Mark Andrew Quirk v Janice Anne Bawden [1992] ACTSC 118; (1992) 112 ACTR 1; (1992) 111 FLR 115 (3 December 1992)

SUPREME COURT OF THE ACT

MARK ANDREW QUIRK v. JANICE ANNE BAWDEN
No. SCA 59 of 1992
Number of pages - 21
Negligence - Practice
[1992] ACTSC 118; (1992) 112 ACTR 1
(1992) 111 FLR 115

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(2), Gallop (3) and Higgins(1) JJ.

CATCHWORDS

Negligence - Quantum of damages - Discount on past and future los of income.

Practice - Offer of compromise - Costs - Indemnity costs - Failure to accept a reasonable offer.

HEARING

CANBERRA, 21 August and 9 October 1992
3:12:1992

Counsel for the Appellant: Mr A. Leslie QC

Instructing solicitors: Messrs Crossin Barker Gosling

Counsel for the Respondent: Mr R. Williams QC with Mr B. Hull

Instructing solicitors: Messrs Nelson and Co

ORDER

THE COURT ORDERS THAT: 1. The appeal be allowed and the judgment of the Master set aside
only as to quantum of damages. In lieu thereof, the Court orders

the entry of judgment in favour of the respondent against the
appellant in the sum of $372,192.00.
2. The appellant pay the respondent's costs of this appeal.

DECISION

HIGGINS J. This is an appeal from a decision of the Master handed down on 28 January 1992. By that decision, judgment was directed in favour of the respondent against the appellant in the sum of $375,192.00. On 30 April 1992, the Master ordered that the appellant pay the respondent's costs, on a party and party basis up to and including 10 September 1991, and on an indemnity basis thereafter. There is an appeal from the decision to make that order.

2. Whilst liability was in issue before the Master, there is no challenge to that decision on this appeal.

3. The respondent was injured in a motor vehicle accident on 14 June 1984. She suffered ruptured discs at cervical 4/5 and 5/6 levels. It was a whiplash type of injury. The results were serious and chronic. She had to be retired on medical grounds from the Commonwealth Public Service in March 1986. Her life was and will continue to be seriously disrupted by ongoing pain and disability.

4. On the hearing of the appeal, the appellant did not seek to challenge the award of general damages. There is a challenge to the amount of interest awarded ($6,000.00). However, both parties concede, as did the Master in his decision on 30 April 1992, that the proper award should be $3,000.00 to conform to this court's decision in Hallett v Schoevers (unreported; SCA 78/91; 5 March 1992; Miles C.J., Gallop and Higgins JJ.).

5. There was a substantive challenge to the award of damages for past and future loss of earnings.

6. No challenge was made to the factual findings made by the Master. The submission was that insufficient allowance had been made for the impact of unfavourable contingencies. The Master accepted that the respondent, being paid at the ASO3 level at the date of her accident, would, at some point soon after, and before the hearing, have been paid at, and been substantively promoted to, an ASO4 level. If that had occurred, the plaintiff would have been paid at ASO4 rates for almost the entire pre-trial period. Up to 27 August 1991, that would have been a figure a little below $133,895.00 net.

7. No specific error or omission on the part of the Master was suggested. The complaint was that the Master should have reduced the past loss of income component by a greater percentage than he did. $21,386.00 was suggested as the figure which should have been allowed. The figure for past loss of earnings was, in fact, discounted by approximately 15%. If the period between hearing and judgment was to be taken into account, the discount would be nearly 20%.

8. I can detect no error in that approach. The weight to be accorded to the various factors suggested as militating against the plaintiff earning at least $115,000.00 from date of accident to date of judgment was very much a matter for the Master to decide. I would not disturb his conclusion in that respect.

9. It follows that there is no cause to disturb the findings made by the Master as to interest on past loss of earnings or as to the Fox v Wood [1981] HCA 41; (1981) 148 CLR 438 figure allowed.

10. So far as future loss of earnings was concerned, the value of the plaintiff's earning capacity at the date of judgment was, quite properly, assessed at $467.53 net weekly. The undiscounted loss from date of judgment to age 65 was $280,000.00 (approximately). The award of $165,000.00 represents a discount of over 40%. The Master approached the matter, not by discounting the current value of the total earnings the plaintiff might have earned, but by first discounting the plaintiff's working life to 10 years and then applying a discount a little greater than 15% to the result.

