Brittain v Commonwealth of Australia

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

21248/95 Anthony Winston BRITTAIN v COMMONWEALTH OF AUSTRALIA

JUDGMENT 1 HER HONOUR: the plaintiff, Mr Brittain, was a seaman on board HMAS Melbourne when it collided with HMAS Voyager on 10 February 1964. On 29 November 1995 Mr Brittain commenced proceedings against the Commonwealth of Australia seeking damages for psychiatric injury said to have been sustained by him as a result of the collision. 2 The action has had a lengthy history which it is unnecessary to detail here. The hearing commenced on Monday 24 February 2003 before myself and a jury of four. During the course of the proceedings, the Commonwealth admitted liability in relation to the collision in all but one respect. The outstanding issue was whether Mr Brittain had suffered a relevant injury as a result of the collision. It was Mr Brittain's case that he suffered chronic post traumatic stress disorder which had significantly affected his ability to function in many aspects of his life over a very lengthy period. Two psychiatrists were called in the plaintiff's case. They were Dr Brendan Holwill and Professor Beverley Raphael. Both of them expressed the view that Mr Brittain had suffered the diagnosable injury of post traumatic stress disorder. The defendant called Dr John Champion who considered that neither Mr Brittain's history nor presentation suggested post traumatic stress disorder or any other form of psychiatric disorder as a result of his experiences on 10 February 1964. 3 Thus the sole issue on liability was whether a relevant injury had been suffered by Mr Brittain as a result of the collision. This remained an open question throughout the hearing. When the jury retired to consider its verdict there was evidence which could have justified a verdict either for or against the plaintiff. 4 On 13 March 2003, the thirteenth day of the hearing, the jury returned a verdict in favour of the plaintiff. It awarded him damages in the sum of $25,038. 5 The jury's award of damages was, to put it mildly, surprisingly low. Mr Brittain had claimed total economic losses of well over $1,000,000, and although some deductions needed to be made to the total figure, the amount claimed was still very substantial. Moreover, once injury had been established, one would have expected the non-economic component to significantly exceed the amount awarded by the jury, given the lengthy time over which it had been suffered. 6 The jury's unexpectedly low award of damages has raised significant issues relating to the award of costs. In addition, the defendant has made submissions on the matter of interest. I shall deal with each of these issues in turn.

Interest 7 The first issues raised by the defendant under this head can be dealt with shortly. It is suggested that, as the existing statement of claim does not include a claim for interest, the Court lacks jurisdiction to award interest. 8 In this regard Mr Melick SC, for the plaintiff, sought at the outset of the hearing to amend the statement of claim in order to add a claim for interest. The defendant objected to that course and it was agreed that the matter would be deferred until after the jury's verdict. Had there been a verdict for the defendant, the issue would have gone away. No particular prejudice has been asserted by the defendant by reason of the late claim for interest. This being the case I consider it would be appropriate to allow the amendment so that the issues relating to interest can be dealt with on their merits. However Mr Branson QC, who appeared for the defendant, urged that such an amendment would infringe s 14 of the Limitation Act 1969. This is because when leave was granted on 27 July 2000 to commence these proceedings out of time, it was done on the basis of the statement of claim as then pleaded, which did not include a claim for interest. 9 In my view this objection must fail. The plaintiff is not now seeking to rely upon a new cause of action, but rather to raise an additional component under an existing cause of action. This is outside the purview of the limitations legislation. 10 Accordingly, in the exercise of my discretion, I grant leave to the plaintiff to amend the statement of claim so as to insert a claim for interest. 11 However this is by no means the end of the matter. The defendant says that, given the extreme delay between the accrual of the cause of action and the commencement of these proceedings, it would be unfair to the defendant to require that interest be paid on the whole of the judgment at the normal rate. I was referred to a number of authorities on this issue. Suffice it here to refer to a passage from the judgment of Moffitt P in Simonius Vischer v Holt and Thompson [1979] 2 NSWLR 322 at 338: "It has been long generally accepted that, whatever be the cause, delay between cause of action and judgment is productive of unfairness to one or other or both parties. While accepting that the defendant has the advantage of not having to pay the money and has the use of it, it does seem to me that, to make an order for the payment of interest at commercial rates extending for long periods into the past is prima facie productive of unfairness to the defendant; and that it is the more so if he has had no notice, or no early notice, of such a claim." 12 The position is somewhat complicated in this case by the surprisingly low verdict returned by the jury. A full award of interest will have much less impact on the defendant than it might otherwise have had. Nevertheless, as Mr Branson rightly pointed out, this is not a relevant consideration. A principled approach to the issue of interest needs to be adopted. In my view, taking all these issues into account, it would be appropriate to allow interest on past losses at two-thirds of the normally applicable rate. 13 Given the paucity of the jury's verdict, it is difficult to know how much should be attributed to past losses. However I must assume that the major part, if not all of it, relates to the past. The only future damages sought by the plaintiff related to non-economic loss and the cost of treatment. 14 In my view the appropriate outcome is to attribute $24,000 of the jury's award to past losses and to order that the defendant pay interest on that amount at two thirds of the normally applicable rate.

