Steven Patrick Morgan and Samantha Sue Morgan v The Legal Personal Representative of Willard

[2015] NSWDC 96

District Court

New South Wales

Medium Neutral Citation:	Steven Patrick Morgan and Samantha Sue Morgan v The Legal Personal Representative of Willard [2015] NSWDC 96
Hearing dates:	24, 28 November 2014, 17 April 2015, 14, 21 May 2015
Decision date:	12 June 2015
Jurisdiction:	Civil
Before:	Lakatos J
Decision:	Defendant to pay one third of the plaintiffs’ costs of the proceedings
Catchwords:	Costs
Legislation Cited:	Civil Procedure Act 2005
Cases Cited:	All Trans Express Limited v CVA Holdings Ltd [1984) 1 All ER 685 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85
Category:	Costs
Parties:	Steven Patrick Morgan (First Plaintiff) Samantha Sue Morgan (Second Plaintiff) The Legal Personal Representative of Willard (Defendant)
Representation:	Counsel: D Toomey (First and Second Plaintiffs) G Carolan (Defendant)   Solicitors: T Tancred, Whiteley, Ironside & Shillington M Candan, MCK Lawyers
File Number(s):	2014/00035313

Judgment

1. On 17 April 2015, I handed down judgment in these proceedings ordering that there be a verdict and judgment for the plaintiffs in the sum of $820.90.

2. The parties have put conflicting submissions to the Court in relation to the appropriate order for costs. It is common ground that the appropriate starting point is section 98 of the Civil Procedure Act 2005 which by subsection (1) provides:

Subject to rules of court and to this any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

3. It is the common position that although the section creates a wide discretion, it must be exercised judicially and subject to any statutory limitations. The net result of the interaction of these principles is that a successful party should not be deprived of costs unless there is material to justify a contrary order being made. As noted in the commentary to Ritchie’s Uniform Civil Procedure NSW at [s.98.10], this may occur where the otherwise successful party has failed on substantial issues in the litigation; has caused other parties to incur unnecessary costs in their conduct proceedings or has rejected, and failed to better, reasonable offers of settlement.

4. It is also the common position that whilst the plaintiffs were successful in obtaining a verdict, they have failed to establish the major part of their claim in monetary terms, which relate to the destruction of a trailer and the death of two greyhound racing dogs. Whilst it was conceded that the replacement cost of the phone was not free of some controversy, significant matters were contested particularly in relation to the proper quantum of damages for the death of the dogs and to a lesser extent in relation to the loss of the trailer. In any event, no claim was pressed at the hearing in relation to the trailer.

5. The proceedings concluded by way of a verdict and judgment to the plaintiffs in a modest amount, but a substantial failure by the plaintiffs to quantify the more significant losses relative to the death of the greyhound dogs.

6. The parties adduced evidence on the costs application. The plaintiffs relied upon the affidavit of the solicitor Mr Tobias Tancred sworn 4 May 2015. Objection was taken by Mr Carolan, counsel for the defendant, to the opinions expressed by Mr Tancred in paragraphs 13 and 14, in which the solicitor attested to the proposition that both plaintiffs were “psychiatrically affected to a significant degree” in his observation and recounted his experiences as a solicitor in dealing with persons suffering from psychiatric injury.

7. I admitted the paragraphs. I did so, on the basis that whilst the solicitor clearly does not have expertise in the psychiatric field, it is open to have regard to his opinions based on his contact with persons with psychiatric problems. Hence, I concluded that his observations carry some weight, although clearly less than that of an expert psychiatrist/psychologist.

8. Mr Toomey, counsel for the plaintiffs, particularly relied upon the report of psychiatrist Dr Frukacz, dated 4 February 2014, relevant to the first plaintiff Steven Morgan and the report of Dr Blom, Approved Medical Specialist (Permanent Impairment and General Medical Disputes) – Workers Compensation Commission and a psychiatrist, dated 1 September 2014, relevant to the second plaintiff, Samantha Morgan.

