Leave to join the insurer
18 By her proposed amended statement of claim, the applicant proposes to seek a declaration that the insurer is liable to indemnify AGM Markets in respect of the respondents' liability to pay compensation to the applicant in connection with the subject matter of this proceeding. To this end the applicant seeks to have the insurer joined as a party in the proceeding. Counsel for the applicant stated that if the insurer were joined, "then, to the extent that the litigation is actively defended by or on behalf of the existing respondents, that would be undertaken by the insurer".
19 Rule 9.05(1) of the Federal Court Rules 2011 (Cth) permits an application to join a person as a party if the person:
(a) ought to have been joined as a party to the proceeding; or
(b) is a person:
(i) whose cooperation might be required to enforce a judgment; or
(ii) whose joinder is necessary to ensure that each issue in dispute in the proceeding is able to be heard and finally determined; or
(iii) who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings.
20 Employers Reinsurance Corporation v Ashmere Cove Pty Ltd [2008] FCAFC 28; 166 FCR 398 is authority for the proposition that there is no constitutional impediment to joining an insurer in circumstances like the present, where declaratory relief is sought by a client investor (to the effect that the insurer is liable to indemnify the insured being the person responsible for the client investor's loss): see Ashmere Cove at [49] and [58]. In circumstances such as these, it is said that the client investor has a real interest in establishing that the insured is entitled to be indemnified and therefore the joinder is of practical utility: see Ashmere Cove at [58] and [73]. The decision in Ashmere Cove is consistent with s 22 of the Federal Court of Australia Act 1976 (Cth).
21 In this case, the applicant seeks to have the Court determine the question "whether, under the Policy, [the insurer] is liable to indemnify AGM Markets in respect of any liability of the respondents to the applicant arising from the subject matter of the proceeding". The applicant submitted, and it may be accepted, that "[t]he practical reason for the joinder … is to ensure that all relevant controversies which arise from the same factual substratum are decided in the one case".
22 It must, of course, be accepted that a decision to allow joinder of an insurer is discretionary and dependent on the circumstances of the case. It is well accepted, however, that certain matters are relevant to the exercise of this discretion. These matters were described by Lindsay J in The Owners-Strata Plan 62658 v Mestrez Pty Ltd [2012] NSWSC 1259 at [54], as accepted in, for example, Genworth Financial Mortgage Insurance Pty Ltd v KCRAM Pty Ltd (in liq) (No 2) (2011) 284 ALR 72 at [27]; Austcorp Project No 20 Pty Ltd v LM Investment Management Ltd (in liq) [2013] FCA 883 at [25]-[32]; CGU Insurance v Blakeley [2015] VSCA 153 at [17]; and Kaboko Mining Limited v Van Heerden (No 2) [2018] FCA 706 at [17].
23 In Mestrez, Lindsay J stated that "the interests of justice, and the convenient administration of justice, may authorise an order that an insurer be joined as a co-defendant with its insured, whether on the application of the third-party Plaintiff or otherwise, if":
(i) the insurer has denied liability to indemnify the insured against the Plaintiff's claim.
(ii) there is a bona fide dispute as to the entitlement of the insurer to deny liability.
(iii) there is a substantial impediment (including insolvency on the part of the insured) standing in the way of the proceedings being conducted simply by the Plaintiff against the insured defendant, with a cross claim filed by the defendant against the insurer.
(vi) the dispute as to the liability or otherwise of the insurer to indemnify the insured defendant can properly be made the subject of a grant of declaratory relief …
(v) there is, in particular, a true legal controversy between the Plaintiff and the insurer such as would ensure that each of those parties might reasonably be relied upon by the court to serve as a contradictor for the other.
(vi) joinder of the insurer as a co-defendant with its insured might reasonably be relied upon to avoid a multiplicity of proceedings, and to enable all matters in controversy between the parties (namely, the Plaintiff, the insured and the insurer) to be completely and finally determined.
24 In this case, there is evidence that the insurer has denied liability to indemnify the insured against the applicant's claim. It may be accepted that there is a bona fide dispute as to the insurer's liability, as indicated by the applicant's proposed amended statement of claim. The insolvency of the insured second respondent, and the likely insufficiency of the funds available for distribution on the winding up, stand in the way of the proceeding being conducted by the applicant against the insured respondent.
25 The dispute can properly be the subject of declaratory relief under s 21 of the Federal Court of Australia Act. There is a true legal controversy between the applicant and the insurer such as to ensure that those parties serve as a contradictor of each other. The joinder of the insurer as a respondent may reasonably be relied on to avoid a multiplicity of proceedings and enable all matters in controversy between the applicant, the first and second respondents and the insurer to be completely and finally determined.
26 These considerations militate in favour of joinder. Neither the liquidators for the second respondent (the insured under the Policy) nor the liquidator for the first respondent has opposed the joinder of the insurer. Whether liability under the Policy will be established is a matter for subsequent adjudication. None has suggested that there is no real question to be tried: compare Sienkiewicz (As Trustee for the Sienkiewicz Superannuation Fund) v Salisbury Group Pty Limited [2013] FCA 977 at [38]. In that case, Robertson J made an order for the joinder of insurers who the applicants contended were liable and obliged to indemnify the respondents in respect of the applicants' claims for damages, observing at [38] that "joinder should not be refused unless it is clear that there is no real question to be tried in the sense that there needs to be a high degree of certainty about the ultimate outcome of the proceeding" and noting at [42] "[e]ven if I had formed the view that the applicants were unlikely to succeed on the factual issues that does not mean that joinder should be refused".
27 In the circumstances of the case, having regard to the matters I have mentioned, I am satisfied that it is in the interests of justice that Lloyd's and Hamilton each be joined as a respondent in the proceeding in order that the question of the insurer's liability to indemnify AGM Markets under the Policy in respect of the subject matter of this proceeding can be determined as part of this proceeding, and that leave should be granted to the applicant under s 471B of the Corporations Act 2001 to continue this proceeding against the first and second respondents.