Christopher COSTELLO v Mark ARRAGON

LOWER COURT District Court JURISDICTION : LOWER COURT DC 1736/03 FILE NUMBER(S) : LOWER COURT Herron ADCJ JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40716 of 2003 DC 1736 of 2003

MASON P McCOLL JA

1 MASON P: The Court heard full argument in relation to an application for leave to appeal on the basis that it could address the appeal if leave were granted. 2 The claimant (hereafter "the defendant") and the opponent (hereafter "the plaintiff") were the drivers of motor vehicles involved in an accident on 28 February 1999. The plaintiff sustained injuries, particularly to his back, and he wishes to claim damages under the Motor Accidents Act 1988 (the MA Act). 3 The limitation period expired on 28 February 2002 (cf s52(4)). Since proceedings were not commenced within time the plaintiff required the leave of the court. This could not be granted unless the plaintiff provided a full and satisfactory explanation to the court for the delay (s52(4B)(a)). (There was no issue as to the likely damages exceeding the threshold stipulated in s52(4B)(b).) 4

Section 40(2) of the MA Act provides: In this Part, a reference to a full and satisfactory explanation by a claimant for non-compliance with a duty or for delay is a reference to a full account of the conduct, including the actions, knowledge and belief of the claimant, from the date of the accident until the date of providing the explanation. The explanation is not a satisfactory explanation unless a reasonable person in the position of the claimant would have failed to have complied with the duty or would have been justified in experiencing the same delay.

See generally Russo v Aiello [2003] HCA 53, 77 ALJR 1775, Buller v Black (2003) 56 NSWLR 425. 5 The plaintiff's first application for leave was dismissed by Freeman DCJ on 27 March 2003 on the basis that there was no material before the court from Messrs Creaghe & Lisle, the solicitors who had carriage of the plaintiff's legal affairs from immediately after the accident until late 2001. 6 A fresh application was heard by Herron ADCJ. The evidence that had been placed before Judge Freeman was supplemented by a further affidavit of the plaintiff and an affidavit of his former solicitor Mr Ireland of Creaghe & Lisle. The two men also gave oral evidence and were cross-examined. 7 Judge Herron granted the leave sought and it is this order that is challenged in these appellate proceedings. 8 The accident also gave rise to claims under the Workers Compensation Act 1987 (the WC Act) because it occurred while the plaintiff was on a journey to work. 9 The plaintiff's version of the accident is that he was forced to swerve to avoid an oncoming vehicle driven down the middle of the road. He lost control and went over an embankment. 10 However the question of fault has always been problematic. The police issued the plaintiff with a traffic infringement notice, the defendant's solicitors formally denied liability on 3 May 1999, and the defendant's third party insurer subsequently declined the claim on the basis that the defendant was not negligent. 11 The plaintiff first conferred with Mr Ireland on 1 March 1999. He was advised of his entitlements under the WC Act and the MA Act. The solicitor subsequently assisted in the preparation and timely lodgement of the requisite notices of claim upon the employer's insurer and the defendant's compulsory third party insurer. The latter claim was first lodged on 22 July 1999. 12 On 8 March 1999 Mr Ireland provided the plaintiff with a three page letter of advice as to his rights under the two Acts. He advised of the need to serve a Motor Accident Claim Form no later 28 August 1999. The letter also stated: The Motor Accidents Act imposes a statutory limitation period of three years from the date of accident within which to commence formal proceedings with the appropriate court. If proceedings are not commenced within that three year period the claimant will run the risk of having his or her claim deemed statute-barred.

