Richmond Valley Council v JLT Risk Solutions Pty Ltd (No 2)

I gave judgment dismissing the plaintiff’s claims in these proceedings on 19 December 2022: Richmond Valley Council v JLT Risk Solutions Pty Ltd [2022] NSWSC 1761 (the principal judgment). These reasons concern the costs of the proceedings. Familiarity with the principal judgment is assumed.

The plaintiff’s claims were dismissed because the defendant did not provide the alleged broking services or make the alleged recommendations that were the subject matter of the causes of action in contract, tort, and for breach of fiduciary duty. [1] In addition, the plaintiff failed to establish the annual broking services contracts that it claimed to have entered into with the defendant and the duties of care and fiduciary duties which it alleged the defendant had breached. [2] It followed that the plaintiff also failed to establish the alleged breaches of contract and duty. [3]

In case of any appeal, I set out the reasons why, even if it had succeeded in relation to the matters above, I would have held that the plaintiff had failed to prove its claims for damages and equitable compensation [4] for alleged losses of opportunities to obtain suitable alternative insurance and/or to pay lower Statewide contributions that the plaintiff claimed the defendant should have negotiated on its behalf. [5] Many of the causation counterfactuals relied on by the plaintiff were outside the scope of its pleaded case. I reasoned that, even if they had been within the scope of the pleaded case, the plaintiff had not adduced evidence capable of establishing the existence of opportunities for the plaintiff to obtain suitable alternative insurance in the commercial insurance market. In doing so, I rejected the plaintiff’s submissions about how the legal principles applicable to claims for loss of opportunity applied to the plaintiff’s claims in this case that it lost opportunities to obtain suitable alternative insurance contracts in the commercial market in multiple insurance years. I rejected the plaintiff’s contention that the evidence that it had adduced was sufficient to prove the alleged loss of opportunities in accordance with the applicable principles. [6] The plaintiff’s approach to endeavouring to prove the allegedly lost opportunities was an inferential one, by which it sought to draw inferences favourable to its case in relation to each insurance year in question from evidence concerning the insurance market generally, evidence of insurance policies obtained by other local councils (with different assets, activities and risk profiles than the plaintiff) and evidence of insurance obtained by the plaintiff in the commercial insurance market in later years than the insurance years relevant to the proceedings. The plaintiff did not adduce any evidence of the matters that the defendant’s expert witness, Mr Fagen, had identified as being fundamental to a prospective insurer’s decision whether to offer insurance to the plaintiff, and on what terms, in any particular insurance year. The shortcomings in the plaintiff’s evidence, and the evidence of its own expert witness under cross-examination, which undermined the plaintiff’s approach to endeavouring to prove the alleged loss of opportunities, are described in the principal judgment at [645]-[648].

In relation to the alleged loss of opportunities to pay lower Statewide contributions, I reasoned that the alleged opportunities did not exist because the defendant would have been in breach of its obligations under the deed governing the Statewide mutual risk pool if it had sought to negotiate lower contributions on behalf of the plaintiff. Both the plaintiff and defendant were parties to that deed at the times of the alleged breaches. [7]

The plaintiff accepts that it should be ordered to pay the defendant’s costs of the proceedings. It submits that those costs should be payable on the ordinary basis.

The defendant seeks an order that the plaintiff pay its costs on the ordinary basis until 27 August 2021 and on an indemnity basis from 28 August 2021, being the date on which the defendant served its expert insurance broking and underwriting evidence, including Mr Fagen’s evidence referred to above. The defendant submits that, the plaintiff must have known from that time that, if it proved the alleged breaches of contract, negligence and breaches of fiduciary duties, its claim for damages and equitable compensation was nevertheless hopeless because it would be unable to establish the matters necessary for it to prove that such breaches had caused it to lose opportunities to obtain suitable alternative insurance and that such lost opportunities had some value. The defendant submits that the plaintiff should have already known that it had no chance of succeeding on its claims for damages and equitable compensation for loss of opportunities to pay lower Statewide contributions because those claims depended on the plaintiff establishing that the defendant owed duties to the plaintiff that were inconsistent with the defendant’s obligations to the plaintiff and other parties under the deed. The defendant submits that it therefore became unreasonable from 28 August 2021 for the plaintiff to continue the proceedings. The defendant points to transcripts of directions hearings at a relatively early stage of the proceedings in which senior counsel then appearing for the plaintiff made statements acknowledging that the plaintiff would need to prove the matters which the defendant says the plaintiff must have known from 28 August 2021 that it could not prove.

Both parties relied on the following passages from the judgment of Wigney J in Australian Competition and Consumer Commission v Colgate Palmolive Pty Ltd (No. 5) (2021) 151 ACSR 26; [2021] FCA 246 at [8]-[12], which I respectfully adopt as gathering the principles to be applied in determining the defendant’s application for indemnity costs:

As the defendant submitted, the plaintiff’s contention that suitable alternative insurance was available to it in the commercial insurance market was central to its allegations of breach of contract, negligence, and breach of fiduciary duty, as well as to the plaintiff’s claims for damages and equitable compensation.

Putting the pleading issues to one side, [8] I consider that the plaintiff’s case that it lost opportunities to obtain suitable alternative insurance in the commercial insurance market during each of the insurance years in question was a weak case. It relied on a particular interpretation of the applicable legal principles, and an application of those principles so interpreted to the particular circumstances of this case. I rejected the interpretation and application for which the plaintiff contended. Whilst the plaintiff’s contentions were weak, I do not consider that they fell short of being reasonably arguable. If the plaintiff’s submissions about the interpretation and application of the relevant principles had been accepted, then its claim for damages or equitable compensation for lost opportunities would still have been weak having regard to the nature of the evidence that it adduced in support of the claim, but it would not have been hopeless, in my opinion.

Statements made by the plaintiff’s legal representatives in the heat of exchanges with opposing counsel and the presiding judicial officer during directions hearings at an early stage of the proceedings indicated that the plaintiff intended, at that stage, to take a far more direct approach to establishing the alleged opportunities than the inferential approach which was ultimately taken and which failed. For the reasons explained above, I consider that the plaintiff’s apparent change in strategy for its evidence relating to the alleged opportunities, causation and loss, rendered its case extremely difficult to win, but not hopeless.

For those reasons, the appropriate exercise of the discretion under s 98 of the Civil Procedure Act 2005 (NSW) in this case is to order the plaintiff to pay the defendant’s costs of the proceedings on the ordinary basis, save for the costs of the defendant’s application for indemnity costs. The defendant should be ordered to pay the plaintiff’s costs of that unsuccessful application. The parties agree that the order for the plaintiff to pay the defendant’s costs of the proceedings should incorporate an exception for any interlocutory costs orders that have been made in the proceedings to date, with the intention that those costs orders are not disturbed.

The orders of the Court are as follows: