Ryan v Workers Compensation Nominal Insurer (No 2)

[2020] NSWCA 129

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Ryan v Workers Compensation Nominal Insurer (No 2) [2020] NSWCA 129

Hearing dates:

On the papers

Decision date:

03 July 2020

Before:

Leeming JA;
Payne JA;
White JA.

Decision:

1. Vary order 2 made on 11 March 2020 by replacing “costs” with the words “(i) the defendant to pay the plaintiff’s costs on the ordinary basis up to 25 July 2018, and (ii) the plaintiff to pay the defendant’s costs on an indemnity basis from 26 July 2018”, such that order 2 as varied will read:

“2. Set aside the orders made on 13 August 2019, and in lieu thereof, order that the proceedings be dismissed, with (i) the defendant to pay the plaintiff's costs on the ordinary basis up to 25 July 2018, and (ii) the plaintiff to pay the defendant’s costs on an indemnity basis from 26 July 2018.”

2. The Workers Compensation Nominal Insurer to pay Mr Ryan’s costs of the notice of motion dated 25 March 2020.

Catchwords:

COSTS – offer of compromise – small offer made by defendant shortly after recovery proceedings commenced in District Court pursuant to Workers Compensation Act 1987 (NSW) s 151Z(1)(d) – motor vehicle accident many years earlier – ample time to investigate – defendant ultimately successful in Court of Appeal – whether offer of compromise amounted to genuine compromise – significance of important evidence emerging later in litigation

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), r 42.15

Workers Compensation Act 1987 (NSW), s 151Z

Cases Cited:

Croghan v Blacktown City Council (2019) 100 NSWLR 757; [2019] NSWCA 248

Fabre v Lui [2015] NSWCA 312

Herning v GWS Machinery Pty Ltd [No 2] [2005] NSWCA 375

Morgan v Johnson (1998) 44 NSWLR 578

Nominal Defendant v Hawkins [2011] NSWCA 93

Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368

Vale v Eggins (No 2) [2007] NSWCA 12

Category:

Costs

Parties:

Stephen Patrick Ryan (Applicant on motion for special costs order)
Workers Compensation Nominal Insurer (Respondent to motion for special costs order)

Representation:

Counsel:
K Rewell SC (Applicant)
W Fitzsimmons SC (Respondent)

Solicitors:
McInnes Wilson Lawyers NSW (Applicant)
Stiles Lawyers (Respondent)

File Number(s):

2019/221432

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

District Court of New South Wales

Jurisdiction:

Civil

Date of Decision:

13 August 2019

Before:

Curtis ADCJ

File Number(s):

2018/00093520

Judgment

1. LEEMING and PAYNE JJA: Mr Bradley Stahlhut collided into the rear of Mr Stephen Patrick Ryan's stationary articulated oversized vehicle on the Princes Highway at around 6:00 am on 30 June 2011 while the latter was waiting to turn right at an intersection. Mr Stahlhut was seriously injured. He was on his way to work. His employer seemingly had not paid workers compensation insurance premiums. Substantial amounts of workers compensation were thereafter paid by the Workers Compensation Nominal Insurer to him.

2. More than six years later, on 23 March 2018, proceedings were commenced against Mr Ryan in the District Court, on the basis that Mr Ryan was negligent. The proceedings were brought in the name of Mr Stahlhut’s employer, but at all times it seems that the Workers Compensation Nominal Insurer was the moving party, and that is the party to which reference will be made below. The Workers Compensation Nominal Insurer obtained a judgment against Mr Ryan, in the agreed amount of $262,366.11 plus interest, with Ms Stahlhut’s damages notionally assessed at $850,000. Mr Ryan appealed. This Court allowed the appeal, set aside the judgment, and ordered instead that the proceedings be dismissed with costs: Ryan v Workers Compensation Nominal Insurer [2020] NSWCA 38.

3. Within the time provided by the rules, Mr Ryan has applied to vary that costs order, such that the Workers Compensation Nominal Insurer pay his costs at first instance on an indemnity basis from 25 July 2018. There has been an exchange of evidence and submissions in accordance with a timetable directed by the Registrar.

Submissions

4. Mr Ryan relies on an offer of compromise served on that day, offering to pay the plaintiff $20,000 plus its costs, as agreed or assessed. That being a more favourable result than was ultimately achieved, he says that UCPR r 42.15 applies, and in the absence of any exceptional circumstances, he is entitled to the special order.

5. The rule on which Mr Ryan relies is as follows:

“42.15 Where offer not accepted and judgment no more favourable to plaintiff (cf SCR Part 52A, rule 22; DCR Part 39A, rule 25; LCR Part 31A, rule 20)

(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim no more favourable to the plaintiff than the terms of the offer.

