Avoiding surplus payment – interest – UCPR 360 costs

GEJ & MA Geldard Pty Ltd v Mobbs & Ors (No 3) [2011] QSC 297

I refer to my earlier postings about the trial and contribution issues.

The matter returned to argue whether the judgment amount should be apportioned for the “settling defendants” payment, interest and indemnity costs under UCPR 360.

Ann Lyons J:

Apportionment:

[24] However in the current case it would appear that a total of $300,000 has in fact already been paid with $200,000 specifically allocated to costs. In my view the amounts paid have to be taken into account otherwise there would be a surplus. The plaintiff cannot recover more than their loss and the Terms of Settlement, which are now in evidence, indicate that the plaintiff’s current loss has been reduced by $100,000 because of the Terms of the Settlement. Whilst there is no evidence before me that the Terms of Settlement have been satisfied the plaintiffs have not argued that they have not been paid in accordance with that agreement. It is clear however that as the NSW Court of Appeal held in CSR Limited & Anor v Maree Anne D’Arcy[5] “the rule against double compensation prevents receipt of payment which, in aggregate, exceeds the amount owed by several defendants”. I would therefore only award the total judgment amount of $461,237.23 if the plaintiff satisfies the court that the amount of $100,000 payable pursuant to the Terms of Settlement has not in fact been received.

[25] In this case the Court’s jurisdiction has been invoked and the matter has proceeded to trial and now to judgment. I consider that an award of compensation to a plaintiff in excess of their actual loss or damage by way of judgment clearly goes against the common law and the philosophy behind the CLA and s 31(1)(b) and s 32B of the CLA in particular which clearly indicate that a plaintiff should not receive compensation for loss or damage that is greater than the loss or damage actually suffered by the plaintiff.

Interest

[32] The award of interest pursuant to s 47 is compensatory in character as articulated by Margaret Wilson J in Greig & Anor v Commissioner of Taxation & Ors (No 2). [8] The section was also discussed by McPherson JA in Interchase Corporation Limited v ACN 010 087 573 Pty Ltd & Ors[9] where his Honour noted:

“The section confers a discretion which, it is settled, is to be exercised judicially with a view to compensating the successful plaintiff for the injury or loss sustained: see Haines v Bendall. The purpose or function of an award of interest under the section is restitutionary. It is not to punish the defendant but to compensate the plaintiff for being kept out of the money represented by the judgment sum in the period between accrual of the cause of action and judgment: Batchelor v Burke; Grincelis v House. In a perfect world, a defendant who injured a plaintiff would immediately recognise the wrong done and pay the amount of compensation required to make good the loss. For reasons that are self-evident, that never happens in practice, and the justification for awarding interest is, as s 47 recognises, to compensate for the delay in payment between the time when the cause of action arises and the date of judgment: Thompson v Faraonio.” (footnotes omitted)

[36] To argue for interest from the date the cause of action accrued the plaintiff relies on Sullavan & Anor v Teare[10] where the Court of Appeal applied the High Court case of Commonwealth of Australia v Cornwell.[11] In that case it was held:

“However, to show the existence of a completely constituted cause of action in negligence, a plaintiff must be able to show duty, breach, and damage caused by the breach; accordingly, in the ordinary case, it is at the time when that damage is sustained that the cause of action ‘first accrues’ for the purposes of a provision such as s 11 of the Limitation Act [1985 (ACT)].

[37] It seems uncontroversial that a cause of action in negligence accrues not at the time the damage is first observed but at the time the damage was sustained. In my view it is difficult to ascertain the precise point in time that damage to the plaintiff’s crops occurred. I have determined that a duty existed and a breach occurred on 15 December 2005 but the damage may have occurred at a point after 15 December 2005. The evidence also indicates that due to the damage, the picking of cotton affected by the spraying was delayed.

[38] Given the wide discretion conferred by s 47 of the Supreme Court Act I consider that it is reasonable that interest accrue from the date from which the Geldards suffered as a result of lost payments from the season of damaged crops. This is in accordance with the principles underlying the award of interest as espoused by McPherson JA in Interchase.

