Richardson v NZI Insurance [2000] NSWSC 510

New South Wales Supreme Court

CITATION : Richardson v NZI Insurance [2000] NSWSC 510 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 1616/2000 HEARING DATE(S) : 6 June 2000 JUDGMENT DATE : 6 June 2000

PARTIES : Lynette Richardson (Plaintiff) NZI Insurance Australia Ltd (Defendant) JUDGMENT OF : Windeyer J at 1

COUNSEL : Mr R Goodridge (Plaintiff) Mr B.G. Smith (Defendant) SOLICITORS : Firths (Plaintiff) Stewart Cuddy & Mockler (Defendant) CATCHWORDS : CONTRACTS - offer and acceptance - whether or not the parties had reached a settlement agreement - whether or not the formal document was reasonable having regard to the objective intention of the parties - whether it was reasonable that the plaintiff indemnify the insurer in regard to all claims arising out of her injuries LEGISLATION CITED : Motor Accidents Act 1988 CASES CITED : Calderbank v Calderbank (1975) 3 WLR 586 DECISION : See paragraph 21

1 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WINDEYER J

TUESDAY 6 JUNE 2000

1616/00 LYNETTE RICHARDSON v NZI INSURANCE AUSTRALIA LTD

JUDGMENT

1 HIS HONOUR: In this matter the plaintiff seeks a declaration that a claim, which she would have for damages under the Motor Accidents Act arising out of injuries sustained in an accident on 20 June 1998, has been settled for the sum of $10,000 plus costs of $3,000. She also seeks a mandatory injunction directing the defendant to pay the plaintiff the sum of $10,000 plus costs. That second claim is obviously misconceived. Probably what ought to be sought is an order that the agreement be specifically performed, but for the purposes of this case I do not think anything turns on that and an appropriate order, if necessary, can be framed. 2 There were negotiations between the plaintiff's solicitors, Messrs Firths, and the defendant's insurer pursuant to its rights under the Motor Accidents Act. These negotiations were conducted mostly through correspondence commencing with an offer from the plaintiff on 29 June 1999 to settle for $27,000 plus out-of-pocket expenses, plus s45 payments, plus costs. It is not necessary to go through all the offers and counter offers to settle. 3 On 15 September 1999 an offer was made by the defendant in the following terms: We wish to advise that we make a final offer of settlement in the sum of $10,000.00 inclusive of out-of-pocket expenses, HIC plus $3,000.00 for Legal Costs. This offer is made pursuant to the principles of Calderbank v Calderbank and is open to be accepted for a period of 28 days from the date of this correspondence. Should you not accept this offer and in the event that the matter becomes litigated, we will rely on the making of this offer should the question of interests [sic] arise. 4 To that letter the solicitor for the plaintiff responded with a counter offer to settle of $16,500, plus out-of-pocket expenses, plus costs. To that the insurer responded by letter of 1 October 1999 which included the following: Please note your client's offer is rejected. We feel that the offer contained in our Calderbank letter dated 14 September 1999 is more than sufficient. Could you please seek your client's instructions. 5 That letter, in my view, is a re-offer on the terms of the letter of 14 September 1999. By letter dated 25 October 1999. Mr Firth wrote accepting the letter in the following terms: We refer to this matter and to your letter of 30 September 1999. Please be advised that we have received instructions from our client that she is prepared to accept the sum of $10,000 plus costs of $3,000 in full and final settlement. Please let us have your Deed of Release in that regard at your earliest convenience. 6 By letter of 17 November the insurer sent a form of agreement for release from indemnity and said that: This agreement, when signed and witnessed, is for full and final settlement of your claim for personal injuries arising out of this motor vehicle accident. 7 He then set out the out-of-pocket expenses that would be paid by the insurer, and the Health Insurance Commission payment which would also be deducted and paid direct. There is no dispute about that. 8 The Form of Release, which is in relatively simple terms, although while it is in the form of an agreement it refers to the claimant as "you", in the clause under contention has the following words: 3. In consideration of the payment, you agree:- (a) not to commence or proceed with any action, suit or proceeding in respect of injuries sustained in the accident. (b) to indemnify and keep indemnified { the owner, the driver or their respective successors, executors, administrators, heirs and assigns; and { NZI against any claims, losses, damages, actions, suits or proceedings in respect of injuries sustained by you in the accident. 9 Mr Firth crossed out the part of that clause under (b) and inserted a new clause 5: If not paid within 28 days NZI will pay interest at the rate of 9.5 per cent per annum. 10 NZI did not accept those amendments and sent back a new unamended form, which again Mr Firth refused to sign, this time only objecting to clause 3(b) that has brought about this action. The insurer says it will not make any payment unless it obtains a signed form in its terms. 