Insurance Australia Limited v Muhammad (No 2)
[2021] ACTSC 237
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Insurance Australia Limited v Muhammad (No 2) |
Citation: | [2021] ACTSC 237 |
Hearing Date: | On the papers |
DecisionDate: | 23 September 2021 |
Before: | Crowe AJ |
Decision: | See [34] |
Catchwords: | PRACTICE AND PROCEDURE – COSTS – where the Respondent submits Appellants only achieved a ‘marginal’ success in the appeal – where the Respondent submits the Appellants are in no better a position than if the appeal had not been brought – assessment of costs – operation of s 184 of the Civil Law (Wrongs) Act 2002 (ACT) – whether each party should bear their own costs of the appeal – whether the Respondent should pay 50 per cent of the Appellants’ costs |
Legislation Cited: | Civil Law (Wrongs) Act 2002 (ACT) s 184 Land and Environment Court Act 1979 (NSW) s 69 |
Cases Cited: | Calderbank v Calderbank [1975] 2 All ER 333 The Owners – Units Plan No 1917 v Koundouris (No 3) [2016] ACTSC 184 |
Parties: | Insurance Australia Limited t/as NRMA Insurance ACN: 000 016 722 (First Appellant) Mohammad Maroof (Second Appellant) Muhammad Adeel (Third Appellant) Hazrat Muhammad (Respondent) |
Representation: | Counsel W Fitzsimmons SC (Appellants) A Muller (Respondent) |
| Solicitors Sparke Helmore Lawyers (Appellants) United Legal (Respondent) | |
File Number(s): | SCA 14 of 2021 |
CROWE AJ
Background
On 10 September 2021, I delivered my judgment in the appeal from the orders made in the Magistrates Court on 24 March 2021: see Insurance Australia Limited v Muhammad [2021] ACTSC 220. This decision, which deals with the question of the costs of the appeal as between the parties, assumes familiarity with the substantive decision.
The Respondent submits that the appropriate order is that each party should bear their own costs of the appeal. The basis for this submission is said to arise from the following (summarised from the Respondent’s written submissions):
(1)The Appellants only achieved a ‘marginal’ success in the appeal. They failed in relation to the critical issue of whether the Magistrate erred in allowing increased costs under s 184(1) of the Civil Law (Wrongs) Act 2002 (CLWA).
(2)In practical terms, the Appellants are in no better position than they would have been if no appeal had been brought.
In support of his submission, the Respondent relied upon comments made by Higgins CJ in Suthern v Unilever Australia Ltd [2008] ACTSC 75 as follows:
35.I note also the case of McDonald v James Hardie & Co Pty Ltd (No 2) (1998) 17 NSWCCR 178. O’Meally J decided the issue of liability in favour of the plaintiff but found that the negligence of the defendant had not been causative of any loss or damage to the plaintiff. His Honour referred to a Note in the Supreme Court Practice approved by Mahoney JA in Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA No. 40678/92 (unreported, 6 July 1994). It is in the following terms:
Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed.
36.It is apparent that the severability or otherwise of the issue on which a party, otherwise successful, has failed will be relevant to whether, prima facie, an order for costs without differentiation should be made. As I have noted, to some extent the costs rules accommodate partial lack of success on undifferentiated issues.
In the alternative, the Respondent suggested, the Court could defer making a decision on costs until the taxation of costs as between the parties has been completed. This would allow the Court to consider a letter sent by the Respondent’s solicitor to the solicitor for the Appellants on 4 June 2021 pursuant to the principles stated in Calderbank v Calderbank [1975] 2 All ER 333.
It is necessary to set out the terms of that letter:
Letter from United Legal to Sparke Helmore Lawyers dated 4 June 2021
“We refer to the above-mentioned matter and your clients [sic] notice of appeal.
In our view your client is unlikely to succeed in the appeal.
As you client is aware the Magistrates Court made orders for an uplift of the plaintiffs [sic] costs. A ceiling was set for the costs of the substantive matter for $77,000. Further our client was awarded costs of the application which we assess at $19,290. In addition, we assess our costs of the Appeal to date in the order of $5,000.00
We are now instructed to compromise and to resolve the question of costs in respect of the substantive proceedings, the Application and the Appeal for $85,000 all-inclusive and for your clients Appeal (SCA 14 of 2021) to be dismissed with no order as to costs.
