Federal Court of Australia

Allianz Australia Insurance Limited v Uniting Church in Australia Property Trust (NSW) (No 2) [2025] FCAFC 94

ORDERS

THE COURT ORDERS THAT:

1.    The respondent is to pay 85% of the appellant’s costs of the proceedings at first instance, inclusive of:

(a)    the costs of, and incidental to, the reference ordered by the primary judge on 27 April 2023; and

(b)    any reserved costs,

on a standard basis.

2.    Liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    On 7 February 2025, this Court delivered judgment and orders in Allianz Australia Insurance Limited v Uniting Church in Australia Property Trust (NSW) [2025] FCAFC 8 (Allianz v UCPT (FC)). In short, Allianz Australia Insurance Limited (Allianz) was successful, and paragraphs 3 – 21 of the declarations and orders made by the primary judge in Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Limited (Liability Judgment) [2023] FCA 190 (UCPT v Allianz) were set aside (and the proceedings below otherwise dismissed).

2    The respondent (UCPT) was ordered to pay Allianz’s costs of the appeal. I was also prepared to find that it should pay Allianz’s costs of the hearing at first instance: Allianz v UCPT (FC) [581]: though Colvin and McEvoy JJ concluded that it should be afforded the opportunity to advance submissions as to why it should not be ordered to do so: Allianz v UCPT (FC) [869]. As these reasons demonstrate, their Honours were correct to adopt that view.

The submissions advanced

3    Section 43(2) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) imbues the Court with a broad and unfettered discretion to award the costs of a proceeding. That discretion is to be exercised judicially, not arbitrarily or capriciously or on grounds unconnected to the litigation, but having regard to the justice of the particular circumstances of the case involved: see Norden Holdings Pty Ltd (Trustee) v Martens Investments Pty Ltd (Trustee), in the matter of Amazonia IP Holdings Pty Ltd (No 4) [2025] FCA 662 [55], citing Minister for Immigration, Citizenship, Migrant Services & Multicultural Affairs v Mukiza [2022] FCAFC 105 [4].

4    On one view, being that of Messrs Potts SC and Conde for Allianz, there was:

… no reason why Allianz should not have its costs of the proceedings below. Allianz has had substantive success. The costs of the proceedings before the primary judge should follow Allianz’s success on appeal, consistently with the ordinary rule: Gladstone Park Shopping Centre Pty Ltd v Wills (1984) 6 FCR 496 at 505 (Davies J), 509 (Beaumont J, Northrop J agreeing at 504).

5    On another view, being that of Messrs Williams SC and Riordan for the UCPT, it:

… would be appropriate for this Court to make an order as to the costs of the proceeding in the court below by awarding the UCPT a percentage of its costs [(25%)] to reflect that it succeeded on its claims, albeit not on all of them.

6    In broad terms, this latter submission was predicated upon three propositions. First, it was said that, following the decision in Allianz v UCPT (FC), “it remains the case that the UCPT was the successful party in obtaining relief (albeit that it has now failed on a substantial part of the relief it claimed)”. The basis for such submission appears to lie in the fact certain substantive relief awarded to the UCPT at first instance – being a monetary judgment in the amount of $839,952.89 and declarations of indemnity vis-à-vis potential third-party claimant (PTPC) 1 – was not challenged on appeal (and, therefore, was neither addressed nor reversed). Second, it was said that “other than in exceptional cases, a successful [party] will not be deprived of its costs simply because it failed on some issues” (citing Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61, 131 – 132 [300] – [303] (Apotex)). Third, it was said that the making of a partial costs order in favour of the generally successful party was preferable to “the making of competing orders for costs to reflect each party’s success on discrete issues” (citing Hockey v Fairfax Media Publications Pty Ltd (2015) 237 FCR 127, 149 – 150 [117] – [123]).

Defining the “successful” party

7    The submissions of the UCPT helpfully focus attention upon a central issue for determination, being the nature of the substantive outcome in these proceedings.

8    The total value of the claims advanced by the UCPT is not readily susceptible to quantification. It must, however, be substantial. For instance, it appears that the value of the known claims of (53) third-party claimants (TPCs) sought to be visited upon Allianz is at least $40m. The UCPT sought further declarations which would have exposed Allianz to additional liability in relation to at least 139 PTPCs. Adopting a broad comparison, given the number of the claims that were made and the liability sought to be imposed upon Allianz, the inherent value of any judgment given in favour of the UCPT (had it proven wholly successful) could very well have exceeded $100m. Although that hypothesis must necessarily be tempered by the existence of the limits of the relevant policies, it sufficiently demonstrates the magnitude of the UCPT’s overall claim.

