Appelbee v TAC
[2012] VCC 54
•6 March 2012
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted |
AT MELBOURNE
CIVIL DIVISION
Case No. CI-10-05056
| DENISE VERONICA APPELBEE | Plaintiff |
| v | |
| TRANSPORT ACCIDENT COMMISSION | Defendant |
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JUDGE: | HER HONOUR JUDGE MILLANE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 February 2012 | |
DATE OF RULING: | 6 March 2012 | |
CASE MAY BE CITED AS: | Appelbee v TAC | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 54 | |
COSTS RULING
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Catchwords: s.93 Transport Accident Act 1986 – serious injury application – leave granted under paragraph (c) of the definition of serious injury on 3 February 2012 – plaintiff’s application for direction that costs be taxed on an indemnity basis.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M. Lombard | Holding Redlich |
| For the Defendant | Mr S. A. O’Meara S.C. with Mr S. E. Gladman | Transport Accident Commission (TAC) |
HER HONOUR:
Introduction
1 By originating motion filed on 8 November 2010, the plaintiff sought leave to bring proceedings for damages for injury suffered by her as a result of a transport accident.
2 The plaintiff alleged a number of injuries: concussive head injury with cognitive impairment, injury to the cervical and lumbar spines, bilateral carpal tunnel syndrome, Chronic Major Depressive Disorder with somatisation features and anxiety disorder with avoidance behaviour.[1]
[1]Plaintiff's Court Book ("PCB") 5 and Transcript (“TN”) 1
3 Her application was made pursuant to s.93 of the Transport Accident Act 1986 (“the Act”). Sub-section 93(6) required that the Court be satisfied that the accident-related injury was a serious injury which existed at the date of the determination of the application for leave.
4 Relevantly, sub-s.93(17) defines “serious injury” under paragraphs (a) and (c) as:
“(a) serious long-term impairment or loss of a body function; or
(b) … ; or
(c) severe long-term mental or severe long-term behavioural disturbance or disorder ” ("the definition")
5 Having previously relied on both paragraphs (a) and (c) of the definition, at hearing, the plaintiff proceeded under paragraph (c) only[2] in respect to her psychiatric reaction to a minor head injury that in its consequence was both long-term and severe.[3]
[2]PCB 5 and TN 1
[3]TN 8-9, 19 -20 and 196
6 Essentially, the defendant defended the application on the basis that major life stressors occurring subsequent to the transport accident were responsible for the plaintiff's current mental state.[4] In the alternative, the defendant submitted that, if the transport accident was a cause of the plaintiff's current mental state, the consequences described and taken as a whole were not severe.[5]
[4]TN 3-4
[5]TN 181 and 193-195
7 On 3 February 2012 I granted leave to the plaintiff under sub-s. 93(17)(c) to bring proceedings for recovery of damages in respect to injury suffered in the transport accident.
8 The hearing of the plaintiff's application for an award of costs on an indemnity basis was fixed for 22 February 2012. Pursuant to an order made by me, an affidavit sworn on 10 February 2012 by the plaintiff's solicitor, Mr. Lombard and affidavits sworn on 16 February 2012 by the Senior Manager of Resolution for the Transport Accident Commission (the "TAC"), Mr. Hocking and on 17 February 2012 by Senior Law Clerk, Mr. Byrnes were filed and served.
9 The numerous exhibits[6] and further copy correspondence were handed to the court during the course of the hearing.
[6]Exhibits "MJL1" to "MJL6" to Mr. Lombard's affidavit and Exhibits "RSB1" to "RSB5" to Mr. Byrne's affidavit
10 Section 93(12)(a) of the Act relevantly provides:
(12) Subject to the discretion of the court –
(a) in a proceeding relating to an application for the leave of the court under subsection (4)(d) – costs are to be awarded against a party against whom a decision is made;..
