Nakos v Serdaris
[2016] VSC 179
•27 April 2016
| Not Restricted |
IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE
COMMON LAW DIVISION
PERSONAL INJURIES LIST
S CI 2015 04728
| GREGORY NAKOS (by way of Litigation Guardian ANASTASIA NAKOS) | Plaintiff |
| v | |
| GEORGE SERDARIS | Defendant |
JUDGE: | ZAMMIT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 31 March 2016 |
DATE OF JUDGMENT: | 27 April 2016 |
CASE MAY BE CITED AS: | Nakos v Serdaris |
MEDIUM NEUTRAL CITATION: | [2016] VSC 179 |
COSTS — Supreme Court (General Civil Procedure) Rules 2015 r 26.08(3) — Offer of compromise made — The Court’s discretion to ‘otherwise order’.
Transport Accident Act 1986 ss 46A, 47, 49, 93(3), 93(11)(b)(i) — Impairment — Whether plaintiff required to pay back the impairment benefit.
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Mighell QC with Ms J. Frederico of Counsel | Slater and Gordon |
| For the Defendant | Mr P. Elliott QC with Ms A. Wood of Counsel | Transport Accident Commission |
HER HONOUR:
The following reasons deal with two applications. The first application is in relation to costs. The defendant seeks an order pursuant to r 26.08(3) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) that the defendant pay the plaintiff’s costs up to 18 December 2015, and thereafter the plaintiff pay the defendant’s costs. The plaintiff seeks a finding that the litigation guardian’s refusal of the offer of compromise (‘the offer’) was not unreasonable and urges the Court to exercise its discretion to refrain from enforcing the costs prescribed by r 26.08 of the Rules, and further, that the defendant pay the plaintiff’s costs. The second application concerns the plaintiff seeking an order that the jury verdict should not be reduced by the amount of the impairment benefit paid to the plaintiff in the sum of $35,180 pursuant to s 47 of the Transport Accident Act 1986 (‘TA Act’).
The plaintiff relies on the affidavits of:
(1)Anastasia Nakos, sworn 16 March 2016;
(2)Craig Anthony Lynch, solicitor, sworn 18 March 2016.
For completeness, the Court heard submissions in relation to the admissibility of Exhibit CAL2 to the affidavit of Craig Lynch. Following submissions, I determined that Exhibit CAL2 was not admissible.
Both parties relied on written submissions.
Background
On 24 October 2014, the plaintiff issued a proceeding by writ seeking damages for personal injuries following a transport accident on 28 October 2008 (‘the proceeding’).
On or about 5 November 2008, the plaintiff lodged a claim with the Transport Accident Commission (‘TAC’). On 26 August 2009, the plaintiff made an impairment benefit claim for compensation pursuant to s 47 of the TA Act. On 24 July 2014, the TAC advised the plaintiff that his level of impairment had been determined and that such level of impairment was assessed to be 28 percent. This entitled the plaintiff to a lump sum payment of $35,180.
On 16 December 2015, the parties attended a court-ordered mediation. Junior counsel and instructing solicitor appeared on behalf of the plaintiff. On 17 December 2015, the defendant served an offer of compromise (‘the offer’) on the plaintiff’s solicitors offering to settle the proceeding in the sum of $600,000 plus costs. The offer stated that should the offer be accepted, the plaintiff could ‘keep’ payments previously paid pursuant to s 47 and s 49 of the TA Act, thereby making the value of the offer $659,633.05 plus costs.
The offer was not accepted by or on behalf of the plaintiff. On 22 December 2015, an offer of compromise was served on behalf of the plaintiff on the defendant in the sum of $865,000 plus retention of the said payments.
The plaintiff’s wife, Anastasia Nakos, was appointed the plaintiff’s litigation guardian in October 2014. It follows that the decision to reject the plaintiff’s offer of compromise was made on his behalf by his litigation guardian.
The trial of the action commenced on 23 February 2016 and, on 3 March 2016, the jury returned a verdict that assessed the plaintiff’s pain and suffering damages at $175,000 and his pecuniary loss damages at $125,000. The total award of damages was less than both offers of compromise. Importantly, the jury’s verdict was that the transport accident on 28 October 2008 was not a cause of the plaintiff’s psychiatric injury. The award of $300,000 pertained solely to the plaintiff’s physical injuries, namely, his left leg injury.
