Highway Hauliers Pty Ltd v Matthew Maxwell (The authorised, nominated representative on behalf of various Lloyds underwriters)
[2012] WASC 53 (S)
•21 FEBRUARY 2012
HIGHWAY HAULIERS PTY LTD -v- MATTHEW MAXWELL (The authorised, nominated representative on behalf of various Lloyds underwriters) [2012] WASC 53 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 53 (S) | |
| Case No: | CIV:1775/2007 | 23-27 MAY, 22 & 30 JUNE 2011 | |
| Coram: | CORBOY J | 21/02/12 | |
| 17/04/12 | |||
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Application for indemnity costs refused Application for special costs allowed and plaintiff's costs to be taxed without limit imposed in item 17 of the Supreme Court Scale of Costs | ||
| B | |||
| PDF Version |
| Parties: | HIGHWAY HAULIERS PTY LTD MATTHEW MAXWELL (The authorised, nominated representative on behalf of various Lloyds underwriters) |
Catchwords: | Practice and procedure Costs Indemnity costs Whether unreasonable conduct by party or its legal advisors Practice and procedure Costs Special costs order Removal of limit in scale Whether requirements of s 280(2) Legal Profession Act 2008 (WA) satisfied |
Legislation: | Insurance Contracts Act 1984 (Cth), s 54 Legal Practice Act 2003 (WA), s 215(2) Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA) Legal Profession Act 2008 (WA), s 280(2) Rules of the Supreme Court 1971 (WA), O1 r 4B |
Case References: | Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); 28 WAR 95 Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) Johnson v Triple C Furniture & Electrical Pty Ltd [2010] QCA 282; 243 FLR 336 Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 17 APRIL 2012 FILE NO/S : CIV 1775 of 2007 BETWEEN : HIGHWAY HAULIERS PTY LTD
- Plaintiff
AND
MATTHEW MAXWELL (The authorised, nominated representative on behalf of various Lloyds underwriters)
Defendant
Catchwords:
Practice and procedure - Costs - Indemnity costs - Whether unreasonable conduct by party or its legal advisors
Practice and procedure - Costs - Special costs order - Removal of limit in scale - Whether requirements of s 280(2) Legal Profession Act 2008 (WA) satisfied
(Page 2)
Legislation:
Insurance Contracts Act 1984 (Cth), s 54
Legal Practice Act 2003 (WA), s 215(2)
Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA)
Legal Profession Act 2008 (WA), s 280(2)
Rules of the Supreme Court 1971 (WA), O1 r 4B
Result:
Application for indemnity costs refused
Application for special costs allowed and plaintiff's costs to be taxed without limit imposed in item 17 of the Supreme Court Scale of Costs
Category: B
Representation:
Counsel:
Plaintiff : Mr G R Hancy
Defendant : Mr D J Higgs SC & Mr J A Thomson
Solicitors:
Plaintiff : WHL Legal Pty Ltd
Defendant : CLS Lawyers
Case(s) referred to in judgment(s):
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); 28 WAR 95
Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)
Johnson v Triple C Furniture & Electrical Pty Ltd [2010] QCA 282; 243 FLR 336
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
(Page 3)
- CORBOY J:
(These reasons were delivered orally on 4 April 2012 and have been edited from the transcript.)
Introduction
1 The plaintiff, Highway Hauliers Pty Ltd, carries on a trucking business. Two prime movers and the trailers they were hauling, leased by Highway Hauliers, were damaged in separate accidents. Highway Hauliers claimed that it was indemnified for the loss and damage caused by the accidents by an insurance policy issued by the defendant and various Lloyds underwriters through their agent, SRS Underwriting Agency (SRS). The underwriters refused to indemnify Highway Hauliers on the grounds that the drivers involved in the accidents:
(a) had not complied with an endorsement to the policy requiring drivers of particular types of vehicles used for interstate trips to have achieved a minimum score on a test known as the PAQS test; and
(b) were 'non-declared' drivers for the purpose of an exclusion contained in the policy.
2 Highway Hauliers contended that the underwriters were not entitled to refuse to indemnify on those grounds by reason of s 54 Insurance Contracts Act 1984 (Cth) (ICA). It claimed in this action both the benefit of the indemnity provided by the insurance policy and damages for breach of the policy.
