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[2026] NSWSC 896
Supreme Court of NSW
2026-07-29
Rees J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Sphere Healthcare Pty Ltd v Allianz Australia Insurance Ltd (No 2) (costs) [2026] NSWSC 896
Hearing dates: On the papers; last submissions 24 July 2026
Date of orders: 29 July 2026
Decision date: 29 July 2026
Jurisdiction: Equity - Commercial List
Before: Rees J
Decision: Decline to vary usual costs order.
Catchwords: COSTS — notice to admit facts — indemnity costs sought under r 42.8(2), UCPR for facts said to have been disputed until first day of trial — the rule is concerned with facts, not mixed legal and factual propositions or legal propositions — unclear what “fact in dispute” the plaintiffs were put to the cost of proving — rule not engaged.
COSTS — reserved costs of interlocutory motion — plaintiffs obtain orders for defendant to search archival database — defendant contends that search will likely be time consuming, expensive and a waste of time — judge defers question of costs until product of search known — no discoverable documents found — decline to make costs order sought.
Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), rr 17.3, 42.7, 42.8
Cases Cited: Australiawide Airlines Ltd t/as Regional Express v Aspirion Pty Ltd [2006] NSWCA 365 Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd [2025] NSWSC 395 Hobart International Airport Pty Ltd v Clarence City Council (2022) 276 CLR 519; [2022] HCA 5 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Re Heavy Plant Leasing Pty Ltd [2017] NSWSC 1835 Sphere Healthcare Pty Ltd v Allianz Australia Insurance Ltd (No 2) [2025] NSWSC 552 Sphere Healthcare Pty Ltd v Allianz Australia Insurance Ltd [2026] NSWSC 579
Category: Costs
Parties: Sphere Healthcare Pty Ltd (First Plaintiff)
Yes Family Pty Ltd (Second Plaintiff)
Allianz Australia Insurance Ltd (Defendant)
Representation: Counsel:
MA Jones SC / E Steer (Plaintiffs)
D Lloyd SC / C O’Neill (Defendant)
Solicitors:
Herbert Smith Freehills Kramer (Plaintiffs)
Carter Newell Lawyers (Defendant)
File Number(s): 2022/269876
“17 On 9 July 2020, during the period of cover under the Policy, there was a fire at the Premises (the Fire).
18 The Fire caused physical loss, destruction and damage to Property Insured (Physical Losses) and other losses indemnified under the Policy.”
“9. In answer to paragraphs 17 and 18 of Part C of the List Statement Allianz:
(a) Admits that a fire occurred at the Premises on 9 July 2020 (Fire).
(b) Admits that the Fire caused damage to the Premises.
(c) Does not know and cannot admit any other physical loss, destruction or damage to property owned by Sphere and Yes Family that was caused by the Fire.
(d) Otherwise, does not admit paragraphs 17 and 18 of the List Statement.”
“22 On or about 10 July 2020 Sphere notified Allianz of the Fire and made a claim for indemnity under the Policy on behalf of Yes Family and on its own behalf.”
“12. In answer to paragraph 22 of Part C of the List Statement Allianz:
(a) Admits that Jonathon Cheung of AAIB notified Allianz of the Fire in an email dated 10 July 2020, timed at 9.52am.
(b) Admits that Allianz acknowledged AAIB’s email dated 10 July 2020 by email of the same date, timed at 10.34am.
(c) Otherwise, does not admit paragraph 22 of Part C of the List Statement.”
“1 For the purposes of the Policy, Allianz was notified of the Fire and the damage it caused.
2 Allianz received a claim for indemnity under the Policy on behalf of Sphere and Yes Family on or after 10 July 2020.
3 At least in the order of magnitude of 75% of the Premises was damaged by the Fire.
4 At the time of the Fire there was a factory at the Premises.
5 At the time of the Fire there was a warehouse at the Premises.
6 At the time of the Fire there was an office facility at the Premises.
7 At the time of the Fire, there was manufacturing and office equipment at the Premises (Equipment).
8 At the time of the Fire, Sphere had stock at the Premises (Stock).
9 At the time of the Fire, Sphere and/or Yes Family owned or were responsible for the factory, the warehouse, the office facility, the Equipment, and the Stock at the Premises.
