Reported Decision : 67 NSWLR 712 New South Wales Court of Appeal CITATION: MARICIC v DALMA FORMWORK (AUSTRALIA) PTY LTD & ANOR (NO. 2) [2006] NSWCA 237 HEARING DATE(S): 16 June 2006 JUDGMENT DATE: 28 August 2006 JUDGMENT OF: Beazley JA at 1; Ipp JA at 2; Basten JA at 7 DECISION: Amend the orders made by this Court on 30 June 2006 by adding the following order:; (5A) Order the Appellant to pay to the Respondents the cross-respondent's costs of the cross-appeal from 14 May 2006. CATCHWORDS: COSTS – offers of compromise – appeal successful – issue of damages remitted to District Court – offers of compromise made during trial and appeal – whether Uniform Civil Procedure Rules 2005, r 20.26 applied – whether there should be a costs order for the appeal prior to the assessment of damages where offers have been made - COSTS – Bullock Order – Workers Compensation Act 1987, s 151H - appellant did not proceed against employer – concession that appellant could not establish the minimum 15% permanent impairment only forthcoming on appeal – whether reasonable for respondent to pursue cross-claim against employer in the absence of such concession – whether successful appellant should pay costs incurred by unsuccessful respondents in unsuccessfully joining the employer Civil Procedure Act 2005 (NSW), s 56 LEGISLATION CITED: Uniform Civil Procedure Rules 2005, r 20.26, r 42.15, Part 51, r2, r3 Workers Compensation Act 1987 (NSW), ss 151C, 151D, 151H, 151Z Workers Compensation Legislation Further Amendment Act 2001 (NSW), s 2 and Schedule 4, item [14] Anderson Group Pty Ltd v Tynan Motors Pty Ltd [No. 2] [2006] NSWCA 120 Edgington v Clark [1964] 1 QB 367 Maitland Hospital v Fisher (No. 2) (1992) 27 NSWLR 721 CASES CITED: Roads and Traffic Authority of NSW v Palmer (No. 2) [2005] NSWCA 140 State of New South Wales v Burton [No. 2] [2006] NSWCA 43 Suresh v Jacon Industries Pty Ltd (No. 2) [2005] NSWCA 270 Sved v Council of the Municipality of Woollahra (1998) NSW Con R 55-852 Zoran Maricic - Appellant PARTIES: Dalma Formwork (Australia) Pty Ltd - First Respondent/Cross-Claimant Bovis Lend Lease Pty Ltd - Second Respondent Dee Why Enterprises Pty Ltd - Cross-Respondent FILE NUMBER(S): CA 40148/05 Mr B. Toomey QC/Mr J. Fernan - Appellant COUNSEL: Mr D.P. O'Dowd - First Respondent, Cross-Claimant Mr G.M. Watson SC/Mr P.S. Braham - Second Respondent Mr J. McIntyre SC/Mr A. Capelin - Cross-Respondent CMC Lawyers - Appellant SOLICITORS: Curwood & Partners - First Respondent, Cross-Claimant Yeldham & Associates - Second Respondent Moray and Agnew - Cross-Respondent LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S): DC13478/01 LOWER COURT JUDICIAL OFFICER: Hughes DCJ LOWER COURT DATE OF DECISION: 8 March 2005 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40148/05 DC 13478/01 BEAZLEY JA IPP JA BASTEN JA 28 August 2006 MARICIC v DALMA FORMWORK (AUSTRALIA) PTY LTD & ANOR (NO. 2) Judgment 1 BEAZLEY JA: I agree with Ipp JA that the usual order for costs ought to be made in this matter. I also agree with proposed Order 5A and the reasons of Basten JA for the making of that Order. 2 IPP JA: The respondents seek to have the appellant's costs of the appeal reserved and determined after further hearing in the District Court. They seek this variation of the costs orders because they made offers of compromise, both during the District Court proceedings and during the appeal. 3 In Suresh v Jacon Industries Pty Ltd [No 2] [2005] NSWCA 270 at [17] Basten JA (with whom Mason P and Santow JA agreed) said: "The possibility that the respondent would ultimately be successful, once the offer of compromise is taken into account, is a possibility which may arise in any case where a retrial is ordered. There is no authority for the proposition that, in such circumstances, the proper course is for this Court to make its order conditional on such an outcome not eventuating. It is usual for this Court, and indeed the High Court, to award costs of an appeal to follow the outcome of the appeal. There is no reason not to do so in the present case." 4 In my opinion, in this case, there is no reason not to make the usual order. 5 The respondents, further, seek a Bullock order requiring the appellant to pay costs otherwise payable by them in their unsuccessful cross-appeal against the employer. I agree with what Basten JA has written about this issue. 6 I agree with the order proposed by Basten JA. 7 BASTEN JA: Judgment was delivered in this appeal on 30 June 2006. The appeal was allowed and the judgments in favour of the second and third defendants, in the District Court, were set aside. This Court found in the Appellant's favour on the question of liability. The Respondents were therefore ordered to pay the Appellant's costs of the appeal. In addition, a cross-appeal brought by the Respondents against the employer was dismissed and the Respondents were ordered to pay the employer's costs. 