Singh v Cooper (No 2)
[2015] ACTSC 368
•27 November 2015
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Singh v Cooper & Anor (No 2) |
Citation: | [2015] ACTSC 368 |
Hearing Date: | 18 September 2015 |
DecisionDate: | 27 November 2015 |
Before: | Mossop AsJ |
Decision: | See [36] |
Catchwords: | PRACTICE AND PROCEDURE – Costs – assessment of damages for personal injury – Calderbank offer made by defendants – plaintiff fails to obtain judgment better than offered – non-acceptance unreasonable – what costs order should be made in relation to period after expiry of offer – introduction of rules providing for offers of compromise – effect of orders provided for under the Rules in equivalent circumstances on the exercise of discretion arising from Calderbank offer – desirability of maintaining consistency of outcomes arising from Rules and Calderbank offers – no order as to costs from expiry of offer |
Legislation Cited: | Civil Law (Wrongs) Act 2002 (ACT) Road Transport (Third-Party Insurance) Act 2008 (ACT) s 156A Court Procedures Amendment Rules 2014 (No 3) (ACT) Court Procedures Rules 2006 (ACT) rr 1000, 1010, 1011 |
Cases Cited: | Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Heywood v Miller [2005] ACTSC 12 Singh v Cooper [2015] ACTSC 243 |
Parties: | Aneeta Kayla Singh (Plaintiff) Michelle Cooper (First Defendant) Insurance Australia Limited trading as NRMA Insurance (Second Defendant) |
Representation: | Counsel Mr D Crowe (Plaintiff) Mr R Crowe SC (First and Second Defendants) |
| Solicitors United Legal (Plaintiff) Sparke Helmore Lawyers (First and Second Defendants) | |
File Number: | SC 566 of 2014 |
Introduction
On 21 August 2015 I gave judgment in personal injury proceedings in favour of the plaintiff against the second defendant in the sum of $311,603: Singh v Cooper [2015] ACTSC 243. I made an order that the second defendant was to pay the plaintiff’s costs as agreed or assessed but permitted the parties to be further heard in relation to costs. The second defendant wished to be further heard and as a consequence the costs order that I made has not taken effect.
The costs application
The second defendant sought an order that the defendants pay the plaintiff’s costs on a party and party basis up until 26 March 2015 and that the plaintiff pay the defendants’ costs on an indemnity basis from 27 March 2015.
Both sides led evidence relevant to the question of costs. The defendants relied upon the affidavit of Gemma Burke affirmed on 17 September 2015. The plaintiff read the affidavit sworn by Robert Montagnino on 16 September 2015.
The affidavit of Ms Burke discloses the following facts relevant to the issue of costs.
The accident the subject of the proceedings occurred on 25 March 2013. The proceedings were commenced on 17 December 2014. On 19 January 2015 I heard an application by the plaintiff to expedite the final hearing of the matter on the basis of the risk of self-harm to the plaintiff. I made directions for the preparation of the matter for hearing including directions that the plaintiff file and serve her statement of particulars within seven days and that the parties conduct a further settlement conference by 20 March 2015.
The plaintiff’s statement of particulars was filed on 22 January 2015 and served on the defendants on 24 January 2015. This was the first time the defendants were given any clear notice of the scope of the plaintiff’s claim. The total of the damages identified in the statement of particulars was $1,883,154.56.
A settlement conference was held on 12 March 2015. The plaintiff made a final offer of $790,000 plus costs. The defendants made a final offer of $380,000 plus costs.
On 16 March 2015 the plaintiff, through her solicitors, made a Calderbank offer of $650,000 plus costs as agreed or assessed. That offer was open until 5.00 pm on Monday, 23 March 2015. However, at 2.07 pm on the day that it would have expired, it was withdrawn by the plaintiff.
On 23 March 2015 the defendants made a counter offer of $540,000 plus costs as agreed or assessed. That offer was inclusive of payments made by the second defendant as at 23 March 2015 in the sum of $20,237.80. It was open for the plaintiff to accept up until 4.00 pm on Thursday, 26 March 2015.
On 25 March 2015 a solicitor employed by the defendants’ solicitors had a telephone conversation with the plaintiff’s solicitor in which the following exchange occurred: Mr Montagnino, the solicitor for the plaintiff, said that “there is little prospect of settlement”. Ms Parkins, the solicitor for the defendants, expressed her concern about “the impact the litigation may have on the plaintiff’s psychological state” and indicated “we are happy to discuss settlement at any stage”. No further settlement negotiations took place. The proceedings were heard on 30 and 31 March and 1 April 2015.
