Court of Appeal Supreme Court New South Wales Medium Neutral Citation: AV8 Air Charter Pty Limited v Sydney Helicopters Pty Limited (No 2) [2014] NSWCA 238 Hearing dates: On the papers Decision date: 24 July 2014 Before: Barrett JA at [1] Hoeben JA at [2] Ward JA at [36] Decision: (1) Costs orders made by Levy DCJ as to the trial and by this Court as to the appeal confirmed. (2) The respondent to pay the appellant's costs of this application. [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 - Application by successful respondent to appeal for indemnity costs of trial, indemnity costs of appeal and interest on its costs - no application for indemnity costs made to trial judge - no challenge to costs orders made by District Court in the appeal - dispute as to form of Offer of Compromise made before trial - possibility that evidence may have been called if indemnity costs raised in District Court - claim for indemnity costs of appeal - no offer made in appeal proceedings - reliance placed on offer made in court below - no indication to other party of intention to rely upon pre-trial offer in appeal proceedings - application for interest on costs not raised in District or on appeal - raised for first time after appeal judgment - respondent's application refused. Legislation Cited: Civil Procedure Act 2005 - ss 101(4) and (5) Uniform Civil Procedure Rules 2005 Cases Cited: AV8 Air Charter Pty Limited v Sydney Helicopters Pty Limited [2014] NSWCA 46 AV8 Air Charter Pty Limited v Sydney Helicopters [2012] NSWDC 220 Bathurst Regional Council as trustee for the Bathurst City Council Crown Reserves Reserve Trust v Thompson (No 2) [2012] NSWCA 420 Ettinghausen v Australia Consolidated Press Ltd (1995) 38 NSWLR 404 Hawkesbury District Health Service Ltd & Anor v Patricia Chaker [2010] NSWCA 320 Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) [2013] NSWCA 211; 84 NSWLR 436 Nowlan v Marson Transport Pty Ltd [2001] NSWCA 246, 53 NSWLR 116 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 The Uniting Church v Takacs (No 2) [2008] NSWCA 172 White v Overland [2001] FCA 1333 Whitney v Dream Developments Pty Ltd [2013] NSWCA 188; 84 NSWLR 311 Category: Costs Parties: AV8 Air Charter Pty Limited - Appellant Sydney Helicopters Pty Limited - Respondent Representation: Counsel: Mr D Fagan SC/Mr T Brennan - Appellant Mr G Curtin SC/Mr G Gregg - Respondent Solicitors: Norton White - Appellant Gilchrist Connell - Respondent File Number(s): 2012/390046 Decision under appeal Citation: [2012] NSWDC 220 Date of Decision: 2012-12-07 00:00:00 Before: Levy DCJ File Number(s): 2010/348326 Judgment 1BARRETT JA: I agree with Hoeben JA. 2HOEBEN JA: The appeal in this matter was heard on 7 November 2013 and judgment was delivered on 12 March 2014 (AV8 Air Charter Pty Limited v Sydney Helicopters Pty Limited [2014] NSWCA 46). The appeal was dismissed. 3It came back before the Court on the application of the respondent which sought the following orders: (a) That the appellant pay the respondent's costs of the District Court proceedings, assessed on the ordinary basis up to 9 November 2011. (b) That the appellant pay the respondent's costs of the District Court proceedings and of the Court of Appeal proceedings on an indemnity basis from 10 November 2011. (c) That the appellant pay interest on the respondent's costs. 4The parties were invited to file written submissions in respect of those matters and to place before the Court any evidence upon which they wished to rely. They were advised that the application would be dealt with on the papers. Factual background 5The facts relating to this matter are fully set out in the appeal judgment. In summary, the appellant owned a helicopter which was damaged in an accident which occurred on 29 January 2009. The appellant unsuccessfully claimed from the respondent as bailee of the helicopter and as the employer of the pilot, the damage caused to the helicopter. The appellant failed at first instance (AV8 Air Charter Pty Limited v Sydney Helicopters [2012] NSWDC 220) and on appeal. The amount claimed by the appellant was $700,000. The following facts are relevant to the issues raised by the application. 6On 9 November 2011, approximately five months before the commencement of the trial, the respondent served what purported to be an Offer of Compromise on the appellant: "OFFER OF COMPROMISE Without admission the Defendant offers to settle the Plaintiff's claim on the following terms: 1 The Defendant to pay the Plaintiff the sum of $10,000. 2 Proceedings against the Defendant are discontinued by the Plaintiff. 3 This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005. 4 This offer shall remain open for 28 days." 7The offer was not accepted by the appellant. 