Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Metro North Hospital and Health Service v Pierce (No. 2) [2018] NSWCA 112 Hearing dates: On the papers Decision date: 25 May 2018 Before: Macfarlan JA [1]; Payne JA at [1]; White JA [1] Decision: (1) Order that order (3) made on 14 February 2018 be set aside. (2) Order that the appellant pay the respondent's costs of the appeal and cross-appeal (including the respondent's costs of the notice of motion filed on 29 March 2018) on the ordinary basis up to and including 20 March 2017, and thereafter on the indemnity basis. Catchwords: COSTS – application for indemnity costs – where offer of compromise concerned appeal and cross-appeal – no question of principle Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 36.15(2), 36.16, 42.14, 51.47, 51.48 Cases Cited: Metro North Hospital and Health Service v Pierce [2018] NSWCA 11 Category: Costs Parties: Metro North Hospital and Health Service (Appellant) Emily Pierce (Respondent) Representation: Counsel: n/a Solicitors: Corrs Chambers Westgarth (Appellant) Edwards Michael Powell Lawyers (Respondent) File Number(s): 2016/357828 [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.] Judgment 1. THE COURT: On 14 February 2018 this Court made orders dismissing an appeal and a cross-appeal. The Court ordered that the appellant pay 60 per cent of the respondent's costs of both the appeal and cross-appeal (Metro North Hospital and Health Service v Pierce [2018] NSWCA 11). At trial the respondent and cross-appellant, Ms Pierce, had claimed damages from the respondent. The primary judge had awarded damages in the sum of $1,672,790.75 plus costs. Metro North appealed. Ms Pierce cross-appealed claiming that the award of damages was too low. The primary judge had substantially discounted damages for past economic loss and for future economic loss and future care by reason of his finding that the appellant suffered from a progressively deteriorating condition. On the question of costs of the appeal White JA said: "188 It follows that the appeal and cross-appeal should both be dismissed. Prima facie the Hospital should pay Ms Pierce's costs of the appeal and she should pay the Hospital's costs of the cross-appeal, with the costs payable by one party to be set off against the costs payable by the other. That would be a difficult and expensive exercise. It would require both parties' costs to be assessed. A costs assessor would have the unenviable task of determining what costs should be allocated to the appeal, and what costs to the cross-appeal when it is very likely that for most of the costs incurred, any such division would be arbitrary. This is a case of the parties' having had mixed success. The better course is for the Court to make its own evaluative and necessarily impressionistic assessment of where the costs were incurred and then apply a notional set-off. The costs of preparation of the appeal books were necessary for both the appeal and the cross-appeal. My impression is that the bulk of the costs of written and oral submissions were directed to the appeal, rather than the cross-appeal. Applying a notional set-off I would order that the Hospital pay 60 per cent of Ms Pierce's costs." 1. The orders made were as follows: "(1) Appeal dismissed. (2) Cross-appeal dismissed. (3) Order that the appellant pay 60 per cent of the respondent's costs of the appeal and cross-appeal." 1. On 29 March 2018 Ms Pierce filed a notice of motion seeking orders that the costs order made on 14 February 2018 be vacated and an order that the appellant (Metro North) pay Ms Pierce's costs of both the appeal and cross-appeal on the indemnity basis. 2. The primary judge, Campbell J, gave judgment on 3 November 2016. On 7 December 2016, his Honour ordered that the costs of the proceedings from 6 June 2015 be paid on the indemnity basis. This order was the result of an offer of compromise served by Ms Pierce. 3. The appeal was filed on 31 January 2017. The cross-appeal was filed on 13 February 2017. 4. On 20 March 2017 Ms Pierce served on Metro North an offer of compromise in the following terms: "The respondent offers to compromise the whole of this claim on the following terms: 1. Judgment for the Respondent in the sum of $1,572,790.75. 2. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005." 1. The offer of compromise of 20 March 2017 was an offer to "compromise the whole of this claim". The offer identified Metro North as appellant and Ms Pierce as respondent. It did not identify either party in their capacities as cross-appellant and cross-respondent. At the time of the offer there were two claims pending in the Court of Appeal: one by Metro North by which it sought to have the judgment against it set aside, and one by Ms Pierce by which she sought orders which, if made, would have increased her damages from approximately $1.67 million to over $5 million. 2. The better view of the offer of compromise is that it was an offer to compromise all of the issues arising on the appeal and cross-appeal. That was the "whole of the claim". It could not have been contemplated that if the offer had been accepted, Ms Pierce could nonetheless have pursued her cross-appeal. Metro North did not submit that it understood the offer to relate only to the appeal and not to both the appeal and the cross-appeal. 