Bella Vita Pty Ltd v Lumley General Insurance Limited

[2001] WADC 48

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   BELLA VITA PTY LTD -v- LUMLEY GENERAL INSURANCE LIMITED [2001] WADC 48

CORAM:   DEPUTY REGISTRAR HEWITT

HEARD:   16 FEBRUARY 2001

DELIVERED          :   9 MARCH 2001

FILE NO/S:   CIV 1180 of 1998

BETWEEN:   BELLA VITA PTY LTD

Plaintiff

AND

LUMLEY GENERAL INSURANCE LIMITED
Defendant

Catchwords:

Practice - Western Australia - Rules of the Supreme Court - Order 23 - Costs on discontinuance

Legislation:

Nil

Result:

Leave to discontinue granted.  Plaintiff to pay the costs of the action

Representation:

Counsel:

Plaintiff:     Mr G J Quartermaine

Defendant:     Mr M R M George

Solicitors:

Plaintiff:     Pye & Quartermaine

Defendant:     Phillips Fox

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

AWA Ltd v Daniels, unreported; SCt of NSW; BC 920 3187; 8 October 1992

Donald Campbell and Company Limited v Pollak [1927] AC 732

Forbes v Samuel [1913] 3 KB 706

Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469

Jones v McKie and Mersey Docks and Harbour Board [1964] 2 All ER 842

Mannix v Loumbos Pty Ltd [2000] NSW CA 32; 28 February 2000

Oshlack v Richmond River Council [1998] 193 CLR 72

1. DEPUTY REGISTRAR HEWITT: This matter comes before me by way of the plaintiff's application to discontinue its action against the defendant and for certain costs orders consequent upon that discontinuance.  Order 23 r 2(3) requires the plaintiff to obtain the leave of the Court to discontinue the action and provides that I may grant such leave upon such terms as to costs as may be just.

2. The precise order sought by the defendant upon the discontinuance are that it pay the defendant's costs of the action up to and including the pre-trial conference held on 11 July 2000 and the defendant pay its costs thereafter.

3. The defendant is an insurer with which the plaintiff took out a policy of insurance in relation to a caterpillar scraper.  The claim alleges that the scraper was, in effect, sabotaged by persons unknown introducing sand dust and other foreign matter into the engine of the scraper causing it damage and the need of expensive repair.  The plaintiff says that damage is compensable under the terms of the policy of insurance it held with the defendant.

4. The defendant defended on a number of basis but for the purposes of this application the important one was that the repairs to the scraper were required through a lack of maintenance rather than any form of sabotage.

5. Since the plaintiff could not point to any specific incident in which the alleged sabotage took place the matter was always going to be an action in which expert evidence was of critical importance.

6. The defendant has no quarrel with leave being granted to discontinue the action nor does it have any quarrel with the plaintiff paying its costs up to the pre-trial conference.  The defendant argues that the plaintiff should pay its costs of the entire action and furthermore those costs should be on an indemnity basis subsequent to 29 August 2000 when it made an offer of compromise that the action be dismissed on the basis that the parties bear their own costs.

7. The plaintiff has decided to abandon its action against the defendant because of its view that on the state of the expert evidence as it now stands the plaintiff is not likely to succeed in the action.  That view largely flows from an assessment of the report of William Brown an expert engaged by the defendant whose report was made available to the plaintiff on 19 December 2000.  It appears that Mr Brown has qualifications and experience which would make him the most persuasive of the expert witnesses to be called at the trial of the action.  In the light of that evidence together with some other evidence which also came fairly late the plaintiff has concluded that the risk of taking the matter to trial is not justified and accordingly has not proceeded with the trial which was previously listed to commence on 15 January 2001 and has brought this application to discontinue.

8. Boiled down to its essentials the plaintiff says that the defendant was in breach of orders concerning expert evidence.  Those orders were made in April 2000 and required expert evidence to be exchanged prior to the pre-trial conference.  The critical report was served on 18 December 2000.  The plaintiff says if that report had been made available to it at an earlier stage it would have been in a position to reassess its case and avoid the costs incurred between the pre-trial conference and today.  For its part the defendant says that the report was not available to it at an earlier stage.