8On 7 December 2012 Levy DCJ gave judgment and made the following orders: (a) Verdict and judgment for Sydney Helicopters. (b) (AV8) is to pay (Sydney Helicopters') costs of the proceedings on the ordinary basis unless a party can show an entitlement to some other costs order. (c) Liberty to apply on 7 days' notice if further orders are required. 9No application was made to Levy DCJ for some other costs order, or any further orders. On 17 December 2012 the appellant served its Notice of Intention to Appeal. The appellant's Notice of Appeal was filed on 22 February 2013 and it appealed "from the whole of the decision below". 10Between the filing of the Notice of Appeal and the hearing of the appeal, the only issue which arose between the parties was whether the appellant should provide security for costs in relation to the appeal. This issue had apparently also arisen in correspondence before the hearing in the District Court. The first time the issues, the subject of this application, were raised was on 19 March 2014, seven days after the appeal judgment was delivered. 11In the respondent's written submissions the explanation for why no application for indemnity costs was made to Levy DCJ was stated as : "In view of the appeal Sydney Helicopters did not seek to have the matter listed before Judge Levy for a costs hearing." There was no evidence to that effect in the two affidavits filed in support of the respondent's application. Respondent's submissions 12The respondent submitted that the offer of 9 November 2011 complied with r 20.26 of the Uniform Civil Procedure Rules 2005 (UCPR). It submitted that in accordance with r 42.15A UCPR it was entitled to have its costs in the District Court assessed on an indemnity basis from 10 November 2011. It submitted that the appellant had the onus of persuading the Court to "otherwise order". It submitted that exceptional circumstances were required before the Court would "otherwise order" and there was no basis for such an order. 13It submitted that its offer was a genuine attempt at compromise in that a substantial sum of money was offered, it was prepared to forego its costs up to 1 December 2011 (being the expiry period had the offer been accepted), that those costs were significant, that the offer was made at a time before the proceedings were listed for trial and that there was adequate time for the appellant to give serious consideration to the offer. 14The respondent submitted that the effect of its offer of 9 November 2011 was not spent when judgment was delivered by Levy DCJ but it operated as an offer which could be accepted in the appeal proceedings. In that regard, the respondent relied upon Ettinghausen v Australia Consolidated Press Ltd (1995) 38 NSWLR 404 at 409G - 410B. It also relied upon UCPR 51.49 whereby this Court may have regard to any Offer of Compromise made in the court below. 15The respondent submitted that in the correspondence between the parties before the hearing of the appeal, it had advised the appellant that its costs were in the order of $540,000. It submitted that the fact that the appellant had appealed from "the whole decision below" and that the respondent's estimate of costs was $540,000, should have put the appellant on notice that it was relying upon the offer of 9 November 2011 to support a claim for indemnity costs in the appeal. 16In seeking an order that the appellant pay interest on its costs, the appellant relied upon ss 101(4) and (5) of the Civil Procedure Act 2005 (CPA). In support of its application, the respondent relied upon an affidavit which set out the date of each interim payment of costs over the course of the litigation. The interest claimed was in relation to the costs of the District Court proceedings and of the appeal proceedings. 17It submitted that the discretion in CPA 101(4) was a broad one and should be exercised in its favour, absent some good reason not to do so. It submitted that there was no evidence of any disentitling conduct on its part which would prevent such an order being made. The evidence as to the date of payment of the costs made it clear that it had been out of pocket over a considerable period of time in respect of a substantial amount of costs and that it ought be reimbursed for that loss by an order for interest. Consideration 18Leaving aside for the moment the important consideration that there is no evidence as to why an application for indemnity costs was not made to Levy DCJ, the respondent's failure to do so presents a significant impediment to it being successful in seeking such an order from this Court. The filing of a Notice of Intention to Appeal provides no proper reason for not seeking an order for indemnity costs from the trial judge. It is trite to say that all disputed issues should be decided at first instance before a matter proceeds on appeal. This enables both the parties and the appellate court to have the benefit of a considered decision from the judge at first instance. 