Allianz Australia Insurance Ltd v Mercer [2014] TASFC 3

[23]

The Limitation Act does not contain any provision enabling those limitation periods to be extended, or for leave to be granted for an action to be brought after they have expired[1]. The period of limitation under s5A(3) relevant to this case is three years commencing on the date of discoverability, as referred to in s5A(3)(a).
In its defence in the action, Allianz pleaded that the date of discoverability was 3 September 2008, and that the plaintiff's claim was statute barred. For Mr Mercer, it was contended that s5A(3) of the Limitation Act did not apply to the s601AG action. The critical fact is that, assuming the date of discoverability was as alleged, at the time of Windsor Agencies' deregistration Mr Mercer was still within the time limited for bringing an action against it. But adopting that time limit, he was "out of time" as against the company when he sued Allianz as the insurer.
Blow CJ made an order for the determination, before the determination of any other issues in the case, of the question whether, assuming all the allegations in the statement of claim were proved, and assuming the allegations of fact pleaded in the defence as to the date of discoverability were proved, Mr Mercer was precluded from recovering any damages or monies from Allianz in the action against it.
Blow CJ also dealt with the preliminary issue and, after hearing argument, determined that if those assumptions were made, Mr Mercer was not precluded from recovering monies from Allianz. Blow CJ went on to try the action. His Honour found that Mr Mercer's injuries were caused by the negligence of a fellow employee for whose actions Windsor Agencies was vicariously responsible, that as a result of Windsor Agencies' deregistration Mr Mercer was able to recover an amount equal to Windsor Agencies' "previous liability" to him, that Mr Mercer contributed to his own injuries, and that the amount recoverable should be reduced by 25 per cent. Judgment was entered against Allianz for the sum of $5,095,516.
The appeal is against that judgment but only concerns the determination of the preliminary issue. For the reasons which follow, I would allow the appeal.

[41]

Section 601AH, which was also enacted at the same time, provides by subs(2) that the Court may make an order that ASIC reinstate the registration of a company if an application is made by a person aggrieved by the deregistration or a formal liquidator of the company, and the Court is satisfied that it is just that the company's registration be reinstated. By s601AH(5), a company which is reinstated is taken to have continued in existence as if it had not been deregistered. As the trial judge noted, s601AH(3)(b)[3] empowers a court when making an order for reinstatement of registration, to make any other order it considers appropriate.
As his Honour also noted, under that provision an order can be made that the period of deregistration not be counted for the purpose of a limitation statute. Where reinstatement is sought to enable a plaintiff to pursue an action which would not be capable of pursuit because of a limitation period which expired after deregistration, it is unlikely that the order would not be made: Pagnon (above) per McPherson JA at 500 [17].
As McPherson JA said in Pagnon (above) at 500 [17], the clear purpose of s601AG is to "'short-cut' the need to reinstate the company, and to do so by enabling the ultimate recipient of the insurance proceeds to sue the insurer direct where the company has been dissolved, without imposing the additional trouble and expense of first applying to have it reinstated." See also Almario at 154 [30] and Sciacca v Langshaw Valuations Pty Ltd [2013] NSWSC 1285 at [27]. In Sciacca, Adamson J referred to the fact that in such circumstances the application for reinstatement would be "for the sole purpose of having the insurer act for the corporate insured by way of subrogation."
The Explanatory Memorandum states that rights comparable to those provided for in the proposed s601AG have previously been provided in other legislation, for example, s6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the Law Reform Act). That is a provision which has generated much judicial, extra-judicial and academic discussion: see for instance Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 per Gummow and McHugh JJ at 440, Oswald v Bailey (1987) 11 NSWLR 715 per Kirby P. See also Reflections on Section 6, R D Giles J, (1996) 7 ILJ 152 and Abolish Section 6, S W Drummond and P Mann, (1997) 8 ILJ 79.
As s6 has assumed some significance in this case, I will set out the relevant parts of it:

[48]

Allianz draws attention to the chapeau of s601AG. It makes the point that it is only "an amount that was payable to the company under an insurance contract" which is recoverable if the two preconditions set out in pars(a) and (b) of the section are met. Where a defendant is shown to have been legally liable for damages, that liability dates from the time the liability was incurred, but under an indemnity policy no amount is ordinarily payable by the insurer until the liability of the insured is established by a judgment, award or agreement: Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363; Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1 per Stephen J at 25 - 26.
Allianz points out that s601AG is a "short cut" to avoid seeking reinstatement. A plaintiff can directly sue an insurer and obtain the same amount of money as the insurer would have been obliged to pay to the insured. There is no suggestion that the rights created as between claimant and insurer alter the legal relationship as it was between the insured and the insurer under the insurance contract. The section is a procedural mechanism not designed to alter the substantive operation of an insurance contract.
Allianz argues that the words in the chapeau "an amount that was payable" do not mean an amount which was payable as at the date of deregistration. That is because no amount is payable to an insured until liability has been established by judgment or agreement. The phrase refers to an amount of money that would have been payable under the insurance contract to the company if it were entitled to indemnity under the policy. The past tense is used simply because by the time a plaintiff seeks recourse to s601AG, the company has ceased to exist.
As to the phrase "had a liability" appearing in par(a), Allianz accepts that the relevant point in time is the time of deregistration. It submits however, that "liability" does not mean a determined or established liability, but means a potential or contingent liability in the sense that before the company was deregistered, it had injured someone in such a way that created a right to sue, and it appears that a determined or established liability may result in due course. Ordinarily, if a defendant is shown to be legally liable for damages, the liability dates from when the cause of action accrued: Post Office v Norwich Union Fire Insurance Society Ltd (above); Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (above).
Allianz argues that a purposive construction of the section requires that s5A(3)(a) of the Limitation Act applies in the present case. It is argued, on the basis of what is said to have been held in Almario, that in general terms the limitation period applicable to the cause of action against a deregistered company (referred to as "the underlying cause of action") applies to the s601AG action.
In Almario the limitation period for the action against the company had expired, with the remedy being extinguished as a result, although the legislation permitted an extension of time. It was held that the insurer could raise the limitation defence in the action against it, but that defence was subject to the plaintiff's right to seek leave to extend time. In this case, the trial judge distinguished Almario on the factual basis that the time for bringing proceedings against the company had not expired at the time of deregistration. Allianz says that Almario was correctly decided, and although in strict terms the decision is limited to its facts, the reasons are persuasive and apply to the present case.
Allianz argues that the purposive construction means that the relevant date for determining the availability of the limitation defence is the date on which the s601AG proceedings are commenced. Otherwise, such an action can be brought many years after the event. Further, it is submitted that Parliament is unlikely to have intended s601AG to operate so as to allow limitation periods to operate cumulatively; inequity is caused by permitting the limitation period under s4(1)(d) of the Limitation Act to "piggyback" on the limitation period under s5A(3) as held by the trial judge.
In that scenario, periods of very nearly three years or 12 years before deregistration, depending on the circumstances, could be added to by a period of six years. Such a construction is contrary to the policy considerations which underpin the limitation of actions: Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 per McHugh J at 551 - 553.
Allianz submits that s601AG incorporates by reference the laws applicable to the determination of the existence and quantum of the underlying liability, including the relevant limitation period. That is not inconsistent with the creation of a new cause of action arising on deregistration. The cause of action against the insurer is dependent upon a separate and distinct cause of action involving a liability as between the claimant and the company. The liability of the deregistered company and the quantum of damage still need to be proved in order for a plaintiff to recover under the section. Those matters must be determined by reference to the law applicable to the underlying cause of action, whether common law, State or Commonwealth law. Accordingly, as s601AG incorporates such laws, it incorporates limitation provisions relevant to the underlying cause of action; in this case s5A(3)(a).
Allianz accepts that the Corporations Act does not provide an applicable limitation period, and that there is no generally applicable Commonwealth limitation legislation. Further, the Limitation Act, by its terms, does not purport to directly apply to Commonwealth laws. However, s4(1)(d) of the Limitation Act can operate as a "surrogate Federal law" by way of s79 of the Judiciary Act. It is necessary to consider whether s601AG, as a law of the Commonwealth, "otherwise provides" within the meaning of the Judiciary Act. Section 601AG has the effect of incorporating, by reference, the laws applicable to the determination of the existence and quantum of the underlying liability upon which the substantive relief under the section depends. That includes the applicable limitation period. On that basis s601AG is an instance of where a law of the Commonwealth has "otherwise provided" so that the relevant State law does not operate. In any event, there is no reason s79 would give preference to s4(1)(d) over s5A(3).
Next, it is said that the section is similar in operation to s6 of the Law Reform Act. The Court in Kinzett expressly rejected the applicability of the limitation period for actions for sums recoverable under an enactment. Allianz submits that the decision in Kinzett should be applied to a s601AG action.
Detailed submissions were made as to the principal authorities to which I have referred, and I will deal with those in due course.

