Stevanovic v McIndoe (Costs)

[2011] NSWDC 43

District Court

New South Wales

Medium Neutral Citation:

Stevanovic v McIndoe (Costs) [2011] NSWDC 43

Hearing dates:

In chambers on written submissions

Decision date:

31 January 2011

Jurisdiction:

Civil

Before:

Judge Peter Johnstone

Decision:

1. Application for indemnity costs refused.

2. Defendant to pay the plaintiff's costs of this application, on the ordinary basis.

Catchwords:

COSTS - application for indemnity costs following service of an Offer of Compromise

Legislation Cited:

Civil Procedure Act 2005
Uniform Civil Procedure Rules 2004

Cases Cited:

Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12
Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109
East West Airlines Limited v Turner (No 2) [2010] NSWCA 159
Equity 8 Pty Ltd v Shaw Stockbroking Ltd [2007] NSWSC 503 at [42]
King Network Group Pty Ltd v Club of Clubs Pty Ltd (No 2) [2009] NSWCA 204
Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 33
Morgan v Johnson (1998) 44 NSWLR 578
Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Co Pty Ltd [2001] NSWCA 461
Sedrak v Starr [2010] NSWCA 228
South Eastern Sydney Area Health Service v King [2006] NSWCA 2

Category:

Costs

Parties:

Velinka Stevanovic (Plaintiff)
William McIndoe (Defendant)

Representation:

Mr N Ghabar (Plaintiff)
Mr A Black SC (Defendant)
Anthony Macri (Plaintiff)
Holmann Webb (Defendant)

File Number(s):

CourtLink number: 10/100208

Judgment

The costs application

1. I delivered written reasons for judgment in the substantive proceedings on 19 November 2010 in which I directed the entry of judgment in favour of the plaintiff against the defendant for $338,034.75. I ordered the defendant to pay the plaintiff's costs, on the ordinary basis, but gave leave to the parties to apply for some other costs order. The defendant applied for an order that the plaintiff pay his costs on an indemnity basis from 29 October 2010. That application is opposed.

1. T he basis for the application is an Offer of Compromise served on 29 October 2010 in which the defendant offered to compromise the plaintiff's claim for $340,000.00. Where a plaintiff obtains a result less favourable than the terms of an offer of compromise made by the defendant, the defendant has a prima facie entitlement to indemnity costs from the date of the offer: UCPR r 42.15.

The proceedings

1. The plaintiff was injured on 21 May 2007 when a van driven by the defendant collided with her causing injuries. She commenced proceedings by filing a Statement of Claim alleging negligence by the defendant. The defendant filed a Defence and denied any negligence. Alternatively, he alleged contributory negligence.

1. The defendant served the offer of compromise on 29 October 2010, some 11 days prior to trial. The offer of compromise was in the following terms:

"The Defendant offers to compromise the Plaintiff's claim in the following manner:

(1)   By making payment of the sum of $340,000.00 plus costs on a fu ll and final basis.

(2) This offer is made in accordance with Section 20.26 of the Uniform Civil Procedure Rules 2005."

1. The plaintiff failed to accept the offer.

1. The proceedings went to trial on 9, 10 and 11 November 2010, following which I reserved judgment. I delivered the reserved judgment on 19 November 2010.

1. I found that the conduct of the defendant was in breach of his duty of care, as a result of which the plaintiff was injured. I also found that the plaintiff failed to take reasonable care for her own safety and was guilty of contributory negligence and that in the circumstances of this case it was just and equitable that the damages recoverable by the plaintiff be reduced by 25%.

1. I assessed the plaintiff's total damages in an amount of $450,713.00 from which I deducted $112,678.25 in respect of my finding of contributory negligence. I directed the entry of judgment for the balance, namely $338,034.75.

The plaintiff's submissions

1. Written submissions were made on behalf of the plaintiff, in which the application was opposed on two bases: firstly, the defendant's offer was not a proper offer of compromise within the meaning of r 20.26; and secondly, in the alternative, there are exceptional circumstances for not making the order sought.

