Abedin Vahedian Mazloum v Gayle Maree Rich [1997] ACTSC 53 (11 July 1997)

SUPREME COURT OF THE ACT

ABEDIN VAHEDIAN MAZLOUM v. GAYLE MAREE RICH

No. SC 251 OF 1995
Number of pages - 5
Costs

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

MASTER T CONNOLLY

CATCHWORDS

Costs - Calderbank letter - Defendant's offer of settlement - Calderbank letter relevant to exercise of costs discretion despite failure to make payment into court.

Supreme Court Rules (ACT), O65 r.58

Supreme Court Rules (NSW), Pt 52 r.17

Health and Other Services (Compensation) Act 1995 (Cth), s.22(1), (2)

Cairns, Australian Civil Procedure, 4th ed, p444

Calderbank v Calderbank [1975] 3 W.L.R. 586

Quirk v Bawden [1992] ACTSC 118; (1992) 112 ACTR 1

Cutts v Head [1983] EWCA Civ 8; [1984] Ch 290

Messiter v Hutchinson (1987) 10 NSWLR 525

Biernacki v Klenka (1988) 80 ACTR 1

Hillier v Sheather (1995) 36 NSWLR 414

Multicon Engineering P/L v Federal Airports Corporation (Unreported, Supreme Court of NSW, Rofe J, Matter No. 55004/91, 20 June 1996)

HEARING

CANBERRA, 3 July 1997 (hearing), 11 July 1997 (decision)

11:7:1997

Appearances

Counsel for the Plaintiff: Mr J Bell

Instructing Solicitors: Elrington Boardman Allport

Counsel for the Defendant: Mr R Crowe

Instructing Solicitors: Phillips Fox

ORDER

THE COURT ORDERS THAT:

1. The costs order made on 20 June 1997 is rescinded.

2. The defendant pay the plaintiff's costs up to 16 May 1997.

3. The plaintiff pay the defendant's costs after 16 May 1997.

DECISION

MASTER T CONNOLLY

This is an application to vary a costs decision consequent upon the award of a sum of damages for personal injuries. On 20 June 1997 I awarded the plaintiff damages in the sum of $104,485.07, and ordered that the defendant pay the plaintiff's costs. When the decision was handed down the solicitor who appeared to accept judgment on behalf of the defendant made an application to relist the matter on the question of costs. He handed me a letter, described as a "Calderbank letter" after the decision of Calderbank v Calderbank [1975] 3 W.L.R. 586, which was dated 16 May 1997, some three weeks before the hearing date for the matter, which contained an offer of settlement in the sum of $116,500 plus costs. The letter was headed "without prejudice save as to costs" and concluded

"If the matter proceeds to hearing and judgment and the plaintiff receives an award no more favourable to him than the amount of the above offer, then we reserve the right to refer this letter to the court and seek an order that the plaintiff pay the defendant's costs from the date of this letter."

The use of so called Calderbank letters appears to be widespread. However, the effect of a Calderbank letter in relation to costs where there is an alternative method of indicating an intention to settle, such as payment into court, is controversial (see, generally, Cairns, Australian Civil Procedure, 4th ed, p444). This is the essential issue in the present matter.

Counsel for the defendant applicant argues that the Court should accept the use of a Calderbank letter as a legitimate method of attempting to resolve civil litigation in this court. He refers to the decision of the Full Court in Quirk v Bawden [1992] ACTSC 118; (1992) 112 ACTR 1 where the Court was considering the effect of a Calderbank letter from the plaintiff in relation to the question of indemnity costs where the amount of damages awarded exceeded the amount that the plaintiff had indicated that they would accept in settlement. In that case the Chief Justice noted that the Rules of this Court do not contain express provisions relating to offers of compromise and the costs consequences equivalent to Pt 52 r.17 of the New South Wales Supreme Court Rules, but he indicated that the purpose of offers of compromise was

"...to put a premium on realistic assessment of cases."

The Chief Justice indicated that, even in the absence of express rules, practitioners in this Territory remain under a duty to realistically consider offers, and that costs could be a sanction.

Higgins J said in Quirk at 6 that

"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."

His Honour said at 5:

"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. The effect to be accorded to such a letter was considered by Rogers J in Messiter v Hutchinson (1987) 10 NSWLR 525. In that case the offeror 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."

Rogers J formed that view despite the failure of the defendant to make a payment into court. His Honour noted the English decisions indicating that a Calderbank offer should not be used, and is not relevant, where a procedure for payment into Court is available, but said (at 528):

"The public policy on which the judgments in Cutts rest argues against a hard and fast exclusion of the availability of this method for disposition of disputes by compromise. The purpose of a Calderbank letter is, after all, essentially the promotion of settlement of disputes. Although, historically, the Calderbank letter evolved in circumstances where the procedure of payment in, for one reason or another, was unavailable, there is to my mind no reason in principle why it must necessarily and invariably be so restricted. The discouragement to practitioners to the use of the Calderbank letter in instances where the procedure of payment in is available is that the consequences of payment in, prescribed by the rules will not automatically be available."

