PROCEDURE – CIVIL PROCEEDINGS IN THE STATE AND TERRITORY COURTS
– COSTS – RELEVANT CONSIDERATIONS GENERALLY –
POWER TO ORDER
– Where plaintiff was successful in the primary judgment – Whether
Source
Original judgment source is linked above.
Catchwords
PROCEDURE – CIVIL PROCEEDINGS IN THE STATE AND TERRITORY COURTS– COSTS – RELEVANT CONSIDERATIONS GENERALLY –POWER TO ORDER– Where plaintiff was successful in the primary judgment – Whetherapplicant gave respondent a mandatoryfinal offer – Whether claim fallswithin District Court or Supreme Court Jurisdiction – Whether order as percosts shouldbe made – Whether the plaintiff ought to recover the costs ofan expert’s evidence where that evidence was deemed inadmissible.Uniform Civil Procedure Rules 1999 (Qld), r 360MotorAccident Insurance Act 1994 (Qld), s 51CLawes v Nominal Defendant [2007] QSC 103, considered.Brown v Daniels & Anor (No 2) [2018] QSC 232, followed.Val Eco Homes Pty Ltd (in liq) v Jason Hall t/a JHL Lawyers [2021]QDC 182, appliedWaterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005]NSWSC 1111, considered.
Judgment (48 paragraphs)
[1]
[1] On 7 October 2021, I gave judgment for the plaintiff, Ms Sutton, in the sum of $314,345.[1] I directed that the parties be heard on costs.
[2] Both parties have filed and served written submissions on costs. Ms Sutton's counsel contends that, having regard to a mandatory final offer pursuant to s 51C of the Motor Accident Insurance Act 1994 (Qld) (the 'Act'), Ms Sutton ought to have her costs on an indemnity basis. Alternatively, Ms Sutton ought to have her costs on a standard basis. Or, 'at the very worst' Ms Sutton ought to have her costs on a standard basis on the District Court Scale.[2]
[3] Allianz contends that Ms Sutton's costs ought to be restricted to costs on a standard basis and that Ms Sutton ought not be able to recover the costs of three specific aspects of the case.[3] Alternatively, Allianz's counsel contend the preferred course would be to order that Ms Sutton recover 75% of her standard costs.
[4] Section 51C(10) of the Act requires that the court have regard to a mandatory final offer in making a decision about costs. One of the purposes of the Act is to encourage the speedy resolution of personal injury claims resulting from motor vehicle accidents.[4] It is therefore appropriate for a court making a costs order in a matter which does proceed to trial to seek by the order to further that objective of encouraging speedy resolution.[5]Uniform Civil Procedure Rules 1999 (Qld) ('UCPR') 360 is focussed on the same objective.
This [i.e. s 51C(10)] 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.[7]
[5]
[6] Those are the principles. Here, Ms Sutton's mandatory final offer (MFO), made on 13 August 2018, was $310,000 plus costs. The court's decision, on 7 October 2021, was that Ms Sutton was entitled to $314,345. It can be seen that Ms Sutton's MFO was in the vicinity of the court's award.
[7] Ms Sutton's submissions explain that the defendant's MFO was $70,000, although the offer was not filed in accordance with the rules.
[8] It is difficult to assess the MFO of $310,000 made in August 2018 against the October 2021 judgment. Not only is there the issue of what the MFO comprises in present day values, but the components of past and future economic loss would have varied significantly. The past economic loss would be less (approximately $99,840 instead of $210,336) and the future economic loss would have been more (approximately $189,677 instead of $77,357).
[9] Precision is not possible. It suffices to say that, in a broad way, the MFO and the judgment sum are similar.
[6]
[10] Ms Sutton's counsel draws an analogy with UCPR 360. Under that rule, if a plaintiff makes an offer that is not accepted by the defendant, and the plaintiff obtains an award that is not less favourable than the offer, the court must order that the defendant pay the plaintiff's costs on an indemnity basis unless the defendant shows that another order is appropriate in the circumstances. That is what Byrne J described as the 'presumptive entitlement' in Lawes v Nominal Defendant.
