Ford v Nominal Defendant [No 2]
[2023] QCA 181
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- Notable Unreported Decision
- Appeal Determined (QCA)
- Ford v Nominal Defendant [No 2][2023] QCA 181
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Ford v Nominal Defendant [No 2][2023] QCA 181
Ford v Nominal Defendant [No 2][2023] QCA 181
SUPREME COURT OF QUEENSLAND
CITATION: | Ford v Nominal Defendant [No 2] [2023] QCA 181 |
PARTIES: | TRENT ANTHONY FORD (appellant) v NOMINAL DEFENDANT (respondent) |
FILE NO/S: | Appeal No 11582 of 2022 SC No 317 of 2021 |
DIVISION: | Court of Appeal |
PROCEEDING: | General Civil Appeal – Further Order |
ORIGINATING COURT: | Supreme Court at Brisbane – [2022] QSC 179 (Martin SJA) |
DELIVERED ON: | 8 September 2023 |
DELIVERED AT: | Brisbane |
HEARING DATE: | Heard on the papers |
JUDGES: | Morrison JA and Applegarth J |
ORDER: | The costs ordered in paragraphs 4 and 5 of the orders made on 28 April 2023 each be assessed on the indemnity basis. |
CATCHWORDS: | PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – OFFER OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT, PURSUANT TO RULES – GENERALLY – where the appellant made an offer to settle for less than the agreed quantum several weeks before the trial – where the respondent rejected the offer – where the appellant obtained a judgment no less favourable than the offer – where the respondent submits that the offer did not represent a genuine offer of compromise – whether the respondent should pay the appellant’s costs of the proceeding at first instance on an indemnity basis pursuant to rule 360 of the Uniform Civil Procedure Rules 1999 (Qld) – whether the respondent has demonstrated that another order for costs is appropriate in the circumstances PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – INFORMAL OFFERS AND CALDERBANK LETTERS – GENERALLY – where the appellant made a Calderbank offer to settle the claim and appeal for $150,000 less than the agreed quantum – where the respondent rejected the offer – where the respondent contends that the offer did not foreshadow the appellant’s intention to seek indemnity costs – where the respondent contends that given its success at trial, the failure to accept the offer could not be unreasonable or imprudent – whether the respondent should pay the appellant’s costs of the appeal on an indemnity basis Motor Accident Insurance Act 1994 (Qld), s 51C Uniform Civil Procedure Rules 1999 (Qld), r 360 Bankier v HAP2 Pty Ltd (No 3) [2019] QSC 186, cited Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [No 2] [2023] QCA 140, cited Bulsey v State of Queensland [2016] QCA 158, cited Ford v Nominal Defendant [2023] QCA 83, cited Harbour Radio Pty Limited v Wagner [2020] QCA 83, cited J & D Rigging Pty Ltd v Agripower Australia Limited [2014] QCA 23, cited Jones v Millward [2005] 1 Qd R 498; [2005] QCA 76, cited New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100, cited Rider v Pix [2019] QCA 257, cited Shaw v Jarldorn (1999) 76 SASR 28; [1999] SASC 529, cited The Nominal Defendant v Cordin [2019] NSWCA 85, cited |
COUNSEL: | C C Heyworth-Smith KC, with M A Eade, for the appellant T Matthews KC for the respondent |
SOLICITORS: | Travis Schultz & Partners for the appellant Jensen McConaghy for the respondent |
- [1]MORRISON JA: I agree with Applegarth J.
- [2]APPLEGARTH J: The appellant’s appeal was allowed and, having succeeded on the issue of liability, he was awarded judgment against the respondent for the agreed quantum of his claim, together with interest to be assessed, if not agreed.[1] There is no issue that the respondent should pay the appellant’s costs of and incidental to proceeding BS317/21, and also pay the appellant’s costs of the appeal. The issue on this application is whether either or both of those costs orders should be on the indemnity basis because:
- the appellant made a formal offer before the trial for less than the agreed quantum, thereby engaging rule 360 of the Uniform Civil Procedure Rules 1999 (Qld), with the consequence that the Court “must order” the respondent to pay his costs calculated on the indemnity basis, unless the respondent “shows another order for costs is appropriate”;
- the appellant made a Calderbank offer to resolve the appeal on the basis of a substantial discount on the agreed quantum of his claim.
The costs of the proceeding at first instance
- [3]The parties’ mandatory final offers made on 11 November 2020 under the Motor Accident Insurance Act 1994 (Qld) were poles apart: the appellant offered to settle for $1 million plus costs, while the respondent offered to settle the claim for “$NIL”. Section 51C of the MAIA provides that the Court must have regard to the mandatory final offers, where relevant, in deciding costs. However, the mandatory final offers have little relevance, if any, to the application of rule 360 in the circumstance of this case.
