Mate Ivancic v Nick Zardo
[2004] ACTCA 11
•4 JUNE 2004
MATE IVANCIC v NICK ZARDO
[2004] ACTCA 11 (4 JUNE 2004)
JUDGMENTS AND ORDERS – appeal from decision to award partial relief from liability to pay consent judgement to the extent that judgment sum represented financial benefit procured by fraud (false or misleading statements) – interpretation of s 66 Motor Accidents Act 1998 (NSW) – whether “financial benefit” refers to entire lump sum – whether allows apportionment and partial relief – whether fact that sum represents compromise settlement disallows apportionment – personal injuries from motor vehicle accident – post-settlement surveillance revealed situation inconsistent with claimed disabilities.
JUDGMENTS AND ORDERS – COSTS - whether liability to pay costs should be subject of relief under s 66 – costs previously made subject of relief.
Motor Accidents Act 1988 (NSW), Pt 5, Div 6, ss 64A, 65, 66
Income Tax Assessment Act1936 (Cth), s 51(1)
Zardo v Ivancic [2001] ACTSC 40 (7 May 2001)
Zardo v Ivancic (2001) 161 FLR 228
Zardo v Ivancic [2003] ACTSC 32
Zardo v Ivancic [2003] ACTSC 82
John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; 203 CLR 503
Toubia v Schwenke [2002] NSWCA 34; (2002) 54 NSWLR 46
McLaurin v Federal Commissioner of Taxation (1960–61) 104 CLR 381
Allsop v Commissioner of Taxation (1964–65) 113 CLR 341
Commissioner of Taxation v CSR Ltd (2000) 104 FCR 44, 178 ALR 288
Ronpibon Tin NLv Federal Commissioner of Taxation (1949) 78 CLR 47
Kidston Goldmines Ltd v Federal Commissioner of Taxation (1991) 30 FCR 77
Federal Commissioner of Taxation v Manchester UnityIOOF (1993) 113 ALR 113
Roxborough v Rothmans of Pall Mall (2001) 208 CLR 516
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
No. ACTCA 15 – 2003
No. ACTCA 37 - 2003
No. SC 772 of 2000
Judges: Higgins CJ, Gray and Gyles JJ
Court of Appeal of the Australian Capital Territory
Date: 4 June 2004
IN THE SUPREME COURT OF THE )
)
AUSTRALIAN CAPITAL TERRITORY ) No. ACTCA 15 - 2003
)
COURT OF APPEAL )
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:MATE IVANCIC
Appellant
AND:NICK ZARDO
Respondent
ORDER
Judges: Higgins CJ, Gray and Gyles JJ
Date: 4 June 2004
Place: Canberra
THE COURT ORDERS THAT:
Appeal dismissed.
Cross appeal allowed as to ground 2(b) but otherwise dismissed.
The appellant Ivancic is to pay the costs of the respondent Zardo of the appeal, and of the cross appeal ground 2(b).
IN THE SUPREME COURT OF THE )
)
AUSTRALIAN CAPITAL TERRITORY ) No. ACTCA 37 - 2003
)
COURT OF APPEAL )
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:NICK ZARDO
Appellant
AND:MATE IVANCIC
Respondent
ORDER
Judges: Higgins CJ, Gray and Gyles JJ
Date: 4 June 2004
Place: Canberra
THE COURT ORDERS THAT:
Appeal allowed.
The order of the Supreme Court of 16 October 2003 be varied by deleting the dismissal of paragraph 2 of the Notice of Motion dated 28 May 2003 and the order for costs and substituting therefor:
An order that the plaintiff Zardo be relieved of the liability to pay to the respondent Ivancic the amount for costs as agreed in the sum of $30,000 pursuant to the judgment of 16 August 2000 in SC 619 of 1997.
The respondent Ivancic is to pay the costs of the appellant Zardo of the motion before Connolly J and of this appeal on the basis that there is to be no duplication between this order and the order for costs made in ACTCA 15 of 2003.
