Edwards v Devine

Judgment 1On 27 January 2011, the principal judgment was delivered in these proceedings granting the plaintiff leave to proceed, pursuant to s 109(1) of the Motor Accidents Act 1999. The defendant was ordered to pay the plaintiff's costs of the summons by which such leave was sought: Edwards v Devine [2011] NSWDC 2. The plaintiff now makes an application for an order that the defendant pay her costs on the indemnity basis. 2The context of that application is that on 19 November 2010, which was one month after the plaintiff had filed her summons, her solicitor served upon the solicitor for the defendant, an offer of compromise, which was in the following terms: "1. The Defendant to consent to or not oppose the Plaintiff's claim for the relief sought in prayers 1 and 2 of the Summons; 2. The Plaintiff to pay the Defendant's costs as agreed or assessed." 3That offer of compromise was served under cover of a Calderbank letter, which, in effect, invited the defendant, within 28 days, to abandon any resistance to the relief sought by the plaintiff. In return, the plaintiff offered to pay the defendant's costs of the summons, and undertook to move the court to make the orders sought. The plaintiff also offered to mention the appearance of the legal representatives of the defendant, with the object that the defendant would incur no further costs. 4That offer was not taken up, and the entitlement of the plaintiff to the relief sought was instead contested, albeit on the basis of issues that ultimately became narrowed at the hearing of the summons. In the principal judgment, I recorded my finding that the plaintiff's entitlement to the leave sought, was compelling, and orders were made accordingly. 5In my view, the fact that the orders were made on the basis that the issues had ultimately become narrowed from a much broader array of issues, is not a disentitling factor for indemnity costs, as was suggested by the solicitor for the defendant, Mr Hanna in his submissions. Whilst it is true that the parties ultimately saved time and costs by confining the issues in that way, this was not achieved as a favour extended by one party to the other. Rather, it was something they were obliged to do in any event, in order to avoid the litigation of unnecessary issues : Civil Procedure Act , s 56. 6The Uniform Civil Procedure Rules 2005 make provision for circumstances in which an offer made by a plaintiff is not accepted by a defendant, and where the plaintiff obtains an order no less favourable to the plaintiff than the terms of the offer. In those circumstances, a plaintiff is entitled to an order for costs on the indemnity basis from the beginning of the day following the day on which the offer was made : UCPR, r 42.14. 7On the issue of indemnity costs, on behalf of the plaintiff, it was argued that the result obtained by her was no less favourable to her than the terms of her offer, thus establishing an entitlement to indemnity costs, as provided by r 42.14. 8On behalf of the plaintiff, it was pointed out that the significance to the plaintiff of an order for indemnity costs was that the plaintiff's general entitlement to costs was limited under the statutory scheme because the costs were regulated as prescribed by Schedule 1 to the Motor Accidents Compensation Regulation 2005. Under that scheme, unless an order is made pursuant to s 153(1) of the Motor Compensation Act 1999, to depart from the costs regulated by Schedule 1, the plaintiff's costs would be necessarily limited to those prescribed costs. 9The plaintiff submitted that the circumstances warranted a departure from the prescribed basis of costs in order to avoid the substantial injustice of the plaintiff being left out of pocket by the costs that could have reasonably been avoided, if her offer of compromise had been accepted by the defendant. 10In contrast to the position argued by the plaintiff, on behalf of the defendant, it was primarily argued that the plaintiff's offer was an invalid offer as an acceptance of it could not have led to a result no less favourable than its terms. It was argued this was because only the court, and not the defendant, had the power to grant the leave sought by the summons. In this regard, as I understand the submission, for the purposes of considering the effect of an offer of compromise, the defendant sought to characterise the plaintiff's argued position as being a " nonsense ". In this regard, Mr Hanna sought to draw a distinction in the costs consequences between a claim seeking a grant of the leave of the court by summons, and the entry of a judgment in proceedings. 11I do not accept that submission because, in my view, the argument raised by the defendant is flawed. I have already recorded in the principal judgment, that it was the defendant's choice as to whether or not to offer resistance to the relief sought. If the defendant had accepted the plaintiff's offer, and had made no submissions of resistance to the application, other than to submit to the order of the court, in the face of the compelling evidence available to the plaintiff, as was assembled by her solicitor in this case, a refusal of leave would have been a highly unlikely outcome in the circumstances. 12In rejecting Mr Hanna's submission on this point, I respectfully adopt the opinion of Austin J in Dean-Willcocks v Commissioner of Taxation (No 2) [2004] NSWSC 286 at [27]. There, his Honour stated that where a court was required by statute to be satisfied of certain matters before making orders, there was no general principle or jurisdictional bar preventing a court from acting on the admissions of a party in considering whether the circumstances of a case warranted making consent orders, once satisfied of the basis for such orders. That statement was expressly approved in Dean v Stockland Property Management Pty Ltd & Anor (No 2) [2010] NSWCA 141 at [41]. 13It is undoubtedly correct that, as was submitted by Mr Hanna, the court exercises independent judgment when considering and making consent orders, and does not just rubber stamp the consent of the parties, for example when it sometimes happens that a proposed settlement of a case brought on behalf of a minor or a protected person is not approved notwithstanding any agreement and submissions of the parties. However, in my view, in this case that argument goes nowhere. Just as in the case where a court is required to consider whether a proposed settlement is reasonable and in the best interests of the minor or the protected person, the consideration of whether or not to grant leave pursuant to consent orders would have required some consideration of the circumstances before making such orders. In this regard, at paragraph [124] of the principal judgment, I have already recorded my finding that I considered the case for the making of the orders sought, compelling. 