Chiha v McKinnon

[2004] NSWCA 273

CITATION:	Chiha v. McKinnon [2004] NSWCA 273
HEARING DATE(S):	3 August 2004
JUDGMENT DATE:	3 August 2004
JUDGMENT OF:	Hodgson JA at 1; Ipp JA at 34; Tobias JA at 35
DECISION:	(1) Appeal allowed (2) Orders below set aside (3) In substitution for the verdict and judgment, there be verdict and judgment for the appellant in the sum of $129,409 (4) The respondent to pay the appellant's costs of the proceedings below including the arbitration (5) Respondent to pay the appellant's costs of the appeal.
CATCHWORDS:	PROCEDURE - COSTS - DISTRICT COURT - Defendant applies for rehearing after plaintiff successful in arbitration - Plaintiff recovers substantially smaller verdict in court hearing - Order that plaintiff pay defendant's costs - Whether that order correct.
LEGISLATION CITED:	Arbitration (Civil Actions) Act 1983 s.31
PARTIES :	Mekhael Chiha - appellant Matthew Wayne McKinnon - respondent
FILE NUMBER(S):	CA 40779/03
COUNSEL:	Ms. S. Norton SC with Mr. P. Khandhar for the appellant Mr. I. Harrison SC with Mr. W. Fitzsimmons for the respondent
SOLICITORS:	Bryden's Law Office - appellant Moray & Agnew - respondent

LOWER COURTJURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 1104/01
LOWER COURT JUDICIAL OFFICER :	P R Bell DCJ

CA 40779/03
DC 1104/01

HODGSON JA
IPP JA
TOBIAS JA

Tuesday 3 August 2004

CHIHA v McKINNON

Judgment

1 HODGSON JA: On 13 August 2003, Bell DCJ gave a decision in proceedings in which the appellant Mekhael Chiha had sued the respondent Mathew Wayne McKinnon for damages in respect of injuries caused in a motor vehicle accident on 21 September 1999. The primary judge gave judgment for the appellant in the sum of $102,766.

2 On 15 August 2003, the primary judge ordered that the respondent pay the appellant’s costs of and up to an arbitration hearing that had occurred in the proceedings, and that the appellant pay the respondent‘s costs from the date of filing of the application for rehearing.

3 The appellant appeals from those orders.

4 I will briefly outline the circumstances giving rise to the proceedings.

5 The appellant was born in 1958. In partnership with his wife, he commenced the operation of a pizza business at Mount Druitt in 1996. The motor vehicle accident occurred on 21 September 1999. The defendant admitted liability in the proceedings.

6 The primary judge found that the appellant suffered two significant injuries in the accident. First, there was an injury to the left ankle, an injury which causes pain on standing from one and a half to two hours. The primary judge found that this was probably caused through an aggravation of an asymptomatic condition found in both the appellant’s ankles. Second, there was injury to the appellant’s neck and shoulder causing the appellant to have problems in lifting goods in the course of his occupation and also in preparing pizzas. The primary judge found that this involved the aggravation of a pre-existing neck condition leading to a permanent condition of pain down the left arm.

7 The primary judge’s decision on economic loss was based on a conclusion that in most respects the appellant was able to lead his normal social life, and that the major impact was on his working capacity. The primary judge assessed non economic loss at twenty-five percent of a most extreme case. Initially he quantified this at $76,500, but later this was corrected to $20,000.

8 On economic loss, the primary judge noted that the essence of the claim was that the appellant could not work as quickly in making pizzas or do the lifting of heavy items. The appellant’s son, who had previously worked two days in the business, increased this to five days. This ceased before the trial, and replacement labour was engaged, the replacement being paid $428 per week. It appears that the son had been paid $100 per week, and then later $300 per week.

9 The partnership income had increased steadily both before and after the accident. In the year ending June 1999 it amounted to about $20,000. In the year ending June 2000 it amounted to about $27,000.

10 The primary judge found past economic loss at $95 per week, and this gave rise to a figure of $14,820. He assessed future economic loss at $60 per week for twenty years, on the five percent tables allowing fifteen percent for vicissitudes, which gave $33,996. Past out of pockets were assessed at $30,980, and future out of pockets at $20,000. This included an amount for an ankle operation.