10 Damage at the Premises caused by the Fire included a level of damage to some or all of the factory, the warehouse, the office facility, the Equipment, and the Stock.
11 Sphere and/or Yes Family incurred losses as a result of the Fire that are indemnified under the Policy, including for example, the following costs and expenses incurred with respect to the demolition of portions of the Premises:
a. Invoice INV00002090 dated 23 October 2020;
b. Invoice INV00002112 dated 20 November 2020;
c. Invoice INV00002134 dated 18 December 2020;
d. Invoice INV00002146 dated 29 January 2021; and
e. Invoice INV00002160 dated 16 February 2021,
issued by Chomp Excavation & Demolition Pty Ltd.”
“1. Allianz:
(a) Admits it was notified of a fire at the Premises on 9 July 2020.
(b) Admits it was notified of some damage at the Premises caused by a fire on 9 July 2020.
(c) Disputes it was notified of the extent of physical loss, destruction or damage at the Premises caused by a fire on 9 July 2020.
2. It is not disputed that claims for indemnity were made under the Policy on behalf of Sphere and Yes Family.
3. Disputed. Allianz does not know the magnitude of damage caused to the Premises by the fire on 9 July 2020.
4. It is not disputed that there was a factory at the Premises.
5. It is not disputed that there was a warehouse at the Premises.
6. It is not disputed that there was an office at the Premises.
7. It is not disputed that there was Equipment at the Premises.
8. It is not disputed that there was Stock at the Premises.
9. Allianz disputes:
(a) that Yes Family owned or was responsible for anything more than the Premises;
(b) that Sphere owned the Premises; and
(c) the extent of the Equipment and the Stock owned by or for which Sphere was responsible at the Premises.
10. Allianz disputes the level of damage caused by the fire on 9 July 2020 to the factory, warehouse, office facility, the Equipment and the Stock.
11. Allianz disputes:
(a) that Sphere and/or Yes Family incurred losses as a result of the fire on 9 July 2020 which are indemnified by the Policy; and
(b) that the costs and expenses in the invoices attached to the notice, issued by Chomp Excavation & Demolition Pty Ltd and numbered a. to e. in paragraph 11, are indemnified by the Policy.”
On the face of it, the defendant admitted some facts but separated out legal propositions which were the subject of the proceedings, being whether the insureds were entitled to be indemnified for damage caused by the fire.
In March 2023, the plaintiffs served an affidavit by Vincent Cai, setting out the corporate structure of the group of which both plaintiffs formed part, details of the premises and the insured’s business conducted from those premises and details of the plant, equipment, machinery and inventory at the premises. Mr Cai described the damage caused by the fire and the costs and expenses since incurred by the insureds.
The defendant put on its evidence, followed by the plaintiffs’ evidence in reply. In May 2024, the plaintiffs served a more limited Notice to Admit Facts as follows:
“The Fire (as defined by paragraph C.17 of the Commercial List Statement) caused loss and/or destruction of and/or damage to Property Insured (as defined by paragraph C.14 of the Commercial List Statement) to a value greater than $10,000 being the applicable deductible in the Policy (as defined by paragraph A1 of the Commercial List Statement).”
“O’NEILL: There is no argument.
HIS HONOUR: No issue of damage will arise?
O’NEILL: NO. it is not a quantum case. The building was destroyed.
HIS HONOUR: In this case these documents do not really go to anything, do they?
STEER: Your Honour, the other issue is that we have pleaded that there was damage sufficient to enliven the policy and that has not been admitted. We, like your Honour, are somewhat ba[ff]led how that can be an issue in the case and because it is not admitted we are left in the position where we have to run that point. As your Honour has identified, it should not be necessary. As my friend has said, it is not in dispute, but remains in dispute on the pleadings. That is the issue we have.
