CRISP v KENG SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, PRIESTLEY and CRIPPS JJA 22 February, 2 March and 15 June 1993, 27 September 1993 [1993] NSWCA 78 COSTS — indemnity costs — offer of compromise — application of Pt52 R17 SCR — proceedings against surgeon and hospital for negligence — proceedings against hospital fail — proceedings against surgeon succeed upon one only of several particulars of negligence — judge enters judgment for $160,145 — offer by plaintiff to compromise his claim seven months before trial by accepting judgment of $70,000 plus costs — trial judge (Wood J) declines order for indemnity costs — otherwise orders, ie that defendant not pay such costs despite earlier offer of compromise — explains refusal by reference to (a) plaintiff's delay in bringing matter on for hearing; (b) refusal to supply witnesses' statements; (c) change of case at trial; and (d) failure of plaintiff on some issues — whether grounds relied on by judge irrelevant to the application for indemnity costs — whether judge insufficiently considers policy behind Pt52 R17 SCR — on appeal following grant of leave to appeal. held: (Priestley and Cripps JJA; Kirby P dissenting): The provision of costs was within the discretion of the primary judge and would not be disturbed, no sufficient error having been shown in the exercise of the judge's discretion. The Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 (CA) considered; Rudner v Government Insurance Office of New South Wales, Court of Appeal, unreported, 11 June 1992; (1992) NSWJB 50 and Wilkinson and Anor v Kenny and Anor [1993] 1 WLR 963 (CA) referred to. Supreme Court Act 1970, s101(2)(c). Supreme Court Rules Pt52 R17. Kirby P Before the Court is an appeal, pursuant to leave to appeal earlier granted, from a costs order made by Wood J. Leave to appeal was required by the Supreme Court Act 1970, s101(2)(c). The provision of the requirement for leave to appeal in cases such as this reflects a recognition on the part of the legislature that cost orders typically involve a high measure of judgment and the exercise of the decision maker's discretion. Upon them, different decision makers will often, quite reasonably, reach different conclusions. The necessity of leave accepts the utility of finality in disposing of such orders; the advantages which the primary decision maker will usually have in deciding them justly; and the unlikelihood that important matters of principle will ordinarily be raised in such cases. Nevertheless, waving about the flag of discretion does not, in my respectful view, excuse the appellate judge from considering carefully the decision which is challenged. The exercise of discretion by the primary judge does not exempt the appellate court from the performance of its own functions. Quite apart from review for identified error in the exercise of the discretion, cases will arise where the discretion could only really be exercised in one particular way. A recent illustration of the error of appellate abdication of responsibility, by invoking the catchcry of discretion, can be seen in the decision of the High Court of Australia in Foster v The Queen (1993) 67 ALJR 550 (HC). In that case, the primary judge indicated that, if necessary, "in the exercise of my discretion" he would have 2 UNREPORTED JUDGMENTS admitted a confessional statement. In the Court of Criminal Appeal, the Court concluded that it could not intervene because the judge had exercised his discretion to admit the document and that discretion had not been shown to have miscarried. The High Court held that the case was one where the proper exercise of the primary judge's discretion required the exclusion of the confessional statement on the grounds of unfairness and on public policy grounds. See ibid, 557. Serious injustices and errors may lurk in the exercise of discretions. I reject the appellate abandonment of its function simply because the flag of discretion has gone up. Judging, at least in any conception of the function, is not such an automatic or mechanical activity. This Court's, jurisdiction having been enlivened, and leave having been granted by the Court, it is necessary to consider the appeal on its merits. In doing so, the Court must take into account the reasons for restraint which I have mentioned and doubtless others which I have not. Cases certainly exist where the Court has reviewed a cost order, as for example where an issue of principle may be involved or where an apparent injustice has been done by the cost order made. See Madurasinghe v Penguin Electronics (a Firm) [1993] 1 WLR 989 (CA). In Norbis v Norbis (1986) 161 CLR 513 at 519 Mason and Deane JJ stated that the "point of preserving the width of discretion... is that it maximizes the possibility of doing justice in every case. But the need for consistency... provides an important countervailing consideration". Appeals against cost orders frequently arise in the course of disposing of an appeal brought to the Court as of right. See eg Parker v National Roads and Motorists' Association and Anor, unreported, Court of Appeal, 7 September 1993, at 17. In such cases, the challenge to a particular cost order, including an interlocutory order, will typically be raised as one of the grounds of appeal. This is what occurred, for example, in Rudner v Government Insurance Office of New South Wales, Court of Appeal, unreported, 11 June 1992; (1992) NSWJB 50. In that case, the Court disturbed a special cost order made, in the discretion of the trial judge, by which a successful plaintiff was required to pay three quarters of the defendant's costs of the trial. Sheller and Cripps JJA (with Mahoney JA dissenting) held that the trial judge erred in making that error. The Court set aside the order. It left standing only the cost order that the defendant pay the plaintiff one quarter of her costs of the trial. The Court