Hammond v Stern [2013] NSWSC 70 | Case summary

The relevant statutory provisions 13Sections 337 and 338 of the Legal Profession Act read: "337 Interpretation and application (1) In this Division: defendant means a person against whom a claim for personal injury damages is or may be made. party means plaintiff or defendant. personal injury damages has the same meaning as in Part 2 of the Civil Liability Act 2002. plaintiff means a person who makes or is entitled to make a claim for personal injury damages. (2) This Division does not apply to the following costs: (a) costs payable to an applicant for compensation under Part 2 of the Victims Support and Rehabilitation Act 1996 in respect of the application for compensation, (b) costs for legal services provided in respect of a claim under the Motor Accidents Act 1988 or Motor Accidents Compensation Act 1999, (c) costs for legal services provided in respect of a claim for work injury damages (as defined in the Workplace Injury Management and Workers Compensation Act 1998), (d) costs for legal services provided in respect of a claim for damages in proceedings of the kind referred to in section 11 (Claims for damages for dust diseases etc to be brought under this Act) of the Dust Diseases Tribunal Act 1989. 338 Maximum costs fixed for claims up to $100,000 (1) If the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a party in connection with the claim are fixed as follows: (a) in the case of legal services provided to a plaintiff -maximum costs are fixed at 20% of the amount recovered or $10,000, whichever is greater, (b) in the case of legal services provided to a defendant - maximum costs are fixed at 20% of the amount sought to be recovered by the plaintiff or $10,000, whichever is greater. ... (4) When the maximum costs for legal services provided to a party are fixed by this Division the following provisions apply (subject to sections 339-341): (a) a law practice is not entitled to be paid or recover for those legal services an amount that exceeds those maximum costs, (b) a court or tribunal cannot order the payment by another party to the claim of costs in respect of those legal services in an amount that exceeds that maximum, (c) in assessing the amount of those costs that is a fair and reasonable amount, a costs assessor cannot determine an amount that exceeds the maximum set by this section. (5) In this Division: (a) a reference to legal services provided to a party is a reference to legal services provided to the party by a law practice (including by an associate of the law practice), and (b) a reference to costs for legal services does not include costs charged as disbursements for services provided by any other person or other disbursements. (6) If proceedings are commenced on a claim, the amount sought to be recovered by the plaintiff is taken to be the amount sought to be proved by the plaintiff at the hearing of the claim. (7) Maximum costs fixed by this Division apply despite regulations under section 329(1)(b) (Regulations to provide for fixed costs) fixing those costs." 14Part 2, s 11 of the Civil Procedure Act 2005 contains the definition of "personal injury damages" referred to in s 337(1). That section reads: "Part 2 Personal injury damages ... 11 Definitions In this Part: injury means personal injury and includes the following: (a) pre-natal injury, (b) impairment of a person's physical or mental condition, (c) disease. personal injury damages means damages that relate to the death of or injury to a person." And s 11A of the Civil Procedure Act reads: "11A Application of Part (1) This Part applies to and in respect of an award of personal injury damages, except an award that is excluded from the operation of this Part by section 3B. (2) This Part applies regardless of whether the claim for the damages is brought in tort, in contract, under statute or otherwise. (3) A court cannot award damages, or interest on damages, contrary to this Part. (4) In the case of an award of damages to which Part 2A (Special provisions for offenders in custody) applies, this Part applies subject to Part 2A." 15The issue to be determined is whether a professional negligence claim for the loss of a chance to pursue a personal injury action falls within the definition of "a claim for personal injury damages". As set out above, "personal injury damages" is defined in s 11 the Civil Procedure Act as damages that relate to the death of, or injury to, a person.

