AAI Limited v Josipovic (No 2)
[2013] NSWSC 1577
•01 November 2013
Supreme Court
New South Wales
Medium Neutral Citation: AAI Limited v Josipovic (No 2) [2013] NSWSC 1577 Hearing dates: In chambers on the papers Decision date: 01 November 2013 Jurisdiction: Common Law Before: Campbell J Decision: (1) First defendant's application for indemnity costs is dismissed;
(2) Each party to bear its or her own costs of the application.
Catchwords: COSTS - offer of compromise purportedly made in accordance with r 20.26 Uniform Civil Procedure Rules 2005 (NSW) - application for indemnity costs pursuant to r 42.15A - whether offer made in public law claim in the Court's supervisory jurisdiction engages r 20.26 - whether an order dismissing the proceedings engages r 42.15A Legislation Cited: Civil Procedure Act 2005 (NSW)
Motor Accidents Compensation Act 1999 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)Cases Cited: AAI Limited v Josipovic [2013] NSWSC 1524
Attorney-General (NSW) v Quin [1990] HCA 21; 170 CLR 1
Dawson v ACP Publishing Pty Ltd [2007] NSWSC 542
Morgan v Johnson (1998) 44 NSWLR 578
Whitney v Dream Developments Pty Ltd [2013] NSWCA 188Category: Costs Parties: AAI Ltd (plaintiff)
Biljana Josipovic (defendant)Representation: Counsel:
MA Robinson SC (plaintiff)
JE Sexton SC with JK Trainor and J Lee (defendant)
Solicitors:
Curwoods Lawyers (plaintiff)
Gajic & Co (defendant)
File Number(s): 2013/140606
Judgment
In these proceedings an insurer challenged the validity of a certificate issued under s.94(4) Motor Accidents Compensation Act 1999 (NSW) (the Act) by a claims assessor of the Claims Assessment and Resolution Service in respect of her assessment of the first defendant's (the claimant) claim for damages for personal injury suffered in a motor accident.
The insurer's claims for relief were formulated in various ways in its amended summons. Essentially, it sought an order in the nature of certiorari setting aside the assessment certificate and a further order in the nature of mandamus remitting the claimant's application for reassessment according to law.
On 17th October 2013 I pronounced orders dismissing the proceedings and making the following order as to costs:
The plaintiff to pay the first defendant's costs of and incidental to the proceedings forthwith after they have been agreed or assessed.
My reasons are published with the medium neutral citation of [2013] NSWSC 1524.
As I pointed out at [10] of the principal judgment, the insurer's challenge to the validity of the certificate of assessment concerned the assessment made for future domestic assistance on a commercial basis. That head of damage was assessed at $75,996.60, in the context of a total assessment of $118,633.60 plus costs and disbursements (which the assessor allowed in the sum of $28,564.08).
As required by s.94(1)(b) the claims assessor made an assessment of the amount of damages, and in compliance with s.94(4) she issued the insurer and the claimant with a certificate as to the assessment, specifying the amount of damages and attaching a brief statement of her reasons for the assessment to the certificate (s.94 (5)).
By dint of s.95 of the Act, an assessment of the amount of damages for liability under a claim is binding on the insurer, and the insurer must pay the claimant the amount of damages specified in the certificate as to the assessment if the insurer accepts that liability under the claim and the claimant accepts the amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued.
Originally the insurer had challenged not only the validity of the certificate, but also, and alternatively, its liability to pay that amount under s.95. The latter alternative claim was withdrawn at the hearing before me.
The present application
The claimant is seeking to amend the order for costs she obtained to reflect the terms of r 42.15A of the Uniform Civil Procedure Rules 2005 (NSW) so that she will be entitled to costs on an indemnity basis from 21st August 2013, "the day following the day on which the offer was made".
The application has been dealt with in Chambers on the basis of written submissions provided by the parties. The claimant's application for indemnity costs is based upon what is said to be an offer of compromise made in accordance with r 20.26 UCPR in the following terms:
The [claimant] offers to settle this action on terms that a verdict or judgment be entered against the [insurer] in favour of the [claimant] in the sum of $125,000 plus costs as agreed or assessed.
The offer was expressed to be open for 28 days from 20th August 2013, the date of the letter serving it.