[49]

Mr Mercer argues that the trial judge's reasons and conclusion are correct. The point is made that the s601AG cause of action is a new one which arises on the deregistration of the company. It is not a claim for damages. The limitation period for proceedings under the section begins to run from the date of deregistration. That is apparent from Almario in which Ipp JA noted that it was so held at first instance and the finding had not been challenged: 151 [15].
From the section's wording, the inference is that the time for determining whether the company had a liability, and whether insurance covered the liability, is immediately before deregistration: Almario at 153 [20]; Fairwater (above) at [4]. This, it is said, stands completely in the way of accepting Allianz's submission that the date for determining the availability of the limitation defence is the date on which the proceedings are commenced.
Mr Mercer submits at the time the new cause of action arose, proceedings against the company would not have been time barred. The three year period in s5A(3)(a) had not expired, assuming the date of discoverability was 3 September 2008. The relevant question was whether the company has a liability immediately before deregistration. That liability did exist because the cause of action against the company was not time barred. He argues that under s601AG, an insurer is only able to raise defences which would have been open to the company immediately before deregistration: Almario at 155 [35]; Fairwater at [4].
As to the applicable time limit, Mr Mercer submits that neither the section itself nor any other Commonwealth law provides a limitation period for the s601AG cause of action. It is correct that the word "liability" in par(a) imports a consideration of any limitation period that applied to the cause of action against the company at the time of deregistration, but that says nothing about whether there is a separate and additional period that precludes an action against the insurer after a period of time even if the limitation period against the company had not expired at the time of deregistration or if no limitation period applied at all.
Allianz' argument that for the purposes of s79 of the Judiciary Act, s601AG "otherwise provides" that the limitation period to be applied to the action against the insurer is that relating to the underlying cause of action, faces "formidable difficulties". It involves the unacceptable implication of words, and overlooks the structure of the section. Section 601AG contemplated two liabilities; the liability referred to in par(a) and that of the insurer to the third party. It is therefore not surprising that there are two limitation periods which operate in relation to those two liabilities. The Commonwealth Parliament saw fit to allow State or Territory legislation to operate as surrogate federal laws on the question of limitation periods. The Limitation Act is picked up in its entirety, without preference between provisions. Both s4(1)(d) and s5A(3)(a) apply to the different causes of action referred to in s601AG.
The s601AG cause of action is one for the recovery of an amount from the insurer which is payable because of the provision, and accordingly one to which s4(1)(d) of the Limitation Act applies. Section 5A(3) of the Limitation Act cannot apply because it is not possible to characterise the s601AG action as an action involving an action for damages for negligence. Section 6 of the Law Reform Act is a provision of quite a different kind from s601AG, and the decision in Kinzett has no application.
Mr Mercer submits that a purposive construction also results in the conclusion that, in respect of the s601AG cause of action, there is a limitation period of six years under s4(1)(d). It begins to run on the date of the deregistration of the company. Such defences as were available to the company at that time are available to the insurer. The engagement of s601AG upon satisfaction that s5A(3)(a) did not bar liability is consistent with, and does not offend, the policy considerations discussed in Brisbane South Regional Health Authority v Taylor (above).
Mr Mercer submits that on the contrary, policy considerations support his argument. The section does not confer greater rights on a claimant, but grants a new cause of action. It is beneficial legislation and should be construed accordingly. There is no substance to the argument that insurers should not be saddled with different liability from that of its deregistered insured; s601AG imposes a new and different liability on insurers. Applying s601AG according to its clear terms, and making it subject to the limitation period under s4(1)(d), does not artificially extend the limitation period. It provides for certainty and permits a plaintiff time to get affairs in order. As the section provides a new cause of action it is unsurprising that the limitation period situation changes if the proposed defendant is deregistered and ceases to exist as a legal entity.
Allianz's interpretation would force the plaintiff to apply for reinstatement of the company. That is exactly what the section seeks to avoid. The effect of s4(1)(d) in combination with s601AG is not to extend any time limits at all, but to impose an additional time limit applicable to the new cause of action. This is distinct from the internal protection afforded by s5A(3), which limits the potential liability of the insurer by reference to the liability of the employer under par(a) as at the date of deregistration.
Detailed submissions were made about the principal authorities.

[51]

Allianz relies on the decision in Kinzett which I noted above. It will be recalled that the decision concerns s6 of the Law Reform Act, the relevant parts of which I set out. Allianz submits that, particularly because the Explanatory Memorandum in relation to the proposed s601AG draws an analogy with s6, the approach adopted by the Court in Kinzett should be applied.
Mr Kinzett acquired a motorboat. Shortly after he noticed a hole in it which he took to be repaired. When he was observing the process of repair by welding, there was an explosion which injured him. He initially sued a partnership of two individuals as the suppliers of the boat, and later joined in as third and fourth defendants, the persons responsible for the repair process. Later still, because of uncertainty over the proprietorship of the boat supply business, the plaintiff decided to join in a company which appears to have been the real proprietor of the business, and the insurer of that company. Leave was required to proceed against the company because it was in liquidation. That leave was granted, by which time the six year limitation period for causes of action founded on contract and tort had expired.
Ultimately, two matters came before a judge at first instance. There was a notice of motion seeking an order extending the limitation period to bring proceedings against the company, and a notice of motion for leave to join the insurer as a defendant. It is only the second application which is of relevance to the present case. The primary judge, having dismissed the plaintiff's claim for an extension of time against the company, refused the second application on the basis that the joinder of the insurer would be pointless.
In the appeal, Mr Kinzett argued that the insurer could be joined irrespective of the success in relation to the application concerning the company. In response, the insurer sought to rely on a defence under the Limitation Act 1969 (NSW), but one which was not in any way derivative from the Limitation Act defence available to the company. Section 14(1)(a) and (b) of that Act respectively provided that causes of action founded on contract or tort could not be maintained if brought after the expiration of the limitation period of six years running from the date on which the cause of action first accrued. It will be recalled that s14(1)(d) applies the same limitation period of six years to a cause of action to recover money recoverable by virtue of an enactment, and is effectively in the same terms as s4(1)(d) of the Limitation Act.
The Court was constituted by five judges, with the leading judgment delivered by Spigelman CJ. As to the matters directly relevant to this case, Mason P, Priestley, Meagher and Handley JJA agreed with the Chief Justice. At 42 [51], citing authorities in support, Spigelman CJ said that the starting point for any consideration of the relationship between s6 and the Limitation Act (NSW) is a recognition that s6(4) is intended to be the exclusive method of enforcing the obligation created by the statutory charge. At 43 [54] his Honour noted that the common law presumption that a remedy specified in a statute is intended to be exclusive was expressly applied to s6 of the Law Reform Act in one of the authorities he had cited.[6]
His Honour continued at 43:

[53]

