Wei Fan v South Eastern Sydney Local Health District (No 3)

1. [1]

   HER HONOUR: This is a decision in relation to costs. On 31 August 2015, I delivered judgment in this matter: see Wei Fan v South Eastern Sydney Local Health District (No 2) [2015] NSWSC 1235. The plaintiff is Wei Fan. The defendant is South Eastern Sydney Local Health District. The plaintiff was legally represented up until May 2013. His solicitors drafted the further amended statement of claim and medical reports, instructed medical legal experts and obtained experts’ reports on damages.

2. [2]

   On 5 September 2014, Garling J listed these proceedings for a five day hearing commencing 16 March 2015. The hearing took place over 10 days being 16, 17, 18, 19, 20, 23 and 30 March 2015; 25, 26 and 28 May 2015. At the hearing, the plaintiff did not have legal representation. David Fan, the plaintiff’s son, spoke on behalf of his father. David Fan is in his final year of Law School. Judgment was entered in favour of the defendant. Costs were reserved.

3. [3]

   Orders were made that the parties provide written submissions and affidavit evidence in relation to costs. Both parties have now provided those written submissions. The defendant relies on two affidavits of its solicitor Simon Grey dated 7 September 2015 and 21 October 2015.

4. [4]

   The defendant seeks an order that the plaintiff pay its costs on a party/party basis up to and including 27 June 2013 and on an indemnity basis from 28 June 2013. The defendant also seeks an order pursuant to s 98(4) of the Civil Procedure Act 2005 (NSW) for a specified gross sum instead of assessed costs.

5. [5]

   The plaintiff’s primary submissions did not address the issue of costs except to draw this Court’s attention to the costs order made in his favour on 29 April 2010. The plaintiff in both his submissions in reply (dated 30/10/2015 and 2/11/2015), largely reproduces his earlier submissions. They seek to reagitate matters that were determined at trial. However, in his first submissions in reply the plaintiff at [15] submitted that the defendant should pay his damages, interest and costs of these proceedings. In the latter submissions in reply the plaintiff at [16] also seeks an order that the defendant pay the plaintiff’s damages, interest and costs of these proceedings.

6. [6]

   The defendant submitted that the plaintiff has not advanced any or any cogent reason why the defendant should not be entitled to its costs on an indemnity basis from 28 June 2013 and a gross costs order in the amount of $260,000.

7. [7]

   So before I deal with the overall costs of these proceedings, I shall deal with a discrete order for costs made on 29 April 2010.

Costs order – 29 April 2010

1. [8]

   On 19 February 2010, the defendant’s notice of motion dated 12 December 2008 came before Harrison J for hearing. The plaintiff was represented by Mr N Kirby of counsel. On 26 February 2010, Harrison J delivered judgment dismissing the defendant’s notice of motion and reserving the question of costs: see Fan v South Eastern Sydney and Illawarra Area Health Service [2010] NSWSC 123.

2. [9]

   On 24 April 2010, the costs hearing was heard by Harrison J. On 29 April 2010, his Honour delivered reasons and made an order that the defendant pay the plaintiff’s costs of the defendant’s notice of motion dated 12 December 2008: see Fan v South Eastern Sydney and Illawarra Area Health Service (No 2) [2010] NSWSC 343.

3. [10]

   The defendant agrees that the plaintiff is entitled to the costs of the notice of motion dated 12 December 2008, but that those costs ought to be absorbed into the gross sum costs order sought by the defendant. I will take into account that the plaintiff is entitled to costs incurred in defending this motion.

Overall costs of these proceedings

1. [11]

   The defendant submitted that since it has been successful in the litigation, the plaintiff ought to pay its costs of the proceedings pursuant to UCPR 42.1.

The law

1. [12]

   The starting point is s 98 of the Civil Procedure Act. It relevantly reads:

2. [13]

   Rules 42.1 and 42.15A of the Uniform Civil Procedure Rules 2005 (NSW) (”UCPR”) are relevant. They read:

3. [14]

   On 1 September 2015, the defendant’s solicitor reviewed Curwoods’ file, and has compiled a document entitled “Court Appearances/Costs Orders” (Annexure “A”, Aff. Grey, 7/9/2015) reflecting each Court listing of the proceedings prior to the substantive hearing in the proceedings which commenced on 16 March 2015. They are as follows:

4. [15]

   The defendant submitted that aside from the costs order made in the plaintiff’s favour on 29 April 2010, no costs order has been made in the proceedings to date which entitles the plaintiff to costs regardless of the ultimate outcome of the proceedings.

