WSP Structures Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets (Interest and Costs)
[2025] FCA 160
•7 March 2025
FEDERAL COURT OF AUSTRALIA
WSP Structures Pty Ltd v Liberty Mutual Insurance Company t/as Liberty Specialty Markets (Interest and Costs) [2025] FCA 160
File number: NSD 212 of 2022 Judgment of: COLVIN J Date of judgment: 7 March 2025 Catchwords: INSURANCE - statutory entitlement to interest under s 57 of the Insurance Contracts Act 1984 (Cth) - date from which interest should run - whether first respondent liable for all costs of referee who determined the amount of the defence costs Legislation: Insurance Contracts Act 1984 (Cth) s 57
Insurance Contracts Regulations 2017 (Cth)
Cases cited: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435
Mobis Parts Australia Pty Ltd v XL Insurance Company SE [2018] NSWCA 342
Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 10) [2018] NSWSC 37
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 15 Date of hearing: 28 February 2025 Counsel for the Applicant: Mr HJA Neal Solicitor for the Applicant: Crichton & Co Legal Counsel for the First Respondent: Mr D Weinberger Solicitor for the First Respondent: Lander & Rogers Lawyers Counsel for the Second and Third Respondents: The second and third respondents did not appear ORDERS
NSD 212 of 2022 BETWEEN: WSP STRUCTURES PTY LTD
Applicant
AND: LIBERTY MUTUAL INSURANCE COMPANY TRADING AS LIBERTY SPECIALTY MARKETS
First Respondent
CHUBB INSURANCE AUSTRALIA LIMITED
Second Respondent
TOKIO MARINE & NICHIDO FIRE INSURANCE CO LTD (ABN 80 000 438 291) (AFSL 246548)
Third Respondent
ORDER MADE BY:
COLVIN J
DATE OF ORDER:
7 MARCH 2025
THE COURT ORDERS THAT:
1.There be judgment for the applicant against the first respondent in respect of interest on the Defence Costs reserved by order 25 of the orders made on 9 November 2023 in the sum of $1,500,667.81 plus $1,539.23 per day from and including 16 November 2024 until payment.
2.The first respondent pay the applicant the sum of $46,266 in respect of the costs of the referee appointed pursuant to the orders made on 9 November 2023.
3.The first respondent pay the applicant's costs of and incidental to the determination of the issues the subject of the hearing on 28 February 2025 such costs to be taxed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
COLVIN J:
Liberty Mutual Insurance Company has been found to be liable to indemnify WSP Structures Pty Ltd under the terms of a policy of insurance. The indemnity extends to cover defence costs. Two issues remain. First, the extent of the liability for interest on legal costs incurred by WSP in defending other court proceedings brought in respect of indemnified liabilities. Second, the liability for the costs of a referee who determined the amount of the defence costs.
As to interest, there is a statutory liability imposed upon insurers by s 57 of the Insurance Contracts Act 1984 (Cth). The period in respect of which interest is payable commences 'on the day as from which it was unreasonable for the insurer to have withheld payment'.
The following facts are not in dispute:
(1)On 23 November 2021, WSP made a claim for indemnity from Liberty including in relation to defence costs.
(2)On 28 January 2022, Liberty informed WSP that it agreed that indemnity would be available to WSP subject to the terms of its policy with Liberty but maintained that it would not be able to meet or make any payment on WSP's behalf until it was satisfied as to whether WSP had other insurance cover in respect of the same liability.
(3)On 25 March 2022, WSP commenced proceedings against Liberty (and two excess layer insurers) seeking, amongst other things, a declaration that Liberty was liable to indemnify WSP in respect of defence costs.
(4)Liberty defended the claim as to defence costs on the basis that those costs were being met by WSP's professional indemnity insurer.
(5)On 29 July 2022, WSP filed evidence which included a summary of the defence costs it had incurred and paid, being the first occasion upon which any detail of those costs had been provided. The evidence also stated that WSP had not been reimbursed or paid those defence costs by any insurer.
(6)Liberty maintained its defence based upon the alleged availability of cover from WSP's professional indemnity insurer and an election to claim under that other policy.
(7)Liberty’s contentions to the effect that there was no liability by reason of the availability of other insurance cover were not upheld and on 28 September 2023, Liberty was found to be liable for the defence costs.
(8)On 27 October 2023, for the first time, Liberty requested copies of all invoices for defence costs.
(9)Thereafter, the reference as to the amount of the defence costs was conducted.
(10)Of the total defence costs, Liberty disputed an amount of $2,564,670.81 being approximately 29% of the amount claimed to have been incurred (thereby maintaining that only 71% of the costs were reasonable).
(11)WSP responded by accepting that an amount being approximately 4% of the claimed costs were not recoverable.
