AAI Ltd t/a Vero Insurance v Solarus Projects Pty Ltd

Judgment 1BARRETT JA: The Court will give its decision now. Leeming JA will deliver the first judgment. 2LEEMING JA: The applicant (Vero) seeks leave to appeal from the decision of the primary judge to order a separate question pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW). The precise question the subject of the order was: "whether the plaintiff Solarus Projects Pty Ltd is an insured within the meaning of the Project Contract Works Insurance Policy issued to Glen Alpine Properties Pty Ltd and others numbered CT 5010377771 dated 2 May 2007 be determined separately from and prior to any other question of the proceedings." 3The respondent (Solarus) has commenced proceedings against Vero in the Common Law Division of this Court. Paragraphs 8 - 53 of its amended statement of claim contain allegations all of which are directed to the proposition that Solarus is an "insured" within one of the limbs of the definition of "insured" in a policy of insurance written by Vero. Vero's defence denies that Solarus was its insured. The balance of the statement of claim goes on to allege that the insuring clause applied to particular land owned by Solarus (on which was a partly completed residential building complex in Townsville), that there were two "occurrences" within the meaning of the policy (broadly speaking, heavy rain events in January-February 2008 and January-February 2009) each of which caused loss and damage to which the policy responded and of which Solarus gave notice to Vero. Even if Solarus is an "insured", Vero denies that it is liable to indemnify it for damage resulting from either the first or second occurrences. 4There is also a second plaintiff (GAP) to which it will be necessary to return, but which can be put to one side for present purposes. 5Plainly enough, if Solarus is not an "insured", Vero's policy will not respond and the proceeding will be dismissed irrespective of the outcome of the other issues raised on the pleadings. 6There was disputed evidence before the primary judge as to the way in which the question whether Solarus was an "insured" would be determined. The evidence adduced on behalf of Solarus was that that question would not involve leading testimonial evidence, but would be determined on business records and other documentary evidence. The solicitor for Vero said that it "may" require evidence to be given by four men who were directors or otherwise involved in the management of Solarus and related companies at relevant times, and three of the brokers involved in procuring the policy. The solicitor also gave evidence that the Court would be "required to make findings of credit in relation to [those] witnesses". A correcting affidavit was read which explained that the first of the three brokers identified had in fact died. There was no articulation in the affidavit of (a) the likelihood of Vero calling any or all of those potential witnesses, (b) any steps which had been taken by it to obtain proofs of evidence from those witnesses, (c) the matters as to which they would be cross-examined on their credit, or (d) how Vero was going to succeed in having its own deponents declared hostile and then cross-examined if counsel for Solarus chose not to take that approach. 7When the matter was heard, the insurer's position appears to have been refined. Attention was focused upon one man, Mr Bosganas, who was said to be likely to be called as a witness by Vero. Again, it was asserted that there would be, or would likely be, an attack on his credit. 8There was evidence to support a conclusion that there would be very substantial savings of time and cost in the hearing and determination of the separate question, as opposed to a trial of the whole proceedings, in the event that it was determined adversely to Solarus. There seems to have been no contest to Solarus's evidence that the hearing of the remaining issues could take in excess of two months, and the costs and disbursements were likely to be well in excess of $700,000 and could amount to $1-1.5 million. 9It was common ground before the primary judge that the starting point was the principles stated by Giles CJ Comm Div in Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141-142: "In the ordinary course all issues in proceedings should be decided at the one time, but separate decision of a question may be appropriate where, for example, the decision of the question is critical to the outcome of the proceedings and (at least if decided in one way) will bring the proceedings to an end. In particular circumstances the separate decision of a question may be appropriate even if it will not bring the proceedings to an end, such as where there is a strong prospect that the parties will agree upon the result when the core of their dispute is decided or where the decision will obviate unnecessary and expensive hearing of other questions, but such occasions must be carefully controlled lest fragmentation of the proceedings (particularly when the exercise of rights of appeal is borne in mind) brings delay, expense and hardship greater than that which the making of an order was intended to avoid. It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties' dispute." 10The primary judge recorded that the main difference between the parties was that Solarus contended that the approach in Tallglen must now be viewed through the prism of the Civil Procedure Act 2005 (NSW). His Honour acknowledged that the competing arguments and considerations were finely balanced, but decided to order a separate question. His Honour said that "whilst the Tallglen principle remained apposite and applicable", since the enactment of the Civil Procedure Act the exercise of procedural powers had changed, by reference to Aon Risk Services Australia Ltd v Australia National University [2009] HCA 27; 239 CLR 175. His Honour accepted Solarus's estimate of complexity, likely duration and costs of the proceedings and then stated at [24] that: "The critical question is, I think, the question of whether, on the basis of the issues to be contested, lay witnesses who are likely to be called on more than one issue are likely to be cross-examined as to their credit and whether it is would be better, in any event, to take all of their evidence once. I accept that Mr Martin will call Mr Bosganas to show that as managing director he exercised a fair amount of control over all the companies in the Bega Group at the relevant time. However, in my judgment, certainly at this preliminary stage, I cannot see that even if a finding is made at the separate hearing to that effect on the basis of his evidence, it can be decisive or determinative of the question of whether the plaintiff is, for instance, a company affiliated with the named insured." 