Al Khaled v Jacaranda Property Developments Pty Ltd & Ors

EX TEMPORE Judgment 1HIS HONOUR: Mr Said Al Khaled suffered personal injures on 12th November 2007 when he was electrocuted whilst working on scaffolding at a building site in Caringbah in the south of Sydney. 2His work was that of a cement renderer and he suffered electrocution when an aluminium straight edge he was using in the course of his work came into contact with an energised power line. 3By an amended statement of claim filed on 4 November 2010 the plaintiff claims damages from three defendants. He avers that the first defendant is the developer of the building site and that the second or third defendants were responsible for erecting the scaffolding from which he was working. He says that either of the defendants, and I am speaking in general terms, was responsible for his accident in terms of having a duty of care recognised in the law of negligence which extended to the exercise of reasonable care to take steps to de-energise the power line during the course of the work, or to so place the scaffolding that tools and equipment used by workers in the course of their ordinary work would be unlikely to come into contact with the power line. 4Each of the defendants has issued a cross-claim against a company named Neatrule Cement Rendering Pty Ltd (Neatrule). That company is now subject to a creditors voluntary winding up and has been placed in liquidation. The liquidator's firm is RMG Partners and Mr Darren Vardy is the liquidator. Neatrule is said to have provided the plaintiff's labour for the purpose of the construction work. There is a question in the proceedings as to whether the plaintiff was engaged to perform work for Neatrule under a contract of service on the one hand or a contract for services on the other. This is not an unusual issue to arise in industrial accidents involving building sites. 5Neatrule was insured as at the date of the injury. First, Calliden Insurance Limited (Calliden) insured it for public liability purposes, and secondly Allianz Australia Workers Compensation (NSW) Pty Ltd (Allianz) insured it under the Workers Compensation Act 1987. 6Prior to the liquidation of Neatrule, Allianz, who had been paying Workers' Compensation for a period to Mr Al Khaled denied indemnity in respect of any contractual liability of Neatrule if the cross-claims against it are made good, and reserved its position in respect of tortious liability. Calliden had instructed its solicitors to act on behalf of Neatrule but strictly on a reservation of rights basis. 7As I understand Calliden's position, the rights it reserves relate to three matters: (1)an exclusion in respect of liability to persons covered by the Workers' Compensation Act ( I am putting that matter generally); (2)an exclusion in respect of contractual liabilities not otherwise arising or implied by law; (3)a breach of a condition relating to the prompt giving of notice of any claim. 8From the material before me, which consists of the affidavits of three solicitors which have been read, one can certainly appreciate that there was a live issue as to Calliden's obligation to indemnify Neatrule in respect of what I will call the "worker exclusion". It is less obvious that the contractual liabilities exclusion may run, but I can see the possibility of it. There is simply no material before me from which I can assess whether the late notification matter is a real issue. 9Whilst it was acting on that limited basis, Calliden joined Allianz as a cross-defendant alleging that Mr Al Khaled was a worker or deemed worker under the Workers' Compensation legislation and asserting that Allianz was obliged to indemnify Neatrule in respect of any liability under the cross-claims. 10I observe in passing that nobody argues that there was any conflict or difficulty with Calliden instructing solicitors to represent Neatrule, and at the same time to use Neatrule's name in a cross-claim against its workers' compensation insurer. That may be a material consideration given the position adopted by the parties in this case. 11I should also record that following Neatrule being placed in liquidation, Calliden instructed its solicitors to cease to act on behalf of Neatrule, and I understand that a notice of intention to file a Notice of Intention to Cease to Act was filed some time ago, and a Notice of Ceasing to Act yesterday. 12As I have said the three defendants seek leave to continue the cross-claims as they are. The plaintiff neither consents nor objects to any order being made in that regard. If I have not already said it, I should say that the plaintiff has not sued Neatrule. Calliden does not say that it should not be involved in the proceedings. Rather its position is that given the insurance issues it has referred to, the appropriate course is for leave to be granted to the three defendants to institute fresh proceedings seeking relief under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946. Calliden makes clear that it will consent to the Court granting leave for that purpose under s6(4). It is important to point out that none of the defendants who are the moving parties seek that leave and indeed all of them oppose an order in that regard being made. 13I have raised with counsel the operation of Rule 36.1 of the Uniform Civil Procedure Rules 2005 which is in the following terms: At any stage of proceedings, the court may give such judgment, or make such order, as the nature of the case requires, whether or not a claim for relief extending to that judgment or order is included in any originating process or notice of motion. 14Mr Sheller, of Counsel, who appears for the first defendant and upon whose oral submissions the second and third defendants are content to rely, accepts that the rule would empower me to make an order under s6(4) irrespective of the absence of any initiating process seeking it. Mr Colquhoun, of Counsel, who appears with leave for Calliden invites me to make an order under s 6(4) relying upon the Rule. 15For a time I was very attracted to the idea that an order under s 6(4) should be made. After all, if there were to be issues about whether or not either insurer was bound to indemnify in respect of any liability that may be found to repose in Neatrule, those issues could be conveniently heard in the present proceedings and, if appropriate, orders could be made directly against the insurer concerned. 