San v Rumble

CATCHWORDS: PRACTICE AND PROCEDURE - costs - costs of application for leave to appeal -offer of compromise - motor vehicle accident - where Opponent made offer of compromise before hearing of application for leave to appeal - where application for leave to appeal dismissed - application for indemnity costs made by Opponent - whether rule 42.15 Civil Procedure Rules 2005 applicable in proceedings for costs under Ch 6 Motor Accidents Compensation Act 1999 - whether indemnity costs recoverable under s 151(2) Motor Accidents Compensation Act 1999 - whether "exceptional circumstances" existed - STATUTES - acts of parliament - construction - statutory definitions - role of statutory definitions in statutory interpretation - substitution of definiens for definiendum - construction by reference to objectives of statute - Motor Accidents Compensation Act 1999, Ch 6 - TORTS - negligence - motor vehicle accident - costs - where court proceedings preceded by assessment under Claims Assessment and Resolution Service - whether indemnity costs recoverable under s 151(2) Motor Accidents Compensation Act 1999 - interrelationship of Ch 6 Motor Accidents Compensation Act 1999 and rule 42.15 Civil Procedure Rules 2005 - Motor Accidents Compensation Act 1999, Ch 6 - WORDS AND PHRASES - "costs in connection with a motor accident" - "court awarded damages" - "exceptional case and for the avoidance of injustice" - "exceptional circumstances" - Motor Accidents Compensation Act 1999, ss 148(1), 151, 153(1)

Health Insurance Act 1973 (Cth) Legal Profession Act 1987 LEGISLATION CITED: Motor Accidents Compensation Act 1999 Motor Accidents Compensation Regulation (No 2) 1999 Uniform Civil Procedure Rules 2005

Awa v Independent News Auckland Ltd [1996] 2 NZLR 184 Baker v The Queen [2004] HCA 45; (2004) 223 CLR 513 Cohn v Hatcher [2005] FCAFC 199; (2005) 146 FCR 275 Council of the Municipality of Randwick v Rutledge (1959) 102 CLR 54 Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 Director General, Department of Community Services v Adoptive Parents [2005] NSWCA 385; (2005) 64 NSWLR 268 Gibb v The Commissioner of Taxation of The Commonwealth of Australia (1966) 118 CLR 628 Ho v Professional Services Review Committee No 295 [2007] FCA 388 CASES CITED: Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 Manly Council v Byrne & Anor (No 2) [2004] NSWCA 227 Mastrangelo v Reynolds [2001] WASC 347; (2001) 25 WAR 133; (2001) 127 A Crim R 469 Newcastle City Council v McShane (No 3) [2005] NSWCA 437; (2005) 65 NSWLR 155 No 20 Cannon Street Ltd v Singer & Friedlander Ltd [1974] 1 Ch 229 Oreb v Willcock [2005] FCAFC 196; (2005) 146 FCR 237 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 R v Buckland [2000] 1 WLR 1262; [2000] 1 All ER 907 R v Kelly (Edward) [2000] 1 QB 198

PARTIES: Sonyda San - Claimant Matthew Rumble - Opponent

COUNSEL: S G Campbell SC; T Boyd - Claimant A J Stone - Opponent

SOLICITORS: Watson Stafford, Fairfield - Claimant QBE CTP Legal Unit, Sydney - Opponent

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40355/06 DC 61/06

BEAZLEY JA IPP JA CAMPBELL JA

21 SEPTEMBER 2007 SONYDA SAN v MATTHEW RUMBLE (No 2) Judgment - On Costs 1 BEAZLEY JA: The issue with which this judgment is concerned is whether the cost consequences that usually flow from the making of an offer of compromise under the provisions of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR) apply in respect of a claim made under the Motor Accidents Compensation Act 1999 (NSW) (the MAC Act). 2 Campbell JA's judgment (that I have had the benefit of reading in draft) has given detailed consideration to the applicable legislation, as well as to the principles of statutory construction that apply and I agree substantially with his Honour's judgment and with the orders that he proposes. However, I record my own reasons briefly as to why I have reached the same conclusion as his Honour. 3 On 20 July 2007, this Court refused the claimant leave to appeal from the damages award made by Gibb DCJ in respect of injuries the claimant had received in a motor vehicle accident. The claimant's Summons for Leave to Appeal was listed as a concurrent hearing with the appeal, should leave be granted. As leave was refused, the Court ordered that the Summons for Leave to Appeal be dismissed with costs. 4 After that order was made, counsel for the opponent made an application for indemnity costs of the proceedings in the Court of Appeal, based upon an offer of compromise made under Rule 20.26 of the UCPR. The claimant's action in the District Court had been brought pursuant to the provisions of the MAC Act, following upon the claimant's refusal to accept the assessment of her claim made by the Claims Assessment and Resolution Service (CARS). 5 The MAC Act makes provision in Ch 6 for costs incurred in respect of claims for injuries sustained in a motor vehicle accident. Because the claimant's proceedings in the District Court were brought after a CARS assessment had been made, the costs of the District Court proceedings (subject to the issue on the appeal) are governed by s 151(2). That section provides, relevantly: "151 Costs where claims assessment made (1) This section applies if an assessment is made under Part 4.4 of the amount of damages for liability under a claim. (2) If the claimant does not accept that amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued, then the following provisions have effect with respect to liability for costs incurred after the certificate of assessment was issued: (a) the insurer is liable to pay the costs if: (i) the amount of court awarded damages in respect of the claim exceeds the amount of damages specified in the certificate of assessment by at least $2,000 or 20% (whichever is the greater), or (ii) the amount of court awarded damages in respect of the claim exceeds the amount of damages specified in the certificate of assessment by at least $200,000, (b) the claimant is liable to pay the costs if the amount of court awarded damages in respect of the claim does not exceed the amount of damages specified in the certificate of assessment, but the maximum amount that a claimant is liable to pay for the insurer's costs is $25,000 (or such other amount as is determined by the Authority by order published in the Gazette), (c) except as provided by paragraph (a) or (b), the insurer and claimant are liable to pay their own costs. (3) This subsection applies if court proceedings are adjourned under section 111 (2) for further claims assessment because a party to the proceedings has adduced significant evidence in the proceedings that was available to the party at the time of the original claims assessment but was not made available to the claims assessor. In any such case, the court is to take the failure of the party to make that evidence available to the claims assessor into account and may require the party to pay a greater share of the costs incurred after the initial certificate of assessment was issued and until a further certificate of assessment is issued in connection with the claim. (4) The regulations may make provision for or with respect to the manner in which amounts referred to in this section are to be adjusted (to take account of inflation and other matters) for the purposes of enabling the comparisons provided for in this section to be made.

(5) In this section: costs means costs payable on a party and party basis in relation to a claim, including court fees prescribed under section 154." (Emphasis added) 6 Section 152 deals separately with the costs of proceedings brought in a court that were not preceded by a CARS assessment. Importantly for present purposes, it provides that the rules of court relating to offers of compromise apply to any such offer made in those proceedings: s 152(2). Otherwise, subject to the rules of court, the costs of those proceedings are to follow the event and are payable on a party/party basis: s 152(3). 7 Notwithstanding the provisions of ss 151 and 152, the court has a discretion under s 153(1) to depart from either of the costs orders specified in those sections "in an exceptional case and for the avoidance of substantial injustice". That section otherwise provides that: "Any order of a court as to costs is to be made consistently with the relevant provisions of or made under this Act." 8 The primary principle of statutory construction is that a provision must be construed consistently with the language and purposes of the statute in question. As was stated in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69], in the joint judgment of McHugh, Gummow, Kirby and Hayne JJ: "The meaning of the provision must be determined 'by reference to the language of the instrument viewed as a whole'." 9 The MAC Act provides for a scheme for the assessment of motor vehicle personal injury claims. The objects of the MAC Act are set out in s 5. Relevantly, they are to encourage early and appropriate treatment and rehabilitation for injuries sustained in motor vehicle accidents; to provide compensation for compensable injuries and, to encourage the early resolution of claims and also to keep third-party motor vehicle insurance premiums affordable. To that end, there are limitations on the compensation that is payable under the MAC Act. The scheme of compensation provided for by the MAC Act was a continuation of the radical reform of the common law provision of compensation payable for injuries sustained in motor vehicle accidents, first effected by the Motor Accidents Act 1988 (NSW). 10 A purpose of a CARS assessment for which the MAC Act provides, in which an assessment is made without the intervention of lawyers, is to further the object of the statute in promoting early resolution of claims and in keeping premiums affordable. It is trite to say that the costs of retaining lawyers and the bringing of court proceedings adds to the costs of a claim and usually substantially so. 11 It is apparent from the provisions of Ch 6 that the legislature intended that the costs of proceedings in motor accident personal injury claims were to be regulated as part of the overall operation of the statutory scheme. To this end, it makes provision for costs, in the case where there has been a CARS assessment which is very different in effect and operation than applies in proceedings that are not subject of such legislative control. 12 In my view, in doing so, the legislature intended that the provisions made in respect of the costs were to operate comprehensively according to the terms of the relevant statutory provisions. In the case where s 151 applies, it is apparent that the legislature intended that there were limited and specified circumstances in which the insurer would be liable for the claimant's costs. Likewise, there were limited and specified circumstances in which the claimant for compensation would be liable for the insurer's costs; and in all other circumstances, save for the operation of s 153(1), each party was to be responsible for their own costs. The section also made express provision that where a party was so liable for costs the costs for which it was liable were to be party/party costs. 13 Section 151 is to be contrasted with s 152. That section operates where there has been no CARS assessment, so that the first resolution of a disputed claim is brought in the court. In that circumstance, the legislature has recognised that there has not been the opportunity for early resolution of the claim. 14 The difference in purpose of the two provisions is apparent. The restrictions placed upon the circumstances in which costs are recoverable in the case where there has been a CARS assessment, indicate a legislative intention of encouraging parties to accept the primary assessment made under the scheme and of discouraging the bringing of legal proceedings. However, where there has been no anterior CARS assessment, that factor is not present. Accordingly, the cost sanctions against agitating the claim a second time without any significant difference in the result do not apply. That is recognised by the section providing that, in effect, the usual provisions of the rules of court relating to costs operate, including the rules governing offers of compromise. 15 In my opinion, having regard to the purpose of the legislation and the language used, the provisions of Ch 6 regulate costs in court claims brought under the MAC Act in a way that does not otherwise permit for the operation of the rules of court. I have already referred to the purposes of the MAC Act and the way in which I consider that the costs provisions in Ch 6 both support and are consistent with those purposes. I am further of the opinion that the language of the sections is clear. Should any further support for my view be required, I consider that it is to be found within s 153 itself which, as I have stated provides that, subject to the discretion to make a different order in an exceptional case and for the avoidance of substantial injustice, specifically provides that a court order as to costs in a claim brought under the MAC Act "is to be made consistently with the relevant provisions of or made under the Act". 16 I should also add that I agree with Campbell JA that s 151(5) has a substantive effect as explained by his Honour. I also agree with his Honour's reasoning at [72]-[74] and with his proposed order. 17 IPP JA: I agree with Beazley JA and Campbell JA. 18 CAMPBELL JA:

Topic of this Judgment 19 On 20 July 2007 this Court held a concurrent hearing of an application for leave to appeal and, if leave were granted, the appeal itself. The judgment concerning which leave was sought, was given by her Honour Judge Gibb in the District Court on 2 June 2006, in an action in which the Claimant was the plaintiff. 20 The litigation arose from a motor vehicle accident that occurred on 21 August 2001, in which a motor vehicle driven by the Claimant was hit from the rear by a motor vehicle driven by the Opponent. The Claimant was injured in that accident. 21 The Opponent admitted liability for the accident, so the hearing proceeded as an assessment of damages only. There was agreement about two elements of the Claimant's claim for damages. The first element was past economic loss, concerning which an amount of $312 was agreed, relating to two weeks that the claimant had off work immediately following the accident. The second element agreed was past out-of-pocket expenses, in an amount of $6,980.94. It was common ground that the Claimant was not able to seek damages for non-economic loss. This was because the motor vehicle accident in question was one to which the Motor Accidents Compensation Act 1999 ("MAC Act") applied, and the Claimant did not exceed the 10 percent permanent impairment threshold imposed by section 131 of that Act for damages for non-economic loss. 22 The sole topic of dispute at the hearing in the District Court related to whether the Claimant was entitled to damages for future economic loss. She asserted that she was entitled to damages for two different aspects of future economic loss - loss of future earning capacity, and future out-of-pocket expenses. The primary judge rejected each of those claims, and, in consequence, gave judgment for the Claimant in a total sum of $7,292.94. 23 On 20 July 2007 this Court made an order dismissing the summons for leave to appeal with costs. 24 That costs order was made without having heard argument on the question of costs, and on the assumption that the only relevant principle that governed the costs of the application for leave to appeal was that costs should follow the event. 25 Immediately after that order was pronounced, counsel for the Opponent sought to be heard on the question of costs, and foreshadowed the making of an application for indemnity costs. Both parties were granted leave to make additional written submissions concerning costs. This judgment relates to the reconsideration of the costs of the application for leave to appeal. 26 There were, unusually, two separate rounds of submissions on this topic. The second round of submissions was occasioned by the Court's request for some additional submissions.

Additional Facts Relating to Costs 27 Some additional facts, that were alleged to be relevant to the disposition of the costs of the application for leave to appeal, were made known to the Court. One is that the litigation in the District Court was preceded by an assessment of the Claimant's claim by the Claims Assessment and Resolution Service ("CARS"). That assessment resulted in an Assessment Certificate being issued pursuant to section 94 MAC Act by Assessor John Watts on 14 November 2005. Mr Watts awarded the Claimant $5,535.99, made up of $168.74 for past economic loss, and $5,367.25 for past out-of-pocket expenses. He rejected the Claimant's claim for future economic loss and future out-of-pocket expenses. He made an award for the costs of the Claimant, in an amount assessed in accordance with the Motor Accidents Compensation Regulation (No 2) 1999. 28 The Opponent made two offers of compromise pursuant to Rule 20.26 Uniform Civil Procedure Rules 2005 in the course of the litigation. He made an offer of compromise on 14 March 2006 - ie, before the hearing in the District Court - in the sum of $34,000 plus costs to be agreed or assessed. He made another offer of compromise on 15 November 2006 - which was soon after proceedings had been instituted in the Court of Appeal - in the sum of $15,000 plus costs to be agreed or assessed. On the basis of the latter offer of compromise, the Opponent sought an order for indemnity costs from 15 November 2006.

