Arnott v Choy

CATCHWORDS: PROCEDURE - costs - whether Calderbank letter may be relied upon in proceedings under the Motor Accidents Compensation Act 1999 (NSW)

LEGISLATION CITED: Motor Accidents Compensation Act 1999 (NSW) Uniform Civil Procedure Rules 2005 (NSW)

Arnott v Choy [2010] NSWCA 259 CASES CITED: Calderbank v Calderbank [1976] Fam 93 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322

PARTIES: Demetrious Arnott - Appellant Henry Choy - Respondent

COUNSEL: PJ Deakin QC with J Turnbull - Appellant CS Leahy SC - Respondent

SOLICITORS: Holman Webb Lawyers - Appellant Ron Kramer Associates - Respondent

LOWER COURT JURISDICTION: District Court

LOWER COURT MEDIUM NEUTRAL CITATION: [2009] NSWDC 17

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 2009/298214

McColl JA Basten JA

Tuesday 7 December 2010 Arnott v Choy (No 2) 1 THE COURT: The respondent brought proceedings in the District Court of New South Wales for an assessment of damages for personal injuries suffered in a motor vehicle accident. He obtained a judgment below in the amount of $2,154,131.60. That award was reduced to $1,134,464 on appeal: Arnott v Choy [2010] NSWCA 259. The parties were given an opportunity to make submissions as to the appropriate orders as to the costs of the appeal and of a cross-appeal brought by the respondent. 2 The appellant, relying on an offer of compromise, sought an order that the respondent pay his costs of the appeal, to be assessed on the ordinary basis up to 2 July 2009 and on an indemnity basis thereafter. The respondent sought an order that each party bear his own costs of the appeal. There was agreement that each should bear his own costs of the cross-appeal. 3 On 1 June 2009, some three days short of three months after judgment in the Court below, the appellant served an offer of compromise, expressed to be made in accordance with Calderbank v Calderbank [1976] Fam 93, together with a draft notice of appeal. The appellant's offer to settle the claim in the sum of $1,754,131.60 plus costs, was rejected by the respondent on 2 July 2009. The appellant was successful before this Court in obtaining a reduction in the award to a sum $619,667 less than the amount offered.

4 The respondent submitted that, with respect to a motor accident claim, only an offer made in accordance with the Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR") could be relied on, absent an exceptional case where a special order would be required to avoid substantial injustice: see Motor Accidents Compensation Act 1999 (NSW), s 152 and s 153, set out below. He submitted that to make an indemnity costs order merely in reliance on a Calderbank letter of offer would be inconsistent with those provisions.

5 The respondent further submitted that the correct application of s 152 would lead to an order that each party should bear its own costs. He pointed to the incompleteness of the appellant's success on appeal, and to his own successful resistance on certain items.

6 The question that arises in this case is whether s 152 permits the Court to adopt its usual approach in determining costs where a party has made a Calderbank offer and applies for an indemnity costs order; and in particular, whether the statement in sub-s (2), that the "rules of court concerning offers of compromise apply to any such offer in those proceedings", by implication precludes the Court taking that approach. 7 This case went straight to court for assessment of damages, liability having been agreed; no pre-hearing claims assessment was obtained under Part 4.4 of the Act. In those circumstances, the special provisions with respect to costs of proceedings following a claims assessment (s 151) did not apply. Section 152 and s 153 of the Act provide: " 152 Costs where court proceedings and no claims assessment

(1) This section applies where a claim is determined by court proceedings (including court arbitration) and an assessment has not been made under Part 4.4 of the amount of damages for liability under the claim. (2) The rules of court concerning offers of compromise apply to any such offer in those proceedings. (3) The costs payable on a party and party basis are, subject to the rules of court, to follow the event, and are to include the court fees prescribed under section 154. 153 Other matters relating to costs

(1) Any order of a court as to costs is to be made consistently with the relevant provisions of or made under this Act. However, the court may make an order that departs from those provisions in an exceptional case and for the avoidance of substantial injustice. (2) Subject to the regulations and rules of court where relevant, if costs are awarded to a claimant by reference to the amount recovered by the claimant, that amount is to be taken to be the amount recovered as qualified, or after making any deduction or reduction, in accordance with or by reference to Chapter 5. (3) Regulations under this Chapter may fix maximum costs and fees by reference to costs and fees fixed by regulations under the Legal Profession Act 1987. (4) The regulations may make provision for or with respect to the assessment or taxation of costs and any associated matters, and may do so by reference to the provisions of any Act." 8 It is not necessary to consider whether and how these provisions apply to proceedings on appeal in this Court; the parties assumed that they did apply. The only relevant issue is whether the express reference to "the rules of court concerning offers of compromise" is inconsistent with common law principles relating to the consequence of rejection of a Calderbank offer.

