The recent NSW Court of Appeal decision in Health Care Corporation Pty Ltd t/as Wollongong Private Hospital v Cleary (No 2) 1 offers a detailed analysis of the costs implications stemming from Offers of Compromise and Calderbank offers. It underscores the significance of the nature and timing of pre-trial offers to secure costs protection, both at trial and on appeal. This article looks at the case and the implications for practitioners.
Background
The respondent Graham Cleary (Mr Cleary) was admitted to Wollongong Private Hospital on 17 July 2020 for a revision L4/5 posterior lumbar fusion and nerve decompression.
When being transported from the ICU for an additional scan less than 24 hours after his surgery, his bed collided with a wall in the hospital corridor. A subsequent surgery on 23 July 2020 revealed a piece of bone graft material under the left L5 nerve, allegedly caused by the collision.
Mr Cleary alleged permanent impairment as a result and commenced proceedings in the NSW District Court against Health Care Corporation Pty Ltd trading as Wollongong Private Hospital (HCC).
The trial was presided over by Acting Judge Ainslie-Wallace in May 2023 and Judgement was in favour of Mr Cleary. He was awarded damages in the amount of $583,711.00.
Notably, Mr Cleary had made an Offer of Compromise on 26 July 2022 for $350,000 plus costs as agreed or assessed. Consequently, the court ordered HCC to pay Mr Cleary's costs on an ordinary basis up to and including 26 July 2022 and on an indemnity basis thereafter.
HCC's appeal
HCC appealed the District Court's decision, presenting 17 grounds of appeal. The primary issues revolved around factual findings and liability. The Court of Appeal dismissed all grounds relating to the facts, breach of duty, and causation.
HCC did however succeed on two grounds concerning the quantum, for which Mr Cleary had conceded. As a result, the appeal was partially upheld, reducing the damages awarded from $583,711 to $350,187.60. Both parties subsequently submitted competing written arguments on costs.
Court of Appeal costs decision
The Court of Appeal evaluated the exchange of Offers of Compromise and Calderbank offers between the parties, as well as the reasonableness of rejecting these offers at different stages. The court also considered exceptions to the general rule that costs follow the event.
On 26 July 2022, Mr Cleary made an Offer of Compromise of $350,000 plus costs, valid until 23 August 2022. Later, on 21 April 2023 at 1:43 PM, HCC made a Calderbank offer of $475,000 inclusive of costs, which expired at 4:00 PM the same day. The court found this offer unreasonable due to its brevity and lack of sufficient explanation, thus denying an indemnity costs order in HCC's favour from 22 April 2023.
Subsequently, on 28 April 2023, HCC made another Offer of Compromise for $350,000 plus costs, with a deadline of 5 May 2023. HCC argued that the minor difference of $189.60 between their offer and the final judgment should not significantly impact the application of UCPR 42.15. However, the court noted that Mr Cleary's final award was more favourable, given it did not account for the costs incurred after 27 July 2022. Thus, the court concluded it was reasonable for Mr Cleary to reject HCC's offer and maintained the primary judge's cost order.
Further considerations
The court also took into account a later Offer of Compromise from HCC, made on 22 December 2023 at 12:10 AM, proposing $350,000 plus costs. Mr Cleary's solicitors responded at 7:04 AM, indicating their inability to provide proper advice due to the comprehensive nature of the Notice of Appeal and the absence of detailed submissions from HCC. The court acknowledged Mr Cleary's position, noting that accepting the offer would have required him to concede on quantum without adequate legal counsel regarding the appeal's merits.
Consequently, the court upheld the primary judge's costs orders, requiring HCC to pay 75% of Mr Cleary's appeal costs, reflecting HCC's limited success in reducing the damages.
Key takeaways
This case serves as a critical reminder of the importance of meticulously crafting and timing Offers of Compromise. Such offers must include a clear explanation to justify their terms, be open for a reasonable period to allow proper consideration and be reasonable and genuinely attractive in the context of the litigation's stage and the costs incurred. The decision highlights the need for careful strategy in settlement negotiations, particularly in complex legal disputes with significant potential costs implications.
Footnote
/> 1 [2024] NSWCA 94.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
