Certain Lloyd's Underwriters v. Cross

[2012] HCA 56
(2012) 248 CLR 378
(2012) 293 ALR 412

(Decision by: Crennan J, Bell J)

Certain Lloyd's Underwriters
v Cross

Court:
High Court of Australia

Judges: French CJ
Hayne J

Crennan J
Kiefel J

Bell J

Judgment date: 12 December 2012


Decision by:
Crennan J

Bell J

[44] In New South Wales, the statute that regulates the legal profession imposes a restriction on the maximum costs that one party may recover from another in connection with a claim for personal injury damages in which the amount recovered on the claim does not exceed $100,000 ("small claims"). The scheme was introduced as Div 5B of Pt 11 of the Legal Profession Act 1987 (NSW) ("the 1987 LP Act") in a Schedule to the Civil Liability Act 2002 (NSW) ("the Liability Act"). The 1987 LP Act was repealed by the Legal Profession Act 2004 (NSW) ("the 2004 LP Act") and the costs restrictions are now found in Ch 3, Pt 3.2, Div 9 of that Act. The question raised by these appeals is whether the restrictions apply to a small claim for damages for personal injury suffered as the result of an act done with intent to cause injury or death. The answer turns on the meaning of the words "personal injury damages" contained in s 198C(1) of the 1987 LP Act (now s 337(1) of the 2004 LP Act).

Factual background

[45] The respondents were assaulted at the Narrabeen Sands Hotel by security guards who had been engaged to provide security services at the hotel. The respondents brought proceedings in the District Court of New South Wales claiming damages for the injuries suffered by them in the assaults. In July 2005, AVS Australian Venue Security Services Pty Ltd ("AVS"), the employer of the security guards, was joined as a defendant to the proceedings. AVS later went into liquidation and the appellants, AVS's insurers, were joined as defendants to the proceedings. Following a trial lasting in the order of 22 days, Judgment was entered for the respondents. The damages awarded in each case were for an amount less than $100,000. On 22 April 2010, Garling DCJ ordered that the appellants were to pay the respondents' costs. His Honour made a declaration that the costs were subject to s 198D of the 1987 LP Act.

Division 5B of Pt 11 of the 1987 LP Act

[46] Section 198D [55] is the central provision in Div 5B. Section 198D(1)(a) provides that if the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a plaintiff are fixed at 20% of the amount recovered or $10,000, whichever is greater. Sections 198E and 198F provide exceptions to the cap in the case of solicitor and own client costs that are the subject of an agreement that complies with the statute, and costs incurred after the date of a reasonable offer of compromise that is not accepted by the other party. Section 198G permits the court to exclude from the cap costs for legal services provided in response to actions taken by the other party that were not reasonably necessary for the advancement of that party's case. As noted, Div 5B is a scheme that restricts the recovery of costs in connection with claims for "personal injury damages". That expression is described for the purposes of Div 5B in s 198C(1) as follows: "personal injury damages has the same meaning as in Part 2 of the [Liability Act]."

[47] The Liability Act defines "personal injury damages" for the purposes of Pt 2 in s 11: In this Part:

injury means personal injury and includes the following:

(a)
pre-natal injury,
(b)
impairment of a person's physical or mental condition,
(c)
disease.

personal injury damages means damages that relate to the death of or injury to a person.

[48] The heading of Pt 2 is "Personal injury damages". Part 2 applies in respect of awards of personal injury damages except those that are excluded from its operation by s 3B. [56] Section 3B(1)(a) in Pt 1 of the Liability Act states that the provisions of the Liability Act "do not apply to or in respect of civil liability (and awards of damages in those proceedings)" in the case of liability for an intentional act done by a person with intent to cause injury or death or with respect to a sexual assault or other sexual misconduct. This is one of a number of exclusions for which s 3B(1) provides.

Procedural history

[49] Garling DCJ reasoned that the respondents' claims were for "personal injury damages" for the purposes of s 198D because each was a claim for damages relating to injury to a person within the meaning of s 11 of the Liability Act, as picked up by s 198C(1).

[50] The New South Wales Court of Appeal (Hodgson and Basten JJA and Sackville AJA) allowed the respondents' appeals against that part of the costs orders which declared that the costs were subject to s 198D. The Court of Appeal interpreted the words "has the same meaning as in Part 2 of the [Liability Act]" as applying the words of the definition in s 11 by reference to their application in Pt 2 of the Liability Act. [57] The Court of Appeal made a declaration that the legal costs incurred by the respondents were not subject to s 198D of the 1987 LP Act, nor to s 338 of the 2004 LP Act.

