New South Wales Supreme Court CITATION : Smith v The Commonwealth of Australia [2006] NSWSC 956 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 12/10/05, 13/10/05,06/07/06,17/08/06 JUDGMENT DATE : 18 September 2006 JURISDICTION : Common Law JUDGMENT OF : Adams J at 1 DECISION : Costs for the plaintiff CATCHWORDS : Costs - extension of limitation period - whether opposition - whether indulgence - relevance of failed opposition in other cases LEGISLATION CITED : Limitation Act 1969 Brittain v Commonwealth of Australia [No 2] [2006] NSWSC 528 Cavanagh v The Commonwealth [2006] NSWSC 382 Commonwealth of Australia v Neil Patrick Smith [2005] NSWCA 478 Commonwealth of Australia v Neil Patrick Smith [2006] HCA Trans 242 Gregory v The Commonwealth [2006] NSWSC 82 CASES CITED : Holt v Wynter (2000) 49 NSWLR 128 Lewis v The Commonwealth [2005] NSWSC 959 Shaw v The Commonwealth [2005] NSWSC 1027 Smith v The Commonwealth [2006] NSWSC 795 Wendt v The Commonwealth (2006) NSWSC 549 Yu v Speirs [2001] NSWCA 373 PARTIES : Plaintiff: David Ronald Smith Defendant: The Commonwealth of Australia FILE NUMBER(S) : SC 20785/97 COUNSEL : Plaintiff: Mr P. G. Mahony SC with Mr J.L. Sharpe Defendant: Mr C.T. Barry QC with Mr D. Brogan SOLICITORS : Plainitff:Robert Crow, Riordan Legal Defendant: Elena Ordiz, Australian Government Solicitor IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADAMS J 18 September 2006 20785/1997 SMITH v COMMONWEALTH OF AUSTRALIA JUDGMENT 1 ADAMS J: On 6 July 2006 I ordered that the limitation period for the cause of action be extended and reserved the question of costs. The ordinary rule is that "a successful applicant, who allows him or herself to get out of time, should pay the costs of the application unless the respondent's opposition was wholly unreasonable": Holt v Wynter (2000) 49 NSWLR 128 per Sheller JA with whom Meagher, Handley JJA and Brownie AJA agreed. 2 It is important to note the way in which this rule was applied in the circumstances of that case. Sheller JA went on to say – "Although Judge Cantrill was satisfied that the evidence explained and excused the applicant from any responsibility for the delay, the fact remains that one or more of the solicitors she retained were responsible for the delay. The respondent was not. In the circumstances, particularly having in mind the question raised about the availability of medical records, I do not regard the respondent's decision to resist the application as unreasonable." 3 It seems to me that Sheller JA plainly thought that some fault lay on the plaintiff's side, whilst the defendant was not at fault in any way. Such a circumstance justified an order in favour of the defendant. If neither party had been at fault, an order in favour of the defendant might well not have been made. That does not, of course, mean that an order in favour in favour of the plaintiff would have been made. 4 In Yu v Speirs [2001] NSWCA 373 costs were ordered in favour of defendants who had reasonably but unsuccessfully resisted an application for extension of time. However, in that case the plaintiff had received a frank injury and had indeed allowed the limitation period to expire before commencing action. Rolfe AJA, with whom the other members of the Court agreed, pointed out that the relevant rule, "recognises that, at least prima facie, the party seeking the Court's indulgence must pay the costs of obtaining it" [28]. As I pointed out during argument, I am not entirely comfortable with the notion that the grant of an extension of time is an indulgence. If there is an indulgence, it is one created by the Limitation Act 1969. Providing the plaintiff satisfies the criteria specified in the Act for the extension of time, the Court has no discretion but to grant it. In that sense, it is not an indulgence that the plaintiff seeks; rather, the plaintiff is exercising a right given him by an act of Parliament. It is, of course, true that the granting of an order in the plaintiff's favour requires the exercise of a discretionary judgment, but that does not qualify the plaintiff's right to a decision in his or her favour providing, as I have said, the statutory requirements are met. 5 Of particular relevance is the recent decision in Commonwealth of Australia v Neil Patrick Smith [2005] NSWCA 478 where the Court of Appeal dismissed an appeal from the decision of the primary judge granting a plaintiff both an extension of time and costs. Santow JA (with whom Handley JA agreed) considered that the order for costs was within the exercise of the discretion of the primary judge. His Honour referred to the passage from Holt v Wynter which I have set out above and then added – [160] However, there