Why do personal injury claims usually settle out of court?
In Queensland, starting a claim for personal injuries can feel daunting because of the complex procedures that must be followed when making a claim. For this reason, personal injury law is a specialty area of law.
At the outset of making a claim, most injured people wonder:
- Do I have a right to make a claim in the first place?
- How much am I owed?
- How much do lawyers cost?
- Will I win my claim?
- What happens if I lose?
- Will I have to plead my case in court or will it settle out-of-court?
- If I settle out of court, will the settlement offer be lower than going to trial?
It is commonly known that most personal injury claims settle out of court. In fact, less than 1% of personal injury claims in Queensland result in a trial. That is because personal injury legislation in Queensland is designed in a way that requires informal settlement negotiation to take place prior to formal proceedings being filed (unless there is a specific reason that this cannot be achieved).
This article is to answer the likelihood of any personal injury claim going to court or instead reaching a favourable out-of-court settlement.
Requirement to Negotiate Prior to Court
Queensland personal injury law requires that the claimant, before commencing a court action:
- gives the respondent a notice of claim for the personal injury; and
- meets with the respondent to attempt to negotiate a settlement.
The respondent, upon receipt of the initial notice of claim is required to:
- investigate the reasons for the injury; and
- co-operate, respond, and meet with you in a genuine effort to resolve the claim.
Meeting in an attempt to resolve the claim is called a compulsory conference because it is compulsory before the matter is able to proceed through the formal court system.
Of course, it is possible that a respondent does not comply with their obligations or ignores a claimant – particularly when a claimant does not have legal representation. In this case, a motion is able to be brought before the court seeking an order for either compliance of the respondent, or permission to file your formal legal action against them in the circumstances.
Procedure at Compulsory Conferences
At a compulsory conference, the parties meet to discuss the merits of the claim in an informal setting – often at your solicitor's office or barrister's chambers. The conference is held on a without prejudice basis which means that whatever is discussed cannot be used against either party later in court if the negotiations fail to achieve settlement.
The conversation will be centred around issues of 'liability' and 'quantum' – and what a court would likely determine on those matters in a formal judgment.
- Liability – whether the respondent owed the claimant a duty of care, the extent of the duty, whether that duty of care was breached, and whether the breach was the cause of the injuries as alleged.
- Quantum – the amount of money the claimant is entitled to, based on the loss caused by the personal injury (damages).
At the conclusion of the conference, the parties will either agree to settle the claim for a confidential sum, or, if a settlement was not able to be negotiated, exchange written final offers to settle the claim.
The claimant's mandatory final offer is the lowest amount of money they are willing to accept to settle their claim whereas the respondent's mandatory final offer is the highest amount of money they are willing to pay to resolve the matter.
Exchanging written offers is also compulsory when a settlement is unable to be reached, and thus the offers are known as mandatory final offers.
The two offers remain open to both parties for acceptance for a period of two weeks and cannot be withdrawn. Following the conclusion of this period, if a settlement has still not been agreed, the claimant becomes entitled to pursue the matter further through the court system.
Mandatory Final Offers & Cost Consequences
Mandatory final offers need to be carefully considered by each party because there are serious consequences if either offer was unreasonable at the compulsory conference.
Both mandatory final offers are sealed in an envelope and filed in court. The claim then progresses through the litigation phase, culminating in a trial where a judge determines liability and the appropriate quantum independently. After the judge's own determination, the envelopes containing each party's mandatory final offer from the compulsory conference will be opened.
If the judge determines that the quantum of the claim is higher than the claimant's mandatory final offer, the respondent is 'penalised' for not accepting it. Similarly, if the judge ultimately determines that the quantum of the claim is less than what the respondent offered at the compulsory conference, the claimant is 'penalised'. The penalty is typically a court order requiring the unreasonable party to pay the other side's legal costs from the date of the compulsory conference to the conclusion of the trial.
It is not unusual for a trial for personal injuries to cost each party over $50,000. So, each party is, in theory, sufficiently motivated to make a fair and reasonable offer at the compulsory conference which more often than not results in a reasonable settlement and compromise from both parties.
Having experienced legal representation to provide advice at the compulsory conference is crucial.