Russell v Edwards & Anor [No 2] [2006] NSWCA 52

New South Wales Court of Appeal

CITATION: Russell v Edwards & Anor [No 2] [2006] NSWCA 52

HEARING DATE(S): 17/02/06

JUDGMENT DATE: 30 March 2006

JUDGMENT OF: Beazley JA at 1; Ipp JA at 2; Hunt AJA at 10

DECISION: The costs orders made by the trial judge be set aside and in lieu thereof an order be made that the appellant pay the respondents the costs of the action.

Hillier v Sheather (1995) 36 NSWLR 414 Jones v Bradley (No 2) [2003] NSWCA 258 CASES CITED: Leichhardt Municipal Council v Green [2004] NSWCA 341 Morgan v Johnson (1998) 44 NSWLR 578 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323

Ashley James Russell (Appellant) PARTIES: Mark Lewis Edwards (First Respondent) Joanne Edwards (Second Respondent)

FILE NUMBER(S): CA 41141/04

COUNSEL: J Simpkins SC/K Andrews (Appellant) M L Williams SC/B L Jones (Respondent)

SOLICITORS: W H Parsons & Associates (Appellant) Thompson Cooper Lawyers (Respondents)

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 165/03

LOWER COURT JUDICIAL OFFICER: Sidis DCJ

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41141/04 DC 165/03

BEAZLEY JA IPP JA HUNT AJA

Thursday 30 March 2006 ASHLEY JAMES RUSSELL v MARK LEWIS EDWARDS & ANOR [NO 2] Judgment – On Costs

1 BEAZLEY JA: I agree with Ipp JA. 2 IPP JA: The appellant sued the respondents in negligence for damages for personal injuries. The trial judge dismissed the appellant's claim and ordered the appellant to pay the respondents' costs up to and including 2 July 2003 and thereafter to pay the respondents' costs on an indemnity basis. 3 On 3 March 2006 this Court delivered judgment dismissing the appellant's appeal with costs. In my reasons I inadvertently omitted to deal with the appellant's appeal against the order for indemnity costs. My reasons in connection with this issue follow. 4 The basis of the trial judge's award of indemnity costs as from 3 July 2003 was that, on that date, the respondents made a Calderbank offer to the appellant that was not accepted. As Mr Williams SC (who together with Mr Jones appeared for the respondents) stated, the Calderbank offer was "for a verdict for the defendant of $10,000 inclusive of costs". In the Calderbank letter, reasons are set out as to why the respondents would succeed. The Calderbank offer was not accepted and the consequence of the judgment (upheld on appeal) was that the appellant was worse off than he would have been had he accepted the offer. 5 The appellant submitted that there was nothing unusual about the circumstances of the case that justified an award of indemnity costs. He submitted that for an order for indemnity costs to be made there should be something unusual about the case, not simply the fact that a Calderbank offer was made and not accepted. He submitted that the general rule is that the making of such an offer, and its rejection, might entitle the successful party to costs from the date of the offer, but not to indemnity costs. 6 In Jones v Bradley (No 2) [2003] NSWCA 258 this Court approved the remarks of Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], namely: "The making of an offer of compromise in the form of a Calderbank letter …, where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the Court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure …". 7 This approach was followed in Leichhardt Municipal Council v Green [2004] NSWCA 341. The following passages from the reasons of Santow JA are relevant: "[19] There are some distinctions between the two procedures in their attendant costs consequences. A key difference is that where an offer of compromise has been made under the Rules, a prima facie entitlement arises in the relevant party to have costs awarded in accordance with the appropriate Rule This entitlement, though subject to the Court's discretion to prevent substantial injustice in exceptional cases, will rarely be interfered with: District Court – Practice Note 42; Supreme Court – Hillier v Sheather (1995) 36 NSWLR 414 and Morgan v Johnson (1998) 44 NSWLR 578. By contrast, the costs consequences attendant under general law upon an offer of compromise made in a Calderbank letter lie within the discretion of the Court, to be exercised having regard to all the relevant circumstances of the case: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] per Giles JA; affirmed in Jones v Bradley (No 2) (supra) at [9] per curiam. It is not the case that unaccepted offers of compromise by Calderbank letter should give rise to a prima facie presumption of indemnity costs if the offer is not bettered. … "[46] It is respectfully submitted that there is no principle of law or persuasive policy reason why a defendant's unaccepted offer of compromise made by Calderbank letter should give rise to costs sanctions on any basis different to that provided by the rules. Under the rules, such costs would only be awarded in exceptional circumstances if the Court 'otherwise orders'. For the Court to depart from the general rule there must be particular grounds on which the Court can exercise its discretion … A defendant must resort to showing that the plaintiff's rejection of the offer was 'unreasonable' under the general law … That discretion is to be exercised in all the circumstances of the case … Indemnity costs do not flow as a matter of course from unaccepted defendant offers." 8 In my view the trial judge did indeed order indemnity costs "as a matter of course" on the ground merely that the appellant had not accepted the respondents' offers. In my view her Honour erred in that respect. 9 I propose the costs orders made by the trial judge be set aside and in lieu thereof an order be made that the appellant pay the respondents the costs of the action. 10 HUNT AJA: I agree with Ipp JA. **********