Zardo v Ivancic [2003] ACTSC 82 (16 October 2003)

Last Updated: 24 November 2003

NICK ZARDO v MATE IVANCIC

[2003] ACTSC 82 (16 October 2003)

PRACTICE AND PROCEDURE - costs - judgment obtained by fraud.

Motor Accidents Act 1988 (NSW), s 66

Zardo v Ivancic [2003] ACTSC 32, (2003) 149 ACTR 1

John Pfeiffer Pty Limited v Rogerson [2000] HCA 36; 203 CLR 503

Quirk v Bawden [1992] ACTSC 118; (1992) 111 FLR 115

Toubia v Schwenke [2002] NSWCA 34; (2002) 54 NSWLR 46

No SC 772 of 2000

Judge: Connolly J

Supreme Court of the ACT

Date: 16 October 2003

IN THE SUPREME COURT OF THE )

) No SC 772 of 2000

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: NICK ZARDO

Plaintiff

AND: MATE IVANCIC

Defendant

ORDER

Judge: Connolly J

Date: 16 October 2003

Place: Canberra

THE COURT ORDERS THAT:

1. Paragraphs 2, 3, 4 and 6 of the notice of motion dated 28 May 2003 be dismissed.

2. There be an order in terms of par 5 of the notice of motion.

3. The plaintiff pay the defendant's costs of the hearing of 23 September 2003.

1. This is an application, commenced by way of notice of motion of 28 May 2003 for certain costs orders and consequential orders following from the decision in the substantive action Zardo v Ivancic delivered on 16 May 2003 [2003] ACTSC 32, (2003) 149 ACTR 1). That was an action commenced pursuant to s 66 of the Motor Accidents Act 1988 (NSW) (the Motor Accidents Act) to set aside a consent judgment obtained by the defendant, Mr Ivancic against the plaintiff, Mr Zardo arising from a motor vehicle accident which occurred in New South Wales in July 1987. Mr Ivancic had commenced proceedings in this Court in respect of that accident (SC 619/1997) claiming damages for personal injuries arising from the accident. The matter was settled by way of a consent judgment entered into in matter No SC 619/1997 on 16 August 2000 by way of judgment for Mr Ivancic against Mr Zardo in the sum of $425,000 plus legal costs agreed at $30,000.

2. The notice of motion sought short service, which was granted, and also sought certain orders relating to preservation of assets, which were made on 28 May 2003. The rest of the notice was stood over, and came on for hearing on 23 September 2003.

3. The action Zardo v Ivancic (SC 772/2000) was an action by the defendant insurer in the personal injuries claim to have the liability to pay the judgment sum set aside on the basis that the consent judgment had been obtained by fraud. The matter proceeded to hearing, with senior counsel on both sides, on 14-17 October 2002 and 25 and 26 March 2003 before me, initially sitting as Master. On 16 May 2003 I delivered judgment in the matter ordering that the plaintiff insurer (the insurer) be relieved of liability under the consent judgment in matter No SC 619/1997 in the sum of $350,000, and that the defendant (Mr Ivancic) pay the insurer's costs of those proceedings.

4. The notice of motion relevantly seeks orders that:

2. The order for costs made in favour of the defendant (as plaintiff) in matter No SC 619 of 1997 be vacated.

3. In matter No SC 619 of 1997, the plaintiff pay the costs incurred by the defendant (as plaintiff) up to 20 July 1999.

4. In matter No SC 619 of 1997, the defendant pay the costs incurred by the plaintiff (as defendant) from 20 July 1999 on an indemnity basis.

5. The plaintiff be relieved from liability to pay interest in respect of the judgment entered in matter No SC 619 of 1997.

6. The defendant pay to the plaintiff the sum of $35,703 within 7 days.

The Interest Claim

5. At the hearing of the notice of motion the defendant indicated that he would not contest an order in terms of par 5, acknowledging that pursuant to John Pfeiffer Pty Limited v Rogerson [2000] HCA 36; 203 CLR 503, the provisions of the Motor Accidents Act would apply to the calculation of any interest, and that on the facts no interest would be payable on the judgment sum following my decision. It is therefore appropriate to make an order in terms of par 5 of the notice of motion.