5. [16]

   Costs are discretionary. Costs usually follow the event. There is no reason to depart from the general rule. I order that the plaintiff is to pay the defendant’s costs except for those of 29 April 2010.

6. [17]

   The next issue to be determined is whether costs should be paid on an indemnity basis and/or a gross sum basis.

Offers of compromise

1. [18]

   The defendant made three offers of compromise, the first on 27 June 2013, the second on 16 July 2014 and the final one on 26 February 2015.

(a) The first offer of comprise - 27 June 2013

1. [19]

   On 27 June 2013, the defendant’s solicitors wrote to the plaintiff enclosing an offer of compromise. This offer of comprise proposed a verdict for the defendant with each party to bear its own costs. This offer was not accepted. This offer was made in accordance with the UCPR.

2. [20]

   The defendant submitted that this first offer of compromise was a genuine compromise in the circumstances, because the plaintiff would not have to bear the costs already incurred by the defendant and it could not be doubted, given the procedural history of the proceedings and its complexity up and to that date, that those would be considerable: see Melchior v Sydney Adventist Hospital Ltd (No 2) [2009] NSWSC 65, Hoeben J at [17].

3. [21]

   The defendant submitted that in the circumstances, unless the Court otherwise orders, the defendant is entitled to an order that the plaintiff pay its costs on a party/party basis up to and including 27 June 2013, and on an indemnity basis from 28 June 2013. According to the defendant, there is a prima facie entitlement to the successful defendant to a special order for costs and it is a matter for the unsuccessful plaintiff to displace that entitlement. The defendant further submitted that it is a matter for the unsuccessful party to show there are exceptional circumstances warranting an exercise of the discretion not to order costs on an indemnity basis: see Hollier v Sutcliffe (No 2) [2010] NSWSC 433, RA Hulme J at [6].

4. [22]

   In relation to the effect of the words “order otherwise”, in Leach v Nominal (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [46] to [48] McColl JA (with whom Gleeson JA and Sackville AJA agreed), stated:

5. [23]

   The defendant says that there is no evidence to support an “exceptional” ground here. Rather, to the contrary it says that there are a number of reasons why the plaintiff should be expected to pay the costs of the defendant. They are, first, that it was abundantly clear that the plaintiff had no interest in resolution of the proceedings. He maintained throughout the trial an (extraordinary) claim for damages in the order of $86,000,000; secondly, that at all times the plaintiff, and the lay witnesses called on his behalf, attempted to present his case “at its highest”, and there were significant questions of creditability addressed in the judgment; and thirdly, that insofar as the plaintiff relied upon medical evidence in support of his claim, that evidence, in particular the core reports of Professor Smith, was based not on a proper understanding of medical records, but upon information provided to Professor Smith in conference with the plaintiff and his family.

6. [24]

   Overall, in these circumstances, the defendant is entitled to the indemnity costs order sought: see Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208 at [9] (Macfarlan, Gleeson and Leeming JJA).

7. [25]

   The defendant says that if for any reason the first offer of compromise dated 27 June 2013 is held not to support an indemnity costs order, then the second offer of compromise dated 16 July 2014 ought to have effect and seeks orders that the plaintiff pay the defendant’s costs on a party/party basis up to and including 16 July and on an indemnity basis from 17 July 2014.

(b) Second offer of comprise - 16 July 2014

1. [26]

   On 16 July 2014, the defendant’s solicitors wrote to the plaintiff enclosing an offer of compromise. This offer of compromise provided for the making of a payment to the plaintiff in the sum of $100,000. This offer of compromise was an offer open for acceptance for a period of 14 days. The offer was made within two months of the day of commencement of the trial. This offer was not accepted.

2. [27]

   The defendant submitted that if the offers of comprise dated 27 June 2013 and/or 16 July 2014 are not held to support an indemnity costs order, then the third offer of compromise dated 26 February 2015 ought to have effect. If this situation arises then the defendant seeks orders that the plaintiff to pay the defendant’s costs on a party/party basis up to and including 26 February 2015 and on an indemnity basis from 27 February 2015.

(c) Third offer of compromise - 26 February 2015

1. [28]

   On 26 February 2015, the defendant’s solicitors wrote to the plaintiff and emailed David Fan enclosing a third offer of compromise in the sum of $250,000. This offer was not accepted.

