Checchia v Insurance Australia Ltd trading as NRMA Insurance (No 2) [2010] NSWSC 112 (26 February 2010)

Last Updated: 2 March 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Checchia v Insurance Australia Ltd trading as NRMA Insurance (No 2) [2010] NSWSC 112


JURISDICTION:
Common Law

FILE NUMBER(S):
15423/2007

HEARING DATE(S):
23 October 2009 + written submissions

JUDGMENT DATE:
26 February 2010

PARTIES:
John Checchia (Plaintiff)
Insurance Australia Ltd (ABN 11000016722) t/as NRMA Insurance (Defendant)

JUDGMENT OF:
Rothman J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
B J Gross / S Dixon (Plaintiff)
J Poulos QC / V Heath (Defendant)

SOLICITORS:
Young and Muggleton Solicitors (Plaintiff)
Moray & Agnew Solicitors (Defendant)


CATCHWORDS:
COSTS – offer of compromise – consideration of finding of fraud as relevant to discretion – indemnity costs ordered
INTEREST – interest prior to damage – major consideration proper compensation – consideration of delinquency not overcome entitlement to compensation for denial of funds to which plaintiff entitled – consideration of the nature of the discretion – claim is for damages, not payment under the contract and Court entitled to award interest
PRACTICE AND PROCEDURE – stay of part of money amount pending appeal – no issues of principle – stay granted

LEGISLATION CITED:
Civil Procedure Act 2005
Motor Accidents Compensation Act 1999
Uniform Civil Procedure Rules 2005

CATEGORY:
Consequential orders

CASES CITED:
Bennett v Jones (1977) 2 NSWLR 355
Checchia v Insurance Australia Ltd t/as NRMA Insurance [2009] NSWSC 1005
Commissioner of Taxation v Reliance Carpet Co Pty Ltd [2008] HCA 22; (2008) 236 CLR 342
Faulkner v Bourke (1990) 19 NSWLR 574
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7; [1962] 2 QB 26
Johnson v Agnew [1980] AC 367
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115
Leichardt Municipal Council v Green [2004] NSWCA 341
McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457
Moschi v Lep Air Services Ltd; Lep Air Services Ltd v Rolloswin [1973] AC 331
Photo Production v Securicor Transport Ltd [1980] UKHL 2; [1980] AC 827
Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368
Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170
Ruby v Marsh [1975] 32; [1975] HCA 32; (1975) 132 CLR 642

TEXTS CITED:


DECISION:
(i) Judgment for the plaintiff in the amount of $1,225,000;[<br>][<br>](ii) Pursuant to s 100 of the Civil Procedure Act 2005, the defendant shall pay interest on the aforesaid amount, calculated on and from 10 November 2006, until the date of this judgment, for the relevant period at the rate specified by Schedule 5 to the Uniform Civil Procedure Rules 2005, and thereafter pursuant to s 101 of the Civil Procedure Act 2005;[<br>][<br>](iii) The defendant shall pay the costs of and incidental to these proceedings on the ordinary basis up to and including 12 May 2008, and thereafter, on an indemnity basis. Such costs to be as agreed or assessed;[<br>][<br>](iv) The judgment of 29 September 2009, as varied, shall be stayed, except as to the payment of $800,000 by the defendant to the plaintiff;[<br>][<br>](v) Otherwise, the proceedings be dismissed.



JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

ROTHMAN J

26 FEBRUARY 2010

15423/2007 John Checchia v Insurance Australia Ltd t/as NRMA Insurance (No 2)

JUDGMENT

1 HIS HONOUR: The Court, having determined, in the principal judgment (Checchia v Insurance Australia Ltd t/as NRMA Insurance [2009] NSWSC 1005), the substantive issues between the parties, relating to whether the settlement of the damages claim by the plaintiff, Mr Checchia, was binding, and if so, to what extent, granted liberty to the parties to deal with interest and costs. The parties have exercised that liberty. Mr Checchia seeks interest and indemnity costs. The defendant, NRMA, opposes both and opposes any costs order and has also informed the Court of an appeal and sought a stay of part of the judgment issued.