- [4]On 14 July 2022, the parties resolved quantum in the sum of $600,000, including interest. On the same day the appellant made a formal offer under the rules to settle for $575,000 plus costs.
- [5]The matter proceeded to trial on the issue of liability. The issue of the driver’s negligence was conceded at the end of the evidence and the only issue was whether the appellant had undertaken “proper inquiry and search” in relation to the unidentified driver. The appellant succeeded, on appeal, on that issue.
- [6]To engage rule 360 there must be some element of compromise. Some compromise is required before an offer is properly described as an offer to settle.[2] If the plaintiff “obtains an order no less favourable than the offer” then the rule is engaged. This is so even if the judgment is only slightly greater than the offer. The extent of compromise may, however, be relevant to the defendant showing that an order other than for costs on the indemnity basis is appropriate in the circumstances.
- [7]In this case, rule 360 is engaged because the judgment the respondent was ordered to pay is more favourable to the appellant than his offer. The Court must order costs on the indemnity basis unless the respondent shows another order for costs is appropriate.
- [8]The costs results prescribed by rule 360 should be applied according to its terms; concepts such as reasonableness, which may be relevant to assessing the consequence of Calderbank offers, should not be imported into the application of the rule.[3]
- [9]The power to not make an indemnity costs order was considered by Doyle CJ in Shaw v Jarldorn.[4] There must be a good reason to order that the rule is not to have its usual effect.[5] Such a rule operates on the premise that if an offer is made by the plaintiff, the defendant will weigh up the advantages and disadvantages of not accepting the offer. In doing so, the defendant must take into account the ordinary risks of litigation.[6] Once a plaintiff makes an offer that attracts the operation of the rule, the defendant who does not accept that offer accepts the risk of the plaintiff bettering the offer, and obtaining an order for indemnity costs.[7]
- [10]Having regard to the purpose of the rule and the manner in which it operates, “it will only be in limited circumstances that a defendant will be able to demonstrate that it is proper for the Court to order that the plaintiff shall not recover costs as between solicitor and client”.[8] The most likely circumstances will be where there has been “a significant change in the manner in which the plaintiff’s case is presented at the trial, or the manner in which the evidence emerges at the trial, that it might fairly be said that the full dimensions of the plaintiff’s entitlement could not possibly have been foreseen before the hearing commenced”.[9]
- [11]In Bankier v HAP2 Pty Ltd (No 3),[10] Martin J discussed and followed the principles in Shaw v Jarldorn and other appellate authorities to the effect that the language of the rule conveys that “the prima facie position should only be departed from for proper reasons which, in general, only arise in an exceptional case”.[11]
- [12]The appellant’s formal offer to settle was made many weeks before the then listed trial. There is no suggestion of a change in the appellant’s case by way of amendment or otherwise between the making of the offer and the trial. There was no evidence to meet the allegation that the unidentified driver had been negligent.
- [13]The offer to settle for $575,000 was a small reduction on the agreed quantum of $600,000. The respondent submits that the formal offer “did not represent a genuine offer of compromise” in a case in which the issue at trial was “due inquiry and search”. The respondent also submits that its argument about the absence of “due inquiry and search” was “far from spurious” and that it had “respectable arguments to be tested at trial”. However, the fact that a party has respectable arguments and the possibility of winning on those arguments is not sufficient to displace the prima facie position under rule 360, and to demonstrate that “another order for costs is appropriate in the circumstances”. In New South Wales Insurance Ministerial Corporation v Reeve,[12] Gleeson CJ, with whom Clarke and Cripps JJA agreed, said:
“It is impossible exhaustively to state the circumstances in which a discretion to contrary effect might be exercised, and it would be imprudent to attempt any such exhaustive statement. However, I do not read Maitland Hospital v Fisher [No 2] as authority for the proposition that a discretion should be exercised against making an order for indemnity costs in any case in which it was reasonable for the defendant to take the view that it had a good chance of successfully defending the action. The prima facie consequence, which will apply in the ordinary case, is that in the circumstances postulated by the rule an order for indemnity costs will be made.”
- [14]Counsel for the respondent goes so far as to submit that the offer having been made “within two hours of the parties resolving the quantum of the claim”, it was a “purposeful and somewhat disingenuous attempt by the appellant to engage the effect of UCPR r 360(1)”. This is a baffling and unmeritorious submission. The fact that the offer was made shortly after the parties resolved the quantum of the claim is neither here nor there. It was made at a time when the respondent was in a position to assess the appellant’s prospects of winning and its risks of losing on the issue of liability. The offer clearly was a “purposeful” attempt to engage rule 360. After all, it was a formal offer that complied with that rule and the appellant, understandably, wished to gain the benefit that rule 360 offered to him, and not have to use compensation awarded for his injuries to bridge the difference between standard costs and indemnity costs.
