Hiron v State of New South Wales

Civil Liability Act 2002 (NSW) ss.26C, 26D Civil Liability Amendment (Offender Damages) Act 2004 LEGISLATION CITED: Civil Liability Amendment (Offender Damages) Act 2005 Workplace Injury Management and Workers Compensation Act 1998 (NSW) s.319 Supreme Court Act 1970 (NSW) s.69 Uniform Civil Procedure Rules 2005 (NSW) Part 12 rule 12.1, Part 42 rule 42.19(2)

ASC v Aust-Home Investments Ltd (1993) 34 FCR 194 Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 Calderbank v Calderbank [1975] 3 All ER 333 Fordyce v Fordham [2006] NSWCA 274 Foukkare v Angreb [2006] NSWCA 335 CASES CITED: Habib v Nationwide News Pty Ltd (2006) 65 NSWLR 264 Hiron v State of New South Wales & Anor [2007] NSWSC 152 One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 Pentroth Pty Ltd v Kirschild Pty Ltd (2006) 96 SASR 129 Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia & Anor; ex parte Lai Qin (1997) 186 CLR 622 Vale v Eggins [2006] NSWCA 348

PARTIES: Plaintiff: Timothy Hiron Defendant: State of New South Wales

COUNSEL: Plaintiff: D Shoebridge Defendant: S Finnane

SOLICITORS: Plaintiff: Taylor & Scott Lawyers Defendant: Crown Solicitor's Office NSW

The plaintiff by Notice of Motion filed on 22 August 2007 seeks orders that these proceedings be discontinued and that the defendant pay the plaintiff's costs. The defendant does not oppose the order for the discontinuance of these proceedings, but seeks an order that the plaintiff pay the defendant's costs on an indemnity basis from the date when Calderbank offers were made (Calderbank v Calderbank [1975] 3 All ER 333), namely 2 May 2005 and 8 December 2005.

The background to these proceedings is as follows. On 25 September 2001 the plaintiff, who was an inmate of Parklea Correctional Centre at the time, was stabbed by another inmate with a pair of scissors, suffering personal injury. A correctional officer gave the scissors to the other inmate when the other inmate lied and said he was entitled to have the scissors because he was the prison barber. The plaintiff had to undergo a laparotomy and repair of intra abdominal laceration.

The plaintiff did not first see solicitors until early September 2004. The limitation period was about to expire. His solicitors promptly commenced proceedings on 9 September 2004, a matter of weeks within the limitation period. The disabilities pleaded included the possibility of future bowel dysfunction and bowel obstruction, significant scarring and psychiatric sequelae.

Nine months earlier, on 15 January 2004, Mr Hatzistergos, the Minister for Justice, issued a press release announcing legislation to overhaul the rules relating to payment of compensation to inmates and other offenders who try to claim compensation from the Department of Corrective Services. Key features of the scheme included a provision that injuries resulting in less than fifteen per cent whole body impairment will not be entitled to bring common law proceedings.

This proposed reform received widespread publicity. The following article appeared in the Daily Telegraph on Friday, 16 January 2004: " Crackdown on payouts to prisoners

THE NSW Government said yesterday it would crack down on exorbitant payouts to prisoners, which in one recent case topped $100,000.

Justice Minister John Hatzistergos said he would introduce legislation to make it tougher for inmates to lodge claims against the Department of Corrective Services.

The announcement follows The Daily Telegraph's revelations yesterday that an inmate at Grafton Correctional Centre was awarded $100,000 in 1999 after falling out of bed.

Prisoner Craig Ballard was awarded the money after he fell out of a top bunk bed in the jail.

He claimed he suffered serious head injuries, resulting in memory loss and impaired speech.

Mr Hatzistergos said if an inmate suffered a genuine serious injury due to the department's negligence, he or she would receive a fair compensation.

Under the changes, an independent doctor must assess that the injury sustained had resulted in at least 15 per cent whole body impairment before prisoners could start proceedings.

And it would be mandatory for any money owed to the Victim Compensation Fund be paid in full before inmates received any payments, Mr Hatzistergos said."

Amendments to the Civil Liability Act to insert Part 2A into that Act were assented to on 13 May 2004 (see the Government Gazette No 91, Friday 28 May 2004, 3219). On 19 November 2004, the 2004 amendment commenced. The proclamation was published in the Government Gazette No 183, Friday 19 November 2004, 8503.