IN THE SUPREME COURT OF THE ) No. ACTCA 15 – 2003
) No.ACTCA 37 - 2003
AUSTRALIAN CAPITAL TERRITORY ) No. SC 772 of 2000
)
COURT OF APPEAL )
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:MATE IVANCIC
Appellant
AND:NICK ZARDO
Respondent
Judges: Higgins CJ, Gray and Gyles JJ
Date: 4 June 2004
Place: Canberra
REASONS FOR JUDGMENT
THE COURT:
This is an appeal from a judgment of Connolly J delivered on 16 May 2003.
The appellant had sued the respondent for damages for personal injury arising out of a motor vehicle accident which occurred in New South Wales on 3 July 1997. Those proceedings were settled in this Court by way of compromise. A consent judgment was entered in favour of the appellant in the sum of $425,000 plus costs which were agreed at $30,000.
The third party insurer which had represented the respondent, NRMA Insurance Ltd (NRMA), had, in the course of an investigation into the appellant’s claim, authorised video surveillance of the appellant to assess his claim that he had been precluded from gainful employment by virtue of his compensable disabilities. Nothing to contradict his claim arose from any pre-judgment surveillance. However, it appears that NRMA forgot to inform the inquiry agents of the settlement and surveillance continued even after the consent judgment was entered.
The material obtained from that post-settlement surveillance revealed a situation inconsistent with the appellant’s claimed disabilities. NRMA, therefore, in the respondent’s name, sought relief under s 66 of the Motor Accidents Act 1988 (NSW) (the Act). That this claim is properly governed by the law of New South Wales was determined by this Court in an earlier decision in this matter (Zardo v Ivancic [2001] ACTSC 40 (7 May 2001) (Miles CJ, Higgins and Crispin JJ)) following John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; 203 CLR 503.
Subsequently, the respondent’s application was determined by Connolly J who interpreted and applied s 66 in accordance with the decision of the New South Wales Court of Appeal in Toubia v Schwenke [2002] NSWCA 34; (2000) 54 NSWLR 46 (Handley, Heydon and Hodgson JJA). In doing so, his Honour rejected a submission advanced by Mr Webb QC, for the appellant, that the section should be construed differently to the way it had been in that case. This submission was properly rejected. Not only was the decision in Toubia v Schwenke (supra) that of a unanimous bench of the New South Wales Court of Appeal, but an application for special leave to appeal from that decision to the High Court was rejected. In rejecting the application, Gummow J expressly affirmed the correctness of the decision in question. In any event, we see no reason to doubt the correctness of that decision.
It was not disputed that the appellant had suffered injury. There were a significant number of medical reports to that effect obtained by both sides up to the date of the settlement. There was, as Connolly J noted, an apparent conflict between them. For example, Dr Rosendahl, the appellant’s general practitioner, diagnosed very significant permanent disabilities, to wit, “significant intellectual impairment and soft tissue neck injury”. Dr Oakeshott, who examined the appellant on behalf of the respondent, was profoundly sceptical of these claims.
In paragraphs 21 and 23 of his reasons, Connolly J sets out the various representations the appellant had made to examining doctors.
His Honour also examined the video surveillance of the appellant post-settlement, as well as the opinions of medical practitioners (Drs McEwin and Snowden) who had previously accepted the complaints referred to above and then had been shown the more recent video footage. In brief, they concluded that the appellant’s complaints had been grossly exaggerated and deliberately false. Dr Snowden went so far as to assert –
… This has been a frank case of malingering.
The appellant did not seek to challenge these assertions.
As a result, in our view, no challenge could be made to his Honour’s finding that the insurer had been deliberately deceived by the appellant so as to exaggerate his claim.
His Honour found, on the evidence of Mr Nunn, an NRMA officer who had carriage of the appellant’s claims, that the latter had recommended settlement of the appellant’s claim based on the reports submitted as a result of the appellant’s deception. His evidence was challenged on the basis that, in considering the pre-settlement material, he knew, or ought to have known, that the appellant had been exaggerating his disabilities.
