Mott v Philip (No 2)[2017] QSC 255

SUPREME COURT OF QUEENSLAND

2. McMEEKIN J: I delivered reasons in these matters on 29 September 2017.^[1] I left for decision the question of the appropriate orders in relation to costs. The parties have been unable to agree and have now made submissions.

3. The proceedings involved claims for damages by Mr Mott (in proceedings numbered 53/15) and Ms Prosser (54/15) arising out of a motor vehicle accident. Essentially the trial involved a determination as to which of the defendants should pay the damages. There were contribution claims between the first and second defendants on the one hand and the parties I called the “roadworks defendants” (ie the third, fourth and fifth defendants in 53/15 and the third and fourth defendants in 54/15) on the other. There was no argument at trial that either plaintiff was contributorily negligent. I determined that the first defendant was responsible for the accident. The second defendant is the insurer of the first defendant under the statutory insurance policy. I ordered:

1. Judgment for each plaintiff against the second defendant in each proceeding.

2. The claims against the third and fourth defendants (in 54/15) and the third, fourth and fifth defendants (in 53/15), by each of the plaintiffs and by the first and second defendants is dismissed.

4. Different costs considerations apply to each proceeding.

Mott v Philip & Ors (53/15)

5. The second defendant accepts that it is required to pay both the plaintiff’s costs and the third, fourth and fifth defendants’ costs, each on the standard basis. As I follow the submission the second defendant accepts that a Sanderson order is appropriate – i.e. that the second defendant pay the costs incurred by the plaintiff in pursuing the third, fourth and fifth defendants. It does not dispute that it should pay the costs of the contribution proceedings between the parties. I shall return to the question of the costs orders for the contribution proceedings.

Prosser v Philip & Ors (54/15)

6. Again the second defendant accepts its liability to pay the costs of each of the parties on the standard basis and the applicability of a Sanderson order. The issue concerns the effect of an offer.

7. On 5 May 2017 the plaintiff served a formal offer to settle the liability issue between her and the first and second defendants (the offer was not extended to any other party) on a 90/10 apportionment – so, the plaintiff to accept a 10% contribution. As mentioned the defendants did not seek to claim any apportionment of liability at trial against her. Given that Ms Prosser was on the correct side of the road, travelling at a speed well below the speed limit, saw the approaching vehicle as soon as it came into her line of sight, and had only moments in which to react and no obvious means of avoiding the collision, there was never any realistic prospect of any apportionment. In response to the offer the defendants purported to accept the 10% apportionment but not their 90% liability. Unsurprisingly the plaintiff declined that counter-offer.

8. Rule 360 UCPR applies:

the court must order the defendant to pay the plaintiff’s costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances.

9. Obviously the result at trial was more favourable than the offer. And there can be no issue about the plaintiff’s ability and willingness to carry out the offer. So the pre-conditions to the making of an order on the indemnity basis are satisfied.

10. The second defendant submits two things. First, the offer was not reasonably capable of acceptance as it left open all other proceedings between the parties, including the plaintiff’s own claim against the other defendants. Secondly, it is submitted that it is “inappropriate and premature” to consider indemnity costs orders as they can only properly be determined once the damages have been assessed. A reference is made to s 55F of the Motor Accident Insurance Act – the provision dealing with costs in claims involving damages of less than $50,000.

11. So far as I am aware there has been no determination of the damages issue. I am not aware what the damages might be. As best I can see s 55F has nothing to do with the matter. There is force in the plaintiff’s submission that the issue here is concerned only with the costs involved in the determination of the liability issue.

Consideration

12. I observe that the rules expressly provide for offers to be made by a plaintiff to one of several defendants: r 363(1). The liability alleged here was several, not joint, and so the strictures of r 363(2) do not apply - it was not necessary that the offer be made to all defendants to be effective. Nonetheless it seems to me that the fact that there were contribution proceedings between the defendants, and proceedings between Ms Prosser and the third and fourth defendants, are each relevant factors in assessing the practicality of accepting an offer such as the one made here.

13. One thing that the offer left unclear is whether Ms Prosser intended to pursue the roadworks defendants for the remaining 10% of her damages. That is relevant in two ways.

14. The first is that it is not clear that there was in fact an alteration to the costs burden on the plaintiff. If Ms Prosser determined to pursue the roadworks defendants at trial I am not sure there was any difference at all.

15. The second effect is that the first and second defendants were left in a position where they were not to know the practical effect of accepting the offer. One possibility was that Ms Prosser would have no further interest in the proceedings. In that case the second defendant would have been required to pursue the liability question against the roadworks defendants with the disadvantage of having one of the key witnesses as, at best, a disinterested witness and one that it may have been forced to call in chief, not necessarily knowing what precisely she might say on key issues. Another possibility was that Ms Prosser would give evidence in her own case and so be cross examined by the second defendant’s counsel. Looked at in prospect that approach would have significant potential forensic advantages. This is against the background, that the second defendant’s insured, Ms Philip, was brain damaged and unable to give direct evidence about the accident.

