New South Wales Supreme Court CITATION : Ralston v Bell & Smith trading as Xentex Patch & Grout (No 2) [2010] NSWSC 913 HEARING DATE(S) : On written submissions JUDGMENT DATE : 17 August 2010 JURISDICTION : Common Law Division JUDGMENT OF : Hislop J DECISION : (1) The first and fourth defendants are to pay the plaintiff's costs: (a) on the ordinary basis until 16 July 2007, and (b) on an indemnity basis from 17 July 2007; (2) The plaintiff is to pay the costs of the second defendant, the third defendant and the fifth defendant. (3) In respect of the cross claims: (a) the ninth cross defendant is to pay the first defendants' costs of the ninth cross claim; (b) the fourth defendant is to pay the second defendant's costs of the fourth defendant's cross claim against the second defendant; (c) the first defendants are to pay 75 percent of the fourth defendant's costs of its cross claim against the first defendant; (d) otherwise, each party is to bear the costs of any cross claims by or against him, her, or it. CATCHWORDS : Common law - tort - personal injuries - construction site - multiple defendants - costs. Uniform Civil Procedure Rules LEGISLATION CITED : Interpretation Act 1987 Civil Procedure Act Ralston v Bell & Smith t/as Xentex Patch & Grout [2010] NSWSC 245 Hillier v Sheather (1995) 36 NSWLR 414 Bostik Australia Pty Limited v Liddiard (No 2) [2009] NSWCA 304 State of New South Wales v Stanley [2007] NSWCA 330 CASES CITED : Gould v Vaggelas [1985] HCA 85; (1985) 157 CLR 215 Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179 Lackersteen v Jones (No 2) (1988) 93 FLR 442 Roads and Traffic Authority of New South Wales v Palmer (No 2) [2005] NSWCA 140 Dominello v Dominello [2009] NSWCA 257 Collin Ross Ralston (Plaintiff) Peter Bell & Warren Smith t/as Xentex Patch & Grout (1st Defendants) Williams River Steel (2nd Defendant) PARTIES : Sue Gai Connell & Mark Connell t/as New Line Patching (3rd Defendants) Ace Hire Australia Pty Limited (t/as Ace Scaffolding Services) (4th Defendant) Workcover Authority NSW - Uninsured Liabilities - Agent for Workcover Scheme (5th Defendant) GIO General Limited (9th Cross Defendant) FILE NUMBER(S) : SC 2007/264950 M. Joseph SC/J. Catsanos (Plaintiff) In person; S.J. Walsh (from 27.4.09) (1st Defendants) P.M. Morris (2nd Defendant) COUNSEL : A.D.M. Hewitt SC/S.J. Maybury (3rd Defendant) R.A. Cavanagh (4th Defendant) N.E. Chen (5th Defendant) G.M. Watson SC (9th Cross Defendant) White Barnes (Plaintiff) In person (1st Defendants) Moray & Agnew (2nd Defendant) SOLICITORS : Curwoods Lawyers (3rd Defendants) Boyd House & Partners (4th Defendant) Sparke Helmore Lawyers (5th Defendant) Holman Webb Lawyers (9th Cross Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HISLOP J Tuesday 17 August 2010 2007/264950 COLLIN ROSS RALSTON v PETER BELL & WARREN SMITH t/as XENTEX PATCH & GROUT (No 2) JUDGMENT 1 HIS HONOUR: In the substantive proceedings (Ralston v Bell & Smith t/as Xentex Patch & Grout [2010] NSWSC 245), there was judgment for the plaintiff against the first and fourth defendants and judgment for the second, third and fifth defendants against the plaintiff. All questions of costs were reserved pending submissions by the parties. Lengthy written submissions as to costs followed. The costs issues were determined on the papers. 2 Prima facie, the plaintiff was entitled to an order that the first and fourth defendants pay his costs of the proceedings on the ordinary basis and each of the second, third and fifth defendants was entitled to an order that the plaintiff pay their costs on the ordinary basis –UCPR 42.1, 42.2. 3 Although the prima facie position was not disputed, a number of special costs orders were sought. They are considered hereunder. Was the plaintiff entitled to indemnity costs against the first and fourth defendants? 4 UCPR 20.26 provides, so far as relevant: "(1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (4) Despite subrule (1), a plaintiff may not make an offer unless the defendant has been given such particulars of the plaintiff's claim, and copies or originals of such documents available to the plaintiff, as are necessary to enable the defendant to fully consider the offer. (5) If a plaintiff makes an offer, no order may be made in favour of the defendant on the ground that the plaintiff has not supplied particulars or documents, or has not supplied sufficient particulars or documents, unless: (a) the defendant has informed the plaintiff in writing of that ground within 14 days after receiving the offer, or (b) the court orders otherwise." 5 On 16 July 2007 the plaintiff, pursuant to UCPR 20.26, served on the first and fourth defendants a notice of offer of compromise which stated: "The plaintiff offers to compromise this claim on the following terms: 1. That the defendants pay to the plaintiff the sum of $600,000 plus costs as agreed or assessed. 2. This offer of compromise is open for acceptance for a period of 28 days from the date of this offer. 3. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005." 6 The offer was not accepted by any of the defendants. The judgment for the plaintiff was more favourable to him than his offer. The plaintiff, in reliance upon UCPR 42.14, submitted he was entitled to an order for costs against the first and fourth defendants on the ordinary basis up to 16 July 2007 and on an indemnity basis from 17 July 2007. 