Nathan v Western Atlas International Inc - [2006] WADC 70

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: NATHAN -v- WESTERN ATLAS INTERNATIONAL INC [2006] WADC 70

CORAM: MCCANN DCJ

HEARD: 9 SEPTEMBER 2005 & 18 JANUARY 2006

DELIVERED : 16 MAY 2006

FILE NO/S: CIV 1332 of 2002

BETWEEN: ROBERT PAUL NATHAN
Plaintiff
AND
WESTERN ATLAS INTERNATIONAL INC
Defendant
QBE INSURANCE (AUSTRALIA) LIMITED
Third Party

Catchwords:

Contract - Policy of Insurance - Construction of cost extension in the insuring clause

Practice and procedure - Indemnity costs

Legislation:

Insurance Contracts Act 1984, (Commonwealth) s 54(1)
Legal Practice Act 2003, (WA) s 215(1)
Seafarers' Rehabilitation and Compensation Act 1992 (Commonwealth)

Workers' Compensation and Rehabilitation Act 1981 (WA)

Result:

Indemnity costs awarded under policy

Representation:

Counsel:

Plaintiff:     No appearance
Defendant:     Mr L Chiat
Third Party                   :     Mr C C Rimmer

Solicitors:

Plaintiff:     Not applicable
Defendant:     Phillips Fox
Third Party                   :     Jarman McKenna

Case(s) referred to in judgment(s):

Fitzpatrick v Job & Job & Ors [2005] WADC 161
Fluor Daniel Constructors Pty Ltd v Zurich Australian Insurance Ltd [2002] WASCA 218
Karenlee Nominees Pty ACN 004 312 234 Ltd (1995) 8 ANZ Ins Cas 61‑236
Manufacturers Mutual Insurance Ltd v Murray River North Pty Ltd & Ors [2004] WASCA 276(S)
NRMA Smash Repairs Pty Ltd v Royal Insurance Australia Ltd (1990) 6 ANZ Ins Cas 60‑985

Case(s) also cited:

GLG Australia Pty Ltd v Nominal Defendant & Ors (No 2) (2005) 13 ANZ Ins Cas 61-644

MCCANN DCJ: In this action the plaintiff sued his employer for damages for personal injuries arising from a work‑related accident which occurred on 29 May 1998. The defendant commenced proceedings against the third party claiming, inter alia, an indemnity from the third party in respect of the plaintiff's claim (and the costs of the action) pursuant to a policy of liability insurance which the third party had issued to the defendant. The plaintiff's action and the third party proceedings have been settled and consent orders were made by Nisbet DCJ on 19 April 2005. By par 3 of those orders the issues of costs in the third party proceedings and the costs of preparing for and attending the taxation of costs were reserved for argument. I am now required to determine the first of those questions and in particular whether the third party should pay the defendant's costs and, if so, whether those costs should be paid on an indemnity basis or a party‑party basis.

