Andromedas v Truong

District Court of NSW|2017-02-01|Before: Ms J

A. Introduction

Angela Andromedas was awarded judgment in the sum of $16,706.49 in a personal injury damages claim arising out of a motor vehicle accident. [1] She seeks an order for the costs of the proceedings.

B. Issues

The defendant seeks a special costs order for a global sum for costs relying on three offers of settlement made by the defendant and not accepted by Ms Andromedas. The amounts specified in each of the offers were similar and in each case exceeded the judgment sum. The defendant also seeks a global sum for costs to be set off against the judgment sum, relying upon the alleged impecuniosity of Ms Andromedas.
Accordingly, the issues on this application are: 1. whether the offers of settlement comply with r 20.26 of the Uniform Civil Procedure Rules 2005 ("UCPR"); 2. whether, in the alternative, they constitute Calderbank offers; 3. whether they are genuine offers of compromise; 4. whether the judgement was no more favourable to Ms Andromedas than the terms of the offers; 5. whether there is any other reason for a discretion to be exercised in favour of either of the parties; and 6. if the defendant is entitled to an order for costs, is it entitled to a global sum for costs, and for that sum to be set off against the judgment?
Rule 42.35 of the UCPR imposes a general rule that in District Court proceedings costs will not ordinarily be awarded to a plaintiff when the plaintiff obtains judgment for less than $40,000 unless proceedings in the District Court were warranted. Although the judgment sum is less than $40,000, the parties have agreed that r 42.35 has no application to the present proceedings because the complexity of the matter, including the circumstances of an earlier related work injury accident and a possible substantial workers compensation payback under s 151Z of the Workers Compensation Act 1987, meant that the "commencement and continuation of the proceedings in the District Court…was warranted".

C. Background

The first and second offers were made on 27 August 2013 and 9 May 2014 respectively, before court proceedings were commenced (and thus years before the trial date), and are in almost identical form. They provide: "Without prejudice save as to costs Dear Sir/Madam [Andromedas v Truong] We refer to previous correspondence and are instructed to convey an offer of $43,907.00 plus [regulated] costs, to settle Ms Andromedas' claim. The offer comprises: Past out of pocket expenses $5,000.00 Future out of pocket expenses $5,000.00 Past loss of earning capacity $10,000.00 Future loss of earning capacity $20,000.00 Past care $3,907.00

Please obtain your client's instructions and respond. This offer remains open for 21 days from the date of this letter. Yours faithfully MORAY & AGNEW."

