New South Wales Supreme Court CITATION : New Cap Reinsurance Corporation Ltd v General Cologne Re Australia Ltd (No 2) [2005] NSWSC 276 HEARING DATE(S) : 10/03/05 JUDGMENT DATE : 4 April 2005 Equity Division JURISDICTION : Corporations List JUDGMENT OF : Young CJ in Eq DECISION : Limited order for indemnity costs made. CATCHWORDS : PROCEDURE [574]- Costs- Indemnity costs- Commercial litigation- Bad pleadings- Significance of English solicitors acting to great extent for successful party. Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Elders Trustee & Executor Co Ltd v Herbert (Estate of) (1996) 111 NTR 25 FAI General Insurance Co Ltd v Burns (1996) 9 ANZ Insurance Cases 61-384 Knight v FP Special Assets Ltd (1992) 174 CLR 178 Maggbury Pty Ltd v Hafele Australia Pty Ltd (No 2) [2002] 1 Qd R 183 CASES CITED : McCullie v Butler [1962] 2 QB 309 Mitchell v Mitchell (1971) 19 FLR 100 Petrovski v Radin [2000] NSWSC 323 Ragata Developments Pty Ltd v Westpac Banking Corp (Federal Court of Australia, 5.3.1993, unreported) Re Pan Pharmaceuticals Ltd (2004) 48 ACSR 681 New Cap Reinsurance Corporation Limited (P1) John Raymond Gibbons (P2) PARTIES : General Cologne Re Australia Limited (D1) Guy Carpenter & Company Pty Limited (D2) Guy Carpenter & Company Limited (D3) FILE NUMBER(S) : SC 2371/02 S G Finch (P) COUNSEL : M A Pembroke SC and L P Menzies (D2) Henry Davis York (P) SOLICITORS : TressCox (D2) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST YOUNG CJ in EQ Monday 4 April 2005 2371/02 – NEW CAP REINSURANCE CORPORATION LTD v GENERAL COLOGNE RE AUSTRALIA LTD (NO 2) JUDGMENT 1 HIS HONOUR: On 26 August 2004 in a judgment coded [2004] NSWSC 781, I declined to give leave to amend further the statement of claim and effectively struck out the plaintiffs' claim against the second defendant, Guy Carpenter & Company Pty Limited. 2 As noted in the earlier judgment, Guy Carpenter & Company Pty Limited is an Australian company, a subsidiary of the third defendant, Guy Carpenter & Company Limited of the United Kingdom, the principal business of both companies being to act as brokers in the insurance industry. I stood over the question of costs and this was argued before me on 10 March 2005, Mr S G Finch SC appearing for the plaintiffs and Mr M A Pembroke SC and Mr L P Menzies appearing for the second defendant. Further evidence was tendered on the question of costs and I will refer to the relevant evidence in the course of these reasons. 3 Mr Pembroke sought costs on the indemnity basis. Further, he sought costs to include work done by solicitors outside the jurisdiction. He also sought costs of Guy Carpenter UK. 4 As to indemnity costs, counsel were agreed as to the principles to be applied. They are usefully summarised in a passage from the judgment of Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-4; 118 ALR 248, 257, viz: " … it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion (towards indemnity costs). I instance … the fact that the proceedings were commenced or continued for some ulterior motive … or in wilful disregard of known facts or clearly established law … the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions … ". 5 The italicised words were highlighted in counsels' written summary of authorities. Sheppard J gave as an instance of the last mentioned circumstance the decision of Davies J in Ragata Developments Pty Ltd v Westpac Banking Corp (Federal Court of Australia, 5 March 1993, unreported). 6 Mr Pembroke puts that the present was clearly a case where allegations were made against Guy Carpenter Australia which ought never to have been made as was demonstrated by the fact that there were eight versions of the statement of claim and even after the eighth, the claim was still struck out. 7 Mr Pembroke referred to what Mahoney P said in FAI General Insurance Co Ltd v Burns (1996) 9 ANZ Insurance Cases 61-384 at 77,220. (Priestley JA and Rolfe AJA agreed with the President): " … in the Commercial Division, it is particularly important that litigation be conducted without avoidable delay. … Accordingly, a commercial court may expect of the parties before it that they maintain appropriate standards in the conduct of the litigation. They may be expected to conduct the litigation bona fide and with a view to the determination of the real issues in dispute between them. They may be expected to do what is necessary to ensure that those issues are determined effectively, efficiently, timeously and justly. And a commercial court may expect of them and those who act for them an appropriate degree of professional efficiency." 