Frost v Miller (No 2)
[2015] QSC 214
•29 July 2015
SUPREME COURT OF QUEENSLAND
CITATION:
Frost v Miller (No 2) [2015] QSC 214
PARTIES:
CHRISTINA SOPHIA FROST
(applicant)
v
ROSALINE MILLER
(respondent)FILE NO/S:
SC No 46 of 2014
DIVISION:
Trial Division
PROCEEDING:
Originating Application
ORIGINATING COURT:
Supreme Court at Mackay
DELIVERED ON:
29 July 2015
DELIVERED AT:
Brisbane
HEARING DATE:
13 January 2015
JUDGES:
Justice Carmody
ORDERS:
The order of the Court is that the respondent must pay the applicant’s costs of and incidental to the proceedings, to be assessed on the standard basis.
CATCHWORDS:
CIVIL LAW – APPLICATION – COSTS – where the applicant was successful in securing a declaration from the Supreme Court that a conditional costs agreement executed by the applicant and respondent was void – where the applicant submitted a Calderbank letter to the respondent offering to settle the proceedings before the hearing – where the ground upon which the applicant was ultimately successful was only raised during the application hearing and respondent entered into an insurance agreement for certain motor vehicles – whether costs should be awarded in favour of the applicant – whether costs should be awarded on the standard basis.
Legal Profession Act 2007 (Qld)
Uniform Civil Procedure Rules 1999 (Qld)
Fowdh v Fowdh (New South Wales Court of Appeal, 4 November 1993, unreported)
Castro v Hillery & Ors [2003] 1 Qd R 651; [2002] QCA 359
Royce Industrial Power (Pacific) Ltd v James Hardie & COI Pty Ltd (2001) 53 NSWLR 626COUNSEL:
S Deaves for the applicant
R A I Myers for the respondentSOLICITORS:
D Sekac of Macrossan & Amiet for the applicant
R Miller of Preston Miller Lawyers for the respondent
JUSTICE CARMODY: The applicant filed an originating application on 14 October 2014 with the Queensland Supreme Court for a declaration under s 327(1) of the Legal Profession Act 2007 (Qld) that the conditional costs agreement executed by the applicant and respondent in July 2011 is void.
The originating application was heard on 13 January 2015 before the Supreme Court of Queensland at Mackay. On 9 June 2015 the Supreme Court allowed the application of the applicant, and declared the conditional costs agreement void.
The respondent made a formal offer to settle to the applicant on 18 December 2014 on the terms that:
1. the costs agreement is declared void;
2. the applicant pay the respondent’s costs of and incidental to the original personal injuries and property damage claim on the District Court Scale; and
3. no order be made as to the costs of and incidental to the application filed on 14 October 2014.
The applicant made a formal offer to settle to the respondent on 24 December 2014 on the terms that:
1. the costs agreement is void;
2. the applicant pay the respondent’s costs of and incidental to acting on behalf of the applicant in the original personal injuries and property damage claim on the District Court Scale up to and including the date on which the respondent purported to terminate the retainer on 29 July 2014; and
3. that the respondent pay the applicant’s costs of and incidental to the application filed on 14 October 2014.
The applicant’s offer was renewed on 10 February 2015, after the date of the hearing, for a further 14 days.
The applicant asserts that its offers on 24 December 2014 and 10 February 2015 were formal offers pursuant to r 360 of the Uniform Civil Procedure Rules 1999 (Qld). As the order voiding the conditional costs agreement is no more favourable than the formal offers issued on 24 December 2014 and 10 February 2015, the applicant claims that it is entitled to costs assessed on an indemnity basis.
The respondent resists this application on the basis that the offer made on 18 December 2014 was no less favourable than the orders received by the applicant. As the ground upon which the applicant’s claim was ultimately successful was only raised during the hearing on 13 January 2015, the respondent claims it was unreasonable for the applicant to reject its offer and thus it should be entitled to costs assessed on an indemnity basis.
Effect of the Respondent’s Offer on 18 December 2014
The respondent’s offer on 18 December 2014 does not comply with r 361(1) of the Uniform Civil Procedure Rules 1999 (Qld). The submissions of the respondent appear to rest on the assumption that costs should either be awarded in favour of the respondent, or that each party should bear its own costs.
The respondent failed to offer to compensate the applicant for costs accrued by the applicant in prosecuting the originating application up until the date of the offer on 18 December 2014. The applicant, successful in the event, would have been entitled to costs assessed on the standard basis up until 18 December 2014. Accordingly, the respondent’s offer on 18 December 2014 was materially less favourable than the Court’s orders in favour of the applicant.