After the proceedings were commenced, the defendant made a third offer. It was provided under a covering letter dated 30 July 2015 (some two years before the trial date) in the following terms: "Without prejudice save as to costs Dear Sir/Madam [Andromedas v Truong] We enclose, by way of service, an offer of compromise ('offer'). If for any reason, the offer is found not to strictly comply with rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW), it is also made on the same terms in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333. We put you on notice that this letter with the offer will be produced to the court on the question of costs if your client obtains an order or judgment on the claim no more favourable to her than the terms of the offer. In that event, our client will pursue an order for its costs on an indemnity basis. The amount for which our client currently claims credit is $2,292.10 as detailed in the enclosed list. Yours faithfully MORAY & AGNEW."
The letter included a schedule with details of the credit and also included a formal court document headed, "OFFER OF COMPROMISE" and included the following substantive provisions: "Offer of compromise The defendant offers to compromise the claim for $45,000.00 which will be implemented by filing consent orders incorporating the following terms: BY CONSENT and without admission of liability: 1. Judgment for the plaintiff in the sum of $45,000.00 plus costs as agreed or assessed. 2. The defendant's insurer is authorised to deduct and/or pay from the judgment sum in paragraph 1 the amount of any advance and/or interim payments made to, for, or on behalf of the plaintiff. 3. The defendant's insurer is authorised to deduct and/or pay from the judgment sum in paragraph 1 any amount repayable by the plaintiff in respect to this action where a demand or notice for that amount is served on or given to the defendant or its solicitor or insurer, whether for worker's compensation, social services, sick leave payments, make-up pay, accident pay, past medical and nursing home expenses, money paid or payable under s83 of the Motor Compensation Act 1999 [sic] or otherwise. 4. Interest will not be recoverable by the plaintiff on that part of the judgment sum comprising the deductions referred to in paragraphs 2 or 3 above. 5. The plaintiff agrees to pay out of the judgment sum in paragraph 1 any amount repayable by the plaintiff for workers compensation, social services, sick leave payments, make-up pay, accident pay, past medical or nursing home expenses or otherwise which may not have been deducted by the defendant's insurer under these terms, and to pay to the parties entitled all outstanding medical, hospital, ambulance and other out-of-pocket expenses. 6. The defendant's liability to pay the judgment sum in paragraph 1 will not arise until 28 days after: (a) the date of judgment; (b) receipt by the defendant's solicitor of a signed authority to receive; (c) receipt by the defendant's solicitor of a sealed copy of these consent orders; (d) receipt by the defendant's solicitor of a notice of charge from the Department of Human Services; or (e) receipt by the defendant's solicitor of a notice of settlement signed by or on behalf of the plaintiff for submission to Medicare Australia; whichever is the later. 7. The plaintiff acknowledges that she was informed by the defendant's insurer before the making of the offer of settlement contained in these terms that there may be a liability to pay amounts to the Commonwealth in line with the Health and other Services (Compensation) Act 1995 (Cth) or Health and Other Services (Compensation) Care Charges Act 1995 (Cth). 8. The defendant will pay 10% of the judgment sum in paragraph 1 by way of advance payment to the Health Insurance Commission in line with s33B of the Health and Other Services (Compensation) Act 1995 (Cth). No interest will be payable by the defendant on this sum. 9. No interest shall be payable in respect of the judgement herein provided same be paid within 28 days of: (a) the date of judgment; (b) receipt by the defendant's solicitor of a signed authority to receive; (c) receipt by the defendant's solicitor of a sealed copy of these consent orders; (d) receipt by the defendant's solicitor of a notice of charge from the Department of Human Services; or (e) receipt by the defendant's solicitor of a notice of settlement signed by or on behalf of the plaintiff for submission to Medicare Australia; whichever is the later. 10. The plaintiff acknowledges that she was notified by the defendant's insurer before she accepted the offer of settlement contained in these terms of the defendant insurer's intention to make an advance payment to the Commonwealth under s33A of the Health and Other Services (Compensation) Act 1995 (Cth). 11. The parties agree not to disclose the terms of this settlement otherwise than as necessary for compliance with the Health and Other Services (Compensation) Act 1995 (Cth), the Health and Other Services (Compensation) Care Charges Act 1995 (Cth), and the Social Security Act 1991 (Cth). This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules and is open for acceptance for a period of 28 days only."
The document is signed by the solicitor for the defendant and dated 30 July 2015.

D. Were the offers compliant with r 20.26?

Rule 20.26(2)(d) provides that an offer under this rule "must bear a statement to the effect that the offer is made in accordance with these rules". The first and second offers did not bear such a statement, or anything like it. No reference was made to the rules.
Rule 20.26(5) relevantly provides that the closing date for an offer is to be no less than 28 days after the date on which the offer was made. Both the first and second offers specified that the offer remained open for 21 days from the date of the offer.
Accordingly, those offers are not complying offers of compromise under the Rules and thus do not attract the special costs provisions contained in Pt 42 of the UCPR dealing with offers of compromise under the Rules. This appeared to be conceded by the defendant.
The third offer of compromise largely, if not wholly, satisfies the various elements of a complying offer as provided in r 20.26. There is a requirement, which I referred to above, requiring a statement to the effect that the offer is made in accordance with "these rules", whereas the offer contains a statement that it is made "in accordance with Rule 20.26". I note that minor difference, but nevertheless conclude that the statement was "to the effect" that it was made in accordance with "these rules", as is required, especially given that r 20.26 is the principal rule in the Rules with which the offer must comply.
The offer also stated that the offer was open, "for a period of 28 days only", which could refer to 28 days from the date it bore, or 28 days from the date it was received. Rule 20.26(5) provides that in the circumstances of this offer, the closing date for acceptance was to be "no less than 28 days after the date on which the offer is made", which I would take to mean the date when it is communicated to the offeree. However, bearing in mind the assertion that the offer was made in accordance with r 20.26, I would be inclined to read the period specified in the offer as complying with that provision of r 20.26, so that the offer was open for acceptance for 28 days from the date it was received.
Subject to some matters which are considered below, the third offer is found to be, and seemed to be conceded by the plaintiff to be, an offer of compromise that complied with the provisions of r 20.26.