[11] As I understand the submission for Ms Sutton, it is contended that the MFO, and its equivalence to the award, is a 'significant though not decisive consideration' which the court should bear in mind in awarding costs.[8]
[12] Where a plaintiff 'beats' the MFO, or at least obtains an award no less favourable, the purposes of s 51C might well be served by ordering that the defendant pay the plaintiff's costs on the more generous level of costs recovery.[9] In that way defendants are encouraged to accept offers which are shown to be reasonable.
[13] The difficulty here is that it is not possible to conclude that Allianz, acting reasonably, ought to have accepted the MFO. Much has happened in the three years since the MFO.
[14] First, the medical evidence altered significantly after the MFO. At the time of the MFO in 2018 there was only Dr Chung's report and Dr Chalk's first report. At that time, for example, Dr Chalk's 2017 report attributed little or no impairment to Ms Sutton's social functioning. That altered in his subsequent report. That view affects not only general damages but the view one takes of Ms Sutton's loss of earning capacity.
[15] Second, Ms Sutton's loss of earning capacity was difficult for Allianz to assess in 2018. The medical evidence was not clear and indeed did not ever become particularly clear. Dr Lotz, who reported in 2020, and Dr Chalk (2017 and 2019) took different stances on Ms Sutton's degree of impairment and her capacity to work in the future.
[16] In any event, there was always an element of uncertainty about the loss of earning capacity claim here. The claim depended upon proof that Ms Sutton was likely to return to the workforce, having spent a decade out of the workforce.
[7]
The days when a plaintiff could, with impunity, mount an attack on several fronts, with little prospect of victory, in the hope of a direct hit and the recovery of all costs must be put behind us. Litigation is too expensive for courts to sanction this approach. Indeed it should be discouraged.[17]
[8]
[22] That sentiment applies as much to the quantum of claims as it does to a multiplicity of issues. Certainly, the speedy resolution of court proceedings can hardly be assisted by ambit claims, that is, claims that comprise an extravagant initial demand and an expectation that the court will trim the excess.
[23] Here, there was never any substance to Ms Sutton's claims of $2m. If, by virtue of section 50C of the Act, the court is required to have regard to a MFO as a significant though not decisive consideration, the court can also bear in mind the veracity of the subsequent claims made in the proceeding.
[24] Thus, for the reasons explained above, Ms Sutton's case at the time of the MFO, and particularly the medical evidence, was substantially different. And, having regard to the rather extravagant claims, it is not appropriate to award indemnity costs.
[9]
[25] Ms Sutton enjoyed success in the litigation. The award was $314,345. On the general principle that 'costs follow the event' Ms Sutton is entitled to her costs on the standard basis.[18]
[26] There are, however, two further problems. The first is the question of jurisdiction. The second is Allianz's argument that three aspects of the case ought to be excluded from Ms Sutton's entitlement to costs.
[10]
[27] The proceedings were commenced in the District Court at Southport. The proceeding was transferred to the Supreme Court when Ms Sutton increased her claim to nearly $2m.
[28] As the award was for $314,345, well within the District Court's civil monetary jurisdiction of $750,000, UCPR 697(4) requires that the costs be assessed on the District Court scale.
[29] There is no basis for the court to order otherwise. In fact, Ms Sutton's counsel expressly stated there was no argument from Ms Sutton on this point.[19]
[11]
[30] Counsel for Allianz contended that it should not have to pay the costs of:
[12]
(a) The application to transfer of the proceeding from the District Court to the Supreme Court;
[13]
(b) The Vincents report (which was largely ruled inadmissible);
[14]
(c) The claim for gratuitous care - which wholly failed.
[15]
[31] As stated above, this case is well within the District Court's civil monetary jurisdiction. The proceeding should not have been transferred from the District Court to the Supreme Court. On that basis, Ms Sutton should not recover any costs of the application to transfer the proceeding from the District Court to the Supreme Court.