3 It was found that the underwriters had breached the policy by refusing to indemnify Highway Hauliers for the losses suffered as a result of the accidents. The indemnity claimed by Highway Hauliers was for the cost of repairing and replacing the damaged vehicles. That cost was agreed during the trial at $299,807.09.
4 Highway Hauliers also claimed that it had lost the opportunity to earn profits as a result of the underwriters' refusal to indemnify. That claim was variously described during the trial as a claim for loss of profit or a claim for the lost chance to earn profit. The amount claimed for that loss at the commencement of the trial was $826,738. Highway Hauliers amended that amount in supplementary submissions following the close of the evidence to claim $250,000 as the value of the lost chance, subject
(Page 4)
- to a discount for contingencies. Damages were awarded and assessed at $145,000.
5 Highway Hauliers has applied for an order for costs to be awarded on an indemnity basis, alternatively for a special costs order lifting the maximum amount allowed for getting up a case for trial under the Supreme Court Scale of Costs (item 17 cl 11 Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA)). I have concluded that an order for indemnity costs should not be made but that an order for special costs should be made. Whether that order results in Highway Hauliers being allowed more than the maximum amount specified under the relevant scales will be a matter for the taxing registrar to determine.
The principles relevant to an application for indemnity costs
6 There was no issue between the parties on the principles to be applied in determining whether an order for indemnity costs should be made. Those principles were summarised by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10]. Three points should be noted from the summary provided by the Court of Appeal:
(a) An indemnity costs order may be appropriate where there has been improper, or at least unreasonable, conduct by a party or its legal advisors.
(b) Persisting in a hopeless case may be unreasonable conduct that would justify an indemnity costs order. However, competing principles need to be balanced in making an order on that basis as a party should not be discouraged by the prospect of an unusual costs order from maintaining a claim or defence where its success is not certain. Uncertainty is inherent in many areas of the law and the law changes over time and with different circumstances. Nevertheless, where a party has by its conduct unnecessarily increased the cost of litigation it is appropriate for that party to bear that cost.
(c) A properly crafted special costs order may obviate the need for an indemnity costs order where components of costs scale items are allowed above the applicable scale limit.
(Page 5)
7 It is also relevant to note what was said by Pullin J (as his Honour then was) in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); 28 WAR 95:
(a) An order for indemnity costs will only be made if there is some special or unusual feature in the case to justify departure from the ordinary practice of awarding party and party costs [8].
(b) There ought not to be a significant gap between party and party costs and solicitor-client costs having regard to the basis upon which the scale of costs is determined in this jurisdiction. However, there is still a place for indemnity costs orders; such orders would be appropriate in cases where there had been improper or unreasonable conduct on the part of a party or its legal advisors so that the order would be a mark of disapproval on the part of the court about that conduct even though there should not be much difference in the costs recovered [25].
The principles relevant to a special costs order
8 Section 215(2) of the Legal Practice Act 2003 (WA) (LPA 2003) provided that:
Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under the legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a) order the payment of costs above those fixed by the determination;
(b) fix higher limits of costs than those fixed in the determination;
(c) remove limits on costs fixed in the determination;
(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or taxed.
9 Section 280(2) of the Legal Profession Act 2008 (WA) (LPA 2008) is in identical terms. In Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S), the Chief Justice considered the application of s 215(2) LPA 2003 and concluded that:
(a) The court was required to form an opinion about two matters to make an order under the subsection: first, that 'the amount of the costs allowable in respect of a matter under a legal costs determination is inadequate' and second, that the inadequacy arose
- because of the 'unusual difficulty, complexity or importance of the matter' [11].
- (b) The question posed under the section will almost always arise before a taxation has occurred. Further, the section fell to be construed and applied in the context of the well-known principle that at least in respect of costs as between party and party, the successful party is entitled to be compensated by the unsuccessful party for their costs [12].
(c) Those considerations provided a guide to the proper approach to be taken in determining an application under s 215(2). The policy considerations that should guide a court under the section were first, that the court should not usurp the role of the taxing officer and second, that at least where party and party costs are concerned, the court should make an order that would give effect to the general principle of allowing the successful party to be compensated for their costs by the unsuccessful party [13].