The affidavit of Mr Montagnino was directed to the consequences of a costs order which denied the plaintiff her costs from the date of the lapsing of the defendants’ Calderbank offer, namely 27 March 2015. He estimated the costs incurred as being $51,900 and provided a breakdown of those costs. The costs estimated were the whole of the plaintiff’s costs and as a consequence when comparing the position of the plaintiff with or without the benefit of an order for costs from the date of the lapsing of the offer, regard must be had only to that proportion of the costs which would be recoverable by virtue of a party and party costs order.
Submissions of the parties
The defendants submitted that the relevant principles to apply were still those articulated in Quirk v Bawden (1992) 112 ACTR 1. They provided the decision of the Chief Justice in Ning v McGrath (No 2) [2015] ACTSC 213 as an example of the application of those principles. They submitted that, having regard to the settlement offers made by the plaintiff and the defendants and the fact that there were inevitably imponderables in a case such as this involving risks for both sides the Court should conclude, in the light of the ultimate judgment, that the conduct of the plaintiff was unreasonable. As a consequence, they submitted that, applying the principles in Quirk, it was necessary, in order to ensure that parties take a reasonable and realistic approach to settlement negotiations, that costs orders of the nature sought by the defendants be made in this case.
Counsel for the plaintiff made no submissions on the characterisation of the plaintiff’s conduct in failing to accept the offer made on 23 March 2015 as being, in the light of the ultimate judgment, unreasonable. However he did submit that the approach taken by Master Harper in Heywood v Miller [2005] ACTSC 12 was an appropriate one. In that case the order that was made was one which denied the plaintiff her costs after the date upon which the Calderbank offer expired but did not require her to pay the costs of the defendant. In reaching a decision that such an order was appropriate his Honour had regard to the impact of the costs orders sought on each of the parties. He noted the modest means of the plaintiff and characterised the effect of an adverse costs order upon her as likely to be substantial. On the other hand he noted that the defendant was indemnified by a third-party policy issued by an insurer which was a subsidiary of one of Australia’s largest public companies.
Counsel for the plaintiff drew attention to the fact that the evidence disclosed that the plaintiff and her husband did not own any real property and that her husband was unemployed. While he recognised that the conduct of the plaintiff in failing to accept the defendants’ offer was an important consideration, he submitted that it was also necessary to have regard to the comparative financial positions of the parties.
Finally he noted that the offer was not an offer of compromise and that had the offer been an offer of compromise the result under r 1011(2) of the Court Procedures Rules 2006 (ACT) (Rules) would have been that for which he contended in this case. He submitted that making a costs order in the form sought by the defendants would risk undermining the operation of those rules.
In reply, senior counsel for the defendants noted that the decision in Heywood needed to be treated with caution as there was no attempt to reconcile the approach there stated with the earlier decision in Quirk. He noted that the authorities relied upon in Heywood did not involve a statement of clear principles but rather turned on their own particular facts. He contended that the financial circumstances of the plaintiff in Heywood were not comparable to those in the present case. He submitted that in contrast to the modest financial circumstances of the plaintiff in Heywood, the plaintiff in the present case was a well remunerated public servant looking to buy her own home in the inner south of Canberra in the near future. Further, in Heywood, it appeared that the Master proceeded on the basis that had an order been made in favour of the defendant that would have been equivalent to a significant portion of the judgment sum: see McDevitt v Irwin [2005] ACTSC 133 at [12]. That contrasted with the present situation in which even if an order was made the additional costs required to be paid by the plaintiff would not be a substantial portion of the judgment sum.
I gave leave to the parties to provide short additional written submissions as to the consequences of provisions of the Rules relating to offers of compromise in other jurisdictions and how they influence the approach to the exercise of discretion in relation to costs arising from the making of Calderbank offers. Both parties filed additional submissions which provided some references to additional authorities.
Regimes applicable to costs in motor accident cases
There are, relevantly, three different regimes which potentially apply in relation to costs orders made in proceedings such as this one which is governed by the Road Transport (Third-Party Insurance) Act 2008 (ACT) (RT(TPI) Act). I have not ignored the provisions in chapter 14 of the Civil Law (Wrongs) Act 2002 (ACT) (CLW Act) but simply note that these provisions are not engaged in a case like the present.