7 Prima facie, the plaintiff was entitled to the orders sought by him subject only to the Court "ordering otherwise" (UCPR 42.14) or finding that the notice of offer of compromise was invalid. 8 The first and fourth defendants opposed the orders for indemnity costs. They submitted the plaintiff should be denied indemnity costs as the offer was invalid and/or the Court should "order otherwise". These submissions are discussed hereunder. 9 It was submitted the offer was invalid, pursuant to UCPR 20.26(4) as it was not supported by sufficient particulars to permit any of the defendants to assess the value of the claim. 10 I do not agree that insufficient particulars were provided to permit the defendants to assess the value of the claim (see [15] hereof). 11 However, even if the particulars were insufficient, the defendant may only rely on that failure to render the offer invalid if he has informed the plaintiff in writing of that ground within 14 days after receiving the offer – UCPR 20.26(5), which did not occur, or the court orders otherwise. In my opinion, the plaintiff's offer was not invalid on this basis. 12 It was submitted the offer was invalid as it was cast in general terms – that is, it was directed to all "defendants". Even if one defendant had attempted to accept the offer, obvious procedural problems arose which would mean it was not unreasonable not to accept the offer. 13 The liability of the defendants is joint and several. UCPR 20.26(1) permits a plaintiff to make an offer to "any other party". The singular form "party" includes reference to the word in the plural form – Interpretation Act 1987, s 8(b). The plaintiff's offer was not invalid by reason of it being addressed to the "defendants". Of course, it may be necessary as a practical matter for the defendants to confer in order to determine the appropriate response to the offer and this may take more than the 28 days specified in the notice. In that event the appropriate course is for the defendants to seek an extension of time from the plaintiff. A failure by the plaintiff to act reasonably in dealing with the application for an extension would be a relevant consideration as to whether the court should "order otherwise". 14 It was submitted the offer was invalid as it was made at a time when the pleadings were not settled; the causes of action were not settled; and even the full range of parties was not settled. In this respect it is notable that the plaintiff foreshadowed an amendment while the offer of compromise was open and only produced the amendment after the offer of compromise had expired. For the purposes of assessing the offer of compromise, the defendants would have had to have made a guess at the nature of the claim which was put against them. 15 At the time the notice of offer of compromise was served, the nature and extent of the plaintiff's case had been adequately indicated by the pleadings which had been filed, the provision of particulars, the plaintiff's DCM document, the plaintiff's evidential statement, the proposed amended pleadings and medical records, all of which had been furnished to the defendants. If there was a deficiency in this regard it was for the defendants to inform the plaintiff in writing pursuant to UCPR 20.26(5). In the absence of the defendants so informing the plaintiff, the offer was not invalid. 16 It was submitted that it would be unreasonable to permit the plaintiff to rely upon the offer of compromise where, by failing to attend medical appointments, the plaintiff denied the first defendant a proper basis upon which to assess the value of his claim. 17 Extensive material relating to the plaintiff's medical condition was available to the defendants prior to service of the notice of offer of compromise. However, the defendants were entitled to have the plaintiff medically examined by a specialist of their choice (UCPR 23.2) and to that end appointments had been made for the plaintiff to be examined by Associate Professor Jones on 17 May 2007 and 18 July 2007. The plaintiff attended neither examination. In these circumstances, the appropriate course was for the defendants to seek an extension of time to enable them to obtain a report from Associate Professor Jones and to fully consider it before responding to the plaintiff's offer. This they did not do. 18 In my opinion, the circumstances are not such as to justify the Court in ordering otherwise on this basis. 19 It was submitted that it would be unreasonable to permit the plaintiff to rely upon the offer of compromise when part of his damages claim was built upon evidence (including gratuitous care and medical expenses) which was acquired after the offer of compromise expired. 20 The purpose of the offer of compromise process is to promote the early settlement of proceedings, thus reducing court lists and costs. It is unavoidable in such circumstances that particulars, documents, the results of medical examinations and the like may not be available until after the time for acceptance of the offer has expired. Whether the impact of the absence of such material is so great as to require the court to "order otherwise" will be dependent upon the particular circumstances of the case. Kirby P observed in Hillier v Sheather (1995) 36 NSWLR 414 in respect of an application to order otherwise: "It is enough to say that the case needs in some way to be exceptional. It must be exceptional because the general rule is that provided for in the rule itself. To gain relief, an exceptional exempting order must be made." 21 None of the matters identified on behalf of the defendants made this case exceptional. 