Kasai v Logan[2004] QDC 132

DISTRICT COURT OF QUEENSLAND

1. [1]
   On 19 August 2002 a collision occurred between the plaintiff’s vehicle and the defendant’s vehicle in which the plaintiff’s vehicle was damaged.  The collision was the fault of the defendant.  The plaintiff’s vehicle required repairs, and the plaintiff incurred some taxi costs, and the costs of a hire car, to prevent interference with his work as a photographer.  The plaintiff made a claim on the defendant’s insurer, initially with the assistance of recovery agents.  The claim was not settled, solicitors were engaged and on 22 January 2003 they filed a claim in the Southport Registry of the Magistrates Court seeking damages in the sum of $7,396.93.  Although the action was defended only in relation to quantum, it did not settle until the day of trial, and then not completely.  The parties settled everything except costs, which were left to the magistrate to decide.

2. [2]
   This was not entirely straightforward, because there had been some efforts on the part of the defendant’s insurer to settle the claim, and there was some dispute as to the effect on costs of what had occurred. The defendant claimed that the final settlement figure was not as favourable as what was offered to the plaintiff before the action commenced, and was also not more favourable to the plaintiff than an offer of settlement made under the UCPR after the action commenced. The magistrate declined to mitigate costs on the former ground, but upheld the latter contention, and gave judgment to the plaintiff for the agreed amount of $5,600 plus standard costs up to the date of offer, less standard costs to the defendant thereafter. By a notice of appeal filed 17 November 2003 the plaintiff appealed against that order. On the hearing of the appeal, the defendant’s counsel contended that the order made was if anything too generous to the plaintiff.

Pre-litigation offers

3. [3]
   The parties put before the magistrate correspondence which revealed what had occurred prior to the commencement of the action.^[1]  On 2 September 2002 the plaintiff’s recovery agent wrote to the defendant, in what I suspect was not the first letter, advising that the plaintiff’s repairs had been assessed at $6,548.95, and enclosing documents in support of that.  They sought payment of $6,900.95, which included the “assessment fee and professional costs”.  On 13 September a further letter was sent to the defendant threatening prompt commencement of legal action unless payment of $7,596.93 was made.  On 24 September 2002 the defendant’s insurer sent a form requesting a copy of an invoice from the repairers. 

4. [4]
   The recovery agent wrote to the insurer on 9 October 2002 enclosing material in relation to the claim for expense to avoid loss of income, for taxi costs of $20 and rental car costs, and an amount for fuel.  On 22 October 2002 the insurer offered to pay $715.98, being the hire of the vehicle plus the taxi fares, and forwarded a form of discharge.  That referred to “hire vehicle” as the type of loss, but on its face it discharged the defendant from all actions suits claims and demands in respect of loss or damage to property resulting from the accident.  That document was not signed and returned.

5. [5]
   On 29 October 2002 the insurer wrote again to the recovery agents stating that they had completed their investigations, and that “without admitting liability … we are prepared to settle this matter and accordingly we enclose our cheque in the sum of $4,979.62.  If this settlement is unacceptable your return payment for the full amount is required within seven working days from the date of our cheque.  Should your payment not be received within the prescribed time frame, settlement is deemed final.”  This imaginative approach to the law of contract did not provoke any response prior to the commencement of proceedings.  The cheque was neither banked nor returned.^[2]

6. [6]
   If the offer of 29 October 2002 was intended to be a separate offer from that of 22 October 2002, the total amount being offered was $5,695.60.  There was however nothing in the letter of 29 October 2002 to indicate that the offer in that letter was intended to be cumulative upon the offer previously made.  The magistrate found that the plaintiff was entitled to treat that letter as an offer which superseded the earlier offer, in the absence of particularisation of what the offer represented.  That was plainly a reasonable conclusion for the magistrate to arrive at.  Indeed, I regard it as the correct interpretation of the letter of 29 October 2002. 

