Watson, Estate of v Conolly

Judgment 1On 22 June 2012 I heard and determined the plaintiff's notice of motion seeking to strike out paragraphs 184 to 189 of the defence (Watson, Estate of v Conolly [2012] NSWSC 741 ("Watson (No 1)")). I struck out those paragraphs and, except for one respect, refused the defendants leave to file a further amended defence. I made directions for a regime for the determination of an application made by the plaintiff for an order for indemnity costs payable forthwith. The parties agreed that I could determine it on the papers. 2The parties filed submissions in accordance with the directions. In addition, the plaintiff filed an affidavit of Flo Mitchell affirmed 28 June 2012 and sought to rely on its contents. The defendants objected to paragraphs 23 and 24 on the basis of relevance, and paragraph 36 as an inadmissible opinion. Paragraphs 23 and 24 relate to some disputes about discovery. I reject those paragraphs. In paragraph 36 of her affidavit, Ms Mitchell gives an estimate of the amount of costs her client had incurred. I allow that paragraph. A solicitor with the carriage of the matter is capable of giving an estimate of the costs likely to be charged on a matter that has been determined. 3Section 98(1)(c) of the Civil Procedure Act 2005 confers on the Court a power to award costs on an indemnity basis. To justify such an order there needs to be identified some "relevant delinquency" (Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [44], per Gaudron and Gummow JJ). In this case, three matters are said by the plaintiff individually and in combination to amount to such a delinquency. 4First, it was submitted that the defendants persisted in maintaining the struck out paragraphs when they ought to have known they were objectionable. 5Second, it is said that the defendants unreasonably refused to "settle the motions" by failing to take up letters which invited them to withdraw the paragraphs and not seek to re-plead. 6Third, it is said that the defendants' conduct was exacerbated by their threatening to seek orders restraining the plaintiff's counsel and solicitor from acting on behalf of the plaintiff, but never in fact doing so. 7In relation to the first matter, the defendants denied that their conduct had that character. In relation to the second matter, the defendants contested that the offers were not genuine offers of compromise. In relation to the third matter, the defendants submit that, inter alia, there was no necessary connection between those threats and the matters litigated in the motion. 8The basis upon which I struck out paragraphs 184 to 189 of the defence is set out in Watson (No 1) at [6] to [18]. Before me, no real attempt was made by the defendants to defend them. Instead, the only response to the strike out application was an application to amend the defence which sought to rely on the fact that the late Mr Watson was not himself a party to the relevant insurance contract. I rejected those amendments on the basis that that matter did not warrant any departure from the established position concerning the irrelevancy of the payment made by Allianz to the plaintiff (Watson (No 1) at [19] to [28]). 9The correspondence attached to Ms Mitchell's affidavit reveals that the existence of the struck out parts of the defence has been a continuing irritant between the parties and that has caused considerable distraction for the plaintiff in the pursuit of its case. The plaintiff's solicitors repeatedly pointed out to the defendants' solicitors why these aspects of their defence were misconceived. They referred them to the relevant authorities. Yet they did not receive any sensible response. Moreover, the maintenance of the allegations caused the plaintiff considerable angst in that they included allegations of negligence against its legal advisors thus placing them in a difficult position. The maintenance of a pleading containing irrelevant allegations of negligence against the plaintiff's legal advisers was, in my view, a relevant delinquency which more than justifies an order for indemnity costs. 10The defendants' conduct was aggravated by the fact that from time to time they threatened but did not ultimately make an application to restrain those legal advisers from acting on behalf of the plaintiff. There were traces of this in the written submissions that were provided to me prior to the hearing of the motion on 22 June 2012. They referred to a conflict of interest on the part of those advisors. I queried why I received submissions contending that there was a conflict of interest given their irrelevance to the plaintiff's motion to strike out the defence. I did not receive a satisfactory explanation. 11Accordingly, I propose to make an order for indemnity costs as sought by the plaintiff. The same considerations warrant an order that the costs be payable forthwith (see Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277, at [38] per McColl JA, with whom Allsop P and Handley AJA agreed). 12The plaintiff also sought an order specifying that the costs include without limitation the costs of: instructing an independent solicitor to advise the plaintiff concerning the defence, to brief further counsel to advise on the motion and appear on the hearing on 22 June 2012, and the costs of the costs application. The necessity to obtain independent advice arose from allegations in the defence against the plaintiff's then legal adviser. I do not propose to make any order as to what those costs include. It is sufficient that I indicate that the costs I will order encompass all those matters, including the costs of the costs application. 13The plaintiff also sought an order that, without prejudice to the right of either party to seek an adjustment of the costs payable, that there be an order for provisional assessment of the costs in the amount of $55,000.00, with that amount to be paid by the defendants to the plaintiff within twenty-eight days. Paragraph 36 of Ms Mitchell's affidavit estimated that the costs of the motion were almost $70,000.00. She explained that this estimate was so high in part because of the need, as I have referred, for the plaintiff to obtain independent advice concerning the matters in the defence. She indicates that she has not prepared any bill in taxable form and has not received counsel's final bills for the work on the motion. In the absence of her having received any bills I do not propose to make an order for any provisional assessment of a lump sum at this point. I am, however, prepared to entertain an application for this form of order once all the bills have been rendered. 14The plaintiff also seeks an order that the defendants pay its costs of and incidental to the defendants' oral application for leave to amend their defence as well as the costs thrown away by the amendment, including the costs of filing an amended reply. All of the costs of the hearing of the application to amend are covered by the order for indemnity costs. The plaintiff is entitled to the additional costs occasioned by the amendment on a party/party basis.