Lelio Falasca v Margaret Morrissy [2000] ACTSC 65 (4 August 2000)

Last Updated: 16 October 2000

Lelio Falasca v. Margaret Morrissy [2000] ACTSC 65 (4 August 2000)

CATCHWORDS

PRACTICE AND PROCEDURE - Payment into court - Genuine offer rejected by plaintiff who recovers substantially less at trial - Plaintiff to pay defendant's costs from date of payment into court.

Civil Procedure A.C.T., Supreme Court Rules, O 26

Crimes Act 1914 (Cwth), s 4D

Health & Other Services (Compensation) Act 1995 (Cwth), s 21, 22

Calderbank v Calderbank [1975] 3 WLR 586

Findlay v Railway Executive [1950] 2 All ER 969

Mangan v Mendum (1970) 4 ACTR 44

Quirk v Bowden [1992] 112 ACTR1

Windbank v Bradley [1974] 4 ACTR 14

No. SC 637 of 1995

Coram: Master T. Connolly

Supreme Court of the ACT

Date: 4 August 2000

IN THE SUPREME COURT OF THE )

) No. SC 637 of 1995

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: LELIO FALASCA

Plaintiff

AND: MARGARET MORRISSY

Defendant

ORDER

Coram: Master T. Connolly

Date: 4 August 2000

Place: Canberra

THE COURT ORDERS THAT:

1. The defendant pay the plaintiff's costs to 30 May 1997.

2. The plaintiff pay the defendant's costs after 30 May 1997.

1. This is an application for costs following the hearing of this matter before me on 24 June and 8 and 9 September 1997. The matter proceeded as a contested assessment of damages claim. The plaintiff's claim was that the rear end motor vehicle accident for which liability had been admitted which occurred in June 1993 caused substantial injuries to his neck and back by way of rendering symptomatic a previously asymptomatic degenerative condition, and also precipitated heart disease. The claim as it related to the heart disease was abandoned during the hearing, and I found as a fact that the plaintiff had had prior complaints of neck pain which he had failed to disclose to doctors. I assessed the plaintiff on the basis of transient soft tissue injuries only, and awarded damages in the sum of $8,200 with costs reserved. Although submissions were made as to costs in late 1997 an appeal to the Full Court was taken, and it seemed appropriate to reserve further argument until this was dealt with. The appeal was dismissed, with costs, as was a further appeal to the Federal Court. An application for special leave to appeal to the High Court of Australia was dismissed, with costs, on 12 May 2000, and the matter came on for argument again before me on 20 July 2000.

2. It was common ground that on 30 May 1997 the defendant paid into court the sum of $80,000, and served a Notice of Payment into Court on the plaintiff, together with a Notice of Past Benefits from the Health Insurance Commission. The plaintiff accepts that, as the amount of the award was substantially below this sum, they should only receive their costs up until the date of payment into court, or some reasonable time thereafter. The substantial argument before me was as to whether the defendant should pay the plaintiff's costs from after the payment into court.

3. Payment into court is provided for in Order 26 of the Rules of Court. The payment in was made in proper form, and accordingly the plaintiff had 14 days from the payment into court to accept the proffered sum of $80,000. It is not in dispute that the plaintiff failed to do this. The general effect of such circumstances is set out by the learned authors of Civil Procedure A.C.T. as follows;

"If the plaintiff refuses so to accept the amount and proceeds to a trial, but only recovers judgment for less than the amount paid into court, then the plaintiff may be made liable to pay the defendant's costs from the time of the payment into court.... Normally the defendant will obtain an order for costs from the date of payment in against a plaintiff who recovers less than the amount paid in: Windbank v Bradley (1974) 4 ACTR 14 at 15", ([8635.10]).

4. There is of course a discretionary element in such an award. As Smithers J said in Mangan v Mendum (1970) 4 ACTR 44 at 45:

"it does not follow rigidly or automatically or inexorably that where the plaintiff recovers less than is in court, the plaintiff will be ordered to pay the defendant's costs incurred after the time for acceptance of the money, or the date of payment in. Such a practice would operate harshly in some cases, and might well cause some bona fide plaintiffs to be intimidated and to accept less than they honestly and reasonably think to be fair and reasonable for fear of the consequences which might be incurred by them if they failed to judge accurately what a judge would think to be fair and reasonable in the circumstances."