Costs 15 The jury's low award of damages gave rise to two issues relating to the payment of costs. I shall deal with them separately as they raise different matters of principle.

Party and party costs under the Supreme Court Rules 16 Part 52A r 33 of the Supreme Court Rules is designed to discourage the bringing of small claims in the Supreme Court. As relevant here, r 33(2)(e) provides that, in proceedings commenced between 30 June 1993 and 1 October 1997, a plaintiff who recovers a sum not more than $75,000 shall not be entitled to payment of his costs of the proceedings unless it appears to the Court that the plaintiff had "sufficient reason for commencing or continuing proceedings in the Court", in which case the Court can make an order for payment. 17 Mr Branson, on behalf of the defendant, submitted that it must have been "tolerably clear to the plaintiff" that there was a substantial risk of him not succeeding at all or of obtaining a verdict lower than $75,000. Accordingly, the normal rule should apply and the plaintiff should not receive his costs of the proceedings. 18 Mr Melick urged that r 33(2)(e) does not apply to the present case. In this regard he relied on sub r 33(1)(b)(ii), which provides that r 33 does not apply "where the proceedings can be brought only in the Supreme Court". At the time when these proceedings were commenced, in November 1995, the Supreme Court was the only court with jurisdiction to deal with the matter, given that the collision arguably occurred outside State boundaries. Mr Branson countered this argument by pointing out that, since 1 February 1999, when s 47 of the District Court Act was amended so as to enlarge the District Court's jurisdiction, the action could have been transferred to that court. He pointed out that r 33(2)(e) bars the plaintiff from payment of his costs in the absence of a finding that he "had sufficient reason for commencing or continuing proceedings in the Court." (emphasis added) So long as the proceedings could, at any stage, have been brought in or transferred to the District Court, the exclusion in r 33(1)(b)(ii) will not apply, according to his submission. 19 These submissions highlight an apparent ambiguity in the scope of r 33(1)(b)(ii). What is the temporal basis of its operation? Does the exclusion of "proceedings which can be brought only in the Court" relate to proceedings which, at the time of their commencement, could only be brought in the Court, as urged by the plaintiff?. Or does it, as the defendant submits, only operate to exclude proceedings which could neither have been commenced in another Court nor transferred to one?. 20 In my view the interpretation suggested by the defendant unduly strains the clear terms of the provision. At the time these proceedings were commenced, they could be brought only in the Supreme Court. On the face of it, this attracts the exclusion in Pt 52A r 33(1)(b)(ii). I do not consider that subsequent events can have the effect of altering this situation. 21 Even if I were wrong in this, it would not have affected the outcome. For I would in any event have found that the plaintiff had sufficient reason for continuing these proceedings in this Court. Damages were very much at large in this case and it was, in my view, entirely reasonable for the plaintiff and his advisers to continue the proceedings in the court where they were commenced, notwithstanding that the District Court later acquired jurisdiction to deal with it. 22 Accordingly, subject to the issue relating to the Calderbank offer, I would have ordered that the defendant pay the plaintiff's costs. I now turn to discuss that issue.

