//
[2012] VCC 981
General information, not legal advice.
County Court of Victoria
2012-06-28
Original judgment source is linked above.
For Kane Constructions Pty Ltd and Lumley General Insurance Ltd
350Q BBS PTY LTD (formerly BURNS BRIDGE SERVICES PTY LTD
350Q BBS PTY LTD (formerly BURNS BRIDGE SERVICES PTY LTD)
**1 The background to this Ruling, and the proceedings and orders made to date are detailed in my Reasons for Judgment of 2 September 2011.[1]
3 Consequent upon that Judgment, three further matters arose for determination:
(a) Whether a stay ought be ordered in respect of a proposed appeal by Kane/Wesfarmers;
(b) The application of a "deductible" of $50,000 under the Wesfarmers' Policy;
(c) An application by Kane for adverse costs against Port Phillip and TBS.[5]**
**4 Kane/Wesfarmers has indicated its intention to appeal my Judgment of 2 September 2011. Final orders have not been made. It seeks a stay on any orders made consequent upon that Judgment. The proposed orders will require Wesfarmers to pay to Port Phillip:
(a) The sum of $617,255.55 plus interest of $41,733.04 by way of indemnity in respect of the principal proceeding;
(b) Wesfarmers to pay to Port Phillip the sum of $277,812.50 plus interest of $20,354.65[6] in respect of the recovery proceeding.
5 Order 64.25 of the Rules[7] provides relevantly that an appeal shall not operate as a stay upon execution save insofar as the Court of Appeal or a Judge may otherwise order. The general principle is that a successful party is entitled to the fruits of its judgment unless there is sound reason to suspend that right. The applicant for a stay has the burden of satisfying the Court that the discretion ought be exercised.
6 In Johnson v Cressy & Ors,[8] the Court of Appeal said:**
"The power to order a stay will only be exercised where special or exceptional circumstances exist.[9] Such circumstances will exist where there is a real risk that the appeal, if successful, will be rendered nugatory. Special circumstances will exist where there is a real risk that it will not be possible for a successful applicant to be restored substantially to his former position if the judgment against him were executed.[10] It is essential to show serious injury to the applicant.[11] It is not sufficient to rely on an argument that the judgment below might be wrong; that is, that the appeal might succeed."[12]
8 In submissions, save to say that Port Phillip would have the benefit of interest attached to any judgment sum at the end of the day, counsel for Kane did not identify any special or exceptional circumstances to justify the grant of a stay.
9 Port Phillip is a local council with, it may be presumed, significant assets. Absent any exceptional circumstances, there is no basis upon which a stay ought be granted.
10 Subject to the making of proposed orders, and to the lodging by Wesfarmers of an appeal, a stay should not be granted.**
11 According to the Policy of Insurance, the limit of indemnity is said to be:
"$20,000,000 any one occurrence unlimited in the Period of Insurance ... ."[15]
**12 Further, under the heading "Excesses", the excess applicable in respect of a claim for bodily injury is $50,000.[16]
13 Under the General Conditions of the policy, the following is stated:**
"Excess provision - liability shall not attach to insurer(s) until the loss or damage in respect of any occurrence exceeds the amount stated as Excesses in the Schedule and then insurer(s) shall only be liable for the Sums Insured or Limits of Liability stated in the Schedule."[17]
(emphasis added)
"Cross liability - each of the parties comprising the insured shall for the purposes of this Policy be considered as a separate and distinct unit and the words 'the insured' shall be considered as applying to each of such persons in the same manner as if a separate Policy had been issued to each of them in their name alone and that the insurer(s) waive all rights of subrogation or action which they may have or acquire against any of such persons."[18]
"... Occurrence means an event, or continuous or repeated exposure to conditions, which results in loss of and/or damage to and/or destruction of property, provided the insured neither expected nor intended that such loss would result."[19]
**16 Port Phillip argues that the "Occurrence" is the injury to Threlfall when he fell over the step-over on the doorway and suffered injury. It argues the payment of the deductible of $50,000 is attached to the Occurrence.
