PALUMBO v IZMIRLIAN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL GLEESON CJ and ROLFE AJA 7 June, 6 July 1995 [1995] NSWCA 354 Application to the Court of Appeal for indemnity costs by virtue of an offer of compromise made pursuant to Ptl9A R9(5) of the District Court rules, on the basis that judgment, as varied, by the Court of Appeal is no less favourable than the amount of the offer of compromise. Not established that the Court should "otherwise order". Order for indemnity costs made. Forbes Services Memorial Club Ltd v Hodge (Court of Appeal - 8 March 1995 - unreported) applied. Gleeson CJ FURTHER JUDGMENT [1] Iagree with the orders proposed by Rolfe AJA in his Further Judgment and with his reasons. Rolfe AJA Judgment in this matter was delivered on 14 June 1995. The following orders were made: 1. Appeal allowed. 2. Judgment of McDevitt DCJ set aside. 3. In lieu thereof judgment for the plaintiff in the sum of $73,004. 4. The respondent pay the appellant's costs of the proceedings before McDevitt DCJ and of the appeal and as to the costs of the appeal have a certificate under the Suitors' Fund Act if he is otherwise entitled to it. Upon the orders being announced Mr Lakeman of Counsel for the appellant sought a special order for costs on an indemnity basis arising from the making of an offer of compromise. It was inappropriate to consider that then and directions were given for the parties to furnish written submissions. There has been compliance with those directions and the detailed submissions make further oral submissions unnecessary. Several additional matters have been raised. Firstly, the appellant has pointed out that an arithmetical error has been made in the calculation of non-economic loss. The amount included in the award of damages for this component was $37,000. No issue is taken with the base figures, but it has been submitted that an application of the formula laid down by the Motor Accidents Act produces a figure of $43,000, in lieu of the figure of $37,000. It is not necessary to go into the figures further because the respondent concedes that the statutory formula under s79 of that Act yields the figure of $43,000. Accordingly, the amount of the judgment should be increased from $73,004 to $79,004. The appellant submits the correction to the judgment should be made pursuant to Pt20 R10 and the submissions of the respondent raise no objection to this course. A second matter to which attention has been drawn is that the learned trial Judge's order for costs does not appear in the orders he made at the conclusion of his judgment. This is because after his Honour delivered judgment counsel for the appellant made an application for costs and, in support thereof, tendered a 2 UNREPORTED JUDGMENTS copy of the Award made by an Arbitrator on 29 March 1993. Two applications were made to each of which his Honour acceded. The result was that his Honour ordered there should be a refund of the filing fee for a re-hearing from the decision of an arbitrator in the sum of $300, and that the respondent should pay the appellant's costs of the arbitration. The effect of setting aside his Honour's judgment is, arguably, to set aside the orders to which I have referred. They were not challenged and that was not the intention of the Court. Once again, very frankly, the respondent, in his written submissions, has accepted that his Honour's orders as to costs ought not to have been set aside and that: "Accordingly the respondent submits that the orders proposed by this Court as to costs should stand except for the addition of the words 'save as to his Honour's orders as to costs' in para2 of the orders of this Court." The third question for consideration is whether the respondent should pay the appellant's costs on an indemnity basis. By letter dated 30 September 1993 the appellant's solicitors served an Offer of Compromise pursuant to Ptl9A of the District Court Rules on the solicitor for the respondent. The letter stated: "We confirm our offer to you to-day of Eighty thousand dollars ($80,000) inclusive of costs and inclusive of all payments made under the Transcover Scheme and inclusive of all out-of-pocket expenses. We note that your response is the amount of Twenty seven thousand five hundred dollars ($27,500) on the same basis. We emphatically reject your offer. We enclose herewith by way of service Offer of Compromise pursuant to the District Court Rules." The Offer of Compromise, omitting formal parts, stated: "The plaintiff offers to compromise the claim in the following manner: 1. by accepting the sum of $69,000 plus costs in answer to the cause of action on which the Plaintiff claims. This offer is made in accordance with Ptl9A of the District Court Rules. A copy of this document has been served on the solicitor far the defendant." Ptl9A R2 provides: "(1) Subject to this rule, in any proceedings each of the plaintiff and the defendant may make to the other an offer to compromise any claim in the proceedings on the terms specified in the offer. (2) A plaintiff may not make an offer under subR(1) unless he has supplied to the defendant such particulars of