Consideration of Williamson and Cross 20In Williamson v State of New South Wales [2010] NSWSC 229, Hall J considered s 338 of the Legal Profession Act 2004. The substantive case had been settled by consent judgment. Williamson's claims were mixed causes of action pleaded: Damages were sought in respect of alleged assaults, being intentional torts causing personal injury, and in addition, damages were sought on causes of action not involving personal injury, namely alleged unlawful arrest and alleged false imprisonment. 21Hall J decided that costs were not capped or limited by s 338 of the Legal Profession Act. In reaching this conclusion, his Honour reviewed the plaintiff's claim and noted that the plaintiff had sought damages in respect of a number of assaults, as well as an action for alleged false imprisonment and alleged unlawful arrest. His Honour said at [83]: "...The consent judgment in the Plaintiffs favour as earlier stated, having regard to the causes of action pleaded, can be taken as having been an award of damages in respect of the intentional torts alleged by the Plaintiff. On examination of the pleadings and evidence, the claims for alleged false imprisonment and unlawful arrest were not personal injury claims and according they fell outside the scope and operation of the Civil Liability Act." 22Williamson v State of New South Wales was subsequently appealed. On 5 July 2011, the Court of Appeal delivered judgment in State of New South Wales v Williamson [2011] NSWCA 183, dismissing the appeal on the basis that: (1) a claim for false imprisonment is not a claim for personal injury damages within the meaning of s 338(1) of the Legal Profession Act; (2) the expression "personal injury damages" in the Legal Profession Act does not include claims for intentional torts. Shortly before the decision of State of New South Wales v Williamson was delivered, the Court of Appeal gave judgment in Cross v Certain Lloyds Underwriters [2011] NSWCA 136 on 1 June 2011. 23In Cross v Certain Lloyds Underwriters each of the three applicants had suffered injuries at the hands of security officers at the Narrabeen Sands Hotel. They brought proceedings in the District Court against, eventually, the insurers of the security company that employed the officers who were held to be responsible for the assault. Each applicant obtained an award for damages under $100,000. They also obtained costs against the insurer defendants. The appeal in Cross was from a judgment of Garling DCJ who had found that the appellants' costs were limited under s 198C of the Legal Profession Act 1987. 24The Court of Appeal in Cross allowed the appeal, Basten JA, who delivered the leading judgment (with whom Hodgson JA agreed) concluding at [59] that the preferred construction of the term "personal injury damages" in s 198C of the Legal Profession Act 1987 was that the parties injured by intentional tortious conduct are not subject to the cost-capping provisions introduced by the Civil Liability Act. 25The majority in the High Court in Cross did not agree with this reasoning. At [33] French CJ and Hayne J said in construing s 198C: "[33 The construction favoured by the Court of Appeal and supported in this Court by the respondents must be rejected. The text of the provisions at issue in these appeals readily yields the construction which the appellants urged: that the expression "personal injury damages" when used in the costs limiting provisions of Div 5B of Pt 11 of the 1987 Legal Profession Act extended to any and every form of damages that relate to the death of or personal or bodily injury to a person caused by the fault of another person. In its terms, the definition of "personal injury damages" contained in the Liability Act and picked up by the 1987 Legal Profession Act neither required nor permitted any different application according to whether the "fault" which founded the claim was a failure to take reasonable care or the commission of an intentional act with intent to injure. And s 198C(1) of the 1987 Legal Profession Act, by providing that "personal injury damages" has the same meaning as in the Liability Act, naturally and immediately directed attention to the definition of that expression in the Liability Act, which used the cognate word "means": "personal injury damages means ..." (emphasis added). It did not refer to the operation or application of the Liability Act. It did not direct attention to whatever was identified as being the legal effect or consequence which the Liability Act produced by using that defined expression in its various provisions. [34] At least in this Court, if not also in the courts below, the respondents' argument for confining the application of the costs limiting provisions by reference to the operation or application of the Liability Act depended upon a false premise. The respondents focused attention on the expression "personal injury damages" as if that expression was the hinge on which both the 1987 Legal Profession Act and the Liability Act turned. Hence, their argument was that "personal injury damages" in the 1987 Legal Profession Act is to be confined to those "personal injury damages" regulated by the Liability Act. [35] The premise underlying this argument is not sound. Each Act used the defined expression "personal injury damages" as part of a larger composite phrase: "award of personal injury damages" in the Liability Act and "claim for personal injury damages" in the 1987 Legal Profession Act (emphasis added). They hinge on which the relevant operation of each Act