Reported Decision : 60 NSWLR 476 New South Wales Supreme Court CITATION : Herbert v Tamworth City Council (No.4) [2004] NSWSC 394 25 - 27 February 2004 HEARING DATE(S) : 1 - 5 March 2004 1 April 2004 7 May 2004 JUDGMENT DATE : 13 May 2004 JURISDICTION: Common Law JUDGMENT OF : Sperling J at 1 DECISION : 1. The defendant is to pay the plaintiff's costs of the determination of the separate question on an indemnity basis from 13 November 2003 and on a party and party basis prior to that date; 2. Such costs are to paid forthwith following agreement or assessment as to amount; 3. The defendant is to pay the cross-defendant's costs of the separate question on a party and party basis. CATCHWORDS : Costs - whether an offer to compromise liability is an offer of compromise within the meaning of Pt 22 of Supreme Court Rules - order for payment of costs forthwith pursuant to Pt 52A r 9(1) - whether s198D of the Legal Profession Act 1987 is subject to s198F Civil Liability Act 2002 LEGISLATION CITED : Legal Profession Act 1987, s198D, s198F, s198G Supreme Court Act 1970, s19 Supreme Court Rules 1970: Pt22 r2, r3; Pt31 r2; Pt52A r9, r22 CASES CITED : SMEC Testing Services Pty Ltd v Campbelltown City Council [2002] NSWCA 164 Whitehouse Properties Pty Limited v Bond Brewing (NSW) Ltd (1992) 28 NSWLR 17 Maddy Herbert by her tutor Teresa Lee Meehan PARTIES : Tamworth City Council Matthew William Keam FILE NUMBER(S) : SC 20187/02 Mr R V Letherbarrow SC with Mr R Taylor for the Plaintiff COUNSEL : Mr M T McCulloch for the Defendant / Cross-Claimant Mr G Niven for the Cross-Defendant McCabe Partners Lawyers for the Plaintiff SOLICITORS : Phillips Fox for the Defendant / Cross-Claimant Rhodes Kildea Solicitors for the Cross-Defendant - 6 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Sperling J Thursday, 13 May 2004 20187/02 Maddy Herbert by her tutor Teresa Meehan v Tamworth City Council Judgment (No.4) – On costs 1 His Honour: In these proceedings, the plaintiff claims damages for personal injury. 2 On 31 March 2003, an order was made by consent pursuant to Pt 31 r 2 which provides that the court may make an order for the decision of any question separately from any other question, as follows: As between the plaintiff, defendant and cross-defendant, the issue of liability be determined first and assessment of quantum and [sic] damages be stood over pending stabilisation of the plaintiff's injuries and disabilities. The phrase "quantum and damages" was obviously intended to mean "quantum of damages". 3 Following a hearing before me in relation to the separate question, I gave judgment on 25 March 2004, pursuant to which the following orders were made on that date: (1) In relation to the Plaintiff's claim against the Defendant, I direct the entry of judgment for the Plaintiff for damages to be assessed; (2) In relation to the cross-claim, I direct the entry of judgment for the Cross-Defendant. Directions were given for the filing of written submissions in relation to the costs of the separate hearing. I heard oral argument on 25 March 2004, following which I reserved my decision. Plaintiff's claim for costs Offer of compromise and indemnity costs 4 The plaintiff claims an order for costs on an indemnity basis from 13 November 2003 and on a party and party basis prior to that. 5 The evidence adduced on 25 March 2004 included the service by the plaintiff on the defendant on 13 November 2003 of a document purporting to be an offer of compromise. The document was in the following form so far as is material: The Plaintiff hereby offers to compromise her claim against the Defendant by virtue of a verdict for the Plaintiff with damages to be reduced by 10% plus costs as agreed or assessed. 6 Part 22 rule 2 provides, so far as is material, as follows – In any proceedings the plaintiff or the defendant may make to the other an offer to compromise any claim in the proceedings… 7 In s19 of the Supreme Court Act 1970 the definition of "claim for relief" includes – (c) a claim for the determination of any question or matter which may be determined by the Court 8 Part 52A rule 22(4) provides, so far as is material, as follows – 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… 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. 9 The phrase "any claim in the proceedings", mentioned in Pt 22 r 3, includes a question ordered to be decided separately pursuant to Pt 31 r 2, by operation of the definition of "claim for relief" in s19: Whitehouse Properties Pty Limited v Bond Brewing (NSW) Ltd (1992) 28 NSWLR 17, 21 and 22. The plaintiff's document of 12 November 2003 was, accordingly, an offer of compromise within the meaning of Pt 22. 10 It is common ground that the offer of compromise was not accepted by the defendant. 11 The plaintiff is, accordingly, entitled to the order claimed pursuant to Pt 52A r 22(4), unless the court otherwise orders. 12 No reason was shown why the court should otherwise order. Costs payable forthwith 13 Part 52A rule 9(1) provides, so far as is material, as follows – Where… the Court makes an order for the payment of costs… the costs shall not, unless the Court otherwise orders, be payable until the conclusion of the proceedings. The phrase "conclusion of the proceedings" in that subsection means the conclusion of the proceedings as a whole. 