BETWEEN : BALANGARRI ABORIGINAL CORPORATION (IN LIQ)

Third party proceedings - Application by third party for summary judgment under O 16 Rules of the Supreme Court or to set aside third party proceedings under O 19 r 6 - Whether a third party has right to summary judgment under O 16 - Indemnity under HIH Scheme documents

Appropriation (HIH Assistance) Act 2001

Rules of the Supreme Court, O 16 r 1, O 19 r 1(3), O 19 r 3(3), O 19 r 6

Third party's application for judgment under O 16 allowed

First-named defendant's applications to strike out part of third party's defence and for further and better discovery dismissed

Anderson v Effexseven (1999) 10 ANZ Ins Cas 61-424

Carrington Confirmers Pty Ltd v Cascio & Mirabelli, unreported; SCt of Vic; 8 November 1991

Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Limited (1991) 5 WAR 208

Dalgety Australia Ltd v Rubin, unreported; FCt SCt of WA; Library No 5485; 24 August 1984

Denara Nominees Pty Ltd v Scolaro [2002] WASC 252

Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87

Forsayth NL v Northern Gold NL, unreported; FCt SCt of WA; Library No 940012; 20 January 1994

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Harm v Winter [2004] QSC 10

Johnson v Ribbins [1977] 1 All ER 806

Kimberley NZI Finance Ltd v O'Sullivan [1999] WASC 82

Olympic Airways SA v Alysandratos, unreported; SCt of Vic; 11 August 1998

Teros Pty Ltd v Countrywide Home Loans Ltd [2002] WASC 87

Baxter v France [1895] 1 QB 455

Bell & Co v Von Dadelszen (1883) WN 208

Benecke v Frost [1876] 1 QBD 419

Brice v Wackerbarth (Australasia) Pty Ltd & Ors [1974] 2 Lloyd's Rep 274

C E Heath plc v Ceram Holding Co [1989] 1 All ER 203

Calico Printers Association v Barclays Bank (1930) 145 LT 51

Chatsworth Investments Ltd v Amaco (UK) Ltd [1968] 3 All ER 357

Commissioner of Taxation v Ahern (No 2) (1986) 87 FLR 112

Distillers Co (Bio-chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1

Furness, Withy & Co Ltd v Pickering [1908] 2 Ch 224

Groom v Crocker [1939] 1 KB 194

Hall v Johnson [1904] VicLawRp 88; [1904] 29 VLR 649

Hardie Rubber Co Pty Ltd v The General Tyre and Rubber Company [1973] HCA 66; (1972) 129 CLR 521

Hobson v Monks (1884) WN 8

Jacka Nominees Pty Ltd (In Liq) v Edwards Karwacki Smith & Co Pty Ltd, unreported; SCt of WA; Library No 920512; 12 October 1992

Jager v Richard [1909] VicLawRp 31; [1909] VLR 181

John McCann & Co (a firm) v Pow [1975] 1 All ER 129

Lewkowski v Bergalin Pty Ltd, unreported; FCt SCt of WA; Library No 7675; 26 May 1989

Macbeth v Buller (1895) 2 IR 357

Millington v Loring [1880] 6 QBD 190

Morris v Kennedy (1892) 30 LR IR 461

National Mutual Life Association of Australasia Ltd v Chris Poulson Insurance Agencies Pty Ltd [1997] TASSC 65; (1997) 7 Tas R 10

National Westminster Finance Australia Ltd v Powe [1992] TASSC 43; (1992) 1 Tas R 161

Norris v Beazley [1877] 46 LJQB 515; (1887) 2 CPD 80

Pontifex v Foord [1884] 12 QBD 152

Re Speight [1883] 22 Ch D 727

Stott v West Yorkshire Road Car Co Ltd [1971] 2 QB 651

Sutton v Sautter [1891] VicLawRp 83; (1891) 17 VLR 371

1 COMMISSIONER ZILKO SC: By application dated 31 March 2004 the first-named defendant ("the defendant") applied to strike out a number of paragraphs in the third party's defence in the third party proceedings. By application dated 28 April 2004 the third party applied for summary judgment in the third party proceedings pursuant to O 16 of the Rules of the Supreme Court or, alternatively, to set aside the third party proceedings pursuant to O 19 r 6 thereof. By application dated 23 August 2004 the defendant applied for an order for further and better discovery by the third party. Although the three applications were heard together, the hearing was essentially taken up with the merits of the third party's application for summary judgment or to set aside the third party proceedings. This is because insofar as the application to strike out parts of the third party's defence was concerned, the third party provided further and better particulars of its defence on 25 August 2004 and counsel for the defendant acknowledged that these particulars largely addressed the concerns of the defendant in relation to the third party's defence. After hearing argument on the third party's application, a short period of time was spent dealing with the application for further and better discovery. I will deal with the applications in that order.

