Ottrey v Bedggood's Transport Pty Ltd (Costs Ruling)
[2022] VSC 134
•22 March 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT WODONGA
COMMON LAW DIVISION
CIVIL CIRCUIT LIST
S ECI 2021 04311
| BRENDAN JOHN OTTREY | Plaintiff |
| v | |
| BEDGGOOD'S TRANSPORT PTY LTD | Defendant |
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JUDGE: | J FORREST J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 March 2022 |
DATE OF RULING: | 22 March 2022 |
CASE MAY BE CITED AS: | Ottrey v Bedggood’s Transport Pty Ltd (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 134 |
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PRACTICE AND PROCEDURE – Costs – Costs Orders – Offer of compromise – Fox v Wood 148 CLR 438 - Redfern v Mineral Engineers Pty Ltd [1987] VR 518 – Workplace Injury Rehabilitation and Compensation Act2013 (Vic) s 344 – Supreme Court (General Civil Procedure) Rules 2015 (Vic) Order 26 – Legal Profession Uniform Law Application Act 2014 (Vic) s 172– Civil Procedure Act 2010 (Vic) s 24.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | M Walsh with S Pinkstone, of counsel | Barbante Personal Injury Lawyers |
| For the Defendant | P Jens QC with J Clark, of counsel | Transport Accident Commission |
HIS HONOUR:
On 9 March 2022 I delivered reasons for judgment and set out potential orders.[1] These required adjustment by the parties to take into account interest on damages, Fox v Wood damages, deduction of statutory payments and to insert consequential costs orders.
[1]Ottrey v Bedggood’s Transport Pty Ltd [2022] VSC 59.
I required the parties to confer and endeavour to agree (or narrow the issues) on appropriate final orders. They did so and each submitted draft orders at a hearing on 17 March 2022. Those drafts reflected a significant level of consensus; it was clear that the parties and the lawyers complied with their obligations under s 22 and s 23 of the Civil Procedure Act 2010 (CPA).
Two issues (one contentious and the other on the motion of the Court) remained after I had resolved several minor costs issues at the hearing on 17 March.
The first related to the efficacy of an offer of compromise made by the plaintiff, Mr Ottrey, on 4 November 2021. The second relates to the assessment of Mr Ottrey’s lawyer/client costs.
This ruling endeavours to explain: first, why, despite on its face a successful offer of compromise having been made by Mr Ottrey, I determined that the proper order for costs of the second incident is to be on a standard rather than an indemnity basis. Second, why I think it necessary that the Costs Court carry out an assessment of his lawyer/client costs.
Background
Mr Ottrey in the course of his employment with Bedggood’s Transport Pty Ltd (‘Bedggood’) suffered two separate back injuries. Each gave rise to a separate cause of action which, quite properly, are the subject of this single proceeding.
The first, on 12 April 2016, occurred when Mr Ottrey was lifting two aluminium trailer gates at Bedggood’s depot at Lyndhurst (‘the first incident’).
The second, on 12 November 2017, occurred when Mr Ottrey’s prime mover struck a rough piece of road on the Western Highway, aggravating his back condition (‘the second incident’).
The claim for the first incident is confined to damages for pain and suffering and is governed by the provisions of the Workplace Injury Rehabilitation and Compensation Act2013 (the Act).
The claim in respect of the second incident is for pain and suffering and pecuniary loss damages. It is governed by the provisions of the Transport Accident Act 1986.
Orders
After hearing submissions and considering the draft orders provided by the parties, I entered judgment on 18 March 2022. For the purpose of this exercise, the relevant parts of the orders were as follows:
In respect of the first incident:
1.There be judgment for the plaintiff in the sum of $275,000 for pain and suffering damages.
2.Pursuant to section 344(2)(d) of the Act there be no order as to costs.
In respect of the second incident:
3.There be judgment for the plaintiff in the sum of $200,000 for pain and suffering damages.
4.There be judgement for the plaintiff in the sum of $726,085 for pecuniary loss damages, being damages as assessed by the Court in the sum of $958,045, less weekly compensation payments deducted pursuant to section 343 of the Act totalling $298,960, and with $67,000 added pursuant to the principles in Fox v Wood.
