Suresh v Jacon Industries Pty Ltd (No. 2) - [2005] NSWCA 270

NEW SOUTH WALES COURT OF APPEAL

CITATION: Suresh v Jacon Industries Pty Ltd (No. 2) [2005] NSWCA 270

FILE NUMBER(S):
40100/04

HEARING DATE(S): 22/06/05

JUDGMENT DATE: 17/08/2005

PARTIES:
Kumada Suresh v Jacon Industries Pty Ltd

JUDGMENT OF: Mason P Santow JA Basten JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 3677/00

LOWER COURT JUDICIAL OFFICER: O'Reilly DCJ

COUNSEL:
R T McKeand QC, D W Elliott (Appellant)
D J Hooke (Respondent)

SOLICITORS:
W D Hunt & Associates (Appellant)
Nevill & Edwards (Respondent)

CATCHWORDS:
Costs - offer of compromise made under Part 39A r25 (6) of the District Court Rules - whether offer applies to costs of appeal - payments made under s151B of the Workers Compensation Act 1987 - possibility that such payments may exceed ultimate award at new trial in the District Court - whether sufficient reason to depart from normal rule of costs follow the event of the appeal

LEGISLATION CITED:
Workers Compensation Act 1987
Federal Proceedings (Costs) Act 1981 (Cth)
Supreme Court Act 1970 (NSW)
Suitors Fund Act 1951 (NSW)

DECISION:
Vary orders (2)(b) and (4) as set out in the judgment handed down on 22 June 2005 so that they now read
(2)(b) order that the costs of the proceedings in the District Court be in the discretion of the judge to whom the matter is remitted
(4) order that the Respondent pay the Appellant's costs of the appeal, including the costs of this further application to vary the orders, and to have a certificate under the Suitors Fund Act 1951 (NSW) if qualified

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40100/04
DC 3677/00
MASON P
SANTOW JA
BASTEN JA
17 August 2005

KUMADA SURESH v JACON INDUSTRIES PTY LTD (NO. 2)