That submission did not find favour with his Honour. He viewed the pre-settlement video material referred to and, whilst agreeing that it could have indicated exaggeration, found that it was not sufficiently unequivocal to have warranted a dismissal of the evidence supporting the appellant’s claims, relying as they did primarily on psychiatric disability. It was clearly open to his Honour so to conclude.
Even assuming Mr Nunn had been less than diligent, his Honour was of the view that Toubia v Schwenke (supra) precluded reliance by a fraudster on the lack of diligence of the victim in detecting the fraud.
Nor, in his Honour’s view, did the fact that the settlement could be regarded as a compromise, or that the insurer may have entertained some suspicion of exaggeration in proposing such a compromise, preclude relief under s 66.
The next submission was that the onus lay on the respondent to establish the extent to which the settlement had been caused by the fraudulent misrepresentations. In the absence of such evidence, it was contended for the appellant there was no demonstrated causal connection between the quantum of the settlement and the fraudulent statements.
The contrary proposition, as his Honour accepted, might lead to a claimant being obliged to confess his deception and then, burdened by his demonstrated lack of credibility, give evidence of the “true” level of his disabilities, if otherwise the evidence seemed to undervalue them.
His Honour accepted that an assessment of the extent of the overpayment had to be made and that he was required to be satisfied as to the quantum of it, but considered that this could be done on such material, including any evidence presented by the former plaintiff, as the Court had before it.
The effect of Mr Nunn’s evidence was that, had he known the truth of the matter, he would have offered no more than $10,000. However, his Honour did not regard himself as bound to apply that approach. He examined for himself the circumstances of the accident and the medical evidence that related to its sequelae. That indicated to his Honour, as a matter of fact, that there had been “soft tissue injuries of some significance”. As a result his Honour felt able to conclude that the appellant – [76]
… did experience a soft tissue injury of some severity that persisted for over twelve months after the accident to such a level that his ability to lead a normal life was significantly impaired.
Thus the threshold set by s 79A(3) of the Act would have been exceeded. The evidence, untainted by the fraud, would, in his Honour’s opinion, have warranted a finding of 20% of the most serious case. General damages would, if so, be $8,500. Although $50,000 was claimed for out-of-pocket expenses, his Honour concluded that only $10,000 could be justified. For loss of earning capacity, his Honour accepted that the physical injuries would have warranted a year’s absence from work. That, inclusive of Fox v Wood, would warrant an award of $48,000. Thus, the claim, had the truth been known, would have warranted an award of $65,000. This is a little less than the $66,500 that his Honour’s figures amount to but this may be accounted for by the fact that the $40,000 assumed for loss of earnings was assessed as being “up to $40,000”.
In directing relief his Honour allowed $350,000 as the result of the fraud leaving $75,000 as still payable. The settlement had included an order for costs agreed at $30,000. There was no relief ordered in respect of that latter figure as, in his Honour’s view, even if $75,000 had been awarded, a costs order would still have been made. Thus the respondent remained liable for $75,000 plus costs of $30,000.
THE APPELLANT’S CONTENTIONS
The appellant’s case, as advanced by Mr Webb QC, was that the respondent had, in further amending his statement of claim on 15 October 2002, by his counsel, Mr Robert Stitt QC, limited his case to a proposition that if the claim was tainted to any extent by fraud the claimant lost the entire amount.
As a result, he contended, the Court should not have attempted to assess the extent of the over-payment, but should instead have dismissed the claim.
THE RESPONDENT’S CONTENTIONS
The respondent was granted leave to file a Notice of Cross-Appeal.
The respondent denied that he had confined his case to an all or nothing approach, albeit that the reliance on an entitlement to a partial relief was not made clear until submissions in reply. However, as Mr Stitt QC pointed out, that did not preclude the appellant from putting his case fully, nor did it affect the range of evidence his Honour had to assess.
