Dungan v Padash

Judgment

1. WHITE JA: On 23 April 2021 this Court allowed an appeal from orders of the District Court and in lieu thereof directed entry of judgment for the respondent in the sum of $41,965.65, such judgment to take effect as and from 30 July 2020 (Dungan v Padash [2021] NSWCA 66; order 3). The parties were directed to file written submissions on the question of what costs order should be made in respect of the proceedings in the District Court.
2. The solicitors for the successful appellant provided written submissions, not limited to that question. The solicitors for the respondent advised that they did not hold instructions to file any submissions in reply on costs and no such submissions were received.
3. In my reasons I observed: "[60] The appellant submitted that the award of damages for out-of-pocket expenses and loss of past earnings should have been limited to the period up to 30 November 2017 and that no award for future out-of-pocket expenses, future lawn-mowing services or future loss of earning capacity should have been allowed. For these reasons, I agree. On this basis the appellant calculated that judgment should have been entered for the respondent in the sum of $41,965.65. The respondent did not take issue with this calculation."
4. In both the notice of appeal and in the appellant's submissions, the order sought by the appellant was that in lieu of the judgment given in the District Court there be judgment for the respondent in the sum of $41,965.65.
5. In their written submissions, that ought to have been confined to dealing with questions of costs, the appellant's solicitors sought, in lieu of the judgment that was entered, that there be a verdict for the respondent in the sum of $41,965.65 and that judgment be given for the respondent in the sum of $207.53. This was said to reflect payments made by the appellant's insurer (Allianz) under s 83 ($10,758.12) and s 84A ($30,000) of the Motor Accidents Compensation Act 1999 (NSW) which are a defence to the proceedings to the extent of the amounts paid.
6. No argument was directed at the hearing of the appeal to whether the figure for which judgment was sought took into account the payments made by Allianz, or was a figure from which further sums should be deducted. If it were the latter, the appellant ought not to have sought judgment in the sum it did. I would reject the appellant's submission that order 3 should be set aside and judgment entered for a lower amount.
7. On the question of costs, order 4 made on 23 April 2021 was that the respondent pay the appellant's costs of the appeal. The appellant applied to have that order set aside. She sought in lieu thereof an order that the respondent pay the appellant's costs of the appeal and of the proceedings in the District Court in the sum of $25,000 in accordance with s 151(2)(b) of the Motor Accidents Compensation Act 1999 (NSW).
8. As to the costs of the proceedings below, the appellant submitted that she ought to be ordered to pay the respondent's costs and disbursements in accordance with Sch 1 of the Motor Accidents Compensation Regulation 2015 and that there be a set off between the costs payable by the appellant to the respondent in accordance with Sch 1 of the Motor Accidents Compensation Regulation 2015 and the sum of $25,000 that the appellant sought for her costs.
9. Section 149 of the Motor Accidents Compensation Act relevantly provides: 149 Regulations fixing maximum costs recoverable by Australian legal practitioners (1) The regulations may make provision for or with respect to the following - (a) fixing maximum costs for legal services provided to a claimant or to an insurer in any motor accidents matter, (b) fixing maximum costs for matters that are not legal services but are related to proceedings in any motor accidents matter (for example, expenses for investigations, for witnesses or for medical reports). (2) An Australian legal practitioner is not entitled to be paid or recover for a legal service or other matter an amount that exceeds any maximum costs fixed for the service or matter by the regulations under this section. (3) This section does not entitle an Australian legal practitioner to recover costs for a legal service or matter that a court or costs assessor determines were unreasonably incurred. (4) This section and any regulations under this section prevail to the extent of any inconsistency with the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014). An assessment under that legislation of any costs in respect of which provision is made by a regulation under this section is to be made so as to give effect to that regulation.