(d) The requirement of inadequacy for the purpose of s 215(2) will be satisfied if the applicant shows that there is a fairly arguable case that the bill to be presented to the taxing officer may tax out at an amount that is greater than the limit that would be imposed by the relevant costs determination. It would then be for the taxing officer to determine whether the costs allowed under the relevant court scale were, in fact, inadequate [15] - [16].
(e) The word 'unusual' when used in s 215(2) only qualified the word 'difficulty' and did not qualify the words 'complexity' or 'importance' [17].
(f) The reference to 'importance' in the section enabled the court to consider the question of whether the work done was appropriate to the significance of the issues that arose in the litigation. An issue might be significant because it was significant to the parties or because it was significant to the public [19].
(g) An application under s 215(2) will be determined as a matter of impression rather than by a detailed evaluation of the successful party's costs. That is because the application will ordinarily be determined in advance of a taxation. It will not be necessary for the court to embark upon a detailed evaluation of a draft bill of costs for taxation [20].
(Page 7)
The grounds on which Highway Hauliers seek an indemnity costs order
10 Two broad reasons were advanced by Highway Hauliers for why an indemnity costs order ought to be made in this case:
(a) the defendant's conduct of his defence; and
(b) the use by the defendant of these proceedings as a vehicle to test the construction of its policy wordings.
11 In relation to the first of those grounds, five matters were identified about the defendant's conduct of his defence that either together or separately were said to justify an indemnity costs order:
(a) the defendant's reliance on a defence that was not supported by evidence and was ultimately abandoned;
(b) the inadequacy of the defendant's discovery;
(c) the late introduction by the defendant of a large amount of evidence and non-compliance with the court's directions regarding pre-trial disclosure of evidence;
(d) the defendant's use of an exhibit (exhibit 4) that was created by the defendant's legal advisors and which summarised a number of other documents that were admitted into evidence; and
(e) the defendant's unwillingness to compromise prior to trial.
12 It is convenient to separately consider each of the grounds identified by Highway Hauliers, recognising that an order for indemnity costs might be justified by a combination of those grounds even if it was concluded that justice did not require such an order on any of the grounds advanced when considered in isolation.
The defendant's defence under s 54 ICA
13 One of the primary issues in this action concerned the proper construction and application of s 54 ICA. Highway Hauliers contended that the underwriters were not entitled to refuse to indemnify it on either of the grounds on which they relied by reason of that section. The defendant contended until the close of his case that:
(a) on its proper construction, s 54 did not apply to the claims made by Highway Hauliers;
(Page 8)
- (b) alternatively, if the section did apply, the acts relied on to refuse to pay the claims could reasonably be regarded as being capable of causing or contributing to the losses claimed by Highway Hauliers: see s 54(2).
14 Highway Hauliers argued in response to the second of those contentions that no part of the losses claimed was caused by the fact that the drivers involved in each accident had not sat a PAQS test and were non-declared drivers for the purpose of the policy: see s 54(3).
15 In his closing submissions, the defendant abandoned any defence based on s 54(2). His argument in closing was confined solely to the proper construction of s 54(1) and its application to the circumstances of the claims made by Highway Hauliers. The construction and application of s 54 fell to be determined on facts that were not controversial once that concession had been made.
16 The PAQS test was designed to assess the attitudes of drivers on safety matters. While it can be readily appreciated why an insurer of commercial vehicles would be interested in monitoring driver behaviour and attitudes about safety, it is more difficult to see how a failure to take a PAQS test (that might or might not have disclosed a propensity to take risks while driving) or to have submitted a driver declaration could be reasonably regarded as being capable of causing or contributing to a loss arising out of a particular occurrence.
17 More fundamentally, the information available to the defendant's agent and subsequently, his legal advisors did not suggest that either of the accidents that were in issue was caused by the carelessness or other fault of the Highway Hauliers drivers who were involved. As to the first accident that occurred on 17 June 2004, SRS was provided with statements by Ms Battle and her husband made contemporaneously with the accident that apparently indicated that she was not at fault but rather, that the accident was caused by the unroadworthy condition of another vehicle. Ms Battle's witness statement in this action was consistent with her contemporaneous statement. Although she was cross-examined on her evidence concerning the accident, it was not put to her that any aspect of her contemporaneous statement or her witness statement in this matter was unreliable or should be rejected for any other reason.