Third party's application for summary judgment or to set aside the third party proceedings

2 Affidavits were filed in support of the third party's application by Dean Carrigan on 11 May 2004, 13 May 2004, 20 May 2004, 24 June 2004 and 25 August 2004 (although counsel for the third party advised me during the hearing that the third party did not rely upon the affidavit sworn by Mr Carrigan on 13 May 2004). The defendant swore an affidavit in opposition to the application on 26 July 2004. In addition, counsel for both parties provided both oral and written submissions in support of their respective arguments.

3 An application under O 16 is required to be filed within 21 days after appearance or at any later time by leave of the court. It was common ground that as the application had not been filed within 21 days after appearance, the third party required leave of the court to bring the application. The onus was on the third party to justify the delay. The third party's appearance was filed on 19 January 2004 and so its application for summary judgment should have been filed by 9 February 2004. It was in fact filed on 28 April 2004, more than two and a half months after the 21 days provided for in O 16. The defendant opposed any extension of time on the basis that no reasonable explanation had been advanced by the third party for the late filing of the application. Nevertheless, I am satisfied that the delay in bringing the application has been adequately explained by the third party's attempts, through its solicitors, to resolve the issues which are now the subject of the application by a train of correspondence with the defendant's solicitors. In this respect I refer to the affidavits of Dean Carrigan sworn on 11 May 2004, 20 May 2004 and 26 June 2004. In particular I refer to the letters annexed to the first of those affidavits.

4 I am also satisfied that no prejudice has been caused to the defendant by the delay in bringing the application. Although both parties provided discovery in the period between 9 February 2004 and 28 April 2004, most of their efforts were focused on the applications now before me. In the circumstances, leave will be granted to the third party to bring the application for summary judgment. Insofar as that application is made in the alternative under O 19 r 6, there are no time constraints imposed upon the third party. Such an application can be brought at any stage of the proceedings.

5 Before dealing with the merits of the third party's application, it is necessary to identify the basis on which the application is brought. As already noted, the application is said to be made pursuant to either O 16 or, in the alternative, O 19 r 6. However, O 19 does not specifically refer to O 16 or incorporate the provisions thereof. Does this mean that the right to seek summary judgment under O 16 is not available to a third party?

6 Order 16 in its terms applies to a defendant seeking summary judgment in relation to the claim of a plaintiff. There is nothing therein which provides for it to apply mutatis mutandis to the position of a defendant and a third party in third party proceedings. In this regard a comparison can be made with O 14 r 6 which expressly provides for a defendant seeking summary judgment on a counterclaim to stand in the shoes of a plaintiff for the purposes of making such an application.

7 The question does not appear to have been directly addressed in this jurisdiction. On the one hand it has been said that there is real doubt as to whether summary judgment is open to a third party after orders have been made on a summons for directions (Kimberley NZI Finance Ltd v O'Sullivan [1999] WASC 82 at [7]) whilst on the other it has been suggested that O 19 r 6 affords a third party "the option of seeking the equivalent of summary judgment" under O 16 (Teros Pty Ltd v Countrywide Home Loans Ltd [2002] WASC 87 at [3]). Little guidance is to be found elsewhere in Australia because in those cases where a third party has succeeded in obtaining summary judgment against a defendant the court has usually assumed without discussion on the point that the power to order summary judgment under the equivalent of O 16 applies to third party proceedings between a defendant and a third party. In this respect see, for example, Carrington Confirmers Pty Ltd v Cascio & Mirabelli, unreported; SCt of Vic; 8 November 1991; Olympic Airways SA v Alysandratos, unreported; SCt of Vic; 11 August 1998 and Harm v Winter [2004] QSC 10.