Thus, at the time that the Plaintiff commenced proceedings, the relevant retrospective legislation had already been assented to but not yet proclaimed.

During late November, December and early January, the parties had an exchange of correspondence about a pre-trial review on 19 January 2005. On 8 February 2005 Jacqueline Townsend, the solicitor for the defendant, informed Lisa Powell, the solicitor for the plaintiff, that s.26D of Part 2A Civil Liability Act 2002 applied to this claim.

Section 26D provides that if there is a dispute about the degree of permanent impairment of an injured offender, a court may not award damages unless the degree of permanent impairment has been assessed by an approved medical specialist in accordance with the Workers Compensation Act 1998.

When the matter came before Judicial Registrar McDonald on 8 February 2005 the Registrar included amongst her notes of orders that the claim fell within the Civil Liability Amendment (Offender Damages) Act 2004.

Further amendments were made to the Civil Liability Act in the Civil Liability (Offender Damages) Act 2005, but these are of no significance to this application.

By letter dated 8 April 2005 the defendant served the plaintiff with three medical reports finding that the plaintiff's degree of permanent impairment was between 0% and 4%.

The plaintiff did not serve any medical reports giving the necessary expert opinion. On 30 May 2005 the solicitors for the plaintiff and defendant had a telephone conversation, according to the affidavit of Jacqueline Townsend of 24 September 2007, in which the solicitor for the plaintiff said that the plaintiff did not have any money to pay for medical reports. Accordingly, the matter was stood over.

On 29 August 2005 the plaintiff applied to the Workers Compensation Commission to have the threshold issue of assessment of permanent injury determined. The defendant in the District Court proceedings, the respondent in those proceedings, filed pleadings alleging that the Workers Compensation Commission had no jurisdiction to determine the threshold issue because, in the absence of medical reports from the plaintiff being served, there was no issue to determine. The defendant in these proceedings also filed a Notice of Motion seeking to strike out the plaintiff's claim for want of prosecution in the District Court. This motion was heard by Judicial Registrar McDonald on 23 February 2006. In a judgment of 21 March 2006 the Registrar accepted the defendant's argument that it was inappropriate for the plaintiff to refer the matter to the Workers Compensation Commission because there was no medical dispute under s.319 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW). The plaintiff was directed to serve a medical report within 42 days. A claim for medical negligence was struck out by reason of failure to serve medical reports.

The plaintiff subsequently filed a Notice of Motion on 9 May 2006 seeking an extension of time in which to file a medical report and then on 1 June 2006 filed a summons seeking relief under s.69 Supreme Court Act 1970 (NSW) to require the Workers Compensation Commission to exercise jurisdiction and refer the matter for assessment. The matter came before Associate Justice Malpass on 28 February 2007. Associate Justice Malpass considered that it was not necessary that the plaintiff serve medical reports showing he was entitled to more than 15% for there to be a "medical dispute". Associate Justice Malpass took a different view of this issue from Judicial Registrar McDonald, and granted the relief sought.

The plaintiff was duly assessed and on 7 August 2007 a medical assessment certificate of Dr Mark Burns was provided to the parties identifying the plaintiff's degree of permanent impairment as 0%. The plaintiff cannot reach the threshold to claim damages of any kind.

It is against this background that the plaintiff now seeks leave to discontinue these proceedings. Uniform Civil Procedure Rules 2005 (NSW) Part 12 rule 12.1 provides that a plaintiff in any proceedings may discontinue the proceedings. Part 42 rule 42.19(2) provides that "unless the Court orders otherwise" the plaintiff must pay such of the defendant's costs as, at the date on which the Notice of Discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings had been discontinued.

The problem in such cases was succinctly put by Lord Denning MR in JT Stratford & Son Ltd v Lindley (No 2) [1969] 1 WLR 1547 at 1553: "Nobody has lost. Nobody has won… Neither side wanted to go on. But neither side wanted to pay the costs of the other side… So what is to be done? Is this case to go on simply about costs? I think not."