13 The employer's insurer commenced weekly compensation on 8 March 1999. Payments totalling over $158,000 were made between that date and 21 September 2001 when all workers compensation rights were commuted. 14 The plaintiff knew from his solicitor that it would be risky to prosecute the damages claim because the defendant disputed negligence, and that dismissal of legal proceedings would result in a significantly burdensome costs order. 15 It is equally clear that no decision to foreswear the damages claim was taken in 1999 or 2000. As indicated, a notice of claim was lodged in accordance with s43 of the MA Act. The plaintiff's description of that claim being kept on the "back burner" (see below) confirms both the primacy of the compensation proceedings and the continuing possibility that the damages claim might be pursued in court. 16 The plaintiff continued to receive medical treatment for his back throughout 1999. He was also required to attend specialists nominated by the two insurers. 17 One of Mr Ireland's secretaries made a file note on 20 October 1999: I have cancelled the appointment with CIC [the motor accident insurer] who have arranged a medical for Mr Arragon. Ms Aitken [the plaintiff's de facto partner] has apparently spoken with JAI [Mr Ireland] in regard to this claim and has decided not to go ahead with it as JAI advised if they didn't win it, they would have to pay all bills which they cannot afford to do. I suggested we wait until CIC reschedule the appointment and in the meantime speak with JAI about whether or not to keep it.

18 On 17 November 1999 Mr Ireland wrote to the plaintiff giving advice with respect to his compensation claim. The letter also stated: In relation to the motor accident claim, we confirm that the appointment for the third party insurer with Dr Nicholls was cancelled. We will advise once a new appointment has been arranged. We confirm our advice to you that the question of the third party claim will be left in abeyance until the Workers Compensation Claim has been resolved one way or the other. We note your instructions in relation to the comprehensive claim being damages to your motor vehicle that this issue is to remain alive but not prosecuted at this stage. As you are aware, you have only three years from the date of the accident in order to prosecute the claim failing which the claim will be statute barred. We note that this action will be revisited after the Workers Compensation Claim has been completed.

19 The plaintiff submitted in this Court that these paragraphs were potentially misleading in that the only reference to a three year limitation period at this stage was in connexion with the property damage claim. It is unnecessary to resolve this particular question. Suffice it to say that I agree with Judge Herron that the former paragraph supports the plaintiff's contention that the motor accident claim was put on the "back burner" as distinct from being abandoned. 20 On 20 January 2000 the plaintiff was interviewed by a solicitor for the defendant's insurer. A letter dated 1 February 2000 from Mr Ireland included: As you are aware we are hopeful that the insurer's solicitor, having heard your version of the incident, might re-assess their position. However as we have indicated, it really does not matter terribly much at this point in time as we will continue both the Workers Compensation claim and Motor Accident claim simultaneously and will make the ultimate decision as time progresses, as to which one ought to be pursued.

21 This letter should be read against the background of s151Z of the WC Act. Relevantly, the section allows concurrent proceedings against the employer for compensation and against a third party for damages; it requires that compensation payments are to be recouped out of damages later awarded; and it stipulates that "if the worker firstly recovers … damages the worker is not entitled to recover compensation under this Act". There were obviously good reasons in the particular case for the plaintiff and his lawyers to be cautious about pressing a doubtful damages claim, at least before maximising compensation recovery. The stabilising of the plaintiff's injuries also had a bearing on decision-making. 22 In early June 2000 an unacceptable settlement offer was made by the defendant's insurer. Allowing for pay-back of compensation received to date, and based upon a stated 50% deduction for contributory negligence, the offer was to pay $13,750 plus $3,500 on account of costs. In a letter to the plaintiff dated 2 June 2000 Mr Ireland recommended rejection of this offer "particularly in light of your workers compensation rights which may end up being considerably more favourable". The letter stated that "In the meantime, we will continue to press the Workers Compensation aspect of your claim". 23 On 7 June 2000 the defendant's third party insurer formally declined the plaintiff's claim on the basis that its insured was not negligent. It also confirmed the abovementioned settlement offer. On 19 June 2000 Mr Ireland wrote indicating that the plaintiff wished to leave the matter in abeyance because the plaintiff's injuries had not yet stabilised. 24 An Application for Determination of workers compensation was filed in August 2000. 25 On 12 March 2001 there were proceedings in the Compensation Court at Narrandera. They were adjourned because of late service of a medical report commissioned by the employer's insurer. The report had suggested that the main cause of the plaintiff's disc protrusion was an incident that occurred in July 1999 when he was working under his car. 26 These events on 12 March 2001 are attested to in Mr Ireland's explanatory letter to the plaintiff dated 14 March 2001 and in a letter dated 21 March 2001 from the barrister involved, Mr I D Roberts, to Mr Ireland. Each of these letters is however silent as to discussions or instructions relevant to the motor accident claim. Yet the conference that took place at Narrandera on 12 March 2001 has assumed considerable significance in the present proceedings. 27