7. [7]
   Counsel for the defendant submitted that the plaintiff ought to have sought clarification of the position from the defendant’s insurer. It might well have been helpful if that had occurred, but the need for clarification arose only because of the failure of the defendant’s insurer to be clear enough in the first place, and it can scarcely complain if as a result of that failure the making of those two offers before proceedings commenced was, properly, not treated by the magistrate as a ground for depriving the plaintiff of the costs of the action.

The payment

8. [8]
   The next step that occurred of relevance is that on 17 February 2003 the solicitors for the defendant wrote to the solicitors for the plaintiff serving the notice of intention to defend and defence and enclosing a request for further and better particulars, and noting that the cheque forwarded in October 2002 had been neither returned nor banked.  The letter continued:  “As our client agrees that this amount is fair and reasonable, we are instructed to inform you that our client agrees to this cheque being banked and the proceeds being used towards payment of your client’s loss.  Of course, no settlement of the action will arise as previously foreshadowed in the letter of 29 October 2002 and this offer is made without any conditions.  The only issue remaining then will be whether or client is liable for the further amount claimed in the statement of claim.  Should your client be unable to locate the previous cheque for some reason, we ask that you inform us of this and upon receiving your agreement that the previous cheque will not be banked if and when it is located, our client will forward another to you.”

9. [9]
   On 19 February 2003 the plaintiff’s solicitors replied advising that the plaintiff had misplaced the cheque, and inviting the defendant’s solicitors to forward another cheque payable to the trust account in that amount which cheque “will not settle the action and is not in full and final satisfaction of the debt.”  On 4 March 2003 the defendant’s solicitors forwarded a fresh cheque in the sum of $4,979.62 “towards payment of damages in respect of your client’s claim.  This cheque is sent to you unconditionally.  We note that proceedings have been instituted.  If at the trial of this action judgment is awarded against our client for any amount over and above this amount we will forward the further moneys to you after judgment has been delivered.”

10. [10]
    Two things follow from the terms of that letter. The cheque was being forwarded in respect of the claim so that it represented part payment of the amount of the liability to be determined by the court, and the defendant’s solicitor contemplated that the amount in respect of which judgment would be awarded would not be reduced because of this payment. The cheque I was told was banked. Consistently with that approach, both parties proceeded on the basis that so far as the action was concerned the payment had not been made.

11. [11]
    On 7 May 2003 the plaintiff’s solicitors forwarded to the defendant’s solicitors an offer to settle for a total of $7,933.35, which included the $1,387.10 by way of costs to that date.  In the offer the plaintiff acknowledged the payment that had been made on 11 March 2003, but the formal offer assumed that the action was proceeding without deduction of that payment.

Offer to settle

12. [12]
    On 13 May 2003 the defendant’s solicitors rejected that offer but offered to settle for $5,405 in respect of “your client’s claim”, in context the cost of repair to the vehicle, plus $715 in respect of “loss of income and taxi”, on the basis that “each party bear their own costs.”  The offer was said to be made pursuant to Chapter 9 Part 5 of the UCPR.  It was not accepted.  The matter proceeded to trial, but on the day of hearing was settled for $5,600, with the question of both parties’ costs to be resolved by the magistrate.  It was accepted before me that the agreement to settle the action, which was not reduced to writing, was simply on the basis that the defendant would consent to judgment in that amount together with whatever costs the court awarded.

13. [13]
    At one point during the argument, counsel for the respondent submitted that it was open to the plaintiff, having received the offer of 13 May 2003, to accept it and require payment of $6,120, without giving credit for the payment which had already been made.  I suspect that that submission would not have been made with the same degree of enthusiasm had the plaintiff actually attempted to take such a course.  In the light of the history as I have recounted it, the parties were plainly treating the part payment as a payment in part satisfaction of the ultimate judgment, rather than a payment in part satisfaction of the plaintiff’s claim.  The defendant had admitted liability on the face of the defence, and plainly both parties contemplated that the matter would proceed to a judgment without reference to the payment that had already been made, but that the payment amounted to part satisfaction in advance of the judgment that would ultimately be given.  That is a somewhat unconventional way of dealing with a payment of this nature, but I see no reason why it cannot be characterised that way, which is consistent with the way in which both parties were apparently content to treat it.