Anastasia Nakos deposes that the basis upon which she rejected the defendant’s offer was that she formed the opinion that it was in the interests of the plaintiff for the offer not to be accepted. She formed this opinion for the following reasons:
(a)the legal advice provided by junior counsel and the plaintiff’s solicitors;
(b)the plaintiff’s treating psychiatrist’s opinion that the accident was the cause of the plaintiff’s psychiatric illness, contrary to the view expressed by Professor Doherty, the defendant’s medico-legal expert;
(c)an awareness that there were inconsistencies in Professor Doherty’s report, including the fact that the plaintiff had suffered psychiatric illness prior to the transport accident;
(d)the fact that the plaintiff’s treating psychiatrist, Dr Sanghvi and the medico-legal expert on behalf of the plaintiff supported a causal link between the transport accident and the plaintiff’s illness;
(e)the fact that the plaintiff was likely to be found to be totally incapacitated and that the litigation guardian had formed an opinion that the plaintiff was unlikely to ever return to work;
(f)the advice of junior counsel that the plaintiff could put his own offer of compromise.[1]
[1]Affidavit of Anastasia Nakos sworn 16 March 2016 at [10].
Costs
The plaintiff seeks a finding that the litigation guardian’s refusal of the offer was not unreasonable and that the Court exercise its discretion and refrain from enforcing the costs consequences. The plaintiff submits that the discretion vested in the Court in r 26.08 should be exercised in favour of the plaintiff and an order should be made by the Court that the defendant pay the costs.
The defendant seeks an order that the defendant pay the plaintiff’s costs up to 18 December 2015 and thereafter the plaintiff pay the defendant’s costs on a standard basis.
Rule 26.08 provides the procedure for offers of compromise. It also prescribes the costs consequences which a party served with an offer of compromise will incur if the party does not accept the offer and the judgment at trial is more favourable to the party than the terms of the offer.
The defendant’s offer was made pursuant to r 26.08(3), which provides:
(3)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 the Plaintiff than the terms of the offer, then, unless the Court otherwise orders –
(a)the plaintiff shall be entitled to an order against the defendant for the plaintiff’s costs in respect of the claim before 11.00am on the second business day after the offer was served, taxed on the ordinary applicable basis; and
(b)the defendant shall be entitled to an order against the plaintiff for the defendant’s costs in respect of the claim thereafter taxed on the ordinary applicable basis.
Accordingly, where the defendant has served an offer of compromise, as was done in this case, and the plaintiff obtained judgment on terms not more favourable to him or her, than the terms of the offer, the defendant will be rewarded in costs. Then, unless the court ‘otherwise orders’, the plaintiff will be entitled to costs up to and including the day the offer was served, taxed on the ordinary applicable basis, which in this case is the standard basis, but is liable to pay the defendant’s costs tax on the same basis after that day.
Rule 26.08(3) gives the Court the discretion ‘to order otherwise’, that is, to refrain from penalising, the other party in costs.
The party upon whom the offer of compromise was served, in this case, the plaintiff, carries the heavy burden to displace the prima facie rule as to costs.[2] The Court has an unfettered discretion. In Simply Irresistible Pty Ltd v Couper & Ors (No 2),[3] Kyrou J adopted the term ‘special circumstances’ when considering whether to displace the effect of the rule-based presumption as provided in r 26.08(3). In Simply Irresistible, Kyrou J referred to the principles applicable to the exercise of the discretion as summarised by the Full Federal Court in IFTC Broking Services Ltd v Commissioner of Taxation:[4]
[2]Simonovski v Bendigo Bank Ltd (No 2) [2003] VSC 139; [17] (Ashley J).
[3][2011] VSC 33.
[4][2010] FSCAFC 31, [9] and [12]-[13].
9.It may be accepted that the prima facie position established by O 23 r 11(6) can be departed from. So much is clear from the statement of exception in the rule which the appellants seek to invoke (‘unless the court otherwise orders’). The cases say more than this, however. The cases establish that:
(1)If O 23 r 11(6) is engaged it is for the applicant to satisfy the Court that the prima facie position established by that rule should be departed from: Futuretronics at [12].
(2)Unlike a case in which a Calderbank offer (named after the decision in Calderbank v Calderbank[1975] 3 All ER 333) is made, the fact that an unsuccessful litigant acted reasonably in rejecting an offer of compromise “is not of itself a sufficient reason to displace the operation of the rule”: Futuretronics at [11].
