Bulsey & Anor v State of Queensland [2016] QCA 158

SUPREME COURT OF QUEENSLAND

CITATION: Bulsey & Anor v State of Queensland [2016] QCA 158

PARTIES: DAVID JOHN BULSEY (first appellant) YVETTE FAITH LENOY (second appellant) v STATE OF QUEENSLAND (respondent)

FILE NO/S: Appeal No 2831 of 2015 / SC No 829 of 2007

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal – Further Orders

ORIGINATING COURT: Supreme Court at Townsville – Unreported, 20 February 2015

DELIVERED ON: 14 June 2016

DELIVERED AT: Brisbane

HEARING DATE: Heard on the papers

JUDGES: Fraser JA and Atkinson and McMeekin JJ / Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS: The first appellant be awarded pre-judgment interest pursuant to s 58(3) of the Civil Proceedings Act **2011 in the sum of $69,493;**The second appellant be awarded pre-judgment interest pursuant to s 58(3) of the Civil Proceedings Act **2011 in the sum of $30,403;****The respondent be ordered to pay 80% of the appellants’ costs of trial on the indemnity basis;****The parties have leave to make submissions on the costs of the appeal;**The order previously made by this Court be varied by deleting paragraph 1 and in its place order: “Allow each appellant’s appeal with costs on the indemnity basis.”

CATCHWORDS: PROCEDURE – COSTS – RECOVERY OF COSTS – where the appellants were successful on appeal for damages for assault, battery and false imprisonment – where the parties disagree on the amount and rate of interest and costs that should follow – where the appellants made pre-litigation, UCPR and Calderbank offers lower than the court awarded damages when interest is taken into account – where the appellants seek indemnity costs – where the appellants abandoned a claim for malicious prosecution – whether the appellants suffered progressive loss – whether the respondent demonstrates another order for costs is appropriate – whether appellants costs should be awarded on District or Supreme Court scale – whether any costs order needs to be adjusted to allow for abandonment of claim for malicious prosecution – whether order previously made should be varied to allow costs of appeal on indemnity basis / Civil Liability Act 2003 (Qld), s 60 / Civil Proceedings Act 2011 (Qld), s 58 / District Court of Queensland Act 1967 (Qld), s 68, s 145 / Personal Injuries Proceedings Act 2002 (Qld), s 40 / Police Powers and Responsibilities Act 2000 (Qld), s 198 / Supreme Court Act 1995 (Qld), s 47 / Uniform Civil Procedure Rules 1999 (Qld), r 360, r 681, r 697, r 703 / Bulsey & Anor v State of Queensland [2015] QCA 187, cited / Calderbank v Calderbank [1975] 3 WLR 586; [1975] 3 All ER 333 cited / Camm v Salter [1992] 2 Qd R 342; [1991] QSC 84, cited / Cerutti & Anor v Crestside Pty Ltd & Anor [2014] QCA 33, cited / Chambers v Brice [2014] QSC 52, cited / Coleman v Greenland & Ors [2004] QSC 37, cited / Coleman v Watson & Shaw & Anor [2007] QSC 343, cited / Comgroup Supplies Pty Ltd v Products For Industry Pty Ltd & Anor [2016] QCA 130, considered / Eaves v Donelly & Anor [2011] QDC 207, cited / Fire & All Risks Insurance Co Ltd v Callinan (1978) 140 CLR 427; [1978] HCA 31, cited / Fisher v Channel Seven Sydney Pty Ltd (No 5) [2014] NSWSC 1873, cited / Hadzigeorgiou v O'Sullivan [1983] 1 Qd R 55, cited / Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298, followed / Kenny & Anor v Eyears & Anor [2004] QSC 59, cited / Kern v Evans & Anor [2005] QCA 416, cited / Lawes v Nominal Defendant [2007] QSC 103, cited / Monement v Faux [2006] 2 Qd R 392; [2005] QSC 342, cited / Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15, considered / Nguyen & Anor v Condo & Anor [2014] QSC 239, cited / Pollock v Thiess Pty Ltd & Ors (No 3) [2014] QSC 121, cited / Richfield Investments Pty Ltd v Oversea-Chinese Banking Corp Ltd (OCBC) [2004] VSC 351, considered / Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322, cited / Skelton v Collins (1966) 115 CLR 94; [1966] HCA 14, considered / Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331; [2014] HCA 31, considered / Vowles v Osgood (No 2) [2012] QSC 126, cited

COUNSEL: No appearance for the appellants, the appellants’ submissions were heard on the papers / No appearance for the respondent, the respondent’s submissions were heard on the papers

SOLICITORS: Connolly Suthers Lawyers for the appellants / Crown Law for the respondent

1. FRASER JA: I have had the advantage of reading the reasons for judgment of McMeekin J. I agree with those reasons and with the orders proposed by his Honour.

2. ATKINSON J: I agree with the reasons given and orders proposed by Justice McMeekin.

3. McMEEKIN J: The Background & Issues

4. The first appellant sued the respondent for damages for trespass to the person (assault, battery, and false imprisonment) and malicious prosecution. The action for damages for malicious prosecution was abandoned on the seventh day of the eight day trial. The second appellant sued the respondent for damages for assault and false imprisonment.