The Cross-appeal did not abandon support for the finding of the judgment below, that relief to the extent of $350,000 should be granted, but asserted, in the alternative, that s 66(2), properly construed, required relief from the entire amount of $425,000 and, as well, from the $30,000 agreed for costs.
CONSTRUCTION OF THE SECTION
Section 66 appears in Division 6 of Part (5) of the Act. Sections 64A, 65 and 66 are as follows:
Licensed insurers to deter fraudulent claims
64A.A licensed insurer shall take all such steps as may be reasonable to deter and prevent the making of fraudulent claims.
False claims
65.A person who makes a statement knowing that it is false or misleading in a material particular:
(a)in a report under section 42 (report of motor accident), or
(b)in a notice of a claim given to a person or an insurer for the purposes of section 43, or
(c)when otherwise furnishing information to any person concerning a motor accident or any claim relating to a motor accident,
is guilty of an offence.
Maximum penalty: 50 penalty units or imprisonment for 12 months, or both.
Remedy available where claim fraudulent
66.(1) This section applies to a claimant if it is established that, for the purpose of obtaining a financial benefit, the claimant did or omitted to do anything (including the making of a statement) concerning a motor accident or any claim relating to a motor accident with knowledge that the doing of the thing or the omission to do the thing was false or misleading.
(2)If this section applies to a claimant:
(a)a person who has a liability in respect of a payment, settlement, compromise or judgment relating to the claim is relieved from that liability to the extent of the financial benefit so obtained by the claimant, and
(b)a person who has paid an amount to the claimant in connection with the claim (whether under a settlement, compromise or judgment, or otherwise) is entitled to recover from the claimant the amount of the financial benefit so obtained by the claimant and any costs incurred in connection with the claims.
The question which arises is the identification of ‘the financial benefit’ obtained by a claimant as a result of false or misleading statements which relate to part of a claim, and so affect the amount of a lump sum settlement of an action for damages for personal injury leading to a consent judgment for that lump sum together with costs, where there is no agreed apportionment or dissection of the lump sum.
It is submitted for the respondent/cross-appellant (the defendant below) that the financial benefit obtained is the entitlement to the lump sum which cannot be apportioned. In so submitting, the respondent relied upon the decisions in McLaurin v Federal Commissioner of Taxation (1960–61) 104 CLR 381; Allsop v Commissioner of Taxation (1964–65) 113 CLR 341 and Commissioner of Taxation v CSR Ltd (2000) 104 FCR 44, 178 ALR 288.
It was submitted, for the appellant/cross-respondent, that the relief from liability is only ‘to the extent of’ the financial benefits obtained as a result of the deception, a concept which requires that there be apportionment. Apportionment is required in this case as the false statements related to only part of the damages claimed. The cases upon which the cross-appellant relies, the appellant/cross-respondent submitted, related to taxation law and are not applicable to this statute or section. It was suggested that the legislature would not have intended that a false statement as to a minor head of claim would lead to the result that the benefit of the whole of the settlement would be lost. It was further submitted that the argument for the cross-appellant was inconsistent with the only other reported decisions on the section – Toubia v Schwenke (supra) and the decision of the Full Court in this case – Zardo v Ivancic (2001) 161 FLR 228 particularly at [15] and [16]. It is submitted, in the alternative, that if the cases relied upon by counsel for the cross-appellant were applicable, then the cross-respondent should succeed as the cross-appellant could not establish the necessary causal link between the false statements and the whole lump sum.
