APFC No.1 Corporation v Insurance Australia Limited

Grounds for seeking variation of order

1. Tokio Marine advanced two grounds for seeking the variation of the order which was made in respect of costs on 8 May 2024.
2. First, Tokio Marine submitted that it was successful on the Security Application "as a whole", and "there was no reason not to apply the usual rule that costs follow the event".
3. Secondly, Tokio Marine submitted that it had "wished to be heard on costs at the appropriate time and had further evidence to adduce on the question, and the Court appears to have misapprehended that fact". The further evidence was "without prejudice" correspondence which was attached to an affidavit in support of its application to vary the costs order. Tokio Marine submitted that, having regard to the contents of correspondence between the parties' solicitors in the months prior to the hearing of the Security Application, including this "without prejudice" correspondence which was not before the Court at the hearing, the Court "misapprehended the degree of Tokio Marine's true success on the application, and the plaintiffs' responsibility for the matter being contested in Court".
4. I deal with each of these grounds in turn below.

Costs should follow the event

1. Having regard to the principles outlined above, I do not consider that the first ground advanced by Tokio Marine provides a basis for varying the costs order that was made on 8 May 2024.
2. In essence, the submission of Tokio Marine is that the Court should have determined that Tokio Marine had been "entirely successful on the Security Application", and should therefore have ordered that the Plaintiffs pay its costs of that application.
3. On the hearing of the Security Application, costs were in the Court's discretion. In Kyriacou v Raphis Securities Pty Ltd (No 2) [2022] NSWSC 339 at [27], Ward CJ in Eq observed that: "The principles applicable on interlocutory costs applications are well-known. There is a broad discretion as to costs generally (see s 98 of the Civil Procedure Act 2005 (NSW)), which discretion must of course be exercised judicially and by reference to the overriding statutory purpose mandated by s 56 of the Act. Moreover, the usual rule is that costs follow the event (r 42.1 of the UCPR). Where there is more than one event or there is mixed success on an application, questions of apportionment of costs may arise."
4. In Nadilo v Eagleton [2021] NSWCA 232 at [6], Brereton JA (with Meagher JA agreeing) said that: "The power to award costs is an important aspect of rendering justice between litigants. Underlying the general rule that costs follow the event, and the qualifications to it, is the idea that costs should be borne in a way that is fair, having regard to the responsibility of each party for the incurring by the other of the costs."
5. In making the order that there be no order as to the costs of the Security Application, I exercised the discretion to award costs in a way that I considered fair, having regard to the responsibility of each party for the incurring by the other of the costs of that application. I set out my reasons for making this order at paragraph [130] of my reasons for judgment (which is set out at paragraph [3] above). In short, I reached the view that the relevant "event" was not complete success for Tokio Marine, but mixed success for the parties on the issues which had been before the Court.
6. There were essentially two contested issues at the hearing of the Security Application: the first concerned the form of the security, and the second concerned the quantum of the security (see judgment at [3]-[4]). I found in favour of Tokio Marine on the question as to the form of the security, accepting its criticisms of the form of security proposed by the Plaintiffs (at [50]-[104]). However, on the question of the quantum of the security, I accepted, in part, the criticisms which were raised by the Plaintiffs regarding the amount that was sought by Tokio Marine as security for its costs (at [105]-[129]).
7. I referred to this mixed success on the Security Application in determining, in the exercise of my discretion, that there should be no order as to costs (at [130]).
8. On the present application to vary this order, Tokio Marine submitted that the issue of quantum was an "ancillary aspect of the dispute" regarding security for costs, pointing out that this question occupied around 15-20% of the written and oral submissions on the Security Application. However, this submission ignores that the evidence in support of the quantum issues was extensive. Whereas the evidence regarding the question of the form of security was relatively limited, with the issue being resolved primarily by reference to the terms of the ATE Policy, the evidence regarding the question of quantum occupied much of the affidavits that were filed by both parties, and was also the subject of a report by a costs assessor (see judgment at [108]-[109]).
9. Ultimately, the contention advanced by Tokio Marine is that I erred in determining the "event" for the purposes of determining the appropriate order as to the costs of the Security Application, and that I should have reached a different view on the extent of its success on the material that was before the Court.
10. This does not provide a basis for the exercise of the power under rule 36.16(3A). Tokio Marine is not seeking to correct an "inadvertent error", but is instead seeking to "reagitate, in the hope of a more favourable outcome", an issue which has already been considered and determined (Ranclose at [5(1)]), namely, the proper exercise of the Court's discretion to exercise costs having regard to the outcome of the security application. That is, Tokio Marine is not relying on "matters of oversight and inadvertence", but is instead taking issue with a deliberate decision which is "said to be incorrect" (Ranclose at [5(3)]).
11. In any case, even if there had been a basis for the exercise of the power, I would not, for the reasons given above, have accepted Tokio Marine's submission that it was "entirely successful" on the Security Application, or that the questions of quantum were of comparatively minimal significance on that application.

