Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Macourt v Clark (No 2) [2012] NSWCA 411 Hearing dates: On the papers Decision date: 13 December 2012 Before: Beazley JA; Barrett JA; Tobias AJA. Decision: (1) Judgment for the Appellant against the Respondent on the claim and cross-claim in the sum of $315,255.04 (including interest up to 8 November 2011, and after setting off the amount including interest to which the Respondent is entitled against the Appellant). (2) Order that interest be paid under s 100 of the Civil Procedure Act 2005 on the sum of $315,255.04 from 8 November 2011 until the date of the entry of these Orders. (3) Order that, in restitution for the money paid by the Appellant to the Respondent on 13 December 2011 pursuant to the judgment of Gzell J, the Respondent, within 21 days, pay the Appellant the sum of $1,290,805.11 and interest on that sum at the Reserve Bank cash rate from 13 December 2011 until the sum is paid. (4) Order that the Respondent pay the Appellant's costs of the claim and cross-claim before Gzell J on the ordinary basis up to 13 July 2009, and on the indemnity basis thereafter. (5) Order that the Respondent pay the Appellant's costs of the appeal and cross-appeal. (6) Order the Respondent to pay to the Appellant interest on costs and disbursements, at the rates set out in Schedule 5 Uniform Civil Procedure Rules, on the Allowed Percentage 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 (a) such time as the Respondent has paid the costs due to the Appellant under Orders (4) and (5) above, or (b) any further Order relating to interest on costs in the proceedings. In this Order: X - equals the total amount of costs and disbursements which the Respondent has paid or is liable to pay to its legal advisors in connection with this appeal and the proceedings at first instance. Y - equals the total amount of costs and disbursements allowed on assessment to the Respondent in connection with this appeal and the proceedings at first instance. The Allowed Percentage equals [(Y/X) x 100]%. (7) Grant liberty to the Appellant to apply on 3 days notice to the Respondent for an Order for payment of a specific amount in respect of the interest upon costs pursuant to Order (6). [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: COSTS - appropriate apportionment of costs - indemnity costs - resolution of orders Legislation Cited: Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 Cases Cited: Lahoud v Lahoud [2012] NSWCA 401 Macourt v Clarke [2012] NSWCA 367 Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 Category: Costs Parties: David Charles Ross Macourt (Appellant/Cross Respondent) Anne Clark (Respondent/Cross Appellant) Representation: Counsel: C Harris SC with H Altan (Appellant/Cross Respondent) A Leopold SC with ARR Vincent (Respondent/Cross Appellant) Solicitors: Redmond Hale Simpson Solicitors (Appellant/ Cross Respondent) Norton Rose Australia (Respondent/Cross Appellant) File Number(s): CA9248 of 2012 Decision under appeal Citation: St George Fertility Centre Pty Ltd v Clark [2011] NSWSC 1276 Date of Decision: 2011-10-25 00:00:00 Before: Gzell J File Number(s): SC255614 of 2006 Judgment 1THE COURT: On 9 November 2012, the Court made the following Orders and Direction (see Macourt v Clark [2012] NSWCA 367 at [176]): (a) Appeal allowed. (b) Cross-appeal dismissed. (c) Set aside the orders made by Gzell J on 8 November 2011. (d) Direct the parties within 14 days of the publication of these reasons to file short minutes of order to reflect these reasons and within the same period to file and serve, if otherwise there is any dispute, written submissions not exceeding three pages on the issue of the costs of the trial and the appeal. The foregoing Orders were supported by detailed reasons (the primary judgment). 2Pursuant to Order (d), the parties have provided submissions with respect to the appropriate Orders to be made and, in particular, with respect to the issue of costs. Relevantly, Dr Macourt proposed the following Orders in addition to Orders (a), (b), and (c) referred to above: 4. Judgment for the Appellant against the Respondent on the claim and cross-claim in the sum of $315,255.04 (including interest up to 8 November 2011, and after setting off the amount including interest to which the Respondent is entitled against the Appellant). 5. Order that interest be paid under s 100 of the Civil Procedure Act 2005 on the sum of $315,255.04 from 8 November 2011 until the date of the entry of these orders. 6. Order that, in restitution for the money paid by the Appellant to the Respondent on 13 December 2011 pursuant to the judgment of Gzell J, the Respondent, within 21 days, pay the Appellant the sum of $1,290,805.11 and interest on that sum at the Reserve Bank cash rate from 13 December 2011 until the sum is paid. 7. Order that the Respondent pay the Appellant's costs of the claim and cross-claim before Gzell J on the ordinary basis up to 12 July 2009, and on the indemnity basis thereafter. Alternatively, order that the Respondent pay the Appellant's costs of the claim and cross-claim before Gzell J on the ordinary basis up to 13 July 2009, and on the indemnity basis thereafter. 