The ruling

14. [14]
    The magistrate treated the matter of costs as falling within r 361, and was not persuaded that another order for costs was appropriate in the circumstances.  This was on the basis that the amount agreed to be paid under the settlement, $5,600, was less than the total of the two sums offered on 13 May 2003, so that the judgment to which the defendant was consenting in respect of the claim was not more favourable to the plaintiff than the offer to settle.  He concluded that there were no circumstances justifying a conclusion that another order for costs was appropriate.

15. [15]
    The appellant submitted that the conclusion of the magistrate, that the judgment was not more favourable to the plaintiff than the offer to settle, was wrong, and that therefore the approach of the magistrate miscarried. The magistrate should have concluded that r 361 did not apply, and ought to have exercised the discretion as to costs without regard to it.  Indeed, counsel for the plaintiff submitted that the offer to settle was not a proper offer for the purposes of the rule, or alternatively regard should not be had to it, because it did not make provision for costs.^[3]  In the alternative, it should be interpreted as an offer to settle for an amount arrived at by deducting from the total of the sums offered the scale costs incurred to that time, plus costs in that amount.

Analysis

16. [16]
    Whether the offer that was made was more favourable to the plaintiff than the judgment the plaintiff obtained depends entirely on how one deals with the question of costs in respect of the judgment. If one disregards costs of both for the purposes of comparison, the judgment was not more favourable. The result of the costs order made by the magistrate pursuant to r 361(2) plainly put the plaintiff in a less favourable position than he would have been if he had accepted the offer, but to some extent that result is self-justifying.  If the plaintiff had recovered the amount of the agreed judgment plus costs, or even just plus costs up to the date of the offer, the judgment for the plaintiff would have been more favourable than was the offer.  So in a sense a decision not to apply r 361 would also have been self-justifying.

17. [17]
    It may be of some significance to note a difference in practice in relation to costs between the Magistrates Court and the other courts to which the UCPR applies. In the Magistrates Court when a magistrate gives judgment costs are assessed by the magistrate, usually forthwith, so that the formal judgment is for a figure which incorporates both the amount allowed in respect of the claim, any amount allowed in respect of interest, and the amount assessed in respect of costs. On the other hand in the Supreme and District Courts costs are never assessed by the judge when giving judgment, so the formal judgment is invariably for the payment of a particular sum, together with an order as to the disposition of costs, with any relevant assessment to be undertaken later by a deputy registrar in accordance with the rules. I do not consider that the operation of r 361 (or for that matter r 360) should be different in the Magistrates Court because of this difference in practice.

18. [18]
    The clear purpose of r 361 is to provide a costs penalty for a plaintiff who does not accept an offer that ought to have been accepted.  Where it operates, the proceeding is in effect divided into two parts for the purpose of costs, at the point when the offer to settle was served.  The plaintiff gets the costs up to that point, but has to pay the costs thereafter.  This is on the basis that the proceeding ought to have come to an end at the time when the offer to settle was made, and therefore the plaintiff should get costs only up to that point in the proceeding.  What happened thereafter was made necessary not by the need for the plaintiff to pursue a just claim, but by the failure of the plaintiff to accept an offer that ought to have been accepted, and therefore the plaintiff should pay those costs. 

19. [19]
    This structure suggests that, for the purpose of determining whether the offer is more favourable, the plaintiff receives the costs up to the date of the offer of settlement, because that will be the outcome from the application of the rule. In the present case, under r 361 the plaintiff was entitled to receive the agreed amount together with costs on a standard basis up to and including the day of the service of the offer to settle, although he was liable for the costs thereafter as a result of the application of the rule.  But if one takes into account the costs which the plaintiff is entitled to recover under r 361(2)(a), the effect of the judgment obtained is more favourable to the plaintiff than the defendant’s offer to settle.  This is therefore not a case where one can say that at that point that offer ought to have been accepted.

