Forbes Shire Council v AG Australia Holdings Ltd [2007] NSWSC 1091 | Case summary

(A) The claim under para 32 5 Para 32 of the amended statement of claim reads: "In addition to the sums referred to in the preceding paragraphs, the defendant was obliged under the policy to pay the plaintiff all reasonable expenses, particulars of which will be supplied." 6 Eventually, details of the expenses were supplied, not in the form of particulars, but rather as schedules to the affidavit of Mr Smith sworn on 29 July 2005. The principal claim under this head was for payments to Environmental Consultancy Services. Pages 10 and following of the annexures to Mr Smith's affidavit set out a series of items with the amount claimed by the consultant, the amount paid, and also a note that in various cases 50, 66, 90 and 100 per cent of the fee is claimed against the insurer. 7 The case before me proceeded with commendable express speed. Partly because the defendant abandoned various defences just prior to the hearing, and partly because both sets of counsel put up detailed written submissions, the case was finished in about four hours instead of the three days that were set aside. 8 However, there was no mention in any of the written submissions, nor when they were developed, of the claim under para 32. I must confess, I completely overlooked the fact that that claim was still in the ring. 9 After reasons for judgment were published, the plaintiff complained that the claim was in the ring and that I had not dealt with it. The defendant took the attitude that: (i) I could not now reopen matters to deal with the complaint; (ii) the case was rightly decided by me as the claim under para 32 had not been pressed at the trial; (iii) even if it were pressed, the claim must fail because the insurer never consented to the incurring of the expenses; (iv) the plaintiff had not proved this claim beyond its general claim; and (v) the evidence provided did not justify a verdict for the whole of the claim. 10 As to (i), it should first be noted that I am not, strictly speaking, dealing with an application to reopen the evidence. No formal order has ever been taken out and I am considering what orders should be made in the proceedings as a result of my reasons. 11 I consider that it is now clear that if there is a complaint which the trial judge considers to be bona fide made that he or she has failed to deal with an issue or has not clearly decided an issue or found necessary facts, that it is more appropriate for the trial judge to deal with that complaint than allow the complaint to be made to the Court of Appeal. 12 However, even if this were a case of reopening an order finally made, the principles adopted in the context of the Slip Rule indicate that the court should deal with the complaint. 13 A number of authorities were put to me about the operation of the Slip Rule. However, there is no need to consider these in the light of the recent Court of Appeal decision in Newmont Yandal Operations Pty Ltd v The J Aron Corporation [2007] NSWCA 195, which makes it clear that the Slip Rule can be applied in circumstances, as here, where the case moves so fast that a point which was before the court escapes evaluation. 14 Whilst I think that even the most critical observer would excuse my overlooking the claim under para 32 because it was not mentioned at all on the day of the trial, I also consider that Mr Trebeck, who appeared for the plaintiff at the short minutes stage, is correct in saying that it technically was before the court. 15 It was faintly suggested by Mr McCulloch SC for the defendant, that he would have conducted his case differently had the claim been pressed, but it is hard to see how this could have been done other than by making the points (ii) to (v) which he has made and to which I will now turn. 16 (ii) I have already really dealt with this. I agree that the plaintiff did not make it completely clear that the point involving para 32 of the amended statement of claim was before the court. Further, there was no mention of it in its counsel's written submissions. However, the claim was never abandoned and I cannot say that the way the trial was conducted showed implied abandonment. The fact is that the trial proceeded at express speed, counsel and judge concentrated on the major issues and this point was merely left unaddressed. 17 I thus reject this submission and consider that I should now examine the claim under para 32. 18 (iii) The policy in question contains a clause (c) under the heading "Law Costs and Expenses" on p 2 that the insured is covered for "all reasonable expenses … incurred with the consent of GIO". 19 It is clear that the defendant, then trading as GIO, never consented to the plaintiff's expenditure on consultants, but this can be explained because, very early on, GIO repudiated any liability under the policy. Mr Trebeck submits that where the insurer repudiates a policy so that it is a complete waste of time seeking its consent, then the pre-condition of obtaining the insurer's consent is dispensed with. 20 It seems to me that in the few cases where a point similar to (iii) has been taken by an insurer, it has not been successful. In an appeal in the Privy Council from Gibraltar, Hadwin v Lovelace (1809) 1 Acton 126; 12 ER 48, the Privy Council rejected the submission, as did the Full Court of this Court in Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88. 21 However, in Edwards' case, it was said by Davidson J who gave the leading judgment, that it may well be that the insurer's argument was technically correct, but in a case such as this, when one looks at the real loss suffered by the insured, one must take into account the reasonable costs involved in settling the claim where the insurer has repudiated liability under the policy. In Edwards, the court seems to have rejected the proposition that there is a difference between repudiating the policy on the ground of fraud etc, or repudiating liability under the policy. 22 In the present case, the attitude of the insurer was that it was not intending to pay the claim and it impliedly communicated that it was a matter of indifference to it as to how the insured gathered material to support its defence or settled with the persons who were suing the insured. 23 Accordingly, this submission fails. 24 (iv) and (v) The question then is whether the expenses claimed are part of the insured's loss. Mr McCulloch rightly puts that the evidence on this is very thin. However, where the court only has thin evidence, and the evidence is credible and there is no other evidence, then the court is justified in acting upon it. That seems to me to be the situation here. 25 Again, Mr McCulloch objects to the apportionments on pp 10 and following of 50, 66 per cent etc, but again, there was no challenge to these, no contrary evidence and I need to act on the best evidence I have. 26 Accordingly, in my view it follows that I should include in the judgment the costs claimed under para 32 of the statement of claim.

