Turnbull v Kyogle Council (No 2)

[2024] NSWSC 1302

Supreme Court

New South Wales

Medium Neutral Citation:

Turnbull v Kyogle Council (No 2) [2024] NSWSC 1302

Hearing dates:

16 October 2024

Date of orders:

16 October 2024

Decision date:

16 October 2024

Jurisdiction:

Common Law

Before:

Elkaim AJ

Decision:

Costs Orders as sought by the plaintiff.

Catchwords:

COSTS - offer of compromise – where defendant rejected offer of compromise – reasonableness of rejection – held defendant’s rejection of offer of compromise was unreasonable

Legislation Cited:

Motor Accident (Lifetime Care and Support) Act 2006 (NSW), ss 7.3, 9

Uniform Civil Procedure Rules 2005 (NSW), r 20.26

Cases Cited:

Morgan v Johnson (1998) 44 NSWLR 578

Turnbull v Kyogle Council [2024] NSWSC 1297

Category:

Costs

Parties:

Mr Simon Charles Turnbull (Plaintiff)
Kyogle Council (Defendant)

Representation:

Counsel:
Mr D Hooke SC (Plaintiff)
Mr G Radburn (Plaintiff)
Dr S Hartford Davis (Plaintiff)
Mr John Tryon (Plaintiff)
Mr Jeremy Morris SC (Defendant)
Mr Reno Gambi (Defendant)

Solicitors:
Somerville Laundry Lomax (Plaintiff)
Makinson & d'Apice Lawyers (Defendant)

File Number(s):

2021/216575

Publication restriction:

No

EX – Tempore JUDGMENT

1. At the commencement of the hearing on Monday of this week I was informed that the parties had reached agreement on the quantum of the matter ($15 million) and on a discount that should be applied to this figure (10%).

2. I was then asked to initially deal with a notice of motion that had been filed by the defendant on 3 September 2024 seeking leave to amend its defence. I was informed that if the motion failed then it would follow that judgment would be entered for the plaintiff for $13.5 million.

3. I gave my decision on the notice of motion earlier today (Turnbull v Kyogle Council [2024] NSWSC 1297). I refused the defendant leave to amend its defence, thereby prompting the judgment referred to above.

4. A costs issue then arose. The defendant accepted that it should pay the plaintiff’s costs. The plaintiff however, sought a variation of the standard costs order by seeking an order that the costs be payable on an indemnity basis on and from 19 July 2024. The defendant resisted this variation.

5. The reason behind the plaintiff’s request was that the plaintiff had served an offer of compromise on the defendant on 18 July 2024 offering to accept a judgment in his favour in the sum of $8,700,000. The offer was made in accordance with r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW).

6. The defendant accepted that there was no technical defect in the offer. It is also for a figure well below the judgment sum. Without more, there would be no reason for the indemnity order not to be made.

7. The defendant said that there was a reason not to make the order. The defendant submitted that it had acted appropriately in not accepting the offer because it had a reasonable and viable argument in support of its proposed amended defence. Had the defence succeeded, the defendant would not have been liable for any damages, although it did seem to concede, in my mind a little illogically, an obligation to pay the amount that had been agreed for non-economic loss. This was $761,000 which is well below the offer that had been made by the plaintiff.

8. In support of its case the defendant tendered some correspondence (Exhibit 1 on costs) that it had conducted with icare, the organisation which operates the Lifetime Care and Support Scheme. The defendant had sought clarification of certain matters relating to the plaintiff’s position within the Scheme. The reply received, on 26 March 2024, reflected some erroneous interpretations of the relevant Act. The defendant wrote back to icare on 20 May 2024, seeking clarifications and received an email response on 22 May 2024 in which the icare representative agrees with the comments that had been made by the defendant’s solicitors.

9. Notwithstanding that the defendant’s interpretation of s 9 of the Motor Accident (Lifetime Care and Support) Act 2006 (NSW) was correct and that icare seemed to agree with the defendant’s argument, as pursued in the notice of motion, in respect of s 7(3), the fact is that this correspondence had been completed almost 2 months before the offer of compromise was made.

10. The difficulty that then arises for the defendant is, even if it had a reasonable argument on the notice of motion, is that sufficient to relieve it of the consequences of the offer of compromise.

11. In Morgan v Johnson (1998) 44 NSWLR 578, at 581 Mason P said this about the principles concerning offers of compromise:

“The following principles can be extracted:

(1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation: Maitland Hospital (at 725-726); Hillier (at 421, 431).

(2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance: Maitland Hospital (at 724).

(3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party: NSW Insurance Ministerial Corporation v Reeve (at 102); Hillier (at 422). This is because, from the time of non-acceptance “notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise”: Maitland Hospital (at 724); see also Hillier (at 420).

(4) Lying behind the rule is the common knowledge that “litigation is inescapably chancy”: Maitland Hospital (at 725). For this reason, the ordinary provision is expected to apply in the ordinary case: ibid NSW Insurance Ministerial Corporation v Reeve (at 102-103). The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: NSW Insurance Ministerial Corporation v Reeve (at 102). As Clarke JA expressed it in Houatchanthara (at 2-3):

‘The rule lays down the general principle that should be applied, and the order provided for in that rule should only be departed from for proper reasons which, in general, only arise in an exceptional case.

It is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. The idea behind the rule is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to a plaintiff, the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow naturally from that risk.’

(5) The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be borne in mind: Maitland Hospital (at 725-726). Reasons must be given for ‘otherwise ordering’: Hillier (at 419); Quach.”

12. The most relevant part of the just quoted passage is:

“The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule.”

13. Accepting that the defendant did run a reasonable argument in the notice of motion it is apparent from Morgan that this does not avoid the natural consequence of the rule.

14. There was no other reason advanced by the defendant to not give effect to the offer of compromise. Accordingly, I will make the orders as requested by the plaintiff.

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Decision last updated: 16 October 2024