2. [29]

   As previously mentioned, these proceedings were fixed for hearing on 5 September 2014. By that stage the plaintiff no longer had legal representation. At the time when the first and second offers of compromise were made, the plaintiff had not obtained his medical expert report of Professor Smith on liability (report dated 8/12/2014). So far as these first two offers of compromise are concerned, without the benefit of Professor Smith’s report the plaintiff was not in a proper position to evaluate his chances of success. Professor Smith’s report supported the plaintiff’s case. The third offer of compromise was made after the plaintiff had obtained Professor Smith’s report but before the hearing commenced. It was only after the conclave met and produced a report and then during the trial, when Professor Smith was shown various clinical notes he had not previously seen, that he revised his opinion. While I accept the third offer of compromise was more favourable than the judgment, after taking the above matters into account, in the exercise of my discretion I order otherwise. The defendant’s costs are to be paid on an ordinary not an indemnity basis.

A gross sum costs order

1. [30]

   Alternatively, the defendant says that this is a case where an order pursuant to s 98(4) of the Civil Procedure Act for a specified gross sum instead of assessed costs is appropriate.

2. [31]

   The defendant referred to Hamod v New South Wales [2011] NSWCA 375, where Beazley JA (with whom Giles and Whealy JJA agreed) stated at [816]:

3. [32]

   Recently, in Ghougassian v Fairfax Community Newspapers Pty Ltd [2015] NSWCA 307, Emmett JA stated at [62]:

4. [33]

   Further, the defendant submitted that this is a case where the assessment of costs will be protracted and expensive and that such expense will be incurred in circumstances where the plaintiff may not be able to meet a liability of the order likely to result from the assessment: see Hamod and Mainteck Services Pty Ltd v Stein Heurtey SA (No 2) [2014] NSWCA 214 at [13].

5. [34]

   In Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [22], Giles JA (quoted with approval in Hamod) stated:

6. [35]

   The defendant submitted that its professional costs and disbursements from 8 April 2012 (the date when the proceedings were commenced) incurred to date, including counsel’s fees, are $512,250.83. A breakdown of the costs and disbursements is as follows:

7. [36]

   In Chaina v Presbyterian Church (NSW) Property Trust (No. 26) [2014] NSWSC 1009 at [50(c)] and [51], Davies J stated:

8. [37]

   In Chaina at [56(b)] Davies J continued “As a broad rule of thumb, a successful party will recover 70% to 80% of costs assessed on the ordinary basis.”

9. [38]

   To ensure the Court can approach this task with the degree of confidence necessary, the defendant submitted that an order ought be made that the plaintiff pay its costs in an amount representing 50% to 60% of gross costs. The defendant submitted that these suggested percentages do not take into account the possibility of a special costs order as sought based upon any of the offers of compromise referred to above, but do take into account any tax credits available to it. However, to ensure that the plaintiff is not in any way disadvantaged by the making of a gross sum costs order, the defendant is prepared to accept the quantification of its costs within the range of 50% to 60% of gross costs regardless of any order which may be made in relation to its application for indemnity costs. Taking these matters into account, the defendant seeks a gross sum costs order in the sum of $260,000, which is approximately 50.76% of its costs incurred as at 7 September 2015. The defendant noted that 60% of the total costs incurred is approximately $307,350.

10. [39]

    The defendant seeks payment of the gross sum of $260,000 on the basis that it sufficiently takes into account the single costs order in favour of the plaintiff and represents a fair and appropriate compromise in relation to the assessment of the defendant’s costs for the purpose of a gross sum costs order.

11. [40]

    It is my view that a gross sum costs should be made because firstly, it unlikely that the plaintiff will be able to satisfy the liability to pay costs; secondly, it relieves the parties of having to undergo a protracted and expensive costs assessment process; and finally, the award of a gross sum costs order does justice to both parties. From the evidence of the solicitor for the defendant, Mr Grey, I am satisfied that the total amount of costs incurred by the defendant is $512,250.83. The breakdown of the figures are solicitors’ professional fees of $275,665.12, counsel’s fees of $177.238.60 and disbursements of $72,647.23, which are reasonable. The defendant seeks a lump sum of $260,000, which is approximately 50.76% of the defendant’s costs and which the defendant says takes into account the costs order made on 29 April 2010 in the plaintiff’s favour.

12. [41]

    I have deducted a further $10,000 from the lump sum to represent the costs order made in favour of the plaintiff on 29 April 2010.

13. [42]

    I order that the plaintiff is to pay the defendant the gross sum of $250,000 being the defendant’s costs of these proceedings.