X and Y (by her Tutor X) v PAL (On question of costs) SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY (1), CLARKE (2), AND MEAGHER (3) JJA 28 May 1991, 7 June 1991 [1991] NSWCA 302 Costs Mahoney JA I agree with Clarke JA. Clarke JA When the Court delivered judgment in these matters it reserved the question of what order should be made in respect of the costs of the trial for further consideration after the parties had made submissions. We have now heard those submissions. Broadly, the appellants seek an order that they recover all their costs of the trial upon the basis that they were successful. The respondents, for their part, submit that it is appropriate that the respondents pay 5 per cent of the appellants' costs of the trial and that the appellants pay 95 per cent of the respondents' costs of the trial. The primary basis for the respondents' submissions was that they had been successful in the issue which occupied in excess of 95 per cent of the time taken at the trial. Before dealing with the competing submissions it is convenient to point out that there were, in essence, four issues in contest at the trial. They were: (a) Whether Y was born with syphilis as a consequence of the negligence of the respondents; (b) Whether Y's deformities and brain syndrome resulted from syphilis; (c) Whether the first and third respondents owed a duty of care to Y; and (d) Whether X suffered nervous shock as a result of the respondent's negligence. This Court ruled in favour of the appellants on issues (a), (c) and (d) and in favour of the respondents on issue (b). In so doing they upheld the trial judge's conclusions on issues (a) and (b) but reversed them on issues (c) and (d). In the result the appellants succeeded in their actions to the extent that each obtained a small judgment. On the other hand it is true, as Mr Sperling QC has pointed out, that the vital contest between the parties at the trial concerned issue (b) and that if the appellants had been successful on this issue they would have been entitled to very substantial damages. It is also correct that this issue occupied most of the hearing time of the trial. The appellants submit that they were the victors in the contest and that the normal consequences should flow from their victory, ie. they should receive an award of costs. The respondents contend that this is one of those cases in which it is appropriate to make a specific order for costs which recognises both the appellants' victory and the success of the respondents on the issue which incontestably transformed a simple trial into a highly complex and lengthy one. Before dealing with those submissions it is appropriate to observe that the two proceedings were formally consolidated prior to the hearing and that, in the particular circumstances, it is appropriate to deal with the costs of the trial separately from the costs of the pretrial procedures. In regard to the former the appellants who were both represented by the same solicitors and counsel should, if otherwise entitled, recover only those costs which would have been awarded 2 UNREPORTED JUDGMENTS to a single plaintiff who recovered judgment for $20,000. Further I should point out that it was accepted that if any order is made in favour of the appellants in respect of the costs of the trial then the limitations imposed by SCR Pt52 124(3) and r24(5) should be treated as irrelevant. That is, that the costs should not be reduced because of the size of the verdicts and that allowance should be made for two counsel. This concession, which was made during the hearing of the argument, was perfectly proper in my opinion for the case was a highly complex one involving novel questions of law and should have been brought in the Supreme Court. The principles which should be applied in resolving the present dispute were set out by Toohey J in Hughes v Western Australian Cricket Association (Inc) and Ors, 1986 ATPR 40-748, in terms which I would summarise as follows: Costs are in the discretion of the court. This discretion must be exercised judicially. The principles which bear on its exercise are generally: (1) Ordinarily, costs follow the event; (2) In particular circumstances it may be reasonable to require that a litigant who has succeeded only upon a portion of his claim should bear the expense of litigating the other portion or portions; and (3) Circumstances may dictate that a successful party who has failed on certain issues may not only be deprived of the costs in those issues but may be ordered as well to pay the other party's costs of them. The first principle I have stated finds expression in SCR Pt52 R11 while the second and third reflect case law. In applying those general principles in this case there is a consideration additional to those adverted to by the parties which is, in my opinion, relevant. The rules of court provide for the making of offers of compromise (SCR Pt22) and consequential costs orders. Those rules stipulate the orders which should normally be made in the event that an offer of compromise is made and accepted or is made and rejected, as the case may be. These provisions are, in my view, intended to serve two purposes. First they enable a party who has been sued and who recognises that he is liable for a portion of the claim, or is at risk of suffering judgment in respect of a portion of the claim, to make an offer and contest his liability in respect of the other issues secure in the knowledge that if the judgment is for an amount less than his offer he will not be exposed to the risk of paying all the costs of the action even if he wins on those other issues. The secondary purpose of these rules is to set in place machinery to facilitate the early, rather than later, compromise of actions in the courts. This is not unimportant for it is well recognised that a large number of cases which come before the courts are compromised at the eleventh hour, usually in circumstances where the resources of the court cannot be reallocated beneficially. In this respect it has been accepted that if procedures could be set in place which lead to the compromise of these actions at an early stage the court would be far better placed to utilise its resources effectively and thereby to reduce the delays which presently confront the court. Where, as here, defendants, who did not really contest the issue of negligence at the trial, fail to make an offer of compromise their failure to take the steps provided by the court to enable them to limit their exposure to costs is, in my opinion, a relevant factor for consideration on an ultimate costs order. Although in this case there is much to be said for the view that the normal rules should apply I am persuaded by Mr Sperling, that as the major contest between the parties concerned the issue upon which the appellants failed, it is appropriate to make a different order. I will not, however, accede to his application that the URJ X and Y (by her Tutor X) v PAL (On question of costs) (Meagher JA) 3 appellants pay a large proportion of the respondents' costs. The overriding objective must be to make an order which is appropriate to the justice of the case. Bearing in mind the fact that the appellants were required to contest the case in order to recover an award, that no offer of compromise was made and that the appellants were successful in three of the four issues litigated I have concluded that it is appropriate that they receive 50 per cent of their costs of the trial and the pretrial procedures. In view of my earlier observations the following orders should be made. (1) Each of the appellants to receive 50 per cent of the pretrial costs of their respective actions. (2) The appellants to receive 50 per cent of the costs of the trial (the appellants to be treated as one party for this purpose). Meagher JA I agree with Clarke JA. (1) Each of the appellants to receive 50 per cent of the pretrial costs of their respective actions. (2) The appellants to receive 50 per cent of the costs of the trial (the appellants to be treated as one party for this purpose). COUNSEL for the Appellant: BF MURRAY QC and JD HISLOP Counsel for the Respondent: H SPERLING QC and J STEWART SOLICITORS for the Appellant: TD KELLY and CO Solicitors for the Respondent: TRESS COCKS and MADDOX and BLAKE DAWSON WALDRON