9    By comparison, those areas on which the UCPT claims to have “succeeded” are rather minimal. To rehearse the drafting of its written outline of submissions, it is said that:

1.    At first instance, the UCPT obtained the following relief:

(a)    a monetary judgment of $839,952.89;

(b)    declarations of indemnity in relation to PTPC 1;

(c)    declarations of indemnity in relation to the balance of the TPCs, PTPCs and APs [(Alleged Perpetrators)].

…

3.    It is only the declarations at [1(c)] above which have now been overturned on appeal. …

10    The quantum of the monetary judgment awarded at first instance, albeit substantial in itself, pales in comparison to the totality of the claims advanced. It is noted that this award related to amounts paid to certain claimants (TPCs 2, 3, 4, 5, 7, 8 and 10) who, despite having previously settled their claims as against the UCPT, had subsequently communicated an intention to seek an increase to their compensation following the introduction of the Civil Liability Amendment (Child Abuse) Act 2021 (NSW) (the Supplementary Claims): see UCPT v Allianz [457], [225].

11    There exists some disputation as to the occasion upon which the Supplementary Claims became the subject of a claim for indemnity. In October 2017, Allianz was made aware of the intention of certain TPCs to agitate the Supplementary Claims. It promptly sought the provision of further information as to the premise and merits of such claims and was, in turn, informed of the willingness of the UCPT to entertain the making of “modest ex gratia payments” to each of the relevant TPCs (up to $80,000 per person). Perhaps not unsurprisingly, Allianz indicated that it did not intend to be financially involved in the making of any such “top-up” payments.

12    On the material before the Court, it appears the UCPT proceeded to make payments in respect of the Supplementary Claims. Formal claims for indemnity as to those payments were (a) made by the UCPT on 19 September 2022 (being well after the proceedings had commenced before the primary judge); and (b) accepted by Allianz on 25 November 2022 (being within a month of receiving discovery and, notably, well in advance of the final addresses in the proceedings).

13    This is relevant to the extent it negates the suggestion that the UCPT was required to commence the litigation to secure the relief that it did. Rather, this shows that, whilst payments in respect of the Supplementary Claims became one part of the overall dispute, they were not the subject of the essence of the cause of the litigation.

14    Ultimately, it is self-evident that the costs relevant to the raising of these Supplementary Claims and the consent to them by Allianz, would have been minimal when compared with the overall cost of pursuing the major relief which the UCPT sought. That is, the circumstances in which Allianz responded to the Supplementary Claims (and the obtaining of the monetary judgment) did not significantly alter the nature and extent of the issues in the proceedings before the primary judge nor the cost of their determination. Nor did they relevantly impact upon the evidence led in the proceedings or the duration of the hearing.

15    Further, and on any objective view, it would be very difficult to disentangle the costs associated with the Supplementary Claims from the remainder of the costs of the proceedings. Necessarily, the solicitors involved in dealing with these claims as they arose would have been otherwise intimately involved in the conduct of the action and any attempt to isolate those costs exclusively associated with the Supplementary Claims from costs otherwise expended would (a) be fraught with difficulty; (b) require a lengthy, costly process; and (c) likely be inaccurate.

16    With respect to the UCPT’s second alleged ground of “success”, it is noted that the declarations of indemnity in relation to PTPC 1 arose from a letter written to Knox Grammar School on 30 June 1999 in relation to the alleged assault of a pupil. Allianz made several concessions vis-à-vis this notification before the primary judge and, consequently, the declarations were not the subject of any substantial consideration in UCPT v Allianz. It appears no claim has materialised in relation to the allegations advanced and, ultimately, the declarations concerning PTPC 1 may reasonably be said to be rather minor when compared against the totality of the claims made.

17    The UCPT also claimed that it had some “success” on some issues of law and, in particular, in relation to the legal argument with respect to the operation of s 40(3) of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act). Although it may be accepted that it did succeed on certain legal arguments in some way, that did not, in any way, affect the result of the appeal or the proceedings before the primary judge.

18    Ultimately, although the UCPT had some small measure of success in the proceedings, any that it did achieve was relatively minor in comparison to that which it failed to achieve. As such, the question of costs should be approached upon the basis that Allianz was the successful party overall, including at first instance, with the consequence being the appellant should, generally speaking, be entitled to its costs before the primary judge.

A reduction in costs because the UCPT was required to commence proceedings?

