Hall v Martin (No 2)
[2020] ACTSC 239
•9 September 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Hall v Martin (No 2) |
Citation: | [2020] ACTSC 239 |
Hearing Date: | 4 September 2020 |
DecisionDate: | 9 September 2020 |
Before: | Mossop J |
Decision: | See [54] |
Catchwords: | COSTS – APPLICATION FOR COSTS – Plaintiff seeks costs on a solicitor and client basis pursuant to r 1010(2)(a) – defendant opposes order and seeks the court to use its discretion to order otherwise – offer was an offer of compromise – offer towards conclusion of the hearing – parties had an understanding of the strengths and weaknesses of their cases – time period for offer was reasonable in the circumstances – discretion to order otherwise should not be exercised |
Legislation Cited: | Court Procedures Act 2004 (ACT), s 52B Court Procedures Rules 2006 (ACT), rr 1001, 1002(5)(b), 1006, 1010(2) Workers Compensation Act 1951 (ACT), ss 170F, 171I(1)(c) |
Cases Cited: | Fabre v Lui (No 2) [2015] NSWCA 312 Forge v Rewers (No 2) [2017] ACTSC 273 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 |
Parties: | Donovan Hall (Plaintiff) William Martin (First Defendant) Workers Compensation Default Insurance Fund Manager (Second Defendant) |
Representation: | Counsel D Crowe (Plaintiff) D Richards (Second Defendant) |
| Solicitors AC Lawyers (Plaintiff) Minter Ellison (Second Defendant) | |
File Number: | SC 30 of 2019 |
MOSSOP J:
Introduction
After a trial lasting six days the plaintiff was awarded damages of $532,365: see Hall v Martin [2020] ACTSC 233. At the time of judgment the order of the court was that the first defendant pay the plaintiff’s costs on a party and party basis, but there was an opportunity given for the parties to seek a different costs order. The plaintiff sought a different costs order based on an offer of compromise given to the second defendant on the second last day of the hearing, in which he offered to settle the proceedings for the sum of $475,000. He seeks an order that his costs be paid on a solicitor and client basis pursuant to r 1010(2)(a) of the Court Procedures Rules 2006 (ACT) (CPR). On the other hand, the second defendant contends that the court should order otherwise as contemplated by the opening words of r 1010(2).
The circumstance which takes this case somewhat out of the ordinary is that the first defendant, who was found to be the employer of the plaintiff, did not have workers compensation insurance. The second defendant represents the default insurance fund established under the Workers Compensation Act 1951 (ACT) (WC Act). The second defendant was the contradictor of the plaintiff’s claim in the proceedings in the circumstances outlined in the principal judgment at [3]-[4]. The effect of the statutory provisions under the WC Act is that, if a judgment entered against the first defendant is not satisfied within one month, then the second defendant becomes liable to pay it: s 170F. Once the liability is discharged by the second defendant then “an amount equal to 3 times the amount of the payment is a debt owing” by the first defendant to the second defendant: s 171I(1)(c).
Facts
The facts relevant to the determination of the issue of costs are as follows.
The accident leading to the claim by the plaintiff occurred on 30 January 2016.
The plaintiff made a workers compensation claim. For the purposes of investigating that claim the second defendant engaged an investigator, who obtained a number of statements from relevant persons about the circumstances surrounding the plaintiff’s alleged employment by the first defendant. Those statements were of a good quality. They were detailed and obviously prepared with some care. The first defendant, who was alleged to be the employer, declined to give any statement to the investigator and did not cooperate by providing relevant documents to the investigator.
The proceedings were commenced on 30 January 2019.
The parties participated in a mediation on 12 May 2020 at which the second defendant made an offer to settle the proceedings of $100,000 plus costs.
On 2 July 2020 the plaintiff made an offer of compromise in the sum of $650,000.
The final hearing of the matter commenced on Monday, 20 July 2020.
On that day, after dealing with some procedural matters, Senior Counsel for the plaintiff gave an opening. Two witnesses were called, Donald Newman, a fellow employee, and Frances Verheul, the plaintiff’s sister.
On Tuesday and Wednesday, 21-22 July 2020, the plaintiff gave evidence and was cross-examined.
On Thursday, 23 July 2020, Craig Martin, a vocational capacity assessor, James Bodel, an orthopaedic surgeon, and Robert Pryor, a psychologist, gave evidence.