The repayment Claim

6. The claim to pay the sum of $35,703, which counsel for the plaintiff amended by consent to $35,000, relates to an advance paid to Mr Ivancic by the insurer in June 2001. On 5 June 2001 Mr Ivancic executed an acknowledgement of advance in which he said that he -

hereby acknowledge to have received from NRMA Insurance Limited ...without admission of liability the sum of thirty five thousand dollars ($35,000) free of interest representing an advance against whatever damages I may recover for personal injuries which I received as the result of a motor vehicle accident occurring on 3 July 1997 in Queanbeyan NSW AND I HEREBY AGREE that such amount as aforesaid shall be immediately repayable on demand being made by NRMA Insurance Limited AND I FURTHER AGREE that any damages which I may recover in compensation for my injuries as aforesaid shall be deemed to be satisfied to the extent of the abovementioned amount of $35,000.

7. It is common ground that on 21 May 2003 and again on 22 May 2003 the insurer made demands that the advanced sum be repaid.

8. Counsel for Mr Ivancic acknowledged that on these facts the insurer would have a strong prima facie case to recover the advanced amount by way of the normal debt recovery process, but that it was inappropriate and this Court had no proper basis for making such an order by way of a notice of motion in respect of outstanding costs issues arising following the delivery of judgment in the substantive matter. It seems to me that there is much in this submission. The insurer made in effect a loan to Mr Ivancic secured against any future damages, to be repayable on demand. A demand has been made to repay, and so an ordinary action for debt would arise. Such an action, however, is a separate cause of action from the statutory cause of action pursuant to s 66 of the Motor Accidents Act that was litigated and subject to judgment in matter No SC 772/2000. Although I have an ongoing jurisdiction to entertain costs applications following the publication of the judgment, it seems to me that it is not appropriate to make an order in relation to a separate cause of action by way of a notice of motion substantially concerned with costs orders consequent upon the judgment. I dismiss par 6 of the notice of motion.

The Costs Claims

9. The insurer seeks orders relating to costs in the original personal injuries claim, being matter No SC 619/1997. By par 2 of the notice of motion it seeks an order that "the order for costs made in favour of the defendant (as plaintiff) in matter No SC 619 of 1997 be vacated". Mr Lunney, for Mr Ivancic, made the submission, correctly, that the power of the Court to interfere or vary the consent order is limited to the power contained in s 66 of the Motor Accidents Act, and that is, as set out in the substantive judgment, to relieve an insurer from liability to pay any consent judgment to the extent that the Court is satisfied that the claimant has obtained a financial benefit by way of fraud. On its face then, the power of the Court is limited to a relief from liability, and there is no power to vacate a consent judgment.

10. In my substantive judgment I found that Mr Ivancic had engaged in fraud which had resulted in a consent judgment involving a financial benefit by way of the fraud in the sum of $350,000. Given that the original judgment sum was for $425,000, this left Mr Ivancic, notionally, with a judgment sum of $75,000 in respect of the action No SC 19/1997. I had no evidence that the consent order for costs in the sum of $30,000 was inappropriate, and I made no order relieving the insurer of liability in respect of the costs order.

11. Mr McDonogh, for the plaintiff, in pars 3 and 4 seeks an order for indemnity costs in the action SC 619/1997 on the basis that the insurer made an offer of settlement on 20 July 1999 in the sum of $145,000 plus workers compensation payback plus costs, which was not accepted by Mr Ivancic. Given that Mr Ivancic obtained a nominal judgment at the end of SC 772/2000 of $75,000, which I was told would in effect be repaid to the workers compensation insurer leaving him with no net benefit, it is clear that the rejection of the offer was imprudent, and indeed would, in normal circumstances, attract the operation of the indemnity costs principles set out in Quirk v Bawden [1992] ACTSC 118; (1992) 111 FLR 115.

12. In my substantive judgment I expressly relied on and applied the reasoning of the New South Wales Court of Appeal in Toubia v Schwenke [2002] NSWCA 34; (2002) 54 NSWLR 46, which is the leading judgment on the principles to be applied in an action pursuant to s 66 of the Motor Accidents Act. In that case a judgment was obtained by way of an arbitration, which was subsequently entered as a judgment for the plaintiff plus costs. The insurer became aware of certain facts, and commenced an action pursuant to s 66. The action was heard by a District Court Judge, who found that there had been a degree of fraud which affected part of the judgment, and he relieved the insurer from liability to the extent of the fraudulently obtained benefit. The District Court Judge also made orders akin to the orders sought by the present insurer that the claimant get their costs to a certain point, and that thereafter the claimant pay the insurer's costs.