For this reason, the twelve-year limitation period under s 42(4) of the Limitation Act, applicable to enforcement of a mortgage (defined in s 7 of that Act to include a charge), does not apply to the enforcement of a statutory charge under s 6 of the Law Reform (Miscellaneous Provisions) Act .
For the same reason, s 14(1)(d) which relates to 'money recoverable by virtue of an enactment' is not material: see FAI (NZ) General Insurance v Blundell & Brown Ltd [1994] 1 NZLR 11 at 17.
In the case of liability insurance, to which s 6(1) refers, s 14(1)(a) and s 14(1)(b) are the material provisions of the Limitation Act .
The previous case law appears to have proceeded on the unexpressed assumption that the effect of s 14(1)(a) or s 14(1)(b) (that an 'action is not maintainable'), and the effect of s 63 (which extinguishes 'the right and title of the person formerly having the cause of action to the ... damages or other money') fall within the respects in which an action for enforcement of the statutory charge under s 6(1) of the Law Reform (Miscellaneous Provisions) Act is assimilated to proceedings between the person claiming on an insured and the insured. This case has proceeded on the same basis.
In my opinion this approach is correct. The statutory assimilation by s 6(4) of proceedings to enforce the charge with proceedings against an insured is such as to apply both the general law and statute law relevant to proceedings against the insured in contract or tort or under a statute such as the Trade Practices Act 1974 (Cth), to the proceedings against the insurer. The Limitation Act is a statute so made applicable."
His Honour then posed two questions which needed to be addressed in order to determine the interrelationship between s6(4) of the Law Reform Act and ss14(1) and 63 of the Limitation Act (NSW). They were: "When does time commence to run in favour of the insurer? When does time cease to run in favour of the insurer?" After reviewing conflicting lines of authority as to when the time for a s6 action commenced, the conclusions were stated at 52 as follows:

[55]

Section 14(1)(a) and s 14(1)(b) of the Limitation Act applies to the proceedings.
Time commences to run at the same time as the cause of action in tort or contract accrues to the claimant against the insured.
Time ceases to run under s 14(1)(a) or s 14(1)(b) when proceedings are brought against the insured or the insurer, whichever comes first.[7]
The consequence in the present case is that there is no separate Limitation Act defence available to the [insurer]."
Mr Mercer relies heavily on the difference in wording between s6 of the Law Reform Act and s601AG. In the case of the former, the statutory cause of action against the insurer arises at the same time as the action against the insured and from the same circumstances. Conversely, the s601AG cause of action is a new cause of action which first arises upon deregistration. Mr Mercer submits, "It is thus not surprising that a distinct limitation period applies to the new cause of action constituted by s601AG."
Primarily, Mr Mercer points to the clear distinction which arises because of the express reference in s6(4) to the action being conducted as if it were an action to recover damages or compensation from the insured, with the insurer having "the same rights and liabilities" as if the action were against the insured. That, it is said, is not the concern of s601AG; the relevant issue is whether the company had a liability at the time of deregistration.
The points of differences in the language and operation between the two provisions must, of course, be accepted. At the same time, s601AG clearly creates a new statutory cause of action encompassing both right and remedy: see the discussion by Barker J in Langridge v Insurance Commission of Western Australia [2003] WASC 24; (2003) 27 WAR 504 at 510 - 512 [39] - [48]. The question is whether Parliament's intention behind s601AG, as evident from its language and context, is to bring about the same sort of assimilation of the statutory cause of action to the underlying cause of action, as is achieved by s6 of the Law Reform Act.

[56]

Pagnon concerned the application of the Limitation of Actions Act 1974 (Qld) to an action brought under s186 of the Workers Compensation Act 1990 (Qld). Relevantly, s186(1) provided that where a worker suffered injury in circumstances conferring a right of action for damages against the employer who, being a corporation, had ceased to exist, a person who might have obtained judgment for damages against the employer in respect of the injury may recover by action against the statutory insurer, as if the statutory insurer were the employer, the sum that would have been payable by way of damages had judgment been given against the employer.
Section 186(2) provided that the entitlement to recover from the statutory insurer cannot be exercised by court proceedings unless notice of the claim and a short statement of the grounds thereof were given to the statutory insurer within a time period which the section spelt out.
Section 11 of the Limitation of Actions Act 1974 (Qld) provided that an action for damages for personal injury could not be brought after three years from the date of the cause of action. That time limit had not expired at the time of the company's deregistration but had at the time of the s186(1) action. The issue was whether s11 applied to a claim instituted against the statutory insurer under s186.
The Court of Appeal held that the right conferred was a new cause of action against the statutory insurer as the substituted defendant, "and not simply a continuation of the existing cause of action against the original wrongdoer subject to the unexpired duration of the limitation period fixed by s11 of the Limitation of Actions Act 1974": McPherson JA at 496 [7]; Thomas JA and Muir J agreeing. At 497 [8], McPherson JA said that a plaintiff who sued under s186(1) may still be liable to be defeated by a defence under s11 of the Limitation of Actions Act after the lapse of three years from the date on which the cause of action against the statutory insurer accrued under s186(1).
There was however, a difference of opinion as to when the new cause of action accrued. McPherson and Thomas JJA took the view that it accrued when the procedural pre-conditions were met, whilst Muir J expressly disagreed, saying that the entitlement conferred by s186(1) was the source of the worker's right and cause of action: [2000] QCA 421; [2001] 2 Qd R 492 at 501 [22].
The discussion in Pagnon turned to s601AG because of the need to address s186(3) which provided that subs(1) did not confer on a person any right or advantage that a person would not have had if action had been brought against the employer. The Court held that the power to order reinstatement under s601AH, with the accompanying power to direct that the interim time not count for limitation purposes, along with the right of action under s601AG meant that the construction of s186(1) adopted did not offend s186(3): see McPherson JA at 497 [8] - 500 [18]. At 500 [17], his Honour noted that the purpose of s601AG was to "'short-cut' the need to reinstate the company", but did not deal with when the cause of action arose or what time limit may have applied to it. His Honour merely observed that the company concerned "had a liability" to the plaintiff at the time of its deregistration: 500 [16].
Allianz argues that even accepting that s601AG creates a new cause of action separate from, but dependent on the underlying cause of action, that fact without more does not support a conclusion that the limitation period which applies must necessarily be that which applies in respect of actions for sums recoverable under an enactment; in this State, the six year period under s4(1)(d). It argues that Pagnon is not authority for that proposition, and in any event the decision is inconsistent with that in Kinzett. The court in Pagnon did not refer to Kinzett, and to the extent that the two decisions are inconsistent decisions of intermediate courts of appeal, this Court should apply the decision in Kinzett.
In the present case, the trial judge said that Pagnon supports the arguments advanced on behalf of Mr Mercer. "There is no reason to distinguish it. It is authority for the proposition that the limitation period applicable to the plaintiff's claim against his employer does not apply to a separate cause of action against another party for the recovery of monies in respect of that liability pursuant to an enactment." : see [30]. With respect, that statement is only partially correct. What was held was that the same limitation period in relation to an action against the employer applied, but that it commenced when the separate statutory cause of action arose.
Mr Mercer argues that the trial judge was correct to say that there is no basis for distinguishing the present case from Pagnon, and was correct in his statement of the proposition for which Pagnon is authority. It is submitted that s186(1), considered in Pagnon, served the same purpose as s601AG and was held not to be governed by s11 of the Limitation of Actions Act 1974 (Qld). I have already commented on the correctness of that statement. In my opinion, there is nothing in Pagnon which assists Mr Mercer's case.
In the context of the suggested impact of Pagnon, Mr Mercer also relies on Ex parte Workers Compensation Board of Queensland [1983] 1 Qd R 450 and Victorian WorkCover Authority v Manildra Pty Ltd [1999] VSC 220 as support for the trial judge's conclusion that s4(1)(d) of the Limitation Act applied to the s601AG cause of action.
Each of those two cases involved provisions of workers compensation legislation which created a right of indemnity for the recovery from a wrongdoer of compensation payments made. In the case of the Queensland legislation, the right was created only in the Workers Compensation Board. The Victorian legislation gave the right to the WorkCover Authority along with other specified insurers, or the employer. In each case it was held that the statutory right of indemnity was a cause of action governed by limitation periods relating to actions "to recover a sum recoverable by virtue of an enactment". In each case, it was confirmed that a cause of action under the statute arose each time a payment of compensation was made.
Allianz submits that these cases are of no assistance at all. The particular point of distinction is that the provisions create a statutory right of indemnity against the wrongdoer for compensation which has been paid to an injured worker. Allianz argues that it is obvious that the limitation period applicable to the claim of indemnity against the wrongdoer has nothing to do with the limitation period applicable to the injured party's action against the wrongdoer.
Those observations are valid. I think that closer to the point is Gefken v Union Assurance Society of Australia Ltd [1972] ALR 282 in which Forster J considered Ordinances of the Northern Territory relating to actions by dependants against a wrongdoer. Under the Compensation (Fatal Injuries) Ordinance, an action for the benefit of the dependants of the person whose death had been caused by a wrongful act of another, was to be commenced within 12 months after the death of the person injured.
Section 59(3) of the Motor Vehicle Ordinance provided that where as a result of the use of a motor vehicle, liability for the death of, or bodily injury to, any person had been incurred by any person insured against such liability, any person who could have obtained judgment in respect of the death or bodily injury might recover by action against the authorised insurer where the insured person was dead or could not be served with any process.
Forster J held that the right of action under the Motor Vehicle Ordinance against the authorised insurer was not one which existed independently of the right of action against the wrongdoer under the Compensation (Fatal Injuries) Ordinance which was governed by the 12 months' limitation period. It might well be said that his Honour treated the right of action against the authorised insurer as assimilated to the underlying cause of action.