(3)It is true that doubts have been expressed about a need to show “compelling and exceptional circumstances” to justify otherwise ordering: see Port Kembla Coal Terminal at [17]. Nevertheless, properly understood, the rule creates a presumption in favour of indemnity costs which the unsuccessful party must rebut. A court may depart from the presumptive position but only “for proper reasons which, in general, only arise in an exceptional case”: Port Kembla Coal Terminal at [17] cited with approval in Futuretronics at [10].
(4)The requirement for “proper reasons” for any departure from the prima facie position of indemnity costs reflects the purpose of the rule. As explained by Mason P in Morgan v Johnson(1998) 44 NSWLR 578 at 581F–2E (Morgan) the rule is intended to encourage the compromise of litigation (such compromise being in both the private and the public interest) and to oblige parties “to give serious thought to the risk involved in non-acceptance” on the basis that “litigation is inescapably chancy”: Maitland Hospital v Fisher (No 2)(1992) 27 NSWLR 721 at 725. For these reasons “the ordinary provision is expected to apply in the ordinary case” (referring to New South Wales Insurance Ministerial Corporation v Reeve(1993) 42 NSWLR 100 at 102–3).
…
12.Futuretronics exposes the difference between a Calderbank offer and an offer of compromise. In respect of a Calderbank offer, characterisation of the refusal to accept the offer as reasonable or not is significant, even potentially determinative. In respect of an offer of compromise, the reasonableness of the refusal to accept the offer is not, of itself, sufficient to displace the consequence of indemnity costs. The appellants’ reliance on various circumstances said to make their refusal of the offer reasonable fails to confront this difference of principle.
13.The immediately preceding point also undermines the appellants’ reliance on the circumstances during the time the offer was open for acceptance. Moreover, the rule itself directs attention to the outcome of the litigation, a fact not known at the time of the offer. In any event, circumstances did not alter between the time of the offer and the order we made dismissing the appeal. The conclusions we reached were based on facts known to the appellants when they decided not to accept the offer.
In relation to the inquiry into reasonableness Dal Pont, in The Law of Costs,[5] states, at [13.26]:
Judges have declined to exhaustively list the occasions that may justify displacing the rule-based entitlements, for fear of fettering the relevant discretion. In the past, some rules made the reasonableness of the rejection of the offer the main criterion for ordering otherwise, but where the rule makes no reference to this criterion, it cannot be seen as central or decisive. Were the position otherwise, not only would this go beyond the terms of the rules, but it may give insufficient weight to the fact that litigation is risky. Explained by Blow J with whom Evans and Porter JJ concurred, in Marlow v Walsh (No 2):
There is nothing in [the Rules] to suggest that a party wishing to rely on an offer of compromise should have to prove that the recipient acted unreasonably in not accepting it. Situations will often arise in which a recipient of a generous offer will have to make a difficult choice, and rejection or non-acceptance could not be regarded as unreasonable. In that situation, if the offer is not accepted, the case proceeds to judgment, and the judgment is less favourable to the recipient than the offer, it may still be quite appropriate for [the rules] to be applied, even if the decision not to accept the offer was not unreasonable at the time it was made. One of the purposes of the rule is to provide reasonable litigants with strong incentives to settle their cases.
There may be other factors moreover beyond reasonableness capable of proving probative. For instance, the increasing pervasive concept of proportionality in civil procedure reforms is an illustration. A court may, in this context, refuse an indemnity costs order that will be disproportionate to the (modest) sum of money in dispute.
The foregoing does not mean that the reasonableness or otherwise of rejecting the offer carries no weight in the exercise of the court’s discretion. It remains a weighty consideration — judges inquire into the presence or absence of ‘imprudence or unreasonableness’ — informed by inter alia, the strength and weaknesses of the claim or defence. The presence or absence of imprudence or unreasonableness on the part of the offeree will, in some cases, be clear … The challenges in assessing whether the rejection was imprudent or unreasonable magnified in litigation involving many causes of action and the advancement of alternative contentions.
[5]GE Dal Pont, Law of Costs, (LexisNexis 3rd ed, 2013).
The plaintiff’s submissions
The plaintiff submits that the litigation guardian’s refusal of the offer was not unreasonable and that the Court should exercise its discretion and refrain from enforcing the costs consequences prescribed by r 26.08(3).
