Lynch v Sydney Ferries [2010] NSWSC 1463 (8 December 2010)

Last Updated: 20 December 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Lynch v Sydney Ferries [2010] NSWSC 1463


JURISDICTION:
Equity Division
Admiralty List

FILE NUMBER(S):
2009/287068

HEARING DATE(S):
8 December 2010

JUDGMENT DATE:
8 December 2010

PARTIES:
Orion Evan Lynch by his tutor Elizabeth Lynch (plaintiff)
Sydney Ferries Corporation (first defendant)
Peter Lynch (second defendant)
Keith Sutton (third defendant)

JUDGMENT OF:
Rein J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
A J Stone (plaintiff)
E G H Cox (defendants)

SOLICITORS:
Stacks/Goudkamp (plaintiff)
HWL Ebsworth Lawyers (first defendant)
Curwood Lawyers (second and third defendants)


CATCHWORDS:
PROCEDURE - costs - maximum costs orders and capped costs - statutory cap on recovery of costs in personal injuries actions - where plaintiff made offer of compromise to defendants which was not accepted - where plaintiff accepted defendants' offer of compromise for the same amount and containing offer to pay costs on the ordinary basis - whether plaintiff entitled to indemnity costs from the defendants to avoid capping of costs in Legal Profession Act

LEGISLATION CITED:
Legal Profession Act 2004 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)

CATEGORY:
Consequential orders

CASES CITED:
Shellharbour City Council v Johnson (No. 2) [2006] NSWCA 114; (2006) 67 NSWLR 308

TEXTS CITED:


DECISION:
Orders made on 24 November 2010 stand.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
ADMIRALTY LIST


Rein J

Date of Hearing: 8 December 2010
Date of Judgment: 8 December 2010

2009/287068 Orion Evan Lynch by his Tutor Elizabeth Lynch v Sydney Ferries Corporation and ors

JUDGMENT (EX TEMPORE)

1 REIN J: On 24 November 2010, I approved a settlement that had been reached between the plaintiff, an infant, through his tutor. The settlement included a provision that the defendants pay the plaintiff $10,000 plus costs as agreed or assessed: see annexure B to the affidavit of Mr Tom Goudkamp affirmed 22 November 2010.

2 The plaintiff had, on 6 May 2010, offered to compromise the claim for “$10,000 plus costs”: see annexure A to Mr Goudkamp’s affidavit. That offer was not accepted within the time specified for acceptance in the offer and in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). The offer which was accepted by the plaintiff was served on 29 October 2010.

3 The plaintiff’s solicitors are concerned that s 338 of the Legal Profession Act 2004 (NSW) caps their costs at 20 per cent of the amount recovered (that is $4,000) or $10,000, whichever is the higher. I infer from that concern that their claim for costs would exceed $10,000.

4 The plaintiff seeks to avoid the consequence of the legislative capping by inviting the defendants’ solicitors to agree that capping will not apply, or alternatively, by asking the Court to make an order that the defendants pay indemnity costs. This last argument is based on the proposition that the defendants did not accept the plaintiff’s offer of compromise of 6 May, and the plaintiff has now, by the orders made on 24 November, done at least as well as the offer of compromise of 6 May.

5 The defendants’ principal response is that the plaintiff accepted the defendants’ offer of compromise, and it contained an offer that costs would be paid on the ordinary basis, not the indemnity basis. It is not disputed that that is the effect of the terms of the offer of compromise made by the defendants, although there is a point made in respect of that offer by Mr A Stone of counsel, who appears for the plaintiff, to which I shall return.

6 Mr E Cox of counsel, who appears for the defendants, also submits that there is no power in the court now to order indemnity costs. He submits that the words in Rule 42.14 of the UCPR, which permits the Court to make an order for indemnity costs “if the plaintiff obtains an order or judgment on the claim”, contemplate a curial determination of a claim on the merits, and not by virtue of an agreement reached following an offer of compromise. Mr Cox draws attention to the fact that s 340 of the Legal Profession Act, which recognises that indemnity costs orders can override the effect of s 338, is not itself a source of power to make such an order: see Shellharbour City Council v Johnson (No. 2) ([2006] NSWCA 114; 2006) 67 NSWLR 308 at 311 per Hunt AJA, with whom Beazley and Tobias JJA agreed, which provides ample authority of this contention.