8 Pursuant to leave granted when judgment was delivered, the Respondents have sought to vary the orders for costs in two respects. First, because the Respondents had made offers of compromise, both during the District Court proceedings and during the appeal, they sought to have the Appellant's costs of the appeal reserved, to be determined after the further hearing in the District Court. Secondly, they sought a Bullock order requiring the Appellant to pay costs otherwise payable by them to the cross-respondent (the employer). Offer of compromise 9 In an affidavit in support of the present application, the solicitor for the Second Respondent stated: "On 27 August 2004, I sent a letter to the solicitors for the appellant enclosing an offer of compromise on behalf of both the first and second respondents in accordance with Part 19A of the District Court Rules . That offer was not accepted by the appellant." 10 The principal judgment of the District Court in this matter, though undated, appears to have been delivered on 8 March 2005. In a further judgment, dated 14 March 2005, his Honour referred to the offer of compromise which had been made by the Respondents, but declined to award indemnity costs from that date. 11 The solicitor for the Second Respondent further stated in his affidavit: "On 19 May 2006, I sent a letter to the solicitors for the appellant enclosing an offer of compromise on behalf of the first and second respondents in accordance with r 20.26 of the Uniform Civil Procedure Rules . That offer was not accepted by the appellant." 12 Given that the issue of damages remains to be determined, the contents of those offers have, quite properly, not been disclosed to this Court. This Court proposed no order in relation to the costs of the previous hearing in the District Court, leaving that matter to be dealt with on the remitter. The submission for the Respondents is, in effect, that until damages are assessed, it is not possible to say what consequences will flow with respect to the costs of the appeal either. 13 There is authority for the proposition that an offer of compromise in the District Court may be relevant to the exercise of the power to award costs in this Court: see Suresh v Jacon Industries Pty Ltd (No. 2) [2005] NSWCA 270 at [15]. However, because the District Court judge declined to award costs other than on a party and party basis, despite the failure of the plaintiff in the proceedings before him, it is at least arguable that the effect of the offer of compromise in the District Court should be taken as being of little relevance to the appropriate order on the appeal, particularly given the Appellant's success on the appeal. A similar conclusion was reached in State of New South Wales v Burton [No. 2] [2006] NSWCA 43. 14 Different considerations apply, however, in relation to an offer of compromise made in the course of an appeal. 15 The application in this Court of r 20.26 of the Uniform Civil Procedure Rules 2005 ("the UCPR") was explained in The Anderson Group Pty Ltd v Tynan Motors Pty Ltd [No. 2] [2006] NSWCA 120 at [17]. The Appellant does not suggest that the offer did not comply with that rule, but sought to rely upon comments made in Suresh (No. 2) at [14]-[15]. Those comments, however, were directed to a situation where no offer of compromise had been made in the course of the appeal. 16 The relevant consequences of an offer of compromise made by a "defendant" are set out in r 42.15 of the UCPR. That rule provides: (1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim concerned as favourable to the plaintiff or less favourable to the plaintiff than the terms of the offer. (2) Unless the Court orders otherwise: (a) the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11am on the day following the day on which the offer was made. 17 As is apparent from the terms of this rule, the plaintiff is the person making a claim for an order or judgment, and the defendant is the party resisting the claim. However, according to Part 51, r 3 of the Supreme Court Rules 1970 (NSW), when applying other parts of the rules, including the UCPR, the plaintiff is the appellant in this Court and the defendant is the respondent. Assuming that r 42.15 is otherwise applicable, this translation will cause a difficulty where the defendant in the Court below is the appellant in this Court. That difficulty was addressed in Maitland Hospital v Fisher [No. 2] (1992) 27 NSWLR 721 at 726-727, by ignoring sub-rule 3(2) in Part 51 (then numbered sub-rule 2(2)). 