Dungan v Padash (No 2)

WHITE JA: On 23 April 2021 this Court allowed an appeal from orders of the District Court and in lieu thereof directed entry of judgment for the respondent in the sum of $41,965.65, such judgment to take effect as and from 30 July 2020 (Dungan v Padash [2021] NSWCA 66; order 3). The parties were directed to file written submissions on the question of what costs order should be made in respect of the proceedings in the District Court.

The solicitors for the successful appellant provided written submissions, not limited to that question. The solicitors for the respondent advised that they did not hold instructions to file any submissions in reply on costs and no such submissions were received.

In my reasons I observed:

In both the notice of appeal and in the appellant’s submissions, the order sought by the appellant was that in lieu of the judgment given in the District Court there be judgment for the respondent in the sum of $41,965.65.

In their written submissions, that ought to have been confined to dealing with questions of costs, the appellant’s solicitors sought, in lieu of the judgment that was entered, that there be a verdict for the respondent in the sum of $41,965.65 and that judgment be given for the respondent in the sum of $207.53. This was said to reflect payments made by the appellant’s insurer (Allianz) under s 83 ($10,758.12) and s 84A ($30,000) of the Motor Accidents Compensation Act 1999 (NSW) which are a defence to the proceedings to the extent of the amounts paid.

No argument was directed at the hearing of the appeal to whether the figure for which judgment was sought took into account the payments made by Allianz, or was a figure from which further sums should be deducted. If it were the latter, the appellant ought not to have sought judgment in the sum it did. I would reject the appellant’s submission that order 3 should be set aside and judgment entered for a lower amount.

On the question of costs, order 4 made on 23 April 2021 was that the respondent pay the appellant’s costs of the appeal. The appellant applied to have that order set aside. She sought in lieu thereof an order that the respondent pay the appellant’s costs of the appeal and of the proceedings in the District Court in the sum of $25,000 in accordance with s 151(2)(b) of the Motor Accidents Compensation Act 1999 (NSW).

As to the costs of the proceedings below, the appellant submitted that she ought to be ordered to pay the respondent’s costs and disbursements in accordance with Sch 1 of the Motor Accidents Compensation Regulation 2015 and that there be a set off between the costs payable by the appellant to the respondent in accordance with Sch 1 of the Motor Accidents Compensation Regulation 2015 and the sum of $25,000 that the appellant sought for her costs.

Section 149 of the Motor Accidents Compensation Act relevantly provides:

Sections 151 and 153 provide:

In this appeal, the Claims Assessment and Resolution Service (CARS) assessor issued a certificate under s 94 of the Act for $47,724.71 plus costs, which was more than the judgment recovered by the respondent.

In accordance with s 151(2)(b), the respondent was thereby liable to pay the appellant’s costs up to a maximum amount of $25,000.

The costs payable by the appellant’s insurer (Allianz) for the appellant’s legal representation substantially exceeded that sum unless the lawyers engaged by Allianz for the appellant were precluded from charging and recovering more than the amount of costs calculated in accordance with Sch 1 to the Regulation.

Because the motor vehicle accident occurred on 30 November 2016, and the claim arising from the accident was made on 2 March 2017, the Motor Accidents Compensation Regulation 2015 (as amended by the Motor Accidents Compensation Amendment (Claims) Regulation 2016) fixes the maximum amount of costs recoverable by legal practitioners. Clause 6(1)(a) of the Regulation provided that costs set out in Sch 1 were the maximum costs for legal services provided by an Australian legal practitioner to a claimant or to an insurer in a motor accidents matter.

Parties and their lawyers could contract out of that provision in respect of costs payable on a practitioner and client basis (cl 8). Nonetheless the maximum costs recoverable on a practitioner and client basis were fixed at the amount calculated by subtracting $50,000 from the amount paid in resolution of the claim (cl 8(2)). [1]

The appellant submitted that in accordance with cl 8(2) of the Regulation and Sch 1, the amount recoverable by the appellant’s solicitor on a solicitor/client basis for work done up to 31 August 2020 would be $8,551.17, unless an order were made under s 152(1) departing from that provision.

Section 153(1) of the Act is quoted at para [10] above. The appellant submits that the present is an exceptional case in which an order should be made to permit the appellant’s solicitors (Moray and Agnew) who are retained on the instructions of Allianz, to charge more than the amounts provided for by the Regulation and to permit Allianz to pay such amounts. Allianz has advised that it consents to pay Moray and Agnew solicitor/client costs from 28 June 2018 if permitted to do so pursuant to an order of the court. On 7 May 2021 it confirmed its instructions to Moray and Agnew to seek a special order as to costs pursuant to s 153 to enable that to be done.

It is clear that there would be a substantial injustice if Moray and Agnew were restricted to charging amounts in accordance with Sch 1 to the 2016 Regulation. This is also an exceptional case, having features that are unusual and out of the ordinary (San v Rumble (No 2) [2007] NSWCA 259 at [67]). The appellant’s solicitor submitted that most motor accident cases are resolved by way of a negotiated settlement and that only about 20% of all claims proceed to a CARS assessment conference, citing the Motor Accidents Authority 2014/15 Annual Report. In this case, the CARS assessment conference was part heard. It was deferred to allow the parties to obtain further expert medical evidence and proceeded to a second CARS assessment conference. It then proceeded to a hearing in the District Court and to the appeal to this Court.

During this period the respondent failed to respond to numerous attempts by Allianz to resolve the claim. A Calderbank offer in the sum of $200,000 served on 25 June 2019 and repeated on 25 October 2019 was not responded to. After the CARS assessor issued a s 94 certificate awarding the respondent $47,724.71 plus costs and disbursements of $17,472.42, the appellant served an offer of compromise in the sum of $70,000 plus costs. That offer was served on 16 December 2019 and repeated on 3 July 2020. Again, the offers were not responded to. A further offer of compromise in the sum of $140,000 plus costs was served on the filing of the notice of appeal. That was also not responded to. As the appellant’s solicitors submit, these are circumstances that make the present an exceptional case.

An order should be made pursuant to s 153(1) that the appellant’s solicitor is permitted to charge Allianz on an unregulated solicitor/client basis, thereby dispensing with the 2016 Regulation. Allianz consents to such an order.

On the making of that order, the amount of costs for which the respondent would be liable but for the cap imposed by s 151(2)(b) would greatly exceed the cap.

There is no occasion to vary the order made for the respondent to pay the appellant’s costs of the appeal. But a further order should be made as submitted by the appellant to reflect the capping of costs provided for by s 151(2)(b).

The appellant also submitted that an order should be made requiring the appellant pay the respondent’s costs and disbursements in accordance with Sch 1 of the Motor Accidents Compensation Regulation 2015 and that the costs orders be set off against each other. The appellant calculated that prior to set-off the respondent would be entitled to $16,585.52 in accordance with that Schedule. The basis of that calculation was explained. In the absence of contradiction it should be accepted.

There is no doubt about the power of the court to order a set-off. It is just that a set-off be ordered lest the appellant be required to pay an amount it concedes it is liable to pay to the respondent but is unable to recover the sum of $25,000 from the respondent. Where both amounts of costs are quantified effect should be given to the set-off by giving judgment for the appellant in the amount payable by the respondent after set-off (Ritchie’s Uniform Civil Procedure, LexisNexis Butterworths, s 21-25).

For these reasons I propose the following orders:

MCCALLUM JA: As indicated in the principal judgment, I would have dismissed the appeal with costs. On the conclusions reached by the majority, I agree with White JA as to the orders that should now be made as to costs for the reasons his Honour has stated.

EMMETT AJA: I agree with White JA.