Schimke v Clements & Suncorp Metway Insurance Ltd

[1] On 22 June 2011 judgment was given for the plaintiff in the sum of $201,430. She seeks an order pursuant to the Uniform Civil Procedure Rules 1999 (UCPR) r 360 that she be paid her costs of and incidental to the proceeding calculated on the indemnity basis. UCPR r 360 provides:

(a) the plaintiff makes an offer to settle that is not accepted by the defendant and the plaintiff obtains a judgment no less favourable than the offer to settle; and

(b) the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in 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."

[2] The plaintiff relies upon a letter of 26 February 2010 which contained a formal offer to settle for the sum of $100,000 plus standard costs of and incidental to the action to be assessed on the District Court scale. There is no doubt that the plaintiff has obtained a judgment "no less favourable than the offer to settle". I am satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer. In the circumstances, it is for the defendants to show that another order for costs is appropriate in the circumstances.

[3] The second defendant seeks to do so by pointing to the plaintiff's mandatory final offer made under the Motor Accident Insurance Act 1994 ("the Act"), to which, pursuant to s 51C(10), the Court "must" have regard in making a decision about costs. That offer was $300,000 plus standard costs, exclusive of all payments made to that date by the second defendant for medical and/or rehabilitation treatment and/or advances made by the insurer for the benefit of the plaintiff. The second defendant submits that the mandatory final offer was "grossly excessive and properly rejected" by it, and should be held not to have been a genuine offer to settle the claim pursuant to the pre-litigation requirements of the Act. It relies upon the significant disparity between the plaintiff's mandatory final offer and the offer made under the rules approximately one month later.

[4] I have regard to the mandatory final offer. I do not consider that it was grossly excessive. Had the evidence on liability at trial fallen differently - for example, if the first defendant and his wife had given evidence and been cross-examined - then an apportionment on liability more favourable to the plaintiff than that made by me may have been made. On the evidence as given, acceptance of the plaintiff's

well-made submissions concerning apportionment of liability would have resulted in a far more substantial award. I do not consider that the mandatory final offer made by the plaintiff of $300,000 exclusive of certain payments plus costs was not a genuine offer to settle the claim. It involved a not unrealistic assessment of the likely outcome of the proceedings based upon a recognition of the deceased's contributory negligence.

[5] The disparity between the plaintiff's mandatory final offer and the offer made under the rules does not persuade me that an order for costs other than the order provided for in r 360 is appropriate in the circumstances. The formal offer to settle reflected a substantial compromise and was such as to give the offeree serious thought to the risk involved in non-acceptance.[1] The plaintiff's formal offer of settlement was accompanied by her statement of loss and damage. The prima facie consequence of non-acceptance is the enforcement of the rule against the non-accepting party.[2] The second defendant's submissions do not point to any offer to settle made by it in response to the plaintiff's formal offer. On 21 June 2010 it made a formal offer to settle of nil.

[6] Due to the defendants' non-acceptance of the plaintiff's reasonable formal offer to compromise, "notionally the real cause and occasion of the litigation"[3] was the attitude adopted by the defendants to the offer of compromise. The making of an earlier, higher offer to settle does not displace this conclusion. The plaintiff's formal offer to settle under the rules involved a substantial and proper compromise. Rule 360 provides costs protection to a party who offers such a compromise. No sufficient grounds have been advanced as to why the defendants should not face the prima facie consequence of not accepting a proper, formal offer to settle under the rules.

[7] The defendants have not persuaded me that it is appropriate in the circumstances to displace the operation of the rule as to costs contained in r 360.

[8] Accordingly, the order for costs will be that the defendants pay the plaintiff's costs of and incidental to the proceeding on the indemnity basis.

[1] Morgan v Johnson [1998] NSWSC 367; (1998) 44 NSWLR 578 at 581-582, [1998] NSWSC 367 per Mason P.

[3] Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724.