New South Wales Supreme Court CITATION : Cotie v Cox [2006] NSWSC 859 HEARING DATE(S) : 4 August 2006 JUDGMENT DATE : 23 August 2006 JUDGMENT OF : Latham J DECISION : 1. The Second Defendant/First Cross-Defendant (the hospital) pay the First Defendant/First Cross-Claimant's costs on the First and Second Cross-Claims in proceedings 20435/01, 20433/01 and 20434/01; 2. The First Defendant (Dr Cox) pay the Second Defendant's costs on the Notice of Motion. CATCHWORDS : Costs - s 98 Civil Procedure Act - Rule 42.1 UCP Rules - whether costs follow the event - successful party on hearing of cross-claims. LEGISLATION CITED : Civil Procedure Act 2005 Rhonda Ballard v Wendy Louise Cox & Anor. [2006] NSWSC 252 Diamond v Simpson (No. 4) [2004] NSWSC 57 Patten v Moffat & Ors. [1999] NSWSC 1322 Proctor & Gamble Pty Ltd v Australian Slatwall Industries Pty Ltd [2001] NSWSC 398 CASES CITED : New South Wales Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8 Harris v Schembri NSWSC 7 November 1995 Grygiel v Baine & Ors. [No. 2] [2005] NSWCA 434 Oshlack v Richmond River Council (1998) 193 CLR 72 Latoudis v Casey (1990) 170 CLR 534 Plaintiff - Spencer Cotie by his Tutor Mike Cotie PARTIES : Defendant 1 - Wendy Louise Cox Defendant 2 - Prince of Wales Private Hospital FILE NUMBER(S) : SC 20434/2001 Plaintiff - Not represented COUNSEL : Defendant 1 - DJ Higgs SC / J Downing Defendant 2 - MJ Fordham Plaintiff - Not representend SOLICITORS : Defendant 1 - Tresscox Lawyers Defendant 2 - Minter Ellison Lawyers IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST LATHAM J 23 AUGUST 2006 20434/2001 SPENCER COTIE By His Tutor MIKE COTIE v WENDY LOUISE COX JUDGMENT 1 By Notice of Motion filed on 4 July 2006, the first defendant in proceedings instituted by three plaintiffs seeks an order for costs against the second defendant in those proceedings. The plaintiffs, who alleged negligence on the part of the first (Dr Cox) and second defendants (Prince of Wales Private Hospital) in the course of Spencer Cotie's birth, reached a settlement with the first defendant in early December 2005 which was approved on 13 December 2005. The outstanding proceedings between the plaintiffs and the second defendant and the cross-claims by each of the defendants against the other were determined on 7 April 2006 when Dunford AJ delivered a judgment for the plaintiffs against the second defendant, with liability apportioned 60% to the first defendant and 40% to the second defendant. That judgment has not been entered : Rhonda Ballard v Wendy Louise Cox & Anor. [2006] NSWSC 252 2 At the end of his Honour's judgment, following the apportionment of liability, his Honour said "Subject to any submissions the parties wish to make as to the costs of the cross-claims, I therefore intend to make the following orders." At the conclusion of those proposed orders his Honour said that he made "no order as to the costs of the cross-claims to the intent that each defendant bear her or its own costs of the cross-claims." 3 Immediately following the delivery of his judgment, his Honour left the bench so that the parties might consider any further orders relating to his costs orders. He returned to the bench a short time later, at which time Senior Counsel for the first defendant (who is also counsel on the hearing of the Notice of Motion) and counsel for the second defendant indicated that they had no further applications to make. (Affidavit of Raylee Joy Hartwell of 3 August 2006 and Affidavit of Donald Allan Ross Munro of 29 June 2006) 4 By letter dated 3 May 2006, the solicitors for the first defendant informed the solicitors for the second defendant that they were instructed to pursue a claim for the costs of the cross-claim. The failure to raise this issue when the opportunity was provided by Dunford AJ was conceded by the first defendant to be an oversight. Thus, Mr Higgs SC acknowledges that the first defendant has at least one hurdle to overcome before this Court would intervene to exercise its undoubtedly wide discretion under s 98 of the Civil Procedure Act 2005. 5 Reliance is placed upon s 98 of the Act and Rule 42.1 of the Uniform Civil Procedure Rules which provides that if the Court makes any order as to costs, the Court shall order that the costs follow the event, except where it appears to the Court that some other order should be made as to the whole or any part of the costs. Essentially, the first defendant submits that she was the successful party in the context of the outstanding issues in the litigation, as against the second defendant. In order to understand this submission, it is necessary to have brief regard to those issues. 