also ordered that the plaintiff receive one half of her costs of the appeal, to signal her success on the costs issue. Indemnity costs principles The costs application in this case was for an indemnity costs order in accordance with the Rules of Court. The general scope of indemnity costs was considered by Rogers CJ Comm D in Singleton and Anor v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103 (SC). His Honour provided a useful outline of the case law and a summary of the applicable principles. He pointed out that there is a distinction between costs on an indemnity basis and costs on a solicitor/client basis, such that "[the] indemnity remains constrained by reasonableness in contrast to extravagance" (at 107). It thus includes all costs which are reasonably incurred. It does not include those over and above the necessary legal requirements. See also Degmam Pty Ltd (In Liq) v Wright (No 2) [1983] 2 NSWLR 354 (SC), 358. Another recent case in which particular consideration was given to the subject of indemnity costs was The Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 (CA), a decision of this Court. That case concerned an application for indemnity costs of an appeal. It did not involve a review of a trial judge's cost URJ CRISP v KENG (Kirby P) 3 order. But the reasons of the Court contained observations on the importance of the policy behind the Rules of the Supreme Court providing for indemnity costs to plaintiffs where they have made offers of compromise which are rejected incorrectly, as the outcome of the litigation demonstrates. Pt52 R17 SCR provides that the plaintiff is entitled to have his or her costs taxed on an indemnity basis in circumstances where more is recovered at trial than an offer of compromise made before the trial. In such a case, costs from the date on which the offer was made are to be paid on an indemnity basis, unless the Court otherwise orders. In Maitland Hospital, the Court outlined the objects of the applicable indemnity costs rule as follows (at 724): 1. To encourage the saving of private costs, and the avoidance of the inherent risks, delays and uncertainties of litigation, by promoting early offers of compromise which amount to a realistic assessment of the plaintiffs real claim. Such offers may be placed before the plaintiff without risk that the defendant's assessment of its position will be revealed to the Court; 2. To encourage the saving of public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and 3. To indemnify the plaintiff, who has made the offer of compromise, later found to have been reasonable, against the whole of the reasonable costs thereafter incurred. This is deemed appropriate and just, because, from the time of the rejection (or deemed rejection) of the compromise offer, the real cause and occasion of the litigation, is, notionally, the attitude adopted by the defendant which has rejected the plaintiffs offer of compromise. In such circumstances, that party should ordinarily bear all of the plaintiff's subsequent reasonable costs of the litigation. It is the duty of the Court to give effect to the rule in order to secure the achievement of its purposes. These considerations were emphasised in the submissions of the appellant in these proceedings. In Maitland Hospital, the Court identified a particular purpose of Pt52 R17 SCR as being to put a premium on the realistic assessment of cases by defendants. It was not to require perfect foresight - a gift which is denied to us all. Accordingly, a discretion is retained to permit the Court sometimes to order otherwise than as provided by the prima facie rule. However, clearly, this exception is intended to apply in cases having exceptional features. The usual provision for an order for indemnity costs following refusal of a reasonable offer of compromise is to apply in the ordinary case (see ibid at 725). It was the policy behind the indemnity cost provisions in Pt52 R17 SCR, as explained above, that the appellant in these proceedings repeatedly invoked. Put shortly, his arguments suggested that Wood J's cost order had miscarried because his Honour had failed to give effect to the policy of the rule as explained by this Court in the Maitland Hospital case. On the way towards establishing that proposition, it was suggested that the four reasons given by Wood J for the order which he made demonstrated errors in the exercise of his discretion. The appellant urged this Court to establish again, and to enforce, the principle that would ensure that trial judges of the Supreme Court gave more than lip service to the provisions of the rule and the intended operation of it, as explained in the Maitland Hospital decision. The appellant made an offer of compromise, which was declined by the respondent. In doing so, the respondent had chosen to accept 4 UNREPORTED JUDGMENTS the risks of litigation, and to accept the consequences. The normal costs rules applied in accordance with Pt52, R17 SCR. That meant that, from the day of the appellant's offer, the respondent should bear the appellant's costs on an indemnity basis - just as the Rules of Court provided and Maitland Hospital, properly understood, required. Cf Re Hoare and Co Ltd (1933) 150 LT 374, 375; [1933] All ER Rep 105, 107; see TN Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd (1984) 1 FCR 371. The respondent, by a notice of contention, advanced a number of arguments of a technical kind to support the decision of Wood J to refuse indemnity costs upon grounds not stated by his Honour. For example, he urged that the "offer of compromise", as made in the present case, was not in answer to the proceedings as required. This was because it was expressed as being an "answer to the cause of action", unspecified as to which of the causes of action against the two defendants sued upon. It was also unspecified because it was directed to the respondent and the