14In the result, I find that the order obtained by the plaintiff was no less favourable to her than the terms of her offer. This is demonstrated by the fact that she had not only obtained the leave which she had sought, but she obtained that leave together with an order that the defendant pay her costs of the application, rather than having to pay her own costs and the costs of the defendant, if her offer had been accepted. 15Subject to the rules, an order for the award of costs in relation to proceedings is discretionary: Civil Procedure Act 2005, s 98(1). On the facts of this case I see no disentitling conduct on the part of the plaintiff, which would have the effect of avoiding the result contemplated by UCPR r 42.14. For practical purposes, in this case I see no substantive difference in the effect of the plaintiff's offer either when viewed as an offer of compromise pursuant to r 42.14, or as a Calderbank offer, to which the discretion in s 98(1) applies. 16In Chen v Karandonis [2002] NSWCA 412, the principles concerning the entitlement of a party to indemnity costs were explained as including circumstances where the litigation has been prolonged to an unnecessary extent, including where there has been an imprudent refusal of an offer of compromise : per Beazley JA at [110]. 17Where a party obtains a less favourable result than that offered in an offer of compromise made under the UCPR regime, there is a presumption that the offeror is entitled to indemnity costs from the date of the offer. The onus is on the offeree to establish a basis for displacing the presumption : Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 at [32] - [35]. 18It is well settled that a court will only depart from the usual rule where exceptional circumstances are shown : Morgan v Johnson (1998) 44 NSWLR 578 at pp581-2; South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [83]; Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 33 at [15]. 19The decided cases disclose three broad categories of circumstances in which the presumption in favour of an award of indemnity costs might be displaced. The first basis is that the period for acceptance was unreasonable. The second basis is that the offer did not involve any compromise . The third basis is that the rejection of the offer was not unreasonable. 20The stated period for acceptance of the offer was 28 days. In my view this period for acceptance of the offer was reasonable and unremarkable, especially given the relatively straightforward nature of the issues involved. 21In the present case, the plaintiff's offer of compromise clearly involved a compromise rather than just a demand for the defendant to capitulate from his position. In contrast, a capitulation would have involved the defendant not only conceding the plaintiff's entitlement to the relief sought, but would have also required conceding the defendant's liability for the plaintiff's entitlement to the costs of the process. Instead, by the terms of her offer, the plaintiff was indicating a preparedness to forego seeking her costs, as well as indicating a preparedness to concede a liability for the defendant's costs. 22The determination as to whether the rejection of an offer was unreasonable is an evaluative judgment requiring a consideration of the facts and surrounding circumstance specific to the case : Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [19]; King Network Group Pty Ltd v Club of Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11]. 23Whilst in this case the defendant had an unfettered right to contest the plaintiff's application, on the compelling circumstances shown by the plaintiff, the defendant elected to reject the plaintiff's offer. This was at the potential peril of an indemnity costs order, having been forewarned of the possibility that an entitlement to such an order might arise. I have concluded that such rejection was, on the compelling case assembled by the plaintiff, unreasonable. This is because it seems to me that the principal thrust of the defendant's resistance to the relief sought by the plaintiff was to focus criticism upon the plaintiff's solicitor, where authority indicated that such criticism was unlikely to be determinative, even if the criticisms were valid. 24The defendant has not demonstrated any special circumstances that would justify displacement of the presumption prescribed by r 42.14. The fact that the relief sought involved the need to obtain the leave of the court is not a special circumstance: Richards v Cornford (No 3) [2010] NSWCA 134 at [98] ff. 25The preceding paragraphs deal with what I considered to be the substantive submissions made on behalf of the defendant. In the paragraphs that follow, I set out my consideration of some additional matters raised on behalf of the defendant by Mr Hanna, in his written submissions dated 28 January 2011. 26First , it was submitted the plaintiff's offer was " inappropriate " as it provided financial incentive to a defendant to offer no opposition to a claim for leave, and as such it was " repellent to the administration of justice " to sanction such an arrangement. I consider that submission to be flawed and I reject it because it fails to recognise that the offer that it criticises is clearly compliant with the spirit and the intention of s 56 of the Civil Procedure Act 2005, which requires parties to fulfil their obligations to assist the court to achieve or to further the overriding purpose of facilitating a just, quick and cheap resolution of the real issues in dispute between the parties in the proceedings. 