Quinlan v Safe International FÖRSÄKRINGS AB

WESTERN AUSTRALIA DISTRICT REGISTRY WAD 282 OF 2005

REASONS FOR JUDGMENT 1 The applicant suffered injuries as a result of a motor vehicle accident in the Bahamas on 4 October 1999. She claimed to be covered by the terms of an insurance policy in which the first respondent (SAFE) promised to provide her with benefits in those circumstances. On 3 October 2005 she filed an application claiming that SAFE had engaged in unconscionable conduct by not paying her the benefits provided for in the insurance policy. She further claimed that the second respondent (CCUSA) had made a representation (for which SAFE was responsible) that the insurance provided by SAFE was an effective and readily accessible form of travel insurance. As against CCUSA the applicant sought relief for misleading and deceptive conduct and damages for breach of a claimed collateral contract. 2 On 26 September 2006 the applicant entered into a deed of settlement of her claims against SAFE. This contained a mutual release between them. She was paid and received the sum due under the deed. 3 There remained the applicant's action against CCUSA. On 27 September 2006 CCUSA filed a notice of motion seeking the dismissal of the claim against it and that the applicant pay its costs, in the alternative that it have leave to file a cross-claim against SAFE. On 28 September 2006 the applicant foreshadowed that it would seek discontinuance of the proceedings against CCUSA with no order as to costs. On 31 October 2006 the applicant sent to CCUSA an unsealed copy of a motion to that effect together with a list of cases relevant to the issue. It was the applicant's stated intention thereby to induce a resolution to the issue. On 15 November 2006 the applicant filed a notice of motion seeking leave pursuant to O 22 r 2(1)(d) of the Federal Court Rules to discontinue the proceedings against CCUSA with no order as to costs. Each of the motions is now before the Court for resolution. 4 Admitted into evidence on the hearing of the motions were a copy of the deed of settlement, affidavits of the applicant and of M/s Garnett of the respondents' solicitors and M/s Cooke, a director of CCUSA. 5 The applicant does not mind whether her claim against CCUSA is either discontinued or dismissed provided that no order to pay costs is made against her. She would consent to dismissal if that condition were met. There is no dispute between the parties that the action against CCUSA should not continue. The only issue in that respect is what order should be made disposing of the proceedings. The consequence is that the main issue before the Court is whether CCUSA is entitled to costs against the applicant. The costs at stake are those incurred by CCUSA prior to the mediation which resulted in the deed of settlement, such costs being on a party/party basis and seemingly being very modest. 6 For CCUSA it is submitted that costs should follow the event. It is contended the leading relevant authority in this respect is Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia & Anor; Ex parte Lai Qin (1997) 186 CLR 622 (Lai Qin 186 CLR) where McHugh J stated at 624: 'In an appropriate case, a court will make an order for costs even where there has been no hearing on the merits and the moving party no longer wishes to proceed with the action …. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action …' At 625 he continued: 'Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried' The submissions for CCUSA then turn to the reasons why the Court should conclude that it was unreasonable for the applicant to commence the current proceedings and why the applicant was unlikely to have succeeded on her motion.