The first issue for determination is whether on discontinuance there is a presumption that the discontinuing party pays the costs. The terms of Part 42 rule 42.19 do not, however, mean that the mere fact of discontinuance itself justifies an order against the discontinuing party: Fordyce v Fordham [2006] NSWCA 274 per McColl JA at [67], [78], [84] and [87]. Beazley JA (at [1]) agreed with McColl JA's judgment, while Santow JA at [3] expressed the contrary view. The difference between the views of Santow JA and McColl JA was examined with some care by the Full Court of the South Australian Supreme Court in Pentroth Pty Ltd v Kirschild Pty Ltd (2006) 96 SASR 129, where the court was considering a rule analogous to Part 42 rule 42.19, the court preferred the views of McColl JA to those of Santow JA.

In Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 Bryson JA at [53] considered that the provisions of Part 42 concerning discontinuance or dismissal would be overstated if they were regarded as creating a presumption about the disposition of costs. While his Honour's comments referred to rule 42.20, they are equally appropriate to use of rule 42.19. McColl JA and Basten JA agreed. In Foukkare v Angreb [2006] NSWCA 335 Beazley JA at [65], with whom Giles JA and Ipp JA agreed, held that Part 42 rule 42.19 does not give rise to a presumption that costs will be ordered against the discontinuing party.

It is an important feature of the facts in Foukkare v Angreb that the plaintiff commenced and continued proceedings as an abuse of process in that they sought identical relief to proceedings in the Family Court.

In those circumstances, it would appear that Santow JA's views are very much in the minority in the Court of Appeal and I should prefer the generally expressed view of the other judges of the Court of Appeal as noted above.

The principles concerning discretion as to costs of proceedings which are discontinued prior to hearing were explained by McHugh J in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia & Anor; ex parte Lai Qin (1997) 186 CLR 622 at 624-625. McColl JA set out the relevant passage of McHugh J's judgment at paragraph 28 of Fordyce v Fordham, where her Honour not only quoted but underlined the following paragraph: "If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continues to be reasonable until litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean that the Court will make no order as to the cost of the proceedings."

McHugh J's statements were made in relation to the discretionary power in O 71 r 39 High Court Rules (Cth), which is discretionary overall, whereas rule 42.19 is not. However, it is important not to overstate the reference in rule 42.19 as creating a starting point. What rule 42.19 is doing is recognising that there are two different kinds of cases which may be discontinued. These two different kinds of cases were referred to by Burchett J in One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 at 543: "In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs by the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs."

In ASC v Aust-Home Investments Ltd (1993) 34 FCR 194 Hill J noted Lord Denning MR's comments in JT Stratford & Son Ltd v Lindley (No 2) and went on to distil the following propositions in relation to discontinuance: (i) where neither party desires to proceed with litigation, the Court should be ready to facilitate the conclusion of the proceedings by making a costs order;

(ii) it will rarely, if ever, be appropriate for the Court to determine the merits by determining the outcome of a hypothetical trial;

(iii) it is, however, appropriate for the Court to determine whether the applicant acted reasonably in commencing the proceedings and the respondent acted reasonably in defending them;

(iv) conduct prior to the commencement of proceedings may be relevant if that precipitated the litigation;

(v) where proceedings terminate after interlocutory relief has been granted, this may be taken into account.

Essentially what I have to determine is the reasonableness of the conduct of each of the plaintiff and defendant. My discretion in relation to costs on this issue is agreed by the parties to be unfettered, but must be exercised judiciously and not capriciously (Cretazzo v Lombardi [1975] 16 SASR 1).

The defendant submits that the plaintiffs should have known, when they commenced proceedings, that new legislation was in the pipeline. The solicitors for the plaintiff are experienced personal injury litigators. However, this is a heavy burden to place on a solicitor who is consulted by a client less than a month before the limitation period expires, in circumstances where that client is a prison inmate and there is at best only a limited opportunity to take any kind of instructions. In addition, the passing of retrospective legislation is a rare event and the precise nature of the retrospectivity can often be the subject of uncertainty (for a recent example see Habib v Nationwide News Pty Ltd (2006) 65 NSWLR 264). The defendant submitted that, if the plaintiff's solicitors had read the Daily Telegraph, they would have been warned about this legislation, but there is nothing in the Daily Telegraph's editorial to advise of the retrospectivity of the claim. The media release from the Minister for Justice speaks of limitations applying to claims in the future; only in the final paragraph does it warn that the proposed amendments will apply from the date of the press release (15 January 2004) "in order to prevent a surge of claims being lodged under the existing regime" in much the same way that the Civil Liability Act 2002 (NSW) contained retrospective provisions.