This offer is made pursuant to part 2.10 of the Court Procedure Rule 2006 [sic].
This offer will remain open for a period of 28 days from the date of this letter.
In the alternative this offer is made in reliance upon the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333.”
I understand the Respondent to be inviting the Court to await completion of the assessment of the costs to see if, in total, they fall below the figure of $85,000.
The Appellants seek an order that the Respondent pay the costs of the appeal.
They point out that in the Magistrates Court, the Respondent merely sought an order under s 184(1) of the CLWA. When the Appellants argued that it was necessary for the Magistrate to identify the additional costs said to arise from the alleged complexity, the Respondent contended that the Magistrate was not required to perform the task required by s 184(2). The Respondent thus led his Honour into error.
As demonstrated by the Calderbank offer made by the Respondent, he maintained that the appeal should be dismissed with no order as to costs. This left the Appellants with no alternative but to proceed with the appeal. Ultimately, the Appellants succeeded in demonstrating that there had been an error in the way in which the section had been applied in the Magistrates Court.
It was not the case here that the bulk of the time and effort in the appeal related to the s 184(1) argument. Indeed, the ground of appeal in relation to s 184(2) was significant and demanded considerable time in written and oral submissions.
Furthermore, it was not correct to say that the outcome of the appeal will make no practical difference to the assessment of costs. The orders made by the Magistrate would have left the Appellants with a significant costs order, the only restriction being the ceiling of $77,000. The effect of the orders made by this Court will be to significantly limit the costs otherwise recoverable by the Appellants.
The principles to be applied were those stated by McHugh J in Latoudis v Casey (1990) 170 CLR 534 (Latoudis) at 566-7 and in Oshlack v Richmond River Council (1998) 193 CLR 72 (Oshlack) at 97. In the latter, His Honour said at [67]:
The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party (104). If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
The Appellants submit that the application of the principles stated by his Honour should, in the circumstances of this case, result in the order that the Respondents pay the Appellants’ costs of the appeal.
Consideration
The power for this Court to award costs in these proceedings arises under r 1721 of the Court Procedures Rules 2006 (ACT) (CPR). Section 7 of the Court Procedures Act2004 (ACT) gives the rulemaking committee established by s 9 the power to make rules in relation to practice and procedure in the Court, and anything mentioned in Schedule 1 to the Act. Item 26 of that schedule states:
26Costs
costs, including, for example, the following:
(a) security for costs;
(b) entitlement to recover costs;
(c) costs for parties in proceedings;
(d) assessment of costs
Pursuant to r 5001(3), Part 2.17 of the CPR (which contains r 1721) applies to appellate civil matters such as the current proceedings.
Rule 1720(1) provides:
1720Costs–entitlement to recover
(1)A party to a proceeding cannot recover any costs of the proceeding from another party or anyone else otherwise than by agreement, under a territory law, or an order of the court under a territory law.
NoteA territory law includes these rules (see Legislation Act, s 98)
The note to rule 1720(1) states that a ‘territory law’ includes the CPR. In that context, r 1721(1) states:
1721Costs–general rule
(1)The costs of a proceeding or of an application in a proceeding are in the discretion of the court.
It is immediately apparent that the rule conferring the power to order costs is silent as to the principles to be applied in the exercise of that power. In Oshlack, Gaudron and Gummow JJ said in relation to section s 69(2) of the Land and Environment Court Act 1979 (NSW) (LECA):
22. The terms of s 69(2) contain no positive indication of the considerations upon which the Court is to determine by whom and to what extent costs are to be paid. The power conferred by the section is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. However, subject to such considerations, the discretion conferred is, to adapt the words of Dixon J, unconfined except in so far as "the subject matter and the scope and purpose" of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be "definitely extraneous to any objects the legislature could have had in view" (35).
The terms of s 69(2) of the LECA are relevantly indistinguishable from r 1721.
That is not to say that the exercise of the discretion is unconstrained by the guidance provided by previous judicial decisions in analogous cases. In Northern Territory v Sangare [2019] HCA 25; 265 CLR 164 (Sangare), the High Court said:
[24]It is well established that the power to award costs is a discretionary power, but that it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation. While the width of the discretion "cannot be narrowed by a legal rule devised by the court to control its exercise", the formulation of principles according to which the discretion should be exercised does not "constitute a fetter upon the discretion not intended by the legislature". Rather, the formulation of principles to guide the exercise of the discretion avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power
[25]A guiding principle by reference to which the discretion is to be exercised – indeed, "one of the most, if not the most, important" principle – is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party.