The plaintiff relies on the principles outlined in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)[6] and contends that the principles set out in Hazeldene are relevant to the considerations of costs sanctions associated with an offer of compromise. The plaintiff relies on the decisions of Settlement Group Pty Ltd v Purcell Partners (a firm) (No 2)[7] and Smith v Jovanoska & Anor (No 2).[8]
[6][2005] VSCA 298 (‘Hazeldene’).
[7][2014] VSCA 68 (‘Settlement Group’).
[8][2013] VSC 714 (‘Smith’).
The plaintiff submits that the relevant considerations to be taken into account by the Court in exercising its discretion include:
(a) the extent of the compromise offer;
(b) the plaintiff’s prospects of success as assessed at the date of the offer; and
(c) the fact that the litigation guardian acted reasonably in not accepting the offer.
In relation to the latter, it is submitted that the litigation guardian acted in the best interests of the plaintiff by rejecting the offer of compromise, as the risk of getting more significantly outweighed ‘the certainty of obtaining the compromised sum’. The litigation guardian’s opinion accorded with counsel’s advice at the time of the offer.
In the case of Hazeldene, the Court did not consider an application for costs pursuant to r 26.08(3). In Hazeldene, the Court was requested to determine the issue of costs in circumstances where a Calderbank offer had been served in the context of an appeal. The successful party sought an order for indemnity costs, which is not the situation in this case.
The plaintiff submits that the litigation guardian is in a slightly different position to an ordinary plaintiff. It is submitted that, had the litigation guardian accepted the offer, the plaintiff’s solicitors would have been required to obtain approval of the compromise by the Court. In such circumstances, the plaintiff submits that if such a compromise was put before the Court in December 2014, absent some specific desire by the litigation guardian to resolve the matter because of, for example, stress associated with the trial or added stress to the plaintiff, the compromise, in all likelihood, would not have been approved.
The defendant’s submissions
The defendant submits that this case does not involve an application for indemnity costs and that the wording of r 26.08(3) makes no reference to the question of reasonableness.
The defendant submits that the cases relied upon by the plaintiff, Settlement Group and Smith, do not consider an application for costs pursuant to r 26.08(3).
In the case of Smith, the Court considered the question of costs in the context of r 26.08(4), which is different to r 26.08(3) in that it specifically refers to the plaintiff unreasonably failing to accept an offer of compromise; it entitles a defendant to indemnity costs in the event that the plaintiff unreasonably fails to accept the offer; and it relates to the plaintiff’s claim being dismissed or where there is judgment on the claim.
The defendant submits that Settlement Group and Smith are much closer in nature to the regime created by a Calderbank offer and are not similar to the circumstances of this case.
The defendant submits that the question of reasonableness of the litigation guardian’s actions in rejecting the offer should not be considered in the same way as cases concerning the granting of indemnity costs.
The defendant submits that the Court should not be persuaded that it should ‘otherwise order’ on the basis that:[9]
(a)The decision to reject the offer failed to take into account the case of the plaintiff in relation to his claim for damages in relation to his psychiatric condition was an all or nothing case. It was not a case involving contributory negligence. If the plaintiff failed to prove causation for his psychiatric conditions he would get no damages. This created a significant risk for the plaintiff.
(b)The decision failed to take into account the plaintiff’s case was to be tried by jury. Experience shows that juries are unpredictable.
(c)The decision placed too much importance on some factual errors made by Associate Professor Doherty. The approach taken by those advising the litigation guardian, failed to acknowledge that his report still supported his opinion on causation even though he might have been mistaken as to when the plaintiff formed the view that there had been three “near misses” by the developers. Even though Associate Professor Doherty may have got some of the history incorrect, this was not fatal to his opinion that the transport accident was not a cause of the plaintiff’s psychiatric condition.
(d)The decision failed to take into account that the amount offered was not insignificant and that it represented a reasonable assessment of the risks in the proceeding. On a conservative assessment of the evidence, a 50% reduction (in the context of an all or nothing case) was not unreasonable.
(e)The decision also failed to give due consideration to the fact that “litigation is inescapably chancy”.
[9]Defendant’s written submissions at [30] (footnotes omitted).