20. [20]
    Accordingly, in my opinion, when determining whether the judgment is not more favourable to the plaintiff than the offer to settle, it is necessary to take into account the costs recoverable up to the date of the offer to settle. Such an approach would be consistent with the specific provision in r 362 in relation to interest, that interest relating to the period after the day of service of the offer to settle is disregarded.  The offer which was made was an offer to settle for a particular amount.  It is artificial to attribute that amount solely to the claim, and disregard the question of costs, and it is equally artificial, for the purposes of determining whether r 361(1)(a) has been satisfied, to disregard the fact that costs have been incurred, and that the offer to settle made no provision for costs. 

21. [21]
    I would not go to the point of saying that an offer to settle which does not make provision for costs is not a valid offer for the purposes of the rules. In my opinion an offer must be one which could be incorporated in a judgment for the purposes of the rules, and is one which involves the settlement of the whole of the plaintiff’s claim^[4], but I think in principle that an “all up” offer may be available.  A defendant who makes an offer in those terms however will run the risk that a court will ultimately not be satisfied that the defendant has shown that the plaintiff’s judgment is not more favourable to the plaintiff than the offer to settle.^[5]  Apart from this, if the form in which the offer is made appears to be calculated to prejudice the plaintiff, that could justify a court in concluding that another order for costs was appropriate under r 361(2).

22. [22]
    In my opinion therefore the magistrate in the present case erred in concluding that the judgment was not more favourable to the plaintiff than the offer to settle. That comparison must involve a comparison of apples with apples. Either the position of the plaintiff net of costs under the offer and under the judgment should have been compared, or the position of the plaintiff including costs under both should have been compared. One does not show that the judgment was not more favourable to the plaintiff than the offer to settle by comparing a judgment net of costs with an offer inclusive of costs. On a comparison properly conducted r 361(1)(a) was not satisfied, and accordingly r 361(2) did not apply.

Rule 683

23. [23]
    It follows that the magistrate’s determination of the question of costs was on an incorrect basis, and it is necessary for me to deal with that issue afresh. In these circumstances, it is not necessary for me to consider whether the magistrate erred in any event in applying r 361 given the situation that had arisen in the action before him.  As a result of the partial settlement of the action, the only matter remaining in issue between the parties was the question of costs.  In those circumstances it seems to me that r 683 applied, because it had become unnecessary to continue the proceeding other than for deciding who was to pay the costs of it.  In those circumstances under subrule (2), “the court may make the order the court considers to be just.”  Rule 361(1)(a) applies where a plaintiff obtains judgment in the form of final relief in a proceeding.  That in my opinion is relief determined and awarded by the court.  I doubt whether the rule was applicable at all in circumstances where there had not been a determination by the court of the appropriate final relief, but it is unnecessary to decide the appeal on that basis.  Assuming r 361 could apply in such a situation, it was not in fact satisfied in view of the terms of the final settlement.

The effect of the part payment

24. [24]
    Before deciding how the discretion as to costs ought to be exercised, it is necessary to refer to one issue which was raised on the appeal, although not argued below. The defendant submitted that once the part payment had been made the claim was really proceeding in respect of the balance of the plaintiff’s claim, so that judgment ought only to have been given for the net amount after deducting that part payment. The significance of this is that, under the schedule dealing with costs in the Magistrates Court, there are different scales for different amounts, with the scale to be used for standard costs to be that “appropriate for the amount the plaintiff recovers”: r 690(3).

