New South Wales Supreme Court CITATION : Simpson v Diamond & Anor [No 2] [2001] NSWSC 1048 FILE NUMBER(S) : SC 12791/87 HEARING DATE(S) : 09/11/01 JUDGMENT DATE : 21 November 2001 PARTIES : Calandre Simpson by her Tutor William Charles Simpson v Robert Diamond & Anor JUDGMENT OF : Whealy J at 1 Mr L. Levy SC; Miss J. Lonergan - Pltff COUNSEL : Mr P. Brereton SC - 1st Defendant Mr P. Hall QC; Mr S. Woods - 2nd Defendant/Cross Defendant Turtons - Plaintiff SOLICITORS : Blake Dawson Waldron - 1st Defendant Makinson & d'Apice - 2nd Defendant/Cross Defendant LEGISLATION CITED : Supreme Court Rules NSW Supreme Court Act 1970 Beck v State of New South Wales [2000] NSWSC 278 Bennett v Jones (1977) 2 NSWLR 355 Colgate Palmolive v Cussons (1993) 118 ALR 248 at 256-257 Cremona v RTA (2000) NSWSC 735 (31-34) Falkner v Bourke (1990) 19 NSWLR 574 Grincelis v House (2000) 201 CLR 321 at 327-328 CASES CITED : Lipovac v Black & Ors (ACT Supreme Court unreported, 17 January 1997) Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 725 Morgan v Johnson (1998) 44 NSWLR 578 NSW Ministerial Insurance Corporation v Reeve (1997) 42 NSWLR 100 Oshlack v Richmond River Council (1998) 193 CLR 72 at 89 Ruby v Marsh (1975) 132 CLR 642 Van Gervan v Fenton (1992) 175 CLR 327 DECISION : See Paragraph 71 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST Whealy J WEDNESDAY 21 November 2001 12791/87 - Calandre SIMPSON by her tutor William Charles SIMPSON v Robert DIAMOND & Anor Judgment and Orders Further Reasons 1 His Honour: On 5 November 2001 I indicated that, in relation to the plaintiff's claim for damages, there would in due course be a verdict and judgment for the plaintiff. I made no orders at that stage. I directed that Short Minutes be brought in to reflect, after mathematical correction, the amounts intended to be awarded as a consequence of the reasons for judgment. 2 I stood the plaintiff's claim for damages over for mention and, if necessary, further argument on 9 November 2001. 3 In relation to the cross-claim, I indicated that when the matter was finally disposed of I would direct that verdict and judgment be entered for the cross-defendant on the cross-claim. I stood the cross-claim over until 9 November 2001 to enable the parties to place any arguments before me in relation to the issue of costs and the final form of the orders to be made. The plaintiff's claim – Outstanding issues 4 The first matter addressed on 9 November 2001 was the question of mathematical adjustments to the amounts set out in the "Damages Summary" at pages 350-351 of the reasons. I had asked the parties to attend to three matters: The first related to the mathematical calculations themselves. There were three alterations agreed as between the parties. The first of these was in relation to head of damage No 2 "Interest on past general damages". The second related to head of damage No 4 "Interest on past loss of earning capacity". The third related to the costs of a Case Manager. (Head of Damage 27) 5 I have prepared a fresh "Damages Summary" which is attached to these further reasons. The summary includes and incorporates the three mathematical calculations agreed between the parties. 6 The next major item discussed during the further hearing on 9 November 2001 related to out-of-pocket expenses. There was also the related component of interest on out-of-pocket expenses. There is now substantial agreement between the parties in relation to both out-of-pocket expenses and the calculation of interest on out-of-pocket expenses. There are two areas, however, where agreement has not been reached. The first of these relates to a set-off for schooling suggested by the first defendant in relation to past gratuitous services arising from the services and respite care given to the plaintiff by the Spastic Centre. The allowance of this set-off will impact on the quantum of the claim for gratuitous services and the calculation of interest, if interest be allowed. 7 The second issue, clearly related to the first, was whether interest should be awarded on past gratuitous services in relation to this aspect of the plaintiff's claim, namely the provision of services by the New South Wales Spastic Centre. At the original hearing, the defendant did not make any submission that interest should not be allowed on past gratuitous services in relation to this part of the plaintiff's claim, if it were otherwise made out. On 9 November 2001, Mr Brereton SC argued that interest should not be awarded. It is convenient to deal with this second point before returning to the set-off for schooling issue. Should interest be awarded? 8 Despite some preliminary misgivings, I have now come to the conclusion that interest should be allowed on the amount to be awarded in relation to the services provided by the Spastic Centre to the plaintiff between 1981 and 30 June 2001. 9 The power to order interest is to be found in s 94 of the Supreme Court Act 1970. There is nothing in the circumstances of the provision of those services to the plaintiff, which would disentitle her from an award of interest. (Bennett v Jones (1977) 2 NSWLR 355; Falkner v Bourke (1990) 19 NSWLR 574; Ruby v Marsh (1975) 132 CLR 642 at 644). 10 The arguments advanced by Mr Brereton SC on behalf of the first defendant were variants of those that did not find favour with the High Court of Australia in Grincelis v House (2000) 201 CLR 321 at 327-328. 