Anjin No 13 Pty Ltd v Allianz Australia Insurance Ltd [2009] VSC 371

Supreme Court of Victoria|2009-08-31|Before: VICKERY J

PRACTICE AND PROCEDURE - Application by plaintiff for joinder of third party insurer as a defendant - plaintiff / applicant suing former architects in respect of a construction project - application to join architects' insurer as a defendant to obtain declaration that insurer liable to indemnify architects - power to grant declaration - Rules 9.02 and 9.06 Supreme Court (General Civil Procedure) Rules 2005 - whether true legal controversy - practical utility of joinder - factors affecting discretion to order joinder - avoidance of multiplicity of proceedings - Technology Engineering and Construction (TEC) List objective - case management considerations

2 The present proceeding is a claim by Anjin for damages against its architects Riddle Radcliff and Studio 5 and its project manager, Knight Design and Management Pty Ltd (the thirdnamed defendant) and its principal Michael Knight (the fourthnamed defendant), in respect of works conducted at premises at 255 Cardigan Street, Carlton, in Victoria (the "Architect Liability Proceeding"). The works involved the refurbishment and construction of a building called "Poyntonz" (the "Project").

3 When an insurer has denied indemnity, it is uncontroversial that an order may be made for the joinder of the insurer as a third party to the proceeding at the suit of the insured. This is the usual case where an insurer finds itself in dispute with its insured.

4 However, the issue in this case concerns the circumstances in which an insurer may be joined as a defendant by a third party to the contract of insurance, in this case the plaintiff, who has brought an action against the insured, in this case the first and second defendants Riddle Radcliff and Studio 5, in a proceeding in which the liability of the insured to the plaintiff is in issue, but there is no issue as to the liability of the insurer to the plaintiff. The plaintiff alleges that the insurer has denied liability to its insured and seeks a declaration that the insurer is liable to indemnify those parties. The position is illustrated diagrammatically in Annexure "A" attached.

5 The proceeding was commenced by the issue of a Writ on 12 April 2005. A mediation was held on 12 April 2007. The mediation was not successful in resolving the dispute. Shortly after the mediation, it appeared to Anjin that Riddle Radcliff and Studio 5, who had prior to that time been represented by solicitors acting on instructions from Allianz, would no longer be defending the action and their solicitors had ceased to act.

6 The circumstances surrounding the apparent cessation of the solicitors for Riddle Radcliff and Studio 5 from continuing to act were as follows: On 21 December 2007 Anjin's solicitor Michael Beswick received a letter and notice from the firm of solicitors which had previously acted for Studio 5 advising that the firm had ceased to so act for that company. Then on 5 February 2008 Mr Beswick's law firm received an email from the wife of Ron Riddle, Valerie Riddle. I infer that Mrs Riddle acted as agent of her husband Mr Ron Riddle in sending this email, and from the content of the email, I infer that the subject matter was within her personal knowledge. Mr Ron Riddle was a director of Riddle Radcliff and the sole director of Studio 5. The email stated that Riddle Radcliff had gone into voluntary liquidation and that Ron Riddle was living in Abu Dhabi. It also stated that Studio 5 was no longer an operating commercial concern and that the business had ceased trading. There being no contrary evidence before me, I accept the facts stated in the email from Mrs Riddle as being correct.

7 Following a further exchange of correspondence between Mr Beswick and Mrs Riddle, on 7 February 2008 she advised by email that both Riddle Radcliff and Studio 5 had valid policies of insurance and that she would seek legal advice as to whether the relevant files could be released to Mr Beswick from the former solicitors.

8 The insurance policy of Riddle Radcliff had not been provided to Anjin, although it had in its possession the insurance policy relating to Studio 5. The Allianz policy in respect of Studio 5 appeared to Mr Beswick to show that it provided insurance cover at least for some part of the claim which Anjin seeks to make against Studio 5 in the present Architect Liability Proceeding.

9 As to the corporate status of the company defendants: Riddle Radcliff and Studio 5 remain registered according to a company search conducted in March 2008, but the thirdnamed defendant, Knight Design and Management Pty Ltd, has been deregistered.

10 Following further inquiries and extensive correspondence, on the part of Mr Beswick acting for Anjin, no further insurance documents were forthcoming from any source.

11 Anjin then made application to the Court for discovery of insurance documents relating to Riddle Radcliff and Studio 5. The application was successful. The documents thus obtained by Anjin, show that both companies are insured by Allianz in respect of the period 11 June 2002 to 11 June 2003 pursuant to the Allianz Architects' Professional Indemnity Policy dated 16 June 2002 (the "Allianz Policy").

12 The Allianz Policy provides insurance cover by virtue of clause 1.1 in respect of indemnity against all civil liability arising from any claim that is first made against the insured, Studio 5, during the period of cover in respect of Studio 5's conduct of its professional business, as an architect. By clause 43, "claim" is defined to include a written or verbal demand by a third party for compensation or damages; and by the same clause the insured is defined to include a predecessor in business, thereby including Riddle Radcliff as an insured. By clause 30, the policy provides for notification, as a claim condition, of any claim made against the insured during the period of cover as soon as practicable after the claim is made.

13 In Anjin's Statement of Claim, it claims that Riddle Radcliff was appointed Anjin's architect in respect of the Project pursuant to an architectural agreement made in or about September 2000. On and from 22 February 2002 Studio 5 is alleged to have assumed responsibility for the performance of Riddle Radcliff under the architectural agreement and the work of both architects is alleged to have continued not beyond February 2003. Accordingly, the Allianz Policy appeared to Mr Beswick, on the face of it, to provide insurance cover to one or both of Riddle Radcliff and Studio 5 for at least part of the period in contention in the Architect Liability Proceeding.

14 A relevant claim was first made in this matter under the Allianz Policy by letter dated 21 January 2003 when Mr Beswick wrote to Ronald Riddle of Riddle Radcliff and Studio 5, making a demand upon Mr Riddle and his companies for compensation or damages for negligence of Mr Riddle and his companies, as architects for the Project. By email of 23 January 2003, Mr Riddle informed Mr Beswick that his letter had been handed to his solicitors and to his insurance company and stated to Mr Beswick that:

A formal response will be issued regarding the assertions pertaining to our architectural services.

15 In the present proceeding the defendants were initially represented by personal solicitors, but subsequently were represented by solicitors instructed by Allianz. From 19 December 2005, Phillips Fox of 140 William Street, Melbourne, acted as solicitors for Studio 5 and from 7 March 2006 acted as solicitors for Riddle Radcliff, in both cases on instructions from Allianz. Later, Phillips Fox ceased to act for Riddle Radcliff and Studio 5, and Holding Redlich of 350 William Street, Melbourne, commenced to act as solicitors for Studio 5. On 21 December 2007, Holding Redlich filed a Notice of Solicitor Ceasing to Act. On 12 December 2007, in a conversation between Mr Beswick and Kane Barrett of Holding Redlich, who had the carriage of the matter on behalf of Studio 5, Mr Barrett had informed Mr Beswick that Allianz had declined cover to Studio 5 under the Allianz Policy. He later confirmed this in an email dated 19 December 2007.

