Costs – PIPA – Lawes & Michael’s principles

Gibbings-Johns v Corliss (No. 2) [2010] QSC 78

 

Further to my earlier posting regarding this case, his Honour Justice McMeekin considered whether costs should be ordered on a standard or indemnity basis, having regard to the mandatory offer required by s 39 of the Personal Injuries Proceedings Act 2002 (“the Act”) and subsection 40(8) of the Act.

The plaintiff made an offer of $150,000.00, which was not bettered at trial by the defendant, with an award of damages for $196,152.00.

His Honour adopted the principles expressed by his Honour Byrne in Motor Accident Insurance Act 1994 (Qld) in Lawes v Nominal Defendant [2007] QSC 092, namely:

[8] I respectfully adopt Byrne J’s characterisation of those provisions and his description of their effect. The principles that can be derived from Lawes include:

(a) The mandatory final offer made pursuant to the provisions of the Act operates much as a Calderbank offer that is bettered at trial – the mere fact that the party making the offer obtains a judgment more favourable than the terms offered does not of itself inevitably demonstrate such special circumstances as would justify departure from the ordinary basis of a cost assessment;

(b) The fact that such an offer has been made is a significant but not decisive consideration in the exercise of discretion to award costs on the indemnity basis;

(c) A relevant matter to consider is whether it appears that the party sought to be made liable for costs on the indemnity basis has “imprudently or unreasonably” failed to accept the offer of compromise;

(d) The onus lies on the party seeking indemnity costs to demonstrate the imprudence or unreasonableness of the other party’s conduct and that judgment has to be made on the basis of the relevant strengths and weaknesses of the cases that ought to have been apparent to the parties at the time when the offer was made.

In applying these principles, his Honour commented:

[11] In my view there are two relevant points to make. First, where the decision as to the final assessment turned very much upon what can only be considered to be very subjective impressions gained by myself both of the plaintiff and as to the impact of the injury on the plaintiff’s earning capacity I find it difficult to describe a defendant’s underassessment of those imponderables as necessarily “unreasonable or imprudent”.

[12] Second, the plaintiff overstated his case, both at trial and, apparently, at the conference following which the offer was made. Mr Crow informs me in his submission that at conference the plaintiff assessed his damages at some $150,000 approximately above my assessment. The significance of that overstatement is that the defendant was both justified in rejecting the plaintiff’s methodology of assessment and was left with no reliable measure himself of assessing damages. This could only be done by an assessment of the personal qualities of the plaintiff. Where the plaintiff’s measure was justifiably rejected as overstated the defendant can do little but hazard a guess.

[14] Mr Crow contends that there are no countervailing circumstances that I need bring into account in making this decision. I disagree. Mr Grant-Taylor of Senior Counsel who appears for the defendant points out that the damages fall well within the damages applicable in the District Court. Thus the defendant was required to incur his own legal costs in defending the claim on the Supreme Court scale, not the appropriate District Court scale. This is in effect a penalty on the defendant which he should not be required to bear. This was considered to be a relevant factor by Byrne J in Michael v The Nominal Defendant (Queensland) [1995] QSC 001 (88/2962) at 9-10. Byrne J there said, so far as is relevant to this point, as follows: “Plainly, the claim should have been pursued in a District Court. Prosecuting it in this Court has had at least two undesirable consequences. First, it has entitled the defendant’s lawyers to charge their client on the higher scale of costs which relates to proceedings in this court. This has imposed needless additional expense on the defendant. Secondly, other litigants whose cases can only be resolved in this court have been delayed. If the plaintiff receives his costs on the appropriate scale for actions in the District Courts that might encourage the prosecution in this Court of cases which should be litigated elsewhere. Costs are discretionary. I consider that there ought to be a sanction in this case, which is not one in which the defendant could have been expected to seek remitter.”

 

Conclusion

[16] Thus to summarise the competing considerations:

(a) The plaintiff made an offer prior to litigation being commenced which, if accepted, would have avoided the costs of litigation and which was some $45,000 less than the judgement eventually received;

(b) The way in which the plaintiff framed his case both at that conference (according to the plaintiff’s submission), in the statement of claim, and at trial overstated significantly the impact on his earning capacity;

(c) The plaintiff having overstated his case, the defendant had no reliable measure on which to gauge the likely assessment;

(d) The plaintiff adopted that basis for bringing the proceedings in the Supreme Court instead of the District Court thereby causing a penalty to the defendant.

[17] Consistently with the approach taken by Byrne J in Lawes and in the authorities to which he there refers the issue is whether the defendant was “unreasonable or imprudent” in not accepting the plaintiff’s mandatory final offer. It seems to me that in all the circumstances it would be inappropriate to characterise the defendant’s refusal of the offer as improper or unreasonable.

[18] The remaining considerations are against an exercise of the discretion in the plaintiff’s favour.

[19] I order that the defendant pay the plaintiffs costs to be assessed on the standard basis on the scale appropriate for proceedings in the District Court.

Brisbane Barrister –David Cormack

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