8. Order that the Respondent pay the Appellant's costs of the appeal and cross-appeal. 9. Order the Respondent to pay to the Appellant interest on costs and disbursements, at the rates set out in Schedule 5 Uniform Civil Procedure Rules, on the Allowed Percentage 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 date of payment by the Respondent of those costs and disbursements to the Appellant. In this order: X - equals the total amount of costs and disbursements which the Respondent has paid or is liable to pay to its legal advisors in connection with this appeal and the proceedings at first instance. Y - equals the total amount of costs and disbursements allowed on assessment to the Respondent in connection with this appeal and the proceedings at first instance. The Allowed Percentage equals [(Y/X) x 100]%. 10. Grant liberty to the Appellant to apply on 3 days notice to the Respondent for an order for payment of a specific amount in respect of the interest upon costs pursuant to order (6). 3Dr Clark also filed draft Orders which differed from the Orders proposed by Dr Macourt in the following respects: (i) Order 5 of Dr Macourt's Orders was deleted, as was Order 6. However, Dr Clark's submissions in support of the Orders she proposed did not purport to justify the deletion of Dr Macourt's Orders 5 and 6. There therefore appears no reason why they should not be included in the final Orders of the Court. (ii) Orders 7 and 8 were opposed in two respects. First, it was submitted that Dr Clark should only be required to pay ninety percent of Dr Macourt's costs of the proceedings before the primary judge and only ninety percent of his costs of the appeal. Secondly, those costs with respect to the proceedings before Gzell J should be paid only on an ordinary basis and not on an indemnity basis. (iii) A minor amendment was made to Order 9 to bring it into line with the Order made by Campbell J (as his Honour then was) in Lahoud v Lahoud [2006] NSWSC 126 and which was to the effect that the interest to which that Order refers should be paid on the relevant amount until the first to occur of: (a) such time as the respondent has paid the costs due to the appellant under any costs order made with respect to the proceedings before the primary judge and on the appeal, or (b) any further order relating to interest on costs in the proceedings. 4In our opinion this last mentioned amendment to Order 9 should be made although its effect will be limited in the manner recently decided by this Court in Lahoud v Lahoud [2012] NSWCA 401. 5As we have indicated Dr Clark raised two issues with respect to the matter of costs. The first related to whether both before the primary judge and on appeal, Dr Macourt should have the whole of his costs or only 90 percent as Dr Clark submitted. The basis of this contention was that Dr Clark had succeeded in retaining the award of damages by the primary judge in the sum of $3,024 in respect of the telephone lines: see the primary judgment at [135]-[140]. It was submitted that the issue relating to the telephone lines was a clearly separable issue from the other issues before both his Honour and this Court with the consequence that Dr Clark should have the costs of preparing the written submissions with respect to that issue as well as the time taken in oral argument with respect thereto. It was suggested that the costs referrable to that issue should be estimated at about five percent of the total costs of the proceedings and of the appeal. 6We would not be prepared to accede to Dr Clark's submissions on this issue. Although it was a separate issue it does not follow from that fact that Dr Clark is entitled to a reduction in the percentage of costs which she is required to pay Dr Macourt given his success on the major issue which was argued both before the primary judge and on appeal. Reliance was placed upon a passage in the judgment of Campbell JA, with whom Macfarlan and Young JJA agreed, in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [107] where his Honour relevantly observed: There is an undoubted principle whereby, unless a particular issue or group of issues is clearly dominant or separable, it would ordinarily be appropriate to award the costs of the proceeding to the successful party without attempting to differentiate those particular issues on which it was successful and those on which it failed. 7His Honour then went on to note, in effect, that the principle whereby a successful party might be deprived of his or her costs in respect of a particular issue upon which he or she was unsuccessful generally applied where that issue was a dominant issue. Although, as we have said, the telephone expenses issue was a separate issue, it was certainly anything but dominant. It played but a very minor part in the proceedings as a whole. Accordingly, we would not be prepared to discount Dr Macourt's entitlement to the whole of the costs of the proceedings both before the primary judge and on the appeal. 