2 This consequential judgment should be read in conjunction with the principal judgment. It is sufficient, for present purposes, to reiterate that Mr Checchia suffered injury as a result of a car accident and claimed under the Motor Accidents Compensation Act 1999 (“MACA”), which claim was settled. Mr Checchia did not, in his application for compensation, inform NRMA of a previous injury to the same part of his back and, purportedly utilising s 118 of MACA, NRMA refused to pay the settlement sum. Mr Checchia commenced proceedings and obtained judgment for the full amount of the settlement.

The nature of the substantive proceedings

3 During the course of the substantive proceedings, counsel for NRMA referred to the “ordinary course”, being a reference to proceedings for damages arising from a motor vehicle injury. Reference was made in the principal judgment (supra, at [17], [18], [19], [136] and [167]) to the circumstance that the substantive proceedings were not for damages arising from the accident. The substantive proceedings sought damages for breach of contract (being the settlement) as the means of enforcing the settlement.

4 The breach of contract was the refusal of NRMA, for reasons which it considered were available, to pay, ever or at all, the settlement amount. The statement of claim sought damages of $1.225 million, as well as interest and costs. The statement of claim pleaded that NRMA had “refused to pay to the Plaintiff the agreed sum of $1,225,000.00”. And it pleaded that, as a consequence, Mr Checchia had “suffered loss and damage” as a result of the breach.

5 NRMA, for its part, admitted, in its defence, that “it has refused to pay [Mr Checchia] the agreed sum”. The defence denied breach of the agreement on the basis of s 118 of MACA and asserted that Mr Checchia did not suffer loss and damage from NRMA’s refusal to pay the amount. NRMA did not (and does not), in its defence, suggest, or otherwise plead, that the time for payment of the agreed sum had not yet arisen. Nor does it plead any specific legal principle, fact or circumstance affecting costs or interest.

6 On 5 February 2007, NRMA, through its solicitors, wrote to Mr Checchia’s solicitors, relevantly, in the following terms:

“Pursuant to s118 of the Motor Accidents Compensation Act 1999, the insurer takes the position that your client has, for the purpose of obtaining a financial benefit, omitted to inform the insurer or any doctor consulted or seen by him in relation to his claim of his complete medical history, in particular of the injury suffered to his back in 1993. The insurer is further of the view that your client knew that his failure to reveal his actual medical history was of [sic] the very least misleading.

Accordingly the insurer is relieved of its liability in respect of the Settlement Agreement dated 20 October 2006 to the extent of the financial benefit flowing from the claimant’s above omission.”

7 As the Court understands, part, at least, of NRMA’s submissions, is that the Court should not award interest, because, as a matter of discretion, the Court would not grant specific performance of the interest clause in the contract. But the award of interest is not, it seems, interest under the contract, nor would the Court be ordering “specific performance”.

8 Neither party has attended to the specific basis of the substantive proceedings. This, as earlier mentioned, was the subject of comment in the principal judgment. The statement of claim seeks damage for breach of contract. Neither the statement of claim, nor the defence, alleged that the contract (i.e. the Settlement Agreement) has been discharged. Indeed, NRMA relies upon the settlement to stop Mr Checchia from proceeding before a motor accident assessor under MACA.

9 It is necessary to set out the steps that have been taken since the settlement. I will omit some of the obvious, such as the party’s obtaining further information, including further medical reports and surveillance material.

10 The correspondence between the parties included the letter of 5 February 2007, an extract from which is recited at [6] above. At that point, at least, issue was joined and Mr Checchia and NRMA knew the situation.

11 Following the letter of 5 February 2007, Mr Checchia’s solicitors wrote to the solicitors for NRMA on two relevant occasions. On the first occasion, 6 February 2007, they recited instructions to seek to enforce the settlement. On the second occasion, the relevant letter, dated 22 February 2007, was, omitting the formal parts, in the following terms:

“We refer to the above matter and your letter of 5^th February 2007.

Our client instructs us to agree to have the settlement set aside.

We will now make an application to CARS to have the matter referred to an assessor for determination or hearing.”

12 On 29 March 2007, the Motor Accidents Authority (“the Authority”) wrote to NRMA’s solicitors, referring to a discussion with an officer of NRMA, noting that there may not be agreement to set aside the settlement, and requesting answers to certain enumerated questions.