Mr Ireland said in par 32 of his affidavit: Following a conference between the Plaintiff, his partner, Mr Ian Roberts of Counsel and the writer on the morning of 12 March 2001 at Narrandera Workers Compensation Court it was agreed that this matter should be stood down from the list to facilitate the Plaintiff being examined by an independent Orthopaedic and/or Neurosurgeon. At that conference the issue of proceeding with the Plaintiff's Motor Accident Claim was discussed. The question of liability generally was examined at length by Mr Roberts with the Plaintiff and the Plaintiff again agreed that he would prefer to pursue his rights at workers compensation rather than any risk associated with a claim under the Motor Accidents Act.

28 The defendant submitted before Judge Herron and in this Court that this evidence established a decision by the plaintiff, taken on advice and instructed to his lawyers, not to pursue any damages claim under the MA Act against the defendant. This submission was bolstered by reference to the solicitor's earlier correspondence (quoted above) suggestive of an "either/or" approach to the claims capable of being prosecuted by the plaintiff. 29 Reliance was also placed upon the fact that Creaghe & Lisle took no steps to prosecute the damages claim after the plaintiff's workers compensation rights were commuted for $90,000 on 20 September 2001. This was the adjourned hearing date of the compensation proceedings. Mr Ireland's employed solicitor was present, instructing counsel. The plaintiff was also there with his partner. Settlement of the compensation proceedings was prompted by the plaintiff's revelation of a previously unnotified back injury that had occurred in December 1994. 30 The solicitor's file note and the confirmatory letter to the plaintiff are silent as to any discussion about the common law proceedings at the time when the compensation claim was finally resolved. The letter was at pains to confirm advice that rights under the WC Act had come to an end. This appears to have been the last dealing between the plaintiff and Creaghe and Lisle. 31 The plaintiff swore that he heard nothing further from this firm about his rights under the MA Act. He said that "As a result of something someone told me on 5 March 2002 I contacted Firths - The Compensation Lawyers for the first time". He learnt that the limitation period for his damages claim had just expired. 32 The onus lay upon the plaintiff to provide the court with a full and satisfactory explanation for his delay and to persuade the court that it was fair and just in all the circumstances to grant the leave sought (Parsons v Doukas (2001) 52 NSWLR 162). These are independent criteria, but the defendant appears only to have fought the application on the former front. I imply no criticism, because the two issues effectively converged in the particular circumstances. 33 In the proceedings before Judge Freeman the plaintiff had sworn an affidavit that stated (in par 13) that he was not aware of a three year limitation period for bringing proceedings for damages for personal injuries under the MA Act until he was informed on 5 March 2002 by his present solicitors, Firth - The Compensation Lawyers. The plaintiff had said that he had not been told about this by Mr Ireland or anyone at Creaghe Lisle. 34 The plaintiff conceded before both Judge Freeman and Judge Herron that he had received and read Mr Ireland's letter of 8 March 1999 that had provided general advice, including advice as to the three year limitation period. He told Judge Herron that he could not remember reading the letter of 8 March 1999 and that he had forgotten, if he had ever actually perceived it, that there was a three year limitation period (Tr 31/07/03 pp20-22). He said (ibid p23): All l can remember that he was leaving the car accident on a back burner, I can remember him telling me that . 35 He was an unskilled labourer. He also referred to the painkillers taken because of back pain and his general reliance upon "me Misses" for most reading, phone calls and assistance with business affairs. 36 The plaintiff conceded a general recollection of speaking with Mr Ireland and the barrister at Narrandera, but he could not remember and could not say whether he had been given and had accepted advice then not to proceed with the car accident case. 37 Mr Ireland agreed that, from June 2000, his communications with the plaintiff related essentially to the workers compensation proceedings. He was particularly questioned in relation to par 32 of his affidavit (set out above). Some of that questioning was tantamount to gentle cross-examination by the plaintiff's own counsel. Mr Ireland understandably had concerns about the costs risks involved in prosecuting the damages claim. He confirmed that there was a conversation at Narrandera on 12 March 2001 pertinent to the motor accident claim. At times his evidence