DP (a pseudonym) v Bird (Costs Ruling)
[2022] VSC 58
•28 February 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
INSTITUTIONAL LIABILITY LIST
S ECI 2020 01541
| DP (a pseudonym) | Plaintiff |
| v | |
| BISHOP PAUL BERNARD BIRD | Defendant |
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JUDGE: | J FORREST J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers (written submissions filed 28 January 2022 by the plaintiff and 4 February 2022 by the defendant) |
DATE OF RULING: | 28 February 2022 |
CASE MAY BE CITED AS: | DP (a pseudonym) v Bird (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 58 |
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PRACTICE AND PROCEDURE — Costs — Costs orders — Offer of compromise — Calderbank offer — Social Security Act 1991 (Cth) pt 3.14, ss 17(2), 1178, 1179 — Civil Procedure Act 2010 (Vic) ss 22, 23 — Supreme Court (General Civil Procedure) Rules 2015 (Vic) Order 26.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr G Boas with Dr E Kelly, of counsel | Ken Cush & Associates |
| For the Defendant | Ms R Annesley QC with Ms T Skvortsova, of counsel | Colin, Biggers & Paisley Lawyers |
HIS HONOUR:
On 22 December 2021, reasons for judgment in this matter were handed down.[1]
[1]DP (a pseudonym) v Bird [2021] VSC 850.
Judgment was entered for the plaintiff on 25 January 2022 in the sum of $232,701.37, after the parties agreed upon damages by way of interest.
The only remaining issue (at least at this level) is that of the appropriate order for costs.
The Diocese made a formal offer of compromise pursuant to Order 26 of Supreme Court (General Civil Procedure) Rules 2015 (the ‘Rules’) of $250,000 on 6 July 2021 (the ‘offer of compromise’), and a further offer of $480,000 on 30 July 2021 in the form of a written offer (the ‘Calderbank offer’), purporting to be made in accordance with the principles in Calderbank v Calderbank (‘Calderbank’)[2] and Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (‘Hazeldene’).[3]
[2][1975] 3 All ER 333.
[3](2005) 13 VR 435 (‘Hazeldene’).
The Diocese cannot rely on its Calderbank offer in respect of costs as it did not give DP sufficient time in which to consider whether it should be accepted.
The efficacy of the offer of compromise was contested by DP. It is said by DP that it should fail for a variety of reasons, none of which are persuasive.
I will make a costs order giving effect to the Diocese’s offer of compromise.
Background
DP’s proceeding was issued on 27 March 2020.
On 5 July 2021, a mediation was conducted. The following day both DP and the Diocese made offers of compromise pursuant to r 26.02 of the Rules.
The Diocese’s offer of compromise was for $250,000 plus costs on a standard basis to be taxed in default of agreement. It was said to be served in accordance with r 26.02 and included the following provision:
This offer is inclusive of any liability to pay any Medicare Notice of charge pursuant to the provisions of the Health and Other Services (Compensation) Act 1995 and any liability to pay any Centrelink charge payable pursuant to social security legislation.
(‘the DSS condition’).
DP countered with an offer of compromise of $1.5 million.
As required by the Rules, the respective offers of compromise were open for acceptance for 14 days after service.
On 20 July 2021, the Diocese served an expert report on economic loss of Ms Tammy Lindsay, a forensic accountant.
On 27 July 2021, the trial commenced and DP’s application to adduce tendency evidence was heard on 27 and 28 July 2021.
On 30 July 2021, a judicial mediation was held. It failed to resolve the proceeding.
At 4:20pm on 30 July 2021, the Diocese served the Calderbank offer with a similar condition in relation to Medicare and Centrelink charges as the DSS condition contained in the offer of compromise. That offer was said to be open until 10:00am on 2 August 2021.
On 2 August 2021, the trial resumed with the ruling as to the admissibility of the tendency evidence delivered.[4]
[4]DP (a pseudonym) v Bishop Bird (Ruling) [2021] VSC 453.