19    Despite the foregoing, the UCPT did pursue proceedings in relation to the numerous claims on its related associations or boards, arising from the sexual abuse of students and, to a small degree, it successfully obtained some positive outcomes in the nature of a money judgment and declarations. In a broad sense, it might then be said that it was required to litigate to obtain the relief that it did, and some recognition of that should be reflected in the costs orders. It is impossible to know what the position would have been had the UCPT not commenced the litigation though, as it has been hard-fought on both sides, it might fairly be presumed that it is unlikely that Allianz would have capitulated to the extent that it did in the face of the pending hearing. In such circumstances, it is appropriate to reduce Allianz’s entitlement to the costs of the proceedings before the primary judge by 15% to reflect the small measure of success that was achieved by the UCPT. While that may appear to be somewhat generous to the respondent in the circumstances, it is necessary to adopt a broad-brush approach to such assessments.

A reduction in costs because of the abandoned defence of non-disclosure?

20    It was said by Messrs Williams SC and Riordan that the UCPT was entitled to the costs of the “considerable work” that it undertook “in meeting, and responding to, Allianz’s non-disclosure case under s 21 of the [Insurance Contracts Act]” prior to the abandonment of such defence on 26 September 2022 (being some six weeks before the hearing before the primary judge).

21    It is undoubted that additional time and money was so expended; however, it does not follow that the work undertaken by the UCPT in that respect was necessarily nugatory. For instance, it may reasonably be thought that the facts revealed by the evidence relating to the non-disclosure case were of some relevance to the question of the applicability of (a) s 40(3) of the Insurance Contracts Act; and/or (b) “Exclusion 7”, which purported to exclude cover in relation to claims that arose from facts of which the insured was aware of prior to the inception of the relevant policy: see Allianz v UCPT (FC) [604]. Inevitably, evidence pertaining to the non-disclosure of LKA2 bore some relevance to the issue of the pre-policy knowledge of persons within the Uniting Church in Australia and its agencies. In that sense, it may be said the “non-disclosure defence” shared a common substratum of fact with the “s 40(3) defence” in that the decisive issue, on either case, was who knew what when. This, it might be observed, was a substantial part of the disputed issues on appeal: see, eg, Allianz v UCPT (FC) [72].

22    Much the same can be said as to the relevance of evidence relating to the issue of non-disclosure to the question of the attribution of knowledge to the insureds (that being a substantive question addressed by both the primary judge: see UCPT v Allianz [585] – [673]: and the Full Court: see Allianz v UCPT (FC) [211] – [338], [773] – [799]).

23    In the circumstances, although it is true that some costs will have been wasted in relation to the abandonment of the non-disclosure defence, it is far from apparent that they are substantive in the scheme of the litigation. There is no substance in the submission that the amount of costs to which Allianz is entitled should be diminished by the amount spent in relation to the non-disclosure defence, even if it were possible to disentangle them (which it is not).

24    Moreover, it is not necessarily apparent that, because a successful defendant did not succeed on one of the defences (by way of abandonment), it should be denied its costs. Indeed, it will be recalled that the UCPT characterised the reasoning of the Court in Apotex as follows:

… there is a longstanding line of authority that, other than in exceptional cases, a successful applicant will not be deprived of its costs simply because it failed on some issues, and courts will not usually attempt to differentiate between those issues when exercising the discretion as to costs: Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [300]-[303].

25    If that assertion of principle is correct, it must apply with equal force to Allianz as the successful defendant. Here, Allianz successfully defended the UCPT’s claims and, it follows, there should be no deduction for wasted costs, if any, flowing from the abandoned non-disclosure defence.

The costs of the reference made by the primary judge

26    A further question arises in relation to whether the costs of the proceeding below should include the costs of a reference which occurred pursuant to the orders of the primary judge of 27 April 2023. By those orders, his Honour referred certain questions regarding the settlement of claims by the UCPT to a referee. The referee was to determine whether (a) the claims made against the UCPT had been resolved for “reasonable amounts”; (b) the expenses said to have been incurred by the relevant TPCs, which, in turn, had been paid by the UCPT, were “reasonable”; and (c) the expenses incurred by the UCPT in reaching the settlements were “reasonable”. This process was instituted to assess the amounts payable by Allianz under its policies in accordance with the substantive determination of the primary judge in UCPT v Allianz.

27    The expense incurred in the conducting of the references has been rendered redundant by the result in the appeal and, naturally, Allianz asks that they be included within the scope of the orders for costs in relation to the proceedings below. For the reasons below, they should be.

28    In the first instance, the costs of the references are costs of the proceedings before the primary judge, and no good reason was given as to why they would not be subsumed by an order that Allianz have its costs of those proceedings. It is irrelevant that they were incurred following the handing down of the primary judge’s decision, as they are, and remain, costs of that action.