5. The appellants failed on the remaining causes of action in the proceedings before the trial judge, the trial judge assessing damages in the sums of $85,000 for the first appellant and $30,000 for the second appellant. They appealed. The appeal was allowed and judgment entered for the first and second plaintiffs in the sums of $165,000 and $70,000 respectively together with interest and costs to be agreed or determined. The parties were given leave to make submissions on the costs of the trial below and on interest. There has been no agreement and submissions have now been made.

6. Four issues remain to be determined:

(a) The amount of pre-judgment interest that should be allowed. That depends on the interest rate that is appropriate to apply;

(b) Whether the appellant’s costs below should be on the standard basis or the indemnity basis. That depends on the effect that various offers to settle should have;

(c) Whether any costs order in favour of the appellants needs to be adjusted to allow for the abandonment of their claim for damages for malicious prosecution – whether by proportioning the costs or making an order in favour of the respondent in relation to that cause of action;

(d) Whether the appellants should be heard on the question of the appropriate costs order in relation to the appeal and if so whether the order previously made should be varied to allow costs on the indemnity basis.

The Amount of Interest

7. It is not in issue that interest should be awarded for the period from the accrual of the causes of action taken as 27 November 2004. Nor is it in issue that s 60(1) of the Civil Liability Act 2003 (Qld) prohibits the awarding of interest on the amount of damages applicable to personal injury – an amount here of $5,000 of the first appellant’s award. The only dispute between the parties is as to the rate of interest that is appropriate.

8. The appellants contend that the appropriate rate of interest is that set for default judgment interest pursuant to Practice Direction (PD) No. 2 of 2002 (9% to 30 June 2007), PD No. 6 of 2007, and PD No. 22 of 2012 (10% to 18 April 2013) until 18 April 2013 and thereafter calculated in accordance with the rates agreed upon by the “Discount and Interest Rate Harmonisation Committee” established following a referral by the Council of Chief Justices of Australia and New Zealand being “4% above the cash rate last published by the Reserve Bank of Australia” before the relevant period commenced. The appellants alternative submissions are that interest should be either at 4% to 12 May 2010 and thereafter at 10% or alternatively at 4% for the entire period.

9. The respondent contends that the rate adopted should be 2%. That is arrived at by assuming a rate of 4% and then halving the rate, presumably on the assumption that interest is being assessed for a continuing loss suffered progressively and more or less evenly through the relevant period.

10. Despite the limited extent of the dispute it is helpful to reflect on the relevant principles underpinning an award of interest on damages.

11. The power to award pre-judgment interest is presently provided by s 58(3) of the Civil Proceedings Act 2011 (Qld). At the time of the accrual of the cause of action and commencement of the proceedings the relevant legislative provision was s 47 of the Supreme Court Act 1995 (Qld). There is no material difference in the provisions.

12. Section 58 of the Civil Proceedings Act 2011, so far as relevant, provides:

“Interest up to judgment

(1)This section applies in relation to a proceeding in a court for the payment of money, including a proceeding for debt, damages or the value of goods.

(2)This section does not apply in relation to—

(a)a proceeding for a cause of action arising before 21 December 1972; or

(b)a proceeding for the payment of money on which interest is payable as of right whether because of an agreement or otherwise.

(3)The court may order that there be included in the amount for which judgment is given interest at the rate the court considers appropriate for all or part of the amount and for all or part of the period between the date when the cause of action arose and the date of judgment.

…”

13. Thus, at all material times the applicable legislation provided that the Court may order that interest be paid “at the rate the court considers appropriate.” What might be “appropriate” will depend on all the circumstances of the case.

14. The purpose of an award of interest is not to punish the defendant¹ but to compensate the plaintiff for having been kept out of money to which he or she was entitled as a result of the defendant’s wrong. McPherson JA succinctly stated the relevant principles in Interchase Corporation Ltd v Grosvenor Hill (Queensland) Pty Ltd (No 3) in speaking of the predecessor to s 58:

“The section confers a discretion which, it is settled, is to be exercised judicially with a view to compensating the successful plaintiff for the injury or loss sustained: see Haines v. Bendall (1991) 172 C.L.R. 60, 63. The purpose or function of an award of interest under the section is restitutionary. It is not to punish the defendant but to compensate the plaintiff for being kept out of the money represented by the judgment sum in the period between accrual of the cause of action and judgment: Batchelor v. Burke (1981) 148 C.L.R. 448, 455; Grincelis v. House (2000) 201 C.L.R. 321, 328. In a perfect world, a defendant who injured a plaintiff would immediately recognise the wrong done and pay the amount of compensation required to make good the loss. For reasons that are self- evident, that never happens in practice, and the justification for awarding interest is, as s. 47 recognises, to compensate for the delay in payment between the time when the cause of action arises and the date of judgment: Thompson v. Faraonio (1979) 54 A.L.J.R. 231, 233. In substance, the interest awarded is, it has been said, itself “in the nature of damages”: Haines v. Bendall (1991) 172 C.L.R. 60, 66.²

15. The respondent’s approach – the adoption of a rate of 4% and then halving it - is that adopted in respect of awards of non-economic loss, for example pain and suffering in a personal injury case. Whether the damages here are on all fours with damages for pain and suffering for a personal injury is debateable. I will return to the point. However the fact that the damages here are for non-economic loss is of significance.