Judgment

MASON P: I agree with Basten JA.
SANTOW JA: I agree with Basten JA.
BASTEN JA: On 22 June 2005 the Court handed down judgment in the appeal in this matter: see Kumada Suresh v Jacon Industries Pty Ltd [2005] NSWCA 202. Pursuant to leave reserved in that judgment, the parties have now made further submissions in relation to the issue of costs.
The Appellant, the plaintiff in the Court below, was successful on the appeal in relation to liability and the proceedings were remitted to the District Court for assessment of damages. The plaintiff having lost there on the question of liability, the District Court did not proceed to assess the damages which might have been awarded in the event that the liability finding, as is now the case, were to be reversed. This Court proposed orders that the Respondent (the defendant in the Court below) pay the Appellant’s costs of the proceedings in the District Court and the costs of the appeal. The Respondent now seeks the following orders with respect to costs:
(1)Order that the costs of the proceedings in the District Court be in the discretion of the judge who determines damages.
(2)Order the Appellant to pay the Respondent’s costs of the appeal if the damages assessed exceed the amount of the payments made by the Respondent pursuant to the provisions of the Workers Compensations Act 1987 and, in those circumstances, to have a certificate under the Suitors Fund Act if qualified, but otherwise the Appellant to pay the Respondent’s costs of the appeal.
Two comments must be made in relation to proposed order (2). First, the designation of the Appellant and the Respondent in the first line has been reversed, to give effect to the apparent purpose of the proposed order. Secondly, the contingency contained in the proposed order reflects a defence available to the Respondent under s 151B of the Workers Compensation Act 1987, requiring benefits paid pursuant to that Act to be set off against an award of damages. However, as noted below, the relevant contingency sought to be relied on by the Respondent is an offer of compromise filed in the District Court proceedings.
The Appellant submits that the orders proposed by the Court, namely that the Respondent should pay her costs both of the trial and of the appeal, should not be disturbed. There is no issue concerning the costs of any further hearing in the District Court, which will abide by the outcome of that hearing and be in the discretion of the trial judge.
The Respondent refers to three factual matters which were not taken into account in proposing the earlier orders. These are:
(1)the Appellant was paid an amount pursuant to the Workers Compensation Act 1987, which, pursuant to s 151B of that Act (now repealed) must be taken into account by way of reduction of any damages assessed, so that, unless the plaintiff obtains an amount in excess of those statutory benefits, she will have failed to achieve success in the proceedings below;
(2)at some unidentified date, during the District Court proceedings, the Respondent served an offer of compromise pursuant to Part 19A of the District Court Rules 1973, as a result of which, if the Appellant does not obtain damages in excess of the amount offered, the Respondent would be entitled to its costs of those proceedings, from the relevant date, and
(3)the trial judge separately ordered that the Appellant pay the Respondent’s costs incurred by failure to disclose in a timely fashion the report of Mr Burn dated 25 May 1999.
Neither the amount of the statutory benefits paid, nor the amount of the offer of compromise have been revealed to this Court; nor has the date on which the offer was made been identified. To the extent that these are matters which will need to be considered by the District Court in completing the trial of the proceedings before it, that course is understandable.
As a matter of principle, it is appropriate that the disposal of costs incurred so far in the District Court and the costs of the appeal be dealt with separately.
Costs of earlier proceedings in District Court
Part 39A r 25(6) of the District Court Rules provides that a defendant will have its costs of the proceedings in that Court from the date of the offer, where an offer of compromise has been made, which was not accepted by the plaintiff, who obtains a judgment, but one less favourable than the offer. In effect, the making of the offer redefines the meaning of “success” for the other party. There are similar provisions in the Supreme Court Rules.
The first question is whether the offer of compromise continues to operate, despite the fact that a judgment had been given in the Court below, albeit a judgment which was reversed on appeal. The answer is that it does so operate, being an offer made in respect of a “claim” and not in respect of a trial, or even part of a trial: see Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 410 (Gleeson CJ and Priestley JA) dealing with an offer made under the Supreme Court Rules, Part 52 r 17(4). Further, that principle was held to apply in relation to the equivalent provisions in the District Court Rules in South Sydney Council v Morris(No. 3) [2001] NSWCA 200 at [9] (Heydon JA, Meagher JA and Fitzgerald AJA agreeing).
Because the outcome of the District Court proceedings are as yet unknown, subject to two matters noted below, it is appropriate that the costs of the first trial be left to be determined by the judge who hears the remitted proceedings. The first minor qualification is one noted by the Respondent, namely that there is at least one interlocutory costs order made in the Court below which the order originally proposed in this Court might have appeared to overrule. That result was not intended.
The second qualification concerns so much of the costs of the first trial as related to the damages issue which was, incorrectly as it turns out, not addressed by the trial judge. As a result of the error, the steps giving rise to such costs will need to be replicated. The result is that both parties will have incurred additional costs as a result of the need for a further hearing. There is, however, no power, equivalent to s 8 of the Federal Proceedings (Costs) Act 1981 (Cth), which would allow that apparent unjustness to be remedied. Nevertheless, the fact that additional and unforeseen costs may have been incurred is a matter which may be relevant to any costs order made in the District Court at the conclusion of the further hearing.
Costs of the appeal
The costs of the appeal raise separate considerations. The only basis on which it is suggested that the costs of the appeal should not follow the event of the appeal is that such costs should be seen as part of the costs of the claim and therefore should await the outcome of the further hearing in the District Court.