8The second costs issue relates to Order 7 proposed by Dr Macourt, that he should be entitled to indemnity costs after 13 July 2009. In the primary judgment at [150] ff, Tobias AJA dealt with an Offer of Compromise made by Dr Clark pursuant to UCPR 20.26 on 29 May 2009 which Dr Macourt had declined to accept. The Court has now been provided with a letter dated 12 July 2009, from Dr Macourt's solicitors to Dr Clark's solicitors, which sets out in detail the reasons why Dr Macourt was not prepared to accept that Offer of Compromise. Having rejected that offer, Dr Macourt then made his own Offer of Compromise pursuant to UCPR 20.26 in which he offered to settle the proceedings on the following terms: (1) that there be a verdict for the defendant [Dr Clark] on Dr Macourt's claim, with each party to bear its own costs; and (2) that there be a verdict for the cross-defendants [St George and Dr Macourt] on Dr Clark's cross-claim with each party to bear its own costs. The offer was open for acceptance until 17 August 2009. The offer was also proffered as a Calderbank offer. Dr Clark has not challenged the validity of the Offer of Compromise or otherwise suggested that it did not comply with the relevant rules. This offer was also not accepted. 9Prima facie the effect of this Court's judgment is that Dr Macourt obtained Orders as favourable, or more favourable, to him than the terms of the offer. Relevantly, rather than there being judgment for Dr Clark on Dr Macourt's claim, Dr Macourt has obtained judgment on his claim in the sum of $315,255.04 (including interest). On Dr Clark's cross-claim there has been a verdict for Dr Macourt. It follows, and was so accepted by Dr Clark, that Dr Macourt was entitled to indemnity costs as and from 14 July 2009 "unless the court Orders otherwise". In this latter respect, Dr Clark submitted that there were two circumstances which justified the making of such an Order. 10First, it was submitted that it was not unreasonable for Dr Clark to reject the offer because the defence upon which Dr Macourt ultimately succeeded, being the allegation that Dr Clark mitigated her loss by virtue of recouping the acquisition and transportation costs of the Xytex sperm supplied to patients in lieu of the St George sperm, was not pleaded until 21 June 2011, almost two years after the date of the offer. 11Reliance was placed upon a statement in Dr Macourt's solicitor's letter of 12 July 2009 in response to Dr Clark's claim for the reasonable costs and expenses associated with the procurement of replacement sperm which, so it was submitted, was factually incorrect in that it asserted that although $127,000 was claimed in relation to costs paid to procure replacement sperm in the past and a further $822,000 was claimed for the costs which would be apparently payable to procure sperm in the future. However documents discovered by Dr Clark and the admission she was prepared to make in her proposed reply showed that she had not expended any sum in procuring replacement sperm and would not do so in the future with the consequence that she had suffered no loss. It was submitted that the error in this assertion was that Dr Clark did in fact expend money in procuring replacement sperm, but that she mitigated her loss by recouping the acquisition and transportation costs of the Xytex sperm supplied to patients in lieu of the St George sperm which was in substance different from the allegation that she had not expended any sum herself in procuring that sperm in the first place. 12The reference above to Dr Clark's reply, is a reference to the draft reply referred to in [36] of the primary judgment. In that paragraph reference is made to paragraph 29(a) of a draft amended defence which, according to Dr Macourt and not denied by Dr Clark, was served on her solicitors on 3 October 2008, the defence itself being filed on 10 September 2009. Paragraph 29 was in the following terms: 29 Further or in the alternative, the Cross-Claimant has suffered no loss in relation to the procurement of replacement sperm because: (a) She charges a fee to patients for the supply of that sperm, the amount of which is equal to or exceeds the cost and expense involved in the acquisition of that sperm ... 13As noted in [36] of the primary judgment, Dr Clark's draft reply admitted in paragraph 7(2) that she charged and had charged a fee to patients for the use of sperm acquired by her from Xytex for an amount equal to the cost and expense involved in the acquisition of that sperm although she denied that that charge exceeded that cost and expense involved in its acquisition. 14Although it is true that as at the date of the Offer of Compromise of 13 July 2009, the amended defence containing paragraph 29 had not been filed, nevertheless it is apparent that Dr Clark was under no misapprehension as to the nature of that defence and, in particular, that it would be alleged that she had suffered no loss as a consequence of her having recouped the cost and expense of procuring replacement sperm by charging that cost to her patients. In these circumstances, we do not consider that the first ground relied upon by Dr Clark in support of an "Order otherwise" has any substance. 