Raad v VM & KTP Holdings Pty Ltd as Trustee for VM & KTP Nguyen Family Trust (No. 2)

1. [1]

   On 29 June 2016 I gave judgment for the Plaintiff for $75,547: Raad v VM & KTP Holdings Pty Ltd as Trustee for VM & KTP Nguyen Family Trust [2016] NSWSC 888 (“the principal judgment”). The matter was adjourned to hear submissions on costs in the light of the judgment sum and r 42.34 Uniform Civil Procedure Rules 2005 (NSW).

2. [2]

   Subsequently, the Defendant filed a Notice of Motion on 3 August 2016 seeking orders staying the judgment pending the determination of what costs are payable by either party, an order pursuant to r 42.34 UCPR that the Plaintiff is not entitled to any costs of the proceedings, an order pursuant to r 42.15 that the Plaintiff pay the Defendant’s costs from 5 September 2014 on an indemnity basis and an alternative order that the Defendant pay the Plaintiff’s costs up to 4 September 2014 with the Plaintiff paying the Defendant’s costs on an indemnity basis from that date.

3. [3]

   In an affidavit of the Plaintiff’s solicitor sworn 17 August 2016 a claim was made by the Plaintiff’s solicitors for a lien over the judgment sum.

4. [4]

   Accordingly, there are four issues to be determined:

(1) The Plaintiff’s costs

1. [5]

   The parties were agreed in the first instance that because the judgment did not exceed $100,000 the Plaintiff’s costs were limited under s 338 Legal Profession Act 2004 (NSW). That section relevantly provides:

2. [6]

   Although the Legal Profession Act 2004 was repealed by Legal Profession Uniform Law Application Act 2014 (NSW) clause 59 of the Legal Profession Uniform Law Application Regulation 2015 (NSW) provides:

3. [7]

   The Plaintiff’s lawyers are limited therefore to costs of $15,109 plus disbursements. Counsel’s fees are not disbursements for the purpose of the section and are included in the figure of $15,109.

4. [8]

   The second issue in relation to the Plaintiff’s costs concerns r 42.34 UCPR. Rule 42.34 provides:

5. [9]

   It is necessary to say something about the history of the proceedings.

6. [10]

   The proceedings commenced by a Statement of Claim filed in the District Court on 9 May 2013. A Defence was filed on 18 June 2013 that included an objection to the District Court’s jurisdiction under s 51(2)(b) of the District Court Act 1973 (NSW). The effect of the objection was to limit the District Court’s jurisdiction to $750,000. The matter proceeded in the District Court and was fixed for hearing on 27 May 2014.

7. [11]

   On 9 May 2014 the Plaintiff filed a Summons in this Court to transfer the proceedings to this Court. A Schedule of Damages was prepared totalling a little less than $1.3 million plus costs.

8. [12]

   On 20 May 2014 an order was made transferring the proceedings to this Court, there being no objection from the Defendant. It is necessary to examine the state of the medical evidence at or about the time of the transfer.

9. [13]

   In the principal judgment I summarised the views of Dr Giblin and Dr Winer who examined the Plaintiff in 2012. Dr Giblin’s conclusions are set out at [74] and [75] of the principal judgment and Dr Winer’s conclusions are at [80]-[82] of that judgment.

10. [14]

    The Plaintiff was examined by Dr Elias Matalani, a consultant occupational physician, on 26 August 2013. Dr Matalani concluded that the Plaintiff suffered an acute crush fracture of T5 with a further fracture at T3. He said the fall on 13 June 2011 had been a substantial contributing factor to the development of the Plaintiff’s then back disabilities. Dr Matalani found that he was unfit to return to his pre-injury occupation as an electrician’s labourer but he was fit for permanently modified duties with restrictions that avoided prolonged standing, repetitive bending of the spine, heavy lifting and heavy manual handling activities. Dr Matalani considered the Plaintiff would need the involvement of a rehabilitation provider and that he was likely to find it difficult to obtain suitable employment in the open labour market because of his very limited education, poor English and his illiteracy.