On Friday, 24 July 2020, William Martin, the first defendant, gave evidence, as did his son Dean Martin. At about 2 o’clock on that day a direction was made at the request of the plaintiff that the first defendant produce certain business records relevant to his conduct of the scrap metal business at which the plaintiff alleged that he was employed at the time of his accident. Those were business records that the first defendant had referred to during the course of his cross‑examination. The lunch adjournment was between 2:11pm and 3:06pm. Gillian Stewart, a physiotherapist, gave evidence by telephone later that afternoon.
The offer of compromise was given to the solicitor for the second defendant at the start of the lunch adjournment on 24 July 2020. The offer was an offer made to the second defendant. There is no evidence that the first defendant was served with, or was otherwise aware of, the offer. The offer was an offer to settle the plaintiff’s claim for an amount of $475,000. The offer was open until 2pm on Monday, 27 July 2020.
During the course of Friday, 24 July 2020 (at a time which is not disclosed by the evidence) the second defendant made an oral offer to settle the proceedings for $125,000 plus costs.
On Monday, 27 July 2020 evidence was given by Kevin John Small, a process server. The first defendant was then recalled and he explained why he had not been able to produce any documents. His cross‑examination then continued for about an hour. He was then re-examined. Some additional documents were then tendered before the lunch adjournment at 12:30pm. The afternoon was spent hearing the submissions of the plaintiff and the second defendant.
The plaintiff’s offer of compromise expired at 2pm on 27 July 2020. The second defendant made no request for any extension of time in which to consider the offer.
Second defendant’s first argument
The second defendant’s first argument was that the offer made on 24 July 2020 was not an “offer of compromise” because it did not involve any “compromise”. The only authority pointed to by the second defendant was the reference in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 (Kooee) at [14], where Basten JA said of an offer that had been bettered by some 13%: “That is a significant element of compromise, which is capable of attracting an order for indemnity costs in accordance with UCPR r 42.15…”
Unfortunately, counsel for the second defendant did not refer the court to the numerous authorities on this point in the New South Wales Court of Appeal. A useful summary of such authorities is found in Fabre v Lui (No 2) [2015] NSWCA 312 (Fabre) at [6].
Counsel for the plaintiff referred the court to the decision of Elkaim J in Geddes v Taleni (No 2) [2017] ACTSC 215 where, at [12], his Honour said that he did not consider that “a verdict sum that exceeds the offer by only a small amount, be at 2.1% or even 0.5%, is an exceptional circumstance”. As will be apparent, his Honour’s comments go to the discretionary decision as to whether or not to order otherwise, rather than the nature of the offer as an offer of compromise.
While, having regard to the similarity of the language in the ACT and New South Wales rules relating to offers of compromise, it will usually be appropriate to follow established New South Wales authority as to the interpretation of the provisions, it is unnecessary for me in this case to consider in detail the New South Wales authority referred to in Fabre. This is because I am satisfied that, if an element of compromise is necessary in order for there to be an offer of compromise under the rules, the element of compromise exists in this case. The offer was an offer to settle for $475,000. The judgment reached was $532,365. In round terms, this is a reduction of 11% on the plaintiff’s legally determined entitlement. In the context of a personal injury proceeding such as this, where there were a variety of outcomes possible, there is no doubt that the offer involved a compromise sufficient, if necessary, to bring it within the concept of an “offer of compromise”.
I do not accept the submission made by counsel for the second defendant that in order to involve a “compromise” a substantial discount in the order of 30-40% from the awarded figure was necessary, to take account of litigation risk or the possibility that there would be judgment for the defendants.
Further, I do not accept the second defendant’s submission that the case was a largely “win all” or “lose all” matter. There was an issue as to liability. However, there was also a substantial contest over the extent of damages. The damages schedules provided by the parties in closing submissions contended for damages as low as $200,150 and as high as $738,686.
I do not accept the submissions of the second defendant based upon cases relating to the reasonableness of a failure to accept Calderbank offers. It is important to bear in mind that offers of compromise and Calderbank offers are discrete areas of discourse and care must be taken to avoid attempting to apply statements made in one context in another context where they are not relevant.