11 The sum which I have decided to allow the plaintiff is to be awarded in satisfaction of her need for care from the Spastic Centre: it is not in satisfaction of the cost incurred in providing the services representing the care. In Grincelis, the majority decision rejected the argument that, because the damages allowed were not in recompense for actual outlays, "too much" had been allowed by application of the principles established in Van Gervan v Fenton (1992) 175 CLR 327 and that there should be some countervailing amelioration of the position of the defendant by refusing to allow any award of interest under the statute. (Grincelis para 14 at p 328). Mr Brereton's arguments must be rejected as they are the very arguments rejected by the majority decision in Grincelis. Is the Defendant entitled to a set-off for the cost of private schooling? 12 The defendant has argued that a set-off should be allowed in relation to the gratuitous services provided by the Spastic Centre. Put simply, the argument is this: If the plaintiff had not attended the Spastic Centre between the mid-1980's and the mid-1990's obtaining care and education at that institute, she would have, uninjured, attended a private school and the costs of her attendance at the private school would have been incurred. In those circumstances, if the cost of gratuitous services provide by the Spastic Centre are allowed, the defendant should have an off-set for the costs of what would have been the expenses of private schooling. There is no dispute between the plaintiff and the first defendant that, if an off-set is to be allowed, it should be in the sum of $50,000. 13 In my opinion, the defendant's argument is both reasonable and correct. The services provided by the Spastic Centre were for care, rehabilitation, respite care and education. In relation to the last category, those services replaced the ordinary schooling the plaintiff would have received had she been uninjured. While it is true it may well have been her parents who would have borne the expense of private schooling, there is an equivalence between the plaintiff's need for educational services from the Spastic centre and the need she would have had for private education, but for the injury. 14 In these circumstances, it appears that a reasonable off-set should be allowed to reflect the fact that Calandre has been spared the expense of schooling. The effect of this set-off is that the amount of the gratuitous services is to be reduced to $614,752.40. 15 Interest on this amount is $824,885 calculated as follows: - $614,752.40 x 6.86 x 19.56 years = $824,885. 16 This effectively reduces the interest component on the amount originally claimed by $67,090.00. 17 I attach an updated and revised sheet showing out-of-pocket expenses and interest. Claim 31 – Fund Management 18 Although Fund Management charges were not allowed, (judgment pp 324-325), I indicated that I proposed to make an moderate allowance to compensate the plaintiff for the expenses of arranging for others to carry out a number of financial functions that she might otherwise have been able to do but for her injury. Secondly, I indicated that a separate allowance should be made for a one off sum to cover the cost of tuition and training for the plaintiff in relation to financial management. 19 At the further hearing on 9 November 2001, the plaintiff placed before me a letter from the Perpetual Trustee Company Limited dated 7 November 2001. This letter identified the cost of tuition as possibly varying between $42,150 and $84,300 depending upon whether tuition was given for one year or two years. 20 Secondly, the plaintiff urged to the Court to find that $35,000 represented a reasonable figure as the present value of a moderate weekly recurring expense to enable the plaintiff to arrange the carrying out of financial functions she was unable to attend to herself. 21 Mr Brereton had no instructions to agree with this figure of $35,000 but put nothing in opposition to the plaintiff's suggested estimate. 22 In my opinion, a reasonable allowance for the plaintiff's tuition in financial management would be $20,000. I accept the plaintiff's estimate of the present value of the recurring weekly expense at $35,000 with the result that $55,000 will be allowed in relation to head of damage 31. This will be in lieu of the funds management charges originally claimed. It is to be found in the attached summary at claim 31. Costs 23 The final matters at issue between the parties relate to costs. The discrete areas of contention are: - (i) The costs of the hospital upon discontinuance by the plaintiff against the second defendant; (ii) The successful plaintiff's costs – should these or any part of them be on an indemnity basis? (iii) The costs associated with the cross-claim. This is confined to an argument between cross-claimant and cross-defendant. 24 I shall deal with each of these separately. The Plaintiff discontinues against the hospital 25 Upon securing an admission of liability from the first defendant, the plaintiff discontinued against the hospital. This happened on the first day of the hearing when costs were reserved. I heard argument on the issue on 9 November 2001 and indicated that, in my view, the plaintiff should pay the hospital's costs upon discontinuance. Immediately after that decision was announced the court was informed that the first defendant did not oppose the plaintiff receiving the benefit of a Bullock order in respect of the order that the plaintiff pay the second defendant's costs. 