11. [15]

    The Plaintiff was also examined by Dr Robert Adler, another rehabilitation specialist, on 6 August 2014. Dr Adler considered that x-rays of the Plaintiff’s lumbar spine taken in May 2013 were consistent with his complaints of low back pain and he said that there were no pre-existing spinal conditions in relation to the mid-thoracic fracture complaint. Dr Adler thought that he would not be suitable to return to his pre-existing employment. He thought he was fit for work in a limited range of occupations given his unskilled work background and illiteracy.

12. [16]

    Apart from Dr Adler’s report that was largely the state of the Plaintiff’s medical evidence at the date of transfer to this Court. With Dr Adler’s report it was also the state of the Plaintiff’s medical evidence at 20 February 2015 being the date the proceedings were fixed for hearing in this Court. Although the opinion of the doctors relied upon the Plaintiff’s complaints to a substantial extent there was objective evidence that pointed to the fall being the cause of the disabilities. The Plaintiff had had undoubted fractures at T3 and T5. It does not appear that any of those doctors, at that time, identified that the Plaintiff suffered from pre-existing Scheuermann’s Disease. (Of the Defendant’s doctors, Dr Maxwell did identify this congenital condition and Professor Jones thought that there was a predisposing factor including pathology to explain the Plaintiff’s complaints.) In the light of the medical evidence to which I have referred, the substantial claim for economic loss both past and present made it not unreasonable for the proceedings to be brought into this Court where there was objection on the Defendant’s part to the District Court’s jurisdiction being increased.

13. [17]

    Things changed considerably on receipt of the joint report of the rehabilitation doctors dated 20 August 2015 and the joint report of the orthopaedic surgeons on 26 August 2015. It was those reports which were significant in leading to the relatively modest verdict that the Plaintiff was ultimately awarded.

14. [18]

    As noted in the principal judgment at [95], neither the rehabilitation specialists nor the orthopaedic specialists related the Plaintiff’s ongoing problems to the accident. The question for present purposes is, therefore, whether the continuation of the proceedings in this Court was warranted after those joint reports were received.

15. [19]

    In my opinion it was reasonable for the proceedings to remain in this Court given the impending hearing date of 26 October 2015 and in circumstances where the proceedings had been removed into this Court on reasonable grounds and without objection. I do not consider that r 42.34 UCPR should prevent a costs order in favour of the Plaintiff.

(2) The Defendant’s costs

1. [20]

   On 4 September 2014 the solicitors for the Defendant served an Offer of Compromise for the Defendant to pay the Plaintiff the sum of $320,000. On the same day a Calderbank letter was served offering the same amount. The Plaintiff did not accept the offer. That offer and the judgment ultimately ordered formed the basis for the Defendant’s seeking that the Plaintiff should pay the Defendant’s costs on an indemnity basis from 5 September 2014.

2. [21]

   Rule 42.15 provides:

3. [22]

   Because there is a challenge to the validity of the Offer of Compromise it is necessary to set out parts of the Offer of Compromise served. It relevantly provided:

4. [23]

   The Plaintiff submitted that the Offer of Compromise was not valid because it was not made in accordance with UCPR r 20.26 in the following ways:

5. [24]

   Rule 20.26 relevantly provides:

6. [25]

   Paragraph 3 of the Offer of Compromise was unnecessary because the claim was not one involving the Health Acts referred to. As the Plaintiff well knew, he was not entitled to the benefits of Medicare nor were there Centrelink deductions. In any event, there is nothing in r 20.26 that precludes the inclusion of paragraphs such as 3 and 4 in an appropriate case. Even if there were deductions the amount offered is specified.

7. [26]

   There was no obligation to provide particulars by the Defendant because the Defendant as offeror was making no claim on the Plaintiff. Rule 20.26(4) appears to apply only where the Plaintiff is the offeror. This is for two reasons. First, in the ordinary course a claim is made by a plaintiff and not a defendant. Secondly, r 42.14 (referred to in r 20.26(4)) is a rule which operates only where the offer has been made by a plaintiff.

