Kenny & Anor v Eyears & Anor [2004] QSC 59

Supreme Court of Queensland|2004-03-19|Before: Philippides J

[1] On 23 December 2003, judgment was given in favour of the first plaintiff in the sum of $100,242. The second plaintiff however received no award for damages as a result of s 55C(1)(b) of the ("the "). It now remains to deal with the issue of costs.

[2] As regards the second plaintiff, I order that the second plaintiff pay the second defendant's costs of the action on a standard basis.

Mandatory Final Offer made to the first plaintiff

[3] As regards the first plaintiff, the following orders are sought:

(a) An order that the first plaintiff's costs be paid by the second defendant on a standard basis;

(b) An order that those costs be assessed on the Supreme Court Scale;

(c) A certificate for an increase of 30% of the solicitors' costs on the standard basis pursuant to r 690(5) of the Uniform Civil Procedure Rules 1999 (UCPR); and

(d) That the court grant a certificate for two counsel or otherwise, if the first plaintiff's costs are to be limited to the District Court Scale, pursuant to item 83 of the District Court Scale of Fees.

[4] The second defendant contended that it ought only be ordered to pay the first plaintiff's costs on a standard basis up to and including 30 August 2002, the date when the second defendant's mandatory final offer made under s 51C of the Act expired. It was submitted that thereafter, the first plaintiff ought to be ordered to pay the second defendant's costs on a standard basis.

[5] On 16 August 2002, the second defendant made a mandatory final offer to the first plaintiff of $120,000 plus costs pursuant to s 51C(1)(a) of the Act, which requires such an offer to be made where a motor vehicle accident claim is not settled at the compulsory conference provided for under the Act. Section 51C(10) of the Act provides that the court must (where relevant) have regard to the mandatory final offers in making a decision about costs. Further provision is made in respect of costs in s 55F of the Act which concerns "costs in cases involving relatively small awards of damages" and applies if a court awards $50,000 or less in damages (s 55F(1)). Section 55F(2) specifies the principles to be applied in awarding costs where the court awards $30,000 or less in damages, while s 55F(3) specifies the principles to be applied where the award is more than $30,000 but not more than $50,000 in damages.

[6] The second defendant placed reliance on s 51C(10) of the Act and argued that it was relevant to have regard to a mandatory offer in circumstances such as the present case, where judgment for the plaintiff was equal to or less than a defendant's mandatory final offer. It was argued that regard must be had to the mandatory final offer in such a case in order to put into effect the legislative intent of Division 5A of the Act, in particular, the object of encouraging speedy resolution of claims, that is, a meaningful negotiation and early settlement.[1] Counsel for the second defendant placed weight on the following statements of the Hon Mr D J Hamill, made at the Second Reading of the Motor Insurance Amendment Bill 2000[2]:

"... The Bill provides that, before the claimant brings an action in a court for damages for personal injury arising out of a motor vehicle accident, there must be a compulsory conference of the parties. The advantages are that a compulsory conference provides a chance to negotiate meaningfully for early resolution of the claim and reduces legal costs where the claim settles as a result of the process. The conference may be initiated by either party and can be used to incorporate cost penalties where a claim does not settle.

Failure to settle at a compulsory conference requires each party to exchange mandatory final offers, which remain open for 14 days. If the matter proceeds to court, each party must submit its mandatory final offer to the court in the sealed envelope. The court must not read the offers until it has decided the claim and then must have regard to the offers in making a decision about costs."

[7] The genesis of those statements is said to be the Review of the Queensland Compulsory Third Party Insurance Scheme Report submitted to the Queensland Government on 31 October 1999, which made recommendations as to costs as follows:

"Recommendation

3.16 The Act be amended to abolish the costs indemnity rule (including outlays) for claims where the total damages recovered are under $30,000, and to prescribe that the maximum recoverable costs including all professional costs are $2,500 for claims not less than $30,000 but less than $50,000. However, costs penalties shall apply in accordance with part 5 of the Uniform Civil Procedure Rules to take effect from the commencement of the proceedings only where either party obtains a judgement no less favourable than its final offer to settle made prior to the commencement of the proceedings."

