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 Conferencein claims regulated by the:
- Workers’ Compensation and Rehabilitation Act 2003 (Qld) (WCRA)
- Personal Injuries Proceedings Act 2002 (Qld) (PIPA)
- Motor Accident Insurance Act 1994 (Qld) (MAIA)
Here are just some of the irregularities that can arise with MFOs in Queensland claims:
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 (except in WCRA claims); 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 that has been joined to a claim late in the piece. Otherwise, a refusal by one party to have a level playing field with the others for no valid reason, is likely to impact settlement negotiations.
Offers inclusive of cost
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.
Offers fixing an amount for cost
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.
Offers between Contributor and 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 PIPAContributor 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.
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.
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.
Clash of the 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 theMFO to the effect that the document serves as an acceptance of any offer that is less/more than the offer made by their opponent.
Expiring limitation period
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. It’s important to be familiar with the legislation that regulates both your claim AND your opponent’s. Adequate preparation before a Compulsory Conference will facilitate negotiations and prevent confusion between parties and their legal representatives when MFOs are exchanged.