11 On the question of costs, the primary judge noted that he had dealt with the matter as a rehearing following an arbitration. At the arbitration, the appellant had obtained an award of $190,634; and the primary judge noted that his judgment had improved the respondent’s position by forty-seven percent. The primary judge referred to Part 39A Rule 31 of the District Court rules which is in the following terms:

31 Arbitration (Civil Actions) Act 1983
(1)–(3) (Repealed)
(4) Subject to subrule (5), where proceedings are heard and determined under section 18A of the Arbitration (Civil Actions) Act 1983 (the Arbitration Act ) and the determination of the Court is not substantially more favourable to the applicant for the order for rehearing (the applicant ) than is the determination of the arbitrator, the Court:
(a) may not order any other party to pay the applicant’s costs incurred by reason of the rehearing, and
(b) is to order the applicant to pay the costs of every other party incurred by reason of the rehearing.
(5) The Court may in respect of a rehearing certify that the special circumstances of the case require the Court:
(a) to make an order referred to in subrule (4) (a), in which case the Court may make that order, or
(b) to refrain from making an order referred to in subrule (4) (b), in which case the Court may refrain from making that order.
(6) Where, by operation of section 18D of the Arbitration Act, an order for rehearing of proceedings ceases to have effect, the applicant shall pay the costs of every other party incurred by reason of the order for rehearing, unless the Court otherwise orders.
(7) Unless the Court otherwise orders, any application for an order or direction under this rule in respect of costs consequent on the rehearing of an action must be made immediately after judgment is given on the rehearing.

12 He also referred to part of Practise Note 14 in the following terms:

Part 51A Rule 12(4) of the District Court Rules requires that court on a re-hearing to impose on the applicant for the re-hearing the full burden of the costs of all parties unless the applicant “substantially” improves the position he held under the Arbitrator’s Award. The court may depart from this requirement only where special circumstances apply. The intent of the rule is to discourage ill-considered applications for re-hearing and so to reduce waste of court and parties’ resources.

13 The primary judge noted that Part 51A Rule 12(4) referred to in the Practise Note had been replaced by Part 39A Rule 31(4).

14 The primary judge accepted a submission for the respondent that where an applicant does obtain a substantial improvement over the arbitrator’s award, the applicant is entitled to an order for costs. The primary judge considered it contrary to the scheme as to the rehearing of matters, after an arbitration, to penalise a defendant who succeeded in substantially improving its position, by imposing on it an order for the costs of the rehearing.

15 The appellant appeals on the following grounds:

1. That the Trial Judge gave insufficient reasons for his decision.
2. That the Trial Judge erred in failing to conclude that the Appellant’s ankle and foot injuries were the result of the collision.
3. That the Trial Judge erred in failing to include the Appellant’s ankle and foot injuries as part of his non-economic loss.
4. That damages for non economic loss were manifestly insufficient.
5. That the Trial Judge erred in originally applying the wrong non economic loss tables to calculate the Appellant’s non economic loss.
6. That the amount awarded for past economic loss was manifestly insufficient.
7. That the amount awarded for future economic loss was manifestly inadequate.
8. That the Trial Judge erred in his application of Part 39A Rule 31(4) DCR in depriving the Appellant of his costs of the re-hearing and ordering the Appellant to pay the Respondent’s costs thereof.
9. That the Trial Judge erred in not ordering the Respondent to pay all of the Appellant’s costs of the whole action.
10. That the Trial Judge erred in holding that the Respondent had “significantly improved” his position between arbitration and re-hearing thereby in the trial judge’s view entitling the Respondent to the costs from date of lodgment (sic) of the re-hearing to conclusion of the re-hearing.

16 Grounds one to three in the notice of appeal were not pressed.

17 I will deal in turn with the question of damages and the question of costs.

18 In relation to non economic loss, it was submitted for the appellant that the primary judge’s assessment of twenty-five percent was grossly inadequate and should be replaced by the figure of thirty-three percent as proposed by the appellant. The submission was to the effect that the two significant injuries found by the primary judge could be seen to have a direct and daily impact on the appellant and his working life.

19 In the written submissions there was reference to the incorrect calculation initially made by the primary judge but this matter was not pressed in oral submissions.

20 In relation to economic loss, it was submitted that the primary judge made an award for future economic loss which was significantly inadequate and also involved particular errors. It was submitted that the appropriate starting point for future economic loss would have been at least $107 per week, being one quarter of the amount paid for the replacement. This was on the basis that, but for the disability of the appellant, an extra worker would only be needed for three days a week; but having regard to the disabilities, an extra worker was needed for six days a week. Sharing the additional cost of $214 between the two partners that left a prima facie loss of $107 per week to the appellant.

