New South Wales Court of Appeal CITATION: Gilberg v Maritime Super Pty Ltd (No. 2) [2009] NSWCA 394 HEARING DATE(S): on the papers JUDGMENT DATE: 3 December 2009 JUDGMENT OF: Allsop P at 1; Hodgson JA at 2; Campbell JA at 20 DECISION: (1) Order that there be no order as to costs at first instance, to the intent that each party bear its own costs. (2) The respondent to pay the appellant's costs of the appeal. CATCHWORDS: PROCEDURE – Costs – Relief obtained by successful appellant substantially less than sought at first instance and on appeal – Less than reasonable participation in settlement negotiations – Appropriate orders for costs at first instance and on appeal. LEGISLATION CITED: Evidence Act 1995 s 131(2)(h) Judiciary Act 1903 (Cth) s 79 CATEGORY: Consequential orders Australia v Gretton [2008] NSWCA 117 CASES CITED: Bruinsma v Menczer (1995) 40 NSWLR 716 Gilberg v Maritime Super Pty Ltd [2009] NSWCA 325 PARTIES: John GILBERG (Appellant) MARITIME SUPER PTY LIMITED (Respondent) FILE NUMBER(S): CA 40041/09 COUNSEL: B W RAYMENT QC/ M J GOLLAN (Appellant) V M HEATH (Respondent) SOLICITORS: John GILBERG (Appellant) MARITIME SUPER PTY LIMITED (Respondent) LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC 50121/08 LOWER COURT JUDICIAL OFFICER: McDougall J LOWER COURT DATE OF DECISION: 25 November 2008 LOWER COURT MEDIUM NEUTRAL CITATION: John Gilberg v Stevedoring Employees Retirement Fund Pty Ltd [2008] NSWSC 1317 - 10 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40041/09 SC 50121/08 ALLSOP P HODGSON JA CAMPBELL JA 3 DECEMBER 2009 John GILBERG v MARITIME SUPER PTY LIMITED (No. 2) Judgment 1 ALLSOP P: I agree with Hodgson JA. 2 HODGSON JA: On 8 October 2009, this Court gave the substantive decision in this appeal: [2009] NSWCA 325. The appellant's appeal was allowed; but while the appellant was given some relief, that relief was substantially less than had been explicitly sought in the summons and on appeal. The Court invited submissions on the question whether the ordinary result as to costs should not follow, either at first instance or on appeal. 3 The respondent provided an affidavit of a solicitor, Ms Chalmers, giving evidence of a discussion at a settlement conference held on 29 August 2008, before the hearing at first instance, which occurred on 24 and 25 November 2008. That evidence was objected to by the appellant, on the basis that the discussions were without prejudice. However, s 131(2)(h) of the Evidence Act 1995 removes the bar to admission of without prejudice discussions, where this is relevant to determining liability for costs: Bruinsma v Menczer (1995) 40 NSWLR 716 (affirmed by the New South Wales Court of Appeal on 7 August 1996). To the extent that the primary judge and this Court are exercising federal jurisdiction, there is no relevant difference: Judiciary Act 1903 (Cth) s 79. Accordingly, I would admit that evidence. 4 At this conference, senior counsel for the appellant said $240,000 was the maximum the appellant could recover, and that there was a further $60,000 in costs and disbursements; and he subsequently said that the appellant wanted $200,000 in his hands and that costs were $60,000, making $260,000. 5 On 19 September 2008, the respondent offered to compromise the appellant's claim for $160,000 inclusive of costs, this offer being open for acceptance for fourteen days. The offer was not accepted and no counter offer was made. 6 The respondent also led evidence of particulars supplied by the appellant on 19 November 2008; and led evidence that the respondent had refrained from seeking an order for costs against the appellant in the previous proceedings in the Federal Court, in which the respondent was successful. 7 The respondent's contention is that there should be no order as to the costs of the appeal. As regards the costs at first instance, the respondent submits that the respondent should pay the appellant's costs on an ordinary basis up to and including 3 October 2008 (the date of expiry of the respondent's offer), and that the appellant should pay the respondent's costs on an ordinary basis on and from 4 October 2008. In the alternative, the respondent contended there should be no order as to the costs at first instance. 8 The appellant's contention is that the respondent should pay the appellant's costs both at first instance and on appeal. Submissions 9 The respondent made the following written submissions: Costs of the appeal 2. It is submitted that the appropriate outcome in respect of the appeal is that there be no order as to costs because (1) the Appellant did not obtain the relief he expressly sought (either in the Amended Summons in the proceedings below [RED 1-9] or in the Amended Notice of Appeal [RED 37DJ]) but much more limited relief. The case that the Appellant had always asserted in the proceedings and on appeal was one of entitlement to a money order, whether as a result of execution of the trust by the Court or what was said to be the statutory claim for damages [BLACK 66FG; ORANGE 27HO; BLACK 24G, 25TU]. (2) the Appellant's conduct of his case below was a cause of error at first instance, or at least did nothing relevantly to avert it, in that (i) he expressly rejected the proposition that remitter was the appropriate relief if the Respondent