Hughes v. Grogan & Anor
[2007] QSC 78
•3 April 2007
SUPREME COURT OF QUEENSLAND
CITATION:
Hughes v Grogan & Anor [2007] QSC 078
PARTIES:
SAMANTHA DEBORAH HUGHES
(plaintiff)
v
SAMMIE-JO GROGAN
(first defendant)
SUNCORP METWAY INSURANCE LIMITED
(ABN 83 075 695 966)
(second defendant)FILE NO/S:
BS 6327/05
DIVISION:
Trial Division
PROCEEDING:
Civil Trial
ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON:
3 April 2007
DELIVERED AT:
Brisbane
HEARING DATE:
6 and 7 November 2006
JUDGE:
Lyons J
ORDER:
The second defendant pay the plaintiff’s costs to be calculated on the indemnity basis.
CATCHWORDS:
PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – ORDER FOR COSTS ON INDEMNITY BASIS – where plaintiff made offer of settlement – where offer not accepted – where court awarded
damages no less favourable than offer of settlement – whether second defendant should be ordered to pay indemnity costs
Motor Accident Insurance Act 1994, s 51C
Uniform Civil Procedure Rules 1999, r 360
Castro v Hillery & Ors [2002] QCA 359 (cited).
Fail v Hutton & Suncorp [2003] QSC 291 (cited).
Ibbs v Woodrow & QBE [2002] QCA 298 (followed).
McChesney v Singh & Ors [2004] QCA 217 (applied).
Morgan v Johnson (1998) 44 NSWLR 578 (applied).
Morrison v Hudson & Allianz Australia Insurance Limited [2006] QCA 170 (discussed).COUNSEL:
S Williams QC with P Feely for the plaintiff
M Grant-Taylor SC with R Green for the second defendantSOLICITORS:
McInnes Wilson Lawyers for the plaintiff
Jensen McConaghy Solicitors for the second defendant
LYONS J:
Facts
This matter was heard on 6 and 7 November 2006 and Reasons for Judgment were delivered on 22 February 2007. The reasons indicated that judgment was awarded for the plaintiff against the second defendant in the amount of $405,031.13. Final orders were not made pending written submissions as to costs and consideration of the plaintiff’s capacity to manage the proposed judgment sum.
The written submissions indicated that the parties had exchanged offers as to settlement with the highest offer being a mandatory final offer by the plaintiff in the amount of $315,000 plus costs in April 2005 and a formal offer of $250,000 plus costs on 2 March 2006. The second defendant had offered $170,000 plus costs on 26 April 2005 and had made a formal offer of $200,000 plus costs 14 September 2005.
The Legislation
Section 51C of the Motor Accident Insurance Act provides for the exchange of mandatory final offers at Compulsory Conferences and s 51C(10) provides that where relevant the Court must have regard to the mandatory final offers in making a decision about costs.
Rule 360 of the Uniform Civil Procedure Rules (the “UCPR”) provides, relevantly:
“360 Costs if offer to settle by plaintiff
(1) If—
(a) the plaintiff makes an offer to settle that is not accepted by the defendant and the plaintiff obtains a judgment no less favourable than the offer to settle; and
(b) …
the court must order the defendant to pay the plaintiff’s costs
calculated on the indemnity basis unless the defendant shows
another order for costs is appropriate in the circumstances.”
The Second Defendant’s submissions as to costs
The second defendant acknowledged that the plaintiff has obtained judgment which is in excess of all the offers previously made by the plaintiff and is therefore a judgemnt within the meaning of Rule 360, as it is no less favourable than the plaintiff’s offer to settle. The second defendant submits however that it is not appropriate that an order for indemnity costs should be made. The second defendant relies on the authorities of Morrison v Hudson & Allianz Australia Insurance Limited[1]and Castro v Hillery & Ors[2] to contend that where there is a substantial change in the case after the offer of settlement was made, costs should not be ordered on an indemnity basis.[3]
[1][2006] QCA 170.
[2][2002] QCA 359.
[3][2006] QCA 170 at [2].
The second defendant relies in particular on the decision by Williams J in Morrison[4] where his Honour indicated that an offer to settle could only be evaluated in the light of the circumstances disclosed in the documents in the proceedings at the time the offer was made.
[4][2006] QCA 170 at [2].
The second defendant’s primary submission is that the principles articulated in Morrison should be followed in this case and costs should not be ordered on an indemnity basis. Specifically, the second defendant points to offers made prior to the compulsory conference and prior to the delivery of the plaintiff’s Certificate of Readiness for trial which were based on documents in the proceedings at the time. The second defendant refers to the significant information, including five medico-legal reports, obtained by the plaintiff subsequent to the compulsory conference, the delivery of the Certificate of Readiness for trial and the offers made by the parties to submit that the plaintiff’s case substantially changed.
