Ali v Duffy Kennedy Constructions Pty Ltd

Notice of Motion

1. By notice of motion filed 8 November 2022, which was amended today, the plaintiff seeks an order that the Court grant him leave to file an Amended Statement of Claim in the form which is contained in Exh 2 on the Motion. Further, the plaintiff seeks an order that the Court grant him leave pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 ("the Act") to proceed and to continue the proceedings against the proposed second defendant.
2. The proposed pleading nominates AAI Limited, trading as Vero Insurance ("Vero"), as the second defendant. It seeks to claim that Vero is obliged to indemnify three companies. The first is a company called Duffy Kennedy Pty Limited (also known as DuffyKennedy Pty Limited). That company seems to have had a number of different names and was finally called Capitol Property Services Pty Limited and is now in liquidation. The second is a company that is known as DK Palisade Pty Limited, which has also subsequently changed names, and which has been wound up and is now deregistered. The third is a company which was at the relevant times known as Duffy Kennedy Payroll Pty Limited, which also changed its name and which is now in voluntary external administration.
3. The solicitor for Vero opposed the Court making the orders sought in the Notice of Motion. He did so on a number of grounds centred upon the lack of proof that the relevant companies were shown to have any connection with the plaintiff's claim and also that Vero was not liable under the policy of insurance which had been proved to exist. He also submitted that the Act was not applicable in the circumstances of the plaintiff's claim.

Relevant Legislative Provisions

1. It is necessary to identify the relevant applicable statutory provisions. Section 4(1) of the Act provides: "If an insured person has an insured liability to a person (the claimant), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court."
2. Section 3 defines the term "insured liability" as "a liability in respect of which an insured person is entitled to be indemnified by the insurer".
3. As Leeming JA observed in In the matter of Reed Constructions Australia Pty Ltd (in Liquidation) - Walley v Chubb Insurance Australia Ltd [2019] NSWSC 1007- at [11], the phrase "insured liability" includes an insured liability which has not yet been established or else, one which is claimed by a plaintiff.
4. I am satisfied that the plaintiff's claim for the damages arising out of his accident which falls outside any workers compensation entitlement is an "insured liability" within the meaning of that term in s 3 of the Act.
5. Section 4(1) of the Act makes reference to the term "insured person". Section 3 defines the term "Insured person" in these terms: "a person who is, in respect of a liability to a third party, entitled to indemnity pursuant to the terms of a contract of insurance, and includes a person who is not a party to the contract of insurance but is specified or referred to in the contract, whether by name or otherwise, as a person to whom the benefit of the insurance cover provided by the contract extends."
6. Where the claimant wishes to proceed under the Act against an insurer, leave to proceed must be obtained. Section 5(3) of the Act provides that a court may grant or refuse the claimant's application for leave. It does not otherwise proscribe any pre-condition or requirement for a grant of leave.
7. Section 5(4) provides that leave must be refused if the insurer can establish that it is entitled to disclaim liability. Vero did not submit in the course of this motion that it was entitled to disclaim liability under any policy referable to these proceedings. Accordingly, I can put that subsection to one side.

