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[2001] WADC 48
defendant. Leave to discontinue granted; plaintiff to pay the defendant's costs of the action; defendant's claim for indemnity costs subsequent to the Calderbank letter of 29 August 2000 refused (paras 1,...
The plaintiff discontinued its insurance claim after late expert evidence undermined its sabotage theory. The court granted leave to discontinue but ordered the plaintiff to pay the defendant's costs of the action. The defendant's request for indemnity costs after its settlement offer was refused because the defendant had breached an order about expert evidence when the offer was made.
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1,867 words · generated 08/07/2026
Bella Vita Pty Ltd sued its insurer, Lumley General Insurance Limited, for loss to a Caterpillar scraper which Bella Vita alleged was caused by sabotage, foreign matter introduced into the engine. Lumley defended, asserting the damage resulted from inadequate maintenance. The action required contentious expert evidence to establish causation. The court made pre-trial orders in April 2000 requiring exchange of expert reports before the pre-trial conference. Negotiations and an offer of compromise from Lumley (a Calderbank letter) dated 29 August 2000 intervened. A critical expert report from Lumley's expert, William Brown, was only served on Bella Vita on 18 December 2000. After receiving that report and other late material, Bella Vita decided it was unlikely to succeed and applied for leave under Order 23 r 2(3) to discontinue the action. Lumley consented to leave being granted but sought an order that Bella Vita pay Lumley's costs of the whole action and, in the alternative, indemnity costs from the date of the Calderbank offer. Deputy Registrar Hewitt heard the costs application in chambers and delivered reasons on 9 March 2001.
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The court concluded the expert report was served at the earliest opportunity once its author became available to prepare it, and that Lumley was not blameworthy for failing to give anticipatory notice of the report (paras 9-11). However, Hewitt examined the expert evidence because that evidence was the stated basis for the plaintiff's discontinuance and concluded the plaintiff's case (that the machine had been properly maintained and failure was due to sabotage) was effectively rebutted by the expert evidence; moreover facts about maintenance were peculiarly within the plaintiff's knowledge (paras 12-14). Given that, Hewitt considered it unfair to order Lumley to pay costs and therefore ordered the plaintiff to pay Lumley's costs of the action. Lumley's claim for indemnity costs from 29 August 2000 was refused because Lumley was in breach of the expert evidence order when the Calderbank offer was made; that breach, albeit not contumelious, was a sufficient reason to deny indemnity costs (para 15).
Three elements drove the decision.
The court's broad discretion under Order 23 r 2(3). The court explicitly framed the question as one of discretion: leave to discontinue can be granted on such terms as to costs as are just (para 1). The authorities cited in argument were said to illustrate the breadth of that discretion rather than to dictate an outcome (para 12).
The factual basis for discontinuance. The plaintiff discontinued because it concluded, after receipt of Lumley's expert report, that its sabotage case was unlikely to succeed (paras 7, 8). The deputy registrar accepted that the expert report had been served at the earliest opportunity and that Lumley could not reasonably be expected to anticipate the expert's opinions before receipt of the report (para 11). Nevertheless, the court treated the discontinuance as a concession that the expert evidence was correct and that the engine failure was due to lack of maintenance, not sabotage (para 13). Because the maintenance details were "peculiarly within the knowledge of the plaintiff" and the plaintiff's pleaded case depended on those facts, it was unfair to award the plaintiff any costs on discontinuance (para 14).
Conduct surrounding the Calderbank offer and compliance with orders. Lumley sought indemnity costs from the date of its Calderbank offer of 29 August 2000. The court acknowledged its power to award indemnity costs but refused to do so because Lumley was in breach of the expert evidence order at the date of the offer, even if that breach was not contumelious (para 15). The court treated that non-compliance as a reason to refuse the punitive measure of indemnity costs notwithstanding the existence of a Calderbank offer.
In short: leave was granted because the court had to permit discontinuance under the rules; the plaintiff bore the costs because the expert evidence effectively defeated its case and maintenance was a matter within its knowledge; indemnity costs were refused because the defendant had not fully complied with the court's expert-evidence orders when making the offer.