11. Whatever the mathematical methodology, it seems to me that the greater than usual discount was properly made and I can detect no error in the weight assigned to it by the Master.

12. It follows that, save for reducing the judgment sum to $372,192.00, I would dismiss the appeal as to damages.

Indemnity Costs
13. The appellant does not complain of being ordered to pay costs on the conventional party and party basis. He does object to that part of the costs order which is expressed to be on an indemnity basis.

14. On the issue as to costs, the respondent's counsel tendered to the Master a letter dated 6 September 1991 marked "Without Prejudice except as to Costs".

15. It read,

"We refer to the adjourned hearing of this matter. We have
received instructions from our client that she would accept in
settlement of her claim a verdict in the sum of $350,000.00 plus
costs.
This offer is not the basis of negotiation, rather it is the sum
she will accept in settlement without the matter proceeding to a
full hearing.
In the event that the Court awards a sum close to or exceeding
the amount of this offer then we will be seeking an order for
indemnity costs for the further conduct of this matter."

16. The solicitors for the appellant responded, by letter dated 10 September 1991, as follows,

"We would be grateful if you would explain to us what you mean by
indemnity costs for the further conduct of this matter."

17. On the hearing of this appeal, the appellant provided further information by way of an affidavit dated 26 May 1992. I will summarise the effect of it.

18. A listing hearing had been held on 16 July 1991. The appellant's solicitor complained that the respondent's solicitors had not, by then, particularised the comparable earnings that they would contend should form the basis of calculation of the figures for past and future loss of earnings.

19. A further listing hearing was scheduled for 14 August 1991. On 2 August 1991, the appellant's solicitor wrote asserting that, unless outstanding particulars were provided by the date of that Listing Hearing, an application would be made to vacate the hearing date.

20. The listing hearing was not held until 19 August 1991. The outstanding particulars had still not been provided.

"At that listing hearing the Deputy Registrar
ordered the plaintiff to provide the defendant
with particulars of her claim for wage loss on a
net basis by Friday, 23 August 1991."

21. The matter came on for hearing on 28 August 1991. The appellant then applied for an adjournment on grounds summarised by Mr MacLachlan in his affidavit, as follows,

"5.(i) The plaintiff had not presented the
defendant with the plaintiff's claim for wage loss on a net
basis;
(ii) The plaintiff had not made any COMCARE
documents available and it was not possible for the
defendant to assess the plaintiff's claim for interest on
wage loss to the date of the hearing;
(iii) There was still no details relating to
a comparable employee to substantiate the plaintiff's claim
for past and future wage loss;
(iv) There were no source documents to
support the report prepared by KPG and Peat Marwick,
Accountants, on behalf of the plaintiff."

22. Some evidence was taken that day and the matter was then adjourned. The respondent was ordered to remedy the deficiencies in particulars provided. Her solicitors purported to do so by a letter dated 2 September 1991.

23. Then followed the letters of 6 and 10 September 1991 referred to above. The hearing of the matter resumed on 4 November 1991. It was completed on 5 November 1991 and the decision reserved. There had been no response from the respondent to the appellant's letter of 10 September 1991.

24. No protest was made by counsel for the appellant as to particulars when the matter resumed on 4 November 1991. The letter from the appellant's solicitors of 10 September 1991, did not claim that there were then any particulars outstanding.

25. Paragraph 10 of Mr MacLachlan's affidavit, referring to the letter of 6 September 1991 and his reply of 10 September 1991, states,

"10. Further, because of the inadequacy of the plaintiff's
particulars, it was always very difficult for me to make an
informed attempt to calculate the worth of the plaintiff's
claim and for me to advise my client in that regard so that
even if I had been aware of the legal implications of the
abovementioned letter, I was never in a position to
adequately advise my client on the value of the plaintiff's
claim."

26. It is not clear whether Mr MacLachlan was, by this statement, asserting that, as at 10 September 1991, he was embarrassed by a lack of proper particulars or whether that had been the position up until shortly before that time. Given the lack of protest, I infer that he intends the latter meaning.

