Prosser v Eagle [2002] NSWSC 787

New South Wales Supreme Court

CITATION : Prosser v Eagle [2002] NSWSC 787 CURRENT JURISDICTION: Common Law Divison FILE NUMBER(S) : SC 20460/94 HEARING DATE(S) : 15 August 2002 JUDGMENT DATE : 15 August 2002

Sarah Kimball Prosser (Plaintiff) PARTIES : Sandra Eagle (First Defendant) The North Coast Area Health Service (Second Defendant) Kim Prosser (Third Defendant) JUDGMENT OF : Dunford J

COUNSEL : ML Brabazon (Plaintiff) DJ Higgs SC (1st & 2nd Defendants) McClellands (Plaintiff) SOLICITORS : Blake Dawson Waldron (1st & 2nd Defendants) Colquhoun Murphy (3rd Defendant) CATCHWORDS : PRACTICE & PROCEDURE - costs - party and party - indemnity basis - refused - PRACTICE & PROCEDURE - order for interim damages - plaintiff unsuccesful - order for restitution. DECISION : Refer to para 16.

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST

DUNFORD J

Thursday, 15 AUGUST 2002

20460/94 Sarah Kimball PROSSER -v- Sandra EAGLE & ors

JUDGMENT - On costs 1 His Honour: When I delivered judgment in this matter on 2 April I reserved the question of costs. There having been a verdict for the defendant, it is not disputed that the costs of the trial before me should follow the event, and in addition the costs of the first trial were reserved by the Court of Appeal to the discretion of the judge at the second trial. Once again, as the plaintiff has ultimately lost, it is not disputed that the plaintiff should also pay the defendants' costs of the first trial and also the costs of the application for a stay of proceedings which were reserved by the Court of Appeal in its order entered on 8 January 1999. 2 The only issue between the parties in relation to costs today has been whether any part of those costs should be paid on an indemnity basis. Two offers were made by the defendant. Firstly, on 2 November 1999 the defendant invited the plaintiff to discontinue the proceedings against Dr Eagle on the basis that each party pay its own costs to date. Then by letter dated 8 October 1999 the defendant offered to settle the outstanding proceedings in the sum of $150,000 inclusive of costs and inclusive of a 10% advance which had been made to the Health Insurance Commission. This offer would, in effect, have allowed the plaintiff to keep the money already received by her plus any interest liability to that date. This offer was also rejected. 3 At that stage the defendants' appeal to the Court of Appeal had been successful, but the plaintiff had obtained a new trial on the issue of the postnatal care. The plaintiff meanwhile had an application for special leave pending in the High Court, which was subsequently refused. 4 Although, as events turned out, it would have been beneficial for the plaintiff to accept the offer of 2 November 1995, I do not intend to pay any further attention to it. In relation to the second offer, my attention has been drawn to the fact that unless special leave were granted and the appeal to the High Court succeeded, the damages would have been limited to those referable to postnatal care or lack thereof, in other words, merely an exacerbation of the plaintiff's earlier condition, and at the trial a number of the plaintiff's expert witnesses, when confronted with details of the examinations carried out by the first defendant, made significant concessions regarding the reasonableness of such conduct. 5 On the other hand, this is not a situation where the plaintiff's case could always have been described as hopeless. Bruce J in the first trial had found in favour of the plaintiff in relation to the postnatal care, and his judgment in that regard was only set aside by the Court of Appeal because he had failed to give reasons; so the order for a new trial on this issue must have given the plaintiff some encouragement. Moreover, this was not a formal offer of compromise in accordance with Pt 52A r 22 of the Rules, and even if it had been, the rejection of the offer by the plaintiff would not, in the ordinary course of events, have rendered her liable to an order for indemnity costs. 6 The commencement or the continuance of these proceedings could not in any way be regarded as an abuse of the Court's process or an improper conduct of litigation. It is very different to the type of cases referred to in Ritchie Supreme Court Procedure NSW at p 1144.8, para [76.7A]. For these reasons the application for indemnity costs is refused. 7 Following the judgment in the first trial, but pending the hearing of the appeal to the Court of Appeal, various moneys were paid to the plaintiff, her counsel, solicitors, and the Health Insurance Commission. These moneys were paid as a condition of a stay of proceedings, the terms of which are embodied in the order of the Court of Appeal of 8 February 1999. 