Heywood v Miller [2005] ACTSC 12 (18 February 2005)

Last Updated: 8 March 2005

ELIZABETH HEYWOOD v WAYNE MILLER

[2005] ACTSC 12 (18 February 2005)

COSTS - Calderbank offer by defendant - plaintiff recovering less than amount offered - relevant considerations

Supreme Court Rules, O 26, rr 1, 11

Evidence Act 1995, s144

Calderbank v Calderbank [1975] 3 WLR 586

Mazloum v Rich, Supreme Court of the ACT (Master Connolly, 11 July 1997, unreported)

Hart v McGlynn, Supreme Court of the ACT (Gallop ACJ, Higgins and Crispin JJ, 13 July 1998, unreported)

Kosev v GIO General Limited, Supreme Court of the ACT (Cooper J, 18 November 1997, unreported)

No. SC 835 of 2001

Judge: Master Harper

Supreme Court of the ACT

Date: 18 February 2005

IN THE SUPREME COURT OF THE )

) No. SC 835 of 2001

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: ELIZABETH HEYWOOD

Plaintiff

AND: WAYNE MILLER

Defendant

ORDER

Judge: Master Harper

Date: 18 February 2005

Place: Canberra

THE COURT ORDERS THAT:

The defendant pay the plaintiff's costs up to and including 27 November 2003.

1. I delivered judgment in this action on 28 January 2005, assessing the plaintiff's damages at $202,869.35, and reducing that figure by 30% to take account of her contributory negligence. Judgment was entered in her favour in the sum of $142,008.55.

2. The solicitors for the defendant seek orders for costs reflecting the fact that the plaintiff twice rejected offers conveyed by Calderbank letter. The first letter was dated 6 November 2003 and expressed to be without prejudice except as to costs. The solicitors for the defendant offered $145,000.00 plus costs, and made reference to the decision in Calderbank v Calderbank [1975] 3 WLR 586.

3. The offer was expressed to be on the basis that its acceptance was acknowledged to be a settlement under s 22(1)(a) of the Health and Other Services Act (Compensation) Act 1995 of the Commonwealth, and that the defendant's insurer had informed the plaintiff that it might be liable to pay amounts under the Act or under the Health and Other Services (Compensation) Care Charges Act 1995. It has not been submitted that this wording converted the offer into a conditional one, so that its acceptance might have placed the plaintiff in a less favourable position than if the Court had awarded her $145,000.00 following a hearing.

4. The offer was expressed to be subject to the condition that no interest would be payable on the settlement amount provided that it was paid within twenty-eight days. It does not seem to me that the imposition of this condition should deprive the defendant of any benefit from the offer.

5. The offer was expressed to be open until 4.00 pm on 27 November 2003, a period of twenty-one days. The letter concluded that if the offer was not accepted, the defendant would rely upon the letter in any argument relating to costs or interest. It has not been submitted that the period of twenty-one days was inadequate for the plaintiff to consider and give instructions in relation to the offer.

6. The solicitors for the plaintiff filed and served a certificate of readiness and statement of particulars on 6 November 2003. The matter came before the Deputy Registrar on 3 February 2004 for a listing hearing, and on that date it was fixed for hearing on 23 March 2004. It was not reached during that week, and was given a fresh date, 19 July 2004, when the hearing proceeded.

7. On 14 July 2004, the solicitors for the defendant sent to the solicitors for the plaintiff another letter, in identical terms to the previous one, putting the offer of $145,000.00 plus costs again, and leaving it open until 4.00 pm on 16 July 2004, the last working day before the hearing date. The letter was sent on 14 July by fax, giving the plaintiff two days to reconsider settling at the proposed figure. I have not been informed whether or not any settlement negotiations took place at this time, but it is apparent the plaintiff did not accept the offer.

8. The rules make provision for a defendant to make a payment into Court: Order 26, rule 1. An authorised insurer under the Road Transport (General) Act 1999 may pay into Court by bond. Order 26, rule 11 includes the following:

(3) When exercising a discretion about costs of the action (other than an interlocutory application for which a separate costs order is to be made), the judge must take into account -

(a) the fact that an amount has been paid into Court; and

(b) the amount of the payment

(4) Subrule (3) does not limit the matters that the judge may take into account.

9. In this case, the defendant was driving a motor vehicle registered in the Australian Capital Territory which came into collision with the plaintiff, a pedestrian. Having regard to the provisions of the Road Transport legislation and regulations, I find that the vehicle driven by the defendant was insured under a policy of third-party insurance issued by an authorised insurer, and I take judicial notice under s 144 of the Evidence Act 1995 that NRMA Insurance Limited is the only authorised insurer of Territory-registered motor vehicles.

10. In 1995 the Health and Other Services (Compensation) Act came into force, its purpose being to secure the position of the Commonwealth Health Insurance Commission with respect to treatment expenses paid through Medicare and subsequently recovered by a plaintiff against a tortfeasor. The Act requires that an amount be paid to the Health Insurance Commission at the time of settlement, pending a determination by the Commission of the precise amount refundable by the plaintiff. Although the issue has, as far as I have been able to ascertain, never arisen directly for determination, insurers and legal practitioners have been concerned that a payment into Court by a defendant or insurer might constitute an offence under the Commonwealth Act. Master Connolly, as his Honour then was, accepted in Mazloum v Rich in this Court (11 July 1997, unreported) that the legislation imposed a considerable barrier to the effective settlement of personal injury claims by way of payment into Court. In that case the then Master gave effect to an offer made by a defendant in a Calderbank letter. The plaintiff had rejected the offer and proceeded to trial, in the event recovering less than the amount of the offer. The Master gave the plaintiff his costs up to the date of the Calderbank letter, and ordered that the plaintiff pay the defendant's costs from that date.