[58]

Before Almario there does not appear to have been any consideration given to questions of limitation periods in relation to the s601AG. The arguments in this case call for a rather detailed analysis of the judgments. The Court of Appeal had before it two appeals by Mr Almario. He was seeking damages for personal injury allegedly suffered through exposure to toxic substances whilst employed by a company. He stopped working in 1992, and a three year limitation period which applied by virtue of s151D(2) of the Workers Compensation Act 1987 (NSW)[8] expired, at the latest, in December 1995.
In December 1992 the employer company was wound up. Mr Almario instituted proceedings against the company in February 1999 without the leave which was necessary because the company was then in liquidation. Application was later made for leave, but the application was subsequently dismissed by consent.
More relevantly, the company was deregistered in April 1999. In June 2001, Mr Almario commenced proceedings against the company's insurer. The insurer was initially wrongly identified, but that issue was rectified in June 2002. In November 2002, he applied to a District Court judge for an order, pursuant to s151D(2), extending the time for the commencement of s601AG proceedings. That application was dismissed on the basis that s151D(2) referred only to proceedings against "the employer" and the section had no application to a claim against the employer's insurer.
Later, the insurer successfully applied to a different District Court judge to strike out the statement of claim on the ground that the cause of action could not succeed. The judge held that the limitation period for s601AG actions begins to run on the deregistration of the company, and said it was necessary to look at the question of whether, on deregistration, the company "had a liability" as required by s601AG. The judge drew an analogy between s601AG and s6(4) of the Law Reform Act which I have set out above, and agreed with the proposition that the insurer would be entitled to rely on any defence on which the deregistered company might have relied. It was held that the insurer was entitled to rely on the limitation defence, and absent an extension of time, the action could not succeed.
The end result leading to the two appeals before the Court was explained by Ipp JA at 152 [16]:

[63]

Subsequently, at par[21] and following, his Honour:
- said that the insurer did not challenge the proposition that if, immediately before the company's deregistration it had a liability to Mr Almario, the insurance contract covered that liability - [21];
- also noted that the insurer focused on the phrase "had a liability" in s601AG(a), and had submitted that, by reason of the expiry of the time period specified in s151D(2), the company had no liability to Mr Almario immediately before its deregistration - [22];
- observed that the word "liability" was capable of ambiguity stemming from the distinction between statutory time limitations that bar the remedy for an existing cause of action and those that extinguish the cause of action - [23];
- said that s151D(2) barred an existing cause of action, and "on a strictly textual construction, it affects the remedy available to a person to whom it applies" - [26] (original emphasis);
- said that it followed, on a strictly textual construction, that the expiry of the three year period in s151D(2) did not extinguish whatever liability the company might have had to Mr Almario for damages caused by its negligence - [29]; and
- went on to say that on this basis, the expiry of the three year period would not prevent Mr Almario from establishing that at the date of the company's deregistration, it had a liability to him within the meaning of s601AG(a). "'Liability' would then include a time barred cause of action" - [29] (original emphasis).
At [30] his Honour then observed that if it were otherwise, and the "liability" excluded the liability in respect of which the remedy was time barred, Mr Almario would only be able to prosecute his claim by having the company reinstated on the register and then applying under s151D(2) for an extension of time within which to bring proceedings against it. His Honour said that this would defeat the legislation policy underlying s601AG, that being, as McPherson JA noted in Pagnon at 500 [17], to obviate the need to reinstate the company.
It is best if I set out in full a number of the paragraphs of his Honour's judgment which follow from that point:

[65]

Take the notional case where a worker is injured through the negligence of his employer but takes no legal proceedings to recover damages. Assume that, say, 20 years later, the employer company is deregistered and the worker then sues the deregistered company's insurer. It would give rise to a serious inequity if, in those circumstances, the insurer would be fixed with liability and not be afforded the protection given to employers by s 151D(2).
Another potential anomaly concerns the question whether an insurer (not being a joint tortfeasor) is entitled to claim a contribution to whatever amount it may be liable under s 601AG. This is an issue that could well arise should Mr Almario's action proceed.
In my view, the purpose of the legislature in inserting s 601AG in the Corporations Act is to require the insurer of a deregistered company to stand in the shoes of the company to the extent necessary to allow creditors of the company to recover from the insurer whatever amounts they were entitled, by force of law, to recover from the company had it not been deregistered. This purpose is discernible from the section as a whole and the Explanatory Memorandum. The notion that a person may recover from the insurer of a deregistered company 'an amount that was payable' supports this inference. These words convey the idea of a creditor being entitled to recover that which was payable to him or her. Paragraph (a) of s 601AG is not inconsistent with this idea.
In accord with such a purpose, an insurer would be able to raise against a claimant under s 601AG whatever defences would have been open to the company - subject to any qualification that might, in law, attach to those defences. So that if a statute caused a creditor's remedy to be time barred, but nevertheless provided that the bar could be relaxed by affording the creditor the opportunity of applying for the time to be extended, any right the insurer would have to rely on the time bar would be subject to the creditor being able to apply (as against the insurer) for an extension of the time period.
On this basis, it would be open to the insurer, in a claim against it under s 601AG, to raise the defence that the three-year period under s 151D(2) of the Workers Compensation Act had expired. But, as that defence is subject to the right of the person claiming to seek the court's leave to extend the three-year period, that person would have the right to apply to the court for leave to extend the time as against the insurer, as if the insurer was the employer of the person concerned."
Ipp JA said that in that sense, s601AG would be construed as operating in a way akin to s6 of the Law Reform Act. At 155 [38], his Honour noted the observation of Spigelman CJ in Kinzett, that the statutory objective of s6 was to assimilate proceedings against the insurer against the insured, and at 156 continued in what I see to be the critical part of the judgment:

[74]