Before this decision, the principles governing discontinuance and costs were well established: courts have a discretion to grant leave to discontinue on terms as to costs as they see fit, and Calderbank offers can justify indemnity costs. The decision in Bella Vita v Lumley applies those settled principles to the particular facts: where a plaintiff discontinues after receiving decisive expert evidence which rebutted the plaintiff's theory, and where the relevant knowledge (maintenance records and practice) lies with the plaintiff, it is appropriate to order the plaintiff to pay costs.
The decision also emphasises two practical points:
A party serving expert evidence late will not necessarily be penalised if the report could not reasonably have been prepared earlier and was served at the earliest opportunity; courts will not expect parties to pre-announce or anticipate the content of expert opinions prior to receipt of a formal report (para 11).
A Calderbank offer does not automatically yield indemnity costs; non-compliance with court orders at the time the offer was made is a relevant factor weighing against indemnity costs (para 15).
Thus the case sits comfortably within existing law but clarifies the balancing exercise the court will undertake when expert evidence, pre-trial compliance and settlement offers intersect.
Quoted passage: "Order 23 r 2(3) requires the plaintiff to obtain the leave of the Court to discontinue the action and provides that I may grant such leave upon such terms as to costs as may be just." (para 1)
Quoted passage: "The evidence establishes to my satisfaction that the expert report was not available to the defendant at an earlier stage in the proceedings and was served on the plaintiff at the earliest opportunity." (para 11)
Quoted passage: "In my view the discontinuance is a concession that the experts were right and that the machine was not properly maintained and its failure was through that cause rather than any other cause." (para 13)
Quoted passage: "I regard the fact that the defendant was in breach of the expert evidence order (albeit not in a contumelious way) at the date the offer was made as a reason to refuse the defendant's costs on an indemnity basis." (para 15)
This decision is directly helpful where the following facts appear:
Where those elements are present, Bella Vita supports ordering costs against the discontinuing plaintiff while declining to award indemnity costs to the defendant if the defendant was non-compliant with court orders when making its Calderbank offer.
The judgment itself records citations to authorities and positions the decision as an exercise of discretion consistent with established authorities. The deputy registrar explicitly treated cited cases as illustrative of the breadth of the court's discretion (para 12). The decision is pragmatic and fact-specific: its value to later courts will primarily be as a persuasive example of how to balance expert-evidence timing, knowledge asymmetry about maintenance, and Calderbank-related indemnity claims. It is not a high‑court authority that changes substantive doctrine; rather it is an instructive application at District Court level showing that:
Practitioners should therefore expect courts to treat this combination of factors in a similarly pragmatic way.
Quantification of prejudice from late expert evidence: Hewitt found the Brown report was served at the earliest practical time and rejected that anticipatory notice should have been given (para 11). Future disputes may still require finer-grained assessment about when a report is 'available' and what steps would have been reasonable to avoid post-pre-trial costs.
What constitutes sufficient non-compliance to defeat indemnity costs: Hewitt refused indemnity costs because of a breach of the expert-evidence order "albeit not in a contumelious way" (para 15). The decision does not specify thresholds of culpability. Future courts will need to articulate how serious or prolonged the breach must be to counter-balance a clear Calderbank offer.
The role of a discontinuance as concession: Hewitt treated discontinuance following expert evidence as an implicit concession that the expert was right (para 13). There may be fact patterns where discontinuance results from strategic considerations unrelated to concession, and future courts will need to distinguish genuine concessions from tactical discontinuances.
Allocation of costs when multiple late events occur: Here there was a combination of negotiation, offers held open, and late evidence. How courts apportion costs where blame for delay is shared, or where late evidence results from circumstances beyond either party's control, remains a practical question.
The procedural interplay between pre-trial orders, settlement negotiations, and expert exchange: This case emphasises that all three overlap. Future practice points: parties should document steps taken to comply with expert exchange orders, and parties making Calderbank offers should ensure compliance with court orders before making such offers if they seek indemnity costs.
