgery conducted by the defendant. I found that the particularised grounds of negligence were not made out. Had they been made out, then I would have been satisfied that the condition in the plaintiff’s hip and buttock were a consequence of the surgery, although any damages would have had to have been subject to a substantial discount because of the risk that those conditions would have arisen in any event.
At the time of giving judgment I made an order that the plaintiff was to pay the defendant’s costs of the proceedings but permitted an application for a different order within 14 days. The defendant seeks an order that the plaintiff pay the defendant’s costs of the proceedings:
(a)on a solicitor and client basis up to 5pm on Monday, 16 July 2018; and
(b)on an indemnity basis from 5pm on Monday, 16 July 2018.
The date of 16 July 2018 is identified because that is the date upon which the relevant offers made by the defendant expired.
Both offers were made on 20 June 2018, approximately one month after a mediation had been conducted. One was an offer of compromise under the Court Procedures Rules 2006 (ACT) (the Rules). The other was a Calderbank offer. The offers were in substantially the same terms.
The offer of compromise offered that there be judgment for the defendant and no order as to costs of the proceedings. It was open for a period of 28 days. The Calderbank offer made the same offer and was also open for that period. It contained some further explanation of the reasons for the offer based upon the expert evidence.
It may be inferred from the time at which the offers were made that the defendant had incurred substantial costs in relation to the proceedings and, therefore, they did involve an element of compromise sufficient to serve the public policy of encouraging settlement: cf Taheri v Vitek (No 2) [2014] NSWCA 344 at [10].
Rule 1012 has the effect that, because the judgment on the claim was no less favourable to the defendant than the terms of the offer, he is entitled, unless the court orders otherwise, to have his costs assessed on a party and party basis up to the date of the offer and on a solicitor and client basis from the following day.
Submissions
Not content with this favourable outcome, the defendant contended that the prima facie costs entitlement under r 1012 of the Rules should be departed from by the court ordering otherwise in two respects:
(a)in the period prior to the offer by increasing the entitlement to costs from party and party costs to solicitor and client costs;
(b)in the period after the offer by increasing the entitlement to costs from solicitor and client costs to indemnity costs.
So far as the period prior to the offer was concerned, the defendant submitted that the following factors should cause the court to make an order in his favour on a solicitor and client basis:
(a)the offer of compromise was made after the parties had completed service of their primary liability evidence;
(b)the court should infer that the plaintiff’s decision to pursue the proceedings in the face of “unresolved issues on breach and causation” was made with the benefit of considered and informed legal advice.
(c)the offer involved a genuine compromise of significant legal costs incurred up to date three months prior to the trial, in circumstances where significant further costs would be incurred.
(d)the defendant had a personal and professional reputational stake in the proceedings and the plaintiff had chosen to fully litigate the claim “which on her own expert evidence could not succeed”.
The submissions then suggested it would be “unfair” for the court not to exercise its discretion to ensure that, “he can recover the significant costs he has incurred in defending the proceedings where he had no option to do so given his personal reputation was at stake”.
So far as the period after the offer was concerned, the defendant placed reliance upon the Calderbank offer and submitted that the failure to accept the Calderbank offer should lead to an order on an indemnity basis in relation to the period after the expiry of the offer. The defendant submitted that the plaintiff’s rejection of the Calderbank offer was unreasonable and that, therefore, an order even more favourable than that available under the Rules should be made in relation to the period after the offer.
In support of the proposition that the rejection of the offer was unreasonable the defendant pointed to the late stage of the proceedings at which the offer was made, that pleadings had closed and all particulars had been provided, that the plaintiff did not advise the defendant that she was not able to assess the offer, that the offer foreshadowed application for indemnity costs, that the offer was clear, that the offer was left open for a reasonable time, that the compromise offered was significant, that the parties had served all primary expert liability reports and that the parties had attended mediation. He also pointed to the fact that during the currency of the offer, the plaintiff obtained a supplementary report from Professor Spigelman which left it open that a reasonable surgeon might have performed the surgery, identified that the injury alleged was not a known risk of the surgery and did not suggest a specific mechanism by which the injury may have occurred. The submissions suggested that the plaintiff never identified a specific mechanism of her injury and that this “represented an insurmountable hurdle for the plaintiff in relation to factual causation”. The submissions state that: “This was the finding ultimately made by the Court”.
The plaintiff also submitted that the court should “otherwise order” and submitted that the appropriate order was that the plaintiff pay the defendants costs on a party and party basis, that is, that the order made at the time of judgment should stand.
The plaintiff submitted that:
(a)the judgment of the court accepted that the plaintiff suffered an injury as a consequence of the subject surgery and that the contingent award of damages reflect the significance of the injury and its impacts upon the life of the plaintiff;
(b)the offer of compromise was, in effect, a walk away offer and that the court has previously held that a demand that a party capitulate may be viewed as an offer that was not unreasonable to reject.
The plaintiff submitted that: “The issue is ultimately whether in all the circumstances it was unreasonable for the Plaintiff to reject the Defendant’s offer to walk away”. The plaintiff submitted that in making its offer of compromise the defendant did not give something away.