Factual background

The following summary of the facts is derived from the defendant's outline of submissions dated 6 September 2005 and is agreed between the parties.
The defendant was at all material times the plaintiff's employer. The plaintiff worked as a cable‑hand in connection with the defendant's off‑shore seismic exploration operations in the vicinity of the Montebello Islands off Dampier, Western Australia. On 29 May 1998 the plaintiff was working on a small boat retrieving some cable from the sea when he allegedly stumbled sustaining an injury to his right knee. The plaintiff submitted a workers compensation claim to the defendant pursuant to the Workers' Compensation and Rehabilitation Act 1981 ("the Workers' Compensation Act"). The defendant forwarded the claim to the third party on 13 June 1998. At the time the third party was the employer's indemnity insurer of the defendant pursuant to an employer's indemnity insurance policy which was in force for the period 30 June 1997 to 30 June 1998 ("the policy").
On 11 September 1998 the third party accepted the plaintiff's claim and commenced reimbursing the defendant for payments of workers compensation which it made to the plaintiff pursuant to the Workers' Compensation Act.
In or about August or September 1999 the third party's solicitors wrote to the defendant and advised it that the third party was reviewing its liability to indemnify the defendant under the policy. On 16 November 1999 the third party's solicitors advised the defendant that the third party considered that the plaintiff ought to have made his claim for compensation pursuant to the Seafarers Rehabilitation and Compensation Act 1992 (Commonwealth) ("the Seafarers Compensation Act") and, further, that the third party denied liability to indemnify the defendant in respect of the plaintiff's claim under the Workers Compensation Act and any common law proceedings brought by the plaintiff. That decision turned on whether the plaintiff was a "worker" under the Workers' Compensation Act or a "seafarer" under the Seafarers Compensation Act. I was informed in the course of argument that that issue turned on the location of certain statutorily prescribed ocean‑bed boundaries and raised factual issues as to the precise location of the plaintiff's accident viz a viz those boundaries.
On 18 January 2000 the third party filed an application in the Conciliation and Review Directorate seeking approval to terminate the payment of weekly payments to the plaintiff on the basis that the plaintiff's entitlement to compensation fell under the Seafarers Compensation Act. For the same reason the third party also refused to continue paying for medical treatment provided to the plaintiff. On 19 August 2001 the third party discontinued its application to cease weekly payments and agreed to continue making those payments on a "without prejudice" basis.
On 28 May 2002 the plaintiff issued a writ of summons against the defendant claiming damages at common law for the injuries that he allegedly suffered in the accident. The defendant sought indemnity from the third party pursuant to the policy. The third party denied liability to indemnify the defendant, whereupon the defendant joined the third party to these proceedings claiming an order that the third party indemnify it pursuant to the policy, and damages for breach of duties of care and good faith which were allegedly owed by the third party to the defendant. The third party denied that the policy responded to the plaintiff's claim on the ground that the plaintiff was not a "worker" pursuant to the Workers' Compensation Act. Questions of estoppel and waiver also arose in addition to the question of policy coverage under the policy.
The issue as to whether the plaintiff was a "worker" under the Workers' Compensation Act or a "seafarer" under the Seafarers Compensation Act was listed for trial as a preliminary issue on 11 and 12 October 2004. On or about 7 October 2004 the third party conceded that the plaintiff was a "worker" under the Workers' Compensation Act and the trial of the preliminary issue was vacated. However, the third party did not agree to wholly indemnify the defendant in respect of the plaintiff's claim and take over the conduct of the defence because at that stage the plaintiff was claiming exemplary damages from the defendant in addition to compensatory damages. The claim for exemplary damages was primarily based upon the third party's cessation of the payment of the statutory allowances under the Workers' Compensation Act. The third party took the view that any liability of the defendant to pay exemplary damages was not covered by the policy and that accordingly the defendant was obliged to continue to conduct its own defence of the plaintiff's action.
The proceedings were listed for trial between 19 and 22 April and 26 and 28 April 2005. On 1 April 2005 the plaintiff was granted leave to re‑amend his statement of claim to seek "aggravated damages" instead of "exemplary damages". As a result of this amendment the third party advised the defendant on 8 April 2005 that it would wholly indemnify the defendant "subject to the terms and conditions of the policy" and further advised that it would take over the conduct of the defence of the plaintiff's claim. The third party agreed to pay the defendant's reasonable costs incurred in defending the plaintiff's claim and prosecuting the third party proceedings in accordance with the terms of the policy. The third party then proceeded to settle the plaintiff's claim against the defendant. Consent orders were made by Nisbet DCJ in the action and in the third party proceedings as follows.
In the plaintiff's action it was ordered that:
"1.The defendant do pay the plaintiff the sum of $350,000 exclusive of workers' compensation payments and statutory allowances paid to date to the plaintiff under the [Workers' Compensation Act].
2.. . .
3.The plaintiff's motion for costs be adjourned sine die."
In the third party proceedings it was ordered that:
"1.The third party do indemnify the defendant in respect of the defendant's liability (if any) to the plaintiff in respect of the matters pleaded in the plaintiff's statement of claim.
2.The third party pay all costs incurred by the defendant of and incidental to the plaintiff's action, the plaintiff's originating summons numbered 476 of 1999 for leave to commence proceedings pursuant to s 93D(4) and (5) of the [former provisions of the Workers' Compensation Act] and the applications … filed at the Conciliation and Review Directorate, except insofar as those costs are of an unreasonable amount or have been unreasonably incurred, so that, subject to the above exceptions, the defendant be completely indemnified by the third party for its costs, to be agreed or taxed.
3.The question of the appropriate order for costs in the third party proceedings and the costs of preparing for and attending taxation do be stood over for hearing at a special appointment on a date to be fixed by application …"
The question of the third party's liability to indemnify the defendant in respect of its costs associated with defending the plaintiff's action (and related proceedings) was provided for in par 2 of the orders in the third party proceedings. The application before me is made pursuant to par 3 of those orders. As I have said, the third party has agreed to pay the defendant's costs of the third party proceedings. The issue is the nature of the order that should be made. The defendant seeks an order for its costs in the third party proceedings to be taxed and paid on an indemnity basis (as opposed to be taxed on a party‑party basis pursuant to the cost scale which prevailed from time to time pursuant to the Rules of the Supreme Court or s 215(1) of the Legal Practice Act 2003, as the case may be). The defendant contends that it is entitled to indemnity costs on two grounds. First, pursuant to the insuring or indemnity provision of the policy ("the policy coverage issue"). Second, the defendant claims indemnity costs in the exercise of the Court's discretion ("the discretionary costs issue"). I shall deal with these grounds in turn.

The policy coverage issue

The insuring clause of the policy is as follows:
"IT IS HEREBY AGREED THAT if during the said period a disability of any worker of the Employer occurs in the business described in the Schedule and the Employer is legally liable to make any payment in respect of such disability under the [Workers' Compensation Act] … the Insurer will indemnify the Employer against the payments for which the Employer is so liable and in addition will pay all reasonable costs and expenses incurred with the written consent of the Insurer.
IT IS HEREBY FURTHER AGREED (provided always that the Employer is not otherwise indemnified in respect of the liability hereinafter referred to) that the Insurer will indemnify the Employer against legal liability to pay damages and in addition will pay all reasonable costs and expenses incurred with the written consent of the Insurer under the Fatal Accidents Act, 1959, the Law Reform (Miscellaneous Provisions) Act, 1941, the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 and any amendments of such Acts and at Common law for personal injury sustained by any person employed by the Employer under a contract of service or apprenticeship if such injury is an injury in respect of which such person is entitled to recover from the Employer both compensation under the [Workers' Compensation Act] and (subject to s 92 of the [Compensation Act] damages independently thereof and if the Employer would be entitled to indemnity hereunder in respect of any compensation so recovered.
PROVIDED THAT such indemnity:
(a)shall not apply with respect to personal injury occurring outside a State or Territory of the Commonwealth of Australia nor with respect to claims brought against the Employer outside a State or Territory of the Commonwealth of Australia;
(b)except in the case of the Employer's liability under the Fatal Accidents Act, 1959, the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947, the Law Reform (Miscellaneous Provisions) Act 1941 and any amendments of such Acts shall apply only to the Employer's liability to the injured worker and shall not apply to the Employer's liability to any other person arising from the worker's injury;
(c)shall not apply where the Employer is an employer of the injured worker by reason of s 175 of the [Compensation Act]; and
(d)shall be limited to $50,000,000 any number of persons arising out of the one event; and
(e)shall not apply to exemplary or punitive damages."
The insuring clause is divided into three sections. Pursuant to the first section the third party agreed to insure the defendant against liability pursuant to the Workers' Compensation Act and for all reasonable costs and expenses incurred with the written consent of the insurer. Pursuant to the second section the third party agreed to insure the defendant in respect of any common law or statutory liability to an employee or third party in tort for personal injuries suffered by an employee provided that the employee was entitled to compensation payments under the Workers' Compensation Act as well as damages independently of that Act. The third section sets out a number of provisos to the insuring sections.
It was a further term of the policy (which might loosely be described as the "settlement condition") that the defendant would not without the third party's written authority incur any expense of litigation or make any payment, settlement or admission of liability in respect of any disability or personal injury to or claim made by any worker.
The policy coverage issue between the parties relates to the proper construction of the words "will …pay all reasonable costs and expenses incurred with the written consent of the" third party in the second insuring section ("the cost extension").
The third party took no issue with the fact that the defendant incurred costs in the third party proceedings without the written consent of the third party. So, the only issue that arises in relation to the policy coverage issue is whether the phrase "reasonable costs and expenses" in the cost extension is to be construed so as to include the costs of the third party proceedings against the insurer itself, or whether it is confined to the costs of defending the plaintiff's claim.
The defendant contended that the terms of the cost extension are wide enough to include the costs of the third party proceedings since, it was submitted, the same were reasonably incurred in the circumstances. Counsel for the defendant further submitted that there was no basis for limiting the wording of the cost extension to only cover the costs of defending the plaintiff's claim. Alternatively, the defendant submitted that the cost extension is ambiguous and ought to be construed contra proferentem, that is to say against the interests of the third party since the policy wording is the third party's standard employer's liability policy wording.
The defendant submitted that regard could be had to the conduct of the proceedings, particularly of the third party proceedings. However, whilst those are matters that are potentially relevant to the discretionary costs issue they can have no relevance to the construction of the policy wording itself in my view.
Counsel for the defendant referred to a number of decisions which he said were relevant to the policy coverage issue.
The first case was Fluor Daniel Constructors Pty Ltd v Zurich Australian Insurance Ltd [2002] WASCA 218, a decision of the Full Court of the Supreme Court of Western Australia. In that case the substantive issue was whether Zurich Australian Insurance Ltd was obliged to indemnify Fluor Daniel Constructors Pty Ltd for damages and costs payable in respect of injuries to an employee of Fluor Daniel Constructors which occurred whilst the plaintiff was driving home from work. Pursuant to the relevant policy Zurich Australian Insurance was obliged to indemnify Fluor Daniel Constructors unless the plaintiff "was injured in the course of his employment". The Court of Appeal held that the plaintiff was not injured in the course of his employment and accordingly Zurich was obliged to indemnify Fluor Daniel. Against that background a further issue arose as to Fluor's entitlement to an indemnity from Zurich pursuant to the policy in respect of costs which Fluor Daniel incurred defending and compromising the plaintiff's claim (which was done with the consent of Zurich). The cost extension in the policy wording applied to all expenses incurred by Fluor or by or with the permission of Zurich for investigation, negotiation and defence of claims and suits as well as all costs taxed against Fluor in any suit for damages on account of any judgment in such suits. (See Fitzgerald AJ at [22]).
Fitzgerald AJ held (McKechnie and Roberts‑Smith JJ agreeing) that this extension entitled Fluor Daniel to be indemnified by Zurich in respect of all expenses incurred by Fluor Daniel in connection with the defence and compromise of the plaintiff's claim against Fluor Daniel. Quite clearly, those costs did not relate in any way to the costs of the proceedings between Fluor Daniel and Zurich and the issue as to whether Fluor Daniel was entitled to indemnity costs in respect of those proceedings was not dealt with by the Court. In my view the case is distinguishable from the matter before me and is of no assistance.
The defendant next referred to Karenlee Nominees Pty Ltd v ACN 004 312 234 Ltd (1995) 8 ANZ Ins Cas 61‑236. That case also related to the application of a cost extension clause to the costs incurred by the insured (defendant) in defending a claim, as opposed to the costs incurred by the insured in asserting its rights against its insurer. The particular issue in Karenlee Nominees was whether the insured was entitled to indemnity for costs incurred in successfully defending a claim where liability was not proven and the only loss incurred by the insured was its costs. The insured was held to be entitled to indemnity for those costs. Counsel for the defendant in the matter before me rightly conceded that the facts of Karenlee Nominees are distinguishable from the facts of the present matter.
The defendant next referred to the recent decision of French DCJ in Fitzpatrick v Job & Job & Ors [2005] WADC 161. In that matter the plaintiff claimed damages against Mr and Mrs Job (the first defendants) and a second defendant in respect of a personal injury he suffered when he was using a wood‑cutting machine. The first defendants claimed to be entitled to indemnity in relation to the plaintiff's claim (including costs) pursuant to a liability insurance policy issued by their insurer, which was joined as a third party. The first defendants also claimed indemnity in respect of contribution proceedings brought against them by the second defendant. The third party denied liability to indemnify the first defendants on grounds relating to policy coverage. After a trial of the plaintiff's action and the third party proceedings French DCJ dismissed the plaintiff's claim and ordered the plaintiff to pay the first defendants' costs. Notwithstanding the dismissal of the plaintiff's claim, the first defendants sought orders in the third party proceedings declaring that the third party was obliged to indemnify them in respect of the plaintiff's claim and also sought an order that the third party pay all of the first defendants' costs and expenses incurred in defending the plaintiff's claim. The first defendants also sought an order for indemnity costs in respect of the conduct of the third party proceedings. The claim for indemnity costs in respect of the substantive action and the third party proceedings was based on the cost extension clause in the relevant policy and, in the alternative, the discretion of the Court. The cost extension clause read as follows:
"In addition [to indemnifying the first defendants for liability to pay compensation] we will also pay legal costs, charges and expenses incurred as a result of your entitlement to indemnity…and incurred with our written consent."
French DCJ held that the first defendants were entitled to a declaration that the third party was liable to indemnify them for any damages or costs awarded to the plaintiff, and also in respect of all legal costs, charges and expenses incurred by the first defendants in defending the plaintiff's claim and in the contribution proceedings against the first defendants. Accordingly, her Honour ordered that the third party pay the first defendants' costs of and incidental to defending the plaintiff's action and the contribution proceedings on a solicitor and own client basis. However, her Honour found in the third party's favour in respect of the costs of the third party proceedings and ordered that the third party only pay the first defendants' costs to be taxed on a party‑party basis.

Her Honour dealt with the question of policy coverage in respect of the costs of defending the plaintiff's claim at some length. That issue is not germane to the present matter. But, her Honour held that the cost extension did not in its terms apply to costs other than those incurred defending the plaintiff's claim, Her Honour also rejected any discretionary basis for awarding indemnity costs to the first defendants. Her Honour said at par 25:
"…I do not consider it appropriate that in relation to the third party proceedings the costs be on a solicitor/client basis. I cannot see any justification for such an order. As was pointed out by counsel for the third party the third party is entitled to dispute the question of indemnity in the operation of the relevant exclusion clause. The defence costs covered by the cost extension clause are on a solicitor/client basis and that is in accordance with the terms of that clause."
In the matter before me counsel for the defendant rightly conceded that the decision in Job does not support the defendant's application, although that case is distinguishable because the wordings of the cost extension clauses in the two cases are different. Whereas in Job the extension applied to costs "incurred as a result of your entitlement to indemnity" the policy wording in the present matter refers to "all reasonable costs and expenses incurred". The existence of such a distinction underlines that the cost extension in the present matter must be construed on its own terms and little assistance can be obtained from the constructions adopted in cases involving different policy wordings.
The third party submitted that the construction of the cost extension contended for by the defendant was contrary to the commercial purpose of the policy and inconsistent with the circumstance that the third party's consent was a prerequisite to policy coverage under the cost extension. In particular, the third party submitted that the cost extension predicates that the policy applies and indemnity is available to the insured (defendant) in respect of a claim. The third party submitted that costs incurred with the insurer's consent could only mean costs over which the insurer had control and which it is liable to pay for the purpose of indemnifying its insured in respect of the insured's liability to the claimant. The third party submitted that it could never have been contemplated by the parties that a policy that insured costs incurred with the insurer's consent would cover the costs of the insured pursuing a claim against the insurer arising from the insurer's wrongful denial of indemnity under the policy (i.e. costs incurred without the insurer's consent). In other words, it was submitted that the parties would not have been contemplating a breach of the policy itself when agreeing upon the wording of the insuring clauses themselves. The third party further submitted that the parties would have envisaged that there was no need for the cost extension to cover the costs of the insured pursuing the insurer, since the usual cost sanctions available to a court would protect the insured's interests if it was obliged to resort to litigation to enforce its entitlement to indemnity under the policy.
At the conclusion of the hearing on 9 September 2005 I reserved judgment. The decision of the WA Court of Appeal in Manufacturers Mutual Insurance Ltd v Murray River North Pty Ltd & Ors [2004] WASCA 276(S) was delivered on 20 October 2005. I heard further argument from the parties in relation to that decision on 18 January 2006 and subsequently received written supplementary submissions from the parties.
Murray River North dealt with orders that should be made in consequence of Manufacturers Mutual Insurance Ltd ("MMI") being held liable to indemnify Murray River North Pty Ltd and another defendant Gaucho Pty Ltd (who I shall refer to collectively as "MRN") in respect of a judgment obtained against MRN by an injured employee. The employee's claim failed at trial but was upheld on appeal. The trial Judge made provisional rulings in the third party proceedings to the effect that MMI was obliged to indemnify MRN in respect of the plaintiff's claim, but a second insurer, Zurich Australian Insurance Limited ('Zurich') was held not to be liable to indemnify. These policy coverage rulings were upheld by the Court of Appeal.
The MMI policy was an employer's liability policy. The relevant wording was as follows:
"The Insurer will indemnify the Employer against legal liability to pay damages and in addition will pay all reasonable costs and expenses incurred with the written consent of the Insurer…at Common Law for personal injury sustained by any person employed by any Employer under a contract of service of apprenticeship if such injury is an injury in respect of which such person is entitled to recover from the Employer both compensation under the Act and (subject to s 92 of the Act) damages independently thereof…"
The Act referred to is the Workers' Compensation Act. As can be seen, the wording of the cost extension in the indemnity clause in that case was the same as in the present matter. The policy also included a "settlement condition" in similar terms to the settlement condition in the policy (see par 15 above). The issue before the Court of Appeal was whether MMI was obliged to indemnify MRN for the costs which MRN incurred in defending the plaintiff's claim and for MRN's costs incurred in both third party proceedings. The Court found that MMI was obliged to pay indemnity costs to MRN pursuant to the cost extension in respect of both defending the plaintiff's claim and in prosecuting the third party proceedings against MMI and Zurich at first instance and on appeal. The Court held that MRN was entitled to indemnity from MMI in respect of the costs of the third party proceedings against Zurich even though those proceedings were unsuccessful. The Court declined to make indemnity cost orders in the exercise of its discretion, holding that MMI was entitled to contest what was regarded as an arguable point.
The reasons of the Court of Appeal in Murray River North are principally concerned with the application of s 54(1) of the Insurance Contracts Act 1984 (Cth) and in particular whether MRN should be relieved of the consequences of its omission to obtain MMI's written consent to incur the costs of the third party proceedings. The Court held in MRN's favour on that issue, ruling that MMI was not prejudiced by MRN's omission to obtain the consent. The third party in the matter before me contends that the ratio decidendi of MRN should be limited to that ruling and that, accordingly, I was not bound to apply Murray River North in this case in relation to the construction of the cost extension. There is some merit in that submission insofar as it is unclear from the reasons of the Court of Appeal whether or not MMI argued that the cost extension did not apply to the costs in the third party proceedings or simply confined its argument to MRN's failure to obtain its consent prior to incurring the relevant costs. However, in my view the Court of Appeal's decision necessarily predicated that the Court accepted as a matter of construction that the cost extension clause was capable of extending to the costs which the insureds incurred pursuing their own insurers for indemnity. On that basis, in my view Murray River North is authority for the following propositions in respect of the particular cost extension wording which was under consideration by the Court:
1.The cost extension is capable of extending to costs incurred by the insured pursuing indemnity from the insurer, or from another insurer under another policy that could arguably respond to indemnify the insured (even if the claim against the second insurer is unsuccessful).
2.The obligation of the insurer to pay "all reasonable costs and expenses incurred with the written consent of" the insurer is conditional upon the insured first obtaining the insurer's written consent to those costs being incurred, having regard to the proviso to that effect in the cost extension itself and to the settlement condition which is to similar effect (see the Court at par [16]).
3.The failure of an insured to seek the insurer's consent is an omission to which s 54(1) of the Insurance Contracts Act applies (see par [24]). An insured is entitled to be relieved of the consequences of its failure to obtain that consent to the extent that the insurer is not thereby prejudiced (see par [26])
4.In the absence of evidence as to prejudice, and in particular evidence that the amount of costs incurred by the insured would have been less had the insured sought the insurer's consent, the insured is entitled to an order for indemnity costs pursuant to the cost extension (see par [27]).
The defendant submitted to me that the ratio decidendi of the Court of Appeal in Murray River North extends to proposition 1 above and that I am bound to apply that proposition. It further submitted that it is not open to the third party to challenge the Court of Appeal's reasoning (as is done in the third party's supplementary written submissions). The defendant submitted that Murray River North is binding on this Court because the relevant facts (including the relevant policy wording) are on all fours with the facts of the matter before me. In my view there is some force in the defendant's submission. On the other hand, every contract, whether it is a policy of insurance or otherwise, must be construed on its own terms, and having regard to the factual matrix pertaining to that contract, and it does not follow that the ratio decidendi of an appellate court in respect of the construction of a particular policy or contract would be binding in respect of the construction of another similar policy or contract. In my view it is not necessary for me to apply the doctrine of precedent in the present case. It is sufficient in my view to approach this matter on the basis that the principles inherent in the decision in Murray River North (see par 32 above) are pertinent and should be followed by this Court in this case.
The third party submitted that the approach to the construction of the cost extension adopted by the Court of Appeal in Murray River North was flawed because it had the unintended consequence of extending indemnity to the defendant for the costs of unsuccessfully seeking indemnity from another insurer besides MMI. I do not accept that submission, since the pursuit of indemnity from a second insurer (either in the alternative, or as a co‑insurer with the first insurer) is in the interests of the first insurer. Indeed, in Murray River North it was open on the facts to hold that MMI had actually consented to MRN incurring those costs.
Thus far, I have dealt with the proper construction of the cost extension in this matter. It remains for the defendant to prove either that it obtained the third party's consent to incur the costs of the third party proceedings, or that it is entitled to be relieved of the consequences of its omission to do so pursuant to s 54(1) of the Insurance Contracts Act. As I have said (see par 17 above), the third party does not take issue with the defendant's omission to obtain its consent and, moreover, there is no evidence of any prejudice having been caused to the third party by the defendant's omission to do so. That is to say, there is no evidence that the third party's consent could have been properly or reasonably withheld as it was necessary in the circumstances for the third party's liability to indemnity to be established. In those circumstances and for the reasons set out earlier (see pars 32 and 33) I hold that the defendant is entitled to indemnity pursuant to the cost extension for the reasonable costs incurred by it in conducting the third party proceedings.

The Discretionary Costs Issue

I turn now to consider the defendant's application for an indemnity costs order in the exercise of the Court's discretion. The principles relevant to an application of this kind are conveniently set out in par 66.1.16 of Seaman: Civil Procedure in Western Australia. Put shortly, the discretion of the Court is not confined to particular categories of case but is confined to cases where there has been "some form of delinquency in the conduct of the proceedings".
The New South Wales case of NRMA Smash Repairs Pty Ltd v Royal Insurance Australia Ltd (1990) 6 ANZ Ins Cas 60‑985 is an example of the Court awarding costs on an indemnity basis to an insured. In that case the plaintiff (insured) sought indemnity from two different insurers. There was no real doubt that the first defendant was liable to indemnify the plaintiff, but it declined to do so and contested the plaintiff's claim. The only real issue in the litigation was whether the first defendant was entitled to contribution from the second defendant. Rogers CJ held that the first defendant should have indemnified the plaintiff and confined its contest exclusively to the second defendant (which the plaintiff had suggested to the first defendant). Rogers CJ held that the plaintiff was entitled to an order for indemnity costs because "there was never any doubt that it was entitled to be indemnified by the first defendant".
In Murray River North the Court of Appeal declined to make an order for indemnity costs on discretionary grounds, holding that the insurer had "done nothing more than test the validity of arguable views as to whether it was liable in terms of its policy of insurance" and that MMI did not behave unreasonably in doing so notwithstanding that it ultimately failed.
In this matter the defendant submitted that the facts are "quite different" from the facts in Murray River North and advanced a number of written supplementary submissions in support of its contention that indemnity costs should be awarded in the exercise of discretion. It was not my intention to receive supplementary submissions from the parties in relation to this aspect of the matter and the third party has not had the opportunity to respond to the defendant's submissions. The parties were only invited to file written supplementary submissions in relation to the policy coverage issue under the cost extension. Notwithstanding the taking of this liberty by the defendant, it is not necessary for me to receive further submissions from the third party for two reasons. First, I have already held that the defendant is entitled to indemnity costs pursuant to the policy itself. Secondly, very briefly, there is insufficient evidence to satisfy me that the third party's conduct was unreasonable, or that there was no doubt that the defendant was entitled to indemnity under the policy in respect of the plaintiff's claim. From the little I have been told, I am of the view that there was an arguable issue between the parties as to whether the plaintiff was to be regarded as a "worker" under the Workers' Compensation Act or a "seafarer" under the Seafarers Compensation Act. Once that issue had been resolved the question of indemnity and the conduct of the defendant's case could not be immediately resolved because the plaintiff was claiming exemplary damages in addition to compensatory damages. The submissions which the defendant has sought to advance draw heavily upon the facts that the third party paid compensation pursuant to the Workers' Compensation Act and ultimately consented to a judgment for the plaintiff which was (according to the defendant's submissions) tantamount to an admission by the third party that the plaintiff had a valid claim against the defendant and that the latter was entitled to indemnity under the policy. For the reasons I have mentioned I do not propose to go into those submissions in any detail, but suffice to say that at this juncture they appear to me to be somewhat unmeritorious. By the time the consent orders were entered into the third party had already acknowledged that the plaintiff was to be regarded as a "worker" and not a "seafarer" (within the meaning of the relevant Acts) and that it was obliged to indemnify the defendant.

Conclusion

In my view, the defendant is entitled to indemnity from the third party pursuant to the cost extension in respect of the conduct of the third party proceedings in this matter. However, I am not satisfied that the case calls for the making of an indemnity costs order in the exercise of the Court's discretion.
The defendant is seeking an order for interest on the costs recovered pursuant to the policy pursuant to s 57 of the Insurance Contracts Act. I will hear the parties in relation to that application.
The defendant has provided a minute of proposed orders which is based on the orders made by the Court of Appeal in Murray River North, which in turn reflects the requirement that the costs be reasonably incurred. I will also hear the parties in relation to the form of the orders.