11 Accordingly, the presumption in favour of an award of costs to the plaintiff is subject to the discretion of the court. The court is required to exercise its powers and discretion as to costs in accordance with Order 63A of the County Court Civil Procedure Rules 2008.[7]
[7]Rule 63A.02
12 These Rules require that costs be taxed on a party and party basis, except as provided by the Rules or any order of the court.[8]
[8]Rule 63A.31
13 Generally speaking, an order that the plaintiff's costs be taxed above a party and party basis requires evidence of improper conduct or circumstances (from time to time categorised as special circumstances) that warrant the disapproval of the court. [9]
[9]See Bass Coast Shire Council v King [1997] 2 VR 5, 29 and Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, paragraph 7
14 As submitted by the TAC, the cases where conduct has been found to justify an order for indemnity costs, largely involve instances of conduct of a contumelious nature; namely cases of false allegations, irrelevant allegations of fraud, contempt of court or wilful disobedience of court orders, to mention a few.[10]
[10]The Defendant's Outline of Submissions Re: Indemnity Costs at paragraph 3 and 12
15 In applying the test of "serious injury" under this Act (or indeed under the Accident Compensation Act 1985) the court is required to compare with and assess an injury (as occurred in this case) to the plaintiff’s psyche relative to other possible mental or behavioural disturbance or disorders. In the past superior courts have emphasised that the determination of whether the consequence of a plaintiff’s injury met the test involved elements of fact, degree and value judgment.[11]
[11]Humphries & Anor v Poljak [1992] VR 58, and Mobilio v Balliotis [1998] 3 VR 833
16 Those representing plaintiffs and the TAC must at the various stages of litigation weigh the strengths and weaknesses of any application for leave, an exercise where reasonable minds will differ. It follows, so the TAC correctly submitted, that some latitude is required when evaluating the TAC’s conduct.
17 The abandonment at hearing of the plaintiff's claim under paragraph (a) of the definition indicates that the plaintiff and her legal advisers then believed that the plaintiff was unlikely to establish underlying brain pathology that in its consequences amounted to serious injury. Whereas, the plaintiff was vindicated in her decision to proceed with her application for leave under paragraph (c) of the definition because she met the test for serious injury under the Act.
The guidelines governing the TAC’s conduct
18 It was common ground that the TAC, a Statutory Authority is obliged to behave as a model litigant in the conduct of litigation. In this application the plaintiff particularly relied on paragraph 2(g)(iv) of the Model Litigant Guidelines (the "MLG ") [12] which provides that:
[12]Exit "MJL1"
"(g) where it is not possible to avoid litigation, keep the costs of litigation to a minimum, including by:
…..
(iv) monitoring the progress of litigation and, where appropriate, attempting to resolve the litigation, including by settlement offers, offers of compromise and ADR."
19 The public clearly has an interest in the compromise of litigation and in discouraging inappropriate claims.[13] Importantly, as the TAC submitted, the MLG do not prevent the State of Victoria, its Departments and agencies from seeking to recover costs or from using tactical weapons to compromise litigation such as a Calderbank letter, underpinned by the threat of a costs order should a matter proceed to judgment.[14]
[13]See Murphy v Harney [2001] VSC 386, 5 at paragraph 15
[14]MLG [10]
20 The TAC has published costs recovery guidelines: "Guidelines for the recovery of legal costs in common law and administrative review proceedings" (the "Cost Recovery Guidelines"), their purpose being "to enunciate the TAC's approach to the recovery of legal costs where it is entitled to seek recovery".[15] We are told that one of the governing considerations in respect of legal costs recovery is the requirement to: “…promote clarity and certainty in the management of the TAC’s recovery rights in accordance with the model litigant guidelines.”
[15]
21 As to the general principles governing recovery of legal costs the Cost Recovery Guidelines relevantly state that:
"Except where otherwise stated in these guidelines, the TAC will only give effect to an order for costs where:
· There has been material witting misrepresentation on the part of the person against whom the costs order is made;
· There is another exceptionally good reason why the TAC should give effect to an order for costs."
22 The Cost Recovery Guidelines provide a clear indication to plaintiffs and practitioners alike that the TAC will not seek or enforce a costs order against an unsuccessful plaintiff other than in the limited circumstances described. As to what constitutes “another exceptionally good reason”, one imagines that something more compelling than an unsuccessful application is required before the TAC will give effect to an order for costs.
23 It was common ground that in the past, meetings convened by the TAC with representatives from law firms (Legal Liaison Group meetings) have involved discussion of particularly the circumstance or circumstances the TAC considered would constitute "an exceptionally good reason" to give effect to an order for costs.
24 As Mr. Hocking's affidavit demonstrates, at a meeting convened on 9 September 2010 one of the concerns expressed by practitioners was that some clients found intimidating the initial letters sent by the TAC denying a serious injury application. This, Mr Hocking said, led to a review of the format of the initial letters and, at a meeting convened on 10 March 2011, Mr. Hocking made a presentation as part of which he explained the procedure adopted by the TAC for informing clients and legal representatives of the existence of the Cost Recovery Guidelines and their potential application.
25 Apparently, Mr. Hocking also provided the practitioners with "example letters",[16] as Mr. Lombard believed, to clarify the possible initial response by the TAC to a serious injury application and to provide an example of a letter in which the TAC notified an applicant that it would seek costs if the application was unsuccessful. The first of the example letters informed practitioners that:
[16]Exhibit "MJL3" and "MJL4"
"In the event that your client's serious injury application to the County Court is unsuccessful, the TAC may seek an order for costs against your client. The TAC may also take steps to recover any costs ordered.
The TAC's decision to seek recovery of its legal costs will be dependent upon:
§ the circumstances relevant to your client application;
§ the TAC guidelines for recovery of legal costs; and
§ the Victorian Model Litigant Guidelines."
26 The second of the example letters is the equivalent of a Calderbank offer by which the other party is invited to discontinue the serious injury application against the TAC on the basis that both parties bear their own costs. If they fail to do this within the time specified and are unsuccessful in their application, the other party is further advised that instructions will be sought to apply for an order as to costs. This is not the same as saying that a costs order will be sought or that the TAC intends to exercise any recovery right.
27 I was also provided with a copy of a table distributed by Mr. Hocking, setting out year-to-date numbers of the initial letters sent and the number of times that the TAC had sought recovery of its costs.
28 Toward the conclusion of the cost application hearing there was some debate about how this table should be interpreted. The document itself is not particularly informative. It shows that in the year to 10 March 2011, pre-litigation the TAC sent 399 letters advising denial of the application together with a reminder regarding the Costs Recovery Guidelines. There were 251 letters sent following the filing of an Originating Motion, 48 of which were said to have informed the party that the case lacked merit and that unless withdrawn the TAC may seek to recover its costs. Allowing for the dates on which the TAC formally notified rejection of the plaintiff's application for a serious injury certificate, 23 August 2010, and the date on which the Originating Motion was filed, 8 November 2010, the letter of rejection was probably one of the 399 letters sent pre-litigation.
29 The affidavit evidence contained conflicting views about the advice received from the TAC outlining the circumstance or circumstances the TAC considered would constitute "an exceptionally good reason" to enforce a costs order. For instance, at paragraph 7 of his affidavit Mr. Lombard deposed that he understood that this would apply where the application was "without merit". On the other hand, at paragraph 8 of his affidavit, Mr. Hocking deposed that practitioners were advised that this included cases considered by the TAC to be without merit and further that, due to differences in cases it was not possible for the TAC "to simply provide prescriptive or narrow criteria".
30 As my discussion of the history of this leave application demonstrates in due course, it has not been necessary for me to comment further on their different recollections because, prior to the commencement of the hearing of the plaintiff’s leave application on 25 November 2011, the TAC informed the plaintiff’s solicitors that the Calderbank offer, made by letter dated 15 November 2011, was based on the TAC's view that her application for leave was without merit.