6 The following summary is necessarily constrained by the fact that I have not been fully apprised of every aspect of what was a complex piece of litigation for the purposes of these proceedings, nor could I be in the brief time allocated to the hearing of the Notice of Motion. Dunford AJ was, in my view, ideally placed to determine the arguments now being advanced. However, I accept that the first defendant has no other recourse and that she ought not be prejudiced by the fact that Dunford AJ is no longer available to hear submissions that would have been advanced on 7 April 2006, but for Senior Counsel's oversight. The Issues Determined by the Hearing 7 Spencer Cotie was born at about 5:24 a.m. on 18 April 1999 at the Prince of Wales Private Hospital suffering perinatal asphyxia and resultant brain damage. He has since developed cerebral palsy. The circumstances giving rise to the birth of the plaintiff were described by Dunford AJ in the course of his judgment in the following terms :- 5 Ms Ballard [Spencer's mother] had been a patient of Dr Cox in respect of the pregnancy since 8 December 1995 and was admitted to Prince of Wales Private Hospital at about 7:40 p.m. on 17 April 1999 with three to four minute contractions lasting 40 to 50 seconds, such contractions having started about 5 p.m. 6 Following her transfer to the delivery suite, CTG tracing was commenced at about 9:30 p.m. recording the mother's heart rate and contractions and also the foetal heart rate. 7 From about 10 p.m. there were a number of decelerations or drops in the foetal heart rate concurrently with the mother's contractions particularly at about 2200, 2210 and 2220. Because these decelerations were concurrent with the contractions they were not matters of concern and are referred to as Type A, early or benign decelerations. [His Honour went on to explain "variable" decelerations, "variable contractions with a late component" and late decelerations, the latter two being indicators of foetal distress and the development of possible hypoxia and acidosis, which over a prolonged period of time can lead to brain damage. Similarly, a foetal heartbeat of more than 160 beats per minute further indicates foetal distress, hypoxia and acidosis, and foetal asphyxia where the foetal heartbeat falls below 120 per minute.] 14 [Following observations made by Sister Whitehead, an employee of the second defendant (a midwife), at 2230 of late decelerations, that employee] telephoned Dr Cox at about 2230 and informed her of the meconium in the liquor and the late decelerations and .. Dr Cox told her to continue observations and to alert Dr Chilton to be present for the delivery. Dr Cox does not deny receiving the phone call but has no recollection of it, and said that if she had been given that information, she would either come in to examine the patient and the CTG trace, or at least had the CTG trace faxed to her as this was her usual practice. She did neither. 8 These events grounded the first basis upon which the first defendant was found negligent, in that Dunford AJ accepted that the second defendant informed the first defendant of signs of foetal distress at 2230 and the first defendant failed to respond appropriately. His Honour found that had the first defendant come into the hospital at that time, "she would have been on hand to observe the continuing deteriorating condition of the foetus and would undoubtedly have performed a caesarean delivery within a few hours." (at par 35) 9 His Honour's judgment continued :- 36 After 10:30 p.m. the condition of the foetus continued to deteriorate and from 11 p.m. onwards, there was an ever-increasing need for Sister Whitehead to contact Dr Cox again and notify her of the deterioration, particularly after midnight when there were late decelerations, variable decelerations with a late component, tachycardia and the meconium continued to be present in the liquor. In failing to call Dr Cox again during this period, particularly having been told by Dr Cox at about 10:30 p.m. to continue to observe, Sister Whitehead was in breach of her duty of care for which the hospital is responsible. 37 There is no dispute that if Dr Cox had been called during this time, particularly by about 2 a.m., she would have had no choice but to deliver the child by caesarean section which I am satisfied she would have done, and if she had done so, the probabilities are that the child would have suffered no damage whatsoever. Even if not delivered until 3 a.m. the general opinion of the experts appears to be that, although there may have been some hypoxia, the child could have been resuscitated to normality. 38 Finally, when Dr Cox did arrive at the hospital at about 4:30 a.m. following the call at 4:20 a.m., she only reviewed the trace back to 2:34 a.m. and did not examine the earlier traces, which would have alerted her to a much more serious condition of the foetus and probably deflected her from attempting the forceps delivery. She concedes she was in breach of her duty of care in this regard but claims that Sister Whitehead was also in breach of her duty in failing to draw her attention to what had gone on prior to 2:34 a.m. In my opinion, if Dr Cox wanted to know what the state of the CTG trace prior to 2:30 a.m. was (as she should have) it was up to her to ask Sister Whitehead for more details and herself examined the earlier traces, and not to depend on the midwife volunteering information. 