Yesterday, the High Court delivered judgment in the matter of
Selig v. Wealthsure Pty Ltd  HCA 18.
At a Glance
The significance of this decision is in the orders for costs
that were made by the Court. Of interest to insurers in this
particular case, is that the Court determined that the actions of
QBE (the insurer of the unsuccessful respondents) in pursuing the
appeal, where sufficient to warrant an order that QBE pay the
costs. This is contrary to the usual order that the defendants
themselves (rather than their insurer) pay the costs.
Whilst to many this may not seem unusual as insurers would
ultimately be liable for the insured's costs under the
indemnity policy, what makes this decision different is that by
ordering QBE themselves to pay the costs they fall outside the
scope of the policy and therefore they are in addition to rather
than contained within the policy limits.
This is a timely reminder that insurers cannot always rely on
the limits of a particular policy to protect them against excessive
costs orders. This is especially the case when the costs of the
litigation might erode the indemnity available as courts will be
more inclined to this type of order if it means protecting the
insurance funds available to meet any judgement.
In determining the appeal, the appellant sought an Order that
the professional indemnity insurer (QBE, a
non-party), pay the costs of the appeal and the costs of
the appeal in the Federal Court.
The Court made the Order noting the insurer had the conduct of
the defence in the matter at trial and consequently, made the
decision to appeal from the judgment of the primary judge. The full
Federal Court had accepted that the insurer had the right to
conduct the appeal on behalf of the first and second respondents
(after the second respondent's trustee in bankruptcy elected to
discontinue the appeal).
In considering whether to make the Order, the Court noted that
there is no specific rule as to when this type of Order for costs
will be made against a non-party but noted that it could
be made against the non-party if the interests of
justice required that it be made.
The Court noted the decision to appeal was made at a time when
the first and second respondents had no interest in the outcome of
the litigation and found the insurer was acting for its own benefit
in conducting the litigation, seeking to better its position. In
deciding to make an Order for costs the Court noted the
insurer's decision to continue with the appeal, reduced the
amount of funds available to pay the appellants by virtue of its
own increasing legal costs which were eroding the sum insured. The
conduct of the insurer put the appellants at further significant
It is a landmark decision insurers should be conscious of,
especially when the conduct of the litigation might erode the
indemnity available. It will inevitably lead to an increasing
acceptance by Courts of the ability to make Orders of this kind
Whilst the risk of an Order of that nature has perhaps always
existed, the strength of the pronouncement by the High Court
highlights the availability of the Order. It makes decisions
regarding litigation more challenging and complex. The test adopted
by the High Court, "in the interests of justice" means
that factors that will be taken into account will be broad, and
places significant focus on commercial considerations.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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