Idoport Pty Limited v National Australia Bank Limited, Idoport Pty Limited v Donald Robert Argus, Idoport Pty Limited v National Bank Limited & Ors

[2006] NSWSC 1191

CITATION:	Idoport Pty Limited v National Australia Bank Limited, Idoport Pty Limited v Donald Robert Argus, Idoport Pty Limited v National Bank Limited & Ors [2006] NSWSC 1191
HEARING DATE(S):	Determined on the papers
JUDGMENT DATE :	14 November 2006
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Notice of motion seeking further discovery dismissed. Notice to produce struck out.
CATCHWORDS:	Practice and Procedure - Discovery - Notice to Produce - Insurance claim or settlement reached with an insurer by party entitled to costs not relevant in terms of being capable of rationally affecting assessment of any of issues to be litigated in gross sum costs application.
LEGISLATION CITED:	Uniform Civil Procedure Rules 2005 (NSW)
CASES CITED:	Angor Pty Ltd v Ilich Motor Co Pty Ltd (1992) 37 FCR 65 Hunt v Severs [1994] 2 AC 350 National Australia Bank Ltd v Idoport Pty Ltd [2000] NSWCA 8 Parry v Cleaver [1970] AC 1 Screenco Pty Ltd v R L Dew Pty Ltd (2003) 58 NSWLR 720
PARTIES:	Idoport Pty Limited (Plaintiff) National Australia Bank Limited (Defendant) Donald Robert Argus (Defendant)
FILE NUMBER(S):	SC 50113/98; 50026/99; 3991/00
COUNSEL:	Mr L Foster SC, A Paterson (Plaintiff) Ms K Williams (Defendant)
SOLICITORS:	Sarvaas Ciappara (Plaintiff) Freehills (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Tuesday 14 November 2006

50113/98 Idoport Pty Limited v National Australia Bank Limited & Ors

50026/99 Idoport Pty Limited v Donald Robert Argus

3991/00 Idoport Pty Limited v National Australia Bank Ltd & Ors

JUDGMENT

The amended notice of motion

1 There is before the Court an amended notice of motion filed for Idoport Pty Ltd seeking discovery of:

i. the documents by which National Australia Bank Ltd made a claim on its insurers which resulted in the recovery of the sum of $49,000,000 generated through insurance recoveries relating to Ausmaq litigation costs referred to on page 35 of the NAB Half Year Results for the half-year ended 31 March 2006;

ii. Any document which records or discloses how the sum of $49,000,000 was calculated or made up;

iii. The policy of insurance under which the recovery was made.

2 The application for discovery is pursued in relation to the Bank's claim for an award of a gross sum costs order [instead of assessed costs] in these proceedings [as well as in proceedings 50026 of 1999], presently fixed to commence later this month.

3 The parties have sensibly suggested that the Court determine on the papers, the notice of motion and ancillary matters concerning a notice to produce. Hence both parties have addressed written submissions on these issues.

The notice to produce

4 Idoport has also served a notice to produce documents upon the Bank. The documents sought are the same as those sought by Idoport's notice of motion.

5 The Bank has filed a notice of motion seeking to set aside the notice to produce.

6 The application for the further discovery and/or by notice to produce appears to be grounded upon a disclosure appearing in the Bank's Financial Results for the half year ended 31 June 2006 and released on 11 May 2006. The material entry is that to be found on page 35 of the March 2006 half year results where the Bank discloses receipt of the following sum:

"$49,000,000 due to favourable income, generated through the insurance recovery relating to Ausmaq litigation costs".

The material rule

7 Documents are discoverable under Part 21 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) if they are relevant to facts in issue, in the sense that they could rationally affect the assessment of the probability of the existence of facts in issue: see National Australia Bank Ltd v Idoport Pty Ltd [2000] NSWCA 8 at [3]-[12].