Legislation Relating to Costs 29 The rule on the basis of which the Opponent initially foreshadowed seeking the order for indemnity costs is rule 42.15 Uniform Civil Procedure Rules. It provides: "(1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim concerned as favourable to the plaintiff, or less favourable to the plaintiff, than the terms of the offer. (2) Unless the court orders otherwise: (a) the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made." 30 Even though that rule uses the terminology of "plaintiff" and "defendant", it applies to proceedings in the Court of Appeal: Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721; Manly Council v Byrne & Anor (No 2) [2004] NSWCA 227. 31 Mr S G Campbell SC, counsel for the Claimant, submitted that it is not appropriate to make any award of indemnity costs in favour of the Opponent. Indeed, Mr Campbell submitted that the proper order for the Court to make is that each party bear its own costs. 32 That submission was based on provisions found in Chapter 6 MAC Act. Chapter 6 runs from section 147 to 156 inclusive. It includes the following: "148 Application of Chapter (1) This Chapter applies to and in respect of costs in connection with a motor accident occurring after the commencement of this Act. (2) This Chapter applies to and in respect of costs payable on a party and party basis, on a solicitor and client basis or on any other basis, unless this Chapter otherwise provides. Note. This Chapter applies only if the vehicle has motor accident insurance cover for the motor accident or the motor accident gives rise to a work injury claim (except a work injury claim by a coal miner). See section 3B. 149 Regulations fixing maximum costs recoverable by Australian legal practitioners (1) The regulations may make provision for or with respect to the following: (a) fixing maximum costs for legal services provided to a claimant or to an insurer in any motor accidents matter, (b) fixing maximum costs for matters that are not legal services but are related to proceedings in any motor accidents matter (for example, expenses for investigations, for witnesses or for medical reports). (2) An Australian legal practitioner is not entitled to be paid or recover for a legal service or other matter an amount that exceeds any maximum costs fixed for the service or matter by the regulations under this section. ... (4) This section and any regulations under this section prevail to the extent of any inconsistency with the Legal Profession Act 2004 (in particular section 329 of that Act) and the regulations under that Act. An assessment under Division 11 of Part 3.2 of that Act of any costs in respect of which provision is made by a regulation under this section is to be made so as to give effect to that regulation. … 151 Costs where claims assessment made (1) This section applies if an assessment is made under Part 4.4 of the amount of damages for liability under a claim. (2) If the claimant does not accept that amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued, then the following provisions have effect with respect to liability for costs incurred after the certificate of assessment was issued: (a) the insurer is liable to pay the costs if: (i) the amount of court awarded damages in respect of the claim exceeds the amount of damages specified in the certificate of assessment by at least $2,000 or 20% (whichever is the greater), or (ii) the amount of court awarded damages in respect of the claim exceeds the amount of damages specified in the certificate of assessment by at least $200,000, (b) the claimant is liable to pay the costs if the amount of court awarded damages in respect of the claim does not exceed the amount of damages specified in the certificate of assessment, but the maximum amount that a claimant is liable to pay for the insurer's costs is $25,000 (or such other amount as is determined by the Authority by order published in the Gazette), (c) except as provided by paragraph (a) or (b), the insurer and claimant are liable to pay their own costs. … (5) In this section: costs means costs payable on a party and party basis in relation to a claim, including court fees prescribed under section 154. court awarded damages means all damages of any kind awarded by a court in respect of a claim (without the addition of interest) after taking into account any deduction or reduction in accordance with Chapter 5. 152 Costs where court proceedings and no claims assessment (1) This section applies where a claim is determined by court proceedings (including court arbitration) and an assessment has not been made under Part 4.4 of the amount of damages for liability under the claim. (2) The rules of court concerning offers of compromise apply to any such offer in those proceedings. (3) The costs payable on a party and party basis are, subject to the rules of court, to follow the event, and are to include the court fees prescribed under section 154. 153 Other matters relating to costs (1) Any order of a court as to costs is to be made consistently with the relevant provisions of or made under this Act. However, the court may make an order that departs from those provisions in an exceptional case and for the avoidance of substantial injustice."

Construction of Section 151 33 Because the Claimant did not accept the amount of damages that the CARS assessor had arrived at, the way was opened for section 151(2) to apply "with respect to liability for costs incurred after the Certificate of Assessment was issued". In the District Court, the Claimant had obtained a larger award of damages than the CARS assessor had assessed. However, the difference between the amount of the court awarded damages and the amount of damages specified in the CARS Assessment Certificate was less than $2,000. Twenty percent of the damages specified in the CARS Assessment Certificate was $1,107.20, so in the circumstances, $2,000 was the sum referred to in section 151(2)(a)(i) MAC Act. The amount of court awarded damages in the District Court proceedings did not exceed the amount of damages specified in the CARS Assessment Certificate by at least $2,000. In consequence of section 151(2)(c) MAC Act, the learned District Court judge ordered, by consent, that each party should pay their own costs of the District Court proceedings. No attack is made in these proceedings on that decision. 34 Mr Campbell submitted that the expression "costs in connection with a motor accident" in section 148(1) MAC Act extends to costs in the Court of Appeal in a motor accident claim. In Newcastle City Council v McShane (No 3) [2005] NSWCA 437; (2005) 65 NSWLR 155 (at [35]-[39]; 165), Mason P (with whom Giles JA and Hunt AJA agreed) held that the expression "legal services provided to a party in connection with a claim" in section 198D(1) Legal Profession Act 1987 extended to legal services provided to a party in appellate proceedings that arose from the claim. Similarly, Mr Campbell submitted, the costs of the present application for leave to appeal are "costs in connection with a motor accident", within the meaning of section 148(1). In my view, that submission is clearly correct. 35 When section 151 MAC Act is applied to Court of Appeal proceedings in which the Court of Appeal re-assesses the damages that were awarded in the court below, the amount of "court awarded damages" referred to in section 151 is the amount of damages assessed by the Court of Appeal. When section 151 applies in proceedings in the Court of Appeal in which the Court of Appeal declines to interfere with the assessment of damages made in the court below, the operative order that fixes the amount of damages is the order in the court below, and hence the amount awarded in the court below is the amount of "court awarded damages" within the meaning of section 151. 36 Mr Campbell submitted that the effect of the application for leave to appeal being rejected is that the judgment of the District Court stands, and that, in consequence, the amount of "court awarded damages" within the meaning of section 151 exceeded the amount of damages specified in the CARS Assessment Certificate, but not by at least $2,000. So far, I accept that submission. Mr Campbell went on to submit, that in consequence of section 151(2)(c), the appropriate order in this Court is for each party to pay their own costs of the application for leave to appeal. 37 Mr Campbell pointed to a distinction between sections 151 and 152 MAC Act. Section 152 MAC Act expressly contemplates that where a claim is determined by court proceedings and a CARS assessment has not been made concerning that claim, the rules of court concerning offers of compromise apply in those proceedings. By contrast, section 151 makes no mention of the rules of court concerning offers of compromise applying to proceedings that follow the making of a CARS assessment. Mr Campbell submitted that section 151 covers the field for the awarding of costs if a CARS assessment has been made concerning a claim, subject only to the possibility of the court invoking section 153(1) to depart from the provisions of section 151 "in an exceptional case and for the avoidance of substantial injustice". 38 Mr Stone, counsel for the Opponent, accepted (correctly, in my view) that section 151 is capable of applying to appellate proceedings. He pointed, however, to some oddities that resulted from its applying to appellate proceedings: "A claimant who secures an extra $5 in damages (having elected not to accept a CARS assessor's determination) will be entitled to an order that each party pay their own costs of the District Court hearing. If the same claimant thereafter pursues hopeless applications for Leave to Appeal or even Special Leave to Appeal to the High Court, there is no risk as to costs provided the insurer/defendant does not seek to cross appeal the damages awarded. The court awarded damages will always exceed the CARS assessment by $5 irrespective of the level in the appellate process at which proceedings are ultimately conducted. The claimant can never be liable for the insurer/defendant's costs of the appellate process under section 151 provided the District Court judgment appealed from is $1 more than the CARS assessor's award. This outcome is wholly inconsistent with the objectives of the Motor Accidents Compensation Act as set out in section 5(1)(b). It can hardly encourage the early resolution of compensation claims if a claimant can pursue unmeritorious or frivolous appellate proceedings with no risk as to an adverse costs order."

