Foley v Australian Associated Motor Insurers Ltd and Another [2008] NSWSC 778 | Case summary

6354/06 CAROLYN FOLEY v AUSTRALIAN ASSOCIATED MOTOR INSURERS LTD AND GALLAGHER BASSETT SERVICES PTY LTD WORKERS COMPENSATION NSW JUDGMENT 1 HIS HONOUR: These reasons relate to costs applications by parties to cross-claims. The plaintiff in the proceedings was Mrs Carolyn Foley, who died on 16 October 2007. Mrs Foley was injured in a motor accident on 12 April 2001; the vehicle she was driving was hit from behind by another car. She was injured again in a second motor accident on 13 July 2001; she was driving a motor vehicle which was struck on the passenger's side by another car. She was involved in a third accident on 25 May 2002; this does not seem to have caused any significant injury or aggravation. Each of the first two injuries occurred in circumstances in which Mrs Foley was entitled to Workers Compensation from her employer Cepal Pty Ltd, sometimes known as Fleets Flyers. The two vehicles which impacted with her vehicle and their drivers were not connected with each other but they each had Compulsory Third-Party Insurance issued by Australian Associated Motor Insurers Ltd (AAMI). 2 Mrs Foley received Workers Compensation payments, including weekly payments from Gallagher Bassett Services Pty Ltd, Workers Compensation insurer of her employer, for some years. Her employment was terminated on 8 August 2002. 3 Mrs Foley was awarded $537,859.30 damages and $38,292.52 costs on 13 October 2006 by a CARS Assessor of the Motor Accidents Authority. She accepted this assessment. When making payments to discharge liability for damages AAMI paid $194,817.56 to the Workers Compensation insurer; this was the total of all Workers Compensation paid irrespective of any allocation between the first and the second accidents. I act on the assumption that provisions of s 151Z of the Workers Compensation Act 1987 authorising deduction from damages and creating repayment liabilities apply. 4 Mrs Foley did not ever make a claim to the Motor Accidents Authority relating to her second accident; or if she did, she did not have any entitlement to damages determined and paid to her. In the ordinary workings of Workers Compensation legislation payment of damages for injuries sustained in her first accident would bring to an end her entitlement to Workers Compensation for injury and disability caused by the first accident. It would not bring to an end her entitlement to Workers Compensation for injury and disability caused by her second accident. 5 Statements by the Assessor in his reasons for decision seem to show that the second accident had little if any continuing effect. The Assessor said "on 13 July 2001 she was the driver of a motor vehicle which was struck on the passenger side. The second accident aggravated the injuries received in the first accident but there were no further symptoms or signs." Later he said "The MAS Panel further determined that the exacerbation of her neck and back pain by the subsequent accident of 13 July 2001 settled completely after several months and there was no permanent injury by that accident." He also relied on Mrs Foley's history that a third accident of 25 May 2002 did not result in any injury to her neck and back. 6 The Assessor's reasons seem to show that relatively minor significance and continuing influence were attributed to the second injury and that this reflected the way in which Mrs Foley's case was presented before him. Counsel for the Workers Compensation insurer contended that Mrs Foley could not depart from this position, a result he attributed to Issue Estoppel based on the reasons of the Assessor, to Abuse of Process and also, tentatively, to Estoppel. 7 Mrs Foley commenced the present proceedings by Summons dated 18 December 2006 against AAMI. She disputed that AAMI had been entitled to deduct Workers Compensation payments from the amount of damages paid to her under the Assessor's determination. From the terms of one of the declarations she claimed it appears that her position was that the Workers Compensation payments were "… payments previously received by the plaintiff in respect of Workers Compensation Claim No. 97647419 for injuries sustained on or about 13 July 2001." That is to say, it appears to have been her position that the Compensation which had been deducted had been paid or should be treated as paid to her for injuries in her second accident, and not the first accident for which she had been awarded damages. She also claimed an order for payment of the whole amount of damages and costs as determined to by the Assessor, interest and costs. 8 The basis of her claim can be gathered from passages in an affidavit of her solicitor Mr Matthew Garling sworn 18 December 2006. Mr Garling said: 8. The Accident occurred on the periodic journey within the meaning of the Workers Compensation act 1987, it being the journey from a place of work to the plaintiff's home. The plaintiff was therefore eligible, and has received, Workers Compensation payments totalling $17,447.29 in respect of the accident pursuant to the Workers Compensation act 1987 (NSW) and the Workplace Injury Management and Compensation Act 1998 (NSW). Those payments were made to the plaintiff by the relevant fund manager appointed under the Workers Compensation act 1987, CGU Workers Compensation (NSW) Ltd. 9. I am instructed by the plaintiff, and believe, that the plaintiff was involved, and suffered further injuries, in another motor vehicle accident that occurred on or about 13 July 2001 ("the second accident"). The plaintiff has received from CGU Workers Compensation (NSW) limited Workers Compensation payments in respect of the second accident totalling approximately $161,124.99. 