8 As appears from that order, the payment of the moneys was subject to undertakings given by the plaintiff, her husband Kim Prosser, and others. 9 The plaintiff undertook that the moneys paid to her would be used to discharge the mortgage on the property known as 126 Langdon Avenue, Wanniassa, ACT, owned by herself and her husband, and that in the event of the appeal being successful she would repay to the appellants the moneys paid, plus interest in accordance with the rates set out in Schedule J to the Rules. 10 Her husband's undertaking was that in the event of the appeal being successful he agreed to the property previously referred to being sold "for the purpose of recovering money paid to Sarah Prosser". They both undertook to notify the defendants' solicitors before selling or otherwise offering the subject property as security. 11 Following the successful appeal, various amounts paid to counsel, solicitors and the Health Insurance Commission were repaid, and it is agreed the amount outstanding is presently $156,119 together with interest from the dates of payment. There is no objection by the plaintiff to an order being made for the repayment of that amount, and there is no objection to that order being stayed for eight weeks to enable the property to be sold or refinanced. Mr Kim Prosser has appeared by his solicitor and consented to being joined as a party to the proceedings. 12 The defendants also seek an order that the property at 126 Langdon Avenue, Wanniassa, be charged with the order for repayment of the amount of repayment including interest, and it is this last application that has given rise to submissions. The undertakings to which I have referred certainly make no reference in terms to any charge over the subject property. The moneys were used to pay out a pre-existing mortgage on the property, and both Mr and Mrs Prosser, as mortgagors, received the benefit of such payment. 13 That payment came from the defendants at a time when they were the subject of a judgment for a larger amount in favour of Mrs Prosser; but it seems to me that on the judgment being set aside, not only did Mrs Prosser become liable to repay the amount that had been paid, but Mrs Prosser and also Mr Prosser, having received the benefit of the discharge of the original mortgage with moneys to which, as it then turned out, Mrs Prosser was not entitled, the property became subject to a constructive trust in favour of the persons, namely the defendants, who had provided the money. 14 Whether it is expressed in terms of unjust enrichment or subrogation is probably immaterial for present purposes, but it is also relevant in this regard that Mr Prosser by his undertaking agreed to the property being sold for the purpose of recovering the moneys paid to his wife. As I have already noted, there was no charge as such given over the property, and in those circumstances I would not regard the property as subject to any equitable charge, but I am satisfied that in the circumstances to which I have referred any proceeds of the sale of the property are trust property in the form of a constructive trust in favour of the defendants for the balance of the amount received by Mrs Prosser from the defendants, together with interest. 15 It is not necessary for me at this stage to determine the ownership or entitlement as between Mr and Mrs Prosser of any surplus that may be left after such repayment. 16 I therefore make the following orders:- 1. I order the plaintiff to pay the defendants' costs of the proceedings, including the costs of the first trial before Bruce J and the costs of the application for a stay of proceedings reserved by the Court of Appeal by its order of 8 January 1999. 2. By consent I order the plaintiff to repay to the defendants an amount of $156,119, together with interest at the rates set out in Schedule J of the Supreme Court Rules from dates of payment of the moneys. 3. By consent I grant a stay of that order for eight weeks from today. 4. I declare that any net proceeds of the sale of the property known as 126 Langdon Avenue, Wanniassa, ACT, to the extent of the amount payable under order 2, are held by the plaintiff and Kim Prosser on a constructive trust in favour of the defendants. 5. I direct that in any costs assessment the assessor have regard to the inclusion of unnecessary and repetitious material in the affidavit of Rebecca Kay Barnes of 8 August 2002. **********