11 The plaintiff's solicitors state that the matter has been settled, that the terms of settlement must reflect the contract agreed between the parties, and that with clause 3(b) in, they do not. 12 It is right to say that this action is an extraordinary waste of time. There has been no suggestion, as I understand it, that there is any possibility of anyone else making a claim against NZI Insurance Australia Ltd in respect of the plaintiff's injuries. If there were, then there would have been evidence of it. NZI gains nothing from the clause. It is probably equally intransigent on the part of the plaintiff to refuse to sign an agreement with that term in it because the plaintiff is likely to know that no other claim could possibly arise unless she had assigned her cause of action or unless she thought she was likely to die before the payment was made. On any basis, what is happening here is a great waste of the Court's time and the parties' money mostly brought about by the insurers who insisted on having a clause in without knowing what the effect of the clause might be. 13 I turn to the question of whether or not there was a binding contract. In my view this is clearly determined by looking at the letter dated 15 September 1999, the reissue of the terms of that letter on 1 October 1999 and the letter from the plaintiff's solicitors of 25 October 1999. It is perfectly clear that the parties agreed in that correspondence to a settlement, the terms of that contract for settlement being perfectly clear from the correspondence. 14 It was, however, also clear that it was envisaged that a more formal agreement would be signed giving effect or putting into other words the agreement which the parties had come to. It is quite impossible to come to any other conclusion because the of offer was said to be made on the principles of Calderbank v Calderbank (1975) 3 WLR 586 and is stated to be open to acceptance for a period of 28 days. That means if the plaintiff had not accepted that offer, as she says she did, then the insurance company would have put that letter into evidence stating that it had made an offer which the now plaintiff had refused to accept. On that basis it must have been regarded as an offer which was capable of acceptance by a letter stating that the offer was accepted albeit that it was intended that a more formal release would be entered into. 15 The question then is whether or not the terms of the document proffered by the plaintiff were reasonable having regard to the objective intention of the parties. The objective intention of the plaintiff was to obtain the sum of $10,000 for her injuries less the appropriate deductions for out-of-pocket expenses and Health Insurance Commission payments and a sum of $3,000 for costs. On any basis that was the objective intention of the defendant in making of its offer. It could never have been thought that it was the intention of the parties that the plaintiff would indemnify the insurer against extraneous claims for damages such as claims for loss of services or for nervous shock which could have no effect whatsoever on the damages which the plaintiff was entitled to recover from the defendant. Unfortunately, however, those claims would have been embraced by the form of indemnity which the defendant insurer for some reason insisted on having, and that is not a reasonable term to be incorporated into the Form of Release. In fact it is not a release at all, but it is an indemnity. Whether or not there can be argument about a release being required, there was never any contract for an indemnity. On that basis the plaintiff is entitled, in general, to the relief which she seeks. It is probably appropriate that I make the declaration sought and give judgment for an agreed amount rather than make an order of specific performance. 16 Two questions arise to finalise this matter. The first is the question of interest. The claim for interest is really a claim for interest due upon an amount agreed to be paid by contract which has not been paid. In that respect it differs from claims of interest on general damages and the like which are not allowed under the provisions of the Motor Accidents Act. 17 While I previously expressed the view that both parties had been intransigent, the fact is on my judgment I found that the parties were required, pursuant to their intention and at least objective intention to enter into a reasonable Form of Release and the form required by the defendant was not such a form. In those circumstances, in my view, it is proper that interest be awarded to the plaintiff from a period commencing one month after the contract was made. It is agreed that that amount is $500. 18 The final question is the question of costs. The defendant made an offer to settle for $13,000 plus costs on certain terms, all of which would have been reasonable. The plaintiff says that the $13,000, if awarded in that way, would have made a difference to repayments or entitlements in respect of social security and that it made no provision for interest on the contract sum. 19 While there is a discretion, the fact is that what the plaintiff is getting is more than the amount offered. In those circumstances the provisions of Pt 22 of the Rules are not available to the defendant. I have come to the conclusion that the ordinary order for costs must follow. 20 It has been agreed to finalise matters between the plaintiff and the defendant, and this will be achieved by way of judgment for a money sum. It is to be noted that it is accepted by the parties that the judgment brings to an end the plaintiff's claim for damages arising out of her motor vehicle accident on 20 June 1998, that right having merged in the judgment. It is also agreed that the defendant is at liberty to deduct from the judgment amount and pay direct the out-of-pocket expenses and the Health Insurance Commission payment, which it is required to pay pursuant to the Motor Accidents Act together with any payment the defendant is required to make to the Department of Social Security out of the plaintiff's damages. 21 I make the declaration as sought in paragraph 1 of the Summons. Judgment for the plaintiff against the defendant for the separate sums of $10,500 and $3,000. I order the defendant to pay the plaintiff's costs. The exhibits may be returned.