5. Conversely, a defendant may be entitled to special consideration in appropriate circumstances. As Fox J said in Windbak v Bradley (1970) 4 ACTR 14 at 15:

"In personal injuries cases, where general damages are to be assessed, there are obviously special difficulties both in assessing the amount to pay in and in deciding whether to accept that amount. A defendant usually has to work from information supplied by the plaintiff or his solicitors and from relatively limited opportunities for medical examination of the plaintiff. Both parties have to try to form an assessment of what view the court will take of the facts and of what damages will be assessed. A defendant who is supplied with inadequate or misleading information by the plaintiff may be entitled to special consideration in the matter of costs, notwithstanding that his payment in was too small."

6. In this case, I found that the plaintiff had withheld information from examining doctors as to previous complaints of neck pain which had resulted in traction treatment from a physiotherapist in a period from 18 months to 4 months before the accident. The effect of failing to disclose this was that various doctors assumed that his degenerative back condition had been asymptomatic prior to the accident. The existence of the physiotherapists notes which confirmed such complaints and treatment only came to light between the first day of hearing in June 1997 and the resumed hearings in September, and, but for assiduous work by those instructing the defendant, would well have never come to light, resulting in the plaintiff perhaps recovering a substantial award of damages based on false information. In such circumstances there is a strong case for a defendant who makes a payment into court receiving full benefit of that payment.

7. The plaintiff had claimed that his coronary artery disease, which it was common ground had lead to major coronary surgery involving a five way bypass in November 1994, had been brought on by stress arising from his back and neck pain. This proposition had been supported by an expert report, and the defendant had obtained reports from other experts challenging this thesis. Counsel for the plaintiff submitted that it was not unreasonable for them to reject an offer in the range of the $80,000 paid into court if they were at that time properly considering the matter as one involving liability for the significant heart condition. I am not persuaded that this factor would affect the exercise of my discretion. The link between the accident and the heart condition was premised on the accident causing the emergence of neck pain, which I found to be based on expert opinion founded on untrue facts. The plaintiff should not, it seems to me, benefit from this false impression that he had created as to his lack of neck pain prior to the motor vehicle accident.

8. Furthermore, it emerged during the hearing that there was a medical report from the plaintiff's long term treating general practitioner, dated February 1997, which had not been served on the defendant. In this report the treating general practitioner disavowed any linked between coronary artery disease and the motor vehicle accident. Notwithstanding their possession of this report, which they were bound to serve on the defendant as they had always intended to rely on other reports from the treating general practitioner, they failed to serve it, and twice filed amended statements of claim pleading aggravation of a pre existing heart condition. While it is of course not uncommon for a specialist to take a different view on a matter than a treating general practitioner, it seems to me that again the plaintiff's conduct in this matter does not entitle him to any special consideration in relation to costs.

9. It was the plaintiff's decision, on senior counsel's advice, to abandon the claim in relation to coronary artery disease. It was submitted that this decision was made after senior counsel for the defendant indicated that he would strongly contest this aspect of the claim, and would require the expert for detailed cross examination. This may well be so, but it also was taken after it emerged that the general practitioner's report, which disavowed such a link, had come to light. It seems to me that the defendant has acted prudently and has made a payment into court on the basis of the best information it then had, which has subsequently turned out to be an overly generous payment because of the difference between the information then available to the defendant and the facts as they emerged at trial.

10. In all of the circumstances of this case the normal consequences should follow. On the arguments as they had been set out in written submissions before the hearing of this application I would have ordered that the plaintiff's failure to accept the payment into court of $80,000 within 14 days should have the effect that, the plaintiff having eventually recovered at trial only $8,200, the plaintiff should have their costs up to the date of the payment into court, but the plaintiff should pay the defendants costs after 30 May 1997.

11. On the hearing of this application counsel for the plaintiff raised a question of the validity and effectiveness of the payment into court of 30 May 1997. Notwithstanding that the payment was made in accordance with the Rules, Mr Pappas argued that the effect of section 22 of the Health and Other Services (Compensation) Act 1995 was that the payment into court was of no effect.

12. The Health and Other Services (Compensation) Act 1995 was introduced with a view to ensuring that, where compensation payments were recovered for personal injuries, adequate repayments were made to the Health Insurance Commission to reflect public payments by way of Medicare benefits for medical services related to the accident. The Act casts certain duties and obligations on, inter alia, insurers, as "notifiable persons". The relevant section for the purposes of this application is section 22 which provides:

"Restriction on making settlements:

22(1) The notifiable person must not make a settlement in respect of the claim for compensation unless:

the notifiable person has informed the compensable person that the compensable person may be liable to pay amounts under this Act or the Charges Act as a result of the settlement being made; or

the Managing Director has, within the 3 months prior to the settlement, given the notifiable person a notice under section 21 in respect of the claim.