16 Mr Beswick formed the view that it would be desirable to obtain copies of correspondence between Allianz and its insured, Studio 5, in order to obtain more specific information in relation to the circumstances in which Allianz appeared first to accept liability in respect of Anjin's claim, and for a time to defend the proceedings, and later to deny indemnity. He wrote to the solicitors for Allianz seeking copies of correspondence between Allianz and its insured in relation to the Anjin's claim and, in particular, in relation to a claim by the insured for indemnity and the successive responses of Allianz to that claim.

17 By letter dated 23 April 2009, DLA Phillips Fox refused to provide the requested documents. Mr Beswick responded by letter dated 1 May 2009, to which DLA Phillips Fox responded, by letter dated 20 May 2009, again refusing to provide copies of the documents sought by Mr Beswick.

18 The plaintiff Anjin subsequently issued its summons on this application seeking to join Allianz as a defendant to the Architects Liability Proceeding. By a draft Amended Statement of Claim presented in support of its application, Anjin seeks:

A declaration that the fifth defendant [Allianz] is liable to indemnify the first and second defendants in respect of any judgment herein obtained by the plaintiff [Anjin] against the first defendant [Riddle Radcliff] and/or the second defendant [Studio 5] and in respect of any sums (including legal costs) which the court may order the first defendant and the second defendant, or either of them, to pay to the plaintiff.

19 The plaintiff Anjin sought to place reliance on rr.9.02 and 9.06 of the Supreme Court (General Civil Procedure) Rules 2005 in seeking to found the joinder of Allianz. Joinder is dealt with in both these Rules of Court.[1]

20 Rule 9.02 provides:

9.02. Permissive joinder of parties

Two or more persons may be joined as plaintiffs or defendants in any proceeding-

(a) where-

(i) if separate proceedings were brought by or against each of them, some common question of law or fact would arise in all the proceedings; and

(ii) all rights to relief claimed in the proceeding (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions; or

(b) where the Court, before or after the joinder, gives leave to do so.

21 In my opinion, r.9.02 (a) is not the appropriate vehicle for the proposed joinder. The questions underlying the plaintiff's proposed declaration arise in relation to the insurance cover of the architect companies. These insurance questions do not arise out of the "same transaction or series of transactions" as found the relief claimed in the existing Architect Liability Proceeding in which the liability of the Architect Companies to the plaintiff, arising from their engagement as architects on the Project, is in issue.

22 As to r.9.02(b), this paragraph economically states that joinder is permitted "where the Court, before or after joinder, gives leave". The circumstances in which a court may give leave are not specified. It may be assumed, however, that leave will be given if it is in the interests of justice to do so.

9.06 Addition, removal, substitution of party

At any stage of a proceeding the Court may order that -

(a) any person who is not a proper or necessary party, whether or not he was one originally, cease to be a party;

(b) any of the following persons be added as a party, namely

(i) a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or

(ii) a person between whom and any party to the proceeding there may exist a question arising out of or relating to or connected with any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding;

(c) a person to whom paragraph (b) applies be substituted for one to whom paragraph (a) applies.

24 The plaintiff Anjin in this case relied principally upon paragraph (b)(ii) of r.9.06.

25 As observed by Gillard J in Tatterson v Wirtanen (as Executrix of the estate of Desmond Barry Wirtanen)[2] there is a substantial difference between paragraph (b)(i) and sub-paragraph (ii). The first part of the paragraph is limited in its application. An applicant has to establish the additional party ought to have been joined as a party or whose presence is necessary to ensure that all questions are effectually and completely determined and adjudicated upon. The limitations on its application were discussed and recognised by the House of Lords in Vandevell's Trustees Ltd v White.[3]

26 To overcome these limitations r.9.06(b)(ii) was introduced into Victoria in 1986. It followed a similar rule in England which was introduced after Vandevell's case.[4] Consequently, as noted by Gillard J in Tatterson, the scope of the rule has been substantially broadened by the addition of paragraph (b)(ii).

27 By way of summary, following the analysis of Gillard J in Tatterson, an applicant who seeks to invoke the Court's jurisdiction pursuant to r.9.06(b)(ii) has to establish the following:

(i) that there are two entities namely the person to be added as a party and a party to the proceedings;

(ii) between the two entities there may exist a question arising out of or relating to or connected with any claim in the proceeding;

(iii) it is just and convenient to determine that question between the proposed party and the other party as well as between the parties to the proceeding.

28 The Corporations Act 2001 (Cth) (the "Corporations Act") by s.562 provides for priority of third parties to insurance monies in a winding up. This section is one of the exceptions to the basic rule that in every winding up all debts and claims are to rank equally. Section 562 provides:

(1) Where a company is, under a contract of insurance (not being a contract of reinsurance) entered into before the relevant date, insured against liability to third parties, then, if such a liability is incurred by the company (whether before or after the relevant date) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount must, after deducting any expenses of or incidental to getting in that amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability, or any part of that liability remaining undischarged, in priority to all payments in respect of the debts mentioned in section 556.

(2) If the liability of the insurer to the company is less than the liability of the company to the third party, subsection (1) does not limit the rights of the third party in respect of the balance.

(3) This section has effect notwithstanding any agreement to the contrary.

Section 117 Bankruptcy Act 1966 _(_the "Bankruptcy Act") also provides for priority of third parties to insurance monies in the case of a bankrupt. It is similar in effect to s.562 Corporations Act. Section 117 provides:

Policies of insurance against liabilities to third parties [see Table B]

(1) Where:

(a) a bankrupt is or was insured under a contract of insurance against liabilities to third parties; and

(b) a liability against which he or she is or was so insured has been incurred (whether before or after he or she became a bankrupt);

the right of the bankrupt to indemnity under the policy vests in the trustee and any amount received by the trustee from the insurer under the policy in respect of the liability shall, if the liability has not already been satisfied, be paid in full forthwith to the third party to whom it has been incurred.

(2) Subsection (1) does not limit the rights of the third party in respect of any balance due to him or her after the payment referred to in that subsection has been made.

(3) This section applies notwithstanding any agreement to the contrary, whether entered into before or after the commencement of this Act.

29 Section 51 of the Insurance Contracts Act 1984 (Cth) (the "Insurance Contracts Act") provides for rights of third parties to recover against an insurer. Section 51 provides:

(1) Where:

(a) the insured under a contract of liability insurance is liable in damages to a person (in this section called the third party);

(b) the insured has died or cannot, after reasonable enquiry, be found; and

(c) the contract provides insurance cover in respect of the liability;

the third party may recover from the insurer an amount equal to the insurer's liability under the contract in respect of the insured's liability in damages.

(2) A payment under subsection (1) is a discharge, to the extent of the payment, in respect of:

(a) the insurer's liability under the contract; and

(b) the liability of the insured or of the insured's legal personal representative to the third party.

