Eikrem v Fitzgerald [2003] ACTSC 97 (28 November 2003)

Last Updated: 28 January 2004

PAUL DANIEL EIKREM v DONALD FITZGERALD

[2003] ACTSC 97 (28 November 2003)

PRACTICE AND PROCEDURE - costs - application for indemnity costs - attack on insurer for contesting liability - no basis for indemnity costs.

LEGAL PROFESSION - duty of counsel to have basis for cross-examination.

Australian Capital Territory Bar Rules, r 38(a)

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

Calderbank v Calderbank [1975] 3 WLR 586

Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543

Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721

No SC 470 of 2000

Judge: Connolly J

Supreme Court of the ACT

Date: 28 November 2003

IN THE SUPREME COURT OF THE )

) No SC 470 of 2000

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: PAUL DANIEL EIKREM

Plaintiff

AND: DONALD FITZGERALD

Defendant

ORDER

Judge: Connolly J

Date: 28 November 2003

Place: Canberra

THE COURT ORDERS THAT:

1. The defendant pay the plaintiff's costs of the action [2003] ACTSC 66 on the ordinary basis.

2. The plaintiff pay the defendant's costs of the costs application.

1. This is an application by the plaintiff for indemnity costs following my decision in his personal injuries claim Eikrem v Fitzgerald [2003] ACTSC 66, delivered on 19 August 2003. The claim involved a rear end motor vehicle collision which occurred on 11 July 1998 in Canberra, and which resulted in cervical spine soft tissue type injuries. In that decision I awarded the plaintiff damages in the sum of $216,133.70 plus costs, but an application was made and granted that the question of costs be reserved for further argument.

2. The application for indemnity costs was heard on 5 November 2003. In his submissions, which were helpfully reduced to written form, Mr Purnell SC for the plaintiff made the argument that the defendant's offer to settle the matter for $80,000 plus costs, which was the basis of a Calderbank offer of 14 June 2002 was plainly unreasonable, that liability had wrongly been put in issue, and that counsel for the defendant acted improperly in putting certain questions concerning quantum to the plaintiff. As these submissions involved a frank attack on counsel for the defendant at the hearing, I granted leave to the solicitor for the defendant who appeared at the costs argument, Mr Galbraith, to file written submissions in response.

3. Indemnity costs may be ordered following the rejection by one party of a reasonable offer made by the other party. This practice is long established in this Territory, following the decision of the Full Court in Quirk v Bawden [1992] ACTSC 118; (1992) 112 ACTR 1 which endorsed the practice adopted in the United Kingdom in Calderbank v Calderbank [1975] 3 WLR 586. The rationale of the rule, as Higgins J (as he then was) said at 6 in Quirk v Bawden, is that -

There is much to be said for encouraging, at an early stage in the litigation, the serious consideration of offers of settlement. ...

Accordingly, I believe that this court should apply an appropriate costs sanction where a party has declined to accept or make, as the case may be, a reasonable offer of settlement.

4. I have been told that the insurer made a Calderbank offer to settle the matter for $80,000 plus costs. I have not been told that the plaintiff made any Calderbank offer. It is clearly established that, if a plaintiff offers to settle a claim for a given sum, and this claim is rejected by the insurer, and the plaintiff goes on to trial and recovers a higher sum, then indemnity costs will generally follow. But it is not the case that indemnity costs will follow merely because the plaintiff recovers at trial more than the insurer offered. It does not follow that an insurer's offer of settlement was plainly unreasonable just because a court awards a greater sum. The insurer at the time was contesting liability and quantum, and the offer of $80,000 was no doubt a commercial settlement offer and a reasonable one in that context. In the absence of any evidence at the costs hearing about any counter offer by the plaintiff, I am not satisfied that the case for indemnity costs is made out.

5. The plaintiff argues that liability was wrongly put in issue which unnecessarily prolonged the hearing. It is true that liability was in the end not in contest, but the circumstances surrounding this need to be considered, and it is appropriate that I set out what was said in the judgment of 19 August 2003 -

[2] When the hearing commenced on 18 March 2003 it was apparent that there were significant issues between the parties on both liability and assessment. The defendant's case was that the accident occurred in quite different circumstances, with the plaintiff in effect accelerating rapidly in the left-hand lane in order to overtake the defendant, and then suddenly cutting in front of the defendant as the defendant was approaching the lights.

[3] There were expert reports tendered from road traffic engineers giving competing versions of the mechanism of the accident. Mr FW Schnerring, a traffic and road safety engineer, prepared a report based on the plaintiff's version of the facts, and Mr W Karamadis, an expert in forensic engineering and collision reconstruction, prepared a report based on the defendant's version of the events. Mr Schnerring gave evidence and was cross-examined. When the defendant gave his oral evidence and was cross-examined, his evidence was in certain respects inconsistent with the version of events that had been set out in the expert reports, and indeed his oral evidence as to where his vehicle had been and speeds at certain points was such that, on Mr Schnerring's evidence, the accident could not have occurred in the manner described by the defendant. At the end of the first week of hearing I made the observation to counsel that it would be necessary to closely examine the transcript of this evidence, and that in particular it would be necessary for the defendant's expert to be appraised of the version of events sworn to.

[4] At the resumption of the hearing I was advised by counsel that the defendant was no longer contesting liability, and the matter would proceed by way of an assessment of damages only. It seems to me that this was entirely appropriate.

