Booz Allen Hamilton (Aust) Pty Ltd v Smith
[2014] ACTSC 396
•2 December 2014
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Booz Allen Hamilton (Aust) Pty Ltd v Smith |
Citation: | [2014] ACTSC 396 |
Hearing Date(s): | 2 December 2014 |
DecisionDate: | 2 December 2014 |
Before: | Robinson AJ |
Decision: | Defendant to pay the costs of the Plaintiff |
Category: | Costs |
Catchwords: | COSTS − Whether to depart from costs following the event |
Legislation Cited: | Workers Compensation Act 1951 (ACT) s 183 Court Procedures Rules 2006 (ACT) |
Cases Cited: | SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Calderbank v Calderbank [1975] 3 All ER 333 Miwa Pty Ld v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 |
Parties: | Booz Allen Hamilton (Aust) Pty Ltd (Plaintiff) Roland Smith (Defendant) |
Representation: | Counsel: Mr Wayne Sharwood (Plaintiff) Mr Robert Crowe SC (Defendant) |
| Solicitors: Minter Ellison (Plaintiff) Sparke Helmore Lawyers (Defendant) | |
File Number(s): | SC 155 of 2014 |
Robinson AJ:
These are my reasons for making an order for costs in this proceeding on 2 December 2014.
Both the Plaintiff and the Defendant claimed an entitlement to a special order as to costs arising out of offers made in correspondence and communications between the parties during the period 9 May 2014 to 27 November 2014.
Some background explanation is necessary. At 8am on 12 January 2007, Ms Kim De Britt was a passenger in the front seat of a stationary car in Coulter Drive waiting to turn left into Belconnen Way. The car in which she was travelling was struck in the rear by a car driven by the Defendant, Rowland Smith. That led to Ms De Britt bringing an action in common law for negligence against Mr Smith.
As it happened, on that day, Ms De Britt was travelling to her workplace. She subsequently made workers compensation claims against her employer, Booz Allen Hamilton (Aust) P/L. She has been in receipt of workers compensation for the injuries and disabilities said to have occurred as a result of that motor vehicle accident. Her employer sought to recover from Mr Smith the value of the workers compensation payments made. The employer brought the current proceedings in its name to achieve that end.
By an order made on 19 November 2014, the two proceedings were heard together.
On 1 December 2014, I commenced the hearing of the two proceedings. As between Ms De Britt and Mr Smith, the matter proceeded as an assessment, as would be expected in the case of a rear end collision.
After hearing an opening address from counsel for Ms De Britt, I was informed that the proceeding between Ms De Britt and Mr Smith had been conditionally settled. I was informed that because of the nature of Ms De Britt’s current disabilities it would be necessary to appoint a tutor and have the Court approve that settlement. This process was undertaken by a different judge so that, if the Court failed to approve the proposed settlement, those proceedings could be resumed before me.
Another judge dealt with that settlement and it was an agreed fact on this application that the compromise was for $1,000,000 plus costs.
The consequence of this settlement was that the employer will receive back the whole of the payments made by it to Ms De Britt. This occurs pursuant to s 183 of the Workers Compensation Act 1951 (ACT). The sum paid by that employer was $385,897.93. The employer is also entitled to interest on that sum. The plaintiff and the defendant in these proceedings agreed that interest in the sum of $113,000 has been accrued. Orders were made by me giving effect to this position.
Before examining the correspondence passing between the plaintiff and the defendant setting out the various offers on which each relies, it is necessary to say something about the cause of action in the related proceeding of De Britt v Smith. It is common ground that, at the time when Mr Smith’s motor vehicle ran into the rear of the motor vehicle in which Ms De Britt was a passenger, she was already suffering from medical and psychological conditions. In addition, there was apparently evidence capable of proving that the impact of the collision was very slight. In substance, the defendant in both proceedings proceeded on a case theory that the motor vehicle accident did very little to exacerbate those symptoms and that Ms De Britt’s subsequent deterioration in both mental and physical states was due to other causes.
