Indemnity costs in Qld “all or nothing case”

Posted in CTP Claim, CTP Insurance, CTP payout, Motor Vehicle Accident, Motor Vehicle Accident Claim, No Win No Fee, Personal Injury
on 11 September 2023

Ford v Nominal Defendant [No 2] [2023] QCA 181

Mr Trent Ford, the Appellant, brought a claim against the Nominal Defendant under the Motor Accident Insurance Act 1994 (Qld) (MAIA) for injuries he suffered as a result of a collision with an unidentified motor vehicle on 11 March 2019. His case was resolved by his successful appeal to the Court of Appeal in April 2023, some 4 years after his accident. He sought costs on an indemnity basis for his claim. The Nominal Defendant resisted Mr Ford’s application.

Issue for determination

The question for determination by the Court of Appeal was whether Mr Ford should have the benefit of Rule 360 of the Uniform Civil Procedure Rules 1999 (Qld) and achieve an order for indemnity costs in his favour.

Background

The Court had regard to the following background in determining the issue of indemnity costs:

The parties exchanged Mandatory Final Offers (MFOs) on 11 November 2020 which were poles apart, with Mr Ford offering to settle his claim for $1M and the Nominal Defendant offering $NIL.
On 14 July 2022, the parties resolved quantum in the sum of $600,000 including interest.
Also on 14 July 2022, Mr Ford offered to settle his claim in the sum of $575,000 plus costs. This was many weeks before the trial.
The matter proceeded to trial on the discrete issue of whether Mr Ford had undertaken “proper inquiry and search”. Mr Ford was unsuccessful.
Mr Ford filed an appeal.
On 21 December 2022, Mr Ford made a Calderbank offer in the sum of $450,000 including interest.
The Court of Appeal granted Mr Ford’s appeal in April 2023.

Nominal Defendant’s submissions

The Nominal Defendant argued that another order for costs was appropriate because:

Mr Ford’s offer of 14 July 2022:
- was made within two hours of the parties resolving the quantum of the claim;
- was purposeful and a disingenuous attempt to engage Rule 360 of the UCPR;
- “did not represent a genuine offer of compromise” in an “all or nothing case”.

With respect to the Calderbank offer in the appeal:
- It did not state that Mr Ford would seek indemnity costs;
- The Nominal Defendant succeeded at trial and it was reasonable to not accept the offer.

The $NIL MFO was apparently the Nominal Defendant’s only offer.

The Decision

The Court of Appeal ordered that costs should be assessed on an indemnity basis in respect of the proceeding and the appeal.

The Ratio

In arriving at its decision, the Court of Appeal had regard to the following considerations:

Purposeful engagement of Rule 360. The Court recognised the legitimacy of Mr. Ford’s efforts to engage the rule purposefully, aiming to safeguard his damages from being eroded by the gap between standard and indemnity costs.
Invocation of the Rule’s protective mechanism: The judgment emphasised that the Rule operates on the principle that a defendant must critically evaluate the pros and cons of rejecting a plaintiff’s offer, factoring in the inherent risks associated with litigation. A defendant rejecting an offer assumes the risk of potentially facing an order for indemnity costs, should the plaintiff better the offer at trial.
Limited circumstances for overriding the Rule: The Court highlighted that circumstances allowing a defendant to escape an indemnity cost order are limited. Such situations generally involve substantial shifts in the case or evidence emergence during the trial, which could not have been anticipated before the hearing commenced. In this case, there was no suggestion of a change in Mr Ford’s claim.
Insufficiency of respectable arguments to override Rule 360: The Court clarified that presenting respectable arguments or the prospect of winning based on those arguments does not displace Rule 360. It insisted that the circumstances must warrant a different order for costs to be considered appropriate.
Protection of Plaintiff’s entitlement under Rule 360: The Court noted that Rule 360 should not be construed to compel a plaintiff with a strong claim to relinquish a significant portion of their claim, thereby risking undercompensation, merely to secure the Rule’s protective provisions concerning costs.
Evaluation of the Calderbank Offer: The Court scrutinised the Calderbank offer made by Mr. Ford, noting that it involved a substantial reduction from the agreed sum and a waiver of interest accrued from the date of the accident to the date of the offer. The Court stressed that the Nominal Defendant should have recognised the reasonable prospects of the appeal succeeding, which would invoke Rule 360 concerning the trial proceedings, making the rejection of the Calderbank offer unreasonable.

Considerations

In a choice between a “settle or defend” strategy, the Nominal Defendant clearly opted for the latter, whereas Mr Ford’s offers dropped by $550,000.

The Nominal Defendant’s criticism of Mr Ford’s offer of 14 July 2022 was somewhat contradictory, especially when considering that the statutory insurer seemingly maintained a stance of offering a $NIL settlement throughout the entire legal proceedings and the subsequent appeal. This stance could potentially be viewed as a reluctance to engage in a meaningful negotiation process, which is critical in such complex litigation cases.

This decision reveals valuable insights that parties can draw upon in “all or nothing” cases, where the stakes are high and the margin for error is slim. Here are some key takeaways that can guide strategic decision-making in similar litigation:

Issue narrowing as a strategic move: Streamlining the issues that need to be addressed at trial can reduce costs exposure, allowing for a more focused and potentially successful legal strategy.
Reasonable offer considerations: In scenarios where a defendant is either sticking to a $NIL offer or proposing a sum that grossly undermines its exposure, it’s prudent to avoid making exceedingly low offers. This not only facilitates a fair negotiation ground but also reflects a commitment to a just resolution.
Recognising the Plaintiff’s “point of no return”: It is important to acknowledge that there comes a stage in litigation where the plaintiff’s solicitor-client costs escalate to a point that further reduction in offers to facilitate an out-of-court settlement becomes unfeasible.
Judicious assessment of Plaintiff’s offer: A defendant must undertake a meticulous evaluation of any offer put forth by the plaintiff, considering the potential implications and the evolving dynamics of the case.
Significance of offer timing: The timing of an offer holds considerable weight in litigation, influencing the trajectory of negotiations and potentially the outcome of the case.
Communication of indemnity costs intent: While it is beneficial to clearly state the intention to seek indemnity costs, it is not an absolute requirement. However, an intention to seek indemnity costs will be taken into account by the court.
Relevance of MFOs in MAIA claims: It should be noted that MFOs might not always hold sway in claims under the MAIA if they are perceived as irrelevant within the specific context of the case.