13 On 5 April 2007, NRMA, through its solicitors, confirmed to the Authority that NRMA did not consent to the Settlement Agreement being set aside, and referred to its understanding that Mr Checchia intended to commence court proceedings. Those proceedings (i.e. the current matter) were commenced on 24 October 2007, the date of the filing of the statement of claim.

14 From the foregoing, the following is evident:

(a) NRMA has not, either on account of the alleged fraud of Mr Checchia, or otherwise, sought to discharge the contract;

(b) On the contrary, NRMA has insisted on the contract remaining on foot, to the extent that they could do so;

(c) NRMA has simply refused to pay the amount in the contract and relied on s 118 of MACA;

(d) Mr Checchia has not sought (other than as an offer to reach a collateral or subsequent agreement) to rescind the contract;

(e) The contract has remained on foot and Mr Checchia has sued for breach of that contract.

15 The foregoing needs some explanation. A contract, including the Settlement Agreement, may be rescinded for fraud and other matters affecting its formation, in which case the parties are restored to their pre-contract positions: Commissioner of Taxation v Reliance Carpet Co Pty Ltd [2008] HCA 22; (2008) 236 CLR 342 at [2], per Gleeson CJ, Gummow, Heydon, Crennan and Kiefel JJ. As the High Court there made clear, such a rescission is distinct from a rescission (hereinafter referred to as a “termination”) at the election of one party, or indeed arising from frustration: see also Photo Production v Securicor Transport Ltd [1980] UKHL 2; [1980] AC 827 at 844, per Lord Wilberforce; and Johnson v Agnew [1980] AC 367.

16 Further, termination (and/or discharge) of a contract may occur by agreement of the parties. That agreement will either be a term of the original contract, or form a collateral or subsequent agreement. If the power to terminate were contained in the original contract, it would usually be contained in a “termination of contract” clause and, usually, be conditional on the occurrence of some event or the passage of time, or both, or some default by one or more of the parties.

17 In this case, there is no provision in the contract for either party to terminate. Nor, as is obvious from the foregoing, was there a collateral or subsequent agreement to rescind or to terminate.

18 Absent agreement of the parties, and absent frustration, a party may terminate the contract, under the common law, for a breach of a condition (or essential term), or for a sufficiently serious breach of an intermediate term: Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115; Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7; [1962] 2 QB 26.

19 While there may be some doubt about the proper definition of an intermediate term, such doubts seem presently irrelevant. The UK Court of Appeal in Hong Kong Fir, supra, seems to define it by applying the same test as applies to frustration of the contract, but, necessarily, occasioned by default of a party: Hong Kong Fir, supra, at 71.6, 65.9-66.5, and 69.3, per Lord Diplock.

20 The foregoing is recited for the purpose of clarifying that, even if NRMA did not seek to rescind, or agree to a termination of the contract, Mr Checchia could have rescinded (i.e. terminated). The payment of the settlement, or, more accurately, the refusal to pay, must be a breach of an essential term of the contract, or, at the very least, a sufficiently serious breach of an intermediate term.

21 Once there has been breach of an essential term (or a sufficiently serious breach of an intermediate term), the party not in breach (the obligee) may elect to terminate the contract and sue for damages arising from the breach: McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457, at 476-477, per Dixon J.

22 The alternative course to termination is to elect to keep the contract on foot and sue for the breach, without terminating. It is this course for which Mr Checchia has elected. More accurately, Mr Checchia has declined to elect to terminate the contract and, with the contract in existence, has sued for damages for breach of the contract. Those damages were the subject of the principal proceedings.

23 Ordinarily, in a case such as the present, the practical effect on the calculation of damages and the mutual rights and obligations of the parties between, on the one hand, an election to terminate and sue for damage, and, on the other hand, continuing the contract and suing for breach, may be nil. But, in cases where there are continuing obligations (and rights) under the contract, which rights are executory only, the differences will be substantial, because such executory rights and obligations would, on termination, be discharged: McDonald, supra, at 476-477.

24 One other issue of principle needs to be reiterated, in order to deal with the submissions in this consequential proceeding. The rationale for the discharge of rights and obligations is explained conceptually by Lord Diplock in Moschi v Lep Air Services Ltd; Lep Air Services Ltd v Rolloswin [1973] AC 331. Some of that explanation is trite, but significant and relevant. His Lordship said:

“The law of contract is part of the law of obligations. The English law of obligations is about their sources and the remedies which the court can grant to the obligee for a failure by the obligor to perform his obligation voluntarily. Obligations which are performed voluntarily require no intervention by a court of law. They do not give rise to any cause of action.