8 In the absence of authority it is necessary to have regard to the relevant provisions of O 19 to identify the existence and extent of any power therein to grant summary judgment to a third party. Order 19 r 1(3) is in the following terms:

"Where a third party notice is served on the person against whom it is issued, he shall as from the time of service be a party to the action with the same rights in respect of his defence against any claim made against him in the notice and otherwise as if he had been duly sued in the ordinary way by the defendant by whom the notice is issued."

The effect of O 19 r 1(3) is that the third party becomes a party to the action and has the same rights as against the defendant as if he had been sued by the defendant in a separate action (Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Limited (1991) 5 WAR 208 at 215; Johnson v Ribbins [1977] 1 All ER 806 at 811).

9 The effect of O 19 r 1(3) whereby a third party is in essence a defendant in a separate action is reinforced by the provisions of O 19 r 3(3) which is in the following terms:

"Subject to the foregoing provisions of this Rule, the following provisions of these Rules, namely, Order 5 Rules 7, 8 and 11, Order 9 except Rule 1(4), Order 10 except Rule 3 and Order 12, shall apply in relation to a third party notice and to the proceedings begun thereby as if -

(a) the third party notice were a writ and the proceedings begun thereby an action; and

(b) the defendant issuing the third party notice were a plaintiff and the person against whom it is issued a defendant in that action."

A combination of the provisions of O 19 r 1(3) and r 3(3) make it clear that the action commenced by a third party notice, whilst procedurally part of the action commenced by the plaintiff, is a separate action in its own right with each of the parties thereto possessing the rights and obligations of a plaintiff and a defendant. In the circumstances, the absence of any reference to the right to summary judgment in O 19 is not altogether surprising. In my view the court's power to grant summary judgment under O 16 is implicit in the third party's status as a defendant in the separate action commenced by the third party notice. I am therefore satisfied that the power to grant summary judgment under O 16 may be exercised by me in respect of the third party's application.

10 The principles applicable to an application under O 16 are well-established. The power to order summary judgment should be exercised with great care and should never be exercised unless it is clear there is no real question to be tried (Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87 at 99) or, put another way, that the claim is so clearly untenable that it cannot possibly succeed (General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130). The third party must therefore show that there is no serious question to be tried on any cause of action raised by the defendant in the third party proceedings (Anderson v Effexseven (1999) 10 ANZ Ins Cas 61-424 at 74,756 - 74,758). However, it is not for the court to identify causes of action which are not pleaded (Forsayth NL v Northern Gold NL, unreported; FCt SCt of WA; Library No 940012; 20 January 1994).

11 The application is brought in the alternative under O 19 r 6 which is in the following terms:

"Proceedings on a third party notice may, at any stage of the proceedings, be set aside by the Court."

There appears to be little judicial guidance as to what setting aside the proceedings entails. In Minproc Ltd v Killinger [2001] WASC 347, an application was made by third parties to set aside the third party notices on the ground that they disclosed no reasonable cause of action and for an order that the third party proceedings be dismissed. Whilst there was no analysis of the concept of setting aside the proceedings, the court noted that the third parties accepted the application could only succeed if the third parties were able to demonstrate that the defendant's claims against them were so untenable that they could not succeed ([3]). Later in the reasons this was put as a concession by counsel for the third parties that the third party notices should not be struck out unless it was clearly demonstrated that they could not succeed ([36]). These observations by counsel were taken to correctly represent the legal position and the matter was not further raised in the reasons for decision.

12 As already noted there is some suggestion that an application under O 19 r 6 provides an applicant with the option of seeking what was described as the equivalent of summary judgment under O 16 (Teros Pty Ltd, supra). Alternatively, the concept of setting aside proceedings may be said to be analogous to the power to dismiss an action or to enter judgment under O 20 r 19(1) on the ground that the pleading in question discloses no reasonable cause of action or defence. This was the approach taken in Denara Nominees Pty Ltd v Scolaro [2002] WASC 252. If that is the correct approach, the relevant principles under O 20 r 19(1) will apply with equal force to an application to set aside the proceedings under O 19 r 6. The principles applicable to an application under O 20 r 19(1) are also well-established. The power to strike out a claim as disclosing no reasonable cause of action is intended to apply only to cases which are really not arguable because of substantive deficiencies rather than technical objections. If, regardless of the way in which the facts are found, there is no basis for the legal conclusion contended for by the plaintiff, then the statement of claim should be struck out (Dalgety Australia Ltd v Rubin, unreported; FCt SCt of WA; Library No 5485; 24 August 1984). The difference, of course, between an application under O 20 r 19(1) and one under O 16 is that where an applicant is successful under the former, the court will very often strike out the pleading complained of but give the respondent leave to file a fresh pleading in revised terms, whereas where the applicant is successful under O 16, judgment will be entered in his favour. For the reasons which follow, the potential for different outcomes under O 16 and O 19 r 6 has not arisen in this matter.

13 At this juncture it is well to consider the allegations in the defendant's statement of claim against the third party and the relief sought. The defendant, along with the second-named defendant, has been sued by the plaintiff for damages said to arise out of the financial audits of the plaintiff which it is alleged were carried out by both defendants in the years ending 30 June 1996, 1997 and 1998. At the relevant times the defendant pleads that he was entitled to indemnity pursuant to a policy of insurance issued by HIH Casualty and General Insurance Limited ("HIH"). That company and the other companies in the HIH Insurance Group were placed into provisional liquidation on 15 March 2001.

14 By the Appropriation (HIH Assistance) Act 2001 the Commonwealth Parliament provided substantial funding from consolidated revenue for a scheme to assist policy holders of companies in the HIH Insurance Group called the HIH Support Scheme ("the Scheme"). The Scheme is constituted by the HIH Claims Support Trust Deed dated 6 July 2001 between the Commonwealth and the third party ("the Trust"), the Commonwealth Management Agreement dated 6 July 2001 between the Commonwealth and the third party ("the CMA"), and the Claims Management Agreement dated 4 September 2001 between the various companies in the HIH Insurance Group (collectively described as "the Insurer"), the third party and QBE Management Services Pty Ltd ("the Claims Manager").

15 The defendant applied for assistance pursuant to the Scheme and in due course the third party granted the defendant eligibility to receive assistance from the Scheme. His eligibility was made subject to the terms and conditions of the HIH policy held by the defendant and referred to above. Subsequent to the third party accepting the defendant's eligibility, the defendant was granted an indemnity under the HIH policy by the Claims Manager on the basis of the facts and circumstances currently known to the Claims Manager and subject to the terms and conditions of the HIH policy held by the defendant. There are other terms and conditions as well but these were revised in due course and are not relevant for present purposes.

16 Paragraph 9 of the defendant's statement of claim against the third party pleads that the third party's duties included:

(a) assessing whether claimants were eligible for help in accordance with the Government's criteria;

(b) working with HIH's provisional liquidator and other insurance companies to manage and settle eligible claims; and

(c) making sure policy holders actually got the assistance the Australian community was providing.

The defendant relies in particular on subpars (b) and (c) above in support of his submission that the statement of claim is properly directed to the third party. I should make it clear, however, that the language of subpars (b) and (c) is not to be found in any of the documents which comprise the Scheme. It seems that this language has been taken from the relevant Minister's Second Reading Speech when introducing the Appropriation (HIH Assistance) Act 2001 in Parliament. It was submitted to me that I should have regard for the Minister's Second Reading Speech in interpreting what is otherwise a very short Act. Recourse can, of course, be had to Hansard to interpret the terms of a statute which is ambiguous or obscure (Acts Interpretation Act 1901, s 15AB). However, this Act does not fall into that category. It is but a few sections which provide in very plain terms that a specific sum of money will be allocated for relief to HIH policy holders. The machinery for the provision of relief is to be found in the Scheme documents.

17 There are three causes of action pleaded in the statement of claim. At par 16 the defendant pleads that the third party is in breach of its duties as trustee and administrator of the Trust and the Scheme in that it has:

"(a) notwithstanding the grant by the Third Party to the Defendant of eligibility under the Scheme the Third Party refused and continues to refuse to:

(i) grant indemnity to the Firstnamed Defendant for 90% of the claim;

(ii) 'make sure' the Firstnamed Defendant, as a person eligible under the Scheme, actually gets the assistance the Australian Community was providing by the Scheme and the Trust, in particular an indemnity for 90% of the claim and payment of 90% of the costs of Defence of the claim, as such costs are incurred, or at all.

(b) failed to give any, or any sufficient, reason for the refusal to indemnify the Firstnamed Defendant according to the terms of the Trust and the Scheme.