Calderbank offer 23 On 13 February 2003 the defendant's solicitor wrote to the plaintiff's solicitor offering to settle this matter on the payment of $125,000 "inclusive of all applicable repayments", together with costs as agreed or assessed. The offer was said to be made in accordance with the principles enunciated in Calderbank v Calderbank [1976] FAM 96. It was open for acceptance until 4 pm on 21 February, which was the Friday immediately before the commencement of the hearing. 24 The plaintiff did not accept the offer within the stipulated time. The jury's verdict was, of course, significantly lower than the amount offered. 25 There is now ample authority that Calderbank offers are to be treated in substantially the same manner as offers of compromise under the Supreme Court Rules. The effect, according to Pt 52A r 22(6), is that a plaintiff who rejects a settlement offer and later receives a judgment of a lesser amount, is entitled to receive damages on a party and party basis up to the date of the offer. Thereafter the plaintiff is to pay the defendant's costs on a party and party basis. 26 It is to be noted that r 22(6) provides for the plaintiff to pay the defendant's costs on a party and party basis. This is to be contrasted with Pt 52A r 22(4), which applies where a defendant has failed to accept an offer made by a plaintiff and later suffers a more adverse judgment. In that situation the defendant is liable to pay the plaintiff's costs on an indemnity basis from the date of the offer. 27 Despite the fact that the rules differentiate between the consequences to a plaintiff who rejects an offer which is not bettered by the result, and those to a defendant, nevertheless the trend of judicial decisions has been towards ordering indemnity costs in both situations. As Rolfe J said in Multicon Engineering Pty Limited v Federal Airports Corporation (1996) 138 ALR 425 at page 445 "Thus there is a strong and consistent body of authority in this court favouring the predisposition towards an order for indemnity costs if an offer of settlement has been made, rejected and not bettered in the litigation. It provides, at least, the prima facie position and, thereafter, one considers all the facts of the case to decide whether, in the proper exercise of discretion, that prima facie view should prevail."