The cases upon which counsel for the cross-appellant relied certainly establish, absent any special statutory provision, that a lump sum settlement, which represents a compromise of various claims where there is no dissection of amounts agreed between the parties, cannot be apportioned for the purpose of characterisation of the nature of the payments in the hands of the recipient between a taxable and non-taxable characterisation. The principle is set out in the judgment of Dixon CJ, Fullagar and Kitto JJ in McLaurin at 391:
It is true that in a proper case a single payment or receipt of a mixed nature may be apportioned amongst the several heads to which it relates and an income or non-income nature attributed to portions of it accordingly: Texas Co (Australasia) Ltd v Federal Commissioner of Taxation (1); Ronpibon Tin NL and Tongkah Compound NL v Federal Commissioner of Taxation (2); The National Mutual Life Association of Australasia Ltd v Federal Commissioner of Taxation (3). But while it may be appropriate to follow such a course where the payment or receipt is in settlement of distinct claims of which some at least are liquidated, cf Carter v Wadman (4), or are otherwise ascertainable by calculation: cf Tilley v Wales (5), it cannot be appropriate where the payment or receipt is in respect of a claim or claims for unliquidated damages only and is made or accepted under a compromise which treats it as a single, undissected amount of damages. In such a case the amount must be considered as a whole: Du Cros v Ryall (6).
In our opinion s 66 does require apportionment of the liability of the respondent/cross-appellant in respect of the judgment so that relief is only granted in relation to the financial benefit obtained by the appellant/cross-respondent as a result of the false and misleading statements he made.
Whilst the meaning of s 66(2) is far from clear, the reference to ‘the extent of’ any financial benefit in s 66(2)(a) favours that conclusion. Some guidance as to that concept can be gleaned from the decision in Ronpibon Tin NLv Federal Commissioner of Taxation (1949) 78 CLR 47 which concerned the then new s 51(1) of the Income Tax Assessment Act1936 (Cth) which, by contrast with the previous regime, permitted a deduction of expenditure ‘to the extent to which’ it was incurred in gaining or producing the assessable income of the taxpayer. Their Honours said at p 55 -
… the principle expressed by the former s 25(e) has been abandoned. The principle was, in the words of that provision, that a deduction should not in any case be made in respect of money not wholly and exclusively laid out or expended for the production of assessable income. Instead of imposing a condition that the expenditure shall wholly and exclusively be for the production of assessable income the present s 51(1) adopts a principle that will allow of the dissection and even apportionment of losses and outgoings. It does this by providing for the deduction of losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income.
We do not believe that the absence of reference to ‘to the extent of’ in s 66 (2) (b) should lead to a different result, although the slight differences in language between (a) and (b) do require reconciliation. The opinion we have formed is consistent with the decision in Toubia v Schwenke (supra), although there is no discussion in that case of the precise point.
There are a number of decisions as to how apportionment pursuant to that and cognate sections should take place, many of which are referred to by Hill J in Kidston Goldmines Ltd v Federal Commissioner of Taxation (1991) 30 FCR 77 at 83–85 and by Northrop J in Federal Commissioner of Taxation v Manchester UnityIOOF (1993) 113 ALR 113 at 123–125.
There is discussion of a similar issue in relation to the apportionment or dissection of consideration given and received pursuant to contract in Roxborough v Rothmans of Pall Mall (2001) 208 CLR 516 per Gleeson CJ, Gaudron and Hayne JJ at 526–7, Gummow J at 557–8 and Callinan J at 585–7. It is clear that the basis of dissection so discussed is not applicable in this case as no part of the lump sum is identified or ‘earmarked’ in relation to any particular head of damage.
In considering a similar issue in Ronpibon Tin NL (supra) the Court said (at 59) -
The charges for management and the directors’ fees are entire sums which probably cannot be dissected. But the provision contained in s 51(1), as has been already said, contemplates apportionment. The question what expenditure is incurred in gaining or producing assessable income is reduced to a question of fact when once the legal standard or criterion is ascertained and understood. This is particularly true when the problem is to apportion outgoings which have a double aspect, outgoings that are in part attributable to the gaining of assessable income and in part to some other end or activity. It is perhaps desirable to remark that there are at least two kinds of items of expenditure that require apportionment. One kind consists in undivided items of expenditure in respect of things or services of which distinct and severable parts are devoted to gaining or producing assessable income and distinct and severable parts to some other cause. In such cases it may be possible to divide the expenditure in accordance with the applications which have been made of the things or services. The other kind of apportionable items consists in those involving a single outlay or charge which serves both objects indifferently. Of this directors’ fees may be an example. With the latter kind there must be some fair and reasonable assessment of the extent of the relation of the outlay to assessable income. It is an indiscriminate sum apportionable, but hardly capable of arithmetical or ratable division because it is common to both objects.
