Herning v GWS Machinery Pty Ltd [No. 2] [2005] NSWCA 375

New South Wales Court of Appeal

CITATION: Herning v GWS Machinery Pty Ltd [No. 2] [2005] NSWCA 375

HEARING DATE(S): 03/05/05

JUDGMENT DATE: 3 November 2005

JUDGMENT OF: Handley JA; Beazley JA; Basten JA

DECISION: 1. Variation of orders with respect to costs refused; 2. Each party to bear its own further costs incurred after the date of judgment, namely 15 August 2005.

Calderbank v Calderbank [1975] 3 All ER 333 Herning v GWS Machinery Pty Ltd [2005] NSWCA 263 CASES CITED: Leichhardt Municipal Council v Green [2004] NSWCA 341 Townsend v Townsend (No 2) [2001] NSWCA 145

Scott Herning (Appellant) PARTIES: GWS Machinery Pty Ltd (First Respondent) Jarrett Implements Pty Ltd (Second Respondent)

FILE NUMBER(S): CA 40237/04

S. Norton SC/M. Fraser (Appellant) COUNSEL: L. King SC/S. Bliim (Respondent)

Brydens Law Office (Appellant) SOLICITORS: Moray & Agnew (First Respondent) Abbott Tout (Second Respondent)

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 13468/01

LOWER COURT JUDICIAL OFFICER: Bishop DCJ

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40237/04 DC 13468/01

HANDLEY JA BEAZLEY JA BASTEN JA

3 November 2005 SCOTT HERNING v GWS MACHINERY PTY LTD & ANOR [NO. 2] Judgment 1 THE COURT: On 15 August 2005 the Court allowed the appeal in this matter, in part, and made orders in lieu of those made by the District Court on 10 March 2004. In effect, and subject to a reduction for contributory negligence, the Court upheld the Appellant's claim that the First Respondent (the first defendant in the proceedings below) was liable in negligence for the injury suffered by the Appellant (the plaintiff in the proceedings below). The Appellant was unsuccessful against the Second Respondent. The Second Respondent was therefore entitled to its costs of the appeal. 2 No submissions having been addressed to this question, the Court left open in its earlier judgment the question whether the Second Respondent's costs of the appeal should be paid by the Appellant, or by the First Respondent: [2005] NSWCA 263 at [40]. Submissions have now been received from the Appellant seeking a Bullock order, but offering by way of support nothing to suggest that the continued persistence against the Second Respondent, by way of appeal, amounted to more than an overcautious approach by the Appellant, in circumstances where the conduct of the First Respondent could not be said to warrant continued proceedings against the Second Respondent. Accordingly the proposed order should stand, namely that the Appellant pay the Second Respondent's costs of the appeal. The First Respondent was ordered to pay the Appellant's costs of the appeal, but it was noted that those costs were not intended to include any costs the Appellant was required to pay to the Second Respondent: [2005] NSWCA 263 at [42]. There is no reason to depart from this conclusion. 3 As a separate matter, the Second Respondent sought payment of its costs on an indemnity basis. Support for such an order was said to rest on a letter sent by the solicitors for the Second Respondent on 11 January 2005 offering to settle the appeal on the basis that each party bear his or its own costs of the proceedings. The offer was said to be open for acceptance until the close of business on 7 February 2005. The Second Respondent reserved its right to rely upon the letter in relation to the issue of costs, pursuant to the principles stated by Cairns LJ in Calderbank v Calderbank [1975] 3 All ER 333. 4 According to the well-established authorities, reviewed by Santow JA in Leichhardt Municipal Council v Green [2004] NSWCA 341, such a letter will only justify an order for costs on an indemnity basis, rather than the usual basis, if it constitutes a genuine offer of compromise, which it was unreasonable for the appellant not to accept. 5 The general approach adopted in this Court is that where an offer involves "no real element of compromise" but merely "invites capitulation by the appellant" it will not result in a variation of the usual costs order: see, eg, Townsend v Townsend (No. 2) [2001] NSWCA 145 (Giles JA) at [5]. Whilst the Second Respondent had no doubt incurred some costs by 11 January 2005, it is difficult to know whether the sum would have been significant in relation to the costs of the litigation as a whole, or in relation to any possible judgment which the Appellant might obtain, if successful. Either the Appellant's case against the Second Respondent was hopeless and should not have been pursued at all, or it was not. The "Calderbank letter" does not, by itself, justify any variation from the usual order. 6 As noted by the Court in its earlier judgment, although he was unsuccessful in the Court below, the trial judge had ordered that the first defendant pay the second defendant's costs of the hearing in that Court because the first defendant had put in issue questions of liability in the manner explained at [39] in this Court's earlier judgment. Whilst this factor does not justify a Bullock order in relation to the appeal, it tends to support the view that the Appellant was not acting irrationally in joining the Second Respondent to the appeal, nor was that course manifestly hopeless. Accordingly, the variation of the orders earlier made, proposed by the Second Respondent, should be refused. 7 Given the nature of the submissions in relation to this issue, each party should bear its own further costs incurred after the date of judgment, namely 15 August 2005. **********