I take Messiter v Hutchinson as authority for the proposition that a Calderbank letter is relevant to the Court's exercise of discretion in relation to final costs notwithstanding the availability of the method of payment into Court as an alternative to a defendant. In Biernacki v Klenka (1988) 80 ACTR 1 Kelly J held that a Calderbank letter was not relevant to the exercise of the costs discretion in a matter where the issue in dispute was not the substance of the claim between the parties, but the question of the costs alone. In that matter after judgment in favour of the plaintiff the defendant wrote a Calderbank letter offering $4,000 in costs, which was refused. At taxation a smaller sum was recovered, and the defendant sought the costs incurred after the offer. Order 65 rule 58 provides a method of settlement for costs dispute akin to payment into court, and the plaintiff argued that, because the defendant had chosen to use a novel procedure rather than the provision in the Rules, the letter ought not be relevant.

Kelly J held that, in these circumstances, the taxing officer had no discretion because of the form of the Order, even though Kelly J found that the plaintiff was unreasonable in refusing the offer (at 7). As I read this decision, it does not contradict Messiter v Hutchinson. Indeed, His Honour was very careful to distinguish that case. He said (at 7):

"It seems to me that Messiter v Hutchinson is distinguishable. Rogers J was dealing with an offer which had to do with the subject matter of the action. The question he had to consider related to a situation where he had to exercise the discretion of the court as to costs in much the same way as if a payment in had been made. It is unnecessary for me to form any concluded opinion as to whether, given the facts he was dealing with, I should approach the question of discretion in the way he did. But I am not to be taken as disagreeing with his view that the court should foster all proper means for the disposition of disputes before hearing."

It seems to me that His Honour very carefully left open the question of the effect in this Territory of a Calderbank letter containing an offer of settlement in the substance of a matter. I do not take Biernacki v Klenka as establishing a principle contrary to the decision of Rogers J in Messiter, and indeed His Honour comments favourably on the policy considerations expressly underlining that decision.

These considerations have been expressed in subsequent decisions in New South Wales. While the Rules of both the District Court and the Supreme Court in that state now make express provision for offers of compromise, these provisions reinforce the goal of settlement. In Hillier v Sheather (1995) 36 NSWLR 414 Kirby P said (at 421) that these rules

"...are clearly intended to instill a heightened sense of realism in the negotiation between parties. After offers are made, they know that they are at risk as to significant sums in costs. Plainly, the rules are designed to promote offers of compromise by parties to litigation, with differing inducements to each. Equally clearly, they are designed to promote early offers of compromise. They introduce an added element of risk. But litigation is inescapably risky. It is essential that the risks be brought home to the parties by their lawyers advising them."

These sentiments are entirely in line with the views expressed by the Full Court in Quirk v Bawden, particularly the remarks of the Chief Justice I have cited above. A recent unreported decision of Rofe J of the New South Wales Supreme Court was cited as an example of the approach now being taken in commercial litigation in that state. In Multicon Engineering P/L v Federal Airports Corporation, Matter No. 55004/91, delivered on 20 June 1996 His Honour said

"In my opinion, the proper approach to take to an Offer of Compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer."

I note particularly that His Honour indicates that it matters not whether the offer is by way of formal offer of compromise pursuant to the Rules or by way of Calderbank letter.

I am satisfied that a Calderbank letter is relevant to the issue of costs notwithstanding the failure to comply with the provisions of the Rules in relation to payment into court. I thus find that in the Australian Capital Territory, as in New South Wales, the restrictive approach to a Calderbank letter adopted in England in Cutts v Head is not to be followed.

This is not to say that a Calderbank letter is conclusive, as I take it that Rogers J in Messiter v Hutchinson requires me to consider the reasons for the failure to make a payment into court in exercising my discretion. In this context, counsel for the applicant defendant argued that a defendant faces difficulties in actually making a payment into court in satisfaction of a personal injuries claim because of the effect of the provisions of the Health and Other Services (Compensation) Act 1995. This Act prevents a person making a settlement of a compensation claim unless a notice has issued from the Health Insurance Commission in relation to benefits paid (s.22(1)). The making of a payment into court is expressly deemed to constitute the making of a settlement by s.22(2) of that Act.

Counsel argued that it would not be feasible for a defendant to obtain such a notice in order to make a payment into court in circumstances that would satisfy the Health and Other Services (Compensation) Act 1995. While counsel for the respondent plaintiff argued that no request had been made of the plaintiff to facilitate the issue of such a certificate, I am satisfied that the Health and Other Services (Compensation) Act 1995 does impose a considerable barrier to the effective settlement of personal injury claims by way of payment into court. I thus do not consider that the failure to make a payment into court is relevant to the exercise of the discretion, and the normal consequence to a party of a Calderbank letter offer of settlement should follow in this case where the final judgment sum is less than the settlement offer.

I would add that the barrier imposed by the Health and Other Services (Compensation) Act 1995 to payments into court by defendants in personal injuries matters is so substantial that, even if I was wrong in my conclusion that Messiter v Hutchinson is authority for the proposition that a Calderbank letter is effective despite the availability of a provision in the Rules for payment into court, I would find that the effect of the Act is that there is in effect so limited an availability of an offer of compromise by way of payment into court that, in accordance with Cutts v Head, the Calderbank letter is effective.

It follows that the plaintiff should have costs only up to the date of the Calderbank offer, that is 16 May 1997, and that the defendant should have costs after this date. Counsel for the applicant defendant properly did not seek costs on an indemnity basis. Accordingly, I rescind the order for costs in the published reasons for decision, and order that the defendant pay the plaintiff's costs up to 16 May 1997, and the plaintiff pay the defendant's costs after this date.