Appeal Outcome: Special leave refused with costs by the High Court - 3 August 2007 New South Wales Court of Appeal CITATION: Thomas William Vale v Timothy David Eggins (No 2) [2007] NSWCA 12 JUDGMENT DATE: 15 February 2007 JUDGMENT OF: Beazley JA at 1; McColl JA at 26; Bryson JA at 27 DECISION: The respondent to pay the appellant's costs at trial and on the appeal. CATCHWORDS: COSTS – offer of compromise made in accordance with Pt 19A of the District Court Rules– consequences of refusal to accept offer of compromise – result to offeree less favourable than terms of offer – exceptional case and the avoidance of substantial injustice – failure to serve expert reports prior to offer being made - relevant to decision whether to accept offer – significant change in case after offer made Civil Liability Act 2002 (NSW) s 50 District Court Rules 1973 (NSW) Pt 19A Pt 19A r 2 LEGISLATION CITED: Pt 39A r 25(6) 25(8) Supreme Court Rules 1970 (NSW) Pt 22 Pt 52A r 22 Uniform Civil Procedure Act 2005 (NSW) Baresic v Slingshot Holdings Pty Limited & Anor (No 2) [2005] NSWCA 160 Connor v Hatgis (No 2) (Court of Appeal 7 December 1995 unreported) CASES CITED: Fowdh v Fowdh (Court of Appeal 4 November 1993 unreported) South Eastern Sydney Area Health Service v King [2006] NSWCA 2 South Sydney Council v Morris (No 3) [2001] NSWCA 200 PARTIES: Thomas William Vale (Appellant) Timothy David Eggins (Respondent) FILE NUMBER(S): CA 40967/05 COUNSEL: L T Grey (Appellant) K Rewell SC; M Cleary (Respondent) SOLICITORS: McClellands Lawyers (Appellant) T L Lawyers (Respondent) - 4 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40967/05 BEAZLEY JA McCOLL JA BRYSON JA 15 February 2007 THOMAS WILLIAM VALE v TIMOTHY DAVID EGGINS (No 2) Judgment 1 BEAZLEY JA: The Court gave judgment in this matter on 11 December 2006, in which it allowed the appellant's appeal and ordered a verdict and judgment in favour of the appellant. Damages had been agreed between the parties, so that the judgment sum ordered in favour of the appellant, after taking into account the Court's assessment of contributory negligence at 75 per cent was $925,000 together with interest calculated from the date of trial. 2 The Court reserved the question of costs to allow the parties to make written submissions in respect of the appropriate costs order. The respondent now seeks an order for costs in his favour, both of the trial from 19 February 2005, being the day after he made offers of compromise to the appellant, and of the appeal. Offers of compromise 3 The respondent served two separate offers of compromise upon the appellant on 18 February 2005, in accordance with Pt 19A of the District Court Rules 1973 (NSW) (the DCR). The first offer was to compromise the issue of liability on terms that the appellant was to be held 70 per cent responsible for the accident and the respondent 30 per cent responsible (the liability offer). 4 The second offer of compromise was one in which the respondent would consent to judgment for the appellant for $1,080,000 plus costs, subject to there being statutory and other deductions. The payment of interest was also provided for (the damages offer). 5 The consequences where a plaintiff did not accept an offer of compromise made under Pt 19A were governed by Pt 39A r 25(6) and (8) of the DCR. The rule provides: "(6) Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court in an exceptional case and for the avoidance of substantial injustice otherwise orders, the plaintiff shall be entitled to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim thereafter assessed on a party and party basis. … (8) Where a plaintiff obtains an order or judgment for the payment of a debt or damages and: (a) the amount payable under the order or for which judgment is given includes interest or damages in the nature of interest, or (b) by or under any Act the Court awards the plaintiff interest or damages in the nature of interest in respect of the amount, then, for the purpose of determining the consequences as to costs referred to in subrules (4), (4A) and (6), the Court shall disregard so much of the interest or damages in the nature of interest as relates to the period after the day the offer was made." 6 The respondent submits that the outcome of these proceedings is such that on either offer, the result was less favourable to the appellant. In the case of the liability offer, the respondent's offer had been based on an assessment of contributory negligence of 70 per cent, whereas the amount apportioned by the trial judge and not disturbed by this Court was 75 per cent. As to the damages offer, the amount of damages awarded was $925,000 as compared to the offer of $1,080,000 plus costs. It is implicit in the respondent's submission that this is not an exceptional case, nor would the Court make a different order as to costs for the avoidance of substantial injustice: see Pt 39A r 25(6) of the DCR. 7 The appellant contends that this is a case where some other order ought to be made, either because there are exceptional circumstances, or so as to avoid substantial injustice. 