HIS HONOUR: Yes, but if the parties indicated that something is not in dispute, then if counsel, on instructions say that is so, then it is no issue.”
“O’NEILL: ... we accept that the damage would be more than $10,000. The policy operation or, what does that have to do with the policy is a different matter, but the underlying fact we accept.”
“O’NEILL: The damage for both insureds exceeds $10,000. The policy consequences of that are still in dispute.
… STEER: Nothing further to say on that your Honour.”
“1. Allianz admits that a fire at the Premises (as defined in paragraph A.1 of the Commercial List Statement) on 9 July 2020 caused damage to a value greater than $10,000.
2. Allianz disputes that the damage was to Property Insured (as defined by paragraph C.14 of the Commercial List Statement).
3. Allianz disputes that the first defendant and/or the second incurred losses as a result of the fire on 9 July 2020 which are indemnified by the Policy.”
Again, fairly obviously, the defendant accepted that there was a fire and that damage was caused, but did not accept that the insureds were entitled to be indemnified in respect of that damage under the policy.
On 21 June 2024, the matter came before Nixon J again. The plaintiffs contended that the Notice Disputing Facts “seemed to walk back” from the concessions made on the last occasion, while the defendant submitted that the proposed notation sought to take matters further than its concession by referring to “Property Insured” under the policy. The defendant’s counsel explained that there was no dispute that there was a fire at the premises which caused destruction which exceeded $10,000 in value. What was not conceded was that the damage was insured. The dispute was whether the policy responded. Nixon J accepted the defendant’s submission and concluded that no notation was needed.
In September 2024, the defendant provided discovery. In December 2024, the plaintiffs’ solicitor raised a “wholesale concern” as to the adequacy of that discovery. In January 2025, the defendant responded at length, noting that the defendant had undertaken further searches of its databases. The defendant’s solicitor provided a detailed explanation as to how the defendant’s records were stored. In particular, the insurer used a database called “Teamworks” to store all underwriting files. Employees manually saved emails to the relevant Teamworks file. The defendant’s solicitor acknowledged that, although this was standard practice, it did not always occur. Further, if not saved to a Teamworks file, emails in “Allianz employees’ inboxes are automatically deleted by Allianz’s IT systems after three years.”
In February 2025, the defendant provided some additional documents produced by these further searches. But the plaintiffs’ solicitors wrote that their concerns were “heightened” by the supplementary discovery rather than alleviated. The defendant’s document retention policy was sought, together with further details of the repositories searched for the purposes of complying with the defendant’s discovery obligations.
In March 2025, the defendant’s solicitor confirmed that the defendant had undertaken multiple reviews of the Teamworks file in order to comply with its discovery obligations. The defendant’s solicitor repeated that standard practice was that documents were required to be saved by employees to the relevant Teamworks file and, as such, all emails, attachments and documents should have been saved to the relevant Teamworks file. The plaintiffs’ solicitor was not satisfied and wrote again, at length, attaching a proposed notice of motion.
On 2 April 2025, the plaintiffs filed a motion seeking a verified schedule recording the repository and searches undertaken by the defendant to comply with the Court’s orders for discovery. In the alternative, the plaintiffs sought leave to cross-examine the defendant’s officer who had verified the discovery as to the adequacy of that discovery. The defendant’s document retention policy was sought. In addition, the plaintiffs sought two further discovery categories.
In response to the motion, the defendant put on an affidavit from senior property underwriter, Sean McCaffrey, who said that employees’ emails were not deleted but automatically archived after three years.