1. In support of the first submission, the plaintiff pointed to the wording of the offer of compromise and contended that it was not an offer made "exclusive of costs" as required by r 20.26. The offer, which was expressed to be "plus costs on a full and final basis", did not detail how costs would be determined and on what basis costs might be further dealt with. It did not advert in the usual sense to the practice that costs could be later agreed or assessed. The offer made was inclusive of an additional amount for costs but did not specify either that amount or how that amount would be determined or calculated.

1. In my view, the offer made was self - evidently exclusive of costs. The rules do not require that the offer detail how the costs were to be determined and on what basis. Those were matters that the plaintiff, properly advised by competent lawyers, would be aware of, having regard to the relevant principles and the relevant rules, such as r 42.2.

1. In my view the offer of compromise complied with r 20.26 and was a valid offer.

1. In support of the alternative submission, the plaintiff made three broad points, which I summarise as follows. The first point was that the offer of $340,000 did not address the fact that the defendant had already made payments totalling $84,397 to the workers' compensation insurer, and then made submissions at trial in relation to past economic loss which were inconsistent with the position it "sought to impose" by making the offer of compromise. Secondly, the defendant did not file a Defence until after it had served the offer of compromise. Whilst the plaintiff was on notice of an intention to plead contributory negligence, the particulars and the extent of the allegation was not specified until the defence was filed. Thirdly, the defendant did not complete service of its medical evidence in accordance with court orders. Indeed it only served a number of reports the day prior to the offer of compromise, and did not serve the reports of Dr Barrett until the day of the offer of compromise. The defendant thereby substantially altered its case to the detriment of the plaintiff. Furthermore, the late service of the defendant's reports prejudiced the plaintiff because it was unable to obtain any material in reply, nor was it anticipated that the defendant would make the submissions it did in respect of past economic loss. It was suggested that the defendant failed to serve the reports in question until the last possible opportunity prior to trial, and that the defendant should not be allowed to profit from withholding service and putting the plaintiff to the expense of having to prove its entitlement to non - economic loss by going to MAS. For these reasons, it was not unreasonable for the plaintiff to have rejected the offer of compromise.

1. The plaintiff also submitted that the plaintiff only fell short of the offer of compromise by less than $2,000. A finding of contributory negligence of 1% less would have produced a different outcome.

The defendant's submissions

1. The defendant also provided written submissions in response to the various matters raided on behalf of the plaintiff.

1. In respect of the complaint that the defendant had already paid $84,397 to the workers' compensation insurer, the defendant pointed out that the plaintiff was fully aware of this fact at the time of the offer. In any event, the payment did not render the offer "ambiguous" in that the workers compensation payments were required to be repaid in any event from any damages recovered by the plaintiff. The plaintiff was not misled, nor did her solicitors seek any clarification, assuming it was required.

1. The defendant's submissions next address the plaintiff's argument that the payment to the workers' compensation insurer was inconsistent with the attitude adopted by the defendant at trial that the plaintiff had residual earning capacity since at least the time of her arthroscopic surgery in June 2008. It was submitted that the plaintiff's argument is misconceived. The payment, which was mandated by the legislation, did not amount to any admission, nor could it bind the defendant to any position concerning the plaintiff's earning capacity. Nor did it involve an alteration in the defendant's case.

Turning to the plaintiff's second broad contention, that the Defence was only filed after the offer of compromise, the defendant submitted that the plaintiff was on notice of an intention to plead contributory negligence. No request for particulars of that defence was made, and the plaintiff cannot have been misled as to the allegation. It was self - evident that the allegation would be related to the plaintiff having positioned herself immediately behind and close to the van in circumstances where she knew or should have known that the van might be moved.

1. In respect of the plaintiff's third broad complaint, concerning the medical and vocational evidence, the defendant submitted that the matters raised do not amount to special circumstances justifying a departure from the presumption created by r 42.15. The plaintiff did not object to late service, and did not object to the admission of the reports at trial, nor did it complain then that further time was needed to seek evidence in reply. The relevant experts were made available for cross - examination, but were not required at trial.

