New South Wales Supreme Court CITATION : Jovanovski v Billbergia Pty Ltd (No 2) [2010] NSWSC 617 HEARING DATE(S) : 9 June 2010 JUDGMENT DATE : 11 June 2010 JUDGMENT OF : Davies J DECISION : (1) The Defendant's Notice of Motion is dismissed. (2) The Defendant is to pay the Plaintiff's costs of the Notice of Motion. CATCHWORDS : COSTS - offer of compromise - indemnity costs - discretion to "order otherwise" - whether exceptional circumstances needed - offer by Defendant for a verdict and judgment in its favour with Defendant to pay its own costs - change of basis of the case between time of the offer of compromise and the time of hearing - no order for indemnity costs made. LEGISLATION CITED : Uniform Civil Procedure Rules CATEGORY : Consequential orders Fowdh v Fowdh [1993] NSWCA 100 Hillier v Sheather (1995) 36 NSWLR 414 Jovanovski v Billbergia Pty Ltd [2010] NSWSC 211 CASES CITED : Leichhardt Municipal Council v Green [2004] NSWCA 341 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd (No 2) [2009] NSWCA 336 Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 South Eastern Sydney Area Health Service v King [2006] NSWCA 2 PARTIES : Ilo Jovanovski (Plaintiff) Billbergia Pty Ltd (Defendant) FILE NUMBER(S) : SC 2006/267086 COUNSEL : Mr S Longhurst (Plaintiff) O Dinkha, Solicitor (Defendant) SOLICITORS : RMB Lawyers (Plaintiff) Curwoods Lawyers (Defendant) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DAVIES J 11 JUNE 2010 2006/267086 JOVANOVSKI V BILLBERGIA PTY LTD (NO 2) JUDGMENT 1 I gave judgment in this matter on 31 March 2010. I found a verdict for the Defendant on the basis that the Plaintiff had not established causation between the Defendant's breaches of its duty of care and the injury the Plaintiff suffered: Jovanovski v Billbergia Pty Ltd [2010] NSWSC 211. 2 The Defendant filed a Notice of Motion for a variation of the costs order to provide that the Plaintiff pay the Defendant's costs on an ordinary basis up to 20 January 2009 and thereafter to pay the Defendant's costs on an indemnity basis. The application is based on an offer of compromise that was served on the Plaintiff's solicitor on 20 January 2009. The offer of compromise provided that there be a verdict and judgment in favour of the Defendant with each party to pay its own costs. 3 There is no evidence whether the offer was positively rejected or whether the 28 day period merely expired. 4 The Defendant relies on r 42.15A UCPR which provides: (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) 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. 5 Although earlier cases had suggested that a court could only deviate from the general rule provided in that Rule and associated Rules 42.14 and 42.15 (South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [83]; Hillier v Sheather (1995) 36 NSWLR 414 at 422-423) the Court of Appeal more recently in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 have said that the position is otherwise. The joint judgment of Spigelman CJ, Beazley and McColl JJA said at [15]: … Part 39A, r 25(6) [District Court Rules] expressly provided that the adverse costs consequences following a failure to accept an offer of settlement applied "[u]nless the Court in an exceptional case and for the avoidance of substantial justice otherwise [ordered]". Rules 42.14, 42.15 and 42.15A are in different terms. They provide that, when the relevant costs rule is engaged, a party is entitled to indemnity costs from a specified time (usually one day after an offer of compromise is made), "unless the court orders otherwise " (emphasis added). The relevant provisions of these rules do not specify that exceptional circumstances or the avoidance of substantial injustice must be established before the court will make a different order to the prima facie order for which the rules provide and, in our opinion, the rule should not be so construed. Rather, the discretion is one that has to be exercised having regard to all the circumstances of the case. 6 I accept that an offer which is in substance an invitation to surrender (as this offer of compromise was) can nevertheless successfully trigger the indemnity costs mechanisms under the Rules: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [36]-[37] and [40]; Regency Media at [31] noting what the Court of Appeal there said about the earlier decision in Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170. Such an offer is not of itself for ordering otherwise. 