co defendant hospital, without differentiation between them. The co defendant escaped liability at the trial. I do not find either of these submissions attractive. However, in the conclusion which I have reached, and in the course which I propose, it is unnecessary for me to resolve them. The respondent also resisted the appeal on predictable grounds which stressed the discretionary nature of the cost order involved, especially, as it was put, in circumstances where, despite the outcome of the trial, the presentation of the appellant's case "fully justified" the respondent's defence of it. The respondent urged that Wood J's decision was not only open to his Honour, but was correct and, indeed, virtually inevitable in the circumstances of the case. Warming to these arguments, the respondent asked the Court to dismiss the appeal and to order the appellant to pay his costs on an indemnity basis. The plaintiff partly succeeds in a medical negligence case It is now appropriate to say something about the nature of the issues litigated at the trial. Mr Roger Crisp (the appellant) underwent spinal surgery at the Albury Base Hospital on 3 May 1976. The surgery was performed by Dr Gul Keng (the respondent). The operation was a laminectomy. In the course of it, the appellant suffered a cauda equina injury. This was later observed when a further laminectomy was performed upon the appellant at the Royal North Shore Hospital in Sydney on 9 August 1977. The precise cause of the disability flowing from his treatment was, of course, unknown to the appellant. A summons for discovery was filed in September 1979 on his behalf. The statement of claim was not filed until 2 September 1981. It named both the respondent and the Albury Base Hospital as defendants. As is not uncommon in such matters, there was a great deal of conflicting evidence from medical experts. The appellant went through a number of solicitors before retaining the solicitors who represented him at the trial and who still appear for him. The respondent and the hospital were jointly represented at the trial which was heard before Wood J, sitting alone. On 2 December 1992 his Honour published a reserved judgment. He entered judgment against the appellant in favour of the hospital. However, he also gave judgment in favour of the appellant against the respondent in the sum of $160,145. The appellant failed on most of the particulars of negligence alleged against the respondent. The one upon which he succeeded was that the respondent had failed efficiently and promptly to treat a wound infection which had developed complications. URJ CRISP v KENG (Kirby P) 5 It is important now to mention the evidence which gave rise, once the foregoing orders were announced, to the appellant's claim for the order for indemnity costs under the rule. On 9 December 1991 an offer of compromise, in accordance with Pt52 R17 SCR was made by the appellant (as plaintiff). It was made to the respondent and the hospital (as defendants). The respondent offered to accept a judgment of $70,000 together with his [party and party] costs. The offer was made to the respondent and the hospital without differentiation. As I read it, it was open to them severally or jointly to accept it. It related to their total liability. This offer was rejected by those who represented the respondent and the hospital. The time for acceptance passed. On 24 December 1991 the respondent and the hospital made a joint offer of compromise of $5,000, together with costs. This was rejected by the appellant. It was in this state of settlement offers, unknown to the Court, that the matter went to trial. The decision of trial judge refusing indemnity costs Wood J immediately heard the appellant's argument for indemnity costs. Until his judgment was delivered in the substantive claim he was, of course, unaware of the foregoing offers of compromise. Remarkably enough, no application was made on behalf of the appellant for a Bullock order for costs in relation to the appellant's success against the respondent and failure against the hospital. In an affidavit of the appellant's solicitor it is said that this was an "accidental omission". No Bullock order having been sought, Wood J did not make such an order. He ordered the appellant to pay the costs of the hospital. For reasons given on the same day (2 December 1992), Wood J also ordered that the respondent should not be obliged to pay the appellant's costs on an indemnity basis. Instead, he simply confirmed the ordinary cost order that the respondent pay the [party and party] costs of the appellant in relation to those proceedings. He excepted from his general order costs "which have already been dealt with upon a party/party basis". He also exempted the costs of certain written submissions, prepared by one of the counsel for the appellant which he felt contained a "quite unjustified and extravagant attack" upon the professional competence and honesty of Dr Keng. He described these submissions as "little more than a meandering walk through the evidence". That is where the actual orders stood in December 1992 when Wood J commenced long leave. His Honour was not expected to return to the Court until May 1993. It was in this interval that the summons for leave to appeal came before this Court. The appellant indicated an intention to seek a Bullock order from Wood J in due course. Meanwhile, he prosecuted these proceedings. The respondent initially urged that this Court should leave the consideration of the summons for leave to appeal until after Wood J had made his determination on the remaining cost issue, foreshadowed in the proposed claim for a Bullock order. That would allow the entirety of his Honour's costs orders to be reviewed, if still necessary. The appellant plaintively suggested that this Court should bring up the cost orders in their entirety, to grant, as well, the Bullock order