From the written submissions of the parties, two issues arise:
(a) First, whether an offer in those terms made in a public law claim in the Court's supervisory jurisdiction effectively engages r 20.26 UCPR; and
(b) Second, whether the order dismissing the proceedings is "an order ... on the claim no less favourable to the [claimant] than the terms of the offer".
Obviously, these questions overlap.
The submissions of the parties
I take it to be common ground between the parties that the reference in the offer of compromise to "plus costs as agreed or assessed" is a reference to the costs of the proceedings in this Court, and does not offend r 20.26(2) UCPR in its current form, and accordingly the present case is not governed by the decision of the Court of Appeal in Whitney v Dream Developments Pty Ltd [2013] NSWCA 188.
After both parties had filed submissions complying with my directions, the claimant lodged a short written reply. I had not made a direction permitting this, but the reply followed the insurer's submission on the very same day. However the insurer objected, relying upon familiar authority prohibiting the lodgement of written submissions after the conclusion of an oral hearing in an appeal court without leave. In the event that I granted leave nunc pro tunc, it sought leave itself in a separate document to raise a new point, in chief, in opposition to the application. I decided to grant any leave that was necessary in both cases.
The claimant acknowledges that success in her application depends upon both compliance with r 20.26 and effective engagement with r 42.15A. She acknowledges that an offer must be one "to compromise any claim in the proceedings". She argues that the definitional provision of r 20.25 "contemplates special costs orders following the dismissal of a summons, and that the terms of Part 20.26(2)(a) of the UCPR imports wider application than only to actions for damages" (sic). She says r 20.26 is engaged because the reference to an offer "to settle this action" is an offer to settle the whole claim made by the plaintiff, and therefore sufficiently identifies the claim to which it relates. It proposes an order for disposal of the claim by way of monetary judgment and the amount of that monetary judgment is identified. Rule 20.26(2)(c) is not offended because no amount of costs is specified, and the offer is not expressed to be inclusive of costs. The offer bears a statement that the offer is made in accordance with the Rules and specifies that the offer is open for a period of 28 days, which the claimant argues is reasonable in the circumstances, having regard to the terms of r 20.25(5).
In relation to the "no less favourable" criterion, the claimant argues that the rules are legally capable of applying to a claim even where, as here, the plaintiff seeks no monetary relief. For the purpose of r 42.15A, the question is whether the order is in substance no less favourable to the claimant than her offer. I understood the argument to be that the relief sought by the insurer was directed to invalidating the assessment of damages for the purpose of having them re-assessed, not only "according to law", but also, even if only for that reason, in a lesser amount. Therefore, the effect of an order dismissing the proceedings was that the claims assessor's assessment (including the allowance for costs) stood, and bound the insurer. This result was manifestly more favourable to the claimant than her offer to accept a lesser assessment, including the allowance for costs, of $125,000.
There was nothing to stop the Court entering judgment for the lesser amount had the insurer accepted the claimant's offer. This Court is a court of ordinary jurisdiction in which proceedings in respect of a claim for motor accident damages "may be taken": s107 of the Act. By dint of s108(1)(b) of the Act, the claimant was "entitled to commence court proceedings" in respect of her claim because the claims assessor had issued the requisite certificate.
In its first submissions the insurer argued that the claimant's offer of compromise did not comply with r 20.26 because the offer, on any fair construction, was not an offer to settle a claim that was made in the subject proceedings. That the insurer sought to challenge the validity of the certificate as to the assessment of the amount of damages payable to the claimant under the Act was not to the point. The subject proceedings were concerned only with judicial review; there was no money at issue, nor were damages at issue. For these reasons it could not be said that the offer of compromise constituted a proper foundation for indemnity costs.
In reply, by leave, the claimant reiterated that the consideration that the insurer sought only orders in the nature of prerogative writs, and no monetary relief, did not preclude the parties from entering a consent judgment awarding damages to the plaintiff. In substance, a judgment dismissing the proceedings was more favourable to the claimant than the monetary offer because it left the insurer liable for the amount of the assessment of the claims assessor.