7 It has been held in earlier decisions that a basis for ordering otherwise is (or, at the time those cases were decided, exceptional circumstances existed) where the party's case changed significantly between the date of the offer and the trial: King at [85]; Fowdh v Fowdh [1993] NSWCA 100 at 8 per Mahoney JA; Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd (No 2) [2009] NSWCA 336 at [18]-[19] and [21]. 8 In the present case there was a significant change which took place between the time the offer of compromise was served and the hearing of the proceedings. 9 The Amended Statement of Claim, filed 20 March 2008 (the form of the Statement of Claim extant at the time of the offer of compromise) relevantly pleaded: [4] On or about 20 August 2003 the Plaintiff was upon the Defendant's premises when he was assaulted by one Ricky Denton who was an employee of the Defendant. [5] On or about 20 August 2003 the Plaintiff informed the Defendant's representative Brendan Cronin of the assault, [6] The Defendant knew of the assault. [7] The Defendant ought to have known of the assault on 20 August 2003. [8] On or about 7 February 2004 the Plaintiff was upon the Defendant's premises when he discovered that grease had been placed on the handle of his truck. [9] On or about 7 February 2004 the Plaintiff reported the presence of grease on the handle of his truck to Brendan Cronin, who was the Defendant's representative. [10] On or about 7 February 2004 the Defendant ought to have known about the grease on the handle of the Plaintiff's truck. [11] On or about 9 February 2004 the Plaintiff went to enter his truck and discovered the presence of grease on the handle of the truck and on the side steps leading to the cabin. [12] On or about 9 February 2004 the Plaintiff reported the presence of grease on the truck to Brendan Cronin who was the Defendant's representative. [13] [13] On or about 9 February 2004 the Defendant ought to have known of the presence of grease on the truck. [14] On or about 16 February 2004 the Plaintiff discovered grease on the handle and the side step of his truck. [15] On or about 16 February 2004 the Plaintiff reported the presence of grease on the handle and the side step of his truck to Brendan Cronin who was the Defendant's representative. [16] On or about 16 February 2004 the Defendant ought to have known of the presence of grease on the handle and the side step of the truck. 10 The Defence to that Statement of Claim in para 2 denied paras 4, 5, 6, 7, 9, 10, 12, 13, 15 and 16. Paragraph 3 of the Defence said that the Defendant did not know whether the allegations of fact contained in paragraphs 8, 11 and 14 were true and correct and the Defendant was therefore unable to admit the same. As can be seen the paras denied and not admitted concern the issue of whether the Plaintiff had been assaulted by Ricky Denton, had had grease placed on his vehicle, and had reported all of these matters to Brendan Cronin of the Defendant. 11 On the first day of the hearing after senior counsel for the Plaintiff had opened his case, counsel for the Defendant informed me that it was intending to file an Amended Defence where admissions would be made about certain matters. He said that counsel for the Plaintiff had first been informed about that matter earlier that day. 12 The Amended Defence to the Second Amended Statement of Claim, which was filed on the second day of the hearing, relevantly answered the paragraphs that I have identified in the Amended Statement of Claim as follows: [2] The Defendant does not admit the allegations contained in paragraph 4 of the Statement of Claim. [3] The Defendant admits the Plaintiff informed Mr Brendan Cronin of an alleged assault by Ricky Denton as alleged in paragraph 5 of the Statement of Claim. Save as aforesaid the Defendant does not admit the allegations contained in paragraph 5 of the Statement of Claim. [4] The Defendant does not admit the allegations severally contained in paragraphs 6, 7 and 10 of the Statement of Claim. [5] The Defendant does not admit paragraphs 8, 11, 14 and 17 of the said Statement of Claim. [6] As to paragraphs 9, 12 and 15, the Defendant admits that the Plaintiff reported the presence of grease on the door handle of his truck to Mr Brendan Cronin on occasions. Save as aforesaid, the Defendant does not admit the allegations severally contained in paragraphs 9, 12 and 15. [7] The Defendant does not admit the allegations severally contained in paragraphs 13 and 16 of the Statement of Claim. 13 What made that change of approach by the Defendant even more significant was the fact that it emerged in evidence that Mr Cronin had made a statement to an investigator as early as 1 March 2007 where he had acknowledged a number of the matters which had been denied in the Defence up until the first day of hearing. The details of what that statement contained appear in para [42] of the principal judgment. As that judgment made clear I found that matters went beyond what Mr Cronin had been prepared to acknowledge in that statement inasmuch as I found that he had been informed of grease being placed on the steps of the Plaintiff's truck. 