New South Wales Supreme Court CITATION : Sherry v Australasian Conference Association (trading as Sydney Adventist Hospital) & 3 Ors [2006] NSWSC 1242 HEARING DATE(S) : 12 September 2006 JUDGMENT DATE : 22 November 2006 JUDGMENT OF : Simpson J DECISION : Costs to be assessed on an indemnity basis from 24 April 2004; plaintiff to pay the costs of the third defendant; interest payable on costs; apportionment of award of damages between plaintiff and three adult children CATCHWORDS : claim under Compensation to Relatives Act 1897 - plaintiff successful against three out of four defendants - award of costs - whether costs of plaintiff assessed on an indemnity basis - plaintiff offer of compromise - offer not accepted by defendants - judgment on claim no less favourable than offer - plaintiff entitled to indemnity costs unless alternative order made - no exceptional circumstances - third defendant entitled to award of costs - application for Bullock order dismissed - interest on costs - costs already paid - plaintiff entitled to interest on costs - apportionment of award of damages under Compensation to Relatives Act 1897 Civil Procedure Act 2005 Schedule 6 Cl 2, s101 Compensation to Relatives Act 1897 LEGISLATION CITED : Supreme Court Act 1970 Supreme Court Rules 1970 Part 33, r8A Uniform Civil Procedure Rules 2005 20.26, 42.14 Bullock v London General Omnibus Company [1907] 1 KB 264 Gould v Vaggelas [1985] HCA 75; 157 CLR 215 Hillier v Sheather (1995) 36 NSWLR 414 CASES CITED : Houatchanthara v Bednrczyk (unreported, Court of Appeal, 14 October 1996) Marsland v Andjelic [No 2] (1993) 32 NSWLR 649 Morgan v Johnson (1998) 44 NSWLR 578 Rogers v Kabriel (No 2) [1999] NSWSC 474 Sherry v Australasian Conference Association (trading as Sydney Adventist Hospital) & 3 Ors [2006] NSWSC 75 Ann Elizabeth Sherry - Plaintiff Australasian Conference Association Ltd trading as Sydney Adventist Hospital - 1st Defendant PARTIES : David Marshman - 2nd Defendant Ross Wilson - 3rd Defendant Shaun Walsh - 4th Defendant FILE NUMBER(S) : SC 20437/00 B McClintock SC / RA O'Keefe - Plaintiff COUNSEL : P Garling SC - 1st Defendant KC Morgan - 2nd, 3rd and 4th Defendants Gray & Perkins - Plaintiff SOLICITORS : Ebsworth & Ebsworth - 1st Defendant Blake Dawson Waldron - 2nd, 3rd and 4th Defendants IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST SIMPSON J Wednesday 22 November 2006 20437/00 Ann Elizabeth Sherry v Australasian Conference Association (t/as Sydney Adventist Hospital) & 3 Ors SUPPLEMENTARY JUDGMENT 1 HER HONOUR: On 23 February 2006, after a lengthy and complex trial, I delivered findings of fact and reasons for judgment in respect of a claim brought by the plaintiff under the Compensation to Relatives Act 1897 following the death, on 14 August 1997, of her husband, Timothy Sherry: Sherry v Australasian Conference Association (trading as Sydney Adventist Hospital) & 3 Ors [2006] NSWSC 75. The plaintiff brought proceedings against four defendants: the first defendant was the organisation that conducted the Sydney Adventist Hospital ("SAH"); the second, third and fourth defendants were medical practitioners involved in the care of Mr Sherry whilst he was a patient in SAH. I held that the first, second and fourth defendants were liable in negligence but the third defendant was not. I gave judgment for that defendant. 2 The relevant findings having been made, the parties performed the calculations necessary in order to quantify the damages to be awarded. On 12 September 2006 I was told by agreement (as to calculation, not entitlement) that the verdict, quantified in accordance with my findings, would be in the sum of $2,164,000. It was not, of course, in dispute that the plaintiff will be entitled to an order for costs against the first, second and fourth defendants. 3 It now remains to finalise some outstanding issues. These were identified by the parties as: · a claim made by the plaintiff that costs be assessed on an indemnity basis; · what, if any, order ought to be made in respect of the costs of the successful third defendant; · whether interest ought to be payable on all or any of the costs to be awarded to the plaintiff; · the apportionment of the damages between the plaintiff and her three adult children, on whose behalf, as well as her own, she brought the proceedings. indemnity costs 4 The relevant facts are not in dispute. They are: (i) the plaintiff's claim was commenced on 11 August 2000. The fourth defendant was not then a party but was joined on 27 February 2001; (ii) by letter dated 26 March 2004 addressed to the solicitors for the plaintiff, Messrs Blake Dawson Waldron ("BDW"), solicitors for the second, third and fourth defendants (to whom I will at times refer as "the doctor defendants"), and on behalf also of SAH, invited the plaintiff to agree to a verdict in favour of each defendant on the basis that all parties bear their own costs; (iii) on 23 April 2004 the plaintiff made, pursuant to SCR Part 22, Division 1, an offer of compromise. She offered to accept, from the defendants jointly