29    Further, it is relevant that Allianz opposed the making of the reference orders on the basis of the then pending appeal and, in so doing, submitted that the costs of the reference would be wasted if the appeal succeeded. As the transcript of the hearing before the primary judge on 27 April 2023 reveals, his Honour was initially minded to delay the making any reference orders, but was persuaded by Mr Williams SC for the UCPT that, if the appeal was successful, the costs of the reference would be payable by the UCPT. The following exchange occurred:

HIS HONOUR: Well, I suppose you would say that the costs of the reference process would be costs ultimately – if you were unsuccessful on any appeal would be costs that be payable by you in any event. So there’s no real prejudice.

MR WILLIAMS: That’s right.

HIS HONOUR: Yes.

MR WILLIAMS: If we lose, we lose.

HIS HONOUR: Yes. All right. Thank you.

30    In these circumstances, there can be no real question that the costs of the reference should be included in any costs order now made in relation to the costs of the proceedings below. The UCPT accepted that if the appeal was successful, it would be liable for the costs of the reference and, now it has “lost”, it would be entirely inappropriate to allow it to reprobate that position.

The UCPT’s claimed success on the reference

31    The UCPT asserted that it should be entitled to an order that it have the cost of the wasted references on the basis that it had been successful before the referee. It appears that both the UCPT and Allianz filed 27 different submissions in relation to the issues before the referee addressing, inter alia, the reasonableness of the settlements, the defence costs, and the expenses incurred in respect of those claims. As detailed in the affidavit of a Mr Ashley Tsacalos (filed 28 February 2025) additional substantial work was undertaken in relation to the references, including the delivery by the UCPT to Allianz of numerous “notices to admit” in relation to the reasonableness of the issues which the referee was to determine. Ultimately, it does not appear to be controversial that, despite the position taken by Allianz in relation to the disputed settlements before the referee, the UCPT prevailed in the overwhelming number of cases.

32    Despite that apparent success, no costs would have been incurred by either side had the UCPT not sought to progress the reference process as it did in the face of Allianz’s resistance and the extant appeal. There was a real possibility the costs of doing so would be wasted if, as matters transpired, Allianz proved successful on appeal. The UCPT was prepared, and indeed indicated its preparedness, to assume the risk of bearing the costs if the reference proceeded. Having done so, it is disingenuous for it to now disavow that earlier preparedness and seek payment of any part of the wasted costs, including those evidential matters on which it succeeded.

33    Moreover, the UCPT did not genuinely succeed in the reference process. Though the referee may have agreed with its claims as to the reasonableness of the amounts of the settlements and of each parties’ costs of reaching them, the referee’s report has not been adopted by the Court. It, therefore, remains uncertain whether the findings of the referee would have been accepted.

34    It follows that there is no basis to discount Allianz’s entitlement to the costs of the proceedings before the primary judge by reference to the reference process or any attendant findings.

Conclusion

35    On any rational view, Allianz was the party that achieved substantive success in the litigation. It is, therefore, generally entitled to recover the costs of the action. While it did not appeal the orders of the primary judge in toto, those matters which were not re-agitated were peripheral to issues between the parties, and the relative cost and time associated with them was minor. Though Allianz had raised and maintained a defence of non-disclosure for a substantial period of time, the time and cost associated with the legal work in relation to it could not be adequately disaggregated from other related issues in the proceedings. Despite the pendency of the appeal, the UCPT agitated for the referral of particular questions to a referee and conceded that, should the appeal be successful, it would bear the costs of it. In any event, there is no basis to saddle Allianz with the costs of a reference process which did not complete.

36    Despite those matters, there should be some recognition the UCPT commenced the proceedings for indemnity under its policies with Allianz and, ultimately, did secure some relief. Though that relief was somewhat tangential in the scheme of the issues between the parties, a reduction in the costs it is obliged to pay in relation to the costs of the unsuccessful action is warranted.

37    For the foregoing reasons, an order should be made that the UCPT pay Allianz 85% of its costs of, and incidental to, the proceedings before the primary judge, such costs to include the costs of, and incidental, to the reference ordered by the primary judge on 27 April 2023.

Associate:    

Dated:    25 July 2025

REASONS FOR JUDGMENT

COLVIN J:

38    For the reasons given by Derrington J, I agree with the orders proposed by his Honour concerning the costs of the proceedings before the primary judge.

Associate:

Dated:    25 July 2025

REASONS FOR JUDGMENT

mcevoy j:

39    I also agree with the orders proposed by Derrington J concerning the costs of the proceedings before the primary judge for the reasons that his Honour has given.

Associate:

Dated:    25 July 2025