New South Wales Supreme Court CITATION : Freeman v Allianz Australia Insurance [2005] NSWSC 257 HEARING DATE(S) : 24 March 2005 JUDGMENT DATE : 24 March 2005 JURISDICTION : Equity JUDGMENT OF : Campbell J DECISION : Litigation settled. Declarations made. CATCHWORDS : CONTRACT - offer and acceptance - whether contract entered to settle litigation - PROCEDURE - appropriateness of making declaration in terms parties have agreed to, to settle litigation, even if the declaration is not accurate Motor Accidents Compensation Act 1999 LEGISLATION CITED : Motor Accidents Compensation Regulation (No 2) 1999 Natalie Alicia Freeman - Plaintiff PARTIES : Allianz Australia Insurance Limited - Defendant FILE NUMBER(S) : SC 7025/04 R Goodridge - Plaintiff COUNSEL : D Ronzani - Defendant Firths The Compensation Lawyers - Plaintiff SOLICITORS : TL Lawyers - Defendant LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION ONE-DAY LIST CAMPBELL J THURSDAY, 24 MARCH 2005 7025/04 NATALIE ALICIA FREEMAN v ALLIANZ AUSTRALIA INSURANCE LIMITED JUDGMENT – Ex Tempore (Revised 24 March 2005) 1 HIS HONOUR: This is a dispute about whether some litigation has been settled. 2 The plaintiff was injured in a motor vehicle accident on 29 December 2001. The defendant is the compulsory third party insurer under the Motor Accidents Compensation Act 1999 (which I will refer to as the "MAC Act") of the vehicle which was at fault in that accident. The plaintiff lodged a claim under the MAC Act. The defendant admitted the breach of its insured's duty of care on 25 June 2003, and made a fairly low offer of settlement. Offers of settlement were traded back and forth between the solicitor for the plaintiff and the claims officer of the defendant on several occasions thereafter. 3 A continuing theme of the offers made by the defendant was that its offer was inclusive of all costs and disbursements, and that the parties were to execute an agreement for release and indemnity in a form which was attached to the first letter which made an offer. A continuing theme of the offers made by the plaintiff was that its offer took the form of settlement for "X dollars plus costs plus out of pocket expenses", and said nothing about whether a deed would be executed. 4 After the tennis match of offers and counter-offers had gone on for a while, the plaintiff's solicitor made an offer on 28 October 2004, the relevant part of which is: "Our client instructs us that she would be prepared to accept the sum of $18,000 plus out-of-pocket expenses plus costs in full and final settlement of her claim." 5 On 2 November 2004, the secretary of the solicitor for the plaintiff received a telephone call from someone called Mona at the defendants. The secretary made a file note which says (extending the abbreviations): "Mona from Allianz received our final offer of $18,000 plus plus and would like to accept it. Will fax confirmation this afternoon." 6 The secretary made a file note that that conversation had occurred at 12:07 on 2 November 2004. The claims officer of the defendant who had signed earlier letters making settlement offers was Mona Elkady. 7 As things happened, confirmation was not faxed that afternoon, but rather on 5 November 2004. The defendant's letter of that date said: "Please be advised we accept your offer of $18,000 plus out of pocket expenses plus legal costs. We make an allowance of $225.00 for past out of pocket expenses being physiotherapy treatment from 2/11/03 to 25/2/04, and $1775.00 for legal costs, making a total settlement offer of $20,000 inclusive of all costs. On acceptance of the offer these unpaid accounts totalling $225.00 will be paid directly to Back in Action Physiotherapy. If you are aware of any treatment expenses not listed above please advise. We will not be held liable for any unpaid treatment accounts once the claim is settled. Please find attached a Release and Indemnity for execution and return to this office so payment may proceed. We remind you our acceptance is conditional, subject to the following Release and Indemnity." 8 The Deed of Release and Indemnity had, as its operative provision, "The insurer will pay you $20,000.00 inclusive of all costs ... in full and final settlement of all claims which you may have under the Act ...". 9 On 9 November the solicitors for the plaintiff replied, noting: "… that you have accepted our offer of $18,000 plus out of pocket expenses, plus legal costs and yet you purport to submit a deed for $20,000 inclusive of costs. Please advise whether or not you wish us to amend the document submitted by you to reflect the agreement actually reached or will you submit a document for our reconsideration that contains the actual terms agreed between the parties?" 10 There was some further correspondence, the gist of which was that the defendant stuck by its requirement that the deed be entered in a form which was inclusive of all costs and past out of pockets, and that the all inclusive amount was to be $20,000. 11 The solicitors for the plaintiff continued to say that the matter was already settled, for the sum of $18,000 plus out of pocket expenses plus costs. 12 Matters had reached that stage where the present proceedings were begun by summons filed on 19 November 2004. It sought the following orders: "1. A declaration that the plaintiff's claim under the Motor Accidents Compensation Act arising out of injuries sustained in a motor vehicle accident on 29 December 2001 was settled on 2 November 2004 for the sum of $18,000 plus out of pocket expenses plus costs. 2. Interest on the sum of $18,000 from 30 November 2004 to the date of payment. 3. Costs on an indemnity basis." 13 There is before me today not only the claim for the orders articulated in that summons, but also an oral motion by the plaintiff, seeking specific performance of a settlement agreement it claims has been arrived at concerning these proceedings themselves. 14 There is a second oral motion before me by the defendant contending for a declaration as to what it says are the terms which have been agreed upon concerning settlement of the present proceedings, if any have in fact, been agreed upon. 15 After the proceedings were begun, and the carriage of the matter went from an officer of the defendant to a solicitor for the defendant, the defendant took a somewhat different stance. That stance resulted in the solicitors for the defendant writing to the solicitors for the plaintiff on 13 December 2004, saying: "Our client is prepared to consent to the following orders: 1. A declaration that the plaintiff's claim under the Motor Accidents Compensation Act arising out of injuries sustained in a motor vehicle accident on 29 December 2001 was settled on 2 November 2004 for the sum of $18,000 plus past out of pocket expenses plus costs as regulated by the Motor Accidents Compensation Regulation (No 2) 1999 . 