HER HONOUR: On 16 March 2020, I delivered judgment in Duffin v Mount Arthur Coal Pty Ltd [2019] NSWSC 229 ("Duffin"), subject to the parties providing calculations of the assessment of particular damages.
On 20 May 2020, I entered judgment in favour of the plaintiff in the sum of $2,494,386.40. The defendant had made workers compensation payments in the sum of $345,401.59.
In Duffin at [400], I made an order that the defendant pay the plaintiff's costs on an ordinary basis. The plaintiff has made an application that the costs order in her favour be varied pursuant to s 96 of the Civil Procedure Act 2005 (NSW). A timetable was set for the parties to provide written submissions. I have now received their submissions.
The plaintiff relied upon the affidavit of her solicitor, Jessica Boatwright, dated 27 May 2020. The defendant did not rely on any affidavit evidence.
The plaintiff seeks that the costs order made in her favour be varied as follows:
"The defendant is to pay the plaintiff's costs on an ordinary basis until 28 September 2018 and on an indemnity basis from 29 September 2018."
The starting point in awarding costs is s 98 of the Civil Procedure Act. It relevantly reads:
"98 Courts powers as to costs
(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
..."
Rule 42.14 of the Uniform Civil Procedure Rules 2005 (NSW) (the "UCPR") relevantly reads:
"42.14 Where offer not accepted and judgment no less favourable to plaintiff
(1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer.
(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim:
(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and
(b) assessed on an indemnity basis:
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) ..."
UCPR 20.26 relevantly reads:
"20.26 Making of offer
(cf SCR Part 22, rules 1A, 2, 3 and 4; DCR Part 19A, rules 1, 2, 2A, 3 and 4; LCR Part 17A, rules 2 and 5)
(1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms.
(2) An offer under this rule:
(a) must identify:
(i) the claim or part of the claim to which it relates, and
(ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and
…
(c) must not include an amount for costs and must not be expressed to be inclusive of costs, and
(d) must bear a statement to the effect that the offer is made in accordance with these rules, and
…
(f) must specify the period of time within which the offer is open for acceptance.
(3) An offer under this rule may propose:
(a) a judgment in favour of the defendant:
(i) with no order as to costs, or
(ii) despite subrule (2) (c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or
(b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or
(c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer.
…
(5) The closing date for acceptance of an offer:
(a) in the case of an offer made two months or more before the date set down for commencement of the trial-is to be no less than 28 days after the date on which the offer is made, and
(b) in any other case-is to be such date as is reasonable in the circumstances."
By email dated 30 August 2018, the plaintiff's solicitors served an offer of compromise on the defendant, which relevantly reads:
"1. Pursuant to Rule 20.26 of the Uniform Civil Procedure Rules the Plaintiff makes an offer of compromise in this matter in the sum of $1,365,000.00 plus costs as agreed or assessed.
2. This offer remains open for a period of 28 days."
The defendant did not respond to this email.
[2]
The plaintiff's submissions
The plaintiff accepts that the offer of compromise did not identify the claim or the proposed orders for its disposal, as required under UCPR 20.26(2)(a)(i) and (ii). The plaintiff also accepts that the offer of compromise referred to costs, although not in the sense prohibited by UCPR 20.26(2)(c), as the offer was neither specific in the amount for costs sought nor expressed to be inclusive of costs. In all other respects, the offer of compromise complied with the requirements of UCPR 20.26. The plaintiff submitted that the lack of compliance with UCPR 20.26 is minor and not fatal. It is her position that the offer of compromise clearly conveyed her offer to resolve the proceedings by payment of the certain sum of money, plus costs as agreed or assessed.
The plaintiff referred to Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 ("Leach"), where McColl JA (with whom Gleeson JA and Sackville AJA agreed) stated at [35]-[37]:
"[35] …there could be many breaches of the requirements of the contents of an offer of compromise. However UCPR 20.26 only deals with non-compliance in one respect. Pursuant to UCPR 20.26(12), a "notice of offer that purports to exclude, modify or restrict the operation of r 42.14 or 42.15 is of no effect for the purposes of this Division"…
[36] Whether non-compliance with the requirements of UCPR 20.26 as to the form of an offer invalidates the offer turns on whether "it was a purpose of the legislation that an act done in breach of the provision should be invalid ... [i]n determining the question of purpose, regard must be had to the language of the relevant provision and the scope and object of the whole statute": Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 ; (1998) 194 CLR 355 (at [91]- (93]) per McHugh, Gummow, Kirby and Hayne JJ.