is no rule that binds the judge to deny costs to an applicant for extension of the limitation period. A costs order for such an application is a matter of practice and procedure within the discretion of the primary judge. In view of the Commonwealth's failure in so many of these extension cases over six years [para 133] the judge would have been entitled to find that the Commonwealth acted unreasonably in opposing an extension in this case and should pay the applicant's costs. It has not been shown that the primary judge erred in the exercise of his discretion so as to warrant the interference of an appellate court ( Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274; House v The King (supra); Lovell v Lovell (1950) 81 CLR 513 at 518-519 and 532-533). [161] Although not relied upon specifically, there is also the overriding purpose rule enjoining the parties to assist the Court in the just, quick and cheap resolution of the real issues in the proceedings; Pt 1 r3(1), (2) now to be found in s56(3) Civil Procedure Act 2005. By putting unsuccessful submissions as to prejudice based on the unavailability of documentation when this has so frequently been found insufficient to constitute significant prejudice, and was again so found here, that Rule would support the result that the primary judge's cost order should not be interfered with. 6 In dealing with the other aspect of the appeal, Santow JA set out in detail the results of at least thirty other matters heard in this Court in which former members of the crew of HMAS Melbourne applied for an extension of a limitation period. In each case the application was opposed by the Commonwealth and in only three cases did the Court decline to extend the limitation period, each of these cases having somewhat unusual facts. It is not necessary for me to set out the paragraphs ([148] to [154]) in this judgment. The point is, as I see it, that part of the ratio decidendi of the decision of Santow JA (with which, as I have said, Handley JA agreed) is that the Commonwealth's repeated failure in resisting applications to extend limitation periods over a period of six years was a relevant consideration in determining whether it was reasonable to find that the Commonwealth acted unreasonably in opposing an extension in this particular case and thus should pay the applicant's costs. Basten JA (who dissented on the outcome of the appeal) was of the view that, even if he had not dissented as to the merits, the unsuccessful opposition by the Commonwealth to other applications for extensions of time was immaterial [222]. His Honour also discussed whether an applicant for an extension of the limitation period was seeking an "indulgence" – "[220] It is fair to say that the Applicant does not in the present proceedings seek an indulgence in the sense of being relieved of some penalty imposed by the law, for relief from which it should pay the costs of the defendant in any case. These proceedings may be contrasted with those which used to be brought by credit providers under s 85 of the Credit Act 1984, to be relieved of civil penalties for contravention of the mandatory requirements of that Act. In such cases, costs orders were routinely made against successful applicants, in favour of borrowers who opposed reinstatement in full of credit charges payable by them: see, eg, Australian Guarantee Corporation Ltd v Stander (1987) ASC 55-546 at p57,155. However, the effect of a successful application for an extension of time is analogous in the sense that the prospective defendant loses an immunity from suit which it would otherwise enjoy as a result of the expiration of the limitation period and the prospective plaintiff obtains a concomitant benefit. The difference lies in the fact that, the applicant having been unaware of the circumstances which gave rise to the cause of action, cannot properly be said to be 'at fault' in failing to proceed earlier." 7 The Commonwealth sought special leave to appeal to the High Court of Australia. The Court (Callinan and Heydon JJ) refused leave: Commonwealth of Australia v Neil Patrick Smith [2006] HCA Trans 242, Callinan JA saying on behalf of the Court – "On the substantial issues raised by the applicant, we are of the view that any appeal would enjoy insufficient prospects of success to warrant a grant of special leave. In refusing the application we would wish to make it clear, however, that we doubt very much whether we would have exercised our discretion in the way in which the intermediate Court of Appeal did in relation to costs. Our provisional view, at least, is that each case depends upon its own facts and that a party, if it has an arguable basis for defending an application or a claim, is entitled to do so without the penalty of costs." 