16. In the rather peculiar circumstances of this case there were sound forensic reasons for not accepting the offer, even though the second defendant obviously enough had no reason to think that it would achieve any apportionment against Ms Prosser.

17. I think it relevant that the offer was made very late, that at best there was relatively little saving in costs to be made and at worst none, that the compromise offered was modest, and in fact the offer did not serve to resolve the true issue. The true issue at the pending trial was not between Ms Prosser and the first and second defendants but between the two sets of defendants. Given those peculiar circumstances I do not think it appropriate that there be an order on the indemnity basis. In the words of the rule the defendant has shown that another order for costs is appropriate in the circumstances.

Contribution Proceedings

18. What remains in issue is the effect of an offer made by the third, fourth and fifth defendants to the first and second defendants on 12 May 2017 (noting that the trial commenced on 30 May) offering to settle the contribution claims between the defendants by a payment by the third, fourth and fifth defendants to the first and second defendants of $25,000 including costs and interest. The third, fourth and fifth defendants contend, and the second defendant denies, that while their costs are properly payable on the standard basis up and until the date of the offer, thereafter the costs should be ordered to be paid on the indemnity basis.

19. Again it is relevant to note that I do not know anything about the damages that might be payable to either plaintiff. I assume that the sum mentioned of $25,000 represents a very modest contribution to the likely total of all claims and costs.

20. The effect of a costs order made to settle contribution claims is dealt with in r 364 UCPR:

Offer to contribute

21. The second defendant points out that there is no provision in the rule akin to that in rules 360(1) and 361(3)(b) to the effect that the court should order costs on the indemnity basis where a party obtains an order more favourable than the offer. It was argued that as a matter of construction the inference should be drawn that the legislature did not intend that indemnity costs should follow, at least as a matter of course. The second defendant also points out that after the date of the offer, but while it was still open, its insured, Ms Philip, elected to discontinue her own claim for damages arising out of the same accident. This, it is said, resulted in considerable forensic disadvantage to the second defendant – e.g. in the calling of witnesses, the cross examining of witnesses and the like. So much can be accepted.

22. In the absence of any legislative warrant for awarding costs on the indemnity basis (and the absence of that warrant in the rule is indeed instructive as the second defendant contends) I am inclined to think that in the exercise of the general discretion provided for in r 364(3) the principles that apply to Calderbank offers are applicable here. Those principles generally can be said to be that the granting of costs on an indemnity basis should be reserved “for unusual cases or cases involving unreasonable conduct” established on “clear grounds”: Mizikovsky v Queensland Television Ltd^[2]; Chaina v Alvaro Homes Pty Ltd^[3]; 2040 Logan Road Pty Ltd v Body Corporate for Paddington Mews CTS 39149 (No 2)^[4].

23. Where, as here, the argument is that the rejection of the offer was imprudent (at least I assume that is the contention) then the matters identified as relevant by the Victorian Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)^[5] (a decision which has been accepted as authoritative in Queensland in relation to Calderbank offers: J & D Rigging Pty Ltd v Agripower Australia Limited & Ors^[6]) need to be considered. The matters suggested in Hazeldene’s Chicken Farm were:

1. the stage of the proceeding at which the offer was received;

2. the time allowed to the offeree to consider the offer;

3. the extent of the compromise offered;

4. the offeree’s prospects of success, assessed as at the date of the offer;

5. the clarity with which the terms of the offer were expressed;

6. whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.

24. The offer came fairly late in the proceedings and, as I have said, before a significant change forensically in the case. Fourteen days, not an inadequate time, was allowed for acceptance. The extent of the compromise offered was modest in the scheme of things. The second defendant’s prospects of success were always a very difficult matter for the second defendant to judge – Ms Philip was brain damaged and unable to give evidence of the accident. The second defendant’s prospects were therefore entirely dependent on the evidence that fell from the other parties. To an extent it was not to know how successful it was likely to be in establishing the facts suited to its position until the evidence was given. The offer was clear. There was no mention of indemnity costs being sought if the offer was not accepted.

25. The onus is on the third, fourth and fifth defendants to justify the making of an order on the indemnity basis. In my view they have not discharged that onus. The first, third, fourth and sixth matters mentioned are against the exercise of the discretion sought. The offer is sufficiently brought into account in the making of the Sanderson order. There is a benefit to the roadworks defendants in having a substantial insurer liable for their costs as opposed to a possibly indigent plaintiff.

Conclusion

Mott v Philip & Ors – 53/15

26. I order that the second defendant pay:

1. the costs of the plaintiff on the standard basis, those costs to include the costs incurred by the plaintiff in his proceedings against the third, fourth and fifth defendants;

2. the costs of the third, fourth and fifth defendants on the standard basis.

3. the costs of the third, fourth and fifth defendants incurred in the contribution proceedings between the parties, on the standard basis.

Prosser v Philip & Ors – 54/15

27. I order that the second defendant pay:

1. the costs of the plaintiff on the standard basis, those costs to include the costs incurred by the plaintiff in her proceedings against the third and fourth defendants;

2. the costs of the third and fourth defendants on the standard basis.

3. the costs of the third and fourth defendants incurred in the contribution proceedings between the parties, on the standard basis.