9. Mr Brown although collaborating to some extent earlier in this action was not prepared to be called as a witness, it apparently being his employer's directive that he distance himself from this litigation.  In September the employer's resistance was overcome and the way was cleared for Mr Brown to investigate the matter as an expert and provide his expert opinion.  He was not immediately asked to do so because some negotiation was ongoing between the plaintiff and the defendant and in particular the offer of 29 August 2000 which was held open for an additional period at the request of the plaintiff.  Towards the end of that time it was learned that the plaintiff intended to rely on an additional expert report and the decision was taken to wait for that to be received before the report was commissioned.

10. An issue arose during the course of the case as to whether or not foreign material might be introduced into the motor of the scraper through some holes which were discovered in an intercooler in the turbo charging system of the scraper.  An intercooler is in effect a radiator through which air compressed by the turbo charger passes (in order to cool it) before it is introduced into the engine.  In my view that issue was never properly raised on the pleadings by the plaintiff but was mentioned in correspondence at various stages and commented upon in certain expert reports commissioned by the plaintiff.  Part of the importance of Mr Brown's affidavit was his statement that the relevant intercooler was positively pressurised as a consequence of which air would be forced out of it rather than sucked into it and the damage was therefore not a likely cause of the contamination which allegedly damaged the engine of the scraper.

11. The evidence establishes to my satisfaction that the expert report was not available to the defendant at an earlier stage in the proceedings and was served on the plaintiff at the earliest opportunity.  Suggestions were made in the course of argument that some notification should have been given to the plaintiff in advance of the receipt of the formal report.  I reject such proposition.  The defendant would have to be foolhardy indeed to attempt to anticipate the opinion of the expert prior to the receipt of his report and I see no criticism of the defendant for not taking that step.

12. Various cases have been cited to me but in my view they simply underline the proposition that I have a considerable discretion in relation to any costs order which I may make and in my view the cases are by a large illustrative of the breath of that discretion.  The plaintiff's case was essentially based on the proposition that the engine had been properly maintained during the course of its operating life and its premature failure was in all probability caused by sabotage.  The weight of evidence suggests that the engine was not sabotaged and that its cause for premature failure was want of maintenance.  Of the two parties the plaintiff is the one which would know whether or not the engine was properly maintained.  In order to succeed the plaintiff would have needed to testify as much.  The expert evidence suggests that proposition is inconsistent with a proper examination of the engine and the lubricant residues within it.

13. Counsel for the plaintiff has indicated he considers it inappropriate for me to in effect try the case but in my view I should examine the evidence since it is a view of the evidence by which the plaintiff justifies its discontinuance of the case and its claim for partial costs against the defendant.  In my view the discontinuance is a concession that the experts were right and that the machine was not properly maintained and its failure was through that cause rather than any other cause.

14. Given that the details of maintenance were peculiarly within the knowledge of the plaintiff and given the fact that the plaintiff's proposition that the machine was properly maintained has been its own eyes rebutted it strikes me that it would be unfair to award the plaintiff any costs on its discontinuance and to deprive the defendant of its costs in any measure.  Therefore insofar as the plaintiff seeks an order that the defendant pay any costs I am not inclined to make that order and as far as I am concerned the proper order to make is that the plaintiff do have leave to discontinue its action against the defendant on terms that it pay the defendant's costs of the action.  In relation to the defendant's claim for indemnity costs subsequent to the Calderbank letter on 29 August 2000 I accept that I have the power to make such an order the question simply being whether or not it is appropriate in the circumstances of this case to do so.  I am not aware if there will be any significant difference between costs taxed on an indemnity basis and those taxed according to scale however I am aware of the fact that there has been some work undertaken by the defendant subsequent to the offer being made in the way of requisition of the relevant report and its perusal and so forth.  Other than that I am not given any information as to the level of activity of the defendant's solicitor subsequent to the making of the offer.

15. I regard the fact that the defendant was in breach of the expert evidence order (albeit not in a contumelious way) at the date the offer was made as a reason to refuse the defendant's costs on an indemnity basis.  At the stage the offer was made all the cards should have been on the table.  They were not and that is in my view a sufficient reason to deny the defendant its costs on an indemnity basis.