8 The fact that there were eight versions of the statement of claim gives a prima facie indication that things were not happening efficiently. The fact that after the eighth version the claim was still struck out adds to this view. 9 Mr Finch sought to meet this by saying that whilst the form of the claim was inelegant, when one looks at the eight versions of the statement of claim only two were of substance, Nos 4 and 7. None of the alterations made in the other versions would have caused any concern. 10 Mr Finch submits that the appropriate orders for costs are as follows: "1. The first plaintiff pay the costs of the second defendant and Guy Carpenter & Company Limited (Guy Carpenter UK) of the plaintiffs' application for leave to amend the statement of claim filed on 1 August 2003 as agreed or assessed; 2. The first plaintiff pay the costs of Guy Carpenter UK of the plaintiffs' application to join Guy Carpenter UK as a defendant to the proceedings as agreed or assessed; 3. The remaining costs of the second defendant and Guy Carpenter UK be costs in the proceedings in this Court SC 50169 of 2001, Ingot Investments Pty Limited & Ors v Macquarie Equity Capital Markets Limited & Ors, in which the second plaintiff is a cross defendant and cross claimant and the second defendant and Guy Carpenter UK are cross defendants to the second plaintiff's 33rd cross claim." 11 To a great degree, this matter involves a value judgment. To my mind it is unacceptable to have eight versions of a statement of claim. I am not at all moved by the suggestion that the variations in some of the versions were only of marginal significance because anyone who is receiving an amended claim needs to read it again thoroughly. Especially in commercial litigation the Court expects that the claim will be properly thought out and properly presented in the most expeditious fashion. That did not occur in this case. 12 Then there is the proposition that the second defendant only started complaining in March 2004. That may be so and I accept that before that time there may well have been some without prejudice discussions which meant that the technical issues went off the boil. 13 It seems to me that this is a case for indemnity costs because the allegations made were not supportable and at least for some period of months they were made in an unacceptable form, and indeed contrary to the facts, a matter which in due course was conceded. 14 Mr Finch submitted that if I were of this view I should make an order for indemnity costs only as to issues. There is, of course, some merit in that suggestion but I do not consider that the present case is one where it is really possible to separate out issues so far as they affect the second defendant. 15 Accordingly, in due course I will make an order that the plaintiffs pay an appropriate part of the second defendant's costs on the indemnity basis. 16 The next matter to consider is whether the costs should include costs of non-NSW solicitors acting and doing solicitors' work in the current litigation. 17 I should note here that there are running in the Commercial List of this Division parallel proceedings in which Ingot Investments Pty Ltd and others are the plaintiffs ("the commercial proceedings") in which more or less identical issues are raised as in the current proceedings. 18 Mr Finch says that it is very difficult to work out what work was done in order to deal with the striking out of the statement of claim against the second defendant in the current proceedings and what work was done in the commercial proceedings. He suggests that the way to deal with the problem is to make the costs in the present case costs in the Ingot proceedings. 19 I will put this aside for the time being and deal with the discrete question of work done by foreign solicitors. 20 Mr Pembroke put forward a series of authorities. Dealing with these in chronological order one starts with McCullie v Butler [1962] 2 QB 309. In that case in an English action the plaintiff had moved to Scotland and Scottish solicitors did a considerable amount of work in Scotland that would normally be done by solicitors. Diplock J at 313 said that the costs and expenses of the Scottish solicitors were properly charged as disbursements, the proper amount to be allowed being the proper rate of charge in Scotland. 