VicProp OC Pty Ltd v AIG Australia Ltd (No 2)

[2025] VCC 221

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-22-05651

VicProp OC Pty Ltd (as trustee for the VicProp OC Unit Trust) (trading as Melb OC) (ACN 606 358 909)	First plaintiff
ACN 163 625 750 Pty Ltd	Second plaintiff
v
AIG Australia Ltd (ACN 004 727 753)	First defendant
Allianz Australia Insurance Limited (ACN 000 122 850)	Second defendant

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JUDGE:	HIS HONOUR JUDGE WISE
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	7 March 2025
CASE MAY BE CITED AS:	VicProp OC Pty Ltd & Anor v AIG Australia Ltd & Anor (No 2)
MEDIUM NEUTRAL CITATION:	[2025] VCC 221

REASONS FOR DECISION
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Subject:COSTS – Contract Law – Indemnity Insurance          

Catchwords:              Costs order - Interpretation of insurance policy – construction of professional liability insurance policy insuring Owners Corporation manager - obligation to indemnify - third party liability - meaning of “claim” - meaning of “professional business” - nature of compensatory relief – nature of restitutionary relief - “claims made” policy - claims made by third parties against an insured.              

Legislation Cited:      

Cases Cited:Chen v Chan (No 2) [2009] VSCA 233, Rozenblit v Vainer (No 2) [2019] VSC 366, Amcor Ltd v Barnes [2020] VSC 585, Ritter v Godfrey [1920] 2 KB 47; McFadzean v CFMEU (2007) 20 VR 250, GT Corporation Pty Ltd v Amare Safety Pty Ltd [2008] VSC 296, Marriner v Australian Super Developments Pty Ltd [2016] VSCA141        

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J Barber KC with Mr D Briggs.	Tisher Liner FC Law Pty Ltd
For the Second Defendant	Mr W Thomas with Ms A Armstrong.	Moray & Agnew

HIS HONOUR:

1I handed down judgment on the hearing of a preliminary question in this matter on 12 February 2025 (Reasons).  I gave the parties time to file submissions on the question of the costs of that hearing.  The parties have filed submissions and these reasons now determine that question on the papers. 

2The primary dispute in these proceedings is whether and to what extent the second defendant (Allianz) is liable to indemnify the first plaintiff (VicProp) under a policy of professional indemnity insurance against claims made against it in the conduct of its business as an owners corporation manager. 

3By the Reasons I determined that Allianz is liable to indemnify VicProp in respect of two claims made against it, but is not liable to indemnify in respect of the other 2 claims. 

4The principles to be applied on the question of costs are not in doubt.  VicProp summarised them as follows.  Allianz accepted those principles to be correctly stated, as do I. 

“The Court has a broad discretion as to costs. That includes a power to order costs in relation to a particular question in or a part of a proceeding.[1]  Generally, costs follow the event. The effect is that the party who succeeds on the whole of the action is usually entitled to the costs of the action, even if they have been unsuccessful on alternative issues or heads of their claim.[2]  In Amcor Ltd v Barnes[3], Sloss J said: 

Section 24(1) of the Supreme Court Act and s 49(3)(k) and Part 4.5 of the Civil Procedure Act dealing with the Court’s powers as to costs, and rules 63.02, 63.03 and 63.04 of the Rules, provide that the Court has a broad discretion in determining questions of costs. Further, s 65C(1) of the Civil Procedure Act also now permits the Court to make ‘any order as to costs it considers appropriate to further the overarching purpose’ and such order may ‘make different awards of costs in relation to different parts of a proceeding’ or ‘order that parties bear costs as specified proportions of costs’. 

Generally, where a party is successful, costs will follow the event and a successful party will usually obtain all of the costs of the action even though it may have failed in establishing some of the alternative heads of claim. In Oshlack v Richmond River Council, McHugh J conveniently summarised the general position concerning the ‘usual order as to costs’, and the objectives the Court seeks to meet in exercising its discretion as to costs, as follows: 

(i)[67] The expression the ‘usual order as to costs’ embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. 

[1] Rule 63A.04, the principles relevant to which were summarised in Chen v Chan (No 2) [2009] VSCA 233 at [10] (Maxwell P, Redlich JA and Forrest AJA).

[2] Rozenblit v Vainer (No 2) [2019] VSC 366 at [12] (Sifris J).

[3] Amcor Ltd v Barnes [2020] VSC 585 at [35]–[36].