The defendant submits that the litigation guardian rejected the offer on the basis of legal advice and her assessment of the case, and with the belief that the prospect of achieving a greater sum of damages at trial at the date of the offer was likely. The defendant submits that the state of the evidence at the date of the offer did not support the optimistic view taken by the litigation guardian and her legal advisers.
The defendant notes that the litigation guardian is a tertiary educated person and is professionally employed as a practising accountant. The litigation guardian had expert and experienced lawyers advising her, and she had a personal view about the case. The litigation guardian considered the plaintiff’s case was strong and that she understood the critical and significant issue in the case. Regardless of this issue, the litigation guardian rejected the offer and assumed the associated risks, such as costs consequences.
The defendant submits that in relation to whether the Court would have approved the compromise, when assessing whether approval was appropriate, the Court must be satisfied that the compromise will benefit the defendant. The defendant relies on the decision of Jessica June Elderfield (by her litigation guardian Deborah Visentin) v Transport Accident Commission (‘Elderfield’).[10] In this decision, Robson J, when determining whether to approve a compromise pursuant to r 15.08, referred to a passage in Elliott v Diener,[11] where the Court said:
I am obliged to repeat what I said in Karvelas v Chikirow (1976) 11 ACTR 22. The solicitor says in his affidavit that he has considered what would be for the benefit of the infant; but that is not enough. The test of benefit to the infant is not whether the sum is adequate and reasonable. The matter is not to be decided by the plaintiff’s own solicitor as if he were a judge awarding damages after a contested hearing. The question which counsel or solicitor for the plaintiff has to decide, when considering a compromise of an infant’s claim, is whether the prospect of getting a greater sum by rejecting the present offer is good enough to outweigh, significantly, the risk of not getting any more. There may be various factors in such a decision, sometimes present and sometimes not; for example, the importance of termination of proceedings may be great for some plaintiffs and insignificant for others. The question of costs, also, will usually be significant. The decision is peculiarly one for experienced counsel and solicitors. The opinion of the next friend will seldom be of any importance; never, indeed, unless he is carefully advised as to the real question to be decided, and in particular that his own interests are totally irrelevant.[12]
[10][2010] VSC 116.
[11](1978) 21 ACTR 21, 22.
[12][2010] VSC 116 [19] (footnotes omitted).
Robson J considered that the question is relevantly answered by deciding whether or not the certainty of obtaining the compromised sum is significantly outweighed by the uncertain prospect of obtaining more by rejecting the compromise after taking into account the risk of obtaining less.[13]
[13]Ibid [20].
The defendant submits that, applying the test set out in Elderfield,[14] the Court would have approved the acceptance of the offer. The defendant submits that the Court will hesitate to withhold approval where the risk involved in the proceeding is not insignificant. The defendant submits that, had the Court been informed in the process of an approval of compromise there was a real risk of the plaintiff not succeeding on the question of causation and that the sum offered was not insignificant, the offer would have been approved.
[14][2010] VSC 116.
Analysis
In this case, the defendant served the offer pursuant to r 28.06(3). It was rejected by the plaintiff’s litigation guardian. The jury returned a verdict well under the offer. The offer having been engaged, establishes a prima facie position set out in r 28.06(3). The plaintiff must now persuade the Court that it should make an order ‘otherwise’. The plaintiff must establish a proper basis for departure from the ordinary consequences of his refusal to accept the defendant’s offer.
The plaintiff submits that the principles set out in Hazeldene are relevant to the considerations of costs sanctions associated with the offer. The cases relied upon in support of this submission, Settlement Group Pty Ltd and Smith. Both cases contemplated indemnity costs. In Smith, the offer of compromise was pursuant to r 26.08(4), which specifically refers to the plaintiff unreasonably failing to accept an offer of compromise, and it entitles a defendant to indemnity costs in the event that the plaintiff unreasonably fails to accept the offer. Further, it relates to the plaintiff’s claim being dismissed or where there is judgment on the claim.
The discretion to order ‘otherwise’ in relation to an offer of compromise is unfettered. While the principles enunciated in Hazeldene may, on occasion, be relevant to the matters the Court considers when exercising its discretion in relation to an offer of compromise, the principles found in Hazeldene are not principles that must be applied or considered to any offer of compromise. It is trite to say that a Calderbank offer is different to an offer of compromise. Importantly, the entitlement to costs created by the offer of compromise is only displaced if the Court otherwise orders in terms of the rule, creating a presumption in favour of the party making the offer. A Calderbank offer creates no presumption in favour of a costs order. Consideration of the reasonableness or otherwise in rejecting an offer is highly relevant when a court assesses what costs penalties might flow from a Calderbank offer. In the context of an offer of compromise, a consideration of whether it was reasonable or unreasonable to reject the offer of compromise may be relevant, but of its own, is not enough to displace the presumption.[15] The consideration of reasonableness is not, of itself, determinative.