5.The defendant pay the plaintiff’s costs on a standard basis, excluding any costs incurred by reason of the proceeding related to the first incident, to be taxed by the Costs Court in default of agreement.
…
11.That the Costs Court determine the amount of lawyer/client costs to be paid to the lawyers acting on behalf of the plaintiff in relation to the second incident.
The Offer of compromise issue
The following offers of compromises were served in the proceeding:
(a)On 26 April 2021 Bedggood served an offer of compromise of $500,000 plus retention of benefits received from April 2016 plus costs to ‘compromise the claim’.
(b)On 10 May 2021 Bedggood served a revised offer of compromise offering $500,000 plus costs plus retention of benefits to date from November 2017 to ‘compromise the claim’.
(c)On 4 November 2021 Mr Ottrey served an offer of compromise in which he offered $775,000 plus retention of benefits received to date from 12 November 2017 to ‘compromise the claim’. Its form and terms (with the exception of the compromise amount) generally mirrored those of Bedgood’s May offer. The relevant parts of Mr Ottrey’s offer of 4 November 2021 read as follows:
TAKE NOTICE that the Plaintiff offers to compromise the claim on the following terms:
1.The Plaintiff will accept payment of the sum of $775,000.00 after reduction pursuant to section 343 of the Workplace Injury Rehabilitation and Compensation Act 2013 of compensation paid under Part 5 Division 2 (s 160) in respect of the injury of 12 November 2017 being weekly payments in the sum of $398,806.28.
2.If accepted this offer will result in the Defendant making a net payment to the Plaintiff of $775,000.
3. This offer remains open for a period of 14 days.
4.This offer is exclusive of costs, which are to be paid in addition to the offer.
The following matters were not in issue.
First, that the claim in respect of the first incident was one to which the provisions Part 7 of the Act applied. It was in respect of an injury ‘caused by the negligence of the workers employer’: s 318(1). This was demonstrated by the granting of a serious injury certificate under s 335 of the Act and, eventually, the application of the terms of s 341 to the award of costs in respect of the first incident (Order No 2).
Second, that the reference to ‘the claim’ in the opening words of the offer (and its two predecessors) meant the claim for damages in respect of both causes of action. In other words, the offer was composite and sought to compromise both causes of action brought in the proceeding.
Third, that the judgment sum obtained by Mr Ottrey in relation to both causes of action (and sought to be compromised) was ‘no less favourable’ – to adopt the words of Order 26 of the Supreme Court (General Civil Procedure) Rules 2015 (the Rules) – than the terms of his offer of 4 November 2021.
The issue raised by senior counsel for Bedggood was short and to the point: he contended that none of the offers of compromise (including the two that Bedggood made) were valid. Each endeavoured to make an offer compromising the first incident with a consequential costs condition. This, it was said, was fatal to the efficacy of the offer: it fell foul of the statutory regime established by s 344 of the Act which governs the award of costs after consideration of prescribed ‘statutory offers’ and ‘statutory counter offers’ as against the ultimate settlement or judgment sum.
Counsel for Mr Ottrey responded by contending: First, that his client had done all he could to try and resolve the proceeding. He, like Bedggood, made a composite offer of compromise with the purpose of resolving the whole of the claim (i.e. both causes of action). To do otherwise, by settling one cause of action and not the other, would have exposed his client to the risk that Bedggood would endeavour to place all the responsibility for his injuries on the compromised claim.
Second, he contended that Mr Ottrey’s offer of compromise followed, almost word for word, the offer put by Bedggood – save for the amount. He contended that each of the offers were valid as they complied with the provisions of Order 26.
Finally, counsel argued that even if the offer of compromise failed then the Court should exercise its discretion as to costs given his client’s willingness to settle the case and the fact that he had recovered significantly more than that offered by Bedggood. This he said was consistent with the aims of the CPA.
It is convenient now to set out the relevant provisions of the Rules and the Act.
The Rules
Rule 26.02 of the Rules reads:
Offers of compromise generally
(1)A party may, in respect of any claim in a proceeding, serve on another party an offer of compromise on the terms specified in the offer.
