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Cost Orders - a hollow victory?

Newsletter Article 03 May 2016

Norris v Routley [2016] NSWSC 147

In late December 2015, the plaintiff was awarded Judgment in her favour in the Supreme Court of NSW in the amount of $21,757 in a medical negligence case. On 2 March 2016, Justice Harrison handed down his decision on the issue of costs.

The general rule in relation to legal costs is that costs follow the event, therefore if the plaintiff receives a Judgment in her favour, she will also receive a cost order in her favour.  In this case the defendant opposed such an order and submitted that any cost order made should take into consideration the following submissions:

  1. The plaintiff was not entitled to any order for costs because she had commenced and continued proceedings in the Supreme Court, and in that jurisdiction a plaintiff must be awarded a Judgment of at least $500,000  to receive any order for costs (Rule 42.34 of the Uniform Civil Procedure Rules);
  2. That the defendant was entitled to indemnity costs by reason of the plaintiff’s rejection of the defendant’s Offer of Compromise in the amount of $100,000 plus costs; and
  3. The defendant should be granted an order for costs in relation to those costs incurred responding to the plaintiff’s claim for lost income which was abandoned on the second day of the Hearing.

Rule 42.34

The justification for this Rule is that the Supreme Court should be reserved for those matters in which damages will exceed the jurisdictional limit of the District Court, being $750,000 plus costs. The complexity of the matter may also be taken into consideration.  The Court held that the plaintiff was not entitled to have her costs paid by the defendant having regard to the application of this Rule. The case was not particularly complex and even if there may have been some doubt about the validity of the amount claimed at the outset, continuation of the proceedings in the Supreme Court could not be warranted following correspondence between the parties in October 2014 regarding the quantum of the claim. The plaintiff should have transferred the proceedings to the District Court.

Offer of Compromise

The plaintiff sought to argue that the Offer of Compromise was invalid. The Offer of Compromise was made on the basis that a Consent Judgment/Order be executed, without any admission of liability, and would have included a note that the terms of the agreement not be disclosed. The plaintiff argued inter alia that the non-disclosure clause contravened Rule 36.1A(2) of the UCPR and that the Judgment proposed did not determine all the issues in the proceedings as the non-admission of liability left that issue unresolved.  Harrison J agreed with the defendant and held that ‘the non-admission and non-disclosure terms were no more than notations’ that ‘did not require the Court to make orders that it was neither empowered nor permitted to make’ and that there was no merit to the plaintiff’s argument that the offer did not determine all the issues in the proceedings. 

The plaintiff also contended that in the event the Offer of Compromise was found to be valid, the order she obtained was more favourable than the defendant’s offer.  The plaintiff submitted that the proceedings were an attempt at vindication and that successful efforts to establish liability against the defendant could not be assessed in dollar terms.  An offer to settle the proceedings with an express non-admission of liability was therefore less than a full vindication of her decision to sue.  The Court did not agree with this argument and ordered that the defendant was entitled to indemnity costs. 

Loss of income claim

The defendant also made a claim for costs thrown away by the plaintiff abandoning her claim for lost income on the second day of hearing. This claim was also successful.

Implications

The plaintiff was awarded a Judgment of $21,757 but the defendant was not ordered to pay her legal costs. Subject to the cost agreement entered into with her solicitor, the plaintiff will still be liable to pay her own legal fees for a defended hearing, which will well exceed the Judgment awarded. Further, the plaintiff will also have to pay a significant proportion of the defendant’s legal costs.  After costs are taken into account, the apparent victory for the plaintiff in receiving a Judgment for $21,757, will ultimately result in the plaintiff owing a significant debt to the defendant and potentially her own lawyers. This case shows that there can be very serious implications for plaintiffs who do not make a realistic assessment of quantum. 


Kylie Agland, Partner
Sydney

Stacey King, Solicitor
Sydney

Newsletter Article 03 May 2016
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