seemed to state that a decision not to proceed with the damages claim was taken at that meeting. At other times he appeared less categorical. Answers he gave at Tr p5 suggested that the decision not to pursue the motor accident claim was a provisional or temporary one ("at that time"), ie limited to the pendency of the compensation proceedings. He had a clear recollection of specific instructions not to proceed with a property damages claim, but was less certain about the personal injury damages claim (Tr pp9-10, 13, 14-15). He was challenged as to why he had never written to the client confirming instructions to abandon the common law claim in 2001, given his practice of spelling out matters carefully in correspondence. There had been incidents where this particular client had experienced difficulty in understanding legal information provided to him. 38 Senior counsel for the claimant/defendant submitted that Herron ADCJ erred in two broad respects. The propositions overlap to a degree. It was submitted first that the judge had failed to address and/or make sustainable findings on the issue whether the plaintiff had provided a "satisfactory explanation" for his failure to commence proceedings within the three year period. Secondly, the judge had failed to apply the central reasoning in Itek Graphix Pty Ltd v Elliot (2002) 54 NSWLR 207 in that the plaintiff had made a tactical decision to settle for his compensation rights and to allow the limitation period to elapse. 39 I would grant leave to appeal but dismiss the appeal. 40 It is important at the outset to record the matters that were not in issue either before the primary judge or in this Court. It was accepted that there was no abuse of process in bringing the second application (cf Nominal Defendant v Manning (2000) 50 NSWLR 139). It was further accepted that the critical focus of attention in the present case is upon the position of the plaintiff as distinct from his legal advisors. And, as previously indicated, virtually all attention was directed at the "satisfactory explanation" issue without separating out the question as to the justice of granting leave in all of the circumstances. No question of prejudice to a fair trial was raised before Judge Herron. 41 I now turn to the two submissions directed at the reasoning of the primary judge. 42 The defendant acknowledges that Judge Herron recited and made findings on the evidence now said to be critical to the issue of "satisfactory explanation". Thus, there were findings that the plaintiff was initially advised as to the three year limitation period. There was also particular reference to the secretary's file note of 20 October 1999 and to the letters suggesting that (in Mr Ireland's mind in particular) the compensation and damages claims were viewed as alternatives in practical terms. 43 But the primary judge was also required to address the factual issues opened up in the oral evidence. His Honour found that the plaintiff had forgotten any initial advice as to the three year limitation period for making a damages claim. This finding (at p4 and 12 of the Reasons) was well open in light of the plaintiff's testimony, including his evidence as to the circumstances in which he learnt that his claim had become statute-barred less than a week after it had happened, when he made first contact with his current solicitor. The plaintiff is an unsophisticated litigant and the primary judge had the advantage (denied to this Court) of seeing him give oral testimony. The conclusion was not glaringly improbable having regard to the fact that written advice as to the limitation period for personal injury claims was given once only and at the very inception of the solicitor-client relationship. 44 I shall return to the findings of the primary judge relevant to the Narrandera conference. It is, however convenient to address first the way his Honour dealt with Itek Graphix, the subject matter of the defendant's second broad submission. 45 Herron ADCJ held that Itek Graphix was a case in which the applicant had deliberately allowed the limitation period (under s151D of the WC Act) to expire in order that he would be able to get a decision of the Compensation Court which in turn would create estoppels against his proposed defendant. I have not detected any finding as to such a purpose in the reasons of this Court in Itek Graphix. What is, however, clear is that the applicant in that case made an informed decision not to bring common law proceedings for a work injury, but rather to continue prosecuting only a workers compensation claim with respect to that injury. The critical point was not that there was some election between alternative rights (see per Ipp AJA at 233 [148]). Rather, there was a decision not to sue at common law, being a decision consciously in the applicant's mind at the time when, to her knowledge, the limitation period was about to expire (see per Ipp AJA at 213-4[33], 232 [142]-[144]). 