10. Sections 151 and 153 provide: 151 Costs where claims assessment made(cf 82D MAA) (1) This section applies if an assessment is made under Part 4.4 of the amount of damages for liability under a claim. (2) If the claimant does not accept that amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued, then the following provisions have effect with respect to liability for costs incurred after the certificate of assessment was issued - (a) the insurer is liable to pay the costs if - (i) the amount of court awarded damages in respect of the claim exceeds the amount of damages specified in the certificate of assessment by at least $2,000 or 20% (whichever is the greater), or (ii) the amount of court awarded damages in respect of the claim exceeds the amount of damages specified in the certificate of assessment by at least $200,000, (b) the claimant is liable to pay the costs if the amount of court awarded damages in respect of the claim does not exceed the amount of damages specified in the certificate of assessment, but the maximum amount that a claimant is liable to pay for the insurer's costs is $25,000 (or such other amount as is determined by the Authority by order published in the Gazette), (c) except as provided by paragraph (a) or (b), the insurer and claimant are liable to pay their own costs. (3) This subsection applies if court proceedings are adjourned under section 111(2) for further claims assessment because a party to the proceedings has adduced significant evidence in the proceedings that was available to the party at the time of the original claims assessment but was not made available to the Commission. In any such case, the court is to take the failure of the party to make that evidence available to the Commission into account and may require the party to pay a greater share of the costs incurred after the initial certificate of assessment was issued and until a further certificate of assessment is issued in connection with the claim. (4) The regulations may make provision for or with respect to the manner in which amounts referred to in this section are to be adjusted (to take account of inflation and other matters) for the purposes of enabling the comparisons provided for in this section to be made. (5) In this section - costs means costs payable on a party and party basis in relation to a claim, including court fees prescribed under section 154. court awarded damages means all damages of any kind awarded by a court in respect of a claim (without the addition of interest) after taking into account any deduction or reduction in accordance with Chapter 5. … 153 Other matters relating to costs (1) Any order of a court as to costs is to be made consistently with the relevant provisions of or made under this Act. However, the court may make an order that departs from those provisions in an exceptional case and for the avoidance of substantial injustice. (2) Subject to the regulations and rules of court where relevant, if costs are awarded to a claimant by reference to the amount recovered by the claimant, that amount is to be taken to be the amount recovered as qualified, or after making any deduction or reduction, in accordance with or by reference to Chapter 5. (3) Regulations under this Chapter may fix maximum costs and fees by reference to costs and fees fixed by regulations under the Legal Profession Uniform Law Application Act 2014. (4) The regulations may make provision for or with respect to the assessment or taxation of costs and any associated matters, and may do so by reference to the provisions of any Act.
11. In this appeal, the Claims Assessment and Resolution Service (CARS) assessor issued a certificate under s 94 of the Act for $47,724.71 plus costs, which was more than the judgment recovered by the respondent.
12. In accordance with s 151(2)(b), the respondent was thereby liable to pay the appellant's costs up to a maximum amount of $25,000.
13. The costs payable by the appellant's insurer (Allianz) for the appellant's legal representation substantially exceeded that sum unless the lawyers engaged by Allianz for the appellant were precluded from charging and recovering more than the amount of costs calculated in accordance with Sch 1 to the Regulation.
14. Because the motor vehicle accident occurred on 30 November 2016, and the claim arising from the accident was made on 2 March 2017, the Motor Accidents Compensation Regulation 2015 (as amended by the Motor Accidents Compensation Amendment (Claims) Regulation 2016) fixes the maximum amount of costs recoverable by legal practitioners. Clause 6(1)(a) of the Regulation provided that costs set out in Sch 1 were the maximum costs for legal services provided by an Australian legal practitioner to a claimant or to an insurer in a motor accidents matter.
15. Parties and their lawyers could contract out of that provision in respect of costs payable on a practitioner and client basis (cl 8). Nonetheless the maximum costs recoverable on a practitioner and client basis were fixed at the amount calculated by subtracting $50,000 from the amount paid in resolution of the claim (cl 8(2)). [1]
16. The appellant submitted that in accordance with cl 8(2) of the Regulation and Sch 1, the amount recoverable by the appellant's solicitor on a solicitor/client basis for work done up to 31 August 2020 would be $8,551.17, unless an order were made under s 152(1) departing from that provision.
17. Section 153(1) of the Act is quoted at para [10] above. The appellant submits that the present is an exceptional case in which an order should be made to permit the appellant's solicitors (Moray and Agnew) who are retained on the instructions of Allianz, to charge more than the amounts provided for by the Regulation and to permit Allianz to pay such amounts. Allianz has advised that it consents to pay Moray and Agnew solicitor/client costs from 28 June 2018 if permitted to do so pursuant to an order of the court. On 7 May 2021 it confirmed its instructions to Moray and Agnew to seek a special order as to costs pursuant to s 153 to enable that to be done.