had taken the wrong view as to its powers under the trust deed and rules [eg BLACK 23UX-24AO, 25NU, 26L]; (ii) he invited the court below to consider the medical material for itself and determine the question of entitlement, including by departing from the provisions of the trust deed and rules. [BLACK 26LV, 28AB, 29BF, 33CD, 57QT]. (3) additionally, the conduct of the parties in all the circumstances and their respective contributions to the incurring of the costs of the appeal makes it a fair outcome to leave the costs burden of the appeal where it lays (ie to make no order). In particular that: (i) the Respondent submitted in the court below that remitter was the correct outcome if the proper conclusion was that the material submitted to the Respondent for reconsideration was such that a reasonable trustee could decide it enlivened a duty to reconsider [BLACK40SZ-41AJ, 71Q], it must be acknowledged however that this submission was made in the alternative and where the Respondent also submitted the material could not have that effect; (ii) the failure of the Appellant to accept the Respondent's early offer to compromise his claim on the Fund and the proceedings in all the circumstances (as discussed further in respect of the costs of the proceedings below) is relevant to the assessment of responsibility for the continued incurring of costs, including on the appeal (and although the offer was not renewed on the appeal). Costs of the proceedings below 3. It is submitted that the effect of the failure of the Appellant to accept an offer to compromise the proceedings and his claim on the Fund is such that he should have his initial costs of bringing the proceedings for proper execution of the trust but pay the Respondent's costs after the expiry of the offer, on the following grounds: (1) the sum in issue in the claim on the Fund (although not, properly, in the proceedings) is modest having regard to the expected costs of litigation [cf Appeal Transcript p.3.26-4.5]. (2) the Respondent refrained from seeking a costs order against the Appellant in the previous proceedings between them in which it was successful, although there was no bar to its doing so [Affidavit Ms Chalmers 15.10.09, BLUE 240D] and, if an application had been made, costs would ordinarily have followed the event (cf Hughes v Western Australian Cricket Association [1986] ATPR ¶40-748 per Toohey J; cf Superannuation (Resolution of Complaints) Act 1993 (Cth) s 46(5) - the Federal Court 'appeal' was actively resisted by him). (3) the offer by the Respondent made on 19 September 2008 of $160,000 was an offer to pay, in substance, the whole amount of benefit to which the Appellant is not yet but might become entitled if the Respondent on proper consideration decided that the Rule 17 process should be re-engaged and the (future) medical reports supported the Appellant's claim [Affidavit Ms Chalmers 15.10.09, Appeal Transcript p 4.5]. (4) alternatively if the value of the offer is assessed as about $100,000 plus the ordinary costs the Appellant had incurred to that date in seeking a proper execution of the trust it was still a reasonable offer. The approximate costs the Appellant had incurred to date were known to both parties because of the discussions at the settlement conference of 29 August 2008 [Affidavit Ms Chalmers 15.10.09] and the effect of the offer should be understood in light of the parties' shared knowledge. (5) Although the offer was only open for 14 days that was a reasonable time in the context of the litigation. The issues between the parties were well-known to them and there was no request to extend the time. (6) The Appellant had already indicated that his 'bottom-line' was that he would not settle the proceedings unless he also settled his claim on the Fund and that he received $200,000 plus his solicitor client costs and expenses [Affidavit Ms Chalmers 15.10.09]. That is, the Appellant was holding out for more than he could obtain in the proceedings and indeed more than he could become entitled to if the request for reconsideration, properly considered, eventually resulted in entitlement to the Fund benefit. Persisting in the litigation to claim the full amount of the benefit, where the eventual outcome of the process to be followed under the rules remains uncertain, plus a claim for interest to which he could not be entitled under the trust rules was not reasonable conduct. (As to interest, Rule 24 [BLUE 36Q] provides only that interest is payable if a benefit is not paid immediately on the date entitlement arose. Pursuant to Rule 17 entitlement to a TPD benefit can only arise when and if the requisite facts occur, ie the qualifying opinions favourable to the Appellant's claim. That has not yet happened.) (7) In the circumstances, failure to accept the offer was unreasonable. Even if failure to accept the offer was not positively unreasonable it is still conduct relevant to the Court's assessment of responsibility for incurring costs ( Commonwealth of Australia v Gretton [2008] NSWCA 117 esp at [41], [85], [91], [120]-[121]). (8) In all the circumstances, the Appellant was relevantly responsible for the costs of the litigation continuing after expiry of the offer and ought bear the risk of those costs on an ordinary basis. 