Federal Court of Australia MOS Beverages Pty Ltd v Insurance Australia Ltd trading as CGU Insurance (No 2) [2020] FCA 1820 File number: NSD 2022 of 2019 Judgment of: ALLSOP CJ Date of judgment: 18 December 2020 Catchwords: COSTS – where applicant was successful in hearing on separate question of indemnity under an Industrial Special Risks Policy – where matter was originally listed for hearing on a different separate question – where applicant applied to vacate first hearing and rely upon an additional clause under the Policy – where applicant established indemnity under Industrial Special Risks Policy based on new clause – whether the applicant is entitled to all of its costs for the hearing of the separate question – whether a deduction should be made to account for the applicant applying to vacate the first hearing Legislation: Federal Court of Australia Act 1976 (Cth) s 24(1A) Federal Court Rules 2011 (Cth) r 35.01 Cases cited: Clarence City Council v Commonwealth of Australia [2020] FCAFC 134; 382 ALR 273 Goodfellow v Fairfax Media Publications Pty Limited [2017] FCA 1152 Ho v Grigor [2006] FCAFC 72; 151 FCR 236 MOS Beverages Pty Ltd v Insurance Australia Ltd trading as CGU Insurance [2020] FCA 1716 Warramunda Village Inc v Pryde [2002] FCA 250; 116 FCR 58 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance – Insurance List Number of paragraphs: 16 Date of last submissions: 14 December 2020 Date of hearing: Determined on the papers Counsel for the Applicant: Mr G J Parker SC with Mr J De Greenlaw Solicitor for the Applicant: Chambers Russell Lawyers Counsel for the Respondent: Mr G Watson SC with Mr D Lloyd Solicitor for the Respondent: Lander & Rogers Lawyers ORDERS NSD 2022 of 2019 BETWEEN: MOS BEVERAGES PTY LIMITED Applicant AND: INSURANCE AUSTRALIA LTD TRADING AS CGU INSURANCE Respondent order made by: ALLSOP CJ DATE OF ORDER: 18 DECEMBER 2020 THE COURT DECLARES THAT: 1. Upon the proper construction of the Industrial Special Risks policy issued by the respondent to Admiral International Pty Ltd, the applicant is entitled to an indemnity from the respondent under s 48(1) of the Insurance Contracts Act 1984 (Cth) by reason of the applicant being sufficiently noted in the records of Admiral International Pty Ltd in accordance with the clause titled "Interests of Other Parties". THE COURT ORDERS THAT: 2. The respondent pay 85% of the applicant's costs of the proceeding to date other than on any question of quantum, as agreed or assessed. 3. The applicant have leave after the resolution of any appeal to apply for the payment of the costs. 4. To the extent necessary the respondent be granted leave pursuant to rule 35.01 of the Federal Court Rules 2011 (Cth) to appeal the making of the above declaration. 5. To the extent necessary, the applicant be granted leave pursuant to rule 35.01 of the Federal Court Rules 2011 (Cth) for any cross-appeal in relation to the refusal of the Court to make a declaration of indemnity based on the SALESXB4 endorsement. 6. The appeal and any cross-appeal be expedited with a view to the hearing of the appeal in the February Full Court period or so soon thereafter as a special fixture as is convenient to the parties and to the Court. 7. The parties are to consult as to mutually convenient dates for the appeal and any cross-appeal and are to agree upon a consolidated electronic appeal book including written submissions in accordance with Practice Note APP2 and Special Measures Information Note (SMIN-3), to be filed (including the submissions on appeal and any cross-appeal) by 8 February 2021. 8. The matter be listed for case management before Chief Justice Allsop in the week commencing 15 February 2021 to fix a date for the appeal and any cross-appeal and to make any necessary directions in the proceeding and for the appeal and any cross-appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT ALLSOP CJ 1 On 1 December 2020, I published my reasons for judgment in MOS Beverages Pty Ltd v Insurance Australia Ltd trading as CGU Insurance [2020] FCA 1716, which addressed a separate issue of indemnity and construction of an Industrial Special Risks Policy issued by the respondent to Admiral International Pty Ltd. The applicant sought indemnity under the Policy as a third party beneficiary. 2 The separate question the subject of the judgment was as follows: 1. Whether the applicant is entitled to indemnity from the respondent under s 48(1) of the Insurance Contracts Act 1984 (Cth) by reason of: a. The applicant being sufficiently noted in the records of Admiral International Pty Ltd in accordance with the clause titled "Interests of Other Parties"; and/or b. The proper construction of endorsement SALESXB4. 3 As reflected in the reasons, I concluded that the applicant was entitled to indemnity from the respondent under s 48(1) of the Insurance Contracts Act 1984 (Cth) by reason of the applicant being sufficiently noted in the records of Admiral in accordance with the "Interests of Other Parties" clause. I did not find that the applicants were entitled to indemnity by reason of the proper construction of the SALESXB4 endorsement. 4 I ordered that within 14 days the parties file a draft minute of orders to give effect to the Court's reasons, or competing draft minutes, together with any submissions on the proposed declarations or orders, including on costs and the future conduct of the proceeding. 