[51] On 9 December 2011, the appellants were given special leave to appeal from the order of the Court of Appeal. Their appeals were heard together with the appeal in New South Wales v Williamson, [58] which raised the same constructional question. These reasons should be read with those in Williamson.

[52] For the reasons that follow, we would dismiss the appeal.

The 1987 LP Act or the 2004 LP Act?

[53] The costs orders were made by Garling DCJ on 22 April 2010. The 1987 LP Act was repealed by the 2004 LP Act, which commenced on 1 October 2005. Transitional provisions provided for the continued application of Div 5B of Pt 11 of the 1987 LP Act to a matter if the client first instructed the law practice in the matter before 1 October 2005. [59] Garling DCJ applied the 1987 LP Act. The appellants submitted that his Honour was correct to do so. This had been a common position below. Basten JA thought that the "matter" under the transitional provisions was the claim for party and party costs and that the 2004 LP Act applied. The respondents adopted Basten JA's analysis and in their written submissions asserted that the question should be determined by reference to the 2004 LP Act. The operative provisions of the two Acts are identical in their application to the appeals. Little attention was devoted to the operation of the transitional provisions on the hearing of the appeals. There are differences between the two schemes that are not raised by these appeals, [60] which make it appropriate to leave consideration of the effect of the transitional provisions to an occasion when it is in point.

[54] The appellants' submissions were based on Div 5B of Pt 11 of the 1987 LP Act and the Liability Act as enacted. In their submission, the meaning of the expression "personal injury damages" had not been affected by later amendments including those introduced in December 2002 by the Civil Liability Amendment (Personal Responsibility) Act 2002 (NSW) ("the Personal Responsibility Act"). There is no reason to consider that the meaning of "personal injury damages" has changed as the result of any of the amendments that have been made to the Liability Act, although the relationship between the two Acts may be clearer as a result of the amendments.

The legislative history

[55] Division 5B of Pt 11 was inserted into the 1987 LP Act by Sch 2 to the Liability Act. As enacted, s 198C(1) provided that "personal injury damages has the same meaning as in the [Liability Act]." At the time, the Liability Act consisted of two Parts. Part 1 was headed "Preliminary" and contained a definition section. Part 2 was headed "Personal injury damages" and contained provisions imposing restrictions of various kinds on the award of damages in claims for personal injury damages whether the claim was in tort, contract or otherwise. The expression "personal injury damages" was defined in s 3 to mean "damages that relate to the death of or injury to a person caused by the fault of another person." "Fault" was defined to include an act or omission. "Injury" was defined to mean "personal or bodily injury" and to include "pre-natal injury", "psychological or psychiatric injury" and "disease". Under s 9(2), statutory schemes governing compensation for motor accidents, work injuries, dust diseases, victims support and rehabilitation, discrimination and sporting injuries, together with sums paid under superannuation schemes or insurance policies or under the Industrial Relations Act 1996 (NSW), were excluded from the operation of Pt 2 of the Liability Act. Importantly, s 9(2)(a) excluded from the operation of Pt 2:

an award where the fault concerned is an intentional act that is done with intent to cause injury or death or that is sexual assault or other sexual misconduct.

[56] The Liability Act was assented to on 18 June 2002. It operated with retrospective effect from 20 March 2002. [61] This was the date on which the Premier of New South Wales released a Ministerial statement, titled "Public liability insurance", announcing the measures to be enacted in the proposed civil liability legislation. An extract from the statement is set out in Basten JA's reasons. The Premier referred in the statement to "the number of small claims that are argued in a way that drives up legal costs and makes insurance more expensive." One way to address that problem was said to be "to cap legal costs for small claims to a proportion of the claim." [62]

[57] The restrictions on the recovery of party and party costs inserted into the 1987 LP Act by the Liability Act also operated with retrospective effect. They applied to legal services provided on or after 7 May 2002. On that date, the Premier announced the release of the draft Civil Liability Bill 2002 [63] ("the Liability Bill").

[58] In his second reading speech for the Liability Bill, the Premier described it as implementing "stage one of the Government's tort law reforms." The need for reform was said to be "vital to the survival of our community" in light of "the damage that the public liability crisis is doing to our sporting and cultural activities, small businesses and tourism operators, and our local communities." The second stage of the tort law reform program was proposed to be introduced in the next session of the Parliament and to address "broad-ranging reforms to the law of negligence." [64] Reference was made to the "cap on fees" under the amendments to the 1987 LP Act. This, it was said, would "promote efficiency on the part of the legal profession and help to contain claims costs." [65] In conclusion, the Liability Bill was said to "build[] on the Government's work with the insurance industry and other jurisdictions to find solutions for people affected by the public liability crisis." [66]