8 The appellant submits that at the time that the offers of compromise were made, the respondent had served only one medical report, that of Associate Professor Richard Jones dated 21 January 2004, notwithstanding that at the time, the respondent had in its possession the expert reports of Margi MacMaster, Consultant Occupational Therapist, Dr Robert Pryor, Vocational Psychologist (there being two such reports), and Dr Spira, Consultant Neurologist. Those reports were served on the appellant after, and in some cases, shortly after, the offer of compromise was made. The respondent subsequently served additional expert medical evidence that it had obtained, but did not renew the offers of compromise, which by then had expired. It should be noted that the respondent disputes that it had not served the report of Margi MacMaster dated 1 November 2004, as contended by the appellant. The respondent's assertion seems to be based upon the appellant's submission that that report was served on 15 February 2005. Neither party adduced independent evidence of its assertion that the report was or was not served. However, for the reasons I give, the question whether this report had been served is not critical to the costs determination. 9 Likewise, the appellant relies upon the fact that at the time of the offer of compromise, the appellant had not served any reports relating to liability. Accordingly, the appellant's case on liability was assessed on the basis of the evidence that the appellant believed was to be called, namely, his own evidence, that of the respondent and the passenger in the respondent's car. However, on 9 August 2005, just over a month prior to trial, the respondent served an expert report which dealt with the capacity of the respondent to react in time to avoid an accident after he saw the appellant stumbling on the road. The respondent's expert concluded that it was impossible for the respondent to react in time to avoid hitting the appellant. It was on the basis of this evidence that the respondent contended that he was not negligent. The appellant submits that this evidence had a profound effect on the conduct of the trial. This submission should be accepted. The trial judge placed considerable emphasis upon the expert evidence called at the trial. This is referred to in this Court's judgment at [10] and [11]. 10 The appellant submits that he was entitled to assess the respondent's offers on the basis of his own medical evidence and that of Associate Professor Jones which had been served, or alternatively, in respect of liability, on the basis that the driver had ample time to avoid the accident if he had acted with reasonable care, because it was known from statements made at about the time of the accident that the respondent had first seen the appellant on the roadway at a distance of some 90 metres, which would have allowed him to stop in time to avoid the accident. 11 The appellant contends, therefore, that he should not now be subjected to a costs order when the case significantly changed after the date of the offers: see South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [84]-[85]. That case involved an offer of compromise made by a plaintiff to a defendant pursuant to Pt 22 of the Supreme Court Rules 1970 (NSW) (the SCR). The consequence of a failure to accept an offer of compromise under Pt 22 was governed by Pt 52A r 22 of the SCR. Its terms were different from Pt 39A r 25 of the DCR in that Pt 22 did not specify that exceptional circumstances or the interests of justice require the making of some other order. However, r 22 has been interpreted as attracting the same principle: see Fowdh v Fowdh (Court of Appeal, 4 November 1993, unreported). 12 The appellant also contends that the result on appeal is not sufficiently different from the offers of compromise as to deprive him of his costs: see Connor v Hatgis (No 2) (Court of Appeal, 7 December 1995, unreported); BC 9501810. This submission can be approached by looking at each offer. First, on the 'liability offer' the difference between the offer and the result is 5 per cent. On the damages offer the difference between the offer and the result was $155,000 or 14.4 per cent. On the liability offer, the difference is not large and although it is debatable whether it could be considered to be marginal, the difference in the result on the damages offer could not be so considered. I would not, therefore, accede to this submission. 13 That leaves for consideration whether the case significantly changed so as to warrant some other order. In South Eastern Sydney Area Health Service v King, Hunt AJA, Mason P and McColl JA agreeing, stated at [85]: "… However, the fact that the plaintiff's case had changed significantly between the date of the plaintiff's offer and the trial in which the judgment obtained is higher than the amount of the offer does provide a sufficient basis for an order denying the plaintiff's entitlement to indemnity costs: Maitland Hospital v Fisher [No 2] (at 725). The very nature of the situation itself demonstrates that it would be unfair to a defendant to make an order for indemnity costs when the evidence at the trial is different from that known to the defendant at the time of the offer. Whether or not this is an "exceptional" situation does not matter." 