[15]IFTC Broking Services v CMR of Taxation, BC 2010 01891.
The circumstances at the time the plaintiff, though his litigation guardian, rejected the offer and the circumstances up to the jury verdict, did not raise any special circumstances warranting displacing the presumption set out in r 26.08(3). The evidence and the information available to the plaintiff at the time of the offer did not change in any significant way after the offer was made and up to the time the jury returned its verdict. There was no ‘shifting landscape’ in relation to the pleadings and the state of the evidence. In Simply Irresistible, the Court ‘otherwise ordered’ on the basis that, after the relevant offer of compromise was made, the defendant filed an amended defence. Kyrou J found that:[16]
The factual and legal issues that were added to the proceeding by virtue of the amendments to the defence materially contributed to the findings of the Court in relation to causation.
The fact that the amendments were made after the expiration of the offer of compromise meant that Simply could not take them into account when it was considering the offer of compromise and that it could not assess their possible impact on the outcome of the proceeding. In my opinion, it would be unfair for Simply to pay to Riordans the additional costs that were incurred as a consequence of the amendments. Accordingly, the amendments and their timing constitute special circumstances warranting departure from the usual order set out in r 26.08(3) of the Rules.
[16]SimplyIrresistible Pty Ltd v Couper & Ors (No 2) [2011] VSC 33 [15]-[16].
In this case, at the time the offer was made the litigation guardian had the expert evidence critical to making an informed decision. The litigation guardian had counsel’s advice. The litigation guardian understood the risks involved and made a considered decision to reject the offer. Whether the offer would have been approved by the Court does not assist. Ultimately, the test a court applies when considering an approval of a settlement is whether the prospect of getting a greater sum by rejecting the offer is good enough to outweigh, significantly, the risk of not getting more. It would have been open to the court to approve the settlement in the sum of the offer.
Rule 26.08(6) makes no reference to the reasonableness of the plaintiff’s failure to accept the offer. Nonetheless, I consider that reasonableness may be taken into account in the exercise of discretion. However, in this case, the plaintiff did no more than assess, on the basis of the evidence and advice available, whether to accept the offer. I accept that, at the time, there was nothing unreasonable in the plaintiff’s decision to reject the offer. But that is not enough for the Court to exercise the discretion to displace the presumption contained within the Rules. In the context of r 26.08(3), reasonableness is not central or decisive. This case, like many cases, involved a generous offer from the defendant, and the plaintiff was confronted with a difficult choice. Rejection or acceptance of the offer as at December 2015 could not be regarded as unreasonable. The problem for the plaintiff is that this is an ordinary case. The plaintiff did not accept the offer, but instead took a chance in the inherently risky business of litigation. The fact that the plaintiff’s litigation guardian believed the plaintiff’s case had a reasonable prospect of success is insufficient. The plaintiff has not identified any fact, matter or event that provided a proper and principal basis for making an order displacing the ordinary consequences of the refusal to accept the defendant’s offer. The rules governing offers of compromise are intended to encourage the compromise of litigation and to make parties give ‘serious thought’ to the risk involved in non-acceptance on the basis that ‘litigation is inescapably chancy’.[17]
[17]Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721, 724, 725.
I am not satisfied that I should ‘otherwise’ order as referred to in r 26.08(3). It follows that the costs consequences in the rule are engaged.
Should the jury verdict be reduced by the amount of impairment benefits previously paid by the TAC pursuant to s 47 of the TA Act
The issue to be determined is whether the amount awarded to the plaintiff by the jury for damages for pain and suffering should be reduced by the impairment benefit sum previously paid by the TAC pursuant to s 47 of the TA Act.
Background
The plaintiff made an impairment benefit claim for compensation pursuant to section 47 of the Act in August 2009. On 24 July 2014 the Commission advised the plaintiff that his level of impairment had been assessed at 28 percent. Accordingly he was entitled to a lump sum payment of $35,180 (‘lump sum payment’). The level of impairment was based on a combined assessment of 25 percent psychiatric impairment, and 4 percent left leg impairment.