(2) Unless the court orders otherwise—

(a) the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and

(b) the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, assessed on an indemnity basis—

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.”

6. The offer of compromise was also drafted so as to amount to a Calderbank offer. There is no dispute that the offer was made, or that it complied with the rules.

7. The Workers Compensation Nominal Insurer accepts that it has the onus of persuading the Court to depart from the default position established by the rules. It relies on these circumstances:

1. The offer was served very early in the litigation.

2. The offer preceded service of the two expert reports concerning the mechanism of the accident. The first, although dated May 2014, was only served in September 2018, although the Workers Compensation Nominal Insurer concedes that it had possession of it when the offer was made. The second, which used imaging software to enhance what was shown on some under-exposed police photographs, was only served shortly before the trial, which commenced in June 2019.

3. Mr Stahlhut was badly injured, and his damages were agreed at very substantially more than the offer. Even allowing for contributory negligence, the $20,000 was a tiny fraction of the verdict to which it would be entitled if it succeeded on liability. Thus it was said that the offer did not fairly reflect a compromise of the claim, and involved no real element of compromise, by reference to Herning v GWS Machinery Pty Ltd [No 2] [2005] NSWCA 375 at [5]; Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [25]-[26] and Fabre v Lui (No 2) [2015] NSWCA 312 at [6]-[8].

4. The Court would have regard to the fact that Mr Ryan’s case had changed significantly since the offer was made.

8. The submissions concluded:

“Given the evidence available to the respondent at the time the offer was made, and the fact the supplementary report of William Keramidas was not served until shortly prior to the hearing, the respondent respectfully submits that the Court would not vary the orders as to costs in respect to the District Court proceedings.”

9. In reply, Mr Ryan pointed to the fact that the Workers Compensation Nominal Insurer had served a series of offers of compromise in August 2018, as to which there was some confusion, but which ultimately resulted in an offer of $150,000. There was a much later offer concerning contributory negligence.

10. Mr Ryan relies on the concession that the Workers Compensation Nominal Insurer’s solicitors had Mr Keramidas’ first report when considering the offer. He points to the costs component of the offer, which makes it a more significant compromise than merely paying $20,000. He says that the Workers Compensation Nominal Insurer is an institutional litigant, familiar to the risks of litigation, which commenced proceedings many years after the accident and with ample opportunity to investigate it, such that there is no reason to depart from the ordinary consequences in the rules.

Consideration

11. The offer was to pay $20,000 plus the plaintiff’s costs. It was much less than the plaintiff’s claim. There was no evidence of what the plaintiff’s costs were, but in any event, there was some small element of compromise. This is not a case such as a “walk-away offer” made shortly after proceedings are commenced and where no significant costs have been incurred which involves no real element of compromise; cf Fabre v Lui (No 2) at [7].

12. In order to understand the second and fourth points made by the Workers Compensation Nominal Insurer, it is necessary to state that Mr Ryan was driving an oversize vehicle, which was physically unable to turn right at the intersection whilst remaining wholly within his lane. He had stopped his vehicle at the unbroken line near the traffic lights. If he had advanced another 2-3 m into the intersection, his trailer would not have protruded into Mr Stahlhut’s lane. As it was, the trailer protruded around 50 cm into Mr Stahlhut’s lane. The lane was 3.7 m wide, and Mr Stahlhut struck the corner of the trailer because he was driving wholly within his own lane, but only just.

13. The appeal was allowed on the basis of two issues. First, there was no breach of duty in Mr Ryan failing to drive his oversize vehicle beyond the unbroken line at the intersection (which was unknown to Mr Ryan and into which it would have been an offence to drive). Secondly, Mr Ryan's trailer was well lit. Even if as the plaintiff contended he should also have turned on his hazard lights, in addition to the six lights illuminating the rear of his trailer, it was not shown that that would have prevented Mr Stahlhut from colliding with the trailer.

14. The circumstances of the collision are described more fully in this Court’s main judgment. Both dispositive issues, and especially the second, turned on a precise understanding of the position of the two vehicles at the time of the collision, and in particular, how far into Mr Stahlhut’s lane Mr Ryan’s trailer protruded, and how far past the unbroken line at the intersection Mr Ryan’s truck would have had to extend if his trailer were not to protrude into Mr Stahlhut’s lane.

15. That led to the service of two reports by Mr Keramidas, to which the Workers Compensation Nominal Insurer refers in its submissions. The first contained some errors. The second contained the best evidence of the location of the vehicles, based on further work done on police photographs so as to indicate gouges in the road surface where the collision occurred.

16. Prior to the service of Mr Keramidas’ second report, there were testimonial accounts from witnesses who said that the trailer had extended much more significantly into Ms Stahlhut’s lane. Their evidence is summarised at [32] of this Court’s principal judgment. They said that the trailer was, respectively, one third, between one quarter and one third, and 1 m to 1.5 m, into Mr Stahlhut’s lane.

