Insurance Australia Limited v O'Shannessy (No 2)

[2015] NSWSC 1328

Supreme Court

New South Wales

Medium Neutral Citation:	Insurance Australia Limited v O’Shannessy (No 2) [2015] NSWSC 1328
Date of orders:	11 September 2015
Decision date:	11 September 2015
Jurisdiction:	Equity - Commercial Arbitration List
Before:	Beech-Jones J
Decision:	(1)   The first defendant's notice of motion filed 12 August 2015 be dismissed; and  (2)   The first defendant pay the plaintiff's costs of the notice of motion.
Catchwords:	COSTS – Calderbank letter – necessary to demonstrate refusal of offer unacceptable – no question of principle.
Legislation Cited:	- Motor Accidents Compensation Act 1999
Cases Cited:	- Calderbank v Calderbank [1975] 3 All ER 333 - Commonwealth of Australia v Gretton [2008] NSWCA 117 - Insurance Australia Ltd v O’Shannessy [2015] NSWSC 1047 - Lee v Carlton Crest Hotel (Sydney) Pty Ltd (No 2) [2014] NSWSC 1586 - Leichardt Municipal Council v Green [2004] NSWCA 341 - Perisher Blue Pty Ltd v Nair Smith (No 2) [2015] NSWCA 268 - Regency Media Pty Ltd v AAV Australia Pty Limited [2009] NSWCA 368
Category:	Costs
Parties:	Insurance Australia Limited (a.k.a. NRMA Insurance) –    Plaintiff Steven John O’Shannessy – First Defendant The Motor Accidents Authority of New South Wales – Second Defendant – Submitting appearance filed 1 April 2015 Geraldine Daley, as Claims Assessor of 2nd Defendant – Third Defendant – Submitting appearance filed 1 April 2015.
Representation:	Counsel: On the papers   Solicitors: On the papers
File Number(s):	2015/087303

Judgment

1. On 31 July 2015 I dismissed the plaintiff’s application for judicial review of an assessment made under s 94 of the Motor Accidents Compensation Act 1999 of the amount of damages payable to the first defendant arising out of his motor vehicle accident on 14 May 2011 (Insurance Australia Ltd v O’Shannessy [2015] NSWSC 1047). The plaintiff is the insurer of the vehicle that injured the first defendant.

2. At the time I dismissed the proceedings I ordered the plaintiff to pay the first defendant’s costs. However in doing so I drew the parties attention to Uniform Civil Procedure Rule 36.16(3A) which enables a party to apply by notice of motion to set aside an order within 14 days of it being entered. Pursuant to this rule, on or about 12 August 2015 the first defendant filed a notice of motion seeking an order that the plaintiff pay its costs of the proceedings up to 29 April 2015 on the ordinary basis and thereafter on an indemnity basis. I ordered that the parties file brief written submissions. They requested the Court deal with the matter without a further hearing.

3. The basis for the application was that on 29 April 2015 a “Calderbank” letter (Calderbank v Calderbank [1975] 3 All ER 333) was sent by the first defendant’s solicitors to the plaintiff’s solicitors. It contained an offer that the proceedings be resolved on the basis of a “Verdict for the First Defendant” and no order as to costs. The letter was sent after the plaintiff had filed an affidavit attaching the material before the Assessor and the first defendant had filed a response to the plaintiff’s summons but prior to the first defendant filing any evidence and prior to the filing of any written submissions. The letter included some brief observations on the plaintiff’s prospects of success. On the next day the plaintiff responded by rejecting the offer and instead offering to settle the first defendant’s personal injury claim for $550,000 (inclusive of out of pocket expenses) with the plaintiff paying the first defendant’s “costs as regulated by the Motor Accidents Compensation Act 1999”.

4. Generally to justify an order for indemnity costs in respect of a Calderbank letter, the court must be satisfied that the offer is a “genuine offer” and that it was “unreasonable” for the defendants not to accept it (Commonwealth of Australia v Gretton [2008] NSWCA 117 at [44] per Beazley JA; Perisher Blue Pty Ltd v Nair Smith (No 2) [2015] NSWCA 268 at [14] to [15]).

5. The plaintiff contended that the offer that was made did not represent a “genuine” offer but instead amounted to an “invitation to surrender” (Regency Media Pty Ltd v AAV Australia Pty Limited [2009] NSWCA 368 at [31]). While in some cases an offer that involves the plaintiff discontinuing does not represent a genuine compromise that is not necessarily the case (Leichardt Municipal Council v Green [2004] NSWCA 341 at [36] per Santow JA). These are judicial review proceedings and, as such, there were only two possible outcomes being either the dismissal of the proceedings or the making of an order setting aside the assessment and requiring that it be re-determined according to law. In such a case it is difficult to see how offering one of the two possible outcomes can result in a characterisation of the offer as not being genuine. I consider that it was a genuine offer.

6. However was the plaintiff’s refusal to accept the offer unreasonable? One matter affecting that assessment is the time allowed for the acceptance of the offer (Perisher at [16] per Gleeson JA). In this case that is of little moment. The almost instantaneous reaction of the plaintiff to the offer reveals that it considered that it had sufficient time to consider the prospects of success of its own case.

7. Nevertheless, at the time the offer was received the first defendant was unlikely to have incurred any significant costs. From the plaintiff's perspective it was seeking to challenge a large judgment entered against it and had substantial grounds upon which to do so (even if they were ultimately unsuccessful). Thus the plaintiff was confronted with an offer that, if accepted, involved the avoidance of a relatively small exposure to a potential liability and the foregoing of substantial grounds to challenge a substantial judgment. The onus of persuasion that it was unreasonable to accept the offer rests upon the first defendant (Lee v Carlton Crest Hotel (Sydney) Pty Ltd (No 2) [2014] NSWSC 1586 at [9]). I am not satisfied that it has discharged it.

8. Accordingly the Court orders that:

1. The first defendant's notice of motion filed 12 August 2015 be dismissed; and

2. The first defendant pay the plaintiff's costs of the notice of motion.

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Decision last updated: 11 September 2015