The Owners – Strata Plan No 55682 v W. R. Berkley Insurance (Europe), Plc and Ors (No.3)

[2021] NSWDC 15

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:	The Owners – Strata Plan No 55682 v W. R. Berkley Insurance (Europe), PLC & Ors (No.3) [2021] NSWDC 15
Hearing dates:	On the Papers
Date of orders:	12 February 2021
Decision date:	12 February 2021
Jurisdiction:	Civil
Before:	Abadee DCJ
Decision:	See paragraph 8
Catchwords:	COSTS – costs of cross-claim – whether Sanderson order should be made
Legislation Cited:	Nil
Cases Cited:	Nil
Texts Cited:	Dal Pont, Law of Costs (4th Ed, 2018, Lexis Nexis Australia) at [11.36]
Category:	Costs
Parties:	The Owners – Strata Plan No 55682 (Plaintiff) W. R. Berkley Insurance (Europe), PLC (First Defendant/First Cross-Claimant) Berkley Insurance Company (Second Cross-Claimant) HHIA Pty Ltd (Second Defendant) Mr D Hynes (Third Defendant) Ms L Honeychurch (Fourth Defendant) Westcourt General Insurance Broker Pty Ltd trading as Westcourt General Insurance Broker Pty Ltd ACN 009401772 as trustee for the WGIB Trust (Fifth Defendant) QUS PTY LTD (Cross-Defendant)
Representation:	Counsel: Mr C Simpson for the plaintiff Mr M Friedgut for the first defendant/first cross-claimant and the second cross-claimant Mr J Sleight for the second to the fifth defendants Mr M Newton for the cross-defendant Solicitors: Baker Mannering & Hart for the plaintiff McInnes Wilson Lawyers for the first defendant/cross-claimant HBA Legal for the second to fifth defendants Gilchrist Connell for the cross-defendant
File Number(s):	2019/100722
Publication restriction:	Nil

Judgment

1. On 10 February 2021, I published my reasons for making dispositive orders, including primarily orders for costs.

2. Since then, the First Defendant and Cross-Claimant (the Insurer) has sought further opportunity to make further submissions on costs, principally in reply to submissions raised on behalf of the brokers and licensee. A written submission was filed on 11 February 2021.

3. Initially, my inclination was one of scepticism as to whether it would be necessary to permit such opportunity: the Insurer has already served two sets of detailed written submissions. But having regard to the circumstance that such opportunity was countenanced at the time that I delivered my reasons for judgment, on 17 December 2021, and to avoid any suggestion of unfairness, I now consider the Insurer’s most recent submissions.

4. The first submission was that the brokers and licensee, as unsuccessful defendants, should pay the Insurer’s costs. That submission need not be considered further since an order to that effect has already been made.

5. The second submission was that the brokers and licensee should pay the Insurer’s costs of the cross-claim. This was, as indicated, a submission extensively argued in an earlier written submission of the Insurer. The argument was reiterated in the latest written submission that the brokers’ conduct contributed to the Insurer’s decision to commence the cross-claim. That was said to make it just for the brokers to pay the Insurer’s costs of its ‘contingent’ cross-claim. In particular, and in reply to the brokers’ citation of a passage from Professor Dal Pont’s text, the Insurer argued that a Sanderson order should be made in favour of a cross-claimant, against an unsuccessful defendant, who joins a third party where, aside from the unsuccessful defendant’s contribution to the decision to join the third party, it was “reasonable” to so join the third party. The Insurer cited a further part of Professor Dal Pont’s text to the effect that ‘reasonableness’ could be inferred where the plaintiff’s claim against the ultimately successful defendant/cross-claimant appeared to have merit and the defendant/cross-claimant could reasonably have concluded that any liability it had to the plaintiff might prima facie be attributable to the conduct of the third party (Dal Pont, Law of Costs [11.36]). It was said that those observations were applicable to this case.

6. ‘Reasonableness’, of course, depends upon all of the circumstances, and not just those identified by Professor Dal Pont. The difficulty for the Insurer is that, firstly, it always vehemently disputed that the plaintiff’s claim against it had merit. Secondly, a relevant circumstance in my view is the strength of the prospect of the successful claim against the third party. The test for reasonableness necessarily is objective even if that assessment is based on the circumstances known to the party at the time. If it were otherwise, there may be no dis-incentive to a defendant bringing a misconceived claim against a third party where an (ultimately unsuccessful) defendant’s conduct may have contributed to the plaintiff bringing a claim against the defendant.

7. As indicated in my reasons published on 10 February 2021 (at [44]), in view of the limitations issues, although I did not regard the decision to claim against the Agent as so hopeless as to warrant an order for indemnity costs, as had been pointed out at length by the Agent to the Insurer, it remained a major obstacle to the success of such claim. The Insurer erroneously and unreasonably treated the Agent’s argument about the difficulty with the limitations defence, which reasoning the Court substantially accepted, with unjustified disdain. It is not simply to engage in hindsight reasoning to say that the prospective cross-claim was likely to fail irrespective of: (a) how meritorious was the plaintiff’s claim against the Insurer and (b) the brokers’ and licensee’s conduct contributing to the Insurer’s decision to claim against the Agent. In the circumstances, it is unreasonable to require the brokers and licensee to, as it were, ‘pick up the tab’ for the Insurer’s continued pursuit of its cross-claim for its forensic benefit.

8. It is unnecessary to make any further order.

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Amendments

12 February 2021 - Fixed typographical error

Decision last updated: 12 February 2021