Discernment

1. In the evidence before the Court, which was not challenged, was a detailed contract with respect to the site of the Palisade Project described as "Palisade Design and Construct Contract (Residential Works - NSW)" ("the works contract"). The parties to that contract were Galileo, described as the Principal, and Duffy Kennedy Pty Limited, described as the Contractor.
2. The recitals to the contract provided as follows: "Introduction A. The Principal requires the Contractor to design and construct two (2) residential buildings, car parking, pool and other facilities as part of the Palisade development B. The Contractor has agreed to design, construct and complete the Works in accordance with the Contract C. The Principal has agreed to pay the Contractor the Contract Price in accordance with the contract for the completion of the works in accordance with the Contract."
3. The contract price was specified to be $65,758,576, which amount included "Provisional Sums" but excluded GST. The contract also included, as an item under the contract which could not be subcontracted without the approval of the principal, the tiling package.
4. The contract in its terms is plain and obliges Duffy Kennedy Pty Limited to perform design and construction services at the site of the Palisade Project.
5. I am satisfied that, having regard to the fact that the plaintiff was injured on the site of the Palisade Project, he has a claim to be entitled to damages with respect to his fall from Duffy Kennedy Pty Limited. In so finding, I am not coming to any concluded view that the plaintiff will succeed against that party. I am satisfied that he has a proper claim to be made against Duffy Kennedy Pty Limited and one which he is entitled to plead and pursue.
6. Lest there be any doubt about the role played by Duffy Kennedy Pty Limited in the Palisade Project, also in evidence are the pleadings in proceedings numbered 2019/136937 in the Equity Division. These proceedings were commenced by Galileo against Duffy Kennedy Pty Limited. The pleadings contend, consistently with the works contract to which I have referred, that such a contract existed and that the contract governed the relationship between the parties with respect to the site of the Palisade Project. Duffy Kennedy Pty Limited filed a cross-claim in those proceedings. The cross-claim pleaded and relied upon the existence of the contract and its enforceability.
7. The detail of the works contract, of the proceedings and of the parties' contentions can be found in a judgment of this Court entitled Galileo Miranda Nominee Pty Limited v Duffy Kennedy Pty Limited [2019] NSWSC 1157. I do not need to refer to the detail of that judgment. It is sufficient to indicate that, on any view of the material put before this Court, Duffy Kennedy Pty Limited played a significant role, pursuant to the works contract, in controlling the work being carried out on the site of the Palisade Project.
8. The existence of DK Palisade Pty Limited was, as I have indicated, brought to light by the pleading of the existence of a subcontract in the defence of Duffy Kennedy Constructions Pty Limited. In evidence is a document dated 19 January 2018 entitled "Subcontract agreement for Tiling and Waterproofing" between DK Palisade Pty Limited and First Choice Tiling Pty Limited. It is not in doubt that the plaintiff was on the site of the Palisade Project because he was engaged in the tiling work being carried out by First Choice Tiling Pty Limited. He was, in effect, an employee of that organisation.
9. The subcontract requires First Choice Tiling Pty Limited to carry out the subcontract works which were described as tiling and waterproofing for the project in accordance with the described Scope of Works. The agreed Scope of Works was to provide tiling and waterproofing to every surface which was to be tiled. The agreed subcontract price was $1,155,000 including GST for the laying of tiling, and $300,217.50 for waterproofing work. That is to say, the value of the subcontract was a little less than $1.5 million in total. It covered all of the works at the site of the Palisade Project.
10. Although the evidence was unclear as to precisely the relationship between DK Palisade Pty Limited and either of the other two companies in the Duffy Kennedy group of companies, being Duffy Kennedy Constructions Pty Limited and Duffy Kennedy Pty Limited, I would be prepared to infer that DK Palisade Pty Limited was also a part of the Duffy Kennedy group of companies.
11. First, there is the obvious inference that the company has DK in its name. Secondly, I observe that one of the documents prepared by the solicitor for the liquidator for DK Palisade Pty Limited recorded that Duffy Kennedy Pty Limited was the head contractor of the insolvent company DK Palisade Pty Limited and that it had provided the funds appropriate to cover the liquidator's initial remuneration and expenses. As well, those documents reveal that Duffy Kennedy Pty Limited claimed to be a creditor of DK Palisade Pty Limited in the sum of $4.5 million.
12. There is simply no doubt in my mind that DK Palisade Pty Limited was a company in the Duffy Kennedy group of companies which was used as a vehicle to engage in contractual relationships with at least one company carrying out work on the site of the Palisade Project. It was obviously authorised to do so by Duffy Kennedy Pty Limited.
13. DK Palisade Pty Limited was the principal contractor in relation to the plaintiff's employer with respect to the tiling work. Therefore, I am satisfied that DK Palisade Pty Limited is one of the companies potentially liable in negligence in respect of the system of work which was being carried out at the site of the Palisade Project at the time the plaintiff sustained his fall.
14. The third company, Duffy Kennedy Payroll Pty Limited, as earlier observed is also in liquidation. According to the material put before the Court, Mr John Yeldham, who is the proprietor of a business called Yeldham's Taxation and Business Services, is the accountant and taxation agent for Mr Gavin Duffy "and his group of construction companies that includes Duffy Kennedy Pty Limited and Duffy Kennedy Payroll Pty Limited".
15. Mr Yeldham, in a letter of 2 May 2017, asserted that Duffy Kennedy Payroll Pty Limited was a subsidiary of Duffy Kennedy Pty Limited, and that its function was to engage all employees who were to work for Duffy Kennedy Pty Limited. Mr Yeldham said this: "Duffy Kennedy Pty Limited does not have any employees. All employees are engaged under Duffy Kennedy Payroll Pty Limited, which is the payroll company for Duffy Kennedy Pty Limited. Duffy Kennedy Pty Limited pays a Service Fee to Duffy Kennedy Payroll Pty Limited for the use of the employees. Hence the Workers Compensation Certificate of Currency that is provided is under Duffy Kennedy Payroll Pty Limited."
16. If the facts are as the plaintiff contends, that one of the contributing causes of his accident and injury was the failure of a worker on the site who was part of the Duffy Kennedy group of companies to secure the ladder from which he was working by holding it, or else to provide him with a stable platform such as a scissor lift with which to conduct his work, was negligent, then it seems, if Mr Yeldham's statement is taken to be accurate, that such employee was employed by Duffy Kennedy Payroll Pty Limited, which would be vicariously liable for any negligent conduct on the part of that employer.
17. Each of these matters satisfy me that the plaintiff has an entitlement to claim that each of these three companies is, or may be found to be, liable to him for his damages. Of course, such liability will not be established on any basis prior to a hearing.
18. I should also remark for completeness that, after the plaintiff's accident occurred, as is required under the various workplace health and safety laws, SafeWork NSW was notified of the incident. The person responsible for notification was named Michael Cafe who was, at the relevant time, on the material I have been provided with, an employee of Duffy Kennedy Constructions Pty Limited, the named defendant. It is apparent that SafeWork NSW was informed that the principal contractor in charge of the site was Duffy Kennedy Constructions Pty Limited. Mr Cafe described himself to the SafeWork NSW inspector as: "Project manager for Duffy Kennedy constructions pty ltd [sic] who are undertaking a new residential unit complex which is under construction."