English law is thus concerned with contracts as a source of obligations. The basic principle which the law of contract seeks to enforce is that a person who makes a promise to another ought to keep his promise. This basic principle is subject to an historical exception that English law does not give the promisee a remedy for the failure by a promisor to perform his promise unless either the promise was made in a particular form, e.g., under seal, or the promisee in return promises to do something for the promisor which he would not otherwise be obliged to do, i.e., gives consideration for the promise. ...

Each promise that a promisor makes to a promisee by entering into a contract with him creates an obligation to perform it owed by the promisor as obligor to the promisee as obligee. If he does not do so voluntarily there are two kinds of remedies which the court can grant to the promisee. It can compel the obligor to pay to the obligee a sum of money to compensate him for the loss that he has sustained as a result of the obligee’s failure to perform his obligation. This is the remedy at common law in damages for breach of contract. But there are some kinds of obligation which the court is able to compel the obligor actually to perform. ... But, since a court of common law could make and enforce orders for payment of a sum of money, where the obligation was itself an obligation to pay a sum of money, even a court of common law could compel the obligor to perform it. Historically this was the only remedy which the court would grant at common law when an obligor failed to perform this kind of obligation.” (Moschi, supra, per Lord Diplock at 346-347.)

25 In these proceedings, Mr Checchia sues for damage for breach of contract. Notwithstanding what seems to be the submission of NRMA, those damages do not sound in equity, even though, at one level, the Court is requiring NRMA to perform its obligation under the contract. The performance of its obligation, being the payment of money, is not a specie of specific performance, but a remedy at common law for damages.

26 The foregoing is not intended to suggest that there is no discretion to award interest. Delay and delinquency by the plaintiff are relevant to the extent that they affect the appropriateness of compensating for the time during which the amount has been denied to him. The purposes of MACA are also relevant. Thus the avoidance of fraud is a relevant consideration.

27 Yet, while s 116 and s 117 of MACA disclose a statutory purpose to avoid and deter fraud and dishonesty, s 118 of MACA evidences a statutory purpose that compensation should be paid, even to those guilty of fraud, except to the extent that the fraud has resulted in a benefit. “Fraud” in the foregoing is used to include “fraudulent claims”, and false and/or misleading statements, conduct or omissions to which ss 116, 117 and 118 of MACA refer.

Interest

28 The Settlement Agreement, by Clause 5, requires payment of “interest at the rate of 10% per annum for every day after the 21st day from receipt by NRMA Insurance of the last of the documents specified” in the previous clause. There is a mistaken reference to Clause 5 in the body of Clause 5, but, clearly the clause referred to is Clause 4.

29 Clause 5 is inelegantly drafted. The Court will construe it to refer to the documents last received. Somewhat faintly, NRMA submits that Mr Checchia did not provide it with all the information necessary to calculate deductions and, therefore, interest does not run.

30 There are three obvious answers to that submission. Firstly, Clause 4 does not require Mr Checchia to provide anything; it establishes a timeframe for payment based upon the date of receipt of certain documents and information. There is no evidence, which evidence would be solely within the knowledge of NRMA, as to when the receipt occurred.

31 Secondly, the submission of NRMA was that all of the information it needed to calculate the deductions was not supplied. But Clause 4(c), to which that submission refers, requires the receipt of “information”, not documents.

32 The only documents to which Clause 4 refers are “the signed Settlement Agreement” and “the signed Health Insurance Commission Notice of Settlement”. There is no suggestion that they were not provided by Mr Checchia to NRMA. Further, there is no suggestion that the documents were not provided well before 21 days prior to the date from which interest is sought to be calculated.

33 Thirdly, as has been explained, Mr Checchia is not enforcing the obligation to pay interest under the contract, but has successfully sued for damages for breach of contract and the order for interest issues from the Court, not to enforce any contractual obligation, but to compensate for the period from which Mr Checchia ought to have been recompensed, but did not have use of the funds, to which he was, because of the breach, entitled.