In its second set of submissions, by leave, and lodged after the time for making submissions fixed by my directions had expired, the insurer advanced a new ground. It submitted that the offer did not comply with r 20.26 because it did not adequately identify the orders proposed for disposal of the claim. In particular the claimant had not proposed any order invalidating the certificate as to the assessment of the amount of damages. Absent such an order the insurer would remain bound by the certificate, and therefore liable for the full amount. Judgment for the claimant for a lesser amount could not discharge this liability. For the same reason it argued the offer was not a genuine attempt to compromise its claim in the proceedings.
Decision
The parties were not able to refer to any precedent governing, or illustrating, the application of the rules about making offers of compromise, and the costs implications where an offer has been rejected, in proceedings where the only claim made is for judicial review of an administrative decision, and neither have my own researches turned one up. Accordingly, my task is no more complicated than applying the rules to the circumstance of the case.
The relevant rules are in the following terms:
20.26 Making of offer
(1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms.
(2) An offer under this rule:
(a) must identify:
(i) the claim or part of the claim to which it relates, and
(ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and
(b) if the offer relates only to part of a claim in the proceedings, must include a statement:
(i) in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or
(ii) in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and
(c) must not include an amount for costs and must not be expressed to be inclusive of costs, and
(d) must bear a statement to the effect that the offer is made in accordance with these rules, and
(e) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and
(f) must specify the period of time within which the offer is open for acceptance.
(3) An offer under this rule may propose:
(a) a judgment in favour of the defendant:
(i) with no order as to costs, or
(ii) despite subrule (2) (c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or
(b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or
(c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer.
(4) If the offeror makes an offer before the offeree has been given such particulars of the offeror's claim, and copies or originals of such documents available to the offeror, as are necessary to enable the offeree to fully consider the offer, the offeree may, within 14 days of receiving the offer, give notice to the offeror that:
(a) the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents, and
(b) in the event that rule 42.14 applies to the proceedings, the offeree will seek an order of the court under rule 42.14 (2).
(5) The closing date for acceptance of an offer:
(a) in the case of an offer made two months or more before the date set down for commencement of the trial-is to be no less than 28 days after the date on which the offer is made, and
(b) in any other case-is to be such date as is reasonable in the circumstances.
...
(8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer.
(9) An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides.
(10) A party may make more than one offer in relation to the same claim.
(11) Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer.
(12) A notice of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division.
20.27 Acceptance of offer
(1) A party may accept an offer by serving written notice of acceptance on the offeror at any time during the period of acceptance for the offer.
(2) An offer may be accepted even if a further offer is made during the period of acceptance for the first offer.
(3) If an offer is accepted in accordance with this rule, any party to the compromise may apply for judgment to be entered accordingly.
20.29 Failure to comply with accepted offer
(1) If the plaintiff, being a party to an accepted offer, fails to comply with the terms of the offer, the defendant is entitled:
(a) to such judgment or order as is appropriate to give effect to the terms of the accepted offer, or
(b) to an order that the proceedings be dismissed, and to judgment accordingly, as the defendant elects, unless the court orders otherwise.
(2) If the defendant, being a party to an accepted offer, fails to comply with the terms of the offer, the plaintiff is entitled:
(a) to such judgment or order as is appropriate to give effect to the terms of the accepted offer, or
(b) to an order that the defence be struck out, and to judgment accordingly, as the plaintiff elects, unless the court orders otherwise.
(3) If a party to an accepted offer fails to comply with the terms of the offer, and a defendant in the proceedings has made a statement of cross-claim or cross-summons that is not the subject of the accepted offer, the court:
(a) may make such order or give such judgment under this rule, and
(b) may make such order as to the further conduct of proceedings on the statement of cross-claim or cross-summons, as it thinks fit.
42.15A Where offer not accepted and judgment no less favourable to defendant
(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer.
(2) Unless the court orders otherwise:
(a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and
(b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis:
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.
The central contention upon which the insurer's first argument is based is that an offer to accept a discount on the damages and costs awarded by the assessor is not an offer to compromise any claim in the proceedings, because the insurer's claim consisted only of a challenge to the legality of the claims assessor's decision: Attorney-General (NSW) v Quin [1990] HCA 21; 170 CLR 1 at 35 - 6. However, the basis of the claim was that the decision was vitiated by jurisdictional error, or error on the face of the record consisting of legal error, in assessing the allowance to be made for a particular head of damage, namely, the allowance for future care. The insurer's claim extended to remitter for reassessment of the damages according to law. About such matters Brennan J said the following in Quin at 35 [17]:
The duty and jurisdiction of the court to review administrative action do not go beyond the declaration and enforcing of the law which determines the limits and governs the exercise of the repository's power.
