Ambulance Service of New South Wales v Worley (No 2)

[2006] NSWCA 236

Reported Decision: 67 NSWLR 719

Court of Appeal

CITATION:	AMBULANCE SERVICE OF NEW SOUTH WALES v WORLEY (NO. 2) [2006] NSWCA 236
HEARING DATE(S):	10/04/06-12/04/06
JUDGMENT DATE:	28 August 2006
JUDGMENT OF:	Tobias JA at 1; McColl JA at 2; Basten JA at 3
DECISION:	(1) Vary order (3) made on 3 May 2006 so that it reads:; (3) Order that the Respondent pay the costs of the Appellant -; (a) of the trial, on the ordinary basis; (b) of the appeal up to and including 10 January 2006 on the ordinary basis, and; (c) of the appeal on and from 11 January 2006, including the costs of this application, on an indemnity basis.; (2) Add to the orders made on 3 May 2006 the following orders:; (5) Order the Respondent to repay to the Appellant the amount of $1,314,016.28, together with interest thereon calculated at the rate of 9% from 11 February 2005, or such other rate as may be prescribed by Schedule 5 to the Uniform Civil Procedure Rules from time to time, until the date of payment.
CATCHWORDS:	COSTS – offers of settlement – first offer: whether reasonable for plaintiff to reject the offer – second offer: whether Supreme Court Rules (1970) Part 52A, r 22(6) as in force then applied where judgment is entered for the defendant – third offer: whether Uniform Civil Procedure Rule r 42.14 applied – whether offer involved a significant level of compromise - RESTITUTION – interest rate – part judgment paid as condition of stay – successful appeal – restitution ordered – whether interest should be calculated as prescribed by the Uniform Civil Procedure Rules or as ‘the real cost of money’ assessed as the rate for bonds issued by the NSW Treasury Corporation
LEGISLATION CITED:	Safety, Rehabilitation & Compensation Act 1988 (Cth), s50 Supreme Court Act 1970 (NSW), s75A Supreme Court Rules 1970 (NSW), Part 22; Part 51, r3, r26; Part 52, r17, Part 52A, r22 Uniform Civil Procedure Rules, r20.26, r42.14, Schedule 5
CASES CITED:	Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No. 2) [2006] NSWCA 120 Commonwealth v McCormack (1984) 155 CLR 273 Cornwall v Rowan (No. 2) [2005] SASC 122 Easterday v Western Australia [2005] WASCA 202 Heydon v NRMA Ltd (No. 2) (2001) 53 NSWLR 600 Jones v Bradley (No. 2) [2003] NSWCA 258 Leichhardt Municipal Council v Green [2004] NSWCA 341 Maitland Hospital v Fisher [No. 2] (1992) 27 NSWLR 721 Maricic v Dalman Formwork (Australia) Pty Ltd (No. 2) [2006] NSWCA 237 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Roads and Traffic Authority v Ryan (No. 2) [2002] NSWCA 128 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323
PARTIES:	Ambulance Service of New South Wales - Appellant Stephen Paul Worley - Respondent
FILE NUMBER(S):	CA 40113/05
COUNSEL:	P. Garling SC/M. Windsor - Appellant D.J. Russell SC/P.S. Jones - Respondent
SOLICITORS:	Frances Allpress, General Insurance Law Department - Appellant Forners - Respondent
LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 20456 of 2001
LOWER COURT JUDICIAL OFFICER:	Barr J
LOWER COURT DATE OF DECISION:	4 February 2005 (Reasons for judgment revised 9 February 2005)
LOWER COURT MEDIUM NEUTRAL CITATION:	Worley v The Ambulance Service of New South Wales [2004] NSWSC 1269

CA 40113/05
SC 20456/01

TOBIAS JA
McCOLL JA
BASTEN JA

28 August 2006

AMBULANCE SERVICE OF NEW SOUTH WALES v STEPHEN PAUL WORLEY (NO. 2)

Judgment

1 TOBIAS JA: I agree with Basten JA.

2 McCOLL JA: I agree with Basten JA.

3 BASTEN JA: On 3 May 2006 the Court handed down judgment in this matter, allowing the appeal and setting aside the judgment obtained by the Respondent, who was the plaintiff in the Court below. The Respondent was ordered to pay the costs of the Appellant in this Court and in the Court below.

4 Pursuant to a grant of leave, the Appellant has made submissions in support of a variation of the orders in two respects. First, it seeks costs on an indemnity basis after one of three dates upon which it made offers of settlement. Secondly, it seeks an order refunding the amount paid by it to the Respondent, as a condition of a stay of judgment in the Court below, together with interest on that sum.

