Lawes v Nominal Defendant

The Nominal Defendant does not resist an order for costs assessed on the standard basis, but does rely on rule 698(3) to propose that the costs be on the District Court scale, the judgment sum having been $212,000.

The plaintiff, however, seeks indemnity costs on the Supreme Court scale, relying on the circumstance that the judgment sum exceeds his mandatory final offer of $125,000 made pursuant to s.51C(2) of the Motor Accident Insurance Act 1994 ("the Act") before the litigation commenced.

No attempt was made to invoke the UCPR Chapter 9 Part 5 Offer to Settle procedure. Had there been such an offer for $125,000, by rule 360(1), because the plaintiff obtained a judgment no less favourable than $125,000, and as no doubt he was willing and able to carry out the offer,

"the Court must order the defendant to pay the plaintiff's costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances."

Had the damages been more than $30,000 and not more than $50,000, the plaintiff would have been entitled to an award of pre-litigation costs (to a maximum of $2,500) assessed on the standard basis: See s.55F(3)(b)(i) of the Act. In addition, the plaintiff would have had a statutory entitlement to "costs on or after the date on which the proceeding" began "on an indemnity basis": See s.55F(3)(b)(ii).

That regime, however, does not apply where, as here, the judgment sum exceeds $50,000. In this event, the Act does not stipulate in terms for an award of indemnity costs where the plaintiff is awarded more by judgment than his mandatory final offer showed he was willing to accept. Instead, in those circumstances (see Monement v Faux [2006] 2 QdR 392, 397 [27],) by s.51C(10) of the Act,

"The Court must (where relevant) have regard to the mandatory final offers in making a decision about costs."

This is not the right to indemnity costs created by s.55F. Nor is it equivalent to the presumptive entitlement arising from successful compliance with the Offer to Settle scheme. Rather, potentially, a mandatory final offer is, by operation of s.51C(10), a significant, though not decisive, consideration in the exercise of a discretion to award costs on an indemnity basis.

In this respect, s.51C(10) operates much as a Calderbank offer that is bettered at trial: namely, that the mere fact that the party making the offer obtains a judgment more favourable than the terms offered does not of itself inevitably demonstrate such special circumstances as would justify a departure from the ordinary basis of a costs assessment: See Crump v Equine Nutrition Systems (No 2) [2007] NSWSC 25 at [39]- [41]; Gove v. Black [2006] WASC 298 at [43]- [47]; Balderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited [2006] NSWSC 583 at [30]- [37]; Fordyce v Fordham (No 2) [2006] NSWCA 362 at [16], [21]; Devprov v Seamark Pty Ltd [2007] QSC 31 at [4]; Westpac Banking Corporation v Commissioner of State Revenue at - ; Gretton v The Commonwealth of Australia at - ; Food Improvers Pty Limited v BGR Corporation Pty Ltd (No 4) , at ; and Grice v The State of Queensland at .

Among the pertinent considerations is whether it appears that the party sought to be made liable for costs on an indemnity basis has imprudently or unreasonably failed to accept a Calderbank offer of compromise.

That will often involve an attempt to form a view about the relevant strengths and weaknesses of the cases that ought to have been apparent to the parties when the offer was made:

cf Baulderstone Hornibrook Engineering at [34]-[35]; and Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 at

There has been no attempt by the plaintiff to demonstrate that the Nominal Defendant's decision to decline the plaintiff's final mandatory offer was unreasonable.

In any event, in view of the issues that arose and the several obstacles of fact and law the plaintiff needed to surmount to establish liability, it cannot be concluded that the Nominal Defendant was unreasonable or imprudent in not accepting the plaintiff's mandatory final offer.

The next question is whether the costs ought to be awarded on the District Court Scale.

Rule 698(3) provides that if the only relief obtained by a plaintiff in a proceeding in the Supreme Court is relief that when the proceeding began could have been given by the District Court, the costs the plaintiff may recover must be assessed as if the proceeding had been started in the District Court.

But subrule (1) provides that that is the costs order "unless the Court otherwise orders".

The circumstances here justify the exercise of the discretion to award costs on the Supreme Court Scale.

The agreed damages - $265,000 - exceeded the jurisdictional limit of the District Court, and a finding of contributory negligence was by no means inevitable.

It was appropriate in all the circumstances that the litigation be prosecuted to trial in the Supreme Court.

There will therefore be an order otherwise pursuant to rule 698(1) stipulating for costs on the Supreme Court Scale.