On 3 March 2016 a jury returned a verdict awarding damages to the plaintiff for the left leg injury only. The plaintiff was awarded $300,000 in total, of which $170,000 was for pain and suffering (‘jury award’). No damages were awarded by the jury for the plaintiff’s psychiatric injury.
Pursuant to s 93(11)(b)(i) of the TA Act, the defendant seeks that the plaintiff’s damages for pain and suffering be reduced by the lump sum payment paid in respect of s 47. The plaintiff submits that as the jury only awarded compensation for his left leg injury, and the lump sum payment was assessed substantially in respect of his psychiatric injury, the jury award should not be reduced by the lump sum payment as the two payments are not in respect of the same ‘injury’ for the purposes of
s 93(11)(b)(i). The defendant submits that the term ‘injury’ includes all relevant injuries arising from the transport accident. The question for the Court is what is encompassed by the term ‘injury’ in s 93(11)(b)(i) and whether the jury award should be reduced by the lump sum payment given there was no finding in relation to the psychiatric injury.
Legislative scheme
In order to understand what is meant by the term ‘injury’ in this context it is necessary to examine the legislative scheme.
Section 46A of the Act requires the Commission to determine the degree of impairment as follows:
46A Degree of impairment
(1)The Commission must determine the degree of impairment of each person who is injured as a result of a transport accident and appears to the Commission to be or to be likely to be entitled to an impairment benefit, as at—
(a)if the person was not a minor when the accident occurred—
(i) when the injury stabilises; or
(ii)3 years after the accident, or 3 years after any injury first manifests itself (as the case may be)—
whichever occurs first…
As is evident from the provision, the degree of impairment is assessed in respect of a person who is injured as a result of a transport accident. That is, the cumulative degree of impairment as a result of all injury suffered as a result of that transport accident is determined. Section 47 of the Act then requires that if the degree of impairment determined by the Commission under section 46A is greater than 10 percent, the Commission must assess an impairment benefit in respect of the person. The impairment benefit payable in respect of the person’s injury as a result of the transport accident must then be calculated in accordance with the table provided in s 47(2) of the Act.
Part 6 of the Act governs legal rights outside the Act. Section 93 of the Act provides that:
(1)A person shall not recover any damages in any proceedings in respect of the injury or death of a person as a result of a transport accident occurring on or after the commencement of section 34 except in accordance with this section.
…
(2)A person who is injured as a result of a transport accident may recover damages in respect of the injury if—
(a)the Commission has determined the degree of impairment of the person under section 46A, 47(7) or 47(7A); and
(b) the injury is a serious injury.
Section 93(7)(b)(i) then provides that damages for pain and suffering may be recovered in proceedings in accordance with sections 93(2), (3) and (4) only if:
the assessment of damages before any reduction in respect of the person's responsibility for the injury is more than $30 520 but less than $305 250, in which case the amount that can be recovered is that amount so assessed as reduced first under subsection (11) and secondly in respect of the person's responsibility for the injury …
Section 93(11)(b)(i) then details the reduction in the amount of damages required that is referred to in section 93(7)(b)(i):
(11) Damages under subsection (7) are to be reduced—
(b) in the case of damages for pain and suffering—
(i)if the person was entitled to compensation under this Act, by the amount of compensation paid in respect of the injury under sections 47 and 54 …
Accordingly, we must turn our minds back the nature of the compensation awarded under s 47. That is, the impairment benefit. The impairment benefit is calculated in accordance with the degree of impairment assessed under s 46A. The degree of impairment is determined in respect of ‘each person who is injured as a result of a transport accident’, that is- a whole person assessment of the cumulative impairment resulting from a particular transport accident.
As such, the amount paid ‘in respect of the injury’ is in fact the full impairment benefit paid. Consequently, ‘the injury’ must be read as ‘any injury arising out of the transport accident that is the subject of an assessment as to the degree of impairment by the Commission’. The language of s 93(11)(b)(i) does not assist the interpreter. Sections 47 and 46A do not provide for the assessment of the impairment degree or benefit by reference to ‘the injury’, rather as I have emphasised above the assessment is with respect to ‘each person who is injured’.