1. The defendant then addressed the complaint that the defendant "forced the plaintiff to MAS without at that stage serving the reports of Dr Barrett" when those reports clearly put the plaintiff over the 10% threshold for an award of damages for non - economic loss. The defendant submitted that this was a circumstance irrelevant to the non - acceptance of the offer of compromise. The plaintiff was in fact entitled at trial to claim damages for non - economic loss, because the 10% threshold had been exceeded. The fact that the evidence at trial was at odds with the findings of the Medical Assessment Service was not unusual, nor was the plaintiff misled by the circumstance.

1. Finally, the defendant submitted that the fact that the ultimate outcome was $2,000 below the offer of compromise does not amount to a special circumstance. The rule is clear in this regard.

The relevant legal principles

1. The onus is on the offeree to establish a basis for displacing the presumption created by r 42.15: Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 at [32] - [35].

1. The Court will only depart from the usual rule in exceptional circumstances: Morgan v Johnson (1998) 44 NSWLR 578 at 581 - 2; South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [83]; Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 33 at [15].

1. The decided cases disclose three broad categories circumstances in which the presumption in favour of an award of indemnity costs might be displaced. The first basis is that the period for acceptance was unreasonable. The second is that the offer did not involve any compromise . The third is that the rejection of the offer was not unreasonable.

1. The determination as to whether t he rejection of an offer was unreasonable is also an evaluative judgment requiring a consideration of the facts and circumstance specific to the case: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [19]; King Network Group Pty Ltd v Club of Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11].

1. Circumstances relevant to the reasonableness of rejection have been held to include the situation where the full parameters of the dispute were still uncertain at the time of the offer: Equity 8 Pty Ltd v Shaw Stockbroking Ltd [2007] NSWSC 503 at [42]; or where the offeror's case changes after the offer: South Eastern Sydney Area Health Service v King [2006] NSWCA 2006 NSWCA 2 at [85]; Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Co Pty Ltd [2001] NSWCA 461; East West Airlines Limited v Turner (No 2) [2010] NSWCA 159 at [16].

Findings and conclusions

1. In the present case no period for acceptance of the offer of compromise was stipulated. Nor was it suggested that the defendant's offer of compromise did not represent or form part of a genuine attempt to reach a negotiated settlement: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [19]. The contest here was whether the plaintiff demonstrated that she was not acting unreasonably in failing to accept the offer of compromise.

1. In my view, the plaintiff established that the full parameters of the dispute were still uncertain at the time of the offer of compromise. The late notice of the particulars of contributory negligence and the late service of experts' reports that had been in the defendant's possession for a considerable period meant that the plaintiff was not made aware of the case she was required to meet until the last minute. Such conduct is inconsistent with s 56 of the Civil Procedure Act 2005 and the defendant should not have the benefit of the court's discretion when it has not conducted itself in an appropriate manner consistent with the overriding purpose required by that Act: Sedrak v Starr [2010] NSWCA 228 at [19].

1. More importantly, it is clear to me that the case to be made against the plaintiff lacked full particularity at the time of the offer of compromise. It was not for the plaintiff to assume the case to be made against her. It was for the defendant to put her on notice.

1. I find, therefore, that it was not unreasonable for the plaintiff to have not accepted the defendant's offer of compromise. In my view, there were special circumstances justifying displacement of the presumption in favour of the defendant created by r 42.15

1. For these reasons I am persuaded that the defendant should not be awarded indemnity costs.

Costs of the Costs Application

1. It remains for me to deal with the costs of the costs application itself.

1. The plaintiff has succeeded and costs should follow the event.

Disposition

1. I therefore refuse the defendant's application for indemnity costs and confirm the costs order made on 19 November 2010.

1. I order the defendant to pay the plaintiff's costs of this application, on the ordinary basis.

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Decision last updated: 23 June 2011