RT(TPI) Act: The provisions of part 4.9 of the RT(TPI) Act deal with costs in motor accident cases. Potentially relevant in the present case is s 156A which applies to cases in which the Court awards more than $50,000 in damages other than damages for non-economic loss. However there is no evidence in this case that the amount awarded was less than a mandatory final offer made by the defendants under s 156A of the RT(TPI) Act and no application was made by the defendants based on that provision. It is, however, worth noting about the provision the following features. First, the provision only impliedly indicates any rule because it simply empowers the making of an application for costs on the basis indicated in the section. Second, it does not purport to constrain or govern the exercise of the Court’s general costs discretion. Third, insofar as it indicates a costs rule, it is one that requires a party who does not do better than the other party’s offer to pay the costs of the other party on an indemnity basis from the time of the offer or its non-acceptance. Because no reliance is placed upon any mandatory final offer in this case it is not necessary to say more about the operation of this provision.
Offers of compromise under the Rules: Next there are the provisions in the Rules relating to the making of offers of compromise. Those provisions were introduced by the Court Procedures Amendment Rules 2014 (No 3) (ACT) which took effect from 1 January 2015. They are necessarily and expressly subject to the operation of the RT(TPI) Act and the CLW Act: r 1000. In a personal injury case such as the present, the making of an offer of compromise by a defendant that was not accepted and not subsequently bettered by the plaintiff would give rise to a default rule that the plaintiff recover costs on a party and party basis up until the day the offer was made but then there is no order as to costs after that: r 1011(2). In contrast, in cases other than personal injury cases, the plaintiff is entitled to an order for costs on a party and party basis up to either the last day for acceptance of the offer or 11.00 am on the day after the offer was made depending on the circumstances and the defendant is entitled to costs on a party and party basis after that.
It is significant that the Rules make a deliberate distinction between personal injury cases and other cases. That distinction is repeated in other provisions in the Rules. In particular, r 1010 draws such a distinction and, where a plaintiff in a personal injury claim recovers more than an amount the plaintiff has offered in an offer of compromise, the plaintiff is entitled to costs on a solicitor and client basis for the whole of the proceedings. In non-personal injury cases the benefit of an order on a solicitor and client basis only applies to the period following the offer of compromise.
The distinction drawn in the Rules between personal injury proceedings and other proceedings recognises the reality that there is usually a significant imbalance in resources between plaintiff and defendant in such proceedings as a result of the fact that defendants usually are, or are indemnified by insurers who are, skilled repeat litigants with substantial resources. As a consequence costs provisions designed to give incentives to parties to settle proceedings will usually have a much greater impact upon an individual plaintiff as compared to an insurer defendant. In order to encourage the making of offers of compromise and their acceptance the Rules provide significant benefits to a plaintiff in personal injury proceedings if he or she is successful in beating an offer of compromise made in the proceedings. Similarly, where a plaintiff recovers less than an offer of compromise given by a defendant the Rules impose a costs penalty but not so great as would exist if a costs order in favour of the defendant was made for the period following the offer. In this regard the regime in the Rules makes the consequence of failing to better an offer made by the other side more comparable as between plaintiff and defendant than would be the case if the consequence for the plaintiff was a requirement not only that the plaintiff not recover post-offer costs but also pay the defendant’s post-offer costs.
Calderbank offers: As senior counsel for the defendants correctly identified, the principles relevant to Calderbank offers remain those articulated in the decision in Quirk. In that case the plaintiff had offered to settle proceedings for $350,000 plus costs. The plaintiff had ultimately obtained judgment for $375,192. The Master had ordered the defendant to pay party and party costs up until a date shortly after the date of the offer and costs on an indemnity basis thereafter. The Full Court of the ACT Supreme Court found no error in the Master’s approach. The principal judgment was that of Higgins J. His Honour’s judgment made the following points:
(a)If a defendant unreasonably rejects an offer of settlement from the plaintiff, the only sanction to encourage serious consideration of an offer is an award of costs on a more favourable than usual basis (at 5).
(b)There is much to be said for encouraging at an early stage in the litigation serious consideration of offers of settlement having regard to the savings to the parties and the community (at 6).
(c)The Court should apply an appropriate costs sanction where a party has declined to accept or to make, as the case may be, a reasonable offer of settlement (at 6).
(d)It may in some cases be sufficient to deprive an otherwise successful party of all or part of the costs that otherwise would follow the event. In other cases it may be appropriate to award some or all costs of the action on a more favourable than usual basis to a party who has been put to the expense of continuing litigation that ought reasonably to have been earlier settled (at 6).
