Codey v Toll Ipec Pty Ltd [2003] ACTSC 69 (29 August 2003)

Last Updated: 2 September 2003

ROBERT LANCE CODEY v TOLL IPEC PTY LIMITED [2003] ACTSC 69 (29 August 2003)

COSTS - Calderbank offer - special order justified

Health and Other Services (Compensation) Act 1995 (Cth)

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

Calderbank v Calderbank [1975] 3 WLR 586

No SC 170 of 2001

Coram: Master Harper

Supreme Court of the ACT

Date: 29 August 2003

IN THE SUPREME COURT OF THE )

) No SC 170 of 2001

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: ROBERT LANCE CODEY

Plaintiff

AND: TOLL IPEC PTY LIMITED

Defendant

ORDER

Coram: Master Harper

Date: 29 August 2003

Place: Canberra

THE COURT ORDERS THAT:

1. The defendant pay the plaintiff's costs as between party and party up to and including 24 April 2003 and thereafter on an indemnity basis.

1. On 4 August 2003, I ordered the entry of judgment in the plaintiff's favour in the sum of $563,500, in an action for damages for personal injury against his employer. Counsel for the plaintiff made an oral application for an order for costs reflecting the defendant's rejection of a Calderbank offer.

2. The offer in question was in response to a Calderbank offer made by the defendant in an amount of $318,609.25 plus costs. By letter dated 10 April 2003, expressed to be without prejudice save as to costs, the solicitors for the plaintiff rejected that offer and offered to settle for $450,000 plus payments made by the workers' compensation insurer in the sum of $95,649.42 (as at 11 March 2003) plus costs. The offer was expressed to be open for fourteen days, and the defendant was put on notice that if the offer was rejected and the plaintiff was awarded a greater amount following the hearing of the action, the letter would be relied upon in support of an application that the defendant pay the plaintiff's total costs from the date of the letter.

3. In subsequent written submissions, the plaintiff's counsel submitted that the appropriate order was that the defendant pay the plaintiff's costs on a party-and-party basis up to 10 April 2003, and on an indemnity basis thereafter. Counsel submitted that the offer should be examined at the time it was open for acceptance, and that while the workers' compensation amount might have increased during the fourteen-day period, it could not have exceeded $98,000 based upon the evidence given subsequently at the hearing. Even by the date of judgment, the increased workers' compensation payments could not have increased to such a figure that they would have exceeded the difference between the judgment sum and $450,000, assuming that to be a valid consideration.

4. The plaintiff further submitted that following the plaintiff's offer, the defendants failed to negotiate further: it was accordingly necessary for the plaintiff to proceed to hearing, thereby incurring significant additional costs.

5. Counsel for the defendant submitted that even by the time of the Calderbank offer, further workers' compensation had been paid, so that the figure included in the offer was already out of date. I was informed that between 11 March and judgment, the workers' compensation insurer had paid a further amount of $6,123.76, bringing the total to $101,773.18.

6. The defendant submitted that it was relevant that figures in the reasons for judgment were calculated to the date of judgment, including interest. If the plaintiff's offer was viewed as an amount clear of compensation paid to the date of judgment, and the judgment was itself reduced to the same calculation, the difference between offer and judgment would be $11,726.82. The offer was thus approximately 2% more favourable to the defendant than the amount of the judgment. Counsel for the defendant submitted that such a narrow margin in a case of such an order was not unreasonably rejected by the defendant, and that accordingly, a special costs order was not justified.

7. It was not suggested that the defendant's rejection of the offer was affected by lack of knowledge of any aspect of the basis upon which the plaintiff's case was to be put at trial.

8. Calderbank offers are now commonplace in litigation in this Court, particularly since the Health and Other Services (Compensation) Act 1995 of the Commonwealth cast doubt on the lawfulness of payments into court in personal injury actions. The principles governing the effect of rejection of a Calderbank offer were explained by Higgins J (as his Honour then was) in Quirk v Bawden [1992] ACTSC 118; (1992) 112 ACTR 1, in a judgment in which Miles CJ and Gallop J concurred. His Honour referred to the genesis of the principle in Calderbank v Calderbank [1975] 3 WLR 586, and its development through subsequent decisions in England and other Australian jurisdictions. As his Honour said, there needs to be more than an offer of settlement made by the plaintiff and not accepted by the defendant which is exceeded by the judgment, to make it appropriate to order indemnity costs. The assessment, for example, of non-economic loss in a personal injuries claim, involves a discretionary judgment. The mere refusal of an offer which happens to be less than the sum ultimately awarded is not necessarily to be characterised as unreasonable. In some cases it may be enough to avoid a special costs order that the defendant has reasonably engaged in a proper attempt to settle the matter.