16. The parties did not refer to any case where the appropriate rate of interest for damages awarded for torts of this kind has been discussed. The only Queensland decisions that I have found award interest at 9% to 10% but without discussion of relevant principles.³

17. The High Court set out the relevant principles relating to an award of interest on damages for pain and suffering, the discussion being clearly of more general application, in MBP (SA) Pty Ltd v Gogic⁴:

“…although it is a fallacy to refuse to award any interest on the ground that the verdict contains a built-in inflationary factor, it is equally fallacious to hold that a plaintiff will be properly compensated for the delay in obtaining damages for pre-trial pain and suffering only if the award of damages contains an amount for interest calculated at the commercial rate or rates. The function of an award of interest is to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period: Batchelor v Burke (1981) 148 CLR 448, per Gibbs CJ at 455. But the loss or detriment which a plaintiff suffers by being kept out of his or her damages for pre-trial pain and suffering cannot be equated with the amount which those damages, invested at the commercial rate of interest, could have earned during the relevant pre-trial period. The determinants of rates of interest have been the subject of much dispute among economists. But it cannot be denied that during periods of significant inflation … commercial rates of interest reflect a component to compensate a lender for the decline, by reason of inflation, in the real value of the principal which occurs during the period of the loan … Damages for pre-trial non-economic loss, however, are assessed in accordance with the value of money as at the time of the award. In no way is any loss which a plaintiff incurs by reason of being deprived of his or her damages for pre-trial non-economic loss brought about by inflationary factors. In those circumstances, to award interest on damages for non-economic loss during the pre-trial period by reference to commercial rates is to compensate the plaintiff for a "loss" which he or she has not sustained.

No doubt whatever interest rate is used to compensate a plaintiff, it can be at best only a rough guide as to the value of the plaintiff's loss during the period when he or she was deprived of the use of his or her money. Nevertheless, to award interest at commercial rates for periods of pre-trial pain and suffering appears to be a breach of the principle that a plaintiff in a personal injuries action should not receive a sum for general damages greater than the "sum which, so far as money can do so, will put him in the same position as he would have been in if ... the tort had not been committed": Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185, at 191. The proposition that, during periods of inflation, interest on pre-trial non-economic loss ought to be calculated at commercial rates, therefore, is erroneous in principle. On this point, Cullen v Trappell should no longer be regarded as authoritative.”

18. As the respondent submits it has long been the practice in Queensland to assume a rate of 4% for such non-economic loss and then halve that for the reason earlier stipulated. The High Court approved of that approach in Gogic, it then being a long standing practice in South Australia (from whence the case had come) to adopt the 4% rate. The approach was adopted in Queensland following Gogic – see Camm v Salter⁵ per Thomas J (as his Honour then was). A leading text suggests that it was the invariable practice throughout Australia to apply the Gogic rate to awards of general damages: Interest Awards in Australia Edelman & Cassidy, LexisNexis Butterworths 2003 at p 151 n 211. Until the intervention of the legislature it remained the common practise. It is at least a starting point in the assessment of damages for torts such as defamation, although a rate of 3% is typically adopted eg see Cerutti and Anor v Crestside Pty Ltd and Anor [2014] QCA 33 per Applegarth J (McMurdo P and Gotterson JA agreeing); Fisher v Channel Seven Sydney Pty Ltd (No 5) [2014] NSWSC 1873 per Rothman J.

19. The passing of the Civil Liability Act 2003 (Qld) resulted in a different rate being adopted. However the practise of halving the rate for progressive loss was given legislative sanction – see the example to s 60(3) of the Civil Liability Act, a provision applicable to “monetary loss”. The rate provided for in that legislation is:

“the rate for 10 year Treasury bonds published by the Reserve Bank of Australia under ‘Capital Market Yields—Government Bonds—Daily—F2’ as at the beginning of the quarter in which the award of interest is made.”

20. Typically the rates required to be adopted under the Civil Liability Act have been less than 2%, when halved. Relevantly, the approach of the legislature suggests that the long practise of the Courts of allowing a rate of 2% on non-economic loss, and so assuming a 4% starting point, was not inappropriate.

21. The authorities that the appellants rely on for a commercial rate of interest are not for non-economic loss of this type. They each involve commercial interests and concern economic loss or losses akin to economic loss.⁶ In my view reliance on these cases is misconceived. The losses here are of a non-economic nature and the adoption of commercial rates for any period would be against principle as held in Gogic.

