New South Wales Supreme Court CITATION : Abraham v St Mark's Orthodox Coptic College & anor [2006] NSWSC 1271 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 13/11/2006 JUDGMENT DATE : 29 November 2006 JURISDICTION : Supreme Court JUDGMENT OF : Rothman J DECISION : Further to the orders made on 24 October 2006: (iv) the cross-claim is dismissed; (v) the cross-claimant shall pay the costs of the cross-defendant of and incidental to the proceedings, as agreed or assessed, which costs shall be payable forthwith; (vi) the defendants, jointly and severally, shall pay the plaintiff's costs of and incidental to the proceedings, including the costs of the assessment of damage thus far incurred, as agreed or assessed, which costs shall be payable forthwith; (vii) so much of the proceedings that remain shall stand over to the next call-over. CATCHWORDS : CIVIL LAW - COSTS - liability determined - contributory negligence determined - damages to be assessed in future - split proceedings - costs and disbursements of the preparation of damages aspect of litigation are costs which follow the event - cross-claim dismissed - indemnity costs of cross-defendant - Offer of Compromise not a genuine offer of compromise - costs not awarded on an indemnity basis. Abraham BHT Abraham v St Mark's Orthodox Coptic College and Ors [2006] NSWSC 1107 CASES CITED : Hahn v Conley (1971) 126 CLR 276 R v Davies & Partridge [2005] NSWSC 324 Robertson v Swincer (1989) 52 SASR 356 P: Christopher Abraham BHT Nareem Abraham PARTIES : D1: St Mark's Orthodox Coptic College D2: Coptic Orthodox Church (NSW) Property Trust FILE NUMBER(S) : SC 20186/2002 P: J P Gormly SC & B Dooley COUNSEL : D2/Cross-Claimant: S G Campbell SC & P Stockley Cross-Defendant: L T Grey SOLICITORS : P: Paul Connery D: N Studdert - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION CIVIL LIST ROTHMAN J 29 November 2006 20186/2002 ABRAHAM v ST MARKS ORTHODOX COPTIC COLLEGE & 1 OTHER JUDGMENT 1 HIS HONOUR: This judgment deals with issues agitated between the parties on the question of costs. 2 On 24 October 2006, I published reasons for judgment on liability in which I ordered that the first and second defendants be jointly and severally liable in negligence to the plaintiff for the damage suffered by the plaintiff in his fall from a first-floor balustrade on the premises of the College conducted by the defendants. I also found contributory negligence and reduced the amount of damage by 10 percent on account thereof. That aspect of the judgment, and reasons, dealt only with liability. Damages are to be assessed on or after the plaintiff, who is now 15 years of age, reaches the age of 18. 3 Further, the reasons for judgment and orders dealt with the cross-claim against the father of the plaintiff for conduct said to be negligent and in breach of a duty care owed by parents to their child. The orders made on 24 October 2006 included a verdict for the cross-defendant on the cross-claim and dismissed the cross-claim, subject to issues associated with costs. 4 There are two fundamental issues. First, the cross-defendant claims indemnity costs on the basis of an offer to settle the cross-claim. Second, an issue arises as between the first and second defendants, on the one hand, and the plaintiff, on the other, as to whether costs and/or disbursements thus far incurred, associated with the assessment of damage, ought be included in the order for costs which is otherwise agreed. Offer of the Cross-Defendant and Indemnity Costs 5 The proceedings were commenced by the plaintiff in 2002 and on 5 November 2002 the cross-claim was filed seeking orders against the father of the plaintiff. On 25 July 2003, Mr Abraham, the cross-defendant and father of the plaintiff, sought orders staying or dismissing the cross-claim on the basis that it disclosed no cause of action and/or was frivolous or vexatious and/or an abuse of process. That Motion was dismissed. The matter proceeded. 6 On 23 May 2005, the solicitors for the cross-defendant, Carroll & O'Dea, wrote to the solicitors for the cross-claimants (the defendants). The terms of that letter summarised the previous history relating to the motion to strike out, the cross-claim and reiterated the view of previous solicitors whom Carroll & O'Dea had succeeded. They asked the defendants to provide any authority adopting a position contrary to the one they espoused, namely, that the cross-claim will be unsuccessful on the basis of judgments in Robertson v Swincer and R v Holly Davies (which reference I take to be R v Davies & Partridge). The letter then makes the following offer: "The costs in this matter are about to significantly escalate. Whilst we are not in possession of all of the relevant material, it appears that should this matter proceed to hearing, the Cross-Defendant's costs will run into the tens of thousands of dollars. In the circumstances, we invite you to seek instructions from your client to resolve the matter on the following terms: 1. Verdict for the Cross-Defendant on the cross-claim. 2. Cross-Claimant to pay Cross-Defendant's costs to date as agreed or assessed." 7 The defendants' solicitors replied contesting the interpretation of the judgments to which reference had been made and referring the cross-defendant to the judgment of the High Court in Hahn v Conley and the distinction between omissions and commissions (a distinction relied upon by the cross-defendant in the proceedings). They then described, at least implicitly, the offer made in the letter of 23 May as "an offer to a party to effectively capitulate" and referred to unspecified appellate court decisions to the effect that such was not a proper offer of compromise or settlement. 