Second defendant’s second argument
The second defendant’s second argument was that the offer was not open for a period which was “reasonable in the circumstances”: CPR r 1002(5)(b) and hence, not an “offer of compromise”. The second defendant pointed to three factors identified in Kooee at [20], where Basten JA said the following:
In considering whether the time allowed for acceptance is “reasonable in all the circumstances” once a trial commences, or indeed final preparation commences, three factors come into play. The first is that both parties may reasonably be expected to have a clear perception of the strengths and weaknesses of their positions, so that the reasonableness of a particular offer may be speedily assessed. Secondly, because significant costs will be accruing on a daily, even an hourly basis, there is a heightened incentive to respond within the time permitted. Thirdly, and counterbalancing the first factor, the need to address the terms of an offer, provide advice and obtain instructions will often be a significant distraction from final preparation.
The second defendant submitted that when the offer was made, on Friday, 24 July 2020, it did not have a clear perception of the strengths and weaknesses of the case, as the first defendant had not completed his cross‑examination and the second defendant was not aware what, if any, documents the first defendant would produce in accordance with the directions made. Further, it submitted that the time between the conclusion of the first defendant’s evidence and the expiry of the offer, on Monday, 27 July 2020, was insufficient to allow the second defendant to address the terms of the offer. Third, it submitted that the process of assessing the offer, providing advice and obtaining instructions would have been a significant distraction from the hearing, given that at the time the second defendant was preparing its final submissions.
I accept that the period available to consider the offer was relatively short. However, the period available to consider the offer must be understood in the context that:
(a)the parties were very clearly in a position to assess the strengths and weaknesses of their case, particularly having regard to the fact that the second defendant had called all of the oral evidence that it wished to and it was only the plaintiff’s cross‑examination of the first defendant that was outstanding; and
(b)there was a history of both parties having participated in mediation and having made considered offers of settlement, consistent with them having made a proper assessment of the potential outcomes of the case.
I accept, consistently with what Basten JA said in Kooee at [22], that for the purpose of deciding whether or not the offer was an offer of compromise under the rules, reasonableness must be judged objectively in the circumstances known, or which should reasonably have been anticipated, by both parties. In my view, it would reasonably have been anticipated that a defendant such as the second defendant would be in a position to consider and respond to an offer of settlement of a case such as this in the period between lunchtime on Friday and lunchtime on the following Monday, notwithstanding that the case was still running. It is not unreasonable to expect an institutional litigant such as the second defendant to have the capacity to respond promptly to an offer made in the context of a trial such as this one.
Much emphasis was placed by the second defendant upon the fact that the first defendant had been ordered to produce documents that had been referred to in cross‑examination on the Friday. The second defendant submitted that “this was a potential turning point in the case”. However, these documents were only directed to be produced at the request of the plaintiff and no attempt had been made by the second defendant to adduce this evidence in chief. In my view, there can be no doubt that, by the time the offer was made, the second defendant ought to have had a very clear perception of the strengths and weaknesses of its own case. It had heard all of the evidence led by the plaintiff. All of its own witnesses had given evidence. It had seen the first defendant give evidence and observed him being cross-examined for around two hours. It was aware of the previous lack of cooperation from the first defendant with the second defendant’s investigator. In my view, in those circumstances the second defendant ought reasonably to have been, and been understood to have been, in a position to assess the strengths and weaknesses of its case. The uncertainty surrounding whether or not there were documents that might corroborate the first defendant’s evidence is not a matter which would lead to any other conclusion. It is certainly not a matter which had prevented the second defendant from leading all of the evidence from the first defendant that it wished.
The second defendant also submitted that the offer expired only one hour and 31 minutes after the proceedings were adjourned on Monday, 27 July 2020 and that this was “insufficient time to assess the strengths and weaknesses of the case in order to address the terms of the offer of compromise, provide advice and obtain instructions”. Having regard to the objective nature of the requirement for reasonableness it is probably not correct to analyse the circumstances in this way, but instead to analyse them from the perspective of when the offer was made. Insofar as it is relevant, I do not consider that the fact that the hearing continued to within an hour and a half of the expiry of the offer deprives the period during which it was open for acceptance of reasonableness.
So far as the second defendant contended that dealing with the offer would be a substantial distraction from the preparation for the trial, the remarks of Basten JA in Kooee which gave rise to this submission were made in the context of an offer that had been made 23 hours prior to the commencement of what his Honour described as “a reasonably complex dispute”. Without wishing to underplay the significance of this trial for the parties, it was not a particularly complicated dispute. It was a personal injury case with a discrete issue on liability and a contest over the extent of damages. Although it had run for some days, at the time when the offer was made, the evidence was almost complete. The position of the second defendant was very substantially different from that of a party preparing for a potentially complex commercial case that was due to imminently commence. Had there in fact been some difficulty for the second defendant, in both considering the terms of the offer and preparing for final submissions, it should have sought the indulgence of the plaintiff and the court so that it could do both.
In my view, the offer was open for a reasonable time. The time for which it was open does not prevent it from being characterised as an offer of compromise under the rules.
Second defendant’s third argument
The third argument put forward by the second defendant was that if the offer made by the plaintiff was an offer of compromise, then the court should exercise its discretion to order otherwise: CPR r 1010(2). In developing this submission, the second defendant made reference to the terms of the rules that apply in other jurisdictions. These submissions were not of assistance, as the fact that there are different rules relating to the making of, or consequences of, offers of compromise in other jurisdictions to those which exist in the ACT does not shed light on how the discretion granted by the ACT rules should be exercised. The discretion under the ACT rules must be exercised within the context of those rules and not based upon preconceptions about the operation of those rules derived from elsewhere, which have different legal policy assumptions underlying them: see Forge v Rewers (No 2) [2017] ACTSC 273 at [31]-[32].
The second defendant submitted that three factors provided good reasons to order otherwise under r 1010(2). They were, in summary:
(a)that the second defendant did not have a clear perception of the strengths and weaknesses of the case “given the difficulties the [Second] Defendant faced with defending the proceeding on behalf of the First Defendant”;
(b)the first defendant only had a clear perception of the strengths and weaknesses of its case after the first defendant had completed his evidence, which was only an hour and a half prior to the expiry of the offer and the commencement of submissions; and
(c)addressing the offer would have been a significant distraction from the conduct of the hearing.
In relation to the exercise of discretion, the court is not limited to considering only questions of objective reasonableness. It is also entitled to take into account the actual circumstances faced by the second defendant and its lawyers. In that regard, there was no evidence at all about whether there was in fact any difficulty in addressing the offer or what steps were taken to address the offer. The court is therefore left with only what it may infer from the objective circumstances known to it.
I do not accept that the matters pointed to by the second defendant provide a sufficient reason to order otherwise under r 1010(2). That is for the following reasons.
For the reasons given above, I consider that the second defendant ought to have had a clear perception of the strengths and weaknesses of its own case and the case of the plaintiff. That the evidence had not concluded does not stand in the way of that conclusion. Offers of compromise are necessarily made in circumstances where there is some degree of uncertainty about the likely outcome of the trial. The degree of uncertainty at the point where the present offer was made was low, much lower than would be the case with most offers of compromise.
Similarly, for the reasons given above, neither the period during which the offer was open or the potential for addressing the offer to be a distraction provide an appropriate reason to order otherwise.
The second defendant emphasised during the course of the submissions the difficult position that it was in as a result of its relationship with the first defendant. Although the position of the second defendant was somewhat out of the ordinary, its position was little different to that which an insurer finds itself in when it has an insured who is less than optimally cooperative with it or whose evidence is uncertain. It has to make realistic decisions in light of the hand that it has been dealt. In the present case the second defendant had, in 2016, investigated the workers compensation claim made by the plaintiff and obtained detailed statements from relevant witnesses, including a detailed statement from the plaintiff and detailed statements, which corroborated the plaintiff’s evidence about his employment, from Joe Tarzia and the plaintiff’s former partner Lynette Davis. It had also had interactions with the first defendant which demonstrated a lack of cooperation and would have alerted it to the real prospect that it would receive no useful cooperation from the first defendant or that the first defendant’s evidence would be unreliable. Notwithstanding that, it did not attempt to subpoena any documents from the first defendant so as to discover whether he had any documents that would corroborate his assertion that the plaintiff was not employed by him. Notwithstanding the enthusiastic statement by counsel for the second defendant at the commencement of the hearing that his client perceived that it had “a very, very strong case”, the second defendant ought to have been alert to the significant prospect that the plaintiff would succeed on the question of employment and hence succeed on liability.
The circumstances facing the second defendant and the manner in which it conducted the case are not such as to warrant the court otherwise ordering under the rule.
