Reported Decision : (2003) 12 ANZ Insurance Cases 61-552 New South Wales Supreme Court CITATION : Coshott v Schmierer [2002] NSWSC 1098 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 11241 of 2002 HEARING DATE(S) : 6 November 2002 JUDGMENT DATE : 20 November 2002 PARTIES : Robert Gilbert Coshott (Plaintiff) John Trevor Schmierer (Defendant) JUDGMENT OF : Windeyer J at 1 COUNSEL : Mr G Laughton (Plaintiff) Mr P Bolster (Defendant) SOLICITORS : Hill Ryner & Company (Plaintiff) Henry Davis York (Defendant) CATCHWORDS : COSTS - SOLICITORS RETAINER - INSURANCE - solicitors instructed by insurer to act in defence of District Court proceedings in which judgment given for defendant with costs - defendant company wound up - solicitors file bill of costs for assessment - plaintiff in District Court liable for costs obtains copy of insurance policy - successful defendant not insured under the policy - basis of insurer taking over conduct of proceedings could only be pursuant to insurance contract - defendant company itself had incurred no costs so indemnity of costs order not required - insurer a volunteer - assessment stayed LEGISLATION CITED : Insurance Contracts Act 1984 s48 DECISION : See paragraph 14 - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION WINDEYER J WEDNESDAY 20 NOVEMBER 2002 11241/02 ROBERT GILBERT COSHOTT V JOHN TREVOR SCHMIERER JUDGMENT Outline 1 This is a claim by summons to stay proceedings on an assessment of costs. Facts 2 Baramul Stud Pty Limited (Baramul) was the successful defendant in District Court proceedings No 6912 of 1994, brought by the plaintiff in these proceedings and two other persons as plaintiffs. Orders were made on 5 December 1996 that the plaintiffs pay the defendant's costs to the defendants forthwith after assessment. Baramul Stud Pty Limited is now in liquidation but was not when judgment was entered in its favour. 3 The proceedings were conducted for the defendant company by Messrs Henry Davis York, solicitors. Those solicitors acted on instructions from CGU Insurance, a company apparently formed by merger of the operations of Commercial Union Insurance Company of Australia Limited and General Accident Fire and Life Assurance Corporation Limited. For the purposes of this decision the details do not matter. Notice of Appeal to the Court of Appeal was filed but it seems the appeal was withdrawn in about April 1999. 4 An application for assessment of costs was then filed in this Court on 26 October 2000 by Messrs Henry Davis York, Baramul being shown as the applicant and the plaintiffs in the District Court proceedings being shown as the respondents. The bill in question appears to be addressed to Tregoyd Holdings Pty Limited. It is an admitted fact that Baramul is or was a wholly owned subsidiary of Tregoyd. 5 There seems to have been great delay in proceedings before Mr Conti, the costs assessor appointed. The liquidator of Baramul has changed its name to ACN 002 797 640 Pty Limited, a common method of unnecessarily confusing the public. By letter dated 19 November 2001, the liquidator authorised Messrs Henry Davis York as solicitors for the insurer to continue the assessment in the name of the company in liquidation on the basis that the liquidator be indemnified against any costs or liability arising on the assessment. 6 Mr Coshott, the plaintiff in the proceedings before me, sought and eventually obtained a copy of the insurance policy under which Baramul was said to be indemnified against the Coshott claim. There was considerable correspondence about this request and the claimed right to conduct the defence, but eventually after considerable pressing from the assessor, solicitors for Mr Coshott were forwarded a copy of the relevant insurance policy on 17 September 2002. To say the least, the fact that the request for assessment was made on 26 October 2000 and there was still correspondence going on between the applicant for assessment and the respondents and between the costs assessor and each side, points to a delay which is almost scandalous. 7 Messrs Henry Davis York, in correspondence prior to the policy being produced, had stated that Baramul was a wholly owned subsidiary of Tregoyd Holdings Pty Limited, that an insurance policy issued by Commercial Union Insurance to Tregoyd Holdings Pty Limited gave indemnity to Baramul as a subsidiary, that while Baramul was not a party to the contract, it had the same rights as if it were, this being provided by s48 of the Insurance Contracts Act 1984. It was therefore said that Baramul had the right to claim on the policy and be indemnified by CGU in accordance with the terms of the policy. There were other submissions and statements made about rights under policies of liability insurance and assignment of those rights, which were not really accurate but which are irrelevant to this decision. 8 The copy of the policy which is in evidence, provides in the definition section, that "insured" means "any person, firm, partnership, company or subsidiary company named as insured in the schedule". The only evidence of the schedule is that the person named as the insured is "Tregoyd (Holdings) Pty Limited", Baramul was not an insured. Proceedings in this Court 9 By summons filed on 2 May 2002, Mr Coshott, as plaintiff, sued Mr Schmierer, the liquidator, as defendant, claiming orders that the costs assessment proceedings be dismissed, struck out or permanently stayed. The plaintiff then, by notice of motion filed on 6 June 2002 and ultimately determined by Master Malpass on 14 August 2002, sought various orders, most of which were not pursued on the hearing of the motion. The only claim pursued was that the plaintiff have leave to join CGU Insurance Limited as a defendant, which application was refused by the learned Master. When the proceedings then came on for hearing before me they were in a state of great disarray. The plaintiff applied for leave to file an amended summons which leave, for reasons I gave, was refused. At that stage the parties to these proceedings were Mr Coshott and Mr Schmierer as liquidator. After some