14 Ms Dinkha, who appeared for the Defendant on this application, acknowledged that there had been this change in the factual matrix and that that impacted on the significant issue of breach of duty in the case. She submitted, however, that the issue of causation (the one issue upon which the Defendant succeeded in the case) had always been an issue. I can accept that that is true in general terms because, even on the face of the pleading, para [19] of the Statement of Claim that alleged the injury was occasioned as a result of the negligence of the Defendant had been denied. 15 However, it is also of significance that it was not until the filing of a Defence on 17 August 2009 that the issue of causation was expressly identified as an issue. Paragraph 13 of that Defence pleaded: [13] In answer to the Statement of Claim as a whole the Defendant says that, if contrary to the terms of this Defence the Plaintiff sustained injury as alleged in paragraph 17 of the Amended Statement of Claim. (i) the events which are pleaded in paragraphs 4 to 17 of the Amended Statement of Claim did not cause or contribute to the injuries sustained by the Plaintiff by 18 February 2004, (ii) to the extent that the Plaintiff's accident was caused or contributed to by deliberate conduct by persons unknown, the Defendant is not vicariously liable for such conduct; (iii) at all material times the truck remained within the control of the Plaintiff, (iv) it was the Plaintiff not the Defendant who was liable for checking and ensuring that the truck was safe to operate on the day of the accident, (v) the Occupational Health & Safety Regulations do not give rise to a cause of action in favour of the Plaintiff; (vi) the Defendant is not in breach of any provisions of the Occupational Health & Safety Regulations; (vii) if the Plaintiff suffered injury, loss and damage as alleged, such injury, loss and damage was caused by the Plaintiffs own negligence; Particulars of Plaintiff's Negligence (i) failing to notice or observe the grease on the ladder prior to climbing down the ladder; (ii) failing to properly check the truck prior to use on the morning of the accident; (iii) failing to observe the presence of the grease on the rungs of the ladder on the morning of the accident; (iv) walking over the top of his truck and attempting to climb down using the ladder and checking that the ladder was not safe for use; (v) failing to properly inspect and check the truck in circumstances where, on his own case, he says that there were a number of earlier events involving the application of grease or oil on the truck. 16 It was not surprising, therefore, that the Plaintiff's solicitor said in his affidavit filed on this application: [9] Prior to the hearing date, the plaintiff understood the defendant's case to be, that it owed no duty of care, and that there was no breach on the basis that the defendant was not put on notice of any of the complaints referred to in the Amended Statement of Claim. 17 There was no challenge to that evidence which is entirely consistent with the pleading that was extant at the time of the offer of compromise. As the Court of Appeal made clear in Regency Media at [33] an offer of compromise must be assessed, in large part, at the time it was made. Whether its rejection was reasonable should not be assessed with the benefit of 20:20 hindsight. 18 In my opinion, the significant change in the Defendant's approach to the case is a matter of considerable significance in assessing whether I should order otherwise than is provided in r 42.15A(2). I also take into account the fact that the Plaintiff was successful on issues of duty and breach of that duty. Whereas the case was principally being fought by the Defendant on those issues at the time of the offer of compromise but was won by the Defendant on the issue of causation in a way that was not articulated until well after the expiry of the offer of compromise it is not appropriate that the provisions of r 42.15A(2)(b) should operate. The costs order that I made on 31 March 2010 which was for payment by the Plaintiff of the Defendant's costs on the ordinary basis should remain. 19 The orders I make are these: 1. The Defendant's Notice of Motion is dismissed. 2. The Defendant is to pay the Plaintiff's costs of 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.