14 The defendant submitted that the court should not otherwise order, because the plaintiff's entitlement to costs, including the costs of the hearing of the separate question, might be capped by s198D of the Legal Profession Act 1987. 15 Section 198D is in Pt 11, Div 5B, of the Legal Profession Act 1987, introduced by the Civil Liability Act 2002. The amendment commenced on 20 March 2002. The present proceedings were commenced on 6 May 2002. Accordingly, the new provisions apply. 16 Section 198D(1) provides, so far as is material, as follows – If the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a party in connection with the claim are fixed as follows: (a) in the case of legal services provided to a plaintiff maximum costs are fixed at 20% of the amount recovered or $10,000, whichever is greater, (b) … 17 Section 198D(4) provides, so far as is material, as follows – When the maximum costs for legal services provided to a party are fixed by this Division the following provisions apply (subject to sections 198E–198G): (a) … (b) a court… cannot order the payment by another party to the claim of costs in respect of those legal services in an amount that exceeds that maximum, (c) in assessing the amount of those costs… a costs assessor cannot determine an amount that exceeds the maximum set by this section. 18 Section 198F provides, so far as is material, as follows – (1) If a party to a claim for personal injury damages makes a reasonable offer of compromise on the claim that is not accepted, this Division does not prevent the awarding of costs against another party to be assessed on an indemnity basis in respect of legal services provided after the offer is made. (2) An offer of compromise on a claim by a party is reasonable if the court determines or makes an order or award on the claim in terms that are no less favourable to the party than the terms of the offer. 19 I am of the opinion that, as a matter of statutory construction, where the conditions specified in s198F are fulfilled, s198D does not operate. My reasons for that opinion are as follows. 20 First, there is the language of s198F. The section (see above) provides that, where the section applies – [the] Division does not prevent the awarding of costs against another party to be assessed on an indemnity basis in respect of legal services provided after the offer is made. The terminology shows that s198F is intended to allow indemnity costs to be recovered which would otherwise be precluded. 21 It is then to be recognised that there is nothing in s198D which prevents costs being awarded on an indemnity basis, subject to the limit as to amount specified in the section. Nor is there anything in s198D which prevents costs being awarded on an indemnity basis after an offer of compromise pursuant to Pt 52A r 22(4) or that rule's District Court counterpart, again, subject to the specified limits as to amount. The only limitation in s198D on the recovery of costs on an indemnity basis after an offer of compromise, pursuant to court rules, is the specified limitation as to the amount of such costs. 22 It follows that, for s198F to have work to do, it must have been intended to override the limitation as to amount specified in s198D where the conditions for the operation of s198F are fulfilled. 23 Section 198F will accommodate such a construction. Where the conditions for operation of s198F are fulfilled, the division "does not operate to prevent the awarding of costs … on an indemnity basis", where, but for the division – relevantly, the limitation as to amount specified in s198D – such costs would be awarded. 24 The second reading speech relating to the Civil Liability Bill (which became the Civil Liability Act 2002) supports this construction (Hansard, 28 May 2002, p2085). The Premier mentioned clauses 198F and 198G (which became the corresponding sections in the statute). 25 I have set out the content of s198F above. Section 198G provides as follows – A court hearing a claim for personal injury damages may by order exclude from the operation of this Division legal services provided to a party to the claim if the court is satisfied that the legal services were provided in response to any action on the claim by or on behalf of the other party to the claim that in the circumstances was not reasonably necessary for the advancement of that party's case or was intended or reasonably likely to unnecessarily delay or complicate determination of the claim. 