APFC No.1 Corporation v Insurance Australia Limited (No 2)

[2024] NSWSC 818

Supreme Court

New South Wales

Medium Neutral Citation:

APFC No.1 Corporation v Insurance Australia Limited (No 2) [2024] NSWSC 818

Hearing dates:

On the papers; written submissions provided 14 and 28 June 2024

Date of orders:

3 July 2024

Decision date:

03 July 2024

Jurisdiction:

Equity - Commercial List

Before:

Nixon J

Decision:

(1) The Notice of Motion filed 22 May 2024 is dismissed, with costs.

Catchwords:

COSTS – application to vary costs order – UCPR, r 36.16(3A) – whether basis for variation made out

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), r 36.16

Cases Cited:

Aktas v Westpac Banking Corporation Ltd (No 2) (2010) 241 CLR 570; [2010] HCA 47

APFC No. 1 Corporation v Insurance Australia Limited [2024] NSWSC 534

Arjunan v Neighbourhood Association DP No 285853 (No 4) [2023] NSWCA 329

Fuller v Albert (No 2) [2021] NSWCA 183

Grygiel v Baine (No 2) [2005] NSWCA 434

Kyriacou v Raphis Securities Pty Ltd (No 2) [2022] NSWSC 339

Mohareb v State of New South Wales (No 2) [2024] NSWCA 69

Nadilo v Eagleton [2021] NSWCA 232

Ranclose Investments Pty Ltd v Leda Management Services Pty Ltd (No 2) [2024] NSWCA 13

State of New South Wales v Hollingsworth (No 2) [2023] NSWCA 283

Westpac Banking Corp v Wittenberg (No 3) [2016] FCAFC 51

Category:

Costs

Parties:

APFC No.1 Corporation (First Plaintiff)
APFC No.2 Corporation (Second Plaintiff)
SLFC No.1 Corporation (Third Plaintiff)
LFC No.1 Corporation (Fourth Plaintiff)
LFC No.2 Corporation (Fifth Plaintiff)
LFC No.3 Corporation (Sixth Plaintiff)
THC No.2 Corporation (Seventh Plaintiff)
Tokio Marine & Nichido Fire Insurance Co Ltd (Second Defendant)

Representation:

Counsel:
J Giles SC with J Byrnes (Plaintiffs)
E Collins SC with P Holmes (Second Defendant)

Solicitors:
Thomson Geer (Plaintiffs)
Kennedys (Australasia) Partnership (Second Defendant)

File Number(s):

2023/111959

Publication restriction:

Nil

JUDGMENT

1. On 8 May 2024, I delivered my reasons for judgment and made orders in respect of an Amended Notice of Motion filed on 11 April 2024, by which the Second Defendant (Tokio Marine) sought security for its costs (the Security Application): APFC No. 1 Corporation v Insurance Australia Limited [2024] NSWSC 534.

2. I ordered that the Plaintiffs provide security for the costs of Tokio Marine in the amount of $1.15m for what was described as the “Expanded First Phase” of the proceeding. In addition, I made the following order:

“(5)   There be no order as to the costs of the Second Defendant’s Amended Notice of Motion filed on 11 April 2024.”

3. I gave the following reasons for this order (at [130]):

“In circumstances where Tokio Marine has been successful in respect of the issues about the form of security, but where I have accepted (in part) issues raised by the Plaintiffs about the quantum of security, I consider it appropriate that there be no order as to the costs of the application.”

4. By a Notice of Motion filed on 22 May 2024, Tokio Marine seeks an order pursuant to rule 36.16(3A) of the Uniform Civil Procedure Rules 2005 (NSW) that Order 5 of the orders made on 8 May 2024 be varied to provide as follows, or alternatively be set aside and substituted with an order that provides as follows:

“(5)   The Plaintiffs pay the Second Defendant’s costs of the Notice of Motion filed on 12 September 2023 and the Amended Notice of Motion filed in Court on 12 April 2024.”

Relevant Principles

5. Rule 36.16 of the UCPR relevantly provides as follows:

36.16   Further power to set aside or vary judgment or order

(cf SCR Part 40, rule 9)

(1)   The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.

…

(3A)   If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.

6. Tokio Marine filed its application to vary Order 5 on 22 May 2024, being the fourteenth day after that order was made. The criterion for enlivening the power under r 36.16(3A) is therefore satisfied.

7. Tokio Marine, as applicant on the motion, bears the onus of establishing that the power under rule 36.16(3A) should be exercised: Arjunan v Neighbourhood Association DP No 285853 (No 4) [2023] NSWCA 329 at [12] (Stern JA).