Indemnity Costs

[51] The defendants’ essential argument is that the crucial expert report, namely Mr Gordon’s amended report, “upon which liability ultimately rested” was not tendered until the third day of trial and therefore their rejection of the plaintiff’s offer was not unreasonable in the circumstances.

[52] Ultimately I accept the defendants’ arguments in this regard. I consider that Gordon’s Report was a report of great significance. This was a long and complex trial involving almost 10 days of evidence. This expert report was delivered late, essentially on the morning of trial. It was a complex report involving computer modelling. It was incorrect in its calculations, and in fact patently so, by an error of ten. The final report was delivered on day three of the trial. That report was significantly different to the original report. In the end a great deal of reliance was placed on that report in relation to whether the chemicals could have travelled the required distance.

[53] I consider therefore that at the time the offer to settle was delivered the sixth and eighth defendants did not have the benefit of this significant document and could not therefore appropriately assess the offer to settle in light of the contents of that Report. As Ashley J held in Simonovski v Bendigo Bank Ltd (No 2):[15]

“In my opinion it is important that, when an offer is made, and during the period when it remains open for consideration, the offeree then has in its possession all the material from the opposing party to which it is entitled, whether by operation of the Rules or by order of the Court. An offeree should not be obliged to consider an offer whilst ignorant of required detail of the offeror’s case.”

[54] Significantly, in Castro v Hillery[16] Williams JA held:

“[72] The basic principle in my view is that the recipient of the Offer to Settle must have an informed opportunity to assess the chances of either side doing better than the offer. Further that issue must be decided on material disclosed in the proceedings; it is the claim as made in the proceedings which is under consideration.

[73] A similar issue was considered by the New South Wales Court of Appeal in Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & COI Pty Ltd [2001] NSWCA 461; (2001) 53 NSWLR 626. Stein JA (with whom Davies A-JA agreed) observed at 642 that the learned judge at first instance did not err in concluding that the offeree did not have an informed opportunity to assess its chances because, in that case, the cross-claim was brought at a later point of time. He said: “Surely what must be relevant is the circumstances which exist at the time the offer is made?” Stein JA then quoted with approval a passage from a judgment of Mahoney A-P in an unreported case Fowdh v Fowdh (4 November 1993); there it was said: ‘It is one thing for a plaintiff to present her evidence, make an offer of compromise, and to succeed at trial on that evidence. In such a case, indemnity costs may be warranted. It is another thing for the plaintiff to present a case and make an offer of settlement, and then to succeed at the trial upon a relevantly different case. A plaintiff who has done that may not readily receive indemnity costs. I do not mean by this that minor differences between the case at offer and the case at trial will be of significance or that, if the difference be significant, a discretionary judgment for indemnity costs may not be given. But where the difference between the position at offer and the position at trial be as the Master assessed it to be, a decision to refuse indemnity costs may readily be understood”.

[75] Those English cases to my mind reinforce the proposition that a procedure such as an Offer to Settle must be evaluated in the light of circumstances as they exist at the time the offer is made. If a plaintiff enlarges his case after an Offer to Settle is made and rejected then there will be good reason for refusing the plaintiff indemnity costs notwithstanding that the judgment is better than the offer. As Mahoney A-P pointed out a minor difference in the claim will not ordinarily have that consequence. But where the difference is significant, where the risk to the defendant is significantly altered, there would have to be careful analysis before a proper exercise of discretion could result in indemnity costs being ordered. Cases such as Hiscox v Woods & GIO General Limited [2002] QSC 64 (Moynihan SJA) demonstrate that in particular circumstances an award of indemnity costs can be justified even though further particulars of the claim have emerged after the offer was made.

[76] In Campbell v Jones & Anor [2002] QCA 332 (judgment therein was delivered after argument was heard in this case) Fryberg and Mullins JJ ordered that costs be recovered on the standard basis though the plaintiff did better than her offer to settle. Again that was a case where the statement of loss and damage at the time the offer to settle was made did not disclose significant material which affected the ultimate assessment of damages. The reasoning of their Honours is in accord with the reasoning herein.”

[55] I consider that the defendants have satisfied the onus on them to satisfy the Court that another order is appropriate.

Brisbane Barrister – David Cormack

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