7 Alternatively, the defendants make submissions on the basis that if Rule 42.14 of the UCPR applies, the Court does have a discretion to otherwise order and it should otherwise order, first, because an extension of time was sought for the offer, secondly, had the offer been accepted by the defendants, they would not at that stage have been protected by any fund, and the settlement is, in any event, full value for the plaintiff’s claim and there was no relevant compromise.

8 Mr Stone argues that the defendants offered to pay costs but are now seeking to rely on the Legal Profession Act, in effect, to pay costs on a capped basis and that the defendants did not mention s 338 in their offer of compromise.

9 Section 338 provides for maximum costs which are fixed by the legislation, not by the parties or even by the Court, since by s 338(4)(b), the Court is prevented from ordering payment of costs in an amount that exceeds the maximum.

10 Mr Stone makes the point that the purpose of offers of compromise is to promote settlement and that it does not promote settlement to construe Rule 42.14 of the UCPR 42.14 “in such a fashion that only curial determination of cases gives rise to indemnity costs orders”. Mr Stone submits that an interpretation that is contended for by the defendants in relation to Rule 42.14 of the UCPR would discourage settlements on the part of plaintiffs.

11 In his submissions, Mr Stone has given an example of the way in which he says that the interpretation urged by the defendants would work an unfairness to plaintiffs: a plaintiff makes an offer of compromise of $150,000 plus costs, the defendant does not act on that offer, and 12 months later the defendant puts on its own offer of compromise of $150,000 plus costs to settle the litigation. In his example, Mr Stone says if the case is worth exactly $150,000, then the plaintiff must accept the defendant’s offer or risk an adverse costs order at trial, but in those circumstances, the plaintiff would not be entitled to indemnity costs despite the case having been prolonged for 12 months entirely by the conduct of the defendant.

12 In my view, the plaintiff, having accepted an offer of compromise of 29 October 2010 on the basis of a payment of $10,000 and payment of costs as agreed or assessed, is precluded from making an application for indemnity costs. The acceptance of the offer on that basis is reflected in orders 1 to 5 made by the Court by consent on 24 November. The Court has given effect to the agreement reached between the parties, and an application for indemnity costs is antagonistic to the agreement reached and inconsistent with the offer as accepted.

13 I am of the view that the reference to “obtains an order or judgment on the claim” in Rule 42.14 of the UCPR means a determination or order made after curial decision and cannot mean an order obtained by acceptance of an offer of compromise. If I am wrong in that view, I would as a matter of discretion exercise that discretion where the plaintiff has accepted an offer of compromise, and I would not make an order for indemnity costs in those circumstances.

14 It is clear that Rule 42.14 of the UCPR is designed to promote settlement. I think that it is not conducive to that purpose to permit a party who has accepted an offer of compromise which includes an offer to pay costs on the ordinary basis to apply for indemnity costs.

15 So far as the example that Mr Stone gave is concerned, if a defendant does not accept an offer that later seems attractive to it and repeats the offer in exactly the same terms or even more favourable terms, the defendant will not only be liable for the further costs if the offer is accepted by the plaintiff, but it faces the risk that the plaintiff will not accept the offer in those terms at that stage since the plaintiff will have the advantage of an unaccepted offer of compromise to deal with, and if the offer is accepted, the defendant will have to pay the further costs on the ordinary basis incurred since the previous occasion.

16 It would be a rare case in which a defendant makes an offer in precisely the same figure that has been put by the plaintiff, with the plaintiff accepting that offer, notwithstanding the advantage of a previously unaccepted offer of compromise. Very likely it would be a case where the plaintiff realistically has very little prospect of obtaining more than the amount offered.

17 In my view, the plaintiff’s arguments should be rejected and the orders that I made previously will stand.

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LAST UPDATED:
16 December 2010