Murphy v Harney

[2001] VSC 386

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT WARRNAMBOOL

COMMON LAW DIVISION

No. 1358 of 2001

Trevor Edwin Murphy	Plaintiff
v
Francis J. Harney	Defendant

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JUDGE:	Eames J
WHERE HELD:	Melbourne
DATE OF HEARING:	11 October 2001
DATE OF RULING:	12 October 2001
CASE MAY BE CITED AS:	Murphy v Harney
MEDIUM NEUTRAL CITATION:	[2001] VSC 386

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Costs – Offer of compromise – Transport Accident Act 1986 s.93(12) – Rules of Supreme Court, Order 26.08 – whether effect of offer of compromise was negated by provision of Transport Accident Act where party is awarded damages for pain and suffering in a sum less than statutory minimum for recovery.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Meldrum QC with Mr T Tobin	Maddens Lawyers
For the Defendant	Mr D Curtain QC with Mr R Middleton	TAC Law

HIS HONOUR:

1. The plaintiff, Trevor Edwin Murphy, brought proceedings under the Transport Accident Act 1986 (“the Act”) seeking damages for personal injuries arising out of a motor vehicle accident in Warrnambool on 23 July 1996. Liability was admitted by the defendant and the case was tried by a jury at Warrnambool over nine days from 27 September to 9 October 2001.

1. On 9 October 2001 the jury of six gave its verdict by answering the two questions asked of it.  The first question was in what sum they assessed the plaintiff’s pain and suffering damages.  The jury answered “$15,000”.  The second question asked in what sum they assessed pecuniary loss damages, and jury answered “$70,000”.

1. Mr Tobin, junior counsel for the plaintiff, moved for judgment for damages for pecuniary loss in the sum of $44,998.17. That sum represented the balance payable after deductions were made pursuant to s. 93(11)(a) of past weekly payments which had been made by the Transport Accident Commission. In addition, Mr Tobin sought an order for costs with respect to the plaintiff’s claim for pecuniary loss damages up to the date of an offer of compromise which was made by the defendant on 31 July 2001. Mr Tobin conceded that the plaintiff was obliged to pay the costs of the defendant from the date of the offer of compromise but only as to the claim for pecuniary loss damages. He submitted that no order as to costs, whether incurred before or after the date of compromise, could be made in favour of either the plaintiff or defendant insofar as those costs related to the claim for pain and suffering damages. Mr Curtain QC, senior counsel for the defendant, submitted that the defendant was entitled to all of his costs from the date of the offer of compromise. The application for costs raises what appears to be a novel question as to the effect of s. 93(12)(b)(ii) and its relationship to Order 26.08 of the Rules of the Supreme Court.

1. The offer of compromise which was made on 31 July 2001 was to pay to the plaintiff the sum of $275,000 and for him to retain the benefit of compensation payments already made.  The offer of compromise did not distinguish as between an award for pain and suffering damages and an award for pecuniary loss damages.  Counsel agreed that as a matter of practice offers of compromise did not draw such distinctions.

1. Section 93(12) of the Act provides:

“(12)    Subject to the discretion of the court –

(a)in proceedings relating to an application for leave of the court under sub-section (4)(d) – costs are to be awarded against a party against whom a decision is made; and

(b)in proceedings for the recovery of damages in accordance with this section –

(i)if no liability to pay damages is established, costs are to be awarded against the claimant; and

(ii)if damages are assessed but cannot be awarded under this section, each party bears its own costs; and

(iii)if damages are awarded, costs are to be awarded against the defendant.

1. Rule 26.08(3) provides:

“Where an offer of compromise is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains a judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim up to and including the day the offer was served, taxed on a party and party basis and the defendant shall be entitled to an order against the plaintiff for his costs in respect of the claim thereafter taxed on a party and party basis.”

1. By virtue of s. 93(7)(b) damages with respect to pain and suffering can be recovered only if the assessment with respect to that head of damages attains a certain minimum figure.  That minimum figure has been adjusted from time to time, but counsel agreed it now stands at about $36,000.  The jury verdict on Question 1 fell well below the minimum sum.  An identical lower threshold also applies to a claim for pecuniary loss damages, but the jury assessment on Question 2 exceeded the threshold. 