which had not been sought from Wood J. This was a beguiling, but unattractive, invitation. It was rejected by the Court. Nothing I am saying reflects, one way or the other, upon the consideration by Wood J of any belated application for a Bullock order in respect of the costs of the respondent and the hospital at the trial which the appellant may bring before him. 6 UNREPORTED JUDGMENTS Because of his departure for leave, Wood J's reasons were originally provided to the Court in an uncorrected condition, not having been revised by his Honour before he commenced leave. However, the reasons for his Honour's refusal of the indemnity costs were clear enough. Four reasons were stated. They were: 1. The substantial delay on the appellant's part in originally prosecuting the proceedings and thereafter in pursuing them without appropriate vigour; 2. The fact that on 6 May 1992, the solicitor for the appellant had declined to agree to an exchange of witnesses' statements, which would, in his Honour's view, have had the effect of substantially shortening the length of the hearing; 3. The fact that the appellant's case changed dramatically at the hearing from one based substantially on the alleged negligence in taking to surgery a patient who had a low haemoglobin level (a claim which failed) to one (ultimately upheld) of cauda equina compression and incompetent treatment of a wound infection; and 4. The fact that, on many of the issues affecting liability the appellant had failed in the case as presented at the trial. Senior counsel for the appellant attacked each of these four reasons in this Court. Moreover, he urged that they showed a lack of appreciation on his Honour's part of the important policy which lies behind the indemnity cost rule (SCR Pt52 R17). Criticism of the reasons for declining indemnity costs So far as the first reason is concerned, the appellant pointed out that the offer of compromise was made on 9 December 1991. Any provision for indemnity costs would therefore date only from 10 December 1991. Upon this footing, the long delay before that date was irrelevant to the single issue before Wood J on this application, namely whether he should otherwise order in respect of costs from 10 December 1993. The trial of the action commenced on 7 July 1992. With respect to Wood J, I am inclined to agree with the appellant's submission on this point. The delay in bringing on the matter for hearing may have been a reason for making a special order in respect of the party/party costs prior to the offer of indemnity costs. It was not, in my respectful view relevant to the refusal to grant indemnity costs from the moment the offer of compromise was made. It cannot be suggested that the delay between that moment and the trial was excessive or in any way attributable to procrastination or lack of vigour or efficiency on the part of the appellant or his legal representatives. The discretion in refusing indemnity costs was therefore affected by consideration of an irrelevant ground, viz the pre offer delays on the part of the appellant and his advisers. So far as the refusal of the solicitor for the appellant to provide witnesses' statements on 6 May 1992 (ie three months before the hearing) is concerned, the correspondence between the solicitors has been tendered and read before this Court. Wood J does not appear to have had the correspondence. With respect to his Honour, he appears to have misunderstood what was being asserted. It seems to me that the statements would not have significantly shortened the hearing, given the extent of cross examination and the matters in dispute. From the chasmic distance between the offers of the respective parties, as now revealed, it seems plain that they each had an entirely different view of the nature of the case and of the prospects of their respective success and failure in it. It is certainly relevant for a judge, in disposing of costs, to visit on a party the consequences of undue procrastination and non cooperation. But, in this case, it does not appear to me that the provision of the statements would have relevantly narrowed the URJ CRISP v KENG (Kirby P) 7 gap between the parties. It is important to keep steadily in mind the discretion which was being invoked, viz to deprive a party of a prima facie entitlement to indemnity costs. An offer was made on behalf of the appellant to settle at an amount considerably lower than that ultimately recovered by him. Whilst some other costs penalty might have been appropriate for the failure to provide the witnesses statements, it appears to me, with respect, that the non cooperation cannot remove the undeniable fact that an offer of compromise now demonstrated to have been reasonable, was made for the appellant and spurned by the respondent. So far as the third given reason is concerned, I also consider that it involved consideration of an irrelevancy. The original statement of claim filed for the appellant alleged a failure of the respondent to examine the appellant's lower back at regular intervals in order to ensure that the post operative treatment was being carried out and was having the appropriate effect. (See statement of claim para7(g)). The amended statement of claim contained the same allegation. The further amended statement of claim of 13 February 1991 made even more specific the reliance by the appellant upon post operative treatment relevant to the cauda equina compression. Accordingly, in my respectful view, Wood J appears to have erred in concluding that the appellant suddenly raised an "entirely new case" at the trial. If this is so, consideration of that issue, as if it were a fact, would amount to a further irrelevant ground for consideration in the application for indemnity costs as provided by the rule. I do not doubt that the appellant's advisers, as the case developed, placed emphasis upon different facts. But a