13. The Court of Appeal held that the District Court Judge had no power to make such an order. In the primary judgment Handley JA said (at 57) -

During argument Hodgson JA drew attention to a difficulty with the judge's order for costs in respect of the earlier action. The plaintiff in the s 66 proceedings had not paid the then plaintiff's costs of the earlier proceedings as assessed. That order was nevertheless a financial benefit "so obtained" by the then plaintiff and under s 66(2)(a) the plaintiff in the s 66 proceedings was entitled to be "relieved from that liability". However the insurer could obtain no relief in respect of its own costs of the earlier proceedings. Under s 66 a successful plaintiff is entitled either to be relieved from an outstanding liability (s 66(2)(a)) or to obtain restitution (s 66(2)(b), but is not entitled to be indemnified against its own costs. Relief of that nature could have been obtained by a costs order following a successful re-hearing of the original action before a judge, or possibly in an action for deceit. The orders made by the judge in respect of the earlier proceedings were beyond power and must be corrected. Neither party objected to this course.

14. Mr McDonogh, in his written submissions, has collected an impressive range of authorities in respect of the circumstances where a court may make an order for indemnity costs. However, I am satisfied that the analysis of the effect of s 66 of the Motor Accidents Act in Toubia v Schwenke is sound, and should be followed. I will repeat for present purposes what I said about the effect of this decision in the substantive judgment at [9] -

As a single judge of this Court, I would normally regard a decision of the Court of Appeal of [New South Wales], while not strictly binding, of great persuasive authority. Given that the High Court has stated in Pfeiffer v Rogerson that I must apply the law of New South Wales, and the law of New South Wales for present purposes is s 66 of the Motor Accidents Act, it may well be that I am in fact bound, as a judge of this Court, to apply the law as it has been held to be by the New South Wales Court of Appeal. In that sense, the decision of the New South Wales Court of Appeal, which states the law in New South Wales could be seen as binding on a single judge in [New South Wales]. The implications of Pfeiffer v Rogerson on the doctrine of precedent have yet to be fully worked through.

15. It follows that I am of the opinion that I do not have jurisdiction to vacate the costs order in SC 619/1997 and to substitute for that costs order an order in favour of the insurer. All that an action pursuant to s 66 enables a court to do is to relieve a defendant of a liability to the extent that that liability amounts to a financial benefit that has been obtained by fraud. In making the original orders in the substantive matter I was satisfied that the claimant had obtained a financial benefit by reason of fraud in respect of $350,000 of the original judgment sum, and I made an order relieving the insurer of this much of the liability under the consent judgment. This left what I found to be on the evidence before me a proper claim by Mr Ivancic for personal injuries that would sound in damages in the order of $75,000. Given this finding, I was not satisfied that the agreed costs of $30,000 could be seen necessarily to have been a financial benefit obtained by fraud, as I had found that absent the fraud there was a valid claim for damages in the order of $75,000 to this amount, which would carry with it an entitlement to costs.

16. I decline to make orders 2, 3 and 4 of the notice of motion. In the substantive action I ordered Mr Ivancic to pay the insurer's costs of the action (being SC 772/2000). No application was made by this notice of motion to vary that order, and nor should there have been, as there is no evidence that there was ever any effort by the insurer to compromise SC 772/2000. In Toubia v Swenke there had been efforts to compromise the s 66 action, and the Court of Appeal made indemnity costs orders in relation to part of the proceedings because of these efforts, but in this case the offer of settlement was made only in respect of the original claim, SC 619/1997, and was not, on the evidence before me, repeated in SC 77/2000.

17. The result of this is that I dismiss pars 2, 3, 4 and 6 of the notice of motion dated 28 May 2003. I make an order in terms of par 5 of the notice of motion, which was consented to by Mr Ivancic.

18. It seems to me that, as Mr Ivancic has been wholly successful in respect of the contested costs application and the repayment issue, the plaintiff should pay his costs of the hearing of 23 September 2003.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 16 October 2003

Counsel for the plaintiff: Mr MA McDonogh

Solicitor for the plaintiff: Phillips Fox

Counsel for the defendant: Mr G Lunney

Solicitor for the defendant: Blumers Personal Injury Lawyers

Date of hearing: 23 September 2003

Date of judgment: 16 October 2003