[59] The second stage of the reforms initiated by the Liability Act was effected by the Personal Responsibility Act. [67] It was enacted not long after the Final Report of the Commonwealth committee chaired by Justice Ipp was published. [68] The amendments introduced by the Personal Responsibility Act included Pt 1A, which contains a statement of the principles governing the determination of civil liability for the negligent infliction of harm. Provisions were also introduced dealing with mental harm, [69] proportionate liability, [70] the liability of public and other authorities, [71] intoxication, [72] self-defence and recovery by criminals, [73] good Samaritans, [74] volunteers [75] and apologies. [76] These provisions were not confined to civil liability for personal injury or death. The award of "personal injury damages" continued to be governed by Pt 2. The definitions of "personal injury damages" and "injury" were removed from Pt 1 and inserted into Pt 2 in s 11. The definition of "personal injury damages" no longer contained reference to fault. "Personal injury damages" was now defined to mean "damages that relate to the death of or injury to a person."

[60] The Personal Responsibility Act effected a consequential amendment to the 1987 LP Act. [77] The description of "personal injury damages" in s 198C(1) was omitted and a new description was inserted. Section 198C(1) now provided "personal injury damages has the same meaning as in Part 2 of the [Liability Act]." Section 9 of the Liability Act was repealed. In its place, s 3B was inserted into Pt 1. Section 3B excluded the provisions of the Liability Act from applying to or in respect of civil liability under statutory schemes for compensation which largely corresponded to the exclusions under the former s 9. Relevantly, s 3B(1)(a) excluded from the provisions of the Liability Act the civil liability of a person "in respect of an intentional act that is done with intent to cause injury or death or that is sexual assault or other sexual misconduct".

[61] The Liability Act has been further amended in respects to which it is not necessary to refer, save to note the insertion in Pt 2 of s 15B and the amendment to s 18(1) in 2006. [78] Section 15B makes provision for the award of damages for the loss of capacity to provide domestic services. The amendments made to s 18(1) were to preclude the award of interest on damages under s 15B. The exclusion of the provisions of the Liability Act with respect to the civil liability of a person for an intentional act done with intent to cause injury or death under s 3B(1)(a) was now subject to an exception in the case of ss 15B and 18(1) (in its application to the award of s 15B damages). [79] The effect of the 2006 amendments is that Pt 2 now applies to the award of damages with respect to the loss of capacity to provide domestic services that relate to the death of or injury to a person arising from an intentional act done with intent to cause injury or death.

The Court of Appeal

[62] Basten JA gave the leading judgment in the New South Wales Court of Appeal, with which Hodgson JA agreed. His Honour considered that the words in s 198C(1) "personal injury damages has the same meaning as in Part 2 of the [Liability Act]" admitted of a "broader inquiry" than if the provision read "personal injury damages as defined in". [80] In ascertaining that meaning, his Honour took into account the context of the definition in the source statute [81] and that "the cost-capping provisions were seen as part of a single package, having the same justification as the controls being imposed on awards of damages." [82] The incorporation of the meaning of "personal injury damages" in the Liability Act indicated a legislative intention that the scope and operation of the expression derive from the source statute. [83] His Honour concluded that the description of "personal injury damages" in s 198C(1) of the 1987 LP Act picks up the words of the definition in the Liability Act in their application under that Act [84] with the result that a party injured by intentional tortious conduct is not subject to the costs cap. [85]

[63] Sackville AJA also concluded that the description of "personal injury damages" in s 198C(1) means personal injury damages of the kind to which Pt 2 of the Liability Act applied. [86] His Honour, too, took into account that Div 5B of Pt 11 of the 1987 LP Act was enacted as "part of a broader statutory scheme for limiting the costs of personal injury claims" and that the scheme did not apply to awards of damages for personal injuries caused by intentional acts. [87] His Honour characterised claims in negligence for personal injury as "high volume litigation conducted or capable of being conducted along largely standardised lines", and which are usually brought against insured defendants. [88] This was by way of contrast with claims arising from the intentional infliction of injury. [89] This contrast highlights a rationale for capping costs in claims in negligence for personal injury which does not readily apply to claims arising from intentional torts.