new case it was not. So far as concerns the fourth reason given, it is true that the appellant did not succeed on all issues of liability. Of itself, this would not be a disqualification from the operation of the rule, as intended. It might have been a reason for confining, with some particularity, the provision of the indemnity costs so that they were afforded only as to the costs involved in the proof of the matters upon which the appellant actually succeeded. I acknowledge the right of a judge of trial to determine such matters with a relatively broad brush. That is the way this Court proceeded in Baltic Shipping Company v Dillon ("The Mikhail Lermontov') (1991) 22 NSWLR 1 (CA) at 32f. The High Court also proceeded in this way. See ibid (1993) 111 ALR 289 (HC), 306. That Court made its own broad assessment of the measure of success of the appellant to be reflected in the costs ordered. (loc cit). But to deny completely the claim for indemnity costs in this case amounted to an error, at least so far as those issues which were raised by the statement of claim, in contest in the proceedings, the subject of ultimate success and productive of a judgment more than twice that which the appellant offered to accept by way of compromise. The error, if uncorrected by this Court, frustrates the clear purpose of the new cost rule. The result reached by Wood J suggests the application of an incorrect principle in ordering otherwise than Pt52 R17(4) ordinarily provides shall be the case. Conclusion: irrelevant considerations - costs order set aside In Maitland Hospital v Fisher (above) the Court, in a unanimous opinion, emphasised the importance of the new indemnity cost rule. It explained its objects. Those objects constitute part of a number of concerted initiatives taken by the legislature and by the Court itself (including in the Rule Committee) to transfer some of the obligations of decision making in litigation from the Court to other responsible persons or to the parties themselves. The aim of such moves is the achievement of the important public and private objectives stated in 8 UNREPORTED JUDGMENTS Maitland Hospital. For the reasons explained in that case, this Court must give full force and effect to the Rules of Court providing for indemnity costs. Where the primary judge fails to apply the policy of the rules, it is the duty of this Court to uphold those rules and the policy which lies behind them. Tenter with the greatest hesitation upon the disturbance of the orders of Wood J. I do so not only out of respect for his Honour in such a matter but out of a particular recognition that the conduct of the subject trial would have afforded his Honour many advantages in determining the issue of costs as between the parties which it is difficult to recapture in the appellate setting. When I first embarked upon the hearing of this summons I was opposed to the application for leave. Even having joined in the grant of leave, I was unsympathetic to the arguments for this Court's intervention. I was very mindful of the many authorities which urge appellate restraint in such matters. See eg John Fairfax and Sons Ltd v Palmer (1987) 8 NSWLR 297 (CA), 301; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors (1988) 81 ALR 397 (FC), 400; Donald Campbell and Co Ltd v Pollack [1927] AC 732 (HL), 750 and Wilkinson and Anor v Kenny and Anor [1993] 1 WLR 963 (CA), 973f. However, this Court has its function to perform. It would be to deny that function to say that it will never intervene in costs orders. The recent experience of Rudner shows that it will do so, where error is demonstrated. In particular it will do so where the costs discretion miscarried for consideration of erroneous or irrelevant considerations. See eg House v The King (1936) 55 CLR 499, 505; Dillon (above) (1991) 22 NSWLR 1 (CA) at 35; Bankamerica Finance Ltd v Nock [1988] AC 1002 approving Scherer and Anor v Counting Instruments Ltd and Anor (Note) [1986] 1 WLR 615 (CA) 622 principle 10. In this case error has been demonstrated, as set out above. Wood J's order was affected by extraneous and irrelevant considerations. It must therefore be set aside. Orders I have considered whether this Court should substitute its decision for that offered by Wood J. Ordinarily, I would favour that course, especially in such a protracted dispute. The usual position provided for by the Rules of Court is that a party who has made an offer of compromise, rejected by its opponent, who goes on to recover a larger judgment will receive indemnity costs from the date of that offer, unless the judge otherwise orders. In default of a positive conviction that the Court should "otherwise order', the appellant would thus be entitled to the order sought in this case. For three reasons, however, I consider that it is appropriate to return the motion to the Division (and thus probably, and desirably, to Wood J) for consideration of the cost order which should be made, freed from the irrelevant considerations which I have identified. Those three reasons are: 1. There remains outstanding the foreshadowed application for a Bullock order. It would be appropriate and just that the primary judge should decide all outstanding cost questions. As the matter must be relisted in the Division anyway, it is preferable that it should be relisted with the additional task of exercising the discretion under Pt52 R17(4) SCR in accordance with law; 2. The respondent has raised some additional points in the appeal which were not initially placed before the primary judge. In the circumstances, it is appropriate that he should have the opportunity of dealing with such points; and URJ CRISP v KENG (Priestley and Cripps JA) 9 3. There is no doubt that the trial judge has advantages over this Court in justly disposing of costs in this case. This was a large and complex trial. There were shifting issues and tactics. The