E. Are these offers Calderbank offers?

The primary element of a Calderbank offer is that it discloses an intention in the offeror to rely on the offer on the question of costs if it is not accepted and the judgment is no more favourable to the plaintiff than the offer. [2] It might disclose that intention by referring to the decision in Calderbank v Calderbank [1975] 3 WLR 586.
The covering letter of the third offer in substance satisfies this requirement by both referring to the Calderbank decision and by disclosing an intention to use the letter to seek costs on an indemnity basis if the judgment is no more favourable than the terms of the offer. However, the first two offers do not either refer to the Calderbank decision, or indicate any use that would be made of the offer on the question of costs. That the offers were made "without prejudice save as to costs" operates to confirm the limited privilege attaching to the offer but it is insufficient to manifest an intention in the defendant to rely upon the offer on the question of costs.
Accordingly, in my view, the first two offers are not to be regarded as Calderbank offers. The third offer, if it is important, and if it fails to be an offer of compromise for some other reason, does satisfy the necessary requirements to be a Calderbank offer.
The fact that the first two offers are not complying offers of compromise or Calderbank offers does not mean they are entirely irrelevant to the question of costs. They do manifest some attempt to settle the proceedings and thus should be taken into account on the question of costs in the exercise of the Court's discretion. [3] But of themselves they do not operate to enliven the statutory offer of compromise principles, or the Calderbank principles, and are merely relevant matters to be considered.

F. Genuine offers of compromise

The first two offers of the defendant do not seek an acceptance by the plaintiff of the offer, but rather request, "Please obtain your client's instructions and respond". Nor do they identify with precision the manner in which Ms Andromedas' claim would be "settled" by the offer, or the time or mode of payment of the amount offered. The defendant, when asked about this matter, submitted that the offer was not in a form that could produce an immediate compromise by acceptance, but rather the acceptance would be subject to the execution of a deed containing the defendant's standard settlement terms. These terms were not disclosed or referred to in the offer, so that matter is not obvious on the face of the document, although it may be known to the parties' solicitors by past practice. Ms Andromedas accepted the defendant's submission that the offer was not in a form capable of immediate acceptance.
Accordingly, the first and second "offers" so-called were really invitations to deal and were not properly offers since they could not be accepted so as to produce a final settlement agreement. I accept this construction of those offer documents because of the nature of the request in the documents, the uncertainty of what was involved in settling the dispute - paying the amount offered, and other matters - and perhaps most importantly, because of the common submission by both parties that the offers were not readily capable of acceptance in the form offered.
Thus, the first two offers were not complying offers of compromise, were not Calderbank offers, and were not genuine offers of compromise because they were not capable of immediate acceptance. [4] In contrast, the third offer did contain all of the terms of the offer, was sufficiently certain in its meaning, and thus was capable of immediate acceptance.
Ms Andromedas raised a second reason as to why each of the three offers was not a genuine offer of compromise. She submitted that properly judged at the time these offers were made, they were not an attempt genuinely to seek to compromise the dispute.
This argument relies on factual matters which are not in dispute. Ms Andromedas had had a previous work accident. The subject motor vehicle accident occurred in connection with treatment for that previous work accident. Ms Andromedas was receiving workers compensation at the time of the motor vehicle accident and has continued to do so. Her workers compensation insurer claimed that an amount of between approximately $120,000 and $190,000 was compensation paid as a result of the motor vehicle accident and was repayable under s 151Z of the Workers Compensation Act 1987. Notice of this claim and the demand of the workers compensation insurer were given to the defendant, so it was also aware of these matters.
The terms of the third offer of compromise contained the standard settlement terms of the defendant. These terms provided in cl 3 of the third offer: "The defendant's insurer is authorised to deduct and/or pay from the judgment sum … any amount repayable by the plaintiff … where a demand or notice for that amount is served on or given to the defendant … whether for worker's compensation…[etc.]"
The words "repayable by the plaintiff" left open the possibility of the plaintiff challenging her liability to meet the demand by the workers compensation insurer. Nevertheless, as the defendant had been served with a demand for a sum that well exceeded the amount of the offer, there remained a real prospect that if the offer were accepted, the amount of the offer would be paid to the workers compensation insurer in accordance with cl 3, a matter accepted by the defendant. In the result, no amount would be paid to Ms Andromedas.
The circumstance that Ms Andromedas would likely receive no funds from acceptance of the offer and might be forced to negotiate with the workers compensation insurer about the payback amount under the disadvantage that the workers compensation insurer had already received those funds leaves me unpersuaded that the offer, made by the defendant, was a genuine attempt to settle a dispute. The insurer was well aware that the size of the offer had the effect that there would likely be no benefit to Ms Andromedas in accepting the offer.
This submission that the offer, and in particular the third offer, did not operate to benefit Ms Andromedas was only faintly resisted by the defendant. However, the defendant did submit that two other matters were important.
First, the defendant submitted that with legal costs Ms Andromedas would also get no benefit from the judgment. As to this, there is no relevant evidence and no authority to support such an enquiry. There was, in reply submissions, an attempt to tender some correspondence from Senior Counsel for the plaintiff which referred to the quantum of Senior Counsel's fees and his entitlement to a lien on the judgment for those fees. Whether that claim of a lien was correct, and in any event, whether it would prevail over any set off under s 151Z against the judgment in favour of the worker compensation insurer, are matters not beyond dispute. Those matters would impact upon whether Ms Andromedas would receive a benefit from the judgment.
It is sufficient to note that the documents did not purport to quantify the whole of the plaintiff's costs or, perhaps more importantly, the terms on which those costs would be payable or whether the costs exhausted any judgment moneys Ms Andromedas might receive. In any event, the tender came far too late for the matter properly to be ventilated before me.
No authority was cited to indicate that the question of legal fees, including legal fees incurred between the date of the offer and the date of judgment, was a relevant matter to take into account in determining whether a party had received a greater benefit from the judgment than from the offer. Rule 42.15 focuses on a comparison between the terms of the offer and the judgment order, and does not appear to justify an excursion into all of the financial impacts of the litigation upon the plaintiff that occur between the date of the offer and the date of the judgment. [5] This may be a reason why costs inclusive offers and offers including an amount for costs are not offers of compromise that comply with r 20.26. [6] In my view, the rules do not require or authorise a comparison between the legal costs of the plaintiff at the time of the offer compared to at the time of the judgment, especially since those costs and their impact on the plaintiff would themselves be affected by the nature of the costs order made in the proceedings.
For all of those reasons, I reject the correspondence as not being relevant to the application of the costs rule.
Secondly, the defendant submitted that the workers compensation insurer's demand should be ignored because it was not part of the relevant proceedings. It is true that the judgment has no effect on that demand, but the relevance of the demand is created by the reference to the demand in the terms of the offer of the defendant. It is the defendant's offer that has enlivened the significance of the workers compensation insurer's demand.
In this respect, and somewhat ironically, the offer may arguably be non-compliant because, contrary to r 20.26(1), which provides for an offer to compromise "any claim in the proceedings", this offer seeks to impact on matters beyond the ambit of the proceedings, namely the workers compensation insurer's demand. In any event, for the reasons earlier given, I do not regard the third offer as a genuine attempt to compromise the proceedings, because although a sum was specified it was not a sum which would ever have been paid to the plaintiff, and thereby was understood by the defendant to be, in a practical sense, incapable of being accepted by the plaintiff.