Offers of compromise

5 The injury giving rise to these proceedings was suffered by the Respondent on 7 October 1998, when he was treated by officers of the Ambulance Service after suffering an allergic reaction to a bee sting. Because the Respondent suffered the injury in the course of his employment with Australia Post, he received payments under the Safety, Rehabilitation & Compensation Act 1988 (Cth) (“the Compensation Act”), by way of compensation for economic loss and expenses. According to the affidavit sworn by the Appellant’s solicitor on 25 May 2006, the proceedings commenced in the Supreme Court on 28 May 2001 in the name of the Respondent, were brought by Australia Post, pursuant to its powers under s 50 of the Compensation Act.

6 A mediation had apparently been attempted on 29 July 2003, but was unsuccessful. The trial was fixed to commence on 22 March 2004.

7 On 12 March 2004 the solicitor for the defendant Ambulance Service sent a letter to the solicitors for Mr Worley making an offer to settle the plaintiff’s claim for $400,000 plus costs. The letter continued:

“This offer is made without prejudice save as to costs. The defendant reserves the right to rely on this letter to seek costs on an indemnity basis if the question of costs should arise. See Messiter v Hutchinson (1987) 10 NSWLR 525 and Calderbank v Calderbank (1975) 3 ALL 33 [sic].
This offer shall remain open until 5pm on 19 March 2004.”

8 The letter was sent on a Friday and the offer remained open until 5pm the following Friday, which was the last working day before the trial.

9 The trial commenced on 22 March 2004 and ran continuously until 15 April 2004. There was then a break until 9 August, the trial continuing from 9 August to 18 August 2004.

10 On 29 June 2004, the Ambulance Service made a further offer of compromise, in an amount of $500,000 plus costs, which was stated to be open for a period of 28 days. The offer was made in accordance with Part 22 of the Supreme Court Rules 1970 (NSW), as then in force. The offer remained open until 27 July 2004, leaving almost two clear weeks before the resumption of the hearing.

11 In an affidavit sworn on 21 July 2006 by the solicitor for Mr Worley, a number of matters are raised concerning amendments to pleadings and provision of reports and documents during or shortly before the commencement of one or other hearing period. By letter dated 23 March 2004, the solicitor complained that it was “unfair” to serve 40 pages of material on the morning of the first day of the hearing. How that was dealt with at the hearing was not recorded.

12 By contrast, what is noticeably absent from the solicitor’s affidavit is any suggestion that the plaintiff did not have a reasonable opportunity to consider the offers of settlement. It should not be inferred that this was an oversight. The solicitor stated that he had conducted “hundreds of personal injury matters over the past 16 years” and that his costs, together with disbursements of “the present trial” exceeded $1 million: Affidavit, par 25. One must infer that he was diligent in his consideration of the offers and in advising the plaintiff.

13 The amount of the first offer was $400,000 and the amount of the second $500,000. Neither is an insignificant amount in absolute terms. However, the Respondent submits that, judged against the verdict of a little over $2.6 million at trial, the amounts should not be accepted as “significant”.

14 There is no doubt that Mr Worley suffered a serious injury. Although the quantum of the damages award was challenged on appeal, and the relevant grounds were addressed by this Court, there was no significant reduction in the amount awarded. However, because the offers were approximately 15% and 19% respectively of the amount awarded, does not mean that they were not true offers of compromise. Each included an entitlement to an additional amount by way of costs.

15 Although some material was apparently served belatedly, it is clear that the primary reports relied on by the parties at trial had been served months, and in most cases, more than a year, before the first offer. The plaintiff was clearly on notice that there was a serious dispute as to liability and that one group of eminent practitioners were of the view that there had been no breach of duty on the part of the Ambulance Service. The Court has no information as to what advice Mr Worley received, nor whether he had control of the proceedings, which may have been under the conduct of Comcare, pursuant to sub-s 50(2)-(5) of the Compensation Act.

16 On the basis that the final award of damages was within a foreseeable range, the first Calderbank offer may be treated as assessing Mr Worley’s chances of success at only 15%. It would have been reasonable for Mr Worley, on advice, to assess his prospects at a significantly higher figure and accordingly it would have been reasonable for him to reject that offer. Applying the broad principles identified by Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], I would not be inclined to vary the usual order as to costs on the basis of the first offer: c.f. Leichhardt Municipal Council v Green [2004] NSWCA 341.