- [15]The appellant took the chance that the extent of the compromise offered in terms of the difference between the amount offered and the agreed claim would not be sufficiently attractive to the respondent to resolve the matter. There was, however, the attraction to the respondent of not having to pay its own costs of preparing for and conducting a trial, and to not be exposed to having to pay the appellant’s costs of trial preparation and trial if the offer was accepted.
- [16]In not accepting the offer the respondent must be taken to have weighed up the advantages and disadvantages of not accepting it. One disadvantage was that the appellant would engage rule 360 if he succeeded on liability. The respondent took that risk. I do not accept the respondent’s submission that in an “all or nothing case” the offer that was made was not a genuine offer to compromise the claim.
- [17]The respondent’s submissions suggest, without explaining why, in an “all or nothing” case in which quantum is not in dispute, a plaintiff should offer a substantial degree of compromise in order to gain the costs protection that rule 360 provides. The purpose of the rule is to encourage settlements and avoid the unnecessary generation of the costs of going to trial. The rule offers to plaintiffs the opportunity to not be out of pocket in respect of the difference between their costs assessed on an indemnity basis and costs assessed on the standard basis.
- [18]It would be an odd thing, and contrary to the purpose of the rule, if a plaintiff with a strong or overwhelming claim had to offer to give away a substantial proportion of the agreed or expected quantum of that claim in order to obtain the costs protection of the rule. In such a circumstance, the plaintiff would avoid being out of pocket on costs, but at the price of foregoing a substantial proportion of the compensation to which they were entitled.
- [19]Rule 360 does not require a substantial degree of compromise in order for it to be invoked. The rule is invoked if the outcome is more favourable than the offer.
- [20]The purpose of the rule would be undermined if the view were taken that the absence of a substantial measure of compromise necessarily meant that another order was appropriate.
- [21]The purpose of the rule in providing an incentive to settle claims requires some compromise by a plaintiff in an “all or nothing” case. Neither the rule nor the authorities prescribes the degree of compromise required to engage the rule’s operation or states that in every case a substantial compromise is required to avoid another order than that contained in the rule being appropriate in the circumstances.
- [22]The rules do not leave a defendant who receives an offer from a plaintiff that provides only a small amount of compromise without protection. Imagine a case in which only liability is in issue and, objectively speaking, the plaintiff has an 80 per cent chance of success. The plaintiff makes an offer to settle for 95 per cent of the agreed quantum. The defendant must appreciate that a failure to accept the offer exposes it to paying its own costs of going to trial and all of the plaintiff’s costs on an indemnity basis. If it takes this risk but thinks that the plaintiff’s offer does not provide a sufficient discount for the risk of losing the case, then the defendant can offer to settle on the basis of paying 80 per cent, 85 per cent or 90 per cent of the claim plus costs. A rational plaintiff would be well-advised to accept that offer. The making of such an offer and the plaintiff’s refusal to accept it might make another order appropriate in some circumstances.
- [23]Here, the respondent seemingly did not make a formal offer to settle in response to the appellant’s formal offer to settle, let alone one in an amount that reflected what must be taken, in the light of this Court’s decision, to have been the appellant’s good prospects of succeeding on liability in an “all or nothing” claim. Having failed to do so, it has a poor claim on the exercise of the discretion in rule 360 to deprive a successful claimant of the costs protection that the rule provides.
- [24]The rule should not be interpreted to require a plaintiff with a strong claim for a proven or agreed quantum to forego a substantial part of that claim and end up being undercompensated as the price that must be paid to gain the rule’s protection on costs.
- [25]Rule 360 does not use the expression “exceptional circumstances”. However, the prima facie position that costs are ordered on an indemnity basis should only be departed from for proper reasons. There only will be limited circumstances in which a defendant will be able to demonstrate that it is appropriate for the Court to depart from the position that costs be on the indemnity basis.
- [26]The respondent knew of the risks it faced in not accepting the offer. It should not be relieved of those risks being visited upon it in the circumstances. It has not shown that it is appropriate to require the appellant to direct a substantial part of the compensation to which he is entitled towards bridging the gap between costs assessed on a standard basis and costs assessed on an indemnity basis.
- [27]Another order for costs is not appropriate in the circumstances. Therefore, in my view, the order for costs made by paragraph 4 of the orders made on 28 April 2023 should be assessed on the indemnity basis.