19. If that admission is correct, then the viability of a claim by the plaintiff against the existing defendant is not to be doubted.
20. Having regard to all of those facts, it is now necessary to consider the insurance position. Before doing so, I should indicate that I have come to the conclusion, based on the material before me, and in the absence of any evidence being led by the existing defendant, Duffy Kennedy Constructions Pty Limited, which company appeared to oppose the Motion, that the most probable structure of the work on this site was that the over-arching contract between Galileo and the Duffy Kennedy group of companies was held by Duffy Kennedy Pty Limited.
21. I would conclude that Duffy Kennedy Pty Limited appointed as its project manager Duffy Kennedy Constructions Pty Limited. All employees of each of these companies were employed by Duffy Kennedy Payroll Pty Limited. For reasons which may be due to a complexity of intra-group company arrangements or for some other, as yet, unidentified reason, DK Palisade Pty Limited, a wholly owned subsidiary of Duffy Kennedy Pty Limited or Duffy Kennedy Constructions Pty Limited (it does not matter which) entered into at least one contract with a subcontractor for a particular part of the work. Here, it was the tiling work. There was one work site for the Palisade Project. A range of companies within the Duffy Kennedy group all engaged in carrying out various parts of the work.
22. It is now necessary to consider the insurance arrangements. Vero issued a policy numbered CTA110126528 described as a Contract Works and Legal Liability Policy which was in place from 7 June 2018 to 7 June 2019 ("the contract of insurance"). In the contract of insurance, Vero insured two named policy holders and other parties as described in the contract, namely the principal, the principal contractor and the project manager. It also insured subcontractors being various "entities under subcontract or sub-agreement for the performance of the Contract Works".
23. That policy was arranged by a broker called Finsura Insurance Broking Pty Limited. The contract works were described in the schedule as being "all works of residential and commercial building construction including excavation 3 level basement". It is conceded for the purpose of this hearing that the Palisade Project and its description fell within the description of contract works. Certain types of contract work are excluded. They are named in the Annual Schedule. It is also conceded for the purpose of this hearing that the Palisade Project works were not excluded by reason of that contractual provision.
24. According to the Annual Schedule, there were two separate parts of the contract of insurance which had limits of indemnity or insured sums applied to it. The first, Section A, headed Material Damage, has no relevance to this claim. The plaintiff is claiming personal injury. The plaintiff is not claiming damage which can be described as Material Damage, that is, damage to property.
25. The second section, Section B, deals with Legal Liability. It provides that there is coverage for Contract Works Liability with a limit of indemnity of $20 million for "Any one Occurrence or series of Occurrences due to or arising out of one source or original cause". The Annual Schedule goes on to provide for various deductibles and provides for various premiums.
26. That Annual Schedule bears a close relationship to a Certificate of Currency dated 6 December 2018 which noted that the contract of insurance to which I have earlier referred provided contract works and legal liability insurance for the contract site at Kingsway, which is the Palisade Project. It noted that the limit for contract works Material Damage was $65,868,989 and for Contract Works Liability was $20,000,000. It described the works as being "Demolition of 14 houses & design & construction of 197 residential units over 2 level basement".
27. It is necessary to refer to a number of clauses in the policy. I have earlier noted that persons insured on the Annual Schedule included the named policy holders and other individuals. The contract of insurance contains a definition of persons insured. Relevantly, it provides: "Persons insured shall mean: 1. the Policyholder so named in the Schedule; … 3. (a) the Principal; (b) the Principal Contractor; (c) the Project Manager; not being the policy holder, but being a legal entity with whom the policy holder has entered into the contract, but only to the extent required by the contract. … 6. any sub-contractor to entities noted in sub-clauses 1 or 3 above being a legal entity with whom such Persons Insured has entered into a sub-contract or sub-agreement for the performance of any part or parts of the Contract Works, but only to the extent required by sub-contract or sub-agreement."
28. It cannot be doubted that Duffy Kennedy Pty Limited fell under the title or description of principal contractor, which is found in clause 3 of the "persons insured" definition in the contract of insurance. After all, who else was going to undertake this construction work? Ultimately, when pressed about that matter, the solicitor for Vero conceded that Duffy Kennedy Pty Limited fell directly within that term and, accordingly, was entitled to indemnity under the policy of insurance.
29. I have referred to clause 6 of the "persons insured" definition. Clause 6 provides that any subcontractor to the entities noted which was a legal entity and with whom there was a subcontract or sub-agreement for the performance of any part or parts of the contract works, was also entitled to indemnity under the policy.
30. The insurance policy does not require that the subcontract or sub-agreement referred to in clause 6 be one in writing. It could be oral, it could contain implied terms, or it may well be a subcontract to be implied from the conduct of parties engaged in the work.
31. It seems to me obvious that as a matter of common sense the company known as DK Palisade Pty Limited was a subcontractor within that definition. The notion that a large construction site, likely to be secured for the purpose of safety by limited security access, would permit entry on to it of an interloper that just happened to have the same name as the company group to which it belongs, and that the interloper would enter into a contract for almost $1.5 million to do part of the construction and tiling work at that site out of their own sense of duty or goodwill and in a way which was not the subject of any agreement with the principal contractor, and merely came to be on the site without any authorisation or agreement at all, is just pure nonsense. I would infer from all of the evidence before me that there was obviously a subcontract or sub-agreement between the principal on the site and DK Palisade Pty Limited to arrange for the tiling work to be carried out. I have not the slightest doubt that DK Palisade Pty Limited, by whatever name it is now known, fell within the definition in clause 6 of the contract of insurance.
32. Finally, as is obvious from the assertion of Mr Yeldham to which I have earlier referred, Duffy Kennedy Payroll Pty Limited was the vehicle which paid workers on the site. It must have done so through some agreement with Duffy Kennedy Pty Limited or Duffy Kennedy Constructions Pty Limited. Duffy Kennedy Pty Limited, according to its accountant, paid Duffy Kennedy Payroll Pty Limited to do those things. Again, I have not the slightest doubt that Duffy Kennedy Payroll Pty Limited fell within the description in paragraph 6 of the insuring clauses. Ultimately, during the hearing the solicitor for Vero conceded that that must be so.
33. In those circumstances, I am satisfied that the plaintiff, for the purposes of this Motion, has established that there was in existence a Contract Works and Legal Liability Policy with a limit of indemnity of $20 million for the purposes of personal injury by which each of the three companies that I have referred to were entitled to indemnity in respect of the plaintiff's claim.