[64] Five weeks after judgment was delivered in these appeals, a differently constituted New South Wales Court of Appeal (Hodgson, Campbell and Macfarlan JJA) gave judgment in New South Wales v Williamson. [90] The claim in Williamson was for damages for personal injury sustained in an assault and damages for false imprisonment. The latter included claims for the loss of liberty, loss of dignity and exemplary damages. The claim was settled and judgment entered for the plaintiff by consent for an undifferentiated sum. Costs were to be assessed or agreed. [91] Resolution of the present question was not determinative on the view that any of the judges took in Williamson. However, Campbell and Macfarlan JJA both doubted the correctness of the construction adopted by the Court of Appeal in these proceedings. Hodgson JA, who sat on each appeal, adhered to his earlier agreement with Basten JA [92] and gave additional reasons for that conclusion. His Honour took into account that s 198C was introduced into the 1987 LP Act as part of "a single package, addressing a perceived crisis in public liability insurance". He considered that the phrase "'the same meaning as in the [Liability Act]' ... could be understood as directing attention to the meaning effectually given in the [Liability Act], and thus as incorporating the limitations" on its application. [93]

[65] Campbell JA made much the same point as Sackville AJA in these appeals respecting the distinction between small claims in negligence, which fit a "fairly common pattern", and small claims for damages for assault, which do not. [94] His Honour viewed the enactment of the costs restrictions as part of a single scheme and remarked that the imposition of a cap on costs in claims for assault did not appear to come within the mischief to which the Liability Act was principally aimed, [95] which he identified as the increasing costs of insurance premiums. He noted that insurance for intentional torts will usually be unprocurable. [96] His Honour went on to say this: [97]

However, it is the words of the statute that are the starting point in statutory construction. While those words are to be construed in their context (which includes the objective of the legislation in question), clear words in the statute will prevail.

[66] Macfarlan JA agreed with Campbell JA. His Honour recognised the "contextual and policy arguments" favouring the views expressed by the Court of Appeal in the present case but considered the text of the 2004 LP Act to be clear. His Honour said that the meaning of "personal injury damages" is found in the definition, but the scope of the application of the expression is a separate question. [98] His Honour considered that: [99]

the literal meaning of the text of a statutory provision must prevail unless it can be disregarded upon the ground that that literal meaning gives rise to an absurdity or the text is sufficiently tractable to accommodate the meaning suggested by contextual or policy considerations.

The submissions

[67] The parties' submissions mirrored the differing views of the members of the Court of Appeal in these appeals and in Williamson. The appellants contended that "the ordinary meaning of [the statutory language] plainly indicated that the Legal Profession Acts were employing the meaning of an expression found (and clearly defined) in another Act." The appellants were critical of the Court of Appeal's recourse to extrinsic materials "to discern an intended meaning other than the ordinary meaning conveyed by the statutory language". The respondents contended that the Court of Appeal was correct to take into account that Div 5B of Pt 11 of the 1987 LP Act had been enacted as part of a scheme with the Liability Act and to give a purposive construction to the provision.

Construing s 198C(1)

[68] Statutory construction involves the identification of the purpose of a statute or a statutory provision. A court undertaking that task is concerned with the assignment of the legal meaning to the words of the text, a task that will usually, but not always, correspond with the ordinary grammatical meaning of the text. In the joint reasons in Project Blue Sky Inc v Australian Broadcasting Authority, [100] it was said:

However, the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.

[69] In the last-mentioned respect, their Honours referred with approval to the statement in Mr Bennion's text: [101]

Furthermore there needs to be brought to the grammatical meaning of an enactment due consideration of the relevant matters drawn from the context (using that term in its widest sense). Consideration of the enactment in its context may raise factors that pull in different ways. For example the desirability of applying the clear literal meaning may conflict with the fact that this does not remedy the mischief that Parliament intended to deal with.

[70] Whilst consideration of extrinsic materials should not displace the clear meaning of the text of a provision, [102] the purpose of a provision may be elucidated by appropriate reference to them. [103] It has often been said that the clear meaning of the text of a statute or a statutory provision is the surest guide to the meaning of "the intention of the legislature", [104] an expression used metaphorically. [105] Nevertheless, it is uncontroversial that in determining the meaning of the text of a statute or provision a court may take into account the general purpose and policy of a provision and, in particular, the mischief that it is intended to remedy. [106] It was for the latter purpose that the Court of Appeal had recourse to the extrinsic materials. This did not involve error. [107] The extrinsic materials indicated that the Liability Act was enacted to deal with a perceived problem involving the high cost of negligence claims and the impact of such claims on the cost of insurance. This conclusion is uncontroversial. [108] Was it right to conclude that Div 5B of Pt 11 of the 1987 LP Act was enacted to remedy the same problem? The extrinsic materials suggest that it was. So does the retrospective operation of the Division. The latter is a strong indication that the scheme was enacted as part of the legislative response to the perceived crisis involving negligence claims. The enactment of Div 5B in a Schedule to the Liability Act and the choice to describe "personal injury damages" by reference to the meaning of the expression in the Liability Act support that conclusion. The definition of "personal injury damages" in the Liability Act is not elaborate and the scope and operation of the Liability Act is clearly stated in s 3B. Something more than economy may be discerned in the choice to incorporate the meaning of the expression in the Liability Act into Div 5B.