26 I shall now state briefly the reasons for my decision that the plaintiff should pay the hospital's costs. First, the hospital has a prima facie entitlement to costs arising out of the discontinuance (Part 52A rule 21). Secondly, the hospital's breach of duty did not occasion the plaintiff's injury nor, on the plaintiff's case, was it ever likely to have been proved to be causative of injury. Thirdly, despite this the plaintiff did not discontinue until the hearing and only when it had secured an admission of liability from Dr Diamond. While it is perfectly plain that the plaintiff's discontinuance against the hospital was a tactical decision based on the situation, which had been reached at the commencement of the hearing, it was as well a recognition that on the evidence proposed to be called by the plaintiff, there were no real prospects of success against the hospital. Finally, the hospital records were poorly kept, there is no doubt about that. But that fact did not really bear directly on the issue of liability as between the plaintiff and the hospital. It merely provided a framework, which reinforced or, at the very least, made respectable the Syntocinon argument enshrined in the further amended cross-claim. 27 As I have already indicated, the first defendant did not oppose the plaintiff's receiving the benefit of a Bullock order in respect of these costs and I propose to make such an order in favour of the plaintiff. Costs as between plaintiff and first defendant 28 Mr Levy SC has asked that there be an order for indemnity costs in his client's favour, such order to operate from the commencement of the proceedings. There are two strands to Mr Levy's argument. These are: (i) On 4 December 2000 the plaintiff's solicitors wrote a Calderbank letter requesting an admission of breach of duty of care and/or liability. This offer was stated to be open for 14 days. It was made without prejudice but on condition that if there were a verdict in favour of the plaintiff against the first defendant, the letter would be tendered on the question of costs and an order would be sought that the plaintiff's costs of proving breach of duty of care and/or liability should be paid on an indemnity basis. The first defendant did not respond to this letter but at or shortly before the hearing admitted liability. The formal admission of liability was contained in a pleading, which was handed up on 5 March 2001. (ii) Late in the afternoon of 24 November 2000, the plaintiff's solicitors served on the first defendant an Offer of Compromise (Part 22 S.C.R.). The first defendant did not accept the Offer of Compromise but later on the same day forwarded its own Notice of Offer of Compromise. The plaintiff's Compromise Offer was $10,500,000 plus costs to be agreed or assessed. In these circumstances, the plaintiff maintains that it is entitled to an order for costs on an indemnity basis at least from 24 November 2000. 29 The powers and discretions of the court to order costs are contained in s 76 of the Supreme Court Act. Relevantly, those powers and discretions are to be exercised subject to and in accordance with Part 52A of the Supreme Court Rules. Rule 22 of Part 52A provides in sub-paragraph 4, that 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 the plaintiff than the terms of the offer, then, unless the court otherwise orders, the plaintiff shall, subject to rule 33, be entitled to an order against the defendant for the plaintiff's costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to his costs incurred before and on that day assessed on a party and party basis. 30 The powers conferred on the court by these provisions of the Supreme Court Rules (and like provisions in the District Court) have been examined by the NSW Court of Appeal. Morgan v Johnson (1998) 44 NSWLR 578 dealt with three appeals, which were heard concurrently. In each case a plaintiff injured in a motor accident had obtained a modest verdict following a hearing in which liability was not or had ceased to be an issue. In each case the verdict fell well below the sums previously offered by the defendant by way of settlement offers. Consequently, the Court of Appeal was considering the District Court equivalent of Part 52A rule 22(6). At p 581 Mason P said: - "The leading cases on the Supreme Court Rules are Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 and NSW Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100. The leading cases on the corresponding provision in the District Court Rules are Hillier v Sheather (1995) 36 NSWLR 414, Quach v Mustafa (Court of Appeal, 15 June 1995, unreported) and Houatchanthara v Bednarczyk (Court of Appeal, 14 October 1996, unreported). 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 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." 