Fattouh v Neffati

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

14856/1992 - KAREN FATTOUH v MONCEF NEFFATI (No 3)

JUDGMENT (Application to amend judgment and indemnity costs) 1 MASTER: On 20 September 2002 I delivered judgment in this matter. There was a verdict and judgment in favour of the plaintiff in the sum of AUS$132,871.00, and I reserved the question of costs. 2 On 12 February 1999 the defendant made an offer of compromise in the sum of AUS$150,00 plus costs (Ex O). This meant that the plaintiff was entitled to her costs up to and including 12 February 1999, but she would not be entitled to any costs after that date (including the costs of the trial). Hence, I reserved the question of costs to allow the plaintiff to put forward reasons as to why the court should not make an order pursuant to Part 52A r 22 of the Supreme Court Rules (SCR). 3 On 28 November 2002 the costs hearing commenced and documents were tendered as exhibits by both parties. The plaintiff is not legally represented but has been linked up to the court by means of telephone. She has been able to participate in the costs hearings. The plaintiff tendered two offers of compromise (Exs P and Q) and the defendant tendered one further offer of compromise (Ex 15). The plaintiff also tendered an economic loss report of Dolman Bateman dated 18 January 2000 (Ex R). 4 During this hearing the defendant sought to have the judgment varied. To allow the plaintiff to know the case that she had to meet to put her fully prepared case before the court, on both the costs issue and the amendment issue, orders were made that the arguments both in relation to costs and the proposed amendments to the judgment be put in writing. The defendant has subsequently furnished written submissions. The only additional document forthcoming from the plaintiff was a copy of the Notice to Appeal to the New South Wales Court of Appeal (NSWCA). I have decided to proceed to deal with these two outstanding issues on the basis of these documents, the oral submissions made on 28 November 2002 and documents that were tendered as exhibits on that day.

Applications for the amendment The plaintiff's application 5 As previously stated, the plaintiff forwarded a copy of her Notice of Grounds of Appeal. I have read it carefully and the matters that she raises in her appeal are matters that are properly addressed to the NSWCA. They will be ventilated at the hearing of the appeal. I decline to make any orders for amendment as sought by the plaintiff.

The defendant's application 6 At paragraphs 72, 80 and 90 of the judgment delivered 20 September 2002 I stated: "72. In her report dated 5 March 2001 Dr Stoline stated that her final diagnostic impression of the plaintiff in October 1997 was that of "a mood disorder, non-specific type, as well as Cluster B personality features (the borderline, hysterical, narcissistic group). Factors contributing to her mood disorder included the possible role of head injury in the taxi accident; a possible familial/genetic mood disorder triggered by stress; dysphoria related to personality traits; and simple unhappiness about her life situation." She notes that indirect factors have played a role in her symptoms and that "while the accident may have made her depressed and anxious, such an injury does not seem sufficient to explain the subsequent course of events." Regarding her future prognosis Dr Stoline reported that in terms of her psychiatric status, the mood and anxiety symptoms have been successfully treated with medication but will need ongoing monitoring and treatment. She noted that personality traits are stable over time but that regarding her overall life course; her prognosis does not appear favourable since she appears to remain unhappy. As to her capacity to work, during the time of her treatment Dr Stoline stated that the plaintiff was able to do research work with specific accommodations to her working conditions. She did not have the emotional stamina for sustained, intense work and when anxiety, dysphoria or pain were present they presented obstacles in her work relationships and ability to concentrate.

… 80. I have taken into account that this accident had a significant effect on the plaintiff's lifestyle and her career. The 1991 motor vehicle accident caused her career to stall until 1993. In 1993 the plaintiff had a further motor vehicle accident in which she suffered back pain. By 1995 she had resumed her career at the point she left it in 1991.

… 90. It is my view that the plaintiff's injuries and disabilities from the 1991 accident have resolved. It is not reasonable to allow any amount for future medical expenses." 7 At paragraph 3 of the notice of motion the defendant seeks that under Part 40 r 9 of the SCR the judgment given on 20 September 2002 be varied as follows: "(a) the allowance made in paragraph 82 and 100 for non-economic loss from $94,720 to nil; and (b) the amount of the judgment from $132,871 to $38,151."