31 Essentially, the plaintiff's application for an award of costs on an indemnity basis was premised on her view that, irrespective of, and whether or not this was intentional, the threat by the TAC that it would enforce a costs order against the plaintiff should her application fail was intimidatory and bullying conduct and, as such it breached the Statutory Authority's obligations under the MLG and its Cost Recovery Guidelines.
32 In this case the success of the plaintiff's leave application and the making of the Calderbank offer by the TAC are not, individually or collectively, circumstances that warrant a costs order other than on a party and party basis. The exercise of my discretion to order costs on an indemnity basis calls for consideration of all of the circumstances of the leave application. However, in so far as these matters may inform my understanding of the TAC's conduct of this litigation and whether this warrants the disapproval of the court by ordering costs on an indemnity basis, the TAC's obligation to act as a model litigant and the application of its Cost Recovery Guidelines are relevant considerations.
The Relevant History
33 The history of the leave application is summarised in the following paragraphs.
34 On 13 July 2010 application for a serious injury certificate was made. Mr. Lombard deposed that this was supported by medical material obtained to that date and by the plaintiff's affidavit sworn on 13 May 2010. Apparently, the medical material included the reports obtained in 2008 from the treating general practitioner and psychologist and from an independent psychiatrist as well as the results of an assessment by a neuropsychologist to whom the plaintiff had been referred by a treating neurologist in 2006. This material indicated, amongst other things, that the plaintiff was suffering from a Chronic Major Depressive Disorder and that deficits in the plaintiff's recent and working memory and a slowing in information processing were likely mediated by psychological factors associated with the transport accident.
35 In a letter dated 23 August 2010 the TAC rejected the application because, so the letter advised, the TAC did not consider that the plaintiff had sustained a serious long-term impairment or loss of a body function with respect to her spine and/or brain within the meaning of paragraph (a) of the definition or a severe long-term mental or severe long-term behavioural disturbance or disorder within the meaning of paragraph (c) of the definition. The decision to reject the application was said to have been made after consideration and review of all relevant material in the TAC's possession.
36 The letter cautioned the plaintiff that the TAC may bring an application to recover legal costs in the event that any subsequent application to the County Court for leave was unsuccessful and also expressed the TAC’s view that an application for legal costs in these circumstances was consistent with the MLG and accorded with the Cost Recovery Guidelines.
37 Whilst less clear in the message conveyed in respect to the seeking of an order for costs and for taking steps to recover any costs, the form and substance of this letter resembles the first of the example letters which Mr. Lombard and Mr. Hocking agreed were subsequently provided to practitioners who attended the Legal Liaison Group meeting convened on 10 March 2011.
38 On 8 November 2010 the plaintiff filed her Originating Motion. On 16 February 2011 orders were made, amongst other things, setting the application down for hearing on 23 November 2011 and directing that no later than six weeks prior to hearing, the parties complete any exchange of further affidavit or medical reports to be relied on at the hearing.
39 In October 2011 the TAC obtained a report from a clinical neuropsychologist whose testing revealed severe attentional difficulties which he attributed to a severe emotional reaction to the accident, aggravated by other later stressors. Reports from a psychiatrist who assessed the plaintiff at the request of the TAC in February 2009 and again in October 2011 also indicated that in his opinion the plaintiff was suffering from an Adjusted Disorder with mixed anxiety and depressed mood and that this condition was still related to the transport accident and the resultant injuries. This psychiatrist also identified a number of what he termed: “unrelated” stressors.
40 Apart from up-to-date reports from the treating general practitioner and psychologist, by October 2011 all of the specialist evidence bearing upon the paragraph (c) claim was available to the TAC, indicating as it did an ongoing link between the plaintiff's mental state and the transport accident, although there were conflicting views about whether other stressors were related to the transport accident and about the extent to which any of these other stressors were contributing to the plaintiff's mental state.