the plaintiffs claim, and copies or originals of such documents available to the plaintiff, as are necessary to enable the defendant to fully consider the offer. (3) Unless the Court otherwise orders, where a plaintiff makes an offer under subR(1), no order shall be made in favour of the defendant on the ground that the plaintiff has not supplied, or has not supplied sufficient particulars or documents as required by subR(2) unless the defendant has informed the plaintiff in writing of that ground within fourteen days after receipt of the offer." Pt19A R3(1) provides an offer may be made at any time before verdict or judgment and subR(3) provides: "An offer may be expressed to be limited as to the time it is open to be accepted but the time expressed shall not be less than twenty eight days after it is made. " URJ PALUMBO v IZMIRLIAN (Rolfe AJA) 3 SubR(4) provides that an offeree may accept the offer by serving a Notice of Acceptance before the expiration of the time specified in accordance with subR(3) or "if no time is specified, the expiration of twenty eight days after the offer is made", or in the case of a reference to arbitration before the commencement of the hearing before the Arbitrator, or before "verdict or judgment in respect of the claim to which the offer relates", "whichever event is the sooner". It should be noted that the words "whichever event is the sooner" do not appear in Butterworths District Court Practice, but do appear in O'Grady's District Court Practice. It seems they should be included. They arose from the amendment proclaimed on 4 October 1991 (Gazette at 8537), which omitted the then current subR(4)(b), inserted a new sub-rule therefor and also subR4(c). Ptl19A R9(5) provides: "Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains an order or a 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 be entitled to an order against the defendant for his costs in respect of the claim from the date on which the offer was made, assessed on an indemnity basis, in addition to his costs in respect of the claim incurred before that date, assessed on a party and party basis." The appellant's submission is that it made an offer of compromise in the sum of $69,000 plus costs and that it has received a judgment "no less favourable to him than the terms of the offer", namely $79,004 plus costs and, accordingly, he is entitled to an order for indemnity costs either under the Court's inherent power or its powers under s76 of the Supreme Court Act 1970. In my opinion the entitlement to the order flows from the power of this Court to make the orders it considers the District Court should have made had that Court found as this Court has decided it should have. The respondent did not challenge, at a jurisdictional level, the power of this Court to make the order for indemnity costs, nor did it submit the matter should be referred back to the District Court for consideration. I can see no basis on which this latter course should, in the circumstances of this case, be taken. The sole basis on which the respondent submits the order sought by the appellant should not be made is that the Court, in the exercise of its discretion, should decline to make such an order, thereby picking up the words "unless the Court otherwise orders" in subR(5). The submission proceeds on the basis that the time for acceptance of the offer of compromise expired on 28 October 1993 and, thereby, adopts the version of the rule appearing in O'Grady. The hearing did not commence until | February 1995. The respondent submits that the time for acceptance expired on 28 October 1993 and, on 27 October 1993, the appellant filed an Amended Statement of Particulars pursuant to Ptl2 R4A, which made no specific claim for loss of one day's trading. The Ordinary Statement of Claim was filed on 3 July 1990 and, in respect of economic loss, it asserted: "The plaintiff is involved in a pizza business and has been unable to perform to the same level that he did before the accident. Further particulars will be advised in due course. It is not suggested any particulars of such loss were sought and, in particular, they were not sought within fourteen days of 30 September 1993 as provided for in R2(3). On 27 October 1993, somewhat more detailed particulars of past and future "economic loss" were provided. In relation to past economic loss a claim 4 UNREPORTED JUDGMENTS was made for the total period in reasonably specific terms and, also, in somewhat more general terms. It concluded with the following: "As a result of the injuries and disabilities from which the plaintiff suffers he has experienced a marked reduction in earning capacity and it has only been through the voluntary assistance of others that he has been able to continue to operate the pizza business. The plaintiff claims damages for the substantial diminution in earning capacity that he has experienced." As particulars some criticism may be made of these, but there is no suggestion the respondent sought further particularisation, although one may be forgiven for thinking that a claim in such terms cried out for that. Under the heading "Future