Queensland Judgments
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Allen v O'Donnell & Anor (No 2)

Unreported Citation:

[2021] QSC 149

EDITOR'S NOTE

At issue in this significant costs-related application is whether or not the applicant was entitled to the disclosure of the respondent’s costs agreement with its solicitors. In considering this issue, Crow J helpfully explained the application of the indemnity principle, as well as setting out the general principles governing when an applicant might be entitled to the disclosure of a costs agreement.

Crow J

23 June 2021

Mr Allen commenced proceedings against the first defendant and his insurer, the second defendant, for personal injuries suffered as a result of a motor vehicle accident. [1]. He was successful at trial, with judgment for approximately $2.5 million being granted in his favour. [2]. However, that amount did not exceed the defendants’ mandatory final offer, which means that Mr Allen was liable to pay the defendants’ costs. [2].

At issue in this application was whether Mr Allen ought to be granted production of the costs agreement between the second defendant and its solicitors. [3]–[4]. Mr Allen sought production on the grounds that costs agreements between CTP insurers and their solicitors could make provision for stage-based assessments and payments of costs which may reduce an insurer’s ultimate liability for costs. [5]. Accordingly, he contended that the costs agreement might assist him in negotiating or arriving at an appropriate order to settle the costs. [5]. Although the second defendant filed a costs statement prior to the hearing of the application, Mr Allen persisted in his application. [6].

In considering this issue, Crow J started by setting out the indemnity principle which underlies a liability to pay costs. That is, his Honour identified that costs are intended to provide the party entitled to them with “some level of indemnity” for the legal costs they would not have incurred but for the litigation. [8]–[9]. Accordingly, the unsuccessful litigant is not required to pay more than the costs actually incurred by the successful litigant. [10]–[14]. His Honour considered that this principle applies both to places where there is no obligation to pay costs and where there was a lower liability for costs than would be allowed under the Uniform Civil Procedure Rules 1999 (“UCPR”). [15]–[16].

Crow J considered that, contrary to the second defendant’s submission, the allegation made by Mr Allen was that the second defendant may not have been liable to pay costs on a full fee basis, and that the second defendant’s liability under the costs agreement was relevant to that allegation. [18]. The second defendant also sought to distinguish between indemnity costs ordered under r 703 of the UCPR, which expressly requires a cost assessor to consider any cost agreement, and standard costs under r 702, which does not. [19]–[20]. Crow J did not accept this submission, holding that r 702 is concerned with the mechanics underlying the assessment of costs on a standard basis, and that even in respect of standard costs, a party cannot be indemnified for costs they did not incur. [21]–[24]. Accordingly, his Honour found that, where liability under a costs agreement is less than the liability as assessed under the Schedules to the UCPR, costs should be assessed under the costs agreement rather than the schedules. [23]–[24].

Turning then to the question of whether production should be ordered, Crow J considered that, generally, a costs agreement will not attract legal professional privilege. [25]. While his Honour noted that there might be exceptions to this, such as where the agreement contains material that expressly or impliedly conveys legal advice, there was no evidence that the costs agreement at hand conveyed legal advice. [26]. The principles governing an order for production of a costs agreement are the same as those for access to documents produced in answer to a subpoena. [27]–[28]. While evidence might usually be produced to show this, it will be limited in cases such as the one at hand, given the applicant seeks production of documents not in their possession. [30]. Crow J noted that the Court must take care not to simply accept an assertion by a respondent that the indemnity principle has not been breached. [34].

Ultimately, Crow J considered that there was sufficient evidence to support the proposition that the assessed costs may be greater than the second defendant’s actual liability to pay costs. [36]. Accordingly, his Honour ordered that a copy of the costs agreement be disclosed. [36].

M Paterson

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