17 The second offer was a formal offer of compromise and was no doubt intended to invoke the costs sanctions available under Part 52A, r 22. If the offer had been accepted by the plaintiff, the defendant would have been required to pay his costs up until the day of acceptance. The offer was not accepted: accordingly, sub-r 22(6) is the potentially relevant provision. However, that rule assumes that the plaintiff obtains a judgment “not more favourable to him than the terms of the offer”. In this case the premise underlying the application is that judgment has been entered (following the appeal) for the defendant. If Part 52A, r 22(6) is based upon an assumption that the plaintiff obtains a judgment, and not the defendant, the rule is inapplicable. Support for that conclusion may be found in the judgment of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 at 433, dealing with the predecessor to the rule presently relevant, namely Part 52, r 17.

18 The non-application of the rule removes the need for orders in accordance with the rule, “unless the Court otherwise orders”. On one view, the result is that the formal offer of compromise is to be treated in the same way as a Calderbank offer in relation to an application for indemnity costs. It is no longer accepted, as Rolfe J suggested in Multicon, 138 ALR at 451, that there is a “prima facie presumption” that costs would be awarded on an indemnity basis if the person who failed to accept the offer achieved a less favourable result. That approach was rejected by this Court in Jones v Bradley (No. 2) [2003] NSWCA 258 at [6]-[9]. In the context of an offer of compromise, that result is, perhaps, surprising: the defendant might have been treated more favourably if the plaintiff had been successful and obtained a judgment, but for less than the amount offered. Nevertheless, the plaintiff has not been shown to have acted unreasonably in not accepting an offer which was less than 20% of the damages as finally assessed.

19 The offers did not, however, end there. A third offer was made on 10 January 2006 during the pendency of the present appeal proceedings. At that stage the plaintiff, now the Respondent, was defending a judgment for $2.6 million. The Appellant’s offer was to pay an amount of $1.5 million, plus costs. Again the offer was said to be open for a period of 28 days and was made in accordance with Uniform Civil Procedure Rules, r 20.26. Again, the offer was not accepted.

20 The application of the Uniform Civil Procedure Rules in this Court was considered in The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No. 2) [2006] NSWCA 120 at [17]. There is further discussion of their application more recently in Maricic v Dalma Formwork (Australia) Pty Ltd (No. 2) [2006] NSWCA 237, albeit in the context of a plaintiff against whom judgment was entered at trial, but who was a successful appellant in this Court.

21 If Part 51, r 3(2) of the Supreme Court Rules is applied, the Appellant will be treated as “a plaintiff” for the purposes of the UCPR. The relevant costs rule will therefore be r 42.14, which provides:

42.14 (1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer.
(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim:
(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and
(b) 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.

For the purposes of an appeal, the reference to a “trial” must be treated as the hearing of the appeal.

22 Given the approach adopted by this Court in Maitland Hospital v Fisher [No. 2] (1992) 27 NSWLR 721, the parties should have acted on the assumption that an offer made under r 20.26 of the UCPR would engage the cost consequences provided by Part 42. The offer made on 10 January 2006 was for an amount in excess of 50% of the judgment below. It was an offer involving a significant level of compromise and, in not accepting it, the Respondent was at risk as to costs.

23 The only basis upon which it is suggested that the Court should otherwise order for the purposes of r 42.14(2) is that the Appellant raised matters on the appeal, on which it was unsuccessful. However, no attempt was made to assess the time taken on the appeal by matters on which the Appellant was unsuccessful and in my view no such exercise would be appropriate. The primary issue litigated was the liability of the Appellant, being the matter on which it was successful. It should have its costs on appeal on a party and party basis up to and including 10 January 2006 and thereafter on an indemnity basis.

24 The Appellant should also have its costs of the trial, but on the ordinary basis.

Order for restitution

25 As noted above, a condition of a stay of the judgment below was that the Respondent pay an amount of $1,314,016.28, no later than 11 February 2005. On 7 February 2005 Mr Worley provided a written authority to pay the amount so ordered to the Australian Postal Corporation. On 11 February 2005 the solicitor for the Ambulance Service sent to the solicitor for Mr Worley a cheque in the sum of $1,313,138.53, presumably payable to the Australian Postal Corporation and a cheque for $877.75 payable to the Health Insurance Commission “in accord with statutory requirements”: affidavit of Ms Fox, dated 25 May 2006, par 9.

26 The order for reimbursement seeks from the Respondent the full amount of $1,314,016.28. There is no objection to an order in those terms and it should be made.