and severally, in full satisfaction of her claim, the sum of $1,500,000. The offer was expressed to be open for acceptance for 28 days, thus expiring on 21 May 2004. The covering letter accompanying the offer made no reference to BDW's letter of 26 March. It appears that no explicit response was made to that letter, or to the defendants' offer; (iv) on 24 May 2004 BDW wrote to the plaintiff's solicitors, referring to (without expressly accepting or rejecting) the plaintiff's offer. They asserted, however, that, after the offer of compromise had been served, and as late as the date of expiry of the offer (21 May), the plaintiff's solicitors had served on them additional material, being a report of a financial consultant going to quantification of damages, and a statement of particulars of claim filed pursuant to SCR Part 33, r8A. They said that review of these documents established that the plaintiff's claim, which had formerly been quantified on her behalf at approximately $5 million, had "radically altered", and now amounted to in excess of $8.5 million, and that new heads of damages claimed had been added; and that, in respect of one (relatively minor) aspect, the claim was yet to be particularised. The point of the letter is to be found in one paragraph, as follows: "The nature and extent of the plaintiff's case on quantum has now changed so dramatically that it is not now open to the plaintiff to rely on her offer of compromise in relation to the question of costs unless it is extended for a substantial period to enable the defendants to consider the additional material"; (v) the following day (25 May) the plaintiff's solicitors responded. They took issue with BDW's identification of the date of service of the financial report and the Part 33 particulars, maintaining that they had been served on 20 May (the day before expiry). (The factual dispute – appropriately dubbed, by senior counsel for SAH as "quibbling" – appears to me to be of no moment whatsoever; BDW's point was that the documents were served at a time that did not enable them to give proper consideration to the plaintiff's claim as then formulated, to advise the defendants, or the defendants time to consider their position.) The solicitors asserted that the offer represented a significant (approximately 30%) compromise on the potential full value of the claim, and noted their intention, in the event that the plaintiff succeeded in her claim, of relying upon the offer of compromise on an application, which they then foreshadowed, for an order that costs be assessed on an indemnity basis. [The dispute over the date of service of the financial report and statement of particulars continued, but, as I have noted, it is immaterial to the present question.]; (vi) the agreed judgment sum of $2,164,000 includes a component representing interest, of approximately $140,000. The verdict thus exceeds, by a significant margin, the offer made by the plaintiff. Accordingly, as foreshadowed, the plaintiff now seeks an order that costs be paid on an indemnity basis as and from 24 April 2004. 5 Although the proceedings were commenced, heard, and substantially determined, under the legislative regime that applied prior to the enactment of the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules, it was agreed that the latter regime governs the plaintiff's application (see Civil Procedure Act, Schedule 6, cl 2). 6 UCPR 20.26 lays down a procedure by which a party may make an offer of compromise. Part 42 is concerned with costs; Division 3 of Part 42 deals with the award of costs where an offer of compromise has been made. (Although the plaintiff's offer was made before the introduction of UCPR, it was common ground that it should be treated as though it had been made under UCPR 20.26.) 7 UCPR 42.14 (which is found in Division 3) provides: " 42.14 Where offer not accepted and judgment no less favourable to plaintiff (1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim: (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made." 8 On behalf of the plaintiff it is therefore claimed that r42.14(2)(b)(i) entitles her to an order that costs be assessed on an indemnity basis as from the beginning of the day following the day on which the offer was made, this is, 24 April 2004. The prerequisites to the plaintiff's entitlement are: · that she made, for the purposes of r20.26, an offer of compromise, · that her offer of compromise was not accepted by the defendants · that she obtained judgment on her claim no less favourable than her offer. All three are here met. 9 It will be seen that, even where the prerequisites are otherwise met, as they are here, the court retains a discretion to decline to make an order in favour of the plaintiff. It has been held (under the corresponding provisions of the former regime, the Supreme Court Act 1970, and the Supreme Court Rules) that, once the successful party has established the foundational facts necessary for the order, that party has an entitlement to an order for costs to be assessed on an indemnity basis, and the onus lies upon the unsuccessful party to dislodge that entitlement: Marsland v Andjelic [No 2] (1993) 32 NSWLR 649. 