34 Mr Checchia has been denied access to money to which he was entitled, under the contract, and, were Mr Checchia to have taken proceedings immediately, would have been awarded forthwith. He was, on the basis of the principal judgment, entitled to be paid. He was not paid. The grant of interest is part of the compensation for the breach; it is not, and cannot be used as, a punishment for Mr Checchia’s earlier misbehaviour: Ruby v Marsh [1975] 32; [1975] HCA 32; (1975) 132 CLR 642 at 644; Bennett v Jones (1977) 2 NSWLR 355; Faulkner v Bourke (1990) 19 NSWLR 574; Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 at [35]- [46].

The obligations of NRMA under MACA

35 NRMA, correctly and appropriately, submits, in answer to both the application for interest and the application for indemnity costs, that it has particular and peculiar obligations imposed upon it under MACA, which obligations require it, as an insurer, to take “all such steps as may be reasonable to deter and prevent the making of fraudulent claims” (s 116 of MACA).

36 It is unnecessary, and probably inappropriate, for the Court to discuss the distinction, if any, between “fraudulent claims” and “a statement knowing that it is false or misleading ... in an accident notification form ..., in a notice of a claim ..., or in the course of the assessment” etc (cf s 116 and s 117 of MACA).

37 For present purposes, the Court shall assume that the obligations, imposed on an insurer, to deter and to prevent the making of fraudulent claims (s 116 of MACA), is equivalent to deterring and preventing the making of a knowingly misleading or false statement in a claim (s 117 of MACA), and/or the doing or omitting to do something knowing it to be false or misleading (s 118 of MACA). On that assumption, there is, at a theoretical level, at least, some force in NRMA’s submission.

38 The obligation imposed, in those circumstances, by s 116 of MACA, is an arguably exceptional circumstance to which the Court must give consideration in assessing whether interest should be awarded and whether to award indemnity costs.

39 But the obligation is to deter and to prevent by all reasonable steps. When NRMA learned that Mr Checchia had provided wrong information, upon which it had based its decision to settle the claim for the sum agreed, it was required, assuming NRMA considered the claim fraudulent, to take all steps as were reasonable to ensure that Mr Checchia did not obtain an advantage from the fraud, and, by so doing, deter him and others from behaving likewise.

40 The difficulty, at a practical level, however, is great. On 22 February 2007, Mr Checchia offered to set aside the Settlement Agreement. At that point, if that offer were accepted, NRMA would have ensured that no benefit could be obtained from any fraud or misleading conduct. Its obligation would have been fulfilled, at least in large part.

41 Further, on 12 May 2008, Mr Checchia served an Offer of Compromise, pursuant to Part 20.26 of the Uniform Civil Procedure Rules 2005 (UCPR). The offer was for judgment for Mr Checchia in the sum of $1.0 million, plus interest under s 100 of the Civil Procedure Act 2005, plus costs as agreed or assessed, plus costs of the CARS Proceedings. The offer was open for 28 days.

42 At the hearing, in its submissions to the Court, NRMA submitted that the proper assessment of damage was less than the amount agreed upon in the Settlement Agreement. It referred to hypothetical negotiations with a “frank and truthful” claimant that, in the circumstances of Mr Checchia, might derive a settlement of $745,000. Otherwise, NRMA’s assessment of damage, it submitted, was between $300,000 and $600,000. The alleged right not to pay the settlement sum was said to arise under s 118 of MACA. That provision reduced the liability “to the extent of the financial benefit ... obtained” from the misleading or false conduct.

43 The Settlement Agreement was for a sum of $1,225,000 (“the Settlement Sum”), including $40,000 for costs of the CARS proceedings, i.e. the amount of the damages arising under the Settlement Agreement was $1,185,000 (see principal judgment, supra, at [163]). As a consequence, on its best case, NRMA was entitled not to pay $885,000 (the difference between $300,000 and $1,185,000). On the basis of its hypothetical negotiations, it was entitled not to pay the difference between $1,185,000 and $745,000, namely, $440,000. The refusal to pay any part of the Settlement Sum went beyond any right that NRMA possessed and beyond any reasonable step.

44 Further, if NRMA were concerned, genuinely, to ensure that no advantage was gained by Mr Checchia from his conduct that was false and misleading, then that purpose would have been fully satisfied by the acceptance of the offer to rescind the Settlement Agreement.

