Crown Insurance Services Pty Ltd & Anor v The National Mutual Life Association of Australasia Ltd (No 2)

[2005] VSCA 280

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 2107 of 2001

CROWN INSURANCE SERVICES PTY LTD (ACN 005 214 237)

and

ROBERT BRUCE BROADLEY

Appellants

v.

THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LTD (ACN 004 020 437)

Respondent

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[No. 2]

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JUDGES:	WARREN, C.J., BUCHANAN, J.A. and BYRNE, A.J.A.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	1 September 2005
DATE OF JUDGMENT:	30 November 2005
MEDIUM NEUTRAL CITATION:	[2005] VSCA 280

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COSTS – Nominal damages – Proceedings not necessary to establish legal right of value – Costs of issues – Plaintiff and defendant each succeeded on substantial issues – No order for costs of trial – Calderbank letters ineffective.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr J.E. Middleton QC, with Mr B.M. Griffin	Deacons
For the Respondent	Mr D.G. Collins S.C., with Mr C.R. Hanson	Lander & Rogers

WARREN, C.J.
BUCHANAN, J.A.
BYRNE, A.J.A.:

1. At the conclusion of the trial in this proceeding the respondent (“the insurer”) was awarded damages in an amount of $83,083.56, interest in an amount of $2,861.93, and costs.  The trial judge held that the appellant (“the broker”) had breached duties owed to the insurer in contract and in tort in obtaining a proposal form signed in blank by a proponent for disability insurance and failing to ask the proponent the questions set out in the proposal.  As a result of the broker’s breaches the insurer was unaware that the proponent within the last three years had obtained a CT scan and an x-ray of his spine.  His Honour found on the balance of probabilities that the insurer would have issued a policy of insurance even if the proponent had disclosed the scan and the x-ray, and held that the agent’s breaches deprived the insurer of the opportunity to consider whether it might limit the insurance cover by excluding liability for back injury.  His Honour assessed the chance as 20 per cent.

1. On appeal this Court held that as there had been a determination of what would have occurred but for the broker’s breach of duty, there was no room for an award of damages for loss of an opportunity.  Accordingly, the judgment for damages below was set aside, but as the insurer did establish breach of a legal duty owed to it, judgment for a nominal sum was given in favour of the insurer. 

1. The insurer brought a cross-appeal seeking to overturn the trial judge’s findings as to the course it would have followed if it had known of the scan and x-ray and to recover the full amount of its liability to the insured.  The cross-appeal was discontinued and, as a result, the appellant was entitled to recover the costs of the cross-appeal.  See Rules 64.17(4) and 64.14(3). 

1. There remains the question of the costs of the trial and the appeal.

1. The broker seeks an order that the insurer pay the broker’s cost of the trial and the appeal.  In our opinion the fact that the insurer recovered nominal damages should not deprive the broker of the costs of the trial.  It was not necessary for the insurer to bring the proceedings to establish a legal right that was of value despite the fact that no substantial remedy was obtained.[1]  There was, however, another circumstance which, in our opinion affected the question of the costs of the trial.  The broker put in issue the question whether the broker owed or breached duties in negligence and contract, and it appears that significant time and expense was incurred as a result.  While generally it is not desirable to award costs according to the resolutions of particular issues, in the present case the issues of breach and damage involved quite distinct facts and legal principles.  The appellant succeeded on the first issue;  the broker succeeded on the second issue.  Accordingly, in our opinion the parties should bear their own costs of the trial.

   [1]See Anglo-Cyprian Trade Industries Ltd v. Paphos Wine Industries Ltd [1951] 1 All ER 873.

1. The broker succeeded on appeal and accordingly should have the costs of the appeal.

1. The broker sought to recover costs on an indemnity basis for both the trial and the appeal on the ground that it served Calderbank[2] offers on the insurer, one before the trial, the other before the hearing of the appeal.

   [2]Calderbank v. Calderbank [1976] Fam. 93.

1. As we have determined that the parties should have to bear their own costs of the trial, the first letter can have no effect.  As to the costs of the appeal, the offer made in the second letter was not confined to the costs of the appeal.  The broker’s offer was to accept payment of the broker’s costs of the third party proceeding and the appeal on a party and party basis if the insurer released the broker from all liability under the judgment and orders of the trial judge.  The insurer has fared better than this offer, and accordingly the letter will not produce the result contended for by the broker.

1. For the foregoing reasons we will set aside the order for costs made by the trial judge and order that the respondent pay the appellants’ costs of the appeal.

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