East West Airlines Limited v Turner (No 2) [2010] NSWCA 159 (9 July 2010)

Last Updated: 9 July 2010

NEW SOUTH WALES COURT OF APPEAL

CITATION:
East West Airlines Limited v Turner (No 2) [2010] NSWCA 159


FILE NUMBER(S):
2009/00298331

HEARING DATE(S):
28 June 2010

JUDGMENT DATE:
9 July 2010

PARTIES:
East West Airlines Limited - Appellant
Joanne Turner - Respondent

JUDGMENT OF:
Allsop P Handley AJA Hoeben J

LOWER COURT JURISDICTION:
District Court

LOWER COURT FILE NUMBER(S):
DDT 428/01

LOWER COURT JUDICIAL OFFICER:
Kearns J

LOWER COURT DATE OF DECISION:
5 May 2009


COUNSEL:
J Turnbull - Appellant
DRJ Toomey - Respondent

SOLICITORS:
Curwoods lawyers - Appellant
Turner Freeman Lawyers - Respondent

CATCHWORDS:
COSTS - indemnity costs - Calderbank offer to compromise appeal - offer rejected by unsuccessful appellant - whether rejection of offer unreasonable - whether an entitlement to some costs on an indemnity basis because certain grounds of appeal had no prospects of success - whether discretion to award indemnity costs should be exercised.

LEGISLATION CITED:
Dust Diseases Tribunal Act 1989
Uniform Civil Procedure Act 2005
Uniform Civil Procedure Rules

CATEGORY:
Consequential orders

CASES CITED:
Calderbank v Calderbank [1976] FAM 93
Dean v Stockland Property Management Limited & Anor (No 2) [2010] NSWCA 141
East West Airlines Ltd v Turner [2010] NSWCA 53
Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited [1988] FCA 202; (1988) 81 ALR 397
Jones v Bradley (No 2) [2003] NSWCA 258
Re: Bond Corp Holdings Limited (1990) 1 WAR 465 at 478; (1990) 1 ACSR 350
SMEC Testing Services Pty Limited v Campbelltown City Council [2000] NSWCA 323

TEXTS CITED:


DECISION:
The respondent's application for indemnity costs is refused.
The respondent to pay the appellant’s costs of the costs application.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

2009/298331

DDT 428/2001

ALLSOP P

HANDLEY AJA

HOEBEN J

Friday 9 July 2010

EAST WEST AIRLINES LTD v Joanne TURNER (No 2)

JUDGMENT

1 THE COURT: Judgment in the appeal was given on 1 April 2010 (East West Airlines Ltd v Turner [2010] NSWCA 53). The successful respondent applied for a special order in relation to the costs of the appeal, i.e. that she have an order for indemnity costs of the appeal from 29 June 2009 confined to grounds 1 – 11 of the Second Further Amended Notice of Appeal. Written submissions were directed and received.

The Appeal

2 The respondent brought proceedings in the Dust Diseases Tribunal. She suffered injuries in March 1992 when working for the appellant as a flight attendant. She developed a persistent cough as a result of inhaling smoke, which entered the cabin of an aircraft in which she was travelling. The trial judge found that she was thereby exposed to dust, which caused her to develop her cough.

3 Under s 32 of the Dust Diseases Tribunal Act 1989 (the Act) an appeal is restricted to a party “who is dissatisfied with a decision of the Tribunal in point of law ...”. The substantial issues raised by the appellant were the jurisdiction of the Tribunal to hear the claim in that it argued that the smoke to which the respondent was exposed was not a dust and a practice issue as to when an amendment to the Statement of Claim took effect.

4 The Court dismissed the appeal. We held that in the circumstances of this case, the trial judge’s decision that the smoke to which the respondent was exposed was a dust was open to him and involved a question of fact not law. We also upheld the trial judge’s decision as to the date on which the amendment to the Statement of Claim took effect. The other issues in the appeal were dismissed largely, but not only, on the basis that they raised factual questions.