31 In NSW Ministerial Insurance Corporation v Reeve (1997) 42 NSWLR 100 Gleeson CJ (with whom Clarke JA and Cripps JA agreed) said at 102 line D: - "The authorities to which I have referred contain some discussion of the availability of the discretion which is conferred by Part 52 rule 17(4), and this is done in the context of a recognition that in an ordinary case where an Offer of Compromise has been rejected by a defendant and the plaintiff has obtained more than the amount for which the plaintiff was prepared to compromise, the defendant should pay indemnity costs from the time specified in the rule. It is impossible exhaustively to state the circumstances in which a discretion to contrary effect might be exercised, and it would be imprudent to attempt any such exhaustive statement. However, I do not read Maitland Hospital v Fisher (No 2) as authority for the proposition that a discretion should be exercised against making an order for indemnity costs in any case in which it was reasonable for the defendant to take the view that it had a good chance of successfully defending the action. The prima facie consequence, which will apply in the ordinary case, is that in the circumstances postulated by the rule an order for indemnity costs will be made." 32 Mr Brereton SC advanced a number of reasons why, in his submission, the court should "otherwise order" in relation to the prospect of indemnity costs. First, he referred to a statement in Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at p 725 line D: - "The decision to award or withhold indemnity costs where a plaintiff's settlement offer has been made but not accepted, involves a discretion to be exercised by reference to all of the circumstances of the case, not by applying a fixed mathematical formula." 33 Read in context, however, this statement does not, in my opinion, advance the defendant's position. It is clear that the statement was made at the conclusion of a paragraph where the court had been discussing the fact that the difference between the Offer of Compromise and the judgment was a small amount, namely 2.5% of the judgment sum. Further, at p 725 line F the Court said: - "The rule does no more than to oblige litigants and those advising them to consider realistically upon the best information available to them the prospects of success and the likely outcome of the litigation. … The purpose of the rule is put a premium on realistic assessment of cases. It is not to demand a perfect foresight, which is denied even to the judges. That is why a discretion is retained, under the rule, for the court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case. It has added a new duty to the functions of legal practitioners advising litigants. It is a duty, which is both protective of the interests of litigants and of the public interest in the prompt and economical disposal of litigation. It is the duty of courts, allowing for exceptions in particular cases, to give effect to the purpose of the rule: see C. F. Larkin McDonald & Associates v Mahoney (Queensland Court of Appeal, 24 June 192, unreported)." 34 Secondly, Mr Brereton addressed the issue of the late admission of liability. He pointed to the fact that there was obstetrical evidence from Dr Keogh, which supported Dr Diamond's management of the plaintiff's delivery. In turn, there was the evidence of Dr Diamond himself who plainly did not think he was negligent in the circumstances. Mr Brereton argued that the admission of liability in fact was a substantial compromise on Dr Diamond's part and was one which effected a considerable saving in the cost of the trial. 35 Thirdly, Mr Brereton tendered a schedule of the plaintiff's expert reports. These showed that after 23 November 2000 there were some 65 reports and/or notes served by the plaintiff on the first defendant. These were reports relevant to the issue of quantum. Mr Brereton argued that this substantial body of evidence relating to the plaintiff's case on quantum was served after the exchange of offers of compromise. It could not be said, so the argument ran, that having regard to the way in which the evidence developed after November 2000, the rejection of the offer of $10,500,000 was unreasonable. 36 In this context, Mr Brereton also pointed to the fact that the defendant's own offer of $8,500,000 was of a greater amount than had ever been awarded in this type of litigation before. Dr Diamond's offer was above the established high mark in this type of litigation. While Mr Brereton conceded that the plaintiff had obtained more than the amount of her offer dated 24 November 2000, it was relevant to note that the defendant started from a position above the previous milestone and, as well, the plaintiff's position was yet again higher. 37 Fourthly, the first defendant points to the fact that it had a substantial measure of success on the issue of life expectancy. 38 Fifthly, Mr Brereton referred to the fact that negotiations continued between the parties even during the hearing in relation to the life expectancy issue. A bundle of documents was tendered as Exhibit 2 on this aspect of the costs argument. Mr Brereton argued that the fact that reasonable settlement negotiations were undertaken and pursued during the trial and that the plaintiff was continuing to maintain a position on life expectancy above that which was ultimately determined in her favour is relevant to the issue of indemnity costs. 