16However, on reflection I am persuaded that I should make the orders sought by the three defendants, for reasons that I will seek to express succinctly. 17Section 500(2) of the Corporations Act 2001 is in the following terms: After the passing of the resolution for voluntarily winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. 18All parties accept that the Court has a wide discretion under this provision. In Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266, Besanko J said at paragraph 21: The effect of s 500(2) is to require the claimant to adopt the course of lodging a proof of debt unless he can demonstrate that there is some good reason why a departure from that procedure is justified in the case of the particular claim in dispute. It is impossible to state exhaustively all the circumstances in which it may be appropriate to grant leave to proceed. Relevant factors are the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and, if proceedings have already been commenced, the stage to which those proceedings may have progressed. The fact that the company is insolvent and will not be able to satisfy a judgment is a factor against the grant of leave (citations omitted) because the Court will not give its imprimatur to fruitless proceedings. Nor will leave be granted if the claimant does not have a genuine claim. On the other hand, the fact that the claimant has an arguable claim for proprietary relief against the assets of the company is a factor in favour of a grant of leave (citations omitted). 19Leave is commonly granted where the claim is likely to be covered by a policy of insurance. I should point out that this is not a proprietary claim against the assets of the company. In Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (Receivers and Managers Appointed) (in liq) (No 2) [2009] FCA 42 Jacobsen J, at paragraphs 42 to 45, pointed out that where it is at least arguable that a policy of insurance would respond to a claim for indemnity by the company in liquidation, that is a sufficient basis for a grant of leave under s 500(2), but in the exercise of the Court's discretion it may be appropriate to fashion orders that protect the position of the liquidators. 20I should say in the present case that the liquidator has given what he terms conditional consent to the orders sought by the defendants. Exhibit A is a letter from him to the solicitor for the first defendant dated 25 June 2012. In part he says: I consent to the orders sought in the notice of motion filed on 8 June 2012 on the condition that no orders of any nature are made against myself in my capacity as liquidator of the company. 21He goes on to point out that, inter alia, the cross-claimants may be entitled to file a claim with the company's pre-appointment insurer who will undertake independent assessment of any claim. 22It seems to me that were it not for the dispute between Calliden and Allianz as to which of them is obliged to indemnify Neatrule, this application would be perfectly routine and of a type that orders would be made in very short order by the Registrar. The fact of that dispute is capable of being a reason telling against the grant of leave, but in my judgment it is insufficiently persuasive to forestall the relief sought by the defendants. It seems to me that I should not impose upon the defendants the additional burden in terms of time, cost and expense of redrafting their pleadings in order to bring claims directly against the insurers, which they are unwilling to do. 23Each of the moving parties is a commercial entity and to the extent to which there is some risk that their preferred option of continuing the present proceedings under s 500(2) may at a later time lead to the necessity for them to bring further proceedings, then they are in a position to adopt that essentially commercial risk, and the Court should not seek to protect them, as it were, from themselves. 24Moreover, although there must be some risk, which is part of the risk I have referred to, that Calliden will simply walk away from these proceedings and that there will be no-one representing Neatrule at the hearing who will press the cross-claim against Allianz. I am not convinced that that will certainly occur. 25I acknowledge that if Calliden and Allianz, whom I should say I am informed would consent likewise to an order under s 6(4), decide not to seek to appear at the trial, that is a matter for them. They are fully apprised of the hearing date and the issues for determination. They are in possession of the pleadings. If they see it as being in their commercial interests to walk away from these proceedings and take no further part, then that is a commercial risk that they are fully entitled to take. Once again I do not consider it is for the Court to protect them from themselves, as it were. 26In the circumstances, I am persuaded that the preferable course is, as it has been put in written submissions, to maintain the status quo and allow the proceedings to continue as they have been for some time. Should either Allianz or Calliden seek leave to be represented at the trial, given that I am case managing the proceedings, I feel confident the Court will be well disposed to such an application, but that is a decision to be made if and when such an application is made. 27My orders are: (1)That each of the first to third defendants be granted leave under s 500(2) Corporations Act 2001 to continue its cross-claim already filed and served against Neatrule Cement Rendering Pty Ltd ACN 125 742 761 (In Liq). (2)Reserve liberty to the liquidator of the company to apply to revoke the grant of leave. (3)Neither of the first to third defendants be permitted to enforce any judgment against the company without further leave of the Court.