27. Mr MacLachlan was unaware of the effect of the judicial comment made in the case of Calderbank v Calderbank (1975) 3 WLR 586 at the time when he wrote the letter of 10 September 1991. I do not think that assists the appellant. The respondent's advisers were entitled to assume that an experienced litigation solicitor would know the nature and intended effect of the letter of 6 September 1991. They were entitled to assume that the letter of 10 September 1991 indicated a lack of interest in continuing negotiations.

28. Cutts v Head [1983] EWCA Civ 8; (1984) Ch 290 settled the rule of practice that, at least where it was not open to a party to make a payment into court, a "Calderbank" letter would be relevant to the issue of costs.

29. The effect to be accorded such a letter was considered by Rogers J in Messiter v Hutchinson (1987) 10 NSWLR 525. In that case the offerer was the defendant. The defendant represented a syndicate of insurers of a horse which had died in circumstances where the plaintiff was entitled to the "actual value" of the horse. Ultimately, the plaintiff was awarded less than the defendant had offered to pay. Whilst accepting that the offer was made late, Rogers J concluded that some costs penalty should be borne by the plaintiff in all the circumstances.

30. It is plain enough that if a defendant unreasonably rejects an offer of settlement from the plaintiff, the only sanction to encourage serious consideration of such an offer, moral exhortations aside, is an award of costs on a more favourable than usual basis. The most favourable basis is indemnity costs. In AFCO v Tobacco Institute (1991) 100 ALR 568, Morling J noted that there is no general rule that there must be positive misconduct on the part of a defendant to warrant an order for indemnity costs. In that case, both the refusal of a reasonable offer of settlement and the fact that the successful party had taken action in the public interest were deemed sufficient to warrant such an order. In Baltic Shipping Co v Dillon [1993] HCA 4; (1991) 22 NSWLR 1, Kirby P considered that the fact that the case was a test case made it appropriate to make an order for costs on a more favourable basis than party and party costs.

31. In Singleton v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103, Rogers C.J. Comm D, had to determine what "indemnity costs" meant. There is a general definition given in Pt 52 r28A of the Rules of the Supreme Court of New South Wales. That rule states,

"On a taxation on the indemnity basis, all costs shall be allowed
except insofar as they are of an unreasonable amount or have been
unreasonably incurred and any doubts which the taxing officer may
have as to whether the costs were reasonably incurred or were
reasonable in amount shall be resolved in favour of the receiving
party."

32. Rogers C.J. Comm D was of the opinion that this statement represented the meaning of an indemnity costs order where that order was made under the court's inherent power. I respectfully agree. It was also held in Singleton that it was open to a party to seek that indemnity by reference to costs assessed on an agreed time costing basis. Such an agreement would, of course, be ineffectual insofar as it was shown to be unreasonable.

33. It seems to me, therefore, that an "indemnity" basis for taxation of costs is more generous than the conventional "solicitor/client" basis. It is designed to give the fullest possible indemnity to the receiving party.

34. There is much to be said for encouraging, at an early stage in the litigation, the serious consideration of offers of settlement. The savings to the parties and to the community from such a process, if successful, is well demonstrated by The Evaluation Report of the recent "settlements week" in New South Wales.

35. Accordingly, I believe that this Court should apply an appropriate costs sanction where a party has declined to accept or to make, as the case may be, a reasonable offer of settlement. It may, in some cases, be sufficient to deprive an otherwise successful party of all or part of the costs that otherwise would follow the event. In other cases, it may be appropriate to award some or all costs of an action on a more favourable than usual basis to a party who has been put to the expense of continuing litigation that ought reasonably to have been earlier settled.

36. Of course, there needs to be more than an offer of settlement made by the plaintiff and not accepted by a defendant which is exceeded by the judgment to make it appropriate to order indemnity costs. As Priestly JA noted in Moran v McMahon (1985) 3 NSWLR 700, the assessment of non-economic loss in a personal injuries claim involves a judgment that is akin to a discretionary judgment. That makes it difficult to suggest that the mere refusal of an offer which happens to be less than the sum ultimately awarded is to be characterised as unreasonable.

37. Of course, if there has been proper particularisation by a plaintiff of his or her claim, it is difficult to conceive of a case in which a defendant, properly advised, could not tender a realistic offer of settlement. It may be enough to avoid an order for indemnity costs that the defendant has engaged, reasonably, in a proper attempt to settle the matter.