The general rule is that costs follow the event and a successful party should obtain all of the costs of the action even though it failed to establish some of the alternative heads of its claim.[4] But in appropriate cases, where a party failed in respect of some claims or distinct issues, the court may award that party only part of its costs.[5]” 

[4] Ritter v Godfrey [1920] 2 KB 47; McFadzean v CFMEU (2007) 20 VR 250 at [152] (Warren CJ, Nettle & Redlich JJA; GT Corporation Pty Ltd v Amare Safety Pty Ltd [2008] VSC 296 at [59] (Robson J).

[5] Amcor Ltd v Barnes at [58] (Sloss J) referring to Marriner v Australian Super Developments Pty Ltd [2016] VSCA141 at [228] (Tate ACJ, Kyrou and Ferguson JJA).

5By its submissions dated 28 February 2025 VicProp says that as the successful party to the hearing of the preliminary question, costs should follow the event and I should order Allianz to pay the entirety of its costs of that hearing. It says that those costs should not be apportioned notwithstanding that it was unsuccessful in establishing an entitlement to indemnity in respect of two of the claims made against it.  It says that as Allianz declined its claim in respect of all of the claims made against it, it was forced to litigate to successfully establish that Allianz had incorrectly declined all of its claims.  It also says that having regard to the matters that were required to be litigated in order to vindicate its claims, it was successful on the vast majority of issues that were litigated. It says that the matters upon which it succeeded were so intertwined with the other matters that it would be artificial to try to separate the costs of those other matters out. 

6Allianz filed submissions in reply dated 3 March 2025 by which it says that VicProp was not the successful party.  It says that VicProp only partially succeeded and submits that in the context of the balance of matters still to be determined in the proceeding VicProp cannot be regarded as having succeeded in the proceeding. 

7At the outset I wish to say that I reject that contention.  As is well known the basic rule is that costs follow the event.  It is always necessary to identify the “event” for costs purposes.  In this case, the event is the determination of the preliminary question that was set down for hearing.  VicProp was the successful party to the extent that I have found that Allianz is liable to indemnify VicProp in respect of two of the claims made against it. The costs associated with working out the extent of the indemnity that I have found to be required, will constitute a separate event to be determined later. 

8Allianz disputes that VicProp enjoyed success on many of the matters litigated as part of vindicating its claim for indemnity.  I reject this submission.  

9That VicProp succeeded on two claims that on their face are likely to be smaller in quantum than the claims on which they did not establish an entitlement to indemnity is not to the point.  Once liability to indemnify against some of the claims is established, Allianz was obliged to indemnify for defence costs in respect of the claims made against VicProp.  The parties informed me in running that these costs were substantial.  It is not correct to characterise VicProp as less than successful because the liability to indemnify was limited to certain only of the claims made against it, given that the obligation to fund defence costs arose. 

10Similarly, that Allianz succeeded on the s 41 claim and that VicProp conceded the unauthorised transactions claim does not mean that VicProp and Allianz enjoyed the same measure of success.  I do not accept that they did.  Allianz denied VicProp indemnity on the policy in respect of all claims made against VicProp.  VicProp was required to litigate to obtain the indemnity to which it was entitled. It succeeded and this will trigger the obligation to pay defence costs.  This is substantial success. 

11Allianz attempts to slice and dice the elements of the indemnity clauses and submits that only some of those elements were found in VicProp’s favour.  As a result, it denies that VicProp was substantially successful.  This approach is highly artificial and I reject it.  In the end, the determination of the preliminary question required construction of the policy as a whole including all of its elements. Upon that exercise, VicProp succeeded. 

12Insofar as Allianz submits that the claims were not intertwined, I note again that in order to construe the policy the entirety of its clauses had to be considered. I do not accept that any part of the exercise can be neatly hived off in the way Allianz suggests. 

13I do not consider that it would be appropriate to award costs on an issues basis. This would be to do what the authorities note is not to be done. That is, the successful party is not to be deprived of some part of its cost merely because it was unsuccessful on parts of its claims.  

14I will order that Allianz pay VicProp’s costs of and incidental to the hearing of the preliminary question on the standard basis to be taxed forthwith in default of agreement.  

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Certificate 

I certify that these 8 pages are a true copy of the reasons for decision of His Honour Judge Wise delivered on 7 March 2025. 

Dated: 7 March 2025 

Liam Crough

Associate to His Honour Judge Wise.