22 In my opinion, the notice of offer of compromise was not invalid nor is there sufficient reason to "order otherwise". Exclusion of costs of estoppel/waiver/admissions 23 The first defendant submitted the Court should make a special costs order against the plaintiff in the following terms: "(a) The plaintiff not recover any costs associated with the application to file a Reply, or the hearing days on 24 April and 1 May 2009; (b) The plaintiff pay the defendant's and ninth cross defendant's costs relating to the application for leave to file a Reply, and in respect of the hearing days on 24 April and 1 May 2009." 24 The essence of the first defendant's submissions on this issue was that: (a) on the fourth day of the trial, 23 April 2009, the plaintiff's senior counsel indicated that he wished to rely upon certain "estoppels" or "admissions", even though these had not been pleaded. The issue had not been raised before; (b) on the fifth day of the trial, 24 April 2009, further, unstructured, arguments were made about estoppel etc. The matter was adjourned at 10.30 am because plaintiff's counsel wished to consider how he would plead the various matters. Effectively the whole day was lost; (c) the tenth day of the trial, 1 May 2009, was devoted solely to the plaintiff's argument for leave to file a reply. The first defendant submitted that the grounds for making the special costs order was that the plaintiff's case, in this respect, was not presented efficiently and the argument on the separate issue was unnecessary. 25 The issue arose when a DVD of the plaintiff's post-injury activities was exhibited and it was put to the plaintiff on behalf of the defendants that there was nothing wrong with his legs and back. 26 Senior counsel for the plaintiff sought to meet the assertion by reliance principally upon an alleged estoppel arising from a certificate of the medical specialist under the workers compensation legislation which concluded the plaintiff had a permanent whole person disability in excess of 15 percent (34 percent). 27 The argument which senior counsel for the plaintiff sought to make was difficult and appeared to evolve over the period following the exhibiting of the video. This, it seems, was because it had not been anticipated that the issue would arise. This is not surprising having regard to the circumstances. 28 Although the argument ultimately ceased to be relevant due to the Court's factual findings, and was not determined, it does appear to me to have been an issue which was legitimately raised. 29 The adjournment on 24 April 2009 no doubt assisted senior counsel for the plaintiff in distilling and formulating his arguments. However, it also served other purposes, in particular enabling the first defendants to obtain legal advice and representation, having been unrepresented on 24 April 2009. 30 In Bostik Australia Pty Limited v Liddiard (No 2) [2009] NSWCA 304 at [38] the court stated: "Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported )." 31 In the circumstances as outlined I do not consider it appropriate to make a special costs order in this regard as, in my opinion, the issue was legitimately raised, the need to raise it could not have been reasonably anticipated resulting in the need to formulate the argument "on the run", the issue remained undetermined by reason of the court's conclusion as to liability and the adjournment also served other purposes, thereby rendering it difficult to separate out the costs incurred solely as a result of the estoppel issue. Proportionate costs 32 The fourth defendant submitted: "The factual case against [the fourth defendant] was simple and even the legal arguments were short. It was only found liable on the basis of the statutory presumption of agency. Yet it was forced to participate in a hearing over many days. A review of the transcript will show the cross examination of witnesses on behalf of [the fourth defendant] was generally brief. The evidence and argument on the contractual indemnity claim against [the second defendant] took no more than a day's court time…The Court apportioned contribution between [the first defendant] and [the fourth defendant] 75 percent to [the first defendant] and 25 percent to [the fourth defendant]. The plaintiff is entitled to a costs order against the fourth defendant but that order should be limited to 25 percent of the plaintiff's costs." 33 The fourth defendant submitted that the court "should have regard to s 60 of the Civil Procedure Act (proportionality of costs)". 34 However, the object of s 60 is to reduce the costs of proceedings by ensuring that appropriate procedural steps are taken in the preparation and conduct of proceedings to ensure the costs are proportionate to the importance and complexity of the subject matter in dispute. It is to be distinguished from rules dealing with the liability for costs – State of New South Wales v Stanley [2007] NSWCA 330 at [30]. 35 The court does have a general discretion pursuant to s 98 of the Civil Procedure Act but as the fourth defendant's liability to the plaintiff was joint and several with the liability of the first defendant, I would not exercise my discretion to make the order sought by the fourth defendant in this regard. Bullock or Sanderson order 36 The plaintiff submitted he was entitled to Bullock or Sanderson orders in respect of the costs for which he was prima facie liable to the second, third and fifth defendants. Such orders were opposed by the first and fourth defendants. 