Economic Loss" it was stated: "The plaintiff claims damages to compensate him for the substantial diminution in his earning capacity and his employability on the open labour market." Once again this statement could hardly be regarded as particulars on the basis of which any forecast could be made of the claim for loss of future earning capacity, but, apparently, no particulars were sought. Not only did the respondent not seek particulars within the fourteen days, to which I have referred, but he sought no particulars of the Amended Statement of Particulars. Had that step been taken, even though beyond the fourteen day period, and had the particulars not been furnished that would, in my opinion, have provided a matter to be considered in the exercise of the discretion to "otherwise order". The matter, so far as the submissions disclose, remained in this state until the commencement of the hearing on | February 1995. The transcript notes that thereupon Mr Lakeman sought leave to amend to extend the claim "to the present limit of the District Court jurisdiction of $250,000". Counsel, who then appeared for the respondent but did not appear before this Court, objected "because he was taken by surprise and that he had prepared the case on the basis of the old limit". His Honour granted leave to amend and there is nothing in the transcript to indicate that any application was made for an adjournment to seek further and better particulars. The respondent's position, bearing in mind the existence of the offer of compromise, was made the worse, in my opinion, by reason of its failure to avail itself of subR(3) of R2. The respondent's response to that is, in effect, that no particulars had been provided prior to 27 October 1993 and, accordingly, it could not evaluate the claim. However, in my opinion, the thrust of subR(3) obliges the party to whom the offer of compromise is made to seek particulars so that it can be evaluated properly if he wishes to contend, subsequently, that an order for indemnity costs should not be made. Particulars given on 27 October 1993 were, arguably, no more helpful, from the point of view of evaluating the offer, than the particulars earlier furnished. Once the offer of compromise was made it was open to the respondent to seek proper particularisation and, in my view, once the further particulars were furnished on 27 October 1993 it was still open to the respondent to do so, with the possible consequences to which I have referred. The respondent has submitted that there was certain evidence before it, based upon what the appellant had told various doctors, which caused it to believe there was no real claim for past economic loss and loss of future earning capacity. It has submitted, in these circumstances, that at the time the offer of compromise was made: URJ PALUMBO v IZMIRLIAN (Rolfe AJA) 5 "., there was therefore no notice by way of any history or indeed by way of Particulars that the plaintiff claimed any amount by reason of his closure of the business for one day a week following the accident. This specific evidence, which formed the basis of the Award for past and future loss of earning capacity by this Honourable Court, only emerged at the hearing before the Trial Judge on Ist and 2nd February 1994 (sic)." It is, accordingly, conceded that such evidence did emerge and, notwithstanding the apparent lack of particularisation, no objection was taken to it or, if it was, the respondent did not file a Notice of Contention asserting any error on the part of his Honour in admitting the evidence. The respondent appears to have adopted the attitude that the claim could not be substantiated. Perhaps the view was taken that in those circumstances it was better not to have the appellant and those representing him focus too closely on the issues. But whatever the reason the fact remains the respondent was prepared to go to trial, with an offer of compromise outstanding, without seeking particulars of the claims for past economic loss and future loss of earning capacity. This, in my opinion, he did at his peril. The respondent submitted he did not have all the information "which would have enabled it to assess the plaintiff's loss of earning capacity in the manner adopted by this Court when the Notice of Offer of Compromise was capable of being accepted by" it. If that is so it was solely the fault of the respondent in failing to seek the information to which he was entitled. It was submitted that the taxation records did not disclose any actual economic loss from the date of accident to trial and that although a claim for assistance provided was made there was no allowance for this head of damage either by the trial Judge or this Court. That is so but, in my opinion, it does not alter the situation that the appellant was entitled to past economic loss and future loss of earning capacity, and this Court has so held. It was submitted by the respondent that on the hearing of the appeal counsel for the appellant contended that his loss was far greater than that accepted by this Court. It was further submitted that at the hearing of the appeal the respondent contended