10 As may be seen from par 36 set out above, the second defendant was found negligent on the basis that she had breached her duty of care in failing to notify the first defendant of the continuing deterioration in the condition of the foetus between 11 p.m. and 4 a.m. 11 Further to the negligence established against the first defendant in failing to come to the hospital when notified by the second defendant at about 10:30 p.m., the first defendant was also found negligent in failing to examine the whole of the CTG trace when she did attend the hospital at 4:30 a.m., in electing in those circumstances to attempt a forceps delivery and in performing the forceps delivery incompetently. 12 A significant issue in terms of apportionment of the damages arose from this latter head of negligence. A considerable quantity of expert evidence was directed to the question whether the damage to the plaintiff occurred primarily before the forceps delivery or as a result of the forceps delivery. His Honour found that the major injury with the most serious consequences was the injury to the basal ganglia, which was entirely due to the forceps delivery. The injury to the cortex, which was less disabling, was due to the prolonged period of intermittent hypoxia, which was in turn due to the failure of Sister Whitehead to call Dr Cox after 11 p.m. 13 However, in the result his Honour apportioned responsibility for the damage primarily on the basis that had the first defendant been called between 11 p.m. and 2 a.m., the plaintiff would almost certainly have been born by about 2:30 a.m. by caesarean section, in which case he would probably have suffered no ill effects. (par 42) Thus, despite the fact that the negligence of the second defendant directly gave rise to the lesser of the plaintiff's injuries, the serious and long-term damage to the plaintiff was indirectly attributable to the second defendant's breach of its duty of care. The Conduct of The Proceedings 14 The proceedings were commenced by the plaintiffs on 28 May 2001. The first defendant filed a cross claim against the second defendant on 2 October 2002 and the second defendant filed a cross claim against the first defendant on 27 March 2003. 15 On 14 October 2005 the proceedings were set down for hearing, to commence on 20 March 2006 with a six week estimate. The first defendant admitted liability to the plaintiffs on 24 October 2005. As noted above, the plaintiffs and the first defendant reached an agreement in early December 2005. The terms of settlement left outstanding the plaintiffs' claims against the second defendant and the cross claims by the first defendant and the second defendant. 16 At par. 3 of his Honour's judgment, his Honour says :- The hearing before me essentially took the form of the hearing of the first cross claim by the first defendant (Dr Cox) against the second defendant (the hospital) and Mr Higgs, senior counsel for the first defendant mentioned the matter on behalf of the solicitor for the plaintiffs to inform me that the plaintiffs relied in their claims against the second defendant on the evidence adduced by the first defendant against the second defendant . Although the terms of settlement between the plaintiffs and the first defendant were on the basis that there was no admission of liability, the first defendant has before me expressly admitted breaches of the duty of care and the second defendant does not deny breach of the duty of care on the part of its employee, the midwife, Sister Whitehead; and the issues before me resolved into determining the precise nature of the injuries suffered by Spencer, causation and, subject to that, apportionment. (Italics not in original) 17 His Honour's reference to the admission of liability by the second defendant derives from the position taken by the second defendant during submissions. In the course of the proceedings itself there was no admission of liability on the part of the second defendant. Both the plaintiffs and the first defendant were required to litigate their claims against the second defendant to judgment. The first defendant in effect assumed the prosecution of the plaintiffs' claims on their behalf, thereby saving the second defendant from any substantial liability with respect to the plaintiffs' costs on the hearing before Dunford AJ. The Submissions of the Parties 18 The first defendant submits that, in circumstances where the second defendant maintained its denial of liability as against the plaintiffs and the first defendant throughout the proceedings and where the determination of the first defendant's cross claim governed the outcome of the proceedings, costs should follow the event in that, as a practical reality, the first defendant has been the successful party. The "event" in this case was the determination of the liability of the second defendant. 19 The first defendant relies upon Diamond v Simpson (No. 4) [2004] NSWSC 57, Patten v Moffat & Ors. [1999] NSWSC 1322 and Proctor & Gamble Pty Ltd v Australian Slatwall Industries Pty Ltd [2001] NSWSC 398 as examples of the exercise of the Court's costs discretion in favour of successful cross claimants, in spite of the fact that none of those claimants succeeded in obtaining a complete indemnity. 