11. Annexed hereto and marked with the letter "C" is a copy of the list of payments made to the plaintiff by CGU Workers Compensation (NSW) Limited in respect of Workers Compensation claim number 97613918 for injury sustained in the first accident on 12 April 2001. 12. Annexed hereto and marked with the letter "D" is a copy of the list of payments made to the plaintiff by CGU Workers Compensation (NSW) Limited in respect of Workers Compensation claim number 97647419 for injury sustained in the second accident on 30 July 2001. 9 The payments listed in Annexures C and D are deeply confused and impossible to follow but it does seem to be the case that payments totalling $18,134.80 were paid under the file number relating to the first injury and payments totalling $161,124.99 were paid under the file number relating to the second injury. 10 Under s 151Z subs 1(b): (b) if the worker recovers firstly compensation and secondly those damages, the worker is liable to repay out of those damages the amount of compensation which a person has paid in respect of the worker's injury under this Act, and the worker is not entitled to any further compensation, 11 It appears to have been Mrs Foley's position that "… the amount of compensation which a person has paid in respect of the worker's injury under this Act" is established by what is recorded in the two files and the insurer's accounting records. However in saying this I am drawing my own conclusions from the parts of the documents to which counsel drew my attention. There has never been an occasion when counsel for Mrs Foley has fully explained the basis of her claim. 12 AAMI filed a Cross-summons on 16 March 2007 in which the Workers Compensation insurer was the sole cross defendant. AAMI claimed a declaration that in the events which have happened, the cross claimant paid the cross defendant $194,817.56 by mistake, a declaration to the effect that the Workers Compensation insurer had no legal entitlement to that sum and an order for restitution. 13 It must be the case that in deciding to pay $194,817.56 to the workers compensation insurer and not to Mrs Foley AAMI acted on information of given to it by the Workers Compensation insurer. Establishing the entitlements of those involved and of the various parties involved the Workers Compensation insurer much more deeply than AAMI, although AAMI was sandwiched in and had to face Mrs Foley's litigation. In the circumstances AAMI had no real choice; protecting its position required that it bring proceedings against the Workers Compensation insurer. 14 The Workers Compensation insurer filed the Second Cross Summons on 18 April 2007. The Second Cross Summons was amended twice and the Further Amended Second Cross Summons was filed on 8 October 2007, as it happened eight days before Mrs Foley died. The Cross Defendants then were AAMI and the two drivers who had caused Mrs Foley's injuries. The claims for remedies are expressed in a complex way but at their core appears to be a claim for a declaration establishing that the Workers Compensation insurer was entitled to retain the money which AAMI had paid to it, or so much of it related to the first accident. The terms of some of the claims recognize the possibility of an outcome in which it was appropriate to deduct some but not all of the $194,817.56. 15 In correspondence between solicitors (interlocutory Exhibit 1) AAMI's solicitors asked the Workers Compensation insurer to articulate the basis on which they were justified in retaining the moneys paid and were told in response "Our client will return the sum which your client alleges is due to it as soon as it receives payment from the plaintiff compensating our client for overpayment which is a necessary consequence of the finding by the Court that you suggest." This was not a reply and can barely be understood; the letter went on further in terms which are still less comprehensible. 16 On 13 June 2007 Registrar Walton made an appointment for the hearing to begin on 6 December 2007 before McDougall J., estimate two days; Mrs Foley's death was made known to McDougall J on 19 October 2007 but preparations continued, apparently contemplating that the trial would take place, until the appointment was vacated on 27 November 2007; McDougall J. then said "I note that the plaintiff has died and that no administrator has been appointed to her estate … By consent I vacate the hearing fixed to commence on 6 December 2007." So far as is known no person has obtained Probate or Letters of Administration in Mrs Foley's estate. Mr Garling solicitor continued to attend at several directions hearings but as no Administration had been granted and nobody had been appointed to represent the estate for the purpose of the litigation his standing was as amicus curiae only. The last occasion when he was noted as having attended was the directions hearing before Registrar Musgrave on 8 April 2008. 17 UCPR 6.30(1) has the effect that proceedings do not abate on the death of a party; Mrs Foley's entitlement to enforce her claim for damages for personal injury survives her death. Subrule (2) empowers the Court widely to make orders for the rearrangement of parties; this would in my understanding extend to appointing a person who is not a legal personal representative to represent a deceased litigant for the limited purpose of conducting a hearing. 18 UCPR 6.31 deals with the situation which has happened in this case, where there is no order for the joinder of a replacing party within three months after the death of a party. Subrule (2) provides: (2) The court may order that, unless an application to join a party to replace the deceased party is made within a specified time, the proceedings in relation to the cause of action concerned be dismissed. 