18 As to the second accident that occurred on 2 April 2005, Mr Kelly provided a written statement that was submitted to SRS with the notification of the claim. He advised in that statement that he misjudged
(Page 9)
- the edge of the road while driving in rain and when visibility was poor. That explanation for the accident was not challenged. Rather, the cross-examination of Mr Kelly was directed to a medical condition from which he suffered but which was not said to be in any way connected to the cause of the accident. At best, the cross-examination of Mr Kelly could be said to have been directed to establishing that he might not have been accepted by the underwriters as a declared driver had Highway Hauliers submitted a driver declaration for him. That could only be relevant to causation for the purpose of s 54(2) in the most crude 'but for' way. Sections 54(2) and (3) appear to contemplate a more proximate relationship between the act and the loss than such a gross 'but for' approach to causation would suggest.
19 Nevertheless, after careful consideration I have concluded that it cannot be said that this aspect of the defendant's case was so hopeless that the court should mark its disapproval by making an indemnity costs order. The defendant's position apparently reflected a view that Highway Hauliers carried the onus on the issues raised by ss 54(2) and 54(3). It appeared from argument during this application that Highway Hauliers took a different view of the question of onus under s 54(2). In the event, it was unnecessary for that issue to be determined in this action. However, I consider that the construction apparently contended for by the defendant was not so untenable as to say that his position was 'hopeless' in the sense of being so unreasonable that it invited the court's sanction. It follows that it was not unreasonable in that sense for the defendant to require the plaintiff to establish that the failure of the drivers to have taken the PAQS test and/or Highway Hauliers' failure to have submitted driver declarations played no part in the cause of each accident.
Discovery
20 Highway Hauliers made three closely related complaints about the discovery given by the defendant. First, it had been necessary to make numerous requests of the defendant for documents relating to PAQS testing. Second, no documents were discovered about why the defendant chose to require PAQS testing and why the requirement was subsequently deleted from the policy issued by the underwriters and no explanation was provided for the failure to discover such documents. Third, the defendant's agent had disposed of documents relating to PAQS testing after proceedings had been commenced.
21 In my view, none of those matters justify an indemnity costs order being made:
(Page 10)
- (a) The complaints about the adequacy or otherwise of discovery were not such as to warrant the sanction of the court by making such an order. They reflect interlocutory differences that are not to be encouraged but there was no evidence of impropriety by the defendant or his legal advisors.
(b) The failure to discover documents or the destruction of relevant documents after proceedings have been commenced is a serious matter. Solicitors have an obligation as officers of the court to ensure that the parties for whom they act in litigation preserve all documents that might be discoverable. However, I do not consider that the apparent disposal of the four documents referred to in Part 1 of the first schedule to the supplementary list of documents verified by Mark McKinnon by affidavit sworn on 29 July 2008 was so serious as to justify an indemnity costs order. The documents concerned were created by People And Quality Solutions Pty Ltd and appeared from their description to be general guides concerning the application of the PAQS test. It would seem that the documents were discoverable but they were of such a general kind that it was perhaps understandable, although regrettable, that their relevance in the possession of SRS might not have been fully appreciated at the time of their disposal. Again, there was no evidence of impropriety or deliberate destruction of evidence.
Late disclosure of evidence
22 The defendant served statements from Mr Reams, Mr Cullum and Mr Bottomley on 1 October 2009. Highway Hauliers objected to aspects of those statements. The defendant served supplementary statements from Mr Reams, Mr Cullum and Mr Bottomley shortly prior to the trial and after the last date by which the parties had been directed to file and serve witness statements. A statement from Mr Hogarth was also served at the same time. Highway Hauliers complained that there was no explanation as to why the statements were introduced at such a late stage and contrary to the directions that had been made by the court.