The costs of the appeal
- [28]On 21 December 2022, the appellant made a Calderbank offer to settle both his claim and his appeal against the respondent for the sum of $450,000 plus costs. The Calderbank offer:
- was made without prejudice save as to costs;
- was expressed to be pursuant to the principles in Calderbank;
- was open for acceptance for a period of 14 days; and
- indicated the appellant’s intention to rely upon the offer with respect to both the costs of the claim and of the appeal.
- [29]The Calderbank offer was made a month after the respondent’s submissions were filed. It involved the appellant accepting $150,000 less than the agreed sum awarded and foregoing interest from 11 March 2019 to 21 December 2022.
- [30]The refusal to accept a Calderbank offer does not, of itself, warrant an order for indemnity costs.[13] The issue is whether refusal of the offer was unreasonable or imprudent.[14] A number of non-exhaustive factors have been identified in the authorities that may be relevant in determining whether a party’s rejection of an offer to settle was unreasonable. They are:[15]
- the stage of the proceeding at the time of the offer;
- the time allowed to consider the offer;
- the extent of the compromise offered;
- the offeree’s prospects of success (at the date of the offer);
- the clarity of the terms of the offer; and
- whether the offer foreshadowed an application for indemnity costs in the event of its rejection.
- [31]The respondent advances two submissions in opposing an exercise of discretion to order the appellant’s costs of the appeal be assessed on the indemnity basis. The first is that the appellant’s Calderbank offer is said to have not foreshadowed that indemnity costs would be sought against the respondent. The 21 December 2022 offer was headed “Without Prejudice Save As To Costs” and stated:
“It is our client’s intention to rely on the offer with respect to costs of both the claim and the Appeal.”
- [32]The appellant submits in reply that this statement can only have been intended to refer to indemnity costs. Their submission should be accepted in circumstances in which there is no suggestion that the appellant’s costs of the claim and of the appeal would not follow the event.
- [33]The respondent’s solicitors do not suggest that they read the statement and did not understand it as foreshadowing a submission for indemnity costs.
- [34]A failure to alert the offeree to an intention to claim indemnity costs can be a relevant factor. However, as this Court observed in Bulsey v State of Queensland,[16] it is not determinative. In the circumstances, I would not regard the absence of an express reference to indemnity costs as a sufficient reason to refuse the orders sought if other relevant factors favour it.
- [35]The respondent’s second argument in opposing an order for indemnity costs is that “given the respondent had succeeded in relation to liability in a two day trial in August 2022, the failure to accept the 21 December 2022 offer could not have been said to have been unreasonable, imprudent or capricious on the part of the respondent”. This submission is unpersuasive. For the reason given on the appeal, the respondent was not entitled to succeed on liability at the trial. The fact that it did so does little more than demonstrate that it had some prospects of succeeding at trial and, it might be added, some prospects of resisting the appellant’s appeal. However, the existence of arguments in resisting a claim is not sufficient. Having regard to the appellant’s prospects of succeeding on appeal, as developed in the appellant’s substantial submissions on the appeal, the Calderbank offer avoided the risks that flowed from a successful appeal. The offer provided a substantial amount of compromise in terms of the appellant’s claim and the containment of costs associated with the appeal.
- [36]The respondent must have appreciated that the appeal had reasonable prospects of success and that, in the event of success, it would be ordered to pay the appellant’s costs of the proceeding and his costs of the appeal, and that the agreed quantum of the appellant’s claim would engage rule 360 in relation to the trial proceedings. In the circumstances, it was unreasonable for the respondent to not accept the Calderbank offer of $450,000 plus costs.
- [37]Therefore, I would order that the costs ordered in paragraph 5 of the orders made on 28 April 2023, be assessed on the indemnity basis.
Conclusion
- [38]I would order that the costs ordered in paragraphs 4 and 5 of the orders made on 28 April 2023 each be assessed on the indemnity basis.
Footnotes
[1] Ford v Nominal Defendant [2023] QCA 83.
[2] Jones v Millward [2005] 1 Qd R 498 at 500; [2005] QCA 76.
[3] Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [No 2] [2023] QCA 140 at [29]; The Nominal Defendant v Cordin [2019] NSWCA 85 at [163].
[4] (1999) 76 SASR 28 at [4]-[9].
[5] At [4].
[6] At [6].
[7] At [9].
[8] At [9].
[9] At [36] per Perry J (with whom Doyle CJ and Mullighan J agreed).
[10] [2019] QSC 186.
[11] At [12].
[12] (1993) 42 NSWLR 100 at 102.
[13] Harbour Radio Pty Limited v Wagner [2020] QCA 83 at [3].
[14] J & D Rigging Pty Ltd v Agripower Australia Limited [2014] QCA 23 at [5]-[6].
[15] Ibid; Rider v Pix [2019] QCA 257 at [9].
[16] [2016] QCA 158 at [54].