Of course, it is correct that the facts of this case are different from those in Almario because Mr Mercer's claim against Windsor Agencies was not time barred at the time of the company's deregistration. It is the next statement in that passage from [19] of the trial judge's reasons which needs to be examined. The proposition raises questions about what the Court in Almario authoritatively said about the general purpose and construction of the section, and what, if anything, did it authoritatively say or imply about the situation in which the plaintiff in a s601AG action is within time in relation to proceedings against a company at the date of its deregistration, but not at the time of the action against the insurer.
It is correct that Ipp JA explained that in the second District Court application the judge had held that the limitation period for a s601AG action begins to run on deregistration of the company. Ipp JA immediately went on to say, "This finding has not been challenged": 9 [15]. As has been seen, Ipp JA later said that the section creates a new cause of action, not being one for damages. It can be inferred that his Honour treated this cause of action as arising on deregistration, but did not directly examine or reach any express conclusion about what limitation period applied nor, if it were assumed that the s151D(2) time limitation applied, did it consider the correctness of the proposition as to its commencement.
A review of the chronology shows that at the time Mr Almario sought to sue the insurer, the three year period under s151D(2) had expired. Even taking that period from the date of deregistration, he was out of time against the correct insurer. Further, because of the date on which the company was deregistered, proceedings against the insurer would not have been statute barred if the six year period under s14(1)(d) applied to the s601AG action. Assuming that the provision applied, both of Mr Almario's District Court applications were simply unnecessary.
In their written submissions, counsel for Mr Mercer note that there did not appear to have been any argument that if s151D(2) did not apply, then s14(1)(d) of the Limitation Act (NSW) supplied the relevant limitation period. Further, they draw a distinction between the situation in which the limitation period which governed an action against the company also governs the s601AG proceedings as such, and the situation in which that same limitation period is relevant only to the question of whether the company "had a liability" at the time of deregistration within the meaning of s601AG(a).
Counsel argue that since Almario concerned the possibility of an extension in circumstances where the limitation period had expired as at deregistration, it was not necessary for the Court to decide which situation applied: "All that was necessary for the Court to decide was that an extension was open, not as to which liability or cause of action the extension operated upon." In argument, Mr Ruskin QC submitted that in Almario, the parties had focused on whether there could be an extension under s151D(2) of the Workers Compensation Act, but that the case was not authority for the proposition that the section provided the correct limitation period for all purposes. The observations of Blow CJ and these submissions raise an important point about Almario which needs to be explored.
As to that point, it is true that there appears to have been no discussion before the Court of Appeal about what time limitation applied, but the case seems to have proceeded on the unstated but plain assumption that Mr Almario's action against Allianz was governed by s151D(2). At the same time, it may also be reasonable to suggest, with respect, that any delineation which was made between an extension of time for the bringing of the s601AG action, and an "extension" for the purposes of deciding whether the company "had a liability" under par(a) is not entirely clear. However, for the reasons which follow, it seems plain to me that the Court dealt with the limitation period as governing the broader question relating to the bringing of the s601AG action, and not just the matter of a liability under par(a).
Having referred to the insurer's focus in argument on the phrase "had a liability", at [23] and following, Ipp JA addressed the ambiguity of the word "liability" stemming from the distinction between statutory time limitations that bar the remedy, and those which extinguish the cause of action. Section 151D(2) was said to be of the former type not the latter, in that it affected the remedy: [28]. That is followed by a discussion of the consequences of interpreting the word "liability" to include or exclude a time barred cause of action. His Honour noted anomalies caused by both the competing arguments: [29] - [33].
It seems to me that the discussion changed from a consideration of how limitation periods operate in the context of the phrase "had a liability" in par(a), to the applicability to the s601AG action of the limitation period relating to the cause of action against the company. By making clear his view as to the legislative purpose behind s601AG, his Honour resolved the issues raised by the appeals on a much broader basis. That resolution was a purposive construction requiring the insurer to stand in the shoes of the company to the extent necessary to allow "creditors" to recover whatever amount they are entitled to recover from the company had it not been deregistered. The proper construction was to read the opening words as though they included, after the word "deregistered", the phrase "as if the insurer was the deregistered company": [34], [41].
As to the operation of a limitation period, I refer to pars [35], [36] and [42] of the Almario judgment set out above. In particular, at [36] Ipp JA said that adopting the broad purposive construction enables an insurer in a claim against it, to raise the defence that the three year period under s151D(2) had expired. For the sake of convenience, I will repeat what his Honour said after that:

[78]

The reason I have somewhat laboured this analysis is to demonstrate the basis for thinking that the true approach in Almario was a direct assimilation between the cause of action against the company and the s601AG action. On my reading, in pars [41] - [43] of Almario, Ipp JA was talking about the assimilation of limitation legislation to the cause of action under s601AG as such, and not an assimilation simply for the purposes of the determination of whether the company "had a liability" within the meaning of s601AG(a). It must be remembered that Mr Almario instituted proceedings against the insurer under s601AG and, being out of time as against the company, sought an extension of time for the bringing of those proceedings. The Court of Appeal set aside the refusal of his application and remitted the application to the District Court for rehearing.
In the context of Mr Mercer's argument, it might be argued that what the Court intended by the order was a hearing of an application by Mr Almario for an extension of time relevant only to determining the company's liability under s601AG(a). If that were the case however, one might think that the Court would have made it much clearer. In any event, there are conceptual difficulties with that approach. It would amount to an application to relieve the plaintiff from the impact of a complete defence possessed by the insurer in the s601AG action, and in advance of the defence being pleaded. The first question which might arise is the source of the power to grant such relief.
An application for an extension of time for the bringing of notional proceedings against the company so as to overcome a potential defence as to whether the company "had a liability" at the time of deregistration, would amount to a rather unusual proceeding. The focus of the factors usually taken into account in applications to extend time would be those relevant to proceedings against the company. Events after deregistration would not seem to have any relevance, and it would probably only be the period of delay before the date of deregistration which would require explanation.
In the absence of a complete assimilation between the cause of action against the company and the s601AG action, it is difficult to see how par(a) of the section would enable a determination to be made about an extension of time, in proceedings which might have been brought against the company, so as to alter the position of the parties under that paragraph.

[80]

Limitation issues also arose in the later case of Murdock v Lipman (above). McCallum J discussed the general approach to s601AG, and her Honour's treatment of the applications is relevant to the "liability" issue under s601AG(a). The case involved the determination of two applications for an extension of time. The plaintiff, Mr Murdock, was injured in the course of his employment at a building site and sought orders to enable him to maintain proceedings against three parties, two of whom were defendants in the action. The first defendant was the head contractor at the building site. The second defendant was the insurer of a subcontractor, the insurer having been substituted in the action for the company under s601AG as it was discovered the company was deregistered before the proceedings were commenced.
The first application sought an extension of time for the bringing of claims against those defendants. The second application was brought against the insurer of the deregistered employer company and, as described by McCallum J, it sought "leave to commence proceedings out of time against [the insurer] in lieu of the deregistered employer". The proposed proceedings were ones under s601AG, and it was plainly assumed that the plaintiff was out of time only because, under s151D(2), he was out of time to bring an action against his employer.
McCallum J discussed the nature of an action under s601AG, and some aspects of the decision in Almario. First, at [46] her Honour described the entitlement under s601AG to recover from an insurer as "a species of statutory subrogation, in which a person in the position of the plaintiff is entitled to be subrogated to the rights of the deregistered company as against its insurer". Her Honour went on to explain the history of the proceedings in Almario, noting at [51] that the Court of Appeal held that it was open to a person claiming under s601AG to seek as against the insurer an extension of the limitation period under s151D(2).
Her Honour noted that the purpose of the section was, as stated in Almario, to require the insurer of a deregistered company to stand in the shoes of the company to the extent necessary to allow recovery from the insurer the entitlement which might have been recovered from the company had it not been deregistered. At [53], her Honour set out the additional remarks of Hodgson JA in Almario at 150 [2] to the effect that the section would deem the insurer to be a tortfeasor liable in respect of damage within the meaning of the indemnity and contribution provisions, so as to enable it to recover contributions.
Her Honour then said:

[82]

