Costs: PIPA & UCPR – When can a defendant get away with refusing to accept an offer?
June 7, 2016
Judgement was given to Ms Chandler (‘the plaintiff’) for personal injuries in the sum of $650,000 plus costs. This sum had been agreed between the parties, and the original trial had concerned liability only – see Chandler v Silwood  QSC 090.
It was agreed the plaintiff was entitled to her costs. Chief Justice Holmes of the Queensland Supreme Court was asked to consider, however, whether the plaintiff should be awarded standard or indemnity costs. In doing so, she had to have regard to a number of offers made pursuant to Calderbank v Calderbank (‘Calderbank’), the Personal Injuries Proceedings Act 2002 (Qld) (‘PIPA’) and the Uniform Civil Procedure Rules 1999 (Qld) (‘UCPR’), and the different tests that apply as to whether those types of offers demand that an indemnity costs order should be made.
Standard or indemnity costs?
The plaintiff made three relevant offers:
- 14 October 2013 – mandatory final offer pursuant to PIPA – $500,000 plus costs (‘the first offer’);
- 22 May 2015 – Calderbank offer – $500,000 plus costs (‘the second offer’); and
- 25 June 2015 – formal UCPR offer – $400,000 plus costs (‘the third offer’).
Both the first and the second offers were ‘akin to’ Calderbank offers, and thus her Honour had to consider whether it had been imprudent for the defendant to refuse them. With respect to the third offer, however, UCPR r 360 required her Honour to consider whether the defendant had established that another order (besides an order for indemnity costs) was appropriate in the circumstances. As such, different considerations applied.
At trial, the plaintiff’s consumption of alcohol had been a key issue.
The plaintiff had made the first offer within one month of signing a document in which she had indicated that on the evening of the relevant incident, she had consumed three glasses of red wine and lemonade. Without further details of the quantity or timing or her alcohol consumption, her Honour thought defences regarding intoxication (particularly contributory negligence) very much remained ‘in play’ at the time the first offer was made, and it was not unreasonable or imprudent for the defendant to have rejected it.
Not long before the second offer was made, the plaintiff filed an amended reply which referred to her consuming three glasses of wine on the evening of the incident. Her Honour found the defendant was entitled on that basis to consider that the prospect of establishing contributory negligence due to intoxication had become stronger. It was not until November 2015 that the plaintiff actually particularised the size of the glass she was drinking from, that she had been drinking over a three hour period, and that she had mixed the wine evenly with lemonade. As such, her Honour held that it was not unreasonable nor imprudent for the defendant to have rejected the second offer.
While the uncertainty about the plaintiff’s consumption of alcohol remained when the third offer was made, her Honour found the defendant had not demonstrated that another order (besides an indemnity costs order) was appropriate.
The plaintiff’s offer had changed, and the third offer represented a more than 40% reduction from the amount that the parties later agreed to be the plaintiff’s quantum. This reduction was, her Honour thought, consistent with what might be reasonable for contributory negligence had such a finding been made against the plaintiff. As an aside, no such finding was made at trial.
The possibility of a finding of contributory negligence did not consequently warrant the rejection of the third offer, and her Honour held that the defendant should pay the plaintiff’s costs on the standard basis up to the date on which the third offer was served, and thereafter on an indemnity basis.
In the writer’s view, this decision highlights that:
- insurers and their lawyers must be mindful of the fact that the test for whether an indemnity costs order should be made is different under the UCPR when compared to the PIPA / Calderbank;
- if a defendant can show that a PIPA offer was rejected at a time when the plaintiff’s evidence was incomplete and/or the defence had reasonable prospects, then the defendant probably has reasonable prospects of arguing that it is inappropriate to order costs be paid on an indemnity basis; and
- it appears much harder to displace the presumption that a defendant should pay costs on an indemnity basis when the defendant has rejected a formal UCPR offer, and this is more so the case when the plaintiff can justify, on the ultimate facts, the offer should have been accepted.
Authored by Scott Cowell, Partner – Brisbane
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