[71] The Liability Act deals with the award of personal injury damages by courts and tribunals and Div 5B of Pt 11 of the 1987 LP Act deals with claims for personal injury damages. Observing this circumstance does not suggest a reason for concluding that each is not directed to addressing the same problem involving the reduction of the cost of negligence claims. There are features of the conduct of personal injury negligence claims which provide a rationale for the imposition of a cap on legal costs in such claims. They are the features noted by Sackville AJA and Campbell JA to which reference has been made earlier in these reasons. These features are also noted by Mason P in Newcastle City Council v McShane (No 3) with particular reference to the conduct of personal injury litigation by specialist members of the profession in New South Wales. [109]

[72] If, as urged by the appellants, the presumed legislative intent of Div 5B is the achievement of some wider purpose than restricting recovery of costs in small negligence claims, what sensible reason could be advanced for confining the scheme to small claims in which damages for personal injury are sought? The facts in Williamson highlight the irrationality of a cap that applies to an action based on an intentional tort in which a claim is made for personal injury but not to the same action when no such claim is made.

[73] Consideration of the mischief with which Div 5B was intended to deal and the express language of s 198C(1) weighs against interpreting that provision as merely picking up the words of the definition in s 11 of the Liability Act. The appellants' construction requires that s 198C(1) be read as if it provided "personal injury damages means 'personal injury damages' as defined in s 11 of the Liability Act". That method of expressly incorporating a definition from another Act is used in s 198C(2)(c), which provides that "work injury damages" is "as defined" in the Workplace Injury Management and Workers Compensation Act 1998 (NSW). A different formulation is employed in the same section with respect to the expression "personal injury damagesf". It is a formulation that expressly directs attention to the meaning of the expression as in Pt 2 of the Liability Act. In its terms, the definition in s 11 applies to Pt 2. The meaning of the expression "personal injury damages" in Pt 2 is plainly circumscribed by s 3B of the Liability Act. The clear purpose of s 198C(1), so expressed, is to confine "personal injury damages" to damages relating to the death of or injury to a person (in the extended way injury is defined) to which Pt 2 of the Liability Act applies. The rationale for such confinement has already been explained. This construction of s 198C(1) reflects the evident purpose for which Div 5B was enacted, gives full effect to the statutory language of s 198C(1) and avoids unintended, if not potentially capricious, results.

[74] One further submission needs to be mentioned. Section 198C(2) of the 1987 LP Act provides that Div 5B does not apply with respect to costs under various statutory schemes: Pt 2 of the Victims Support and Rehabilitation Act 1996 (NSW); the Motor Accidents Act 1988 (NSW) or Motor Accidents Compensation Act 1999 (NSW); the Workplace Injury Management and Workers Compensation Act 1998 (NSW) and the Dust Diseases Tribunal Act 1989 (NSW). The exclusions in s 198C(2) overlap but are not co-extensive with those in s 3B(1) of the Liability Act. The appellants submit that had it been the intention to exclude small claims for personal injury damages resulting from acts done with intent to cause injury or death from the operation of Div 5B, it might be expected that an exclusion in the same terms as s 3B(1)(a) of the Liability Act would have been included in s 198C(2). The submission does not advance the argument either way. If the correct meaning of s 198C(1) is as the respondents contend, there was no occasion to expressly exclude claims involving intentional torts.

[75] What function do the exclusions serve? Division 5B applies to the recovery of party and party costs where the amount recovered on the claim does not exceed the threshold, whether the amount is recovered following trial or by way of compromise. At the time it was enacted, s 198C(2) operated to exclude from the regime of Div 5B the recovery of costs under statutory schemes that make discrete provision for the recovery of party and party costs. [110] The Motor Accidents Compensation Act 1999 (NSW) made such provision, although it may be noted that its predecessor did not. Basten JA's conclusion that the exclusions were provided by way of abundant caution to meet any argument of implied repeal should be accepted. [111] So should the Court of Appeal's conclusion that for the purposes of s 198C(1) of the 1987 LP Act (now s 337(1) of the 2004 LP Act) the meaning of "personal injury damages" in Pt 2 of the Liability Act was not changed by a sidewind by the 2006 amendments to that Part respecting damages for the loss of capacity to provide personal services. [112]

Orders

[76] For the reasons given, the three appeals should be dismissed with costs.