Australia: When winning the case is no victory at all - the impact of cost capping when there has been an intentional tort

Curwoods Case Note
Last Updated: 27 February 2013
Article by Matthew McDonald

Certain Lloyd's Underwriters subscribing to contract no IH00AAQS v John Cross; Certain Lloyd's Underwriters subscribing to contract no IH00AAQS v Mark George Thelander; Certain Lloyd's Underwriters subscribing to contract no IH00AAQS v Jill Maria Thelander [2012] HCA 56

Judgment date: 12 December 2012
Jurisdiction: High Court of Australia1

In Brief

  • The four appeals2 were heard together. They deal with the construction of provisions of the NSW statutes that limit the costs that a court may order one party to pay another, where the amount recovered on a claim for personal injury damages does not exceed a specific amount. In particular, the application of the relevant costs provisions applied in the circumstances where the personal injuries sustained were the result of an intentional act.
  • The question posed is whether the definition of 'personal injury damages' was to be construed by reference only to the definition set by the Civil Liability Act 2002 (Liability Act), or by reference to both the definition and the circumscribed operation which the Liability Act had in respect of awards for personal injury damages.
  • Held by the High Court of Australia, the costs limiting provisions of the Legal Profession Act 1987 (NSW) (LP Act) and the Liability Act do not have coextensive operation, as each provision was intended to have a different area of operation.
  • The claims for personal injury damages based on intentional acts are claims for 'personal injury damages' within the meaning of s 198D of the LP Act and therefore costs are capped if the damages do not exceed the specified amount.


The respondents were assaulted at the Narrabeen Sand Hotel by hotel security staff. The respondents brought proceedings in the District Court of New South Wales against the appellant (the insurer of the company employing those staff) for trespass to the person and claimed damages for personal injuries intentionally inflicted and intended to injure. The respondents were successful after a trial which lasted 22 days. The damages awarded in each case were for less than $100,000, with a declaration that each respondent's costs for legal services should be subject to s 198D of the LP Act. This section provides that where the amount recovered on a claim for personal injury damages did 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.

Procedural history

Garling DCJ reasoned that the respondents' claims were for 'personal injury damages' for the purposes of s 198D, as each claim for damages related to injury sustained to a person as within the meaning of s 11 of the Liability Act. On 22 April 2010, Garling DCJ ordered the appellants to pay the respondents' costs, subject to s 198D.

The respondents then appealed to the New South Wales Court of Appeal. They argued that the relevant provisions of Div 5B of Pt 11 of the LP Act, which includes s 198D, only applied to awards of personal injury damages that were regulated by Pt 2 of the Liability Act. They argued that when construing the relevant legislation one needed to have reference to both the context and purpose of the legislation. They further argued that the 2 pieces of legislation were intended to be read together. The respondents contended that both Acts operated in the same sphere and pointed to the fact that the amendments to the LP Act inserting Div 5B were inserted into the LP Act by the Civil Liability Amendment (Personal Responsibility) Act 2002, which made the relevant amendments to the Liability Act. In effect, their submission was that the restrictions in the LP Act only applied to small claims for damages for personal injuries caused by negligence.

The New South Wales Court of Appeal unanimously upheld the respondents' submissions3 . Basten JA gave the principal reasons for the Court of Appeal. His Honour stated that the definition of 'personal injury damages' contained in the relevant provisions of the LP Act were to be construed by:

"... reference not merely to the definition of that expression in the source statute (the Liability Act), but also to the scope of its application in the specified Part." 4

The High Court Decision

The appellants appealed from the decision of the Court of Appeal to the High Court. The appeal was heard with the appeal in a matter of Williamson5 which raised similar issues. The judgment in this matter is to be read with the High Court's judgment in that matter. Interestingly, part of the conditions of special leave being granted for the appeal was that the appellants pay the respondents' costs of the appeal to the High Court.

The effect of s 198D is referred to above. The other provisions to be construed by the High Court included s 198C(1) of the LP Act which defined terms to be used in Div 5B. In particular, it provided that:

"Personal injury damages has the same meaning as in the Civil Liability Act 2002."

Regard was also had to s 198C(2) of the LP Act which excludes from the operation of Div 5B costs in respect of claims under certain statutory schemes.

Personal injury damages is defined in s 3 of the Liability Act as:

"Personal injury damages means damages that relate to the death of or injury to a person caused by the fault of another person."

Injury is defined in that Act as:

"Injury means personal or bodily injury, and includes:

  1. pre-natal injury, and
  2. psychological or psychiatric injury, and
  3. disease."