Conclusion

1. It follows that my conclusions are these.
2. The plaintiff has an arguable claim for personal injury against the identified companies, that is, the defendant and the other companies within the Duffy Kennedy group of companies to which I have referred.
3. Secondly, Vero insured each of those companies with respect to the site of the Palisade Project and provided a limited indemnity which is more than sufficient to cover any possible liability which may be awarded to the plaintiff.
4. I turn then to consider whether leave to proceed against Vero should be granted. I can see no reason why it ought not be. Vero was the insurer for the contract works for this project. Any claim which it makes now of a kind which suggests that it was not the insurer and that it did not cover the principal to the contract, Duffy Kennedy Pty Limited, Duffy Kennedy Constructions Pty Limited, and any other subcontractor on the project, including DK Palisade Pty Limited and DK Payroll Pty Limited, is a nonsense.

Orders

1. Leave will be granted to the plaintiff to file the Statement of Claim in the form contained in Exhibit 2 on this Motion.
2. I order that costs of this Motion be costs in the cause.
3. The formal orders of the Court are: 1. Make the orders as amended in the Notice of Motion filed 8 November 2022. 2. Order that any Amended Statement of Claim be filed on or before Friday 14 April 2023. 3. Order that any defence be filed on or before 12 May 2023. 4. List the matter for directions before the Registrar on 22 May 2023 at 9am.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 April 2023