Nature of the claim 7 Before proceeding to consider those issues it is appropriate to examine the content of the amended statement of claim (the claim). 8 The action pleaded against CCUSA is an action based upon s 52 of the Trade Practices Act 1974 (Cth) (the Trade Practices Act), s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and a claim based upon a collateral contract. The claim against CCUSA under the Trade Practices Actand the ASIC Act is a claim that is based upon the allegation that CCUSA, and/or its agents, made representations in trade or commerce, which representations the applicant acted upon thereby suffering damage or loss. The representations that the applicant relies on are representations pleaded in [22], [23], [28] and [30] of the claim. 9 It is pleaded CCUSA was a certified sponsor for persons wishing to participate in a work/study program established by the Government of the United States of America (USA) whereby persons, who fell within nominated categories, were granted special visa access to the USA for specific times for specific purposes (the US Government programs). Persons who were participating in the US Government programs were accepted by summer camps for children, which were conducted in various parts of the USA during their summer. It was a requirement of the USA Government that participants in US Government programs hold insurance coverage of a type stipulated by the USA Government and provided by an approved insurer (US Government approved insurance). SAFE provided such insurance. 10 Around December 1998 to January 1999 CCUSA placed an advertisement in a West Australian newspaper concerning positions obtainable in the USA camps during the then approaching USA summer/Australian winter. The applicant responded by making a telephone request for further information. CCUSA posted to her a brochure and other written material concerning the positions obtainable in the USA camps (Promotional Material). This contained the following statements, appearing at [22] and [23] of the claim: 'Compulsory Comprehensive Insurance Insurance is required by the U.S. government. Our worldwide comprehensive medical, baggage and liability insurance covers you for three full months. You may purchase additional months of coverage if needed. Medical and accident coverage is unlimited. There is no excess on any claim.' 'Insurance No extra cost to you! Our fully comprehensive travel Insurance policy is included with the program and covers luggage, dental, third party, legal and has unlimited medical accident coverage. Our policy has no excess on claims. The policy can be extended for up to 18 months if you are continuing your travels around the world.' 11 Around 21 January 1999 the applicant attended a Camp Directors Fair at an expo at Murdoch University, Western Australia at which applications could be made for positions in the USA camps. It was pleaded in [28] of the claim that at that Fair an initial presentation was given by Mr Harwood in which he said that the insurance available as part of the CCUSA program covered everything while participants were at the USA camps; could be extended to cover travel after work at the USA camps; and could be so extended by payment made through CCUSA. 12 It was further pleaded in [29] that the applicant met with a representative of the New Jersey 'Y' camps - Cedar Lake Camp (the NJY camp), by the name of 'Gali', who said to the applicant in relation to the insurance available as part of the CCUSA program that such insurance was fully comprehensive and could be extended to cover travel after the applicant had completed work at the NJY camp: (claim [30]). 13 The applicant was accepted for a position as a counsellor for the NJY camp. To complete the acceptance she signed the CCUSA Program Form. This contained a statement that insurance coverage while participating in the CCUSA program was required by the US Government. 14 Two or three weeks after the Fair, CCUSA posted to the applicant written material concerning her travel to the NJY camp (the Acceptance Package). This included a letter containing a statement saying that if the applicant wished to cover extra travel after the NJY camp she would need to extend her insurance and that it could be done by CCUSA prior to or after the NJY camp for a total of up to 18 months. The Acceptance Package included an Extended Insurance Form headed 'CCUSA Insurance' which read: 'HOW TO EXTEND: It's really easy, for each additional month it will cost you $85 and (in the handbook it says $60usd, don't forget the exchange rate). Complete the section below and return it to CCUSA Sydney, Australia as soon as possible. You can extend your insurance out to cover you for up to 18 months.' 15 In [40] it was pleaded that the applicant had no effective choice other than to obtain insurance with SAFE for the whole of the period she was outside Australia (including after completing work at the NJY camp). In particularisation of this it was pleaded that insurance companies other than SAFE, and in particular Australian based insurance companies, would not offer travel insurance for other than a full journey outside Australia. Further, it was particularised that the effective monopoly which SAFE had on providing insurance whilst the applicant was at the NJY camp meant that it also had an effective monopoly on providing the applicant with travel insurance whilst she was outside Australia after completion of her work at the NJY camp. 16 The applicant completed the Extended Insurance Form and returned it to CCUSA with payment. 