Conclusion: Bella Vita v Lumley is a practical, fact-specific application of the court's discretionary power on discontinuance and costs. It underlines the importance of (1) the provenance and timing of expert evidence; (2) the allocation of knowledge between parties; and (3) the contextual nature of Calderbank-linked indemnity costs. Practitioners should use the decision as a guide to the balancing exercise courts will undertake, while recognising that the outcome will turn on detailed facts and the parties' compliance with pre-trial directions.
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
CITATION : BELLA VITA PTY LTD -v- LUMLEY GENERAL INSURANCE LIMITED [2001] WADC 48
Practice - Western Australia - Rules of the Supreme Court - Order 23 - Costs on discontinuance
Leave to discontinue granted. Plaintiff to pay the costs of the action
AWA Ltd v Daniels, unreported; SCt of NSW; BC 920 3187; 8 October 1992
Donald Campbell and Company Limited v Pollak [1927] AC 732
Forbes v Samuel [1913] 3 KB 706
Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VicRp 38; [1984] VR 469
Jones v McKie and Mersey Docks and Harbour Board [1964] 2 All ER 842
Mannix v Loumbos Pty Ltd [2000] NSW CA 32; 28 February 2000
Oshlack v Richmond River Council [1998] HCA 11; [1998] 193 CLR 72
1 DEPUTY REGISTRAR HEWITT: This matter comes before me by way of the plaintiff's application to discontinue its action against the defendant and for certain costs orders consequent upon that discontinuance. Order 23 r 2(3) requires the plaintiff to obtain the leave of the Court to discontinue the action and provides that I may grant such leave upon such terms as to costs as may be just.
2 The precise order sought by the defendant upon the discontinuance are that it pay the defendant's costs of the action up to and including the pre-trial conference held on 11 July 2000 and the defendant pay its costs thereafter.
3 The defendant is an insurer with which the plaintiff took out a policy of insurance in relation to a caterpillar scraper. The claim alleges that the scraper was, in effect, sabotaged by persons unknown introducing sand dust and other foreign matter into the engine of the scraper causing it damage and the need of expensive repair. The plaintiff says that damage is compensable under the terms of the policy of insurance it held with the defendant.
4 The defendant defended on a number of basis but for the purposes of this application the important one was that the repairs to the scraper were required through a lack of maintenance rather than any form of sabotage.
5 Since the plaintiff could not point to any specific incident in which the alleged sabotage took place the matter was always going to be an action in which expert evidence was of critical importance.
6 The defendant has no quarrel with leave being granted to discontinue the action nor does it have any quarrel with the plaintiff paying its costs up to the pre-trial conference. The defendant argues that the plaintiff should pay its costs of the entire action and furthermore those costs should be on an indemnity basis subsequent to 29 August 2000 when it made an offer of compromise that the action be dismissed on the basis that the parties bear their own costs.
7 The plaintiff has decided to abandon its action against the defendant because of its view that on the state of the expert evidence as it now stands the plaintiff is not likely to succeed in the action. That view largely flows from an assessment of the report of William Brown an expert engaged by the defendant whose report was made available to the plaintiff on 19 December 2000. It appears that Mr Brown has qualifications and experience which would make him the most persuasive of the expert witnesses to be called at the trial of the action. In the light of that evidence together with some other evidence which also came fairly late the plaintiff has concluded that the risk of taking the matter to trial is not justified and accordingly has not proceeded with the trial which was previously listed to commence on 15 January 2001 and has brought this application to discontinue.
Bella Vita Pty Ltd
Lumley General Insurance Limited [2001] WADC 48
Leave to discontinue granted; plaintiff to pay the defendant's costs of the action; defendant's claim for indemnity costs subsequent to the Calderbank letter of 29 August 2000 refused (paras 1, 14-15).
8 Boiled down to its essentials the plaintiff says that the defendant was in breach of orders concerning expert evidence. Those orders were made in April 2000 and required expert evidence to be exchanged prior to the pre-trial conference. The critical report was served on 18 December 2000. The plaintiff says if that report had been made available to it at an earlier stage it would have been in a position to reassess its case and avoid the costs incurred between the pre-trial conference and today. For its part the defendant says that the report was not available to it at an earlier stage.