8. The principles relevant to the exercise of the discretion under r 36.16(3A) were not in dispute. They were recently summarised in State of New South Wales v Hollingsworth (No 2) [2023] NSWCA 283 at [17]-[22] (Mitchelmore JA, Stern JA, Basten AJA); and Ranclose Investments Pty Ltd v Leda Management Services Pty Ltd (No 2) [2024] NSWCA 13 at [5] (Bell CJ, Mitchelmore JA, Adamson JA).

9. The power conferred by the rule is to be exercised “sparingly and with caution”, having regard to the importance of the finality of litigation: Hollingsworth at [17]; Ranclose at [5(1)]. The rule “does not give a licence to disgruntled litigants to re-agitate, in the hope of obtaining a more favourable outcome, issues that have been determined against them”: ibid. Instead, the purpose of the power is “to permit readily identifiable, readily rectifiable, inadvertent errors to be corrected without the complication and expense of an appeal”: Hollingsworth at [17].

10. In order to enliven the exercise of the jurisdiction, what must emerge “is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing”: Hollingsworth at [18]; Ranclose at [5(2)].

11. The reference to misapprehension in this context “is concerned with matters of oversight and inadvertence, and not with deliberate decisions which are said to be incorrect”: Hollingsworth at [20]; Ranclose at [5(3)].

12. Accordingly, it is only in limited circumstances that the Court will act under rule 36.16(3A) to vary an earlier judgment: Mohareb v State of New South Wales (No 2) [2024] NSWCA 69 at [21] (Gleeson and Stern JJA).

13. Ordinarily, questions of costs should be raised and addressed at the hearing rather than by way of separate and subsequent applications: Hollingsworth at [22], citing Aktas v Westpac Banking Corporation Ltd (No 2) (2010) 241 CLR 570; [2010] HCA 47 at [5]-[7]. The Court in Hollingsworth extracted the following from Fuller v Albert(No 2) [2021] NSWCA 183 at [31]:

“If [parties] wish to make submissions on costs, they should either do so at the hearing of the appeal, addressing the foreseeable possible outcomes, or in special circumstances seek leave to make costs submissions after the outcome is known.”

14. In Grygiel v Baine (No 2) [2005] NSWCA 434 at [11], Basten JA (with whom Mason P and Bryson JA agreed) observed that: “Failure to address on costs is commonplace and, with two qualifications which will be addressed below, may properly be taken by the Court as an indication that no special or unusual orders are required. The usual order with respect to costs is that they should follow the event, the Court thus being left to judge the precise terms of an appropriate order in the circumstances which eventuate in the judgment.”

15. His Honour continued as follows (at [12]-[13]):

“The first and major qualification to this principle arises where an offer of compromise or settlement has been made which properly should not be disclosed to the Court prior to judgment. Although the substance of the offer should not be disclosed, there is usually no difficulty in indicating, at least in this Court, that some form of offer has been made and that, accordingly, questions of costs may need to be reserved so that relevant material can be put to the Court, depending on the outcome and in the event that the parties cannot agree on the appropriate result. Secondly, there are complex cases which involve interconnected issues and possibly multiple parties. Where different parties are ultimately partly successful only, submissions as to costs may need to follow the handing down of judgment. However, even in these cases, the Court should be entitled to act on the basis that resolution of the issue is not intended to be the subject of further submissions, unless a contrary position has been indicated at the hearing. The burden on the Court of applications to address further in relation to costs after judgment is significant. Inadvertence on the part of the legal representatives will generally not be a sufficient basis for permitting further submissions, even in writing, and certainly not a basis for a further hearing, as appears to have been proposed in the present case.

The expeditious despatch of the business of the Court depends to a significant extent on the Court being able to rely upon practitioners appearing before it to ensure that its attention is drawn to matters relevant to the determination of the proceedings. If any unexpressed inference is sought to be drawn from the statement that the Court did not “invite” submissions on a particular topic, that inference must be rejected.”

Grounds for seeking variation of order

16. Tokio Marine advanced two grounds for seeking the variation of the order which was made in respect of costs on 8 May 2024.

17. First, Tokio Marine submitted that it was successful on the Security Application “as a whole”, and “there was no reason not to apply the usual rule that costs follow the event”.

18. Secondly, Tokio Marine submitted that it had “wished to be heard on costs at the appropriate time and had further evidence to adduce on the question, and the Court appears to have misapprehended that fact”. The further evidence was “without prejudice” correspondence which was attached to an affidavit in support of its application to vary the costs order. Tokio Marine submitted that, having regard to the contents of correspondence between the parties’ solicitors in the months prior to the hearing of the Security Application, including this “without prejudice” correspondence which was not before the Court at the hearing, the Court “misapprehended the degree of Tokio Marine’s true success on the application, and the plaintiffs’ responsibility for the matter being contested in Court”.