[32] As to the Vincents report and the gratuitous care claim, it is worthwhile noting that courts are reluctant to depart from the general rule that costs follow the event by splitting costs in the sense of depriving the successful party of the costs of particular issues or even ordering the successful party to pay the costs of some issues. In Waterman v Gerling Australia Insurance Co Pty Ltd (No 2), [20] in assessing costs, Brereton J observed:
[16]
The starting point is that the plaintiff, having been successful, is entitled to his costs. It is for the defendants to establish a basis for departing from that rule. A successful plaintiff who has failed on certain issues may be deprived of costs on those issues, or even ordered to pay the defendant's costs of them [Hughes v Western Australia Cricket Assn Inc[1986] FCA 357; (1986) 19 FCR 10]. But this course, while open, is one which the court embarks with hesitancy...[21]
[17]
[33] Nevertheless, there are occasions where the court will opt to tally 'wins and losses' and make costs orders both for and against each party.[22] More frequently though courts have adopted a pragmatic approach of ordering a proportion of costs in favour of one or other of the parties.[23] In approaching the apportionment of costs, the court must strike a balance between not discouraging litigants from canvassing all material issues, and not rewarding them for unreasonable conduct in pursuing issues.[24]
[34] During the trial, the opinion parts of the Vincents report were ruled to be inadmissible. The inadmissibility was for several reasons.[25] In this respect, this case is similar to Brown v Daniels & Anor (No 2).[26] In that case, an objection was taken to the successful plaintiff's expert engineering evidence of Dr Kahler. Davis J ruled a large part of Mr Kahler's report to be inadmissible. Subsequently, Dr Kahler's report was admitted into evidence, but in a heavily redacted form. His Honour noted that nothing of the nature of an expert opinion of Mr Kahler was admitted. Ultimately, His Honour ordered that the second defendant pay the plaintiff's costs, excluding any fees or expenses paid to Dr Kahler and any costs associated with obtaining or leading evidence of Dr Kahler, which was either admitted into evidence, or proposed to be admitted into evidence.
[35] In the circumstances Allianz ought not to be required to pay Ms Sutton's costs of obtaining the Vincents report and the attempt to rely on that report. One further reason for excluding those costs is that a party who prepares and serves an expert report under UCPR 427 places the opposite party in an invidious situation. The opposite party is required to elect whether to prepare and serve its own responsive expert report. Here, Allianz obviously backed its assessment that the Vincents report would be ruled inadmissible. But in Brown v Daniels the defendant elected to engage another expert to respond to Dr Kahler's report. Thus, the costs of two experts were wasted. Costs orders ought to encourage parties to apply to careful scrutiny to the preparation and admissibility of expert reports, especially where those expert reports are not joint reports under UCPR 429G.
[18]
[39] One consideration is whether to order that Allianz pay a proportion of Ms Sutton's costs. Those types of orders are often made because there is often an inutility and expense to the parties and to the court in dividing legal fees based on the amount of time spent on various issues.[27] On the other hand, there is an evaluative element to a percentage apportionment.[28] It is an exercise largely based on impression,[29] in circumstances where the court is not aware of the preparation time, effort and expense involved in each issue. For example, the time spent on an issue at trial may not be a good guide to the time spent in preparation for trial.
[40] In this case, it seems to me that an order can be crafted which excludes the two aspects of costs which the plaintiff ought not recover, and that such an order is not likely to cause difficulty in assessment.
[41] The order will be that the second defendant pay the plaintiff's (standard) costs on the District Court scale, but excluding:
[19]
(a) the costs of the application to transfer the proceeding from the District Court (at Southport) to the Supreme Court; and
[20]
(b) the fees and expenses of Vincents and any costs associated with obtaining the expert reports of Vincents, and preparing and leading that evidence.
[7] This passage was cited and followed by Lyons J in Mansi v O'Connor[2012] QSC 374 at [26].
[27]
[8] See, again, Byrne J's reasons in Lawes v Nominal Defendant (supra).
[28]
[9] Keane JA referred to the more generous level of cost recovery in Morrison v Hudson[2006] QCA 170 at [31] (a case relied on by Allianz's counsel at [5] of his submissions).
[29]
[10] Second Defendant's Submissions as to costs at [14].
[12] Second Defendant's Submissions as to costs at [23].
