Skinner v The State of New South Wales (No.3)

Case •

[2021] NSWDC 115

•

09 April 2021

No judgment structure available for this case.

District Court


New South Wales

Medium Neutral Citation: Skinner v The State of New South Wales (No.3) [2021] NSWDC 115
Hearing dates: On the papers
Date of orders: 9 April 2021
Decision date: 09 April 2021
Jurisdiction:Civil
Before: Abadee DCJ
Decision:

See paragraph 40

Catchwords:

PRACTICE AND PROCEDURE – dispositive orders for claim for work injury damages – former police officer’s claim for psychiatric injury – whether interest pursuant to s 151M of the Workers Compensation Act recoverable – whether offer of settlement made prior to proceedings unreasonable

COSTS – parties agree that costs of the proceeding generally are to be borne by each party – whether different costs order should be made for plaintiff’s application to extend time to commence proceeding under s 151D

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW) r 42.7

Workers Compensation Act 1987 (NSW) ss 151D, 151M

Workers Compensation Regulation2016 (NSW) regs 94, 96

Cases Cited:

Briggs v State of New South Wales (No.2) [2015] NSWDC 299

Cottom v Scone Race Club Limited (unreported, 2 November 2018)

Furina v Transfield Construction Pty Ltd (1994) 10 NSWCCR 23

J T Stratford Ltd v Lindley (No.2) [1969] 1 WLR 1547

Juniper Property Holdings No. 15 Pty Ltd v Caltabiano [2015] QSC 95

Ortlipp v Employers Mutual NSW Ltd as agent for the Workers Compensation Nominal Insurer (No.2) [2014] NSWDC 158

Skinner v State of New South Wales (No.2) [2021] NSWDC 49

State of New South Wales v Briggs [2016] NSWCA 344

Texts Cited:

Nil

Category:Consequential orders
Parties: Ms K Skinner (plaintiff)
The State of New South Wales (defendant)
Representation:

Counsel:
Mr C Hart and Mr G Schipp for the plaintiff
Mr D Stanton for the defendant

Solicitors:
Prominent Lawyers for the plaintiff
SMK Lawyers for the defendant
File Number(s): 2017/90426
Publication restriction: Nil

Judgment

  1. These reasons for judgment concern the dispositive orders following publication of reasons of judgment on 5 March 2021: Skinner v State of New South Wales (No.2) [2021] NSWDC 49. (‘My Earlier Reasons’). The parties have agreed on the quantum of loss, but remain in contest on interest and costs.

QUANTUM

Loss

  1. The parties agree that the components of loss are as follows:

Past economic loss   

$902,448

Past superannuation

$99,269

Fox v Wood   

$14,684

Future economic loss

$778,219

Future loss of superannuation

$108,172

Total loss

$1,902,792

Deductions

  1. Applying a 40% reduction for vicissitudes, the amount of this particular deduction is $761,117. That leaves damages, subject to two further deductions, in the sum of $1,141,675.

Contributory negligence

  1. Applying a 10% discount, the amount for this deduction is $114,168.

Workers compensation payments

  1. This sum is $283,727.39.

  2. After the discounts, the total sum of damages is $743,780.

INTEREST

  1. The plaintiff claims interest on the damages of $743,780, from the date that she ceased work (10 November 2008), which she quantifies as being in the sum of $585,498.26.

  2. At a mediation on 11 November 2016, the plaintiff’s final offer of settlement to the defendant was for the sum of $1,450,000, clear of workers compensation payments, plus costs. The defendant’s final offer of settlement to the plaintiff the sum of $425,000, clear of workers compensation payments, plus costs.

  3. Subsequent to filing her written submissions, the plaintiff also supplied the Court with a letter revealing that after the proceeding had commenced, on 23 October 2018, the defendant also made an offer of settlement to the plaintiff, at a time when she was self-represented, in the sum of $350,000, clear of workers compensation payments, but inclusive of costs.

  4. The plaintiff also supplied the Court, for the purposes of the argument on interest, a schedule of damages prepared for the mediation conducted on 26 February 2020, which mode of dispute resolution was unsuccessful in resolving the dispute.