25. [25]
    It was submitted for the plaintiff that the term “recovers” (used in contra distinction to the term “claims” in r 690(4)), although obviously referring to the amount of any judgment obtained at the end of the proceeding, was not limited to that meaning, and included any other money paid voluntarily by the defendant in response to the proceeding.  Reference was made to a number of authorities where the term had been used in the context of recovery other than by action.  Certainly the primary meaning is the amount recovered by judgment.  The traditional form of a common law judgment is that “the plaintiff do recover against the defendant” a particular amount.^[6]  In general the UCPR abolished that usage, and, following the approach in the Supreme Court of Queensland Act 1991, provides that a judgment for a sum of money (a “money order”) be simply a judgment that the defendant pay the plaintiff a particular amount.  Nevertheless the rules obviously in several place use the term to refer to the process by which as a result of a proceeding a money order for a particular amount in favour of the plaintiff is made.  But the term may in a particular context have a meaning which is wider than recovery by common law judgment.

26. [26]
    In Bluehaven Transport Pty Ltd v Deputy Commissioner of Taxation [2000] QSC 268 the question was whether the power in s 209 of the Income Tax Assessment Act for the commissioner to “sue for and recover unpaid tax” authorised a proceeding to have the taxpayer company wound up.  Williams J (as his Honour then was) referred to a number of old cases where the term “recover” had been used in “the larger sense of obtaining in any legal manner”.  From one of the decisions referred to, Page v Burtwell [1908] 2 KB 758, Kennedy LJ was quoted as saying at p. 764:  “It appears to me a narrow and unjustifiable view to hold that ‘recover’ means recover in the course of and as a result of some litigious proceedings.”  But even that expression could be seen as wider than recovery by judgment in the litigious proceeding.  If after a proceeding is commenced, and in response to it, a payment is made by the defendant to the plaintiff in response to the plaintiff’s claim, it is no great stretching of the language to characterise that as a payment of an amount “in the course of and as a result of” the proceeding.  On that interpretation the payment would be within a version of the term which was rejected as being too narrow, and therefore plainly within the correct meaning of the term.

27. [27]
    Williams J considered this and other authorities before concluding at paragraph [20]: “In my view the term ‘recover’ in s 209 should be given the wide meaning ascribed to it in the authorities to which I have referred.  It is not limited, as contended for by counsel for the applicant, to some recovery process consequent upon a judgment having been obtained.  In other words, the commissioner does not have to sue the taxpayer to judgment before he can ‘recover’ the unpaid tax.  The power to ‘recover’ unpaid tax entitles the commissioner to obtain satisfaction of the debt through any available legal proceedings.  Payment consequent upon winding up proceedings is obtaining satisfaction in a permissible legal manner.”  A similar view of the same section was taken by Atkinson J in Shaladis Pty Ltd v Deputy Commissioner of Taxation [2000] QSC 501.  Her Honour said at [13]:  “There is no valid reason in logic to limit the meaning of ‘recover’ to a situation where there is a judgment debt.  There is no authority that there is any such limitation on the term.”  Her Honour went on to follow the decision in Bluehaven Transport.

28. [28]
    Those two cases were concerned with the use of the term in a particular statute. But they demonstrate that the term is capable of a meaning which is wider than “recover as a judgment debt”. Is there any reason why a similar breadth of the term should be applied where it is used in r 690(3)?  In my opinion it should, for two reasons.  The first is that situations could easily arise where it was appropriate to assess costs on a standard basis in the Magistrates Court where a matter had been concluded without a formal judgment.  One example is where an offer of settlement is accepted;  another example is where it is appropriate to deal with costs under r 683.  There may well be others.  If a strict interpretation of the term “recovers” as limited to recovers by judgment is adopted, in the absence of a formal judgment there would be no entitlement to any costs on the standard basis, and that I think would be an unduly narrow and inappropriate interpretation of the rule.

