Spotlight Pty Ltd v Maintek Roofing Pty Ltd

Judgment (7 paragraphs)

[1]

Solicitors: Goldrick Farrell Mullan Lawyers (Plaintiff) McCabes Lawyers (Applicant) Moray & Agnew (Third Defendant) Colin Biggers & Paisley Pty Ltd (Fourth Defendant) Curwoods Lawyers (Fifth Defendant) File Number(s): 2013/00299083

[2]

Background

The plaintiff, Spotlight Pty Ltd ("Spotlight"), commenced proceedings on 4 October 2013 for breach of the terms of a lease and in negligence against the third defendant, Fatseas Investments Pty Ltd ("Fatseas"). Spotlight's claims as against the first, second, fourth and fifth defendants are not presently relevant. Fatseas has filed a cross-claim ("the second cross-claim") against Spotlight alleging that it was in breach of certain conditions of the lease.
Spotlight's interests as plaintiff are represented by solicitors instructed by Zurich Australian Insurance Ltd ("Zurich") with whom it had an industrial special risks policy. Spotlight's interests as cross-defendant are represented by solicitors instructed by Chubb Insurance Australia Pty Ltd ("Chubb") with whom it had a commercial public liability policy. As at 5 December 2016 the solicitors instructed by Zurich were the solicitors on the record.
On 5 December 2016, I heard an application made by Spotlight as cross-defendant, instructed by solicitors representing Chubb, to have separate legal representation from the solicitors and counsel appearing on behalf of Spotlight as plaintiff. On 3 March 2017, I granted the application on the basis that I was satisfied that the interests of Spotlight as cross-defendant to the second cross-claim were different from those of Spotlight as plaintiff in the substantive proceedings such as to give rise to a potential conflict for the solicitors on the record: Spotlight Pty Ltd v Maintek Roofing Pty Ltd & Ors [2017] NSWSC 165. At that time I ordered that the question of costs be reserved, but permitted the parties leave to apply for a different costs order, with such application to be made in writing to my Associate within seven days.

The position of the parties as to costs at the hearing of the motion

The question of costs was raised briefly during the hearing of the motion. Mr Weinberger of counsel appeared on behalf of the applicant and Mr Gracie of counsel appeared on behalf of Spotlight as the plaintiff in the substantive proceedings in a role that he described as amicus curiae. Mr Carey of counsel appeared on behalf of Fatseas. Although there was also an appearance on behalf of the fifth defendant by Ms Bell, solicitor, she took no active role in the proceedings.
During the hearing of the appeal, I enquired of Mr Weinberger as to the applicant's position regarding the costs of the motion. The following exchange took place: "HER HONOUR: In the event that you were successful on this application, what would you submit would be the appropriate costs order of today's proceedings? WEINBERGER: Costs in the cause. HER HONOUR: I will see what the other parties have to say about that. WEINBERGER: Look it would be opportunistic for me to say I'd seek costs. There is certainly no warrant, if I succeed, for an adverse costs order. As for Mr Gracie, he is really here as amicus. As for Ms Bell, with respect, she is obviously welcome here but I should not have to pay her costs as a bystander as it were." [emphasis added]
When I subsequently asked Mr Carey what would be the appropriate costs order, he replied, "Certainly costs reserved, but that would probably ultimately end up in it being costs in the cause."
Finally, when I raised the same issue with Mr Gracie, he responded, "As amicus, we don't seek costs. We would resist any such order but costs in the cause of the second cross-claim would be in our submission the way to deal with today's motion."

Consideration

During the hearing of this application the only costs orders envisaged were that costs be reserved for the trial judge or that they be in the cause. When I ordered that costs be reserved I left open the option to the parties to make further submissions on that issue. This was directed towards the question of whether there was any fundamental reason why costs should not be reserved. It was not an invitation for the parties to alter their positions regarding what an appropriate costs order may be. The applicant has now completely changed its position in this regard and Fatseas has followed suit. Contrary to the positions adopted at the hearing of the motion, these parties now seek that each pay the other's costs.
The Court has a broad discretion to award costs: s 98 of the CPA. That discretion is fettered to some extent by the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). Rule 42.1 of the UCPR provides: "General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs."
It is to be accepted, as I noted in Spotlight Pty Ltd v Maintek Roofing Pty Ltd & Ors [2017] NSWSC 165 at [44], that the successful party is usually entitled to costs and, as the successful party, the applicant would in the usual course be entitled to its costs based on the general rule that costs follow the event. But this was an unusual case and, consistent with the unusual nature of the application, the applicant departed from that general position and submitted that costs should be in the cause.
It is of significance that the applicant's indication to the Court that it would not seek a costs order against Fatseas if successful was made during submissions outlining the steps that the applicant proposed to take, if successful on the motion, to minimise the potential costs that Fatseas would incur in the event that Spotlight was represented by two counsel and two firms of solicitors.
In granting the orders sought, I was satisfied that the applicant, specifically, Chubb exercising its right of subrogation, was required to approach the Court for an order for separate representation. Despite this, at the hearing of the motion counsel for the applicant did not seek that Fatseas pay its costs if successful. Rather, he submitted that any application that Fatseas pay its costs would be "opportunistic". Once its application was successful, the applicant changed this position and sought costs from Fatseas. In these circumstances, I do not propose to order that Fatseas pay the applicant's costs.
Nor am I satisfied that it is appropriate to make an order that the applicant pay Fatseas' costs of the motion. Again, a different application was made during the hearing of the motion and it is to be inferred that the change in position of Fatseas was a result of the applicant's change in position. Although Fatseas was the unsuccessful party on the motion, the nature of the application was unusual and the Court was assisted by the presence of a contradictor.
I have had regard to the decisions of Adamson J in Buses No 1 and Buses and 4WD Hire Pty Limited v Oz Snow Adventures Pty Limited [2016] NSWSC 1149 ("Buses No 2"). In Buses No 1 her Honour ordered that the plaintiffs, the successful parties, pay the defendants' costs when she granted leave for the cross-defendant to be separately represented. That order was subsequently varied in Buses No 2 such that the plaintiffs' insurer was to pay the defendants' costs. There is a significant difference between the present case and the application in Buses No 1. In order for her Honour to be satisfied that there was an actual conflict in that case, the cross-defendant tendered confidential information to which the solicitors acting for the plaintiff as plaintiff and as cross-defendant were privy but the defendant was not. Her Honour considered (at [57] of Buses No 1), that it was reasonable for the defendant to oppose the orders sought since it was not privy to the confidential information that produced the actual conflict. That was not the case in the application before me. The nature of the potential conflict in the application before me was made apparent to Fatseas.
I have had regard to her Honour's statement in Buses No 1 (also at [57]) that the order could not have been made by consent since it is an exceptional order that requires balancing of the various case management principles contained in ss 56 - 60 of the Civil Procedure Act 2005 (NSW) ("CPA"). Notwithstanding this, I am not satisfied that Fatseas was obliged to oppose the motion before me in circumstances where it was aware of the nature of the potential conflict.
Having considered the position taken by the parties at the hearing of the motion and the subsequent submissions filed on behalf of the applicant and Fatseas, I am not persuaded that there is any reason why I should depart from the order I have already made in this matter. The applicant has been granted an indulgence and has undertaken to seek to minimise any additional costs to be incurred by Fatseas in this matter. What ultimately occurs in this regard remains to be seen. In these circumstances it is appropriate that the question of the appropriate costs order incurred in relation to the present motion be determined by the trial judge.

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Judgment (7 paragraphs)

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Legislation Cited (2)

Cases Cited (3)