19. I deal with each of these grounds in turn below.

Costs should follow the event

20. Having regard to the principles outlined above, I do not consider that the first ground advanced by Tokio Marine provides a basis for varying the costs order that was made on 8 May 2024.

21. In essence, the submission of Tokio Marine is that the Court should have determined that Tokio Marine had been “entirely successful on the Security Application”, and should therefore have ordered that the Plaintiffs pay its costs of that application.

22. On the hearing of the Security Application, costs were in the Court’s discretion. In Kyriacou v Raphis Securities Pty Ltd (No 2) [2022] NSWSC 339 at [27], Ward CJ in Eq observed that:

“The principles applicable on interlocutory costs applications are well-known. There is a broad discretion as to costs generally (see s 98 of the Civil Procedure Act 2005 (NSW)), which discretion must of course be exercised judicially and by reference to the overriding statutory purpose mandated by s 56 of the Act. Moreover, the usual rule is that costs follow the event (r 42.1 of the UCPR). Where there is more than one event or there is mixed success on an application, questions of apportionment of costs may arise.”

23. In Nadilo v Eagleton [2021] NSWCA 232 at [6], Brereton JA (with Meagher JA agreeing) said that:

“The power to award costs is an important aspect of rendering justice between litigants. Underlying the general rule that costs follow the event, and the qualifications to it, is the idea that costs should be borne in a way that is fair, having regard to the responsibility of each party for the incurring by the other of the costs.”

24. In making the order that there be no order as to the costs of the Security Application, I exercised the discretion to award costs in a way that I considered fair, having regard to the responsibility of each party for the incurring by the other of the costs of that application. I set out my reasons for making this order at paragraph [130] of my reasons for judgment (which is set out at paragraph [3] above). In short, I reached the view that the relevant “event” was not complete success for Tokio Marine, but mixed success for the parties on the issues which had been before the Court.

25. There were essentially two contested issues at the hearing of the Security Application: the first concerned the form of the security, and the second concerned the quantum of the security (see judgment at [3]-[4]). I found in favour of Tokio Marine on the question as to the form of the security, accepting its criticisms of the form of security proposed by the Plaintiffs (at [50]-[104]). However, on the question of the quantum of the security, I accepted, in part, the criticisms which were raised by the Plaintiffs regarding the amount that was sought by Tokio Marine as security for its costs (at [105]-[129]).

26. I referred to this mixed success on the Security Application in determining, in the exercise of my discretion, that there should be no order as to costs (at [130]).

27. On the present application to vary this order, Tokio Marine submitted that the issue of quantum was an “ancillary aspect of the dispute” regarding security for costs, pointing out that this question occupied around 15-20% of the written and oral submissions on the Security Application. However, this submission ignores that the evidence in support of the quantum issues was extensive. Whereas the evidence regarding the question of the form of security was relatively limited, with the issue being resolved primarily by reference to the terms of the ATE Policy, the evidence regarding the question of quantum occupied much of the affidavits that were filed by both parties, and was also the subject of a report by a costs assessor (see judgment at [108]-[109]).

28. Ultimately, the contention advanced by Tokio Marine is that I erred in determining the “event” for the purposes of determining the appropriate order as to the costs of the Security Application, and that I should have reached a different view on the extent of its success on the material that was before the Court.

29. This does not provide a basis for the exercise of the power under rule 36.16(3A). Tokio Marine is not seeking to correct an “inadvertent error”, but is instead seeking to “reagitate, in the hope of a more favourable outcome”, an issue which has already been considered and determined (Ranclose at [5(1)]), namely, the proper exercise of the Court’s discretion to exercise costs having regard to the outcome of the security application. That is, Tokio Marine is not relying on “matters of oversight and inadvertence”, but is instead taking issue with a deliberate decision which is “said to be incorrect” (Ranclose at [5(3)]).

30. In any case, even if there had been a basis for the exercise of the power, I would not, for the reasons given above, have accepted Tokio Marine’s submission that it was “entirely successful” on the Security Application, or that the questions of quantum were of comparatively minimal significance on that application.

Misapprehension of facts not attributable to default of Tokio Marine

31. Tokio Marine submitted that the Court, in making Order 5 on 8 May 2024, misapprehended the extent of Plaintiffs’ responsibility for the costs incurred on the hearing of the Security Application, and the extent of Tokio Marine’s “true success” on the application, because the Court did not have available certain “without prejudice” correspondence that was relevant to these matters. Tokio Marine further submitted that any such misapprehension was not attributable to Tokio Marine, including because:

1. Tokio Marine was precluded by s 131(1) of the Evidence Act from adducing evidence of the “without prejudice” communications before judgment was delivered on the Security Application;

2. it would have been premature for Tokio Marine to make submissions at the hearing of the Security Application on the issue of costs, in circumstances where it could not, at that time, put forward all of the facts relevant to the costs question and where, in any event, it did not know the result of the application; and

3. at the time that the judgment was delivered and the orders were pronounced, Tokio Marine did not have the opportunity to make submissions on the costs question.

