Albrecht v Insurance Australia Ltd
[2016] ACTCA 58
•10 November 2016
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Albrecht v Insurance Australia Limited |
Citation: | [2016] ACTCA 58 |
Hearing Date: | 5 November 2015 |
DecisionDate: | 10 November 2016 |
Before: | Murrell CJ, Burns and Perry JJ |
Decision: | 1. Appeal Allowed with Costs 2. The Declaration of the Master made on 25 March 2015 and the Orders as to Costs made by the Master on 24 April 2015 be set aside and substituted by an order that “The originating application dated 6 February 2015 is dismissed with costs”. |
Catchwords: | STATUTORY INTERPRETATION - interrelationship between Part 4.8 and s 155(3) of the Road Transport (Third-Party Insurance) Act 2008 (ACT) – where mandatory final offer (MFO) was accepted after institution of proceedings – where proceedings were instituted to protect appellant’s position before expiry of limitation period – where acceptance of offer in MFO was embodied in consent judgment – whether cap on assessment of appellant’s costs under s 155(3) applies – where general words in statute were intended to bear a narrower meaning. |
Legislation Cited: | Australian Human Rights Commission Act 1986 (Cth) s 46PO Legislation Act 2001 (ACT) ss 139, 140 Road Transport (Third-Party Insurance) Act 2008 (ACT) ss 5A, 77, 84, 88, 90, 96, 97, 99 100, 101, 102, 104, 105, 112, 113, 115, 126, 128, 129, 136, 137, 139, 140, 141, 142, 143, 144, 150, 155 |
Cases Cited: | Alcan (NT) Alumina Pty Ltd v Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 |
Parties: | Jeffrey Albrecht (Appellant) Insurance Australia Ltd t/as NRMA Insurance (First Respondent) Ivan Habus (Second Respondent) |
Representation: | Counsel Mr R Crowe SC (Appellant) Mr A Black SC (Respondent) |
| Solicitors Maliganis Edwards Johnson (Appellant) Moray & Agnew (Respondent) | |
File Number: | ACTCA 15 of 2015 |
Decision under appeal: | Court: ACT Supreme Court Before: Mossop M Date of Decision: 25 March 2015; 24 April 2015 Case Title: Insurance Australia Limited & Anor v Albrecht; Insurance Australia Limited & Anor v Albrecht (No 2) Citation: [2015] ACTSC 68; [2015] ACTSC 94 |
THE COURT:
INTRODUCTION
Chapter 4 of the Road Transport (Third-Party Insurance) Act 2008 (ACT) (the Act) prescribes a process whereby the parties are required to undertake certain steps intended to facilitate a settlement of a motor accident claim if at all possible. As a part of that process, s 141 of the Act provides for the parties relevantly to exchange mandatory final offers before instituting proceedings in a court if the processes engaged under the Act to that point have failed to resolve the issues between the parties. Where a mandatory final offer (MFO) is not accepted, then depending upon the amount of any award of damages for personal injury by a court, s 155(3) of the Act imposes a significant cap upon the amount of any costs order which may be made in favour of the successful party.
The appellant, Mr Albrecht, accepted a MFO by the first respondent insurer, Insurance Australia Limited trading as NRMA Insurance (the NRMA), for damages for personal injury as a result of a motor accident, being comprised of $40,000 for pain and suffering and $45,000 for the balance of the claim. However, Mr Albrecht did so only after instituting proceedings in the ACT Magistrates Court shortly before the limitations period expired. Final consent orders were then entered at the request of and by the NRMA in the ACT Magistrates Court for the sum of $85,000.
This appeal lies in separate proceedings instituted in the Supreme Court by the NRMA for declaratory relief that s 155(3) of the Act applies to the assessment of costs relating to the consent judgment. Mr Albrecht contends that the Master erred in holding that, by reason of proceedings being on foot when the MFO was made and accepted, s 155(3) of the Act imposed a cap upon the amount of the costs recoverable by him under the consent orders and granting declaratory relief to that effect. The appellant also appeals from the order made below awarding the NRMA it’s costs of the originating application as agreed or assessed.
For the reasons explained below, the appeal must be allowed but on a substantive ground not argued before the Master. In our view, s 155(3) of the Act has no application where, as here, a MFO has been accepted irrespective of whether or not it was accepted after litigation was instituted and its terms are later embodied in consent orders made by a court. It follows that there is no cap upon the assessment of the appellant’s costs. The arguments for the parties were premised upon the assumption that in this event, the appellant’s costs are to be agreed or assessed on a party/party basis and include the appellant’s legal costs prior to the institution of proceedings.
BACKGROUND
(a) The motor accident claim
Mr Albrecht and the second respondent were involved in a motor vehicle accident on 21 October 2010. Mr Albrecht’s solicitors served documents on the NRMA, as the second respondent’s insurer, giving notice of a motor accident claim under the Act on 12 November 2010. The NRMA admitted that the second respondent had been in breach of his duty of care on 26 July 2011. That admission had the effect of confirming Mr Albrecht’s cause of action and hence extending the limitation period under s 16B of the Limitation Act 1985 (ACT) (Limitation Act) until 26 July 2014: see s 32, Limitation Act, and reasons of the Master at [6].
(b) The institution of proceedings in the ACT Magistrates Court
On 8 July 2014, Mr Albrecht commenced proceedings urgently in the ACT Magistrates Court in order to preserve his rights, given the imminent expiry of the limitation period. At that time, the parties had neither engaged in a compulsory conference nor exchanged MFOs, as required by ss 136(1) and 141(2) of the Act respectively. Nor had the parties sought dispensation from these requirements under ss 137(1) and 142 of the Act respectively. These matters were acknowledged by Mr Albrecht in the letter from his solicitors of 16 July 2014 enclosing by way of service the originating claim and statement of claim. The letter further stated that:
As you would be aware, the limitation period is prima face about to expire and it has become necessary for us to protect our client’s position by commencing proceedings notwithstanding non-compliance with these procedures.
In McIntosh v Hikechukwu [2011] ACTSC 131, Master Harper expressed the view that Section 150 [of the Act], by virtue of a suspected drafting error, does not confer power on the Court to grant leave for the commencement of proceedings on the basis of urgency in these circumstances (see paras 11 and 12).
By adopting the current course, our client is not seeking to avoid compliance with the procedures set out in Chapter 4 [of the Act] and we readily acknowledge it would be appropriate for the proceedings to be stayed until a period of 14 days after mandatory final offers have been exchanged (as per Sections 143 and 145 [of the Act]).
We note that this is the approach adopted by Master Harper in Racic v Haltiner [2010] ACTSC 63.
For the sake of clarity, we confirm we do not require you to file a Notice of Intention to Respond or a Defence until after mandatory final offers have been exchanged and will not take any steps adverse to your position in that regard without adequate prior notice.
Under these circumstances, we respectfully suggest that there is no need for an Application to the Court seeking an order that the proceedings be stayed pending compliance with the procedures set out in Chapter 4 of the Act.
The solicitors for the NRMA responded by letter on 7 August 2014 noting that the proceedings had been commenced despite the procedural obligations contained within the Act. On the basis of Mr Albrecht’s intention to fully comply with the procedural requirements, the NRMA advised that “we consider the matter is ready for compulsory conference and invite you to attend a conference at a mutually agreeable time.” The letter proposed that the conference be held at 2.00pm on 2 September 2014, and enclosed the certificate of readiness in accordance with s 139(1)(d) of the Act.
(c) Acceptance of the NRMA’s mandatory final offer
The parties attended a compulsory conference in accordance with s 140 of the Act on 5 September 2014 but failed to reach agreement. As a result, the parties exchanged MFOs by letters dated 5 September 2014. The NRMA’s offer was in the following terms:
In accordance with s 141 of the [Act], we are instructed to offer [Mr Albrecht] the sum of $85,000, plus costs as agreed or assessed, inclusive of any statutory payback, in accordance with the [Act] and Regulations, broken down as follows:
1.$40,000.00 for pain and suffering (general damages)
2.$45,000.00 for the balance of the plaintiff’s claim.
…
We confirm that this offer may only be accepted in writing, within 14 days, in accordance with s 143(2) of the [Act].
(Emphasis added.)
Mr Albrecht accepted the NRMA’s MFO on the last day of the 14 day period on 19 September 2014. Upon accepting the offer, Mr Albrecht had an enforceable right to recover his legal costs, albeit that the quantum of costs to which he was entitled was yet to be agreed or assessed on a party/party basis. It was not in issue that at this point in time, Mr Albrecht’s right to costs was not subject to any cap under the Act.
(d) The finalisation of settlement, including orders as to costs
By letter dated 24 September 2014 and received by the NRMA’s solicitors on 25 September 2014, Mr Albrecht’s solicitors indicated that Mr Albrecht’s costs were assessed on a party/party basis as $27,800 together with a claim for disbursements totalling $13,128.10.
Also on 25 September 2014, the NRMA wrote to Mr Albrecht’s solicitors enclosing a “General Form of Consent Judgment” and terms of settlement, together with other documents, and requested that these documents be executed and returned. The letter concluded by stating “[p]lease forward your assessment of costs and disbursements in due course.” In line with the terms of the MFO accepted by Mr Albrecht, the enclosed terms of settlement stated relevantly that by consent and without admission “Judgment be entered for the plaintiff against the first defendant and second defendant for [sic] $$85,000.00, inclusive of payments made and plus costs as agreed or assessed” (emphasis added). The general form of consent judgment was in the same terms, providing that:
The Court orders by consent that:
1. Judgment for the plaintiff in the sum of $85,000.00, inclusive of payments made and plus costs as agreed or assessed.
…
The judgment of the Court is that:
1.The plaintiff recover against the first defendant and second defendant $85,000.00, inclusive of payments made and plus costs as agreed or assessed.