22. Bearing in mind the “rough guide” to compensation⁷ involved in the assessing of this component I see no reason not to adopt the long standing practise of using the 4% rate. That accords with the respondent’s submission.

23. The respondent’s assumption that the 4% rate should be halved presumably proceeds on the premise of a correlation between damages such as those for pain and suffering in the personal injury context and the damages here for wrongful imprisonment and assault and battery (excluding any compensation for personal injury). Can that assumption be sustained here? Is the assumption underlying the submission that the loss is a progressive one correct?

24. In Skelton v Collins, Windeyer J, when discussing what is entailed in the loss of a limb, observed (at 130): “A man who loses a limb, his eyesight, or his mind, does not lose a thing that is his, as his ox or his ass or his motor car is his, but something that is a part of himself, something that goes to make up his personality.”⁸ That is a very different thing to a complaint of wrongful imprisonment or assault and battery excluding the personal injury sustained.

25. The further point is that properly understood the plaintiff in such a claim that Windeyer J spoke of seeks compensation for the loss of the “profitable and pleasurable use” of the limb or the eye etc.: see Haines v Bendall (1991) 172 CLR 60 at 71-72 citing Fleming, The Law of Torts, 7th ed (1987), 215 with approval. In no sense does that reflect the nature of the loss here.

26. In the principal judgment⁹ I endeavoured to explain the features that justify compensation in cases of this type. I cited from the judgment of Clarke JA in (1996) 41 NSWLR 1 at 14 – 15. His Honour there quoted from 15th ed (1988) par 1619: “The principal heads of damage would appear to be the injury to liberty, ie. the loss of time considered primarily from a non-pecuniary viewpoint, and the injury to feelings, ie. the indignity, mental suffering, disgrace and humiliation, with any attendant loss of social status.”

(a) The first plaintiff - $69,493;

(b) The second plaintiff - $30,403.

31. The amount then that should be awarded to the appellants, including interest, is $234,493 for the first plaintiff and $100,403 for the second plaintiff.

Standard or Indemnity Basis

32. The issues here turn principally on the effect of the various offers made. Those offers are set out in a schedule – there were 10 such offers. Some were pre-litigation, some under the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), some “Calderbank offers.”¹¹

33. Of the 10 offers the respondent’s offers can be largely ignored. There is no submission that they are in any way relevant. The only observation I would make is that the offers appeared to be, at best, commercial offers and did not involve a realistic assessment of the likely damages.

34. Each of the appellants’ offers implicitly included interest. It is necessary to determine how much interest would have applied, assuming the amount of damages awarded by the Court, but taken to the date of the offer: Hadzigeorgiou v O'Sullivan¹²; r 362(2) UCPR expressly provides that the court must “disregard the interest …relating to the period after the day of service of the offer.”

35. Applying a 4% interest rate to the amounts in fact awarded for the period from accrual of the cause of action to the date of those various offers it can be seen that each plaintiff has consistently offered to settle for less than the amount eventually awarded. The various offers, the dates that they were made, the nature of them, the interest that ought to be allowed to the date of the offer (adopting the damages of $160,000 and $70,000 respectively), along with the total that results from adding that interest component to those amounts, are set out in the table below.

Offer Number Date of Offer Nature of Offer Plaintiff Period of Days Offer Interest Notional Total the Court would have awarded

1a 19.04.2010 MFO - Pre-litigation 1st 1969 $195,000 $34,501 $199,501

1b 19.04.2010 MFO - Pre-litigation 2nd 1969 $75,000 $15,094 $85,094

3a 12.05.2010 Informal verbal offer -Pre-litigation 1st 1992 $175,000 $34,904 $199,904

3b 12.05.2010 Informal verbal offer- Pre-litigation 2nd 1992 $25,000 $15,270 $85,270

4a 21.07.2010 UCPR 353 1st 2062 $195,000 $36, 131 $201,131

4b 21.07.2010 UCPR 353 2nd 2062 $75,000 $15,807 $85,807

8a 08.03.2012 Calderbank 1st 2658 $120,000 $46, 575 $211,575

8b 08.03.2012 Calderbank 2nd 2658 $35,000 $20,376 $90,376

9a 21.03.2012 Calderbank 1st 2671 $100,000 $46,802 $211,802

9b 21.03.2012 Calderbank 2nd 2671 $30,000 $20,475 $90,475

10a 30.07.2015 UCPR 353 and Calderbank 1st 3897 $84,999 $68, 284 $233,284

10b 30.07.2015 UCPR 353 and Calderbank 2nd 3897 $29,990 $29,874 $99,874

The Principles

36. The usual rule is that costs follow the event (r 681 UCPR). Indemnity costs can be awarded in the discretion of the court (r 703 UCPR). Different principles apply to the exercise of that discretion in the context of the various offers made here, depending on whether they were mandatory final offers, Calderbank offers or offers under Chapter 9 Part 5 of the UCPR.

