Habig v McCrae & Ors [2014] QSC 69

In the recent decision of Habig v McCrae & Ors, Henry J of the Queensland Supreme Court considered the effect of several offers made by the Defendant throughout the course of a claim which the Plaintiff ultimately failed to surpass at trial.

The Plaintiff had sought damages for personal injuries allegedly sustained in a motor vehicle accident. Judgment was delivered in favour of the Plaintiff on 6 December 2013, subject to a 50% reduction for the Plaintiff’s own contributory negligence. The quantum of the Plaintiff’s damages had been agreed between the parties prior to trial at $800,000 meaning that after the 50% reduction, the Plaintiff was awarded $400,000.

As a result of a number of offers made throughout the claim, the parties made further submissions on the appropriate Order on costs and the costs Judgment was delivered by Henry J on 7 April 2014.

The Offers

Ultimately, there were three offers of significance.

  1. On 22 July 2010, the Defendant offered to settle the Plaintiff’s claim for $400,000 plus costs and outlays. This offer did not contain any explicit expiry date.
  2. On 15 February 2012, at the conclusion of the compulsory conference, the Defendant made a mandatory final offer in accordance with s51C of the Motor Accident Insurance Act 1994 (Qld) again offering settlement for $400,000 plus costs and outlays. This offer was expressed as being subject to the Plaintiff’s execution of “the attached Release Discharge and Indemnity”.
  3. On 3 October 2013, the Defendant offered to settle the Plaintiff’s claim for $460,000 plus costs and outlays. This offer was expressed as being in accordance with the principles established in Calderbank v Calderbank.

Henry J noted that none of the relevant offers were expressed as being made in accordance with Chapter 9, Part 5 of the Uniform Civil Procedure Rules 1999 (Qld).

Unreasonable Failure to Accept Offer

There seemed little question that the Judgment awarded to the Plaintiff failed to beat the third of the above offers, ($460,000 plus costs) which would have been more favourable to the Plaintiff than the result achieved at trial by $60,000. As this offer was only made in October 2013, close to the commencement of the trial, argument arose as to whether one or both of the Defendant’s earlier offers had also been more favourable than the ultimate award.

The Plaintiff submitted that the mandatory final offer of 15 February 2012 was invalid as the “Release Discharge and Indemnity” referred to in the offer was not attached to the offer. Henry J also noted that the Defendant did not appear to have filed with the Court a copy of the mandatory final offer in a sealed envelope as required by s51C(8) of the Motor Accident Insurance Act 1994 (Qld) however his Honour determined that it was not necessary to consider the consequences of these failures due to the overriding relevance of the earlier offer of $400,000 made on 22 July 2010.

As to the offer of 22 July 2010, it was argued on behalf of the Plaintiff that he did not act unreasonably in failing to accept the more favourable offer and therefore adverse costs consequences should not flow from that failure. The basis of this submission was that the statutory declaration of one of the Defendant’s principal witnesses had not, at that time, been disclosed and the evidence of this witness was ultimately a determinative factor in the Court reaching the 50% contributory negligence reduction.

Henry J noted however that the proposed evidence of this witness had in fact been set out by the Defendant in the offer of 22 July 2010 and further, even after the subject statutory declaration had been provided to the Plaintiff on 13 August 2013, the Plaintiff failed to accept the Defendant’s greater offer of $460,000 plus costs, made on 3 October 2013. This, according to his Honour, demonstrated that even if armed with the statutory declaration in July 2010, the Plaintiff was still unlikely to have accepted the $400,000 plus costs offer.

Henry J therefore concluded that it was unreasonable for the Plaintiff not to have accepted the Defendant’s offer of $400,000 plus costs made on 22 July 2010 and that it was therefore appropriate that the Plaintiff pay the Defendant’s ongoing costs in respect of the proceeding that resulted from this failure.

Taking into account some difficulties that the Plaintiff’s solicitors may have had in investigating and taking instructions from their client in respect of this offer (in light of the fact that he was a German national not residing in Australia), his Honour determined that the unreasonable failure to accept this offer commenced on 31 December 2010, some 6 months or so after the offer was first made.

The Plaintiff was therefore awarded his standard basis costs up to 31 December 2010 and thereafter, the Plaintiff was Ordered to pay the Defendant’s standard basis costs to the conclusion of the trial, including reserved costs.

Mansi Order

Henry J also followed Mansi v O’Connor and Ors [2012] QSC 374 in Ordering that the Defendant’s costs were to be offset against the Plaintiff’s damages award and that the Defendant’s costs were to be payed to the Defendant prior to balance of funds being paid to the Plaintiff.

The basis for this Order seemed to be the fact that the Plaintiff was an overseas national without property in Queensland and it would be difficult for the Defendant to enforce any costs order in Germany.

Conclusion

The submissions of the parties regarding the validity or otherwise of the Defendant’s various offers serves as a reminder to practitioners to ensure technical compliance with the rules and principles under which an offer is made, when making an offer to settle.

The Defendant was fortunate that further consideration was not required of the failure to both attach the Release and Discharge to the mandatory final offer (in circumstances where the offer expressly refers to the offer being conditional upon the Plaintiff signing the “attached release”) and also the failure to file a copy of the offer with the Court at the time of filing the Defence, as required by the Act.

Had these issues ultimately been found to invalidate the offer, this could have resulted in an unfortunate (and expensive) outcome.