turned was the larger composite phrase and not the defined expression "personal injury damages". None of the statutory provisions that depended on the composite expressions "claim for personal injury damages" or "award of personal injury damages" affected the sense in which the defined expression "personal injury damages" was used in the relevant Acts. There is no textual reason to limit the expression "personal injury damages" in the 1987 Legal Profession Act to those claims for personal injury damages the award of which was regulated by the Liability Act. [36] There is an additional problem with the respondents' argument. It assumed that the costs limiting provisions of the 1987 Legal Profession Act and the Liability Act were to have coextensive operation. For example, the respondents submitted that "the Civil Liability Act and the costs limitation provisions of the Legal Profession Act were introduced as a single package of reforms in the Civil Liability Act and were clearly intended to work in harmony". From this premise, the argument continued that because the Liability Act regulated some but not all forms of awards of "personal injury damages", the only claims for "personal injury damages" to which the costs limiting provisions of the 1987 Legal Profession Act applied were those claims for personal injury damages the award of which was regulated by the Liability Act. Again, the premise underpinning this argument is not right. [37] The use of the defined expression "personal injury damages" in both composite phrases provides no textual basis for reading the defined expression (when it is used in the 1987 Legal Profession Act) as confined by reference to the Liability Act's field of operation once due regard is paid to the wider, and different, composite expressions that are central to the relevant provisions of each Act. Further, as has already been noted, the two Acts expressly identified circumstances in which their respective provisions were not to apply, some of which were the same but some of which were different. In their very terms the relevant provisions of the two Acts demonstrate that each had, and was intended to have, a different area of operation. [38] Considerations of context do not support the conclusion that the two Acts are to be read as having coextensive fields of operation. The Liability Act's exclusion of intentional torts done with intent to injure from the application of its operative provisions (all of which were originally to be found in Pt 2 of the Act) demonstrates that the mischiefs to which that Act was directed were identified as arising in connection with claims for damages for personal injury other than claims in respect of intentional torts. It by no means follows, however, that the mischiefs to which Div 5B of Pt 11 of the 1987 Legal Profession Act was directed were confined to mischiefs arising in respect of only those classes of claims for personal injury damages the award of which was regulated by the Liability Act. Particularly is that so when intentional torts were not expressly excluded from the operation of Div 5B, as they might so easily have been." 26The High Court in Cross held that Garling DCJ had been correct to declare that the limiting section, s 198C, on costs in the Legal Profession Act 1987, the equivalent to s 338 in the Legal Profession Act 2004, did apply to tortious conduct caused by intentional acts. 27The High Court concluded at [41] that: "[A] claim for personal injury damages includes any and every form of claim for damages that relate to the death of or personal or bodily injury to a person caused by the fault of another person whether it be a failure to take reasonable care or the commission of an intentional act with intent to injure." 28In New South Wales v Williamson [2012] HCA 57, the High Court (French CJ, Hayne and Kiefel JJ) held, contrary to the Court of Appeal, that s 338(1) of the Legal Profession Act should not be construed as confined in its operation to claims that might result in awards to which Part 2 of the Liability Act would apply. However, the High Court held that the costs limiting provisions did not apply in this case as the damages for the claim of false imprisonment was not a claim for damages for personal injury and it was not possible to say that the amount recovered was "recovered on a claim for personal injury damages" was correct. 29Both Williamson and Cross set out above involve the application of ss 338 (and 198C its precursor) of the Legal Profession Act to personal injury actions for alleged intentional torts. They are not directly on all fours with this case, which involves the application of s 338 to a claim for professional negligence against legal practitioners. 30Senior counsel for Mr Hammond submitted that the approach that should be adopted in construing these statutory provisions is that referred to in Wilson v State Rail Authority [2010] NSWCA 198, where Allsop P stated at [14]: "[14] Also relevant to the task at hand is what was said by Mason J in K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd [1985] HCA 48 ; 157 CLR 309 at 315. Though his Honour was in dissent, the following passage can be taken to have been expressly approved by McHugh, Gummow, Kirby and Hayne JJ in Project Blue Sky at 381 at fn 48: '... The modern approach to interpretation insists that the context be considered in the first instance, especially in the case of general words, and not merely at some later stage when ambiguity might be thought to arise. In Prince Ernest Augustus of Hanover, Viscount Simonds