On 23 May 2025, the plaintiffs’ motion was heard by Stevenson J. His Honour was interested in the inconsistency between the defendant’s correspondence – suggesting that its employees’ emails were automatically deleted after three years – and Mr McCaffrey’s evidence that such emails were automatically archived. The defendant’s counsel submitted that it did not make a difference as the discovery category required the documents to have a bearing upon the risk. The defendant’s employees only looked at the emails in the Teamworks file when assessing risk, as was explained by the defendant’s lay witnesses in their affidavits served in the defendant’s case. The archived files were huge. The cost of undertaking a search of the archives was not known. The defendant’s counsel submitted:
“O’NEILL: … So, if there is to be discovery of every single email box it will be an extensive process. I’ll want to put evidence on in relation to how much it’s going to cost, and then the Court can come back and review whether that is an appropriate use of the discovery process for no forensic benefit at all in my submission…”
The defendant’s counsel noted that the issue “certainly wasn’t raised with this precision in the written submissions”. The archive was then thought to be maintained by a third party. It was not known how long records were kept in the archive before being deleted. His Honour asked that the defendant make enquiries in relation to the archive. The defendant’s counsel agreed to do so, but noted that the archive was unlikely to turn up anything forensically relevant to the underwriters’ consideration of risk in this case.
On 26 May 2025, the defendant’s counsel informed his Honour and the plaintiffs – based on instructions from Graham Turnock – that the archive system was known as Enterprise Vault. Emails were deleted from the archive after 10 years. The archive consisted of more than two billion emails and could be text searched but the cost of doing so was unknown. As instructed by Mr Turnock, “Simple searches often generate millions of irrelevant returns and … finding anything is like searching for a ‘needle in a haystack’”.
On 29 May 2025, Stevenson J gave judgment on the motion: Sphere Healthcare Pty Ltd v Allianz Australia Insurance Ltd (No 2) [2025] NSWSC 552. His Honour permitted cross-examination of Mr Turnock, such cross-examination to be confined to questions concerning the archive and on the basis that the plaintiffs first circulate a list of topics for the proposed cross-examination: at [26]. The two additional discovery categories were allowed, but with modified wording: at [28].
On 2 June 2025, Mr Turnock made an affidavit, setting out how the defendant’s emails were saved in the Teamworks database and automatically archived in Enterprise Vault. Mr Turnock noted that underwriters did not have access to the archive for the purpose of undertaking any assessment of risk. He expected that a search of the archive would produce a large number of irrelevant emails. A search was unlikely to locate emails relevant to the underwriting decisions taken in respect of the plaintiffs.
On 11 June 2025, the defendant’s solicitors wrote, suggesting that it was premature to cross-examine Mr Turnock and, indeed, cross-examination may not be necessary. The defendant’s IT team had given an indication of the likely number of emails held in the archive by using particular search terms, which had produced more than 20,000 emails. The documents identified were highly unlikely to be relevant but the plaintiffs were invited to submit search terms.
The motion came before Stevenson J again on 12 June 2025. Mr Turnock was available for cross-examination but the matter was stood down while the parties agreed on search terms for the archive. Consent orders were handed up. As to costs, the defendant’s senior counsel submitted that the additional discovery categories had been ordered but the plaintiffs’ success was only partial as the categories had been varied to limit the categories. As to the search of the archive, the transcript records:
“LLOYD: … your Honour has determined, in effect, that there are grounds for believing that one can be fairly certain there'll be additional documents. This is one of those cases where by the end of this motion, when it's finally disposed of, we'll know.
HIS HONOUR: I suppose if it turns out that not one further relevant document is produced, then that might be a matter relevant to costs. … So, perhaps it should be deferred.”
The plaintiffs’ counsel submitted that they had enjoyed “complete success”, where the defendant was said to have met the motion with “an absolute stonewalling”. (Having read the correspondence, that was an over-statement.) His Honour concluded, “I think the appropriate course is to defer the question of the costs of the motion until its outcome is known finally, so I won’t make any order for costs.” Costs were reserved.
On 30 July 2025, the defendant served a List of Documents, verified by Mr McCaffrey, who noted that an initial search of the Enterprise Vault was undertaken using various search terms. These documents were then further searched with the assistance of an eDiscovery service provider. No additional documents were identified for discovery. The defendant’s solicitor, Julie Bowker, made an affidavit as well, noting that the initial search for documents produced 54,228 documents, of which 13,656 documents were removed as duplicates or junk files. The search of these documents produced no further discoverable documents.