14 Insofar as the appellant was aware, the respondent's case on damages was that which was contained in Associate Professor Jones' report and possibly Margi McMaster's report. Margi McMaster was an occupational therapist so that, as it appeared to the appellant, the respondent had evidence of a rehabilitation expert and possibly that of an occupational therapist, which also related to rehabilitation. In fact, the respondent had the report of a neurologist and a psychologist. It should be inferred that its offer was based on this material. 15 In relation to liability the respondent's case changed significantly just prior to trial. This Court, by majority, determined liability essentially on the basis of the case as originally conceived by the appellant, namely, that having seen him at a distance of some 90 metres, the respondent had ample time to react so as to avoid the accident. On that determination, the expert evidence essentially became irrelevant. The introduction of the expert evidence just prior to trial was such as to require the appellant to meet a quite different case at trial than that which was under consideration at the time that the offer was made and, in my opinion, constitutes exceptional circumstances within the meaning of Pt 39A r 25(6) of the DCR. 16 However, that does not necessarily mean that the Court ought to deny the respondent its costs. The test under r 25(6) is that the costs are governed by the terms of the rule unless the Court, in exceptional circumstances and for the avoidance of substantial injustice, orders otherwise. In my opinion, given the exceptional circumstance that I have found, a different order ought to be made so as to avoid substantial injustice. The question is what that different order ought to be. The existence of the alternate damages offer is relevant to that determination. But in any event, whatever final order as to costs is made after a consideration of the alternate offer, the respondent should not have his costs in relation to the liability expert evidence. 17 The position in relation to the offer of $1,080,000 raises different considerations. 18 The appellant contends, first, that as medical and other expert evidence on damages was served after the offers of compromise were made, it was not possible for the appellant to assess the merits of the respondent's offer when it did not have any significant evidence contrary to that which had already been obtained and served in his case. In this regard, it was submitted that the appellant, having regard to the strength of his own medical evidence, was entitled to take the view that his damages would be more than that offered by the respondent. In those circumstances, it was submitted that it would be unfair to penalise the appellant for rejecting an offer which appeared to be significantly at odds with his own case on damages. It was submitted that there was at that stage no good reason to doubt the strength of his own assessment of damages. 19 The appellant further relies, by way of analogy, upon the provisions of Pt 19A r 2 of the DCR. That rule provided that a plaintiff is unable to take advantage of the provisions of Pt 19A and make an offer of compromise unless he has supplied the defendant with such particulars of his claim and copies of documents that are available to him and which were necessary to enable the defendant to fully consider any offer of compromise. The appellant accepts that there is no similar rule governing offers made by defendants, but submits that in principle, the same rule should apply. Thus, in circumstances where the defendant has not provided all relevant documents in his possession to enable a plaintiff to properly assess the merits of any offer, it was submitted that the offer should not be used to trigger an entitlement to costs for the unsuccessful defendant. 20 The appellant further relies upon the fact that the trial judge had also determined the case favourably to the respondent by a wrong application of s 50 of the Civil Liability Act 2002 (NSW). On the appeal, the Court held that her Honour erred in the application of that provision. 21 Finally, it was submitted that the offer of damages was uncertain, because it made reference to statutory or ex gratia deductions, as well as for the amount of any fee paid or payable as a result of the appellant failing to attend medical appointments. I do not consider that this last submission carries much weight. The appellant would know what medical appointments he failed to attend and the amount involved would, it seems to me, be likely to be very small – and at least not accounting for the difference between the award made by the Court and the offer of settlement. The offer also quantified the amount of the deduction, in a way that appears to be sufficiently certain. 22 However, the other matters raised by the appellant do warrant further consideration. In my opinion, there is merit in these points. As I have already indicated, the respondent, at the time that he made the offer of compromise, had not served all the medical reports which he already had in his possession. In those circumstances, when the respondent already had material in his possession which he did not serve, and which was relevant to an assessment of the offer made, he ought not to be entitled to the favourable costs provisions under the Rules. It is not an answer, as submitted by the respondent, that the appellant could have himself made an offer of compromise once all the evidence was in his possession. 