The defendant filed submissions in reply on costs. It is unnecessary to summarise those further submissions.
Consideration and decision
Prior to the introduction of the regime for offers of compromise, practitioners in the Territory could use Calderbank offers to obtain a more favourable costs outcome but only in circumstances where it could be demonstrated that the conduct of the party against whom a more favourable costs order had been sought was unreasonable. That was sometimes an involved exercise that required consideration of the detailed circumstances of the case. The introduction of the regime for offers of compromise should have simplified the manner in which costs could be dealt with because the more favourable costs outcomes are defined by the rules unless the court “orders otherwise”. Those rules formalise the costs mechanisms by which the Court encourages parties to give close attention to the hazards of litigation and the desirability of compromise of proceedings. They should make the costs consequences of offers more certain and, hence, reduce the occasions on which the court needs to give separate consideration to more favourable than usual costs orders.
Where a defendant obtains a judgment in the defendant’s favour then the costs consequences in personal injury proceedings are the same as in other classes of proceedings. That contrasts with the position where the plaintiff obtains a judgment in the plaintiff’s favour where the costs consequences differ as between personal injury proceedings and other proceedings. Those differences are designed to reflect the economic reality for litigants in the Court and the different levels of incentives necessary to encourage proper consideration of compromise.
In the present case the failure to accept the offer of compromise made by the defendant gave the defendant a prima facie entitlement to costs on a solicitor and client basis from the day after the offer was made: r 1012(2). The matters put forward by the plaintiff are not matters which would provide a proper basis upon which the court would otherwise order. Sympathy for the personal circumstances of a plaintiff who has been unsuccessful in a personal injury claim is, without more, not a proper basis for departing from the regime in the Rules.
That leaves the submissions of the defendant that the court should “order otherwise”. In short, the matters pointed to by the defendant quite clearly do not provide an appropriate basis for making an order even more favourable to the defendant than that provided for by the Rules.
So far as the period prior to the offer is concerned, the matters pointed to do not go beyond facts consistent with a proper offer of compromise. While the submissions appeared to suggest that the plaintiff’s own expert evidence indicated that she could not succeed that is not, in my view, a fair assessment of the evidence. It cannot be characterised as a case which should not have been run. The defendant’s submission to the effect that it would be unfair for the court not to ensure that he can recover the costs involved in defending the proceedings because his personal reputation was at stake, were drafted in a manner so as to imply that the defendant personally had been required to incur significant costs defending the proceedings and that this gave rise to some unfairness. There was no evidence as to the extent to which he was personally responsible for those costs or the extent to which an insurer was involved in the defence of the claim. In the absence of evidence that there was no insurer, I am not prepared to draw the implication which arises from the language used in the submission.
Similarly, in relation to the period after the offer of compromise, the making of a Calderbank offer is not logically a matter which would give a greater entitlement to costs than the costs available under the Rules. The various matters pointed to about the terms of the offer simply go to demonstrate that there was a proper offer on foot. They do not disclose any circumstance out of the usual or any reason why the court should make an order even more favourable than that provided for by the Rules. In so far as the defendant relied upon the content of the report by Professor Spigelman, that report did not, in my view, indicate that it was unreasonable for the plaintiff to pursue her claim in the manner that she did. The submissions suggested that the court ultimately found that the plaintiff could not establish factual causation. That is not correct. Factual causation was found to have been established, although in a manner which would have substantially reduced the damages recoverable: see [145], [151] of the primary judgment.
In summary, the position is that no departure from the costs consequences identified in r 1012 is justified in the circumstances of this case.
Costs of the application
So far as the costs of the application in relation to costs are concerned, I consider that there should be no order as to costs. The usual position would be that the cost of such an application are treated in the same manner as the costs of the proceedings generally. In the circumstances of this case, I consider that there should be no order as to costs because, in my view, the approach taken by the defendant in relation to costs reflected an unrealistic claim in circumstances where the defendant had a good entitlement under the Rules to a more favourable than usual costs order. Instead of claiming the more favourable than usual costs allowed to him under r 1012, the defendant has gone further than that to seek orders which, in my view, were clearly not justified in the circumstances. Parties who anticipate an entitlement to costs of an application such as this should not thereby be encouraged to increase their costs by making ambitious claims in the expectation that they are likely in any event to recover those costs. To award costs of this application would to be encourage parties to exploit the strength of their position without considering the reasonableness of their claims in the light of the Rules.
Order
The order of the court is:
1. Orders 2 and 3 made by the Court on 12 October 2018 are discharged and the following orders are made:
“2. The plaintiff is to pay the defendant’s costs in relation to the claim to be assessed on a party and party basis up to and including 20 June 2018 and thereafter is to pay the defendant’s costs on a solicitor and client basis.
3. Despite order 2, there is no order as to costs in relation to the application to vary the costs order made by the Court on 12 October 2018.”
| I certify that the preceding twenty-five [25] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: 18 December 2018 |
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