41 On 14 November 2011 the parties attended a case conference. The TAC was represented by Mr. Byrne and Serious Injury Manager, Mr. Caruana. As he explained in his affidavit Mr. Byrne thought that:
"4. ... the plaintiff's case under sub-paragraph (a) was highly unlikely to succeed and that, in respect to her case under sub-paragraph (c), she would not succeed in establishing that her condition was related to a knock on the head in the accident, but rather a result of many other events which were unrelated to the accident. At that point, the plaintiff had filed only two affidavits of her own, which were uncorroborated, and the medical reports have been obtained on the basis of histories given by her. I thought that the application did not meet the threshold. I did not think that it was a "credit case"; I thought it was a case in which the plaintiff was mistakenly attributing many of her issues to the accident rather than other events."
42 It was common ground that, when during this conference the TAC again rejected the plaintiff’s application, Mr. Byrne did not explicitly state that her application was "without merit". Mr. Byrne obviously considered that the case under paragraph (a) was unlikely to succeed and that there were weaknesses in the plaintiff's case under paragraph (c). He may have also believed, as he deposed, that during the course of their discussions he had conveyed the message that the TAC considered the plaintiff's case to be without merit. Nevertheless, absent advice to this effect, it is hardly surprising that Mr. Lombard did not, as he deposed, understand that the application was considered by the TAC to fall into the category of cases where the TAC may give effect to an order for costs.
43 By letter dated 15 November 2011 the TAC made a Calderbank offer which remained open for acceptance until the close of business on 21 November 2011. The offer clearly indicated that the TAC would (not “may”) seek an order that the plaintiff pay costs incurred in defending an unsuccessful application.[17]
[17]Exhibit "MJL5" and "RSB3"
44 There followed a letter from Mr. Lombard requesting that the letter be withdrawn because no fraud had been alleged; the TAC had acknowledged that the plaintiff sustained injury as a result of the transport accident, albeit not with consequences the TAC believed would meet the statutory threshold and the TAC letter did not meet the standard format (presumably the second example letter[18]) provided by the TAC at the Legal Liaison Group meeting. As I have already noted the Calderbank offer appears to have been expressed to indicate that the TAC would (not “may”) seek an order for costs against the plaintiff and in that sense it went further than the example letter.
[18]Exhibit "MLJ4"
45 On 18 November 2011 the plaintiff served additional material in support of her application which included five lay witness affidavits, her further affidavit and further reports from her treating psychologist and general practitioner. The TAC was correct in its submission that this additional material (particularly the corroborative evidence of the lay witnesses) served out of time and subsequent to the making of the Calderbank offer bolstered the plaintiff's case.
46 Notwithstanding the content of the additional material, on 22 November 2011 the TAC gave notice of objection to the late filing of additional material and, by a letter dated 23 November 2011 the Head of Claims, Ms Slatter responded to Mr. Lombard's earlier correspondence stating, amongst other things, that the advice that the evidence in this case did not justify the granting of a serious injury certificate was the equivalent of the TAC saying during the case conference that the plaintiff's application was without merit.[19]
[19]Exhibit "MJL6"
47 If the TAC consistently applied this reasoning, an assessment by the TAC at any stage of the proceeding that the evidence did not justify the granting of a serious injury certificate would, in any particular leave application, constitute an exceptionally good reason why the TAC should give effect to an order for costs.
48 The TAC response caused Mr Lombard to advise his client on 23 November 2011 that should her application fail she faced a substantial order for costs and, further, the prospect of enforcement of any costs order against her and her assets.
