An offer of compromise made in a WID matter after a certificate of mediation will have no impact.

In Smith v Sydney West Area Health Service (No. 2) [2009] NSWCA 62, at paragraph 14, the Court of Appeal held that insofar as the costs of a work injury damages claim are concerned (subject to agreement between the parties), parties to court proceedings in a claim for work injury damages are “fossilised in their respective positions at the conclusion of the mediation”.

It was held that offers of compromise made after a certificate of mediation have no practical impact in work injury damages claims and there is no costs discretion of the District Court to make orders outside of those allowable by clauses 89-91 of the 2003 Regulation (now clauses 104-105 of the 2010 Regulation.)

A matter recently conducted by Bartier Perry highlights this situation.

In this matter, the plaintiff's final offer at mediation was $475,000.00 plus costs.  Our client's offer was $225,000.00 plus costs.

After the plaintiff's solicitors filed a statement of claim, they served an offer of compromise for $300,000.00 plus costs.Referring the plaintiff's solicitor to the above decision, we pointed out that the offer of compromise would have no impact and there was virtually no chance of the plaintiff obtaining a judgment which exceeded his final mediation offer, and the plaintiff would therefore not obtain an order that our client pay his costs.

The matter was potentially heading for a 4-5 day hearing on the substantive claim (after a section 151D motion).

Within a week of the above discussion, the matter settled for $240,000.00 plus costs.  This was an excellent outcome for our client and represented only a slight increase on its final mediation offer.

The Court of Appeal decision and this case study demonstrate that plaintiffs should make realistic final offers at mediations or they can be exposed to significant costs consequences if they do not ultimately obtain a judgment for an amount higher than their final mediation offer following a court hearing.  The strength of a plaintiff’s negotiating position can also be significantly affected by an unrealistic final mediation offer particularly if the ultimate hearing of the WID claim will take at least several days in court.