9. In his report, Doctor Frukacz, reported that the first plaintiff continued to suffer serious sequelae from his involvement in the accident in which his brother died. The first plaintiff reported sleep problems, experiencing guilt, feeling tired and lethargic and being generally more wary, nervous and twitchy. He reported depression and headaches. Furthermore he reported seeing a psychologist on a regular basis. On examination, the first plaintiff presented as alert and cooperative with no psycho-motor abnormalities. His speech was logical and sequential and there was no formal thought disorder. However his mood was depressed and anxious and his affects were constricted.

10. Doctor Frukacz concluded that the first plaintiff had experienced significant anxiety and depression following a catastrophic motor vehicle accident. He had symptoms consistent with post-traumatic stress disorder. Those symptoms were specified. He also had symptoms of a depressive disorder. The first plaintiff was assessed as being unfit to perform all of his pre-injury work. His capacity was reduced by reason of his hyper-arousal symptoms which lead him to being irritable and interfered with his capacity to deal with clients and colleagues as well as his reduced motivation and endurance due to his depressive symptoms. Doctor Frukacz reported that the first plaintiff’s concentration was also impaired through constant rumination about the accident. He continues to see a psychiatrist and a psychologist on a regular basis.

11. In relation to the second plaintiff, Doctor Blom’s report recorded her history following the death of her husband. Her concern and anxiety were increased on the day of the accident as she had not received a phone call from her husband which was the usual practice. She increasingly became confused and disoriented and shocked. She was referred to a psychologist whom she saw once every two or three weeks, in early 2013. She found the sessions helpful in dealing with her overwhelming grief. Over the following months her symptoms gradually subsided.

12. On examination, Ms Morgan appeared quite distressed and her affect was somewhat flattened. Her thinking was somewhat slowed and occasionally disorganised – there was no evidence of cognitive impairment. Doctor Blom diagnosed Ms Morgan as having a Major Depressive Disorder with symptoms of depressed mood, significant and persistent loss of energy, disturbed concentration and significant sleep disturbance. She was placed on a trial of antidepressants but had not shown any significant response. The considered view was that the second plaintiff, whilst being able to work in her job as a retail manager at a chemist, was not able to function at full capacity. Part-time work was suggested.

13. In addition to this material, Mr Tancred referred to the following chronology:

• proceedings were commenced on 4 February 2014;

• there was a pre-trial conference of 9 May 2014 at which time orders were made relating to the filing of the defence and reliance on expert evidence;

• the defendant was served with the affidavit of the plaintiffs’ expert on or about 1 September 2014;

• the defendant did not serve any evidence or tender evidence in the proceedings;

• at 5:18pm on 19 November 2014, a letter was received via email from the defendant’s solicitor in which an offer of compromise was made for a sum of $33,800. The offer was stated to be “open and capable of acceptance until 5pm 21 November 2014” and was made in accordance with rule 20.26 of the Uniform Civil Procedure Rules.

14. The defendant relied upon the affidavit of its solicitor Mr Muharrem Koyuncu, sworn 14 May 2015. In substance, the affidavit indicated that the offer of compromise was faxed at 4:52pm on 19 November 2014.

15. On 24 November 2014, the defendant’s solicitor spoke with his counsel Mr Carolan, to the effect that there had been discussions between counsel and the plaintiffs were prepared to accept $125,000 inclusive of costs. The solicitor conveyed instructions to his barrister that the defendant was prepared to go up to $45,000 to settle the matter.

16. The defendant pointed to contact between the solicitors between 6 March 2014 and 17 September 2014 in relation to the quantification of damages and associated matters. It was contended that the chronology demonstrated persistent attempts to ascertain the basis upon which the plaintiffs quantified their claim. Counsel for the defendant conceded that whilst the short period of time between the making of the offer and the deadline, was not in accordance with the usual period of 28 days, the Court is not precluded from taking it into account when asked to exercise its discretion in relation to costs. Counsel argued that the plaintiff’s oral offer for $125,000 made on 24 November 2014 and the counter offer made shortly thereafter, indicated that the plaintiffs were capable of providing timely instructions in relation to settlement issues, despite any psychological difficulties.

Uniform Civil Procedure Rules

17. Part 20 of the Uniform Civil Procedure Rules provides for the procedure where proceedings are resolved without a hearing. Relevantly, Division 4, entitled “Compromise” provide for the procedures involved in making an offer to compromise a claim.