(Section 5(1)(b) MAC Act states that one of the objects of the Act is "to provide compensation for compensable injuries sustained in motor accidents, and to encourage the early resolution of compensation claims." ) 39 Mr Stone conceded that it was a consequence of section 151(2)(c) MAC Act that the Claimant was entitled to an order that each party pay its own costs unless the Court ordered otherwise pursuant to section 153(1). The oddities to which he pointed were, as I understand his submission, the sort of circumstance that might justify a court in making an order under section 153(1). He went on to make submissions about why the Court should make an order under section 153(1) in this particular case. 40 A court is not bound to act on admissions or concessions made by the parties: Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 (at [157]; 520). There were some possible arguments that, if correct, may have meant that Mr Stone's concession was mistaken. As the questions involved in the costs argument in the present case are of some general importance, it was thought desirable that the result not be arrived at through a process of reasoning that included a concession that was, even arguably, incorrect. Thus, the Court requested further submissions concerning those possible arguments, and any other arguments that related to whether it was possible for section 151 to co-exist with the rules of Court relating to indemnity costs when an offer of compromise is not bettered.

The Arguments Favouring Application of the Indemnity Costs Rule 41 The arguments concerning which the Court sought further submissions are as follows. 42 The first argument starts from a recognition that the usual function of a definition in a statute is solely to state a convention about the manner of use of words that has been adopted by the drafter for the purpose of that statute. When all such a definition does is to state a fact about how words are used in the statute in question, it does not have any substantive effect. By contrast, the provisions of a statute that have substantive effect are ones that alter the substance of the law. Some substantive provisions of a statute might state expressly what shall be the rights or obligations of a person. Other substantive provisions of a statute might state what shall be the conditions upon which an action (such as the making of a will, or the holding of a company meeting) can take place, being an action that the law recognises as one that can alter the rights or obligations of a person. 43 The first argument then recognises that the definition of "costs" in section 151(5) is an exhaustive definition - it states what the word "costs" means. That is to say, it provides a synonym for the word "costs". It is the verbal equivalent of a statement in mathematics that a = b. When a definition states that in the particular statute in question there is equivalence of meaning of the definiens and the definiendum of a definition, it should be possible to then go to a substantive provision in the statute and substitute the definiens for the definiendum without altering the meaning of that substantive provision. This can be done in the same way that, in algebra, once one is told that a = b, it is possible to replace "a" with "b" in any equation without altering the correctness of that equation. 44 The definition in section 151(5) applies to section 151, but not to other sections in Chapter 6 MAC Act. It is arguable that the definition has the effect that section 151(2) governs only the costs that are payable on a party and party basis in court proceedings that concern a claim that has been the subject of a CARS assessment. This can be seen if one substitutes the full meaning of "costs" in the opening words of section 151(2). If that substitution is carried out, those opening words read: "If the claimant does not accept that amount of damages in settlement of the claim within 21 days after the certificate of assessment is issued then the following provisions have effect with respect to liability for costs payable on a party and party basis in relation to a claim, including court fees prescribed under section 154, [being costs] incurred after the certificate of assessment was issued." 45 As so understood, section 151 says nothing about the costs that are payable on, in particular, an indemnity basis in relation to a claim that has been the subject of a CARS assessment. It thus leaves the way open for the ordinary rules of court concerning costs to operate, including rule 42.15 Uniform Civil Procedure Rules. 46 The other arguments concerned how this construction of section 151 fits in with the policy of the MAC Act. I will not set out detail of those other arguments.