39 A further matter relied upon by Mr Brereton was the fact that in a recent decision (Beck v State of New South Wales & Anor [2000] NSWSC 278) the court had allowed the costs of future care on the basis of the reasonable costs of a house couple. Mr Brereton said that this entitled the defendant to proceed on the basis that this was a likely albeit, not a guaranteed outcome. 40 Finally, Mr Brereton submitted that when the whole of the circumstances were examined it could not be said that the defendant had acted so unreasonably in defence of the proceedings as to warrant an order for indemnity costs. Mr Brereton submitted that this was the appropriate test to be applied and he referred to the observations made by Higgins J in Lipovac v Black & Ors (ACT Supreme Court unreported, 17 January 1997). His Honour said at p 18: - "Nevertheless, I have to find before ordering costs on a more favourable than usual basis that the third defendant acted unreasonably or imprudently so that a costs sanction is appropriate. Then a question arises as to the extent of that costs sanction. The burden of persuasion as to that proposition rests with the plaintiff. In some cases that persuasion may follow ineluctably from the refusal of or to make a reasonable offer. However, the issues in this case were far from clear and it is not clear to me that the plaintiff's offers of settlement, though reasonably made, were unreasonably or imprudently refused." 41 Mr Levy responded to these submissions. He accepted that the present case was an unusual one in the sense that it involved, because of the plaintiff's unique situation, a higher level of damages than had been encountered in previous litigation. Mr Levy said this fact did not justify the defendant's actions in adopting the position taken. The defendant had treated the plaintiff as if she were in the category of all other cases and did not recognise the truly unique situation she occupied and the influence this must have on the level of damages in relation to each of the individual heads of damage. 42 So far as the schedule of reports was concerned, Mr Levy made a number of points. The first was that the plaintiff's case had always been that her life expectancy was normal or near normal. Dr Shavelle's first report was served after the Offer of Compromise was made. A significant number of the plaintiff's reports prepared after November 2000, were reactive to the life expectancy issue, which was introduced late in the piece by the defendant. Secondly, a number of the reports (for example, from items 56 to 67) were purely historical material served for the purpose of filling in the gaps in the historical narrative. Thirdly, the reports from items 35 to 56 were either in the nature of update reports or reports, which focussed by way of reaction to the defendant's newly emerged case on life expectancy. 43 Finally, Mr Levy argued that the first defendant failed to recognise the significance and magnitude of the plaintiff's case on quantum. The plaintiff's offer of $10,500,000 represented a substantial compromise on the possibilities. The issue of public policy he identified was that parties should undertake more seriously their attempts at settling cases of this kind. The first defendant had failed to do that in the circumstances of this case. Mr Levy argued that it was essentially the defendant's conduct in refusing the Offer of Compromise, which led to the continuation of the action. Further, the length of the hearing was occasioned by the defendant pursuing a particular course of attempting to share its liability with the hospital. This was the principal focus of the first defendant and this resulted in the situation where the plaintiff was, notwithstanding the admission of liability, obliged to participate in a long and expensive trial unnecessarily. Resolution of the cost issue between plaintiff and defendant 44 In my opinion, the plaintiff has established that it is entitled to an order for indemnity costs as from 24 November 2000. The Offer of Compromise was, it is conceded, in proper form and complied with the requirements of the rules. Although the factual issues were complex and, in many instances, the subject of extensive reports and update material, the issues were essentially ones of fact focussing on the particular disabilities and needs of this individual plaintiff. 45 The amounts ultimately awarded to the plaintiff were substantially in excess of the amount contained in the plaintiff's Offer of Compromise. 46 Despite the complexities of the factual issues and the fact that the amount of damages exceeds that which has been awarded in cases of this kind before, I am not satisfied that this is in any way an exceptional case justifying a departure from the general principle underlying the rule. This is so particularly when regard is had to the private and public purposes of the rule. I consider that the first defendant had sufficient material as at 24 November 2000 to make an assessment of its position in relation to the compromise offer, which had been made by the plaintiff. The defendant's refusal to accept the offer became "the real cause and occasion of the litigation" thereafter. In declining to accept the offer, the defendant has undertaken the risk and the consequences that flow naturally from that risk. Further, the plaintiff having become entitled to an award of damages in excess of the compromise offer is entitled, pursuant to the rule, to an indemnity. 