20 The second defendant resists the intervention of the Court on the basis that the opportunity was provided to the first defendant and that opportunity was not taken up, and for that reason there is no further function for the Court to perform. Further, the second defendant submits that costs have in effect followed the event, insofar as the settlement between the first defendant and the plaintiffs was expressed to be without admission of liability and the hearing before Dunford JA centred on whether or not the second defendant was liable to the plaintiffs and if so, in what proportion. The apportionment question having been resolved in each party's favour in terms of the respective cross claims, each party was therefore successful. 21 The second defendant also relies upon Patten v Moffat [1999] NSWSC 1322 in support of the proposition that in circumstances where the action is maintained by the plaintiffs as against the second defendant, the ordinary rule is that each defendant should pay its or her own costs, even though liability is found in differing proportions. Consideration 22 The written submissions of the first defendant proceeded upon the basis that no order as to costs on the cross-claim had in fact been made. The second defendant's written submissions proceeded on the basis that an order had in fact been made, namely that each defendant was to bear her and its own costs on the cross claims. The characterisation of the decision on costs made by Dunford AJ has some bearing on the outcome of these proceedings. Whilst I do not doubt that his Honour turned his mind to the question of costs on the cross claims, it appears to me that he expressly declined to make an order. 23 Substantially for this reason, I do not regard this Court as functus for the purposes of the orders sought in the Notice of Motion. The second defendant argues that the decision in New South Wales Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8 suggests otherwise. That decision was concerned with the variation of a costs order made after verdict was pronounced in circumstances where an unsuccessful defendant immediately made the trial judge aware of an offer of compromise to the plaintiff which was not accepted. Priestley JA, with whom Spigelman CJ and Sheppard A-JA agreed, rejected an argument that the trial judge was "functus" after he had pronounced the initial costs order on the basis that "he had not then completed his duties" because he was unaware of other relevant factors (at 12E). It may be equally argued that Dunford AJ had not "completed his duties" in that he made no costs orders on the cross-claims. 24 Similarly, Bryson J's decision in Harris v Schembri NSWSC 7 November 1995 does not assist the second defendant. Bryson J's order as to costs made at the conclusion of the hearing, at which time no submissions were made, was sought to be set aside three months later. Bryson J. considered that the question of costs remained open, in view of the fact that "there was no real opportunity to deal with the question before publication of [his] reasons and orders on the principal issues. [Nor was there an] opportunity between publishing the reasons and pronouncing orders for any party to debate the question of costs. … Where courts make orders without giving the party affected, or for that matter without giving either party an opportunity to debate the order which should be made, a party affected has an opportunity to obtain reconsideration." The operative words, however, are "where courts make orders". 25 To similar effect is the decision of the Court of Appeal in Grygiel v Baine & Ors. [No. 2] [2005] NSWCA 434. The Court had made an order as to costs when it handed down its judgment on 29 June 2005. Some five weeks later, the claimant filed a Notice of Motion seeking a variation of the costs order. In dismissing the Notice of Motion, Basten JA (with whom Mason P and Bryson JA agreed) referred to the application as an application to reopen the judgment of the Court of 29 June 2005 and made the following remarks concerning the duties of counsel :- [T]he Court should be entitled to act on the basis that resolution of the issue is not intended to be the subject of further submissions, unless the contrary position has been indicated at the hearing. The burden on the Court of applications to address further in relation to costs after judgment is significant. Inadvertence on the part of the legal representatives will generally not be a sufficient basis for permitting further submissions, even in writing, and certainly not a basis for a further hearing, as appears to have been proposed in the present case. [12] (Italics not in original) 26 Whilst these remarks remain apposite to the exercise of the Court's discretion after the conclusion of the proceedings (s 98(3)), I would not refuse to entertain the first defendant's application, in circumstances where no submissions at all were made and, in truth, no order as to costs on the cross-claim was made. 27 The general principle is that costs are awarded to compensate the successful party for the expense of being put to the necessity of litigation : Oshlack v Richmond River Council (1998) 193 CLR 72 ; Latoudis v Casey (1990) 170 CLR 534. 