said [[1957] AC 436 at 461]: "... words, and particularly general words, cannot be read in isolation: their colour and content are derived from their context. So it is that I conceive it to be my right and duty to examine every word of a statute in its context, and I use "context" in its widest sense ... as including not only other enacting provisions of the same statute, but its preamble, the existing state of the law, other statutes in pari materia, and the mischief which I can, by those and other legitimate means, discern the statute was intended to remedy." In Re Bidie [[1949] Ch 121 at 130]], Lord Greene MR said: "In the present case, if I might respectfully make a criticism of the learned judge's method of approach, I think he attributed too much force to what I may call the abstract or unconditioned meaning of the word "representation". ... The real question which we have to decide is, what does the word mean in the context in which we find it here, both in the immediate context of the sub-section in which the word occurs and in the general context of the Act, having regard to the declared intention of the Act and the obvious evil that it is designed to remedy..."'" 31On the issue of statutory interpretation, counsel for the defendant referred to State of New South Wales v Williamson [2011] NSWCA 183 where Macfarlan JA stated [at 119]: "[119] There is an ongoing debate about the emphasis to be given in statutory interpretation to context and purpose on the one hand and text on the other (see His Honour JJ Spigelman AC, "The Intolerable Wrestle: Developments in Statutory Interpretation" (2010) 84 Australian Law Journal 8222). However it can in my view at least be said that the literal meaning of the text of a statutory provision must prevail unless it can be disregarded upon the ground that that literal meaning gives rise to an absurdity or the text is sufficiently tractable to accommodate the meaning suggested by contextual or policy considerations (see for example Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252 at [27]-[33]; Catlow v Accident Compensation Commission [1989] HCA 43; (1989) 167 CLR 543 at 550, referred to in Saeed at [33]). I do not consider that either of these conditions is present here." 32The approach to the construction of the words "personal injury damages" in s 338(1) of Legal Profession Act 2004 has now been settled. It is as stated by the High Court in Cross at [29]. "In construing the definition of "personal injury damages" contained in the Liability Act ("damages that relate to the death of or injury to a person") it is no doubt necessary to have regard not only to the words of the definition but also to the context in which the definition was set. So much follows from what has been said about statutory construction in the cases to which reference has been made." 33Counsel for Mr Hammond submitted that if a statute is beneficial, ameliorative or reforming in that it liberalises a previous situation, a broad construction would be supported, so as to be consistent with the legislative aims. However if a statute is one which is restrictive, limiting or tightening of the existing law, a narrow construction taking it no further than it need be taken could be consistent with the legislative aim. Another way of putting this might be to say that where a statute obviously trenches upon a right, it should go no further than necessary. 34Counsel for Mr Hammond further submitted that the very severe limitations on the recovery of legal professional costs contained in the Legal Profession Act are restrictive and trench upon the previously existing entitlement to recover the totality of such costs, subject to justifying them in the usual way by agreement or assessment. Therefore, he says that the legislation needs to be read narrowly and referred to the second reading speech to the Civil Liability Bill (New South Wales Legislative Assembly, Premier Carr, (Hansard) 28 May 2002 at 2085). In the second reading speech, Premier Carr spoke of the "public liability crisis" and said that, "the approach of the courts to public liability is unsustainable." Particular reference was made to s 338 (at page 2087) where it was stated that the "cap on fees will promote efficiency on the part of the legal profession and help to contain claims costs". 35While the Court of Appeal in Cross at [39] referred to the purpose and effect of the Civili Liability Act was to limit personal injury, the High Court went on to say that is was not legitimate to identify a legislative purpose not apparent from the text of the relevant provisions (or in this case even expressed in some extrinsic material), to examine extrinsic material and notice that there is nothing positively inconsistent with the identified purpose, and then to answer the question of construction by reference to the purpose that was initially assumed. That reasoning is not sound. Hence, this approach outlined by Mr Hammond's counsel is incorrect and should be rejected. 36Senior counsel for Mr Hammond submitted that his claim for damages against the defendants and the resulting settlement funds were not damages awarded in accordance with Part 2 of the Civil Liability Act. However, this proposition is not to the point. As Cross explains, the words "personal injury damages" are not confined to the Civil Liability Act's field of operation. It is wider. 