Mannall v Howard (No 3)
[2019] ACTSC 260
•26 September 2019
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Mannall v Howard (No 3) |
Citation: | [2019] ACTSC 260 |
Hearing Date: | Decided on written submissions |
DecisionDate: | 26 September 2019 |
Before: | Mossop J |
Decision: | See [39] |
Catchwords: | COSTS – APPLICATION FOR SPECIAL COSTS ORDER – Second defendant ran argument that had been previously unsuccessful in other proceedings – leave granted to file an amended defence – argument that was ultimately successful only arose in the amended defence – Calderbank offers did not relate to the ultimate arguments advanced at hearing COSTS – APPLICATION FOR SPECIAL COSTS ORDER – Where insurer denied liability leading the insured to defend a claim – claim for contribution or indemnity under r 319 of Court Procedures Rules 2006 (ACT) – claim for indemnity arising under an insurer’s obligation to indemnify in s 21 of the Road Transport (Third Party Insurance) Act 2008 (ACT) – costs to be paid on an indemnity basis |
Legislation Cited: | Court Procedures Act 2004 (ACT), s 5A Court Procedures Rules 2006 (ACT), rr 319, 406(1)(c), 407(3)(a), 1721, 1728 Safety, Rehabilitation and Compensation Act 1988 (Cth), s 44 |
Cases Cited: | Gray v Sirtex Medical Ltd [2011] FCAFC 40; 193 FCR 1 Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 |
Parties: | David Mannall (Plaintiff) Malcolm Howard (First Defendant) Insurance Australia Limited t/as NRMA Insurance (Second Defendant) |
Representation: | Solicitors Snedden Hall & Gallop (Plaintiff) ACT Government Solicitor (First Defendant) Moray & Agnew (Second Defendant) |
File Number: | SC 468 of 2017 |
MOSSOP J:
Introduction
On 21 June 2019, I ordered that judgment be entered in this matter for the first and second defendants against the plaintiff and that the plaintiff was to pay the costs of the first and second defendants: Mannall v Howard (No 2) [2019] ACTSC 113 (Mannall (No 2)). The order in relation to costs allowed for the parties to be further heard in relation to costs and in those circumstances, would not take effect until further order of the court. The parties did wish to be further heard in relation to costs. They filed written submissions in relation to costs and identified the evidence relied upon in relation to costs.
The submissions on costs have also identified that in my original decision I failed to make orders finally disposing of a notice claiming contribution or indemnity filed pursuant to r 319 of the Court Procedures Rules 2006 (ACT) by the first defendant against the second defendant.
The proceedings involved a claim by the plaintiff for damages arising when the first defendant reversed his vehicle into him at the Belconnen bus depot. Both the plaintiff and the first defendant worked there. The second defendant (NRMA) was the first defendant’s compulsory third-party (CTP) insurer.
The plaintiff sued the first defendant and was obliged under the terms of the Road Transport (Third Party Insurance) Act 2008 (ACT) (RTTPI Act) to join NRMA. The complicating feature of the case was that because the plaintiff and first defendant were employees of the Territory, the Safety, Rehabilitation and Compensation Act 1988 (Cth) (SRC Act) applied to the claim.
The position adopted by NRMA was that it was not liable to indemnify the first defendant because the accident was not a “motor accident” within the meaning of the RTTPI Act. That was a contention which NRMA had previously advanced and then abandoned in Haider v Lane [2014] ACTSC 205 (Haider) at [32]-[40]. In that case, the court expressed agreement with the position ultimately adopted by NRMA. Notwithstanding the position adopted in Haider, NRMA wished to again run the argument that it had abandoned in that case. It therefore maintained that it had no liability to indemnify the first defendant because the accident in question was not a “motor accident” for the purposes of the statute.
Because he had been denied the indemnity that would have existed under the CTP policy, the first defendant was separately represented and filed a defence which included a defence that an action for damages did not lie against him because of the operation of s 44 of the SRC Act. The s 44 point was pleaded only in the event that the accident was not a “motor accident” within the meaning of the RTTPI Act. As a consequence, the argument only applied if the first defendant was not entitled to an indemnity from NRMA. The first defendant also filed a notice claiming contribution or indemnity, pursuant to r 319 of the Court Procedures Rules 2006 (ACT) directed to NRMA claiming that NRMA had breached its obligations under the CTP policy, seeking a declaration that the claim was a “motor accident claim” under the RTTPI Act and that the second defendant was obliged to indemnify the first defendant “for any liability, interest and costs which may be awarded against him in favour of the plaintiff”. He also claimed damages, interest and costs.
On 29 April 2019, the first day of the substantive hearing, NRMA obtained leave to amend its defence so as to plead in its defence that it had no liability to the plaintiff because, by reason of the operation of the SRC Act, the first defendant had no liability to the plaintiff: see Mannall v Howard [2019] ACTSC 112.
In my reasons for judgment in Mannall (No 2) I found:
(a)that the accident was a “motor accident” within the meaning of the RTTPI Act; and
(b)that the SRC Act had the effect that the plaintiff did not have a cause of action against the first defendant and hence, although liable to indemnify the first defendant, NRMA bore no liability under the relevant CTP policy because NRMA’s obligation was to indemnify the first defendant against any liability and there was no such liability.
So far as costs were concerned the position of the parties was as follows:
The plaintiff: The plaintiff submitted that NRMA should pay his costs up to and including 29 April 2019 and that there should be no order as to costs as between him and the second defendant after that. He submitted that the second defendant should pay the first defendant’s costs. The plaintiff relied upon a schedule of correspondence.
The rationale for these contentions was that prior to 29 April 2019, the only issues pleaded by NRMA were issues upon which it was ultimately unsuccessful at trial. At trial the plaintiff established negligence and that the accident was a “motor accident” for the purposes of the RTTPI Act. It was only after that date that the defendant raised an argument upon which it was successful, namely the point about the operation of the SRC Act.
The first defendant: The first defendant sought an order that NRMA pay his costs on an indemnity basis. The first defendant relied upon an affidavit of Sarah Arthur dated 29 July 2019.
The rationale for this contention was ultimately threefold.
First, under s 21 of the RTTPI Act, a CTP policy insures against the “risk of liability” for personal injury caused by a motor accident. The expression “risk of liability” encompasses any legal costs incurred in defence of an allegation of liability. It is not limited only to “liability” or “damages”.
Second, the first defendant relied upon a Calderbank offer made on 16 March 2018 and open for acceptance until 16 April 2018 by which NRMA was invited to admit that the incident was a “motor accident”, indemnify the first defendant and take over the defence of the plaintiff’s claim. In those circumstances the first defendant would bear his own costs of the proceedings up to the date of the offer.
Third, in response to some of the detailed submissions made by NRMA, the first defendant also contended that his costs could be recovered as damages pursuant to his notice claiming contribution and indemnity and that judgment should be entered on that claim for damages to be assessed.
The first defendant also addressed the contention that had been advanced by the solicitors for the second defendant that it should not have to pay the first defendant’s costs because the claim for contribution or indemnity made by the first defendant against NRMA was not successful. The first defendant contended that the notice was only required because indemnity had been declined and, as a consequence, the fact that the specific declarations sought in the notice did not need to be made because of the outcome of the plaintiff’s claim did not alter the reality that the first defendant was completely successful against the second defendant.
The first defendant filed further submissions in reply to extensive submissions in reply filed by NRMA.
NRMA: NRMA did not seek to disturb the order that the plaintiff pay the defendant’s costs. So far as the first defendant was concerned, the second defendant submitted that the first defendant would ordinarily be required to pay its costs of the notice claiming contribution or indemnity. However, in the circumstances the plaintiff should bear the whole of the insurer’s costs of the proceedings including the notice.
NRMA relied upon the affidavit of Phillip Thomas affirmed 28 July 2019 as well as the pleadings, submissions and transcript of the substantive proceedings.
In support of its contention that the plaintiff should pay the whole of NRMA’s costs of the proceedings, NRMA identified the usual rule being that costs should follow the event and also referred to a Calderbank offer that it made on 3 February 2017, prior to the commencement of proceedings, which offered an amount of $100,000 clear of statutory payments which had been assessed at approximately $134,000 plus costs as agreed or assessed. It did not rely upon this for a better than usual costs order, but simply as a factor supporting exercise of discretion to award party and party costs of the whole of the proceedings in its favour. NRMA contended that the plaintiff ran the case on the basis that NRMA was the defendant in substance and that having wholly failed, should bear the whole of NRMA’s costs.
NRMA subsequently filed extensive submissions in reply addressing, in particular, the claim by the first defendant to recover costs as damages.
Costs orders
It is uncontroversial that costs are in the discretion of the court: r 1721. Ordinarily, the principled exercise of discretion requires that costs follow the event in order to compensate a successful defendant for costs incurred in resisting a claim against it. Plainly enough, whether or not there are sufficient reasons to depart from that usual rule depends upon the particular circumstances of the individual case.
So far as the plaintiff is concerned, up until the amendment that permitted NRMA to rely upon s 44 of the SRC Act, NRMA was relying upon grounds which were unsuccessful at trial. So far as its obligation to indemnify was concerned, it was rerunning an argument which it had previously advanced and then abandoned in Haider. It was only by reason of the matters raised in the amended pleadings that NRMA was successful. I do not accept that the position is so extreme as to warrant, as the plaintiff contended, an order that NRMA pay the plaintiff’s costs up until that point of the proceedings. It was plainly open to the plaintiff to have carefully considered the operation of the SRC Act prior to the commencement of proceedings. However, it is relevant that no point was taken by NRMA about the operation of the SRC Act up until the commencement of the final hearing. That was in circumstances where the existence and possible operation of the SRC Act had been raised in the defence filed by the first defendant at about the same time as the defence filed by NRMA. The plaintiff was entitled to proceed on the basis that, having not been pleaded, those statutory provisions would not be relied upon by NRMA: r 406(1)(c), 407(3)(a). In those circumstances, in my view it is appropriate that during the period up until the granting of leave to make the amendment, the appropriate order is that there be no order as to costs as between the plaintiff and NRMA.
The situation changed after leave was granted to make the amendment on 29 April 2019. From this point the plaintiff was clearly on notice that the application of the SRC Act was put against him by NRMA. That was the argument which was ultimately successful. However, because of the extreme lateness of NRMA’s application, in my view the plaintiff was entitled to a period during which he considered his position before costs consequences follow from NRMA’s change of position. Given that the application was granted on the first day of the trial, it was reasonable and consistent with s 5A of the Court Procedures Act 2004 (ACT) that the plaintiff continue with the trial which ultimately only took two and a half further days to complete the evidence and hear submissions on the non-SRC Act aspects of the case. It is appropriate that the costs consequences of the change in the pleaded position of NRMA only commence after the conclusion of that hearing, that is from 3 May 2019. In the subsequent period it is appropriate that costs follow the event and that the plaintiff be required to pay NRMA’s costs. It is appropriate having regard to the outcome of the proceedings that the reserved costs associated with the amendment application abide by the general orders made: r 1728.
In reaching this conclusion I have had regard to the Calderbank offer made by NRMA on 3 February 2017, that is, well prior to the commencement of the proceedings. The letter made no reference to the SRC Act issue and bore little relation to the damages that would have been assessed without the SRC Act which would have been in excess of $600,000: see Mannall (No 2). I do not consider that the failure to accept the offer was unreasonable or otherwise warrants an order different to that which I have indicated.
So far as the first defendant is concerned, he was at all relevant times entitled to an indemnity under the CTP policy. The statutory scheme is one designed to provide a significant degree of reassurance to drivers as to their protection from liability and ensures through provisions such as s 151(4) of the RTTPI Act, that drivers’ involvement in court proceedings is minimised. Contrary to the terms of the statutory policy of insurance, the first defendant was abandoned by NRMA and required to incur costs in defending the claim and claiming against NRMA in circumstances where he should not have been required to do so. In addition, NRMA abandoned the first defendant in order to take a point which it had taken in Haider and then disavowed. It is likely to have wished to rerun the point that it previously abandoned in order to test the law on that issue in a manner that would benefit it not only in the present litigation, but generally as a significant CTP insurer in the Territory. In my view, as NRMA has been unsuccessful on the point, it is an appropriate case to make an order that ensures that the first defendant is fully indemnified against the costs incurred in being separately represented in order to protect his interests.
In reaching this conclusion it is not necessary to place significant weight upon the Calderbank offer made by the first defendant on 16 March 2018. That is an offer which was made at a very early stage of the proceedings. It required NRMA to abandon its argument about the meaning of “motor accident”. The only compromise that it offered was that the first defendant offered to bear his own costs up to the date of the offer. Whilst the offer does contain an element of compromise, it appears to me to fall into the category of Calderbank offer requiring the other side to abandon its position and offering only the smallest element of compromise sufficient to trigger a costs argument. In those circumstances, the policy behind the making of Calderbank offers does not require that the offer be given significant weight.
Claim for contribution or indemnity
The first defendant’s claim for contribution or indemnity was dated and filed on 16 April 2018. NRMA did not plead in response to the notice. The notice pleaded a breach by NRMA of its obligation to indemnify the first defendant in the proceedings and alleged “by reason of the above the First Defendant has suffered loss and damage”. The notice procedure was available to resolve the issue of the breach of the obligation to indemnify: r 319(1)(c).
The relief claimed was:
1.A declaration that the Plaintiff’s claim against the First Defendant in these proceedings is a “motor accident claim” under the Road Transport (Third-Party Insurance) Act 2008.
2.A declaration that the Second Defendant indemnifies the First Defendant for any liability, interest and costs which may be awarded against him in favour of the Plaintiff.
3.Damages.
There was also a claim for interest and a claim for costs.
There is no evidence of any particulars having been sought by NRMA from the first defendant as to the damages that were being claimed. At the hearing of the proceedings the question of damages was not agitated. The first defendant did not lead any evidence in relation to the damages that he alleged had been suffered by reason of the denial of indemnity. The submissions at the hearing focused upon the question of whether or not there was a “motor accident” and the operation of the SRC Act. The written submissions of the first defendant simply referred to the desirability of making the declarations claimed in the notice “in order to provide clarity”. There was a reference to the issue of costs, but not in the context of the claim for damages. There was no attempt to quantify the damages in the proceedings. At the conclusion of the submissions of the first defendant, the following exchange occurred with senior counsel for the first defendant.
MR KENNETT: … We set out in the closing paragraphs of our submissions the consequences that we would suggest that has for the resolution of the issues and the proceeding.
We note that in our cross claim we did seek some declarations and they may or may not be necessary, but if your Honour thought that was appropriate then they could be made.
HIS HONOUR: Just explain why would they not be necessary?
MR KENNETT: Well, if your Honour set out in reasons - reasons why the - well if your Honour gave judgment against the NRMA rather than us and explained why ‑ ‑ ‑
HIS HONOUR: Explained why, that would be as good as? Okay.
MR WATSON: You would hope that the NRMA would obey it. Just excuse me, your Honour.
MR KENNETT: Mr Watson suggests that there could be perhaps some later submissions on the form of orders depending on the views your Honour reaches, and we wouldn’t have a difficulty with that.
And finally, we just note the issue of costs and there might be, depending on what your Honour finds, circumstances in which we would seek to press for indemnity costs and so we would want to be heard about that in due course.
The issue of the recovery of costs via the notice claiming contribution and indemnity only became a significant one because NRMA did not concede that it was liable for costs and did not concede that its obligation to indemnify the first defendant under s 21 of the RTTPI Act extended to an obligation to indemnify in relation to costs incurred in defending a claim. It was only in the first defendant’s further submissions in reply that the claim for costs as consequential damages (as opposed to being within the scope of s 21) was articulated.
I accept that it is necessary to make some orders in order to finalise the claim for contribution or indemnity. When I gave my original reasons I considered in light of the exchange set out above, that the publication of my reasons and the making of orders in relation to the claim by the plaintiff would be sufficient. I consider that my earlier reasons clearly identified that the plaintiff’s claim against the first defendant was a “motor accident claim” under the RTTPI Act because the accident was a “motor accident” as defined. As a consequence it is clear from those reasons that NRMA was obliged to indemnify the first defendant for any liability, interest and costs which were awarded against him. In those circumstances, having regard to what was said by senior counsel for the first defendant, I did not consider that any formal declarations of the position were necessary.
How should the claims for costs as damages be dealt with? It is necessary to make clear the difference between the two ways in which the first defendant put the “costs as damages” argument: see [14] and [16] above. The statutory scope of indemnity under a CTP policy is defined by s 21 of the RTTPI Act to be “against the risk of liability for personal injury caused by a motor accident”. If the expression “risk of liability” extends to the costs incurred by an insured in defending a claim, then those costs will be recoverable from the insurer as damages because the insurer is obliged under the CTP policy to pay them. This is the contention at [14] above.
The other argument (at [16] above) is that even if s 21 only encompasses an indemnity against liability to a claimant and hence does not include the costs of an insured defending a claim, the incurring of such defence costs would occur in the “usual course of things” if a CTP insurer wrongly denies indemnity because the insured would then be required to incur costs in defending the claim. The recovery of such costs as damages for breach of the insurance contract would therefore be within the first limb of the rule in Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145.
Having regard to the manner in which the parties conducted the case, I do not consider it appropriate to now entertain the claim for costs as damages in either of the ways in which it was put. No claim was made by the first defendant during the substantive hearing and the issue was only raised in further submissions in reply on costs. No evidence was led so as to permit the quantification of those damages. No application was made to have the quantum of damages determined separately. That the first defendant adopted such a position at trial is understandable because the principal contest was in relation to the liability of the first defendant for damages to the plaintiff and the obligation upon NRMA to indemnify the first defendant in relation to that. Having adopted that position at the hearing, I do not consider that it is open to the first defendant to reopen the question of damages so as to permit further evidence upon that to be led to accommodate not only the question of costs already incurred, but also the question of future costs arising by reason of the pending appeal.
That is sufficient to dispose of the issue of damages in the notice claiming contribution or indemnity. Because it is not appropriate to determine in the context of the costs argument either of the claims for damages, it is unnecessary to determine whether a notice claiming contribution or indemnity under r 319 are separate proceedings for the purposes of the principle articulated in Gray v Sirtex Medical Ltd [2011] FCAFC 40; 193 FCR 1, see especially at [35]. Except insofar as the costs order to be made include an order in relation to the costs of the notice claiming contribution or indemnity, no relief has been given pursuant to the notice and the appropriate order is that it be dismissed.
The orders of the Court are:
1. In substitution for Order 2 made on 21 June 2019 the following orders are made in relation to costs:
(a)As between the plaintiff and the second defendant, there is no order as to costs of the proceedings up to and including 2 May 2019 and the plaintiff is to pay the second defendant’s costs thereafter.
(b)As between the first defendant and second defendant, the second defendant is to pay the first defendant’s costs of the proceedings including the costs of the notice claiming contribution or indemnity dated 16 April 2018 on an indemnity basis.
2. Except as provided by Order 1 above, the notice claiming contribution or indemnity dated 16 April 2018 is dismissed.
| I certify that the preceding thirty-nine [39] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: 26 September 2019 |
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