17 Mr McArthur, for Port Phillip, referred to Derrington - 'The Law of Liability Insurance':[20]**
"Should a number of persons so insured be rendered liable by the same Occurrence, it will be a matter of construction whether the limit of the cover as to amount applies in respect of the liability of each insured or as to the totality of such liability, but if the Policy's description of the limitation purports to refer to the group, the tendency of the courts is to read it as total cover in respect of all claims."
**18 He submitted it was a matter of construction to determine whether the limit of liability applied in respect of each insured, or applied in respect of all insured in total. Upon his interpretation of the definition of "Occurrence", it applies as a matter of totality. Thus, there was only one deductible of $50,000 to be paid, given there was one occurrence, and that that amount has been paid by Kane. Port Phillip, notwithstanding it is a co-insured under the Policy, it is not obliged to pay any further deductible.
19 Mr McWilliams, for Kane, argued that the key in interpreting the Policy was the cross liability provision. Each insured should be treated as if a separate policy of insurance had been issued to it. The only "carve out" from the Policy is the proviso, which states:**
"Provided that nothing in this clause shall be deemed to increase the Limit of Liability under this Policy in respect of any one Occurrence."[21]
**20 Thus, notwithstanding separate insured who are each entitled to be considered as if holding a separate insurance policy, the Limit of Liability is maintained at $20 million. However, given that each insured is entitled to a separate policy of insurance, separate and distinct deductibles of $50,000 are required to be paid in respect of each insured. Thus, when a claim is made under the provisions of the Policy, the insured making the claim is responsible for an additional deductible of $50,000.
21 Mr McWilliams did not dispute that there was one "Occurrence" which triggered the liability of the insurer under the Policy,[22] but given the insured were to be treated separately, a further deductible applied to Port Phillip.
22 In my view, key to the interpretation of the Policy is the excess provision which provides that liability shall not attach to the insurer in respect of any Occurrence unless the loss or damage exceeds the excess, $50,000. "Occurrence" is defined to mean an event which results in loss or damage. Clearly, in this instance, the Occurrence is the event of Threlfall tripping over the step-over and suffering injury. The word "any" in the excess provision indicates that liability attaches to the insurer when any one Occurrence exceeds the excess. There is no reference in that provision to liability attaching to the insurer in circumstances where the excess is a multiple of $50,000, determined by the number of insured claiming under the Policy.
23 The excess thus attaches to any one Occurrence, rather than to the number of insured claiming in respect of an Occurrence, notwithstanding that the cross liability provision provides that each insured ought be regarded as having a separate policy issued.
24 The purpose of an excess is to relieve the insurer of liability in respect of lesser claims up to a stated figure, and to render the insurer liable only in respect of claims above that amount. As a general principle, the insurer is relieved from the administrative costs and expenses associated with processing smaller claims, and the insured gets the benefit of lower premiums. Given these principles, if the Policy intended that the excess be raised by a multiple determined by the number of insureds making a claim, it would have expressly so provided.
25 Kane's application in respect of the deductible fails.**
**26 The costs issue concerns an application by Kane for costs against Port Phillip and TBS. Relevant factual matters relating to this part of the application were contained in the affidavit of Andrew Reiner Seiter sworn 18 January 2012.[23] I received written submissions on behalf of all parties.
27 The plaintiff's (Threlfall) proceeding commenced by Writ filed 23 November 2009. A short time later, solicitors for Kane served a Calderbank offer.[24] That letter offered to contribute $50,000 to any settlement which TBS and Port Phillip may achieve with the plaintiff. Such an offer represented approximately 11 per cent of the quantum of the plaintiff's damages, subsequently agreed.[25]
28 On 13 July 2010, solicitors for Port Phillip, having determined that Kane held indemnity insurance with Lumley, made a formal claim upon that Policy. Port Phillip became aware of the indemnity Policy through discovery. Lumley refused indemnity. This led to Lumley being joined as a third party.[26]
29 On 20 August 2010, a second Calderbank offer was made by Kane indicating a willingness to contribute 25 per cent towards any judgment obtained by the plaintiff, and his party-party costs. That offer was formalised in a Notice of Willingness to Contribute dated 25 August 2010, upon the same terms.
