Albert El-Syoufi v Freddy Alcazar [2001] ACTSC 1 (12 January 2001)

Last Updated: 18 January 2001

Albert El-Syoufi v Freddy Alcazar [2001] ACTSC 1 (12 January 2001)

CATCHWORDS

COSTS - Calderbank offers - Effect of change in law due to Pfeiffer v Rogerson.

Motor Accidents Act 1988 (NSW)

Calderbank v Calderbank [1975] 3 WLR 586

Falesca v Morrisy [2000] ACTSC 65

Griffiths v Kerkemeyer (1977) 193 CLR 161

Findlay v Railway Executive [1950] 2 ALLER969 at 972

John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36, (2000) 172 ALR 625

Quirk v Bawden (1992) 112 ACTR1

No. SC 451 of 1996

Coram: Master T. Connolly

Supreme Court of the ACT

Date: 12 January 2001

1. This is an application for costs following judgment in an action for personal injuries arising from a motor vehicle accident. I delivered judgment in the principal action on 1 December 2000 in favour of the plaintiff in the sum of $160,185.25 (El-Syoufi v Alcazar [2000] ACTSC 109). In my reasons I also awarded costs to the plaintiff, but on publication of my reasons the defendant made application to be heard on the matter of costs, and I varied the order accordingly, and heard argument on the matter of costs on 14 December 2000. I awarded the plaintiff his costs on the ordinary basis, and indicated that I would publish my reasons, which I now do.

2. The defendant's application was for an order that the plaintiff only receive his costs up until the expiry of an offer to compromise the action which was dated 14 January 2000 and which offer was open for 28 days from that date. The offer was contained in a letter from the solicitors for the defendant to the solicitors for the plaintiff marked "without prejudice except as to costs", and was in the form generally understood as a "Calderbank" offer. The letter offered to settle the plaintiff's claim in the sum of $170,500 plus costs, additional to certain out of pocket expenses already paid in the sum of $10,325.81. The offer was not accepted, and the matter went to trial, which resulted in a judgment for the plaintiff in the sum of $160,181.25. As the plaintiff received a judgment some $20,000 below the offer, the defendant applies for the costs penalty.

3. All orders for costs are discretionary, but there is no question that this court has adopted a policy of encouraging settlements, and that the principles established in the case of Calderbank v Calderbank [1975] 3 WLR 586 have been recognised in this jurisdiction. The leading authority for our purposes is Quirk v Bawden (1992) 112 ACTR1 where Higgins J said:

"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".

4. I accept that, in general, where a plaintiff has rejected an offer of settlement and subsequently recovered a lesser amount on the hearing of the matter, a costs penalty will normally flow. As I recently observed in Falesca v Morrisy [2000] ACTSC 65 at para 16:

"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 ALLER969 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 plaintiffs generally who have been offered reasonable compensation were allowed to go to 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"."

5. It is apparent that the so-called `Calderbank' test is not an inflexible rule, but rather a principle that penalises unreasonable refusal to compromise actions. In this case it was argued that the plaintiff's refusal of the offer in January 2000 was not unreasonable.

6. The substantive action arose from a motor vehicle accident on a country road near Nowra in New South Wales. The plaintiff, a Canberra resident, commenced his action in this court in 1996, in the settled expectation that he was bringing a common law claim, which when a liability was established, would fall for assessment of damages pursuant to the common law as understood to apply in the Australian Capital Territory. When the offer of compromise was made in January 2000 this was undoubtedly the state of mind of the plaintiff and his legal advisers.

7. The law in relation to the assessment of damages in respect of interstate torts was fundamentally changed as a consequence of the decision of the High Court of Australia in John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36, (2000) 172 ALR 625 handed down on 21 June 2000. In that case the High Court held that an Australian court hearing a claim arising from a tort committed in another part of Australia should apply the law of the place of the tort (the lex loci delecti in private international law terms) in the hearing of the claim. The effect of this is that, where an ACT court hears and determines a claim arising from a motor vehicle accident in New South Wales, the damages must be assessed according to the terms of the relevant New South Wales statute, in this case the Motor Accidents Act 1988 (NSW). The effect of this act is to vary the common law assessment of damages in significant respects, generally resulting in a lower award of damages.

8. In this case, where the plaintiff undoubtedly suffered quite significant spinal injuries resulting in surgery, he was dependant for some time on considerable assistance from his wife which would, under common law principles, result in an award of damages pursuant to the principle of Griffiths v Kerkemeyer (1977) 193 CLR 161. Under the Motor Accidents Act 1988, however, such an award may only be made if the assistance is for six months duration, and counsel for the plaintiff acknowledged during the hearing that this was not the case. I am satisfied that, had the matter proceeded to judgment on the common law, there would have been some award of damages in respect of this claim, but the effect of the change in the law was to exclude such a claim. I am also satisfied that, when the offer was made, those advising the plaintiff were entitled to assume that his claim would fall to be assessed pursuant to the common law. I am not satisfied, in these circumstances, that the rejection of the offer was unreasonable.

9. When an ultimate appellate court effects a change to the common law the doctrine is, of course, that the law has always been as the ultimate appellate court holds it to be. I in no way intend to challenge such a principle. It seems to me, however, that in exercising what is a discretionary power in regard to costs, and being guided by high authority that says that the costs penalty encompassed by the so called `Calderbank' rule is in truth a penalty to be applied where a party unreasonably rejects an offer of compromise and so forces a matter on to a hearing, I am not satisfied that the plaintiff here acted unreasonably in rejecting an offer of settlement when they understood the claim to be assessable under the common law, when they in fact recovered a lesser sum under an assessment of damages governed by the New South Wales statutory scheme.

10. I awarded the plaintiff their costs on the ordinary basis on the hearing of this application on 14 December 2000 but, as the matter raised what seemed to me to be a matter of general principle, and one that may arise again as those matters based on an interstate tort that occurred before the decision of the High Court in John Pfeiffer Pty Ltd v Rogerson was handed down come on for hearing, it was appropriate that I prepare considered reasons for my decisions, which I have now done. It is appropriate to observe that, where a defendant intends to rely on a `Calderbank' offer in respect of an interstate tort, it would be prudent, if the original offer was made before the decision in Pfeiffer v Rogerson was handed down, to at least re open that

11. offer, or make a fresh offer. Where the effect of Pfeiffer is to hold a plaintiff to a less advantageous system of assessing damages, it may be difficult to establish that a rejection of an offer based on common law damages was unreasonable.

I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of Master T. Connolly.

Associate:

Date: 12 January 2001

Counsel for the Plaintiff: Mr Parker

Solicitor for the Plaintiff: Wood Fussell

Counsel for the Defendant: Mr Seton

Solicitor for the Defendant: Abbott Tout

Date of hearing: 14 December 2000

Date of judgment: 12 January 2001