19 The order of 8 April 2008 was preceded by an order of 11 February 2008 in the terms of UCPR 6.31 limiting 21 days for an application to join a party to replace Mrs Foley. UCPR 6.31 authorises dismissal of proceedings: it does not authorise costs orders against parties who are dead and whose estates are not represented under UCPR 7.10. The order for costs of 8 April 2008 may have been irregular. However no application has been made to set it aside. 20 UCPR 7.10 provides: 7.10 Interests of deceased person (cf SCR Part 8, rule 16; DCR Part 7, rule 13; LCR Part 6, rule 14) (1) This rule applies to any proceedings in which it appears to the court: (a) that a deceased person's estate has an interest in the proceedings, but is not represented in the proceedings, or (b) that the executors or administrators of a deceased person's estate have an interest in the proceedings that is adverse to the interests of the estate. (2) The court: (a) may order that the proceedings continue in the absence of a representative of the deceased person's estate, or (b) may appoint a representative of the deceased person's estate for the purposes of the proceedings, but only with the consent of the person to be appointed. (3) Any order under this rule, and any judgment or order subsequently entered or made in the proceedings, binds the deceased person's estate to the same extent as the estate would have been bound had a personal representative of the deceased person been a party to the proceedings. (4) Before making an order under this rule, the court may order that notice of the application be given to such of the persons having an interest in the estate as it thinks fit. 21 The Registrar made these orders on 8 April 2008: 1. Order pursuant to rule 6.31 of the Uniform Civil Procedure Rules that the plaintiff's proceedings be dismissed. 2. Order that the plaintiff has to pay the defendant's costs of the proceedings. Such costs include the defendant's costs to the Cross-claim against the cross-defendant. 3. Ordered that the proceedings on the first Cross-claim and the second Cross-claim be stood over for directions and any argument as to costs, on 6 May 2008. 22 At a later time questions of costs were appointed to be heard by me on 28 July 2008. There are no notices of motion but the orders including costs orders contended for were as follows: Counsel for AAMI contended for these orders: 1. Order that the First Cross Summons be dismissed. 2. Order that the plaintiff pay Gallagher Bassett Services Pty Limited Workers Compensation NSW's ('Gallagher Bassett') costs of the proceedings on the First Cross Summons. 3. In the alternative to order 2, order that there be no order as to Gallagher Bassett's costs of the proceedings on the First Cross Summons. 4. In the alternative to order 2 and order 3, order that the plaintiff and AAMI pay Gallagher Bassett's costs of the proceedings on the First Cross Summons, and that the plaintiff indemnify AAMI in respect of such amount as AAMI pays pursuant to this order. 5. Order that the Further Amended Second Cross Summons be dismissed, with no order as to costs. 6. In the alternative to order 5, order that the plaintiff pay the costs of Gallagher Bassett and Cepal Pty Limited of the proceedings of the Further Amended Second Cross Summons. Counsel to the Workers Compensation insurer contended for these orders: 1. An order that the First Cross Summons be dismissed. 2. An order that the defendant pay the costs of the cross defendant to the First Cross Summons. 3. An order that the Second Cross Summons be dismissed. 4. An order that the defendant pay the costs of the first and second cross claimants to the Second Cross Summons. 5. An order that the defendant pay the costs of the cross defendant to the First Cross Summons and the first and second cross claimants to the Second Cross Summons on an indemnity basis from 14 June 2007, or alternatively 16 November 2007, or alternatively from a date as determined by the Court. 6. An order that such costs as the defendant pays to the cross defendant to the First Cross Summons and the first and second cross claimants to the Second Cross-claim be treated as part of the defendant's costs the subject of Order 2 made on 8 April 2008. 23 No person appeared as a representative of Mrs Foley's estate at the hearing before me. 24 The informality of the applications, the absence of service of notices of motion and the absence of any representative of Mrs Foley's estate caused me concern, as there is a need for the Court to proceed in a strictly correct way when a party interested in a proposed order is not represented and not present. The costs orders which I was asked to make against Mrs Foley's estate could impose very large liabilities on that estate and I am concerned that I should proceed regularly and without any procedural injustice. 25 As no person has sought to continue the proceedings on behalf of Mrs Foley's estate I am not prepared to make any such order. 