(3) This section does not affect any right that the third party has in respect of the insured's liability, being a right under some other law of the Commonwealth or under a law of a State or Territory.

30 It is to be noted that s.562 Corporations Act and s.117 Bankruptcy Act do not provide a cause of action in favour of the third party to an insurance contract against the insurer, whereas s.51 of the Insurance Contracts Act does provide a statutory cause of action.

31 In this case, if Allianz was to be joined as a defendant at the suit of Anjin, no cause of action would be available to the plaintiff enabling it to seek and obtain any direct relief against the insurer defendant. If this was the only consideration, it would follow that it would be an abuse of process to permit the joinder.

32 However, in this case Anjin seeks declaratory relief against Allianz.

33 Anjin submits that, even though relief in the nature of the declaration sought does not arise from any cause of action between it and Allianz, it nevertheless is not precluded from seeking the declaration sought in this case. On the assumption that the joinder is permitted, Anjin says that it may become entitled to its declaration provided it succeeds in establishing the necessary threshold facts which render Allianz liable to indemnify one or other or both of the firstnamed and secondnamed defendants. It may be observed that, whether or not the plaintiff Anjin will ultimately succeed in its proposed claim against Allianz will depend, inter alia, upon proof of a number of threshold facts which include: the contract of insurance provides cover in respect of the liability of Riddle Radcliff and/or Studio 5 arising out of their involvement on the Project during the relevant period; and the insurance does in fact cover the liability established against those parties.

34 Whether or not it is open to a court to make a declaration of the kind sought in this case has been considered in Australia, commencing with three decisions, namely JN Taylor Holdings Ltd (In Liquidation) & Anor v Alan Bond & Ors;[5] Beneficial Finance Corp v Price Waterhouse;[6] and CE Heath v Pyramid Building Society.[7] Each of these cases emerged out of spectacular institutional collapses of the late 1980's and early 1990's in Australia. The principles applied in these cases received further attention in Tatterson v Wirtanen (as Executrix of the Estate of Wirtanen);[8] and Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd;[9] Ashmere Cove Pty Ltd v Beekink (No 2),[10] and Employers Reinsurance Corporation v Ashmere Cove Pty Ltd.[11] Each of these cases will be considered in turn.

35 In JN Taylor Holdings Ltd (In Liq) v Bond[12] the liquidator of companies of which Mr Bond had been a director instituted proceedings in the Supreme Court of South Australia against him and two other directors for damages arising from alleged breaches of directors' duties, which I shall call the "Director Liability Proceedings". By then Mr Bond was bankrupt and the other two directors had left the country. Mr Bond's trustee in bankruptcy had assigned to the plaintiff companies his right to indemnity under the policy, subject to the consent of the insurer. The liquidator of the plaintiff companies wrote to the insurer enquiring whether the insurer accepted liability to indemnify Mr Bond and the other directors in respect of the claims. The insurer replied denying any liability. Subsequently, the insurer did not participate in, nor did it intend to participate in, the liability proceedings by taking over the conduct of the defence.

36 Upon Mr Bond's insurer having denied any obligation to indemnify him and the two other directors, the liquidator of the plaintiff companies sought leave to join the insurer as an additional defendant in the Director Liability Proceedings seeking a declaration that it was obliged to indemnify Mr Bond and the other directors in the event that any of them was found to be liable for the company's losses. The judge at first instance refused the application. The plaintiffs conceded that they did not have a cause of action against the insurance company.

37 The Full Court of Supreme Court of South Australia, comprising King CJ, Prior and Perry JJ, upheld a decision to allow the insurer to be joined by the liquidator as a defendant in the Director Liability Proceedings.

38 The declaration sought by the plaintiff companies was in the following terms:

A declaration that AHA (the insurer) is obliged to indemnify the second and third defendants and Ramsay for any loss within the meaning of the definition clause 5 of the policy sustained by the directors in consequence of judgment being entered against the directors in these proceedings.

39 Of importance in JN Taylor Holdings was the potential for the plaintiff companies to benefit directly from the declaration sought in respect of Mr Bond's potential liability. This arose by operation of s.117 of the Bankruptcy Act 1966. As already observed, this section provided that the right of a bankrupt to indemnity under a policy, vested in the trustee in bankruptcy and any amount received by the trustee from the insurer shall, if the liability had not already been satisfied, be paid in full to a third party (in this case the plaintiff companies) to whom liability had been incurred.

40 It was held by the Full Court in JN Taylor Holdings that the declaration should be granted. In so doing, the Court applied a wide test for the grant of a declaration, the Chief Justice saying:

I can find no warrant for the imposition by the courts of a self-denying restriction on their jurisdiction to grant declaratory relief. I my opinion there is no jurisdictional limit. The court's power to grant such relief is "only limited by its own discretion" (Hanson v Radcliffe Urban District Council (1922) 2 Ch 490 at 507) and the boundaries of judicial power: Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 at 581-582. The settled practice of the courts may indicate the manner in which the discretion will be exercised in given circumstances.

41 After reviewing the authorities, in the opinion of King CJ, the only qualification to the power of a court to make a declaration was described by his Honour in the following passage:[13]

A declaration will not be made except in matters "which have a real legal context, and to the determination of which the Court's procedure is apt" ... There must be some person who has a true interest in opposing the declaration. The question raised must not be purely theoretical. There must not only be a party with a true interest in opposing the declaration, but the plaintiff must have a real interest in having the question determined ... That interest may exist although the apprehended impact on the plaintiff may be no more than a future possibility ... If, however, the determination of the question could not affect the plaintiff's legal rights or commercial or personal interest now or in the future, that is to say would "produce no foreseeable consequences for the parties" ... the declaration would almost certainly be refused.[14]

42 The Full Court went on to hold that the plaintiff companies had arising from its position under s.117 of the Bankruptcy Act 1966 to potentially benefit from any insurance monies vested in the trustee in bankruptcy. Accordingly, under the applicable Rules of Court it was an appropriate case for the joinder of the insurer in the Director Liability Proceedings as a defendant.

The learned [trial] judge summarised his reasons for holding that the question sought to be determined was theoretical only, at this stage, as follows:

"The plaintiffs do not have an interest sufficient to maintain an action unless and until they succeed in this action and are able to obtain the consent of the trustee in bankruptcy to prosecute an action in his name to enforce the right of indemnity provided by the policy or, failing that consent, have the leave of the Court to prosecute such an action in the name of the trustee in bankruptcy. It might also be said that the issues which the plaintiffs seek to have determined by the application for a declaration in this action are hypothetical until they succeed in an action against the defendants."

I think that that is too narrow a view of the interest of the plaintiffs required to render the issue real rather than theoretical. It is true that the plaintiffs have to surmount certain obstacles before they can gain recourse to the proceeds of the indemnity, but the first and most important of those obstacles is the determination of whether the insurer is liable to indemnify the directors under the policy in respect of any judgment the plaintiffs might recover. If that question is determined against the insurer concurrently with the determination of the defendant directors' liability to the plaintiffs, the plaintiffs will avoid the costs of a further trial of that issue. Moreover, armed with a declaration of the insurer's liability to indemnify the directors, the plaintiffs will be far better placed to secure the consent of the trustee in bankruptcy, or alternatively authority to sue in the trustee's name.

