New South Wales Court of Appeal CITATION: Hendriks v McGeoch (No 2) [2008] NSWCA 103 HEARING DATE(S): (On written submissions) JUDGMENT DATE: 23 May 2008 JUDGMENT OF: Spigelman CJ at 1; Giles JA at 2; Basten JA at 18 DECISION: Costs order made on 2 April 2008 not varied. Respondent pay appellants' costs of the application to vary it. CATCHWORDS: Costs - pre-trial offers of settlement - plaintiff achieves greater success at trial than offers - defendant appeals - defendant obtains reduction of damages on appeal - but plaintiff's success still greater than offers - offers a discretionary factor as to appellate costs - appeal a new stage in litigation - plaintiff did not make fresh offer - prior offers counted for little - no variation to costs order otherwise appropriate by reason of offers. CATEGORY: Consequential orders Henri Hendriks - First Appellant Robert George Stone - Second Appellant Ian Erratt - Third Appellant Frederick John Commins - Fourth Appellant PARTIES: Glen Francis Lolback - Fifth Appellant Geoffrey John Potter - Sixth Appellant William James Thompson - Seventh Appellant Peter James Webb - Eight Appellant Jon McLaurin McGeoch - Respondent FILE NUMBER(S): CA 40229/07 COUNSEL: P W Arblaster - Appellants A M Colefax SC - Respondent SOLICITORS: Colin Biggers & Paisley - Appellants Walsh & Blair, Wagga Wagga - Respondent LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC 4154/03 LOWER COURT JUDICIAL OFFICER: Gzell J LOWER COURT DATE OF DECISION: 11 April 2007, 13 April 2007 LOWER COURT MEDIUM NEUTRAL CITATION: McGeoch v Hendriks & Ors [2007] NSWSC 311; Jon McLaurin McGeoch v Henri Hendriks & Ors (No 2) [2007] NSWSC 364. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40229/07 SC 4154/03 SPIGELMAN CJ GILES JA BASTEN JA Friday 23 May 2008 HENDRIKS v McGEOCH (No 2) Judgment 1 SPIGELMAN CJ: I agree with Giles JA. 2 GILES JA: The appellants were held liable to the respondent in negligence. The respondent obtained judgment for $422,834.90. The appellants appealed on liability and quantum. The respondent applied for leave to appeal as to costs. 3 On 2 April 2008 the application for leave to appeal was dismissed, and the appeal was upheld to the extent that, as calculated by the parties in accordance with the Court's reasons, the judgment was reduced to $338,267.92. It was ordered that the appellants pay 50 per cent of the respondent's costs of the appeal. 4 The respondent applied for variation of the costs order to either - (a) an order that the appellants pay the respondent's costs of the appeal on an indemnity basis or alternatively on a party and party basis; or (b) an order that the 50 per cent of the respondent's costs of the appeal be assessed on an indemnity basis. 5 The appellants opposed the application. Written submissions were directed. The parties agreed to the application being decided on the written submissions. 6 The respondent relied in the application upon settlement offers made prior to the trial. A number of offers were exchanged. The proceedings were brought in 2003. The trial was in March 2007: the reason for the delay is unclear. The offers were - (i) 29 November 2004, letter respondent to appellants, verdict for appellants and each party pay their own costs. (ii) 21 December 2004, letter appellants to respondent, judgment for appellants and respondent pay appellants' costs. (iii) 23 December 2004, letter appellants to respondent, adding to the offer of 21 December that respondent acknowledge that his claim was without merit and that he was not the appellants' client and that he withdraw "both the allegation and the implication that [the appellants] acted dishonestly, unprofessionally and unethically"; and that the terms of settlement could be disclosed. (iv) 7 April 2005, offer of compromise respondent to appellants, payment of $50,000 plus costs. (v) 19 April 2005, letter appellants to respondent, judgment for appellants and respondent pay costs and disbursements of $10,000. (vi) 9 August 2005, offer of compromise appellants to respondent, judgment for appellants and appellants bear their own costs; covering letter states also made as Calderbank offer. (vii) 20 November 2005, offer of compromise respondent to appellants, payment of $225,000 and appellants pay respondent's costs. Extent of variation of the costs order? 7 The appellants submitted that, save for the basis upon which the costs were to be assessed, the Court had made its determination as to the costs of the appeal. They said that the only question was whether the 50 per cent of the respondent's costs of the appeal should be on an indemnity basis. 8 At the hearing of the appeal the Court was aware that an offer of compromise had been made by the respondent. The trial judge had made his costs order taking it into account. The parties were not in a position to indicate at the hearing of the appeal how the appellants' challenge to quantum, in which they contended that the trial judge had failed to assess damages on the basis of loss of a chance, would translate into reduction of the judgment. It was plain enough that the offer of compromise might have consequences for appellate costs, see the reasons of Basten JA at [108] and my reasons at [21]. In accepting that the basis upon which the costs were to be assessed remained open for determination, the appellants recognised that possibility. 