37. The offers made on 21 July 2010 were made under Chapter 9 Part 5 of the UCPR. Rule 360 applies to such offers:

“Costs if offer to settle by plaintiff

(1)If—

(a)the plaintiff makes an offer to settle that is not accepted by the defendant and the plaintiff obtains a judgment no less favourable than the offer to settle;; and

(b)the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer;

the court must order the defendant to pay the plaintiff’s costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances.

(2)If the plaintiff makes more than 1 offer satisfying subrule (1), the first of those offers is taken to be the only offer for this rule.

38. As the table shows, here each plaintiff has obtained “an order no less favourable than the offer” made. There is no doubt that each was “at all material times willing and able to carry out what was proposed in the offer.” The default position is that the plaintiffs are each entitled to costs of their whole proceedings on the indemnity basis. The onus is thus on the respondent to demonstrate that “another order for costs is appropriate in the circumstances.”

39. Given that the plaintiffs each made pre-litigation offers that were less beneficial than the orders eventually obtained, the respondent faces a near insurmountable task in discharging the onus the rules place on it.

40. The earlier offers of 19 April 2010 were mandatory final offers made, we are told, under the Personal Injuries Proceedings Act 2002 (Qld) (PIPA) regime. Such offers themselves can provide a proper basis for an award of indemnity costs although that result is not inevitable. The accepted test is whether the refusal to accept the offer was imprudent or unreasonable, and a significant factor in making that assessment is the “relevant strengths and weaknesses of the cases that ought to have been apparent to the parties when the offer was made”: see Lawes v Nominal Defendant [2007] QSC 103 per Byrne J (as his Honour then was) and the authorities cited.

41. The significance of the legislative provisions and evident purpose should not be overlooked. The purposes of the PIPA are set out in s 4 of that Act and include providing a procedure for the speedy resolution of claims for damages for personal injury to which the Act applies; promoting settlement of claims at an early stage wherever possible; and ensuring that a person may not start a proceeding in a court based on a claim without being fully prepared for resolution of the claim by settlement or trial. Offers made under the PIPA process should be made at a time, if the parties have complied with their obligations (see for example s 20), when the “relevant strengths and weaknesses of the cases … ought to have been apparent to the parties.”

42. Finally it ought not be overlooked that the legislation requires the court to consider mandatory final offers when considering costs. Section 40(8) provides: “However, the court must, if relevant, have regard to the mandatory final offers in making a decision about costs.” To give effect to the legislative injunction in s 40(8) where an offer has been made by a plaintiff that was less favorable to the plaintiff than the eventual judgment it would be necessary, at least in the usual case, to adopt the only alternative basis allowed for in the rules – costs on the indemnity basis. Otherwise the offer would be disregarded. Cases in the trial division where such offers have been considered include Monement v Faux & Anor [2005] QSC 342 at [26] per Douglas J for a decision under the Motor Accident Insurance Act 1994 (Qld) regime and [2014] QSC 121 for a decision of my own under the PIPA regime.

The Respondent’s Submissions

44. The respondent’s submissions assume that the mandatory final offers and the first appellant’s UCPR offer were irrelevant as being too high. That assumption was wrong given the finding that the appropriate rate of interest is 4 per cent not 2 per cent. The respondent’s submissions do deal directly with the possibility of the second appellant’s offer being effective under rule 360 UCPR and with the Calderbank offers. The respondent makes these points:

(a) The second appellant’s claim and the facts relied on by her were inextricably bound up with the first appellant’s claim and the facts relied on by him. If the offer (ie the offer under the UCPR) had been accepted the trial would still have been as long and she would have still been required to give evidence as to what occurred prior to the first appellant being taken from his bedroom.

(b) The judgment sum for the second appellant is only higher than the offer of settlement because of the delay by the trial judge in delivering judgement, not because of any fault on the part of the respondent and the respondent should not be penalised for delay over which it had no control.

(c) Substantial costs were incurred by the respondent in dealing with the first appellant’s eventually abandoned claim for malicious prosecution;

(d) In circumstances where the dispute between the appellants and the respondent in part turned upon statutory construction, and in part which involved a claim in which the first appellant had no prospect of success (in relation to his claim for malicious prosecution) it was not unreasonable for the respondent not to accept the offers;

(e) None of the Calderbank offers foreshadowed an application for indemnity costs in the event of the respondent rejecting them;

(f) To award costs on the indemnity basis would have the effect decried by Redlich J in Richfield Investments Pty Ltd v Oversea-Chinese Banking Corporation Ltd:

“Potential litigants should not be discouraged from bringing their dispute to the Courts. It is such considerations which underlie the general rule that an order for special costs should only be made in special circumstances.”¹³

(g) The proceedings were brought in the Supreme Court when clearly within the monetary jurisdiction of the District Court. Pursuant to rule 697(3) and (4) UCPR the appellants only recover costs as if the proceedings had been started in the District Court unless the court otherwise orders. Where the matter was properly brought in the District Court the onus is on the appellants to persuade the court that costs should be awarded on the Supreme Court scale and reference was made to a decision of my own in Vowles v Osgood (No 2) [2012] QSC 126 at [16].