Mr Albrecht’s solicitors duly signed the documents on 4 November 2014. The solicitors for the NRMA signed the terms of settlement and consent judgment on 10 November 2014 and they were entered by the ACT Magistrates Court on that day in the terms proffered.
(e) Disclosure by the NRMA of its view that s 155(3) of the Act applied to the appellant’s costs
Despite receiving the assessment of costs and disbursements and accompanying letter from Mr Albrecht’s solicitors on 25 September 2014, it was only on Wednesday 5 November 2014 that the solicitors for the NRMA responded taking issue with the basis on which Mr Albrecht’s solicitors were proceeding in this regard. In their response, the solicitors for the NRMA wrote that:
The defendant submits that section 155 of the [Act] applies to these proceedings, and that your client has been awarded an amount equal to the defendant’s mandatory final offer, such that section 155(3)(c) applies to the assessment of costs.
We note that we were only instructed to act in this matter after the commencement of court proceedings, and accordingly the only legal costs incurred by our client in this matter have been subsequent to the court action.
It is the defendant’s submission that the amount of legal costs actually recoverable by the plaintiff is Nil.
Nonetheless, the NRMA indicated that it was prepared to agree to payment of the appellant’s costs up to a total amount of $2,500 pursuant to s 155(3)(c) of the Act.
This was the first time that the NRMA had advised of its position on this issue. On 10 November 2014, Mr Albrecht’s solicitors responded denying that position. Nonetheless on 10 November 2014, the NRMA signed the consent orders and filed them in the ACT Magistrates Court.
It is, to say the least, unfortunate that the NRMA proceeded to file the draft consent orders despite being aware no later than 25 September 2015 that Mr Albrecht held a different view of the effect of the agreement insofar as it related to costs, and had apparently signed the settlement agreement and draft consent orders on the basis of that view. It is also, to say the least, unfortunate that there had been no mention in the NRMA’s MFO, settlement agreement, draft consent orders or correspondence before 5 November 2014 that it took this position with respect to the issue of costs. Yet in our view, the fact that the MFO was expressed in terms that costs would be as agreed or assessed plainly conveyed that the ordinary principles as to costs would apply on a party/party basis. We do not accept the NRMA’s submission that this should have been read as conveying that costs would be subject to a statutory cap and, indeed, that costs would be “nil”. We consider that if there was any intention by the insurer to rely upon s 155(3) when the MFO was made, it should have been clearly stated, particularly given that the statutory cap, understandably described by the appellant’s counsel as “draconian”, would significantly erode the amount of damages which the insurer was offering to pay. Mr Albrecht was entitled to decide whether or not to accept that offer, and ultimately to execute the documentation to give effect to that acceptance, properly informed that the NRMA had in mind relying upon s 155(3) of the Act and factoring that into his decision on whether or not the offer was acceptable.
It must also be borne in mind that it was the entry of the consent orders at NRMA’s instigation which was productive of the issue in this case. If, for example, Mr Albrecht had simply discontinued the proceedings consequential upon the parties executing a deed of settlement, this issue would not have arisen.
(f) The decision at first instance
Before the primary Judge, Mr Albrecht’s arguments focused upon whether the reference to an award of damages in s 155(3) of the Act was a reference only to an award based on an adjudication of the merits of the claim by a court. However, for the reasons set out below, it is unnecessary in this case to consider the question of whether or not the reference to an award in the context of this Act is constrained in this way. Rather, the issues on appeal are resolved by the fact that Mr Albrecht accepted the NRMA’s MFO as a consequence of which s 155(3) does not apply.
CONSIDERATION
(a) The statutory scheme
As noted by the Master at [21] of his reasons, the relevant provisions of the Act to be applied are those which appeared in Reprint 12 of the Act, which predates the amendments to ss 144 and 155 of the Act by the Road Transport (Third-Party Insurance) Amendment Act 2012 (ACT).
The objects are set out in s 5A which relevantly reads that:
The main objects of this Act are—
(a)to continue and improve the system of compulsory third-party insurance, and the scheme of statutory insurance for uninsured and unidentified vehicles, operating in the ACT; and
…
(c)to keep the costs of insurance at an affordable level; and
….
