Appeal Outcome: Special leave dismissed with costs by the High Court, 23 April 2010 s314/2009 New South Wales Court of Appeal CITATION: Encyclopaedia Britannica Australia Ltd v Campbell (No 2) [2009] NSWCA 335 JUDGMENT DATE: 28 October 2009 JUDGMENT OF: Giles JA at 1; Macfarlan JA at 1; Sackville AJA at 1 In addition to orders 1-4 made on 10 September 2009: 5. Subject to Order 6, the respondent pay the appellant's costs in respect of the proceedings at first instance on a party and party basis up to and including 9 November 2007 and on an indemnity basis thereafter. 6. Order 5 is without prejudice to any costs orders made by the primary Judge in the proceedings prior to 14 November 2008. 7. The respondent pay the appellant's costs in respect of the appeal on a party and party basis. DECISION: 8.(a) The respondent pay interest on costs and disbursements pursuant to s 101(4) of the Civil Procedure Act 2005 (NSW) at the rates specified from time to time in Schedule 5 to the UCPR, on the Allowed Percentage (as that term is defined in order (b) below) of each amount of costs and disbursements actually paid by the appellant, from the date of payment by the appellant of each such amount of costs and disbursements until the first to occur of (i) such time as the respondent has paid the costs due to the appellant; or (ii) any further order relating to interest on costs in these proceedings. (b) In order to calculate the Allowed Percentage referred to in order (a) above: z – equals the total amount of costs and disbursements which the appellant has paid or is liable to pay to his legal advisers in connection with these proceedings and those in the court below. y – equals the total amount of costs and disbursements allowed on assessment to the appellant in connection with these proceedings and those in the court below. The Allowed Percentage equals (y ÷ z x 100). 9. Grant liberty to the appellant to apply to apply upon 3 days notice to other parties for an order for payment of a specific amount in respect of the interest awarded upon costs pursuant to Order 8. 10. The respondent have a certificate under the Suitors Fund Act 1951 (NSW), if so entitled. CATCHWORDS: COSTS - offer of compromise at trial- not renewed on appeal- whether indemnity costs should be awarded at trial and appeal. Civil Procedure Act 2005 (NSW) s 101(4) LEGISLATION CITED: Suitors Fund Act 1951 (NSW) Legal Profession Act 2005 s 4(1) Uniform Civil Procedure Rules 2005 (NSW) rr 20.26, 42.15A, 42.13, Schedule 5 CATEGORY: Consequential orders Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 CASES CITED: Drummond and Rosen Pty Limited v Barry Easey (No.2) [2009] NSWCA 331 Monie v The Commonwealth (No 2) [2008] NSWCA 15 The Uniting Church in Australia Property Trust (NSW) v Takacs (No 2) [2008] NSWCA 172 PARTIES: Enclopaedia Brittanica Australia Ltd (Appellant) David Campbell (Respondent) FILE NUMBER(S): CA 40420/2008 COUNSEL: T Hale SC/ P Sibtain (Appellant) A McInerney (Respondent) SOLICITORS: Unsworth Legal (Appellant) Carneys Lawyers (Respondent) LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): 5617/06 LOWER COURT JUDICIAL OFFICER: Bergin CJ in Eq LOWER COURT DATE OF DECISION: 14 November 2008 LOWER COURT MEDIUM NEUTRAL CITATION: Campbell v Encyclopaedia Britannica Australia Ltd [2008] NSWSC 1178 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40420 of 2008 GILES JA MACFARLAN JA SACKVILLE AJA 28 October 2009 ENCYCLOPAEDIA BRITANNICA AUSTRALIA LTD v CAMPBELL (NO 2) Judgment 1 THE COURT: On 14 November 2008, the primary Judge made the following orders: "1 Judgement in favour of the plaintiff in the sum $125,338.64 together with interest pursuant to Section 100 of the Uniform Civil Procedure Act on the judgement amount being $25,311.54 and accruing at the daily rate of $34.34 thereafter. 2 That the defendant pay the plaintiff's costs on a party/party basis up to and including 16 April 2007 and thereafter on an indemnity basis. 3 That the defendant pay interest on costs and disbursements pursuant to s.101(4) Civil Procedure Act 2005 (NSW) at the rates set out in Schedule 5 of the Uniform Civil Procedure Rules , on the Allowed Percentage (as that term is defined in Order 4, below) of each amount of costs and disbursements actually paid by the plaintiff, from the date of payment by the plaintiff of each such amount of costs and disbursements until the first to occur of: (a) Such time as the defendant has paid the costs due to the plaintiff; or (b) Any further order relating to interest on costs in these proceedings. 4 In order to calculate the Allowed Percentage referred to in Order 3 above: x – equals the total amount of costs and disbursements which the plaintiff has paid or is liable to pay to his legal advisers in connection with these proceedings. y – equals the total amount of costs and disbursements allowed on assessment to the plaintiff in connection with these proceedings". 