Then, (at 60) -
The Court must make an apportionment which the facts of the particular case may seem to make just, and the facts of the present cases are rather special. In making the apportionment the peculiarities of the cases cannot be disregarded. ... The question of fact is therefore to make a fair appointment [sic] to each object of the companies’ actual expenditure where items are not in themselves referable to one object or the other.
The trial judge set out to make such an apportionment. Neither party has chosen to attack the actual apportionment exercise undertaken by the trial judge. In these circumstances it is neither necessary nor desirable for this Court to consider that issue.
The “all or nothing” contention of each party must be rejected. The apportionment undertaken by Connolly J must stand and represents the overpayment resulting from the appellant’s fraudulent misrepresentations. We see no error in his Honour’s approach to that task.
By way of a separate appeal (ACTCA No. 37 of 2003) the respondent, as appellant in that matter, sought an order that the $30,000 allowed for costs should be the subject of relief. It is arguable that it was not necessary for the respondent to have filed a separate appeal. The issue was raised as ground 2(b) of the cross-appeal in ACTCA 15 of 2003. However, the appeals were heard together as if there was but one appeal and cross-appeal.
There is no substance in the subsidiary grounds of appeal or cross-appeal save to Ground 2(b) of the latter. Each will be dismissed, with no order as to costs.
THE CROSS-APPEAL GROUND 2(b) AND APPEAL IN ACTCA 37 OF 2003
Ground 2(b) states:
The [sic] his Honour erred in failing to consider and determine the submission of the Respondent that he be relieved from liability to pay the Appellant’s costs agreed in the sum of $30,000.
This raises the same issue as involved in the appeal ACTCA 37 of 2003.
The consent judgment which was entered in SC619 of 1997, following the settlement between the parties, was for $425,000 plus costs agreed at $30,000. The decision of Connolly J in SC772 of 2000 on 16 May 2003 (Zardo v Ivancic [2003] ACTSC 32) relieved the respondent from liability under the consent judgment in the sum of $350,000. Connolly J did not explicitly refer to the agreed liability of $30,000 for costs in that part of his judgment of 16 May 2003 at [81]–[82] where his Honour assessed the financial benefit obtained. The appeal and cross-appeal in ACTCA 15 of 2003 relates to that judgment.
Pursuant to leave reserved by Connolly J, he heard a later application for ancillary and related orders, one of which was that Zardo should be relieved from the order for costs which was made as part of the consent judgment in SC619 of 1997 in the sum of $30,000. Judgment was given by Connolly J on 16 October 2003 (Zardo v Ivancic [2003] ACTSC 82) in which that claim was rejected. Appeal ACTCA 37 of 2003 concerns that judgment
In his judgment of 16 October 2003 Connolly J said at [10] and [11]:
10.In my substantive judgment I found that Mr Ivancic had engaged in fraud which had resulted in a consent judgment involving a financial benefit by way of the fraud in the sum of $350,000. Given that the original judgment sum was for $425,000, this left Mr Ivancic, notionally, with a judgment sum of $75,000 in respect of the action No SC 19/1997. I had no evidence that the consent order for costs in the sum of $30,000 was inappropriate, and I made no order relieving the insurer of liability in respect of the costs order.
