Australia: Tutors and Offers of Compromise
Curwoods Case Note

Azar v Kathirgamalingan [2012] NSWCA 429

In Brief

• In circumstances where a plaintiff is under legal incapacity, a tutor can accept an offer of compromise on the plaintiff's behalf and create a binding agreement.
• The onus is on the rejecting party to provide evidence of why the offer was rejected before the Court will exercise its discretion not to award indemnity costs.

Background

Nayla Azar was involved in a motor vehicle accident on 20 August 2003 when Imaharan Kathirgamalingan collided with the rear of her vehicle. Breach of duty of care was admitted, but proceedings were commenced in the District Court of NSW because the plaintiff was a person under a legal incapacity having developed a significant psychological condition in the second half of 2003. Her son acted as her tutor.

On 21 April 2011, Williams DCJ awarded Ms Azar damages in the sum of $250,832.83. His Honour made his assessment based solely on the physical injuries sustained by Ms Azar, indicating that her psychological disability could not be attributed to the accident. Ms Azar's credibility was in issue because the evidence which Ms Azar gave in Court and the histories given to medical professionals were found to have been inconsistent. It was conceded that there were difficulties with her evidence, but explained that this was a result of her psychological condition.

Mr Kathirgamalingan made an offer of compromise on 11 February 2011 for an amount greater than what Ms Azar was ultimately awarded. Williams DCJ subsequently ordered Ms Azar to pay Mr Kathirgamalingan's costs on an indemnity basis from the date of the offer.

Ms Azar sought to challenge the judgment on 25 separate grounds, including the findings on causation, a Jones v Dunkel inference made, and the findings on credibility. The costs order was also the subject of the appeal and will be discussed in detail below.

Offer of Compromise

Capable of Acceptance by Tutor?

Ms Azar submitted that the tutor could not have accepted Mr Kathirgamalingan's offer of compromise because any offer accepted by a tutor cannot be binding, pursuant to UCPR 20.27. She further submitted that UCPR 20.29 directs that an accepted offer bestows an agreement that is subject to implementation by a judgment or order. Therefore, it would be contrary to the Court's supervisory jurisdiction pursuant to s 76 of the Civil Procedure Act (CPA).

The Court agreed that, whilst s 76(3) of the CPA provides that there cannot be any compromise or settlement of any proceedings without the approval of the Court where a person is under legal incapacity, subs (4) provides that if an agreement for the compromise of the proceedings is made by the plaintiff, or on their behalf, the Court may approve or reject the agreement.

The Court of Appeal discussed UCPR 7.14, which requires that everything a person under legal incapacity does in the commencing and carrying on proceedings can be undertaken by their tutor. It also referred to UCPR 7.15 which provides that, as in the present case, if a plaintiff is under a legal incapacity, their tutor is authorised to act on their behalf and do anything the UCPR requires them to in respect of the relevant proceedings. The Court finally highlighted that UCPR 20.27 expressly confers authority upon a tutor to accept an offer of compromise on the plaintiff's behalf. The Court thereby ascertained that once a tutor accepts an offer of compromise, it initiates an "agreement for the compromise or settlement of [a] matter", as per s 76(4) of the CPA.

Therefore, the tutor was permitted to accept the offer of compromise on her behalf and this acceptance would be binding and consistent with s 76 of the CPA.

The Court of Appeal explained that when a tutor accepts an offer, the acceptance itself does not constitute a binding agreement of settlement in relation to the litigation; acceptance does give rise to some contractual obligations.

Tutor's Conflict?

Ms Azar also submitted that the rules concerning offers of compromise should not be applicable to tutors because a costs order may be enforceable against a tutor. It was argued that it was "unreasonable for the tutor to be placed in a position of conflict between his duty to act in the best interests of the plaintiff and his interest in protecting his own assets as a consequence of an offer of compromise." ²

The Court of Appeal rejected this submission because a tutor is always at risk of a costs order against them, especially if a person under a legal incapacity loses their litigation.

Offer Not Open for a Reasonable Period of Time?

Ms Azar submitted that the offer was not left open for a reasonable time. The Court of Appeal disagreed and noted that, for the purposes of UCPR 20.26(7), Mr Kathirgamalingan's offer was left open for a reasonable time, because it was:

1. open for 21 days;
2. conveyed after a mediation; and
3. conveyed 5 weeks prior to the hearing commencing.

At such a time, the parties are expected to be well aware of the strengths and weaknesses of their cases.

Ms Azar's legal incapacity was considered to have been a relevant factor in assessing reasonableness. However, legal incapacity on its own is not enough and Ms Azar failed to adduce evidence which would corroborate her argument that the offer was not open for a time which was reasonable in the circumstances.

Costs

Ms Azar submitted that Williams DCJ should not have ordered her to pay Mr Kathirgamalingan's costs and should have exercised his discretion and "ordered otherwise", pursuant to UCPR 42.15(2). She submitted that as the offer was made less than 2 months before the 10-day trial, most of the costs associated with the litigation had already been incurred. The Court rejected this argument because an unaccepted offer of compromise can only alter the burden of costs for the future from the time the offer was made, the burden of costs up to that time would have fallen on the losing party in the litigation whether the offer of compromise was made or not.

Ms Azar further submitted that it was difficult to obtain instructions from her tutor and to marshal evidence for the approval and have the matter listed for approval and determined prior to the trial. This argument was also rejected on the basis that she was unable to adduce evidence which would corroborate these difficulties.

Finally it was submitted that Williams DCJ's assessment of damages was based on video footage showing Ms Azar undertaking various physical activities of which the tutor was not aware. This ground was noted as being unpersuasive, as the tutor again failed to show that he was unaware that Ms Azar was capable of undertaking the physical activities which the footage depicted.

Importantly, the fact that the Court was not told why the offer of compromise was rejected by the tutor was fatal to this ground of Ms Azar's appeal.

Implications

It is consistent with the UCPR and the Court's supervisory jurisdiction for a tutor to accept an offer of compromise on the plaintiff's behalf and doing so creates contractual obligations. However, for an offer of compromise to be binding in circumstances where the plaintiff is under legal incapacity, it needs Court approval.

Even though a plaintiff is a person under a legal incapacity, that of itself is not sufficient to establish that an offer was not open for a reasonable time.

If a plaintiff under legal incapacity rejects an offer of compromise, they need to explain why the offer of compromise was rejected and corroborate with evidence to avoid an order that it pay costs to the defendant on an indemnity basis in the event the award is less than the offer of compromise.

Footnotes

¹ McColl, Basten and Campbell JJA

² 203

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