18 There is, however, a further difficulty, not expressly dealt with in Maitland Hospital, namely why it is not the relief sought by the appellant (or other moving party) in this Court against which the favourable outcome test is to be judged. Nor is it clear how sub-r 2(b) of the UCPR r 42.15 is intended to operate, where the offer is not made in relation to a "trial" but in relation to an appeal. Finally, the offer must be one made in "proceedings", for the purposes of r 20.26. The offer must be to compromise "any claim" in the proceedings. It seems likely that the offer in the present case was to compromise the claim in the District Court. For many purposes, the appeal would be a separate proceeding, and not the one in which the plaintiff obtains an order of judgment on the "claim". 19 In Maitland Hospital, the outcome of the claim made in the proceedings below was determined by the appeal. In the present case that is not so. The effect sought by the offer of compromise in the present case is to incorporate the costs of the appeal into the costs of the trial, so that the outcome will be the same. The Court was referred to no authority in which that result had been achieved under these rules. 20 The awkwardness of the exercise of accommodating rules with respect to offers of compromise drafted for trials into the appeal rules is evident. The necessary recrafting of the rules goes beyond that provided for in Part 51, r 3(2) and indeed may be inconsistent with it. In the circumstances of the present case the better view is that r 20.26 is not applicable, within the meaning of Part 51, r 3(1). 21 That is not to say that the offer of compromise does not have relevance to a costs order, just as a Calderbank offer or an offer in the Court below would have relevance to the appropriate costs order in this Court. The question is whether, because the effect of the offer cannot be known until the completion of the proceedings in the District Court, the appropriate order for costs in this Court should await that outcome. It is, of course, inevitable, although no doubt inconvenient to the parties, that the resolution of claims for costs in respect of a trial may have to await the outcome of a retrial, following a successful appeal. That effect would be significantly exacerbated by requiring the parties to return to this Court, long after the proceedings in this Court had been completed, in order to deal with the costs of the appeal. 22 Against these considerations are to be balanced the purposes of providing costs incentives to the making and consideration of reasonable offers of compromise, and to permit such offers to extend to any appellate process. 23 These considerations appear to me to be evenly balanced. The deciding consideration in my view is the undesirability of leaving proceedings, otherwise completed, pending in this Court for a significant period, to allow the completion of proceedings in another Court. Such a result would not facilitate the just, quick and cheap resolution of the real issues of the proceedings, as required by s 56 of the Civil Procedure Act 2005 (NSW). I would not vary the order that the Respondents pay the successful Appellant's costs in this Court. If r 42.15 is engaged, I would otherwise order, so that costs will follow the event in this Court. Bullock order 24 The second issue concerns the application by the Respondents for an order requiring the Appellant to pay the cross-respondent's costs, which are to be paid by the Respondents following the dismissal of the cross-appeal. 25 The Appellant commenced proceedings against his employer on 26 November 2001, the day before the commencement of an amendment to s 151H of the Workers Compensation Act 1987 (NSW) in terms which provided that no damages may be awarded unless the injury results in a degree of permanent impairment of the injured worker of at least 15%: see Workers Compensation Legislation Further Amendment Act 2001 (NSW), s 2(2) and Schedule 4, item [14], inserting new clause 9(1) in Schedule 6, Part 18C of the principal Act. However, those proceedings were commenced in contravention of s 151C(1) because six months had not elapsed since notice of the injury had been given to the employer (or indeed since the occurrence of the injury). 26 The fact that the Appellant did not recommence proceedings against the employer may have been taken as a concession that he could not establish the minimum requirement of 15% permanent impairment. However, despite being invited on two occasions by the Respondents to make such a concession, that concession was only forthcoming at the hearing of the appeal. 27 In those circumstances, the Respondents contended that it was reasonable for them to pursue a cross-claim against the employer to protect their interests, although, as it turned out, that course proved unnecessary. The question for present purposes is whether the costs incurred by the failure of the Appellant to make the concession at an earlier time should render it liable for the costs thrown away on the cross-appeal. 