Unsuccessful litigants hit by indemnity costs

A Queensland chemical factory’s owners who sued their broker have had costs awarded against them on an indemnity basis.

As reported in the December 2014 issue of Resolve, last October Hamcor Pty Ltd (trading as Binary Industries) and the executors of Terrence Arthur Armstrong’s estate, owner of the factory building, failed to have Marsh held liable for the company being uninsured for runoff damage to the property and neighbouring land after a fire 10 years ago.

On April 8, Qld Supreme Court Justice Jean Dalton awarded costs on an indemnity basis to Marsh Pty Ltd and a Marsh authorised representative, Otago Pty Ltd, from October 14, 2011, the day a Calderbank offer to Hamcor and Mr Armstrong to “walk away” expired.

She said it was “uncontroversial” the “erstwhile brokers” were entitled to costs; the dispute was about whether costs ought be paid on an indemnity basis.

Justice Dalton said the brokers’ Calderbank letter plainly stated on the first page that if the letter were not accepted the brokers would rely on it as the basis for seeking indemnity costs. “The points raised in the letter were good and sufficient,” she said.

While accepting they had to pay costs, Hamcor and Mr Armstrong’s estate argued it was wrong to award them on an indemnity basis. They said their refusal to accept the offer was not unreasonable because the offer was made before evidence had been tested in court.

Justice Dalton said: “It is true the Calderbank offer was made before a defence was filed, but the offer itself succinctly stated the factual basis why the duty alleged by the plaintiffs was most unlikely to succeed.

“In any event the weakness in the plaintiffs’ case would have been apparent on their own documents (including the policy wording they relied upon) and the instructions from Donald Hayward [a Binary Industries director] and Terrence Armstrong [the managing director, who died after the trial but while judgement was reserved] as to the circumstances of their dealings with the [brokers].”

Justice Dalton said Hamcor and Mr Armstrong’s case was weak and that was clear from the start. “The case ... had no worthwhile prospects of success, and that should have been apparent ... before [starting] the proceeding,” she said.

“The offer succinctly stated the factual basis why the breach of duty alleged by [Hamcor and Mr Armstrong] was most unlikely to succeed.”

She said their refusal to accept the offer was unreasonable. “At the time it was made, the only case pleaded was based on the indemnity policy. The plaintiffs relied on a novel assertion the brokers owed them a duty of care, and the very unlikely contention the liability policy would have responded to the loss they had suffered.”

(Hamcor Pty Ltd & Anor v State of Qld & Ors (No 2) [2015],QSC 69, 08/04/15; Hamcor Pty Ltd & Anor v State of Qld & Ors [2014] QSC224, 01/10/14)