27 There is, however, resistance to an award of interest at the rate of 9%, as sought by the Appellant. Rather, it is submitted on behalf of the Respondent that the Appellant would be compensated for being kept out of its money by an award of the “real cost of that money”, which is said to be 5.65% being the rate for bonds issued by the NSW Treasury Corporation on 11 February 2005.

28 Written submissions made on behalf of the Respondent claimed that the application for interest was “not a usual application”. The submission continued (par 27):

“There is no evidence that the Appellant either borrowed the moneys, or would have invested the moneys, so as to establish any entitlement to interest. In the circumstances it is submitted that no order for interest upon the moneys to be repaid should be made.”

29 The source of power to make such an order is commonly identified as s 75A(10) of the Supreme Court Act 1970 (NSW). There is no reason to suppose, as a matter of power, that it is inadequate for that purpose. In addition, Part 51, r 26 of the Supreme Court Rules provides:

26. Where any step has been taken for the enforcement of a judgment or order and the Court of Appeal varies or sets aside the judgment or order, the Court of Appeal may make such orders for reinstatement or restitution as the Court of Appeal thinks fit.

30 In The Commonwealth v McCormack (1984) 155 CLR 273 at 276 the High Court held that an appellant “who has satisfied a judgment for the payment of money is entitled, on the reversal of the judgment, to repayment of the money paid by him with interest …”. That principle was applied in this Court in Heydon v NRMA Ltd (No. 2) (2001) 53 NSWLR 600, Mason P stating that “restitution is available regardless of the means whereby the judgment is discharged; and restitution with interest is the right of the ultimately successful party”: at [14]. This approach was applied in Roads and Traffic Authority v Ryan (No. 2) [2002] NSWCA 128 and by the Full Court of the Supreme Court of South Australia in Cornwall v Rowan (No. 2) [2005] SASC 122 at [33]-[34] (Bleby, Besanko and Sulan JJ) and was referred to with apparent acceptance by the Court of Appeal in Western Australia in Easterday v Western Australia [2005] WASCA 202 at [10] (Steytler J, Wheeler and Roberts-Smith JJ agreeing).

31 The submission for the Respondent that interest is not payable must be rejected. The only question is then the rate at which interest should be assessed.

32 In Heydon (No.2) the President continued at [22]:

“It is however artificial to seek to calculate the interest actually lost (by the appellant) or the interest actually gained (by the respondent). For one thing, an exact correspondence would only occur by chance unless the parties had come to some agreement about the proper investment of the judgment moneys pending the appeal. This is one of several reasons why a common yardstick for determining the rate of interest is appropriate … .”

33 His Honour continued, at [30]:

“It would be intolerably burdensome if a court required evidence and argument in every case as to what rate or rates of interest would do justice to the principles which I have endeavoured to summarise. The interests of the parties and of the court, including the interest of consistency as a component of justice, are served by taking a broad, standard approach whereby interest is calculated according to pre-determined rates that the parties can take into account in their dealings during the litigation and in their endeavour to avoid wasteful disputation concerning its outcome.”

34 At [32], his Honour noted the practice in this Court “to award restitutionary interest at the rates payable on judgments unless special circumstances exist”. The relevant rates are those contained in Schedule 5 to the Uniform Civil Procedure Rules. For the relevant period, the interest rate is 9% per year. That is the figure claimed by the Appellant. There is no need for the Appellant to demonstrate that this is an appropriate sum; rather, a persuasive and evidentiary burden rests upon the Respondent to take itself outside the general rule: Heydon (No. 2) at [36]. There is nothing in the submissions of the Respondent which satisfy that burden. Accordingly, interest is payable at 9%, on the amount to be repaid, such interest to be calculated from 11 February 2005.

Conclusion

35 In accordance with the conclusions set out above, I propose the following orders:

(1) Vary order (3) made on 3 May 2006 so that it reads:

(3) Order that the Respondent pay the costs of the Appellant -
(a) of the trial, on the ordinary basis;
(b) of the appeal up to and including 10 January 2006 on the ordinary basis, and
(c) of the appeal on and from 11 January 2006, including the costs of this application, on an indemnity basis.

(2) Add to the orders made on 3 May 2006 the following order:

(5) Order the Respondent to repay to the Appellant the amount of $1,314,016.28, together with interest thereon calculated at the rate of 9% from 11 February 2005, or such other rate as may be prescribed by Schedule 5 to the Uniform Civil Procedure Rules from time to time, until the date of payment.
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