Pinnacle Living v QBE Insurance (No 2)
[2024] VSCA 303
•10 December 2024
| (No SUPREME COURT OF VICTORIA COURT OF APPEAL |
| S EAPCI 2023 0132 |
| PINNACLE LIVING PTY LTD (ACN 109 236 759) | Applicants |
| TV MEWS PTY LTD (ACN 007 026 100) | |
| v | |
| QBE INSURANCE (AUSTRALIA) LTD (ACN 003 191 035) | Respondent |
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| JUDGES: | KENNEDY, KAYE and KENNY JJA |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | Determined on the papers |
| DATE OF JUDGMENT: | 10 December 2024 |
| MEDIUM NEUTRAL CITATION: | [2024] VSCA 303 |
| JUDGMENT APPEALED FROM: | [2023] VSC 621 (M Osborne J) |
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COSTS – Where alternative claims made – Where alternative claim withdrawn prior to trial – Whether costs should be awarded against the applicants under r 63.15 of the Supreme Court (General Civil Procedure) Rules 2015 – Where election made in a timely manner prior to trial – Where multiple amendments to pleadings – Where trial contained to one day – Appropriate to ‘otherwise order’ such that costs follow event.
Supreme Court (General Civil Procedure) Rules 2015 rr 26.08, 63.15, 63.17.
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| Counsel | |||
| Applicants: | Mr SE Gladman KC with Mr G Jegatheesan | ||
| Mr T Scotter (Costs) | |||
| Respondent: | Dr MD Rush KC with Mr TR Messer | ||
Solicitors | |||
| Applicants: | Walpole Menzies | ||
| Respondent: | Hall & Wilcox | ||
KENNEDY JA
KAYE JA
KENNY JA:
In reasons delivered on 27 November 2024, we determined that the applicants should be granted leave to appeal and that the appeal should be allowed.[1]
[1][2024] VSCA 671 (‘Principal Reasons’); terms used in the Principal Reasons will also be adopted here.
The parties have been able to agree on all matters necessary for the finalisation of orders, save for the costs of the trial before the judge. Accordingly, the parties were directed to file materials so as to enable the court to resolve this issue on the papers.
Having considered the materials filed,[2] we consider that the respondent should pay the applicants’ costs of the trial on the standard basis until 11 October 2022, and thereafter on an indemnity basis.
[2]The respondent filed submissions dated 29 November 2024, together with a proposed form of order. The applicants filed an affidavit of Andrew Stops dated 4 December 2024, together with submissions and a proposed form of order.
Our reasons follow.
Respondent’s submissions
The respondent’s submissions addressed two matters: first, the respondent highlighted that the applicants abandoned their indemnity claim at the time they filed and served the FASOC; second, they made submissions regarding an offer of compromise made by the applicants.
In relation to the first matter, the respondent submitted that it should only pay the applicants’ costs of the trial insofar as it concerned the First Release (as contained in paragraphs 36 and 37 of the SOC dated 10 May 2018), but not otherwise. Further, that the applicants should pay the respondent’s costs related to the remaining claims.
The respondent noted that, at the time of granting the applicants leave to file the FASOC, the judge made an order which provided that the costs of and incidental to the amendment, ‘including any costs thrown away or those relating to the withdrawal of any claims’ were reserved.
The respondent relied upon r 63.15 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’) which applies in the circumstances identified in r 25.05 as follows:
25.05 Costs
Where a proceeding, counterclaim or claim by third party notice is discontinued, or where part of a proceeding, counterclaim or third party notice is withdrawn, liability for costs shall be determined in accordance with Rule 63.15.
Rule 63.15 of the Rules provides:
63.15 Discontinuance or withdrawal
Unless the Court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.
The respondent submitted that, having regard to the principles in Soteriadis v Nillumbik,[3] no reason was shown for the court to make an order to prevent the ordinary operation of r 63.15.
[3][2015] VSC 363, [12] (Derham AsJ).
In relation to the second matter, the applicants served an offer of compromise by correspondence dated 10 October 2022 under r 26.08 of the Rules.
The offer was:
1.The [respondent] pays to the [applicants] the sum of $500,000 in full and final settlement of the claim and counterclaim.
2.The [respondent] pay the [applicants’] costs incurred in this proceeding on a standard basis to be agreed or taxed in default.