45 For the above reasons, the Court does not accept that, in the circumstances of this case, NRMA’s conduct should be treated, because of NRMA’s obligation under s 116 of MACA, in a way that would exempt it from the payment of proper compensation, including, where appropriate, interest and indemnity costs.

Conclusions on interest liability

46 The damages to which Mr Checchia was entitled because of his accident were, at least, the amount of the settlement (principal judgment at [163] and [166]). The Settlement Sum was due for payment on 10 November 2006. The breach was manifest from shortly thereafter.

47 Mr Checchia should be compensated for not having the money from the time he should have. But the Court is not enforcing the interest payment under the contract. The Court, in accordance with the statement of claim, is awarding interest on the damages.

48 As such, interest will be calculated in accordance with s 100 of the Civil Procedure Act and Schedule 5 of the UCPR. The rate in Schedule 5 relates directly only to interest under s 101 of the Civil Procedure Act (i.e. any interest on judgment, not interest prior to judgment), but in the absence of evidence or good reason for a departure from that rate, ought to apply to interest under s 100.

49 The interest order is permitted, because there is no contractual (or other) right to interest on the damages award. Interest under the Settlement Agreement is payable on the Settlement Sum at 10% per annum. The Settlement Sum has not been paid. The Court has ordered payment of damages for the non-payment of the Settlement Sum. Damages are a secondary obligation, arising from breach. The obligation to pay the Settlement Sum was a primary obligation, arising under the contract itself: McDonald, supra; Moschi, supra. These two are conceptually different and s 100(3)(b) is not invoked.

50 If the foregoing be incorrect, the interest would be payable under the contract at the higher rate of 10% per annum, not the 9% per annum prescribed for the relevant periods by Schedule 5.

Indemnity costs and the period for which interest is calculated

51 The award of costs, on the basis of its assessment, is governed by s 98 of the Civil Procedure Act. The discretion reposed in the Court must be exercised judicially and in accordance with the rules.

52 The award of costs is not a punishment; nor is it a reward. It is part of the process of compensation; in this case, compensation for the reasonable costs of enforcing rights.

53 As UCPR 42.1 makes clear, ordinarily, costs follow the event. There is no good reason to depart from that and Mr Checchia is entitled to his costs. Mr Checchia claims those costs should be awarded on an indemnity basis.

54 NRMA opposes such an order. It does so for the following reasons:

(a) These proceedings have been conducted or caused by a relevant delinquency on the part of Mr Checchia;

(b) The obligations of NRMA, under s 116 of MACA, obliged it not to settle fraudulent claims; and

(c) To the extent not otherwise covered, there are exceptional circumstances warranting a departure from the ordinary rule.

55 There was a “delinquency” in the claim for compensation arising from the car accident. Once NRMA became aware of that delinquency, it was entitled to investigate its effect. The obligation on NRMA under s 116 of MACA, and the provisions of s 118 of MACA, render such investigation reasonable and possibly mandatory.

56 But these proceedings did not commence until 24 October 2007, and NRMA was aware of the “delinquency” on 22 November 2006. It cannot be said that Mr Checchia’s delinquency caused these proceedings, because in the time between 22 November 2006 and 24 October 2007, there was more than sufficient opportunity to assess the “benefit” obtained.

57 Moreover, the offer to rescind (or set aside) the agreement was made on 22 February 2007, which step would have wholly obviated these proceedings and ensured that the amount awarded to Mr Checchia properly reflected the “true” state of affairs.

58 Further, on 12 May 2008, the Offer of Compromise was served. The result of the proceedings was more beneficial to Mr Checchia than the offer.

59 No party has submitted that the Offer of Compromise does not comply with the UCPR 20.26, although, given the unassessed nature of the claim for costs before CARS, to which the offer refers, there is some doubt about compliance. If the offer were not complying with UCPR 20.26, notwithstanding its terms, it should, in the circumstances, be treated as a Calderbank Offer, with the same consequences.

60 While the UCPR offers have greater effect under the Rules, even Offers of Compromise (and the cost consequences thereof) allow for flexibility because the Court may order otherwise: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [15]; Robb Evans, supra; Leichardt Municipal Council v Green [2004] NSWCA 341 at [19].