In the High Court, the respondents repeated the arguments they had successfully raised in front of the Court of Appeal and adopted the Court of Appeal's reasoning. The appellants argued that the LP Act only referred to the definition of 'personal injury damages' in the Liability Act and there was no reference to how the Liability Act operated with respect to the assessment of damages for personal injuries. The appellants argued that, having regard to the definition of 'personal injury damages' in s 3 of the Liability Act, the LP Act applied to all forms of damages for personal injury unless excluded by s 198C(2). By a majority of 3 to 2 the High Court accepted the arguments of the appellants and upheld the appeal. In doing so, it found that the respondents' costs of the claim were to be governed by s 198D of the LP Act.

Whilst this was a split decision of the High Court and there were 3 separate judgments, there were some aspects upon which all members of the Court agreed. The first was that the relevant Act to be interpreted was the LP Act and not the Legal Profession Act 2004 which had commenced operation by the time of the original decision. All members of the Court also found that this question was probably irrelevant as the 2004 legislation was similar in this area.

All Justices of the High Court also agreed as to the principles of statutory interpretation. It was on the application of those principles that they differed. Justice Kiefel, who was the single judge of the majority, summed up the correct approach as follows:

"The fundamental object of statutory construction is to ascertain legislative intention, understood as the intention that the courts will impute to the legislature by a process of construction, by reference to the language of the statute viewed as a whole. The starting point for this process of construction is the words of the provision in question read in the context of the statute. ...

"It is legitimate to resort to materials outside the statute, but it is necessary to bear in mind the purpose of doing so and the process of construction to which it is directed. That purpose is, generally speaking, to identify the policy of the statute in order to better understand the language and intended operation of the statute. An understanding of legislative policy by these means does not provide a warrant for departing from the process of statutory construction and attributing a wider operation to a statute than its language and evident operation permit."

Justice Kiefel's reasoning for upholding the appeal was consistent with that of French CJ and Hayne J who delivered the principal judgment for the majority. In essence, the majority concluded that the text of the relevant statutes was clear and, in particular, the LP Act only picked up the meaning of 'personal injury damages' in the Liability Act as was specifically required by s 198C(1) of the LP Act. The majority concluded that there was no proper basis for departing from this construction given the clear language used. They stated that if the legislature had intended to pick up either the operation or application of the Liability Act this could have been easily done in the words of the legislation itself. The majority found support in their construction from the fact that both pieces of legislation had different spheres of operation, though there was some overlap. They also referred to how both pieces of legislation had excluded from their operation certain circumstances which were similar but not identical. In the view of French CJ and Hayne J, the New South Wales Court of Appeal had erroneously assumed "the answer to the question of construction and then asked whether the assumed answer is falsified" 6

The minority decision was delivered by Crennan and Bell JJ. Their Honours formed the view that both pieces of legislation were part of a package of reforms designed to correct a mischief created by small negligence claims and the disproportionate costs in respect of those claims. The minority paid particular regard to the fact that the amendments to the LP Act to incorporate the relevant part were included in the legislation which amended the Liability Act. Viewed this way, their Honours found that the interpretation promoted by the respondents was the correct interpretation. They further found that the construction advanced by the appellants resulted in irrational results. In this regard, the minority pointed to the matter of Williamson, which action involved claims for personal injury damages and other damages arising from the same incident. They considered it absurd that the cost capping provision would apply to part of the claim but not to other parts.

Finally, Crennan and Bell JJ stated that if the legislature had intended the construction promoted by the appellants, then it could have simply used the phrase "as defined" which it had done in s 198C(2) when excluding certain statutory schemes.


The fact the High Court was split in this matter confirms that this area remains complicated and even when there is agreement as to the relevant principles, differences can emerge in the application of those principles. Hopefully, some of the complexity in this area is removed by this decision.

The decision illustrates the method of statutory construction to correctly ascertain the legislative intention by reference to the language of the statute viewed as a whole. As the statutory text reveals no 'intention' to confine Div 5B to being regulated by Pt 2 of the Liability Act, the legal costs charged in connection with claims in relation to personal injury damages the result of intentional acts amounting to no more than $100,000 have not been excluded from the operation of the Division.

When confronted with a matter of this type, insurers and self-insureds should bear in mind that the cost capping provisions will apply when estimating the claim and determining how the claim will be conducted.


1 French CJ with Jayne and Kiefel JJ agreeing; Crennan and Bell JJ dissenting

2 State of New South Wales v Williamson [2012] HCA 57

3 Cross v Certain Lloyds Underwriters [2011] NSWCA 136

4 Ibid at [59]

5 Op cit

6 At [40]

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