Any Interest in Determining Costs Orders?

Key Points

• Pre-judgment interest is taken into account in determining whether jurisdictional thresholds are met.

• When an insurer relies on a defence of fraud and fails to prove it, it is very unlikely to successfully argue that the insured cannot rely on an offer of compromise because it has been served prior to service of the insured’s evidence.

In Averkin v Insurance Australia Limited (No 2) [2016] NSWCA 150, the NSW Court of Appeal determined costs issues arising from an insured’s successful appeal against a District Court decision which had found that an insured’s claim with respect to a $38,870 agreed value motor vehicle policy was fraudulent.

The District Court Rules presume that a successful plaintiff will not be entitled to a costs order in its favour if the judgment is for an amount less than $40,000. However in determining that amount, pre-judgment interest should be included. The effect of that calculation in this matter took the judgment to over $40,000 and the insured plaintiff was therefore entitled to a costs order. The Court warned however that, if the threshold had been met as a result of interest accruing because of delay, the discretion to award costs may not be exercised in the plaintiff’s favour.

In addition, the plaintiff had made an offer of compromise for $33,100 inclusive of interest prior to the trial at first instance. Ordinarily the onus lies on the unsuccessful party to establish a basis for displacing the presumption that a special costs order be given in favour of a successful party who had served and “beaten” a valid offer of compromise. The insurer argued in this matter that the presumption should be displaced because at the time of the plaintiff’s offer of compromise the insured had not served its evidence and therefore it was not unreasonable for the insurer not to have accepted it. The Court of Appeal rejected this argument pointing out that the insurer was aware that its only defence was that of fraud, a defence which it had to prove based on its own evidence.

Post by Paul Hendriks