The trial then proceeded with opening addresses by counsel for DP and the Diocese. DP commenced giving evidence on the afternoon of 2 August 2021.
Following a significant adjournment owing to DP’s mental state, viva voce evidence concluded on 27 September 2021.
At the conclusion of the evidence written submissions were filed by the parties and oral closing submissions concluded on 30 September 2021.
The offer of compromise
Rule 26.08(3) provides:
Where an offer of compromise is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains a judgment on the claim to which the offer relates not more favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders—
(a)the plaintiff shall be entitled to an order against the defendant for the plaintiff’s costs in respect of the claim before 11.00 a.m. on the second business day after the offer was served, taxed on the ordinarily applicable basis; and
(b)the defendant shall be entitled to an order against the plaintiff for the defendant’s costs in respect of the claim thereafter taxed on the ordinarily applicable basis.
Notwithstanding DP’s submissions, it is clear that he has obtained a judgment ‘not more favourable’ to him than the terms of the offer of compromise. He raises however three separate points which it was said should militate against the Court applying the terms of r 26.08(3):
(a) the offer of compromise was uncertain due to the DSS condition;
(b) the service of the expert report on economic loss out of time — it was due to be served on 24 June 2021 and was served on 20 July 2021 — caused him prejudice;
(c) as the proceeding was a test case in relation to the question of the vicarious liability of a diocese (or archdiocese) of the Catholic Church for the unlawful actions of a priest, the Court should exercise its discretion to ignore the terms of the rule.
For the following reasons I do not accept that any of these contentions are made out and there should be no departure from the terms of the rule.
Uncertainty due to the DSS condition
Under pt 3.14 of the Social Security Act 1991 (the ‘Act’) DP had, as his submissions accept, a potential liability to the Commonwealth.
Section 17(1) of the Act provides a list of social security payments which are included in the definition of ‘compensation affected payment’. It is not in issue that DP received payments from the Commonwealth (‘DSS payments’) which fall within that definition and that a potential settlement or judgment would fall within the repayment provisions of pt 3.14 of the Act (set out below). Nor is it in issue that those payments fall within the reference in the DSS condition to ‘Centrelink charges’.
The relevant provisions within pt 3.14 — Compensation Recovery — in relation to the repayment of DSS payments read as follows:
1178Repayment of amount where both lump sum and payments of compensation affected payment have been received
(1) If:
(a)a person receives a lump sum compensation payment; and
(b)the person receives payments of a compensation affected payment in relation to a day or days in the lump sum preclusion period;
the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.
(2)The amount to be specified in the notice is the recoverable amount under section 1179.
1179 The section 1178 recoverable amount
The recoverable amount under this section is equal to the smaller of the following amounts:
(a) the compensation part of the lump sum compensation payment;
(b)the sum of the payments of the compensation affected payment made to the person in relation to a day or days in the lump sum preclusion period.
In Glad Cleaning Service Pty Ltd v Vukelic[5] Slattery J said of the scheme under pt 3.14:
The whole Part, Pt 3.14 Social Security Act has been described as being designed to prevent “double dipping” under the Commonwealth social security scheme: per Mandie J in Wallace Smith v Secretary, Department of Family and Community Services [2004] VSC 123 at [10]. It has also been described as ensuring that “a person is not paid from two sources in respect of the same period” Re Groth v Secretary, Department of Social Security (1995) 37 ALD 797, at 798.
Social Security Act Pt 3.14, Div 4 provides a mechanism for the Commonwealth to recover monies from a person who has received payments under that Act where the person has also received compensation payments from other parties such as workers compensation insurers: cf Social Security Act s 17(2) definition of “compensation”. The Commonwealth’s right to recover monies under this legislation covers both periodic and lump sum payments of compensation.