6. This was not the first case, nor will it be the last, where a defendant, or indeed a plaintiff, gives evidence in the witness box that is at variance with the version of events that has been the subject of their prior instructions, and has been the basis of instructions to expert witnesses. There were no independent witnesses to the accident, and it seems to me that the insurer cannot be said to have acted unreasonably in accepting the instructions of the insured driver, who was a mature and experienced driver, and indeed a senior academic. There is a range of reasons why a person's evidence may change at a hearing - nervousness, faulty recollection, or indeed skilled forensic cross-examination by an experienced counsel. I am not satisfied that the defendant acted improperly in continuing to put liability in issue, in accordance with the instructions of the insured defendant. When he failed to come up to his proof in his evidence in chief and cross-examination, it seems to me that the insurer acted sensibly and responsibly in order to save costs in making the concession as to liability, but their conduct up to that point cannot be criticised.

7. The criticism directed at counsel went to questions put to Mr Eikrem that he had been digging an irrigation ditch while he was at home on sick leave. This was put to him in cross-examination, and Mr Purnell points out that the only evidence lead in the defendant's case was evidence of a person who, at the end of cross-examination, only said that they had observed him placing or handling plastic irrigation pipes of the type used for domestic garden irrigation. In his submission on this point Mr Galbraith, for the defendant, referred to a note generated by the plaintiff's then employer which refers to an allegation that the plaintiff had been seen "digging an irrigation ditch in his front yard whilst on sick leave".

8. Mr Purnell, in his additional submissions, makes the criticism that counsel should have more carefully examined this claim before putting the question. He submits that the putting of the question was contrary to r 38(a) of the ACT Bar Rules (in similar form to the NSW Bar Rules) that provides -

38. A barrister must not cross-examine so as to suggest criminality, fraud or other serious misconduct on the part of any person unless:

(a) the barrister believes on reasonable grounds that the material already available to the barrister provides a proper basis for the suggestion.

9. This formal rule perhaps reinforces the longstanding common law position that counsel must not "cast unjustifiable aspersions on any party or witness" (per Mason J in Giannarelli v Wraith [1988] HCA 52; (1988) 165 CLR 543 at 556).

10. It seems to me that counsel has not acted inappropriately in breach of this rule. Putting to Mr Eikrem that he had been observed digging was not an allegation of "criminality fraud or other serious misconduct". Mr Eikrem was not presenting as an invalid. It was his case that despite his injuries he could still engage in vigorous activities, including snow skiing on black runs, but not as proficiently or for as long as before the accident. Cross-examination on this point was testing the range of capacity of a person with soft tissue injuries. It is the ordinary course in personal injury litigation. It was based on a version of a witness who was called.

11. Again, it seems to me, this is a case where the witness fell short under oath from the version of events that had previously been instructed. I am not satisfied that counsel did anything other than put to the plaintiff a version of events that she thought she would be able to sustain in her case. While that witness came up short under effective cross-examination, it does not seem to me that the defendant can be legitimately criticised for the way it conducted the case.

12. At the end of the day, this was a case where the plaintiff succeeded and obtained a judgment that was significantly greater than the settlement offer made by the insurer when liability was a live question, but that was still less than the particularised claim made by the plaintiff. I did not award damages as particularised in respect of economic loss, past and future, and Griffiths v Kerkemeyer [1977] HCA 45; (1977) 139 CLR 161 damages. The defendant suffered the not uncommon difficulty in litigation that witnesses did not, under effective cross-examination, come up to proof. But this is not enough to justify an order for indemnity costs, particularly in the absence of any Calderbank offer made by the plaintiff. In his submissions Mr Galbraith referred to the remarks of the NSW Court of Appeal in Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 where the Court (Kirby P, Mahoney and Samuels JJA) said (at 725) that the rule as to indemnity costs -

... does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of the litigation. Where, in the particular circumstances, the litigant or its advisers mis-judge the prosects of success or mis-calculate the outcome, their mistake may be warranted on the material which they had available. Alternatively, it may be no more than a mis-calculation in a case with large imponderables. Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why a discretion is retained, ... But the ordinary provision is expected to apply in the ordinary case.

13. That all litigation involves an element of risk was recognised by Higgins J in the decision of Quirk v Bawden where he said (at 8) -

Most litigation, particularly in the area of personal injuries, admits of a range of outcomes. Which of those outcomes will, ultimately, be reflected in the final judgment is a matter upon which the parties might reasonably differ. Indemnity costs should not be used to inhibit either party from litigating an issue reasonably in contention between them.

14. It seems to me that this is what has happened in this case.

15. I am not satisfied that the ordinary form of costs order should be departed from, and I accordingly rule that the defendant is to pay the plaintiff's costs of the action on the ordinary basis. As this was the form of order that I had originally made in my decision, and the plaintiff sought an additional hearing on an application for indemnity costs, it seems to me that the plaintiff should pay the defendant's costs of the costs application.

I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 28 November 2003

Counsel for the plaintiff: Mr FJ Purnell SC

Solicitor for the plaintiff: Maliganis Edwards Johnson

Counsel for the defendant: Mr D Galbraith

Solicitor for the defendant: Phillips Fox

Date of hearing: 5 November 2003

Date of judgment: 28 November 2003