8 Whilst remarks falling from members of the bench of the High Court of Australia in determining special leave applications deserve great respect, I do not think that, as a first instance judge, I am entitled to prefer them to ratio decidendi in judgments of the Court of Appeal by which I am directly bound. It seems to me, therefore, that I am obliged to consider the application in this case upon the basis that it is relevant to have regard to the body of litigation against the Commonwealth involving members of the HMAS Melbourne crew caught up in the collision with HMAS Voyager claiming to have suffered psychological injury as a consequence. 9 In this case, it is evident that the Commonwealth has not been at fault. At the same time, I think that the plaintiff has also acted reasonably and could not fairly be described as an "applicant who allowed himself … to get out of time". 10 In Brittain v Commonwealth of Australia [No 2] [2006] NSWSC 528, Bell J ordered the Commonwealth to pay the plaintiff's costs of a limitation argument, having found that the Commonwealth had not acted unreasonably in opposing the extension but noting that the plaintiff did not allow himself to get out of time as he was unaware of the nature or extent of his injury prior to July 1995 and commenced proceedings two months later. In Wendt v The Commonwealth (2006) NSWSC 549, Kirby J ordered the Commonwealth to pay the plaintiff's costs of the application noting that there was no fault on the part of the plaintiff: he was simply unaware of the connection between his symptoms and the collision. His Honour also considered that the Commonwealth's opposition to the plaintiff's application for an extension was unreasonable in the situation where the plaintiff had spent his entire working life with the Navy, his medical records were available and his employment records would also be available. The Commonwealth also acknowledged that there was no actual prejudice. It also worth noting the following observation, in light of his Honour's considerable experience in real-world litigation – "[68] One should not overlook that there are significant advantages to the defendant in a contested application to extend time. First, it offers an opportunity to cross-examine the plaintiff, to secure material useful in the ultimate action, if leave is given. Secondly, potential plaintiffs are, by definition, old men who are psychologically fragile. The prospect of having to fight the Commonwealth at every step would, no doubt, deter some. Thirdly, because the potential plaintiffs are old and sick, expedition is not necessarily in the interests of the defendant." 11 I do not, of course, attribute ulterior motives to the Commonwealth in its opposition to the plaintiff's application. Nevertheless, much of the cross-examination of the plaintiff seemed to have been directed to the substantive issues in a potential trial rather than the issues raised by his application. The decision as to the reasonableness of opposition to the plaintiff's application is not made in a vacuum, nor is it an exercise in theoretical or academic forensics: it is made in the context of the practical realities of conducting real-world litigation. 12 In a number of other cases, however, costs have been reserved: Lewis v The Commonwealth [2005] NSWSC 959; Shaw v The Commonwealth [2005] NSWSC 1027; Gregory v The Commonwealth [2006] NSWSC 82. In Cavanagh v The Commonwealth [2006] NSWSC 382 Studdert J ordered the costs to be costs in the cause whilst in Smith v The Commonwealth [2006] NSWSC 795 Hoeben J ordered each party to pay its own costs. 13 As I mentioned in my judgment on the application (at [76]), it was submitted to me by Mr Barry QC on behalf of the Commonwealth that the "real point in this case…is the difficulties associated with the Vietnam experience…that led to psychiatric treatment initially in Saigon and then the reference when [the applicant] came back to Australia…" Mr Barry submitted "the real issue is, can there be a proper trial of these issues now…in the absence of Dr McGeorge specifically". In light of the substantial documentary medical evidence available to the Commonwealth the only commonsense answer to that question was, "Yes", for all that contrary arguments could be articulated. 14 Accordingly, I consider that the opposition to the plaintiff's application was unreasonable and that the plaintiff should have his costs as agreed or assessed of the application. ********** 19/09/2006 - Judgment number changed - Paragraph(s) In heading 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.