COSTS – MEDICAL NEGLIGENCE – SEPARATION OF ISSUES – DELAY BEFORE FINAL DISPOSITION OF PROCEEDINGS – COSTS PAYABLE FORTHWITH
The exercise of court’s discretion – whether costs should be payable forthwith in cases involving separate trials of issues and lengthy period of delay before final disposition of proceedings – McLean by her Tutor Nicole Shuttleworth v Dr Marshall  NSWSC 463
AUTHOR: YEVGENI SHKURATOV, ASSOCIATE
DECISION DATE: 24 APRIL 2015
SUPREME COURT OF NEW SOUTH WALES
SOLICITORS: STACKS GOUDKAMP (PLAINTIFF)
AVANT LAW (DEFENDANT)
The plaintiff was born on 4 August 2004, and at the time of these proceedings was 9 years of age.
There was agreement between the parties, in accordance with the medical opinion, that no attempt should be made to assess the plaintiff’s loss until she reached fourteen to sixteen years of age. The net result being a deferment of assessment of damages in the plaintiff’s claim for at least five years and probably more from the date of her application.
Proceedings were commenced in the Supreme Court of New South Wales, by way of Statement of Claim, on 7 June 2012.
In the proceedings, the plaintiff alleged that the defendant, negligently, failed, inter alia:
1. To diagnose dislocation and/or dysplasia of the left hip in the plaintiff earlier and in particular on 13 January 2006;
2. To heed adequately and/or have regard to the:
- dislocation of the left hip in the plaintiff; and/or
- leg length discrepancy in the plaintiff; and/or
- findings of an extra fatty fold at the top of the left leg in the plaintiff; and/or
- plaintiff being knocked-kneed, pigeon toed with a wobbly walk; and/or
- plaintiff intoeing, tending to trip; and/or
- plaintiff having swinging gait with a Trendelenburg gait, which were suggestive of a dislocation and/or dysplasia;
3. To properly examine and/or test the plaintiff;
4. To follow up on his findings;
5. To properly investigate the plaintiff, in particular by X-rays of her left hip; and
6. To take all reasonable care for the health of the plaintiff (collectively “the negligent acts by the defendant”).
It was also alleged, that as a result of the negligent acts by the defendant, the plaintiff’s un-diagnosed and untreated dislocation and dysplasia of the left hip was not adequately addressed until it was diagnosed in August 2009. As a consequence of this, and in particular the delay in diagnosis, the plaintiff now suffered from ongoing disabilities.
On 4 December 2013 the defendant filed a Defence, in which he inter alia:
1. Denied that he was negligent as alleged or particularised, or at all, in the Statement of Claim;
2. Denied that the plaintiff suffered injury, loss and damage; and
3. Alleged contributory negligence against the plaintiff (who at the time of the events taking place was less than 2 years old).
The plaintiff served four reports from three experts of different specialties, that went to the issue of liability and supported the plaintiff’s claim, The defendant served two reports, from two experts of different specialties, in support of his defence.
On 3 September 2013, the matter was heard before Barr AJ, in relation to the plaintiff’s application, pursuant to Rule 28.2 of Uniform Civil Procedure Rules 2005 (NSW) seeking Orders that the issue of liability be determined separately from the issue of damages.
On 23 September 2013, Barr AJ delivered his judgment, ordering, inter alia, that the issue of liability be determined separately from the issue of damages.
On 24 October 2013, the plaintiff served an Offer of Compromise, pursuant to rule 20.26 of Uniform Civil Procedure Rules 2005 (NSW)(“UCPR”), proposing a verdict for the plaintiff on the issue of liability, with an agreed discount on damages of ten per cent.
On 20 November 2013, the plaintiff filed and served an Amended Statement of Claim.
The defendant let the Offer of Compromise expire. On 28 November 2013, the defendant filed a Defence to the Amended Statement of Claim, admitting, inter alia, that:
1. He breached his duty of care in provision of treatment to the plaintiff and that he failed to take all reasonable care for the health of the plaintiff; and
2. By reason of his admitted breaches of duty care, the plaintiff suffered injury, loss and damage.
In the Defence to the Amended Statement of Claim all allegations of contributory negligence were removed.
On 4 December 2013, a verdict and judgment in respect of liability was entered in the plaintiff’s favour.
The plaintiff, by Notice of Motion, sought orders that costs in respect of liability be payable forthwith, and on an indemnity basis from the time of making of the offer of compromise.
Rule 42.7 of UCPR provides:
42.7 Interlocutory applications and reserved costs
(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:
(a) costs that are reserved, and
(b) costs in respect of any such application or step in respect of which no order as to costs is made,
are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.
(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings.
The plaintiff sought that the court use its discretion pursuant to rule 42.7(2) to order that costs be payable forthwith and not at the conclusion of the proceedings.
Rule 42.34 of UCPR provides:
42.34 Costs order not to be made in proceedings in Supreme Court unless Court satisfied proceedings in appropriate court
(1) This rule applies if:
(a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and
(b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants.
(2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted.