30 The trial commenced on 23 August 2010 and on 27 August 2010, agreement was reached between all parties that the plaintiff's quantum be agreed at $450,000.
31 On 8 September 2010, the jury returned a verdict in favour of the plaintiff, apportioning liability as follows:
32 Kane now seeks an order for indemnity costs against TBS and Port Phillip on the basis of the Calderbank offers and the Notice of Willingness to Contribute.
33 It alleges that in respect of all of the offers made, the result as determined by the jury was significantly less favourable than the various offers made by Kane. It argues that had the offers been accepted, the very likely prospect was that the proceeding would have resolved. As a result, the refusal by TBS and Port Phillip to accept the offers was unreasonable in the circumstances, and ought be reflected in an order for indemnity costs.[27]
34 In addition, the recovery proceeding settled within 24 hours of the jury verdict on the grounds that Kane and Port Phillip contribute to the VWA claim in the same proportions as the jury found them liable.
35 Counsel for Port Phillip made the following submissions:
(a) The application made by Kane for costs was ultimately made for the benefit of Wesfarmers. Kane and Wesfarmers were jointly represented at the hearings in 2011 and 2012.
(b) Wesfarmers indemnified Kane in accordance with its obligation under the Policy. By reason of my Judgment of 2 September 2011, Wesfarmers were ordered to indemnify Port Phillip. In total, the liability of Port Phillip and Kane totalled 40 per cent, as found by the jury. Neither of the Calderbank offers, nor the Notice of Willingness to Contribute offered to contribute 40 per cent.
(c) Wesfarmers, by its application for indemnity costs, effectively argues that it had no obligation to indemnify Port Phillip, contrary to the Judgment of 2 September 2011.
(d) The broad discretion of the Court to award costs[28] ought not be exercised in favour of Wesfarmers in these circumstances.
(e) The indemnity costs order sought is inconsistent with the judgment of 2 September 2011. Had Wesfarmers indemnified Port Phillip then each of Kane and Port Phillip could have been jointly represented at trial, thus considerably reducing the costs, and there would be no basis upon which any offer, be it by Calderbank letter or otherwise, could be made by Kane to Port Phillip. Any offer to be made would be an offer made on behalf of both.
(f) If an adverse costs order was made against Port Phillip, then Mr McArthur argues that order itself ought be the subject of indemnity by Wesfarmers under the liability Policy.
(g) The indemnity costs order sought is prohibited under the terms of the indemnity Policy.[29] As such, the application is a subrogated recovery by Wesfarmers against its insured, Port Phillip.
(h) Effectively, Wesfarmers seeks to be indemnified for costs arising out of its failure to indemnify Port Phillip.
36 Wesfarmers/Kane also seeks indemnity costs against TBS on the same basis. On behalf of TBS, Mr Harrison submits:
(a) He adopts the arguments put on behalf of Port Phillip.
(b) Had TBS accepted Kane's Notice of Willingness to Contribute, the matter would still not have resolved given Wesfarmers refusal to indemnify Port Phillip.
(c) Given Kane/Wesfarmers' intention to appeal, it would be inappropriate for any costs order to be made pending the outcome of such appeal.
37 In response, Mr McWilliams, for Kane/Wesfarmers, submitted:
(a) Correspondence from solicitors for Port Phillip[30] made it clear that Port Phillip would deal with the plaintiff as a prudent uninsured, and rely upon s41 of the Insurance Contracts Act 1984. Had it done so and accepted the proportion of liability of which it was ultimately found, then the proceeding would have been likely resolved.
(b) The question of the indemnity of Port Phillip did not arise until some fourteen months after Port Phillip retained solicitors. There was sufficient time, and sufficient information available to those solicitors to accept Kane's offers.
(c) Even had Lumley indemnified Port Phillip, there would still be the requirement for separate representation at trial.
38 In the normal course of events, a party is entitled to an adverse costs order if an offer made by it as to its liability to contribute is more favourable than the verdict ultimately obtained. Leaving aside the question of indemnity, I accept that the offers made by Kane contained in the Calderbank letters, or in respect of the Notice of Willingness to Contribute indicated a preparedness to contribute an amount, or a percentage, more favourable than the ultimate jury verdict. Similar considerations apply in respect of the recovery proceeding.