Against whom should the order be made?
The plaintiff sought the costs order arising from r 1010 against the first defendant. The position of the second defendant was that no orders should be made but that if an order was made then it should be made against the first defendant. The effect of that would be that the second defendant would become liable to pay the amount of the judgment if it remained unpaid by the first defendant: WC Act s 170F. However, it would also be a consequence of making the order in that way that the first defendant would become liable, pursuant to the triple damages provision, to pay a substantially greater amount: s 171I(1)(c). In one sense, the first defendant has brought that result upon himself by failing to have workers compensation insurance and failing to properly defend the proceedings. On the other hand, the first defendant was not responsible for the conduct of the case and had nothing to do with the acceptance or non-acceptance of the offer of compromise.
In such circumstances, I consider the appropriate order is one which will make the second defendant directly liable for the difference between party and party costs and solicitor and client costs. That will place the responsibility for the decisions made in the conduct of the trial with the party that was responsible for that conduct, the second defendant. It will also mean that the triple damages liability will, to that extent, not accrue to the first defendant in circumstances where he was not responsible for those aspects of the conduct of the trial.
Ruling on evidence
For the purposes of determining the issue of costs the plaintiff relied upon an affidavit of his solicitor, Mr Andrew Christopoulos. There was an objection to two paragraphs of that affidavit.
Paragraphs 7 and 8 were objected to. Paragraph 7 related to the making by the second defendant of the oral offer of settlement of $125,000 plus costs during the course of Friday, 24 July 2020. Paragraph 8 related to the history of offers made in the proceedings and the absence of any request by the second defendant for an extension of time in which to consider the offer made by the plaintiff on 24 July 2020. There was, however, no objection to the admission of that part of paragraph 8 which indicated that on 2 July 2020 the plaintiff made an offer of compromise in the sum of $650,000.
The submission put by counsel for the second defendant was difficult to understand and unsupported by any authority. He did indicate that he had no instructions to waive any privilege over any settlement offers.
The evidence is relevant because the history of offers between the parties may affect the exercise of the discretion to order otherwise under r 1010(2).
The Evidence Act2011 (ACT) does not provide a barrier to admissibility of this evidence if it is relevant. Section 131(2)(h) provides that the prohibition on evidence of settlement negotiations under s 131(1) does not apply where “the communication or document is relevant to deciding liability for costs”. That provision is plainly applicable here.
The second defendant submitted that CPR r 1006 somehow precluded the admission of evidence of an offer. Rule 1006 relates to the disclosure of offers of compromise to the court. It contains a general prohibition on disclosure of an offer: r 1006(1), but permits disclosure to the court “after all questions of liability and relief have been determined, to the extent necessary to determine questions as to costs”: r 1006(3)(c). That stage has clearly been reached.
Further, r 1006 does not have anything to say about offers which are not “offers of compromise” as defined in r 1001. It therefore does not control the admissibility of evidence about other offers of settlement, such as the oral offer made by the second defendant on 24 July 2020.
Therefore, there was nothing in or about r 1006 to prevent evidence being given of the oral offer on 24 July 2020 or of any of the offers of compromise made in the proceedings.
Insofar as reference was made to what occurred at the mediation, namely, the offer by the second defendant to settle the claim for $100,000 plus costs, that was governed by s 52B of the Court Procedures Act 2004 (ACT). That indicates that, in relation to a proceeding in a court, evidence of communications made at a mediation is not admissible unless it is permitted by s 131 of the Evidence Act: s 52B(1)(a). As pointed out above, s 131 permits the admission of evidence of the earlier offers.
For these reasons, I admitted paragraphs 7 and 8 and have relied upon them in finding the facts as set out above.
Orders
By reason of the plaintiff’s offer of compromise, it is appropriate to make orders consistent with r 1010(2)(a). For the reasons given above it is not appropriate to order otherwise and it is appropriate that the order be made in a way that affects the second defendant but not the first defendant.
The orders of the Court are:
1. Orders 2 and 3 made on 26 August 2020 are discharged.
2. The first defendant is to pay the plaintiff’s costs of the proceedings on a party and party basis.
3. The second defendant is to pay the plaintiff’s costs of the proceedings to the following extent: the difference between the plaintiff’s solicitor and client costs and party and party costs.
| I certify that the preceding fifty-four [54] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: 9 September 2020 |
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