27Secondly , a " functus " submission was made concerning the question of indemnity costs. It is difficult to discern the true basis of that submission, not only because the Civil Procedure Act 2005 enables an order for costs to be made at any stage of the proceedings, including after the conclusion of the proceedings : s 98(3), including on the indemnity basis: s 98(1)(c), but also because in his closing submissions, counsel for the plaintiff specifically flagged the intention to claim indemnity costs if the plaintiff's application for leave was successful. At the time, I indicated that any consideration of the question of indemnity costs should be deferred until the plaintiff's claim for primary relief was determined. It is therefore incorrect to say, as was submitted by Mr Hanna, on the basis of the principles identified in Aon Risk Services Australia Limited v Australian National University [2009] HCA 2, that the court is precluded from entertaining an application for indemnity costs on account of a claimed failure by the plaintiff to make a specific claim in the summons for indemnity costs, without an amendment to the summons, which was opposed. For these reasons I reject the " functus " submission. 28Thirdly , Mr Hanna raised a " causation " argument to the effect that the original need for the costs incurred by the plaintiff in making the application for leave, were " entirely avoidable ". That argument was founded upon the argued availability of a procedure identified under s 109(2) of the Motor Accidents Compensation Act 1999, which Mr Hanna described as operating to " freeze time " in certain circumstances, and to prevent non-compliance with statutory time limits. With regard to s 109(2), surprisingly, and without evidence, Mr Hanna made the following extraordinary: "This is the method adopted, in the writer's experience, by every personal injury lawyer in NSW save for the solicitor for the plaintiff in this matter." 29Mr Hanna's submission then went on to seek to criticise the conduct of the case by the plaintiff's solicitor in ... " Blithely allowing a limitation period to sail past without taking the available statutory step to stop time from expiring ...". The reiteration of this kind of criticism was not open to the defendant on the application for indemnity costs because this topic had already been canvassed and determined in the primary judgment as being irrelevant to the exercise : Edwards v Devine [2011] NSWDC 2 at paragraph [108], citing Nominal Defendant v Manning [2000] NSWCA 80; (2000) 50 NSWLR 139 , per Foster AJA at [146]-[147]. I therefore reject the defendant's submission based on criticisms of the conduct of the solicitor for the plaintiff. 30Fourthly , Mr Hanna made submissions to the effect that in this case, the insurer was blameless and ought not be penalised by an order for indemnity costs. In this regard, my attention was drawn to the terms of my judgment in Darwich v Sinclair [2009] NSWDC 295, specifically, with regard to the order for costs made in that case, at paragraph [85], as follows: "85. By reason of the plaintiff seeking leave to proceed, the defendant has incurred costs. I consider that in this case, since the plaintiff has sought the procedural indulgence, the appropriate order should be that the defendant's costs of the application be paid by the plaintiff." 31Mr Hanna submitted that although the primary question of costs had already been determined in the present case, the same approach as that taken in Darwich should be taken with regard to indemnity costs in this case. The problem with such an approach is obvious. The costs outcome of each case is dependent upon its own factual circumstances, and the merits or demerits of those circumstances. In my view, the present case is very different to the case cited. In Darwich there was a substantive dispute over liability, as well as disputes over, amongst other things, whether or not the defendant was significantly prejudiced as to liability by the circumstances of the delay involved in that case, and whether the plaintiff was able to satisfy the quantum requirements of s 109(3)(b). Those matters are absent here. More importantly, in that case there was no offer of compromise requiring consideration. In citing Darwich , the defendant seems to have overlooked the significance of the words " in this case " which operated as a point of distinction in that case. 32Fifthly , Mr Hanna argued, with reference to the plaintiff in this case, that " ... allowing a party to profit from her own statutory breach works directly against the administration of justice ". In my view, that submission misconstrues the true focus of the position. The plaintiff's circumstances were that, because of the effluxion of time, she required the leave of the court in order to commence proceedings. The application for leave required the plaintiff to satisfy the requirements of s 109. The requirements of s 109 are concerned with entitlement to compensation. The notion of profit is foreign to such considerations and I reject the argument so made. 33The question of whether or not the plaintiff was entitled to the benefit of an order granting her leave to proceed, depended upon her providing the court with a full and satisfactory explanation of the matters required by the section. Once she had satisfied the court in respect of those considerations, as was the case here, she established an entitlement, as a tort victim, to seek compensatory damages for the effects of her injuries. In this context, in my view, that is the matter with which the administration of justice is concerned, whilst at the same time ensuring that both parties are treated with fairness. That circumstance has nothing at all to do with notions of alleged profit or windfall, over and above the plaintiff's just entitlements. Those just entitlements include a consideration of the merits of the application for indemnity costs, according to established principles. I therefore reject the submission that an order for indemnity costs would have the effect of profiting the plaintiff beyond her just entitlements. 34The matter that remains to be determined is the timing of the effect of the plaintiff's entitlement to an order for indemnity costs. 35In applying the effect of r 42.14 to the present case, I consider that since the directions timetable for service of evidence was due to expire on 14 January 2011, and by that time the defendant was in a position to consider the import of the entire array of the evidence to be relied upon by the plaintiff on the application, it is appropriate that an order for indemnity costs should take effect from the following day. 36I therefore order the defendant to pay the plaintiff's costs of the summons on the ordinary basis to 14 January 2011, and on the indemnity basis from 15 January 2011.