INDEMNITY COSTS AND MANDATORY FINAL OFFERS

Motor Vehicle Directions

Ryrie v Tanner (No 3) [2020] ACTSC 223, and Ryrie v Tanner (No 2) [2020] ACTSC 104

On 12 August 2020, Murrell CJ issued an indemnity costs order against the defendant for not accepting the plaintiff’s Mandatory Final Offer (MFO) of $100,000, in circumstances where the plaintiff was subsequently awarded $370,501 for damages arising from a motor vehicle accident.

This judgment should be viewed as a warning to Insurers on:

  1. Courts are unlikely to use their discretion to issue special costs orders under r1721 of the Court Procedure Rules 2006 (ACT)
  2. The importance of understanding cost implications of Mandatory Final Offers pursuant to s141 of Road Transport (Third-Party Insurance) Act 2008 (ACT) (repealed)
  3. The importance of obtaining and fully considering medical evidence prior to commencing proceedings.

Background

The matter was heard in first instance by Her Honour in Ryrie v Tanner (No 2) [2020] ACTSC 104. Liability was admitted by the defendant in a motor vehicle accident claim which occurred on 17 August 2015. The matter proceeded by way of an assessment of damages only.

The 28 year old IT consultant claimed damages for ongoing lower back pain, which radiated to her left thigh. Radiological investigations confirmed a L4-L5 disc bulge with no nerve compression. By August 2016, a physiotherapist reported the plaintiff had regained full function and active range of motion, but had poor forward flexion in her lumbar spine.

The defendant submitted that the accident caused a mere transient back condition and the plaintiff’s ongoing disability was due to an unrelated congenital condition.

In the substantive judgment, Her Honour described the plaintiff as a very credible witness with a strong work ethic and stated it was unlikely she would develop an unwarranted focus on disability and found the accident had caused the plaintiff to become symptomatic.

On 1 May 2020, judgment was delivered to the plaintiff for $370,501. This comprised of $160,000 for non-economic loss, $43,750 for economic loss, $50,000 for domestic assistance, $8,408 for past out of pocket expenses, and $50,000 for future out of pocket expenses.

Special costs order

On 12 August 2020, Her Honour issued an indemnity costs order against the defendant for failing to accept the plaintiffs’ MFO of $100,000.

The defendant argued the plaintiff’s MFO erroneously referred to pain and suffering instead of non-economic loss terminology. Despite this, the Court noted that these terms along with the phrase general damages were often used interchangeably and that the Court needed to have regard to the MFO as a whole. They also noted that no issue was taken with the MFO until almost two years after the plaintiff’s offer had been made. The Court found the plaintiff’s MFO was a genuine offer and should be taken into consideration, even if it was found to be technically non-complying.

The defendant also argued that the medial evidence available at the time did not warrant acceptance of the plaintiffs’ MFO. This was not accepted by the Court.
Her Honour stated the insurer should have been aware the plaintiff had suffered a significant back injury by way of her available treatment records which pre-dated the exchange of mandatory final offers. Documentation included frequent pain complaints, a variety of treatments, reports from a treating neurologist documenting chronic pain at the L4/5 spinal level, and the diagnoses of the L4/5 degenerative change and congenital abnormality. In her view and based on the material known to the insurer at the time the MFOs were made, it was unreasonable for the defendant to reject the plaintiffs’ MFO.

Insurer’s should be mindful of considering all available medical evidence at the time of issuing and considering MFOs and be mindful that Courts will be reluctant to use their discretion to award costs which depart from the usual orders for MFOs and offers of compromise.

Further information / assistance regarding the issues raised in this article is available from the author, Vanessa Parkins – Special Counsel, Charlene Barriga – Associate or your usual contact at Moray & Agnew.


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