The defendant submits that, had the plaintiff been aware of this legislation being in the pipeline, then the plaintiff and those who advise him would have known that there was no point in commencing the proceedings unless the plaintiff was able to achieve damages over the threshold.

The difficulty that I have with this argument is that, while I accept the plaintiff's solicitors should have been aware of the legislative changes, the plaintiff acted reasonably in commencing them in circumstances where there was a strong case on liability, a serious injury, uncertainty as to the law, a client with limited access to justice and a limitation period about to expire. The approach taken by the defendant (a model litigant) in preventing the plaintiff from seeking the appropriate finding under s.26D Civil Liability Act resulted in considerable delay and was based on a misconception of the law, for the reasons enunciated by Associate Justice Malpass in Hiron v State of New South Wales & Anor [2007] NSWSC 152.

The plaintiff's legal advisers in these proceedings were in a very difficult position when consulted by the plaintiff. Whether or not they knew of the proposed amendments to the legislation, they had little alternative other than to commence proceedings. Once those proceedings had been commenced, the only realistic way they could be resolved was for there to be a finding in relation to percentage of the plaintiff's whole person impairment. The injuries in question were serious in that the plaintiff required surgery and there was potential for future problems. This was not a case where the injury was a trifling one.

I have not been able to find any decisions where courts have exercised leniency to parties who commence proceedings at a time when there is significant amendment to the law but a solicitor is facing the potential expiry of a limitation period. It seems to me, however, that once the proceedings were commenced, in circumstances where the plaintiff was not in a position to afford appropriate medical reports of his own, and where the medical report that was obtained did not (presumably by reason of the plaintiff's solicitor's lack of understanding of the new legislation) address the issue of whole person impairment, it was reasonable for them to seek the appropriate assessment required by the new statute to ascertain the plaintiff's degree of disability. The obtaining of this information was delayed because of the defendant's opposition.

This brings me to the question of whether the plaintiff should have accepted the Calderbank offers contained in the letters of 2 May 2005 and 8 December 2005. The offer dated 8 December 2005 was for 14 days just before Christmas, and was made in circumstances where the defendant knew that the plaintiff's solicitors were having great difficulty contacting their client and that this was because the plaintiff was in prison and was due to appear in court via video link on 16 December 2005. It was in fact the defendant who provided the plaintiff's solicitors with the plaintiff's whereabouts. The plaintiff's solicitors were under no such disability in relation to the 2 May 2005 offer, but this was early in the litigation and at a time when the vital information as to whether the threshold could be passed could not be ascertained because of the position the defendant has taken: Vale v Eggins [2006] NSWCA 348.

The defendant relied on these offers to seek indemnity costs. A Calderbank offer to settle or compromise proceedings on the basis that each party pay their own costs with a verdict for the defendant is not an offer that the plaintiff was unreasonable to reject, on the facts set out in paragraph 32 above. Accordingly, in my view, there should be no entitlement to indemnity costs by reason of the rejection of the offers.

The real reason that these proceedings are being abandoned is not that these proceedings have been rendered hopeless by reason of unexpected retrospective legislation, but because the plaintiff has been unable to get over the threshold imposed by retrospectively introduced legislation of which his lawyers should have been aware, if not at the time that they commenced proceedings, then after service of the defendant's medical reports. Accordingly, having regard to the two types of discontinued cases that are referred to in One.Tel, the plaintiff's case falls within the first rather than the second kind of case. Having regard to the checklist of Hill J in ASC v Aust-Home Investments Ltd, the application to discontinue has occurred after an interlocutory step of a definitive nature has been made, namely the finding that the plaintiff cannot be awarded damages because he is below the threshold.

If it had not been for the defendant's unreasonable opposition to the obtaining of an assessment under s.26D Civil Liability Act 2002 I would have ordered the plaintiff to pay the defendant's costs, as the defendant is clearly "the successful party", to use Burchett J's phrase in One.Tel. However, in light of the defendant's opposition to the following of the procedure under s.26D Civil Liability Act, I propose to exercise my discretion by making an order that each party pay his or its costs in relation to those parts of the proceedings for which no costs orders have already been made.

(1) Grant leave to the plaintiff to discontinue these proceedings. (2) Each party pay his or its own costs in relation to those steps in these proceedings that are not the subject of existing costs orders.

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