[37] ...the fact that UCPR 20.26 does not sanction non-compliance with the otherwise apparently obligatory requirements for the form of the offer suggests the legislature did not intend to render inefficacious an offer which otherwise complied with its requirements: see Lardil, Kaiadilt, Yangkaal and Gangalidda Peoples v State of Queensland [2001] FCA 414; (2001) 108 FCR 453 (at [117]-[118]) per Dowsett J (Merkel J agreeing)."
The plaintiff submitted that in accordance with UCPR 42.14(1), there can be no doubt that she received a judgment no less favourable to her than the terms of the offer.
The plaintiff submitted she has demonstrated the conditional entitlement to indemnity costs under UCPR 42.14, and says there is no basis upon which this Court should exercise its discretion to order otherwise.
[3]
The defendant's submissions
The defendant submitted that the effect of an offer that is non-compliant with the terms of UCPR 20.26 is that the plaintiff cannot rely upon it for the purpose of securing an order for indemnity costs under UCPR 42.14. Thus, prima facie, the plaintiff's application for indemnity costs should be refused.
The defendant further submitted that the offer under consideration in Leach contained minor changes in form to UCPR 20.26(3).
In Leach, the Court of Appeal identified at [30] that the offer was one that provided for a "verdict for the respondent", whereas it should have provided for "judgment in favour of the respondent". The difference was that the offer said "each party pay their own costs" rather than "no order as to costs", as required by UCPR 20.26(2). The relevant finding by the Court of Appeal regarding the factual issues is at [33]. It states:
"[33] Accordingly, in my view, although the offer uses a different form of words to those found in UCPR 20.26(3)(a)(i), the effect of the words used is that intended by the current Rule."
The defendant submitted that the subtle difference in language in the offer of compromise in Leach is not similar to the defects in the offer of compromise in this case. In this case, there is a complete non-compliance with the terms of UCPR 20.26(2)(a).
It should also be noted that in Leach, the Court of Appeal considered UCPR 20.26(3), not UCPR 20.26(2)(a). UCPR 20.26(3), the subject of Leach, was expressed in discretionary terms. It stated that an offer made under the provision "may propose", which the defendant submitted denotes a discretionary power. By comparison, UCPR 20.26(2)(a) states that an offer under the provision "must" comply with its terms. The defendant submitted that as the plaintiff concedes that she has not complied with the terms of UCPR 20.26, the offer is not an offer of compromise within the meaning of the provision. It follows that the potential costs consequences pursuant to UCPR 42.14 are not available to the plaintiff.
The defendant submitted that in the event that this Court is persuaded that the offer did satisfy UCPR 20.26, it has the discretion to "order otherwise" under UCPR 42.14(2) and order costs on the ordinary basis. The defendant bears the onus to persuade this Court to "order otherwise". It is not necessary to demonstrate exceptional circumstances. Rather, this Court must be persuaded that in the circumstances, and in accordance with the dictates of justice, it is proper to do so.
Circumstances that warrant this Court to order otherwise include circumstances where it is objectively reasonable for the defendant to test the plaintiff's claim.
The defendant referred to South Eastern Area Health Service v King [2006] NSWCA 2, where Hunt AJA stated:
"Although the Court may take into account the particular features of a case and the difficulty of putting an accurate estimate on its value in advance of the litigation, those considerations do not provide a basis by themselves for denying the party making the offer an order for indemnity costs: Hillier v Sheather (1995) 36 NSWLR 414 at [423]. In Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at [725], it was said that that a miscalculation in a case with large imponderables, where the course taken by the party to whom the offer was made may have been perfectly reasonable, provide a basis for denying an order, but the subsequent decision in Hiller v Sheather suggests that, whilst "large" imponderables may be a relevant factor in the particular case in denying an order for indemnity costs, in the general case, a party's reasonable belief as to his own chances of success does not alone provide a basis for denying an order for indemnity costs."
This is not a case where the defendant says that its reasonable belief at the time of the offer is the basis for denying the order for indemnity costs. Rather, the decision at that time should be viewed in the context of the numerous issues to be determined in the litigation. Those issues involved:
1. a fight on liability - there was good reason to believe in light of the contemporaneous medical histories that the plaintiff did not hit a lamination in the road but rather hit a windrow, in which case the plaintiff would not receive a verdict;
2. the plaintiff exaggerating her disability - a finding ultimately accepted by the trial judge.