29. [29]
    The second reason is that, if such an interpretation were adopted, it would permit the costs scale to be manipulated by a defendant. A defendant facing the prospect of judgment for a relatively large amount could make a part payment on account of the liability in the action which if accepted ought to reduce the judgment by the amount so paid. In such circumstances judgment is properly given for the balance, but if that is seen as the only amount which the plaintiff “recovers” that would reduce the amount of costs assessed on the standard basis, since broadly speaking Schedule 3 operates on the basis that the lower the amount specified, the smaller the amounts allowed for costs.  There is no reason why a defendant should have the opportunity, by making a payment on account of a liability in this way, of artificially depressing the amount of costs payable as a result of the proceeding.  On the other hand, there is no reason why a plaintiff should be put in the position of having to refuse to accept any payment on account in order to preserve an entitlement to costs.  There are advantages to both parties in a payment on account being made;  it will reduce the defendant’s liability to interest, and it is always an advantage to a plaintiff to have money in hand.  In my opinion however it is undesirable in principle for this process to give the defendant a collateral, and undeserved, advantage in terms of the assessment of costs on a standard basis.

30. [30]
    In my opinion therefore, where the word “recovers” is used in r 690(3), it refers to the amount of the final judgment together with any additional sum paid on account of the plaintiff’s liability after the commencement of the proceeding, and taken into account in reduction of the final judgment.

31. [31]
    That however is not what happened here. The payment was characterised by the parties as a payment in part satisfaction of the judgment to be given.^[7]  A payment so characterised (and for present purposes I assume that it is possible for it to be characterised in that way) is properly not taken into account in determining the amount of the judgment or the scale of costs.  The parties agreed that the magistrate give judgment by consent for a particular amount, and therefore judgment for that amount was properly given.  In those circumstances Schedule 3 was properly applied by reference to the amount of the judgment, and it is unnecessary to have regard to the wider meaning of the term “recovers”.

32. [32]
    If the payment had been offered and accepted, or was properly characterised, as a payment on account of the defendant’s liability to the plaintiff, it ought to have been taken into account in fixing the judgment, whether the judgment was one determined by the magistrate at a trial, or by consent of the parties. It would be in the same category as part payment of a debt after the start of an action. In those circumstances judgment should have been for the net amount, but, for the reasons given above, in my opinion that ought not to affect the assessment of costs, which should still be on the basis of the amount “recovered”, being the sum of the judgment for the net amount and the amount of the part payment made after the commencement of the action and in response to it.  Accordingly, whatever the correct characterisation of the payment made in this case on 4 March 2003, it ought not to have had any effect on the assessment of the costs.  I reject the submission on behalf of the defendant to the contrary.  It is not necessary, for the purposes of this appeal, to deal with the situation where a payment is made before the action is commenced.  In the present case a cheque was tendered at that time but it was not banked, and that does not amount to a payment.

The discretion as to costs

33. [33]
    In these circumstances, the appropriate approach to the discretion as to costs can be dealt with. On the approach adopted by the magistrate, from which I would not differ, it was reasonable for the plaintiff to commence the action because the amount ultimately recovered was less than the plaintiff was apparently being offered prior to the commencement of the action. By the time the defendant’s offer to settle was made, the amount the plaintiff was entitled to recover (the amount finally agreed on, together with the costs assessed according to Schedule 3 which the plaintiff had by then incurred) was greater than the amount ultimately agreed to be paid, so it was reasonable for the plaintiff to press on.  In those circumstances, the plaintiff should have recovered costs on the appropriate scale up to the time when judgment was given by consent.  It was necessary for the plaintiff to proceed that far in order to receive that which he ultimately obtained. 

34. [34]
    There was no dispute that, if the matter proceeded on this basis, the amount of the costs were properly assessed on scale E of Schedule 3 at $4,208.10.  Added to the amount of the judgment sum, this gives a total judgment including costs of $9,808.10.  I accordingly allow the appeal, set aside the judgment given by the magistrate on 23 October 2003, and substitute a judgment that the defendant pay the plaintiff $9,808.10.  The respondent should pay the appellant’s costs of the appeal to be assessed.