5 The parties were unable to agree on a draft minute of order and have filed competing draft minutes and submissions. Appropriate form of relief 6 The parties agree that the answer to the separate question should be reflected in a declaration. The parties filed competing declarations that were in substance very similar. I will make the declaration in the form suggested by the respondent. In my view it succinctly and straightforwardly encapsulates the applicant's rights, as follows: The Court declares that upon the proper construction of the Industrial Special Risks policy issued by the respondent to Admiral International Pty Ltd, the applicant is entitled to an indemnity from the respondent under s 48(1) of the Insurance Contracts Act 1984 (Cth) by reason of the applicant being sufficiently noted in the records of Admiral International Pty Ltd in accordance with the clause titled "Interests of Other Parties". Costs orders 7 The parties were given an opportunity to consider what costs orders should be made because, as noted at [45] of the reasons for judgment, the matter was initially listed on 22 June 2020 for hearing on separate questions which dealt solely with the SALESXB4 endorsement. That hearing was vacated on short notice because the applicant sought to rely in its written submissions on the "Interests of Other Parties" clause and sought to adduce affidavit material and business records in support of that argument. The applicant had not raised that clause as a basis for indemnity in its originating application or statement of claim. The applicant's statement of claim was amended on 19 June 2020 to include reliance upon the "Interests of Other Parties" clause and the parties filed new proposed separate questions, agreed facts, an agreed tender bundle and amended written submissions accordingly. 8 As explained above, the applicant succeeded on the basis of the "Interests of Other Parties" clause. I rejected the applicant's construction of the SALESXB4 endorsement. 9 The applicant submitted that costs should follow the event and it should be entitled to its costs of the proceedings on the separate question. The applicant accepted that it did apply to adjourn the 22 June 2020 hearing at late notice and that it should pay for the respondent's costs thrown away on 22 June 2020 by reason of the adjournment. The applicant submitted that the costs thrown away should be minor "considering the claim remained almost entirely over the same pleadings, facts, evidence, rules of evidence and submissions that predominantly built on rather than discarded their earlier versions". 10 The applicant submitted that all evidence in the case related to the "Interests of Other Parties" clause. This may support a finding that the applicant ought to be entitled to the majority of its costs, despite only succeeding on one of the two clauses relied upon. It should be noted, however, that this evidence, which was originally presented to the Court in the form of an affidavit with annexures but was later filed as an agreed tender bundle, was only relevant to the proceedings after the initial hearing was vacated and the applicant's statement of claim amended. 11 The respondent submitted that the applicant should receive 50 per cent of its costs of the hearing on the separate question. The respondent acknowledged that as the applicant was successful it is prima facie entitled to its costs. However, according to the respondent, in the ordinary course the applicant could and should be ordered to pay the respondent's costs thrown away as a result of its application to vacate the hearing. The respondent submitted that its proposed cost order was a "cheap and effective way of achieving largely the same result"; the making of a single costs order in favour of the applicant avoids the need for the creation of two assessable bills, and so forth. 12 The respondent's approach to the assessment of costs broadly conforms with the spirit and intended purpose of this List to avoid unnecessary steps in relation to any aspect of the dispute. I am not of the opinion, however, that the applicant's entitlement to costs should be reduced to 50 per cent. I think that an overall and fair division of costs to reflect the costs thrown away and the result of the hearing is that the respondent pay 85 per cent of the costs of the proceeding to date other than on any question of quantum, as agreed or assessed. 13 The applicant sought an order that the costs be payable forthwith. In the light of an appeal I do not consider that is an appropriate order. I will, however, grant leave for the applicant to make this application after the appeal (if it be successful) and before the occasion for further expenditure on any dispute about quantum. Future conduct of the proceeding 14 Pursuant to rule 35.10 of the Federal Court Rules 2011 (Cth), the respondent sought leave to appeal the declaration set out above. The applicant submitted that, if leave to appeal was granted to the respondent, it sought leave to cross-appeal on the findings in relation to the SALESXB4 endorsement. 15 It is not entirely clear that leave is required, given the body of authority in this Court to the effect that any decision resulting in a declaration is final and thus not an interlocutory judgment within the meaning of s 24(1A) of the Federal Court of Australia Act 1976 (Cth): see Warramunda Village Inc v Pryde [2002] FCA 250; 116 FCR 58 at 77 [68]–[70]; Ho v Grigor [2006] FCAFC 72; 151 FCR 236 at 249 [54]; Goodfellow v Fairfax Media Publications Pty Limited [2017] FCA 1152; and Clarence City Council v Commonwealth of Australia [2020] FCAFC 134; 382 ALR 273 at 295 [66]. Nevertheless, for the avoidance of doubt, I will make an order granting leave to appeal and leave to cross-appeal as the orders resolve all issues in the controversy other than quantum. 16 Finally, I note the parties' preference to hear the appeal before proceeding with the determination of the quantum for loss or damage at first instance. I will therefore make orders expediting the appeal, and providing for a case management hearing and the filing of an appeal book and written submissions in early 2021. The parties should prepare for a possible hearing in the February Full Court sittings or soon thereafter as a special fixture. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop. Associate: Dated: 18 December 2020