11. Since Mazloum, defendants in personal injury matters have effectively ceased to make use of the payment into Court procedure, and have relied upon Calderbank offers instead. The Court has consistently given effect to such offers where the plaintiff has recovered a lesser sum at trial, applying similar principles to those prescribed by O 26 r 11.

12. In the present case, I am satisfied that the offer put by the defendant in the letter of 6 November 2003 was a reasonable one. The plaintiff could have accepted it, and chose not to. She was at all times represented by competent and experienced solicitors, and there was time for them to obtain counsel's advice on the offer, if they had advised this course and been so instructed.

13. This brings me to a consideration of the principles which should be applied in exercising the Court's discretion as to costs where a plaintiff has rejected, or not accepted, a Calderbank offer, and has proceeded to trial and obtained a less favourable result. The first proposition, for which authority is so abundant as not to require citation, is that the courts encourage parties to resolve their difference by agreement in preference to going to trial. One of the tools available to the court in encouraging settlement is the ability to take account, when exercising a discretion as to costs, of a Calderbank offer.

14. The next proposition is that, when exercising its discretion, the Court can be expected to take account of a Calderbank offer. Not to do so would deprive Calderbank offers of their efficacy, and might lead to an expectation that Calderbank offers could be rejected, or ignored, with impunity.

15. In the present case, there is no argument that the plaintiff is entitled to her costs up to the date of the first Calderbank offer. It seems to me that she should be entitled to her costs for a slightly longer period, being the period for which the Calderbank offer was expressed to be open. There is a significant difference between the parties as to what order in relation to costs should be made in respect of the period after that date. The defendant seeks an order that the plaintiff pay the defendant's costs thereafter on an indemnity basis.

16. Such an order has been made in many actions arising out of commercial disputes, particularly in the Federal Court of Australia. It is not an order which I would be prepared to contemplate in the absence of evidence as to the retainer between the solicitors seeking the order and their client. Without some information as to the basis of the solicitors' charges to their client, counsel's fees, and the amounts charged by expert witnesses, enabling a comparison with the costs which would be recoverable as between party and party, the court is unable to assess the impact of such an order.

17. In actions for damages for personal injury in this Court, two approaches have been adopted in the past. The first is to order that the plaintiff pay the defendant's costs subsequent to the date of notional rejection of the offer. Such costs would be recoverable on a party-and-party basis. The second approach is to make no order as to costs after that date, so that each party bears his or her own costs. As previously mentioned, Master Connolly adopted the first approach in Mazloum in 1997. In Hart v McGlynn (13 July 1998, unreported) on appeal from the Master, the Full Court (Gallop ACJ and Higgins and Crispin JJ) set aside a costs order made by the Master on the first approach, Gallop ACJ describing it as an unusual order and an unnecessary penalty upon the plaintiff. Their Honours substituted an order that the plaintiff recover her costs to the relevant date and that there be no order as to costs thereafter. The second approach was also adopted by Cooper J in Kosev v GIO General Limited (18 November 1997, unreported) a dispute between an individual plaintiff and an insurer as to a claim under a disability policy.

18. Cooper J in Kosev, in considering whether to make an order that the plaintiff pay the defendant's costs after the relevant date, focused upon whether there was anything in the plaintiff's conduct which would justify making such an order. In other cases the question has been asked whether the conduct of the plaintiff in rejecting the offer was so unreasonable that the plaintiff should be required to meet the defendant's costs thereafter, perhaps even on an indemnity basis.

19. In the present case, it does not seem to me that the plaintiff's conduct can be characterised as unreasonable. She rejected, or decided not to accept, an offer which was within about 2% of the amount she recovered. Issues of fine judgment are involved in a situation like this, in practical terms on the part of solicitors and counsel rather than a lay plaintiff, but having regard to the fact that the assessment of damages for personal injury is an imprecise task involving discretionary considerations and ranges of figures for most components, the plaintiff's conduct was not unreasonable.

20. I am of the view that in exercising a discretion as to costs in personal injury actions, a further relevant consideration is the impact of the costs order sought on each of the parties. This may require some consideration of their comparative financial positions. This is a factor rarely likely to be relevant in a commercial dispute between corporations.

21. In the present case, the plaintiff's financial position is plain from the evidence, particularly in relation to her claim for loss of earning capacity. She was, prior to the accident, a woman of modest means, working in a nursing home and earning $422.00 net per week. Because of her injuries, she has lost her capacity to engage in that employment. She is over sixty. For a period after the accident she was living in a caravan at her brother's house in Tamworth. I draw the inference that she is a woman with few assets, apart from the proceeds of the judgment, and little income. The effect of an adverse costs order upon her is likely to be substantial.

22. The defendant, on the other hand, is indemnified by a third-party policy issued by an insurer which is a subsidiary of one of Australia's largest public companies, and is a regular litigant before the courts, its involvement as a litigant being an inevitable incident of its business activities as an insurer, which it undertakes with a view to earning profits for distribution to its shareholders. The impact of a costs order in a single action upon it would be negligible.

23. In all of the circumstances it seems to me that the interests of justice will best be served by an order that the defendant pay the plaintiff's costs up to and including 27 November 2003, and that there should be no order for costs after that date.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Associate:

Date: 18 February 2005

Counsel for the plaintiff: Ms C M Tunn

Solicitor for the plaintiff: Baker Deane & Nutt

Counsel for the defendant: Mr A Reilly

Solicitor for the defendant: Sparke Helmore

Date of hearing: 4 February 2005

Date of judgment: 18 February 2005