9. His Honour referred to the need for a Calderbank offer to represent a compromise, that is to say, a discount against the sum to which the plaintiff is otherwise found to be entitled. His Honour noted that personal injury litigation in particular admits of a range of outcomes, upon which the parties might reasonably differ. The threat of a special order for costs should not be used to inhibit either party from litigating an issue reasonably in contention. At the same time it would be unreasonable for a plaintiff to insist upon a figure representing the "top of the range" on every element of damages. In the end, as his Honour said, the matter is one for the discretion of the trial judge. Before the discretion can be exercised, it must appear that the defendant failed to act reasonably in declining to accept the plaintiff's offer of compromise, or to continue to negotiate at a reasonable level in response to it. In the case in question, the plaintiff was ultimately awarded $372,000 having offered in a Calderbank letter to accept $350,000. Higgins J said that it was apparent that the offer represented a genuine compromise when it was made, and that the discount was not insignificant. It was also significant, but 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. The Master had ordered that the appellant pay the respondent's costs on a party-and-party basis up to and including the date of the Calderbank letter, and on an indemnity basis thereafter. Higgins J was not persuaded that the Master's discretion miscarried.

10. In this case, the letter conveying the offer was to an extent ambiguous. One could have read it as an offer to accept $450,000 plus $95,649.42 (a total of $545,649.42 plus costs). The alternative construction was that the plaintiff would accept $450,000 plus an amount representing the total payments made by the workers' compensation insurer to the date of the offer (10 April 2003): or perhaps the date of the receipt or acceptance of the offer, or the date of entry of consent judgment following acceptance. It seems to have been intended by the plaintiff, and understood by the defendant, in one of the latter senses, though it is not entirely clear to me which one, or that the parties can be assumed to have understood the offer in the same way.

11. The amount required to be refunded by a plaintiff to a workers' compensation insurer out of any judgment or settlement is a matter of crucial significance to the plaintiff, but it does not form a component of the damages assessed by the court, and is unlikely to correspond precisely with any of those components. This creates some difficulties in making a comparison of an offer put in such terms and a later judgment sum. I recognise that in one sense, workers' compensation payments made by the insurer subsequent to a Calderbank offer are of little relevance - they can be seen as representing no more than an advance against the damages ultimately recovered.

12. I am satisfied that on any view of the offer, it provided an opportunity for the defendant to settle the plaintiff's claim at a figure well below the award of the Court. If the defendant found it ambiguous, clarification could have been sought. I take account also of the fact that the defendant's solicitors received their instructions from the workers' compensation insurer, so that the precise total of workers' compensation at any point in time was within the knowledge of their client, who would be likely to have had a more readily accessible record of payments than the plaintiff.

13. I regard it as significant that the defendant made no further attempts to settle the plaintiff's claim after receipt of the offer in question, preferring to rely on the Calderbank offer contained in the letter from the defendant's solicitors of 26 March 2003 which in the event represented less than 60% of the plaintiff's eventual award.

14. I am reminded that the purpose of the Calderbank principle is to encourage settlement of litigation, in the interests of saving the parties expense and reducing the load on scarce community resources such as the Court itself.

15. I accept that the Calderbank offer made by the plaintiff represented a fair compromise having regard to his actual entitlements as later assessed by the Court.

16. I am satisfied that the plaintiff is entitled to a special order in relation to costs. The order proposed on his behalf is that he have his costs up to the date of the Calderbank offer as between party and party, and thereafter on an indemnity basis. It has not been submitted on behalf of the defendant that the basis suggested is unreasonable, should I find a special order justified.

17. It seems to me unreasonable to penalise the defendant from the date of the Calderbank letter, which was expressed to be open for fourteen days. The defendant could have accepted the offer within that period without penalty as to costs. I think that the indemnity order should run only from the expiration of the fourteen-day period.

18. The plaintiff's costs are to be paid by the defendant as between party and party up to and including 24 April 2003 and thereafter on an indemnity basis.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Decision herein of Master Harper.

Associate:

Date: 29 August 2003

Counsel for the plaintiff Mr R L Crowe SC

Solicitor for the plaintiff Baker, Deane & Nutt

Counsel for the defendant Mr G J Lunney

Solicitor for the defendant Dibbs Barker Gosling

Date of hearing 4 August 2003

Date of decision 29 August 2003