  5. The end result, as indicated, is that the plaintiff will recover an award for damages of $743,780.

The plaintiff’s entitlement to interest

Point of construction

  1. The plaintiff, in her Counsel’s written submissions, submitted that the defendant had not made any offer of settlement “at any time”. Subsequently, I understood Counsel for the plaintiff to resile from that submission, at least on the facts, given that the defendant made a without prejudice offer to the plaintiff on 23 October 2018, being an offer of payment of $350,000 (inclusive of costs), clear of workers compensation payments. Counsel for the plaintiff did point out, however, that this offer was made to the plaintiff at a time when she was legally unrepresented. That observation was not particularly apposite in circumstances where in conjunction with the offer, the defendant’s solicitor expressly encouraged the plaintiff to seek legal advice about the offer.

  2. Be that as it may, implicit in the plaintiff’s submission, as originally formulated, is the premise that the offer that the defendant made at the mediation on 11 November 2016 may be disregarded and that the expression an ‘offer of settlement’ in s 151M(4)(a)(iii) of the Workers Compensation Act 1987 (NSW) (‘the WC Act’) is properly construed as being confined only to an offer of settlement made in a judicial proceeding. Reference was made to an observation by her Honour Judge Olsson SC in Cottom v Scone Race Club Limited (unreported, 2 November 2018) where her Honour awarded pre-judgment interest in the circumstance of having been “told that the defendant made no offer in the present proceedings”.

  3. I do not, with respect, interpret her Honour’s observation as containing an additional and necessarily implied requirement in s 151M(4)(a)(iii) that an offer of settlement must be one made when and after a proceeding has been instituted. To do so is to read down the words of the provision. It was not apparent in the case before her Honour that, as was the case here, whether an offer was made prior to the litigation having commenced. It is, as I go on to observe in a short time, generally well-established that the point of the legislative framework is to encourage reasonable offers of compromise on the basis, primarily, of parties’ pre-filing material, before a proceeding is instituted. In my view, in the light of that purpose, it makes sense that a defendant might be in peril of an order of pre-judgment interest if it does not make a reasonable offer to the plaintiff prior to the institution of a proceeding. This was reflected in the decision of his Honour Judge Levy SC in the decision on interest of Briggs v State of New South Wales (No.2) [2015] NSWDC 299 at [25], upon which the plaintiff relied in her submissions [1] . A corollary must be that if a defendant does make an offer of settlement (which also satisfies the requirement in s 151M(4)(c)) prior to the commencement of the proceedings, then the defendant is potentially able to rely upon it in defence of a claim for interest.

    1. The decision in the substantive proceeding was set aside on appeal: State of New South Wales v Briggs [2016] NSWCA 344

  4. Accordingly, I reject the plaintiff’s submission that the defendant made no offer of settlement capable of falling within s 151M(4)(a)(iii).

  5. The defendant accepts that the plaintiff has established that the damages award that she will receive (before interest) is more than 20% higher than the highest offer made by the defendant.

  6. This leaves for the Court’s determination, the question whether the defendant’s highest offer made on 11 November 2016 was unreasonable, having regard to the information available to it when it made the offer. If it was unreasonable, then it would be necessary to determine the calculation of interest in accordance with s 151M(5).

The parties’ submissions

  1. On the question of whether the defendant’s offer was unreasonable, and consistent with its view that the defendant had not made any offer of settlement at all, the plaintiff had little to say, other than that by the date of that mediation, she had served her expert evidence on liability, and medical evidence on liability establishing the extent of her incapacity. Prior tax records were also served and also a proposed pleading, which substantially was adhered to throughout the course of the proceeding. There was no question that the defendant was able to make a properly informed assessment of the case.

  2. The defendant does not dispute that at the time it made its highest offer, it actually had sufficient information to make a reasonable assessment of the plaintiff’s full entitlement to damages.

  3. The defendant submits that its offer was not unreasonable in circumstances where:

  • the plaintiff required an extension of time to bring the proceeding;

  • the issues of liability, as to both breach and causation, were complex;

  • the quantification of damages was also complicated by the plaintiff’s incapacitating back injury, a pre-existing psychological condition which was exacerbated; and a collateral post-traumatic stress disorder which was also incapacitating (but which was determined not to have been caused by the negligence of the Police Force), and where the extent of the psychological injury was affected by events whose consequences the Force was not legally responsible for;

  • the plaintiff’s offer ($1.45 million, clear of the workers compensation repayments) was itself unreasonable.