21 Mitchell v Mitchell (1971) 19 FLR 100 was a decision of the Supreme Court of Tasmania. In that case a matrimonial cause was moved from Brisbane to Darwin to Hobart, the respondent instructed Brisbane solicitors who instructed in due course a Hobart firm to act as her solicitors in Tasmania. At 107 Neasey J ruled that the taxing officer was correct in allowing the respondent her costs properly incurred with the Brisbane solicitors. 22 Next is a decision of the Northern Territory Court of Appeal in Elders Trustee & Executor Co Ltd v Herbert (Estate of) (1996) 111 NTR 25. There, costs were incurred by South Australian solicitors, although the action was heard in Darwin. The South Australian solicitors were the principal solicitors and the Northern Territory solicitors their agents for the purposes of the contract, but so far as the Court was concerned, the Darwin solicitors were the principal solicitors, but they were entitled to include the South Australian solicitors' costs as disbursements and they were properly allowed by the taxing officer. A similar case occurred in Queensland in Maggbury Pty Ltd v Hafele Australia Pty Ltd (No 2) [2002] 1 Qd R 183 (Wilson J). 23 Again Mr Finch does not quarrel with the concept. However, he says in the present case the problem is who was the solicitor and who was the agent. 24 I am not too sure whether that is really a very deep question. The Elders case in the Northern Territory, and indeed, the Mitchell case in Tasmania were both situations where the dominant solicitor lived outside the State where the court proceedings were involved and the court had no problem in treating for its purposes the local solicitor as being the solicitor and the so-called "principal" as the agent. 25 However, Mr Finch says that the majority of the costs incurred outside the jurisdiction had nothing to do with the pleading point involved in the present case. The bill of the English solicitors, Herbert Smith, is DX16. Looking at the bill a large amount of it appears to be items such as one English solicitor spending five and a half hours reading a letter and attachments and having a chat with his partner for which the client was billed 1,100 English pounds. The great majority of the bill, indeed, appears to be of this nature. Sitting, conferring and considering is billed at 207,000 English pounds. The whole of the NSW proceedings, so far as I was concerned, could have been dealt with by local solicitors without people in London sitting, considering and talking to each other and I cannot see how any of the Herbert Smith bill should be allowed in the present proceedings. 26 However, it may be that some of it is relevant to the present proceedings though the majority, if allowed by the costs assessor at all, would be properly allowable in the Ingot proceedings. 27 Thus I consider that Mr Finch's suggestion that this be part of the Ingot bill is a sensible one and should be followed. 28 The final issue is whether the Court can or should make an award of costs in favour of a non-party having connection with the case. 29 Again the principles of law are not in dispute. The Court has the power to award costs in favour of a non-party in its discretion; see Knight v FP Special Assets Ltd (1992) 174 CLR 178; Re Pan Pharmaceuticals Ltd (2004) 48 ACSR 681 and Petrovski v Radin [2000] NSWSC 323 at [16], a decision of Sperling J. 30 Again Mr Finch says that although Guy Carpenter UK did not actually appear, it might well be allowed its costs on the strike-out application and application for leave to amend but otherwise the costs should be left to the Ingot proceedings. 31 There is a lot of good sense in this suggestion and in my discretion I will adopt it. It seems to me looking at the bill, that it is extremely difficult even for the most experienced cost assessor to make the dissection between the cases without spending a large amount of time, chargeable time, which expense can easily be avoided. 32 Accordingly, I will make orders 1 to 3 in Mr Finch's document which I have set out above adding to orders 1 and 2 at the end, the words "on the indemnity basis". I will grant liberty to apply in case I have missed some nuance in melding in Mr Pembroke's submission on the first point with Mr Finch's submissions. 33 The voluminous exhibits should be returned. ********************* 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. 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