19It is clear from the written submissions on this issue that had such an application been made to Levy DCJ, it would have been fully contested. The appellant submitted that the offer was at best ambiguous and at worst incapable of acceptance. It submitted that was because in its terms it raised two contradictory costs regimes. On the one hand, acceptance of the offer required the plaintiff to discontinue proceedings against the defendant, which would give rise to those rules applicable to the discontinuance of proceedings and on the other, the offer purported to be made in accordance with UCPR 20.26 which had its own in-built costs rules. The costs rules in relation to each procedure were not the same. As to whether any evidence beyond the correspondence would have been required before Levy DCJ, had these matters been argued before him, is not clear. 20In the alternative, the appellant submitted that the offer did not comply with UCPR 20.26 because by invoking the concept of "discontinuance", it offended sub-rule (2) of UCPR 20.26 as it then was, in that the offer was not "exclusive of costs" (see Whitney v Dream Developments Pty Ltd [2013] NSWCA 188; 84 NSWLR 311 at [24] - [25] and [51] - [52]). 21It is no answer to these difficulties to submit as the respondent did, that even if the offer did not operate as an Offer of Compromise it should be treated as a Calderbank offer. If that approach were followed, the meaning of the offer would be even more obscure since the costs consequences of an acceptance were not spelled out otherwise than by reference to the costs rules as to discontinuing an action and accepting an Offer of Compromise. 22Another significant difficulty for the respondent is that it did not by Notice of Cross-Appeal challenge the costs order made by Levy DCJ. Accordingly, the question of whether or not indemnity costs should have been paid by the appellant in respect of any part of the District Court proceedings was not an issue raised in the appeal. It should not now be raised for the first time in this application which relates to consequential orders which should be made following the outcome of the appeal. This application is not an appropriate process to raise new matters which should have been before Levy DCJ, and if not raised before him and if there were proper justification, should have been raised in the appeal. 23Here the respondent failed to avail itself of the liberty granted by Levy DCJ in circumstances where the trial judge clearly anticipated the possibility of an application for indemnity costs. Moreover, it failed to avail itself of the power of the Court to vary an order or judgment under UCPR 36.16 which allows for a notice of motion, setting aside or varying a judgment or order, provided that the notice of motion is filed within 14 days after the judgment or order is entered. It failed to raise this issue in the appeal. Those failures occurred against a background where there is a real issue as to whether the offer complied with the rules then relating to an Offer of Compromise and in respect of which further evidence may have been adduced before the trial judge. The order sought is not an order which relates to matters arising from the appeal. In those circumstances, even if this Court had power to make the order sought (which I doubt), I would decline to do so as a matter of discretion. 24I am also not prepared to make an order that the appellant pay the costs of the appeal on an indemnity basis. 25I have already adverted to difficulties with the form of the purported Offer of Compromise. However, even if there were no question of the Offer of Compromise complying with the rules, I would still decline to make the order sought. 26While it is true that UCPR 51.49 permits this Court to have regard to any Offer of Compromise made in the court below, the usual position is that appeal costs should primarily be determined by the issues in and the outcome of the appeal proceedings themselves (The Uniting Church v Takacs (No 2) [2008] NSWCA 172 at [16] and [34]; Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [37] and Bathurst Regional Council as trustee for the Bathurst City Council Crown Reserves Reserve Trust v Thompson (No 2) [2012] NSWCA 420 at [16]). 27In this case the issues raised in the appeal were more focused and discrete than the issues at trial. Certain matters of fact and law were examined in much greater detail in the appeal than at trial. As is usual, many of the matters which were issues at trial were not issues on the appeal. The issues dealt with in the appeal were sufficiently different to those at trial as to require a separate offer relating specifically to the appeal if a special costs order were to be made relating to the costs of the appeal. 