2. If Order 1 agreed, consent to Order 2. 3. If Orders 1 & 2 agreed, the defendant to pay the plaintiff's costs on a party/party basis The above offer is open until 9am, 14 December 2004" 16 The solicitors for the plaintiff replied on 13 December 2004, saying: "Be advised we are prepared to settle the equity proceedings in the terms set out in your letter. Please let us have draft orders for our execution in that regard." 17 Also on 13 December, but later in the day, the solicitors for the defendant emailed to the solicitors for the plaintiff some proposed consent orders, together with a deed and a Health Insurance Commission advance payments notice. The solicitor said: "We would also require a HIC Notice of Settlement/Judgment". 18 The penultimate piece of correspondence on 13 December 2004 was from the solicitors for the plaintiff to the solicitors for the defendant saying they had received the email, and that: "The proposed consent orders seem appropriate to us. However in light of the fact that the matter has settled by consent orders, there is no longer any need for a deed." 19 In the final piece of correspondence of 13 December the solicitors for the defendant continued to press for a deed. 20 I should say that it is accepted by both the parties that in the discussions between them, any reference to out of pocket expenses was a reference to past out of pocket expenses, and any reference to costs was a reference to costs as regulated by the Motor Accidents Compensation Regulation (No 2) 1999. 21 I consider first whether the proceedings were settled before the filing of the summons. In my view they were not. The secretary's message of 2 November was one which was expressed in somewhat imprecise language, saying the defendant "would like to accept it". Those words sometimes, can indicate a mere state of mind and in some other contexts can be an actual acceptance. However, the statement that the defendant "will fax confirmation this afternoon" should be taken, in my view as an indication that on that occasion it was the written communication which was to be the acceptance. Particularly in the context where there is an oral communication to a secretary, rather than to a legal principal who has carriage of a matter, one should be careful about drawing a conclusion that the leaving of a telephone message shows an intention then and there to enter into contractual relations. It was not so in this case. 22 The "confirmation" when received, turned out not to be a true confirmation of acceptance when read as a whole, but a counter offer. Though it said: "We accept your offer of $18,000 plus out of pocket expenses plus legal costs", the self same document then made clear that the acceptance was conditional on the release and indemnity. The form of the release and indemnity was one which simply did not relate to a settlement which had the structure of $18,000 plus out of pocket expenses plus legal costs, even given the statutory controls that there are, on the way in which out of pocket expenses and legal costs can be quantified for claims under the MAC Act. No closer approach to a finalised contract was reached before the proceedings were begun. 23 The proceedings have, however, settled. The communication of the solicitor for the defendant of 13 December 2004, being from one solicitor to another, stipulating in precise terms the order that it was proposed would be those on which the proceedings would be disposed of, and stipulating a precise time during which the offer was open, was a type of offer which was intrinsically capable of acceptance simply by saying "I accept". That is exactly what the solicitor for the plaintiff did by return mail on 13 December 2004. For those reasons, the proceedings have settled on the terms of the letter of 13 December 2004. 24 There are certain statutory limitations on the way in which out of pocket expenses and legal costs can be quantified, but it is perfectly possible for the quantification of those out of pocket expenses and legal costs to take their course, even when the proceedings have settled. Further, there are various statutory obligations which the defendant has to deduct money from the verdict, to repay social security benefits, workers' compensation, and amounts payable to the Health Insurance Commission. Nothing in the settlement purports to cut down those obligation which exist as a matter of law. 25 For those reasons, I declare that the plaintiff's claim under the Motor Accidents Compensation Act arising out of injuries sustained in a motor vehicle accident on 29 December 2001 was settled on 2 November 2004 for the sum of $18,000 plus past out of pocket expenses plus costs as regulated by the Motor Accidents Compensation Regulation (No 2) 1999. 1. I order that interest on the sum of $18,000 be paid from 30 November 2004 to the date of payment. 2. I order the defendant to pay the plaintiff's costs on a party/party basis. 26 The declaration I have made is in the terms that the parties have agreed. It is appropriate to make it notwithstanding the conclusion I came to concerning the actual contractual situation at the time the proceedings began. To do otherwise would undermine the settlement that has been achieved. That settlement binds the parties to the version of reality that they agreed would apply, so far as settlement of the litigation is concerned. No public policy prevents it from being given effect to in the present case. It is quite common for a court to hold, when there is an estoppel, that the parties are bound to treat some particular state of affairs as being the case, even though the Court knows perfectly well that that state if affairs is not the case. The present situation is similar. 27 That does not mean the Court will always make declarations simply because the parties have agreed it should do so. It will not do so if the making of the declaration could alter, for example, the tax liabilities of someone. I adopt the statement in Young, Declaratory Orders, 2nd ed. para [601] that: "In New South Wales, the course that has been taken is to grant declarations by consent except in cases where other persons might be affected by the order such as in local government matters or other cases involving public rights, rights in rem or other analogous rights." 28 In the present case, the making of the declarations will have no effect on anyone other than the plaintiff and the defendant themselves. 29 That disposes of the principal proceedings. * * * * * * * * * * * * * * * 30 No further orders are sought concerning the oral motions. I therefore make none. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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