Accordingly, there is no statutory basis for looking behind the total degree of impairment and impairment benefit assessed by the Commission, and dissecting the lump sum payment, and consequently any reduction to the award of damages required under s 93(11)(b)(i). I appreciate the plaintiff’s submission that in circumstances such as the present case the result — reduction of the award of damages by the full lump sum payment — may seem unfair. However, it is unfortunately the result mandated by the Act.
This approach is consistent with the approach required by the Act in respect of a ‘serious injury’ and the findings of cases addressing similar concerns in the Accident Compensation Act 1985 (Vic) (‘AC Act’).
Consistency – ‘serious injury’
Proceedings cannot be commenced for common law damages until the injured person has been deemed to have a ‘serious injury’ and has met the threshold of either the ‘percentage’ definition under s 93(3) or the ‘narrative’ definition under s 93(4).
Section 93(3) provides that a permanent impairment of 30 percent or more is deemed to be a serious injury, which may be determined under s 46A (amongst other provisions). If the impairment is determined to be less than 30 percent, s 93(4) provides that a common law claim can only be instituted if either the Commission is satisfied that there is a serious injury and issues a certificate or a Judge of the County Court gives leave to bring proceedings. Section 93(17) provides the criteria for what constitutes a ‘serious’ injury.
Once a decision has been made as to whether or not an injury constitutes a ‘serious injury’, there is nothing in the Act to indicate that a Court is to engage in an analysis of whether one injury (for example, mental harm) made up a greater proportion of the ‘serious injury’ assessment than another injury. That is, the Act does not allow a Court to differentiate between the injuries that made up the impairment assessment.
Accident Compensation Act 1985 (Vic)
A similar issue has been considered in the context of the AC Act. In Nelson v Arrium Ltd[18] Mr Nelson argued that the particular harm he suffered arising from a workplace accident should be characterised as two injuries – a total loss injury and a hand injury, and accordingly should be assessed and compensated separately.[19] The respondent submitted that all injuries arising out of the same event were to be aggregated for the purposes of assessment and compensation, and it was the whole person impairment, and not impairment arising from individual injuries that falls to be considered.[20] The issue arose due to a medical report which gave separate assessments for each injury. The question in that case was whether sections of that act permitted or required separate assessments of the total loss injury and the hand injury.[21]
[18][2015] VSC 488 (‘Nelson’).
[19]Ibid [13].
[20]Ibid [43], [45].
[21]Ibid [14].
It was found that the provisions in question did not so require or permit.[22] The relevant terms contemplated only a whole person impairment assessment in respect of all injuries arising from the particular accident. Although this finding relied on the particular legislative provisions, it nonetheless supports the conclusion that, without a statutory basis for doing so, one cannot go behind the percentage allocated as the degree of impairment to the whole person.
[22]This conclusion was also supported by Victorian WorkCover Authority v Syrad [2004] VSCA 234.
Set off
The defendant submitted that if the Court finds an order against the plaintiff for the defendant’s costs from 2015 is appropriate, that an order for set off should be made.
The defendant submits that if the defendant’s costs are set off against the judgment sum prior to the monies being paid into Court, this would not create an injustice for the plaintiff. Further, it would provide certainty for the defendant and avoid the payment of monies into Court and then an application to have the costs paid out from the monies paid into Court.
The plaintiff submits that no order should be made for a set off, in that it should not be a matter of private agreement between the parties what costs are going to come out of the plaintiff’s damages. It is submitted that any payment from the damages should be approved by the Senior Master, given the plaintiff is a person under a disability.
While I have determined that the defendant is entitled to the costs consequences pursuant to the offer, the actual amount of those costs is yet to be determined. The plaintiff is entitled in the interim period to have his damages paid into Court until there is either agreement between the parties as to the actual amount of the plaintiff and defendant’s costs or a taxation of the costs. Given the plaintiff is a person under a disability any amount to be paid to the defendant for costs should be approved by the Senior Master, following payment into Court of the damages sum.
I will not make an order for set off.
Conclusion
In light of my finding the plaintiff’s damages for pain and suffering should be reduced by the full amount of the lump sum impairment benefit, previously paid, in the sum of $34,180. Further, the defendant is entitled to its costs, in accordance with the offer. I will not make an order for set off.
Subject to hearing the parties, I consider an appropriate costs order to be that the plaintiff pay the defendant’s costs of the applications.
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