The defendant took the view that Ms De Britt may not receive a verdict over and above the amount paid to her for compensation. This was certainly the basis upon which the defendant was motivated, in this case, to make offers in the nature of Calderbank offers. A schedule of damages prepared pre- trial by both sides was put before me in these proceedings. It showed that Ms De Britt was contending for damages approximating $2 million whereas Mr Smith was contending for approximately $65,000.
Judged by the correspondence written by the employer plaintiff which was in evidence in this application, the plaintiff apparently did not share this case theory. The employer plaintiff demanded that the defendant pay the full amount of the amount of workers compensation paid by it to Ms De Britt. Its correspondence did not admit of the possibility that Ms De Britt may receive a verdict for a lesser sum than this amount.
On 11 April 2014 the current proceedings were commenced by the plaintiff employer claiming an indemnity and other relief in respect of the workers compensation payments paid to Ms De Britt. There is no suggestion that the commencement of these proceedings was anything other than prudent. A limitation issue was approaching; costs and interest could only be obtained in court proceedings. Thereafter, the parties exchanged 17 communications which were tendered in evidence on this application relating to the question of the costs of these proceedings.
The defendant (or probably the insurer, NRMA Insurance) was concerned that if it paid over an amount equal to the total of the workers compensation payback figure and if it was later found at trial that Ms De Britt failed to obtain a verdict in excess of this amount, it may never recover the shortfall. See s 183(1)(d) of the Workers Compensation Act. To guard against this concern, the defendant proposed that a deed be entered into where both insurers would be parties and so the insolvency risk, in the defendant’s mind at least, would be eliminated.
It became clear from its communications that the plaintiff employer’s workers compensation insurer, Allianz Australia Insurance Ltd, would not enter into such a deed. One reason may have been that its internal processes apparently would not allow this. On the other hand, neither the plaintiff employer nor its insurer intimated that, in any way, it would not comply with the statutory scheme for recovery. Although inviting the plaintiff’s insurer to be a party to a deed is not outside the ambit of a consensual settlement agreement, it is not something which the plaintiff’s workers compensation insurer is required to do at law.
The precise manner in which an insolvency risk would arise in the circumstances was not explained to me. At first blush it appears that there are two apparently solvent insurers standing behind their respective insured, exercising contractual rights and subrogation. It was explained at T.7-
MR CROWE: ‑ ‑ ‑ and she only recovers a modest amount, then we want some acknowledgement from you that you'll pay us back, and preferably a deed of agreement as between an insurer and insurer which avoids the problem, for example, of the named employer going into liquidation or there being some other technical problem which would then see my client lose its right of recovery. In essence, what we asked for was some earnest, some form of security to ensure that if that eventuated we would be able to get our money back…
See also T. 20 at lines 1 to 16.
However, I am prepared to proceed upon the basis that should Ms De Britt have failed to achieve a verdict of $385,000 at common law, there was an insolvency risk in the repayment of compensation.
As the argument on the application proceeded the parties refined their respective positions. The plaintiff employer drew attention to two letters said to engage the Calderbank jurisprudence. These were letters dated 4 July 2014 and 24 November 2014. The defendant relied on a letter dated 5 August 2014 as engaging that jurisprudence. All three letters have some context derived from the surrounding correspondence. I take this into account.
The defendant relied on the letter dated 5 August 2014 which was headed “without prejudice save as to costs and interest”. The letter expressed itself to be an offer on the basis of Calderbank v Calderbank [1975] 3 All ER 333. The letter contained an expiry time of 4pm on 26 August 2014. The letter stated in part-
In addition, our client offers the following in order to resolve your client’s claim:
(a) That upon the employer and its [insurer ] entering into a deed with Mr Smith and NRMA Insurance to the effect that the former will jointly promise to repay to the latter the difference between the workers compensation indemnity amount and the damages awarded to the worker should they be less than the workers compensation indemnity amount;
…
(d) Mr Smith and NRMA Insurance will within 28 days of settlement of, or judgement in, the workers claim pay interest on the lesser of the workers compensation indemnity amount and the settlement or judgement amount at one half of the rate of interest allowed under Schedule to Part 2.1 of the Court Procedures Rules 2006 (ACT) with respect to payments of compensation made on and after 11 April 2008, account being taken of any reimbursement payments already made.