In relation to the action against the second defendant, (the insurer substituted for the company in the action), having referred to the insertion of the section as creating a new statutory cause of action, her Honour said at [60] that it did not follow that that was the only characterisation or even a correct characterisation of a claim against an insurer which had been substituted for the deregistered company as a defendant in proceedings for damages for personal injury, "particularly where, as occurred here, the substitution order was made by consent." At [69] however, her Honour said that it was clear from the decision in Almario that, at least as to the issue before her, the insurer stood in the shoes of the insured. Her Honour continued: "It follows that the application for an extension of the limitation period 'against the second defendant' is to be determined as an application under the Limitation Act to extend the period for bringing a claim for damages for personal injury." Section 60C of the Limitation Act enabled a court to order that the limitation period for a cause of action for damages for personal injury be extended for such period, not exceeding five years, as it determined.
Her Honour ordered that the limitation period for the plaintiff's cause of action against the second defendant be extended. Her Honour said nothing to suggest that the application was one or anything other than an extension of time for the bringing of the proceedings by virtue of s601AG.
As to the application concerning the insurer of the deregistered employer, her Honour said that s151D(2) governed the situation and not the Limitation Act 1969 (NSW), observing at [93] that "In determining whether to grant leave under s 151D(2), the question to be considered is what is fair and just, or what the justice of the case requires ...". The merits of the application to extend time which her Honour then dealt with included considerations of whether the insurer had a right of contribution from a joint tortfeasor.
A principal feature of that debate also has some relevance to the correct conceptual characterisation of an "extension of time" for a s601AG action. That feature was the fact that, unlike an extension of time under the Limitation Act (NSW) which made specific provision for the situation, an extension of time under s151D(2) of the Workers Compensation Act did not extend the limitation period which applied to actions for contribution under s26(1) of the Limitation Act.
That provision made such actions not maintainable if brought after the first to expire of either (a) a period of two years from the date on which the cause of action for contribution first accrued, or relevantly to the case, (b) four years from the date of the expiration of the "limitation period for the principal cause of action". That phrase was defined to mean the limitation period fixed by or under the Limitation Act or by or under any other enactment for the cause of action for the liability in respect of which contribution was sought.
McCallum J said that the "principal action" for the purposes of s26(1)(b) was Mr Murdock's action for damages against the insurer standing in the shoes of the insured. Her Honour explained that earlier Court of Appeal cases had assumed that the Limitation Act provision was not affected by an extension of time under s151D(2), although the point had been later questioned. Her Honour thought it inappropriate to depart from the assumptions made in the earlier cases.
That meant that an extension of time granted to Mr Murdock did not extend the time in which the insurer might take contribution proceedings; accordingly, the insurer faced actual and significant prejudice. The plaintiff suggested a possible way of avoiding that prejudice, or at least of relieving it to a certain extent, but the resolution of that necessitated hearing further from the insurer.
Ultimately, orders were made joining in the deregistered company as the third defendant in the action, substituting the insurer for the company, and granting leave to the plaintiff under s151D(2) to commence the proceedings against the third defendant out of time: Murdock v Lipman (No 2) [2013] NSWSC 11. In all of this, there is an acceptance of the underlying proposition that the context in which the debate took place was an application for leave to commence the proceedings "out of time". There is no reference or allusion to the proposition that what was really being considered was an application to adjust the parties' rights under s601AG(a).
Further there is the simple point that if, in the application to McCallum J, the real point as to time had been whether the company "had a liability" at the time of its deregistration, the issue concerning the effect of s151D(2) on proceedings for contribution under s26 of the Limitation Act (NSW), would not have arisen[10].

[84]

The meaning of "had a liability" in par (a) had been considered in the earlier case of Tzaidas v Child (above). Three related actions for damages were commenced against two doctors and a company which operated a hospital. Later, leave was granted under s6 of the Law Reform Act to commence proceedings against the hospital's insurer. Later still, the hospital company was deregistered. The doctors filed cross-claims against the company and the insurer, seeking contribution from them as joint tortfeasors.
Ultimately, the doctors sought to amend the cross-claims against the insurer to include a claim under s601AG, contending that they were entitled under that section, to recover directly from the insurer monies payable by it to the company in respect of their claims for contribution. It was ordered that three related questions be determined on a final basis separately from any other question before the further trial of the proceedings. They were:
- did the fact that the plaintiff had not obtained judgment against the doctors prior to the deregistration of the hospital mean that the doctors could not recover on their cross-claims against the insurer pursuant to s601AG, given that the plaintiff had commenced proceedings against the doctors before deregistration?
- for the doctors to recover pursuant to s601AG, must they establish that the hospital had a liability to them "immediately before deregistration" [given that those words do not appear at the end of par(a) but only at the end of par(b)]?
- if, at a final hearing it was established that the hospital and the doctors were tortfeasors each liable to the plaintiff and entitled to recover contributions from each other, will those findings establish that the hospital "had a liability" to the doctors immediately before deregistration?
The insurer's argument began "with the undisputed proposition" that the doctors' cause of action for contribution under the equivalent of s3 of the Wrongs Act 1954 (Tas) did not accrue until judgment had been obtained against the doctors by the plaintiffs. The insurer argued that since primary liability had yet to be established by the plaintiffs against either the doctors or the hospital, the hospital could not have "had a liability" to the doctors within the meaning of s601AG(a) immediately before its deregistration.
As to this argument, at 212 McCallum J said that it made two implicit assumptions:

[86]

Secondly, CGU's argument assumes that a liability does not exist until it is determined. It was acknowledged that the term 'liability' is not universally construed in that sense, and takes its precise meaning from its context: see generally Crimmins (at 51 [134]-[147]). CGU submitted, however, that in the context of s 601AG, 'liability' means a liability that was determinate or crystallised before deregistration of the company in question."
At 213 [26], her Honour framed the critical issue as "the resolution of the conceptual difficulty due to the fact that the statutory cause of action under s601AG requires proof of the existence of a liability at a particular point in time (that is, 'immediately before deregistration')". At 214 [27], her Honour noted that CGU's submissions were that what is required in a claim under s601AG is proof of a liability, the existence of which had been determined immediately before deregistration. The doctors contended that it is sufficient if the determination that a liability existed immediately before deregistration is made at the hearing of the claim under s601AG.
An argument for the doctors was based on the decision in National Mutual Fire Co Ltd v Commonwealth of Australia [1981] 1 NSWLR 400 which concerned s6 of the Law Reform Act. In that case, the Court rejected the proposition that the term "liability" in s6(1) of the Law Reform Act did not include a claim for contribution or indemnity; the liability to pay any damages or compensation extended to a liability to pay contribution to another tortfeasor: see [1981] 1 NSWLR 400 per Glass JA at 407 - 408. Her Honour accepted that there was a strong analogy between the proposition rejected in the National Mutual Fire case and the proposition contended for on behalf of the insurer.
In Tzaidas v Child, the insurer also argued that a potential liability to be determined in the future did not fall within the ordinary meaning of the words in s601AG. It contended that the use of the past tense throughout the section indicated an intention for it to have a limited application; that is, where a liability existed that was determinate or crystallised. The insurer suggested a much more expansive form of words which would have been used if the legislature had intended the result contended for by the doctors. At 215 McCallum J said:

[88]

In my view, the apparent complexity of s 601AG is resolved in the recognition of the following matters. The section is remedial. It creates a new cause of action to recover an amount that was payable to the deregistered company under the relevant insurance contract: Almario (at 152 [19]). There is no requirement for leave to bring an action under the section: compare s 6(4) of the Law Reform (Miscellaneous Provisions) Act. In particular, the conditions set out in s 601AG(a) and s 601AG(b) 601AG are not expressed as pre- conditions to the commencement of proceedings to recover an amount under that section. Rather, proof of those matters is expressed as a condition of recovery in accordance with the section.
Accepting that a claim for recovery under the section is a discrete statutory cause of action (not a claim for damages), the central inquiry is to understand the content of the elements of such a claim. The first element required to be proved is that the (now deregistered) company 'had a liability' to the claimant. Once it is accepted, as recognised by the Court of Appeal in National Mutual Fire Insurance Co, that the liability of one tortfeasor includes his 'secondary liability' to contribute to the damages payable by another, it is clear in my view that what is required under s 601AG(a) is to prove, at the time of the hearing, that the deregistered company was a joint tortfeasor immediately before deregistration." [My emphasis.]
The three questions were respectively answered "No", "Yes", and "Yes". Her Honour said that Almario determined the second question. The relevant significance of the judgment is that "liability" was held not to be confined to one which was determinate or crystallised immediately before deregistration but extended to one which is potential, contingent or inchoate, the existence of which is to be established at the trial of the s601AG action. That is, proof is required at the time of the hearing that the company had a liability to the claimant immediately before deregistration. It is also of some significance that her Honour treated s6 of the Law Reform Act as analogous to s601AG.
A second aspect of Tzaidas v Child is worth noting as having some relevance to the present debate. It relates to s601AG(b). The insurer sought to argue that because the policy provided indemnity against claims for which the insured "shall become legally liable", the policy did not cover any liability of the hospital immediately before deregistration. McCallum J however upheld the doctors' submission that the phrase "covered that liability" in par(b) required them to establish no more than that the scope of the policy extended to the risk that had manifested in the particular case: 216 [44].