To adapt his Honour's language from a preceding passage, the basis of the invocation of the Court's jurisdiction relating to judicial review in the present case was the assertion that the claims assessor's decision went beyond the power conferred by the Act which, by dint of s.94(1)(b), was "to make an assessment of... the amount of damages" payable to the claimant "being the amount of damages that a court would be likely to award".
But in my judgment, it does not offend the limitations on the Court's jurisdiction and power, which are founded upon the consideration "that the judicature is but one of the three co-ordinate branches of government"(Quin at 37 [20]), to recognise that the basal dispute between the parties was about the amount of damages payable. The insurer's legitimate purpose in challenging the legality of the decision of the claims assessor was not only to attain the proper satisfaction of an assessment of those damages according to law, but also, by that means, to bring about a reduction in the damages awarded by the assessor.
In this context, it is apposite to bear in mind that the purpose of the provisions of the rules relating to offers of compromise, and the consequential special costs rules which displace the general rule that costs follow the event, include the encouragement of "the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation": Morgan v Johnson (1998) 44 NSWLR 578 at 581F - 2D per Mason P. Parties, therefore, are required to give serious consideration to settling their disputes without resort to judicial determination.
I repeat, the dispute here was not just about the legality of the claims assessor's decision. More fundamentally it was about the amount of damages payable. It is an object of the Act "to provide compensation for compensable injuries sustained in motor accidents, and to encourage the early resolution of compensation claims": s.5(1)(b) of the Act (my emphasis). To further this end, the Act requires the parties to a dispute, or a claim, to participate in an extra-curial process of claims assessment and resolution: Part 4.4; s. 89 of the Act. Whilst there are exceptions to the application of the various provisions, the detailed provisions made to further this purpose of the Act in this regard include: the duty of an insurer "to resolve a claim, by settlement or otherwise, as justly and expeditiously as possible"(s.80); the duty of an insurer to make a reasonable offer of settlement (s.82 contained in Part 4.3 of the Act); the requirement that the parties exchange relevant documents and participate in a settlement conference before initiation of the dispute resolution process (s.89A of the Act); if the settlement conference is unsuccessful the parties are to exchange offers of settlement before the claim can be referred for assessment (s.89C); and unless exempt, the claim must be referred for assessment by a claims assessor under the provisions of Division 2 of Part 4.4 (s.92). For the purpose of dispute resolution s.98 requires the Authority to establish the Motor Accidents Claims Assessment and Resolution Service. And by force of s.108 of the Act, court proceedings may not be commenced unless the claim is exempt, or an assessor has issued a certificate in respect of the claim under s.94 of the Act.
A practical difficulty of the system from an insurer's perspective is that the Act makes no provision for it to challenge the merits of the assessment of the amount of damages payable in respect of claims for which it has accepted liability, as it may be obliged to do under s.81 of the Act.
In my judgment, it is not irrelevant to consider that the purposes of the Motor Accidents Compensation Act favour treating the claimant's offer of compromise, involving a compromise of her entitlement to damages, in the form in which it was proposed, as an offer within r 20.26 UCPR. Doing so encourages "early resolution". For these reasons I would reject the insurer's first argument and accept the claimant's.
There is more in the new point and I have decided that the claimant's application fails on what might be seen by some to be a technical point raised by the insurer in its second submission. Sub-rule (2) of r 20.26 provides, inter alia, that an offer "must identify ... the proposed orders for disposal of the claim" to which it relates. This stipulation may be seen to dovetail with r 20.27 which, after acceptance of an offer by the offeree in writing, permits "any party to the compromise [to] apply for judgment to be entered accordingly": r 20.27(3) (my emphasis).
To adopt the phrase of Barrett JA in Whitney v Dream Developments at [52], it is"[a]n essential characteristic of any r 20.26 offer", in its current form, that it must identify the proposed orders for the disposal of the claim. As Bathurst CJ said in Whitney at [40], an offer will not engage r 42.15A if it is "not one compliant with r 20.26".