(e)to encourage the speedy resolution of personal injury claims resulting from motor accidents; …
In furtherance of these objects, Chapter 4 of the Act sets out a process which is intended to facilitate the speedy settlement of disputes with a view to avoiding, if possible, the need to institute proceedings in a court. This regime applies with respect to motor accident claims, being claims for damages for personal injury caused by a motor accident (s 77). We note that in the interim, while these processes are on foot, Part 4.6 of the Act provides for the payment of expenses and provision of services in certain circumstances. Thus, where the respondent admits liability and the motor accident was reported to the police, the respondent must pay the injured person’s medical expenses which are reasonably incurred by reason of the accident (ss 121 and 122). The respondent may also make rehabilitation services available to the claimant, the costs of which may be taken into account in assessing damages where notice is given (ss 126 and 128).
It is convenient to summarise key elements of the pre-action scheme prescribed by the Act (leaving aside complexities where multiple respondents may be involved which are not relevant here).
First, Part 4.2 entitled “Motor Accident Claims Procedures” sets out a number of steps which it is intended be undertaken before proceedings are instituted in a court as follows.
(a)Before instituting court proceedings for a motor accident claim, the claimant must give written notice of the claim to the respondent which contains certain information and authorises the respondent to have access to prescribed records and sources of information (s 84).
(b)Unless the respondent considers that it is not properly a respondent for the claim, a respondent must respond within a month under s 90 or seek further information if it cannot respond on the information provided (s 88). Section 90 requires the respondent to state whether it is satisfied that the notice of claim complies with the requirements of s 84 and if not, what more is required, and to state whether the insurer is prepared (without admitting liability) to meet the reasonable and appropriate costs of the claimant’s rehabilitation.
(c)Section 96 provides that a claimant “cannot proceed with the motor accident claim” if the claimant has not given the respondent a complying notice of claim.
(d)Under s 97, a respondent must within six months of receiving a complying notice of claim, take any reasonable steps to find out about the accident, tell the claimant if the liability is admitted or denied, respond to any written offer of settlement from the claimant (or invite the claimant to make an offer), make “a fair and reasonable estimate of the damages” to which the claimant would be entitled, and either make a written offer or counter-offer, or settle the claim by accepting the claimant’s offer. Any offer or counter-offer is to be accompanied by medical reports, assessments of capacity and other material, including documents relevant to assessing economic loss, in the offerer’s control or possession that may help the other person make a proper assessment of the offer.
(e)The recipient of an offer or counter-offer must respond within three months (s 97(3)).
Secondly, Part 4.3 of the Act gives greater efficacy to these steps by imposing obligations upon the parties to exchange relevant documents and information. Section 101 explains that the purpose in so doing:
… is to put the parties for a motor accident claim in a position where they have enough information to assess liability and quantum for the motor accident claim.
In particular:
(a)Within one month of its complying notice of claim, the claimant must give copies of “each required document” in her or his possession, together with further information about the circumstances of the accident and relevant claim information if requested by the respondent (s 104). A “required document” means reports or other documents about the accident, and reports about the claimant’s medical condition, prospects for rehabilitation, and cognitive, functional or vocational capacity (s 102). A failure to comply potentially renders the claimant liable for costs resulting from such failure (s 104(5)).
(b)A reciprocal obligation is imposed upon the respondent to give the claimant “each required document” directly relevant to the claim in its possession, together with further relevant information if requested (s 105).
(c)The obligation to provide required documents is a continuing one if the claimant or respondent receives further required documents at a later time (ss 104(2)(b) and 105(2)(b)).
Part 4.5 also provides that the parties may jointly arrange for expert reports on the probable cause of the motor accident and the claimant’s injuries and on prospects for rehabilitation.
Thirdly, there are various sanctions for non-compliance with the obligations under Parts 4.2 and 4.3. Under ss 99 and 100, costs may be awarded against a party who does not comply with Part 4.2. It is also an offence not to comply with the obligation to provide documents under Part 4.3 (s 112). Moreover, documents which a party has failed to disclose cannot be used by the party in any later court proceeding unless the court orders otherwise (s 113). In addition, under s 115 the court may order a party to comply with a duty imposed under Part 4.2 or 4.3 and make consequential orders including as to costs.
Fourthly, s 136(1) creates a further gateway requirement before court proceedings are instituted. That section provides that:
Before a claimant for a motor vehicle accident claim brings a court proceeding based on the motor accident claim, the parties for the motor accident claim must have a conference (the compulsory conference).
Fifthly, the Act does not specify when a compulsory conference must be held. Rather, Part 4.7 of the Act provides that the compulsory conference may be called by any party at a time and place agreed or, if more than six months have passed since a complying notice of claim was received, at a reasonable time and place nominated by the party calling the conference (s 136(2)). Once that occurs, under s 139(1), the parties must exchange the following documents at least seven days before the conference is to be held:
(a)a copy of each document that is relevant to the motor accident claim that has not yet been given to the other party;
(b)a statement verifying that all relevant documents in the possession of the party or the party’s lawyer have been given as required;
(c)details of the party’s legal representation;
(d)if the party has legal representation—a certificate of readiness signed by the party’s lawyer.
