Prepaid v Atradius (No. 3 - Costs)
[2014] NSWSC 282
•24 March 2014
Supreme Court
New South Wales
Medium Neutral Citation: Prepaid v Atradius (No. 3 - Costs) [2014] NSWSC 282 Hearing dates: On the papers Decision date: 24 March 2014 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Plaintiffs to pay defendant's costs of the first hearing and the rehearing, on the ordinary basis.
Catchwords: PROCEDURE - costs - recovery of costs - determining the costs of an original hearing where original decision set aside on appeal - distinction between costs of successful defendant and successful plaintiff - costs consequence for defendant of raising reasonable but unsuccessful defence Legislation Cited: Insurance Contracts Act 1984 (Cth) Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333
Griffith v Australian Broadcasting Corporation (No.2) [2011] NSWCA 145Category: Costs Parties: Prepaid Services Pty Limited (Plaintiff)
Optus Mobile Pty Limited (Second Plaintiff)
Virgin Mobile (Australia) Pty Limited (Third Plaintiff)
Atradius Credit Insurance NV (Defendant)Representation: Counsel:
NC Hutley SC / DA McLure (Plaintiffs)
CRC Newlinds SC / TM Mehigan (Defendant)
Solicitors:
Solicitors:
Minter Ellison (Plaintiffs)
Allens (Defendant)
File Number(s): 2009/298684
Judgment
HIS HONOUR: The plaintiffs (collectively, Optus) sued the defendant (Atradius), claiming indemnity under a single buyer trade insurance policy issued by Atradius in favour of Optus. That claim has given rise to three substantial judgments:
(1) my first judgment, [2012] NSWSC 608, dismissing the claim on the basis that there had been a material misrepresentation made by Optus, on which Atradius relied, and which was made with reckless indifference to its truth or otherwise;
(2) the judgment of the Court of Appeal, [2013] NSWCA 252, effectively setting aside the finding of fraud and the consequential dismissal of the proceedings, and ordering a rehearing directed to Atradius' alternative defence, that it was entitled to reduce its liability to nil pursuant to s 28(3) of the Insurance Contracts Act 1984 (Cth); and
(3) my second judgment, [2014] NSWSC 21, holding that Atradius had made good that alternative defence.
These reasons are concerned with the question of costs. There are two separate aspects:
(1) the costs of the original hearing before me; and
(2) the costs of the rehearing.
Only the first is contentious. Optus accepts that it must pay the costs of the rehearing. The question as to the costs of the first hearing arises because the Court of Appeal set aside my original order as to costs (for Atradius against Optus, but on the ordinary basis only), with those costs to be redetermined following the rehearing.
The parties furnished written submissions, and stated that they did not wish an opportunity to speak to those submissions. Accordingly, these reasons are given "on the papers".
Optus submitted that it should pay only 80% of the costs of the first hearing, and on the ordinary basis. It submitted that such an order was appropriate because:
(1) it succeeded entirely on the issue of fraud; and
(2) that issue was one that required the preparation of substantial evidence, occupied substantial time and effort during the first hearing, and resulted in the generation of substantial costs.
Atradius submitted that it should have all its costs of the first hearing, unless its conduct in raising and advancing the fraud defence could be characterised as unreasonable.
In addition, the parties referred to offers of settlement that were made from time to time before (and in one case during) the first hearing, on a "Calderbank" basis (Calderbank v Calderbank [1975] 3 All ER 333). It is common ground that, in monetary terms, the outcome of the proceedings was more favourable to Atradius than any of the compromises that it offered.
The Calderbank letters were relied upon, following the first hearing and my first judgment, to support Atradius' application for indemnity costs. I declined to order indemnity costs (unreported reasons given ex tempore on 22 June 2012). I did so, taking into account the following matters referred to at [8] and [9] of those reasons:
[8] It is clear, in this case, that Atradius raised many issues on its pleadings that were abandoned either shortly before or on the commencement of the hearing. It is clear in at least some cases that the consequence of the raising and late abandonment of those issues was that the plaintiffs were put to cost in preparing to fight them.