47 I have come to the clear view however, that the indemnity costs should date only from 24 November 2000 and I reject the plaintiff's request that indemnity costs be ordered from the commencement of proceedings. 48 While it is true that the plaintiff necessarily was put to additional expense in preparing a case on liability especially between the 4 December 2000 when the Calderbank letter was written and the commencement of the hearing, the admission of liability by Dr Diamond was in fact a substantial compromise on his part which did effect a considerable saving in relation to the plaintiff's costs. I accept that Mr Levy is entitled to complain that the exploration of the issues in relation to liability made necessary by the presence of the amended cross-claim may have had an indirect effect on the presentation of the plaintiff's case. This area of complaint is not sufficient, in my opinion, to warrant the making of an indemnity order for costs pre-dating the compromise offer in November 2000. Costs on the Cross-Claim 49 Mr Hall QC has sought an order for costs in relation to the cross-claim and in relation to the reserved costs relating to the application to amend the cross-claim, which was granted on 2 March 2001. The first defendant does not oppose the making of these orders. 50 Mr Hall QC has sought two special orders under s 76 of the Supreme Court Act. First, he seeks indemnity costs on the cross-claim. Secondly, Mr Hall seeks a special order for solicitors costs arising out of the hospital's need to engage two firms of solicitors to act having regard to an issue of insurance. Each of these special orders was opposed by the first defendant. 51 The power to award indemnity costs arises under s 76(1)(c) of the Supreme Court Act 1970. The relevant principles are fully set out in the decision of Sheppard J in Colgate Palmolive v Cussons (1993) 118 ALR 248 at 256-257. Mr Hall QC referred in particular to the reference by Sheppard J to "the making of allegations which ought never to have been made or the undue prolongation of the case by groundless contentions". In Oshlack v Richmond River Council (1998) 193 CLR 72 at 89 the joint judgment of Gaudron and Gummow JJ identified the circumstance that "some relevant delinquency" on the part of the unsuccessful party may justify an order for costs on an indemnity basis. The judgment continues: - "The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part." 52 There are essentially five matters relied on by the hospital in relation to its claim for indemnity costs. 53 First, Mr Hall relied upon the observations made by Dr Diamond in relation to the question whether there were any signs of hyperstimulation prior to and during the attempts at instrumental delivery. Additionally, there was the information given to Dr Diamond by the nursing staff who had been regularly monitoring Mrs Simpson prior to his arrival. 54 Secondly, Mr Hall asserted there had been a failure to brief Professor Fisk and Dr Lyneham with a full statement of facts including statements relating to the knowledge of Dr Diamond as referred to above. Thirdly, it was unreasonable for Dr Diamond's claim to proceed on the basis that Mrs Simpson had received a full infusion of the Syntocinon dose, a situation which Mr Clements had said was medically impossible and inconsistent with survival of the foetus. 55 Fourthly, Mr Hall is critical of the first defendant in that it failed to abandon the proceedings immediately following the evidence of Mrs Simpson. There was a corresponding failure to brief Dr Diamond's experts with her evidence as it had a capacity to affect the opinions expressed in their principal reports. Fifthly, the Doctor's case was infected with delinquency in that the experts, Professor Fisk and Dr Lyneham, were required to reconstruct the case they brought against the hospital following upon the evidence of Dr Diamond and Mrs Simpson. The reconstruction of this case on a new and different basis was an exceptional circumstance warranting indemnity costs. 56 Mr Hall QC sought costs on an indemnity basis from at least the date when the application was made to amend the cross-claim to raise the Syntocinon argument. Alternatively, he urged that indemnity costs should be ordered from the date following the completion of Mrs Simpson's evidence by which time it was necessary for a different direction to be taken in the cross-claim. Resolution 57 I have come to firm conclusion that the cross-defendant is not entitled to costs on an indemnity basis. 58 In my opinion, although the cross-claim was ultimately unsuccessful, it cannot be said that the amended claim was one which should not have been brought or pursued. It had its genesis in a perfectly respectable source of origin – the hospital notes. They were badly kept, they were confusing: the records were highly ambiguous but they revealed plainly enough that Mrs Simpson had received a high dose of Syntocinon. It was a dose that was quite capable of producing hyperstimulation and hence potential damage to the foetus. 59 Taken as a whole, the hospital records, in the view of a number of very eminent and well qualified practitioners, pointed to the fact that there was a real risk of hyperstimulaton in this case. Additionally, the mechanism for the type of injury suffered by Calandre, if it had been solely occasioned by the negligent use of forceps, was not well recognised in the scientific literature. All medical experts agreed that if hyperstimulaton had occurred it would have made the outcome more explicable. Some thought it was not necessary to consider a second or contributing cause but this opinion was itself very much related to their view as to Dr Diamond's actions in the labour ward as they had reconstructed them. 60 This brings me to Dr Diamond's evidence. True it is he maintained that FHR and contraction patterns were normal during the time he was at the hospital after 1.30pm. True it is he said the hospital staff had informed him that everything was normal prior to his arrival. The only problem he was told about was the fact that the epidural had not taken correctly. But Dr Diamond also maintained vehemently that the baby's head was low down distending the perineum. It was not in the transverse position at all, he said. He also vigorously defended his own actions and his obstetric judgment in the circumstances of the attempted delivery. 61 It was not as if the whole of the first defendant's case fell to the ground when Dr Diamond's evidence was given. First there was the question of assessing the reliability of Dr Diamond's observations in the labour ward. Professor Fisk expressed his reluctance at accepting the utility of Dr Diamond's observations both as to FHR (T 1774) and contraction frequency pattern and rate (T 2429 line 10). It was necessary for the court as well to determine the weight it was entitled to place on Dr Diamond's evidence. It was by no means a self evident matter. 62 Secondly, there was the difficult factual question which provided the substratum for the varying arguments regarding the likely mechanism in the case. This in turn was related to questions as to where the baby's true position was during the instrumental attempts and the reasons for the failure of the foetus to descend. I rejected the reliability and truthfulness of Dr Diamond's evidence in this regard. The rejection of this evidence meant that considerable thought had to be given to the reliability of the remainder of Dr Diamond's evidence. Although I did ultimately accept his reliability in relation to his observations of FHR and contraction pattern, this was only done after very careful consideration of the entirety of the expert and other evidence and after reflection upon the opposing theories that had been expressed. 63 There was then the evidence of Mrs Simpson. True it is that it tended to eliminate two aspects of the Syntocinon theory as first formulated. The first was the interpretation of the hospital records as showing continuous contractions. The second was the possibility that the entire contents of the bag of Syntocinon had been infused into Mrs Simpson by the time the baby was born. Her evidence made it extremely unlikely that these two circumstances occurred as first formulated. Nevertheless, there remained a tension between Mrs Simpson's evidence and the hospital records. It was necessary to resolve that tension by rejecting the precise accuracy of everything she recollected about the events of that day. In the ultimate, it was accepted that her contractions never exceeded the upper limit of normal between 11am and 12 midday. The findings of fact however were that, despite her recollection, it was likely there was an easing of contraction frequency in the period after midday (see principal judgment page 558-559). 64 At judgment pages 410-412 and 471-472 I pointed out that although the Syntocinon argument, as originally formulated, was weakened and undermined by the evidence of Dr Diamond and Mrs Simpson, the possibility of hyperstimulation was not eliminated entirely by the joint effect of their evidence. This was clearly the view of both Professor Fisk and Dr Lyneham. Dr Keogh also said that the evidence of Mrs Simpson was not the end of the matter. I have set out at considerable length in the principal judgment a recitation of the matters relied on by the first defendant's experts in continued support of their view that, notwithstanding the evidence of Mrs Simpson and Dr Diamond, there was a body of evidence which, in their view, supported the presence of hyperstimulation and depletion of foetal reserves. 65 The basic point is this: at the outset, the first defendant had an almost overwhelming case to present on the issue of hyperstimulation. As the factual evidence of the participants emerged, the case as originally formulated foundered significantly. There nevertheless remained a body of evidence capable of satisfying eminent practitioners that hyperstimulation and foetal depletion occurred during the labour process. In the end, I rejected the first defendant's case and the views of those experts: but I am unable to say that it was a case which should not have been brought or pursued. It was a case which had the considered support of a number of reputable and eminent practitioners. It was forcefully and cohesively argued. The fact that it failed does not lead to an entitlement to indemnity costs. 