The judgment has not been formally entered. Part 40 r 9(1) permits the court to set aside or vary a judgment where notice of motion for the setting aside or variation is filed before entry of the judgment. Until a judgment or order is authenticated by being formally entered, the court which gave the judgment or made the order can reconsider its decision and withdraw or vary the judgment or order. The court also has other powers under the "slip rule" (Part 20 r 10), but this ordinarily applies to situations where a judgment or an order of the court has been perfected by being drawn up as the record of the court in accordance with Part 41 of the SCR . The issue is whether I should vary the amount I awarded for non-economic loss. 8 The defendant has drawn my attention to the fact that I relied on the form of s 79 as it was after its amendment on 1 March 1994. The accident occurred on 21 July 1991. The court assessed the plaintiff's non economic loss at 32% of a most extreme case, which equated to AUS$94,720, being 32% of the maximum amount of 100% being AUS$296,000 (judgment, para 82). I accept that in making this assessment, I relied upon the incorrect form of s 79. 9 In relation to accidents which occurred prior to 1 September 1994, s 79(1) stated: "No damages shall be awarded for the non-economic loss of an injured person as a consequence of a motor accident unless the injured person's ability to lead a normal life is significantly impaired by the injury suffered in the accident." (my emphasis added) 10 Whereas the current s 79A(3) states: "No damages are to be awarded for the non-economic loss of an injured person as a consequence of a motor accident unless the injured person's ability to lead a normal life has been, or in the near future is likely to be, significantly impaired for a continuous period of not less than 12 months by the injury suffered in the accident." 11 The NSWCA has held that to recover damages for non economic loss pursuant to s 79(1) a plaintiff must show that, as at the date of hearing, her ability to lead a normal life is significantly impaired by reason of the injuries suffered in the accident - see Allen v Chown (1996) 24 MVR 255; Roberts v White (1999) NSWCA 12. 12 In Allen the NSWCA referred to a statement by Grove J in Matthews v Dean (1990) 11 MVR 455 where, in relation to s 79, his Honour stated: "I note the present tense of the verb in the proviso. I conclude that I should look at the current condition of the plaintiff in order to assess her qualification for NEL (non-economic loss). The verbiage is not 'has been' and thus I apprehend the litigant who has recovered from a state of significant impairment will be excluded, nor is the language 'will be' and Mr Jenkin pointed to the hypothetical problem of a plaintiff enjoying asymptomatic existence at the time of a judgment but with a definite prognosis of future disaster. The solution to that dilemma may be a construction but the existence of potential is itself a sufficient current impairment. But there is no need for me to digress further on such an analysis in this case. The context suggests no esoteric meaning for the phrase significantly impaired and I take it to mean damaged or adversely affected to an extent of consequence or notability." 13 The New South Wales Court of Appeal (per Clarke, Handley and Cole JJA) stated that there is nothing in s 79 which would justify interpreting 'is' as meaning 'has been, is or will be'. To give it that interpretation would be to rewrite the section with a power that the court does not enjoy. The New South Wales Court of Appeal held that Grove J was right and that this court should continue the approach to the old s 79 on the basis that his interpretation is a correct one. In Roberts v White the New South Wales Court of Appeal considered the decision in Matthews and declined to disapprove it. Thus the interpretation of s 79 as decided in Allen and Matthews still stands. 14 In my reasons for judgment I made findings that the plaintiff's ability to lead a normal life was not significantly impaired after May 1993 and that the plaintiff's injuries and disabilities from the 1991 accident have resolved (J para 90). Therefore the plaintiff's ability to lead a normal life was not significantly impaired as at the date of the hearing in 2001. If the plaintiff had been injured after 1 September 1994, she would have recovered damages for non-economic loss, by virtue of the amendments made to the Motor Accidents Act. However on the basis of my findings, the plaintiff is not entitled to be awarded any amount for non-economic loss. The defendant previously in his submissions, handed up prior to delivering judgment, had rightly drawn my attention to Roberts v White. When writing the judgment I overlooked that decision. 15 The issue is now whether I should exercise my discretion and correct my judgment. In Wentworth v Rogers [2002] NSWSC 921 (4 October 2002) (noted at (2002) 76 ALJ 745) Barrett J stated: "It seems to me that the relevant principles, as they apply in a case such as the present, can be summarised in one basic proposition, namely, that a single judge whose decision is susceptible to appeal through readily available channels (with or without any preliminary need for leave to appeal) should allow re-opening after judgment where it is obvious to that judge that the decision has miscarried and that the miscarriage may be rectified and the situation retrieved by attention to the matter by that judge rather than by an appeal court. What is highly undesirable is that the first instance judge should be cast in the role of hearing what amounts to an appeal against his or her own decision." 16 In these circumstances where I inadvertently applied the incorrect statutory provision (s 79) it is my view that I should exercise the power under Part 40 r 9 to correct and vary my judgment dated 20 September 2002. I make an order that the allowance for non-economic loss from AUS$94,720 be reduced to a nil amount, in accordance with the strict requirements of s 79(1) of the Motor Accidents Act 1988. When this adjustment is made the judgment that should be entered is for the sum of AUS$38,151.00. I make such an order.