(e)There needs to be more than an offer of settlement made by the plaintiff and not accepted by a defendant which is exceeded by the judgment to make it appropriate to order indemnity costs. For example the assessment of non-economic loss in a personal injuries claim involves a judgment that is akin to a discretionary judgment and hence it is difficult to suggest that the mere refusal of an offer that happens to be less than the sum ultimately awarded is to be characterised as unreasonable (at 6).
(f)Most litigation and particularly personal injury litigation admits of a range of outcomes. Indemnity costs should not be used to inhibit either party from litigating an issue reasonably in contention between them. However neither should parties be permitted to persist in an unrealistic assessment of the chance that the issue or issues in dispute will be determined favourably to them when that view is able to be perceived as unrealistic (at 8).
(g)In the end the matter is one for the discretion of the trial judge. The exercise of that discretion favourably to a successful plaintiff may well, prima facie, be indicated by a substantial difference between an offer made by the plaintiff and the verdict ultimately found. However it must also appear that the defendant had failed to act reasonably in declining to accept the plaintiff’s final offer of compromise (at 8).
The principles articulated in Quirk have been regularly applied in circumstances where a plaintiff fails to do better than a Calderbank offer made by the defendant. However, as Quirk makes clear, the matter is not one involving any default rule but instead the exercise of a costs discretion having regard to the importance of ensuring parties give serious consideration at an early stage to the settlement of proceedings.
The present case
The existence of the regime for an offer of compromise under the Rules and the process for the making of mandatory final offers does not preclude reliance upon Calderbank offers in circumstances where those other regimes are not applicable or not relied upon. Therefore it is open to the defendants to seek a better than usual costs order in the present case.
The principal issue in the case was the aggregate amount for past and future economic loss, the amount for future economic loss being the most significant variable. There is a very significant difference between the judgment awarded and the offer of $540,000 which the plaintiff refused to accept. Indeed, the defendants’ earlier offer of $380,000 exceeded the amount ultimately awarded.
In the light of the large disparity between the amount offered by the defendants and the outcome achieved by the plaintiff, unless some factor about the nature of the case or the information available to the plaintiff is pointed to by the plaintiff, it is relatively easy to make a finding that the plaintiff’s refusal of the offer was unreasonable. Counsel for the plaintiff did not point to any such feature of the case and expressly made no submissions to answer the defendants’ submission that the plaintiff’s conduct should be found to be unreasonable. As the decision in Quirk makes clear, costs should not be used to inhibit either party from litigating an issue reasonably in contention between them. However, costs sanctions should flow if a party persists in an unrealistic assessment of their case. In the present case the fact that the offer rejected was very substantially higher than the amount ultimately awarded, the withdrawal by the plaintiff of an offer that she had made prior to its expiry, the indication by the solicitor for the plaintiff that there was little prospect of settlement, the absence of any subsequent settlement discussions notwithstanding the invitation from the solicitor for the defendants and the absence of any explanation for that course of conduct based on the evidence or advice available to the plaintiff indicate that the plaintiff’s conduct should be characterised as unreasonable.
The substantial question between the parties was what consequences should flow from that finding. While I accept that in some cases the financial circumstances of one party and the amount recovered will be factors of significance, I do not consider that those matters are of great weight in the present case. While an order that the plaintiff pay the defendants’ costs after the non-acceptance of the offer would be a significant detriment to the plaintiff, it is not a case where it would substantially exhaust the judgment in her favour. Similarly her financial circumstances are not in that category of modesty that would make her case similar to Heywood. As a consequence, I do not consider that the reasoning in Heywood is applicable in the present case. While that decision did not involve specific discussion of the decision in Quirk, I do not see it as being inconsistent with the principle in Quirk which leaves open the matters which may be taken into account in deciding both the existence or extent of unreasonableness and the consequences that should follow from that.
The existence of a regime under the Rules is significant in that it reflects a considered policy that distinguishes the circumstances of personal injury cases from other cases in the Court. As I have described above, it provides a regime in personal injury cases which is more favourable to plaintiffs who do better than offers that they have made under the Rules or who fail to beat offers that a defendant has made under the Rules when compared to the situation that would apply to other categories of cases. The order sought by the defendants in the present case (involving an award of indemnity costs from the expiry of their offer) would be even more favourable than the order that would routinely follow in a non-personal injury case where a plaintiff had failed to beat an offer of compromise under the Rules made by a defendant. However, because of the different regime for offers of compromise in personal injury cases set out in the Rules, the order sought by the defendants in the present case would be substantially more favourable to the defendants than would apply if the offer had been a formal offer of compromise.