44 A question also arose in JN Taylor Holdings as to what would be the subsequent effect of the declaratory judgment, if granted in favour of the plaintiff companies as against the insurer. In other words, would such a declaration be of any practical utility? Ordinarily, a declaratory judgment such as that sought would be a judgment inter partes and would enure for the benefit only of a party in whose favour it was granted. But, would the directors or the trustee in bankruptcy, in subsequent proceedings against the insurer, be able to rely upon any judgment in the liability proceedings declaring the liability of the insurer to indemnify Mr Bond and the other directors?

45 In the opinion of the Full Court, the insurer, if joined as a defendant in the liability proceedings would be bound in subsequent proceedings by the defendant directors or their trustee in bankruptcy, by a declaration of liability and also by any findings of fact made in the liability proceedings. This was reasoned to arise because of the application of the doctrine of res judicata, which would apply, even in the absence of a relevant lis.[15] As to this, King CJ observed:

If the insurer is joined in this action it will become a co-defendant with the defendant directors. The circumstances in which the principle of res judicata operates as between co-defendants is stated in Halsbury's Laws of England (4th ed), Vol 16, par 1547, p 1044 as follows:

"In order to create a res judicata as between co-defendants, three conditions are requisite: (1) there must be a conflict of interest between the defendants concerned; (2) it must be necessary to decide this conflict in order to give the plaintiff the relief he claims; and (3) the question between the defendants must have been finally decided."

The existence of an actual lis, in the sense of proceedings, between the defendants concerned is not one of the requisites. That was clearly the view of Jacobs J in Re Multi-tech Services Pty Ltd (In liq); Heard v Commonwealth Trading Bank of Australasia (1982) 30 SASR 218. That case concerned an application by a liquidator of a company for a declaration that certain payments to the respondent bank were void as undue preferences. Jacobs J allowed the joinder, on the application of the bank, as a respondent, of a guarantor of the company's indebtedness to the bank. The judge directed that no issue be joined in the proceedings between the respondents inter se but nevertheless based his decision upon the desirability of the surety being bound, in any subsequent proceedings by the bank, by any determination that the payments to the bank were void.

Accordingly, by application of the doctrine of res judicata, the Full Court held that the directors or the trustee in bankruptcy, in subsequent proceedings against the insurer, would be able to rely upon any judgment in favour of the plaintiff companies in the Director Liability Proceeding declaring the liability of the insurer to indemnify Mr Bond and the other directors. By this means the grant of the declaration sought was said to be of potential practical utility such as to justify the joinder of the insurer.

46 In Beneficial Finance Corp v Price Waterhouse,[16] the Full Court of the Supreme Court of South Australia,[17] was again called upon to consider the question of the joinder of an insurer to a relevant liability proceeding. The plaintiffs in a discovery application sought details of relevant professional indemnity insurance policies, including the identity of the insurers of the existing defendants to the action. The stated purpose of the plaintiffs in making the application was the proposed joinder of the insurer as a defendant in the relevant liability proceeding. In one important respect there was no legal controversy between the parties. The insurer's solicitors had informed the plaintiff that the insurer had not denied indemnity, although it did so without disclosing the insurer's identity. The majority of the Full Court[18] accepted that, because the insurer had not denied indemnity, there was no real legal controversy between the parties on the facts, and the joinder was refused.

47 In CE Heath v. Pyramid Building Society[19] the Victorian Court of Appeal distinguished JN Taylor Holdings and arrived at a contrary conclusion. In CE Heath the liability proceeding involved an action by the liquidators of the insolvent Pyramid Building Society against its former auditors claiming damages for negligence, breach of statutory duties, and the like in relation to the auditors' preparation and examination of the Society's accounts in two audit periods prior to its collapse (the "Auditors Liability Proceeding").

48 The Victorian Court of Appeal was called upon to determine whether liquidator of the insolvent Pyramid Building Society, could join its auditors' liability insurers, CE Heath, to seek declarations as to its liability to indemnify the auditors.

49 The trial judge allowed the application for joinder. However, the Court of Appeal was unanimous in concluding that the joinder of the insurer ought not be permitted. The leading judgment was that of Ormiston JA, with which Tadgell JA concurred, making the following observations:

My brethren have covered so comprehensively the arguments raised on this appeal that it would be supererogation [20] on my part to add to what they have said. I respectfully concur in the reasons of Ormiston JA and wish to also associate myself with the discussion by Phillips JA of r.9.02 and r.9.06 of the Rules of Court.

50 Of some importance in the case was the evidence of the position taken by the insurer in relation to indemnity of the auditors. The liquidator wrote to the auditors' solicitors seeking clarification of the insurers' approach to the construction of the limitation of liability provision in the contract of insurance. Both the auditors and the insurers provided a non-responsive answer to the liquidator's inquiries, merely advising that the auditors would defend the action and that the insurers would have the conduct of the defence. Critically, the insurer did not deny liability. As to this conduct of the insurer Ormiston JA observed:

No conclusion as to the insurer's attitude can properly be drawn from their unwillingness to reply, which in the circumstances was both a predictable and reasonable response.[21]

51 Ormiston JA did not accept the proposition advanced before him that the jurisdiction to grant declarations "is unlimited (except by statute)". After a review of four leading authorities on declaratory relief,[22] his Honour proceeded:[23]

The "boundaries of judicial power" do place a sensible limit on what the courts may be asked to declare. It is perhaps of no great consequence whether certain aspects of the tests as to what is theoretical or hypothetical may lead to a denial of jurisdiction or whether they go only to a discretionary ground to refuse relief. If there is no real "legal controversy" then the courts will not embark upon a hearing which will certainly lead to a refusal of declaratory relief or any other relief. If it is a controversy which is not "fit for determination by judicial declaration" then I see no reason why the litigation should not be immediately resolved.

But there must be a true legal controversy defining the rights of two or more parties, and there must be an appropriate plaintiff and appropriate defendant to enable a justiciable issue to be resolved.

52 Although the Court of Appeal in CE Heath arrived at a different conclusion to the Full Court in JN Taylor Holdings and Beneficial Finance, the Court was dealing with a different set of facts. As observed by Gillard J later in Tatterson v Wirtanen (as Executrix of the Estate of Wirtanen):[24]

In that case [C.E. Heath v. Pyramid Building Society], the court was of the opinion that there was no real legal controversy between the parties on the facts.[25]

This observation is undoubtedly correct. In CE Heath there was no evidence that the insurer denied liability to its insured. Consequently it was difficult to avoid the conclusion that there was no relevant legal controversy between the plaintiff and the insurer on the issue which could properly found the grant of the declaration sought. Accordingly, there was no basis for the proposed joinder which could only result in the determination of a hypothetical question of no practical significance.