The rule, of course, contemplates a monetary judgment and requires in that regard the identification of the amount of any proposed monetary judgment. The subject offer complies to that extent. However I accept the insurer's argument that it was necessary for compliance with r 20.26 in form, as well as in substance, that an offer of compromise proposing a lessor amount of damages, in proceedings for judicial review of the decision of a claims assessor, also had to propose, as a minimum, an order setting aside the claims assessor's certificate. This is because by dint of s.95(2) of the Act, the amount of damages the subject of the certificate "is binding on the insurer, and the insurer must pay to the claimant the amount of damages specified in the certificate as to assessment" if the conditions specified in paragraphs (a) and (b) of that subsection have been satisfied, as they were in the present case. This follows in my view notwithstanding that s.89(2) of the Act provides that nothing in Part 4.4 "prevents a claim from being settled at any time" (emphasis added).
There are three ways of looking at this: first, because of s.95 it is necessary that an order be made setting aside the certificate to dissolve the insurer's liability for the amount specified in it; second, if the insurer's liability is not dissolved, the insurer remains legally liable for the excess over the reduced amount the claimant is prepared to accept by way of compromise, and accordingly, the offer does not represent a true compromise; third, as a matter of grammatical interpretation of r 20.26, the offer must specify the orders proposed for disposal of the claim actually made, and here, the claim actually made is for orders in the nature of prerogative writs.
One might draw an analogy with a damages appeal in the Court of Appeal. To settle a defendant's appeal that the damages are excessive, the orders necessary to dispose of the claim would include an order that the appeal be allowed (at least in part), that the judgment below be set aside, and that judgment be entered in favour of the plaintiff in a lessor amount.
It seems to me that a claimant who is a defendant to proceedings for judicial review of a certificate as to assessment may make an offer to accept a lessor sum of damages that complies with r 20.26 only if the claimant identifies both the order proposed to dispose of the claim for judicial review, and the amount of the monetary judgment proposed for damages. This seems to follow from the emphatic phrase, must identify.
I appreciate that s.73 Civil Procedure Act 2005 (NSW) and r 20.29 UCPR confer wide powers on the Court to enforce compromises and fashion appropriate orders for that purpose. And s.90 and r 36.1 confer great flexibility in making "such order as the nature of the case requires". But the present case is concerned with a different question. As the insurer did not accept the claimant's offer, no question of enforcing the compromise or fashioning an appropriate order arises: Dawson v ACP Publishing Pty Ltd [2007] NSWSC 542 at [21] - [22] per Nicholas J.
Had the offer of compromise been compliant, to state what may be obvious, I would have considered my order dismissing the insurer's claim for orders in the nature of prerogative relief no less favourable to the claimant than the terms of her offer. I would also have found that the offer was a genuine attempt to compromise the insurer's claim.
The claimant did not argue in the alternative that her offer of compromise could operate as a Calderbank offer. As in Whitney, there was nothing in the offer to indicate that it was intended to have effect other than as an offer under r 20.26. Nor was there anything either in the correspondence enclosing the offer, or other surrounding circumstances, to indicate the offer would be relied on in relation to the question of costs, except as a r 20.26 offer, should a more favourable result be achieved: Whitney at [42] and [59].
The parties made written submissions in accordance with directions I made on 18th October 2013. As I said earlier, the claimant made submissions in reply to the insurer's submissions on the same day as the latter were lodged. The insurer objected to those submissions, because I made no provision for them in my directions and the claimant had not first sought and obtained leave to make them "after the conclusion of the hearing". Notwithstanding this, if I granted leave for the reply, the insurer sought leave to make a further submission, not by rejoinder, but in chief. That is the point upon which the insurer has succeeded. As the insurer has lost on the point first taken, and succeeded only on the new point raised by leave, in dismissing the claimant's application for indemnity costs I consider it just that each party bear its or her own costs of the application.
My orders are:
(1) First defendant's application for indemnity costs is dismissed;
(2) Each party to bear its or her own costs of the application.
**********
Decision last updated: 01 November 2013
7
4
3