The Public Trustee as Litigation Guardian for Imre Pinter v Newman - [2011] SADC 113

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
THE PUBLIC TRUSTEE AS LITIGATION GUARDIAN FOR IMRE PINTER v NEWMAN
[2011] SADC 113
Reasons for Decision of Her Honour Judge McIntyre
27 July 2011
PROCEDURE - COSTS
Plaintiff seeks costs on a solicitor/client basis on the grounds that the defendant did not comply with his obligations under Rule 33, the defendant conducted negotiations in an unreasonable manner. Held: the plaintiff did not serve a Rule 33 notice on the defendant; service on his insurer is insufficient. In any event, the manner in which negotiations were conducted was not so unreasonable as to require departure from the general rule. Plaintiff awarded costs on a party/party basis.
Plaintiff sought orders dispensing with need for short form bill. No order made.

INTEREST
Plaintiff sought interest on his costs and disbursements from the date of issue of proceedings on the same grounds as he sought solicitor client costs. Plaintiff awarded interest on and from 22 October 2010.
District Court Rules 1986 R.3, R.33; Transport Accident Act (Vic) 1986, referred to.
Colgate-Palmolive Ltd v Cussons Pty Ltd (1993) 46 FCR 225 and Kenneally v Pouras & Ors [2007] 244 LSJS 435, considered.

THE PUBLIC TRUSTEE AS LITIGATION GUARDIAN FOR IMRE PINTER v NEWMAN
[2011] SADC 113
Introduction

The plaintiff was catastrophically injured in a motor vehicle accident. Proceedings seeking damages for personal injury were issued against the defendant by the plaintiff’s litigation guardian, The Public Trustee, based on the claim that the accident was caused by the negligence of the defendant. The plaintiff’s claim was settled on the third day of trial following approval of compromise on 22 October 2010. Judgment was entered for $2.8 million in addition to all amounts paid on behalf of the defendant to the date of judgment plus costs and disbursements to be agreed or taxed. The basis upon which costs were to be paid was to be the subject of further negotiation. If agreement was not reached between the parties on costs and disbursements within 28 days of the plaintiff providing details to the defendant, then the parties agreed to have the matter referred to the court for further directions. Details of costs were supplied but the parties have been unable to reach agreement.
The principal area of contention relates to the basis upon which the defendant should pay the plaintiff’s costs. The plaintiff seeks costs on a solicitor/client basis. The plaintiff says that an offer was made in accordance with District Court Rule 33 and that the defendant did not comply with his obligations under that Rule because he did not make a counter offer or deny liability on explained grounds. In the alternative it is said that, if the defendant’s response is characterised as compliance with his obligation, the response was unreasonable in the circumstances in that he did not engage in negotiations. Further the plaintiff says that the defendant’s position throughout the conduct of the proceedings was unreasonable, even in the post settlement costs negotiations to the extent that it is reasonable for the plaintiff to have his costs on a solicitor/client basis.
The defendant accepts that he is obliged to pay the plaintiff’s costs but says that this should occur on a party/party basis. The defendant says that the plaintiff did not comply with Rule 33 but, that notwithstanding this efforts were made to resolve the plaintiff’s claim prior to the issue of proceedings including the parties engaging in a mediation for which the defendant paid. The defendant denies that his conduct of the proceedings was unreasonable and in particular resists the assertion that post settlement costs negotiations were conducted in an unreasonable manner.
The Rules
Rule 33 relevantly provides as follows:
…..
(2)     A plaintiff must, at least 90 days before commencing an action to which this rule applies, give the defendant written notice containing or accompanied by –
(a)     an offer to settle the plaintiff’s claim on a basis set out in the notice; and
(b)     sufficient details of the claim, and sufficient supporting material, to enable the defendant to assess the reasonableness of the plaintiff’s offer of settlement and to make an informed response to that offer; and
(c)     if the plaintiff is in possession of expert reports relevant to the claim – copies of the expert reports.
(3)    If the plaintiff believes the defendant to be insured against the relevant liability by an insurer whose identity is known to the plaintiff, the plaintiff must send a copy of the notice and the accompanying materials to the insurer.
(4)    The defendant must, within 60 days after receiving the notice, respond in writing to the notice by –
(a)     accepting the plaintiff’s offer of settlement; or
(b)     making a counter-offer; or
(c)     stating that liability is denied and the grounds on which it is denied.
(5)     If the defendant is in possession of expert reports relevant to the claim, the defendant’s response must be accompanied by copies of the expert reports.
(6)     When an action to which this rule applies is commenced –
(a)     the originating process must include an endorsement stating whether the plaintiff has complied with the requirements of this rule and, if not, why not; and
(b)     the plaintiff’s notice to the defendant and the defendant’s response (if any) to the notice must be filed in the Court in a suppressed file.