38. Some emphasis was placed by counsel for the appellant on the need for the respondent to have offered a "compromise". By this it appeared was meant a substantial discount against the sum to which the plaintiff is otherwise found to be entitled.

39. Reliance was placed, for this purpose, on Tickell v Trifleska Pty Limited (1990) 25 NSWLR 353 and Hobartville Stud v Union Insurance Co (1991) 25 NSWLR 358.

40. Although those cases related explicitly to the exercise of discretion conferred by Pt 52 r17(4) of the Supreme Court Rules 1970 (NSW), I can see no reason why the same considerations should not be applied in a case such as the present.

41. In Tickell, Rogers C.J. Comm D warned that a plaintiff would not necessarily qualify for an order for indemnity costs merely because the offer made had been exceeded. That is a conclusion with which I respectfully concur for the reasons I have already alluded to.

42. A plaintiff who stubbornly insists on everything that he or she claims would, usually, not be genuinely attempting to settle a matter. On the other hand, a claim may be so patently correct that it would be unreasonable to expect a plaintiff to discount it at all. A larger discount may be reasonable in some cases than in others. It is useful to refer to the philosophy perceived by Rogers C.J. Comm D as underlying the concept of the use of costs orders to encourage compromise.

(354-5) "It is the primary aim of any judicial system to attempt
to bring the parties to a point where, with fairness to
themselves, they are able to dispose of the dispute between them
by compromise. It is only in the last resort that a dispute
should proceed to trial and to determination. That is for any
number of reasons. It is in the interests of the community that
scarce resources, such as the court, should not be over-taxed.
It is in the interests of the community and of the parties
themselves that they should not engage in the rancour which a
dispute in court necessarily entails. It is in the interests of
the parties themselves to save themselves the expenditure of time
and energy necessarily entailed in participation in contested
court proceedings."

43. Giles J adopted a similar approach in Hobartville Stud. In that case a plaintiff, quite unreasonably, had insisted that its total claim was unchallengeable. In fact, the plaintiff ultimately succeeded in being awarded more than its offer of compromise. However the amount awarded included a substantial sum for interest. Ignoring the interest which had been added for the period between offer and judgment, the result was less favourable to the plaintiff than the total of its claim and less favourable than the "offer of compromise" made. That "offer of compromise" made by the plaintiff had discounted its total claim by only $1.00. The defendant submitted that there was no element of "compromise" in that offer.

44. His Honour endorsed the following statement of Rogers C.J. Comm D, in Tickell, concerning the award of indemnity costs,

(355) "It must be clear that the inducement which that basis of
costs assessment held out was designed so as to ensure that the
actual offers made were fair and reasonable and reflected, not
the best result that the plaintiff could hope to obtain if
everything fell its way but, rather, a realistic assessment of
what, in the circumstances, represented a fair and proper
compromise."

45. I also respectfully agree with Giles J in Hobartville Stud that "compromise"

(368) "... connotes that a party gives something away. A
plaintiff with a strong case, or a plaintiff with a firm belief
in the strength of its case, is perfectly entitled to discount
its claim by only a dollar, but it does not in any real sense
give anything away, and I do not think that it can claim to have
placed itself in a more favourable position in relation to costs
unless it does so."

46. It may be added that, in Hobartville Stud, a general claim to indemnity costs was also made. That claim was based on an invitation to perceive the defendant's conduct in defending the claim at all as being extraordinarily unmeritorious. That invitation was declined.

47. Most litigation, particularly in the area of personal injuries, admits of a range of outcomes. Which of those outcomes will, ultimately, be reflected in the final judgment is a matter upon which the parties might reasonably differ. Indemnity costs should not be used to inhibit either party from litigating an issue reasonably in contention between them. However, neither should parties be permitted to persist in an unrealistic assessment of the chance that the issue or issues in dispute will be determined favourably to them when that view is able to be perceived as unrealistic.

48. By way of example, if liability is not seriously in issue, it is not reasonable to expect a plaintiff to discount his or her expectations by reference to a theoretically possible adverse finding on that issue. On the other hand, it would be unreasonable for a plaintiff to expect to be awarded the "top of the range" on every element of damages.