(12)The referee determined that approximately 90% of WSP's claimed defence costs were reasonable.
Liberty maintains that its conduct in not paying the defence costs as and when they were incurred by WSP was not unreasonable for the purposes of s 57 because it was not until the date of the referee's report that the extent of the defence costs liability was known. Alternatively, it says that any liability to pay interest should run from three months after 27 October 2023 being the date when copies of invoices were first provided.
I do not accept the submissions advanced for Liberty. Up until 28 September 2023, the operative reason why the defence costs were not paid was the position adopted by Liberty. It is a position that has been found to be legally incorrect. There is no reason to conclude that, if invoices for defence costs had been presented before then, Liberty would have paid them. Thereafter, Liberty continued not to pay any part of the defence costs. In particular, it did not pay the part of those costs that it did not dispute as being reasonable. Further, it maintained a position as to the extent of its liability that was not accepted by the referee.
Liberty relies upon the reasoning of Stevenson J in Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 10) [2018] NSWSC 37 for the proposition that interest should run from the date that the amount payable became apparent, reasoning that was said to have been upheld on appeal in Mobis Parts Australia Pty Ltd v XL Insurance Company SE [2018] NSWCA 342 at [162]-[167]. On appeal Meagher JA (Beazley P and Leeming JA agreeing) applied the approach of Cole J approved by the High Court in CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 410 that 'a reasonable period is to be given to the insurer to investigate and determine its position but the existence of a bona fide dispute as to the entitlement of the insured is not necessarily an answer to the complaint that the insurer has been acting unreasonably in withholding payment'. Meagher JA explained that the primary judge had approached the interest claim on the basis that, in the absence of other evidence, the course of the litigation provided the most reliable guide as to the period of time that would have been required for the ordinary loss adjustment process to be conducted. On that basis it was concluded that the approach of Stevenson J was one in respect of which error had not been demonstrated. Therefore, the reasoning in Mobis Parts does not support the breadth of the proposition advanced by Liberty.
For the following reasons, I do not accept that the correct approach is to apply interest from the date when the extent of the liability is ascertained.
As we explained in LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 at [248] (Derrington and Colvin JJ):
What is required is a determination of the day on which a reasonable insurer would have paid out the claim on which the insured did succeed, assuming the insurer reached the factual conclusions ultimately found by the court and otherwise adopted the correct view as to its legal position.
If Liberty had performed its contract of indemnity then it would have accepted its liability for defence costs as at 28 January 2022. Had it done so, it may be inferred that WSP would have presented invoices for defence costs to Liberty for payment as and when they were issued by its lawyers. Consequently, reasonable defence costs would have been reimbursed on and after 28 January 2022, being the date upon which it had completed its inquiries and had determined that indemnity was available under the policy. Thereafter, as each claim for defence costs was presented it may be expected that it would have been assessed promptly and in accordance with the trading terms for the invoice. Any issue as to reasonableness would have been raised at that time. Further, it would have been unreasonable to withhold the payment of the whole of an invoice where there was an issue as to part only.
The interest claimed by WSP has been calculated on the following basis:
(1)The amount upon which interest is claimed is 90% of the value of the invoice (applying the overall reduction as determined by the referee).
(2)For invoices issued prior to and paid before 28 January 2022, interest is to commence from that date.
(3)For all other invoices interest is to commence from the date they were paid.
(4)The interest rate applied is 7% (by reference to the terms of the Insurance Contracts Regulations 2017 (Cth)).
The use of the date of actual payment of the defence costs allows a period for assessment. The use of the 90% rate is an appropriate way to apply the referee's determination as if it had been undertaken at the time when there was an obligation to indemnify for the defence costs. There is no issue as to the interest rate. Therefore, in my view, the calculation that has been undertaken is appropriate.
It was submitted by Liberty that the award of interest in the manner proposed would have the effect of not rewarding WSP for alleged failure to cooperate with the referee which was said to have caused a period of delay. It is the case that the referee made some observations about conduct by WSP which might have produced some delay. However, the fact remains that Liberty has made no payment. It has had the benefit of the money. In the circumstances, I am not persuaded that the matters pointed to by Liberty provide any reason for adjustment of the interest claim made by WSP.
For those reasons, the interest claim should be allowed.
As to the costs of the reference, WSP was substantially successful before the referee. Accordingly, Liberty should bear the costs of the reference. The parties have each jointly funded the costs of the referee until further order. The amount paid by WSP was $46,266. There should be an order requiring that amount to be paid by Liberty to WSP.
Finally, there is the question of the costs of and incidental to the resolution of these further issues. WSP has been wholly successful. Liberty should bear the costs.
I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin. Associate:
Dated: 7 March 2025
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