(2)An offer of compromise in respect of a claim may be on terms that take into account any other claim made in the proceeding between the parties.
(3) An offer of compromise must—
(a)be in writing and prepared in accordance with Rules 27.02 to 27.04; and
(b)contain a statement to the effect that it is served in accordance with this Order.
(4) An offer of compromise must state either—
(a) that the offer is inclusive of costs; or
(b)that costs are to be paid or received, as the case may be, in addition to the offer.
Rule 26.08 (2) of the Rules reads:
Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled –
(a)If the claim of the plaintiff is for damages for or arising out of death or bodily injury, to an order against the defendant for the plaintiff’s costs in respect of the claim, taxed on an indemnity basis.
The Act
Section 344(1) and (2) of the Act reads as follows:
Costs
(1) Subject to the rules of the court—
(a)in proceedings relating to an application for leave of the court under section 335(2)(d), costs are to be awarded against a party against whom a decision is made; and
(b)unless subsection (2) applies in proceedings for the recovery of damages in accordance with this Division—
(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 Division, each party bears its own costs; and
(iii)if damages are awarded, costs are to be awarded against the Authority or self-insurer.
(2)In proceedings for the recovery of damages commenced in accordance with this Division after a statutory offer was made, or deemed to have been made, under section 333 or 334—
(a)if no liability to pay damages is established, the worker must pay the party and party costs of the employer, Authority or self-insurer and the worker's own costs; or
(b)if judgment is obtained or a settlement or compromise is made in an amount not less than 90 per cent of the worker's statutory counter offer under section 333 and more than the statutory offer of the Authority or self-insurer, the Authority or self-insurer must pay the worker's party and party costs and its own costs; or
(c)if judgment is obtained or a settlement or compromise is made in an amount not more than the statutory offer of the Authority or self-insurer under section 333, the worker must pay the party and party costs of the Authority or self-insurer and the worker's own costs; or
(d)if judgment is obtained or a settlement or compromise is made in an amount that is more than the statutory offer of the Authority or self-insurer under section 333 but less than 90 per cent of the worker's statutory counter offer under that subsection, each party bears its own costs—
and the court must not otherwise make an order as to costs.
Analysis
But for the provisions of the Act there is considerable (indeed compelling) force in the submissions made on behalf of Mr Ottrey. He did try to settle the case. He adopted the form of an offer of compromise formulated by one of the most experienced litigation firms in personal injury claims in this state. If accepted the offer would have settled both claims and eliminated the need for a trial. In normal circumstances these are powerful factors which would have necessitated the orders sought by Mr Ottrey.
The problem (and it is far more than a problem) is that the Act and particularly the costs scheme established by s 344 does not permit an offer of compromise to be made which attempts to settle a common law ‘Workcover’ damages claim brought under Part 7 of the Act. The action for damages arising out of the first incident was just such a claim.
It seems abundantly clear that the legislature, in respect of damages claims coming within the purview of Part 7 of the Act, determined to exclude other means of dispute resolution such as Order 26 or Calderbank offers. Section 344(2) of the Act in effect codifies the manner in which costs can be awarded where a claim governed by the Act is involved. It cannot be avoided
Here, Mr Ottrey was awarded $275,000 by way of judgment in respect of the first incident. I assume given the terms of the order as to costs: ‘no order as to costs’ (Order No 2 agreed between the parties) that he recovered ‘less than 90 per cent of [his] statutory counter offer’ as mandated by s 344(2)(d). This was the only order that was open to the Court in respect of the costs of the first incident.
The unyielding nature of the scheme under s 344 is demonstrated by the closing words of the section: ‘And the court must not otherwise make an order as to costs’. It follows that there is no scope to make any order for costs (such as that provided by Order 26 or by the exercise of the Court’s discretion as to costs) in relation to the first incident other than as provided by s 344.
Accordingly, Mr Ottrey’s offer of compromise endeavouring to settle the claim for the first incident and requiring Bedggood to pay the costs associated with that part of the claim, outside the terms of s 344, is not lawful and cannot be relied upon. The attempt to compromise the first incident as part of a global settlement of the claims within the proceeding by way of an offer of compromise must fail.