…
We propose that if this offer is accepted, proceedings SC 155 of 2014 be stayed until the accounting between our respective clients has been finalised. If that is achieved without further dispute, we would expect that the action would then be dismissed by consent with no further order as to costs.
…
If your client elects not to accept the offer and fails to obtain a more favourable outcome in the recovery proceedings, our client will rely on this letter to seek costs on [an] indemnity basis from the date of this letter.
Four questions require consideration. The first is as Giles JA stated in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]:
“…the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure …”
(Emphasis added)
The second is that a failure to accept a Calderbank offer will only justify an order for indemnity costs if it constituted a genuine offer of compromise and it was unreasonable for the offeree not to accept it. See the cases collected in Lahoud v Lahoud [2011] NSWSC 1186.
The third is whether the offer was capable of acceptance. The inquiry as to whether it was unreasonable for the unsuccessful offeree to have rejected a Calderbank offer assumes that the offer was capable of acceptance by the offeree. (See, for example, Vieira v O’Shea (No 2) [2012] NSWCA 121 at [10]).
The fourth is whether the Plaintiff failed to obtain a more favourable outcome in the proceedings because, as stated by its author above, only then will the Calderbank letter consequences be invoked.
The casting of the offer in terms of the execution of a later deed, a draft of which is not attached, presents problems. Two issues arise here. One is whether the term “to the effect” requires or permits further negotiation. The second is, assuming that there is agreement on sufficiently certain terms: is there an agreement to be bound immediately upon an acceptance of the letter or only when the contemplated deed is agreed or alternatively executed? Neither issue is clear. There is no doubt that, with suitable words, these issues could have been made clear. Indeed, yet a further issue arises from the fact that the letter does not dispose of the proceedings. The proposal “that if this offer is accepted” invites further agreement albeit for ancillary purposes. As a whole, the document might readily be characterised as a penultimate communication in a negotiation.
The payment of interest on the “judgement amount at one half of the rate of interest allowed under Schedule to Part 2.1 of the Court Procedures Rules 2006 (ACT) with respect to payments of compensation made on and after 11 April 2008, account being taken of any reimbursement payments already made” contains an ambiguity which is not capable of resolution from the letter alone. It may very well have been intended to mean that interest will be calculated on a rough and ready approximation of the interest actually accrued by assuming that compensation was paid out in equal installments at equal intervals over the entire period and allowing half the rate under the rules on the whole amount. On the other hand, it might have meant that there was to be a 50% compromise on the interest component.
It is obvious that the replacing of one contested legal position with an “agreement” to resolve that contest which itself produces another legal contest over the true construction of that agreement, is a highly undesirable situation.
As things turned out the Defendant agreed to pay out $1 million and costs. The occasion for the deed to have any relevant effect did not eventuate. The Plaintiff employer has not failed to obtain a more favourable outcome.
In all the circumstances, I find that the failure to accept the letter dated 5 August 2014 does not warrant a departure from the usual costs order.