The second defendant’s secondary submission is that a costs order on an indemnity basis is inappropriate because of the discrepancies in the plaintiff’s case. The second defendant submits that the inconsistencies in the information relating to the nature, effects and consequences of the plaintiff’s injuries are largely due to the plaintiff’s inconsistent and inaccurate self-reporting to her legal advisors and medico-legal examiners. Consequently, the second defendant submits that this made it difficult to accurately assess the plaintiff’s case and make an appropriate offer. Whilst the second defendant accepts that the court explained these inconsistencies by reference to the plaintiff’s reduced level or intellectual functioning and impaired communication skills, the second defendant submits that it is not an appropriate case for an indemnity costs order given that the conflict has arisen by the plaintiff’s own misstatement or inaccuracy.
Whilst the second defendant submits that another order would be appropriate no particular order is specified.
The Plaintiff’s submissions as to costs
The plaintiff submits that the appropriate order is that costs be assessed on an indemnity basis and relies on r 360 of the UCPR.
In particular the plaintiff submits that the very terms of the rule itself are expressed in mandatory terms; save where a defendant is able to show that another order for costs is appropriate. Consequently, there is a heavy onus on a defendant to show cause why the general rule should not be followed. The plaintiff relies on the decision of Fail v Hutton & Suncorp[5] in support of this principle.
[5][2003] QSC 291.
The plaintiff states that the purpose of r 360 is to ensure that litigants consider their position carefully; to be reasonable and not to gamble and unnecessarily waste court time and other litigants’ money. The plaintiff referred to Court of Appeal decision in McChesney v Singh & Ors[6] which considered the purpose of the rule. In relation to the principles guiding the exercise of the discretion under the rule, the judgment of the court referred to a number of other authorities, including the New South Wales Court of Appeal decision of Morgan v Johnson.[7] The court approved the following principles as guiding the exercise of the discretion under the rule:[8]
[6][2004] QCA 217.
[7](1998) 44 NSWLR 578.
[8][2004] QCA 217 at [13].
“(1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation;
(2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance;
(3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party. This is because, from the time of non-acceptance “notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise”.
(4) Lying behind the rule is the common knowledge that “litigation is inescapably chancy”. For this reason, the ordinary provision is expected to apply in the ordinary case. The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule.”
The plaintiff submits therefore that applying those guiding principles to the parties in this case leads to a conclusion that the second defendant was not concerned with the prompt and economical disposal of the litigation, acted unreasonably in not accepting the plaintiff’s formal offer and consequently should be punished in costs for not complying with the spirit and letter of the costs rules.
In response to the second defendant’s primary submission, the plaintiff concedes that in some cases it may be argued that there is a change in circumstances or evidence after a formal offer which might cast the offer in a different light and make “another order” appropriate, but disputes that this is the situation in the present case.
The second defendant essentially submits that the plaintiff’s case was substantially changed by the plaintiff obtaining further medical evidence following the making of the mandatory final offers.
Ultimately however I do not accept this submission because it is not unusual to obtain further reports after the compulsory conference and mandatory final offers. Furthermore, none of the further reports added a new complexion to the case or made any significant alteration to the position of either party. It was always the plaintiff’s case that she had suffered a significant injury to her left arm as well as chronic pain.
This issue was considered in the case of Ibbs v Woodrow & QBE.[9] In that case the Court of Appeal held that new information which was forthcoming between the date of the plaintiff’s offer and the date of trial did not materially alter the nature of the plaintiff’s claim and was in no way unusual or unpredictable. Accordingly, the Court of Appeal held that the defendant had failed to discharge its onus under r 360 and that an order for indemnity costs should follow.
[9][2002] QCA 298.
The material also indicates that despite the second defendant being in receipt of the additional up to date reports, they did not accept the plaintiff’s formal offer made on 2 March 2006, or make any further offers at any stage. The second defendant’s final offer was made on 14 September 2005 and no further offers were made after receiving the later medical reports. Clearly then the second defendant did not in fact discern any change in the plaintiff’s case up to the time of the trial.
The second defendant’s second submission is that the plaintiff’s inaccurate and inconsistent self-reporting led to discrepancies which in turn, led to a level of misunderstanding of the plaintiff’s case that made it impossible for the second defendant to assess her damages properly and make a reasonable offer. It is clear from the material presented in the case that the second defendant considered the plaintiff was a malingerer and a fraud, and it was this consideration which prohibited the second defendant from making an accurate assessment and a reasonable offer, or from accepting the modest offers from the plaintiff to settle her case.
Conclusion
In the circumstances I am not satisfied that the second defendant has shown that another order for costs is appropriate.
Costs should be awarded to the plaintiff to be calculated on the indemnity basis.
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