that a figure of $15 per week ought to have been adopted for past economic loss, which would have provided a figure of $5,895 for that component of the damages, and a figure of $8,741.40 for future loss of earning capacity to the age of 65 years after allowing 15% for vicissitudes. The respondent therefore contended for an amount of $14,636.40 past economic loss and future loss of earning capacity. This Court awarded past economic loss of $11,324.42 and future loss of earning capacity of $16,226 and, it was submitted, made no allowance for the incidence of taxation in deriving the figures for past economic loss on the base figure of $28 per week for future loss of earning capacity. The submission continued: "Had the Court accepted the respondent's Submissions, the total award of the Court would have been below the figure contained in the Offer of Compromise of $69,000 plus costs, even allowing for the increased award for non-economic loss of 25% of a 'most extreme case' of $43,000." Whilst that may have been so the fact is this Court did not accept those submissions and, for the purposes of the present application, the respondent must accept the Court's decision. The submission for the respondent continued that the amount awarded was "considerably closer to the amounts contended at the hearing by the respondent" than the appellant. It was also noted that although leave was granted to assert the 6 UNREPORTED JUDGMENTS trial Judge erred in failing to award any future medical expenses no allowance for any such claim was made by this Court and, for all these reasons the Court should "otherwise order" and not provide any order for the payment of indemnity costs. In many cases where an offer of compromise is made there may be a reasonable coincidence between the figure in the offer and the ultimate judgment. That is hardly surprising because the assessment of damages for personal injury is reasonably well understood by the Court and competent legal representatives. But the appellant only had to obtain an award, which was no less favourable and, on the base figures, the judgment exceeds the offer by some twelve to thirteen per cent. In my opinion this is a case in which the Court should order indemnity costs as from 28 October 1993. The appellant made an offer of compromise. It was then within the power of the respondent to seek to have particulars placed before him justifying the claim made. The fact is the respondent neither availed himself of the specific provisions of the rules, which applied once the offer of compromise was made, nor adopted the fundamental approach of seeking particulars of past economic loss and future loss of earning capacity in the face of a pleading which asserted they would be provided at some future time. The inability of the respondent to determine whether it should accept or reject the offer of compromise was solely its own fault and, in my opinion, that fault continued during the hearing. In these circumstances I do not see any basis on which this Court should exercise the discretion reposed in it by the rule to "otherwise order" that the respondent should not pay the appellant's costs on an indemnity basis from 29 October 1993. I have nominated that date as being the date appropriate for a determination by the respondent as to whether he should accept or reject the offer in the context of his failure to seek appropriate particulars. The submissions for the respondent, as I have said, do not suggest the Court does not have power to make an order for indemnity costs. The existence of the power, although in somewhat different circumstances, was recognized by this Court in Forbes Services Memorial Club Ltd v Hodge (Court of Appeal - 8 March 1995 - unreported). The facts of that case are not, in my opinion, as compelling as those in the present in favour of making an order for indemnity costs. I therefore propose, in lieu of the orders made on 14 June 1995, the following orders, which will also give effect to the first two matters to which I referred: 1. Appeal allowed. 2. Orders of McDevitt DCJ, save as to the orders for costs made by his Honour in favour of the appellant, set aside. 3. In lieu thereof judgment for the appellant in the sum of $79,004. 4. The respondent pay the appellant's costs of the proceedings before McDevitt DCJ and of the appeal on the following bases: (a) Up to and including 28 October 1993 on a party and party basis; and (b) from 29 October 1993 on an indemnity basis. 5. The respondent have a certificate under the Suitors' Fund Act if he is otherwise entitled to it. 1. Appeal allowed. 2. Judgment of McDevitt DCJ set aside. 3. In lieu thereof judgment for the plaintiff in the sum of $73,004. URJ PALUMBO v IZMIRLIAN (Rolfe AJA) 7 4. The respondent pay the appellant's costs of the proceedings before McDevitt DCJ and of the appeal and as to the costs of the appeal have a certificate under the Suitors' Fund Act if he is otherwise entitled to it. 5 Counsel for the Appellant: Mr AR Lakeman Solicitors for the Appellant: Teakle Ormsby and Associates Counsel for the Respondent: Mr JP Guihot 10 Solicitors for the Respondent: GM Meadows