61 It would seem that the offer, insofar as it included a requirement to pay the costs in CARS proceedings, is an offer that complies with UCPR 20.26, as those costs, being for an event in the past, are reasonably ascertainable. The Settlement Sum included an amount of $40,000 for those costs, and, for present purposes, this would render the offer as one for an amount of $1,040,000, plus costs, plus interest. This is a true compromise of the $1,225,000 claim.

62 The inclusion of an express claim for costs of these proceedings (and interest) does no more than express rights otherwise conferred by the Civil Procedure Act and UCPR.

63 In any event, like the claim for costs of the CARS proceedings, it is an easily ascertainable amount and would not take the offer outside the provisions of UCPR 20.26. I reiterate that no party suggests the Offer of Compromise does not comply with UCPR 20.26.

64 Exceptional circumstances need not be shown to have the Court “order otherwise” than indemnity costs: Regency Media, supra. In this case, the offer of 12 May 2008 would ordinarily entitle Mr Checchia to indemnity costs on and from 13 May 2008. I see no good reason to depart from that ordinary rule.

65 If the offer were not in accordance with UCPR 20.26, then the offer would and/or should be treated as a Calderbank Offer. In the circumstances outlined, and for reasons already expressed, rejection of the offer was unreasonable and the same consequences, as to costs, ought to follow.

Stay

66 NRMA has indicated that it has appealed the principal judgment, and seeks to stay some, at least, of the judgment amount. There are matters, including the meaning and proper construction of the term “benefit”, which are of general import, have not been decided before, and which NRMA seeks to pursue. It is entitled so to do.

67 It ought not be put in the position of being required to make payment, in circumstances where there is a real risk that the amount could not be repaid.

68 Mr Checchia has received over $460,000 in Workers Compensation payments, which, if he received any payment from the judgment, would need to be repaid. NRMA submits that the Court should stay any amount over $600,000, from which the Workers Compensation reimbursement would be deducted.

69 I consider there should be a stay, but of a lesser amount. NRMA hypothesised that a “frank and truthful plaintiff” might have received $745,000. It is submitted that it would have been prepared to settle for between $300,000 and $600,000, but these lower figures reflect a degree of ex post facto, but understandable, annoyance with Mr Checchia (see principal judgment at [37]-[40]).

70 Bearing in mind the need for Mr Checchia to repay the Workers Compensation insurer, the hypothetical result that may have been achieved, on NRMA’s own submission ($745,000), were Mr Checchia to have been frank and truthful, and the requirement to pay interest on the amounts, it does not seem that an award of less than $800,000 could reasonably result from any appeal and the Court will stay the payment, under the judgment, of all and any amounts above that figure.

71 The Court makes orders with the following effect:

(i) The judgment issued on 29 September 2009, in this matter, is varied in accordance with the following orders:

(a) Order (ii) of 29 September 2009 be varied by inserting, after the words “the date of this judgment,” the following words:

“for the relevant period at the rate specified by Schedule 5 to the Uniform Civil Procedure Rules 2005,”

(b) Order (iii) of 29 September 2009 be deleted and, in lieu thereof, the following order be made:

“(iii) The defendant shall pay the costs of and incidental to these proceedings on the ordinary basis up to and including 12 May 2008, and thereafter, on an indemnity basis. Such costs to be as agreed or assessed.”

(ii) The judgment of 29 September 2009, as varied above, shall be stayed, except as to the payment of $800,000 by the defendant to the plaintiff.

(iii) Otherwise, the proceedings be dismissed.

72 The orders of the Court, as varied, are:

(i) Judgment for the plaintiff in the amount of $1,225,000;

(ii) Pursuant to s 100 of the Civil Procedure Act 2005, the defendant shall pay interest on the aforesaid amount, calculated on and from 10 November 2006, until the date of this judgment, for the relevant period at the rate specified by Schedule 5 to the Uniform Civil Procedure Rules 2005, and thereafter pursuant to s 101 of the Civil Procedure Act 2005;

(iii) The defendant shall pay the costs of and incidental to these proceedings on the ordinary basis up to and including 12 May 2008, and thereafter, on an indemnity basis. Such costs to be as agreed or assessed;

(iv) The judgment of 29 September 2009, as varied, shall be stayed, except as to the payment of $800,000 by the defendant to the plaintiff;

(v) Otherwise, the proceedings be dismissed.

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LAST UPDATED:
2 March 2010