9 It is understandable that the claims assessment process should affect both common law and statutory provisions concerning offers of compromise. Absent that process, there is no reason to depart from the usual principles with respect to offers made under the UCPR or in accordance with Calderbank principles. Nor does the express reference in s 152(2) to the application of the "rules of court" necessarily imply the exclusion of common law principles. It would not promote the objects of the Motor Accidents Compensation Act, including early settlement of claims, to accept the costs consequences of offers made under the UCPR, but not Calderbank offers. The respondent's submission to the contrary is rejected. 10 The principles relating to Calderbank offers were explained in Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 (per McColl JA) in the following passages: "98 The general principles concerning Calderbank offers were set out in Jones v Bradley (No 2) where the Court approved Giles JA's statement in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 (at [37]) that:

'The making of an offer of compromise in the form of a Calderbank letter … where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the Court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure …' 99 In Leichhardt Municipal Council v Green [2004] NSWCA 341 (at [46]) Santow JA (with whom Stein JA agreed) reviewed the authorities concerning Calderbank letters. His review demonstrated that such a letter would only justify an order for costs on an indemnity basis, rather than the ordinary basis, if it constituted a genuine offer of compromise, which it was unreasonable for the appellant not to accept: Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 (at [4]) per Handley, Beazley and Basten JJA. Among the issues germane to the question of the reasonableness of the offeree's conduct will be whether the offeree had an 'appropriate opportunity … to consider and deal with the offer': Donnelly v Edelsten (1994) 49 FCR 384 (at 396) (Full Court of the Federal Court, Neaves, Ryan and Lee JJ)."

11 In the present case the amount offered was reasonable, was 35 per cent greater than the final award and reflected a genuine compromise of the appeal. Sufficient time, extended at the respondent's request, was given to the respondent to assess the offer, which was not merely allowed to lapse, but was rejected.

12 The respondent points to differences between the draft grounds of appeal provided with the letter of offer and the grounds ultimately relied on before this Court. While the differences were real, the major challenge identified in both documents was directed to the assessment of the respondent's disabilities, both vocational and personal, after the accident. It is not self-evident that the respondent's assessment of the offer would have changed with the benefit of the notice of appeal in its final form. The respondent made no submissions explaining how the differences would have been relevant to a prospective assessment of a reasonable outcome and hence his rejection of the offer. 13 The respondent also made reference to the frontal lobe damage he suffered in the accident, as a matter relevant to the award of indemnity costs based on his rejection of the offer. No submission was made that the respondent was suffering under any legal incapacity; he was legally represented at all material times. Further, it was not explained how the respondent's cognitive difficulties may have affected his decision, presumably with the benefit of legal advice, to reject the offer. 14 The appellant's challenges to the judgment below related almost entirely to the way the evidence was assessed by the primary judge; there were no complex legal matters in dispute. The respondent was in a position to assess the weaknesses of the primary judge's reasoning, and to appreciate the attendant weaknesses with respect to the components of the award under challenge. The appellant attempted to avoid coming to this Court to have that evidence reviewed. That attempt was rebuffed. In all the circumstances of the case, that rejection was unreasonable. The respondent should pay the appellant's costs of the appeal on an indemnity basis from 2 July 2009. 15 The Court makes the following orders:

1. The respondent shall pay the appellant's costs of the appeal, including the costs of this application, to be assessed up to and including 2 July 2009 on the ordinary basis and thereafter on an indemnity basis.

2. Each party shall pay his own costs of the cross-appeal.
3. The respondent shall have a certificate under the Suitor's Fund Act 1951 (NSW). **********

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