17 The applicant booked and paid for extensive travel to various parts of the world after the completion of her work as a counsellor at the NJY camp. As part of this post-camp travel plan she travelled from Florida to Nassau in the Bahamas around 31 September 1999. It was there on 4 October 1999 that she was involved in the motor vehicle accident. She sustained significant physical injuries for which she underwent medical treatment from time to time. From the date of the accident to 4 October 2002 she incurred and paid expenses in obtaining such treatment, only a portion of which was reimbursed by Medicare and the Australian private health insurer HBF. 18 Due to her injuries the applicant returned to Australia within four days of the accident and did not complete her post-camp travel plan. It was alleged that upon true construction of the policy SAFE was obliged to arrange, at no cost to the applicant, airline travel back to Australia or pay the applicant an amount sufficient to cover the cost of such travel. However when she had made a claim on SAFE she was informed that without proof of the accident and submission of a claim form, she would have to make her own way back to Australia. In order to do so the applicant cashed in an airline travel paid for by her in respect of the post-camp travel plan in exchange for airline travel back to Australia. 19 From time to time the applicant made claims on SAFE for assistance with medical expenses. Paragraphs [64] and [65] of the claim read as follows: '64. On or about 26 October 2000 the applicant's solicitor faxed a letter to SAFE which contained the following: … Has Ms Quinlan's claim been accepted?… Further she will have extensive permanent disabilities and we foreshadow that she will be claiming under the permanent loss of function provision of your policy. ... 65. SAFE replied to the letter pleaded in paragraph 64 above with a letter which contained the following: We acknowledge receipt of your fax dated 26 October 2000. So far we have accepted all the invoices we have received due to Nicole's accident of October 4, 1999. … In case Nicole, solely due to the accident, suffer [sic] permanent loss or reduction of bodily function within 3 years of the accident, she is entitled to a lump sum compensation corresponding to the degree of disability. …' 20 In [69A] of the claim it was pleaded that from time to time the applicant made claims on SAFE for reimbursement of the costs of the unused portion of the post-camp travel plan. In [69B] it was pleaded that SAFE has asserted that the policy does not cover the costs referred to in that respect. In [80A] it was further pleaded that notwithstanding the pleaded requests for payment by the applicant, SAFE refused and continued to refuse to make payment for any part of the post-camp travel plan not undertaken by the applicant. 21 The claim against CCUSA was brought under s 12DA of the ASIC Act. It relied on [93] of the claim which reads as follows: '93. CCUSA represented that the insurance provided by SAFE whilst the applicant was outside Australia, and in particular the insurance provided whilst the applicant was outside the USA, was an effective and readily accessible form of travel insurance ("the Insurance Quality Representation"). Particulars The Insurance Quality Representation is implicit in the matters pleaded in paragraphs 21 - 23, 28, 30 and 35 - 38 above (including the particulars thereto).' In [111] it was pleaded that by reason of the representation pleaded in [93] CCUSA has, in trade or commerce, engaged in conduct in relation to financial services, that was misleading or deceptive or likely to mislead or deceive, contrary to s 12DA of the ASIC Act (or alternatively s 52 of the Trade Practices Act). 22 Next there was a claim against CCUSA for breach of a collateral contract. It was pleaded in [113] that the applicant and CCUSA made a contract (the main contract) whereby CCUSA would act as the applicant's certified sponsor in obtaining work in one of the USA camps during the 1999 USA summer/Australian winter. Further in [114] that CCUSA promised the applicant the Insurance Quality Representation was true. In consideration for that promise the applicant has pleaded as having entered into the main contract with CCUSA. By reason of such matters it was further pleaded in [116] that a collateral contract was formed between the applicant and CCUSA (Collateral Contract), a term of which was a promise by CCUSA that the Insurance Quality Representation was true. At [117] it was pleaded that the Insurance Quality Representation was in fact not true so that CCUSA had breached the Collateral Contract: [118]. This in turn had the consequence that the applicant suffered loss and damage: [119].