Consideration of the Arguments Favouring Application of the Indemnity Costs Rule 47 In response to the Court's invitation to make further submissions, Mr Campbell (understandably) adhered to his previous position concerning the construction of section 151. Likewise, Mr Stone adhered to his previous position, and did not withdraw the concession he had earlier made (para [39] above). 48 Mr Campbell drew attention to the remarks of Megarry J in No 20 Cannon Street Ltd v Singer & Friedlander Ltd [1974] 1 Ch 229 at 240: '… I do not think that statutory definitions require you bodily to substitute the definition for the words defined so as to enable you as a matter of grammar to treat words in the definitions as being antecedents of words actually appearing later in the statutory provision. The definitions explain what the expressions mean in the statutory provision, but they remain outside that provision and for grammatical purposes leave unchanged in the provision the actual words that are there, even though they have become freighted with their statutory meanings." 49 In a dissenting judgment in Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216, McHugh J (at [103]; 253) has criticised what Megarry J said at 240 in No 20 Cannon Street Ltd. I take McHugh J's criticisms to relate to that passage that I have extracted at [48] above. I will not go into that criticism, because, even as it stands, I do not find any assistance in the passage from the judgment of Megarry J. The problem with which Megarry J's judgment was concerned involved construction of a provision that said: "Where a business tenancy comes to an end … and the premises are re-let … the rate at which rent is payable … shall not exceed the standard rate, except to the extent that any such excess is properly attributable to a variation in the terms of the tenancy." 50 The question for decision required Megarry J to determine to which tenancy the last two words of the provision were referring. Statutory definitions of "rent" and "standard rate" included a reference to a "tenancy". Megarry J, in the passage to which I was referred, rejected the possibility that the words "the tenancy" appearing as the last two words in the provision referred back to the tenancy that was contained in the definition of "rent" and "standard rate". It was because the question that Megarry J was answering was a "what were the two final words 'the tenancy' referring back to" that he said you could not treat words in the definitions as being antecedents of words appearing later in the statutory provision. Thus, he concluded, "the tenancy" referred to by the last two words of the provision was the "business tenancy" referred to by the opening words of the provision. 51 No problem like that falls to be solved in the present case. Moreover, when properly understood, Megarry J's passage does not express any general disapproval of a process of construction that ascertains the meaning of a statutory provision that contains a defined term by substituting the definiens for the definiendum. Indeed, I note that later on page 240, Megarry J construed a different provision by saying, "If paragraph 3 is expanded by reading into it the relevant parts of the definition it runs …", and then substituting the definiens for the definiendum in the text of paragraph 3. 52 But substituting a definiens for a definiendum is not the only way of applying a statutory definition to a provision that is being construed. As Windeyer J said in Council of the Municipality of Randwick v Rutledge (1959) 102 CLR 54 (at 69): "A statutory definition may be only 'a mechanical device to save repetition' …; or it may, by explanation rather than by synonymous expansion, indicate the particular sense in which a word or phrase is used." 53 In my view, there is a way of giving effect to the definition of "costs" in section 151(5) that differs from the process of substituting the definiens for the definiendum. It involves construing section 151(2) as though it contained an extra paragraph reading: "(d) the costs that are recoverable under this subsection are costs payable on a party and party basis in relation to a claim, including court fees prescribed under section 154." 54 In my view, that is a preferable way of applying the definition in the construction of section 151(2). It gives better effect, in my view, to the overall context and purpose of the MAC Act than does the construction that the Court asked the parties to consider. In Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 (at [69]-[70], 381-382), McHugh, Gummow, Kirby and Hayne JJ said: "[ 69] The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole". In Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 , Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed. [70] A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other". Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme." 55 The construction of section 151 that I prefer involves conferring a substantive effect on the definition, because it has the effect of altering the rights or obligations of people. It does so by providing that the only costs that can be recovered under section 151(2) are party and party costs, and (implicit in that) that costs on an indemnity basis are not recoverable under section 151(2). If the definition had not been in the legislation, it would have been open to a court to apply the rules and principles that are usually applied in litigation to make an award of indemnity costs in an appropriate case where litigation was brought concerning a claim that has been the subject of a CARS assessment. Thus, the effect of the definition is to take away what would otherwise have been a right of a litigant to seek an order for indemnity costs in such a case. I recognise that conferring a substantive effect on the definition is something that is usually not appropriate to the function of a statutory definition: Gibb v The Commissioner of Taxation of The Commonwealth of Australia (1966) 118 CLR 628 at 635. However, as Pearce and Geddes, Statutory Interpretation in Australia, 6th edition, para [6.63] point out, "Drafters do occasionally include substantive material in a definition. This is poor drafting and can lead to error in the interpretation of the legislation because of the approach set out in Gibb's case."

Particularly when the definition in question is one that applies in one section of the legislation only, and the construction I prefer gives better effect to the policy of the Act, I am not troubled by this departure from the usual way in which statutory definitions are construed. 56 Mr Campbell has submitted that Chapter 6 and the Regulation made under it evince an intention that legal costs for both parties in motor accident claims should be limited. He points out that even the liability of an unsuccessful claimant pursuant to section 151(2)(b) is capped at an amount that he describes as "reasonably modest … in the modern day viz $25,000". He submits that these limitations flow from an important part of the overall scheme established by the Act for non-curial assessment of claims pursuant to Part 4.4 of the Act, which furthers the object expressed in section 5(1)(b) MAC Act of the encouragement of the early resolution of the claims. He points out that claimants and insurers who utilise the extra-curial claims procedures laid down in the Act thereby obtain certain protection as to costs, and claimants and insurers who obtain an exemption from using those procedures do not obtain any such protection, by reason of section 152. In my view those submissions are correct. 57 Another legislative purpose in the MAC Act is to restrict the re-hearing of matters and to encourage parties to adopt the CARS assessor's award. The effect of the construction that the Court asked the parties to consider is that if a claim that had been the subject of a CARS assessment were to be litigated, and an offer of compromise were to be made (by either side) that was not bettered, section 151 frequently would not have practical operation. A tactically astute claimant who was reasonably confident of being able to obtain a little more than a CARS assessor had assessed, would be able to make an offer of compromise for more than the amount the CARS assessor had assessed, but less than the amount fixed by section 151(2)(a) as the margin by which the CARS assessment needed to be exceeded before the insurer became liable to pay the costs. In that circumstance, if the litigation proceeded and the amount in the offer of compromise were exceeded, the claimant would be able to (other things being equal) receive an order for indemnity costs. And if the offer was accepted, the claimant would have received more than the CARS assessor had assessed. Of course, the fact that such a claimant was seeking to subvert a statutory policy contained in section 151(2) might provide a reason why the Court should "order otherwise", under rule 42.15, and so decline to make an order for indemnity costs. But even if that were so, the onus would still be on the insurer to persuade the Court that it was appropriate to "otherwise order" under rule 42.15, and the Court would be exercising a comparatively unconfined discretion under rule 42.15 concerning whether to disapply the default rule established by rule 42.15. In that circumstance, section 153(1) would have no work to do - yet section 153(1) is an express statement of the criterion by reference to which a court can depart from section 151. Further, if the costs rules worked so as to provide an incentive to claimants to try such a tactic to squeeze out a little more by way of settlement of their claim than the costs assessor had assessed, the objective of keeping premiums affordable (one of the means to achieving which is to reduce the administration costs of the Motor Accident Compensation Scheme as a whole by lessening the volume of litigation and its consequent total cost) would not be assisted. 58 It is not only the tactically astute claimant who could undermine the objectives of the Act if the construction of section 151 that the Court asked the parties to consider were correct. The tactically astute insurer against whom court proceedings were commenced following an assessment certificate could make an offer of compromise in an amount equal to the amount of the costs that had been assessed and, if the claimant did not better that amount, the insurer would have put the claimant at risk of losing the cap on costs created by section 151(2)(b). These consequences are ones that are not consistent with the overall purpose and objectives of the Act.