(C) Costs 30 The next question is whether I should, as the plaintiff claims, order indemnity costs from 5 July 2005. The reason why it is said I should do so is that, on 5 July 2005, the plaintiff made an offer of compromise for $700,000.00 in full and final settlement, plus costs to be agreed or assessed, the offer to be open for 28 days. 31 The offer was not accepted. 32 The offer was served in the form as prescribed by Part 22 of the Supreme Court Rules 1970. Part 52A r 22(4) of those rules then provided that: "Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall, subject to rule 33, be entitled to an order against the defendant for the plaintiff's costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to his costs incurred before and on that day, assessed on a party and party basis." 33 Under Schedule 6, clause 10 to the Civil Procedure Act 2005, it would seem that one still applies the old provision despite its repeal, but this is of little moment because Part 20 r 26 of the Uniform Civil Procedure Rules 2005 is the same as the former rule in Part 22, and Part 42 r 14 of the new Rules is the equivalent of Part 52A r 22(4). 34 Mr McCulloch's submission, essentially, is that at the time when the offer of compromise was served, the defendant was not in a position properly to evaluate the offer because there had been insufficient discovery and particulars given, consequently, it should not result in the defendant becoming liable for indemnity costs. Further, the offer of compromise expired on or about 2 August 2005 and whilst it could have been revived by a fresh notice, that never occurred. There was no warrant for saying that the offer somehow or other notionally continued in force, nor was there any warrant for saying that as the defendant, when it had evaluated the case, should have known it could settle for $700,000.00, it should have made an offer of compromise itself. 35 On the other side, Mr Trebeck said, quite simply, that the rules say that the plaintiff is entitled to indemnity costs if the offer is not accepted and that questions as to whether the defendant had sufficient information only go to whether the court should "otherwise order". He also says that when one looks at the situation the defendant actually did have sufficient information at the relevant time. 36 In my view, Mr Trebeck's submission is correct. The rule merely looks to whether the offer was accepted or not and what the ultimate verdict was and, as part of the policy of encouraging settlement, imposes the consequence of indemnity costs unless the court otherwise orders. 37 The learned authors of Ritchie's Uniform Civil Procedure at 42.14.10 note that the authorities such as Marsland v Andjelic (No 2) (1993) 32 NSWLR 649, 654, show that the matter the court must address is whether the defendant has dislodged the plaintiff's right to an order for indemnity costs. Ordinarily, exceptional circumstances should exist: Hillier v Sheather (1995) 36 NSWLR 414, 422. 38 This approach applies equally to cases under the Uniform Civil Procedure Rules, see Shellharbour CC v Johnson (No 2) (2006) 67 NSWLR 308, 314 [19]. 39 However, in Hillier, Kirby P said at p 423 that courts are not to overlook the particular features of a case and the difficulty of putting an accurate estimate on its value in advance of litigation; the "otherwise order" jurisdiction is not to be exercised in a mechanical way. However, the rule-maker must have known that there would be difficulties in assessment of the situation for both plaintiffs and defendants, and notwithstanding this, enacted the rule. 40 Mr McCulloch put that the offer of compromise was premature. I was attracted to that argument for a while. However, it does seem to me that the policy of the rule is that litigation should be settled as soon as possible. I can well see that if an offer were made before a defendant had any time to investigate with a short window of opportunity, that the offer might be said to be premature. But where, as here, we have a 2003 action and an offer made after the plaintiff's principal affidavit has been filed, I do not consider that one can say that the offer is not one which complies with Part 22 on the basis that it was premature. 41 Should, then, the offer not have its normal effect because the defendant was deprived of information? Mr Trebeck says that the defendant has not pointed to any particular matter of which it was in the dark. Mr McCulloch was not tempted to answer that submission. He merely referred me to the correspondence about the time when the offer was made in which the defendant's solicitors constantly complained that discovery was not sufficient and particulars were not sufficient. However, one does not need to have much experience of common law litigation to know that defendants' solicitors are apt to say this in 9 cases out of 10. The plaintiff's principal affidavit had been filed, and indeed, whilst the offer was still open, Mr Smith's second affidavit was filed. I do not consider that the defendant was so in the dark that it would be unfair for the rule to apply. 42 I am satisfied that the rule should be applied so that indemnity costs should be paid after 5 July 2005. Accordingly, I make the first order 3 in the yellow short minutes of order. 43 Order 4 in the yellow short minutes of order dealt with the question of costs involved in proving facts and documents which were the subject of the plaintiff's notice to admit facts and authenticity of documents which the defendant refused to admit. I have received extensive submissions on this issue. 44 However, as it is acknowledged that if indemnity costs are to be ordered, this question is otiose, I do not see any purpose in considering those submissions, though, in case the matter goes further, I have preserved them in the file. 45 Accordingly, I have struck out para 4 of the yellow short minutes and I have initialled and dated as at 19 September 2007 the yellow short minutes of order containing the first order 1, order 2, the first order 3 and order 5.

Forbes Shire Council v AG Australia Holdings Ltd

At a glance

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Judgment (17 paragraphs)

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Cases Cited (5)