49. Further, it is to be inferred from an award of indemnity costs following the award to a plaintiff of a greater sum than he or she had previously offered to accept, that the defendant has unreasonably declined to negotiate settlement. If a defendant responded, for example, with a low offer or series of offers "within the range", it would be unreasonable for a plaintiff to ignore such offer or offers. The process of negotiation does not end with one offer made and declined and a counter-offer made and declined.

50. In the end, the matter is one for the discretion of the trial judge. The exercise of that discretion favourably to a successful plaintiff may well, prima facie, be indicated by a substantial difference between an offer made by the plaintiff and the verdict ultimately found. However, it must also appear that the defendant had failed to act reasonably in declining to accept the plaintiff's final offer of compromise.

51. In the present matter, the plaintiff made what may now be perceived as a reasonable offer of compromise. She may have been prepared to accept less but, of course, the offer was not so framed. Liability was not seriously in doubt. The injuries and disabilities were of a conventional nature. Though the particulars of loss and damage delivered on 22 May 1991 were quite detailed, there was a deficiency in those particulars. That deficiency was complained of by counsel for the defendant on 28 August 1991. It related to the criteria for the assessment of the plaintiff's claim for loss of earnings in the past and in the future.

52. I accept, therefore, that, up to that stage, it was not unreasonable for the defendant to have failed to make or to accept a reasonable offer of compromise if one had, before then, been made.

53. As I have noted, there was no complaint on behalf of the defendant of any deficiency in the particulars provided when the hearing resumed on 4 November 1991. There was no correspondence between 2 September 1991 and 4 November 1991 complaining of such a deficiency. This was not a case where the real issue was other than an assessment of damages. The primary facts as to injury and disability were never seriously in issue. Nor was causation. It was really a case of putting a value on the plaintiff's injuries and consequent disabilities.

54. Accepting that the result should have been $372,000.00 and ignoring interest accruing after 6 September 1991, it is still apparent that the offer of $350,000.00 represented a genuine compromise when it was made. The discount was not insignificant. It is also significant, though not conclusive, that no counter-offer was made nor was there any complaint that the basis for the offer was unexplained or that particulars of the claim were then deficient. There was no apparent attempt seriously to consider the offer.

55. The Master, correctly, in my respectful opinion, identified the one issue that was in serious contention. There was a discretion, prima facie enlivened by the offer of compromise, to award costs on a more favourable basis than would usually follow. I am not persuaded in the circumstances of this case, even after considering the further matter adduced on the hearing of this appeal, that the Master's discretion miscarried.

56. I would, therefore, allow the appeal only so as to permit the reduction of the quantum of damages to $372,192.00. Otherwise, the orders made by the Master should stand. In the circumstances, the appellant should pay the respondent's costs of and incidental to this appeal.

MILES C.J. I agree with the order proposed by Higgins J. and with his Honour's reasons for judgment, which I have read in draft.

2. I would add only this. Whilst the Rules of Court do not make express provision for indemnity costs, the general discretion of the Court in relation to costs is adequate for such orders to be made in appropriate cases. Although the discretion is an open one, the factors relevant to its exercise will be similar to those considered in New South Wales under Part 52 Rule 17(4) of the Supreme Court Rules (1970) (NSW). In the judgment of the New South Wales Court of Appeal in The Maitland Hospital v. Fisher (No. 2) (unreported, 5 August 1992), it was said that it was the purpose of the rule "to put a premium on realistic assessment of cases". The following statements of the Court (at p 11) deserve emphasis.

"The rule does no more than to oblige litigants, and those
advising them, to consider realistically, upon the best
information available to them, the prospects of success and
the likely outcome of the litigation. Where, in the
particular circumstances, the litigant or its advisers
misjudge the prospects of success or miscalculate the outcome,
their mistake may be warranted on the material which they had
available. Alternatively, it may be no more than a
miscalculation in a case with large imponderables where the
course they took was nonetheless perfectly reasonable."
...
"(The rule) has added a new duty to the functions of legal
practitioners advising litigants. It is a duty which is both
protective of the interests of litigants and of the public
interest in the prompt and economical disposal of litigation."

3. Whilst in the Territory there is no new rule of court and hence no new duty in that sense, the duty is nevertheless there, as it always has been, although hitherto not often recognized. Practitioners would be well advised to have regard to it.

GALLOP J. I have read the judgment of Higgins J. in draft form and agree that this appeal must be allowed for the reasons expressed by him.