66 In a somewhat rhetorical flourish, Mr Brereton SC pointed to the length of the judgment on the cross-claim itself. He argued that the length of the decision spoke, if not volumes, at least one volume in support of the force of the argument he put in opposition to indemnity costs. It seems to me not inappropriate in this context to point to the fact that the written submissions of the hospital and the Doctor were, in the aggregate, nearly as long as the judgment itself. This was not a simple case. 67 Be that as it may, it is my view that none of the matters that have been advanced to me justify the making of an order for indemnity costs. I propose to award costs on a party/party basis. The order will extend to reserved costs. Special Order for Solicitors 68 I have been informed that for the relevant year when the injury was caused, the hospital was covered by a relatively small insurance ceiling, one which was quite insufficient to match a verdict for substantial contribution had it been awarded against the hospital. In these circumstances, the hospital retained Messrs Carroll & O'Dea to act as its second solicitor throughout the hearing of the litigation whilst continuing to retain Makinson d'Apice as its insurance solicitor. These are the circumstances, which have led Mr Hall QC to ask that a special order be made allowing representation by two firms of solicitors. 69 Mr Hall pointed to the decision of Dowd J in Cremona v RTA (2000) NSWSC 735 (31-34). In that case Dowd J had made a special order directing that an assessment of the plaintiff's costs be undertaken on the basis that permitted the briefing of two senior counsel in the circumstances of the case. 70 I find nothing in Cremona which would justify the making of the special order sought in relation to the costs of the subject cross-claim. It was perfectly sensible and reasonable for the hospital to have Carroll & O'Dea act as its solicitors in addition to its retainer as the insurance company's solicitor but I do not think that this is an expense that can or should reasonably be visited upon the first defendant. I decline to make any special order in this regard. Out-of-Pocket Expenses and Interest 1. Amount agreed as having been paid by the family for treatment and equipment - $40,952.39 2. Interest - $41,446.96 3. Amounts paid by the plaintiff's family to the Spastic Centre for respite care $24,613.20 4. Interest $9,967.57 5. Amount for educational tutoring $9,800.00 6. Interest $713.98 7. Value of distances travelled in taking the plaintiff to therapy $13,490.43 8. Interest $34,130.43 9. Amounts paid by Mrs Simpson to carers (Exhibit "XX" and "YY") to 30 June 2001, $390,484.00 10. Further amount paid to carers between 30 June and 5 November 2001 $9,360.00 11. Interest claimed under items 9 and 10 $424,151.68 12. Spastic Centre - past gratuitous services $614,752.40 13. Interest claimed on this amount $824,885.00 Damages Summary 1. General damages $390,000.00 2. Interest on past general damages 8 7,087.00 3. Past loss of earning capacity 50,880.00 4. Interest on past loss 15,860.00 5. Future loss of earning capacity 720,169.00 6. Past loss of employer superannuation 2,100.00 7. Future loss of employer superannuation 84,700.00 8. Long service leave 5,000.00 9. Past gratuitous service - $366,278 Less offset - 246,544 (Rounded down - $119,730 119,730.00 10. Interest on past gratuitous services 310,880.00 11. Future gratuitous services 25,000.00 12. Future attendant care 6,518,098.00 13. Home building & architectural costs 502,322.00 14. Hydrotherapy 95,467.00 15. Home maintenance and running costs 390,606.00 16. Therapeutic aids, appliances and equipment 427,980.00 17. Maintenance on aids, appliances and equipment 25,916.00 18. Computer 292,679.00 19. Educational tutoring 171,628.00 20. Motor vehicle expenses 161,623.00 21. Future medical treatment 125,564.00 22. Future paramedical costs 476,625.00 23. Future pharmaceutical costs 16,569.00 24. Additional holiday costs 330,000.00 25. Loss of financial benefits of marriage (See future loss of earning capacity -------- 26. Future child care --------- 27. Case manager 361,812.00 28. Court visitor -------- 29. Out-of-pocket expenses 1,103,452.40 30. Interest 1,335,295.60 31. Funds management (Allowances in lieu of Funds Management) 55,000.00 TOTAL $14,202,042.00 Orders: 71 1. In relation to the plaintiff's discontinuance against the second defendant, I order the plaintiff to pay the second defendant's costs upon discontinuance, such costs to be taxed on a party and party basis. 2. I direct entry of verdict and judgment for the plaintiff against the first defendant in the sum of $14,202,402.00. 3. I order that the first defendant pay the plaintiff's costs from 24 November 2000, taxed on an indemnity basis, in addition to her costs incurred on and before that date taxed on a party and party basis. 4. The plaintiff's costs payable by the first defendant are to include the costs ordered to be paid by the plaintiff to the second defendant pursuant to Order 1. 5. I direct entry of verdict and judgment for the cross-defendant on the cross-claim. 6. The cross-claimant is to pay the cross-defendant's costs (including reserved costs) on a party/party basis. 7. The Exhibits are to remain with the papers. It is noted that the plaintiff gives an undertaking that, pending the determination of an appeal by the first defendant, she will not dissipate any of the judgment monies which exceed the sum of $10,000,000. ********** Last Modified: 11/26/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.