Discussion

45. Given the awards made the first point is not relevant. It assumes that the first appellant’s mandatory final offer and UCPR offer were ineffective. As mentioned the statutory requirement is that costs should be on the indemnity basis given the successful UCPR offer unless the respondent can show that another order is “appropriate in the circumstances.”

46. The complaint in (b) above that the offer was effective only because of the trial judge’s delay is of no moment. The submission confuses the true issue. As I have said the award of interest is not a punishment of the defendant. The award of interest is to restore the plaintiff to the position he or she would have been in had the damages been paid appropriately. The award is to compensate the plaintiff for having been kept out of money to which he or she was entitled as a result of the defendant’s wrong.

47. There is no rule that delay in itself restricts the period over which interest may be awarded. Rather it appears that unreasonable delay by one of the parties may be taken into account: Interchase Corporation Ltd v Grosvenor Hill (Queensland) Pty Ltd (No 3) [2003] 1 Qd R 26; [2001] QCA 191 at [59] – [63] per McPherson JA (McMurdo P and Thomas JA agreeing). Even in such a case, the plaintiff has been kept out of its money for the entire period and in the absence of demonstrated prejudice to the defendant it is difficult to see why it would be just to deprive a successful plaintiff of part of its compensation, that being the point of the award of interest. Here, however, the delay is not the fault of either party and the appellants have been kept out of their money since 2004.

48. I deal with (c) and (g) below as separate issues.

49. As to (d) – the fact that the respondent accurately assessed that the first appellant would be unsuccessful in one of his causes of action does not touch on the issue of why the appellants should be deprived of their just compensation where the respondent inaccurately assessed that the appellants would be largely or wholly unsuccessful in the remaining causes of action. It seems apparent from the respondent’s offers that it took that view – those offers valued the causes of action at very little.

50. As to the further point that “the dispute between the appellants and the respondent in part turned upon statutory construction,” it is true but only in a sense and does not advance the argument very far. The premise seems to be that there is a special rule about cases involving points of statutory construction. If that is so the existence of the “rule” is unsupported by the citation of authority. There are statements in the cases to the effect that the fact that the case involves a point of statutory construction is a relevant one – eg see J & D Rigging Pty Ltd v Agripower Australia Ltd (supra) at [12], but the premise is that the construction point involved was one on which minds might reasonably differ, or to put it another way, that the argument was not without reasonable prospects.

District or Supreme Court Scale? - Point (g)

57. Generally speaking the respondent’s submission is right – actions falling within the District Court’s monetary jurisdiction should be the brought in that jurisdiction and costs awarded on the scale appropriate. So much follows from rules 697(3) and 697(4) UCPR which provide:

“(3)Subrule (4) applies if the only relief obtained by a plaintiff in a proceeding in the Supreme Court is relief that, when the proceeding began, could have been given by the District Court, but not a Magistrates Court.

(4)The costs the plaintiff may recover must be assessed as if the proceeding had been started in the District Court, unless the court orders otherwise.”

58. At the time these proceedings were instituted the relevant monetary jurisdiction of the District Court was $250,000.¹⁷ No account is to be taken of the amount of interest awarded in determining whether the proceedings were within the monetary limit: s 68(3)(c) District Court of Queensland Act 1967 (Qld).

59. Good reason will need to be shown by a plaintiff to justify obtaining costs on a higher scale. Generally the case should involve some unusual feature or complexity in the evidence or the assessment of damages: Kern v Evans¹⁸; Kenny v Eyears.¹⁹

60. There are several relevant points.

61. The first is that the matters involved were of some considerable public importance. The events that occurred on Palm Island were of some significance not only to those immediately involved but to the community generally. The issues, as I have said, involved the liberty of the subject and the limits on the police in the exercise of their powers. The involvement of the State’s superior court was entirely appropriate.

62. Secondly, the evidence was sufficiently involved to take up some six days of hearing time, allowing for 20% of the trial to be allotted to the malicious prosecution case (see below).

63. Thirdly, there are relatively few decisions on the approach that ought to be taken to the assessment of damages. While the damages awarded were not at the level of the monetary limit of the District Court they were substantial ($235,000 in total).

64. Fourthly, at no stage did the respondent seek to have the proceedings remitted to the District Court.

65. In my view it is appropriate that the discretion be exercised to permit costs on the higher scale.

The abandonment of the claim for damages for malicious prosecution – point (c)

66. There clearly must be an adjustment for the fact that on the seventh day of the trial the first appellant abandoned the claim for malicious prosecution. By that time considerable costs had been incurred by the respondent in defending the claim.

67. The respondent submits that one of two courses be adopted. The first submission is that the appropriate order is for the respondent to pay 80% of the appellant’s costs of the trial on a standard basis. The 80% is derived from the evidence of a solicitor handling the matter for the respondent, Mr Oh, “that at least 20% of the work undertaken on behalf of the respondent in defending the proceedings related to the claim for malicious prosecution.”