The trial began on 8 September 2025. The defendant’s outline of submissions noted that the insurer denied indemnity, “There is no issue that at least some of the claimed damage falls within the insuring clause.”
The plaintiffs submitted that, as the Court ultimately found, the factory building at the Moorebank site was lost in the fire on 9 July 2020. So much was known to the defendant from the outset, whose forensic fire examiner attended the burnt-out site on 14, 15 and 16 July 2020. By these proceedings, the plaintiffs posed a narrow question of liability only, such that the issue before the Court was confined to whether the defendant was liable to indemnify the plaintiffs under the policy. The question of quantum did not arise. Nonetheless, in seeking a declaration, the plaintiffs had to establish that: (1) the question before the Court was real and not theoretical; (2) the plaintiffs had a real interest in seeking the declaration; and (3) there was a proper contradictor: Hobart International Airport Pty Ltd v Clarence City Council (2022) 276 CLR 519; [2022] HCA 5 at [32] (Kiefel CJ, Keane and Gordon JJ); Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd [2025] NSWSC 395 at [65]-[69] (Peden J). Whether the declaration sought was real and not theoretical turned on whether, absent the defendant’s positive defences, the policy would otherwise respond to the loss. That is, whether there was a loss of insured property. The plaintiffs called this the “Damage Issue”.
The plaintiffs submitted that on 4 September 2025, for the first time, the defendant conceded the Damage Issue in its written opening. Until then, the defendant was said to have disputed that damage had occurred to insured property so as to enliven the policy (subject to defences), in its defence and the Notices Disputing Facts. Rule 42.8 of the UCPR provides that costs are payable on an indemnity basis if facts were disputed facts that were subsequently proved or admitted. Absent the defendant’s non-admissions, the plaintiffs contended that they would not have incurred the costs of preparing a case to establish loss, including the affidavit by Mr Cai. The fact that Mr Cai was ultimately not called by the plaintiffs was said not to change the position. His evidence on this issue was said to be rendered otiose by the defendant’s concession in opening. (I cannot let the last proposition pass without remark. Mr Cai’s evidence remained relevant on a number of fronts. The fact that he was not called resulted in the application of Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 in my substantive judgment.)
The defendant submitted that the Damage Issue was not a separable issue, nor were the plaintiffs entitled to any departure from the usual costs order in respect of that issue. The defendant disputed that loss occurred to insured property. It occurred to uninsured property, as the Court held. There was a distinction between the issues of the fact of physical damage to the insureds’ property on the one hand, and whether that property was insured under the Policy on the other. Paragraph 18 of the Commercial List Statement, by its drafting, linked the fact of loss, destruction and damage to the legal concept of indemnification under the Policy (specifically by use of the conjunctive “and” before the words “other losses indemnified under the Policy”). There being no entitlement to indemnity, the defendant was correct to deny that paragraph, noting that the Commercial List Response admitted both the occurrence of the Fire and that it caused damage to the Premises. This distinction made it clear that damage to property was never disputed, just that the defendant disputed such damage was insured.
The defendant submitted that, in the first Notice to Admit Facts, the fact of damage and the right to indemnity were conjoined by the words “that are indemnified under the Policy”, resulting in a similar answer picking up on the concept of ‘indemnification’. The second Notice to Admit Facts conjoined the fact of damage and the right to indemnity by use of the defined term “Property Insured”, which was first defined by reference to par 14 of the Commercial List Statement, which in turn was referrable to “Property Insured” as defined by the Policy. There being no right to indemnity, the damaged property was not “Property Insured” by the Policy at all.
The defendant submitted that it had earlier conceded the fact of damage. The defendant’s opening simply made the point that claimed damage fell within the insuring clause. But that did not mean the defendant admitted such damage was insured, indemnified or was Property Insured, given that indemnity was denied. The defendant always denied an entitlement to indemnification arising from damage. The defendant was successful on that issue. Further, the issue of damage being indemnifiable was linked to the declaration of indemnity being sought. The issue was not separable in the way contended for by the plaintiffs as would engage the Court’s discretion to otherwise order.