8 On 31 May 2005, a formal Offer of Compromise was served which was said to remain open for 28 days. That Offer of Compromise of the cross-claim was in the following terms: "The Cross Defendant offers to compromise the claim in the following manner. By accepting resolution on the following terms: (i) Verdict and judgment for the Cross Defendant on the Cross-Claim. (ii) Each party to pay its on costs of the Cross-Claim. This offer is made in accordance with Part 22 of the Supreme Court Rules. This offer is to remain open for 28 days." 9 On 15 June 2005 a further letter was sent by Carroll & O'Dea to the solicitors for the cross-claimant in which issue was taken as to whether a mere action of dropping a child at school was, in relation to a parent, a commission in the terms used by Barwick CJ in Hahn v Conley. They set out the terms of the requirement to supervise in the handbook to teachers and reiterated the offer that had been made in the formal Offer of Compromise on 31 May 2005. Reference was then made to the fact that the matter was, at that stage, listed for hearing for a period between three to five days and the anticipation that the costs of defending the proceedings would "run into the tens of thousands of dollars". 10 The Court has a general inherent discretion and a statutory jurisdiction in relation to costs of all proceedings. That discretion must be exercised judicially and in accordance with principle. 11 Fundamentally, the principle to be applied in relation to a question of indemnity costs is whether the offer made in the Offer of Compromise and reiterated in the following letter on and after 31 May 2005 was a genuine offer of compromise with a real element of compromise in it. 12 At the time that the Offer of Compromise was made it was an offer, in effect, that the cross-claimants should walk away from the proceedings and in so doing pay their own costs but not the costs of the cross-defendant. At the time in 2005, on the basis of the terms of the letter written, there does not seem to have been significant costs payable by the cross-defendant and for which the cross-claimants would be liable if the matter proceeded and the cross-claimants were unsuccessful. 13 Further, on 24 October 2003, when the then Master dismissed the Motion filed on 25 July of that year, the Master ordered that the cross-defendant pay the cross-claimants costs of the Motion (such costs to be payable at the conclusion of the proceedings). No account seems to have been taken of that order in the Offer of Compromise and, properly construed, it may well be an Offer of Compromise which required the cross-claimants to forgo the orders for costs to which they were already entitled. 14 Given the stage which the proceedings had reached and the fact that substantial costs were to be incurred only in the future, I do not consider that the Offer of Compromise was a genuine offer with a real element of compromise in it. Therefore, on the basis of the principles to be applied, I do not accept that costs should be awarded on an indemnity basis. 15 The cross-defendant submits that for a party (or any defendant) in his position, the offer made is the only one that can be made and that it is unfair that, having succeeded fully, the cross-defendant does not have his costs fully reimbursed. There is cogency in the argument. The disadvantage suffered by successful defendants from the system of party/party costs is a feature of the system; but it is a feature of the system that applies universally; and not only to defendants. Successful plaintiffs also suffer out-of-pocket expenses either diminishing the damage or because damage is not a remedy that applies. Costs and Disbursements of the Preparation as to Damages 16 The remaining matter deals with costs as between the plaintiff and the defendants. 17 The details and particulars of the damage suffered by the plaintiff on account of the fall for which, I have found, the defendant is predominantly liable, are not before the Court. Nevertheless, there was agreement between the parties during the course of the proceedings that I could assume, for the purposes of any costs order, that there would be sufficient damage proved which would entitle the Court to make an order as to costs and/or to have jurisdiction in relation to the matter. 18 The defendants raise an issue associated with the inclusion of costs associated with the assessment of damage in the costs order relating to liability. The proceedings were split and liability has been determined separately from damages. Nevertheless, on the basis of the information already received by the Court it would be almost impossible for the plaintiff not to be able to obtain damages arising from the liability which has been established. 19 The major premise upon which the defendants relied was the lack of liability because the defendants had not breached any duty of care that existed. That submission has been unsuccessful. In the ordinary course, the Court would expect that the matter would proceed to damages and if the assessment of damage can not be agreed, the Court will assess damage and costs will follow the event. Of course, subsequent offers may be made which would affect the costs of any subsequent proceedings. I take into account the possibility that, hereafter, the defendants may offer an amount, rejected by the plaintiff, which is greater than the amount ultimately assessed by the Court. 20 Nevertheless, at this stage no such offer has been made, the defendants have pleaded liability and that matter has been determined. It is both impractical and inappropriate at this stage to split the costs in the manner submitted by the defendants. Conclusion 21 Further to the orders made on 24 October 2006 I make the following orders: (iv) the cross-claim is dismissed; (v) the cross-claimants shall pay the costs of the cross-defendant of and incidental to the proceedings, as agreed or assessed, which costs shall be payable forthwith; (vi) the defendants, jointly and severally, shall pay the plaintiff's costs of and incidental to the proceedings, including the costs of the assessment of damage thus far incurred, as agreed or assessed, which costs shall be payable forthwith; (vii) so much of the proceedings that remain shall stand over to the next call-over. ********** 01/12/2006 - - - Paragraph(s) n/a 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.