Appealing as Mr Ottrey’s arguments are, they must yield to the statutory command.
There is also no scope for the exercise of judicial discretion to make an order for indemnity costs. To do so would be to make an order for costs contrary to the clear direction of the legislature.
One final observation might be made here. Although it would not have resolved the issue of a global settlement it was open to Mr Ottrey (and for that matter Bedggood) pursuant to r 26.02(2) to make an offer of compromise to settle the claim in respect of the second incident alone, which was not shackled by the legislative prescription of s 344.
Assessment of Lawyer/client costs
Order 11 requires the Costs Court to fix the lawyer/client costs related to the second incident.
The Supreme Court has an inherent and general jurisdiction to ensure that ‘legal practitioners are paid no more than what is fair and reasonable’.[2] In Redfern v Mineral Engineers Pty Ltd, Tadgell J explained:
The court’s surveillance over costs as between solicitor and client is assumed with a view to preventing any unfair advantage by solicitors in their charges to their clients. It stems, it seems, from the notion that ordinarily a solicitor is presumed to be in a position of dominance in relation to his client as a result of his presumed knowledge of the law and of what may and may not be properly charged by way of fees. Were a strict view not taken it might be open to a solicitor to overreach his client or otherwise act oppressively towards him on the matter of costs. Considerations of public policy and undue influence combined to shape the attitude of the Courts of Equity, by which the general rules of taxation of costs were formulated.[3]
[2]Re Jabe; Kennedy v Schwarcz [2021] VSC 106 [44].
[3][1987] VR 518, 523.
In addition, there are statutory provisions which complement this general law principle. Section 172 of the Uniform Law[4] obliges a legal practice to charge no more than fair and reasonable costs. The primary considerations are those set out in s 172(1): costs that are no more than fair and reasonable, that are proportionately and reasonably incurred, and are proportionate and reasonable in amount.
[4]Legal Profession Uniform Law Application Act 2014 (Uniform Law).
In 2012 the CPA was amended to include specific provisions relating to costs. In addition to existing powers the Court has the power under s 65C(1) to make any order as to costs which will further the overarching purpose. Section 24 imposes an obligation on lawyers – ‘to ensure that legal costs … are reasonable and proportionate to - (a) the complexity or importance of the issues in dispute: and (b) the amount in dispute’.
I accept that it is unusual, absent a statutory direction such as s 344(6) of the Act, to make an order in relation to supervision of lawyer/client costs in personal injury litigation. Nevertheless, in this proceeding I think it appropriate for several reasons.
First, it is incumbent upon Mr Ottrey’s lawyers, if they wish to recover lawyer/client costs relating to the first incident (which may or not be permitted under the section), to obtain an order of the Court to that effect – as required by s 344(6)(a) of the Act. Given the complexities (as discussed in my reasons for judgment) with ascertaining the effect of each incident upon Mr Ottrey’s spine and the terms of Order 5, I think it prudent to ensure that the amount charged in relation to lawyer/client costs for each claim is properly examined. I do not mean any disrespect to the lawyers acting for Mr Bedggood but it is imperative that reasonableness and proportionality mark the assessment of costs.
Second, as I have just mentioned, this was a difficult case in which to determine issues of causation and damages particularly in light of conflicting medical opinions. I have serious reservations as to whether Mr Ottrey could understand any of the technicalities associated with the assessment of costs in this proceeding (notwithstanding that he has, in all likelihood, signed a conditional costs agreement). This is particularly so where on one claim there is no order for party/party costs against the employer and on the other claim there is, in effect, an order for costs (including common costs) to be paid by the employer on a party/party basis .
Accordingly, any claim for lawyer/client costs in this proceeding should be scrutinised by the Costs Court. If there is a claim for lawyer/client costs related to the first incident then Mr Ottrey’s lawyers will, undoubtedly, follow the statutory direction in relation to Court approval. In respect of the second incident, Order No 11 will require the lawyers to submit any claim for lawyer/client costs to the Costs Court for approval. Indeed, this Court is fortunate to have the facility to refer a matter such as this to an expert independent body which can conduct this exercise informally and expeditiously.
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