discussion and to endeavour to save the hearing date, various amendments were made and various undertakings were given. It is not necessary to go into these, except insofar as the undertakings ensure that there is suitable protection given for and for that matter against, the other plaintiffs in the District Court proceedings. I gave leave to amend the summons by substituting for the defendant the company in liquidation and gave leave to the plaintiff to proceed against the company in liquidation. The summons was deemed to be amended accordingly and I directed that an amended summons be filed by 4.00 pm on 8 November 2002. Whether that has been done I do not know. The hearing before me proceeded on the basis of two agreed facts, namely that the defendant, then known as Baramul Stud Pty Limited was wound up by court order on 5 September 2000 and that the defendant was a wholly owned subsidiary of Tregoyd Holdings Pty Limited. 10 This is a matter which really needed to have the issues defined by pleadings. The claim of the plaintiff appeared to be that the now named defendant had not incurred any costs and that its liquidator would not be liable to pay any costs on behalf of the company, nor could any claim be made against the company by way of proof of debt for the costs of the successful defence of the action. The claim of the plaintiff was that the defendant company now in liquidation was not insured under the policy of liability insurance relied upon, that in those circumstances there was no entitlement in the insurer which conducted the defence to do so, and that in those circumstances the insurer was a voluntary intermeddler with no entitlement to claim costs in the name of the defendant company. The argument of the defendant seemed to be (1) that the defendant was insured under the relevant policy which was in evidence; (2) that s48 of the Insurance Contracts Act somehow provided for this; (3) that there was some assignment of rights pursuant to that policy; (4) that some right of subrogation, which was not explained, could be relied upon by the defendant company in its claim to have the costs assessed. Nobody suggested that there should be some adjournment, so that the issues could be properly defined and considered. I was not willing to do this myself, because the amount at issue was not great and the parties appeared to have flagged their arguments in correspondence with each other. Some new argument was tentatively put forward in submissions, based on some claim that some new contract of insurance was made when the insurance company took over the conduct of the proceedings. Quite how that could have been done without consideration and without evidence, was not really explained and the argument was not pursued. No arguments were addressed to unjust enrichment or estoppel by convention except insofar as it was pointed out Mr Coshott had been told by letter that Messrs Henry Davis York acted for the insurer. Findings 11 On the evidence adduced the defendant company was not an insured under the relevant policy. The court must proceed on that basis. In view of the way in which endorsements and variations are attached to policies one cannot be sure that is the true position, but that is the evidence. It was not suggested the policy wording was not properly put before the court. The argument put forward in correspondence and by counsel was that for some reason, which I do not comprehend, a subsidiary company was an insured under a liability policy issued to its holding company because it was a subsidiary. This is clearly incorrect. It follows that there was no contractual right of CGU to conduct the proceedings in the name of the insured. If there were no right to conduct the proceedings in the name of the insured, it does not seem to me that costs were incurred by Baramul in the defence of the proceedings. Messrs Henry Davis York were not retained by Baramul and were not retained pursuant to some contractual entitlement or obligation between Baramul and its insurer. The doctrine of subrogation, which was incorrectly relied upon by counsel for the defendant company, has no bearing on the matter. In fact, of course, entitlements of insurers under policies of liability insurance to control litigation are contractual rights and have nothing to do with subrogation. 12 Orders for costs are to give indemnity or partial indemnity for costs incurred by a successful party in the conduct of the proceedings in which that party is successful. No costs have been incurred by Baramul in the conduct of the proceedings in which it was successful. No costs have properly been incurred on its behalf pursuant to some proved contractual responsibility. On the evidence adduced there was no contractual right for CGU to defend the proceedings in the name of Baramul. In acting as it did CGU was acting as a volunteer. A volunteer paying the costs of a party to an action has no entitlement to claim costs against a third party not a client. Mr Coshott was not a client of Messrs Henry Davis York. It is not suggested that Henry Davis York had any retainer from Baramul, other than under a claimed contractual right. 13 I had to reserve judgment in this matter and to delay it to give some proper consideration to it. While only a relatively small amount of money is involved, the questions raised have not proved particularly easy of determination. In some ways it might have been better to relist the matter for further argument as little helpful argument was addressed to me during the hearing. I was reluctant to do that in view of the costs which would have been involved. In some ways the plaintiff may be considered an unworthy victor, but that is really not to the point. The appropriate order is to make an order for permanent stay. 14 The orders are as follows: 1. That proceedings on costs assessment No. 91919 of 2000 be permanently stayed. 2. The defendant pay the costs of those proceedings to date and the costs of these proceedings other than subject to earlier order. ********** Last Modified: 11/22/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.