[105]

It can be seen then, that although the wording is different, there are similar concepts involved. That is, there is a reference to the question of whether the insurance contract covered the liability in s 601AG(b), which is comparable with par (c) and the concluding words of s 51(1), and the reference to the question of whether the company 'had a liability' is very close to the question of whether an insured 'is liable' to a person in par (a) of s 51(1), although the tense is different."
In relation to Wheeler JA's observations that similar concepts are involved in s601AG and s51 of the Insurance Contracts Act, the difference in the tenses used in those provisions may well be explained on the basis that s51 also covers the situation where an insured person is alive but cannot, after reasonable inquiry, be found. Otherwise the two provisions deal with the liability of persons of whom it is appropriate to speak in the past tense; a deregistered company in the case of s601AG, and a person who has died in the case of s51 of the ICA.
In Webb, the Court accepted that the purposive approach taken to s601AG supported the argument that the effect of s51 was to enable the plaintiff to pursue the cause of action directly against the insurer, and that an established liability against the insured at the time of the relevant event was not a precondition of liability: 497 - 498, [19] - [22].
I have not been able to find any authoritative decision dealing with the limitation period which applies to a s51 action. A clue to what Parliament intended in relation to the operation of limitation periods to a s51 action might be found in the Australian Law Reform Commission Report which gave rise to the ICA. At pars338 and 339 of ALRC 20, the Commission identified difficulties with third parties proceeding against insured persons who became bankrupt or died, or companies which went into liquidation.
In par339 it gave an example of legislation in the area of compulsory third party motor vehicle insurance which gave the third party a right to proceed directly against the insurer in cases where the insured driver is dead or cannot be found. The example was s113(1) of the Motor Vehicles Act 1959 (SA). That created the right for a person suffering loss through death or bodily injury to take action against the insurer, provided notice of the claim under the provision and a short statement of grounds, was served as soon as possible after the injured party knew that the insured person was dead or could not be found.
The South Australian provision is similar to that considered in Gefken, with the exception of the notice requirement. It will be recalled that the terms of the Motor Vehicle Ordinance considered in Gefken v Union Assurance Society of Australia (above) were in not dissimilar terms to s51 of the ICA, in the sense that the right of action against any insurer was available where the wrongdoer was dead or could not be served with any process. The decision in Gefken was that the cause of action against the authorised insurer was subject to the limitation period which applied to the underlying cause of action created by the Compensation (Fatal Injuries) Ordinance.
In its recommendations, the Commission said at par340:

[110]

That s601AG creates a new cause of action which arises on deregistration is not in dispute, and I think it must be correct. The issue is what limitation period applies to that action. In short, Allianz submits that the action is governed by the limitation period of the underlying cause of action. In effect, that would make the new cause of action a continuation of the existing cause of action against the original wrongdoer, subject to the unexpired duration of any applicable limitation period. The alternative is that the six year period under s4(1)(d) of the Limitation Act applies because the action is one to recover a sum recoverable by virtue of an enactment. Time commences to run from the date of deregistration. In my view, the former construction is the preferable one.
The task of statutory interpretation begins with the ordinary and grammatical meaning of the text, to be interpreted having regard to its context; context includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at 31 [4], 46 - 47 [47]. Statutory purpose resides in the legislation's text and structure, and may appear by inference from the text or appropriate reference to extrinsic materials: Lacey v Attorney-General for Queensland [2011] HCA 10; (2011) 242 CLR 573 at 592 [44].
The Court of Appeal in Almario adopted a purposive approach to the interpretation of the section. Relevant factors included the terms of the Explanatory Memorandum. It will be recalled that this involved reading the opening words as though they included, after the word "deregistered", the phrase "as if the insurer was the deregistered company". This was said to give it a construction which did not ignore the words in the section, but involved attributing to the words "... a meaning that accords to the purpose of the legislation and removes anomalies and inequities": 157 [46].
That purposive interpretation gave rise, in my view, to the assimilation within s601AG of limitation legislation relevant to the underlying cause of action. That in Almario, the statutory remedy was treated by the Court as fully assimilated to the cause of action against the company is evident from the reasons of Ipp JA, and highlighted by the additional comments of Hodgson JA, the effect of which is that the section puts the insurer in the position of a tortfeasor who is able to recover contribution.
What the Court of Appeal held is directly relevant to the present case. As an interpretation placed on national legislation by another Australian intermediate appellate court, this Court should not depart from that interpretation unless convinced that it is plainly wrong: Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 492. I am not convinced that it is plainly wrong, and accordingly, the purposive construction underpins the resolution of the issue in this case.
The purposive approach to the interpretation of the section and its operation in relation to limitation periods applying to the underlying causes of action, as explained in Almario, is plainly evident in Murdock v Lipman. I respectfully agree with McCallum J's analysis that the section operates so that the insurer stands, in effect, as the keeper of the cause of action against the deregistered insured, and for that purpose the insurer is subrogated to the rights of the deregistered insured. At the same time, a plaintiff is subrogated to the rights of the deregistered insured. The statement in Fairwater Pty Ltd v QBE Insurance (Australia) Ltd (above) at [4] cannot be taken as authoritative in relation to the present point. The issue in that case was the actual existence of the company's liability, not the applicable limitation period or its commencement point, or the ability of the insurer to raise any defence which would have been available to the company.
The Explanatory Memorandum strongly suggested that s601AG was to create rights comparable with those in s6 of the Law Reform Act. That statement in the Memorandum is itself of no little significance. In FAI (NZ) v Blundell & Brown Ltd [1994] 1 NZLR 11 at 18, Hardie Boys J said of the New Zealand equivalent of s6:

[112]