37In further submissions, counsel for Mr Hammond submitted that the High Court decisions in Williamson and Cross support the proposition that Mr Hammond's costs were not limited by s 338 of the Legal Profession Act. He referred to [18] and [25-28] of the joint judgment of French CJ and Hayne J in Williamson, where their Honours said that the relevant construction must focus upon "the larger composite expression 'award of personal injury damages'" and this construction was a strong indication that the definition does not extend to a claim with a different subject matter, namely pure economic loss arising from a loss of a chance in which the measure of damages is likely to be different. According to Mr King SC, in [33-35] of their joint judgment in Cross, French CJ and Hayne J's focus upon the wording of the definition in the context of physical or personal injury shows that a claim of a different type, such as that of Mr Hammond, does not readily fit. According to senior counsel, Mr Hammond's claim is conceptually different because a possible claim for personal injuries damages was squandered or allowed to cease to exist. 38Mr Hammond's counsel also submitted that the reasons of Young JA (as his Honour then was) in Moss v Eaglestone [2011] NSWCA 404 at [21] - [22] make it clear that a claim against a solicitor is for a loss of a right or chose in action and its value. The value of that claim will not be identified with the no longer existing personal injuries claim and the claim will not be a personal injuries claim or case. Mr King SC characterised the professional negligence claim as not being one of economic and non-economic loss to be compensated by damages awarded under that Part, but for breach of contract and loss of opportunity. 39Both parties made submissions regarding the breadth and meaning of the words "that relate to" in s 11 of the Civil Liability Act. Mr Hammond submits that the phrase "damages that relate to the death of or injury to a person" means damages for claims that directly relate to a plaintiff's personal injury, based upon the negligence of a defendant who allegedly caused that injury. The defendants submitted that this narrow construction is not consistent with the ordinary meaning of the phrase, or with authority. In the light of the decisions in Williamson and Cross, the defendant's approach is correct. These submissions are now made somewhat redundant by the High Court's analysis in Cross and Williamson. 40The parties also referred to American International Assurance Company v Skewes [2010] VSC 307, a matter concerning whether it was a "dispute or claim related to personal injury" within the meaning of s 107(2) of the Victorian Fair Trading Act 1999, and the comments of Allsop P in Firth v Sutton [2010] NSWCA 90 where the President approved the trial judge's application of s 18 of the Civil Liability Act to an award of damages in a loss of opportunity action. After the hearing of this matter, counsel drew my attention to the decision of Steve Masselos & Co v Young [2011] NSWCA 352. In that decision, the Court of Appeal again applied s 18 of the Civil Liability Act to a professional negligence case against a solicitor where the plaintiff had suffered a loss of opportunity to sue. 41The above decisions and submissions do not assist in the interpretation of the phrase "personal injury damages" in light of the High Court decisions in Williamson and Cross. 42In the plaintiff's further amended statement of claim filed 3 May 2010 in the District Court, Mr Hammond claimed the following loss and damage: "42.1 He has forever lost the right to recover lump sums under section 66 and 67 of the Workers Compensation Act. 42.2 He has forever lost the opportunity to recover common law damages arising out of the injuries suffered in this incident. 42.3 He has forever lost the right to sue the Transfield companies and/or Clayco for damages arising out of the incident..." (my emphasis) 43Had Mr Hammond's original legal representation advised him to make a "personal injuries claim" against Tyco and Transfield, he would have done so. It is because he did not receive that legal advice that he did not make this claim for personal injury against those two defendants. He lost that opportunity. 44This raises the question, does the professional negligence claim fall within the definition of a claim for "personal injury damages"? In both the claims, the one for personal injury and the one for professional negligence, the claim for damages stem from or "relate to" the same personal injury that was suffered by Mr Hammond. Hence, the plaintiff's claim for damages against the defendants is a claim for damages emanating from his loss of a right to sue and loss of opportunity to recover damages from Transfield and Tyco for personal injuries. At [41] in Cross, the High Court held that "personal injury damages" should be construed by reference to the definition in s 11, that a claim for personal injury damages "includes any and every form of claim for damages that relate to the death of or personal or bodily injury to a person": Cross at [41] (my emphasis added). 45The decisions of the High Court in Williamson and Cross lead me to the conclusion that the professional negligence claim is a claim for "damages that relate to ... injury to a person". Therefore, the professional negligence claim is a claim for "personal injury damages" and s 338 of the Legal Profession Act applies to the consent judgment made between the parties. Hence, I make a declaration that the costs of the proceedings the subject of the consent judgment dated 11 October 2010 are regulated by s 338 of the Legal Profession Act 2004.

Hammond v Stern

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