21 Then it was submitted that the primary judge erred in taking a lower basic weekly amount because of the prospect of an ankle operation, which the primary judge said would mean that the appellant would be able to stand for longer periods, whereas at best the ankle operation would give a reasonable prospect that this might happen; and it was submitted that also the primary judge erred in not taking account of negative possibilities for the appellant, in particular the probability of deterioration of his neck which had previously been referred to by the primary judge.

22 On that basis it was submitted that the primary judge should have based his calculation for future economic loss on $107 per week or at worst $95 per week, the figure adopted for past economic loss.

23 For the respondent, it was submitted that there was strong evidence that the ankle operation which the appellant proposed to have would, in relation to relatively inactive work on a flat surface, release him for almost full work. The primary judge, as he noted, was doing the best he could on material that could not be comprehensive. It was submitted that the award was within the discretionary range open to the primary judge.

24 In my opinion, the primary judge’s assessment of non economic loss at twenty-five percent of a most extreme case was within the discretionary range open in this case. The circumstance that it was arrived at without regard to the dollar result is a matter supporting a view that the discretion was correctly exercised, rather than the reverse.

25 On the question of economic loss, in my opinion the amount awarded by the primary judge was low having regard to the material before the primary judge; although in the absence of reasons suggesting error I do not think I would have considered it outside the possible range. However, in my opinion the matters raised by Ms Norton for the appellant do suggest that the primary judge, when he came to consider future economic loss, did not adequately have regard to negative aspects of the prognosis of the appellant, in particular the negative prognosis in relation to the neck, and the circumstance that the ankle operation would not take place for some time during which the ankle would deteriorate, and then could not guarantee certain success. In my opinion, also an appropriate starting point would have been $107 per week. The lower figure for past economic loss is justified by the period during which lower amounts were paid when the son was doing the necessary work.

26 In my opinion, the amount awarded for future economic loss should be calculated on the basis of $107 per week, because the negative aspects of the prognosis of the appellant roughly balance out the positive aspects, and other vicissitudes are taken care of by the fifteen percent deduction. The result of that calculation would be $60,609 rather than $33,966 awarded by the primary judge. The overall result would be a verdict of $129,409, rather than the $102,766 awarded by the primary judge.

27 Turning to the question of costs, the respondent conceded that the primary judge was in error on the question of costs, and in my opinion correctly so. The rule referred to by the primary judge applies only when the applicant for a rehearing fails to substantially improve the applicant’s position. The rule itself says nothing about the converse situation, where the applicant substantially improves the applicant’s position.

28 The primary judge took the view, it seems, that it would be in accordance with the spirit of that rule to give a successful applicant costs in those circumstances. In my opinion that view is incorrect.

29 Where a defendant seeks a rehearing after a plaintiff has been successful at an arbitration, the plaintiff has to prove the plaintiff’s case at a court hearing from the beginning: it is not just a matter of an appeal, looking for errors in the arbitrator’s decision. In those circumstances, the ordinary rule is that costs follow the event, and the event is that the plaintiff, needing to prove the plaintiff’s case from the beginning, has to undertake that proof and undertake the court hearing in order to achieve a result, and successfully does so.

30 It seems to me also that the approach adopted by the primary judge would unreasonably encourage defendants not to accept the result of arbitrator’s awards, because they would have the opportunity of obtaining an order for costs from the plaintiffs, even if the plaintiffs are successful in the ensuing court hearing; and unreasonable pressure would be put on plaintiffs to make safe offers of compromise and to accept settlements.

31 In my opinion, where a defendant does not accept the result of an arbitration, so that a full court hearing ensues, it should primarily be up to the defendant and not the plaintiff to make offers of compromise, if favourable costs orders are to be sought.

32 So for those reasons in my opinion the appeal should be upheld on the question of costs, and the appellant should have a costs order in the appellant’s favour.

33 So for those reasons, in my opinion the following orders should be made.

1. Appeal allowed.
2. Orders below set aside.
3. In substitution for the verdict and judgment, there be verdict and judgment for the appellant in the sum of $129,409.
4. The respondent to pay the appellant’s costs of the proceedings below including the arbitration.
5. Respondent to pay the appellant’s costs of the appeal.

34 IPP JA: I agree.

35 TOBIAS JA: I also agree.

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Last Modified: 08/09/2004