53 In considering a similar issue in Tatterson v Wirtanen (as Executrix of the Estate of Wirtanen)[26] Gillard J concluded that in his opinion, the elements necessary to establish a claim for declaratory relief were there present. His Honour said:[27]

The case does not involve a mere hypothetical question. There is a controversy between the parties which will define the rights of the two parties to the present proceeding and the insurance company. In my opinion, the plaintiff is an appropriate party having a clear interest in the outcome and the insurance company is an appropriate defendant having an interest in the issue to be resolved.

54 In arriving at his conclusion, Gillard J in Tatterson followed the Full Court decision in South Australia of JN Taylor Holdings.

Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd

55 The Queensland Court of Appeal in Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd[28] also considered the question.

56 In outline, the facts were as follows: In 1994 Interchase Corporation Limited (in liquidation) ("Interchase") commenced proceedings against Colliers Jardine (Qld) Pty Ltd ("Colliers") and its employee, Michael Tidbold. Interchase had retained Colliers as its valuer in connection with the development of retail and commercial premises in Brisbane. Interchase issued a proceeding in which it claimed damages in the order of $60 million through Mr Tidbold's negligent valuation of the complex (the "Valuers' Liability Proceeding"). FAI General Insurance Company Ltd ("FAI") was the insurer of Colliers and Tidbold under a policy of professional indemnity insurance. FAI conducted the defence of the litigation against Colliers and Tidbold for some time. Then, by letter dated 4 October 1996, FAI declined indemnity. Colliers and Tidbold neither objected to this decision nor foreshadowed a possibility of contesting it. Interchase sought to join FAI as an additional defendant to obtain a declaration that FAI is "liable to indemnify" Colliers and Tidbold in respect of their liability to Interchase. The Chamber Judge acceded to the application and permitted the joinder of the insurer as a defendant in the Valuers' Liability Proceeding. An appeal was brought from that decision.

57 Byrne J, with whom McPherson JA agreed, with Davies JA in dissent, held that the joinder would serve no useful purpose and should be set aside. The majority took this approach for two principal reasons. First, the joinder would not determine any question between the plaintiff, who was not a party to the contract of insurance and had no rights under it, and the insurer. On this point, Byrne J reasoned:

Interchase's object in joining FAI is to obtain a declaration concerning FAI's obligations to parties other than Interchase. What utility could attend such an adjudication? Interchase is not a party to the policy. The policy was procured for the protection of the insured, not for claimants against them like Interchase. Although Colliers and Tidbold may sue on the policy, Interchase has no entitlement under the general law or statute to enforce it. Of course, like every prospective judgment creditor, Interchase has a commercial interest in the capacity of judgment debtors to satisfy a money judgment. But the declaration sought - relief that relates exclusively to FAI's liability to Colliers and Tidbold - could not directly affect any property, legal right or obligation of Interchase. Nor could it effectively determine FAI's rights or duties. A judicial determination of the issues pertaining to Interchase's claim for declaratory relief cannot shut out FAI from litigating about them again, as, for example, should Interchase's damages claims succeed, in proceedings instigated by the liquidator or by Tidbold's trustee claiming indemnity. The order for joinder does proceed on a contrary assumption: viz that a question as to the rights and duties of insurer and insured is concluded by a judgment on such issues between Interchase and one or other of the insured. This, however, is not the law.

Second, the rights of the existing co-defendants inter se would not be determined in Interchase's action against the insurer. In this regard, the Byrne JA stated:[29]

As a result of the joinder FAI, Colliers and Tidbold are co-defendants but they are not adversaries. Among them there is no controversy ... No procedural manoeuvres by Interchase can alter this state of affairs ... So even if FAI remains, the litigation is destined to conclude without making adversaries of the defendants amongst themselves. In short, the rights of the co-defendants inter se will not be determined in Interchase's action.

58 Davies JA in dissent accepted that there would be no point in making the order for joinder if the declaration did not, in practice, effectively determine the issue of the insurer's liability to the valuers as between those parties. However, his Honour took the view that, applying the principles of Port of Melbourne Authority v Anshun Pty Ltd,[30] the practical result of the proposed joinder would in effect be a binding determination of the question of liability between the insurer and the valuers. His Honour was of the opinion that it would be an abuse of process to permit those parties to litigate the question of the insurer's liability to indemnify in subsequent proceedings, if it had already been determined in the proceedings in which the declaration was sought. It followed, according to his Honour, that a determination on the declaration sought would effectively determine the question of the insurer's liability to the valuers as between those parties. It also followed that the proposed joinder would not lack utility.

59 Davies JA also took the view that the question which was the subject of the proposed declaration was not hypothetical. Although it was well recognised in the judgment of Davies JA that a number of contingencies were open before a liquidator was in the position of making a claim on Collier's insurer in respect of the claim, and presumably before the plaintiff was in a position to make a claim on the liquidator for the proceeds of the policy of insurance pursuant to s.562 Corporations Act, nevertheless, his Honour was satisfied that a number of factors combined together[31] to give Interchase a "real interest in the relief which it seeks".[32]

60 The issue arose again for consideration in Ashmere Cove Pty Ltd v Beekink (No 2),[33] this time in the Federal Court in Western Australia. French J had cause to consider the joinder of two insurers in circumstances where investors in a registered management scheme commenced proceedings against the former directors of the company which was the responsible entity for the scheme (the "Scheme Liability Proceeding"). They also sought leave to proceed against the company which was in liquidation. The company was covered by a Professional Indemnity Insurance Policy during the relevant period and gave notice to its insurers of the claims against it.

61 The insurers declined to provide indemnity relying upon an exclusion clause in the policy. The liquidator of the company was not prepared to contest the insurers' refusal to indemnify.

62 The applicant investors then sought to join the insurers as respondents to the Scheme Liability Proceeding and sought a declaration that they were liable to indemnify the company. The joinder was opposed largely on the basis that a declaration obtained by the applicant investors against the insurers would not legally prevent the insurers from contesting any claim for indemnity by the liquidator following a judgment against the company. His Honour made an interlocutory order granting leave to the investors to have the insurers joined to their action.

63 In the course of his Honour's reasoning, it was noted that it was not disputed that the applicants, if they obtained a judgment against the insurers in the Scheme Liability Proceeding, could not recover directly against them under s.51 of the Insurance Contracts Act. Indeed, the applicants asserted no legal right or any cause of action against the insurers. Nevertheless, French J observed:[34]

But the want of a legal right or a cause of action is not a bar to the grant of declaratory relief. It is, nevertheless, necessary that declaratory relief be sought in respect of a real question that is not abstract or hypothetical. It must be directed to the determination of a legal controversy. Moreover the party seeking the relief must have a real interest in raising it: Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 139 ALR 663 per Lockhart J (Spender and Cooper JJ concurring) and authorities there cited.