Idoport's submission

8 The submission advanced by Idoport is that in order for the Bank to have claimed and received the sum of $49,000,000 from its insurer, it must have submitted a detailed breakdown of its costs and disbursements together with an explanation of the basis for its claim. The proposition is that even allowing for the fact that the Bank would be entitled to claim more of its litigation costs from an insurer than from Idoport, there is a real possibility that the insurance documents although clearly not necessary to enable the claim to be brought, might throw some light on the actual quantification of the claim or might allow aspects of the claim to be better assessed. The proposition is that access to the documents now sought will allow the Idoport to review the insurance claim and to test the substance of the Bank's gross sum costs claim against its conduct in relation to the insurance claim. It is submitted that the documents sought are directly relevant to a fact in issue before the Court: namely the quantum of costs.

Decision

9 There is no substance in the application for further discovery.

10 The facts in issue are:

i. What is the amount of the legal costs and disbursements incurred by the NAB Parties in defending Supreme Court of New South Wales proceedings nos. 50113 of 1998 and 50026 of 1999 and included in the orders made on 29 January 2002 and 14 September 2006?

ii. What would be the time, cost and effort involved in undertaking an assessment of the NAB Parties’ costs and disbursements?

iii. Is this an appropriate case for the Court to specify a gross sum for the NAB Parties’ costs and disbursements?

iv. If so, what is the appropriate methodology or approach for quantifying the gross sum?

v. Was it reasonable for the NAB Parties to incur the costs and disbursements?

vi. Is the amount of those costs and disbursements reasonable?

vii. What is the appropriate gross sum?

11 Receipt by the Bank of any funds pursuant to a recovery from any insurance entity, whether such insurance entity be within or without the National Australia Bank Ltd Group, has no relevance to any fact in issue [in terms of being capable of rationally affecting the assessment of any of the above described issues] in the gross sum costs litigation. The fields of discourse in relation to the claim for a gross sum and the claim under an insurance policy are entirely disparate.

12 As the Bank has submitted:

i. It is well established that recovery under an insurance policy does not affect the insured’s right to recover the loss against the party liable: see Parry v Cleaver [1970] AC 1 at 14; Hunt v Severs [1994] 2 AC 350 at 358; Screenco Pty Ltd v R L Dew Pty Ltd (2003) 58 NSWLR 720 at [40] per Handley JA.

ii. Costs are awarded to indemnify the successful party, who is under a legal liability to its solicitors to pay the costs.

iii. A payment to the successful party by an insurer in respect of the costs of litigation does not remove the party’s liability to pay the costs to the solicitor.

iv. Such a payment therefore has no effect on the position in relation to costs as between the parties: see Angor Pty Ltd v Ilich Motor Co Pty Ltd (1992) 37 FCR 65.

v. Insurance claims, and negotiations and settlements with insurers, occur in a commercial context very different from the application of established principles to quantifying costs that an unsuccessful party has been ordered by the Court to pay to the successful party.

vi. A wide variety of matters may influence the commercial outcome ultimately agreed between the insured and insurer.

vii. In a gross sum costs application the reasonableness of the costs is assessed and the appropriate amount determined by the trial judge by addressing the above described issues, applying established principles and applying the trial judge’s knowledge and understanding of the way in which the proceedings were conducted.

13 There is no suggestion that the experts for either party have suggested that an insurance claim or settlement reached with an insurer by the party entitled to costs would be relevant to the application of the material principles or would be included in material considered by a costs consultant or costs assessor. No authority has been put forward to support the proposition that it would be appropriate for the Court to take any insurance claim or settlement into account in determining costs on a gross sum basis.

14 For the same reasons the notice to produce requires to be set aside.

Formal matters

15 The Court grants leave to Idoport to file an amended notice of motion in the form which I initial and date 13 November 2006.

Orders

16 The orders of the Court are as follows:

i. the amended notice of motion filed by Idoport Pty Ltd is dismissed;

ii. the notice to produce filed by Idoport Pty Ltd is set aside;

iii. Idoport Pty Ltd is to pay the costs of the National Australia Bank Ltd of and occasioned by the amended notice of motion and the notice to produce.