23 The conclusion which I have reached means that the respondent's further submission, that there should be no award of interest upon the judgment as the continuance of the proceedings beyond the date of the offer of compromise had been proven to be an unnecessary exercise, does not arise for consideration. 24 Nor is it necessary to consider the relevance of the failure to make any fresh offer of compromise prior to the appeal: see South Sydney Council v Morris (No 3) [2001] NSWCA 200 at [10], although in my opinion the decision in Morris continues to apply notwithstanding the introduction of the Uniform Civil Procedure Act 2005 (NSW). If it had been necessary to determine separately the respondent's application for costs of the appeal, I would have rejected that claim on the basis that no fresh offer of compromise was made: see South Sydney Council v Morris (No 3); Baresic v Slingshot Holdings Pty Limited & Anor (No 2) [2005] NSWCA 160 at [18] and following. 25 Accordingly, the costs order I propose is that the respondent pay the appellant's costs at trial and on the appeal. 26 McCOLL JA: I agree with Beazley JA. 27 BRYSON JA: The judgment of Beazley JA a draft of which I have read deals with the costs orders to be made on disposing of the appeal. I regret that I must respectfully dissent from her Honour's opinion and I again find myself in the minority. As the relevant facts circumstances and citations appear in her Honour's judgment I will be brief. 28 When the District Court gave judgment costs in that Court were relevantly governed by DCR Pt.39A r.25(6) and (8). The respondent as defendant was entitled, if the action had been disposed of as the Court of Appeal's order shows it should have been disposed of, to an order for his costs from the day the offer was made, with an offsetting order for the plaintiff's costs up till then: following the terms of r.25(6). As the rule says, this is the parties' entitlement "… unless the Court in an exceptional case and for the avoidance of substantial injustice otherwise orders …". 29 The circumstances of the present case are not exceptional. It is routine and unremarkable that when a case goes to trial parties have more information, more expert reports, more or different witnesses than those available months earlier, and a different view of each side's prospects. It would be exceptional if there had not been changes of those kinds between making an offer of compromise in February and going to trial the following September. Neither party is the custodian of the interests of the other, and the object of the Rule of Court is to put risk and burden on the party who receives and does not accept an offer of compromise: that party is, at its own risk, to assess what it should do. The pursuit by the offeror of its own interest in deciding what evidence to bring forward and when to do so is part of the environment in which litigation decisions have to be made. It is not a substantial injustice that the offeror should turn out to have had or later to obtain better evidence or better prospects than were known to the offeree at the time. If it were a condition of entitlement that the offeror had first made full disclosure of its expert evidence, the Rule would say so. 30 South Eastern Sydney Area Health Service v King [2006] NSWCA 2 related to circumstances in which there should be an indemnity costs order: that is not under consideration. King's case related to a Rule of Court which applied "unless the Court otherwise orders". In King's case, and in Fowdh v Fowdh (CA 4 November 1993) unreported) and Connor v Hatgis (No 2) (CA 7 December 1995 unreported) no Rule of Court was under consideration which contained a test like the barrier in DCR Pt.39A r.25(6) – "unless the Court in an exceptional case and for the avoidance of substantial injustice otherwise orders" – a formidable barrier to an exception. What would be a substantial injustice I am not called on to expound, but I would think that in this context it would probably involve some delinquency, deception, abuse of the offer-of-compromise procedure or departure from an obligation to make information available to the offeree. As well as this the case must also be an exceptional case. There is in my perception no substantial injustice and no injustice in any sense in putting a burden on a party to appraise an offer of compromise by making its own assessment of the strength of its own case. 31 In my opinion the costs order should deal with costs in the District Court in the way indicated by r.25(6). 32 The District Court Rules do not affect the costs discretion in an appeal. There was no offer of compromise in the appeal. There was no opportunity to resolve the appeal by accepting the offer of compromise which had been made long before in the District Court. The appellant succeeded on appeal and his costs follow. ********** 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. 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