The Commonwealth’s payment recovery system under the Social Security Act creates a liability in the recipient of the social security benefit and of the compensation to repay the Commonwealth in conformity with a Recovery Notice served on behalf of the Commonwealth. Alternatively, if the Commonwealth so chooses it can issue a notice for the same sum to be paid by the workers compensation insurer or other compensation payer.[6]
[5][2010] NSWSC 422 (‘Glad Cleaning’).
[6]Ibid [31]-[33].
So, the Department of Social Security (‘DSS’) — or more correctly, the Secretary of the DSS or his or her delegate — can, in relation to any settlement or judgment (of which a common law settlement or judgment is but one example), issue a notice seeking recovery of ‘the recoverable amount’. Usually, this amount is calculated by reference to a proportion of the settlement or judgment sum.
In addition, the DSS may also determine, under s 1170 of the Act, a preclusion period during which a claimant is disentitled to payments under the Act.
In DP’s written submissions, the effect of the scheme on DP was summarised as follows:
Putting the above into the context of this case, where both economic loss and non-economic loss were claimed, the Act provides that half of the lump sum offered in the Offer of Compromise would be deemed to be in respect of economic loss and that such sum would then, upon a determination of the applicable Preclusion Period, result in a calculation of any Recoverable Amount in respect of the plaintiff’s CAP (his carer’s payments), in relation to which the Secretary might issue a Notice or otherwise determine under s 1184K.[7]
Such a string of determinations is not only complex but involves the exercise of multiple discretions by the Secretary or delegate. Most significantly, when would the Preclusion Period start, in circumstances where date of loss of earnings/loss of earning capacity has not been determined and the defendant does not admit injury, denies any economic loss, yet extends an offer expressly referring to a Centrelink liability that could only arise in relation to actual or deemed economic loss?[8]
[7]Plaintiff’s submissions as to costs [10].
[8]Ibid [11] (citations omitted).
In these circumstances DP made two submissions. First, as the offer sum was conditional upon a determination by a third party (the Secretary of the DSS or his or her delegate) then it was impossible to say whether the judgment sum was no more favourable than the offer sum and therefore the rule was not engaged.
Second, and alternatively, that the offer of compromise ‘could not have enabled the plaintiff to know with sufficient precision the judgment he needed to obtain in order to avoid the operation of r 26.08(3)’.[9]
[9]Ibid [13], citing Waterfall v Antony (No 2) [2012] VSC 467, [11].
There is no merit whatsoever in the first contention. DP was offered $250,000 to settle his claim for pain and suffering, economic loss, aggravated and exemplary damages. Judgment on those claims has been entered for $232,701.37. DP has missed the cut-off by over $17,000. There was no condition which affected the measure of the judgment sum as against the offer. The DSS condition does not affect the clear and indisputable outcome, whatever DP’s repayment obligations or preclusion period may or may not be.
The Diocese’s offer was for a greater sum than DP ultimately recovered.
As to the second contention, it is also rejected.
It can be accepted, as DP contends, that at the time the offer of compromise was made he did not know (and, more importantly, could not know) what the recoverable amount or the preclusion period was under the Act. That was necessarily dependent upon determinations made by the Secretary or his or her delegate once the settlement sum was ascertained.
However, that does not invalidate the offer of compromise for uncertainty.
First, to describe the DSS condition as a condition which of its own force limited or obscured the offer of a sum certain, as DP contends, is plainly wrong. As explained by Slattery J in Glad Cleaning, under ss 1178 and 1179 of the Act, DP (as is the case with every other plaintiff or claimant in receipt of DSS payments and seeking damages or compensation under a myriad of federal or state compensation schemes) had a potential liability to pay to the Commonwealth the recoverable amount. Irrespective of the DSS condition, once the proceeding was initiated DP had a potential obligation under the Act to repay part of any settlement or judgment to the DSS.
The DSS condition did no more than reinforce that obligation which existed irrespective of the terms of the offer of compromise. The DSS condition made it clear to DP that, consistent with the legislation, it was his obligation to repay any recoverable amount under the Act. Of course, it was not altruism on the part of the Diocese in making this patent to DP. Rather, it was common sense given the discretionary power of the Secretary to give a compensation payer such as the Diocese a notice of repayment under the Act.