18. Rule 20.25 provides the following relevant definitions: an “offer” means an offer of compromise referred to in rule 20.26. The “period of acceptance” for an offer is the period of time during which the offer is open for acceptance. I note that whilst the defendant stated in his Written Outline that the short time period for acceptance of the offer was not in accordance with the rules, this issue was subsequently clarified so as to be understood as an offer not confined by the usual period for acceptance of an offer of 28 days after it was made.

19. Rule 20.26 (2) provides for the pre-requisites for a valid offer. No argument has been advanced on behalf of the plaintiffs that these requirements were not met. Relevantly, rule 20.26 (5) provides that the closing date for acceptance of an offer is to be such date as is “reasonable in the circumstances”.

20. Part 42 of the Uniform Civil Procedure Rules deals with the issue of costs and rule 42.1 provides that subject to that Part, if the Court makes an order as to costs, the Court is to order that the costs follow the event unless it appears to the Court that some other order should be made. The annotations to Ritchie at paragraph [42.1.15] note that different discretionary considerations may apply where a party succeeds on some issues and fails on others. The authors note that particular difficulty can arise where an otherwise successful party has failed on issues that occupied a substantial part of the time taken by the proceedings. However the primary rule is that a Court should ordinarily order the costs of the proceedings to a successful party without attempting to differentiate between the issues on which the party succeeded and any issues on which it failed.

21. The Practice Book at paragraph [42.1.20] notes that a Court may depart from the general rule that costs follow the event, if satisfied that some other order should be made. One example cited is where the successful party recovers merely nominal damages: All Trans Express Limited v CVA Holdings Ltd [1984) 1 All ER 685.

22. Division 3 relates to Offers of Compromise and the defendant seeks to invoke rule 42.15 (1) which provides for the case where the offer made by the defendant but not accepted by the plaintiff, is greater than or equal to the judgment obtained by the plaintiff. In those circumstances, rule 42.15 (2) provides that unless the Court otherwise orders, the defendant is entitled to an order against the plaintiff for the defendant’s costs, assessed on an indemnity basis from the beginning of the day following the day on which the offer was made.

23. The application raises two questions: has the defendant established its right to an order for indemnity costs pursuant to rule 42.15 (2)? That question in the present circumstances is to be answered in the affirmative only if it has complied with the requirements of rule 20.26 (5), namely that the closing date for the acceptance of the offer must be such “as is reasonable in the circumstances”. If the determination of this question is favourable to the defendant, the plaintiffs would be entitled to their costs on the ordinary basis up until the beginning of 20 November 2014 (i.e. the day following the day on which the offer was made – 19 November 2014). Thereafter, the defendant would be entitled to indemnity costs.

24. Secondly, if the defendant has not established its entitlement to indemnity costs, is there any reason to vary the normal rule that costs follow the event?

Valid Offer of Compromise?

25. It appears to be common ground between the parties that the “circumstances” that the Court can take into account in the present case include the psychological conditions which afflict each of the plaintiffs. The Court was referred to the decision of the Court of Appeal in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85. It is noteworthy that the case before the Court of Appeal dealt with corporate clients involved in a significant commercial dispute. In that sense, the Court was not required to consider any material relating to the personal circumstances of the parties but limited itself to the reasonableness of the limits of the offer of compromise, in the situation which applied in that proceeding.

26. Each of their Honours - Giles and Tobias JJA and Basten JA – the latter giving the principal judgment - agreed that in the circumstances, the relevant offer of compromise was not left open for such time as was reasonable in the circumstances. Giles and Tobias JJA agreed in Basten JA’s reasons as to the proper method of consideration of the issue of reasonableness, but added an additional factor namely “that service of an offer of compromise under rules of court obliges the offeree to give serious thought to the risks of the proceedings and their outcome … (and) the court should not be ungenerous to an offeree in determining whether time is reasonable” – paragraph [2].

27. Basten JA considered that in the context of the commercial proceedings, “viewed in the abstract, an offer which is made less than 23 hours before the commencement of the hearing and requiring acceptance within that period would not appear to have been left open for a reasonable time” – paragraph [15]. His Honour thought it relevant to have regard to the practical considerations including the fact that the parties had made prior offers and that such offers had been explained as to the method of calculation of the component parts.