11.Mr McDonogh, for the plaintiff, in pars 3 and 4 seeks an order for indemnity costs in the action SC 619/1997 on the basis that the insurer made an offer of settlement on 20 July 1999 in the sum of $145,000 plus workers compensation payback plus costs, which was not accepted by Mr Ivancic. Given that Mr Ivancic obtained a nominal judgment at the end of SC 772/2000 of $75,000, which I was told would in effect be repaid to the workers compensation insurer leaving him with no net benefit, it is clear that the rejection of the offer was imprudent, and indeed would, in normal circumstances, attract the operation of the indemnity costs principles set out in Quirk v Bawden (1992) 111 FLR 115.
After referring to the decision of the New South Wales Court of Appeal in Toubia v Schwenke (supra) at some length, his Honour went on (at [15]):
15.It follows that I am of the opinion that I do not have jurisdiction to vacate the costs order in SC 619/1997 and to substitute for that costs order an order in favour of the insurer. All that an action pursuant to s 66 enables a court to do is to relieve a defendant of a liability to the extent that that liability amounts to a financial benefit that has been obtained by fraud. In making the original orders in the substantive matter I was satisfied that the claimant had obtained a financial benefit by reason of fraud in respect of $350,000 of the original judgment sum, and I made an order relieving the insurer of this much of the liability under the consent judgment. This left what I found to be on the evidence before me a proper claim by Mr Ivancic for personal injuries that would sound in damages in the order of $75,000. Given this finding, I was not satisfied that the agreed costs of $30,000 could be seen necessarily to have been a financial benefit obtained by fraud, as I had found that absent the fraud there was a valid claim for damages in the order of $75,000 to this amount, which would carry with it an entitlement to costs.
In our opinion counsel for the respondent is correct in submitting that the decision of the New South Wales Court of Appeal in Toubia v Schwenke (supra) provided no basis for declining to vacate the costs order for the sum of $30,000 in SC 619 of 1997. That order was a financial benefit to the appellant. It was, also, the result of the fraudulent conduct found to have induced the settlement. That was the basis for the order relieving the respondent from a substantial portion of the amount of the verdict itself. The one settlement conference was involved and whatever infected the amount of the verdict obviously infected the agreement to pay costs in the agreed amount.
It is far from evident that there would have been any agreement to pay a sum of $30,000 for costs in relation to a verdict of $75,000 notwithstanding that amount had been agreed in relation to a verdict of $425,000. The disparity at least called for consideration and explanation. That did not take place in the May 2003 judgment. More importantly, however, it is submitted that the finding which Connolly J made at [11] (and set out above) in the October judgment concerning the Calderbank offer should inevitably have led to relief in whole from the agreed amount of costs of $30,000. In our opinion that submission is plainly correct. If the truth had been known at any stage after 20 July 1999 (when the offer was made), with the result that the plaintiff would not have been able to justify a verdict in excess of $75,000, it is perfectly obvious that the Calderbank offer would have stood in the path of any agreement to pay costs and would have prevented any order for costs being made in favour of the appellant in the event of the matter going to trial. The fact that it may not be possible to substitute an order for payment of costs by the appellant is no answer to the claim for relief from a liability to pay costs.
The appeal in ACTCA 37 of 2003 and the cross appeal in ACTCA 15 of 2003 must be allowed to the extent of granting relief in relation to the sum of $30,000 for costs. It would also follow that the respondent is entitled to the costs of the motion disposed of by the October judgment as well as the costs of the cross-appeal in ACTCA 15 of 2003 and of the appeal in ACTCA 37 of 2003, limited to one set of costs.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.
Associate:
Date: 4 June 2004
Counsel for the Appellant: P Webb SC, D Campbell SC and D Mossop
Solicitor for the Appellant: Blumers
Counsel for the Respondent: R Stitt QC, Fitzsimmons
Solicitor for the Respondent: Phillips Fox
Date of hearing: 5 & 6 November 2003
Date of last submissions in ACTCA 37
of 2003: 3 December 2003
Date of judgment: 4 June 2004
2
10
2