26 Where no person applies to be appointed representative for a deceased litigant it is in my opinion necessary for other parties who wish to continue with the litigation, such as AAMI and the Workers Compensation insurer who seek orders for costs against the estate, to proceed under UCPR 7.10 and obtain an order that the proceedings continue in the absence of a representative of the deceased person's estate, or an order appointing a representative for a limited purpose. If this procedure is followed an order may be made which binds the deceased person's estate: see subr (3). It has not been followed in this case. In my view it would not be appropriate to make such an order unless there was first clear notice to the persons interested in Mrs Foley's estate in terms which made known the nature of the application which was proposed and how it might adversely affect the estate, and gave an informed opportunity to decide whether or not to take part in the proceedings. It would in my opinion be irregular and unjust for me to make any costs order or other order adverse to the interests of Mrs Foley's estate in any significant way. For that reason I should and will dismiss the applications which have been made. 27 However there are some further observations which I feel I should make having regard to the attention which counsel gave to the applications and to their submissions. 28 Where it falls to the Court to decide costs of proceedings in which there has been no determination of the merits, the judgment of McHugh J in Re The Minister for Immigration and Ethnic Affairs, Ex parte Lai Qin (1997) 186 CLR 662 has had strong influence on judicial opinion. McHugh J's decision was given on a costs application at first instance, and does not have the binding authority of an appellate decision. Further, Order 71 r 39 of the Rules of Court of the High Court was not expressed in the same terms as the provision of UCPR Pt 42 which governs my decision. I considered the divergencies, and the slightly different approach which is now required, in my judgment in Australia Wide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365. Under the High Court Rules decision as to costs was wholly discretionary but under UCPR 42.1, 42.19 and 42.20 the rules provide a prima facie disposition unless displaced by a discretionary decision. As a practical matter, there is no significant difference in the appropriate approach, having regard to the present facts. As McHugh J said at 624 "A successful party is prima facie entitled to a costs order" and gave authority; under UCPR the position is very similar. 29 At 624 McHugh J said: In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the cost of a litigated action which by settlement or extra curial action they have avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. 30 His Honour referred to authority and gave examples. 31 His Honour also said at 625: Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South Wast Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. 32 His Honour gave many references. 33 Applying the approach indicated by McHugh J I do not feel able to conclude that Mrs Foley acted so unreasonably that other parties should obtain the costs of the proceedings, or of their Cross-claims, against her. On the material before me it appears likely that her claim was very excessive; some or more likely most of the sums paid for Workers Compensation are probably, as a matter of causation in fact, attributable to the first accident. But even so, it is very unlikely that none is attributable to the second accident; and the probabilities seem to favour her achieving some limited success, even at the worst. If it truly was her position that entitlement is established entirely by the form of the entries in the files and accounts of the Workers Compensation insurer, and if it really was the position that on a true view the files and accounts attributed most of the Workers Compensation to the second accident, she would achieve a signal success. To do so she would have to prevail in some argument to the effect that allocation of Workers Compensation payments to one accident or the other is, in an altogether binding way, established by allocations found in the Workers Compensation insurer's own documents, and is not established by reference to facts bearing on causation in any wider way. While I do not take a favourable view of that claim, it cannot be said that it is altogether hopeless. Counsel, particularly counsel for the Workers Compensation insurer, made a number of submissions directed to establishing that there were no prospects of its success; to examine them fully and to come to conclusion I would have to do what McHugh J said the court cannot do; try a hypothetical action between the parties. There certainly are indications that it would be very difficult for Mrs Foley to have succeeded: but that is different to concluding that she took an unreasonable position in the litigation, or that this is one of the cases which McHugh J said are likely to be rare, where the other parties were almost certain to have succeeded if the matter had been fully tried. 34 In the circumstances it appears to me that the appropriate outcome is that indicated by McHugh J's approach at 625; the parties acted reasonably in commencing and defending the proceedings, and continued to be reasonable until the further prosecution of the litigation became futile; there should be no order as to costs of the proceedings, and in particular no order as to the costs of the cross-claims. In the circumstances I propose to dismiss the cross-claims. I propose to make no order as to costs of the cross-claims, because I regard it as a just outcome that the parties who have appeared before me should bear their own costs, while it is not appropriate that I come to any decision which would bind Mrs Foley's estate either way, having regard to procedural irregularities I have mentioned. 35 My Orders are: (1) Each Cross-claim is dismissed. (2) I make no order as to costs of Cross-claims, to the intent that each party should bear his, her or its own costs of the Cross-claims. **********

Foley v Australian Associated Motor Insurers Ltd and Another

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