Effect of the Applicant’s Offer of 24 December 2014
The applicant’s offer on 24 December 2014 ostensibly complies with r 360(1) of the Uniform Civil Procedure Rules 1999 (Qld).
The applicant has received an order voiding the conditional costs agreement and, having been successful in the application, is prima facie entitled to costs assessed on the standard basis. Without anticipating any future costs that may be ordered pursuant to s 319(1)(b) of the Legal Profession Act 2007 (Qld), it is likely that the offer to pay the respondent’s costs in respect of the personal injuries and property damage claim is equivalent to that which will be assessed under ss 319(1)(b) and 327(3) of that Act. Furthermore, the Court is satisfied that the applicant was, at all material times, willing and able to carry out the proposed offer.
As the applicant has satisfied r 360(1) of the Uniform Civil Procedure Rules 1999 (Qld), the Court is prima facie required to order that the respondent pay the applicant’s costs on an indemnity basis, unless the respondent establishes that another order for costs is appropriate in the circumstances.
The general rule is that the Court should not shrink from its statutory duty to impose indemnity costs against a non-accepting settlement offeree, unless there are compelling reasons justifying another costs order. Although the Courts have expressed this standard in the past as requiring “exceptional circumstances”, this phrase possesses connotations which risk improperly distorting the natural and ordinary meaning of “appropriate”.
The Oxford English Dictionary defines “appropriate” as “specifically fitted or suitable, proper”. The adjective, “appropriate”, expresses a selective, normative and contextual concept. The concept is selective, insofar as there are particular characteristics of an “offer” which render it appropriate or inappropriate.[1] The concept is normative, insofar as appropriateness is defined by reference to particular standards.[2] The concept is contextual, insofar as the applicable standards are defined by prevailing circumstances and conditions.
[1]For example, the timeliness of the offer may render it appropriate, whereas the colour of parchment upon which the offer is expressed is likely immaterial.
[2]For example, the instruction to wear appropriate attire will convey different meaning depending on the nature of the event to be attended.
The circumstances which may justify a finding under r 360(1) that an order for costs on a non-indemnity basis is “appropriate” are diverse and multifarious. The Court may obtain guidance on relevant features which may warrant a finding that a departure from the general rule is appropriate from r 5 of the Uniform Civil Procedure Rules 1999 (Qld), which prescribes that:
1. The purpose of the Rules is to facilitate the just and expeditious resolution of the real issues in the civil proceeding at a minimum of expense;[3] and
2. The Rules are to be applied to avoid undue delay, expense and technicality, and facilitating their purpose.[4]
[3]Uniform Civil Procedure Rules 1999 (Qld), r 5(1).
[4]Uniform Civil Procedure Rules 1999 (Qld), r 5(2).
Although somewhat infelicitously expressed, the objective of the Uniform Civil Procedure Rules 1999 (Qld) requires the Court to adopt the most timely, efficient and inexpensive procedures within the prescribed framework of the Rules as is compatible with the fair and just disposition of the proceedings before the Court.
In ascertaining the meaning of “appropriate”, the Court must evaluate the extent to which the settlement offer was compatible with the time and cost efficiency objectives of the Rules, having regard to the importance of fairness to the offeree. This evaluation takes place in light of the circumstances existing at the time the offer was made. An offeror submitting a timely and cost-effective offer will not always be awarded costs assessed on an indemnity basis, especially where it can be shown that such orders would be unfair or unjust in a material particular.
A critical factor impacting on the fairness of the settlement offer is whether the offeree has been provided a reasonable opportunity to make an informed assessment of the merits of the proceedings relevant to the settlement offer.[5] As held by Mahoney AP in Fowdh v Fowdh:
It is one thing for a plaintiff to present her evidence, make an offer of compromise, and to succeed at trial on that evidence. In such a case, indemnity costs may be warranted. It is another thing for the plaintiff to present a case and make an offer of settlement, and then to succeed at the trial upon a relevantly different case. A plaintiff who has done that may not readily receive indemnity costs. I do not mean by this that minor differences between the case at offer and the case at trial will be of significance or that, if the difference be significant, a discretionary judgment for indemnity costs may not be given. But where the difference between the position at offer and the position at trial be as the Master assessed it to be, a decision to refuse indemnity costs may readily be understood.[6]
[5]See, for example: Castro v Hillery & Ors [2002] QCA 359, [72] per Williams JA.