2 This Court delivered judgment on 10 September 2009, allowing the appeal by the defendant ("Encyclopaedia Britannica"): Encyclopaedia Britannica Australia Ltd v Campbell [2009] NSWCA 286 ("Principal Judgment"). The orders made by the Court were as follows: "1. Appeal allowed. 2. Set aside orders 1 to 4 made on 14 November 2008 and entered on 9 February 2009. 3. In lieu of the orders referred to in order 2 above, order that judgment be entered for the appellant (the defendant below). 4. Order the respondent to repay to the appellant the sum of $150,650.18 paid by it to the respondent pursuant to the orders made on 14 November 2008, together with interest thereon at the rates specified from time to time in Schedule 5 to the UCPR from 12 December 2008 to the date of repayment. 5. Direct the appellant to file within seven days an amended notice of appeal seeking restitution of the sum referred to in Order 4 and interest thereon. 6. The appellants file and serve written submissions on the costs of the trial and of the appeal within seven days. 7. The respondent file and serve written submissions in reply within a further seven days". 3 In its written submissions, Encyclopaedia Britannica seeks an order that the respondent ("Mr Campbell"), the plaintiff below, pay Encyclopaedia Britannica's costs on a party and party basis up to and including 9 November 2007 and thereafter on an indemnity basis. Encyclopaedia Britannica seeks indemnity costs not only in relation to the proceedings at first instance but in relation to the appeal. 4 The basis for the indemnity costs order sought by Encyclopaedia Britannica is an offer of compromise said to have been made on 9 November 2007, offering to settle the proceedings for $40,000 plus costs. Although Encyclopaedia Britannica has not filed any affidavit annexing the offer of compromise, the written submissions imply that the offer was made in conformity with the requirements of Uniform Civil Procedure rules ("UCPR"), r 20.26. Encyclopaedia Britannica's entitlement to indemnity costs is said to arise under UCPR, r 42.15A, which provides as follows: " 42.15A (1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim concerned as favourable to the defendant, or more favourable to the defendant, than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, 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) …" 5 UCPR, r 42.15A is in Div 3 of Pt 42 of the UCPR. Rule 42.13 provides that Div 3 applies to: "proceedings in respect of which an offer of compromise … is made under rule 20.26 with respect to a plaintiff's claim …" 6 Encyclopaedia Britannica also says that it is entitled to interest on costs and disbursements pursuant to s 101(4) of the Civil Procedure Act 2005 (NSW) and that all previous orders and agreements as to costs (other than Order 2 made on 14 November 2008) should continue to apply. 7 In his written submissions, Mr Campbell makes no comment about the form of the offer of compromise made by Encyclopaedia Britannica. He does not appear to dispute that the offer of compromise complied with UCPR, r 20.26. He submits, however, that indemnity costs should not be ordered in respect of the appeal since "the appeal proceedings are completely fresh proceedings and no offers were made in respect of those proceedings". No authorities are cited for this proposition. Mr Campbell also submits that no order for indemnity costs should be made in respect of the trial, but the submission is not supported by any substantive argument, other than an assertion that it is a matter of discretion whether costs should be ordered on a party and party or an indemnity basis. Nor are authorities cited or reasons given for overcoming the effect of UCPR, r 42.15A. 8 As I have noted, Encyclopaedia Britannica has not adduced evidence as to the terms or form of the offer of compromise made on 9 November 2007. While its submissions assume that the offer was in a form that complied with UCPR r 20.26 and Mr Campbell does not specifically dispute the assumption, it lacks an evidentiary foundation. There may be a number of reasons why the form of a particular offer might take it outside UCPR, r 20.26: cf The Uniting Church in Australia Property Trust (NSW) v Takacs (No 2) [2008] NSWCA 172, at [6]-[7], [10]-[11], per Hodgson JA (with whom McColl JA agreed). 9 In any event, even if the offer of compromise complied with r 20.26, appeal proceedings are to be regarded as distinct proceedings for the purposes of r 42.13: Uniting Church v Takacs (No 2) at [16], per Hodgson JA; at [34] per Basten JA. Thus the offer of 9 November 2006, in the absence of a renewed offer on the appeal, does not attract r 42.15A in relation to the costs of the appeal. 