3. Ms Pierce submitted that she had served an offer of compromise on 20 March 2017, after the appeal had been commenced, for a sum that was $100,000 less than the judgment and that if that offer had been accepted it would necessarily have waived a significant amount of post-judgment interest from the time that judgment had been given on 3 November 2016. So much may be accepted. She also referred to offers of compromise made in the court below for lesser sums. She submitted that: "12. The Respondent made an offer in these appeal proceedings which was a significant compromise. That offer was made at a very early stage in the appeal proceedings, before the vast majority of costs on the appeal were incurred. Indeed, the Offer was available for acceptance before the Appellant even served its primary submissions in early April 2017. 13. Acceptance of the Respondent's Offer of Compromise would have necessarily resolved both the appeal and cross appeal in whole and on the indemnity basis. 14. That position is bolstered, it is submitted, by the several Offers of Compromise that were made in the proceedings below, which involved significant elements of compromise and were made a long time ago, again, before a substantial volume of costs was incurred. 15. If the Court were not minded to make such an order, the Respondent submits she should have the benefit of some variation to the order made to reflect her attempts at compromise and resolution of the appeal and, previously, the proceedings in the court below. In those circumstances the Respondent submits she should at least have the entirety of her costs of the Appeal and Cross Appeal, on the ordinary basis." 1. Metro North's submissions on costs were as follows: "3 It appears that the respondent relies upon offers served in the proceedings at first instance to ground its application regarding the costs of the appeal. It also appears to be the case that the respondent has not tied her order for indemnity costs to a date because of that reliance on offers made at first instance. Such an approach would not be permissible as the offers below were already the subject of a judgment and also because the offers at first instance were not reserved for the purpose of the appeal proceedings. If the order were made therefore it would have the effect of justifying an order on appeal based upon an extinct issue below in circumstances where the offers were never said to be relied upon for the purpose of the appeal. 4 On appeal the respondent had sought the judgment sum be increased to over $5,000,000. This was not achieved. The cross-appeal was wholly unsuccessful. 5 In the circumstances, if the Court were minded to make an order for indemnity costs on appeal the appellant submits that the respondent should have her 60% of her costs on appeal on the indemnity basis. This figure takes into account that the respondent did better her offer made in the appeal (because she held the figure awarded at first instance) however the complete failure of the respondent's case on the cross-appeal should be taken into account in reducing the percentage of costs awarded down to 60%." 1. On 21 May 2018, in response to a query from the Court, the solicitors for Metro North advised that it consented to the Court's making the orders sought by the respondent if the Court determined that that were the appropriate order and it consented to the Court's making the order indicated in para 5 of its written submissions if the Court determined that that were the appropriate order. 2. As indicated above, had the offer of compromise of 20 March 2017 been accepted, Ms Pierce would not have been entitled to pursue her cross-appeal. Nor would she have been entitled to claim costs of the proceedings below. She would have been entitled to $100,000 less than the judgment sum. There was a very substantial element of compromise in the offer. The offer of compromise was appropriately made in accordance with r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) as modified by r 51.47. 3. Division 3 of Pt 42 applies to the offer of compromise of 20 March 2017 (UCPR, r 51.48). Pursuant to r 42.14, unless the court otherwise orders, Ms Pierce is entitled to an order against Metro North for her costs of the appeal and cross-appeal assessed on the ordinary basis as from 21 March 2017 and thereafter on the indemnity basis. 4. I see no reason to order otherwise. The fact that Ms Pierce pursued her cross-appeal unsuccessfully is not a reason for ordering otherwise, any more than it would be a reason for her to be deprived of indemnity costs because at trial she sought a substantially greater award of damages than she obtained. Had the offer of compromise of 20 March 2017 been accepted, both parties' costs of the appeal and the cross-appeal after that date would have been avoided. 5. Metro North's consent referred to at [11] above is necessarily a consent to the setting aside of the costs order made on 14 February 2018. The order for costs made on 14 February 2018 can be discharged pursuant to UCPR, r 36.15(2). As costs will then not have been finally determined a new costs order can be made in its place. No issue arises under UCPR, r 36.16. 6. I propose the following orders: 1. Order that order (3) made on 14 February 2018 be set aside. 2. Order that the appellant pay the respondent's costs of the appeal and cross-appeal (including the respondent's costs of the notice of motion filed on 29 March 2018) on the ordinary basis up to and including 20 March 2017, and thereafter on the indemnity basis. ********** 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 May 2018