(c) failed to pay any costs of the Defence of the claim incurred by the Firstnamed Defendant at the instruction of the Third Party or its agent, QBE, as such costs of Defence are incurred, or at all unless such costs were incurred with a solicitor nominated by the Third Party or its agent QBE; and where such solicitor was subject to a conflict of interest particularly adverse to the Firstnamed Defendant. Further particulars of circumstances giving rise to the said conflict of interest exceed 3 folios and are set out in the Second Schedule hereto."

It is common ground between the parties that any indemnity to which the defendant was entitled would only be for 90 per cent of the plaintiff's claim and 90 per cent of the costs of defending the plaintiff's proceedings. This is provided for in the Scheme documents.

18 Despite the above plea in par 16, the defendant does not plead the nature of the duties owed by the third party and, most importantly, to whom those duties were owed. In my opinion such a plea would be a necessary prerequisite to an allegation that the third party was in breach of its duties as a trustee and administrator of the Trust and the Scheme. Indeed, pursuant to the terms of the Trust, the beneficial interest in the Trust Fund is held by the Commonwealth (cl 5 thereof). Implicit in par 16 is the proposition, incorrect in my view, that the defendant is a beneficiary of the Trust. Whilst it is true that in a press release issued by the Minister on 21 May 2001 examples are given of successful applicants and they are described in the examples as beneficiaries, I construe that term to be no more than a loose description of policy holders who have received the benefit of a payout after successfully establishing their eligibility and right to indemnity. The use of the term "beneficiaries" in a press release can hardly be used to cut across the express provisions of the Trust itself. For the above reasons, the plea of a breach of duty by the third party arising from the Trust or the Scheme cannot be made out.

19 Further and in any event, par 16 presupposes that the duty to grant or refuse indemnity to claimants is reposed in the third party. As I have explained later in these reasons, that conclusion is incorrect. The power to grant or refuse indemnity lies with the Claims Manager on behalf of HIH. This is made clear by the contents of the Scheme documents.

20 The next cause of action, if it can be so described, is to be found in par 17 of the statement of claim which pleads that the third party ought be estopped from denying it requested the legal costs of the defence to be incurred by the defendant in relation to the defence of the claim. The facts giving rise to the estoppel claimed by the defendant are pleaded as follows:

"(a) acceptance by the Third Party as Trustee of the Scheme, of the eligibility of the Firstnamed Defendant to receive rights under the Scheme; and the representation made by its agent QBE on 25 March 2003 as pleaded in para 10 hereof.

(b) the requirement, at all material times, of the Third Party and its agent QBE that the Firstnamed Defendant acted as a prudent uninsured and take all necessary steps to properly defend the claim; so as to not prejudice the interests of the Third Party or its agent QBE.

(c) the Firstnamed Defendant relied on the acceptance by the Third Party of his eligibility under the Scheme (and his entitlement to receive reimburse of costs outlaid) in incurring legal costs in the proper defence of the claim.

(d) notwithstanding the refusal to grant indemnity to the Firstnamed Defendant, or to pay legal costs actually incurred, the Third Party has not removed the requirement of the Firstnamed Defendant to act as a prudent uninsured and to properly defend the claim made by the Plaintiff so as not to prejudice these interests of the Third Party or it [sic] agent QBE; and continues to require such costs to be incurred."

21 As I understand par 17, it is pleaded that the defendant relied on his acceptance by the third party as an eligible policy holder under the Scheme to incur legal costs in the proper defence of the plaintiff's claim against him. The defendant says that notwithstanding the refusal to grant indemnity to him or to pay legal costs actually incurred by him, the third party has not removed the defendant's requirement to act as a prudent uninsured and to properly defend the plaintiff's claim so as not to prejudice the interests of the third party or the Claims Manager. I assume from this plea that the third party's advice to the defendant that he had met the eligibility requirements under the Scheme is said to be a representation on which the defendant relied to his detriment so as to give rise to a promissory estoppel. However, the Scheme documents do not provide for decisions as to legal costs to be made by the third party, but rather by the Claims Manager. Again, this is borne out by the Scheme documents to which I will refer later in these reasons.