68. The alternative submission is that the appropriate order be that the respondent pay the appellant’s costs of the trial on the standard basis save and except the costs of and incidental to the first appellant’s claim for malicious prosecution and that the first appellant pay the respondent’s costs thrown away on the first appellant abandoning his claim for malicious prosecution.

69. The appellants submit that 5% of the work undertaken on behalf of the first appellant related to the claim for the malicious prosecution and therefore a reduction of 5% of the first appellant’s costs might be appropriate. This submission takes no account of the respondent’s costs in defending the malicious prosecution claim. Nor does it address the evidence of Mr Oh.

70. The simpler course, and the one involving less time and expense, is to adopt the respondent’s first submission, that is, to limit the costs recovered by the appellants to 80% of the costs incurred.

Costs of appeal

71. The respondent points out that the parties were not given leave to make submissions as to the costs of the appeal. At the time that the Court was seized of the matter it was not known, quite properly, that offers had been made to settle the appeal. Had that fact been known to the Court then the direction would have been given that the parties make such submissions as they might be advised on the matter. It is appropriate that the parties have leave to do so now.

72. The offers made between trial and appeal by the appellants were, in each case, one dollar less than the amounts awarded by the trial judge. The appellants offered to accept costs of the claim and of the appeal on the District Court scale up to the date of the offers.

73. There is no doubt that Calderbank offers are a relevant consideration in determining the costs of an appeal.

74. The principles that apply to a Calderbank offer – both in the context of a trial and an appeal – were recently considered by the Court of Appeal in J & D Rigging Pty Ltd v Agripower Australia Ltd (No 2) [2014] QCA 23 where the Court (Holmes JA (as her Honour then was), Applegarth and Boddice JJ) said in dealing with the effect on trial costs:

“[5]The failure to accept a Calderbank offer is a matter to which a court should have regard when considering whether to order indemnity costs. The refusal of an offer to compromise does not warrant the exercise of the discretion to award indemnity costs. The critical question is whether the rejection of the offer was unreasonable in the circumstances. The party seeking costs on an indemnity basis must show that the party acted “unreasonably or imprudently” in not accepting the Calderbank offer.²⁰

[6]In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),²¹ the Victorian Court of Appeal stated that a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:

(a)the stage of the proceeding at which the offer was received;

(b)the time allowed to the offeree to consider the offer;

(c)the extent of the compromise offered;

(d)the offeree’s prospects of success, assessed as at the date of the offer;

(e)the clarity with which the terms of the offer were expressed;

(f)whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.

75. The High Court considered the effect of a Calderbank offer on appeal costs in a joint judgment in Stewart v Atco Controls Pty Ltd (No 2)²² where the court held at 334 [4]:

“This Court has a general discretion as to costs. The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs. The respondent submits that its rejection of the offer was not unreasonable. If that be the test, it would appear to require at the least that the respondent point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.”

76. The appellants rely upon J & D Rigging Pty Ltd v Agripower Australia Ltd (supra) as authority for the proposition that indemnity costs of an appeal can be awarded on the principles that apply when Calderbank offers are made in a claim and that the various factors listed in Hazeldene Chicken Farm²³ are relevant. I do not think that the Court meant to say in J & D Rigging that the approach was necessarily the same when appeal costs were under consideration. There are other factors that impinge on the exercise of the discretion. One is that identified in Comgroup Supplies Pty Ltd v Products For Industry Pty Ltd & Anor²⁴ where this Court (McMurdo P, Atkinson and Mullins JJ) considered the effect of a successful Calderbank offer made by a respondent to an appeal. The Court cited Stewart v Atco Controls Pty Ltd (No 2)²⁵ as setting out the relevant principles²⁶ and observed:

“[8]Although appeal courts are reluctant to encourage these Calderbank approaches in appeals for fear that it might stultify the development of the law, the court concluded that an examination of the merits of the proposed amended notice of appeal showed that it was bound to fail and did not raise any significant questions of law but rather the application of well-established principles of law to the facts of the case.”

77. Assuming however that the Hazeldene Chicken Farm²⁷ criteria apply, the relevant matters are these:

(a) The stage of the proceeding at which the offer was received: The offers were made at the stage of the proceedings when the parties should have been well aware of the relevant facts and had ample time in which to assess the relevant law. Outlines of arguments had been exchanged.

(b) The time allowed to the offeree to consider the offer: Fourteen days was allowed for acceptance of the offer – a reasonable time.

(c) The extent of the compromise offered: As matters transpired the offers involved a very considerable compromise. The first appellant offered to take some $150,000 less than his eventual award and the second appellant some $60,000 less than her eventual award. As the appellants point out even if the amounts awarded by the trial judge are taken as the measure there was still a level of compromise – the appellants forwent post judgment interest and costs on a higher scale.

(d) The offeree’s prospects of success, assessed as at the date of the offer: The respondent should have appreciated its difficulties. The approach taken at trial was abandoned.

(e) The clarity with which the terms of the offer were expressed: The offers were clear and unambiguous.