  1. As indicated, the plaintiff made no submissions about the reasonableness or otherwise, of the defendant’s offer of settlement of 11 November 2016.

Consideration

  1. The general position in s 151M(4) is that a successful worker will not receive interest, unless the circumstances fall within any one of the three exceptions in s 151M(4)(a). In my view, the onus falls upon the worker, as applicant for costs, to persuade the Court that one of those exceptions is enlivened. The purpose of s 151M is to facilitate the reasonable compromise of claims: Furina v Transfield Construction Pty Ltd (1994) 10 NSWCCR 23 at 27. The particular circumstance in s 151M(4)(a)(iii) is directed to the defendant’s omission to make a reasonable offer. For present purposes, it is the plaintiff who must prove that the offer of $425,000, clear of workers compensation payments, was unreasonable.

  2. As the wording of s 151M(4)(a)(iii) itself indicates, it is not enough to conclude that the highest offer made by a defendant is unreasonable because the damages award exceeds it by 20%. That matter has already been factored into the exception. Nevertheless, the damages award did exceed the highest sum offered to a very substantial degree. That observation is, however, made with the benefit of hindsight when the question is to be viewed prospectively. It might also be noted that had the Court made greater deductions on account of the contingencies and contributory negligence, the ultimate award of damages would have been much closer to the final sum awarded. But in November 2016, it would not have been easy for the defendant to confidently predict the quantum of the discounts.

  3. I accept that the case which the plaintiff brought was complex, both in liability and in damages. Although a draft pleading may have been supplied at the time of the pre-filing, the particulars of negligence were pitched at such a high level of generality that it was hard to understand the case the defendant had to meet. The facts were of broad compass. Indeed, the allegations of negligence were sourced in a report by Mr Cockbain, which report was not ultimately relied upon by the plaintiff. Indeed, the arguments on breach of duty were ultimately only ventilated with greater specificity in Counsel for the plaintiff’s final argument. The preponderance of the allegations of breach was rejected, and for some of the breaches of duty that were established, the plaintiff could not prove causation. There was, with no disrespect, something of a scattergun approach to the plaintiff’s case which, in the end, succeeded, because at least one or more breaches were established and proven to have caused the injury. Some of what I have said, so far, is in retrospect. But the matters referred to underscore and therefore support the defendant’s contention, viewed prospectively at the time that it made its offer, about the complexity of the case on liability.

  4. There is, as I have indicated, force to the defendant’s submission that, putting to one side the difficulties in establishing breach, at the time the offer was made, it was very difficult to estimate, with reasonable precision what the quantum would eventually be, having regard to the plaintiff’s circumstances involving a back complaint, her pre-existing susceptibility to mental illness and the appropriate level of contingencies having regard to events in respect to which the defendant was not legally responsible.

  5. Moreover, it is not without significance that the offer made by the defendant was in response to the plaintiff’s offer at the mediation prior to the proceeding which, relative to the quantum of the defendant’s offer, was disproportionate to the claim. This again only underscores the complexity of the plaintiff’s case, on liability and also on quantum.

  6. Another consideration, of lesser weight, being that at the time the offer was made it was uncertain whether the plaintiff would obtain leave to commence the proceeding out of time. Nevertheless that matter was not irrelevant to the parties’ mutual assessment of risk and, viewed objectively, weighed in favour of the conclusion that the offer was not unreasonable.

  7. I am not persuaded that the defendant’s offer was unreasonable.

  8. The plaintiff has not made out her entitlement to receive interest under s 151M.

COSTS

  1. It is common ground that the appropriate order for costs of the proceeding overall is that each party should bear its own costs of the proceeding. That is the result of Regulations 94 and 96 of the Workers Compensation Regulation 2016 (NSW) (‘WCR’).

  2. But it is also common ground that Regulation 94 distinguishes costs of the proceeding, generally and costs of ‘ancillary’ proceedings, which are determined in the light of general rules of court.