9 Once the possibility be recognised, the costs order made on 2 April 2007 is wholly open for reconsideration. Regard can be had to the series of settlement offers as now known so far as they are relevant to appellate costs. Variation of the costs order? 10 The respondent did not distinguish between the letters and the offers of compromise. He implicitly accepted that the pre-trial offers of compromise did not have effect as such under the Rules in relation to appellate costs, and relied on UCPR Pt 51 r 49 which provides in relation to appellate costs that regard may be had to an offer of compromise made at trial. There is no occasion to consider whether a pre-trial offer of compromise continues to have effect otherwise than as a factor in the exercise of the appellate court's discretion. 11 The respondent submitted that he had made genuine settlement offers; that the appellants' settlement offers were not bona fide; and in substance that, although the appellants had partial success on appeal, they failed in the appeal on liability and had but modest success in the appeal on quantum. The appellants' success, he submitted, should not detract from the fact that his reduced judgment was in excess of the sum for which he had offered to settle, because - · it was only modest success; · he had in the pre-trial exchanges offered to settle for much less than the judgment; · it should be inferred from their pre-trial stance that the appellants would have rejected any offer made between trial and appeal; · although the appeal was the only course open to the appellants to obtain the reduction in the judgment, at the trial the appellants had raised loss of a chance only "belatedly and then perfunctorily"; and · the appellants had not contended for loss of a chance less than a 51 per cent probability, but had rejected two offers to receive a lesser sum than would have been yielded by a 51 per cent probability rather than the 80 per cent probability found on appeal. 12 The appellants responded that loss of a chance was addressed at trial, and that they appealed from the trial judge's failure to assess damages accordingly. It is correct that loss of a chance was raised, although it is also correct that it was belated. The appellants said that the respondent had had the benefit of the pre-trial offers of settlement in the order for the costs of the trial, and that no offer was made between trial and appeal notwithstanding that the failure of the trial judge to assess damages on a loss of a chance basis was an issue in the appeal. They said that their failure on liability was reflected in the 50 per cent order, that their success as to quantum was not insignificant and necessitated an appeal, and in effect that costs on appeal did not attract further discretionary consideration of the offers of settlement. 13 The pre-trial exchanges of offers showed extraordinary intransigence on the part of the appellants. By the time of the trial the parties' positions had crystallised. The respondent's success at trial brought indemnity costs from 9 December 2004, although with the exclusion of the costs of abandoned issues. That exclusion was the subject of the respondent's unsuccessful application for leave to appeal. The trial judge noted in his reasons that there was "no argument that costs should be assessed on the ordinary basis to 9 December 2004 and on an indemnity basis thereafter". 14 The appeal was a new stage in the litigation. The respondent sought to uphold his judgment, and did not make a new offer of settlement. He upheld the judgment successfully as to liability, but suffered reduction in the amount of the judgment. 15 The appellants could establish their position that they should not have to pay anything, or at least should have to pay a lesser sum, only by an appeal, and the respondent's position at that stage of the litigation was that he would accept only the amount of his judgment. In my opinion, in the exercise of the costs discretion in relation to the costs of the appeal the pre-trial offers of settlement counted for little. The respondent's willingness to settle on terms now known to be favourable to the appellants was past history, replaced by desire to hold onto the judgment given at trial. If he did not hold on to it, the respondent could not reach for his prior stance. I am not persuaded that there is occasion to enlarge in the respondent's favour the costs order otherwise appropriate. The result 16 The costs order made on 2 April 2008 should not be varied. The respondent should pay the appellants' costs of the application to vary it. 17 The orders made on 2 April 2008 provided for a substituted judgment "for such sum as shall be advised to the Registrar in accordance with order 3 taking effect on 13 April 2007". The materials provided in connection with the application to vary the costs order included a copy of the letter advising the Registrar. The letter envisaged that the appeal would be relisted for hearing in respect of costs, and that orders would then be made which included interest from 14 April 2007. There has not been a relisting, and in any event the parties have misunderstood the Court's orders. The substituted judgment can be implemented without further order. It takes effect on 13 April 2007, the date of the original order, and no order is necessary as to interest thereafter. 18 BASTEN JA: I agree with Giles JA. ********** 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.