49 The plaintiff application was heard by me over three days, commencing on 23 November 2011. The plaintiff, an independent psychiatrist and a number of the witnesses were cross-examined. During this time Mr. Lombard questioned (as it turns out to some limited effect) the explanation provided by Ms Slatter and he urged further consideration of the plaintiff's application, particularly in view of the TAC's own neuropsychological and psychiatric evidence, which he argued demonstrated that the application was not "without merit".[20]
[20]See letter dated 24 November 2011
50 Without addressing the particular merits of the plaintiff’s case already before the court, in her written response Ms Slatter qualified her earlier statement when she advised Mr Lombard that the decision not to grant a certificate in a specific case "does not of itself mean an application is without merit" and that "(t)here are many instances where the TAC does not grant a certificate and in accordance with the guidelines does not recover costs”.[21]
[21]See letter dated 25 November 2011
51 Following the conclusion of the hearing, on 30 November 2011 the plaintiff notified the TAC that, if successful in her application for a serious injury certificate, she would seek her costs on an indemnity basis. In this regard the TAC was referred to the decision of Her Honour, Judge Morrish in Tomlinson v Kilkenny Cleaning Services Pty Ltd. [22]
[22](Unreported, County Court of Victoria, 23 July 2010)
52 Tomlinson involved a successful application by a plaintiff for costs on an indemnity basis where there had been a grant of leave pursuant to section 134AB(16) of the Accident Compensation Act 1985. In that case Her Honour found that the solicitor for the defendant had acted without instructions from WorkSafe and had thereby breached the standards expected of a model litigant to the detriment of the plaintiff, when he threatened to recover costs. Her Honour considered that the circumstances of that case warranted disapproval of the conduct by the making of the costs order sought.
53 The Tomlinson decision is clearly distinguishable on its facts.
54 My summary of the relevant history in this case highlights confusion surrounding the TAC’s approach to the recovery of costs under its published Costs Recovery Guidelines in leave applications. If, in compliance with its obligations under the MLG the TAC seeks to promote clarity and certainty in the management of its recovery rights, there is a pressing need for the TAC:
· to give clear notice to clients and practitioners when it intends to recover costs. This may occur before any offer of compromise is made. Such an approach is consistent with the interest the public has in discouraging inappropriate claims;
· to clarify (with examples) the circumstance or circumstances that might constitute another exceptionally good reason why in a particular case the TAC should recover its costs. Based on the current exchanges “without merit” could apply to a wide spectrum of cases, including inappropriate cases, cases (as was first asserted in this case) where the evidence does not justify the granting of a serious injury certificate or, some but not all cases where the TAC has decided not to grant a certificate.
55 The basis on which the TAC differentiates between one case and another does raise questions of consistency and fairness in the application of the Costs Recovery Guidelines which in a given case could reflect a breach of its obligations as a model litigant.
56 These observations should not be read as indicating that the TAC should be unnecessarily constrained in its interpretation of the circumstance/s in which it will give effect to an order for costs in accordance with the Costs Recovery Guidelines.
57 A finding that there is unresolved confusion impacting the interpretation and application of the Costs Recovery Guidelines is not the same as being satisfied that in the circumstances of this case the conduct of the TAC was in fact intimidatory (even after late service of the additional material and the withdrawal of the claim made under paragraph (a) of the definition), breached the MLG in particular paragraph 2(g)(iv) or was such that it warranted the disapproval of the court through the making of a costs order on an indemnity basis.
58 The TAC has acknowledged the plaintiff’s entitlement to an order for costs on a party and party basis. Neither party sought to be heard on the question of costs in respect to the costs application. The application has helped expose problems arising in association with the interpretation and application of the Costs Recovery Policy. In these circumstances I do not intend to make an order as to the costs of the unsuccessful application.
Orders
59 The only orders I make today are to dismiss the plaintiff’s application for costs on an indemnity basis and, as discussed at the conclusion of the hearing of this application, to order that the TAC pay the plaintiff’s costs of the leave application on a party and party basis to be taxed in default of agreement by the Costs Court.
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Certificate
I certify that these 15 pages are a true copy of the ruling of Her Honour Judge Millane delivered on 6 March 2012.
Dated: 6 March 2012
Hannah Christensen
Acting Associate to Her Honour Judge Millane
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