22 The third and final cause of action in the statement of claim is in par 18 which pleads that a contract was created between the defendant and the third party in the following circumstances:

"(a) By his application for eligibility under the Scheme, the Firstnamed Defendant agreed, if accepted into the Scheme, to assign his rights to claim in the liquidation of HIH Casualty and Insurance Limited, to the Third Party, or at its direction, the Commonwealth.

(b) The Third Party accepted the application by the Firstnamed Defendant, on terms pleaded in paragraph 11 hereof.

(c) There is no reason, which would deprive the Firstnamed Defendant of his eligibility under the Scheme and the Trust"

23 Once again, the difficulty with the plea in par 18 is that it is not supported by the documentation in evidence before me. The defendant suggests that by applying for eligibility under the Scheme, he agreed, if accepted into the Scheme, to assign his rights to claim in the liquidation of HIH to the third party and that the third party accepted his application. However, acceptance of a policy holder's offer to assign only occurs when payment is made under the Scheme. In this respect I refer to the conditions and obligations of the offer to assign policy holder rights which are annexed to the affidavit of Dean Carrigan sworn on 24 June 2004. It is provided by those conditions that the only method which the third party may use to accept a policy holder's offer is by payment of a benefit under the Scheme. This is reinforced by further providing that where the benefit consists of a series of payments relating to one claim, the first payment of the series constitutes acceptance by the third party of the offer. Accordingly, no contract can come into existence between a policy holder such as the defendant on the one hand and the third party on the other until payment of a benefit is made. Whether payment is made will depend entirely upon the policy holder being deemed eligible by the third party and thereafter receiving an indemnity from the Claims Manager. At this point in time the defendant has been deemed to be eligible under the Scheme and has a conditional indemnity in his favour but no payment has been made to him under the Scheme. In the absence of payment, there can be no acceptance of the offer to assign and in turn this means that no contract has come into existence between the defendant and the third party.

24 The defendant pleads that he has suffered loss and damage as a result of the third party's breach of the duties pleaded in par 16 or the breach of contract pleaded in par 18. Somewhat curiously, the estoppel point is not to be found again in the statement of claim and is not part of the defendants' prayer for relief.

25 In its defence to the statement of claim in the third party proceedings, a number of matters have been admitted. These include the fact that the defendant was insured under an HIH policy, that the HIH Claims Support Scheme was established by the Commonwealth, that the Scheme is constituted by the Trust, the CMA and the Claims Management Agreement, and that the third party has granted the defendant eligibility to receive assistance from the Scheme subject to the terms and conditions of the HIH policy held by him.

26 However, what is in dispute is whether the third party has an obligation, indeed a right, to indemnify the defendant against the plaintiff's claim and the costs of defending the plaintiff's claim. The third party says in its defence that it has neither the obligation nor the right pursuant to the Scheme documents to make the requisite decision as to whether the defendant should be granted indemnity pursuant to the terms of his policy. It pleads that its duty is confined to determining the defendant's eligibility. Once it decides that the defendant is eligible to receive assistance from the Scheme, it refers his claim to the Claims Manager who determines, for and on behalf of HIH rather than the third party, whether the defendant's policy responds to his claim. If the policy does respond, then the Claims Manager will, on behalf of HIH, offer to extend to the defendant indemnity subject to the terms and conditions of the policy held by him. The third party says that in these circumstances the determination of whether the defendant is entitled to indemnity under his policy and the terms and conditions subject to which indemnity will be extended under the policy are functions performed by the Claims Manager acting for and on behalf of HIH. They are not functions capable of being performed by or on behalf of the third party. For this reason the third party contends that the defendant has sued the wrong party. Despite my concerns about the inadequacies of the defendants' claim against the third party, in order to determine whether there is merit in the third party's defence as to the limits of its role and function, it is necessary to examine the Scheme documents.

27 The first document to be considered is the CMA. Pursuant to the CMA the third party was appointed by the Commonwealth to administer the Scheme. The third party's obligations and powers under the CMA are set out in cl 5 thereof which provides that the third party shall perform, inter alia, the following tasks:

"(a) receive, review and determine Applications in accordance with the Eligibility Criteria and the Applications Manual;

(b) admit or decline Applications or undertake such additional investigations to ascertain the eligibility of an Applicant as the third party determines;

(c) enter into Claims Management Agreements with HIH companies and such entities who are to perform the functions of Claims Managers as may be agreed from time to time by the Commonwealth;

(f) allocate, in accordance with criteria agreed between the third party, the Commonwealth and Claims Managers from time to time, all admitted Applications (including those admitted by the third party after an Internal Review or by the Review Panel) to Claims Managers to be managed on the terms of the Claims Management Agreements.