64 His Honour, after citing JN Taylor Holdings Ltd (In Liquidation) v Bond,[35] referred to s.117 of the Bankruptcy Act 1966 (Cth), which he noted had some relevance to JN Taylor Holdings, and then observed that the provision was similar in its operation to s.562 of the Corporations Act. French J then quoted a passage from the judgment of King CJ in JN Taylor Holdings, in which the Chief Justice said of the operation of s.117:[36]

By virtue of that section, if the trustee in bankruptcy were to obtain payment of moneys from the insurer in consequence of a judgment against the defendant directors, those moneys would not be divisible among the creditors but would be payable to the plaintiffs. In order to obtain satisfaction in that way, it might be necessary for the plaintiffs to make the non-bankrupt directors bankrupt and, having provided a proper indemnity for costs to the trustee in bankruptcy, to institute and prosecute in the trustee's name an action against the insurer.

65 French J in Ashmere Cove, after reviewing all of the then current authorities, reasoned:[37]

There is a dispute between KMF and its insurers in this case. KMF notified a claim and the Insurers denied liability. They had not offered to conduct any defence on behalf of KMF. The liquidator of KMF is unwilling to proceed against them. Although s 562 confers no legal right on the applicants as against the Insurers, it creates a priority right in the proceeds of any successful claim against the Insurers which gives them a very real interest in having the Insurers' obligations to KMF determined.

66 After then considering some case management issues, his Honour proceeded to make an order granting leave to the investors to join the insurers as respondents in the Scheme Liability Proceeding.

Employers Reinsurance Corporation v Ashmere Cove Pty Ltd

67 The issue arose again, this time before the Full Court of the Federal Court in Employers Reinsurance Corporation v Ashmere Cove Pty Ltd.[38] This was an appeal from the decision of French J in Ashmere Cove Pty Ltd v Beekink (No 2).[39] The Full Court upheld the decision of French J at first instance.

68 The Full Court, in the course of its reasoning, considered the question as to whether the declaration sought by the investors, if determined in their favour, would be binding as a matter of res judicata between the insurers and their insured. The Court acknowledged that this approach, as reflected in the judgment of the Full Court of South Australia "may be correct".[40] The Court then proceeded:[41]

However, it is not necessary to decide whether it is, or whether the contrary view of the Queensland Court of Appeal in Interchase, is to be preferred.

Assuming the view of the Queensland Court of Appeal in Interchase is indeed to be preferred, any attempt by the Insurers to relitigate their liability under the Policy in subsequent proceedings would give rise to an issue concerning the application of the Anshun principle. The outcome cannot be predicted with certainty, since it may be influenced by the course the trial takes. Nonetheless, the likelihood is that the Insurers would face formidable obstacles if they choose not to put forward all their defences in the current proceedings, or if they seek to reagitate issues that are the subject of adverse findings or holdings by the primary Judge.

69 After referring to the Anshun principle, the Full Court said:

If the Insurers have a full opportunity to agitate any defence they wish to raise in answer to the Investors' claim for declaratory relief (presumably they will have such an opportunity), it is difficult to see why the Anshun principle would not preclude them from relying on any such defence in subsequent proceedings involving the same parties. Among other things, relying on such a defence would create the risk of conflicting judgments. That the Anshun principle would apply was in substance the view taken by Davies JA in his dissenting judgment in Interchase (at 310-311) and was adopted by the primary Judge. We see no error in it. In particular, in our view the primary Judge did not overlook the precise legal effect of any declaration that might be made against the Insurers.

70 The Full Court, in upholding the decision of French J at first instance, departed the case with the following concluding observations relating to considerations of case management:

The reality is that the joinder of the Insurers, as directed by the primary Judge, will prove to be of practical utility. There are good reasons, explained by his Honour, for all the issues to be litigated in the one proceeding. The directions that have been made will facilitate the orderly, expeditious and just resolution of the justiciable controversy.

In substance, the effect of the joinder orders made by the primary Judge is no different to the situation involved in the everyday case of an insured joining its insurer as a third party (by whatever procedural means may be appropriate in the particular court). This enables issues of liability and assessment of damages or compensation, both as between claimant and insured and as between insured and insurer, to be heard and determined in the one proceeding. There are obvious benefits in terms of efficiency and economy. There is no reason in modern times why form should trump substance, where the interests of justice suggest that all related issues should be resolved in a single proceeding.

71 A critical factor in founding the jurisdiction to grant an injunction of the type sought in the present case, is therefore the presence or otherwise of a true legal controversy.

72 Anjin, the applicant in this case, even if it obtained a judgment against either of Riddle Radcliff and/or Studio 5, could not recover directly against the insurer Allianz under s.51 of the Insurance Contracts Act 1984. This is because the statutory cause of action conferred by s.51 only applies if, inter alia, the insured has died or cannot, after reasonable enquiry, be found, which is manifestly not here the case.[42] No legal controversy between Anjin and Allianz can therefore arise on this score.

73 What then of s.562 Corporations Act ? This section, however, confers no statutory cause of action upon a party in the position of Anjin, and, not being a party to the contract of insurance, no other cause of action is available to it against the insurer.

74 However, although s.562 Corporations Act confers no legal right on the applicant Anjin as against the insurer Allianz, it does create a priority right in the proceeds of any successful claim against the insurer in the event of a winding up where a liquidator is appointed. In my view, this avenue, although it does not confer a cause of action on Anjin as against the insurer, does give Anjin a very real interest in having the indemnity obligations of Allianz to the architect companies determined. For the purposes of seeking the declaratory relief sought by the plaintiff in this case, the existence of a cause of action is not strictly necessary, but a bona fide legal controversy is. An interest in achieving resolution of a s.562 priority claim may give rise to such a controversy.

75 By operation of that section, if a liquidator appointed to the Architect Companies were to obtain payment of moneys from the insurer following a judgment against them in the liability proceedings, those moneys would not be divisible among the creditors but would be payable to the plaintiffs. If this was to occur, it might be necessary for the plaintiff Anjin to make application to wind up the companies and appoint a liquidator. Upon provision of an appropriate indemnity as to costs, it may then institute and prosecute in the liquidator's name an action against the insurer.

76 Whether or not the plaintiff Anjin is ultimately entitled to proceed in this way depends in significant part upon whether Allianz is liable to indemnify the architect defendant companies, assuming they are found to be liable to the plaintiff. The question becomes therefore, is there a true legal controversy on this issue of indemnity?

77 There is evidence that Allianz has declined to cover Studio 5 under the Allianz Policy. So much was confirmed by a conversation conducted on 12 December 2007 by Mr Beswick, solicitor for Anjin, and Mr Kane Barrett, a lawyer Holding Redlich who then acted for Studio 5, in which Mr Barrett advised Mr Beswick that Allianz had informed him Allianz had declined cover to Studio 5 under the policy. This was later confirmed in an email dated 19 December 2007 from Mr Barrett to Mr Beswick. In that email, Mr Barrett relevantly said:

Refer to our telephone conversation on 12 December 2007 regarding my client's position vis-à-vis its professional indemnity insurer.