disposal of costs should ordinarily be left to trial judges. Try as we might in this Court, it is extremely difficult to recapture all of the considerations relevant to the discretionary judgment involved. In particular, in this case, it might be appropriate to permit indemnity costs from the offer of compromise (as the Rules of Court plainly encourage) but to exclude from such order (by otherwise ordering) costs specifically incurred for professional work found to be unhelpful by the trial judge or specifically devoted to particular issues upon which the appellant lost at the trial. The trial judge will, in this case, be in an advantageous position to define such work and to specify such issues, if he so thinks fit. In saying this I would not wish to appear to control the exercise of the discretion. It should be returned to the judge at first instance. I would simply conserve this Court's intervention in this case to the essential appellate one, viz of ensuring that the discretion here is exercised, as the law envisages, freed from incorrect or irrelevant considerations. Orders I favour the following orders: 1. Appeal allowed, pursuant to leave earlier granted; 2. Set aside the order of Wood J dated 2 December 1992 ordering that the appellant should have his costs otherwise than Pt52 R17 SCR provides; 3. Return the motion relating to indemnity costs to the Common Law Division for rehearing; 4. The respondent to pay the appellant's costs of the appeal (including the summons for leave to appeal) but to have, if so qualified, a certificate under the Suitors' Fund Act 1951; and 5. The costs of the first motion concerning indemnity costs to abide the outcome of the proceedings returned to the Common Law Division. Priestley and Cripps JA This is an appeal, by leave, from a decision of Mr Justice Wood in the Common Law Division of the Supreme Court on 2 December 1992. The appellant sued the respondent and the Albury Base Hospital for damages for negligent medical treatment in 1976. He commenced proceedings in the Supreme Court in September 1981. The matter lay dormant until 1987 when the respondent's solicitor unsuccessfully sought to have it struck out for want of prosecution. The statement of claim was amended in October 1988 and again in February 1991. The proceedings came on before Wood J in the Supreme Court on 6 July 1992 and continued until 17 July 1992. On 2 December 1992, Wood J published his reasons for judgment. On that day he gave judgment for the appellant against the respondent in the sum of $160,145 and entered judgment in favour of the Albury Base Hospital. On the day judgment was published, the appellant made an application for an order for indemnity costs against the respondent. Wood J declined to make the order. However, he made an order that the respondent pay the plaintiffs costs on a party and party basis. He also ordered the appellant to pay the costs of the Albury Base Hospital. On 22 February 1993 the appellant sought leave to appeal against the order of Wood J declining to award him costs on an indemnity basis. Leave to appeal was granted by the Court (Kirby P, Priestley JA and myself). No reasons were given. 10 UNREPORTED JUDGMENTS Mr Donovan QC also sought to appeal from a decision of Wood J "which relates to... the Bullock order', (that is the type of order made in Bullock v London General Omnibus Co [1907] | KB 264). Wood J did not make a Bullock order and did not decline to make such an order. No submissions were put to him concerning the appropriateness or otherwise of making a Bullock order. This Court rejected Mr Donovan's application that it determine whether such an order should be made. The appellant's case before Wood J on the question of indemnity costs was based on an "offer of compromise" dated 9 December 1991. It provided: "The plaintiff offers to compromise the claim in the following manner: 1. By accepting payment of the sum of $70,000 plus costs in answer to the cause of action on which the plaintiff claims; Dated 9.12.91. This offer is made in accordance with Pt22 of the Supreme Court Rules. Pt52 R17(4) provides: "Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim to which the offer relates no less favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall, subject to R24, be entitled to an order against the defendant for his costs in respect of the claim from the day on which the offer was made, taxed on an indemnity basis in addition to his costs incurred before and on that day, taxed on a party and party basis." Pt22 of the Supreme Court Rules is concerned with "offers of compromise". Pt22 R9 provides: "Where two or more defendants are alleged to be jointly or jointly and severally liable to the plaintiff in respect of a debt or damages and rights of contribution or indemnity appear to exist between the defendants, Pt52 R17 shall not apply to an offer unless (a) in the case of an offer made by the plaintiff - the offer is made to all defendants, and is an offer to compromise the claim against all of them;" The appellant had sued the respondent and the Albury Base Hospital jointly and, we think, jointly and severally. It would seem to us that the offer was made to both defendants, ie the respondent and the Albury Base Hospital. The appellant was successful against the respondent but unsuccessful against the Albury Base Hospital. Up until the time of judgment there was a live issue that the Albury Base Hospital was liable to the appellant. There was no time limit specified in the offer. Had the respondent accepted the offer, that would not necessarily have ended the proceedings. The appellant may have continued against the Albury Base Hospital. These are not mere technical matters. The appellant obtained judgment on a claim to which the offer related in a broad sense. But did the appellant obtain a judgment on the claim to which the offer related no less favourable to him