A requesting party may, by notice served on another, require them to admit for the purpose of the proceedings the facts specified in the notice; they have 14 days to decide whether to dispute or admit that fact: r 17.3, UCPR. The rule is concerned with the admission of facts. As such, when drafting a Notice to Admit Facts, each paragraph should put forward (preferably) a single factual proposition. The notice should not include propositions of mixed fact and law or propositions of law, as the rule is not thereby engaged.
Rule 42.8(2) of the UCPR then provides:
42.8 Dispute of fact subsequently proved or admitted
…
(2) Unless the court orders otherwise, the disputing party must, after the conclusion of proceedings in which a fact in dispute is subsequently proved or is subsequently admitted by the disputing party, pay the requesting party’s costs, assessed on an indemnity basis, being costs incurred by the requesting party—
(a) in proving the fact, or
(b) if the fact has not been proved—in preparation for the purpose of proving the fact. …
In this rule, “disputing party” means the person who serves a notice disputing facts, while the “requesting party” is the party who was served with that notice: r 42.8(1).
Obviously enough, the purpose of the Notice to Admit regime is to identify the facts which are seriously in dispute, rather than those which are not, such that the Court’s time can be devoted to resolving the real issues between the parties. To improve the efficacy of this regime, and to focus the mind of the party asked to admit facts, r 42.8 adds a costs incentive. Rule 42.8 provides the ‘default position’, casting the onus onto the party seeking an “otherwise order” to show why some different order should be made: Re Heavy Plant Leasing Pty Ltd [2017] NSWSC 1835 at [24] (Brereton J, as his Honour then was).
What is the “fact in dispute” that the plaintiffs were put to the cost of proving but which it is said that the defendant ultimately admitted on the first day of trial? The pleadings were clear enough. The defendant accepted that there had been a fire and that the premises had been damaged. But the defendant did not accept that the damage was insured under the policy. The Notices to Admit Facts put forward propositions of mixed fact and law, but the defendant made a reasonable fist of it when preparing Notices Disputing Facts. The controversy remained the same. The defendant accepted that there had been a fire and damage, but not that it was insured under the policy. Any ambiguity about the matter was clarified in exchanges before Nixon J in 2024 in the course of the first round of discovery arguments. The defendant’s outline of opening submissions was to the same effect.
I remain unclear on what is the “fact in dispute”, within the meaning of r 42.8(2) of the UCPR. Was it the fact that there was a fire? That was admitted. Was it the fact that the fire damaged the premises? That was admitted. Was it the fact that there was at least $10,000 in fire damage, sufficient to clear the deductible under the policy? That was admitted. Was it the fact that the plaintiffs were insured in respect of that damage under the policy? That was not a fact but a legal question. I am not satisfied that the “Damage Issue”, the precise ambit of which was unclear, is a “fact in dispute” within the meaning of the rule. Nor am I satisfied that the defendant changed its position in respect of a “fact in dispute” on the first day of the trial, such that the plaintiffs were put to unnecessary costs. I decline to make the order sought.
The plaintiffs submitted that they were wholly successful on the discovery motion and there was no good reason for the Court to depart from the usual rule that costs follow the event. Stevenson J ordered discovery of the two additional categories and granted leave to the plaintiffs to cross-examine Mr Turnock. The balance of the motion was stood over to permit the defendant to serve an affidavit of Mr Turnock. Until the eve of the hearing of the balance of the motion, the defendant maintained that it would not search the Enterprise Vault repository. Then, with cross-examination of Mr Turnock scheduled for the following day, the defendant advised on 11 June 2025 that it would, indeed, search the Enterprise Vault. Cross-examination of Mr Turnock was therefore unnecessary, and Stevenson J made orders for further discovery by the defendant that included searches of the Enterprise Vault.
The plaintiffs submitted that whether documents were produced in response to an order for discovery was not a relevant consideration on the question of costs. The question was which party had achieved substantial success. It was the plaintiffs who achieved that success: they were granted leave to cross-examine, as sought; the defendant undertook the additional searches they sought; and the Court ordered discovery of the two additional categories they sought. Ordinary costs in favour of the plaintiffs should follow.
