Mobis Parts Australia Pty Ltd v XL Insurance Company SE

Judgment

1. THE COURT: With one exception the parties have agreed on the orders to be made to give effect to the Court's reasons for judgment delivered on 24 December 2018: Mobis Parts Australia Pty Ltd v XL Insurance Company SE [2018] NSWCA 342. Except for proposed order 5, the parties agree that the following orders should be made: 1. The appeal be allowed in part as to grounds 1.1, 3.1, 3.2, 4 and 5 of the Notice of Appeal filed on 9 March 2018. 2. The cross-appeal be dismissed. 3. The respondent further indemnify the appellant under the insurance policy issued by the respondent to the appellant, entitled "Property Damage & Business Interruption" and numbered AU00002167PR14A (ISR Policy) by paying a sum of $7,193,141 to the appellant in respect of the appellant's losses suffered as a result of a storm occurring on 25 April 2015 at 77 Peter Brock Drive, Eastern Creek, New South Wales. 4. The respondent pay the appellant interest in the sum of $917,762.71 pursuant to section 57 of the Insurance Contracts Act 1984 (Cth) and regulation 32 of the Insurance Contracts Regulation 1985 (Cth) until 25 January 2019 and thereafter at a rate of $1083.90 per day until the sum in order 3 has been paid. 5. Order 4 made on 13 February 2018 in the Supreme Court of New South Wales proceedings 2015/281297 be set aside and in lieu thereof order that the respondent pay the appellant's costs of those proceedings: (a) in respect of the issue of defective design, on an indemnity basis; and (b) in respect of all other issues in the proceedings, on the ordinary basis. 6. The respondent pay 80 per cent of the appellant's costs of the appeal and cross-appeal.
2. Proposed order 5 deals with the costs of the proceedings at first instance, as to which this Court said in its judgment at [157]: Mobis Australia's success on grounds 1.1, 3.1, 3.2, 4 and 5, and consequent entitlement to a further indemnity in an amount exceeding $7 million, requires that the discretion as to its costs of the trial be re-exercised and, if necessary, that a different order be made.
3. The primary judge ordered that XL pay 80% of Mobis' costs of the proceedings, assessed on the ordinary basis. In doing so, his Honour took into account XL's undertaking to pay the costs of the Faulty Design Exclusion issue on an indemnity basis: Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 10) [2018] NSWSC 37 at [12]-[20]. Of continuing relevance to this Court's re-exercise of the costs discretion is the common position between the parties that "it would be undesirable, and productive of unnecessary trouble and expense, to make costs orders by reference to the particular issues in respect of which each party has been successful". Accordingly, it was accepted that the primary judge "should make a global costs order which, to the extent possible, reflects the varying degrees of success of the parties". We propose to proceed on the same basis.
4. Pointing to its success in the appeal, Mobis contends for order 5 as formulated in [1] above. In response, XL submits that it should not be ordered to pay more than 85% of Mobis' costs, assessed on the ordinary basis.
5. There is no issue as to the relevant principles. The discretion under Civil Procedure Act 2005 (NSW), s 98 is ordinarily exercised by requiring that "costs follow the event": Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1. This default position was historically understood to mean (so as to preserve the practice, where any issue was tried with a jury, that those costs followed the outcome of that event) "that the costs of the several issues went to the party who succeeded on them respectively, while the general costs went to him who on the whole succeeded on the action": Reid, Hewitt & Co v Joseph [1918] AC 717 at 724-725 (Lord Finlay LC). But more recent authority favours the award of the costs of proceedings to the party successful overall without any differentiation as to issues, at least "unless a particular issue or group of issues is clearly dominant or separable": Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328 at 330-331 (Mahoney JA); Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [63]-[64] (Campbell JA). And the costs arising from such issues have more readily been apportioned where the party successful overall is the plaintiff: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [22] (Hodgson JA, Allsop P and Macfarlan JA agreeing).
6. Given this Court's conclusions in the appeal, Mobis has succeeded on all substantial issues arising under the Local Policy except those as to "Acceptance of Liability", the cause of the collapse being hail rather than storm, and its claim that all stock not damaged in the collapse was physically lost because its recovery was uncertain.
7. The first of these issues arose only because of XL's reliance on the Faulty Design Exclusion upon which it failed. It is not suggested that the issue was not arguable and its resolution in favour of XL did not change the overall outcome. In these circumstances, in our view, the costs of this issue should not be considered separately from those relating to XL's reliance on the Faulty Design Exclusion.
8. The second issue - the proximate cause of the collapse - was raised by Mobis as part of its response to XL's reliance upon the hail limit, either as incorporated in the Local Policy by reason of cl 1.9 or as a term of that policy as rectified. As the primary judge noted in Judgment (10) at [8], because he had decided "that the local policy should not be rectified to include a hail limit", Mobis' failure on this issue was of no moment. For this reason, and notwithstanding that there was not insignificant evidence and argument directed to this question (see Judgment (7) at [103]-[149]) there should be no separate allowance for XL's success on it, which again did not affect the ultimate outcome.
9. The third issue on which Mobis failed, both before the primary judge and on appeal, was the "physical loss" issue. The resolution of this issue, which Mobis estimates occupied at least 6% of the time spent at the hearing in the Court below, was a discrete issue of substantial significance in relation to the quantum of Mobis' claim for damaged stock. In our view, an allowance should be made for XL's success on this issue.
10. Doing so on the basis that no order is to be made in relation to XL's costs of this issue, taking account of XL's concession that it must pay the costs of the Faulty Design Exclusion, and acknowledging that there were other minor issues determined in favour of XL relating to the quantum of the building, stock and business interruption claims, we consider that XL should pay 90% of Mobis' costs of the proceedings, assessed on the ordinary basis.
11. Accordingly the following orders are made: 1. The appeal be allowed in part as to grounds 1.1, 3.1, 3.2, 4 and 5 of the Notice of Appeal filed on 9 March 2018. 2. The cross-appeal be dismissed. 3. The respondent further indemnify the appellant under the insurance policy issued by the respondent to the appellant, entitled "Property Damage & Business Interruption" and numbered AU00002167PR14A (ISR Policy) by paying a sum of $7,193,141 to the appellant in respect of the appellant's losses suffered as a result of a storm occurring on 25 April 2015 at 77 Peter Brock Drive, Eastern Creek, New South Wales. 4. The respondent pay the appellant interest in the sum of $917,762.71 pursuant to section 57 of the Insurance Contracts Act 1984 (Cth) and regulation 32 of the Insurance Contracts Regulation 1985 (Cth) until 25 January 2019 and thereafter at a rate of $1083.90 per day until the sum in order 3 has been paid. 5. Order 4 made on 13 February 2018 in the Supreme Court of New South Wales proceedings 2015/281297 be set aside and in lieu thereof order that the respondent pay 90% of the appellant's costs in proceedings 2015/281297, assessed on the ordinary basis. 6. The respondent pay 80 per cent of the appellant's costs of the appeal and cross-appeal.

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