Whether admission of liability by SAFE 23 The first submission for CCUSA is that SAFE had already admitted a liability under the policy. This seeks support from correspondence in evidence summarised in [64] and [65] of the claim set out above. 24 CCUSA contends that the correspondence referred to in [65] of the claim, which appears as annexure B to the affidavit of M/s Garnett, amounts to an acknowledgement by SAFE that it had accepted the applicant's claim under its policy of insurance. It submits that the statements quoted above amounted to a representation by SAFE that its policy applied to the applicant's claims. Further, that as the statements have never been retracted, they would create an estoppel preventing SAFE from denying liability. Generally an estoppel will arise where the conditions summarised by Brennan J in Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429 are met. In Legione v Hateley (1983) 152 CLR 406 the majority stressed the need for a representation to be clear and unequivocal if it is to work as an estoppel. 25 I agree with CCUSA that the applicant cannot fairly contend that the correspondence to which the Court was taken on the hearing of these motions amounted to a denial of liability under the policy. However, I do not consider the correspondence referred to has the effect of making the claim unreasonable. Firstly, it does not contain in terms a clear and unequivocal admission of liability. Secondly, there is evidence from an email of the applicant's solicitors dated 7 May 2003 that the applicant had not received payment of any entitlement despite having provided medical reports. Thirdly, the circumstances pleaded in [69A] and [69B] as well as [80A] would have led the applicant not to attribute to the correspondence any definitive effect; that is, she would have thought reasonably that unless she asserted in the pleading all possible reasonable claims she would be at continuing risk.