10 Ordinarily, a party who takes advantage of the offer of compromise procedure to make an offer and whose offer is more favourable to the opposing party than the judgment that eventuates after trial, can expect to receive the benefit of the rule. Where that party is a successful plaintiff, he or she can expect, not only that costs will, in the usual way, be awarded, but also that, from the date fixed by the rule (by reference to the date of the offer of compromise), those costs will be ordered to be assessed on an indemnity basis. That is so, unless the court exercises its discretion otherwise to order. That discretion is to be exercised in the usual way of discretionary powers. There must be a "judicial reason" for taking that course: see Hillier v Sheather (1995) 36 NSWLR 414, per Cole JA at 431. Indeed, in that case, Kirby P held that for another order to be made the case would need to be exceptional (p422): see also Morgan v Johnson (1998) 44 NSWLR 578 at 581-2, citing also Houatchanthara v Bednrczyk (unreported, Court of Appeal, 14 October 1996). 11 The only circumstance identified by senior counsel for SAH (whose submissions were adopted by counsel for the doctor defendants) concerned the late service of a number of experts' reports, both medical and economic, during the currency of the offer of compromise, and late service of the Part 33 statement of particulars. The consequence of this, he argued, was that the defendants were not given a fair opportunity to consider the plaintiff's offer in the light of all relevant information about the case proposed to be made on behalf of the plaintiff. 12 That these reports were served while the offer of compromise was extant is established by a document annexed to an affidavit of the plaintiff's solicitor sworn on 11 September 2006 (Annexure A). That document also shows that various other reports were served well before the expiry of the offer. For example, one of the reports served during the currency of the offer of compromise was that of Mr Brian Glenville dated 16 May 2004. However, two earlier reports of Mr Glenville, dated 3 January and 6 February 2002, had been served on 12 March 2002. No evidence was adduced on this application to suggest that the latest report broke new ground so as to alter the nature of the case the plaintiff had already signified she would present, based upon the opinion of Mr Glenville. Similarly, another of the reports in question was that of a financial consultant who gave evidence in the trial. I was told that this report was served as a substitute for a report served much earlier, because the author of the earlier report was terminally ill. Again it was not suggested that the new report was such as to alter the plaintiff's case, or cause difficulty for the defendants. 13 I was not given any reason to believe that any of the material served during the relevant time was of such novelty as to change the nature of the plaintiff's case or cause the defendants to require additional time to consider it. I do not therefore regard service of the additional material as a reason to refuse the order to which the plaintiff is otherwise prima facie entitled. There is no other reason to do so. 14 Let it be assumed, for a moment, that the defendants are correct, and that the material served during the currency of the offer of compromise was indeed of such moment as to cast the plaintiff's case in a different light, and to warrant further time for the defendants and their legal representatives to consider their position. Even after the deadline passed, the defendants were not left bereft of avenues by which to protect themselves. They could, for example, have advised the plaintiff's solicitors of their willingness to accept the offer; they could themselves have made an offer of compromise. It is scarcely to be thought that any process of open negotiation (where the figures approximated the ultimate result) would not be taken into account in the discretionary exercise. The fact is, the defendants at no time had any interest in, or intention of, accepting the plaintiff's offer, and no extension of time would have altered that position. 15 There was no evidence (which could have readily been adduced, had it existed) that the defendants or their advisors wished to have additional time to consider the offer, or seriously (even retrospectively) contemplated that, given additional time, they might have accepted it. 16 I propose to make an order that costs be assessed on an indemnity basis from 24 April 2004. costs of the third defendant 17 Prima facie the third defendant is entitled to an order that his costs be paid by the plaintiff: UCPR 42.1. I see no reason not to make such an order. However, the order requires some refinement. Throughout the proceedings, the third defendant shared representation with the other two doctor defendants. A great deal of the costs incurred were incurred on behalf of all doctor