The disposition of costs in this Court require the exercise of the power conferred by s 76 of the Supreme Court Act 1970 (NSW), in accordance with Part 52A of the Supreme Court Rules. On its face, Part 52A r 11 applies to the proceedings and, unless some other rule is applicable, or the Court otherwise orders, costs should follow the event, namely the event of the proceedings in this Court. It is well established that the fact of an offer of compromise made under the District Court Rules will not require this Court to apply the provisions of Part 39A r 25 of the District Court Rules in relation to the appeal: see Moore v Woodforth (No 2) [2003] NSWCA 46 at [14], South Sydney Council v Morris(No. 3) (supra) at [10] and [11]; Baresic v Slingshot Holdings Pty Ltd (No. 2) [2005] NSWCA 160 at [19] and Singh v Harika(No. 2) [2005] NSWCA 212 at [10]. It is sometimes remarked that a respondent may not have made a further offer of compromise in this Court (see, eg, Singh v Harika, supra at [10]) or that the offer was not ‘renewed’ (see Baresic, supra, at [21] and Moore v Woodforth, supra, at [15]). Part 51 r 3 provides that the provisions of other Parts apply in this Court “so far as applicable”: r 3(1). Rule 3(2) provides which parties in this Court shall be treated as a “plaintiff” or as a “defendant” for the purposes of the rule, although, as noted in Maitland Hospital v Fisher [No. 2] (1992) 27 NSWLR 721 at 726, referring to the appellant as the plaintiff, where it was the defendant in the Court below, may give rise to difficulties in relation to costs orders following offers of compromise. However, those difficulties are not limited to proceedings in this Court: see Whitehouse Properties Pty Ltd v Bond Brewing (NSW) Ltd (1992) 28 NSWLR 17. In any event, Maitland Hospital is authority for the proposition that the provisions of Part 22 in relation to offers of compromise are available in this Court, at least in relation to proceedings on appeal from a justice sitting in a division of the Court. Whether the procedure provided by Part 22, r 2 applies in this Court on an appeal from another Court may be an open question; although its availability was assumed in Woollahra Municipal Council v Juric (No. 2) [2004] NSWCA 102, and there seems no reason to doubt the conclusion. In any event, there are other means by which an offer of compromise may be made: see Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corporation (1982) 27 NSWLR 567, 578C; and see Newcastle City Council v McShane(No. 2) [2005] NSWCA 250 at [3]-[4].
The cases also affirm, unequivocally, that the existence and non-acceptance of an offer of compromise in the District Court may be relevant to the independent exercise of the costs power by this Court: see Singh v Harika (No. 2), supra at [10] and Baresic v Slingshot, supra, at [19] (Beazley JA, Mason P and Bryson JA agreeing). However, in those cases where an offer of compromise was taken into account by this Court, the outcome of the proceedings has been known, as has the terms of the offer. That is not this case. Furthermore, the fact that there is the opportunity to make an offer of compromise in relation to an appeal, which is not availed of, suggests that less weight should be given to an offer made in the Court below than might otherwise be the case.
The Respondent pressed on the Court that, if the result were known, and the Appellant failed to obtain a judgment no less favourable than the offer, even after the appeal, the Respondent would be entitled to its costs. Berrico Estate Pty Ltd v Andersen [2003] NSWCA 23 and AMC Caterers Pty Ltd v Stavropoulos [2005] NSWCA 79 were relied upon to support that proposition. However, not only was the final result known in each of those cases, but the plaintiff in each had been substantially unsuccessful. In Berrico Estate, Giles JA noted at [39] that, on one view, the plaintiff would succeed, but receive only his out-of-pocket expenses. In that case, his Honour expressed the view that “the proper order for costs would be that the plaintiff pay the defendant’s costs, because as a practical matter, the plaintiff would have failed in his claim and cannot salvage some costs because of a formal verdict for an undisputed amount which must immediately be paid away.” Similarly, in AMC Caterers, the defendant in the District Court had been ordered to pay $129, representing medical expenses that had to be repaid to Medicare. The Court held that a similar order should have been made in the District Court, as that which eventuated in Berrico Estate in this Court.
Berrico Estate and AMC Caterers were unusual cases: it is at least unlikely that the present case will ultimately fall into the same category. The possibility that the Respondent would ultimately be successful, once the offer of compromise is taken into account, is a possibility which may arise in any case where a retrial is ordered. There is no authority for the proposition that, in such circumstances, the proper course is for this Court to make its order conditional on such an outcome not eventuating. It is usual for this Court, and indeed the High Court, to award costs of an appeal to follow the outcome of the appeal. There is no reason not to do so in the present case.
Conclusions
The orders of the Court should be varied so that, although the orders and judgment of the District Court are set aside, the costs in that Court are to be in the discretion of the judge on the further hearing. Accordingly order 2(b) should be varied to that effect.
No variation is required to order 4, namely that the Respondent pay the Appellant’s costs of the appeal. However, there is a further question as to the costs of this separate application. The Respondent has been partly successful and partly unsuccessful. Nevertheless, the matter on which it was successful could readily have been dealt with in the written submissions on the appeal. In some cases, where the outcome of an appeal may be subject to a number of variables, it may be appropriate for one party to reserve its position in relation to the final orders to be made by the Court, pending the handing down of judgment. This was not such a case. The Respondent having failed to indicate in its original submissions the orders it sought if unsuccessful, it should bear the Appellant’s costs of the further application. Order 4 should be varied to make that conclusion explicit.
Accordingly, I propose the following order:
Vary orders (2)(b) and (4) as set out in the judgment handed down on 22 June 2005 so that they now read:
(2)(b) order that the costs of the proceedings in the District Court be in the discretion of the judge to whom the matter is remitted;

(4)order that the Respondent pay the Appellant’s costs of the appeal, including the costs of this further application to vary the orders, and to have a certificate under the Suitors Fund Act 1951 (NSW) if qualified.

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LAST UPDATED: 19/08/2005