The Plaintiff employer first relied upon a letter dated 4 July 2014 as justifying a special order as to costs. That letter was headed “without prejudice save as to costs” it also made reference to the fact that the offer in that letter was made subject to the principles provided in Calderbank v Calderbank. The letter read in part-
“We are instructed to offer to discontinue the recovery proceedings on the following terms, with the offer to be reduced to a formal deed between the parties:
(a)That the NRMA immediately repay the value of worker’s compensation payments paid to date, now calculated at $346,636 and continuing at $880 per week. This payment is to be made with no conditional repayments obligation between the parties;
(Bold in original)
Much of what is written in paragraph [25] above is applicable to this letter. No draft of the proposed deed was attached. There is no express statement in the letter, for example, that the letter is capable of acceptance on the basis that the parties have reached finality on the agreement and intend to be immediately bound but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect in the “formal deed”. The matter is left up in the air.
The offer involved a compromise with interest “to be valued at $45,000” and there was no claim to costs. How much of a compromise it was at that time is not clear. Interest was agreed at $113,000 on a principal figure of $385,897 as at 1 December 2014. It is not known what the costs of the actual recovery proceedings SC 155 of 2014 were at the date of the letter. Contrary to the letter at clause 1.5, interest probably did not exceed $120,000 on a lesser figure at that time and indemnity costs from the date NRMA rejected Allianz’s first demand for payment was unlikely. Against this compromise, NRMA was to give up its right to conditional repayments. This was a substantial right and one that the statute did not require to be given up. It was also a right which on the case theory adopted by the defendant may well have been engaged in a sum in excess of the compromise figure for interest and costs. The extent of the compromise is always a factor in determining whether the offeror has discharged the onus upon it to show an unreasonable rejection at the time of the rejection. (The cases are collected in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344). In my view it was not unreasonable to reject the substance of the offer at that time.
In light of the above I find that the failure to accept the letter dated 4 July 2014 does not warrant a departure from the usual costs order.
The Plaintiff employer also relied upon a letter dated Monday 24 November 2014 as justifying a special order as to costs. It sought a reply to this letter by 4pm on Friday 28 November 2014. The trial had been set down to commence on Monday 1 December 2014 for five days. This hearing date was known to the parties at least from 4 July 2014. (See Ex B item (e)).The terms of this offer were straightforward. The proposal to enter into a deed was not pressed. The defendant had to pay the plaintiff the sum of $383,397.11, being workers compensation payments to 11 November 2014. The defendant had to pay the plaintiff interest on this amount at “one half the rate of interest allowed under the Court Procedure Rules 2006 (ACT) from 12 April 2007 to the date of this letter”. The defendant had to pay the plaintiff’s costs as agreed or assessed. The letter was silent as to whether the payment was to be made “with no conditional repayment obligation” between the parties.
The potential for ambiguity over the specification of the rate of interest was acknowledged by counsel for the plaintiff at T.35. The failure to expressly spell out whether there was or was not a requirement of conditional repayment is more significant. Judged by his response to the offer, the defendant thought the offer contained “a no conditional repayment obligation”. The offer on its face does not contain such a term. I can see two reasonably open constructions, the resolution of which would require a consideration of the totality of the parties’ communications and the application of the objective theory of contract.
There is a further dimension to explore. Assuming that the offer unambiguously conveyed a term which could be said to be “full” interest compensation but roughly approximated on assumptions as to timing of payments, then it is difficult to see the offer amounting to a genuine compromise. This is so whether or not the ambiguity over the “no conditional repayments obligation” between the parties is put to one side.
I have regard to the potential for ambiguity and the underlying genuineness of the compromise. I find that the failure to accept the letter dated 24 November 2014 does not warrant a departure from the usual costs order.
The defendant must come to terms with the fact that it was it that agreed to settle the matter with Ms De Britt at a sum of $1 million and costs. Although it was said from the bar table that, as the parties moved closer to the trial date, much more preparation and effort had been put into the case, and inferentially, more information had come to hand, no analysis was provided to me of any fresh material coming to light in the relevant period and of its impact upon the case. The plaintiff reasonably commenced the proceedings and has been wholly successful. There is no conduct on its part which should deprive it of costs following the event.
| I certify that the preceding thirty-eight [38] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Robinson. Associate: Date: 6 February 2015 |
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