Misapprehension of facts not attributable to default of Tokio Marine

1. Tokio Marine submitted that the Court, in making Order 5 on 8 May 2024, misapprehended the extent of Plaintiffs' responsibility for the costs incurred on the hearing of the Security Application, and the extent of Tokio Marine's "true success" on the application, because the Court did not have available certain "without prejudice" correspondence that was relevant to these matters. Tokio Marine further submitted that any such misapprehension was not attributable to Tokio Marine, including because: 1. Tokio Marine was precluded by s 131(1) of the Evidence Act from adducing evidence of the "without prejudice" communications before judgment was delivered on the Security Application; 2. it would have been premature for Tokio Marine to make submissions at the hearing of the Security Application on the issue of costs, in circumstances where it could not, at that time, put forward all of the facts relevant to the costs question and where, in any event, it did not know the result of the application; and 3. at the time that the judgment was delivered and the orders were pronounced, Tokio Marine did not have the opportunity to make submissions on the costs question.
2. Tokio Marine further submitted that, in making Order 5, the Court appeared to proceed on the misapprehension that Tokio Marine did not wish to be heard on the question of costs and had no further evidence to adduce on the question.
3. Normally it is to be expected that a party will deal with costs during the course of the proceedings or at least indicate clearly that it desires an opportunity to make further, and later, submissions on costs: Westpac Banking Corp v Wittenberg (No 3) [2016] FCAFC 51 at [9] (Buchanan, McKerracher and White JJ), and the cases there cited.
4. Tokio Marine did not say anything to the Court, at the hearing of the Security Application, to indicate that it wished to be heard on costs, including in the event that the Plaintiffs' submissions on quantum were accepted in whole or in part, or that it wished to rely on any "without prejudice" correspondence in relation to costs.
5. The lack of any such indication could properly by taken by the Court as signalling that no special or unusual costs orders were required, and that when it came to the question of costs, the Court was "left to judge the precise terms of an appropriate order in the circumstances which eventuate in the judgment": Grygiel at [11].
6. Although Tokio Marine was not at liberty to disclose the substance of the "without prejudice" correspondence with the Plaintiffs, it was open to Tokio Marine to indicate that "questions of costs may need to be reserved so that relevant material can be put to the Court, depending on the outcome": Grygiel at [12]. It did not do so.
7. It is not to the point that Tokio Marine did not, at the time of the hearing of the Security Application, know what the outcome of that application would be. Tokio Marine was able to make, and should have made at the hearing, submissions "addressing the foreseeable possible outcomes" (Hollingsworth at [22]) and it was plain that one such "foreseeable possible outcome" was that the Court would accept Tokio Marine's submissions as to the form of the security, but accept some or all of the Plaintiffs' submissions as to the quantum of the security.
8. Further, it was not necessary for the Court to ask, following the delivery of reasons and prior to pronouncing orders, whether Tokio Marine wished to make any further submissions on costs. The Court was entitled to act on the basis that resolution of the issue of costs "is not intended to be the subject of further submissions, unless a contrary position has been indicated at the hearing": Grygiel at [12]. No such indication was given by Tokio Marine. The Court was not required to "invite" submissions on costs, and was entitled to "rely upon practitioners appearing before it to ensure that its attention is drawn to matters relevant to the determination of the proceedings" (Grygiel at [13]).
9. The jurisdiction to vary orders is not for the purpose of making submissions which should properly have been, but were not, made (or at least foreshadowed) at the hearing: Grygiel at [20].
10. Accordingly, I do not consider that Tokio Marine has established a basis for the Court to exercise the power under rule 36.16(3A) to vary the order which was made on 8 May 2024 regarding the costs of the Security Application.
11. In any case, I do not consider that the "without prejudice" correspondence which is attached to the affidavit of Tokio Marine's solicitor in support of the present application (the Calderbank correspondence) provides a basis for concluding that a different costs order should have been made. That is because, as the Plaintiffs submitted, this Calderbank correspondence was sent prior to a substantial change in the Security Application.
12. Tokio Marine filed its Notice of Motion on 12 September 2023. At that time, it was seeking an amount of $667,000 as security for its costs of the "Expanded First Phase". On 29 September 2023, Tokio Marine made a "without prejudice" offer to accept security in the amount of $550,000; and on 12 October 2023, it made a further "without prejudice" offer to accept security in the amount of $510,000. That is, the largest reduction offered by Tokio Marine on the amount sought in the original form of its Security Application was $157,000.
13. Subsequently, Tokio Marine more than doubled the amount sought by way of security for its costs. On 22 February 2024, it filed an affidavit of its solicitor, which increased the quantum of security sought from $667,000 to $1,394,940. There was no "without prejudice" offer on quantum after that change in position. Tokio Marine subsequently filed the Amended Notice of Motion which sought, by way of security, the sum set out in the February affidavit. I determined that Tokio Marine was entitled to security in an amount some $244,940 less than was sought.
14. The change in the amount sought by the Security Application, as amended, and the change in the evidence in support of that application were so significant that I do not consider that the offers previously made, in respect of the original application, can be used as a basis for assessing the parties' relative success on the amended Security Application or as a basis for determining the costs of that amended application.

Conclusion

1. For those reasons, Tokio Marine has not made out a basis for varying the order made on 8 May 2024 regarding the costs of the Security Application.
2. Accordingly, I make the following order: 1. The Notice of Motion filed 22 May 2024 is dismissed, with costs.

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