This passage is entirely consistent with what was said by McHugh J in Latoudis and Oshlack.
While the starting point must be the application of the ‘usual rule’, that is not the end of the matter. Rule 1705 of the CPR states what has been long recognised as a consideration in the exercise of the general costs discretion. It provides:
1705Costs–for issue or part of proceeding
(1)The court may make an order for costs in relation to a particular issue in, or a particular part of, a proceeding.
Note Pt 6.2 (Application in proceedings) applies to an application for an order under this rule
(2)For subrule (1), the court may declare what percentage of the costs of the proceeding is attributable to the issue or part of the proceeding to which the order relates.
The approach to be taken in assessing costs of separate issues was helpfully summarised by Refshauge J in Lewis v Chief Executive Department of Justice and Community Safety (ACT) (No 2) [2014] ACTSC 196 at [24]-[32] (Lewis). Mossop AsJ (as his Honour was at that time) referred to the principles as set out in Lewis in addressing the issue of costs apportionment in The Owners – Units Plan No 1917 v Koundouris (No 3) [2016] ACTSC 184 at [14]. His Honour went on to say:
The statements in Bowen and Hockey, which recognise that the modern concern to contain the costs of litigation might make a court more willing to apportion costs, emphasise that the costs discretion is a broad one which must be exercised to achieve a fair outcome in the context of the particular circumstances of the case. In exercising the discretion, courts must necessarily have regard to the principles articulated in legislative provisions such as s 5A of the Court Procedures Act 2004 (ACT).
(The references to Bowen and Hockey were to Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [3]-[5] per Finkelstein and Gordon JJ and Hockey v Fairfax Media Publications Pty Ltd(No 2) [2015] FCA 750; 237 FCR 127 at [88]).
In applying the principles discussed above here, I commence by expressing some sympathy for the situation which both sides found themselves in in attempting to work out what to do about costs in the Magistrates Court. The reality is that the legislation to be applied is complex and unclear. Such authorities as were available were of little assistance. The Magistrate undoubtedly did his best to resolve the issue; however, there must always have been a high chance that the issue would have to be further considered in this Court. Having regard to the state of the law I do not accept that either party ‘led’ the Court into error.
While the circumstances of this case do not quite satisfy the prerequisites for it to be truly regarded as a ‘test case’ (as to which see Insurance Australia Limited & Anor v Albrecht (No 2) [2015] ACTSC 94 at [5]), they are sufficient in my view to warrant some weight in the overall consideration of the justice of the case.
The reality is that the First Appellant is a major insurer under the compulsory third-party scheme in force in the Territory in relation to motor accidents. The appeal involved the interpretation of a statutory provision of some importance to insurers having to manage smaller motor accident personal injury claims. It is not difficult to infer that the First Appellant might well have seen the need for the clarification of s 184 of the CLWA as a matter of general principle beyond the specific dispute with the Respondent.
On the other hand, the Respondent is an ordinary individual who had the misfortune to be involved in a number of motor vehicle accidents. Due to the complexities of his claims and the rather unsatisfactory state of a crucial legislative provision, he has found himself ‘dragged into’ appellate proceedings in this Court.
The main issue raised by the Respondent as justifying a special costs order is what is characterised as, in practical terms, the failure of the Appellants to achieve a better outcome than that which it faced after the Magistrate’s decision. That argument has some force in relation to the complexity issue. The reality is that the Appellant did fail on the distinct and important issue of whether the discretion under s 184(1) should have been exercised in the Respondent’s favour at all.
However, I do not accept that the Appellants failed to achieve a measure of success, in practical terms, in the appeal. Firstly, the submissions of the Appellants as to the interpretation of subsections 184(1) and (2) were substantially successful. Secondly, the effect of the orders made on appeal is that, rather than simply assessing professional costs (as between solicitor and client, and then party and party) up to a maximum of $77,000, those costs will be limited to $20,000 and the additional costs in excess of $20,000 which can be demonstrated to the taxing officer to be attributable to the issues identified in subparagraphs 2(i) and (ii) set out under Order 4 which I made on 10 September 2021. It is difficult to see those additional costs amounting to anything like $57,000, particularly on a party and party basis.
While the Respondent succeeded in upholding the Magistrate’s conclusion that an order should be made increasing the costs limit, I am loath to make costs orders in relation to the separate issues on which the respective parties were successful. Such an order would have the tendency to create new, and potentially complicated, disputes to be resolved in the costs assessment process.
In Mareva Building Consultants v Zevon(No 2) [2012] ACTSC 24, Katzmann J had delivered judgment in which the plaintiff had recovered damages on one of the causes of action on which it had relied. However, it failed in relation to a second cause of action which, if successful, would have resulted in a much larger award of damages. Her Honour had expressed a provisional view in favour of awarding costs on a percentage basis to the plaintiff. In delivering her judgment on the costs issue, her Honour said:
[12]Thus, it is relevant (though not, as his Honour said in Hughes, conclusive) to consider how much time was taken up in a hearing (and, I would add, in preparation) with evidence and submissions relating to that part of the case upon which the moving party failed. For this reason, Mr Zevon’s submission that Mareva should be confined to the costs of the successful cause of action has some attraction. I considered this option before expressing my provisional view. But I decided against it. First, like Toohey J in Hughes, I was concerned that an order of this kind might impose an unreasonable burden on the parties and, potentially, the registrar on an assessment of costs. It seemed to me, therefore, that the better course was to award costs on a proportionate or percentage basis. I remain of this opinion. A question arises, however, about whether the proportion I tentatively fixed upon is fair and just. Both parties submit, in effect, that it is not.
[13]The task of determining costs where apportionment is appropriate does not call for mathematical precision. As the Full Court of the Federal Court said in Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272, mathematical precision is illusory. The exercise depends on impression and evaluation. The result should be one that best reflects the interests of justice in the overall circumstances of the case: EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9].
[14]Having reflected on the matter with the benefit of the submissions, I maintain my provisional view. The parties raise factors that pull in opposite directions. Whilst the time taken up in the preparation and hearing of the successful cause of action is likely to be closer to the figure Mr Zevon nominated, a good deal of the overall time in preparation and hearing was taken up dealing with issues upon which Mareva was successful, including challenges to Mr Zevon’s credit.
[15]The stated purpose of the Rules is to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense: r 21. The costs rule, like any other, must be applied by the Court with that objective in mind. The parties are required to help the Court achieve that objective: see r 21. It seems to me that it would not further the objective if Mareva were limited to 20–25% of its costs, despite its success on all but one issue. It is true that much of the time in the case was occupied with proving the cause of action on which Mareva failed, but, if Mr and Mrs Zevon had focussed on the real issues, the whole of the proceeding would have been disposed of much more quickly and at much less cost. The Rules apart, in Keddie v Foxall [1955] VR 320 at 324 the Victorian Full Court observed that the authorities show that in exercising its discretion a court may have regard to “conduct – not necessarily misconduct of any party which is calculated to occasion unnecessary expense”.
(The reference to Hughes was to Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR; ATPR 40-736).
In all of the circumstances, I am persuaded that the justice of the case does require some departure from the usual rule. However, I do not consider that I should make an order which would require the parties to bear their own costs of the appeal. Overall, I regard the issues on which the parties succeeded as, in broad terms, requiring about the same time by way of preparation, written submissions and argument before this Court. Against this, I am mindful of the principles stated by McHugh J and in the Sangare decision extracted above. In my view, the appropriate order is that the Respondent should be required to pay 50 per cent of the Appellants’ costs of the appeal.
I should say that I do not see the suggestion of deferring the decision on costs until after the costs assessment process has been completed as a viable option. Apart from the delay and over-complication of what is already a complex situation, the suggestion runs up against the threshold issue of how the costs of the appeal could be assessed before the costs order in the appeal is made (The Respondent’s offer to settle costs for the aggregate amount includes the costs of the appeal). Moreover, as the Appellants point out, the offer made by the Respondent included as a term the dismissal of the appeal. In all of the circumstances, I do not see the Respondent’s offer as one which the Court could reasonably take into account in relation to the exercise of the costs discretion.
Orders
The order of the Court is:
(1)The Respondent is to pay 50 per cent of the Appellants’ costs of the Appeal, such costs to be agreed or assessed.
| I certify that the preceding thirty-four [34] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Crowe. Associate: Jake Hester Date: 23 September 2021 |
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