39 The starting point in considering the offers made by Kane is the indemnity insurance which has been found to indemnify not only Kane but also Port Phillip. According to my Judgment of 2 September 2011, Wesfarmers had the obligation to indemnify Port Phillip.
40 I accept that it was not until after the issue of the writ that Port Phillip's solicitors became aware of the prospect of a claim for indemnity under the Wesfarmers' Policy; that is, in July 2010. From that point on, it sought Wesfarmers' indemnity which was refused. Ultimately, leave was granted for the issue of third party proceedings seeking that indemnity. Had Wesfarmers responded to Port Phillip's claim, there would have been no basis for Kane to make any offers in respect of proposed settlement to Port Phillip. Each party would have been jointly indemnified by Wesfarmers. I am uncertain as to whether there would have then been the need for separate representation at trial, but there would not be that likelihood if the interests of Kane and Port Phillip were the same. Any negotiations to attempt to resolve the proceeding with the other parties, including TBS and the plaintiff, would have been conducted by Wesfarmers on behalf of Port Phillip and Kane jointly.
41 In Berrigan Shire Council v Ballerini,[31] Nettle JA (with whom Callaway JA and Chernov JA agreed), said:**
"The rejection of a Calderbank offer not later bettered by judgment does not lead automatically to an indemnity costs order in favour of the offeror. The question in each case is whether the offer was a reasonable offer of compromise, and whether the rejection of the offer was unreasonable, and the answer to that question turns in each case on all the circumstances of the case. The making of an offer and its rejection are but two albeit important circumstances to which the court will have regard in the exercise of its costs discretion. ... ."
**42 In my view, the various offers made by Kane were not reasonable offers of compromise. That is because at each point when the offers were made, Port Phillip was entitled to indemnity under the Wesfarmers' Policy. Although at the time, Port Phillip's rejection was not on the basis that it was entitled to indemnity, nonetheless, had indemnity been offered as it ought to have been, there would be no basis for any offer to be made at all. In that sense, the rejection by Port Phillip of the offer was not unreasonable.
43 Given the wide discretion the Court enjoys in respect of awards of costs and given that exercise of discretion ought be decided in all of the circumstances of a particular case,[32] in my view adverse costs ought not be ordered against Port Phillip.
44 I further accept the submission of Port Phillip that such an application is impermissible given the terms of the indemnity Policy. Given Port Phillip is entitled to indemnity cover, such an application for costs is a subrogated recovery by Wesfarmers.
45 For the same reasons, in respect of the Notice of Willingness to Contribute served upon TBS, had TBS accepted such an offer, I am not satisfied that that would have resulted in any reasonable prospect of settlement, given Wesfarmers refusal to indemnify Port Phillip.
46 Kane's application for costs against TBS also fails.
47 I shall hear from the parties as to final orders.
[2] Wesfarmers General Insurance Ltd (formerly known as Lumley General Insurance Ltd)
[8] [2009] VSCA 123 at paragraph [39]
[9] Cellante v G Kallis Industries Pty Ltd [1991] 2 VR 653
[10] McBride v Sandiland [1918] HCA 59; (1918) 25 CLR 369 at 375
[13] Scarborough v Lew's Junction Stores Pty Ltd [1963] VicRp 20; [1963] VR 129
[14] Maher & Anor v Commonwealth Bank of Australia & Anor [2008] VSCA 122 at paragraph [26]
[20] 2nd edition - page 145 - paragraph 2-343
[23] I ruled various parts of the affidavit inadmissible - the last sentence of paragraph 6, all of paragraph 18 and the last sentence of paragraph 53
[24] Calderbank v Calderbank [1975] 3 All E R 333
[25] At the "statutory conference" the plaintiff agreed to accept $450,000 plus costs in settlement of his proceeding
[27] See Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No.2) (2005) 13 VR 435
[28] See s78A County Court Act 1958
[29] Clause 4, page 21, CB 168
[30] Letter dated 17 August 2010 - Exhibit ARS-12 to affidavit of Mr Seiter
[32] Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481
(1918) 25 CLR 369
(2005) 13 VR 435
(2008) 20 VR 481