...

(i) authorise Claims Managers (subject to having been first funded by the Commonwealth) to effect Scheme Payments;

...

(m) act as Trustee of the Trust and administer the Trust in accordance with the terms of the Trust Deed."

28 Thereafter the third party, the Insurer (which included HIH) and the Claims Manager entered into the Claims Management Agreement in connection with the Scheme. The Claims Management Agreement provides, by cls 2.2 and 2.4 thereof, that the Claims Manager is appointed by the Insurer to provide Claims Management Services to and on behalf of the Insurer. Claims Management Services are defined in the preamble to Sch 11 of the Claims Management Agreement as including the examination, investigation, verification, adjustment, assessment, management and settlement of HIH Scheme Claims under HIH Policies, including the performance or commissioning of all reasonably necessary undertakings and activities in connection with the same, and the determination of coverage entitlement in respect of those claims in accordance with the terms and conditions of the applicable HIH Policies.

29 Paragraph 4 of Sch 11 of the Claims Management Agreement provides that the Claims Management Services include assessment, estimation and quantification of losses and liabilities, including anticipated defence costs, falling for indemnification under applicable HIH Policies. Paragraph 5 thereof includes arranging for proper conduct of HIH policyholders' defences under HIH Policies. Paragraph 9 thereof includes defending any court or tribunal proceedings brought by an HIH Policyholder where the Manager has determined that the HIH Policyholder is not entitled to be indemnified in full or at all under the relevant HIH Policy and negotiating settlement of the same, where appropriate, upon suitable terms.

30 The Claims Management Agreement also provides that the Claims Manager is separately appointed by the third party to provide Payment Management and Recovery Services. Payment Management and Recovery Services are defined in Sch 10 of the Claims Management Agreement to include, inter alia, the following services:

"1. Establishment and maintenance of Approved Accounts and payments out of those accounts of Claims Expenditure;

2. Monthly reconciliation of all transactions into and out of the Approved Accounts;

5. Identification, pursuit and settlement of Recoveries where the Claims Manager considers such action appropriate having regard to cost benefit issues."

31 The Payment Management and Recovery Services which the Claims Manager performs on behalf of the third party do not include Claims Management Services. The fact that Claims Management Services are expressly defined to include the examination, investigation, assessment and settlement of claims and the determination of coverage entitlement in respect of those claims makes it clear, in my view, that the question of whether any particular applicant's policy responds to a claim and, if so, the terms and conditions on which indemnity may be granted to that applicant are matters which fall within the parameters of the Claims Manager's responsibilities acting pursuant to its appointment by the Insurer. That is, they are responsibilities undertaken on behalf of and as the agent of the Insurer, not on behalf of or as the agent of the third party. In this respect I note that cl 2.5 of the Claims Management Agreement expressly provides that the relationship between the Insurer and the Claims Manager in relation to the provision of Claims Management Services is that of principal and agent. There is no suggestion in either cl 2.5 or anywhere else in the Claims Management Agreement that in the performance of the Claims Management Services, the Claims Manager is acting as the agent of the third party.

32 It is true that the Claims Manager will provide separate services called Payment Management and Recovery Services, to which I have referred above, on behalf of the third party and in those circumstances the relationship between the third party and the Claims Manager is one of principal and agent pursuant to cls 2.1 and 2.3 of the Claims Management Agreement. In my opinion it is clear that when performing services as agent of the third party, the Claims Manager has no power to determine issues relating to whether a particular applicant's policy responds to a claim and, most importantly, whether indemnity is to be granted and, if so, on what terms. These are very plainly requirements of the Claims Manager when undertaking Claims Management Services as the agent of the Insurer.