8. [27]

   However, even if r 20.26(4) concerns offers by defendants, at the time of service of the Offer of Compromise medical reports from the Defendant’s doctors had been served as follows:

9. [28]

   It is not clear whether the Plaintiff is referring to r 20.26(2)(c) or (3)(c). However, the reference in paragraph 3 to the assessment or agreement as to costs did not contravene either sub-rule. It did not include an amount for costs and was not expressed to be inclusive of costs: (sub-rule (2)(c)). Sub-rule (3) makes specific provision for a statement concerning costs as agreed or assessed. In any event, paragraph 3 was a statement only of the time for the payment of the amount offered and costs if there was acceptance.

10. [29]

    The Plaintiff submitted that the time for expiry of the offer (28 days) was not reasonable because the matter had not been fixed for hearing in this Court and the joint reports had not been served. Reliance was placed on Pittorino v Yates [2009] NSWCA 87 and Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85. Those cases both concerned an Offer of Compromise made within two months of the trial and the position was, accordingly, governed by r 26(5)(b). The present Offer was governed by r 26(5)(a) and it complied with that part of the Rule. The distinction between the two paragraphs was emphasised by Tobias JA in Pittorino at [29].

11. [30]

    Nor is there any evidence that the Plaintiff requested the Defendant to keep the Offer open until some further event occurred (cf Pittorino at [22], [36] and [38]) or because the Plaintiff required longer to consider it. If r 20.26(4) applies to an offer by the Defendant the sub-rule makes provision for the offeree to give a notice saying that s/he is unable to assess the reasonableness of the offer because of a lack of particulars. It seems fairly clear why that was not done. The Plaintiff considered at that point and right up to the trial that he would recover well in excess of what the Defendant had offered. That was the risk he took in circumstances where reasonableness as to acceptance time was not a consideration when the Offer was served outside the two months period leading up to the trial.

12. [31]

    The Plaintiff relied on a number of authorities to submit that the Offer made was not a genuine offer, required capitulation on the Plaintiff’s part and was done simply to trigger the costs provision in r 42.15. These authorities included Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd (No 2) [2009] NSWCA 336; Robb Evans of Robb Evans and Associates v European Bank Ltd (No 2) [2009] NSWCA 170; Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141; Anderson Group Pty Ltd v Tynan Motor Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120 and Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344.

13. [32]

    The Plaintiff’s submission that the offer was not a compromise is difficult to understand. The submission was that when the Plaintiff was claiming $1.2 million an offer of $320,000 could not be said to be a compromise and, in fact, amounted to requiring a capitulation. However, the Defence filed by the Defendant disputed liability and specifically traversed issues of breach and causation. The Defence pleaded an obvious risk as far as the claim to warn was concerned (ss 5F and 5H of the Civil Liability Act 2002 (NSW)) and pleaded that any risk of injury was an inherent risk under s 5I of that Act. These defences were not without any merit although the Defendant was ultimately unsuccessful on liability. Further, the Plaintiff had the Defendant’s medicals that largely disputed causation for ongoing problems.

14. [33]

    In those circumstances, an offer by the Defendant in the face of a denial of liability, to pay $320,000 must be regarded as a compromise. Further, it was an invitation to the Plaintiff who was claiming $1.2 million to settle the proceedings on the basis of a compromise that would pay the Plaintiff $320,000 together with his costs.

15. [34]

    It has been accepted that an offer to “walk away” or its equivalent may be a compromise: Refrigerated Roadways at [17]; Dean v Stockland at [6] and [15]. What was offered in the present case could not be considered to be trivial or contemptuous (Robb Evans at [23]) and, on the basis of the Defendant’s medical reports at the time the Offer was made, was the offer of a substantial sum, albeit less than the Plaintiff considered his claim was worth.