28 Some general guidance as to the exercise of the discretion relating to costs is available from the judgment of McHugh J. in Oshlack (at 96) :- [T]he discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation. In this manner, the law has gradually developed principles to guide the proper exercise of the discretion and, in some cases, to highlight extraneous considerations which, if taken into account, will cause the exercise of the discretion to miscarry. …………………. By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. …………………. The expression "the usual order as to costs" embodies the important principle that, subject to certain limited exceptions, the successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. 29 Turning to the circumstances of this case, I would regard the first defendant as the successful party in the litigation before Dunford AJ, given the context within which that litigation took place. As his Honour makes clear early in his judgment, the substantive claim before him was the first defendant's cross-claim. The first defendant having admitted liability to the plaintiffs and settled those proceedings, she sought a determination as to the liability of the second defendant towards the plaintiffs, where that liability was wholly denied until the close of the evidence. It was always open to his Honour to find that the second defendant was not liable, leaving the first defendant to bear the whole burden of the damages and costs. In that respect, she was "the successful party". 30 I do not agree that both defendants were successful in so far as each received a result on their respective cross-claims. Any result on the cross-claims was consequent on a finding or admission of liability towards the plaintiffs. That remained at issue as far as the second defendant was concerned when the hearing commenced before Dunford AJ. 31 Some reliance was placed upon the asserted late service of evidence by the first defendant on the second defendant, going to the key issue on causation. Two months before the hearing, the first defendant served an expert report by Professor Ellwood and one month before the hearing a supplementary report was served. The first defendant also served a midwife's report one month before the hearing. A further supplementary expert report was served less than a week before the hearing. My understanding of the second defendant's argument is that the discretion to award costs to the first defendant ought not be exercised because of this conduct by the first defendant immediately prior to trial. However, the second defendant could not have been under any misapprehension as to the nature of the matters in dispute and the supplementary reports went no further than purporting to fortify the first defendant's position. The first defendant acknowledges that the position taken by the second defendant in contesting the cross-claim may well have been reasonable, but that has no bearing upon the discretion to award costs to a successful party. 32 The second defendant's reliance upon Patten v Moffatt is also misplaced. The reference to "the ordinary rule" whereby each party pays its own costs at par 44 of the judgment of Kirby J was a reference to the defendants' own costs in resisting the plaintiff's claim. Elsewhere in the judgment, Kirby J dealt with a claim for costs on the cross-claim and remarked that where "the defendants were not able to shift entirely the responsibility to the cross defendants … [but] succeeded on the cross-claim, [the] usual rule should apply" and they were entitled to costs on the cross-claim. [14] 33 It remains to consider whether the discretion should be exercised in the first defendant's favour, given the failure by Senior Counsel to make these submissions when the opportunity was provided by Dunford AJ on 7 April this year. I respectfully agree with Basten J's remarks in Grygiel v Baine & Ors. [No. 2] concerning the burden on the Court of dealing with arguments as to costs after judgment has been delivered and some finality in the disposition of the proceedings has been assumed. This is particularly so where a judge, other than the trial judge, has been asked to determine the issue. The second defendant was informed of the application approximately one month after judgment was handed down. 34 In the result, I am persuaded that the discretion should be exercised in favour of the first defendant. Senior Counsel's inadvertence, whilst regrettable, should not deprive the first defendant of the benefit of an order which was open to Dunford AJ to make on 7 April, had the submissions been advanced at that time. However, Mr Higgs SC accepts that the first defendant should bear the costs on the Notice of Motion. 35 I make the following orders :- 1. Order that the Second Defendant/First Cross-Defendant (the hospital) pay the First Defendant/First Cross-Claimant's costs on the First and Second Cross-Claims in proceedings 20435/01, 20433/01 and 20434/01. 2. Order that the First Defendant (Dr Cox) pay the Second Defendant's costs on the Notice of Motion. ********** 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.