[32]
[13] See the schedule of damages attached to the Plaintiff's Written Submissions.
[33]
[14] Amended Claim; Amended Statement of Claim at [7](a).
[34]
[15] Like it or not, ambit claims and propositions that are lacking in substance are often raised in commercial negotiations: The Bell Group Ltd (In Liq) v Westpac Banking Corporation (no 9)[2008] WASC 239 (Owen J) at [5059].
[35]
[16] For example, in personal injuries cases, statements of loss and damage.
[22] See the discussion of this issue in G E Dal Pont, Law of Costs, (LexisNexis Butterworths Australia, 4th ed, 2018) at [8.5] ('Dal Pont'); BHP Billiton Iron Ore Pty Ltd v National Competition Council (No. 2)[2007] FCA 557 at [23].
[42]
[23] Dal Pont (supra); Spotless Group Ltd v Premier Building and Consulting Pty Ltd[2008] VSCA 115 at [15].
[28] Dal Pont (supra) at [8.7]; Australian Trade Commission v Disktravel[2000] FCA 62 at [5].
[48]
[29] Dal Pont (supra) at [8.7]; Beagle Holdings Pty Ltd v Equus Financial Services Ltd[2000] WASC 128 at [32].
Parties
Applicant/Plaintiff:
# Sutton
Respondent/Defendant:
Hunter
Legislation Cited (2)
Civil Procedure Rules 1999
Accident Insurance Act 1994
Cases Cited (3)
(1986) 19 FCR 10
(1975) 13 SASR 4
(2000) 174 ALR 53
[17] Third, as Allianz's counsel points out, at the time of the MFO Ms Sutton was not receiving any psychiatric treatment after the retirement of Dr Lichter. It was only later that she began to be treated by Dr Lotz.[10] A concrete example of the impact of the change in the evidence is that the whole of Ms Sutton's claim for future medical and pharmaceutical expenses ($11,040) was dependent on Dr Lotz's report of 6 March 2020 - that is well after the MFO.
[18] Those three aspects demonstrate that the case, as evaluated at the time of the MFO,[11] was a different beast. For that reason I would be reluctant to order indemnity costs, even if Ms Sutton could be regarded as having bettered the MFO.
[19] Allianz's counsel raises a further matter that is contended to be relevant to the exercise of the discretion to order indemnity costs. It is contended that Ms Sutton made a series of quite unreasonable claims. In short, in September 2018, after the MFO, Ms Sutton's claim was for approximately $709,761.[12] Then, in June 2020, the claim increased to approximately $1,973,080.[13] At trial the ultimate claim was for $1,377,004.[14]
[20] In negotiations a party will often make an ambit claim that is, a claim that is an extravagant initial demand made in expectation of an eventual counter-offer and then a compromise at a much lower figure.[15] Even if ambit claims have a role to play in negotiations, it is doubtful that they are helpful or appropriate in litigation where a party's case is recorded in a pleading and in court documents.[16] Those documents are signed and filed by solicitors, who are officers of the court.
[21] In a slightly different context Finkelstein J has remarked that:
[36] The gratuitous care claim falls into a different category. It is true that the gratuitous care claim failed completely. However, that claim largely failed because Mr Sutton had not kept a written record of the gratuitous services he provided and because his evidence did not withstand the blowtorch of cross-examination. There is little doubt that Mr Sutton did provide some gratuitous services to Ms Sutton, particularly in the first six months. Ms Sutton needed a high degree of care soon after the accident and Mr Sutton provided Ms Sutton with transport, including to medical appointments.
[37] In short, the likelihood is that it was reasonable for Ms Sutton to pursue the gratuitous care claim. The claim may well have survived if Mr Sutton's evidence about the care he provided had been satisfactory and his 'guestimation' had withstood criticism. In that event the evidence may well have satisfied the court that the claim exceeded the statutory threshold. It is also likely that the costs associated with this claim did not significantly add to the overall costs of the proceeding.
[38] In those circumstances, there is not sufficient reason for departing from the general rule and it is proposed not to make a separate order as to gratuitous care.