33 Despite a careful consideration of the clauses of each of the agreements comprising the Scheme documents, I am unable to identify any clause in those agreements which could lead to the conclusion that the third party performed any role in assessing the right to indemnity of the defendant or the scope of that right. Moreover, I can find no provision in any of the Scheme documents which could lead to the conclusion that the Claims Manager, in undertaking this task as it is required to do, was acting as the agent of the third party. The express provisions of the Claims Management Agreement to which I have referred are against that proposition and no implication can be drawn from any other term therein which could or might provide comfort to the defendant in relation to this matter. Counsel for the defendant drew my attention to cl 16.1(a) of the Claims Management Agreement where it is said the third party acknowledges that the appointment of the Claims Manager to provide Payment Management and Recovery Services involves the provision by the Claims Manager of Claims Management Services to the Insurer, and that those functions whilst separate and distinct are interdependent. Counsel for the defendant submitted that the use of the word "interdependent" must lead to the conclusion that the Claims Management Services were being performed on behalf of the third party as well as the Insurer. However, I am unable to accept this proposition. It is clear that the provision of Claims Management Services is separate and distinct from the provision of Payment Management and Recovery Services. Clause 16.1(a) merely recognises the fact that the performance of both services is necessarily related.

34 In the circumstances, I conclude that the defendant's claim against the third party cannot succeed. Regardless of how the claim is pleaded, it must fail because the relief sought by the defendant cannot in law be recovered from the third party. If the defendant is dissatisfied with the conditional indemnity afforded to him by the Claims Manager, he must sue HIH as the Claims Manager's principal. Although HIH is in liquidation, there is correspondence annexed to the defendant's affidavit sworn 26 July 2004 from the joint liquidator to the defendant's solicitors dated 3 June 2004 in which the joint liquidator indicates that if the defendant first releases the third party from the proceedings, HIH will not oppose an application by the defendant for leave to proceed against HIH in the proceedings.

35 Having reached the above conclusions it seems to me that I need not consider the alternative claim under O 19 r 6 of the third party's application. However, based on my findings in respect of the O 16 application, it must be the case that the O 19 r 6 application would also have succeeded on the ground that the defendant's statement of claim against the third party discloses no reasonable cause of action against the third party and should therefore be struck out. Furthermore, in light of my reasons this would not have been an appropriate case for the defendant to have leave to re-plead its claim against the third party.

36 This leaves the defendant's applications to strike out parts of the third party's defence and for further and better discovery. I indicated earlier in these reasons that counsel for the defendant acknowledged during the hearing that in view of the further particulars provided by the third party, the concerns raised in the defendant's application to strike out were largely addressed. Having regard to that concession and the fact that I have found in favour of the third party on its application for summary judgment, the proper course is to dismiss the defendant's application to strike out. As far as the application for further and better discovery is concerned, it must also fall away as a result of my reasons in respect of the third party's application for summary judgment. Nevertheless, for the sake of completeness I should say that I would not have granted that application. In the absence of any compelling evidence to the contrary, an affidavit of discovery is conclusive as to its contents. The defendants sought discovery of particular documents which were set out in the schedule to the application. In relation to the second group of documents, said to be those evidencing an arrangement between the third party and the Claims Manager, an affidavit was sworn by Dallas Wayne Booth on 26 August 2004 that no such document exists. Mr Booth deposes that he was the Managing Director of the third party during the establishment of the Scheme and continued in that position from 25 May 2001 until 21 August 2003. I have no alternative but to accept that affidavit as to the existence of the subject documents and counsel for the defendant did not suggest otherwise. In relation to the other group of documents, namely, any deed of indemnity executed pursuant to cl 12.5 of the CMA, the best that counsel for the defendant could do was to direct my attention to an unexecuted pro forma document of that kind annexed to the affidavit of Dean Carrigan sworn on 13 May 2004. However, as the third party's affidavit of discovery discloses no executed deed of indemnity and there is no evidence before me that a deed of indemnity was ever executed, that must be the end of the matter. Further and in any event, I am unable to see the relevance of such a deed to any issue pleaded in the third party proceedings. For these reasons I dismiss the defendant's application for further and better discovery.

37 In summary, and subject to hearing from the parties I propose to make the following orders:

1. the time for the filing of the third party's application under O 16 for summary judgment against the firstnamed defendant in the third party proceedings be extended to 28 April 2004;

2. judgment be entered for the third party against the firstnamed defendant in the third party proceedings under O 16 r 1;

3. the defendant's application to strike out parts of the third party's defence in the third party proceedings be dismissed;

4. the defendant's application for further and better discovery of documents by the third party be dismissed.