In light of the objective nature of the matters to be determined by this Court that would heavily influence the outcome in the proceedings, the defendant submitted that its actions were reasonable. It must be remembered that if the defendant's view on liability was accepted by the Court, the plaintiff would have received no damages. In those circumstances, it was reasonable for the defendant not to accept an offer of $1,365,000 plus costs on 30 August 2018.
The defendant submitted that the proper order is that the defendant should pay the plaintiff's costs on an ordinary basis.
[4]
The plaintiff's submissions in reply
It is accepted that the defendant need not demonstrate exceptional circumstances in order to persuade the Court to "order otherwise". However, the plaintiff submitted that particular circumstances of the case would not justify a departure from the ordinary application of UCPR 20.26 so as to persuade the Court to exercise the discretion against the plaintiff.
The plaintiff submitted that the defendant's reliance upon contemporaneous medical histories as demonstrating the plaintiff did not hit a lamination, but rather a windrow, is an unsound basis for the submission that the circumstances justify such departure. Contrary to the defendant's submission, the contemporaneous histories within the defendant's own incident records and the histories taken by treating practitioners in March 2013 overwhelmingly demonstrate the plaintiff's consistent assertion to the effect she had hit a lamination in the road.
Similarly, the plaintiff submitted that the defendant's assertion that she was exaggerating her disability does not accord with the opinion of Dr Millons. In his report dated 22 August 2018 (contemporaneous with the Offer of Compromise being made), Dr Millions noted that although the plaintiff suffered from compounding non-organic features upon which he was not competent to comment, he accepted that she had a genuine basis for her complaints of some low back pain and lower limb pain.
The plaintiff submitted that in these circumstances the Court should not be persuaded to depart from the ordinary course, particularly in circumstances where the compromise between the sum offered and the judgment entered exceeded the Offer of Compromise by almost $1,130,000.
[5]
Conclusion
It is my view that the terms of the Offer of Compromise are clear. Firstly, pursuant to UCPR 20.26, the plaintiff made an Offer of Compromise in the sum of $1,365,000 plus costs as agreed or assessed; and secondly, the offer remained open for a period of 28 days.
There were two alleged deficiencies in the Offer of Compromise identified by the defendant. The first was that the plaintiff's offer did not comply with UCPR 20.26(2), which requires that an offer not include an amount for costs and not be expressed to be inclusive of costs. In my view, the plaintiff's offer, which was expressed to be "plus costs", did not offend that provision. The second was that the offer did not identify the claim or the proposed orders for its disposal. That deficiency, in my view, does not render the Offer of Compromise inefficacious, as it otherwise complied with the requirements of UCLR 20.26.
The defendant says that I should exercise my discretion to make an "otherwise order" both because there was a fight on liability and because there was medical evidence to suggest that the plaintiff was exaggerating the severity of her injuries and disabilities.
In relation to the fight on liability, the defendant had overwhelming contemporaneous evidence in its possession that established the plaintiff hit a lamination and not a windrow. As to the defendant's submission that the plaintiff was exaggerating her disabilities, there was evidence to support that view from both Dr Millions, an orthopaedic surgeon, and Ms Zeman, an occupational therapist. Importantly, the defendant's solicitors, at the time the offer was made, were in possession of surveillance footage showing that the plaintiff was exaggerating her injuries and disabilities. However, there was also a body of medical opinion to suggest the plaintiff was not exaggerating her injuries and disabilities.
Overall, it is my view that the defendant was in a position to make a realistic assessment of the Offer of Compromise, and that it was reasonable to accept it, taking into account the two factors referred to above at the time it was made on 30 August 2018. Hence, the defendant has not persuaded me that I should make an "otherwise order". The result is that the costs order made on 16 March 2020 that the defendant pay the plaintiff's costs on an ordinary basis is varied by adding the words "up to and including 30 August 2018" and then "as from 31 January 2018 on an indemnity basis."
[6]
The court orders that:
(1) The costs order made on 16 March 2020 that the defendant pay the plaintiff's costs on an ordinary basis is varied by adding the words "up to and including 30 August 2018" and then "as from 31 January 2018 on an indemnity basis."
[7]
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Decision last updated: 23 June 2020