Rian Lane v Dive Two Pty Ltd

Judgment 1I published my reasons for the orders I made in this case on 24 February 2012 and made provision for the making of an application within seven days for a different costs order from the one I had proposed in the event that any party wished to contend for a different order. 2The first cross-defendant ( Horsell ) filed a notice of motion within the time specified seeking a different costs order and accordingly the matter was listed before me for argument on costs on 9 March 2012. The costs order, which I proposed, was that Horsell pay the costs of the defendants ( Dive Two ) and the second cross-defendant ( Liberty ) of the cross-claim. 3By consent, Horsell's motion was dismissed with no order as to costs. Horsell accepted that it was appropriate that a Sanderson order ( Sanderson v Blyth Theatre Co [1903] 2 KB 533) be made against it, namely that it ought pay Dive Two's and Liberty's costs of the cross-claim. 4Both Dive Two and Liberty sought an order that Horsell pay their costs of the proceedings, rather than merely their costs of the cross-claim. 5Dive Two's application was made on the basis that its success against Horsell in the cross-claim meant that it ought be put in the position it would have been in had Horsell not breached its contractual obligations or duty of care. In conformity with my findings, Dive Two submitted that had that breach not occurred, Horsell would have procured insurance which would have responded to the plaintiff's claim and Dive Two would not have been left with the costs of defending the proceedings. Although Dive Two submitted that its costs were, strictly speaking, a head of damage, rather than a matter to be dealt with in a costs order, there was good sense in providing for their reimbursement by way of a costs order, since in the event of disagreement as to their quantum there would be a ready mechanism for their assessment. 6Liberty referred me to s 98 of the Civil Procedure Act 2005 which confers a wide discretion with respect to costs and also to UCPR 42.1 which permits a court to depart from the general rule that costs follow the event. It also submitted that a relevant factor in determining the appropriate costs order in respect of a cross-claim was the extent to which a cross-defendant participates in the defence of the plaintiff's claim. 7Liberty tendered, on its application for an order that Horsell pay its costs of the proceedings, a bundle of correspondence between its solicitors and the solicitors for Dive Two which demonstrated that there had been an agreement between Liberty and Dive Two whereby Liberty, although it had denied indemnity for Dive Two's claim on the policy, would nonetheless fund the defence to the quantum of the plaintiff's claim. To that end, Liberty arranged medical appointments for the plaintiff with medicolegal experts, and paid such experts for assessments and the provision of reports. It was common ground, at least between Liberty and Dive Two, that it was beyond the means of Dive Two to meet such payments, and that it would be beneficial for the defence of the plaintiff's claim for such monies to be spent. 8Liberty submitted that although there was no evidence that Horsell was party to the arrangement it was a beneficiary of it. It submitted that I should infer that Horsell, being the party found liable for an amount which included the plaintiff's judgment, obtained some benefit from the work done by Liberty and the monies expended in containing the plaintiff's damages claim. Liberty also contended that had Dive Two paid those expenses itself, it would have been entitled to recover those expenses from Horsell. Accordingly, it submitted that it would be unjust not to order Horsell to pay Liberty's costs of the proceedings. 9Horsell submitted, first, that I ought not entertain either of the applications for different costs orders because the applications were not made within the seven days for which I had made provision in orders given with the reasons for judgment. 10Secondly, Horsell submitted that Dive Two's costs were properly claimed as a head of damage, that Dive Two had not established that it would be entitled to such costs by way of damages and that it would not be appropriate to deal with this matter by way of costs order. 11Thirdly, it submitted that Liberty had no right to its costs of the proceedings against Horsell since the only proceedings to which they were both parties was the cross-claim. It submitted that Horsell ought not be required to reimburse Liberty for the costs of an arrangement that was, at least potentially, to Liberty's commercial benefit, but which had not been established to be to Horsell's benefit. 12In my view, it is appropriate that I determine the applications for costs on their merits rather than apply a narrow and strict interpretation of the order I made on 24 February 2012. I consider that once Horsell filed its notice of motion within time, it was reasonable for Dive Two and Liberty to expect that they would have the opportunity to argue the question of costs more generally and that they would not be contained by the terms of Horsell's motion. 13I reject Horsell's submissions that Dive Two has not established that it is entitled to an indemnity in respect of the plaintiff's costs, or indeed to its own costs. The principle is well established that Dive Two is to be put in the position it would have been in had the breaches not occurred. Had Horsell performed its duties to Dive Two, Dive Two would not have been required to defend the proceedings at its own expense because there would have been, on my findings, an insurance policy that responded. It would, accordingly, not only not have been liable to the plaintiff for damages, but it would also not have been liable for the plaintiff's costs. Further, it would not have incurred its own costs in defending the proceedings. 14It follows that provision needs to be made either in the judgment or the costs orders for these two amounts: the plaintiff's costs and Dive Two's costs of the proceedings. I have already made provision, both in the orders I have made and in the reasons, for the plaintiff's costs to be included in the judgment sum: see Rian Lane v Dive Two Pty Ltd [2012] NSWSC 104 at [192]. I could also have done so with the Dive Two's costs of defending the plaintiff's claim, since they properly form part of the damages to which I have found it to be entitled from Horsell. 15However, it seems to me to be artificial to segregate Dive Two's costs of defending the plaintiff's claim from Dive Two's costs of the cross-claim in circumstances where I have found that Horsell is liable to pay both amounts. To include Dive Two's costs of defending the plaintiff's claim in the judgment sum, but to make an order in relation to the costs of the cross-claim would necessarily have required this segregation and may have unduly complicated the process of assessment. 16I consider that the matter is best dealt with by an exercise of my discretion to make a costs order. Although it is arguable that Dive Two would be entitled to its costs of defending the plaintiff's claim on an indemnity basis and its costs of the cross-claim on the usual basis, Dive Two did not seek to make this distinction in seeking an order that Horsell pay its costs of the proceedings. Accordingly I will make an order that Horsell pay Dive Two's costs of the proceedings. 17In light of the reasons I have given in respect of Dive Two's claim for its costs of the defending the plaintiff's claim, it follows that had Dive Two expended its own money in paying for medico-legal expenses incurred by Liberty in confining the quantum plaintiff's claim for damages, Dive Two would have been entitled to be reimbursed for that money from Horsell. The fact that Dive Two was placed in a position where was uninsured and yet had to defend proceedings brought against it, was, as I have found, cause by Horsell's wrongful conduct. Horsell's resistance to such a costs order has the flavour of a party attempting to profit from its own breach: but for the wrongful conduct of Horsell, Dive Two would have been entitled to look to its insurer to bear such expenses. As it happened, Liberty incurred that expense notwithstanding that I have found that it was not liable to do so. 18Furthermore I consider that Horsell has benefited, albeit in an unquantified way, from the expenditure of money by Liberty. Had the money not been spent, then it is reasonable to infer that the compromise of the plaintiff's claim would have been on terms less advantageous to Horsell than was actually the case. 19In my view it is appropriate, in all the circumstances, that Liberty obtain an order for its costs of the proceedings, rather than merely its costs on the cross-claim. 20Accordingly, I make the following orders: (1)Order the first cross-defendant to pay the defendants'/ cross-claimants' and the second cross-defendant's costs of the proceedings. (2)Direct the parties, within seven days of the date of this order, to bring in short minutes which either stipulate a sum in which judgment for the defendant on the cross-claim is to be entered, or which propose orders by which any, as yet unquantified, component of such judgment be paid by the first cross-defendant.