Janice Ann Bawden v Mark Andrew Quirk [1992] ACTSC 41 (30 April 1992)

SUPREME COURT OF THE ACT

JANICE ANN BAWDEN v. MARK ANDREW QUIRK
No. SC 1781 of 1988
Costs

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Master A. Hogan(1)

CATCHWORDS

Costs - Discretion - Calderbank Letter - Plaintiff recovering more than offer - Indemnity costs.

Calderbank v Calderbank (1975) 3 All ER 333

Cutts v Head (1984) 1 Ch 290

Messiter v Hutchinson (1978) 10 NSWLR 525

HEARING

CANBERRA
30:4:1992

ORDER

The defendant pay the plaintiff's costs of the action, on a party and party basis up until and including 10 September 1991, and thereafter on an indemnity basis.

DECISION

This is a ruling on a question relating to the costs of an action for damages for personal injury. The hearing of the action took place before me on 1 and 4 November 1991. On 28 January 1992 I directed the entry of Judgment for the plaintiff in the sum of $375,192.00.

2. That sum was made up as follows:
General Damages $30,000.00

Interest $ 6,000.00
Out of Pocket Expenses $ 6,892.00
Fox v Wood $21,300.00
Past Loss of Income $115,000.00
Interest on Loss of
Income $ 26,000.00
Future loss of Income $165,000.00
Cost of Domestic Ass. $ 5,000.00
TOTAL $375,000.00

3. It may be noted that an appeal has been lodged by the defendant against that assessment . It is clear from the decisions of the Full Court of this Court, handed down since the date of my decision, that the amount awarded for interest on general damages was excessive, and should probably be reduced by $3,000. I deal with the matter therefore on the basis that the proper sum to be awarded is $372,000.

4. Liability was not admitted, but it was not contested at the trial, which proceeded substantially as an assessment.

5. The plaintiff had suffered a whiplash injury with some disc disruption. The principal area of contention was the effect of the accident upon her capacity to earn income, both in the past and in the future.

6. There was a substantial divergence of opinion in the medical evidence about the facts relevant to that issue.

7. On the question of costs, Counsel for the plaintiff tendered a letter which had been written on 6 September 1991 to the solicitors for the defendant. It was headed, "Without Prejudice except as to Costs". 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.

8. 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.

9. 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."

10. By letter dated 10 September 1991 the defendant's solicitors responded,

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

11. There was no evidence of any other offers of settlement on either side.

12. Counsel for the plaintiff sought an order that the defendant pay the plaintiff's costs on a party and party basis up to 10 September 1991 and thereafter on an indemnity basis.

13. The Rules of this Court contain, in Order 26, Rules of the usual type relating to payment into Court by a defendant, but it does not contain any rules relating to any offers of compromise by a plaintiff, such as are contained in Part 22 and Part 52 r17 of the Rules of the Supreme Court of New South Wales.

14. Counsel for the defendant submitted that in the absence of any such rule no special order for costs should be made. Alternatively he submitted that before any order other than the usual one should be made it would be necessary to find that the conduct of the defendant in refusing to accept the plaintiff's offer was so obviously unreasonable that the defendant should be ordered to pay indemnity costs.

15. Section 15 of the Australian Capital Territory Supreme Court Act 1933 and Order 65 r1 of the Rules make it clear that the costs of proceedings in the Court are in the discretion of the Court or Judge. I have discussed the history and policy behind the rules relating to payment in in this Court in Titan v Babic (Supreme Court of the Australian Capital Territory, Master Hogan, 30 May 1991, unreported). Since there are no express rules relating to the exercise of the discretion in the circumstances of this case, the only limitation upon that exercise is that it must be judicial.

16. I think it is relevant to the exercise of a judicial discretion to acknowledge that there may be a considerable difference between the costs that a plaintiff may actually incur in litigation and those that will be awarded to a successful plaintiff on a party and party basis, so that costs on an indemnity basis may be substantially greater than those awarded on a party and party basis.

17. I do not regard the question posed by the defendant's solicitors in the letter dated 10 September to be relevant. I am quite sure that they know as well as any members of the profession what is meant by costs on an indemnity basis. Indeed, on the argument, I did not understand Counsel for the defendant to be attempting to persuade me of their ignorance.

18. As Fox J. pointed out in Windbank v Windbank (1970) 4 ACTR 14, the purpose of the rule relating to payment in by a defendant is to encourage parties to avoid litigation and save costs by putting a plaintiff at serious risk as to costs if he did not recover more than the amount paid in. But it is not necessary that there be an express rule before that sort of consideration may become relevant on the question of costs.

19. Even though the "without prejudice" letter actually written in that case was not relied upon in Calderbank v Calderbank (1975) 3 All ER 333, Cairns L.J. made it clear that there could be circumstances where a party who is willing to make a compromise could put it forward in such a way as to make the offer relevant on the question of costs. In Calderbank the crucial offer had been made in an affidavit of the wife.

20. In Cutts v Head (1984) 1 Ch 291 the Court of Appeal held that a letter headed "without prejudice" or "Without Prejudice save as to costs" could be taken into account on the question of costs; At 312, 313 in Cutts v Head, Oliver L.J. administered a caution that a Calderbank letter should not be used as a substitute for payment into Court where payment in is available. That caution only emphasises the fact that it may be an appropriate procedure when payment in is not available.

21. In Messiter v Hutchinson (1987) 10 NSWLR 525, Rogers J held that a letter of offer should be taken into account. In considering what weight should be given to such a letter the court should pay regard to all relevant circumstances, including the reason why no payment into court was made, and the time at which the letter of offer was received. That case concerned an offer by a defendant, but I do not think that is a relevant distinction.

22. Where liability is not bona fide in issue, a plaintiff who is prepared to settle has no sanction other than an order for indemnity costs. He or she is going to be awarded party and party costs in any event.

23. In this case I therefore hold that it is relevant to the exercise of my discretion on costs that the plaintiff offered to accept a verdict of $350,000 on a date nearly two months before the date fixed for hearing.

24. No doubt the defendant's advisers had some grounds for believing that, on one view of the medical evidence she might well recover substantially less than that sum. To that extent, the defendant could not be said to be acting unreasonably, in any sense that requires it to be punished. But for practical purposes, from the date of non acceptance of that offer, the defendant was on notice that he was at some risk as to costs in litigating the question whether the plaintiff was entitled to less than $350,000.

25. The plaintiff has been required to incur extra expense in pursuing the litigation to finality and there has been no reason put forward to demonstrate that she ought be required to have been at any risk in doing so, when she had expressed herself as willing to accept in settlement a sum less than the amount eventually awarded.

26. I therefore propose to make the special order sought. I order the defendant to pay the plaintiff's costs of the action, on a party and party basis up to and including 10 September 1991, and on an indemnity basis thereafter.