(7)     In awarding costs of the action, the court may take into account -
(a)     whether the parties have complied with their obligations under this rule; and
(b)     the terms of any offer or counter-offer, or any response to an offer or counter-offer, made under this rule and the extent to which it was reasonable or unreasonable in the circumstances.
…..
In addition to the provisions of Rule 33 there are general principles that must be taken into account. As a general rule costs are award on a party/party basis and an order for payment of other than party/party costs could only be made when the circumstances justify a departure from the general principle.[1] The purpose of an award of solicitor client costs is to compensate a party and not to punish the opponent[2]
[1] Colgate-Palmolive Ltd v Cussons Pty Ltd (1993) 46 FCR 225 & Kenneally v Pouras & Ors [2007] SASC 303
[2] Flinders Diamonds Ltd v Tiger International Resources Inc [2006] 244 LSJS 435
I agree with the plaintiff’s submission that, in exercising the general discretion as to costs, I should also have regard to the objects of the 2006 Rules as described in Rule 3 which relevantly provides the following objectives:
……
(b)     to facilitate and encourage the resolution of civil disputes by agreement between      the parties; and
(d)     to promote efficiency and dispute resolution in so far as that object is consistent      with the paramount claims of justice; and
(e)     to minimise the cost of civil litigation to the litigants and to the State.
Was there a Rule 33 after?
The plaintiff says that his Rule 33 notice was contained in a letter dated 10 December 2008 sent to the defendant’s insurer the Transport Accident Commission of Victoria (“TAC”).[3] The plaintiff says that the defendant did not respond in any of the ways set out in Rule 33(4). The response was a letter from the TAC dated 12 February 2009.[4] In effect the response indicated that the TAC was not in a position to respond to the formulated claim until some further information outlined in the letter was provided.
[3] Exhibit JLA1 to Affidavit of Joanna Andrew sworn 31.03.2011
[4] Exhibit JMM18 to Affidavit of Joan Miller sworn 14..04.2011
The defendant says that the Plaintiff’s letter did not on its face say that it was an offer made under Rule 33 and further was not compliant because it was not directed to the defendant. The defendant says that a notice served only on the insurer is not a notice within the meaning of Rule 33 and thus cannot give rise to the legal consequences sought by the plaintiff. It is also said that the defendant had reasonable grounds for believing it was not a Rule 33 notice. This view was confirmed when the plaintiff’s summons asserted that no Rule 33 notice had been given.
The defendant further says that even if the plaintiff’s letter was a Rule 33 notice there is no rule that non-compliance by the defendant with a response to Rule 33 would automatically give rise to solicitor/client costs. It is simply a matter that the Court may take into account in assessing the system of costs generally.
In my view, the plaintiff’s letter dated 10 December 2008 complies with Rule 33(2) except for the fact that it was sent to the TAC rather than the defendant. The letter set out a formulation of the plaintiff’s claim on both liability and quantum. It was a detailed formulation of some six pages and it annexed a number of supporting documents. It is not strictly necessary to state that the letter is an offer under Rule 33 although, had this been done, it may have avoided the confusion that has arisen in this matter. The confusion was compounded by the error in the originating process. I further note that the plaintiff did not comply with Rule 33(6)(b) by filing the asserted notice and response in a suppressed file.
The plaintiff’s submissions treat the TAC as the defendant. This is not correct as a matter of principle. The defendant is a natural person and he is the party to these proceedings. The fact of his being insured by the TAC is, to that extent, irrelevant. The plaintiff relies on the fact that the defendant and the TAC are in a statutory relationship under the terms of the Transport Accident Act (Vic) 1986 (the TA Act). This relationship requires, inter alia, that the TAC indemnify the driver of a registered motor vehicle as defined in the TA Act[5] and enables the TAC to do a number of things including undertaking settlement of any claim and defending or conducting proceedings in the name of the driver or owner.[6] TAC’s ability to settle, conduct or defend proceedings is stated in permissive but not mandatory terms. The relationship also imposes duties upon the owner and driver of a registered motor vehicle. The owner must notify the TAC as soon as practicable after being notified of a claim.[7] The owner is liable to recovery proceedings by TAC if he or she:
…..makes any offer, promise, payment or settlement or any admission of liability as to any such matter.[8]
[5] Section 94(1)
[6] Section 94(10)
[7] Section 99
[8] Section 99(2)
Further, any documents served upon an insured owner or driver must be provided to the TAC as soon as practicable otherwise the insured is liable to recovery action.[9]
[9] Section 99(2) & 100(2)
This statutory relationship does not however provide an answer to the question in issue. The fact that the defendant may have a right to indemnity under the TA Act or may have rendered himself liable to a recovery action by the TAC if he had responded to a Rule 33 notice served upon him by a plaintiff does not relieve the plaintiff from an obligation to serve the defendant personally if that is what the District Court Rules require.