"Exceptional case and for the avoidance of injustice" in Section 153(1) 59 There are numerous examples of legislative provisions that provide that a court is to cause a particular consequence to arise in a particular type of situation, but that the court can proceed differently if there are "exceptional circumstances". Concerning an English statute that required a judge to impose a life sentence on a person convicted of a second "serious offence", "unless the court is of the opinion that there are exceptional circumstances relating to either of the offences or to the offender which justify its not doing so", the English Court of Appeal (per Lord Bingham of Cornhill CJ) said in R v Kelly (Edward) [2000] 1 QB 198 (at 208): "We must construe 'exceptional' as an ordinary, familiar English adjective, and not as a term of art. It describes a circumstance which is such as to form an exception, which is out of the ordinary course, or unusual, or special, or uncommon. To be exceptional a circumstance need not be unique, or unprecedented, or very rare; but it cannot be one that is regularly, or routinely, or normally encountered." 60 That passage has been cited by Callinan J in Baker v The Queen [2004] HCA 45; (2004) 223 CLR 513 (at [173]; 573), by Malcolm CJ (with whom Wallwork and Einfeld AJ agreed) in Mastrangelo v Reynolds [2001] WASC 347; (2001) 25 WAR 133; (2001) 127 A Crim R 469 (at [55]; 146; 481), and by Giles JA (with whom Mason P and M W Campbell AJA agreed) in Director General, Department of Community Services v Adoptive Parents [2005] NSWCA 385; (2005) 64 NSWLR 268 (at [45]; 279). 61 The test for "exceptional circumstances" stated in Kelly was expanded upon by the English Court of Appeal (per Lord Bingham of Cornhill CJ) in R v Buckland [2000] 1 WLR 1262; [2000] 1 All ER 907 (at 1268; 912-913): "But the judgment whether exceptional circumstances exist is not quantitative only, but maybe qualitative also. It may, to take an example from quite another field, be far from exceptional for a candidate to obtain 5 A grades at A level, but highly exceptional for this to be achieved by a candidate who is deaf and dumb or who has only spoken English for a year. In judging whether, if exceptional circumstances are found to exist, they justify the court in not imposing a life sentence, the court must bear in mind the rationale of the section. This section is founded on an assumption that those who have been convicted of two qualifying serious offences present such a serious and continuing danger to the safety of the public that they should be liable to indefinite incarceration and, if released, should be liable indefinitely to recall to prison. In any case where, on all the evidence, it appears that such a danger does or may exist, it is hard to see how the court can consider itself justified in not imposing the statutory penalty, even if exceptional circumstances are found to exist. But if exceptional circumstances are found, and the evidence suggests that an offender does not present a serious and continuing danger to the safety of the public, the court may be justified in imposing a lesser penalty." 62 Section 106KA Health Insurance Act 1973 (Cth), and regulations made to give effect to, it aim to identify and control overservicing in the Medicare system. They enable a doctor's conduct to be the subject of disciplinary action if 80 or more services are rendered on each of 20 or more days in a 12 month period, but the days on which "exceptional circumstances existed that affected the rendering or initiating of services by the person" are not to count for certain purposes. In Oreb v Willcock [2005] FCAFC 196; (2005) 146 FCR 237 Lander J (at [66]; 249) (with whom Black CJ and Wilcox J agreed concerning this matter) in the ordinary meaning of the word "exceptional" circumstances "must be unusual or out of the ordinary". In Cohn v Hatcher [2005] FCAFC 199; (2005) 146 FCR 275 Lander J (at [68]; 288) (with whom Black CJ and Wilcox J agreed concerning this matter) in substance repeated that construction. In Ho v Professional Services Review Committee No 295 [2007] FCA 388 Rares J (at [26]) said of this provision that exceptional circumstances "… can include a single exceptional matter, a combination of exceptional factors, or a combination of ordinary factors which, although individually of no particular significance, when taken together are seen as exceptional." 63 Awa v Independent News Auckland Ltd [1996] 2 NZLR 184 concerned a statutory provision that excused a legally aided litigant from paying costs unless there were "exceptional circumstances". The plaintiff in that case had been legally aided, and his action had been dismissed. Hammond J said (at 186): "… the term "exceptional circumstances" when used in a statute is never free from difficulty. As a matter of general approach, it is usually construed as meaning something like "quite out of the ordinary". And obviously the onus must be on an applicant to establish entitlement in the face of the statutory language. Those general considerations apart, it is apparent from the decisions to date under this provision that no intrinsic tests for "exceptional circumstances" has been evolved by our Courts. Indeed it is hard to see how there could be such a test. The facts of each case are so diverse that both this Court, and the Court of Appeal, have approached each application in a quite fact specific way." 64 One of the factors that Hammond J took into account, in holding that in the instant case there were exceptional circumstances, was that a Calderbank offer had been made by the defendant, offering to pay $20,000. Hammond J (at 187) rejected a submission that the making of that offer should not be taken into account. Rather, he said it was "a factor to be accorded a respectable measure of weight". 65 The particular costs order that Hammond J made is instructive. The plaintiff's claim was "quite without merit" (at 187) and the plaintiff had conducted the litigation in a high-handed and wasteful way, such that Hammond J found that "exceptional circumstances" existed. However, Hammond J did not simply make an order for costs, or an order for indemnity costs, against the plaintiff. He said (at 188): "The legislation obviously comprehends that the purpose of legal aid should not be subverted by awarding costs against somebody who is plainly not in a position to meet same." 66 He went on to consider the assets and liabilities, income and expenditure of the plaintiff, and ordered the plaintiff to pay costs in a specific amount "moderated to his particular circumstances" (189), being an amount that would not necessarily lead to a forced sale of the plaintiff's family home. 67 The guidance derived from these cases can be applied, in my view, to the construction of section 153(1). A litigant who seeks to have a court displace, under section 153(1), the costs regime that section 151 creates bears the onus of proving facts and presenting argument that persuades the court that it is appropriate to make such an order. In deciding whether it is an "exceptional case" within the meaning of section 153(1), the court needs to find that the circumstances of the instant case are unusual or out of the ordinary, whether that unusualness or being out of the ordinary arises from qualitative or quantitative factors. But, to adapt Kelly, the case need not be one that is unique, unprecedented, or very rare. The conclusion that the case is exceptional can arise in any of the ways identified by Rares J in Ho. Beyond that, it seems to me it is not possible to provide general guidance. As the New Zealand courts have found concerning the discretion that was the subject of Awa, it will be necessary to approach each application by careful consideration of the facts of the individual case. 68 Before it can make an order under section 153(1), the court must be satisfied not only that the case is an exceptional one, but also that if an order is not made there will be substantial injustice. 69 Even if the court finds that a case is an exceptional case and that departure from section 151 is needed to avoid a substantial injustice, the particular order that the court makes must be one that will have the effect (or at least tend to have the effect) of avoiding the particular substantial injustice that has been identified in the instant case. Also, the particular order that is made should be one that bears in mind the objectives of the MAC Act.