23 It is important that parties adhere to the court's directions which are intended to promote the case management objectives identified in O 1 r 4B of the Rules of the Supreme Court. The provision of witness statements in advance of a trial may facilitate the proper management of proceedings in several ways, including by providing a means of pre-trial disclosure that avoids surprise and by affording an opportunity for the
(Page 11)
- parties to agree facts and confine the issues to be litigated. However, I do not consider that the late statements of Mr Hogarth, Mr Cullum, Mr Bottomley and Mr Reams so seriously undermined those objectives in this instance that an order for indemnity costs is required to be made having regard to the content and subject matter of the statements.
Exhibit 4
24 I accept that it would have been preferable for the defendant to have provided a copy of exhibit 4 to Highway Hauliers' legal advisors in advance of the trial. The exhibit summarised information extracted from numerous primary accounting records that formed part of the trial bundle. The legal advisors to Highway Hauliers would have had an opportunity to check the information summarised against the source documents and obtain any further instructions that might have been necessary had the document been provided in advance. That might also have facilitated an agreement between the parties over the information recorded in the exhibit.
25 However, the genesis of the document was as an aid to cross-examination. It did not contain evidence and ordinarily would have been marked for identification. It was received as an exhibit given the course of the cross-examination of Mr Sartori. In the circumstances, I do not consider that the court is required to mark its disapproval over the failure to provide a copy of the document in advance of the trial by ordering indemnity costs.
Willingness to compromise
26 Highway Hauliers contended that the defendant made no genuine attempt to compromise the claim prior to trial. That was disputed by the defendant. However, it was apparent that the defendant had a firm view regarding the merits of his position, no doubt based on what was thought to be an analogy with the reasoning of the Queensland Court of Appeal in Johnson v Triple C Furniture & Electrical Pty Ltd [2010] QCA 282; 243 FLR 336. It would also appear that the defendant regarded the issue raised by Highway Hauliers as being important for the application of the endorsements and exclusions contained in its policies.
27 Those matters indicate that the defendant's attitude to a possible compromise of the action was not infected by some improper or collateral purpose. Further, I do not consider that the defendant's position was untenable or capable of being characterised as 'hopeless'.
(Page 12)
28 Finally, I do not consider that the various grounds identified by Highway Hauliers when considered collectively establish that it is appropriate that costs be awarded on an indemnity basis.
Special costs order
29 However, in my view the matters identified by Highway Hauliers do justify a special costs order being made under s 215 LPA 2003 and s 280 LPA 2008 having regard to how those sections are to be interpreted and applied according to the judgment of the Chief Justice in Heartlink. The proceedings were important to the parties in the sense identified by his Honour - particularly, to the defendant because of the implications of the s 54 ICA issues for the underwriters' policy wordings and claims management. The importance attached to those issues obviously affected Highway Hauliers' position in the proceedings. Further, the action was no doubt important to it as the operator of a small business for whom its insurance arrangements are significant because of the nature of its business. It may also be inferred that the amount involved was significant for its financial position.
30 The case also concerned another issue that would appear to have some importance for insurers and insureds generally - the availability of damages where an insurer wrongfully refuses to indemnify and factors relevant to the assessment of those damages. As best as I was able to ascertain, the case law on those matters was limited for reasons connected with the approach that courts have historically taken to the application and enforcement of insurance policies.
31 Highway Hauliers provided only limited evidence on the question of whether the costs that might be awarded under item 17 cl 11 of the Supreme Court Scale of Costs was likely to be inadequate. However, I am satisfied that it has demonstrated that the costs allowable for getting up might be inadequate having regard to the comments of the Chief Justice in Heartlink. I make that finding taking into account the evidence relied on by Highway Hauliers as to the adequacy of the relevant scales of costs and from my knowledge of the issues that were litigated at trial. I also take into account the possibility that the late disclosure of evidence, the pursuit of further discovery and the need for Highway Hauliers to prepare and adduce evidence relating to the issues raised by ss 54(2) and (3) ICA may result in the amount allowed under the scale item for getting up being inadequate. That will be a matter for the taxing registrar to determine, consistent with the reasoning of the Chief Justice in Heartlink.
(Page 13)
32 The order that will be made is that Highway Hauliers' costs are to be taxed without regard to the limit imposed by item 17.
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