  3. It follows that the distinction contemplates that there may be different outcomes when viewing the costs of the proceeding generally and the costs of ancillary proceedings. However, that is no different to ordinary civil proceedings in Court, where there may be differences between the costs of final outcomes and costs in interlocutory proceedings; where the Court has a very general discretion (eg Uniform Civil Procedure Rules 2005 (NSW) r 42.7). But even so, the Court’s discretion to award costs in interlocutory, or ‘ancillary’ proceedings in claims for work injury damages is, in my view, influenced by the policy objectives and purposes of proceedings of that kind. These include statutory and regulatory incentives to workers and employers striving to reach reasonable compromises of workers’ claims to obviate the need to commence a proceeding.

Parties’ submissions

  1. The plaintiff seeks her costs of her application under s 151D of the WC Act and asserts that this was an ‘ancillary’ proceeding. The defendant accepts that the application was an ancillary proceeding and susceptible to a specific costs order, potentially independent of the ultimate order for costs to dispose of the proceeding.

  2. The plaintiff argues that the costs of that motion should be the plaintiff’s ‘costs in the cause’, which means that, since the plaintiff succeeded, the defendant should pay the costs of the interlocutory application.

  3. The defendant cited a range of authorities in different limitations cases (ie not concerning s 151D of the WC Act) to the effect that so long as a defendant’s opposition to an application to extend time is reasonable, there should be no order as to costs or, alternatively, that the defendant should have its costs of such application. As to the latter alternative, the defendant noted that it incurred costs which it would not have had to have incurred had the plaintiff acted reasonably in protecting her rights within the limitation period.

Consideration

  1. As I explained in My Earlier Reasons, it struck me as curious that for a proceeding commenced so long ago, the plaintiff’s application to extend the limitation period could not have been determined earlier than it was. This was because of its potentially dispositive effect. If it had been decided before trial and if the defendant was successful, then there would have been little doubt that the defendant would have been entitled to its costs of successfully opposing the application for extension; as that application would have generated an ‘event’, in its own right, and ordinarily, the costs outcome would have followed the result of that event[2] . Nevertheless, the application was allowed to run concurrently with the hearing as a whole, even if I determined the application first and made the interlocutory order. That procedural circumstance substantially undercuts the force of the defendant’s submission about incurring costs that it would not have had to incur if the proceeding was brought in time, at least to the extent that it is suggested that substantial additional costs were incurred by the defendant over and above the costs of defending the proceeding in its entirety.

    2. This was the costs outcome in the decision of his Honour Judge Taylor SC in Ortlipp v Employers Mutual NSW Ltd as agent for the Workers Compensation Nominal Insurer (No.2) [2014] NSWDC 158, cited by the plaintiff in her written submissions

  2. In my view the appropriate order for costs should be that the costs in the cause. The leave requirement was an obstacle which the plaintiff had to surmount on her way to recovering damages. It is unnecessary to form a view whether or not defendant’s opposition to the grant of leave was unreasonable.

  3. But contrary to the plaintiff’s submission, that does not mean simply because the plaintiff recovered the award for damages, she is entitled to her costs of that application. Rather, it means that the costs of the interlocutory proceeding are awarded according to the final award of costs in the action (J T Stratford Ltd v Lindley (No.2) [1969] 1 WLR 1547 per Lord Denning MR at 1552-1553). It has been said that where an order has been made that costs of an interlocutory application are costs in the cause, the effect is that the entitlement to receive costs of the interlocutory application is ‘conditional’ upon the party recovering costs in the final outcome (Juniper Property Holdings No. 15 Pty Ltd v Caltabiano [2015] QSC 95 per Jackson J at [27]). It being agreed between the parties that by operation of the WCR the final order for costs is that each party should bear their own costs, it follows that the conditional basis for the plaintiff receiving her costs of the interlocutory application has not been satisfied. This, in my view, aligns with the purposes or objects of the WC Act and the WCR. True, it was, that the plaintiff ‘won’ but her success was not of such magnitude as to confer an entitlement to costs overall. Her procedural success in being able to pursue the proceeding at all should not sound in a different outcome, in terms of the costs of that ‘ancillary’ proceeding.

  4. I reject the plaintiff’s submission that a special costs order be made that she should have her costs of the application for leave to extend time to commence the proceeding.

ORDERS

  1. I order that:

  1. The plaintiff has judgment for the sum of $743,780.00.

  2. Each party should bear their own costs of the proceeding, including the costs of the plaintiff’s application for leave to commence the proceeding.

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Endnotes

Decision last updated: 09 April 2021

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