Running Pigmy Productions Pty Ltd v AMP General Insurance Co Ltd

[2001] NSWSC 553

CITATION:	Running Pigmy Productions Pty Ltd v. AMP General Insurance Co Ltd and Ors [2001] NSWSC 553
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50097/2000
HEARING DATE(S):	29 June, 2001
JUDGMENT DATE:	29 June 2001
PARTIES :	Running Pigmy Productions Pty Ltd [ACN 071 459 142] (Plaintiff) AMP General Insurance Co Ltd [ACN 008 405 632] (First Defendant) Royal Sun Alliance Australia Ltd [ACN 005 297 807] (Second Defendant) HIH Casualty & General Insurance Ltd [ACN 008 482 291 (Third Defendant)
JUDGMENT OF:	Palmer J

COUNSEL :	M. Walton SC (Plaintiff) J.W. Stevenson (Defendants)
SOLICITORS:	Gells (Plaintiff) Mallesons Stephen Jaques (Defendants)
CATCHWORDS:	COSTS - CONSTRUCTION OF RULES - DISCRETION - Plaintiff succeeds against two defendants - each defendant liable for less than $225,000 - total recovered from both defendants close to $400,000 - whether Pt 52A r33(2) and (4) apply where recovery against each defendant is less than the stipulated amount or whether they apply to the total amount recovered against all defendants in the proceedings - whether discretion under subrules (3) and (5) should be exercised - held: subrules (2) and (4) apply to total amount recovered against all defendants in the proceedings - discretion exercised under subrule (5) to award whole of plaintiff's costs against defendants.
LEGISLATION CITED:	Supreme Court Rules Pt 52A r33, subrules (2), (3), (4), (5) and (6).
DECISION:	Defendants to pay the whole of the plaintiff's costs of the proceedings.