Attached for you information is a copy of the relevant policy of insurance issued by Allianz to Studio 5 Architects Pty Ltd. Please note that certain commercial terms have been redacted. We confirm that Allianz has declined to cover Studio 5 under the policy.

78 As to the position of Allianz with respect to Riddle Radcliff, given the conduct of Riddle Radcliff in at first defending the proceeding by its solicitors Phillips Fox on instruction from Allianz, but then subsequently not defending the proceeding after Phillips Fox ceased to act, coupled with the fact that Riddle Radcliff has gone into voluntary liquidation, I infer that Allianz has also declined to cover Riddle Radcliff under the Allianz Policy. The inference is supported by the fact that Allianz was notified of a claim under the Allianz Policy and initially offered to conduct the defences on behalf of the defendant architect companies, but then subsequently withdrew the provision of litigation support from both of them and has not since either funded or had the carriage of the defences of those parties in the liability proceeding. The inference is also consistent with it taking the positive step, through its solicitor, of declining to cover Studio 5 under the policy. The conduct of Allianz which I have described is sufficient to amount to an implied denial of liability on its part, particularly given that no evidence was adduced by it to the effect that it has positively admitted liability to indemnify.

79 In my opinion, the evidence discloses a "true legal controversy" on the crucial question as to the liability of the insurer to indemnify the architect companies. It follows that, in my opinion, and subject to a consideration of relevant discretionary matters for the grant of relief, the plaintiff Anjin is entitled to bring its proposed proceeding against the insurance company and seek the declaratory relief which it has foreshadowed.

80 The South Australian Full Court decision of JN Taylor Holdings Ltd, where insurer denied liability to indemnify its insured, together with that of Gillard J in Tatterson v Wirtanen, where it was accepted that the plaintiffs had the statutory cause of action under s.51 of the Insurance Contracts Act 1984 available to them in any action against the insurer, and the decision of French J and the Full Court of the Federal Court in Ashmere Cove, where the insurers declined to provide indemnity relying upon an exclusion clause in the policy, all support this conclusion.

81 On the other hand, the Victorian Court of Appeal decision of CE Heath v Pyramid Building Society in arriving at a contrary conclusion, was dealing with a different set of facts which enabled the Court of Appeal to find that there was no real legal controversy between the parties. In that case there was no evidence that the insurer had denied liability to its insured. This was a critical point of factual difference from the present case and on this basis it is to be distinguished.

82 A similar approach may be taken to distinguishing the decision of the Full Court of South Australia in Beneficial Finance Corporation Ltd v Price Waterhouse,[43] where the insurer's solicitors had informed the plaintiff that the insurer had not denied indemnity.

83 The decision of the Queensland Court of Appeal in Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd[44] may also be distinguished, although on a slightly different basis. The Court in that case determined that there was no relevant legal controversy where the insurer not only asserted, but both insured appeared content to accept, that the insurer was entitled to decline indemnity.

84 In any event, I prefer to follow the reasoning of Gillard J in Tatterson v Wirtanen (as Executrix of the Estate of Wirtanen)[45] and French J in Ashmere Cove Pty Ltd v Beekink (No 2)[46] and that of the Full Court of the Federal Court in Employers Reinsurance Corporation v Ashmere Cove Pty Ltd.[47]

85 In the present case there was hearsay evidence given by Mr Beswick in his affidavit sworn 7 May 2008 in support of Anjin's application for discovery against the insurer that he had been told, by an unidentified source, in late 2007 that "Studio 5 had been arguing with Allianz for some time that the policy should be honoured. Eventually it got to the point where Studio 5 did not intend to pursue action against Allianz to compel Allianz to indemnify Studio 5". Mr Beswick was not called to give oral evidence in the present application, nor was he cross examined. I am unable to draw an inference from this evidence, such that it is, that Studio 5 was content to accept, that the insurer was entitled to decline indemnity. Further, given the low probative value of the evidence, I am not prepared to accept it as a proper basis for making an adverse finding against Anjin that Studio 5 was content to accept that the insurer was entitled to decline indemnity.

86 As to Riddle Radcliff, there was no evidence as the position adopted by it on the question of indemnity in relation to its insurer.

87 Accordingly, given that I do not consider that I am in a position to make one of the critical findings that underpinned the decision of the majority in Interchase Corporation, that decision may also be distinguished.

88 Further, in my opinion, a determination of the question raised by the declaration sought by the plaintiff Anjin would be of practical utility in the conduct of the proceeding. Following the approach of the Full Court of the Federal Court in Employers Reinsurance Corporation v Ashmere Cove Pty Ltd,[48] on the question of res judicata it is not necessary to decide whether the approach of the Full Court of the Supreme Court of South Australia in JN Taylor Holdings is applicable, or whether the contrary view of the Queensland Court of Appeal in Interchase, is to be preferred. On the basis that the Queensland Court of Appeal in Interchase is indeed to be preferred, any attempt by the Insurers to relitigate their liability under the policy in subsequent proceedings would give rise to the likely application of the Anshun estoppel. If that was to be the outcome, the insurer would, in a practical sense, be precluded from asserting in any later proceeding between it and the Architect Companies, that it was not bound to indemnify under the Allianz Policy, if that was the finding in the liability proceeding.

89 Pursuant to s.513 Corporations Act, s.562 applies in relation to the winding up of a company whether in insolvency, by the Court or voluntarily. Further, pursuant to ss.495(1) in relation to a members' voluntary winding up, the company in general meeting must appoint a liquidator for the purpose of the winding up.

90 On the facts of this case, it may be reasonably inferred that neither Riddle Radcliff or Studio 5 are presently trading or have any assets or funds against which the plaintiff could enforce a judgment, should it be successful. They were companies which provided architectural services. As such, they were unlikely to have any source of income once they ceased to conduct the practice of architects. There was no evidence to the contrary. Further, as I have found, as at 5 February 2008, Riddle Radcliff had gone into voluntary liquidation and its principal Ron Riddle was living in Abu Dhabi. Given that Riddle Radcliff is in the process of being wound up, s.562 Corporations Act may well become applicable in relation to any proceeds of the Allianz Policy which come into the hands of the liquidator.

91 As at 5 February 2008, Studio 5 was no longer an operating commercial concern and had ceased trading. There being no evidence to the contrary, I infer that it has not conducted any business since 5 February 2008, although it remains registered according to a company search conducted in March 2008. However, there is at least the prospect of Studio 5 being wound up, even though there is no evidence that a winding up has yet been initiated. In the event of a winding up, on grounds of insolvency, or by the Court or voluntarily, again a liquidator must be appointed to the company, permitting s.562 Corporations Act to apply if the pre-conditions for its operation have been satisfied. The winding up of Studio 5, with the consequent appointment of a liquidator, would be likely in the event that Anjin succeeded in obtaining a judgment of damages and costs against it in its Architect Liability Proceeding.