Accordingly, there was no doubt as to the consequences of accepting the offer of compromise — DP would be liable to repay an amount out of the settlement to be determined by the Commonwealth.
The observations of Beach J in Waterfall v Antony (No 2)[10] (a decision relied upon by DP) reinforce this point. In that case, the offer of compromise included a condition that in addition to an amount of money the plaintiff was entitled to retention of benefits under the Transport Accident Act 1986. His Honour concluded that the defendant had no power to make such an offer.
[10][2012] VSC 467 (‘Waterfall’).
His Honour said:
In Duncan & Weller v Mendelson, Kaye J said an offer of compromise ought not leave an offeree in any reasonable doubt about the consequences of its acceptance. Further, the terms of an offer of compromise should be reasonably certain. As I have already said, in my view, the offer of a right of retention which the defendant did not possess, of unspecified “benefits under the Transport Accident Act”, made the terms of offer of compromise uncertain. To put it in the words used by the court in Duncan & Weller v Mendelson, there was reasonable doubt about the terms of the offer of compromise. It follows that the defendant’s application for costs orders in accordance with the provisions of r 26.08(3) must fail.
The matter would have been different if the defendant had simply offered a sum of money equivalent to, or greater than, $309,992 — then permitting s 42 of the Transport Accident Act to have whatever application it might have in the circumstances. Similarly, Azzopardi may well have mandated a different result in this case if the defendant had offered an indemnity in respect of a specified total of Transport Accident Act payments.[11]
[11]Ibid [12]–[13] (citations omitted).
The second paragraph of his Honour’s ruling set out above reflects exactly what happened here: the Diocese offered $250,000, which then permitted the Act ‘to have whatever application it might have in the circumstances’.
The problem therefore is not with the offer of compromise. It lies in endeavouring to determine what will be the result if accepted. This is a problem that is faced and has been met by thousands of plaintiffs, claimants and their lawyers throughout Australia for many decades. Practitioners in the area are acutely aware of the formulae and methods utilised by the DSS to calculate both the recoverable amount and the preclusion period. It is the bread and butter of lawyers acting for personal injury plaintiffs and compensation claimants. Often in the course of settlement negotiations, enquiries will be made of the DSS or alternatively calculations made by the lawyers based upon known formulae utilised by the DSS to enable advice to be given to a client as to the estimates of both factors. A brief perusal of publications of the Commonwealth (e.g., Guides to Social Policy Law, Social Security Guide 4.13.12[12]) and Commonwealth AAT decisions demonstrates the manner in which the DSS calculates both the recoverable amount and the preclusion period.
[12]Australian Government, Social Security Guide 4.13.2 Lump Sum Compensation (Guide to Social Policy Law version 1.291.
I repeat what I said earlier: the terms of the offer of compromise were certain and not constrained by any condition or illusory retention of a benefit.[13] The consequences of acceptance were also capable of being determined with reasonable precision albeit that there was not a determination by the Secretary or his or her delegate.
[13]See Waterfall [2012] VSC 467, [11].
Indeed, if DP’s submissions be correct then it would, in effect, be impossible for any defendant to make an effective offer of compromise or Calderbank offer in a proceeding in which a plaintiff or compensation claimant had been in receipt of payments under the Act. To the contrary, courts and tribunals have regularly acted upon offers with conditions similar to the DSS condition in this case.
Further, to vary the usual terms of r 26.08(3) in this context would run counter to the clear aim of the Civil Procedure Act 2010 (‘CPA’). Section 22 reads as follows:
22Overarching obligation to use reasonable endeavours to resolve dispute
A person to whom the overarching obligations apply must use reasonable endeavours to resolve a dispute by agreement between the persons in dispute, including, if appropriate, by appropriate dispute resolution, unless—
(a) it is not in the interests of justice to do so; or
(b) the dispute is of such a nature that only judicial determination is appropriate.