16. [35]

    The Plaintiff relied principally on his submissions in relation to (c) and (d) above to say that it was not unreasonable for him to have rejected the offer. He also relied on what was said to be his reasonable refusal of the Calderbank offer for the same reasons. In my opinion, where a substantial sum was offered and where no request was made for the Offer to be kept open for a further period, whether to await the joint reports or otherwise, the Plaintiff’s refusal to accept the Offer was not reasonable.

17. [36]

    The Offer of Compromise was a valid one. I reject all of the objections to it. The result must be that r 42.15 operates to deny the Plaintiff his costs from 5 September and to require the Plaintiff to pay the Defendant’s costs on an indemnity basis from that time.

18. [37]

    Whilst it is not necessary, therefore, to consider the Calderbank offer, the conclusions in (c), (d) and (e) would result in a determination that the Calderbank offer was also valid.

(3) Stay of the judgment

1. [38]

   The Plaintiff agreed that it was appropriate that the judgment be stayed until the issue of costs had been determined. Accordingly, an order to that effect was made on 19 August 2016.

2. [39]

   Counsel for the Plaintiff informed me that a Notice of Intention to Appeal had been filed by the Plaintiff. In circumstances where, if the appeal is unsuccessful, there is a substantial likelihood that the Defendant would be entitled to set off costs against the Plaintiff’s judgment, subject to what appears below, there should be a stay until the determination of the appeal pursuant to s 135 of the Civil Procedure Act 2005 (NSW).

4. Solicitor’s lien

1. [40]

   The Plaintiff’s solicitor claims a lien over the Plaintiff’s judgment sum. The solicitor relies on what was said by Campbell J in Firth v Centrelink (2002) 55 NSWLR 451; [2002] NSWSC 564 particularly at [33]-[38].

2. [41]

   The position is conveniently summarised in Abbott v Pilot Development Cooperation Pty Ltd [2006] NSWSC 1178 by Bergin J (as her Honour then was) as follows:

3. [42]

   The Defendant does not dispute the principles in those cases nor that the solicitor has a lien. The Defendant’s point is only that the lien will arise when the solicitor’s proper costs including disbursements are properly determined as between him and the Plaintiff. At the present time, the Defendant submitted, there is no evidence as to what the solicitor’s costs and disbursements are. For that reason, the Defendant submits that the judgment sum should be paid into Court pending the determination of the solicitor’s entitlement to costs.

4. [43]

   Given the effect of s 338 of the Legal Profession Act on the costs recoverable by the Plaintiff’s solicitor, I do not think that there can be any doubt that if the solicitor is otherwise entitled, he will recover the costs of $15,109 being 20% of the judgment sum. However, the disbursements to which he is entitled at this time remain undetermined. Further, the precise contractual arrangements between the solicitor and the Plaintiff are not in evidence.

5. [44]

   I consider, therefore, that the appropriate course is what the Defendant suggests, namely, that the whole of the judgment sum should be paid into Court until such time as the solicitor’s right to costs and disbursements are properly determined.

6. [45]

   Once the issue of the lien has been resolved it may be that the Defendant is entitled to set off its entitlement to costs against the Plaintiff’s judgment: Australian Beverage Distributors v Evans & Tate Premium Wines Pty Ltd [2006] NSWSC 560; (2006) 58 ACSR 22 at [68]-[70] (this matter not disturbed on appeal: Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2007) 69 NSWLR 374; [2007] NSWCA 57; see also Chaina v Presbyterian Church (NSW) Property Trust (No. 26) [2014] NSWSC 1009 at [59]-[61].

7. [46]

   Although passing reference was made to setting off the costs in prayer 2 of the Defendant’s Notice of Motion, the matter was not addressed in submissions apart from the suggestion by counsel for the Plaintiff that the question of set-off should be dealt with after the lien had been resolved.

8. [47]

   I will not make any order at the present time in relation to set-off. The issue will arise when the balance of the judgment is sought by some party to be paid out of Court. That cannot happen until the stay is lifted or expires as provided below.

Conclusion

1. [48]

   Accordingly, the orders I make are these: