Oberlechner v Watson Wyatt Superannuation Pty Ltd [2007] NSWSC 1435 | Case summary

1911/06 ALFREDO OBERLECHNER v WATSON WYATT SUPERANNUATION PTY LTD & ANOR JUDGMENT 1 HIS HONOUR: This judgment is to determine contested questions of costs in these proceedings. In the proceedings the plaintiff claimed that, as from late 1999, he was totally and permanently disabled within the meaning of a superannuation trust deed of which the first defendant is the trustee. Total and permanent disablement was defined in the trust deed as having the same meaning as in an insurance policy taken out by the trustee with the second defendant ("the insurer") to secure benefits payable under the trust deed. 2 The plaintiff commenced these proceedings on 22 April 2005 in the Common Law Division against the trustee alone. At the time the proceedings were commenced the plaintiff's claim had not formally been dealt with either by the trustee or the insurer. First the insurer rejected the claim and then the trustee resolved to decline the claim, both in November 2005. There is some confusion as to when the insurer was in effect joined as second defendant to the proceedings. An order was made granting leave to file an amended statement of claim on 1 December 2005 while the file was still in the Common Law Division and there is among the papers a form of amended statement of claim referring to the second defendant, which appears to date from 2 March 2006, although it is not entirely clear that it was in fact filed on that date or at all. 3 However, the formal order authorising the joinder of the second defendant was made after the matter was transferred to the Equity Division. It was made by Registrar Walton on 20 March 2006 and the amended statement of claim subsequently relied on against both defendants was filed on 12 May 2006. The proceedings were tried by me earlier this year. On 16 August 2007 I delivered judgment: Oberlechner v Watson Wyatt Superannuation Pty Ltd [2007] NSWSC 906 ("my judgment"). 4 In my judgment I indicated at [9] that I should first consider the plaintiff's claim against the insurer and, if I was of opinion that the challenge to the insurer's rejection of the claim should be upheld, I should in due course order that the challenge to the trustee's determination be decided separately from and after the other issues in the proceedings. 5 In my judgment the course of the consideration by the trustee of the plaintiff's claim and the basis of its rejection of it was not traversed. At [56] I concluded that the insurer's determination of the plaintiff's claim was void. I proceeded at [66] to make a determination that the plaintiff was as at November 2005 totally and permanently disabled. In [67] I announced that, pursuant to the intention announced in [9] of the judgment, I proposed to make the foreshadowed order for the separate decision of questions. 6 On 21 September 2007 the first defendant resolved to reverse its decision to decline the plaintiff's claim on it. The proceedings as against the trustee thus became otiose and must be dismissed. 7 It is clear that the insurer must undergo an order for the plaintiff's costs of the proceedings. While there are various ways in which the ambit of those costs may be defined, I think the simplest way to frame the order, which will make the process of assessment easiest and avoid arid dispute, is to order that the insurer pay the plaintiff's costs of the proceedings from and including 20 March 2006, the day on which formal leave was given by Registrar Walton to join it as the second defendant. 8 The questions as to costs in relation to the trustee are more difficult. The plaintiff submits that the trustee cannot be regarded as a successful defendant and the plaintiff should not be ordered to pay its costs; the plaintiff and the trustee should be left to bear their own costs. If the plaintiff is found to be liable for the trustee's costs, then he should have the benefit of a Bullock order or a Sanderson order in respect of those costs. The trustee submitted that the plaintiff should be ordered to pay its costs, but does not oppose the making of a Bullock order or Sanderson order in respect of those costs. The insurer submitted that it should not be ordered to pay the trustee's costs by way of Bullock order or Sanderson order or otherwise. It says that the Court should, for the purposes of determining these costs questions, determine the proceedings by the plaintiff against the trustee. In this regard it refers to the decision of Goldberg J in Yates Property Corporation Pty Ltd v Boland (2000) 179 ALR 663. The plaintiff's claim against the trustee should also be assessed as successful. It would not be just and reasonable for the insurer to bear any part of the trustee's costs. 9 Two decisions are important in dealing with these questions of costs. The first is the decision of McHugh J sitting as a single Justice of the High Court in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622. In an oft cited passage McHugh J said at 624: "In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties ( Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201). To do so would burden the parties with the costs of a litigated action which by settlement of extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the paries has acted so unreasonably that the other party should obtain the costs of the action ( Australiain Securities Commission v Aust-Home Investments Ltd supra)." 10 The second is the decision in Fordyce v Fordham (2006) 67 NSWLR 497 where the Court of Appeal's dealings with Lai Qin are set out in some detail in the judgment of McColl JA, with whom Beazley and Santow JJA agreed. That judgment does three important things:

(3) It confirms the relevance of the principles set out in Lai Qin as to the consideration of the reasonableness of the conduct of the parties up to termination of the proceedings in determining the costs of proceedings dismissed without adjudication on the merits. 11 I do not propose to determine the undetermined proceedings as between the plaintiff and the trustee for the purpose of determining this costs application. In my view Goldberg J's decision in Yates does not apply in the present case. While there has been a hearing on the merits of this case, including between the plaintiff and the trustee, I did not embark on considering that claim, much less almost finish reasons for judgment in respect of it. The criteria for impugning the trustee's decision are quite different from those applying to the insurer's decision to accept or reject the claim. It would be a waste of the Court's time and resources to traverse that matter at this stage. 12 As to the reasonableness of the conduct of the plaintiff and the trustee in the circumstances of this case, in my view it was reasonable for the plaintiff to commence the proceedings against the trustee when he did and to continue to maintain them against the trustee after he had joined the insurer. It was also reasonable for the trustee to defend those proceedings up to November 2005, when the insurer rejected the plaintiff's claim and the trustee resolved to decline it. It was equally reasonable for the trustee to continue to contest the proceedings up to the time of my judgment striking down the insurer's rejection of the plaintiff's claim. Upon this radical recasting of the scene, the trustee promptly reversed its decision to decline the plaintiff's claim. 13 On the basis that the conduct of both the plaintiff and the first defendant has been reasonable, I propose to exercise the discretion conferred by r 42.20(1) and order that there be no order as to costs between the plaintiff and the first defendant. 14 Upon that basis I agree with the submissions of Mr Villa, of counsel for the second defendant, that there is no ground for ordering the second defendant to bear the first defendant's costs directly or indirectly and no such order will be made. …oOo… 15 I have been asked on behalf of the first defendant to make some orders as to proceedings for interpleader relief by the first defendant, as it will receive the fruits of the claim against the second defendant pursuant to the orders that I shall make today and is aware of conflicting claims on those proceeds. However, for me to give leave to make the application by motion in these proceedings, I should need to delay the finalisation of the proceedings by the dismissal of the proceedings against the first defendant contemplated in the orders I have proposed. Furthermore, the first defendant does not have here the affidavit necessary to demonstrate its entitlement to commence interpleader proceedings. I think the cleanest course is to bring these proceedings to an end by the making of the proposed orders and for the first defendant to apply for its interpleader relief by summons issued under UCPR r 43.2(2)(b). 16 I do not therefore propose to make any order concerning the interpleader application. On the indications that I have been given today, no appeal is under contemplation and I shall order that the exhibits be returned.

Oberlechner v Watson Wyatt Superannuation Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Parties

Cases Cited (5)

Cited By (1)