15The second ground advanced by Dr Clark was that in light of the stage of the proceedings that had then been reached and the prospect of the success of Dr Clark as at 13 July 2009, it could not be said that her refusal of the offer was unreasonable. It was described as a "walk away" offer made in circumstances in which Macready AsJ had reserved judgment on an application by St George to withdraw admissions that it had breached the warranties contained in the Deed. It was contended that Dr Clark was being asked to forego a claim which was stated at that time in correspondence to be no less than $950,000 (see primary judgment at [164]) which, in light of the defence to the cross-claim at that time, had very real prospects of success. It was contended that the offer should be characterised as a procedural move to trigger costs consequences rather than as a genuine attempt to reach a negotiated settlement, and as being other than a genuine offer of compromise. 16In our view, this ground has no merit. The effect of Dr Macourt's Offer of Compromise was that he was prepared to forego the amount owing to him by Dr Clark under the Deed, namely, $219,950.91 (excluding interest). Dr Clark did not suggest in her submissions on this issue that she had any real prospect of avoiding that claim. Rather, she asserted that her cross-claim had very real prospects of success. 17As we have noted at [8] above, Dr Macourt's solicitors set out in significant detail in their letter of 12 July 2009, submissions as to the weaknesses in Dr Clark's case based on her cross-claim and in particular in respect to the various heads of loss which she alleged, many of which were ultimately abandoned. No attempt has been made by Dr Clark to put before this Court any response to the contentions contained in the letter of 12 July 2009 apart from the bare assertion in Dr Clark's submissions on the present issue that her cross-claim "had very real prospects of success". That is far from self-evident. Although it is true that Macready AsJ generally found in favour of Dr Clark on the issue of liability propounded in her cross-claim, (see primary judgment [19]), the issue before the primary judge related to whether she in fact suffered any loss as a consequence of the breaches of the warranties which the Associate Justice had found in her favour. The present matter concerns the costs not of the proceedings before the Associate Justice but before the primary judge in relation to the assessment of damages. In our view, nothing has been advanced by Dr Clark which would justify the making of an "Order otherwise", particularly if exceptional circumstances were required to be established before any such Order was made: (see primary judgment at [155]). But even in the absence of any such requirement, in our view we would not be prepared to exercise our discretion to deprive Dr Macourt of his due entitlement to indemnity costs as and from 13 July 2009 in respect of the proceedings before the primary judge. 18Accordingly, the final Orders we would propose in addition to Orders (a), (b) and (c) made on 9 November 2012 are as follows: (1) Judgment for the Appellant against the Respondent on the claim and cross-claim in the sum of $315,255.04 (including interest up to 8 November 2011, and after setting off the amount including interest to which the Respondent is entitled against the Appellant). (2) Order that interest be paid under s 100 of the Civil Procedure Act 2005 on the sum of $315,255.04 from 8 November 2011 until the date of the entry of these Orders. (3) Order that, in restitution for the money paid by the Appellant to the Respondent on 13 December 2011 pursuant to the judgment of Gzell J, the Respondent, within 21 days, pay the Appellant the sum of $1,290,805.11 and interest on that sum at the Reserve Bank cash rate from 13 December 2011 until the sum is paid. (4) Order that the Respondent pay the Appellant's costs of the claim and cross-claim before Gzell J on the ordinary basis up to 13 July 2009, and on the indemnity basis thereafter. (5) Order that the Respondent pay the Appellant's costs of the appeal and cross-appeal. (6) Order the Respondent to pay to the Appellant interest on costs and disbursements, at the rates set out in Schedule 5 Uniform Civil Procedure Rules, on the Allowed Percentage 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 (a) such time as the Respondent has paid the costs due to the Appellant under Orders (4) and (5) above, or (b) any further Order relating to interest on costs in the proceedings. In this Order: X - equals the total amount of costs and disbursements which the Respondent has paid or is liable to pay to its legal advisors in connection with this appeal and the proceedings at first instance. Y - equals the total amount of costs and disbursements allowed on assessment to the Respondent in connection with this appeal and the proceedings at first instance. The Allowed Percentage equals [(Y/X) x 100]%. (7) Grant liberty to the Appellant to apply on 3 days notice to the Respondent for an Order for payment of a specific amount in respect of the interest upon costs pursuant to Order (6). ********** 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. Decision last updated: 14 December 2012