28. His Honour also considered that the “practical circumstances which must have existed at the time the offer was made may be said to tend in either direction. Thus it appears to be common ground, as the Court might have assumed, that the legal representatives of (the respondent) were conferring in preparation for the forthcoming trial, throughout the period that the offer was open. While that may have facilitated an immediate consideration of the offer by advisers who are focused on the relevant issues, it may also be said that the provision of an offer the day before the trial provided an inconvenient distraction from preparation of the case for hearing” – paragraph [16].

29. At paragraph [20], Basten JA stated as follows:

In considering whether the time allowed for acceptance is “reasonable in all the circumstances” once a trial commences, or indeed final preparation commences, three factors come into play. The first is that both parties may reasonably be expected to have a clear perception of the strengths and weaknesses of their positions, so that the reasonableness of a particular offer may be speedily assessed. Secondly, because significant costs will be accruing on a daily, even an hourly basis, there is a heightened incentive to respond within the time permitted. Thirdly, and counterbalancing the first factor, the need to address the terms of an offer, provide advice and obtain instructions will often be a significant distraction from final preparation.

30. Basten JA considered at paragraph [22]:

The question of reasonableness must be judged objectively, in the circumstances known, or which should reasonably have been anticipated, by both parties. In setting the time during which the offer is to remain open, the offeror must necessarily rely upon the circumstances as known to it, or which should reasonably be anticipated by it. The actual circumstances of the recipient, unknown to the offeror, may be relevant to application that the Court otherwise order in relation to costs of a valid unaccepted offer, but so might evidence as to whether the recipient took any steps to bring such matters to the notice of the offeror.

31. Counsel for the defendant accepted in the present case, that the psychiatric circumstances pertaining to the plaintiffs, were a relevant consideration to the question of what circumstances the Court should have regard to. In terms of the principles stated by Basten JA, it was a concession that the circumstances were known or were reasonably anticipated. However, Mr Carolan argued that the evidence did not rise to the level of a conclusion that those circumstances reduced the capacity of the plaintiffs to give proper and timely instructions in relation to the settlement offer.

32. I do not accept that submission. It is clear that both plaintiffs suffer from significant depression, which has impacted upon their general well-being as well as their ability to concentrate. It is certainly within reasonable anticipation that such anxieties and other symptoms were likely to be accentuated when litigation involving the genesis of the plaintiffs’ trauma, is imminent. In those circumstances, I consider that the comparatively short time in which the offer was left open, was not reasonable in the circumstances. I conclude that the offer of compromise did not comply with Uniform Civil Procedure Rules.

Should Costs follow the Event?

33. Basten JA in Kooee at paragraph [6] noted that in that case there was agreement between the parties to the adoption of the trial judge’s approach that the costs order in the proceedings proper “should be on a proportionate basis reflecting the degree of each party’s success.” His Honour considered the issue of proportionate costs at paragraph [22], concluding that:

That the final balance came out in favour of one party rather than another was not, of course, arbitrary or inconsequential. Nor was it arbitrary or inconsequential that some components fell on one side of the ledger rather than the other. Factors which were relevant, however, were the particular issues in dispute, the time taken in addressing the particular issues and which party was successful with respect to those issues.

34. The authorities above indicate – All Trans Express – and the agreed position in Kooee tends in the same direction, that in an appropriate case such as where nominal damages have been awarded or where the position underpinning an agreement between the parties was that the litigation was not wholly or substantially successful, but divided on the basis of issues won and lost, it can be appropriate to vary the normal order that costs follow the event.

35. In the present case, the plaintiffs did not pursue the claim in relation to the damaged trailer. However, they continued to pursue the claim in relation to the potentially major head of damages, the death of the racing greyhounds and also in relation to the irreparably damaged mobile phone. The latter claim was successful. On that basis, I consider that given the plaintiffs were successful in relation to one of three heads of claim, it is appropriate to make an award in favour of the plaintiffs for one third of their costs. I accept that this is a somewhat crude way of quantifying the proportion of costs, given that the greyhound issue was the predominant one. However in my view, the proposed order meets the justice of the case.

ORDER

Accordingly, I order that the defendants pay one third of the plaintiffs’ costs of the proceedings.

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Decision last updated: 23 June 2015