Factual Background

5 The decision of the Tribunal was given on 5 May 2009. On 16 June 2009 the appellant filed a Notice of Appeal. In order to understand the nature of the dispute it is necessary to briefly set out the correspondence which thereafter passed between the parties.

29 June 2009 – letter from respondent’s solicitors inviting appellant to withdraw 21 of the 29 grounds of appeal on the basis that they raised issues of fact not law.

29 July 2009 – respondent served motion to dismiss as incompetent the 21 grounds of appeal referred to in the letter of 29 June 2009.

4 August 2009 – Amended Notice of Appeal served. It deleted 16 of the 21 grounds of appeal referred to in the letter of 29 June 2009.

6 August 2009 – Directions Hearing. Notice of Motion stood over while solicitors for respondent considered the Amended Notice of Appeal.

14 September 2009 – Respondent’s solicitors sent letter proposing settlement of the appeal.

6 The letter was headed “Without Prejudice Save as to Costs”. It was in the following terms:

“We refer to previous correspondence.

Our client has already incurred considerable expense in relation to your Notice of Appeal, including the filing of a Notice of Motion that resulted in your client filing an Amended Notice of Appeal and attending on Directions Hearings in the Court of Appeal.

Our client maintains its position set out in our letter of 29 June 2009 that many of the grounds of appeal relate to findings of fact and are therefore incompetent. While some of the grounds of appeal have been withdrawn by way of the Amended Notice of Appeal, a large number of the remaining grounds of appeal continue to attempt to appeal findings of fact.

In an attempt to avoid further costs being incurred by our client we are instructed to put an offer of settlement in relation to the appeal on the basis that the appeal be withdrawn with each party to bear their own costs.

Orders have now been made by the Court in relation to the preparation of submissions. Further costs will be incurred. Given this, the above offer is open for a period of fourteen days. If the offer is not accepted and your client is not successful in its appeal, then our client will rely upon this letter in an application for indemnity costs from the date of this letter.”

7 The following correspondence then passed between the parties:

16 September 2009 – Appellant sought an estimate of the respondent’s costs and disbursements in the appeal to date.

2 October 2009 – Respondent provided estimate of its costs and counsel’s fees at $7,475.

15 October 2009 – Further Amended Notice of Appeal served. This deleted a further ground of appeal referred to in the letter of 29 June 2009 but added six additional grounds.

16 October 2009 – Appellant’s submissions served.

6 November 2009 – Respondent’s submissions served.

17 November 2009 – Respondent’s offer (letter 14 September 2009) rejected by appellant.

23 December 2009 – Second Further Amended Notice of Appeal filed and served. It deleted a further six grounds of appeal. The appeal proceeded on the basis of this document.

Submissions

8 The respondent submitted that grounds 1 – 11 of the Second Further Amended Notice of Appeal raised questions of fact not of law. She submitted that the appellant had been put on notice by the letter of 29 June 2009 that such was the case yet it had persisted with those or similar grounds which ultimately (and the respondent says inevitably) were dismissed. In the circumstances of this case the respondent submitted that the appellant should have known that there was no real prospect of success in respect of those grounds of appeal. In those circumstances, she submitted that she should have her costs of that part of the appeal on an indemnity basis.

9 As an alternative, the respondent relied upon the letter of 14 September 2009. Although this letter was not in terms expressed to be made in accordance with Calderbank v Calderbank [1976] FAM 93 the respondent submitted that it had that effect. It submitted that there was a real element of compromise in the offer and that it was unreasonable in the circumstances for the appellant to reject it. The unreasonableness arose from the appellant’s failure to recognise that these grounds of appeal, for the reasons set out in the letter, raised issues of fact not law. Accordingly, the respondent submitted, that she should have her costs on an indemnity basis in respect of those grounds of appeal which raised issues of fact, i.e. grounds 1 –11.

