Metro North Hospital and Health Service v Michael Stewart (by his litigation guardian Carol Schwarzman) [2024] QCA 226

Case update: What constitutes a valid offer under the UCPR?

A Court of Appeal has upheld the decision of the Supreme Court in finding that the Metro North Hospital and Health Service’s (‘the Health Service’) offer to settle costs did not comply with r 353 of the Uniform Civil Procedure Rules (‘UCPR’).

Facts

The plaintiff had commenced a claim for personal injuries against the Health Service, arising from his treatment as a patient at a hospital operated by the respondent. Mr Stewart had suffered significant injuries as a result, including brain damage.

At trial, the Health Service had admitted duty, breach and causation. The primary judge awarded damages in the sum of $2,190,505.48 plus management fees to be assessed. The primary judge subsequently ordered that the Health Service pay the plaintiff’s costs of the proceeding up to and including 17 July 2023, and that there be no order for costs after that date.

On 7 June 2024, the primary judge granted the Health Service leave to appeal the order that there be no order as to costs after 17 Jule 2023. That issue is the subject of these proceedings.

In issue

The Health Service submitted that the primary judge had erred in finding that the meaning of “offer’ in r 353(1) of the UCPR, was only limited to offers capable of settling the whole claim.

Rule 353(1) of the UCPR provides that “a party to a proceeding may serve on another party to the proceeding an offer to settle 1 or more of the claims in the proceeding on the conditions specified in the offer”.

An offer was made by the Health Service on 17 Jule 2023 in the sum of $3,000,000 for primary damages inclusive of interest and statutory refunds, plus ‘reasonable fund management and administration fees to be agreed following resolution of primary damages’, along with ‘standard costs of and incidental to the claim including the application for sanction to be agreed, or failing agreement to be assessed according to the UCPR’ (emphasis added).

The primary judge found that in order to be compliant, an offer under r 353 may not offer to settle part of a cause of action or claim for relief. That is, the cost of management fees comprised only one component of the damages of the claim, and providing that management fees to be dealt with separately by means of further agreement between the parties was not an offer to settle the whole claim.

Court’s decision

The Court considered the following in reaching a determination:

1. The purpose of rr 353 and 361 to encourage the just and expeditious determination of litigation;
2. Offers of compromise, which are not accepted by a party who obtains an order that is less favourable than the offer, trigger favourable costs orders;
3. An offer to settle must relate to the claims in the proceeding per r 353. A claim is a cause of action or claim for relief;
4. A claim for damages for negligence is only one cause of action;
5. An offer to settle some heads of damages, with others to be subject to further agreement, is an offer to settle only part of the cause of action. Such an offer does not comply with r 353.

The Court of Appeal found that the offer was not an offer to settle the claim made by the plaintiff, and therefore the Health Service failed to deliver an offer compliant with r 353.

During proceedings, the Health Service submitted that the plaintiff’s offer, couched in the terms of “the sum of $4,900,000 (four million and nine hundred thousand dollars) plus reasonable funds management and administration fees to be agreed or assessed, by way of damages, inclusive of interest, plus standard legal costs, including the costs of the sanction of the settled required by s 59 of the Public Trustee Act 1978, to be agreed or assessed” also had not complied with r 353 (emphasis added).

The Court of Appeal otherwise found that the plaintiff’s offer did not leave the resolution of the funds management administration fees to further determination after resolution of the primary damages. Instead, the plaintiff’s offer provided a mechanism for determination of those fees, as part of a settlement sum by use of the words ‘by way of damages’.

Practical tips

This case highlights the need for careful consideration of all wording of UCPR offers made during litigated proceedings. Here, the Court of Appeal held the use of the words “following resolution of primary damages” within the Health Service’s UCPR offer highlighted that the offer sought to settle only part of the cause of action, rather than the entirety of the claim. Further, the use of the term ‘to be agreed’ in relation to the management and administration fees in the absence of the term ‘or assessed’ resulted in part of the damages being subject to further agreement by the parties, with no mechanism for settlement in the absence of said further agreement by the parties.

The case indicates that in order to comply with r 353, offers should specify the primary damages sum “plus reasonable funds management and administration fees to be agreed or assessed, by way of damages”, thus making it evident that the offer encompasses all heads of damage without the need for any further agreement between the parties.

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