At the relevant time for this claim, the “certificate of readiness” meant a certificate stating that the party is in all respects ready for the compulsory conference and the trial, has obtained all investigative material required for the trial including witness statements and medical or other expert reports, the party has fully complied with her or his obligations to give relevant material to the other parties, and the party’s lawyer has given the party a “costs statement” (s 139(3)). Such a statement will be read as a statement that party is ready for a compulsory conference and ready for trial to the extent practicable, taking account of the fact that proceedings have not yet been commenced: McIntosh v Hikechukwu [2011] ACTSC 131; (2011) 5 ACTLR 284 (McIntosh) at 289 [14] (Master Harper). A costs statement, in turn, is a statement containing (s 139(3)):
(a)details of the legal costs (clearly identifying costs that are legal fees and costs that are disbursements) payable by the party to the party’s lawyer up to the completion of the conference; and
(b)an estimate of the party’s likely legal costs (clearly identifying costs that are legal fees and costs that are disbursements) if the motor accident claim proceeds to trial and is decided by the court; and
(c)a statement of the consequences to the party, in terms of costs, in each of the following cases:
(i)if the amount of the damages awarded by the court is equal to, or more than, the claimant’s mandatory final offer;
(ii)if the amount of the damages awarded by the court is less than the claimant’s mandatory final offer but equal to, or more than, the respondent’s mandatory final offer;
(iii)if the amount of the damages awarded by the court is equal to, or less than, the respondent’s mandatory final offer.
Section 140 in turn requires that each conference participant (being the claimant and respondents) must, absent a reasonable excuse, attend the compulsory conference and actively take part in attempting to settle the claim.
It is apparent that the purposes of Part 4.7 are:
(a)to ensure that the parties attend the conference informed of each other’s case and the materials on which they would rely if the matter were to be litigated and proceed to judgment, and informed of the cost consequences of that eventuality; and
(b)to require preparation of an injured person’s claim for damages, so far as practicable, prior to the commencement of proceedings, as the appellant submitted.
Among other things, the first of these matters recognises the reality that costs are an integral factor to be taken into account in any settlement negotiations as they may significantly erode (or even eliminate) the amount of damages ultimately received by a claimant.
Sixthly, Part 4.8 deals with MFOs. Specifically, s 141 requires the parties to exchange written final offers termed “mandatory final offers” or, if applicable, a written notice of denial of liability, for a motor accident claim at the end of the compulsory conference if the claim has not been settled at the conference.
Section 143(2) prescribes the period for which MFOs remain open, namely, 14 days, while s 145(1) provides that:
A claimant for a motor accident claim must not begin a court proceeding based on the claim if a mandatory final offer for the claim remains open.
If the matter proceeds to litigation, however, “the court must have regard to mandatory final offers if making a decision about costs” (s 145(5)). In furtherance of this requirement, where court proceedings are instituted, the parties are required to file in court their MFOs in sealed envelopes which the court must not read until it has decided the claim (s 145(4)). Section 141(5) provides that a MFO must identify how much of the offer is for pain and suffering, which is relevant to the operation of s 155 as we will shortly explain.
On the application by one of the parties to the claim, the court may, however, dispense with the compulsory conference, having regard among other things to the extent of compliance by the parties with their respective obligations for the motor accident claim (s 137), and/or with the obligation to exchange MFOs (s 142). Where the court has dispensed with the obligation for the parties to hold a compulsory conference and/or exchange MFOs, this has an impact on the time within which proceedings may be instituted under Part 4.9 dealing with court proceedings.
Section 150 in Part 4.9 also provides that the court may grant leave, including on conditions the court considers appropriate, to a claimant to commence proceedings despite non-compliance “with this part” if satisfied there is an urgent need to begin the proceeding. Importantly, however, the section does not extend to the grant of leave despite non-compliance with any other Part of Chapter 4. In this regard, the legislator appears to have picked up the wording of the equivalent provision in Queensland legislation without substituting for the word “part”, the word “chapter” so as to reflect the different nomenclature used by ACT in its legislation: see [31]-[38] of the Master’s reasons below; see also McIntosh at 288 [11] (Harper M). While the use of the word “part” appears to have been in error, it is not open to the Court to rewrite the text of the statute: Haureliuk v Furler [2012] ACTCA 11; (2012) 6 ACTLR 151 (Haureliuk) at 159-160 [21].