This obligation is also reflected in the purpose behind r 26. In Malliaros v Moralis,[14] decided decades before the introduction of the CPA, McGarvie J observed:
Thus r 26.08(1), (2) and (3), bring pressure upon a party receiving a fair and reasonable offer, to accept it, by providing an additional cost burden if the proceeding goes to a verdict or judgment which shows that the offer should have been accepted. Both these policies are designed to operate in the interests of the parties by keeping down their costs and in the interests of good judicial administration, by freeing the court from the time and resources taken by proceedings which are prolonged unnecessarily.[15]
[14][1991] 2 VR 501.
[15]Ibid 505.
The obligation under the CPA to use reasonable endeavours to effect resolution binds both DP and his solicitors. If it be (as I strongly suspect it was not) the case that DP was in some way stymied in terms of acceptance of the offer by the repayment provisions of the Act, then it was incumbent upon him and his lawyers to raise this with the Diocese’s solicitors to see if a path could be steered which may have resulted in acceptance of the offer subject to a particular estimate of the recoverable amount by the DSS.
There is not a shred of evidence proffered by DP that any enquiries or assessments were undertaken by himself or, more likely, his lawyers to determine what amount, if any, was repayable to the Commonwealth under the Act. Rather the submissions are based upon an arid examination of the provisions of the Act without any reference to how, in practice, they operated in DP’s case, other than to correctly assert that the determination by the Secretary or his or her delegate can only take place after the settlement sum is known.
Further, there is no suggestion that the issue of the DSS condition or a potential DSS repayment played any part whatsoever in DP’s consideration of the offer of compromise, the terms of which were abundantly clear. No clarification of the terms of the offer was sought, nor was there any request for more time to determine the position of the DSS on the recoverable amount. Indeed, given the amount of DP’s counteroffer, it can be readily inferred that a potential DSS repayment out of the offer of compromise played no part whatsoever in DP’s consideration of settlement of the case.
Finally, it ought to be noted that the offer of compromise said nothing about the preclusion period under the Act. Again, this was territory to be traversed by DP and his solicitors in considering the provisions of the Act as they applied to the offer — just as every other plaintiff or claimant with a DSS liability under pt 3.14 of the Act, and his or her lawyers, undertake when attracted by an offer of settlement and the effect of its acceptance.
It follows that I am satisfied that the offer of compromise was sufficiently certain and that if there was any genuine uncertainty about it (which I do not accept), then it was incumbent upon DP and, more importantly, his lawyers to raise the issue with the Diocese’s lawyers.
In those circumstances there is no reason to depart from the consequences stipulated by the rule.
The economic loss report
The report was served on 20 July 2021. In DP’s submissions he contends that:
[his] lack of access to the defendant’s economic loss report — and the assumptions and calculations as to economic loss contained therein — limited his ability to consider the offer, in context, during the time for its acceptance.[16]
[16]Plaintiff’s submissions as to costs [14].
Again, DP has not offered a shred of evidence to support the contention that this made any material difference to his consideration of the offer of compromise. I repeat that there was an obligation upon DP and his lawyers to use reasonable endeavours to resolve the proceeding. If this was a genuine impediment or if the terms of the report required reconsideration of a decision to reject the offer, then it should have been raised with the solicitors for the Diocese. Given that at the time DP’s offer of compromise was $1.25 million in excess of the Diocese’s offer, it is (absent hard evidence) inconceivable that any such issue arose.
Indeed, I note that no objection was made at the commencement of the trial or at any time subsequent as to the late service of the report and any alleged prejudice arising from it.
Test case
DP contended:
[A]s acknowledged by the defendant, this was a significant test case, of public interest and importance, as regards the scope and application of vicarious liability in institutional abuse claims.[17]
[17]Ibid [15].
This argument goes nowhere.