28On the particular facts of this case, however, there is another consideration which also leads me to reject the respondent's application for indemnity costs of the appeal. 29If a party to an appeal wishes to rely upon an Offer of Compromise or Calderbank offer made before trial, that party should at the very least provide clear notice to the other party or parties of that intention. Otherwise, the rationale for the acceptance of such offers, i.e. the settling and compromise of litigation with the commensurate saving of costs and court time, is defeated. 30In this case no such indication was given. On the contrary, the failure to make any application to the trial judge relating to the offer of 9 November 2011 may well have led the appellant to believe that no reliance at all was being placed on that offer for any purpose. It is not sufficient, as the respondent submitted here, to rely upon some subtle or ambiguous statements in correspondence as a basis for a submission that the other party should have known that an offer was going to be relied upon. Such an approach is contrary to the current approach to litigation which is very much against the "ambush theory of litigation" (Nowlan v Marson Transport Pty Ltd [2001] NSWCA 246, 53 NSWLR 116 at [26] - [31] (Heydon JA); White v Overland [2001] FCA 1333 at [4] (Allsop J) and Hawkesbury District Health Service Ltd & Anor v Patricia Chaker [2010] NSWCA 320 at [170] and [179]). This, of course, is the rationale behind sections 56 and following of the CPA. 31Accordingly, no fresh offer having been made in relation to the appeal proceedings and no notice having been given of an intention to rely upon the earlier offer, I would refuse the respondent's application for indemnity costs of the appeal. 32The respondent's application for interest on the costs which it has paid from the date when it paid those costs, was not an order which was sought in the District Court. It was not an order which was sought by way of cross-appeal in the appeal. It is raised for the first time in this application which is not a separate appeal but is dealing with the consequential orders which should be made following the outcome of the appeal. Subsections 101(4) and (5) CPA do not in their terms confer on this Court the power to make an order which was neither sought from nor made in the court below and in respect of which there is no appeal. 33This issue was considered in Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) [2013] NSWCA 211; 84 NSWLR 436 at [33] - [34] where the Court (Meagher, Barrett and Ward JJA) said: "Interest on costs 33 Illawarra seeks an order pursuant to s 101(4) of the Civil Procedure Act for interest on the costs and disbursements it has outlaid since commencement of the litigation in 2008. Illawarra thus contends that this Court should order the payment of interest on costs awarded to it in the Equity Division. 34 That contention is misconceived and must be rejected. The amended notice of appeal contains no such claim and no ground of appeal raises the matter. Nor (unlike the s 100(4) question just discussed) does the issue arise as a consequence of the outcome on appeal. Illawarra seems to say simply that it should have from the Court of Appeal an order in respect of costs at first instance that, so far as the record shows, was not sought in the court below and does not flow from the decision on appeal. That is a quite unsupportable proposition." 34It follows that the respondent's application for interest on costs should be refused. Conclusion 35The respondent has failed to obtain the orders which it sought in this application. Accordingly I propose the following orders: (1) That the costs orders made by Levy DCJ as to the trial and by this Court as to the appeal be confirmed. (2) That the respondent pay the appellant's costs of this application. 36WARD JA: I agree with the orders proposed by Hoeben JA. In reaching that conclusion it is not necessary to form a concluded view as to whether, by invoking the concept of discontinuance in the offer, the offer was not compliant with the then rules. Even if the offer was compliant with those rules, I am not persuaded, for the reasons expressed by Hoeben JA, that in the circumstances of this case it should lead to an indemnity costs order in relation to the appeal and there was no application for indemnity costs of the hearing below either made before the primary judge prior to his Honour making the cost orders in question or to vary that order. I also agree with his Honour's conclusion in relation to the application for interest on costs. ********** 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: 25 July 2014