4. Alternatively, it is submitted that there should be no order as to the costs of the proceedings below, having regard to the respective responsibilities of the parties overall for incurring the costs of the litigation including: (1) while the Respondent has been shown to be in error in considering that it had no power to re-engage the Rule 17 process and its submission that the material before it on the claim for reconsideration could not enliven the duty to consider whether to do so was not upheld, nevertheless it did accept below the correct test to be applied [BLACK 40T-41J]. (2) whereas the Appellant maintained below that he was entitled to an order for payment of the benefit and interest (or equivalent damages) which was not a tenable claim. Although the Appellant's Summons sought in the alternative an order that the "plaintiff's claim for reconsideration be administered by the court", Contention 10 in the Appellant's Commercial List Statement filed 15 July 2008 made it plain that what was sought was not an order for remitter but that the court below itself decide whether the claim should be reconsidered and with what effect. Particular 8 given 19 November 2008 in respect of the Amended Summons and Commercial List Statement confirmed that the Appellant sought as damages in the statutory claim the full amount of the TPD benefit plus interest from the date on which he first made a claim (4 July 2003) [Affidavit Ms Chalmers 15.10.09]. In oral submissions to the court below, the Appellant asserted a right to receive the amount of benefit plus interest either as damages (said to be for "the loss of a near certainty" [BLACK 24G]) or on the basis that the court could determine entitlement to the benefit without engaging in the Rule 17 process of obtaining medical opinions [BLACK 26NS, 28NQ]. (3) neither party offered to settle the proceedings on the basis on which the Appellant succeeded in the proceedings. The order ultimately obtained was not one the Appellant had ever expressly sought but was one that the Respondent had submitted, in the alternative, was the appropriate relief. 10 The appellant provided the following written submissions: 1. It was necessary for the Plaintiff to sue because the Defendant refused to reconsider the Plaintiff's claim and did so repeatedly. The refusals were communicated by letters from Mallesons Stephen Jacques, solicitors, at Blue AB, Vol 1, pp.270 ff, 276 and 304. Those letters contain a firm refusal to reconsider the Plaintiff's claim for TPD benefit. 2. The principal issue debated below, and on appeal, was whether that refusal was justified. The statement of issues below is at Black AB, p.60. The proceedings raised issues of construction of the Trust Deed, and required an understanding of the way in which the previous outcome had been arrived at, and the terms of the material placed before the Trustee for its reconsideration. Estoppels issues were said by the defendant to preclude reconsideration and it was said that the duty to reconsider was not enlivened. 3. It is true that the Plaintiffs submitted at first instance and on appeal that the Court could award damages against the Defendant or execute the Trust for itself. 4. The only substantive reason now suggested by the defendant/ respondent why costs should not follow the event is that it made an offer to compromise the Plaintiff's claim under the Trust Deed for the amount of the benefit originally due, without interest and without costs. That letter is part of annexure "B", to the affidavit of Ms Chalmers, and there is no objection to the affidavit in that respect. 5. The Defendant did not, by that letter, or otherwise, offer to reverse its decision not to reconsider the Plaintiffs claim. 6. The summons contained a prayer for further or other relief, pursuant to which it would have been appropriate to remit the matter to the Trustees if the Judge had upheld the submissions upheld on appeal. There is no reason why the trial judge should have departed from the usual order if he had been of the view adopted by the Court on appeal. It would still have been necessary to bring the proceedings and they took the same time as they would have taken if they were limited so as to compel reconsideration. Having dismissed the case, he was not asked to make any special order for costs other than the usual order …… 11. The Respondent does not suggest that it offered to reconsider the Plaintiff's claim at any time. 12. Whether the Appellant will ultimately receive any benefit remains to be seen in this matter. The offer contained in annexure "B" was made on the basis that the Claimant was without merit and was inclusive not only of interest but also of costs. 13. No basis exists for a finding that the rejection of that claim was unreasonable. Decision 11 In my opinion, the appellant's claim for costs and interest at the time of the settlement negotiations was unreasonable. 12 Even the lower figure of $200,000 suggested in settlement negotiations must have included about $40,000 for interest, in circumstances where there was entitlement to interest only as from the date entitlement to the payment arose (Rule 24 of the Fund's Rules); and the entitlement to payment could not have arisen until the expiration of a reasonable time for the Rule 17 process to be gone through after the application for reconsideration had been put in order on or about 26 May 2008 (see principal judgment par [11]). Accordingly, any entitlement to interest as at 29 August 2008 was very small. 