(2) For the purposes of this section, payment of an amount into a court is taken to constitute the making of a settlement.

(3) Subsection (1) is taken not to have been complied with in relation to the payment of an amount into a court unless, at the time of the payment, the notifiable person lodges with the court a copy of the notice under section 21 in respect of the claim."

13. It is common ground that the defendant served on the plaintiff on 30 May 1997 a letter which included the formal Notice of Payment into Court in accordance with Form 19 of the Rules, as well as the Notice of Past Benefits form issued by the Health Insurance Commission to the insurer (the notifiable person) pursuant to section 21 of the Act. It is also common ground that this Notice, while served on the plaintiff, was not lodged with the Court, and so the requirement of subsection 3 was not complied with. The plaintiff argues that this means that the payment into court was invalid.

14. I am not persuaded that this is so. Section 22 of the Act appears to create an offence by stating that the notifiable person must not do certain things, and indeed the official print (and the internet print) of the Act contains the normal note stating that, pursuant to section 4D of the Crimes Act 1914 "these penalties are only maximum penalties for the offences". Section 22 does not itself create a penalty, however, and where penalties are provided in the relevant division of the Act, by s26, they are provided for only in respect of failing to comply with sections 11,12,13,15 or 23 of the Act. There is a further offence created by section 32 of the Act which prohibits the making of a compensation payment before the liability to the Commonwealth is discharged.

15. It thus appears that section 22 creates a prohibition on certain conduct without prescribing a penalty. If a person breaches section 22 there seems to be no penalty for the mere fact of making an offer of settlement without the service of the relevant notice of past benefits, but by section 32 it is an offence to make a payment unless the relevant amount in that notice has been withheld for payment to the Health Insurance Commission. Given this legislative scheme I am not persuaded that the effect of the Act is to strike down for reasons of inconsistency the provisions of Order 26 of the Supreme Court Rules relating to payment into court for the reason only that in this case the payment into court was not accompanied by the notice required under the Commonwealth Act. I am satisfied that the payment into court was validly made under the rules, and that the consequence of the plaintiff failing to take up the payment should be that the defendant has their costs after the 30 May 1997.

16. The policy reasons for encouraging settlements, whether by way of making payments into court or by way of offer of settlement pursuant to the principles of Calderbank v Calderbank [1975] 3 WLR 586, are well known., and were clearly explained by Higgins J in Quirk v Bawden [1992] ACTSC 118; (1992) 112 ACTR 1 where His Honour said (at 6)

"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. 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."

17. The strong public interest in encouraging reasonable offers of settlement to resolve litigation should not, in my view, be frustrated by an expansive reading of section 22 of the Act so as to somehow render inoperative the payment into court. I observe that, if this view is incorrect, the consequence would be not only that the payment into court was invalid, but also that any Calderbank type offer could also be invalid. The importance of providing appropriate incentives to conduct leading to resolution of litigation was stated by Lord Denning in Findlay v Railway Executive [1950] 2 All ER 969 at 972 where His Honour said:

"The hardship to the plaintiff in the instant case has to be weighed against the disadvantages which would ensue if plaintiff's generally who have been offered reasonable compensation were allowed to go tor trial and run up costs with impunity. The public good is better secured by allowing plaintiffs to go on to trial at their own risk generally as to costs."

18. The defendant in this case made a genuine offer to settle by way of a payment into court of $80,000. The plaintiff elected to reject this and go to trial. At the trial, facts within the plaintiff's knowledge, emerged which substantially weakened his claim, and he abandoned one part of the claim. The power to award costs is at the end of the day, discretionary (O65 r1), although this discretion must be exercised judicially. In all of the circumstances of this case I am satisfied that the defendant should have the benefit of having made a genuine offer to settle.

19. I therefore order that the plaintiff is to have his costs up to 30 May 1997, and the plaintiff to pay the defendant's costs from that date.

20. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of Master T. Connolly.

Associate:

Date: 4 August 2000

Counsel for the plaintiff: Mr Pappas

Solicitor for the plaintiff: Peter R. Glover

Counsel for the defendant: Ms Adamson

Solicitor for the defendant: Abott Tout Harper & Blain

Date of hearing: 20 July 2000

Date of judgment: 4 August 2000