The respondent submitted that, if the court determines that the applicants are not entitled to the costs of the indemnity claim, then the judgment would be less favourable to the applicants than the terms of the offer. In this case, r 26.08 would not be engaged and the applicants would be entitled to costs on the standard basis only. It otherwise made no submissions as to the operation of r 26.08.
Applicants’ submissions
The applicants submitted that the respondent should pay the applicants’ costs of the trial on a standard basis from 10 May 2018 to 10 October 2022, and on an indemnity basis from 11 October 2022.
The applicants submitted the respondent always denied it was liable to pay the sum of $420,386 pursuant to the First Release. In those circumstances, it was reasonable for the applicants to protect their interests by advancing what was a true alternative claim for an indemnity. As soon as it became apparent that the claim for indemnity would likely not produce a better outcome, the applicants responsibly removed that claim. The applicants also referred to a related recovery proceeding.[4] They submitted that there was considerable costs overlap in relation to the evidence in relation to both proceedings which tells against an order being made other than in the usual way.
[4]The affidavit of Andrew Stops records that, on 21 September 2017, the respondent, in exercising its right of subrogation, commenced a separate action in the name of TV Mews Pty Ltd to recover the loss that it was liable to pay the applicants.
The applicants submitted that the respondent had also referred to the incorrect rule. Because the indemnity claim was withdrawn by way of an amendment to the pleadings, the relevant rule was r 63.17, which provides:
63.17 Amendment
Where a pleading is amended (whether with or without leave) the costs of and occasioned by the amendment and the costs of any application for leave to make the amendment are the parties’ costs in the proceeding, unless the Court otherwise orders.
The applicants submitted that there was considerable adjustment of all parties’ positions before trial, with amendments and abandonments on both sides. Thus, the respondent also abandoned its earlier rectification claim. These were exactly the sorts of costs that are properly dealt with by the usual ‘costs follow the event rule’. There was certainly no basis for the applicants to pay these costs.
In relation to the offer of compromise, the applicants highlighted that the respondent did not advance any reason why the offer of compromise should not trigger the presumption in r 26.08(2) if the applicants’ submissions as to costs were otherwise accepted.
Consideration
We accept, at least for the purposes of this application, that the applicants ‘withd[rew] part of a proceeding’ for the purposes of r 63.15 when they discontinued their cause of action based on the indemnity. We nevertheless consider that it is appropriate to ‘otherwise order’ in the exercise of our discretion.
We consider that the applicants acted reasonably in making alternative claims in circumstances where the respondent denied that it was liable to pay the sum of $420,386 under the First Release. The applicants also acted reasonably in making their election in a timely manner so as to ensure that the issues at trial were significantly contained. In the result, the trial ran for only one day. The withdrawal of the indemnity claim also occurred in the context of complex and fluid litigation, where the pleadings of both parties were amended on numerous occasions. The respondent earlier abandoned its rectification claim.
We will therefore order that, subject to the offer of compromise, costs should follow the event.
In respect of the offer of compromise, r 26.08(2) relevantly provides that where a plaintiff obtains a judgment no less favourable than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for the plaintiff's costs in respect of the claim before 11:00 am on the second business day after the offer was served, taxed on the ordinarily applicable basis and for the plaintiff's costs thereafter taxed on an indemnity basis.
In circumstances where the applicants will obtain a judgment which is more favourable than the terms of the offer, and where the respondent has not made submissions to displace the presumption which arises under r 26.08(2), it is appropriate to make an order that the respondent pay costs on an indemnity basis from 12 October, 2022.
Conclusion
Orders will be made as follows:
(1)The application for leave to appeal is granted.
(2)The appeal is allowed.
(3)Paragraphs 1 and 4 of the orders of the Honourable Justice M Osborne made on 30 October 2023 are set aside and it be ordered in lieu that:
(a)there is judgment for the plaintiffs in the amount of $420,386.81 and interest in the amount of $275,508.03 pursuant to s 60 of the Supreme Court Act 1986; and
(b)the defendant pay the plaintiffs’ costs of the proceeding, including any reserved costs, on a standard basis from 10 May 2018 to 11 October 2022, and on an indemnity basis from 12 October 2022.
(4)The respondent pay the applicants’ costs of the application for leave to appeal and the appeal on a standard basis.
In ‘other matters’ we will record that the respondent will be granted an indemnity certificate under s 4(1) of the Appeal Costs Act 1998.
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