13 As regards costs, the appellant could not at the time of the settlement negotiations been entitled to any costs other than those properly incurred in connection with the preparation of the application for reconsideration, and preparation for and conduct of the subject proceedings, which had commenced the previous month, that is July 2008. Those costs could not reasonably, in my opinion, have been anything like $60,000. In the absence of any relevant submissions or of any explanation, I would infer that this figure must have included at least some costs related to the earlier unsuccessful proceedings in the Federal Court, to which the appellant was not entitled. 14 On that basis, the respondent's offer of $160,000 on 19 September 2008 must be considered a reasonable offer. I do not think that the appellant could at that time have been entitled to more than something of the order of $20,000 above that figure to cover interest and costs, at best; and in my opinion it was not reasonable for the appellant to neither accept the offer nor make a reasonable counter offer. 15 In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [120]-[123] I said this: [120] However, uninstructed by authority, I would have thought that the question whether refusal of a Calderbank offer displaced (to any and if so what extent) the ordinary rule that costs follow the event, would not depend solely on whether the Court was satisfied that the offeree acted unreasonably in refusing the offer. As this case indicates, where there is a wide range of possible verdicts, an offer may be a reasonable one, yet it may not be positively unreasonable for the offeree not to accept it. As at present advised, I do not think this would necessarily make the offer and refusal irrelevant to the general discretion as to costs. [121] In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach. [122] In a case such as the present one, in my opinion, a judge approaching the question of costs would have a range of available alternatives, depending on the cumulative effect of a variety of factors, and not just the two alternatives of party and party costs in favour of the plaintiff and indemnity costs in favour of the defendant, depending on a judgment as to whether it had been unreasonable for the plaintiff to reject the defendant's offer. At least the following factors could be considered relevant in the present case: (1) It was the negligence of the Commonwealth that put Mr Gretton in the position of having to make a difficult decision as to what compensation to accept, in circumstances where there was a wide range of possible verdicts. (2) Mr Gretton had engaged responsibly in the settlement process with his offer of $250,000, which the Commonwealth refused. (3) Mr Gretton had a cost order against him, which could reasonably be expected to involve tens of thousands of dollars (and which we now know is claimed by the Commonwealth to be about $120,000). (4) The Commonwealth could have adopted the offer of compromise procedure provided for by the Rules; but it chose not to do so for reasons it saw as being in its own interests. (5) The Commonwealth's offer of $150,000 plus costs (save for costs orders made in favour of the Commonwealth) was reasonable, particularly as seen with hindsight; but it was one which in all probability would leave Mr Gretton with nothing, after paying the Commonwealth's costs of the application for extension of time and his own additional legal costs. (6) While refusal of the offer by Mr Gretton might not be considered positively unreasonable, in all the circumstances, it was risky and in the event gave rise to a very long and expensive trial, limited to the question of damages. [123] In all those circumstances, had I been considering the matter de novo, I may have left each party bearing its own costs of the trial. A similar result was reached in somewhat similar circumstances by Miles J in Humphries v TWT Ltd (1993) 113 FLR 422. 16 In the present case, in my opinion both parties bear some responsibility for the incurring of costs at first instance: the respondent through denying power to reconsider appellant's application, giving rise to the proceedings; and the appellant, through less than reasonable participation in settlement negotiations. 17 For those reasons, in my opinion, the appropriate order for costs at first instance is that there be no order as to costs, to the intent that each party bear its own costs. 18 As regards the appeal, in my opinion the costs should follow the event. The appellant had to bring the appeal to obtain any relief. There was no further offer from the respondent. Costs were not materially increased by any severable issue on which the appellant failed. Orders 19 For those reasons, in my opinion the following orders should now be made: (1) Order that there be no order as to costs at first instance, to the intent that each party bear its own costs. (2) The respondent to pay the appellant's costs of the appeal. 20 CAMPBELL JA: I agree with Hodgson 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.