37 There are many judicial statements as to the applicable principles. They are not all consistent. However, the touchstone remains, in my opinion, the judgment of Gibbs CJ in Gould v Vaggelas [1985] HCA 85, (1985) 157 CLR 215 at 229-230 where his Honour said: "…the mere fact that the joinder of two defendants was reasonable does not mean that the unsuccessful defendant should be ordered to pay, directly or indirectly, the costs of the successful defendant. Obviously a judge should make a Bullock order only if he considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant, and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff's error or overcaution." 38 The principle was considered in Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179 where the court approved the comments of Asche CJ in Lackersteen v Jones (No 2) (1988) 93 FLR 442 at 449 that: "1. It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant. 2. The causes of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other. 3. While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient. The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion. 4. Finally, in considering whether to make such an order, the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful." 39 In my opinion, it was reasonable and proper for the plaintiff to join the second, third and fifth defendants. However, that alone is not sufficient to justify a Bullock or Sanderson order. There must be something in the conduct of the unsuccessful defendants which makes it proper to exercise the discretion in favour of the making of the order. 40 In my opinion, there was nothing in the conduct of the first or fourth defendant which would justify the making a Bullock or Sanderson order. The first, second, third and fourth defendants were all named as defendants in the original statement of claim. There is no evidence that the first or fourth defendant said or did anything that led the plaintiff to commence proceedings against the other defendants. The first and fourth defendants did not create any circumstances of uncertainty as to who was the proper defendant, they were not obliged to concede liability or make admissions to remove the other defendants from contention. They were entitled to cross claim for contribution and to argue that other defendants should be held responsible. There is no reason to think that short of effective capitulation by the first and/or fourth defendant, the plaintiff would not have maintained his claim against the other defendants: see Roads and Traffic Authority of New South Wales v Palmer (No 2) [2005] NSWCA 140 per Giles JA at [34]-[35]; Dominello v Dominello [2009] NSWCA 257 at [27]-[28]. 41 In my opinion, conduct has not been shown such as to make it fair to impose on the first or fourth defendant liability for the costs of the second, third and fifth defendants. This is particularly so in the case of the fourth defendant whose liability arose from a statutory agency. Other costs orders 42 The third defendant submitted that in determining the issue of costs in relation to the cross claims the Court should have regard to the substance of the outcome rather than to mere matters of form. Accordingly, where a cross claim failed only because no liability had been established against the cross claimant viz a viz the plaintiff, the costs should be awarded in favour of the cross claimant notwithstanding that it was not successful on the cross claim. 43 The fourth defendant submitted that the appropriate costs order in the cross claims referred to in the preceding paragraph was that each party pay its own costs of the cross claims or that there be no order thereon. This, it was submitted, was a simple way of disposing of the costs issues on the cross claims and would simplify any assessment process. I accept the submission of the fourth defendant. 44 The fourth defendant accepted that the second defendant was entitled to a costs order on the fourth defendant's cross claim against it in respect of contractual indemnity issues but not in respect of the balance of the cross claim. Such a limitation, in my opinion, could lead to problems of demarcation in assessing the costs to which the second defendant was entitled. In my opinion, the appropriate order is that the fourth defendant pay the second defendant's costs of the fourth defendant's cross claim against the second defendant. 45 The ninth cross defendant conceded it was liable to pay the first defendants' costs of the ninth cross claim. Orders 46 I make the following orders: 1. The first and fourth defendants are to pay the plaintiff's costs: (a) on the ordinary basis until 16 July 2007, and (b) on an indemnity basis from 17 July 2007. 2. The plaintiff is to pay the costs of the second defendant, the third defendant and the fifth defendant. 3. In respect of the cross claims: (a) The ninth cross defendant is to pay the first defendants' costs of the ninth cross claim. (b) The fourth defendant is to pay the second defendant's costs of the fourth defendant's cross claim against the second defendant. (c) The first defendants are to pay 75 percent of the fourth defendant's costs of its cross claim against the first defendant. (d) Otherwise, each party is to bear the costs of any cross claims by or against him, her, or it. ********** 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.