Costs argument 17 The defendant seeks an order that the plaintiff pay the defendant's costs from the date of the offer of compromise; and that the defendant's costs be set off against the judgment in favour of the plaintiff. The plaintiff seeks that the defendant pays her costs for the whole of the proceedings. 18 Four offers of compromise have been made, two by the plaintiff and two by the defendant. As previously mentioned on 12 February 1999 the defendant made an offer of compromise in the sum of AUS$150,000 plus costs. On 9 October 2001 the defendant made an offer of compromise for the sum of AUS$350,000. This offer was open for 28 days. In response, on 19 October 2001 the plaintiff made an offer of settlement pursuant to the principles of Calderbank v Calderbank in the sum of AUS$917,000 plus costs. This offer was open for acceptance until 31 October 2001 (Ex P). On 30 July 2002 the plaintiff made an offer of settlement in the sum of AUS$500,000. Neither of the plaintiff's offers were expressed to be offers of compromise. Both of the defendant's offers of compromise were for an amount greater than the amount awarded by the court (albeit the sum of $132,871.00 or $31,151). 19 Part 52A r 22(6) of the SCR reads: "Where an offer is made by a defendant and it is not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim to which the offer related not more favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall, subject to rule 33, be entitled to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim thereafter assessed on a party and party basis." 20 The defendant submitted that although Part 52A r 22(6) confers a discretion to otherwise order, a "successful" offeror has a right to a special costs order under the rule: Hillier v Sheather (1995) 36 NSWLR 414. That rights exists even where the offeror has made a subsequent offer for a different amount. The defendant submitted that the plaintiff has no basis in the present case for denying the "successful" offeror's apparent entitlement under the rule. The defendant submitted that he is entitled to an order that the plaintiff pay to the defendant costs on a party/party basis from 13 February 1999 (being the day following the day on which the offer was made). 21 The plaintiff submitted that the offers made by her and the rejection of the offers of the defendant were reasonable as they were based on an economic loss report. This report was based on the instructions that the plaintiff provided to Dolman Bateman. To put it another way Dolman Bateman prepared the report by accepting the plaintiff's instructions as being correct. The plaintiff's creditability was not taken into account by Dolman Bateman but it was by the court. Unfavourable findings were made in relation to the plaintiff's credibility (J paras 11 to 17, 37 and 79). The plaintiff was not an impressive witness and there were inconsistencies in her evidence, which resulted in the plaintiff being awarded a modest sum of damages. It was the evidence of the plaintiff herself that led to the modest sum of damages being awarded. 22 The rationale of this costs rule has been explained in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721; NSW Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 and Morgan v Johnson (1998) 44 NSWLR 578. 23 In Morgan Mason P stated that the following principles are applicable: "(1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation: Maitland Hospital at 725-6; Hillier at 421, 431.

(2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance: Maitland Hospital at 724.

(3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party: Reeve at 102; Hillier at 422. This is because, from the time of non-acceptance "notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise" : Maitland Hospital at 724; see also Hillier at 420.

(4) Lying behind the rule is the common knowledge that "litigation is inescapably chancy" : Maitland Hospital at 725. For this reason, the ordinary provision is expected to apply in the ordinary case: ibid ; Reeve at 102-3. The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: Reeve at 102. As Clarke JA expressed it in Houatchanthara at p4: "The rule lays down the general principle that should be applied, and the order provided for in that rule should only be departed from for proper reasons which, in general, only arise in an exceptional case.

It is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. The idea behind the rule is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to a plaintiff, the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow naturally from that risk." (5) The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be borne in mind: Maitland Hospital at 725-6. Reasons must be given for "otherwise ordering": Hillier at 419; Quach ." 24 Part 52A r 22(6) operates "unless the court otherwise orders." It is my view that the plaintiff has not demonstrated a sufficient reason or reasons to depart from Part 52A r 22(6). The defendant is to pay the plaintiff's costs on a party/party basis up to and including 13 February 1999; thereafter the plaintiff is to pay the defendant's costs on a party/party basis from 14 February 1999.

25 The defendant applied for an order that he shall be entitled to set off the amount of any costs which the plaintiff is required to pay him, after such amount has been agreed upon or assessed, against the amount of the judgment in the plaintiff's favour and the amount of any costs the defendant is required to pay the plaintiff. I make this order. 26 The court orders that:

(1) Order (1) made on 20 September 2002 be varied by deleting the words "sum of AUS$132,871.00" and inserting the words "the sum of AUS$38,151.00" in lieu thereof.

(2) (a) The defendant is to pay the plaintiff's costs on a party/party basis up to and including 13 February 1999, and (b) The plaintiff is to pay the defendant's costs on a party/party basis from 14 February 1999.

(3) The defendant be entitled to set off the amount of costs, which the plaintiff is required to pay him, after such amount has been agreed or assessed against the amount of judgment in the plaintiff's favour and the amount of costs the defendant is required to pay the plaintiff.

(4) Up until the defendant's costs have been assessed a stay of the enforcement of the judgment amount is granted. **********

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