92 There also appears to be at least a prima facie case that both of the defendant companies, Riddle Radcliff and Studio 5, were insured by Allianz under the Allianz Policy in respect of relevant risks, at the time when they were providing architectural services to the plaintiff, Anjin. On the inquiries conducted by Mr Beswick, solicitor for Anjin, the prima facie case is established.

93 It is to be further noted that there is no liquidator of the architect companies in place to proceed against Allianz to enforce any right to indemnity which they may have. Although they formally have third party proceedings in place, they will not, in all likelihood, be prosecuted against Allianz in this proceeding as it presently stands.

94 It would be inconvenient to have Anjin in effect seek its declaration in a separate proceeding. On the likely scenario that the Architect Companies have no assets, in the event that Anjin succeeded against them, or one or other of them, in the Architect Liability Proceeding as it is presently structured, and if it obtained a judgment of damages and costs and the judgment remained unsatisfied, Anjin would be in a position to wind up the Architect Companies and appoint a liquidator to them. Upon the liquidator making a claim against the insurer under the Allianz Policy, and if Allianz was to continue to deny liability, a new proceeding would need to be instituted to determine the issue. In these circumstances, there would be nothing to prevent the insurer taking any defence which had not been taken by the defendants in the existing Architect Liability Proceeding. Indeed, as things presently stand, there will be no defence taken by Riddle Radcliff or Studio 5 against Anjin's claims in the present proceeding.

95 As Gillard J observed in Tatterson,[49] one of the objects of r.9.06(b) is to prevent multiplicity of actions and to enable a court to determine disputes between all parties in one proceeding. This avoids the same or substantially the same questions or issues being tried twice, with different results possible. At least on the principal issue of the liability of the Architect Companies to the plaintiff, there is room for inconsistent judgments. If this occurred by the proceedings against the insurance company being heard separately, the administration of justice would be compromised. A separate proceeding would also be productive of additional legal costs.

96 In my opinion, the interests of justice call for the issues to be determined at the one trial, or in the words of r 9.06(b)(ii), it is "just" that the insurance company should be joined as a defendant in this proceeding. The element of "convenience" found in r.9.06(b)(ii) would also be satisfied if Allianz was to be joined as a defendant in the current proceedings.

97 Alternatively if r.9.02(b) was to be applied, it is in the interests of justice that the joinder should be permitted.

98 The present proceeding has been issued in the new Technology, Engineering and Construction List (the "TEC List") of the Supreme Court of Victoria. Pursuant to Practice Note No. 2 of 2009 issued by the Court, the objective of the TEC List is:

... to provide for the just and efficient determination of TEC cases, by the early identification of the substantial questions in controversy and the flexible adoption of appropriate and timely procedures for the future conduct of the proceeding which are best suited to the particular case.

99 It would be consistent with the objective of the TEC List to make the interlocutory order proposed by the plaintiff for the joinder of Allianz as a defendant to the proceeding.

100 As was said by the majority of the High Court in Aon Risk Services Australia Limited v Australian National University:[50]

In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings.

101 For the reasons which I have given, this is a case in which, in my opinion, there exists between Allianz and the plaintiff Anjin a question or questions arising out of or relating to or connected with claims in the proceeding, which it is just and convenient to determine as between Allianz and Anjin as well as between the parties to the proceeding.

102 In my opinion, the criteria for joinder provided in r.9.06(b)(ii) of the Rules of Court have been satisfied. Further, it is in the interests of justice that the Court should exercise its power to permit the proposed joinder pursuant to r.9.02(b).

103 I will order the joinder of Allianz and make consequential orders.

104 Subject to submissions from counsel I propose to make the following orders:

(i) Leave is given to the plaintiff to bring the application before a judge.

(ii) Allianz Australia Insurance Ltd be joined as a defendant to the proceeding.

(iii) The plaintiff have leave to serve and file an amended statement of claim on or before 15 September 2009.

(iv) The added defendant serve and file its defence on or before the 7 October 2009.

(v) The plaintiff's costs of the application joinder and amended statement of claim be costs in the cause.

to Defendant. Defendant Joins Insurer) Third Party Proceeding

Riddle Radcliff & Studio 5) Liability Anjin Seeks Joinder of

Claiming Declaration it is Liable to Indemnify Architect Defendants

(Plaintiff alleges Insurer has (Riddle Radcliff & (Allianz)

[1] For a discussion of Rules 9.02 and 9.06 in this context see the judgment of Phillips JA in CE Heath v Pyramid Building Society (1997) 2 VR 256 at 292-293; concurred in by Tadgell JA at 258.

[4] See order 15 r.6(2)(b)(ii) of the English Rules.

[5] (1993) 59 SASR 432 (Full Court of Supreme Court of South Australia - King CJ, Prior and Perry JJ).

[6] (1996) 68 SASR 19 (Full Court of Supreme Court of South Australia - Cox, Perry and Lander JJ).

[7] (1997) 2 VR 256 (Court of Appeal, Victoria - Tadgell, Ormiston and Phillips JJA).

[9] [1998] QCA 180; [2000] 2 Qd R 301 (Full Court of Supreme Court of Queensland - Davies, McPherson JJA, and Byrne J).

[11] [2008] FCAFC 28 (Heerey, Sackville and Siopis JJ).

[14] (1993) 59 SASR 432 at 436-7; see also Galaxy Communications Pty Ltd v Paramount Films of Australia Inc, NSW Court of Appeal, per Stein J with whom Priestley and Meagher JJA agreed, 24 February 1998, unreported, BC980092, where the court declined to exercise its declaratory jurisdiction in the interpretation of a contract, distinguishing without disapproval JN Taylor v Bond.

[15] In Roman law, a proceeding or an issue the subject of a proceeding.

[17] Perry and Lander JJ (Cox J dissenting).

[20] The performance of more than duty requires.

[22] Forster v Jododex Aust Pty Ltd [1972] HCA 61; (1972) 127 CLR 421 per Gibbs J at 437; Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 at 581-2 per Mason CJ, Dawson, Toohey and Gaudron JJ and Brennan J at 596; Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd (1921) 2 AC 438 at 448; and University of New South Wales v Moorhouse [1975] HCA 26; (1975) 133 CLR 1.

[31] The factors were: the insolvency of the valuers; their failure to seek indemnity from the insurer and the ineffectuality of any judgment by the plaintiff Interchase against the valuers unless the insurer indemnified them.

[36] Ashmere Cove Pty Ltd v Beekink (No 2) (supra) at [39], derived from JN Taylor Holdings Ltd (In Liquidation) v Bond (supra) at 437.

[38] [2008] FCAFC 28 (Heerey, Sackville and Siopis JJ).

[42] Section 51 (1)(b) Insurance Contracts Act.

[47] [2008] FCAFC 28 (Heerey, Sackville and Siopis JJ).

[50] [2009] HCA 27 at [113] per Gummow, Hayne, Crennan, Kiefel and Bell JJ.

Court (General Civil Procedure) Rules 2005

At a glance

Court

Decision date

Before

Source

Judgment (185 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (9)