10 In relation to the letter of 14 September 2009, the appellant did not dispute that it operated as a Calderbank offer, nor did it dispute that it contained a real element of compromise. The appellant challenged its effectiveness, however, on the basis that in terms it referred to the grounds of appeal challenged in the letter of 29 June 2009 most of which had by that time already been removed by the Amended Notice of Appeal. The appellant submitted that there were such significant differences between the Second Further Amended Notice of Appeal and the original Notice of Appeal that the reliance by the respondent in its offer on the letter of 29 June 2009 was largely irrelevant in the context of the issues which were actually argued in the appeal.

11 The appellant also submitted that the offer of 14 September 2009 made no reference to the practice issue which was significant in the appeal and which if it had been decided in favour of the appellant, would have led to its complete success. The appellant submitted that it was common ground that the practice issue raised questions of law.

12 In answer to the respondent’s submission that the appellant had no prospects of success in relation to those grounds of appeal which were ultimately held to raise issues of fact, the appellant submitted that if that were so, the respondent could and should have pursued the option of striking out those parts of the Second Further Amended Notice of Appeal which she said fell into that category. It submitted that the respondent’s failure to do so was an implicit acceptance that these grounds were arguable.

Consideration

13 This Court has held on a number of occasions that a Calderbank offer does not trigger an automatic order for indemnity of costs. The correct approach to such offers is:

“The making of an offer of compromise in the form of a Calderbank letter ... where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the Court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure. (SMEC Testing Services Pty Limited v Campbelltown City Council [2000] NSWCA 323 Giles JA at [37]).

14 This statement of principle was unanimously approved in Jones v Bradley (No 2) [2003] NSWCA 258 at [8 - 9].

15 The question for the Court is whether in the particular circumstances of this appeal, it was unreasonable for the appellant to refuse the offer. We have concluded that it was not unreasonable. The offer required the appellant to withdraw the whole of the appeal. The appeal raised an important practice issue in relation to amendments made under the Uniform Civil Procedure Act 2005 and under the Uniform Civil Procedure Rules. The particular issue had not previously been decided. There were persuasive arguments which supported the submissions of both parties on the issue.

16 Moreover, as the appellant submitted, the final form of the Second Further Amended Notice of Appeal was significantly different to that referred to in the letter of 24 June 2009 and in the offer. The final form of the Notice of Appeal was not susceptible to the criticisms made by the respondent of the first Notice.

17 In the exercise of its general discretion the Court can award costs on an indemnity basis if it appears that proceedings have been commenced or continued in circumstances where a party should have known that there was no real prospect of success (Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited [1988] FCA 202; (1988) 81 ALR 397 at 400 – 1; Re: Bond Corp Holdings Limited (1990) 1 WAR 465 at 478; (1990) 1 ACSR 350 at 363-4). This applies to a party pursuing an appeal.

18 However, as was said in Dean v Stockland Property Management Limited & Anor (No 2) [2010] NSWCA 141 at [43]:

“Care must be taken, however, lest parties be unduly deterred from bringing or defending proceedings for fear that they will retrospectively be found to have not been justified in doing so. Uncertainty in outcome is not enough, and what appears certain at the time of judgment does not necessarily have that character at an earlier time.”

19 It is true that Grounds of Appeal 1 – 11 were dismissed substantially on the basis that they raised issues of fact. There was, however, scope for argument to the contrary. This was particularly so when there was an earlier decision of the Dust Diseases Tribunal which held that smoke was not a dust (Stelzer v WD & HO Wills (Australia) Limited, Maguire J, 24.2.1995). It follows that we do not think that on a proper appreciation of the circumstances of this appeal, the appellant’s submissions in respect of Grounds of Appeal 1 – 11 were so untenable that indemnity costs should be ordered. Ultimately the appellant’s submissions did not carry the day but there was an arguable basis for supporting its position.

20 We decline to vary the costs order previously made. The respondent’s application for indemnity costs is refused and the respondent should pay the appellant’s costs of the costs application.

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LAST UPDATED:
9 July 2010