In Grimson v Aviation and General (Underwriting) Agents Pty Ltd (1991) 25 NSWLR 422 at 429, Meagher JA (with whom Hope AJA agreed) referred to "the fact that [s6 of the Law Reform Act] was never intended to augment an insurer's liability". That must be the fundamental approach to the construction of s601AG. At the time s601AG was enacted, there was no real debate that the applicable limitation period was other than that which related to the underlying cause of action: Grimson (above), FAI (NZ) General Insurance v Blundell & Brown Ltd (above). See also Recent Decisions on Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946, A J Meagher, (1993) 6 ILJ 68. The real debate was when that time period commenced: Kinzett at 43 [62] - 52 - [110].
In Kinzett, Spigelman CJ referred to the common law presumption that a remedy specified in a statute is intended to be exclusive, and noted that the presumption had been expressly applied to s6 of the Law Reform Act. In Bailey v New South Wales Medical Defence Union Ltd (above) at 446, McHugh and Gummow JJ said that s6 achieves the creation of a new right with an associated remedy to enforce it. From the consequences of that, and the wording of s6(4), the Court in Kinzett concluded that that there is a statutory assimilation of the s6 proceedings with proceedings against an insured, and that limitation periods such as the equivalent of s4(1)(d) of the Limitation Act do not apply.
It is also true of s601AG that it creates both a statutory right of action and the remedy. The purpose of the section is plain, and its effect is, and was intended to be, comparable to that of s6, although its operating mechanism is different. Accordingly, in my opinion, to that extent the reasoning in Kinzett is persuasive.
In the present case, the trial judge discounted arguments put on behalf of Allianz on the basis that it would follow that when a company was deregistered and the limitation period for proceedings against it subsequently expired without proceedings having been commenced, then unless there was a discretion to extend time, the claimant would need to apply to a court for the reinstatement of the company and in order for the period of deregistration not to be counted for the purposes of the limitation statute. His Honour said "That is exactly the sort of situation that s601AG was intended to avoid": [31].
The mischief of requiring a person seeking to pursue a deregistered company to seek its reinstatement where there is an insurance policy which would respond to the company's liability, is plain enough. The section was obviously intended, as was said in Pagnon, to "short-cut" the need to reinstate the company. The Explanatory Memorandum to the Bill for the enactment of the section confirms this.
However, a person seeking redress under s601AG in relation to the conduct of a deregistered company always has the option of seeking its reinstatement where there was insurance cover for the company's liability. If the only reason reinstatement is sought is the expiration of a time limit, an order will almost inevitably be made, with the associated direction that the interim period after deregistration not count for limitation purposes: Pagnon at 500 [17].
As to the significance of the ability to seek reinstatement, I respectfully agree with the statements of Adamson J in Sciacca (above) at [51] to the effect that there is a need for ss601AG and 601AH to be read together, and that: "Section 601AH is the wider remedy. Section 601AG is a narrower provision which obviates the need to use s601AH to the extent of its operation." There is nothing at all to suggest that s601AG was intended to completely obviate any need to seek reinstatement. I would add, in passing, that in considering whether the applicable limitation period is that which governs the underlying cause of action, it might be unwise to approach the resolution of the issue on the certain assumption that where the remedy has been barred by the expiration of a limitation period, the defence will always be pleaded.
In Grimson (above), when considering the point as to when a limitation period commenced in respect of an action under s6(4) of the Law Reform Act, Kirby P said that the construction of the section: "... must be decided by reference to the possibility that a plaintiff may be only one day outside the limitation period, and although the plaintiff had pursued an action against the insured with relentless diligence, the insured was wound up or, if a person, had died."
Of course, that same scenario might unfold but in relation to a company's deregistration. In the case of s601AG, the response to the objection is that it should be construed with s601AH in mind. Section 601AG was not intended to be the only means available to pursue a deregistered company. The combined remedy of reinstatement and the consequential order nullifying accrued time remains available.
Turning to another point, in distinguishing Almario the trial judge said that it would be wrong to treat the case as authority for the proposition that when s601AG is relied on, the insurer must be treated as if it were the deregistered company for all purposes and without qualification. His Honour pointed out that when, in par [34] of his judgment, Ipp JA said that the purpose of the legislature was to require the insurer of a deregistered company to stand in the shoes of the company to allow creditors of the company to recover from the insurer, this was qualified by the words "to the extent necessary".
It is correct that Ipp JA imposed that qualification. But it is also plain from the judgment that the "necessary extent" included the capacity to take advantage of limitation periods, the overriding principle being that the section should be construed so as to assimilate legislation which provided for the time barring of remedies, and relief from such bars.
The desirability of construing the section so that the insurer stands in the shoes of the deregistered company, and subrogated to its rights, can be readily illustrated. Mr Mercer argues that the date for determining the s601AG liability of the company to the claimant is always the date of deregistration, not the trial. This would mean that for all purposes, the state of the company's liability is frozen at the time of deregistration. As to that, I have already commented on the meaning of the phrase "had a liability" in par(a). There is no doubt that a claimant must establish at trial that there existed a "liability" of the company, in the sense I have discussed, as at the time of deregistration.
The section is, however, a general one; it is not confined to damages for personal injury. Confining the operation of par(a) as suggested, and not assimilating the statutory remedy to the underlying cause of action, means an insurer , in a s601AG action against it, would not be able to rely on any defence to a claim against the company before deregistration but which might arise afterwards. That might occur where there has been a claim on the insured before deregistration, and the insurer has been subrogated to the rights of the insured company or otherwise taken over the conduct of the claim.
Leaving s601AG to one side, the claim might be pursued with the possibility of reinstatement in mind. Defences to an eventual s601AG action which may arise and which would not be dependent on the company's continued existence include that the claimant has assigned rights of action and hence has no standing, or that the claimant has settled or compromised the claim by agreement with the insurer. A plea of "waiver" might also arise; that is, the claimant has done something which amounts to an abandonment of rights, or which would result in being precluded from pursuing them - see the various manifestations of the concept of waiver discussed in Agriculture and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at 611 - 620 [118] - [145].
Although the insurer might qualify under s601AH as a person aggrieved by the deregistration, it is difficult to see that the reinstatement of the company would alleviate such a situation. A claimant under s601AG may still pursue that action notwithstanding the reinstatement of the company: Langridge v Insurance Commission of Western Australia (above).
Focussing on the words of the section, there is support in the text for the purposive construction adopted in Almario, which construction requires that words be read into the chapeau. On the other hand, there is nothing which compels the construction advanced by Mr Mercer. First, as to par(a), I accept that it does not mean that a claimant must establish a determinate or crystallised liability which existed at the time of deregistration: Tzaidas v Child (above). Liability includes an exposure to the establishment of a legal liability in the strict sense, the determination of which is made at the trial of the s601AG action.
Next, provided the two preconditions are met, recovery under the section is limited to an amount that was payable to the company under the contract of insurance. The contract must, of course, "cover" the liability under par(b), but the section does not impose an independent liability on the insurer. Because recovery is limited to the amount that was payable, the terms of the contract need to be examined. The amount which was payable under the contract of insurance is governed by the way in which the cover responds to the established liability. That amount may be capped, or it may be subject to a specific deduction or "excess" payment.
It cannot be right that the section is limited to an amount which literally "was payable" to the company at the time of deregistration. There would be very few, if any, cases in which the company's liability had been established or agreed, and the liability of the insurer for an amount payable under the policy, determined as at the date of deregistration.
It follows that the facts and the law which apply to the resolution of the company's liability, and the amount that was payable to the company pursuant to the contract, are agitated in the s601AG action. As to the company's liability, the relevant law must be the law which applies to the underlying cause of action. The law relevant to the contract of insurance is to be applied where necessary, and the contract is to be construed in accordance with its terms.
These features of the section combine to support the proposition that the insurer is to stand in the shoes of the insured as if it were being sued on the underlying cause of action, whilst the claimant is put in the same position under the contact of insurance, as was the insured. The existence and nature of the company's liability which it may have had, and the existence and amount of the insurer's liability, are determined at the trial of the s601AG action. All of that in turn, in my view, supports the assimilation of the statutory cause of action to the underlying cause of action.
One of the essential problems I see with the application of the separate time limit under s4(1)(d) is that it makes, as plainly shown by the present case, an insurer liable in circumstances where, but for the section and absent reinstatement, it would not have been. To make the s601AG action subject to the limitation period under s4(1)(d) has the potential to significantly expand the liabilities of insurers. Such an intention is not discernible.
Furthermore, actions in respect of which there is no time limit, such as actions by a beneficiary under a trust for breach of fiduciary duty, would become subject to a six year time limit: see s24 of the Limitation Act. I acknowledge Mr Mercer's response that this difficulty may be ameliorated by seeking reinstatement, but note the irony in the fact that the undesirability of seeking reinstatement is relied on by Mr Mercer to support the construction for which he contends. I think a court should be very slow to adopt a construction which produces these results.
There might be an attractive simplicity to the application of s4(1)(d) to the statutory cause of action, with the six year period starting at the time of deregistration, but the attraction is a deceptive one. To apply such a six year limitation period, irrespective of what the claimant's cause of action against the company was, and irrespective of what time had elapsed in respect of any limitation period governing that cause of action, creates unfairness to insurers and to plaintiffs whose causes of action were not limited at all, or limited by a period greater than six years.
That level and extent of unfairness outweighs what unfairness might be done to a claimant having to seek reinstatement and consequential relief. That remains so, even accepting that conceivably there may be a case in which a court sees it appropriate to refuse reinstatement and the appropriate relief as to time.
In conclusion, I proceed on the basis that it is the least disharmonious construction which needs to be adopted. It may well be correct that, as the trial judge said, Almario is not to be taken as authority for the proposition that s601AG treats the insurer as if it were the deregistered company for all purposes and without qualification. However, what was established in Almario, along with the considerations which I have discussed, lead me to hold that s601AG encompasses the assimilation of limitation legislation relevant to the underlying cause of action.
The assimilation of the s601AG cause of action with the underlying cause of action means that there is no need to go beyond the section for limitation of actions provisions. The Limitation Act of this State does not apply because, by virtue of the intended assimilation to the underlying cause of action, the Commonwealth law "otherwise provides" within the meaning of s79 of the Judiciary Act. I am unable to accept that for s601AG to provide otherwise than for the application of State law, it involves an unacceptable implication of words. The operation in that way can be generally implied, without offending principles of construction.
I would hold that s4(1)(d) of the Limitation Act does not apply to a s601AG cause of action. I would also hold that, given that the underlying cause of action is one for damages for personal injuries, s5A(3)(a) of that Act governs Mr Mercer's cause of action under s601AG.

Allianz Australia Insurance Ltd v Mercer [2014] TASFC 3 | Case summary | Zoe

At a glance

Court

Decision date

Before

Source

Judgment (127 paragraphs)

Allianz Australia Insurance Ltd v Mercer [2014] TASFC 3 (9 May 2014)

Parties

Legislation Cited (3)

Cases Cited (21)