Whether claim against CCUSA premature 26 CCUSA further submits that the claims against it in relation to the alleged representation could not have arisen until it became obvious to a reasonable person in the applicant's position that the policy would not respond to her injuries. The submission is that the applicant, if she had acted reasonably, should have commenced the action against SAFE, seeking appropriate declaratory relief and damages for breach of contract. This is said to have been the correct approach because, up until the action against SAFE failed, the applicant's cause of action against CCUSA was not complete. Hence it is argued the applicant should be found to have acted unreasonably. As has already appeared I do not agree. Few costs would be incurred against CCUSA until the action against SAFE proved futile. In bringing the proceeding against CCUSA at the time of formulating her claims, the applicant could not therefore be said to be acting so unreasonably that she should bear the costs of the action.

Whether claim against SAFE sufficient 27 It is also submitted by CCUSA that the applicant could only ever have obtained from the parties the benefits she had contracted to obtain under the policy. Consequently her action against SAFE was sufficient to achieve the result for which she hoped. That does not make her action against CCUSA unreasonable; it only makes it secondary to the resolution of the action against SAFE. 28 A further similar submission is that, if the applicant had succeeded against SAFE, it could not then be successfully established by her that the SAFE policy was not effective and readily accessible. Success against SAFE would have dictated that the applicant's claim must fail against CCUSA. That was the case when the deed was concluded but it does not make the claim against CCUSA unreasonable when it was brought at that time the claim against SAFE was unresolved and unadmitted.

Whether claim against CCUSA outside time limit 29 CCUSA also contended that the claim for lump sum compensation was made well outside the three year limitation period provided by the policy and so was unreasonable. However, the three year time limit referred to in the policy is one relating to the period within which an injury must become manifest, not one of limitation. The ordinary statutory limitations would apply and the action was brought in time.

Whether claim against CCUSA had no likelihood of success

Whether meaning of claimed representation capable of being made out 30 It is submitted by CCUSA that none of the matters set out in the claim found a claim that it represented that the SAFE insurance policy was 'effective' and 'readily accessible'. CCUSA argues that nowhere in any of the abovementioned paragraphs is it alleged that anyone represented that the policy was 'effective' or 'readily accessible'. CCUSA therefore submits the pleadings do not bear out the alleged cause of action. 31 The applicant relies in this respect on the pleading in [93] of the claim, repeated in [109]. The applicant there relies on an implicit representation. The arguable issue for trial was whether the representation was implicit. It cannot therefore be said that the pleadings did not bear out the alleged cause of action in this respect. Depending on the terms in which the implicit representation was made out, it may be a future matter which would be taken to be misleading unless and until CCUSA proved it had reasonable grounds for making the representation: Trade Practices Act, s 51A; ASIC Act, s 12BB. 32 If the implicit representation could have been made out in terms as argued by the applicant, it could not be the case that its terms would be so vague as to be without meaning. The words 'readily accessible' are capable of being meaningful in the circumstances pleaded. The word 'effective' is also capable of meaning in that context. It would be an issue for trial whether an order for specific performance could be formulated by reference to those terms. If the claims in respect of them were made out, it would follow that orders could follow where appropriate.