9 Mr Brown although collaborating to some extent earlier in this action was not prepared to be called as a witness, it apparently being his employer's directive that he distance himself from this litigation. In September the employer's resistance was overcome and the way was cleared for Mr Brown to investigate the matter as an expert and provide his expert opinion. He was not immediately asked to do so because some negotiation was ongoing between the plaintiff and the defendant and in particular the offer of 29 August 2000 which was held open for an additional period at the request of the plaintiff. Towards the end of that time it was learned that the plaintiff intended to rely on an additional expert report and the decision was taken to wait for that to be received before the report was commissioned.
10 An issue arose during the course of the case as to whether or not foreign material might be introduced into the motor of the scraper through some holes which were discovered in an intercooler in the turbo charging system of the scraper. An intercooler is in effect a radiator through which air compressed by the turbo charger passes (in order to cool it) before it is introduced into the engine. In my view that issue was never properly raised on the pleadings by the plaintiff but was mentioned in correspondence at various stages and commented upon in certain expert reports commissioned by the plaintiff. Part of the importance of Mr Brown's affidavit was his statement that the relevant intercooler was positively pressurised as a consequence of which air would be forced out of it rather than sucked into it and the damage was therefore not a likely cause of the contamination which allegedly damaged the engine of the scraper.
11 The evidence establishes to my satisfaction that the expert report was not available to the defendant at an earlier stage in the proceedings and was served on the plaintiff at the earliest opportunity. Suggestions were made in the course of argument that some notification should have been given to the plaintiff in advance of the receipt of the formal report. I reject such proposition. The defendant would have to be foolhardy indeed to attempt to anticipate the opinion of the expert prior to the receipt of his report and I see no criticism of the defendant for not taking that step.
12 Various cases have been cited to me but in my view they simply underline the proposition that I have a considerable discretion in relation to any costs order which I may make and in my view the cases are by a large illustrative of the breath of that discretion. The plaintiff's case was essentially based on the proposition that the engine had been properly maintained during the course of its operating life and its premature failure was in all probability caused by sabotage. The weight of evidence suggests that the engine was not sabotaged and that its cause for premature failure was want of maintenance. Of the two parties the plaintiff is the one which would know whether or not the engine was properly maintained. In order to succeed the plaintiff would have needed to testify as much. The expert evidence suggests that proposition is inconsistent with a proper examination of the engine and the lubricant residues within it.
13 Counsel for the plaintiff has indicated he considers it inappropriate for me to in effect try the case but in my view I should examine the evidence since it is a view of the evidence by which the plaintiff justifies its discontinuance of the case and its claim for partial costs against the defendant. In my view the discontinuance is a concession that the experts were right and that the machine was not properly maintained and its failure was through that cause rather than any other cause.
14 Given that the details of maintenance were peculiarly within the knowledge of the plaintiff and given the fact that the plaintiff's proposition that the machine was properly maintained has been its own eyes rebutted it strikes me that it would be unfair to award the plaintiff any costs on its discontinuance and to deprive the defendant of its costs in any measure. Therefore insofar as the plaintiff seeks an order that the defendant pay any costs I am not inclined to make that order and as far as I am concerned the proper order to make is that the plaintiff do have leave to discontinue its action against the defendant on terms that it pay the defendant's costs of the action. In relation to the defendant's claim for indemnity costs subsequent to the Calderbank letter on 29 August 2000 I accept that I have the power to make such an order the question simply being whether or not it is appropriate in the circumstances of this case to do so. I am not aware if there will be any significant difference between costs taxed on an indemnity basis and those taxed according to scale however I am aware of the fact that there has been some work undertaken by the defendant subsequent to the offer being made in the way of requisition of the relevant report and its perusal and so forth. Other than that I am not given any information as to the level of activity of the defendant's solicitor subsequent to the making of the offer.
15 I regard the fact that the defendant was in breach of the expert evidence order (albeit not in a contumelious way) at the date the offer was made as a reason to refuse the defendant's costs on an indemnity basis. At the stage the offer was made all the cards should have been on the table. They were not and that is in my view a sufficient reason to deny the defendant its costs on an indemnity basis.