True it is that this appears to have been the first time a superior court in Australia has been asked to determine the question of the vicarious liability of a diocese for the unlawful actions of a priest. But it was never suggested in the course of the running of the trial that this was a test case brought for the benefit of DP and others who might be affected by a potential judgment; indeed Father Dillon, who gave persuasive evidence as to the Catholic Church’s practices at the relevant times, was only procured as a witness at the last moment when it became clear that liability (both vicarious and in negligence) was very much in issue.
Even if this was perceived as a test case this does not mean that the terms of Order 26 are avoided. The provisions of the CPA, in particular ss 22 and 23, make it abundantly clear that the Court’s overarching obligation is to encourage resolution and to narrow the issues. Mere parroting of the words ‘test case’ in no way displaces the responsibilities of the parties and their lawyers to work towards those objects.
The Calderbank offer
A successful Calderbank offer does not of itself give rise to a costs presumption, unless the Court is satisfied that its non-acceptance was unreasonable.[18] In Hazeldene, the Court of Appeal identified the following, non-exhaustive list of factors as being relevant to a determination of whether non-acceptance was reasonable:
[18]Hazeldene [19], [23].
(a)the stage of the proceeding at which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c)the extent of the compromise offered;
(d)the offeree’s prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed;
(f)whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.[19]
[19]Ibid [25].
The significant point raised by DP in his submissions on costs goes to the timing of the expiry of the Calderbank offer.
In DP’s submissions, several assertions are made as to the principles applicable to the time allowed for acceptance of a Calderbank offer. In general terms, I accept those propositions but with modification:
(a) the stage of proceeding at which the offer was received is relevant, particularly where a Calderbank offer is made shortly before or during trial;
(b) a Calderbank offer should allow sufficient time for the recipient to consider its content and effect, including time in which to obtain legal advice;
(c) where the recipient of a Calderbank offer is suffering from psychological ill health, sufficient to increase the complexity and difficulty of his or her assessment of the offer, is relevant to the reasonableness of non-acceptance.[20]
[20]Lonergan v Trustees of the Sisters of Saint Joseph [2021] VSC 717, [24].
The Calderbank offer was made on the third day of trial, prior to evidence being led. It can be accepted that DP’s lawyers were busy with trial preparation and that DP had to take into account the complex matters in issue in the proceeding whilst preparing to give evidence in a case that he clearly regarded as being of great significance.
It also occurred at a point at which the trial was disjointed in terms of online and in-person hearings, and where proper discussion between lawyers and client was difficult.
The offer was sent to DP’s solicitors, by email, at 4:20pm on 30 July 2021 and remained open until 10:00am on 2 August 2021, at which time the Court was to resume sitting.
Accordingly, the Calderbank offer was open for less than 2 business hours. This gave DP no reasonable opportunity to obtain advice from his lawyers with respect to the offer and the complex matters that the Diocese had placed in dispute in the proceeding. Nor did it give the lawyers a reasonable opportunity to consider the issues and determine whether the offer required real analysis.
Moreover, it was apparent to all (even before he gave evidence) that DP’s psychological state was fragile and that any reasonable consideration of the offer would take some time.
In my opinion, the fixing of the expiry time for acceptance of the offer was no more than a lawyer’s ploy. It was not consistent with the principles set out in Hazeldene in terms of reasonableness. It was also contrary to the aim and terms of s 22 of the CPA, namely that it was not a reasonable endeavour to resolve the dispute.
Rather, I readily infer that the Calderbank offer was simply a litigation tactic designed to protect the Diocese’s position on costs.
Accordingly, it was not a reasonable offer in terms of the Hazeldene principles. It fails at the first hurdle.
In these circumstances it is not necessary to address any other issues raised by DP or the Diocese in relation to the efficacy of the Calderbank offer.
Orders
For the reasons set out above, I will make the following orders as to costs:
(1) The Diocese pay DP’s costs of the proceeding up to 11:00am on 8 July 2021 on a standard basis to be taxed in default of agreement.
(2) DP pay the Diocese’s costs of the proceeding thereafter on a standard basis to be taxed in default of agreement.
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