It is my view that the provision of the notice to the defendant’s insurer is not sufficient for compliance with Rule 33(2). The plain wording of the Rule 33(2) makes it clear that the notice must be served on the defendant. If there were any doubt about that proposition, it is sufficient to note Rule 33(3) which requires a plaintiff to send a copy of the notice and accompanying materials to the defendant’s insurer in circumstances where the plaintiff is aware of the identity of that insurer. I also note that the TAC, in its letter dated 12 February 2009, informed the plaintiff’s solicitors that any proceedings should be served direct upon the defendant. This should have alerted the plaintiff’s solicitors to the need to serve the Rule 33 notice upon the defendant. The defendant was entitled to be served with the Rule 33 notice just as he is entitled to be served with the originating process.
Given the notice was not served on the defendant, it cannot be said that the defendant has not complied with Rule 33(4). Any asserted deficiencies with the response from TAC dated 12 February 2009 can hardly be said to be those of the defendant.
General Conduct
The plaintiff has taken issue with the defendant’s general conduct of negotiations in this matter for the reasons outlined in Ms Andrew’s affidavits and the plaintiff submissions both written and oral. It is said that this enlivens the general discretion to award costs on a solicitor client basis. The conduct complained of is that of the TAC acting as insurer for the defendant. If there is force in these complaints there is no impediment to an exercise of the discretion as plainly the TAC took over the conduct of the proceedings as it was entitled to do under the provisions of the TA Act.
It is clear from the affidavits filed by both parties that there was substantial correspondence between the parties as to the basis upon which both liability and quantum were disputed. The parties entered into mediation prior to the issue of proceedings. The plaintiff filed an offer of settlement under Rule 137 which was in excess of the judgment that was the subject of the compromise. Both parties made attempts to resolve the matter prior to the issue of proceedings and thereafter albeit without success until the trial had commenced. Whilst it is unfortunate that this settlement did not occur earlier, I see no basis in the conduct of the parties prior to settlement to depart from the general rule that a successful plaintiff should have his costs on a party/party basis.
The final basis that was argued for the plaintiff in support of his claim for solicitor/client costs was the defendant’s conduct in post judgment costs negotiations. The plaintiff provided a detailed claim for costs and disbursements by 1 November 2010 and says that the defendant did not respond within the time required by the consent orders namely 15 November 2010. It is said that the defendant’s first response was to offer less than one-third of the claim and that the second and final response was to offer about one-half of the claim. It is said that the defendant sought proof of costs as though the negotiations were adjudication under the scale and that this was contrary to the spirit of the agreement.
The defendant says that nothing improper occurred – the plaintiff was engaged in serious discussions on the list of disbursements with the result that most were agreed one way or the other and that a cheque had been sent to the plaintiff for the admitted disbursements. In terms of costs, it is said that the plaintiff supplied only a single figure for solicitor’s fees. I note that this is not factually correct as the plaintiff provided a print-out of his solicitor’s work in progress. That this was received is apparent from the correspondence dealing with that print-out.
It is clear that the principal difficulty with the post settlement costs discussions was due to the differences between the parties as to the basis upon which costs were to be assessed. The plaintiff’s position was of course that he is entitled to costs on a solicitor/client basis whereas the defendant’s position was that the plaintiff is limited to costs on a party/party basis. This was plainly going to cause a disparity in their respective assessments. I do not consider that either party acted unreasonably in the circumstances.
I reject the plaintiff’s claim for solicitor/client costs and award the plaintiff his costs of this action on a party/party basis.
Interest
The defendant concedes that interest should be paid on the plaintiff’s costs and disbursements from the date of compromise. The plaintiff seeks interest from the issue of proceedings on the basis of the same arguments as those put in support of the claim solicitor/client costs. In effect the submission is that the defendant should be penalised for failing to settle the claim earlier. I reject the claim for interest from the issue of the proceedings. I award the plaintiff interest, on costs and disbursements on and from 22 October 2010.
Dispensing with a short form bill
The plaintiff seeks an order that I dispense with the need for a short form claim for costs. I do not consider this is appropriate in the circumstances. Long form bills are expensive and time consuming as are taxations of costs. The cost ledger that has been provided does give some indication to the defendant as to the likely extent of costs but it is not a scale formulation and it is my view, that the matter may be capable of resolution if the parties were to discuss a short form formulation now that the basis of the assessment is plain. Accordingly I decline to dispense with the short form bill.