Whether reliance on representation 33 In relation to CCUSA's submission that the applicant does not make clear a claim of reliance, it is the case that in order to recover damages for breach of s 52 of the Trade Practices Act, the applicant was required to prove that she relied upon the alleged misleading or deceptive conduct: see Wardley Australia Limited v. Western Australia (1992) 175 CLR 514 at 525. The allegation is that the applicant relied upon CCUSA's misleading or deceptive conduct in relation to the extension of the SAFE policy beyond her visit to the USA. 34 CCUSA contends the affidavit material filed by the applicant, and the facts pleaded in [40] of the claim, indicate that the applicant did not rely upon any misleading or deceptive statements by CCUSA and had no choice but to extend the SAFE policy beyond her visit to the USA. In [23] of her affidavit the applicant states that her travelling companion sought to obtain insurance from an entity other than SAFE. They called three travel insurers, all of whom said they would 'not offer travel insurance for other than a full journey outside Australia'. As a result of those enquires the applicant decided to take up CCUSA's extended travel insurance option. CCUSA argues that the applicant was forced to insure with SAFE, not because she believed that it was 'effective' and 'readily accessible', but because she had 'no effective choice other than to obtain insurance with SAFE for the whole of the period that [she] was outside Australia': see [40] of the claim. 35 The pleading of reliance appears in [97] of the claim. It is to the effect that the applicant relied on the Insurance Quality Representation. Consequently, the portion of the pleadings relied upon in CCUSA's submissions on the issue of reliance must be read in conjunction with the express pleading of reliance. It was an issue for trial after evidence whether reliance on the representations, if found to be implicit, had occurred. There is nothing inherently improbable in the pleading.

Whether release precludes claim against CCUSA 36 CCUSA also contends that the effect of the settlement is that it has also released CCUSA from any liability to the applicant to the extent to which it is released. Clause 5 of the deed of settlement reads: '5. Releases Each party (and any Related Body Corporate of that party) releases and discharges each other party from all actions, suits, Claims, demands, causes of action, costs and expenses (including any existing unsatisfied costs orders), legal, equitable, under statute and otherwise, and all other liabilities of any nature (whether or not the parties were or could have been aware of them) which each party: (a) now has; (b) at any time had; (c) may have; or (d) but for this deed, could or might have had, against any other party in any way related to or arising from, or any allegation or circumstance arising out of or in any connected [sic] or related to the Action.' 37 There is no evidence that CCUSA is in any way related to SAFE. On its face it is a mutual release between the parties to the deed, namely the applicant and SAFE. If the applicant's claim against CCUSA resulted in a judgment in her favour she would be precluded by these terms from seeking satisfaction from SAFE. Even if CCUSA is to be understood as correctly characterised as the agent of SAFE, the deed does not either expressly or by implication release any claim by the applicant against a party other than SAFE. Given the different character of the applicant's claim against CCUSA in comparison to her claim against SAFE, it cannot be implied that there is an unequivocal statement that the right of action against CCUSA no longer exists.

