DSHE Holdings Ltd (receivers and managers appointed) (in liq) v Abboud; National Australia Bank Limited v Abboud

Judgment

These reasons assume familiarity with my judgment of 12 May 2017: DSHE Holdings Ltd (receivers and managers appointed) (in liq) v Abboud; National Australia Bank Limited v Abboud [2017] NSWSC 579.
I will adopt the same abbreviations in these reasons as in that judgment.
In the earlier judgment, I refused to grant DSHE, NAB and HSBC leave, pursuant to s 6(4) of the LRMP Act, to commence these proceedings against a number of D&O insurers of former directors and officers of DSHE.
It is common ground that, in each of the Company Proceedings and the Bank Proceedings, I should make an order dismissing the plaintiff's application for leave under s 6(4) and, consequently, dismissing the proceedings generally against each of the D&O insurers.
It is also common ground that costs must follow the event, and that the plaintiffs must pay the costs of the insurers.
Two questions arise in relation to costs.
The first is whether the plaintiff should pay the costs of each of the D&O insurers or, rather, whether it should only pay one set of costs in respect of the insurers generally (and, presumably, leave it to those insurers to determine how to share the resultant figure).
The second question, which only relates to the primary insurer, Allianz, is whether Allianz should have its costs on an indemnity basis.
These reasons deal with the first question (as I have not yet received submissions from Allianz on the question of indemnity costs).

One set of costs?

The proceedings were commenced on 16 March 2017.
The Commercial List Summonses were listed for directions on 31 March 2017.
On that date, Hammerschlag J fixed the plaintiffs' applications for leave under the LRMP Act for hearing on 10 May 2017.
The effect of Hammerschlag J's order was to direct that the question of leave under the LRMP Act be dealt with before any other issue in the proceedings.
The insurers sit, "at various points in a single tower of insurance coverage" (to adopt the words of Mr Giles SC, who appeared with Mr Arnott for the plaintiffs).
Allianz is the primary insurer (with a limit to $20 million). The remaining insurers are excess layer insurers with policy limits of $20 million to $50 million, $50 million to $70 million, $70 million to $90 million, $90 million to $100 million and $100 million to $150 million respectively.
Three of the insurers retained separate solicitors (and counsel). Two insurers jointly retained another solicitor (and counsel). The remaining five insurers retained a common solicitor (and counsel).
Before me, on 10 May 2017, Mr Rich SC, who appeared with Mr Lawrance for those five insurers, assumed the burden of the argument. Mr Redwood (for the primary insurer, Allianz) made supplementary submissions. Mr Muston SC, for one of the insurers, made submissions directed principally to a particular question which arose under his client's policies. Ms Whittaker and Mr Zahra, who appeared for the remaining insurers, adopted the submissions earlier made.
Mr Giles, for the plaintiffs, pointed out that: 1. the various insurance policies were, in substance, in the same terms; 2. the insurers took a common position of opposing leave on substantially the same grounds; 3. the insurers led evidence substantially in the same form (particularly as to the terms on which coverage had been confirmed - see [27] of the judgment of 12 May 2017); and 4. Mr Rich took the burden of the argument in the manner I have described above.
Accordingly, he submitted, there should only be one set of costs as each insurer had the same interest in resisting the plaintiffs' application for leave under the LRMP Act and should, the submission implies, have retained one set of solicitors and counsel between them for the purposes of resisting the LRMP Act leave application.
I do not agree.
Of course, there will be cases where, as a matter of discretion, the court will only require an unsuccessful plaintiff to pay one set of costs, notwithstanding the fact that there are multiple, separately represented, defendants.
In Statham v Shephard (No 2) (1974) 23 FLR 244 (cited with approval in Taylor v Owners - Strata Plan 11564 (No 2) [2013] NSWCA 153 at [6] (McColl, Basten and Hoeben JJA) and in Milillo v Konnecke [2009] NSWCA 109 at [109] (Ipp JA with whom Macfarlan JA and Sackville AJA agreed)) Woodward J said (at 246-247) that the court will not normally allow two sets of costs to defendants where there is no possible conflict of interest between them in the presentation of their cases subject to three provisos: 1. if a conflict of interest appears possible but unlikely, the defendants should make any necessary inquiries from the plaintiff as to the way in which his case is to be put if this would resolve the possibility of conflict between defendants; 2. there could be circumstances in which, although the defendants were united in their opposition to the plaintiff, their relationship to each other might be such that they would be acting reasonably in remaining at arm's length during the general course of litigation; and 3. even if the defendants are acting reasonably in maintaining separate representation for some time or for some purpose, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time.
In Van Eeden v Henry; Henry v Van Eeden (2005) 62 NSWLR 301; NSWCA 14 Spigelman CJ (with whom Sheller and McColl JJA agreed) said at [40] that the court could refuse to make an order for costs in favour of a party whose separate representation was "unnecessary or inappropriate" (albeit that was a case of "double representation" where both parties were plaintiffs and defendants and had separate representation for each, resulting in four sets of counsel and solicitors for two parties).
Of course, each case must be examined against its own facts.
A striking feature of this case is that the question on which the plaintiffs have failed was one which arose at the outset of the proceedings, and which was determined before any other issue in the proceedings. Indeed, it was an issue which, strictly speaking, should have been determined in separate proceedings.
My attention has not been drawn to any correspondence from the legal advisors of the plaintiffs to the insurers warning of the proposed application for leave under the LRMP Act, or foreshadowing the plaintiffs' contention that each of the insurers should agree on common representation for the purposes of dealing with the application for leave.
Mr Rich SC submitted (and this was not disputed by the plaintiffs) that when the insurers were joined in the proceedings and confronted with the leave application, none had confirmed its position as to cover. The letters that the insurers sent setting out the terms upon which cover was afforded were not sent until shortly before the hearing of the leave application.
In these circumstances, I accept Mr Rich's submission that unless and until each insurer knew what position the others had taken on cover, it was unlikely that any one of the insurers could know whether the positions and interests of the insurers were identical.
Further, as Mr Rich submitted, the insurers could not be certain of success in advance of the leave application, and in the event that leave was granted, each would have been a party to very substantial litigation which had only just commenced.
In those circumstances, I am not persuaded it was unreasonable for some of the insurers to retain separate representation.
I also accept Mr Rich's submission that, because the question of leave was dealt with at the outset of the proceedings, it was too early to expect all of the insurers to have made final decisions about any question of common representation.
This case is thus different from cases where the question of whether a single costs order should be made arises at the conclusion of a final hearing, or indeed on an appeal.
In my opinion the appropriate order is that the plaintiffs pay the costs of each of the insurers in the usual way.
I will consider the question of indemnity costs once I have received submissions on that question.

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Judgment (8 paragraphs)

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