1 On 5 June 2001 I delivered judgment in these proceedings. By that judgment I indicated that the orders I would make were that there would be a judgment for the plaintiff against the first defendant in the sum of $187,220 and a judgment for the plaintiff against the second defendant in the sum of $109,895. 2 There were, in fact, three defendants in the proceedings, the third defendant being HIH Casual and General Insurance Limited, now in provisional liquidation. Because of that company's circumstances at the time the matter came on for hearing, a claim against it was not pressed. 3 Under the policy of insurance pursuant to which the plaintiff sued, the liability of the three defendant insurers was apportioned severally amongst them. The liability of the first defendant was 46 per cent and the liability of the second defendant was 27 per cent, the remaining percentage of liability being that of HIH. 4 The total amount to which I found the plaintiff entitled in the proceedings was $407,000, of which only some $297,000, excluding interest, was payable by the first and second defendants. 5 The matter was re-listed today for argument as to the calculation of interest and as to costs. The calculation of interest is now close to resolution between the parties, but an issue has arisen as to what, if any, proportion of the plaintiff's costs should be ordered against the first and second defendants, having regard to the provisions of Pt 52A r33 subrules (2)(f)(ii) and (4)(f)(ii). 6 Subrule (2)(f)(ii) provides, so far as is relevant:
“Where … in proceedings commenced after 1 October 1997, … a plaintiff recovers … a sum not more than $225,000 … the plaintiff shall not be entitled to payment of his or her costs of the proceedings unless, it appearing to the Court that the plaintiff had sufficient reason for commencing or continuing proceedings in the Court, the Court makes an order for payment.”
7    Subrule (3) provides:
“Without limiting the generality of subrule (2), it shall be taken to be a sufficient reason if the plaintiff had reasonable grounds at the relevant time for expecting that he would recover an amount in excess of the amount prescribed by that subrule.”
8    Subrule (4)(f)(ii) provides, in so far as is relevant:
“Subject to subrule (5) where, by or under the rules or any order of the Court, the plaintiff is entitled to his or her costs of any proceedings to which this rule applies, the amount of costs payable to him or her shall … in respect of proceedings commenced after 1 October 1997, where he or she recovers … a sum more than $225,000 but not more than $450,000, be only half of the whole amount.”
9    Subrule (5) provides:
“In a case to which subrule (4) applies, if it appears to the Court that the plaintiff had sufficient reason for commencing or continuing proceedings in the Court, the Court may order that the amount of costs payable to the plaintiff be some greater part or the whole of the amount which would be payable to him or her apart from that subrule.
10    Subrule (6) provides:
"Without limiting the generality of subrule (5), in a case referred to in subrule (4)(f)(ii) it shall be taken to be a sufficient reason if the plaintiff had reasonable grounds at the relevant time for expecting to recover an amount in excess of the amount prescribed by that subrule."
11 Mr Stevenson of Counsel, who appears for the first and second defendants, submits that this is a case to which Pt 52A r 33 subrule (2)(f)(ii) applies because the plaintiff has recovered in these proceedings not more than $225,000 against each defendant. 12 Mr Stevenson submits that there is nothing before the Court which could lead the Court to conclude that the plaintiff had sufficient reason for commencing proceedings in this Court. In particular, he says that the plaintiff could not have had reasonable grounds for expecting that it would recover more than $225,000 or, for that matter, more than $450,000 against either defendant. 13 Mr Stevenson points to the fact that the liability of the defendant insurers under the insurance Policy is not joint but several. He says that in order to recover any amount of costs at all the plaintiff would have to satisfy the Court that there was a reasonable basis for the plaintiff to conclude that it would recover as against each defendant a sum in excess of $225,000. 14 Mr Walton SC, who appears for the plaintiff, submits that the approach of the defendants in this regard is not correct. He points out that the Pt 52A r.33 does not expressly provide for what is to happen in proceedings in which the plaintiff sues more than one defendant. The rules do not discuss what is to happen where, for example, there is several recovery against a number of defendants, the total amount recovered being in excess of either $225,000 or $450,000, but the judgment recovered against each defendant is less than either of those sums. 15 Mr Walton submits that the proper approach is to look at what recovery is obtained by the plaintiff from the proceedings as a whole. If the total recovery is less than $225,000 or $450,000, one must then look at whether the plaintiff had sufficient reason for commencing the proceedings in the Supreme Court. That exercise may involve having regard to whether the plaintiff had reasonable grounds for expecting to recover a total amount in the proceedings in excess of $225,000 or $450,000. 16 I am of the view that Mr Walton’s submissions as to how the matter should be approached are correct. 17 It is often the case that proceedings involve several defendants, their liability as between themselves being as much a matter of contention as their liability to the plaintiff. It is often very unclear until judgment is ultimately delivered how liability amongst several defendants, possibly numerous defendants, may be apportioned, whether the liability of the defendants is joint or several, whether there are rights of contribution amongst defendants, and what is the appropriate amount to award against each defendant. 18 Having regard to that quite common difficulty, I do not find it surprising that Pt 52A r33 does not attempt to be any more precise than it is and that it does not attempt to regulate how costs are to be dealt with where there are claims in proceedings against multiple defendants, some claims possibly succeeding, possibly others failing and liability amongst the defendants possibly being subject to apportionment. 19 I think that the proper approach is to look at the total amount recovered by the plaintiff in the proceedings, not the possible share of a number of defendants in the liability for such amount. If the total amount recovered by the plaintiff in the proceedings is less than the amounts specified in subrules (2)(f) or (4)(f) a question then arises as to whether the discretions provided in subrules (3) or (5) should be exercised. 20 I now turn to consider the fact that the plaintiff has recovered a total of nearly $300,000 against the first and second defendants, excluding interest. I am told that the amount of interest, which is yet to be calculated but which is near to agreement, is in the order of some $90,000. The total amount recovered in the proceedings, including interest, will be close to $400,000. Accordingly, I think that this is not a case to which Pt 52A r3(2)(f)(ii) applies. 21 However, it is certainly a case to which subrule (4)(f)(ii) applies. The question, then, is whether it appears to the Court that the plaintiff had sufficient reason for commencing the proceedings in this Court rather than in the District Court, which has a jurisdiction up to $750,000. 22 I turn now to subrule (6), which provides that it shall be taken to be a sufficient reason for the purposes of subrule (5) if the plaintiff had reasonable ground for expecting to recover an amount in excess of $450,000. 23 The plaintiff claimed for several losses covered by the Policy but the largest part of its claim was a claim for loss of an opportunity to publish a magazine. That loss was said to be due to the defendants’ failure to pay out the plaintiff’s insurance claim promptly. The evidence adduced by the plaintiff to quantify the loss of profits from non-publication of the magazine and, therefore, the value of the opportunity lost, was essentially two-fold. Firstly, the plaintiff relied upon the evidence of its expert, Mr McDonald, and secondly, the plaintiff pointed to an offer of $1.7M for an interest in the plaintiff's business which had been made by a Mr Takemura. The offer that Mr Takemura had made was in respect of the business not only of the plaintiff but of an associated company called Australian Picasso Collection Pty Limited. 24 As I have said in my judgment of 5 June 2001, the quantification of the plaintiff’s claim for loss of opportunity, particularly in the circumstances of this case, was a matter of impression and one attended by very considerable difficulty. 25 Mr McDonald, the plaintiff's expert, made various assumptions on the basis of which he postulated a maximum quantification of the plaintiff’s loss arising not only from inability to publish the magazine but also from destruction of designs and artwork and the losses which that entailed, somewhere in the order of $6,000,000. I came to the conclusion that figure was utterly unrealistic. 26 I invited Mr Walton to submit what the plaintiff contended was a realistic range for the quantification of the plaintiff's total loss, including the loss of opportunity claim. Mr Walton submitted that the range was between $1,750,000 and $1,850,000. I do not regard that submission as so fanciful that it should be regarded as unreasonable. After careful reflection, I came to the conclusion in my judgment that the proper amount to award was far outside the range propounded by Mr Walton, but Mr Walton was, in my opinion, entitled on the evidence as it stood to advance a claim within the range that he gave. As Mr Walton has pointed out, it would not have been possible for him to make a submission to the District Court that an award should have been made in that range 27 Bearing in mind that the plaintiff had the evidence of Mr McDonald, though I have largely discounted it, bearing in mind the plaintiff was able to point to a substantial offer by Mr Takemura for an interest in the plaintiff’s business, and bearing in mind that the plaintiff will recover an amount in these proceedings which, with interest, is close to $400,000, I am of the view that the plaintiff did have reasonable ground for expecting to recover in these proceedings a total amount in excess of $450,000. 28 Accordingly, in my opinion the plaintiff has made out a case for the application of the Court's discretion under subrule (5). In my opinion, the proper amount of costs to award against the defendants is the whole of the amount of the plaintiff's costs in the proceedings. 29 As to whether there was such complexity in the proceedings to justify the retention of senior counsel by the plaintiff, again I am in favour of the plaintiff in this respect. It seems to me that the case was one of real difficulty, particularly in dealing with the expert evidence. Accordingly, I certify that the costs of the plaintiff in the proceedings should include the costs of retaining senior counsel. 30 I will stand the matter over to a date to be fixed for the bringing of short minutes to reflect these reasons.

Last Modified: 07/04/2001