DAWSON v EICAS (No 2) - [2015] SADC 38

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
DAWSON v EICAS (No 2)
[2015] SADC 38
Decision of His Honour Judge Stretton
13 March 2015
PROCEDURE - COSTS
Application for costs. Discussion as to the effect of filed offers in the circumstances of this case.
Order:
1. Defendant to pay plaintiff's costs up until 24 December 2013.
2. Subsequent to 24 December 2013 each party is to pay its own costs.
District Court Act 1991 s 42; District Court Rules 187, 188 & 263, referred to.
Forlyle Pty Ltd v Tiver & Anor (2007) SASC 464; Blackman v Gant [2010] VSC 246; Pirotta v Citibank (1988) 72 SASR 259; Whitehead v Maas (1991) 56 SASR 362; Settlement Wine Company v National and General Insurance (No. 2) (1994) 175 LSJS 282; Shaw v Jaldhorn [1999] SASC 529; Simonovski v Bendigo Bank Ltd (No. 2) (2003) VSC 139; Smith v 600 Machinery Australia Pty Ltd (1996) FCA 1029; Grantigard Pty Ltd v Termicide Pest Control Pty Ltd (No. 6) (2010) FCA 381; Maitland Hospital v Fisher (No. 2) (1992) 27 NSWLR 721; NSW Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100; Shaw v Jaldorn [1999] SASC 529, considered.