Inter-relationship of Chapter 6 MAC Act and UCP Rule 42.15 70 If an offer of compromise has been made under the court rules in litigation of a claim under the MAC Act that follows the making of a CARS assessment, it is not possible, it seems to me, for rule 42.15 UCP Rules to apply. Rule 42.15 sets up a default rule, from which the Court is free to depart in circumstances not defined by the rule itself, concerning costs in litigation in which an offer of compromise has been made. Section 151(2) MAC Act sets a different default rule that is required to be applied to claims under the MAC Act concerning which there has been a CARS assessment. The circumstances established by section 153(1) in which the default rule provided by section 151 can be displaced are different to the (lack of) circumstances defined by UCP Rule 42.15 for displacing its default rule. When the two default rules, and the circumstances of disapplication of the default rules, are different, the two regimes simply cannot live together. The way of resolving this conflict is for the more specific provision, namely that contained in the MAC Act, to prevail in those circumstances where there is a conflict. 71 That does not mean, however, that the making of an offer of compromise is irrelevant for the exercise of the discretion under section 153(1). It seems to me that it is a relevant circumstance, which may be taken into account for the purpose of section 153(1), even though the offer of compromise does not attract the automatic costs consequences for which rule 42.15 provides.

Application of Section 153(1) 72 The Claimant's case was that at the time of the accident she had long held an ambition (upon which she had not previously acted) to become a nurse, but the injury she sustained prevented her from carrying out the heavy lifting work that is involved in nursing. The fundamental reason why the Claimant failed to receive damages for loss of future earning capacity, before the assessor, in the District Court, and on the application for leave, was because the Claimant had available to her positions in commerce, like the position she occupied at the time of the trial, from which her likely net earnings during the remainder of her working life would be no less than her likely net earnings if she had been able to change course and become a nurse. The fundamental reason why the Claimant failed, before the assessor, in the District Court, and in the application for leave, to receive damages for future out-of-pocket expenses was because there was insufficient evidence of the likelihood that she would incur any such expenses. 73 In my view, the fact that the Claimant has failed in making the same case before the assessor, in the District Court, and in the Court of Appeal, and that she did not accept an offer of compromise of a significant amount that was made soon after the appeal was instituted, suffice to make this a case that is exceptional. Further, it would, in my view, be a substantial injustice to require the Opponent to bear his own costs of the appeal in those circumstances. 74 However, as already explained, the Opponent is not entitled to the benefit of the default rule contained in rule 42.15 UCP Rules. In litigation where UCP Rule 42.15 does not operate, the Court's usual practice is to regard an order of party/party costs as a sufficient remedy for the party who has succeeded in the litigation having been put to the expense of running it. I am not persuaded that any more extensive remedy is called for in the present case. 75 Thus, I propose that no alteration be made to the costs order that the Court has already pronounced. **********

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