In my view it is appropriate to take into account the existence of the regime under the Rules in determining how to exercise my discretion in a matter which is not governed by the Rules. “It has always been necessary to consider the operation of such offers against the background of the relevant rules of Court at a particular time”: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [133]. The desirability of maintaining some consistency between the outcomes of rules-based offers and Calderbank offers was recognised in a different context by Dutney J in Manwelland Pty Ltd v Dames & Moore Pty Ltd [2000] QSC 432 at [16] where his Honour said:
[16]The award of costs to the defendant from 28 September on an indemnity basis would put the defendant in a better position than it would have been in had it made a formal offer under the rules. In my view this would be inappropriate. The rules in Chapter 9 Part 5 set out a considered framework with clear consequences for failing to beat offers with which all practitioners are or can by reference to the rules become familiar. There are decided advantages in having an established system covering offers to settle. Practitioners should be encouraged to use it so that the other party is under no illusions as to the risk associated with non-acceptance of an offer. To reward the maker of an informal offer more highly would undermine this system.
Once again in a somewhat different context, the desirability of maintaining consistency between the operation of Calderbank offers and rules-based offers was also referred to by Debelle J in Morris v McEwen [2005] SASC 284 at [4]. The High Court declined to get involved in any debate about the relationship between rules-based offers and offers made outside the relevant rules: McEwen v Morris [2006] HCA Trans 56.
It would tend to undermine the regime provided for by the Rules if the Court were to, without considering that regime, adopt an approach that departed substantially from the outcomes contemplated by that regime. Having said that, it must be recognised that in circumstances where the Rules do not apply the discretion of the Court remains at large. It remains open, in an appropriate case, to the Court to make a costs order which would be substantially different from the kind of order that would be made if an offer of compromise under the Rules had been made as opposed to a Calderbank offer.
In the present case the evidence of Mr Montagnino discloses that the solicitor and client costs incurred by the plaintiff after the date of the defendants’ offer was approximately $51,900. If one assumes that approximately 70% of those costs would be recoverable under a party and party costs order then denying the plaintiff her costs after the non-acceptance of the defendants’ second offer would have the effect of making her $36,000 worse off than she would have been had she recovered her party and party costs for the whole of the proceedings. On the other hand, if, in addition, she is required to pay the costs of the defendants on an indemnity basis she may have to pay an additional amount in the order of $40,000. An order that she instead pay the defendants’ costs on a party and party basis would lead to a liability somewhat less than that.
But for the introduction of rules-based offers of compromise and the specific provisions of those rules relating to personal injury proceedings, I would have made an order that required the plaintiff to pay the defendants’ costs from the date of expiry of the defendants’ offer on a party and party basis. However, in the light of the existence of the provisions for rules-based offers which provide a regime more favourable to a plaintiff in personal injury proceedings, I consider it appropriate to give weight to the desirability of there being some consistency in approach between costs orders made as a result of offers of compromise and costs orders made as a result of Calderbank offers. In doing so I recognise that there will be cases in which it is appropriate to make more favourable orders to an offering party than those which are provided by the rules relating to offers of compromise. For example where there is specific evidence of unreasonable conduct or where the magnitude of the case is such that costs sanctions arising from unreasonable conduct need to be greater than would be indicated by analogy to the rules. However, in the present case the fundamental issue related to the extent of future economic loss, in relation to which there was clearly a range of possible outcomes. While I accept that the disparity between the amount offered and the amount ultimately awarded is a significant factor that weighs in favour of an order favourable to the defendants, the extent of unreasonableness on the part of the plaintiff that may be inferred is not so great as to require a consequence greater than that which would apply had there been a rules-based offer.
As a consequence, I consider that while it is appropriate to improve the defendants’ costs position because of the making of the offer, I do not consider it appropriate to make the order contended for by the defendants.
Orders
The orders of the Court are:
1. Orders 3 and 4 made on 21 August 2015 are discharged and the following order is made in their place:
The second defendant is to pay the plaintiff’s costs of the proceedings up to and including 26 March 2015 and there is no order in relation to costs incurred after that date.
| I certify that the preceding thirty-six [36] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Associate Justice Mossop. Associate: Date: 27 November 2015 |
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