Finally, Part 4.8 dealing with MFOs and s 155 dealing with cases where a court awards damages make specific provision with respect to recovery of costs in motor accident claims. On the one hand, s 144 in Part 4.8 imposes strict limitations upon recovery of costs where a MFO for $50,000 or less is made and accepted, while no limitations are imposed in cases where a MFO is accepted for a sum in excess of $50,000. For the purpose of determining whether a cap on costs applies under s 144, it is the total sum of damages offered in the MFO which is relevant and not damages excluding those for pain and suffering: Haureliuk at 166 [43].
On the other hand, at the relevant time s 155 capped the amount of costs (if any) which may be awarded in cases where a court awards damages in the sum of $50,000 or less exclusive of damages for pain and suffering. Specifically, s 155 provides that:
(1)This section applies if a court awards $50 000 or less in damages in a proceeding (other than an appellate proceeding) based on a motor accident claim.
NoteDamages does not include damages for pain and suffering (see s (5)).
(2)If the court awards $30 000 or less in damages, the court must apply the following principles:
(a)if the amount awarded is less than the claimant’s mandatory final offer but more than the respondent’s mandatory final offer, no costs are to be awarded;
(b)if the amount awarded is equal to, or more than, the claimant’s mandatory final offer, costs must be awarded to the claimant in the way prescribed by regulation as from the date on which the proceeding began (but no award is to be made for costs up to that date);
(c)if the amount awarded is equal to, or less than, the respondent’s mandatory final offer, costs must be awarded to the respondent as prescribed by regulation.
(3)If the court awards more than $30 000 but not more than $50 000 in damages, the court must apply the following principles:
(a)if the amount awarded is less than the claimant’s mandatory final offer but more than the respondent’s mandatory final offer, costs must be awarded to the claimant in accordance with the Civil Law (Wrongs) Act 2002, chapter 14, up to the maximum amount prescribed by regulation or, if no amount is prescribed, $2 500;
(b)if the amount awarded is equal to, or more than, the claimant’s mandatory final offer, costs must be awarded to the claimant as follows:
(i) costs up to the date on which the proceeding began must be awarded in accordance with the Civil Law (Wrongs) Act 2002, chapter 14, up to the maximum amount prescribed by regulation or, if no amount is prescribed, $2 500;
(ii) costs on or after the date on which the proceeding began must be awarded on an indemnity basis;
(c)if the amount awarded is equal to, or less than, the respondent’s mandatory final offer, costs must be awarded as follows:
(i) costs up to the date on which the proceeding began must be awarded to the claimant in accordance with the Civil Law (Wrongs) Act 2002, chapter 14, up to the maximum amount prescribed by regulation or, if no amount is prescribed, $2 500;
(ii) costs on or after the date on which the proceeding began must be awarded to the respondent in accordance with the Civil Law (Wrongs) Act 2002, chapter 14.
(4) This section is subject to section 156.
(5) In this section:
damages does not include damages for pain and suffering.
As the appellant submitted, it is apparent that the costs limitations in s 144 applied only to relatively small claims, i.e., where total damages including for pain and suffering were under $50,000. However, by virtue of the definition of “damages” in s 155(5), the costs limitations imposed by s 155 applied to a larger group of claims, i.e. where damages excluding any amount for pain and suffering were under $50,000.
As the appellant also submitted, the purpose of these provisions was to encourage the resolution of claims by the parties without the expense and delay which is likely to be occasioned though litigation where any award of damages would lie at the lower end of the scale. That, in turn, furthers the objects in s 5A including keeping the costs of insurance at an affordable level and encouraging the speedy resolution of claims. In achieving these purposes, s 155 is a key provision. As the appellants explained:
Thus, on the face of it, a claimant with recoverable total damages of between $50,000 and $150,000 (that range assumes damages apart from pain and suffering of less than $50,000…) would have a very strong incentive to settle the claim at the MFO stage rather than run the case in court.
In practical terms, by settling for say $100,000 at the MFO stage the claimant would be able to recover his or her legal costs on the appropriate party/party basis. There may well be some costs incurred of a solicitor/client nature, but these should form only a minority of the total legal costs.
However, in the same example, assuming a defendants’ MFO $45,000 for damages excluding pain and suffering, the effect of section 155 would be that if the claimant ran the case to hearing and obtained a judgement [sic] for say $100,000 of which $40,000 was for damages other than pain and suffering, he/she would recover costs of only $2500 up to the commencement of proceedings and be liable for the defendants’ costs thereafter; see paragraph 155(3)(c).
It is apparent from that example that the interplay of sections 144 and 155 was to provide an extremely strong incentive for a claimant to settle the claim at the MFO stage rather than taking the risk of embarking on court proceedings and running the case to hearing.