The plaintiff submitted that rule 42.34 is only engaged when damages have been assessed, in reliance on the word “and” at the end of rule 42.34(1)(a). Thus, the court’s discretion to order the payment of costs of liability before completion of the proceedings was not affected by this rule. The plaintiff also submitted that any damages would exceed $500,000.00. Further, the plaintiff submitted that, even if the rule applied and the monetary threshold of $500,000.00 was not met, the commencement and continuation of the proceedings in the Supreme Court was warranted because of the weight of the issues involved in this case.
In deciding the plaintiff’s application in her favour and ordering that the defendant pay the plaintiff’s costs of the issue of liability forthwith, with any costs incurred in the period 25 October 2013 to 28 November 2013 to be paid on an indemnity basis, Hidden J relied on the following principles:
1. The three considerations relevant to the exercise of the court’s discretion pursuant to rule 42.7(2) of UCPR, were set out by Barrett J (as he then was) in the decision of Fiduciary Limited v Morning Star Research Pty Ltd , which dealt with a rule to the same effect, and these are:
- whether the costs relate to the determination of a discrete, separately identifiable aspect of the proceedings;
- whether there is found to be some unreasonable conduct on the part of the party against whom costs have been ordered; and
- whether a lengthy period is likely to elapse before the final disposition of the proceedings.
2. In exercising its discretion pursuant to rule 42.34(2) of UCPR, the court ought to consider:
- the factual complexity and any “not insignificant conflicts of evidence”;
- whether the plaintiff’s case is “at least arguable” and whether the questions raised are “by no means straight forward”;
- whether the plaintiff had succeeded on an “what was not a straight forward liability case” and whether there were “significant factual disputes and the liability experts also had significant differences of opinion”; and
- whether “by reason of the serious nature of the injuries the plaintiff was alleging and the effect of those injuries might have had” the plaintiff’s damages would have been much more substantial if he and/or she is successful;
Having considered the plaintiff’s and the defendant’s submissions, Hidden J, concluded:
“It may well be that the plaintiff will recover damages of $500,000.00 or more. However, even if she does not, there is clearly a basis for the exercise of the discretion to award her costs of the proceedings. Given the length of time before the matter can come to finality, I consider it appropriate that costs of the issue of liability should be payable forthwith…
…The costs will be on indemnity basis for the period from 25 October 2013 to 28 November 2013, and otherwise on the ordinary basis”. 
It is questionable whether in fact Hidden J had to give consideration to rule 42.34 of UCPR for the purposes of determining the plaintiff’s application. In this regard, Garling J in the decision of Zandata Pty Ltd v Riley examined the wording of this rule, in detail, where he stated:
“ It is to be observed that the rule states that it is only to have application in circumstances where:
“… a plaintiff has obtained a judgment against the defendant”
and where the judgment is:
“… in an amount of less than $500,000”.
 The terms of settlement did not include any judgment in favour of the plaintiff against the defendants, but on the contrary, expressed the agreement of the parties that there be a verdict for the defendants, and that there be, in effect, an order that the defendants were to pay Zandata the sum of $441,500.
 The correspondence between the parties prior to agreement upon the terms of settlement, make plain the solicitors’ concerns. In a letter from Gilchrist Connell of 12 March 2012, they said:
“We enclose proposed terms of settlement. In relation to Order 1, we propose that there be a verdict for the defendants, rather than simply a dismissal of the proceedings, because there may be some doubt as to whether Order 5 is effective as a release of our clients. However, as an alternative, our client is happy for Order 1 to be merely a dismissal of the proceedings if your client is willing to execute a suitable deed of release”.
 The ultimate agreement was on terms which provided a verdict for the defendants.
 The Offer of Compromise which was dated 1 February 2012, did not include any reference to a judgment in favour of the plaintiff, Zandata, but rather, as indicated earlier, simply stated:
“the defendants offer to compromise the claim made by the plaintiff by paying the sum of $421,500 exclusive of costs.”
 In those circumstances, the precondition for the application of r 42.34 namely, the existence of a judgment in an amount of less than $500,000 has not been established. The rule relied upon by the solicitors to support their submission does not do so.”
In the present case, the condition precedent for the operation of rule 42.34 of UCPR did not exist, namely a judgment in the amount of less than $500,000.00, hence, its provisions to the plaintiff’s case were irrelevant. The defendant’s submissions based upon this rule ought to have been rejected.
 NSWSC 463.
  NSWSC 463, at .
  NSWSC 463, at .
  NSWSC 463, at  and .
 NSWSC 432, 55 NSWLR 1;  NSWSC 463, at .
 State of New South Wales c Quirk [2012[ NSWCA 216, at ;  NSWSC 463, at .
 Gales Holdings Pty Ltd v Tweed Shire Council (No 2)  NSWCA 458, at ;  NSWSC 463, at .
 Gangi v Boral Resources (NSW) Pty Ltd (No 3)  NSWSC 1388, at ;  NSWSC 463, at .
 Milich v Council of the City of Canterbury (No 3)  NSWSC 1280, at  and ;  NSWSC 463, at .
  NSWSC 463, at  and .
  NSWSC 49, at  to .