10 The offer of compromise may nonetheless be relevant to the discretion that the Court has in relation to the costs of the appeal, although the failure to renew the offer on the appeal tends to militate against an award of indemnity costs in relation to the appeal: Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69, at [29]-[30], per Beazley JA (with whom Ipp and McColl JJA agreed); Monie v The Commonwealth (No 2) [2008] NSWCA 15, at [71], per Campbell JA. In my view, having obtained a judgment in his favour at first instance, it was reasonable for Mr Campbell to attempt to support the judgment on the appeal, particularly in the absence of a renewed offer: see Uniting Church v Takacs (No 2), at [16] per Hodgson JA. Accordingly, the costs of the appeal should follow the event, but on the usual party and party basis. 11 So far as the costs of the proceedings at first instance are concerned, the making of the offer of compromise, even if not in a form that enlivens r 42.15A, is a matter to be taken into account. The offer of compromise involved the payment of $40,000 plus costs and was substantially more favourable to Mr Campbell than the outcome of the proceedings (having regard to the successful appeal). Mr Campbell does not dispute that the offer constituted a genuine offer of compromise of his claim and makes no suggestion that any unreasonable conditions were attached to the offer. Nor does he put forward any substantial reason why his rejection of the offer should not lead to an order that he pay costs on an indemnity basis as from 9 November 2007. 12 In these circumstances, it is appropriate that Mr Campbell should pay the costs of the proceedings at first instance on a party and party basis until 9 November 2007 and on an indemnity basis thereafter. 13 Mr Campbell does not dispute Encyclopaedia Britannica's entitlement to interest and agrees that costs orders made by the primary Judge prior to the orders of 14 November 2007 should not be disturbed. In the absence of evidence as to the terms of any agreements between the parties relating to costs, there is no occasion to make specific provision for such agreements not to be disturbed. 14 There is no basis for accepting Mr Campbell's invitation to reopen the question of superannuation contributions addressed in the Principal Judgment, at [79]-[81]. 15 The following orders should be made, in addition to Orders 1-4 made on 10 September 2009: 5. Subject to Order 6, the respondent to pay the appellant's costs in respect of the proceedings at first instance on a party and party basis up to and including 9 November 2007 and on an indemnity basis thereafter. 6. Order 5 is without prejudice to any costs orders made by the primary Judge in the proceedings prior to 14 November 2008. 7. The respondent pay the appellant's costs in respect of the appeal on a party and party basis. 8. (a) The respondent pay interest on costs and disbursements pursuant to s 101(4) of the Civil Procedure Act 2005 (NSW) at the rates specified from time to time in Schedule 5 to the UCPR , on the Allowed Percentage (as that term is defined in order (b) below) of each amount of costs and disbursements actually paid by the appellant, from the date of payment by the appellant of each such amount of costs and disbursements until the first to occur of: (i) such time as the respondent has paid the costs due to the appellant; or (ii) any further order relating to interest on costs in these proceedings. (b) In order to calculate the Allowed Percentage referred to in order (a) above: z – equals the total amount of costs and disbursements which the appellant has paid or is liable to pay to his legal advisers in connection with these proceedings and those in the court below. y – equals the total amount of costs and disbursements allowed on assessment to the appellant in connection with these proceedings and those in the court below. The Allowed Percentage equals (y ÷ z x 100). 9. Grant liberty to the appellant to apply upon 3 days notice to the other parties for an order for payment of a specific amount in respect of the interest awarded upon costs pursuant to Order 8. 10. The respondent have a certificate under the Suitors Fund Act 1951 (NSW), if so entitled. 16 Order 9, although not requested by the parties, is necessary as the jurisdiction of costs assessors under the Legal Profession Act 2004 (NSW), does not extend to the assessment of interest payable on costs: Pt 3.2, Div 11, and definition of "legal costs" in s 4(1); Drummond and Rosen Pty Limited v Barry Easey (No 2) [2009] NSWCA 331, at [7], per Macfarlan JA (with whom Tobias JA agreed). ********** 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.