(b) Applicable principles of construction
The applicable principles of statutory construction were articulated by the primary judge at [47]-[50] and are not in dispute. Relevantly, first, as his Honour explained below, the interpretation of a statute is not merely a linguistic or semantic exercise. The context in which the words appear, including the purpose of the provisions, must be considered in the process of statutory construction: see e.g. Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 (Project Blue Sky) at 381 [69]; Alcan (NT) Alumina Pty Ltd v Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at 46-47[47]. No less is required by s 139 of the Legislation Act 2001 (ACT) which requires that, in working out the meaning of an Act, the interpretation that would best achieve the purpose of the Act is to be preferred and s 140 which requires that the provisions of the Act must be read in the context of the Act as a whole.
As for example, Brennan CJ, Dawson, Toohey and Gummow JJ explained in CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384 (CIC Insurance) at 408:
… the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses "context" in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous.… [i]f the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.
For the reasons set out below, this is a case within the principles articulated in CIC Insurance where the apparently general words of a provision, when read in the context of the Act as a whole and including its purpose, were clearly intended to bear a narrower meaning.
Secondly, as McHugh, Gummow, Kirby and Hayne JJ held in Project Blue Sky at 381-382 [70]:
A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court “to determine which is the leading provision and which the subordinate provision, and which must give way to the other”. Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.
(c) Construction of the interrelationship between Part 4.8 (MFOs) and s 155(3) of the Act
At [51] of his reasons, the primary judge identified five preliminary points:
(a)There was no explanation as to why Mr Albrecht did not arrange for a compulsory conference and the making of mandatory final offers prior to the imminent expiry of the limitation period.
(b)The arrangement reached between the parties for the conduct of a compulsory conference and the making of mandatory final offers was a sensible one having regard to the terms of the statute, the necessity to commence proceedings and the desirability of minimising legal costs.
(c)Each party accepted that the NRMA’s offer purporting to be a mandatory final offer should be treated as such notwithstanding that under the statute a mandatory final offer is something which must occur before proceedings are commenced.
(d)It was not essential for the proceedings to be ended by the entry of judgment. The benefit of entry of judgment was that it provided a means for assessing costs if there was no agreement as to their quantum.
(e)Had the proceedings instead been resolved by a deed then there would be no possible operation of s 155(3). The situation in the present case would not have arisen if, instead of acquiescing in the NRMA’s suggestion that judgment be entered, a deed was entered which required the payment of money and appropriate releases.
With respect to the first point, we also note that there was equally no explanation as to why the NRMA did not arrange for the matters referred to [51(a)] to occur prior to the imminent expiry of the limitation period.
Nor were any of these matters disputed on the appeal. Furthermore and consistently with the parties’ approach below, neither party disputed that the Act permitted and indeed logically obliged the parties to adhere to the compulsory processes prescribed by Chapter 4 notwithstanding that proceedings had been instituted. In fact, the parties embraced that outcome. The NRMA expressly accepted that the commencement of proceedings were not a nullity, notwithstanding that they were irregular and not in its submission intended by the Act; equally the NRMA accepted that the MFO was made and accepted validly under the Act.
In this regard, it was plainly not intended under the Act that proceedings would be instituted before a compulsory conference is held and the expiry of 14 days after the parties have exchanged their MFOs at the conclusion of the conference (absent dispensation from these requirements by the Court): see ss 136(1) and 143. That notwithstanding, we agree that those provisions were not intended to establish a jurisdictional precondition to the institution of proceedings: Racic v Haltiner [2010] ACTSC 63; (2010) 4 ACTLR 224 (Racic) at 228 [10]-[11] and [13] (Harper M) and reasons of the primary judge at [27]; contrast, for example, the position under s 46PO of the Australian Human Rights Commission Act 1986 (Cth) where the making and termination of a complaint to the Human Rights Commission is a jurisdictional precondition to the institution of proceedings (see e.g. Re East; ex parte Nguyen [1998] HCA 73; (1998) 196 CLR 354 at [31]-[32]; Picos v Australian Federal Police [2015] FCA 118 at [36]-[38]). Here, the remedy in an appropriate case under the Act where there has been non-compliance with the procedural steps prescribed by that Act is relevantly to order a stay of the proceedings pending compliance: Racic at 228 [13].
That being so, the NRMA’s submission requires Parts 4.7 and 4.8 to be read so as to disconnect the statutory obligations imposed by those parts (to hold a compulsory conference and, if the claim does not settle, to exchange MFOs) from the statutorily prescribed consequences of compliance with them where the agreement effected by acceptance of a MFO is embodied in a court order. That construction cannot, in our view, be correct.