G. Whether payment was no more favourable than the terms of the offer

Rule 42.15 provides: "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."
Thus, in order to obtain the favourable costs order, the defendant must show that the judgment was not more favourable than the offer. But here the third offer expressly contained terms that were not present in the judgment.
The terms of the chapeau, and cll 2 to 11 of the third offer, are terms which benefit the defendant to the detriment of the plaintiff. The chapeau precludes an admission of liability against the defendant, but that liability has been determined in favour of the plaintiff by the judgment. Clause 2 is inconsistent with the judgment amount. The judgment is intended to determine the obligations of the party at the date of judgment rather than to make it subject to earlier payments made. [7] Clause 3 authorises deductions which are not authorised by the judgment. Clause 4 precludes interest on those unauthorised deductions. Clause 5 imports an additional agreement between the plaintiff and the defendant which goes beyond the obligations the plaintiff may have had to the third party, because it imposes those obligations in favour of a new party, namely the defendant. Clause 6 extends the date for payment by the defendant. Clauses 7 and 10 contain admissions not determined by the judgment and not established on the evidence before me. Clause 8 provides a 10% deduction from the judgment, whereas the plaintiff was only subject to that deduction when no amount had been specified by Medicare. Clause 9 precludes interest in the extended period granted by cl 6, and cl 11 imposes an obligation of confidentiality which is not imposed by the judgment.
Thus, all of the clauses in the offer of compromise, apart from the clause providing for judgment, impose obligations on and detriments to Ms Andromedas additional to the judgment. The extent and value of those obligations on her must be considered in determining whether the judgment is less favourable to her than the terms of the offer. It is not an easy matter to determine the extent and value of those obligations. The covering letter to the third offer together with an accompanying schedule indicate that the value of the obligation in cl 2 alone, the clause that authorised deductions by reason of earlier payments made by the defendant, was $2,292.10. The value of other clauses is not as clear as they have non-monetary components of uncertain value, such as the provisions that there be no admission of liability and that the terms remain confidential. And as already indicated, cl 3 has a significant monetary impact because it creates an entitlement in the defendant to pay from the judgment amounts demanded by the workers compensation insurer, and here those amounts clearly exceed the amount of the offer; the judgment provided that the plaintiff would receive a sum, whereas in the circumstances the offer does not.
For all of these reasons, I am not satisfied that the judgment is "no more favourable to the plaintiff" than the terms of the offer as required for a special costs order under r 42.15.
As the defendant does not, by virtue of the offers of compromise, become entitled to a special order for costs, I need not consider whether a global sum order should be made. I note, however, that the claim for a global sum order, and for that global sum to be set off against the judgment, was founded on the alleged impecuniosity of the plaintiff, which was apparently evidenced by her lack of an investment in real estate and that for a time she stayed with or was staying with a friend. These are not matters that establish impecuniosity. There was also some reference to Centrelink payments which, if they were established to be the plaintiff's only income for a substantial time up to the judgment, might indicate some degree of impecuniosity. However, the defendant was not able to take the matter that far.