32. Tokio Marine further submitted that, in making Order 5, the Court appeared to proceed on the misapprehension that Tokio Marine did not wish to be heard on the question of costs and had no further evidence to adduce on the question.

33. Normally it is to be expected that a party will deal with costs during the course of the proceedings or at least indicate clearly that it desires an opportunity to make further, and later, submissions on costs: Westpac Banking Corp v Wittenberg (No 3) [2016] FCAFC 51 at [9] (Buchanan, McKerracher and White JJ), and the cases there cited.

34. Tokio Marine did not say anything to the Court, at the hearing of the Security Application, to indicate that it wished to be heard on costs, including in the event that the Plaintiffs’ submissions on quantum were accepted in whole or in part, or that it wished to rely on any “without prejudice” correspondence in relation to costs.

35. The lack of any such indication could properly by taken by the Court as signalling that no special or unusual costs orders were required, and that when it came to the question of costs, the Court was “left to judge the precise terms of an appropriate order in the circumstances which eventuate in the judgment”: Grygiel at [11].

36. Although Tokio Marine was not at liberty to disclose the substance of the “without prejudice” correspondence with the Plaintiffs, it was open to Tokio Marine to indicate that “questions of costs may need to be reserved so that relevant material can be put to the Court, depending on the outcome”: Grygiel at [12]. It did not do so.

37. It is not to the point that Tokio Marine did not, at the time of the hearing of the Security Application, know what the outcome of that application would be. Tokio Marine was able to make, and should have made at the hearing, submissions “addressing the foreseeable possible outcomes” (Hollingsworth at [22]) and it was plain that one such “foreseeable possible outcome” was that the Court would accept Tokio Marine’s submissions as to the form of the security, but accept some or all of the Plaintiffs’ submissions as to the quantum of the security.

38. Further, it was not necessary for the Court to ask, following the delivery of reasons and prior to pronouncing orders, whether Tokio Marine wished to make any further submissions on costs. The Court was entitled to act on the basis that resolution of the issue of costs “is not intended to be the subject of further submissions, unless a contrary position has been indicated at the hearing”: Grygiel at [12]. No such indication was given by Tokio Marine. The Court was not required to “invite” submissions on costs, and was entitled to “rely upon practitioners appearing before it to ensure that its attention is drawn to matters relevant to the determination of the proceedings” (Grygiel at [13]).

39. The jurisdiction to vary orders is not for the purpose of making submissions which should properly have been, but were not, made (or at least foreshadowed) at the hearing: Grygiel at [20].

40. Accordingly, I do not consider that Tokio Marine has established a basis for the Court to exercise the power under rule 36.16(3A) to vary the order which was made on 8 May 2024 regarding the costs of the Security Application.

41. In any case, I do not consider that the “without prejudice” correspondence which is attached to the affidavit of Tokio Marine’s solicitor in support of the present application (the Calderbank correspondence) provides a basis for concluding that a different costs order should have been made. That is because, as the Plaintiffs submitted, this Calderbank correspondence was sent prior to a substantial change in the Security Application.

32. Tokio Marine filed its Notice of Motion on 12 September 2023. At that time, it was seeking an amount of $667,000 as security for its costs of the “Expanded First Phase”. On 29 September 2023, Tokio Marine made a “without prejudice” offer to accept security in the amount of $550,000; and on 12 October 2023, it made a further “without prejudice” offer to accept security in the amount of $510,000. That is, the largest reduction offered by Tokio Marine on the amount sought in the original form of its Security Application was $157,000.

33. Subsequently, Tokio Marine more than doubled the amount sought by way of security for its costs. On 22 February 2024, it filed an affidavit of its solicitor, which increased the quantum of security sought from $667,000 to $1,394,940. There was no “without prejudice” offer on quantum after that change in position. Tokio Marine subsequently filed the Amended Notice of Motion which sought, by way of security, the sum set out in the February affidavit. I determined that Tokio Marine was entitled to security in an amount some $244,940 less than was sought.

34. The change in the amount sought by the Security Application, as amended, and the change in the evidence in support of that application were so significant that I do not consider that the offers previously made, in respect of the original application, can be used as a basis for assessing the parties’ relative success on the amended Security Application or as a basis for determining the costs of that amended application.

Conclusion

45. For those reasons, Tokio Marine has not made out a basis for varying the order made on 8 May 2024 regarding the costs of the Security Application.

46. Accordingly, I make the following order:

1. The Notice of Motion filed 22 May 2024 is dismissed, with costs.

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Decision last updated: 03 July 2024