Introduction
In Queensland, parties to a personal injury claim are required to make a ‘mandatory final offer‘ or ‘written final offer‘ (MFO). An MFO is made at the end of an unsuccessful pre-court Compulsory Conference in claims regulated by the:
The purpose of the MFO
A party making an MFO should consider its purpose in advance of the Compulsory Conference.
In many cases, the primary purpose of the MFO will be to provide a party with cost protection. This is because, in many instances, if a party does better than their MFO at the conclusion of a trial, they may achieve a costs order in their favour.
In other cases, however, a party may consider the most important purpose of the MFO is to preserve that party’s position. For example, a party may deliberately keep their offer high or low (depending on whether they are a Claimant or a Respondent) to “keep their powder dry” for negotiations at a later stage in the case.
Making an appropriate MFO that a party is comfortable with, is important. Getting it wrong, can be costly.
Here are just some of the problems and solutions that can arise with MFOs in Queensland claims:
1. No Mandatory Final Offer
Cost consequences flow from an MFO. Any cost orders ultimately made will depend on: the amount of the offers compared with any judgment; the legislation regulating the claim; offers made during the litigation; and, in limited circumstances, case building that occurs once the matter is litigated.
To avoid the potential for adverse cost consequences, a party may agree to participate in settlement negotiations on an informal basis only, so that they are not required to exchange MFOs (or provide a Certificate of Readiness). In multi-party disputes, this strategy may be appropriate for a PIPA Respondent (or Contributor) that has been joined to a claim late in the piece. Otherwise, a refusal by one party to have a level playing field and deliver an MFO for no valid reason, is likely to impede settlement negotiations.
2. Offers inclusive of costs
Under the PIPA and MAIA, where an offer is at or below the ‘upper offer limit‘, parties are required to make offers which are exclusive of costs. Otherwise, parties are permitted to make MFOs which are inclusive of costs. These types of MFOs should be made with caution. Offers which are inclusive of costs have received unfavourable treatment by the courts. The difficulty with these types of offers, is that there’s no way for a court to identify from the MFO the amounts allowed for damages and costs.
3. Offers fixing an amount for costs
A Respondent may make an offer which fixes an amount for costs. The advantage of doing so is that, if accepted, the Claimant has agreed to an amount for costs and no further negotiations are necessary. However, where an offer fixes costs and that offer is rejected – a question might arise later on about whether the Claimant was justified in rejecting it because the allowance for costs was too low. As with offers which are inclusive of costs, these types of offers should be made with caution.
4. Offers between a Contributor and a Respondent
Under the PIPA, parties to a contribution claim are not required to exchange MFOs. However, under the WCRA, both Contributors and Respondents are required to make MFOs. The result of this is that for claims regulated by both the WCRA and PIPA, PIPA Contributors may choose to make no offer towards settlement during pre-court negotiations, as a matter of strategy. It may be in the interests of a PIPA Contributor to take a passive role in the claim and see if the other parties will reach a compromise without any offer from them towards a settlement. However, in a claim where a PIPA Contributor has significant exposure, this approach may simply compel the parties to litigate.
5. Joint MFOs
For claims regulated by the WCRA, costs only flow from the MFO. So, where a claim is regulated by the WCRA and PIPA, the Respondent and Contributor/s in the WCRA claim will be reluctant to make an MFO of $nil. The result is that at Compulsory Conferences there is more pressure on the WCRA parties, than the PIPA parties, to make an appealing MFO to a Claimant. Conversely, if a WCRA party has made reasonable attempts to resolve a matter during the pre-court stage, then they may be reluctant to co-operate with a PIPA party that is keen to negotiate well into the litigation.
6. Attaching a Release and Cost clauses
Care should be taken when drafting the MFO. If the MFO refers to a Release and a copy of that Release is not attached to the MFO, that may affect the validity of the offer. For claims under the PIPA and MAIA, where a Release is attached and there is otherwise no obligation upon a Claimant to sign a Release, a question may arise about whether the terms of the Release affected the acceptability of the Respondent’s offer. Consideration should also be given to the wording of any clause about costs in the MFO. Particularly if the MFO refers to costs being payable in anyway other than ‘in accordance with the’ relevant legislation regulating the claim.
7. Crossover of MFOs
MFOs are ‘exchanged’ and so parties do not usually know what offer/s will be made by their opponent/s. In rare circumstances, two parties may make MFOs to each other which are less favourable than the offers put to them. For instance, Company X offers to settle a Claimant’s claim for $100,000 but the Claimant offers to settle her claim for just $80,000. Parties may attempt to address this by adding a clause to the MFO to the effect that the document serves as an acceptance of any offer that is less/more than the offer made by their opponent.
8. MFO where liability is denied "altogether"
For claims regulated by the MAIA and the PIPA, where a Respondent/Insurer denies liability altogether, they are still required to deliver an MFO. However the legislation requires the Respondent/Insurer to deliver an MFO of $nil.
A Respondent/Insurer who denies liability altogether but makes an MFO of greater than $nil, faces a risk that a Court will find that there MFO is invalid.
9. Time for acceptance of MFO and commencing Court proceedings
A Claimant must commence proceedings within 60 days of a Compulsory Conference and cannot start those proceedings while the MFOs are open. MFOs must stay open for 14 days (10 business days for WCRA claims). There is no discretion under the legislation for that time to be abridged. So, for claims regulated by the PIPA and MAIA, a Compulsory Conference must be held no later than 10 business days prior to the expiration of a limitation period, to allow the MFOs to expire and the Claimant to commence proceedings.
Getting it right
There’s no set formula for getting your MFO ‘right’. However, each piece of legislation has its own nuances and experienced lawyers in these areas are best placed to provide advice to clients about MFOs and the Compulsory Conference process.
It’s important for legal representatives and parties to be familiar with the legislation that regulates the MFO. Adequate preparation before a Compulsory Conference will facilitate negotiations and prevent confusion between parties and their legal representatives when MFOs are exchanged.
Legal advice about Mandatory Final Offers - how we can help
We represent both injured individuals and businesses in claims for personal injuries under MAIA, the PIPA and the WCRA. We do not act for insurers. With this approach, we provide clients with balanced and realistic advice, so they know what to expect out of the Compulsory Conference process.
We offer prospective clients an initial consultation to discuss how we can assist with their claim up to a Compulsory Conference and beyond.
During an initial consultation, you can expect that we will discuss with you:
- the history of the claim and what steps have been undertaken by the parties
- whether the claim is in fact ready to proceed to a Compulsory Conference
- the Compulsory Conference process
- a Certificate of Readiness
- making an MFO
- engaging in informal settlement negotiations
- further medical or other evidence that may be required in the case
- our general views about the case and the value of the claim
- fees and costs
Parties who are legally represented at Compulsory Conference improve their chances of achieving a satisfactory outcome in their claim and avoiding the need for litigation.
To book an initial consultation, call our office on (07) 3067 3025 or schedule your appointment online.