28 There is no doubt that the Respondents and the employer had a common interest in establishing that the Appellant did not suffer a 15% permanent impairment. In that event, the employer would escape liability for damages and the Respondents (if found liable) would be entitled to a reduction of any damages payable by them by the full amount of the contribution which would otherwise have been recoverable from the employer: s 151Z(2)(c). So long as the employer incurred no liability itself, it had no interest in the question of apportionment as between it and the Respondents. (That fact was demonstrated by the absence of submissions by the employer at the hearing of the appeal, in resistance to the assertions of the Respondents.) On the other hand, if the employer were to be liable, it had an immediate financial interest in resisting the level of apportionment sought to be established by the Respondents. Accordingly, it needed to be joined if there were a realistic possibility that the level of the Appellant's impairment was such that he was entitled to bring proceedings against it, whether he did so or not. 29 So far as factual matters were concerned, it is true that the evidence before the trial judge did not establish a 15% permanent impairment. However, the evidence on a retrial might not be the same. The Appellant had sought to tender evidence at trial to establish a level of impairment in excess of 15%, but the evidence had been rejected. It was therefore reasonable for the Respondents to take into account the possibility that, at a retrial, the Appellant might seek to tender admissible evidence obtained in a timely fashion to support a level of impairment above 15%. Absent a concession by the Appellant, they remained at risk of such evidence being tendered and accepted by a trial judge in the future. 30 There might have been a legal issue as to whether the Appellant was, by the time of the appeal, a worker who was still "entitled to take proceedings" against his employer, for the purposes of s 151Z(2). Pursuant to s 151D, there was a three year limitation period, which would have expired in August 2004. Nevertheless, fresh proceedings might have been commenced with leave, and, the employer having been on notice of the proceedings and indeed involved in them, at least in response to a cross-claim, it remained a reasonable possibility that such leave would be granted. Whether that would suffice to satisfy s 151Z(2) was not debated and the point may be put to one side. 31 According to the affidavit filed by the solicitors for the Second Respondent, the employer would have consented to the cross-appeal being dismissed with no order as to costs as at 8 June 2006. That was consistent with the advice given to the solicitors for the Appellant by letter dated 12 May 2006. The Appellant filed lengthy submissions in response to those filed by the Respondents in relation to this matter. The need for lengthy submissions on such a point may be doubted: furthermore, they did not appear to contradict the matters relied on by the Respondents, as summarised above. 32 The Respondents seek what is succinctly described as "a Bullock or Sanderson order" with respect to the costs of the cross-appeal. In fact, the circumstances of the case do not clearly fit within either of those labels. What is sought in the present case is to impose liability on a successful appellant for costs incurred by the unsuccessful respondents in unsuccessfully joining the employer. It was not suggested, however, nor could it have been, that the Court lacked power to make such an order if it were otherwise appropriate in the exercise of discretion: see Edgington v Clark [1964] 1 QB 367 at 384 (Ormerod, Upjohn and Davies LJJ); Sved v Council of the Municipality of Woollahra (1998) NSW Con R ¶55-852 at p 55,605 (Giles J), setting out principles which were accepted by this Court in Roads and Traffic Authority of NSW v Palmer (No. 2) [2005] NSWCA 140 at [30] (Giles JA, Spigelman CJ and Handley JA agreeing). 33 For the reasons noted above, the conduct of the Respondents in joining the employer was reasonable. Further, the Appellant was given an opportunity in a timely fashion to make a concession which would have rendered the joinder no longer necessary. The Appellant should pay the cross-respondent's costs of the cross-appeal from two days after the date of the letter, namely 14 May 2006. Those costs should otherwise be borne by the Respondents in accordance with existing order (5). Conclusions 34 I would propose that the orders made by this Court on 30 June 2006 be amended by the addition of the following order: (5A) Order the Appellant to pay to the Respondents the cross-respondent's costs of the cross-appeal from 14 May 2006. ********** 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.