First, the effect of s 144 in Part 4.8 is that where a MFO in the amount of $50,000 or less (including damages for pain and suffering) is accepted, the offer must be exclusive of costs, as s 144 itself prescribes the manner in which costs are to be worked out. No cap on costs however is imposed with respect to a MFO accepted in a sum above $50,000. In the latter scenario, Parliament evidently intended that each party’s MFO would set out her or his respective proposal as to any component for costs which would crystallise into a term of their agreement upon acceptance of the MFO in question. No distinction is drawn in Part 4.8 as to the effect of accepting a MFO depending upon whether or not litigation had commenced. On an ordinary reading, therefore, of Part 4.8, upon the appellant accepting the NRMA’s MFO in the sum of $85,000 “plus costs as agreed or assessed”, no statutory cap applied to restrict the amount of costs which might ultimately be assessed or agreed.
Secondly, to retrospectively impose a cap upon the liability to pay costs because the parties’ agreement was subsequently embodied in a court order is therefore to unravel the basis on which the parties have reached agreement and thereby fundamentally to alter their rights. Such a result is highly improbable and would require express words or a clear and plain intention in line with the principle of legality: Potter v Minahan [1908] HCA 63; (1908) 7 CLR 277 at 304 (O'Connor J); Bropho v Western Australia [1990] HCA 24; 171 CLR 1 at 18 (Mason CJ, Deane, Dawson, Toohey, Gaudron and McHugh JJ); Coco v The Queen [1994] HCA 15; (1994) 179 CLR 427 at 436-437 (Mason CJ, Brennan, Gaudron and McHugh JJ). As, for example, French CJ explained in Momcilovic v The Queen [2011] HCA 34; (2011) 245 CLR 1 at 46 [43]:
The principle of legality has been applied on many occasions by this Court. It is expressed as a presumption that Parliament does not intend to interfere with common law rights and freedoms except by clear and unequivocal language for which Parliament may be accountable to the electorate. It requires that statutes be construed, where constructional choices are open, to avoid or minimise their encroachment upon rights and freedoms at common law.
Thirdly, there is no express intention in s 155 of the Act or otherwise in Part 4.9 retrospectively to alter any agreement reached by the parties on acceptance of a MFO upon a court “award[ing]” damages (even assuming that the phrase “a court awards damages” might embrace a consent judgment). Nor can a clear and plain intention be discerned to that effect. The rationale underlying s 155 is that, where neither party has accepted the other party’s MFO within the 14 day period prescribed, that must be taken into account in determining costs in the manner set out in s 155. This construction best promotes the object of encouraging settlement prior to trial which underlies both Part 4.8 and s 155, particularly given that most of the preparation for trial must have been completed prior to any exchange of MFOs (see above at [29]-[32]). Furthermore, at a conceptual level, it can be seen as a statutory variation to the common law principles with respect to Calderbank offers, namely, that the Court may have regard to a failure unreasonably to accept a genuine offer of compromise in exercising the discretion as to costs: see e.g. Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] and Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [10]. A contrary construction would lead to a claimant being penalised merely for accepting a MFO after instituting proceedings to preserve her or his rights within a limitations period before completion of the statutory negotiation processes and consenting to orders in terms of the MFO. There is no sensible policy which such a construction could promote.
In the fourth place, the construction which we favour is consistent with the wording of s 145(5) which requires the court to have regard to the MFOs exchanged between the parties “if making a decision about costs”. It is difficult to describe the making of consent orders as “making a decision” which as a matter of ordinary language appears to assume that the Court is adjudicating upon the issue. In this regard, we consider that the word “However” at the commencement of s 145(5) is used in order to make it clear that s 145(4) has to be read together with, and subject to, s 145(5). In other words, while the court must not read the MFOs until it has decided the claim under s 145(4), it must still have regard to them in making decisions about costs.
Consistently therefore with the principle of legality and its context, when s 155 requires a court to have regard to whether the award of damages to a claimant is more or less than the claimant’s or respondent’s MFO (as the case may be), it is referring to a MFO which has not been accepted. In other words, those apparently general words, when read in the light of the purpose of the provisions, were intended to bear a narrower meaning: CIC Insurance at 408. The same may be said to the extent that s 145(5) and in particular the words “making a decision about costs” might be read broadly as potentially including the making of consent orders as to costs.
The respondent submits that the appellant could have avoided the result that s 155(3) was engaged by applying for dispensation from the requirement to attend the compulsory conference and for the parties to give MFOs. However there are significant benefits afforded to both parties in adhering to the compulsory processes created by the Act. It is unlikely that the Parliament intended that an individual would be penalised in effect for having to institute proceedings in order to preserve her or his rights by being deprived of the opportunity to utilise these procedures.
CONCLUSION
For the reasons set out above, the appeal must be allowed with costs and the declaration made by the Master on 25 March 2015 and order as to costs made by the Master on 24 April 2015 be set aside and substituted by an order that “The originating application dated 6 February 2015 is dismissed with costs.”
| I certify that the preceding 57 numbered paragraphs are a true copy of the Reasons for Judgment of the Court. Associate: Date: 9 November 2016 |
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