than the terms of the offer? Against the respondent he did, or at least may have, but not against the Albury Base Hospital. We have some doubt, therefore, whether the circumstances in this case attract the operation of Pt52 R17(4). However, the argument was not advanced before Wood J and only reluctantly acknowledged on appeal after it was raised by Priestley JA. We have come to the conclusion, therefore, that this appeal should be dealt with upon the assumption that the offer was properly made and capable of being accepted so as to attract the operation of the Rule. The appellant was operated on by Dr Keng at the Albury Base Hospital on 3 May 1986. He underwent a laminectomy and discectomy at L4/5 and L5/S1. In his 123 page reasons for judgment, Wood J found that the appellant suffered URJ CRISP v KENG (Priestley and Cripps JA) 11 cauda equina damage as a consequence of the development of excessive and unusual scarring and fibrotic tissue and that the development of that tissue was due to chronic infection in the surgical wound. He found that the infection was inadequately treated by the respondent prior to the appellant's discharge from hospital and that that lack of treatment amounted to negligence on his part. In the statement of claim as filed, the appellant made a number of allegations of negligence against the respondent and the Hospital. The appellant succeeded on the allegation referred to above. That allegation emerged late in the piece. All other allegations were dismissed. At trial the live issues included allegations that the respondent failed to warn of possible complications; that his surgical technique was deficient; that he used improper suture material; that he failed to administer appropriate blood transfusions; that he failed to drain a haemotoma which developed etc. All allegations were thoroughly analysed by Wood J. In his decision he made it quite clear that not only did he reject a number of allegations of negligence against the respondent but that he viewed with disfavour the way the appellant's counsel conducted the trial. In the transcript of the submissions on the question of costs, he said that he thought that the attack on the credit and professional competence of the respondent was "totally unfair, quite extravagant and unjustified". He said: "You maintained an attack on every conceivable basis, did not let a thing go, and at the end of the day did present submissions which were in the strongest possible terms." Later he said: "TY]ou left every possible, conceivable issue open and you have failed on at least some of them. One of the grounds you ran was error in the surgery. There was never any real basis for that, but that was a matter which occupied a great deal of time, and was very important no doubt for the hospital and the doctor's reputation as to whether he made the kind of slip that you suggested during the surgery. Also there is the surgical technique and the use of a black silk suture, you failed on that. The only thing you succeeded on was I have found there was a wound infection which developed during the period in hospital, which led to a slow cauda equina compression through fibrosis and that particular infection was not appropriately investigated or treated. That is the basis you succeed on. All the other issues, including the technique for surgery, the haemoglobin count, all the multiple issues you raised, you failed upon. They took up a great deal of time in the trial. Then you maintained what I can only describe as a most unfortunate and unfair attack on Dr Keng in terms of his professional competence and interest... I can only say I thought the attack upon Dr Keng was unfortunate and unfair. I will also say I found the written submissions of absolutely no help so far as your side of the issue is concerned. The summaries of the evidence were verbose, undirected and not of single assistance to me.... The meandering submissions I got from you were no more than a stream of conscience (sic) running through the thousand pages of transcript involved in this case, and were of no help save to contain repeated attacks upon the propriety and honesty and competence of Dr Keng. I mean not just clinical competence, but his competence to practise at all." And finally when his Honour's mind was directed to the offer of compromise, his Honour said: "When you made that offer the case you were running was totally different to that which you presented at the hearing." 12 UNREPORTED JUDGMENTS Wood J made special reference to the 200 pages of submissions presented by the appellant. He referred to them again as a "meandering walk through the evidence". He also referred to four matters raised by Mr King, on behalf of the respondent, as disentitling the appellants to an indemnity order. They were: "(a) Substantial delay on the plaintiff's part in prosecuting the proceedings, the statement of claim having been filed in September 1981, being stood out of the list in September 1983 on the plaintiff's request, being restored the list, but then the hearing date then allocated being vacated on 17 August 1988 on the plaintiff's application, and again vacated in March 1989 on the defendant's request following late service of the experts' reports. (b) The fact that on 6 May the plaintiff's solicitors declined to agree to exchange witnesses' statements, although that would have had the effect of substantially shortening what was a lengthy hearing. (c) The fact that the plaintiff's case changed dramatically at the hearing from being a case based substantially on negligence in taking a patient to surgery who had a low haemoglobin level to one of cauda equina compression arising from one of several identified causes. (d) The fact that on many of the issues affecting liability, including surgical error, inappropriateness of surgical procedure and absence of informed consent, the plaintiff failed." It is