After an extensive discussion of case law on indemnity costs, his Honour endorsed the following approach: "In my opinion the proper approach to take to an offer of compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness was the failure by the offeree to accept the offer, which unreasonableness is demonstrated, prima facie, by the ultimate result." 28 Mr Branson submits that there is no reason in this case why the normal rule should not be applied. Accordingly the plaintiff should pay the defendant's costs incurred since 17 February 2003 on an indemnity basis. 29 In response to this submission the plaintiff's solicitor, Mr Taylor, swore a lengthy affidavit in which he referred to the events preceding 21 February 2003. He received the defendant's offer, he said, on 17 February 2003. Two days later, on 19 February, Mr Taylor was assured by Ms Robinson of the Australian Government Solicitor's office that all relevant documents had been provided to Mr Taylor and that no further documents existed or could be located. In spite of this, at about noon on 21 February, Mr Taylor received further documentation from the defendant's solicitor relating to disciplinary proceedings taken against the plaintiff before his discharge from the Navy. According to Mr Taylor, it was impossible for him to assess the significance of this material before the defendant's Calderbank offer expired at 4.00 that afternoon. 30 Mr Taylor was cross-examined by Mr Branson. As it transpired, Mr Taylor himself had made two earlier offers of compromise on behalf of the plaintiff. On 9 August 2001 a formal offer of compromise was filed and served, offering to accept a verdict of $350,000 plus costs. On 29 January 2003 Mr Taylor sent a Calderbank offer to the defendant's solicitor offering to settle the matter for $550,000 plus costs. Moreover two days after the defendant's offer was received, namely on 19 February, Mr Taylor made a further Calderbank offer to the defendant, this time offering to accept the amount of $450,000 plus costs. The offer was said to be open for acceptance until 4.30 pm on Friday 21 February 2003. 31 In the circumstances of this case I do not consider that the late provision by the defendant of the plaintiff's disciplinary records had any relevant effect upon the plaintiff's decision to reject the defendant's Calderbank offer. Indeed Ms Robinson, of the Australian Government Solicitor, described a conversation with Mr Taylor on 19 February in which he referred to the defendant's offer as a "joke" and made a very uncomplimentary remark about it. Mr Taylor could not remember the precise conversation, but he said that the comment described by Ms Robinson was the sort of comment that he might have made in the circumstances. He said "If the Calderbank had come up I would have expressed my displeasure at it being so low." 32 Mr Branson, as indicated, submits that the normal consequences should flow from the plaintiff's rejection of the Calderbank offer and that the defendant's costs should be paid on an indemnity basis as from 17 February 2003. He submitted that the Court would only be justified in making any other order if there was "unreasonable conduct" on the part of the defendant. 33 This is not, however, a completely accurate statement of the law as I understand it. Serious consequences can attach to the rejection of a Calderbank offer, as the Court has confirmed on numerous occasions. This is designed to encourage early settlements of cases, thereby saving public costs which are necessarily incurred in litigation. It is also designed to indemnify a party who has made an offer of compromise, later found to have been reasonable, against costs thereafter incurred. To this extent Mr Branson's submission is correct. But, as Rolfe J pointed out in Multicon, ultimately the test of whether indemnity costs should be awarded is whether the failure by the offeree to accept the offer was unreasonable. The reasonableness or otherwise of the defendant's conduct in making the offer is a major consideration in this respect, but it is not necessarily the only one. 34 Mr Melick submitted that there was nothing whatsoever unreasonable in the plaintiff's failure to accept the defendant's Calderbank's offer. It was, he urged an unrealistically low offer. The fact that the jury returned an even lower verdict (so low, Mr Melick submits, as to be perverse) should not be taken to be a measure of the reasonableness of the offer in the first place. Mr Melick submitted that the whole scheme of offers of compromise and Calderbank letters is designed to penalise parties who unreasonably refrain from settling a case in the face of a realistic offer of compromise. This was not, he submitted, a realistic offer. 35 The nub of Mr Melick's submission is two-fold. First, that given the extent of the plaintiff's claim, which included non-economic losses of approximately $1,000,000, the defendant's Calderbank offer was neither a realistic nor a reasonable offer of compromise. Secondly, that the jury's verdict, being, as Mr Melick put it, "perversely low", should not be taken to be a measure of the reasonableness of the defendant's offer. In this regard, Mr Melick pointed out that none of the reported cases on this subject have involved a jury verdict. 36 From a general point of view I accede to Mr Melick's second submission. Whether or not the jury's verdict was perverse is not for me to determine. It was certainly a surprisingly low verdict: so low that it is difficult to understand a rational basis upon which it could have been reached. This being so, it would be unfair to the plaintiff to allow the jury's verdict to be the measure of the reasonableness of the defendant's offer. The reasonableness of that offer, and therefore the reasonableness of the plaintiff's rejection of it, will therefore be a matter for me to determine in exercising my discretion on costs. In other words, the fact that the jury reached its low verdict is a necessary part of the background of the matter, for it gave rise to this issue in the first place. But it cannot be determinative of the issue. 37 This is not, in my view, a case where the plaintiff should pay the defendant's costs on an indemnity basis. It could not on any view of the matter be said that the plaintiff's rejection of the defendant's offer was so unreasonable as to visit such an extreme consequence upon the plaintiff. 38 The real question, in my view, is whether the plaintiff should pay any part of the defendant's costs after 17 February 2003. This, as indicated, involves an assessment of the reasonableness of the defendant's offer in the circumstances which then prevailed. 39 The defendant's offer was, in the circumstances, a very low one. The plaintiff was entitled to expect that, if he succeeded on liability, he would probably receive a verdict well in excess of the amount offered by the defendant, particularly when the question of interest was taken into account. On the other hand, the issue of liability was still an open one at that stage of the proceedings. There was, as Mr Melick conceded, a real possibility that the plaintiff might fail altogether. It is the essence, after all, of an offer of compromise, that it takes account of a doubtful case on liability. 40 Nevertheless, given the low nature of the offer, I consider that it would impose an unwarranted burden on the plaintiff to require that he pay the whole of the defendant's costs of the proceedings from the date of the offer, even on a party and party basis. Costs are, by their nature, discretionary. In my view, an appropriate outcome in all the circumstances would be for the plaintiff to pay half the defendant's costs from the date of the Calderbank letter. 41 The orders I make are as follows:

The defendant is to pay the plaintiff's costs on a party and party basis up to 17 February 2003. Thereafter the plaintiff is to pay 50 percent of the defendant's costs on a party and party basis.

Last Modified: 04/14/2003 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.