Stefanyszyn v Brown; Brown v Newcastle Private Hospital Pty Limited t/as Newcastle Private Hospital (No 2)

1. [1]

   I gave judgment in this matter on 21 June 2016 (see Stefanyszyn v Brown; Brown v Newcastle Private Hospital Pty Limited t/as Newcastle Private Hospital [2016] NSWSC 826). The parties are agreed that I should now give judgment in the sum of $322,000 in favour of Dr Brown. That figure represents 20% of the agreed settlement figure reached with the plaintiffs, inclusive of costs. What costs order should be made is in issue.

2. [2]

   Dr Brown brought his cross-claim in June 2014, before he settled the proceedings brought against him by the plaintiffs, members of Mrs Stefanyszyn’s family.

3. [3]

   Dr Brown now seeks an order that the Hospital pay his costs on the ordinary basis up to 4 April 2016 and thereafter on an indemnity basis. The Hospital’s position is that there should be no departure from the usual order under the Uniform Civil Procedure Rules 2005 (NSW), namely an order that it pay Dr Brown’s costs, as agreed or assessed.

4. [4]

   There is no question as to the Court’s power to make the costs order sought under the Civil Procedure Act 2005 (NSW). There is no issue that Dr Brown earlier made two Calderbank offers to the Hospital to settle the proceedings, on the basis that it would pay 20% of any settlement sum or judgment award made in favour of the plaintiffs, plus 20% of their costs, as agreed or assessed. Dr Brown’s second offer of 4 April 2016 re-opened the first offer made on 20 August 2014, which the Hospital had not accepted. By then the expert evidence on which Dr Brown relied had been served.

5. [5]

   The 2016 offer relevantly provided:

6. [6]

   This offer was also not accepted and on 18 April 2016 the Hospital made an offer of compromise under the Rules, on the basis that verdict be entered in its favour, with no order as to costs on Dr Brown’s cross-claim. The Hospital then also explained the basis of its view that it was not in breach of any duty which it owed Mrs Stefanyszyn. That was not a view to which it adhered, given admissions which it later made. That offer was not accepted by Dr Brown.

7. [7]

   Later Dr Brown settled the plaintiffs’ claims on terms which the Hospital accepted were reasonable and the Hospital also admitted that it owed Mrs Stefanyszyn a duty of care and that it had breached that duty, in identified ways (see June judgment at [3] and [18]). In the June judgement I concluded that the Hospital’s negligence was more extensive than it was prepared to admit, with the result that I assessed that its contribution to Mrs Stefanyszyn’s death had to be assessed to have been 20%.

Calderbank offers

1. [8]

   Calderbank offers do not create any entitlement to an indemnity costs order, even if a better outcome is achieved in the proceedings than that which the offering party proposed. What must be considered is whether the offer involved a genuine compromise and whether the Hospital acted unreasonably in not accepting the offer (see Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8]).

2. [9]

   The Hospital contended that the offer did not involve any genuine compromise, which was revealed by the fact that in the June judgment I concluded that the Hospital’s contribution to Mrs Stefanyszyn’s death had been what Dr Brown had earlier offered to accept. The only element of compromise was thus the costs of the cross-claim, which in April 2016, it was argued, was relatively minor. To that point the majority of Dr Brown’s costs would have been incurred in the principal proceedings.

3. [10]

   That may be correct, but Dr Brown’s costs on the cross-claim, of themselves must have been considerable, given that his expert evidence had by then been served and there had been an unsuccessful mediation. The Hospital was not then a party to the claim brought by the plaintiffs. If not settled, the cross-claim would also unarguably have involved very considerable additional costs, given what was in issue between it and Dr Brown, given the competing expert opinions.

4. [11]

   The result achieved at trial was no less favourable than Dr Brown’s offer.

5. [12]

   That I later reached the same conclusion as to the Hospital’s contribution to Mrs Stefanyszyn’s death does not provide a basis for concluding that what Dr Brown offered in May 2014 did not involve a real compromise, particularly given what I have said as to costs.

6. [13]

   As initiated the plaintiffs brought proceedings against both Dr Brown and the Hospital. They later withdrew the proceeding against the Hospital. Dr Brown did not settle with the plaintiffs until April 2016. There had earlier been an unsuccessful mediation. Their claim was a very significant one. His offer to the Hospital had been on the basis of a 20% contribution to any settlement.

7. [14]

   The Hospital’s case was that the offer required it to agree to bear 20% of any settlement arrived at by the plaintiffs and Dr Brown, its consent to the settlement not being required, only consent to any offer made by Dr Brown. While in April 2016 the Hospital’s expert evidence had been served, the experts had not met and produced a joint report. At the time of the offer the Hospital’s position was supported by the views of its experts and another surgeon, who had provided a report to the Coroner. In all of those circumstances, it was not unreasonable for it to have rejected the offer.

8. [15]

   Dr Brown relied on the fact that the Hospital finally did no better than the offer, to submit that its rejection had been unreasonable. Despite this, I am unable to conclude that it acted unreasonably in refusing the offer, given its terms, which had the effect of binding the Hospital to contribute to any settlement reached, as the result of the acceptance of any offer by the plaintiffs, even one which it did not consider to be reasonable. Had the terms of the offer been worded differently, a different conclusion may have been reached.

9. [16]

   True it is that the deficiency in the offer was not then drawn to Dr Brown’s attention. It would unarguably have been better and accorded with the Hospital’s obligations under s 56 of the Civil Procedure Act for the difficulty to have been raised with Dr Brown. The Hospital did not do so. Had it done so, however, that would unarguably have involved a rejection of the April 2016 offer.

10. [17]

    A counteroffer, had it been forthcoming, may have been accepted. That did not occur. That, however, is not a basis for concluding that the Hospital acted unreasonably in rejecting Dr Brown’s offer.

11. [18]

    In the result I am satisfied that there can be no just departure from the usual costs order in this case.

12. [19]

    For the reasons given, I order:

    1. (1)

       Judgment in favour of Dr Brown on the cross-claim in the sum of $322,000.

    2. (2)

       The Hospital is to bear Dr Brown’s costs of the cross-claim, as agreed or assessed.