[9] There is also a need to take into account that the plaintiffs gave Atradius a notice to admit facts on 3 February 2010. Many of the 19 paragraphs of that notice sought admission of the plaintiff's accounting records. Those records were disputed. In consequence, the plaintiffs put on detailed affidavits annexing prodigious copies of accounting records. Ultimately, the issues that should have been admitted back in 2010 or shortly thereafter were agreed, in the form of an agreed exhibit (PX17 on the hearing).
I noted at [10] that if costs were ordered to be paid on the indemnity basis, Optus would have to pay, on that basis, the costs of issues that were not pressed. I said at [11] that this consequence could, perhaps, be overcome by making offsetting orders for the costs of various issues. However, I concluded, that exercise was not justified.
In the result, I considered that sufficient justice was done between the parties, as to costs, by declining to give effect to the costs consequence that in many cases flows from the making of Calderbank offers and the subsequent success, to a greater extent than offered, of the offeror.
Atradius referred in submissions to the judgment of Hodgson JA (with whom McClellan CJ at CL agreed) in Griffith v Australian Broadcasting Corporation (No.2) [2011] NSWCA 145 at, in particular, [19]. His Honour there noted a distinction between the position (in respect of costs) of a successful defendant and a successful plaintiff. His Honour said:
In the former case, the defendant has been caused to incur costs in defending a claim which the decision in the cases wholly rejected, and has thus determined should not have brought about the incurring of any costs at all. In those circumstances, it may be considered appropriate that the defendant have costs associated with reasonable defences, even if they ultimately proved to be unsuccessful and severable. In the latter case, the plaintiff has chosen to bring the whole proceedings and thereby to incur costs and cause costs to be incurred which otherwise would not have been incurred; and in those circumstances, it may be seen more readily as appropriate that the plaintiff be liable for the costs of unsuccessful severable claims or issues, even if it were reasonable to include those claims or issues.
It seems to me to follow from what his Honour said that ordinarily a defendant is entitled to raise all reasonably available defences in opposition to a plaintiff's claim, without being at risk as to costs in the event that some but not all of those defences succeed.
In the present case, Atradius submitted, the very fact of its success in my first judgment, upholding the defence of fraud, means that it cannot have been unreasonable for it to raise that defence.
I conclude that Atradius should have its costs of the first hearing. My reasons for reaching that conclusion are as follows:
(1) I think it does flow from what Hodgson JA said in Griffiths at [19] that a defendant against whom, by hypothesis, the outcome of the trial decides that the claim should never have been brought, should have its costs of all reasonable defences raised by it in answer to the plaintiff's claim;
(2) in this case, the very fact that Atradius persuaded the trial judge (me) that there had been fraud shows that it was reasonable for it to have raised fraud as a defence to Optus' claim;
(3) the fact that the Court of Appeal took a different view to mine, on the issue of fraud, does no more than confirm that where minds may reasonably differ, it cannot be unreasonable to take one of the differing views;
(4) in any event, I do not think that the fraud issue was, in the relevant sense, severable;
(5) the fraud issue was not relevantly severable because it involved (among others) the same underlying alleged non-disclosure as the s 28(3) defence, involved the same questions of reliance, and thus had a common substratum of fact with the successful s 28(3) defence;
(6) whilst accepting Optus' submission, that fraud is a serious matter and care should be taken in alleging it, once again the fact that the allegation succeeded in the first instance shows that it was not irresponsible (and, a fortiori, not unreasonable) for Atradius to have raised a defence of fraud.
It should be noted, in any event, that Optus at no stage accepted that there had been any relevant misrepresentation, or that Atradius had relied on any representations (whether or not "misrepresentations") that were proved to have been made. The key distinction between the fraud case and the s 28(3) case, in terms of forensic effort, was as to the characterisation of the primary facts. As I have indicated already, the primary facts were relevant alike to both defences.
I order the plaintiffs to pay the defendant's costs of the first hearing and the second hearing, on the ordinary basis.
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Decision last updated: 13 May 2014
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