[8] However, the first plaintiff argued that, except with respect to awards of $50,000 or less, the costs recommendations of the Committee Report were not implemented in the Act. The first plaintiff contended, relying on s 55F of the Act, that the legislature only intended the costs consequences of mandatory final offers to apply to claims where an award of damages was of $50,000 or less, that is, to those claims to which s 55F applies. It was submitted that once an award of damages was made for more than $50,000, any issue relating to costs was beyond the realm of the Act and within the scope of the UCPR, so that the mandatory final offer was not determinative of the costs to be awarded in this case. In making this submission, the first plaintiff pointed to the following extract from the Second Reading Speech, which it was said specifically addressed the issue as follows:

"In an endeavour to contain costs in relatively small awards of damages, provision has been made to direct the court to apply principles which limit the awarding of legal costs where damages are less than $50,000.00. The legal costs are dependent on whether the award is equal to or less than the insurer's final offer; less than the claimant's final offer but more than the insurer's final offer, or is equal to or more than the claimant's final offer. This clause also limits the inclusion of costs to those incurred from the date on which proceedings commenced ... Whilst this provision may appear to be discriminatory, it is important to ensure that the more seriously injured claimants receive appropriate benefits ...".

[9] As to s 55F of the Act, it was the second defendant's contention that it was not intended by that provision to limit the application of costs penalties associated with mandatory final offers to those where damages were assessed at $50,000 or less. Rather, it was said that the purpose of s 55F was to abolish the costs indemnity rule for matters where the court awarded a plaintiff $30,000 or less, and to limit the recoverable costs in matters where the court awards a plaintiff more than $30,000, but not more than $50,000 (except in circumstances where it is relevant to consider the mandatory final offers, as where a party fails to do better than the other's offer). It was argued that to construe the Act in the way contended by the first plaintiff rendered the mandatory final offer a nullity and failed to recognise the obligatory nature of the offer. It was submitted that to give proper effect to the legislature's intention in encouraging speedy resolution of claims that a costs penalty associated with mandatory final offers must apply to all claims, regardless of the quantum involved. The second defendant argued that the effect of s 55F of the Act was that the manner in which the court must have regard to a mandatory final offer was prescribed so that the discretion ordinarily available was removed. It was said that the retention of the discretion in all other claims was necessary in order to give meaning to s 51C(10).

[10] In addition, the second defendant argued that even if the first plaintiff's submissions as to the effect of s 55F were accepted, so that costs penalties are not to be imposed under the Act in the circumstances of the present case, it is nonetheless open to the court to consider the mandatory final offer in respect of the issue of costs. In this regard, counsel relied on the approach in Quality Corp (Aust) Pty Ltd & Ors v Millford Builders (Vic) Pty Ltd & Ors [2003] QCA 550.

[11] I am unable to accept the second defendant's submissions as to the purpose and effect of s 55F. Its purpose was not merely to abolish the costs indemnity rule in respect of matters where awards of $30,000 or less were made and to limit the recoverable costs where awards over $30,000 and up to $50,000 were made. Section 55F goes further and prescribes a comprehensive regime for awarding costs in awards of $50,000 and under. The Act does not seek to mandate in a similar way the costs consequences for awards of more than $50,000. I consider that s 51C(10) is directed to s 55F and does not dictate any particular result in the circumstances of this case.

[12] Nevertheless, it is relevant in the general exercise of discretion to note that a mandatory final offer was made which was more favourable to the first plaintiff than the judgment awarded. Even so, I do not consider that this is a case, such as Quality Corp (Aust) Pty Ltd & Ors v Millford Builders (Vic) Pty Ltd & Ors, where costs consequences should follow the non-acceptance of the second defendant's offer which was not renewed under Chapter 9 Part 5 of the UCPR. The plaintiff's claim had unusual aspects to it and involved an issue of some novelty concerning the first plaintiff's entitlement to recover damages for gratuitous assistance. As counsel for the first plaintiff submitted a relatively small variation in the award for the claim for loss of opportunity for promotion would have resulted in the judgment sum exceeding the mandatory final offer.

[13] The first plaintiff argued that her costs should not be limited pursuant to r 698(3) of the UCPR as if the proceeding had been started in the District Court and that the court should exercise its discretion pursuant to r 698(1) of the UCPR. I am persuaded that this case is an appropriate one for the exercise of the discretion as sought by the first plaintiff. The claim had some difficult aspects to it concerning the claim for loss of opportunity for promotion and overtime and involved some complexity in respect of the aetiology or the first plaintiff's physical and psychiatric condition. Further, as I have mentioned, there was an aspect of novelty which the second defendant's counsel acknowledged concerning the claim for gratuitous assistance. These matters may have prompted the defendants in the approach that they took to the case in engaging two counsel, one being senior counsel.

[14] I do not consider that it is appropriate to make an order for a certificate for an increase of 30% of the solicitors' costs on the standard basis pursuant to r 690(5) of the UCPR. A certificate for two counsel is not required given my ruling on the issue of the appropriate scale for costs.

[1] In this regard, reliance was placed on cl 29 of the Explanatory Notes to the Motor Accident Insurance Amendment Bill 2000.

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