[6]Fowdh v Fowdh (New South Wales Court of Appeal, 4 November 1993, unreported; cited with approval in Royce Industrial Power (Pacific) Ltd v James Hardie & COI Pty Ltd (2001) 53 NSWLR 626, per Stein JA; Castro v Hillery & Or [2002] QCA 359, [73].
The rationale for this principle is that a party should not be required to compromise proceedings without being adequately informed of the merits of the opposing party’s case. Otherwise, early settlement offers may compel a party to decide between compromising an ostensibly meritorious cause of action to avoid indemnity costs, or prosecuting the cause of action and risking an indemnity costs order on later discovering that a previously unknown legal principle or circumstance undermined their claim. This would increase the risk of injustice caused by adverse selection and information asymmetry, and may encourage parties to commence spurious proceedings to extract an early settlement from vulnerable unrepresented parties before properly exchanging pleadings and material which would disclose the untenable nature of their claim.
Applying these principles to the present proceedings, although the originating application and statement of claim both sought a declaration under s 327 that the conditional costs agreement executed between the applicant and respondent was void, the specific grounds particularised did not rely on ss 323(3)(d) and (e) of the Legal Profession Act 2007 (Qld). The two substantive grounds on which the applicant was successful only emerged at the commencement of the hearing.
Although the applicant is correct in stating that the Court declared the costs agreement void pursuant to s 327 of the Legal Profession Act 2007 (Qld), that is primarily a procedural provision. The substantive grounds for the voidance of the conditional costs agreement were articulated under ss 323(3)(d) and (e) of that Act. The amendment of the substantive grounds and particulars of the claim constituted a significant and material change in the case of the applicant eventuating after the settlement offer. Despite the fact that the other grounds articulated in the originating application and statement of claim were not formally abandoned or discharged, the submissions later filed by the parties primarily related to the grounds under ss 323(3)(d) and (e). Accordingly, the Court found in favour of the applicant on such grounds, and did not find it necessary to deal with the applicant’s submissions under s 324 of the Legal Profession Act 2007 (Qld).
Assuming that the applicant would have been successful under s 324, the introduction of the ss 323(3)(d) and (e) grounds after the settlement offer to the respondent nonetheless constituted to a significant and material change in the proceedings. The respondent was deprived of the opportunity to conduct a fully informed assessment of the merits of the applicant’s claim at the time of the settlement offer, which may have altered the respondent’s decision to refuse the offer. Accordingly, to order costs against the respondent on an indemnity basis would be unfair or unjust to the respondent.
Effect of the Applicant’s Offer of 10 February 2015
The applicant renewed her settlement offer on 10 February 2015 after the relevant hearing and exchange of submissions. For the reasons described above at [10]-[11], the offer complied with the requirements prescribed under r 360(1) of the Uniform Civil Procedure Rules 1999 (Qld). Accordingly, the Court is required to order costs on an indemnity basis unless another order is “appropriate”.
The offer on 10 February 2015 was submitted by the applicant to the respondent after the formal hearing and exchange of submissions. If the respondent had accepted the settlement offer, any public or private resources preserved would have been nominal. As this fails to achieve the statutory objectives of r 360(1) of the Rules, it is appropriate to order costs on the standard basis.
Findings
The respondent’s offer submitted to the applicant on 18 December 2014 did not comply with the requirements prescribed under r 361 of the Rules.
The applicant’s offer submitted to the respondent on 24 December 2014 complied with the requirements of r 360(1) of the Rules, but preceded a significant and material change in the proceedings which was of such a nature that the respondent was deprived of the opportunity to conduct a fully informed assessment of the merits of the case prior to the expiration of the offer. This renders it unfair or unjust to order costs on an indemnity basis in reliance on the 24 December 2014 offer, with the result that it is appropriate to order costs on a non-indemnity basis.
The applicant’s offer submitted to the respondent on 10 February 2015 complied with the requirements of r 360(1) of the Rules, but even if it had been accepted, the offer would not have saved significant public or private resources. This renders it appropriate to order costs on a non-indemnity basis.
Notwithstanding the non-applicability of rr 360 and 361 of the Uniform Civil Procedure Rules 1999 (Qld), the applicant was ultimately successful in her claim. The general rule is that costs follow the event, and should be assessed on a standard basis. There are no exceptional features of this case justifying a departure from these principles. Accordingly, the Court should order costs in favour of the applicant, to be assessed on the standard basis.
Orders
The respondent is to pay the applicant’s costs of and incidental to the proceedings, to be assessed on the standard basis.
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