H. Discretion

None of the offers of the defendant were effective to deprive the plaintiff of her general entitlement to costs under r 42.1 of the UCPR as she was the successful party. However, as a matter of discretion I must consider that the plaintiff claimed in excess of $600,000 of damages and was awarded a sum a little over $16,000.
The defendant referred to the proportionality rule in s 60 of the Civil Procedure Act 2005. That rule is concerned with the practice and procedure of the Court and not with the entitlement of a party to costs. On the other hand, I should not ignore that the size of the damages claimed would likely have increased the costs and resources being devoted to the matter by the parties, costs that might not have been incurred by either side if a more modest claim of approximately the amount awarded in the judgment had been made. The difference between the amount claimed and the judgment awarded would ordinarily not be a weighty matter on the question of costs, but in this case, because it is so substantial, I think it should be considered. It is a matter that persuades me that the full costs of the plaintiff should not be awarded.
I should also mention that just before delivering judgment the representative for the defendant requested that I expressly not certify the need for two counsel in the matter. This request, being made at figuratively one minute to midnight, came too late for it to be fairly considered by the opposing party, the plaintiff, who was not represented at the judgment by counsel, and in any event, no provision was able to be identified as a provision authorising or justifying such a certification or refusal of certification.
The plaintiff did not seek a positive order in that regard. I am inclined to think that the proper course is for me to say nothing about that matter and regard the question of the costs of Senior Counsel as being a matter for the assessor, no doubt bearing in mind such matters as the amount of the judgment and the complexity of the proceedings, including the earlier work injury accident, the workers compensation payback, and any other matters that the assessor thinks are relevant. I do not propose to hear or determine a matter in regard to the certification of Senior Counsel in the absence of an appropriate application on notice.
Bearing all these matters in mind, I am of the view that there should be a reduction in the plaintiff's costs of 25% up to the date of judgment, principally because of the substantial difference between the amount claimed and the approximately 2.5% of that amount which was awarded in the judgment.

I. Orders

Accordingly, the orders of the Court shall be: 1. Defendant to pay 75% of the plaintiff's costs up to the date of judgment. 2. Defendant to pay the plaintiff's costs from date of judgment to today. 3. Note that this costs order operates to conclude the stay contained in order (4) made on 9 December 2016. 4. I note the offer of the interpartes undertaking given by the plaintiff's solicitor to the defendant and the defendant's insurer in the form of the document marked with a circularised A and initialled and dated today by me; I also note the defendant's and the defendant's insurer's acceptance of that undertaking and that the undertaking is given by the plaintiff's solicitor.

Endnotes

See Andromedas v Truong [2016] NSWDC 330 and subsequent orders.
See, e.g. Whitney v Dream Developments Pty Ltd [2013] NSWCA 188 at [43].
See Whitney.
See Vieira v O'Shea (No 2) [2012] NSWCA 121 at [13], Little v Saunders [2004] NSWSC 655 at [45]-[46].
The Court of Appeal in Elite Protective Personnel Pty Ltd & Anor v Salmon [2007] NSWCA 322 at [150] held that "it is not appropriate to embark on an assessment of costs at the time the offer was made", so an assessment of future costs seems even more problematic. See also Elite at [111]-[117] and [145].
See r 20.26(2)(c).
See Wende v Horwath (No 2) [2015] NSWCA 416 at [87], [130]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 December 2018

Services (Compensation) Act 1995(Cth)

(Cth), the Health and Other Services (Compensation) Care Charges Act 1995(Cth)

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Judgment (11 paragraphs)

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