17. The analysis of breach and causation would have been different had the accounts of those witnesses been accepted. The new analysis contained in Mr Keramidas’ supplementary report was an important component of Mr Ryan’s case at trial.

18. We were initially attracted to the submissions of the Workers Compensation Nominal Insurer. Against this, however, is the fact that the Workers Compensation Nominal Insurer may be assumed to have had access to the same primary documents as ultimately contributed to Mr Keramidas’ supplementary report. It had, literally, years to investigate the accident. Further, there is the powerful policy consideration that the default provisions in the rules concerning offers of compromise should not lightly be departed from, in order to encourage the making and acceptance of offers which resolve litigation.

19. Broadly comparable cases suggest that offers in cases such as this are capable of producing narrow divisions of opinion. Some of the decisions are collected in Croghan v Blacktown City Council (2019) 100 NSWLR 757; [2019] NSWCA 248 at [10]-[14]. Two decisions in which the default position under the rules was sought to be displaced by evidentiary developments as the litigation progressed are Vale v Eggins (No 2) [2007] NSWCA 12 and Nominal Defendant v Hawkins [2011] NSWCA 93.

20. Vale v Eggins (No 2) concerned a different rule, but this Court by majority denied a special costs order because the trial was run on different evidence than was available at the time the offer was made. Bryson JA dissented, noting, “It is routine and unremarkable that when a case goes to trial parties have more information, more expert reports, more or different witnesses than those available months earlier, and a different view of each side’s prospects.”

21. In Nominal Defendant v Hawkins, the trial judge had refused an application for a special costs order on the basis that the Nominal Defendant did not have access to certain photographic evidence which as tendered at trial. All members of this Court refused leave to appeal, although Hodgson JA, with whom Beazley JA agreed, implied that they would not have exercised the discretion in the same way: at [58]. The third member of the Court, Sackville AJA, also emphasised that a different evaluation of the competing considerations did not justify appellate intervention.

22. In Croghan at [11], Meagher JA reproduced the statement of principle by Mason P in Morgan v Johnson (1998) 44 NSWLR 578 including at 582:

“Lying behind the rule is the common knowledge that ‘litigation is inescapably chancy’: Maitland Hospital (at 725). For this reason, the ordinary provision is expected to apply in the ordinary case: ibid NSW Insurance Ministerial Corporation v Reeve (at 102-103). The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: NSW Insurance Ministerial Corporation v Reeve (at 102).”

23. Although the considerations are finely balanced, we have concluded that the discretion to depart from the ordinary consequences of the rules should not be exercised in favour of the Workers Compensation Nominal Defendant. Mr Ryan’s offer was small, but he was entitled to regard the claim as one which was very weak, as proved to be the case. There is force in the submissions based on the supplementary report by Mr Keramidas, but there is nothing to suggest that the Workers Compensation Nominal Defendant lacked access to those photographs, or that the position it faced was any different from any other litigation, which was subject to the development of more refined views as the litigation proceeded. Whilst an individual litigant may have been in a different position, the Workers Compensation Nominal Insurer is an institutional litigant, familiar with the risks of litigation, which commenced proceedings many years after the accident and with ample opportunity to investigate it. There being an element of compromise in the offer, there is no reason to depart from the ordinary consequences in the rules.

24. From the perspective of Mr Ryan, he made an early offer which, as it turns out, should have been accepted. It amounted to a small, but real, compromise. Had it been accepted, a trial and an appeal would not have been necessary, thereby saving the consumption of private and public resources, not to mention avoiding the need for witnesses testifying about a traumatic event.

25. For those reasons, we favour making orders in accordance with r 42.15. Although Mr Ryan’s notice of motion sought a slightly more favourable order (that the plaintiff pay his costs on an ordinary basis up to 25 July 2018 and on an indemnity basis thereafter), his submissions sought orders in terms of
    r 42.15, and nothing was said as to why this Court should depart from the terms of that rule. The costs of the notice of motion in this Court are severable from other issues, and those costs should be paid by the Workers Compensation Nominal Insurer.

26. WHITE JA:   I have had the advantage of reading the reasons for judgment of Leeming and Payne JJA.

27. I agree generally with their Honours’ reasons. In particular, I agree that there was a genuine element of compromise in the offer of compromise and there is no reason to depart from the ordinary costs consequences prescribed by the Rules.

28. I express no opinion as to whether, in the exercise of the costs discretion under UCPR r 42.15(2), an individual litigant may be treated differently from a frequent institutional litigant.

29. I agree with the orders proposed in the joint reasons.

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Decision last updated: 03 July 2020