Whether discharge of SAFE discharged CCUSA 38 CCUSA submitted that any collateral contract entered into by the applicant as result of the pleaded representation could only be understood as a contract entered into by CCUSA as the agent of SAFE. Therefore, as SAFE was either a disclosed or undisclosed principal, it and CCUSA were jointly and severally liable in both contract and for any misleading or deceptive conduct. The consequence, it was submitted, was that the release of either of them from such liability operated as a release of the other party. The result, it is said, is that there was no longer any action that could be pleaded against CCUSA after settlement was reached with SAFE. 39 The first point to be made on this submission is that at the time the claim was made against CCUSA there was not a release in existence or even in contemplation. It could not then have been said on the basis now submitted that the claim against CCUSA could not be made out. 40 Secondly, there is no necessary foundation for concluding that the Court would find that CCUSA was in fact the agent of SAFE as principal. The pleadings do not contain any express reliance on an agency relationship. It would have been a question for trial whether any such relationship existed. The possibility of a finding of an unpleaded fact cannot properly be the premise of a conclusion that the claim against CCUSA could not have been made out. 41 Thirdly, the rule of merger as between principal and agent (if such a relationship is found to exist between SAFE and CCUSA) arises where judgment is entered against one of them. That is then a bar to proceedings against the other. However, the rule requiring election to sue either agent or principal arises only after a final judgment against the one or the other: Buckingham v Trotter (1901) 1 SR (NSW) 253 at 261. In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 243-244 the High Court cited with approval the following passage from Petersen v Moloney (1951) 84 CLR 91 at 102: 'The case is clearly one of alternative liability. Either Moloney [the purchaser] or Pulbrook [the agent] might be liable to the plaintiff, but both could not be. In such a case a final election to treat either as liable would preclude the plaintiff from proceeding against the other, and it is a well-settled general principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election …' No judgment was entered here. 42 It was put in argument by CCUSA that the liability of the agent and principal was joint and several, though no reasoning was given for this in relation to the Collateral Contract or the s 52 Trade Practices Act claim and it seems to stem from a misconception that the respondents were joint tortfeasors even though no claim of tortuous liability is made by the applicant. However, even if there was a joint and serval relationship for the Collateral Contract the applicant would then not have to make an 'election' in the sense of choosing one or the other to provide relief and could instead have both respondents (due to their joint obligation) provide final relief (LC Fowler & Sons Ltd v St Stephens College Board of Governors [1991] 3 NZLR 304 at 311). (These authorities appear in the text relied upon by the respondent: G E Dal Pont, Law of Agency (Butterworths, 2001) 678-686). 43 The claim against CCUSA for misrepresentation is not in its terms a claim at common law against SAFE and CCUSA as joint tortfeasors. However, arguments were addressed to the rule applicable to joint tortfeasors at common law on the basis that the common law may nevertheless have application in that respect. The relevant consequence of that rule was that an unqualified release (as opposed to a covenant not to sue) of one joint tortfeasor released the other joint tortfeasors: see Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 at 650, at [26] (Baxter 205 CLR), per Gleeson CJ and Callinan J; Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 608-611 (Thompson 186 CLR) per Gummow J and XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1995) 155 CLR 448 at 456 per Gibbs J. That now has to be understood in the light of the fact that it has been held by the High Court in Thompson 186 CLR that s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) has had the effect of changing the common law rule that the plaintiff had a single cause of action against joint tortfeasors and hence the common law rule that a release given to one joint tortfeasor released the other joint tort feasors was also abolished: Baxter 205 CLR at 650, at [26] per Gleeson CJ and Callinan J and 658, at [54] per Gummow and Hayne JJ. The Western Australian equivalent of s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) is s 7(1)(a) of the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA). The two provisions are almost word for word identical. Both sections are based on s 6(1) of the Law Reform (Married Women and Tortfeasors) Act 1935 (UK) (25 & 26 Geo V c 30) as recommended by the Great Britain, Law Reform Committee, Third Interim Report (1934) (Cmd 4637): see Baxter 205 CLR at 648, at [23] per Gleeson CJ and Callinan J, at 663, at [71]-[72] and at 668, at [85] per Kirby J. The effect of s 7(1)(a) of the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA) is that the common law rule that a release given in favour of one joint tortfeasor releases any other joint tortfeasor has been abolished: see Deloitte Touche Tohmatsu v Cridlands Pty Ltd (2003) 134 FCR 474 at 501, at [113] per Selway J. 44 The result is that I do not consider that it can be concluded that the claim made by the applicant against CCUSA could not have been made out. In my view the applicant's pleading against CCUSA was plainly arguable.