18. It is clear that there would be a substantial injustice if Moray and Agnew were restricted to charging amounts in accordance with Sch 1 to the 2016 Regulation. This is also an exceptional case, having features that are unusual and out of the ordinary (San v Rumble (No 2) [2007] NSWCA 259 at [67]). The appellant's solicitor submitted that most motor accident cases are resolved by way of a negotiated settlement and that only about 20% of all claims proceed to a CARS assessment conference, citing the Motor Accidents Authority 2014/15 Annual Report. In this case, the CARS assessment conference was part heard. It was deferred to allow the parties to obtain further expert medical evidence and proceeded to a second CARS assessment conference. It then proceeded to a hearing in the District Court and to the appeal to this Court.
19. During this period the respondent failed to respond to numerous attempts by Allianz to resolve the claim. A Calderbank offer in the sum of $200,000 served on 25 June 2019 and repeated on 25 October 2019 was not responded to. After the CARS assessor issued a s 94 certificate awarding the respondent $47,724.71 plus costs and disbursements of $17,472.42, the appellant served an offer of compromise in the sum of $70,000 plus costs. That offer was served on 16 December 2019 and repeated on 3 July 2020. Again, the offers were not responded to. A further offer of compromise in the sum of $140,000 plus costs was served on the filing of the notice of appeal. That was also not responded to. As the appellant's solicitors submit, these are circumstances that make the present an exceptional case.
20. An order should be made pursuant to s 153(1) that the appellant's solicitor is permitted to charge Allianz on an unregulated solicitor/client basis, thereby dispensing with the 2016 Regulation. Allianz consents to such an order.
21. On the making of that order, the amount of costs for which the respondent would be liable but for the cap imposed by s 151(2)(b) would greatly exceed the cap.
22. There is no occasion to vary the order made for the respondent to pay the appellant's costs of the appeal. But a further order should be made as submitted by the appellant to reflect the capping of costs provided for by s 151(2)(b).
23. The appellant also submitted that an order should be made requiring the appellant pay the respondent's costs and disbursements in accordance with Sch 1 of the Motor Accidents Compensation Regulation 2015 and that the costs orders be set off against each other. The appellant calculated that prior to set-off the respondent would be entitled to $16,585.52 in accordance with that Schedule. The basis of that calculation was explained. In the absence of contradiction it should be accepted.
24. There is no doubt about the power of the court to order a set-off. It is just that a set-off be ordered lest the appellant be required to pay an amount it concedes it is liable to pay to the respondent but is unable to recover the sum of $25,000 from the respondent. Where both amounts of costs are quantified effect should be given to the set-off by giving judgment for the appellant in the amount payable by the respondent after set-off (Ritchie's Uniform Civil Procedure, LexisNexis Butterworths, s 21-25).
25. For these reasons I propose the following orders: 1. Order pursuant to s 153(1) of the Motor Accidents Compensation Act 1999 (NSW) that the costs which the appellant's solicitor is entitled to charge, and which the appellant's insurer is permitted to pay, not be restricted by cl 8 and Sch 1 of the Motor Accidents Compensation Regulation 2015; 2. Subject to orders (3) and (4) below, order that the appellant pay the respondent's costs of the proceedings below, in accordance with Sch 1 to the Motor Accidents Compensation Regulation 2015; 3. Subject to order (4) below order that the respondent pay the appellant's costs of the appeal and of the proceedings below in the sum of $25,000 in accordance with s 151(2)(b) of the Motor Accidents Compensation Act 1999 (NSW); 4. Order that the costs payable by the appellant pursuant to order (2) and by the respondent pursuant to order (3) be set off against each other and that the respondent pay the appellant's costs (after set-off) in the amount of $8,414.48.
26. MCCALLUM JA: As indicated in the principal judgment, I would have dismissed the appeal with costs. On the conclusions reached by the majority, I agree with White JA as to the orders that should now be made as to costs for the reasons his Honour has stated.
27. EMMETT AJA: I agree with White JA.

Endnote

1. Clause 8(6) of the Motor Accidents Compensation Regulation 2020 (NSW) removes many of the restrictions on contracting out between an insurer and the legal practitioner engaged by the insurer, but the appellant accepts that that regulation is inapplicable in the present circumstances. 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. Decision last updated: 26 October 2021