46 The point of distinction emphasised by Judge Herron (at p9 of his reasons) was that the situation in the present case (involving the plaintiff receiving compensation in September 2001) was not to be compared with the decision made by the plaintiff in Itek Graphix deliberately to allow the three year period to elapse. Here the plaintiff thought that his common law claim was not at risk through lapse of time, because he had forgotten about the three year period at all material times in 2001-2002. 47 In my view, Judge Herron correctly recognised that the plaintiff's decision to prosecute the compensation proceedings and to keep the common law proceedings on the "back burner" did not address the situation presented in Itek Graphix which focussed upon the knowledge, belief and intent of the claimant at the time when her claim became statute-barred. 48 In the present case the defendant argued in the District Court and before us that the plaintiff's decision to accept commutation of workers compensation rights was tantamount to abandonment of the claim for damages under the MA Act. It was not suggested that there was an election between inconsistent rights. Rather, the submission was that Mr Ireland and his client perceived that the plaintiff's interests lay in pursuing the compensation claim to a successful conclusion rather than incurring the potentially expensive risk of pursuing proceedings for damages. 49 Undoubtedly the plaintiff kept the damages proceedings on the "back-burner" between 1999 and 2001. But a critical question was whether, having commuted his workers compensation rights in September 2001, the plaintiff intended then or subsequently to abandon any claim for damages, instructing his solicitor accordingly. 50 On one version of his evidence, Mr Ireland considered that was the situation as and from the Narrandera conference on 12 March 2001. But Herron ADCJ made no finding to this effect. He accepted that Mr Ireland had the impression that the plaintiff elected to abandon the damages claim (reasons at pp4, 5). But there was no finding that instructions to that effect had been given or confirmed on 12 March 2001 or at any other time. Indeed, it is unlikely that a definitive decision would have been taken in March 2001 given that the workers compensation proceedings had to be adjourned because of the fresh medical issue raised by the employer. 51 On the contrary, there were the findings that plaintiff thought that the accident claim was still on foot, albeit that he had forgotten that the three year limitation period was fast running out (reasons at pp4, 10, 12). These findings were in my view open to the primary judge for reasons given above. So too was the conclusion that the plaintiff had given a satisfactory explanation for his failure to commence proceedings within three years in light of this understanding and the solicitor's failure to advert to the limitation issue at any time after March 1999 or to advise the client of his (the solicitor's) "impression" that the client would not be prosecuting the common law claim after September 2001. 52 It is true that the primary judge did not ask himself in terms whether the explanation given to the court was satisfactory in the language of s40(2) of the MA Act. This requires a court to consider whether a reasonable person in the position of the plaintiff would have been justified in experiencing the same delay as the plaintiff experienced. But the primary findings and the general conclusions of Herron ADCJ effectively addressed this statutory test. 53 The nub of Judge Herron's reasoning was: I do not think in this case that this agricultural labourer was careless of his rights in the sense to which [Ipp AJA in Itek Graphix ] was referring and I would accept that he in fact was relying upon his solicitors. The facts as to what happened so far as the solicitors were concerned are now known but I think that the applicant after his receipt of worker's compensation was of the view that the matter of the motor accidents claim was still on foot and I do not think, despite the genuine inference which was made by Mr Ireland, that indeed the applicant had abandoned any intention of proceeding under the Motor Accidents Act . It is all very well to be wise after the event, but I think that in a case such as this a solicitor in Mr Ireland's situation, bearing in mind the position of the applicant, should have made it clear to him or should have sought explicit instructions from him as to whether he wished to continue the motor accident claim, that is after the receipt by him of the worker's compensation.

These conclusions reveal no factual or legal error. 54 The following orders should be made:

2. Appeal dismissed with costs. 55 McCOLL JA: I agree with Mason P. **********

Last Modified: 07/26/2004 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.