1. Mr Tobin submitted that whilst the judge was given a broad discretion, the terms of s. 93(12)(b)(ii) should be applied so that each side should bear their own costs with respect to the claim for pain and suffering damages, whether incurred before or after the date of the offer of compromise.

1. Mr Tobin submitted that the power given under Rule 26.08(3) was itself subject to the discretion of the trial judge and that I should regard as paramount the terms of s. 93(12)(b)(ii). He submitted that Parliament had made it clear that there should be no order for costs in circumstances where the sum assessed by the jury did not reach the statutory minimum. Had Parliament intended that the plaintiff should be required to pay costs in such circumstances then there would have been no need for sub-section (ii), as sub-section (i) would have covered the situation.

1. Mr Curtain submitted that the terms of the sub-section should not be read as interfering with the operation of an offer of compromise.  He submitted that in this case the jury assessment of the plaintiff’s damages fell so far below the sum which had been offered that full weight should be given to the terms of Rule 26.08(3).  Mr Curtain submitted that had the plaintiff’s pain and suffering damages been assessed in a sum well above the threshold, say $60,000, his award would still have fallen short of the offer of compromise and he would have had to pay all costs.  Yet when his case was deemed by the jury to have been even more manifestly unjustified – insofar as he was not even able to attain the threshold - he sought to do better on costs than he would have done had the jury been more impressed by his claim.

1. Mr Tobin submitted that there was a good policy reason why Parliament would have intended the course which he submitted to be appropriate. It would be quite contrary to the intended purpose of s. 93(12), he submitted, for a plaintiff to be required to pay costs when, having been held by the jury to be entitled to some damages for pain and suffering the Act prevented him from receiving that sum because it was below the threshold requirement. That would mean that in meeting the costs order which would be made against him with respect to the costs as to pecuniary damages, by virtue of the offer of compromise, the plaintiff would not even have the benefit of the modest sum which had been assessed for pain and suffering damages. Had the jury awarded $60,000 for pain and suffering then whilst the total damages awarded would have fallen short of the offer of compromise, and, thus, the plaintiff would have had to pay all of the defendant’s party party costs since the date of the offer, at least the plaintiff would have had the benefit of the $60,000 to put towards the costs impact. Here, the plaintiff gains no benefit at all of the sum of $15,000 which the jury assessed to be his entitlement for pain and suffering damages. The intention of the Parliament, Mr Tobin submitted, was not that the plaintiff should suffer the double disadvantage of not only having to forego the sum which the jury had assessed, but of also being penalised by a costs order flowing from the offer of compromise.

1. It seems to me that neither of the two provisions – the provision in the Rules and that in the Act - contemplates the existence of the other. It may be assumed, however, that the broad discretion given to the Court by Rule 26.08(3), contemplates that the Court would have regard to any contrary legislative intent disclosed by any legislation. On the other hand, I do not think that the draftsperson of s. 93(12) had contemplated offers of compromise at all. Nonetheless, that provision also gave an unfettered discretion to the Court.

1. I assume for the sake of this analysis that it would be possible to separate out those costs which relate to the claim for pain and suffering damages from those relating to pecuniary loss damages.  The task may be difficult but ultimately would be a mechanical process, and counsel did not suggest otherwise.

1. The logical extension of Mr Tobin’s submission is that had the plaintiff also failed to be assessed above the threshold for pecuniary loss damages then each side would have had to meet their own costs and the defendant would have gained no benefit whatsoever of the offer of compromise, despite the fact that the defendant would have comprehensively established that the claim should not have been pursued.

1. It seems to me that Parliament did not intend that the terms of s. 93(12) should have reduced the effectiveness of the weapon available to a litigant of a well judged offer of compromise. The public interest in the compromise of litigation and the discouragement of inappropriate claims, suggests to me that a party making an offer of compromise should gain the fruits of its tactical victory unless good reason is shown for the contrary result. Whilst I am sympathetic to the plaintiff’s position, and to the fact that he will gain no benefit of the $15,000 assessment made for pain and suffering damages, it does not seem to me that that fact is sufficient in itself to deny to the defendant the benefit of the offer of compromise.

1. Accordingly, I will order that judgment be entered for the plaintiff for pecuniary loss damages in the sum of $44,998.17 together with interest in the sum of $1500.  I will further order that the defendant pay the plaintiff’s party party costs up to 30 July 2001 and that the plaintiff pay the defendant’s party party costs from 31 July 2001.

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