26 The Premier said: The cap on fees will promote efficiency on the part of the legal profession and help to contain claims costs. The cap on costs will be the most that can be recovered from the other party in proceedings, unless the exceptions in clauses 198F or 198G apply . Clause 198F will enable the courts to award indemnity costs against a party if that party refuses an offer of compromise where the eventual outcome of the claim is no less favourable than the terms of the offer. The indemnity costs would apply for the period after the offer is made. Clause 198G will enable the court to order that some costs are not covered by the cap if it is satisfied that the costs are for legal services that were required because the other party took action that was not reasonably necessary for the advancement of its case. [Emphasis added] Again, there is nothing in s198D preventing an award of costs on an indemnity basis after an offer of compromise, up to the limit prescribed by the section. Section 198F is an "exception" to s198D only if s198F is intended to accommodate an order for indemnity costs beyond the limit prescribed by s198D. 27 Section 198G makes clear, in unambiguous terms, that it takes priority over s198D. The situation in relation to s198F is not so clear. The difference in terminology casts a shadow of doubt over my approach. But legislation which removes or restricts previously existing rights is to be construed strictly. I am not persuaded that the difference in terminology sufficiently indicates a difference in legislative intention as between ss 198F and 198G in their relationship with s198D. 28 Where, as here, an offer is made to accept only a proportion of the damages which would be recoverable if liability were determined in favour of the plaintiff, that is an offer of compromise "on the claim for personal injury damages" within the meaning of s198F. 29 Other conditions for operation of s198F being satisfied, the section operates, in the present case, to allow costs on an indemnity basis to be recovered for the period after the offer of compromise, unlimited by s198D. 30 In the present case, it is necessary for the assessment of damages to be delayed for something in the order of ten years from the present date. That is a strong reason for making an order that the plaintiff's costs in connection with the determination of the separate question should be paid forthwith following agreement or assessment as to amount. 31 There being no countervailing consideration apart from the argument in relation to s198D, the order should be made. Two counsel, including senior counsel 32 The plaintiff sought a further order or, failing that, a recommendation that the plaintiff's costs should include the costs of briefing two counsel, including senior counsel. It was submitted that the court is better able to assess the merits on this issue than a costs assessor would be. The scheme for assessment of costs by costs assessors involves the assessor making decisions which involve the trial in detail. I am not persuaded that it is appropriate for the court to involve itself in deciding questions of that kind which, under the scheme, are intended to be dealt with by cost assessors. 33 I decline to make an order or recommendation in relation to the briefing of two counsel. The cross-defendant's claim 34 On 20 February 2004, the cross-defendant's solicitors wrote to the defendant's solicitors, stating that the cross-defendant would be prepared to settle the matter on the basis of the cross-claim "being marked as withdrawn and dismissed", with an order for the cross-defendant's costs on a party and party basis. 35 On behalf of the cross-defendant, it was submitted that the whole of his costs relating to the determination of the separate question should be paid on an indemnity basis or, alternatively, on an indemnity basis from 20 February 2004 and on a party and party basis prior to that date. 36 The argument in support of the former claim was that the claim against the cross-defendant was devoid of merit. I do not agree with that in the relevant sense. Although I found against the defendant on the cross-claim, the defendant had a reasonably arguable case against the cross-defendant that he was negligent in failing to consider the possibility of a hazard beyond the second bridge if the plaintiff were permitted to ride her bicycle in that area, and that such negligence materially contributed to the casualty. The claim for the whole of the cross-defendant's costs to be payable on an indemnity basis accordingly fails. 37 As for the alternative, that is, for indemnity costs from 20 February 2004, the cross-defendant relied on the letter of that date as a Calderbank letter. However, the only element of compromise in the letter was the offer to accept costs on a party and party basis if the cross-claim was withdrawn rather than (by implication) on an indemnity basis. The defendant's non-acceptance of that offer does not, in the circumstances, warrant departure from the ordinary rule as to costs (see SMEC Testing Services Pty Ltd v Campbelltown City Council [2002] NSWCA 164 at [37]) because there was no serious prospect that the cross-claim would be dismissed with an order for indemnity costs. Accordingly, the claim for costs on an indemnity basis as from 20 February 2004 also fails. 38 The cross-defendant is entitled to his costs on a party and party basis. Orders 1. The defendant is to pay the plaintiff's costs of the determination of the separate question on an indemnity basis from 13 November 2003 and on a party and party basis prior to that date; 2. Such costs are to paid forthwith following agreement or assessment as to amount; 3. The defendant is to pay the cross-defendant's costs of the separate question on a party and party basis. -oOo- Last Modified: 05/14/2004 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.