Liability for costs 45 In O'Callaghan v Genovese [2005] WASC 161 (O'Callaghan WASC 161) at [57] Master Newnes considered an application by plaintiffs for leave to discontinue an action in relation to which the only issue was which party should bear the costs. He said: 'In my view, on an application of this nature it is appropriate to look generally at the reasonableness of the conduct of the respondent parties in order to determine where the costs of the litigation should fall. Where, for instance, a party contends that the other parties' case is without merit and therefore must inevitably have failed at trial, it may be a relevant consideration whether the party so contending made reasonable endeavours to draw that to the attention of the other party and to bring the litigation to an early end, or whether it has simply stood by and allowed costs to mount and scarce, expensive public resources to be unnecessarily consumed in hopeless litigation.' 46 In Lai Qin 186 CLR at 625 McHugh J also said: 'If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.' Reasonableness of conduct was also the touchstone approved by Sackville J in Rizal v Minister for Immigration and Multicultural Affairs [1999] FCA 334: cf Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 at 287. In O'Callaghan WASC 161 at [53] Master Newnes continued: 'In Edwards Madigan Toorzillo Griggs Pty Ltd v Gloria Stack & Ors [2003] NSWCA 302, Davies AJA (with whom Mason P and Meagher JA agreed) said at [5]: "When proceedings are brought to an end without a determination after a trial, the Judge may find it difficult, even impossible, to make an award of costs. If the Judge does make an award, it will generally be because the Judge is satisfied that one party has had a substantial victory and the other a substantial loss, or that there has been a marked difference in the reasonableness of the actions taken by the parties, so that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in costs."' 47 In the present proceeding, CCUSA did not take any step to bring the action against it to an end until costs became an issue. Motions for summary disposal are required to be brought promptly for good reason that costs will not continue to accrue where a claim is without merit. I accept the applicant's submission that the reasons for which CCUSA now submits the applicant's claim against it should be dismissed could as well have been made the subject of a motion almost 12 months ago. In my view the referral to mediation of the proceeding is not an adequate explanation for such a motion not being brought. 48 CCUSA's solicitors were provided with a list of authorities in respect of the application for orders under O 22 r 2(1)(d) of the Federal Court Rules under cover of a facsimile dated 31 October 2006 from the applicant's solicitors. 49 The applicant contends she has acted reasonably by successfully mediating with SAFE: Embro Holdings Pty Ltd v Camm (1998) ATPR (Digest) 46-184 at 50,337 quoting Hennessy Glass Aluminium Systems Pty Ltd v Eagle Star Trustees Ltd (unreported, Queensland Court of Appeal, 1996) for the presumption of reasonableness of a settlement. She also contends she acted reasonably in seeking to put an end to the proceeding as against CCUSA without needless fuss - save only on the condition that she not be punished by a costs order for acting reasonably. The applicant further submits it is CCUSA who has acted unreasonably by the resistance it has offered to such a sensible course. 50 I agree with the applicant's submission that both in settling with SAFE and endeavouring to end the proceeding against CCUSA she has acted reasonably. Consistently with authority therefore, there is no basis on that ground upon which a costs order should be made against her upon the discontinuance of the proceeding. 51 With respect to the motion of CCUSA, for the reasons set out above I do not consider it succeeds in its claim for dismissal of the action. No case was made in support of the alternative application for leave to file a cross-claim against SAFE. As no case for the grant of such leave is otherwise apparent, it should, with the motion be dismissed. It follows the applicant should have leave to discontinue the proceeding against CCUSA so that her motion is allowed in that regard. 52 With respect to costs, I consider the costs on the claim against CCUSA by the applicant should be considered separately from costs on either of the motions. CCUSA submits three reasons why it should not be ordered to pay the applicant's costs. Firstly, the applicant has not enjoyed any success on the claim and the claim against it would almost certainly have failed. I have concluded that the claim was plainly arguable. Secondly, the applicant released SAFE from any costs in cl 5 of the deed which operates in favour of CCUSA given the allegations that SAFE and CCUSA are 'jointly liable' in the sense that SAFE by its finalisation has finalised the proceeding against CCUSA. I accept that cl 5 expressly extends to claims for costs and expenses but not that it operates to preclude a claim by the applicant against CCUSA for costs and expenses, for the reasons previously set out. Thirdly, the effect of the deed has been that the applicant has already received satisfaction concerning costs. Reliance is placed on cls 5, 7 and 10 of the deed. Clause 7 is a mutual indemnity against losses and expenses arising from any claim by one of the parties, which would not preclude a claim by the applicant against CCUSA. Clause 10 is a bar to further proceedings and does not assist in that respect. The recitals to the deed state that it is entered into 'to resolve…all and any issues arising out of or in connection with the Action'. The payment is provided for in cl 3.1. By cl 4 the applicant undertook to discontinue the action. Clause 5 extends to 'costs and expenses (including any existing unsatisfied costs order)'. I therefore accept that the payment to the applicant is correctly understood as satisfying her claim against SAFE in all respects, including costs. That, however, is not in its terms nor on the basis of alleged joint liability a preclusion against a costs order against CCUSA. It submits that, if the Court is minded to order that each party bear its own costs of the action, that would fail to take into account the settlement in the applicant's favour partially as to costs. In that event it seeks an order that the applicant pay half of CCUSA's costs. In my view, consistently with the above reasoning on the alleged effect of joint and several liability, the costs settlement by SAFE with the applicant was a settlement of her claim against that party and is to be approached separately from the costs claim in respect of CCUSA. The settlement with the former does not require that it cannot be ordered in respect of the latter that there be no order concerning costs. That should be the order, subject to what follows. 53 The applicant's motion seeks that CCUSA pay her costs of the hearing on 28 September 2006 on a party/party basis. On that date the Court had before it an application by CCUSA for leave to issue a subpoena against the applicant for production of a copy of the deed of settlement and any related collateral documents. It transpired at the hearing that the applicant had already forwarded a copy of the deed to CCUSA by facsimile but it was largely illegible. At the directions hearing arrangements were made for a further copy of the deed to be provided to CCUSA. Orders were made setting down CCUSA's motion and any motion seeking discontinuance to be filed by the applicant for hearing and that this should be referred to the Registrar for a determination on taxation. 54 The applicant's motion also seeks that CCUSA pay the applicant's costs of CCUSA's notice of motion on an indemnity basis. I do not consider the circumstances are such that there is a proper foundation for ordering such costs to be paid on an indemnity basis: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (Fountain Selected Meats 81 ALR). 55 The applicant also seeks an order that CCUSA pay her costs of her motion on an indemnity basis. Again in application of the usual rule, I consider the applicant is entitled to her costs on her motion. However, again there is no proper foundation for ordering such costs to be on an indemnity basis. There is no evidence of ulterior motive or wilful disregard of known facts or clearly established law: Fountain Selected Meats 81 ALR at 401. 56 In accordance with the oral and written submissions of the applicant, the issue of costs raised in [7] of the applicant's motion will be referred to the taxing officer pursuant to O 62 r 36(1)(b)(c) of the Federal Court Rules. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.

Solicitor for the Applicant: Donna Percy & Co

Solicitor for the Second Respondent: Smiths Lawyers

Date of Hearing: 17 November 2006

Date of Judgment: 8 December 2006