DAWSON v EICAS (No 2)
[2015] SADC 38
Introduction

On 29 August 2014 the Court delivered judgement on the plaintiff’s claim against the defendant for damages arising out of a 2008 motor vehicle accident.
I adopt without repeating the findings and assessments of the Court delivered on that day.
The Court found the defendant primarily liable for the accident, apportioning liability 80/20 in the plaintiff’s favour.
Damages were assessed at $1,073,640, less 20% contributory negligence, totalling $858,912. Interim payment in the sum of $155,000 had previously been made by the insurer to the plaintiff, and in light of the 80/20 apportionment of liability the plaintiff was due to return 20% of special damages a sum of $44,247.90. Interest had been agreed at $22,815. As a result, the plaintiff was entitled to judgement in the sum of $682,479.10.
Following the statutory deduction of a Centrelink repayment of $77,135.96 and Medicare repayment of $2,283.80, plus further interest of $1,271.47, the remaining $604,330.81 is available and has been paid into court by the defendant.
Ordinarily, costs follow the event, and the plaintiff having been primarily successful in his claim, would be entitled to costs.
Both parties seek orders for costs.
There is no dispute that the plaintiff is entitled to an order that the defendant pay the plaintiff’s costs on a party/party basis up to and including 14 days after the filing of the defendant’s offers on 9 December 2013. What should occur after that time is in dispute.
Relevant Law
Costs are awarded in the discretion of the Court but that discretion must be exercised judicially.[1] The plaintiff has succeeded in the action and in the ordinary course of events would be entitled to party/party costs to be taxed or agreed.[2]
[1] Section 42 District Court Act 1991.
[2] Forlyle Pty Ltd v Tiver & Anor (2007) SASC 464; District Court Rule 263(1).
Both parties filed offers in accordance with the District Court Civil Rules 2006. Rule 263 provides that as a general rule, costs follow the event. Rule 187 provides for the formal filing of offers of settlement and Rule 188 addresses the potential costs consequences of not bettering a filed offer. Rule 188(6) provides:
(6)If a formal offer of settlement so far as it relates to principal relief is not accepted by the party to whom the offer is made and the Court determines the relevant action or claim on terms (as to principal relief) that are no more favourable to the party than the terms of the offer, then, subject to the Court's order to the contrary—
(a)the party to whom the offer was made is not to be entitled to costs referable to the period falling after the relevant date; and
(b)the party that made the offer—
(i)if a defendant—is entitled to costs referable to the period falling after the relevant date; and
(ii)if a plaintiff—is entitled to the whole of the party's costs of action on a solicitor/client basis and the defendant is not entitled to any costs not otherwise ordered.
Whilst the Court’s ultimate discretion is preserved, the obvious aim of the rule is to encourage reasonable offers to be made, and to encourage the acceptance of reasonable offers. So whilst costs do remain in the discretion of the court, the rules are said to raise a presumptive entitlement to costs.[3] The rule is essentially penal in its operation, designed to encourage offers and the resolution of claims by settlement.[4]
[3] Blackman v Gant [2010] VSC 246, Pirotta v Citibank (1988) 72 SASR 259.
[4] Whitehead v Maas (1991) 56 SASR 362 per King CJ at 367.
Offers of settlement
In this matter, several offers were filed.
On 9 December 2013 the defendant filed an offer of settlement pursuant to Rule 187 offering to settle the plaintiff’s claim for $1,051,000 plus costs. The defendant also filed an offer that day offering to settle the matter for 90% of his damages to be assessed.
It is common ground that at that time the plaintiff had been paid some $155,000 interim payment and that accordingly the defendant’s filed offer was in addition to such sum.[5]
[5] Settlement Wine Company v National and General Insurance (No. 2) (1994) 175 LSJS 282.
The plaintiff then filed an offer to accept $1,210,000 plus costs to settle the claim.
The plaintiff, has accordingly fallen significantly short of the defendant’s filed offer.
On a strict application of Rule 188, the plaintiff would be entitled an order that his costs taxed on a party/party basis be paid by the defendant up to the 24^th of December 2013, and the defendant would be entitled to an order that its costs be paid by the plaintiff on a party/party as and from that date.
The parties’ arguments
The defendant seeks an order that the plaintiff pay its costs as contemplated by Rule 188, as and from 24 December 2013.
The plaintiff opposes any order that he pay the defendant’s costs, and asks that the defendant pay his costs of trial. He does so on essentially two basis, that there was inadequate disclosure by the defendant of matters relating to liability, and that a strict operation of the Rule against him would result in particular harshness to him, in that he is in dire financial straits as a result of his injury with the result that in paying both his own and the defendant’s lawyers’ costs of trial he would be left with virtually none of the judgement monies, which would in turn fatally compound his existing dire financial circumstances and leave him with nothing to support himself or fund the further operations and medical care the Court found he needed.
I have had regard to all the arguments, materials and submissions put. For brevity I do not set them all out herein.
Discussion
The matter has been complicated in that subsequent to judgement the plaintiff ceased instructing his solicitors. The plaintiff’s solicitors told the court that this was to save costs and that relations remained cordial, although this may have changed late in the piece when in final submissions the plaintiff was critical of his lawyers.
Essentially the issue is whether there is good reason to exercise the Court’s unfettered costs discretion to depart from giving Rule 188 its ordinary effect.[6]
[6] Shaw v Jaldhorn [1999] SASC 529 per Doyle CJ at [4].
The defendant submits it acted reasonably at all times, and made a reasonable offer which the plaintiff did not better. In light of the submissions made by the defendant, the carriage of the case, and the supplementary materials tendered by way of affidavit, I accept that submission.
The plaintiff submitted that the defendant did not make adequate disclosure to him about the accident, and although I am satisfied that it did disclose all available information to the plaintiff, there are several factors which I find combined to affect the genuine view the plaintiff held about liability. Firstly, as I found at trial, the accident was very poorly investigated by police, with no accident plan being drawn up and statements not being taken from any of the defendant’s witnesses. Secondly, as I also found in the judgement, both police and ambulance officers seemingly attended the hospital while the plaintiff was severely injured and conveyed to him versions of events which on balance I find likely coloured his view of the facts of the accident itself and hence the issue of liability. These matters however are of limited overall consequence as the issue as to costs is essentially between the parties, rather than with police or ambulance officers.
The plaintiff also submitted, and I accept, is in an extremely dire financial position as a direct result of the accident, its sequelae and the litigation. I accept the submissions he made and materials he tendered in the course of costs submissions as reflecting his current financial situation. His ability to work since the accident has been seriously impaired due to his injuries, and as a result he is now facing the imminent loss of his home and faces likely bankruptcy. The court assessed his future medical needs as $40,000 for surgery, $115,000 for non-surgical treatment and $17,500 for future medication, which such surgery and treatment in this event he will face serious difficulty in securing.
In light of the tendered materials and all submissions, if the plaintiff must pay both his and the defendants costs subsequent to 14 days after the filing of the offer, in light of his dire financial situation, which has itself largely come about as a result of the injuries and their sequelae, the consequences upon the plaintiff will be unusually drastic. It is likely he will be bankrupted and even if not bankrupted will have no ability to manage his way through the current situation or afford even the future medical treatment that he needs.
I have regard to and accept the thrust of the authorities emphasised to me by the defendant that a party wishing to displace the prima facie rule in relation to costs that flows from DCR 188 faces a heavy burden,[7] sometimes described as the requirement for compelling and exceptional circumstances[8] or special or unusual features,[9] and that ordinarily the operation of the rule should not, of itself, be a reason to order otherwise.[10]
[7]    Simonovski v Bendigo Bank Ltd (No. 2) (2003) VSC 139.
[8]    Smith v 600 Machinery Australia Pty Ltd (1996) FCA 1029; Grantigard Pty Ltd v Termicide Pest Control Pty Ltd (No. 6) (2010) FCA 381.
[9]    Maitland Hospital v Fisher (No. 2) (1992) 27 NSWLR 721; NSW Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100.
[10] Shaw v Jaldorn [1999] SASC 529.
I agree, of course, with these authorities and with the purpose and policy of the costs rules, and their importance in managing and regulating the carriage of litigation.
I cannot however ignore that at the end of the day the purpose of the legal system and causes of action available to people such as the plaintiff, is that genuinely seriously injured plaintiffs are compensated, and that in exceptional circumstances the strict operation of the costs rules may operate unusually harshly and drastically upon them.
In all the circumstances of this matter, the strict operation of the costs rules would, I find, operate unusually harshly and drastically upon the plaintiff, such that the court should ameliorate their operation to some degree.
In light of the important policy behind the Rules, the court will not fully ameliorate their effect.
Having regard to everything put, I exercise the costs discretion such that subsequent to 14 days after the defendants filed offer, each party will pay their own costs. The plaintiff in being deprived of its costs from that date is accordingly still suffering a penalty for not having bettered the defendant’s offer, but is not incurring the full penalty of being required to pay the defendant’s costs of trial from that date.
Orders
That the defendant pay the plaintiff’s party/party costs incurred up until 24 December 2013.
That subsequent to 24 December 2013, each party is to pay its own costs.