11Plainly enough considerable deference must be given to the decision of the primary judge in the exercise of his discretion on a matter relating to practice and procedure, for the reasons given by Jordan CJ in In re the Will of F B Gilbert (1946) 46 SR (NSW) 318 at 323 and by the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177, especially where, as is the case here, the decision does not affect the parties' substantive rights. Sir Frederick Jordan cautioned against the potential of interminable delay and "costs heaped up indefinitely" if a tight rein were not kept on interference with such decisions. Without expressing any view as to the merits of the four published interlocutory decisions which have preceded that the subject of this application for leave, it is clear that their effect to date has been substantial in terms of delay and cost to the parties. 12One of those interlocutory decisions required the second plaintiff GAP to provide security for Vero's costs. GAP failed to do so. To the extent that the proceeding is advanced by GAP, it has been stayed for more than a year. 13Vero acknowledged, very properly, that it was necessary for it to establish House v The King error in the exercise of the discretion by the primary judge. It advanced essentially three points. The first is that his Honour was wrong to take the view that the Civil Procedure Act altered the principle stated in Tallglen. The short answer is that, in my view, his Honour was correct to observe that statute now obliges the Court to have regard to the matters contained in ss 56-57 and s 58(2)(b) of the Civil Procedure Act in making orders of a procedural nature such as that sought by Solarus. Both as a matter of form (expressly) as well as in substance, his Honour applied the principles of law enunciated in Tallglen while having regard to the matters to which statute required him to have regard. No error is disclosed in his having done so. 14Secondly, Vero contended that his Honour had failed to apply the principle stated in Tallglen, that it was necessary to "see with clarity that decision of a separate question will be beneficial". Vero also relied upon the statement in Tepko Pty Ltd v Water Board [2001] HCA 19; 206 CLR 1 at [170] that there should be a separate question only where the "utility, economy and fairness to the parties are beyond question". 15Contrary to Vero's submission, it was open to his Honour to conclude that the potential saving of hundreds of thousands of dollars of costs and weeks, if not months, of court time in the event that a separate question be ordered, whose determination was likely to be substantially documentary, satisfied the tests stated in Tallglen and Tepko. 16Thirdly, it was said in writing, although not orally, but correctly, that his Honour had paid no regard to the fact that the resolution of the separate question would not resolve GAP's claim against Vero. That submission was far from being at the forefront of those made by Vero before the primary judge (it was the last point raised in Vero's written submissions). In any event, in circumstances where that claim had been stayed for many months, and there was no evidence that the position would change, Vero has failed to establish that his Honour's failure to address the point would have materially altered his exercise of discretion. 17Further to all the above, it is difficult to identify any material injustice to Vero in the course adopted by his Honour. Plainly the question whether Solarus is an "insured" is a threshold question; if Vero's defence is correct, then there is every reason to determine it in advance. Both parties will be saved time and expense in that event. 18In The Age Company Ltd v Liu [2013] NSWCA 26; 82 NSWLR 286 at [13], Bathurst CJ said: "Generally speaking, it is only appropriate to grant leave in matters that involve issues of principle, questions of public importance or in circumstances where it is reasonably clear that an injustice has occurred by reason of error in the judgment, going beyond what is merely arguable." 19To echo the language in Liu, Vero has failed to demonstrate that there is error of principle, a question of public importance, or that it has suffered an injustice going beyond what is merely arguable. 20I return to the primary judge's view that cross-examination, including cross-examination on credit, was likely on the question identified for separate determination. It was confirmed by Vero's oral submissions that this was matter of inference, essentially to be drawn from the pleadings. It is not necessary to express a view on that finding made by the primary judge, which, as noted above, was favourable to Vero in accordance with what Vero had put to him. That is to say, if it ultimately turns out that evidence is not adduced of the four men, or the brokers, or there is no cross-examination of them, or no cross-examination of them on their credit, or if no credit based findings are ultimately made, then the considerations supporting the ordering of a separate question are simply all the more powerful. 21Accordingly, the reasons of the primary judge disclose no error sufficient to engage appellate review in accordance with the principles in House v The King. I propose that leave to appeal should be refused. There is no reason for costs not to follow the event. 22BARRETT JA: I agree, and would add two short observations. First, as to the effect of ss 56-59 of the Civil Procedure Act in relation to cases of this kind, I note the recent decision of Black J in Re Mutual Storm Limited [2014] NSWSC 615, where his Honour, after referring to the principles stated in the Tallglen case, said at [5]: "Nonetheless the Court may need to take a more interventionist role in ordering separate questions to reflect the requirements of ss 56-59 of the Civil Procedure Act and bring about the just, quick and cheap determination of the real issues in dispute." 23That seems to me to be an unexceptionable statement consistent with the relevant provisions and also consistent with the approach that the primary judge took in this case. Mr Martin has pointed to a number of cases in which orders for separate determinations have been sought and made since the advent of ss 56-59, but without any reference having been made to those sections. It does not follow from the lack of reference to them that those provisions stand in some subsidiary or subordinate position when an application of this kind is before the Court. 24The second observation is that Mr Martin's proposition that s 50AA of the Corporations Act 2001 (Cth) will assist in the identification of "associates" of the named insured is highly problematic in light of what this Court said in Opal Group Holdings (Australia) Pty Limited v Franklins Limited [2002] NSWCA 169 at [43]. 25The order of the Court is as stated by Leeming JA, that is, that the summons seeking leave to appeal is dismissed with costs.