defendants, and would have been incurred by the second and fourth defendants even if the third defendant had never been sued. Contrary to the submission put on his behalf, relying on the decision of Young J (as his Honour then was) in Rogers v Kabriel (No2) [1999] NSWSC 474, any assessment of the costs due to be paid to the third defendant by the plaintiff should exclude those which fall into that category. To order otherwise would be unjust to the plaintiff, who would be required to pay costs partly incurred in respect of two claims in which she was successful. It will be otherwise, however, in respect of any costs exclusively referable to the third defendant. It is worth recalling here that the three doctor defendants all performed different roles and practised medicine in different areas of specialty: the second defendant is a cardiac surgeon, the third defendant an intensive care specialist, the fourth defendant a career medical officer. In respect of each area of specialty, experts were qualified to give evidence of prevailing practice and standards. Plainly, the costs of qualifying those experts in relation to intensive care practice are exclusively referable to the third defendant and he is entitled to recover those costs, as well as the costs of the trial itself that can be attributed to making and meeting the claim against the third defendant. The dissection is a matter for the costs assessor. 18 On behalf of the plaintiff it was asked that an order commonly known as "a Bullock order" (derived from Bullock v London General Omnibus Company [1907] 1 KB 264) be made requiring SAH and/or the fourth defendant to pay the third defendant's costs. A Bullock order may be made where a plaintiff sues two or more defendants, but succeeds only against one or some of them, leaving outstanding the costs of the defendant or defendants against whom the suit fails. In appropriate circumstances under the procedure followed in Bullock, a court may order that the unsuccessful defendant(s) rather than the plaintiff pay the costs of the successful defendant(s). Such an order amounts to an indemnity granted to the plaintiff at the expense of other defendants against the costs of an exercise of judgment (to sue the successful defendant(s)) that proved to be erroneous. The effect of the order sought by the plaintiff in the present case would be to transfer the costs of the unsuccessful suit against the third defendant (that is, the costs incurred by him in his successful defence of the claim) to other defendants – the fourth defendant, or SAH. It was not suggested that such an order ought to be made against the second defendant. 19 A Bullock order is not, in cases where a plaintiff has mixed success against multiple defendants, made as a matter of course, or routine. The appropriate circumstances must be established before an order will be made. The order is discretionary, but the discretion is not unfettered. 20 The most comprehensive authority on the principles that guide the exercise of the discretion to make a Bullock order to which I was referred is Gould v Vaggelas [1985] HCA 75; 157 CLR 215. There it was made plain that reasonableness of conduct of a plaintiff in bringing proceedings against an ultimately successful defendant (where another defendant is unsuccessful) is insufficient, of itself, to warrant requiring the unsuccessful defendant to meet the successful defendant's costs. Something more is required. It is necessary that the plaintiff identify conduct on the part of the unsuccessful defendant that "induced the plaintiff to join the other defendant", or that makes it fair to impose some liability on the unsuccessful defendant for the costs of the successful defendant (per Gibbs CJ at p 230; see also Brennan J at p 260). 21 Here the plaintiff has attempted to identify such conduct on the part either of SAH or the fourth defendant. Counsel for the plaintiff identified the conduct on the part of SAH and the fourth defendant justifying a Bullock order as: (a) failure on the part of employees of SAH to maintain adequate records of observations made of Mr Sherry; (b) denial by SAH of vicarious liability for the third defendant and denial that it owed a non-delegable duty in respect of treatment provided in its intensive care unit; (c) failure, until trial, of SAH and the fourth defendant to provide information about a sequence of events at a particular time relevant to the treatment of Mr Sherry; (d) failure of the fourth defendant, until trial, to provide information about the extent to which he relied upon the third defendant for advice in relation to treatment of Mr Sherry; (e) failure by the fourth defendant to specify, until trial, the information that he conveyed to the third defendant during a telephone conversation. 22 The first of these is untenable, as a matter of fact. Records of observations were made and were in evidence. They were, it is true, subject to criticism, but records there were. 23 The remaining matters cannot have influenced the plaintiff (or her legal advisors) to commence proceedings against the third defendant: all are, axiomatically, matters which arose after proceedings had been commenced. 24 In saying this, I recognise that the principles stated in Bullock and Gould, and cases decided along similar lines, refer to the commencement of proceedings against the defendant who is ultimately successful; I would be prepared to accept that they extend to the continuation of proceedings if it could be said that, but for conduct on the part of the unsuccessful defendant, proceedings against the successful defendant might have been terminated. However, I am unable to see, that, for example, denial by SAH of vicarious liability for the third defendant, or that it owed a non-delegable duty in respect of treatment in the Intensive Care Unit, in any way influenced the plaintiff to maintain the proceedings against the third defendant. No evidence was given, for example, that if an admission of vicarious liability had been made, the plaintiff would have abandoned the proceedings against the third defendant, or given consideration to doing so. 25 It is similarly the case in respect of the other matters alleged to have caused or contributed to the initiation or continuation of the proceedings against the third defendant. 26 I see no reason why the unsuccessful defendants should indemnify the plaintiff in respect of the costs of the third defendant. I decline to make any order to that effect. The only order will be that the plaintiff pay the costs of the third defendant. interest on costs 27 S101 of the Civil Procedure Act provides as follows: " 101 Interest after judgment … (4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs. (5) Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from: (a) the date or dates on which the costs concerned were paid, or (b) such later date as the court may order." 28 The trial of these proceedings occupied approximately three months of hearing time, in which the plaintiff was represented by senior and junior counsel, as were all defendants. The expert evidence on all sides was extensive. From that alone, it is obvious that the costs of the trial will be very high indeed. I was told, and no objection was taken to evidence being put before me in this informal way, that the plaintiff has paid almost $1 million in professional fees and disbursements. 29 There is nothing punitive about making an order that interest be payable on costs already paid. The power to make the order is discretionary, but is intended to enable the court properly to compensate a successful party in respect of costs necessarily or reasonably incurred in pursuit or defence of a claim. 30 In my opinion the plaintiff has established an entitlement to the order. The precise quantification or formulation of the order will depend upon the dates upon which various sums were paid. It is sufficient at this point simply to say that I propose to make an order as sought on behalf of the plaintiff. apportionment 31 The apportionment issue does not affect or involve the defendants. The proceedings were brought, as the Compensation to Relatives Act requires, by the plaintiff on behalf of all of the dependants of Mr Sherry. In this case they are her three children, all now adult and self-supporting. 32 A proposal was put before me as to the apportionment, and this was based upon what appears to be a very careful report (obviously, not subject to cross examination or scrutiny) of Ms Corinna Lueg of 9 May 2006, together with a calculation made on 11 September 2006. 33 Having regard to the evidence of dependency, Ms Lueg proposed an apportionment in relation to each of the plaintiff's children. 34 Each of the children has sworn an affidavit acknowledging the report, deposing that he or she had read and understood the report, and was satisfied for apportionment to be made by the court as it sees fit. 35 I am in no position to question the accuracy or fairness of Ms Lueg's proposal. I was told, in response to a specific inquiry by me, that the children have not had independent legal advice, but there does appear to have been some, limited, consultation with the plaintiff's solicitors. 36 Ideally, perhaps, each of the children would be separately advised. However, such a course could create enormous complications, and certainly incur even more costs than have already been incurred. 37 I had the opportunity to observe this close-knit family during the course of the trial. Proposing that the children be separately advised could have the potential to disrupt those close bonds. I am satisfied that the better course is to accept the assurance of each of the children that he or she is satisfied to accept the apportionment made by the court; in turn, I am satisfied that I can do no better than adopt the apportionment proposed by Ms Lueg. 38 Accordingly, I propose to apportion the award of damages as proposed. 39 The parties can reduce the determinations I have here made to short minutes of order in order to finalise the long-running proceedings. ********** 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.