Owners Strata Plan 70150 v Allianz Australia Insurance Ltd

DECISION : Defendant pay plaintiff's costs of the proceedings, including costs of the reference, and that interest be payable thereon

CATCHWORDS : PROCEDURE - Costs - Departing from the general rule - costs follow the event - interest on costs

(NSW) Civil Procedure Act 2005 LEGISLATION CITED : (NSW) Supreme Court Act 1970 (NSW) Uniform Civil Procedure Rules 2005 Schedule 5

Abigroup v Peninsula (No 2) [2001] NSWSC 1016 CASES CITED : Drummond & Rosen Pty Ltd v Easey & Ors (No 2) [2009] NSWCA 331 Hexiva Pty Ltd v Lederer [2006] NSWSC 1129 Wood v Inglis [2010] NSWSC 749

PARTIES : Owners Strata Plan 70150 (plaintiff) Allianz Australia Insurance Ltd (defendant)

COUNSEL : M Rudge SC w F Hicks (plaintiff) D Weinberg (defendant)

SOLICITORS : Doyle Edwards Anderson Lawyers (plaintiff) HWL Ebsworth Lawyers (defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2005/270884 The Owners Strata Plan No 70150 v Allianz Australia Insurance Ltd JUDGMENT (ex tempore)

1 HIS HONOUR: Before the Court are competing motions by the plaintiff for adoption, and by the defendant for rejection in part, of a report of a referee, to whom the determination of these proceedings was, by order of the Court, referred. After the commencement of the hearing of those motions this morning, the parties were able to compromise their applications on the basis that short minutes will be brought in tomorrow morning providing effectively for the substitution of a judgment in the plaintiff's favour in the sum of $4.5 million, for the referee's recommended $5 million approximately. As I understand it, the difference reflects substantially, though not entirely, the disputed allowance made by the referee for GST.

2 The parties have agreed that each should bear its own costs of those competing motions, but the Court is required to determine what the referee did not determine - namely, the costs of the proceedings (other than the motions for adoption and rejection), and including the costs of the reference; and, consequent upon that, the plaintiff's application for an order that it have interest on those costs.

3 So far as costs generally are concerned, the outcome of the proceedings is plainly that the plaintiff has succeeded and will recover a judgment for some $4.5 million. Ordinarily, the consequence would be that, costs following the event, there would be an order that the defendant pay the plaintiff's costs. The only matter which has been advanced in opposition to that outcome - and, indeed, in connection with the application for interest on costs - is an adjournment, which occurred at one minute to 3pm on the sixth day of the reference, which was then scheduled to occupy the remainder of that day and the following day. As a result of the adjournment, the proceedings instead resumed some two months later for several additional days. 4 There were several factors which contributed to the requirement for that adjournment. One was a late notice application by the plaintiff to adduce additional evidence, which required that the defendant's expert have an opportunity to consider it. Another was a second late notice provision by the plaintiff of photographs previously taken by an expert, which it had not previously produced. A third was the unavailability on the following day of the defendant's expert in any event.

5 As Mr Rudge submitted, it is important to bear in mind the manner in which the reference proceeded - at the referee's direction, largely by expert conclaves followed by joint reports of experts as to matters on which they agreed and disagreed, followed by the taking of concurrent evidence from the experts. That approach resulted, as it often does, in issues becoming refined in the course of the expert conclaves and otherwise, the points of difference emerging, and the requirement for clarification on some of those points of difference becoming apparent. Sometimes, that means that further investigations of the facts or further inspections may still further resolve the issue by clarifying what the experts identify as the remaining point or points of differences between them. 6 That, it seems to me, is essentially what happened here, in that the requirement for the further evidence, adduced late as it was, was something that was triggered by the refinement of issues in the course of a long and complex hearing. I do not think it is reasonable to see it as a discrete new matter caused by one party or the other, so as to justify a departure from the general costs consequences of the proceedings. More correctly, it is seen as one of the exigencies of complex litigation of this kind. It follows that I do not think that there should be any exception in respect of the adjournment on day 6 from the ordinary costs consequences of the outcome of the proceedings.

7 It was submitted that the litigation had to proceed and was inevitable because the plaintiff sued for an unliquidated sum, made no offer (or at least none that is in evidence) to accept a lesser sum, and yet ultimately achieved a lesser sum. Of course, had the plaintiff made an offer which it bettered in the outcome, it would have had a strong case for an indemnity, as opposed to an ordinary, costs order. Similarly, the defendant's submission in this respect would have been much more compelling had it made a relevant offer which the plaintiff had not bettered at trial. In the absence of evidence of relevant offers on either side, the fact that the plaintiff succeeded, albeit for a less sum or amount than it might have sued for, is beside the point; the plaintiff still succeeded. This provides no basis for departing from the ordinary rule.

8 I come then to the question of interest on costs. I considered this in Wood v Inglis [2010] NSWSC 749. As I then sought to explain, just as when the statutory power to award pre-judgment interest on damages was conferred by the (NSW) Supreme Court Act 1970, there was at first significant dispute as to whether interest should be awarded only in special cases or in the general course, but before long it became established that, prima facie interest would be awarded because it was compensatory in nature and intended to compensate the successful party for having been kept out of the moneys to which that party was ultimately found to be entitled, so, since the power to award interest on costs has been more explicitly conferred by the (NSW) Civil Procedure Act 2005, there has been a similar evolution in the Courts' approach from one in which originally it was thought that interest on costs was exceptional and required some special circumstances [see for example, the observations of Barrett J in Abigroup v Peninsula (No 2) [2001] NSWSC 1016, [44], where his Honour suggested that the main factor which may cause the Court to award interest on costs was delay in the resolution of proceedings where a party had been out of pocket for an inordinate time], to one where, ordinarily, a party that obtains a costs order will also recover if it seeks one, an order for interest on those costs in the absence of any countervailing discretionary factor [see the observations of the Court of Appeal in Drummond & Rosen Pty Ltd v Easey & Ors (No 2) [2009] NSWCA 331 and see also Hexiva Pty Ltd v Lederer [2006] NSWSC 1129].

9 It was suggested that, in the present case, the delay occasioned by the adjournment for a couple of months was a relevant countervailing discretionary factor. For reasons already explained, I do not think it is any more so on the question of interest than on costs generally. In any event it would have justified no more than excluding a period of a couple of months from that to which interest would apply. 10 No argument has been addressed that the appropriate rate of interest is other than that prescribed by the rules of Court for interest on unpaid judgment debts.

11 The short minutes to be brought in tomorrow should therefore provide for orders: 1. That save in so far as any other costs order provides, the defendant pay the plaintiff's costs of the proceedings, including the costs of the reference.

2. That interest be payable on any amount payable under the costs order in 1 above, as follows: (a) interest shall be payable on that proportion of each amount of costs and disbursements allowed on assessment which were actually paid by the costs creditor, which the total amount of costs and disbursements allowed on assessment to the costs creditor under this costs order bears to the total amount of costs and disbursements which the costs creditor has paid or was liable to pay in connection with these proceedings;

(b) such interest shall be payable at the rates prescribed from time to time by (NSW) Uniform Civil Procedure Rules 2005 Schedule 5 from the date of payment by the costs creditor of each amount of costs and disbursements actually paid by it until the costs debtor has paid the amount due to the costs creditor under the costs order made in these proceedings or any further order relating to interest on costs in these proceedings;

(c) for the purposes of this order, the costs creditor is the plaintiff and the costs debtor is the defendant.

3. Reserve liberty to apply in the event of any difficulty arising in the implementation of this order. **********

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