not entirely clear from his Honour's judgment that he did any more than simply refer to the submissions made by the respondents. But if (as we think, is more probably correct) he had regard to them, it is clear that they were not the only matters he considered. He was, in my opinion, entitled to have regard to them. No submission was made to him by counsel for the appellant that he should not. S76 of the Act provides, in terms, that costs are, subject to the rules, in the discretion of the Court. Pt52 R11 provides: "Tf the Court makes any order as to costs, the Court shall, subject to this Part, order that the costs follow the event, except where it appears to the Court that some other order should be made as to the whole or any part of the costs." There are cases where the Court will not depart from the usual order notwithstanding that the successful party in the action does not win on all issues. It is not uncommon, however, for costs orders to be moulded so as to deprive a successful party of his or her full party and party costs or even to order a successful party to pay some part of the unsuccessful party's costs (see Morosi v Mirror Newspapers Ltd [1977] 2 NSWLR 749 and Baltic Shipping Co v Dillon (1992 to 1993) 176 CLR 344). The judge has a discretion. Relevant to the exercise of that discretion are circumstances connected with the conduct of the litigation. It is not correct to say, therefore, that anything that happened in the litigation prior to 10 December 1991 was irrelevant to the judge's exercise of discretion. In his determination upon the totality of his costs orders he could have made a number concerning different periods and issues or he could have encompassed a number of considerations in a simple order (which is what he did). The very great delay could hardly have done other than protract the proceedings. It is not disputed, we think, that the conduct of the appellant would have entitled the judge to have made a special (and less favourable) order in respect of party and party costs prior to the offer of compromise. We are not persuaded that Wood J misunderstood the events in May 1993 or their effect on the litigation. The appellant's case changed significantly late in the hearing. It went from being a case based substantially on negligence in taking a patient to URJ CRISP v KENG (Priestley and Cripps JA) 13 surgery who had a low haemoglobin level to one of cauda equina compression. Finally, Wood J was plainly correct in taking into account that the appellant failed on a number of issues. It could not be disputed that it would have been open to Wood J to deny the appellant costs of issues unsuccessfully pursued at trial. We have had the privilege of reading the draft judgment of the President. We do not agree, with respect, that error has been demonstrated. However, the reasons advanced by the President why the matter should be remitted to the trial judge, speak eloquently as to why this Court should not interfere with Wood J's decision. Wood J had advantages this Court does not. It was a large and complex trial. The issues and tactics changed throughout. This Court could not recapture all the considerations relevant to the discretionary judgment involved. Reference was made during the proceedings to a decision of this Court in Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 concerning the object and purpose of the indemnity costs rule in Pt52. Before turning to those objects and purposes, it is necessary to observe that in that case the Court of Appeal was not reviewing a decision of a trial judge. The Court considered for itself whether, in the circumstances before it, it ought make an indemnity order. In the course of determining that such an order should be made, the Court considered that the objects of the rule included the encouragement of saving of private costs, the avoidance of uncertainty of litigation and to save public costs "which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant" (at 724). In the present case, it is no doubt correct that if the respondent and the Albury Base Hospital had accepted the appellant's offer, the time of the Court would not have been taken up in pursuit of the appellant's unmeritorious allegations. However, as it would seem to us, it hardly accords with the purpose of the rule that a plaintiff, such as the present appellant, should receive indemnity costs for doing just that. Moreover, the Albury Base Hospital in fact was successful in the litigation. However all that may be, it is clear, in our respectful opinion, that Wood J had a discretion to exercise and that this Court should not interfere with the exercise of that discretion otherwise than in accordance with well established principles (House v The King) (1936) 55 CLR 499. It is not enough in an appeal against the exercise of discretion that the appellate court would consider that if they had been in the position of the trial judge they would have taken a different course (although in this case, and on the somewhat limited material available to us, we would not have taken a different course to Wood J). In order to justify intervention by this Court, it must be established that the trial judge acted on a wrong principle, allowed extraneous or irrelevant matters to guide him, mistook the facts or did not take into account a material consideration. In our opinion, none of these has been demonstrated. Leave was granted because it was thought that the appellant should be given the opportunity to persuade the Court that Wood J's discretion miscarried because of manifest error or because he had regard in a material way to irrelevant matter. In our opinion, the appeal should be dismissed with costs. Appeal dismissed with costs. Counsel for the Appellant: B Donovan QC Instructed by: Stacks The Law Firm Counsel for the Respondent: PE King 14 UNREPORTED JUDGMENTS Instructed by: Tress Cocks and Maddox