The defendant submitted that the question was whether there had been inadequate discovery. It was not until the first hearing of the motion that it was apparent that what the plaintiffs were asserting was that discovery was inadequate because the defendant’s electronic archiving system had not been interrogated, despite the adequacy of discovery of the Teamworks file. On 12 June 2025, the matter returned before Stevenson J. By then, the defendant had made preliminary searches of the Enterprise Vault, which had yielded a significant number of documents which were highly unlikely to be relevant. Agreement was reached as to further searches, with the only remaining issue being as to costs.
The defendant submitted that costs were reserved as an inquiry remained that was relevant to the discretion as to whether there had in truth been success on the motion was whether the expensive Enterprise Vault exercise would yield even ‘‘one further relevant document’’ and that no person had been examined nor the retention policies discovered. No relevant documents were identified, this being the very point ventilated by the defendant on both occasions the motion was before the Court. Objectively, each party, consistent with their obligations to the Court and each other, had given ground to attempt to resolve the deadlock, with there being no beneficial result to either of them. There being ‘no result’, and in particular no forensic benefit to the plaintiffs, the Court should be reticent to exercise its discretion to award costs. In other words, the whole process was inutile. If it had been otherwise, or even if technical success on some parts of the motion meant actual success as is now contended by the plaintiffs, Stevenson J would have made a costs order on 12 June 2025. His Honour did not. The whole exercise was therefore simply an incident of the conduct of the litigation. No further order was necessary.
(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings … are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.
As explained in Australiawide Airlines Ltd t/as Regional Express v Aspirion Pty Ltd [2006] NSWCA 365, albeit in the context of a different costs rule in the UCPR, such rules create a starting point as to what the costs order is to be unless that outcome is displaced by a discretionary decision: at [48] (Bryson JA, McColl and Basten JJA relevantly agreeing). In this case, the starting point is that the costs of the motion are to be paid in accordance with the costs order made for the proceedings, that is, the plaintiffs should pay the defendant’s costs of the motion.
Having read the inter partes correspondence, it appears that the defendant took its discovery obligations seriously. On receipt of the plaintiffs’ complaints, the defendant made further inquiries of its employees and checked for further documents, which were produced. The defendant’s solicitor explained that any relevant documents in respect of the decision to underwrite the policy should have been stored in a Teamworks file. The defendant’s witnesses who had undertaken the underwriting exercise had put on affidavit evidence by this time, indicating that they looked at documents on the Teamworks file when they decided whether to underwrite this risk or not. And that is where the defendant had looked for discoverable documents.
In the course of meeting the plaintiffs’ motion, the defendant made further enquiries and came to learn that there was a system of automatically archiving emails – whether relevant or not – to the Enterprise Vault. But it was made clear in correspondence before the hearing of the motion and at the hearing of the motion itself that searching this archive was likely to be time consuming, expensive and a waste of time. It was all of those things.
When asked to determine the question of costs on 12 June 2025, Stevenson J declined to do so as he considered that whether or not a search of the archive was productive of discoverable material was a matter that was relevant to the exercise of the discretion in respect of costs. The plaintiffs’ counsel submitted otherwise, and his Honour did not agree. I hold the same view as Stevenson J.
The plaintiffs did persuade his Honour to chase a rabbit down a burrow but, as it turns out, there was no rabbit. Beyond the ordering of two further discovery categories, albeit with some modification and limitation, the plaintiffs’ motion for discovery was unproductive. The considerations put before the Court by the defendant as to why there was no utility in searching the archive were, it turns out, correct. I am not persuaded that the plaintiffs were wholly successful on the motion. Essentially for the reasons advanced by the defendant, I decline to make the costs order sought by the plaintiffs in respect of the motion.
**********
Sphere Healthcare Pty Ltd
Allianz Australia Insurance Ltd (No 2) (costs)
[2026] NSWSC 579
(2022) 276 CLR 519
(1959) 101 CLR 298