K & M Prodanovski Pty Limited v Calliden Insurance Limited

Supreme Court of NSW|2011-07-20|Before: Einstein J, Toohey J

Judgment 1On 15 July 2011, I gave judgment in the matter of K & M Prodanovski Pty Limited v Calliden Insurance Limited [2011] NSWSC 738 ('the substantive matter'). The present hearing deals with the appropriate costs order arising from that matter. 2The substantive matter concerned a Lamborghini motor vehicle ('the vehicle'), which was substantially damaged in an accident. The plaintiff had purchased the Lamborghini for $980, 000. 3Pursuant to leave granted in Court, the plaintiff sought a declaration that the insured motor vehicle is a written off vehicle within the meaning of section 16B (3) (f) of the Road Transport (Vehicle Registration) Act 1997 (NSW) . 4The plaintiff further sought an order that the defendant pay to it the sum of $971, 000 being the purchase price of the vehicle less the excess payable. 5In the alternative, the plaintiff contended that in the event that the Court were to conclude that, notwithstanding the passage of time since the accident, that the defendant remains entitled to repair the insured motor vehicle or to pay the cost of repairing that motor vehicle, that such an order be made for repair forthwith. 6Finally, the plaintiff sought orders that the defendant pay the plaintiff interest and/or damages, including the cost of storage of the vehicle.

Result of the substantive proceedings 7In the substantive proceedings, the Court rejected the plaintiff's case that the vehicle was a statutory written-off vehicle. This finding was primarily reliant on the Court's favourable assessment of Mr Movizio's evidence. 8The Court then considered the plaintiff's claim that the defendant failed to elect to repair the vehicle within a reasonable time such that the defendant was entitled to the full value of the car less excess. The Court also found against the plaintiff in this regard. The Court did not accept that the defendant elected, as early as September 2009 to repair the vehicle, but by 20 September 2011 there was a clear and unequivocal election to repair. In the circumstances that pertained to this case, it was accepted that this was not an unreasonable delay, so as to amount to a breach of the insurance policy. 9Accordingly, Order 1 directed the defendant to pay the costs of repair of the plaintiff's vehicle to within industry tolerance. Save for some disagreement as to the exact cost of repair, in substance this order accorded with the view of the defendant's liability to the plaintiff throughout the hearing.

Some principles 10The principles governing the Court's exercise of discretion are well known and were agreed upon by the parties. 11In brief they are: (1)The Court has a broad discretion in making a costs order. Section 98 (1)(b ) Civil Procedure Act (NSW) and Oshlack v Richmond River Council (1998) 193 CLR 72. However , the general rule is that costs "follow the event": UCPR 42.1 ; and (2)The expressions "follow the event" and "successful party" do not have precise connotations. Their characterisation may be influenced by the nature and extent of the claims in the proceedings. A party's relevant "success" in relation to an "event" is not precisely congruent with it obtaining a formal favourable final outcome. See Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 per Toohey J; Cretazzo v Lombardi (1975) 13 SASR 4 at 12; Colburt v Beard [1992] 2 Qd R 67. A party who succeeds on significant issues in proceedings may be entitled to a favourable costs order, even if they suffer an actual adverse judgment in the final determination of all claims.

The plaintiff's submissions as to costs 12The plaintiff submitted that: (1)In the Amended Summons it sought in paragraph 2A an order that the defendant repair the vehicle; (2)The plaintiff has obtained an order in its favour, namely that the defendant pay the costs of the repair of the plaintiff's vehicle in accordance with industry standards. No sufficient reason has been shown to depart from the ordinary rule. (3)The highest amount the defendant has indicated it would pay was $344,088.51 which clearly is substantially less than the minimum amount of those costs as established by the evidence. (4)Further, the plaintiff maintains a claim for interest pursuant to s 57 of the Insurance Contracts Act 1984 (Cth) and a claim for the costs of storage of the vehicle.

The defendant's submissions as to costs 13The defendant submitted that: (1)The dominant issue in the proceedings, in both hearing time and quantum of evidence as the result of the new evidence served on 2 & 4 May 2011 was the repair case. The plaintiff failed on that issue. (2)The plaintiff also failed on the agreed value case. (3)In these circumstances, it is submitted first that it is appropriate to depart from the general "follow the event" principle because the plaintiff failed: (a)On the agreed value case; and (b)On the repair case. (4)Because the defendant had always asserted that the vehicle could be repaired and the plaintiff always asserted it could not , it is appropriate the plaintiff pay the defendant's costs on an from 20 April 2011 being the day there was an unequivocal election. (5)It is submitted indemnity costs are justified on the basis of the late "forensic shift" in the plaintiff's case. This action constituted unreasonable conduct analogous to a late admission of liability. This court granted the plaintiff an expeditious hearing date initially of 11 May 2011. As the result of the forensic shift in the plaintiff's case it vacated that hearing and listed it within a further 5 weeks and required the defendant to meet that new case. (6)A costs order in favour of the plaintiff from 11 April 2011 properly reflects, it is submitted, the defendants position vis a vis repair and the plaintiff change of tack. (7)The plaintiff lost the agreed value case. The costs order proposed recognizes that fact but also takes into account the fact that the letters asserted by the defendant to constitute an election were found not to constitute an election and the order actually made by the Court .

Decision as to costs of the substantive proceedings 14At no stage during these proceedings did the defendant argue it was not liable to make any payment to the plaintiff. It was always its primary position that it should pay the reasonable costs of repair. In these circumstances the plaintiff's submission that it has been successful in these proceedings is only correct in the most technical sense. In a substantive sense, the defendant succeeded on all the important issues. For this reason a costs order should be made in the defendant's favour. 15However, the order sought by the defendant in its proposed short minutes of order is inappropriate. The defendant has failed to satisfy the Court that circumstances exist that justify an award of indemnity costs. I accept the plaintiff's submission that the amendment to their pleadings was an amendment in the ordinary course of litigation to which no adverse cost consequences should follow. 16In these circumstances, the principled exercise of the Court's discretion is to order that the plaintiff pay the defendant's costs on an ordinary basis as agreed or assessed. The Court does not limit this order such that it only runs from 20 April 2011. The defendant was ultimately successful on the case in its entirety and the costs order should reflect this.

Decision on interest and storage costs 17Turning to the two further claims by the plaintiff, those being: (1)The costs of storage; and (2)interest. 18In the substantive judgment, I did not find a breach of the insurance policy by the defendant. For this reason it is inappropriate to award the costs of storage. I accept Mr Cashion's submission that such an award is only appropriate where it is shown the defendant materially contributed to delay. Given the correspondence between the parties and the history of the litigation, the defendant's conduct did not unreasonably contribute to delay. 19In relation to insurance, section 57(1) of the Insurance Contracts Act 1984 (Cth) only applies where an insurer is liable to pay a person an amount. In this case, no amount is payable directly to the plaintiff. The insurer's liability is only for the cost of repair. 20Further, section 57(2) renders an insurer liable for interest from the day on which the withholding of payment was unreasonable. There was no such finding of unreasonableness and therefore the award of interest is not appropriate.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 July 2011

Road Transport (Vehicle Registration) Act 1997(NSW)

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