(f) Whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it: There was no specific foreshadowing of an application for costs on the indemnity basis but the respondent could have been under no illusion as to the eventual intention of the appellant. The offers were made in conjunction with, and in the context of the UCPR offers and rule 353. The rules do not apply to such offers but that does not change the fact of the evident intent with which the offers were made.

78. In my view where a party has consistently offered to settle proceedings from before their commencement on a basis less beneficial than that eventually achieved and has been forced to appeal to vindicate their rights, there would need to be very significant considerations to deny them their costs on the indemnity basis. Here the factor mentioned in Comgroup Supplies Pty Ltd v Products For Industry Pty Ltd & Anor²⁸ does not assist the respondent. There was no stultifying of the development of the law involved here. The decision involved the application of well-established principles of law to the facts of the case. Acceptance of the offers would have served to vindicate the appellants’ rights.

79. The respondent submitted that “only special or unusual features would warrant a departure from the usual order that costs of an appeal be assessed on a standard basis even though a Calderbank offer has been made”. That is not the law. No authority is cited for the proposition. The decision of the High Court in Stewart v Atco Controls Pty Ltd (No 2)²⁹ is contrary to it.

80. The respondent argues that the offers were made late – one month before the appeals were heard and after much of the costs of preparation for the appeal were incurred. That is true. In Monie v Commonwealth of Australia (No 2)³⁰ the NSW Court of Appeal considered the effect of Calderbank offers on appeal costs (at [71]):

“So far as the costs of the appeal are concerned, there is an additional reason why no order for indemnity costs should be made. It is that the Calderbank offer in question was made at the outset of the second trial, had expired by the time the appeal was instituted, and was not renewed for the purpose of the appeal. An offer of compromise made under court rules at first instance can be a relevant factor to consider on the question of costs on appeal, even if that offer has no statutory effect under the rules on the costs of an appeal: Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 410 per Gleeson CJ and Priestley JA; Fotheringham v Fotheringham (No 2) [1999] NSWCA 21; (1999) 46 NSWLR 194 at [33], 205 per Stein JA. There is no reason of principle why any different situation should apply concerning a Calderbank offer made at first instance. Such an offer operates as one factor able to be taken into account in exercise of the court’s discretion: Estate of Virgona v De Lautour (No 2) [2007] NSWCA 323 at [10]. However, the failure to renew for the purpose of an appeal a Calderbank offer that had been made for the purpose of trial is well recognised as a factor that tends against an award of indemnity costs for the appeal: Brymount Pty Ltd t/a Watson Toyota v Cummins (No 2) [2005] NSWCA 69 at [29]–[30]; Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160 at [21]; Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd (No 2) [2006] NSWCA 379 at [10]–[17]. One factor that particularly tends to disincline an appeal court from making an order for costs of an appeal because of a Calderbank offer made for trial is if (as happened here) the Calderbank offer was not still open for acceptance when the appeal was instituted or before significant costs had been incurred in the appeal: Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [8] to [9].”

81. Hence the point made by the respondent is a relevant one. But it is not determinative. After appeal the pre-trial offer to settle was not only renewed but substantially moderated with a very significant compromise offered. The respondent’s claim to have behaved reasonably in rejecting the appellants’ offers cannot be accepted given the eventual outcome of the case.³¹ The costs of preparation of the appeal were incurred by both sides because of the respondent’s intransigent attitude to the appellants’ claims.

Conclusion

82. The orders should be:

(a) The first appellant be awarded pre-judgment interest pursuant to s 58(3) of the Civil Proceedings Act 2011 in the sum of $69,493;

(b) The second appellant be awarded pre-judgment interest pursuant to s 58(3) of the Civil Proceedings Act 2011 in the sum of $30,403;

(c) The respondent be ordered to pay 80% of the appellants’ costs of trial on the indemnity basis;

(d) The parties have leave to make submissions on the costs of the appeal;

(e) The order previously made by this Court be varied by deleting paragraph 1 and in its place order: “Allow each appellant’s appeal with costs on the indemnity basis.”

Footnotes

1. Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 at 338-9 per Moffitt P. ↩

2. [2003] 1 Qd R 26 at 52-53. ↩

3. Eaves v Donelly & Anor [2011] QDC 207 per Samios DCJ; Coleman v Greenland [2004] QSC 37 per Cullinane J; Coleman v Watson & Shaw & Anor [2007] QSC 343 per Cullinane J. ↩

4. (1991) 171 CLR 657 at 663-664. ↩

5. [1992] 2 Qd R 342 at 343-344 - Ryan and Mackenzie JJ agreeing. ↩

6. Nguyen v Condo [2014] QSC 239; Chambers v Brice [2014] QSC 52. ↩

7. See Gogic above. ↩

8. Skelton v Collins (1966) 115 CLR 94 at 130. ↩

9. Bulsey v Queensland [2015] QCA 187 at [123]. ↩

10. (1978) 140 CLR 427 at 432-433. ↩

11. Calderbank v Calderbank [1975] 3 WLR 586. ↩

12. [1983] 1 Qd R 55. ↩