AMACA PTY LTD (Formerly James Hardie & Co Pty Ltd) (ACN 000 035 512)

Practice and procedure - Order joining third parties - Application to recall order or strike out defendant - Test for summary dismissal - Liability of third party insurer under Corporations Act 2001 (Cth) - Whether insurance contract encompassed liability for common law damages - Whether multiple insurers liable for indemnity

Corporations Act 2001 (Cth), s 601AA, s 601AG, s 601AH

Workers' Compensation and Injury Management Act 1981 (WA), s 33, s 41, Sch 1

Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd [2005] NSWCA 19; (2005) 62 NSWLR 148

Commissioner of Water Resources v Federated Engine Drivers' and Fireman's Association of Australasia Queensland Branch [1988] Qd R 385

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

GRE Insurance Ltd v Bristile Ltd (1991) 5 WAR 440

Hutchinson v ASIC [2001] VSC 46

Krstevska v ACN 010 505 012 Pty Ltd [2001] NSWSC 1093

Lotus Development Corporation v Mayne Nicholas Ltd (1991) 100 ALR 167

Norman v Norman (1992) 6 WAR 372

Orica Ltd v CGU Insurance Ltd [2003] NSWCA 331; (2003) 59 NSWLR 14

Arnold v Poltane Pty Ltd [2005] FCA 1418

Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; (1999) 200 CLR 1

Langridge v Insurance Commission of Western Australia & Ors [2003] WASC 24

Manufacturers Mutual Insurance v National Employers' Mutual General Insurance Assoc Ltd (1989) 5 ANZ Insurance Cases [60-906]

Rothwells Ltd (in liq) v Peng (1990) 1 WAR 380

1 LE MIERE J: In about August 2005 the plaintiff was diagnosed to be suffering from mesothelioma. On 4 October 2005 the plaintiff issued the writ of summons in this action against Amaca Pty Ltd. On 25 October Templeman J ordered that the action be entered into the expedited list and that the second, third and fourth defendants be joined as defendants to the action. The second defendant did not appear at that hearing.

2 The second defendant has now applied by chamber summons for an order that the order made on 26 October 2005 joining the second defendant be recalled and in lieu thereof it be ordered that the plaintiff's application to join GIO General Insurance Ltd as a defendant be dismissed. I heard that application on 3 November 2005.

3 The plaintiff's case against the second defendant arises from his employment from in or about 1975 to in or about 1979 by Austral Insulation Pty Ltd. In the course of his employment with Austral the plaintiff was exposed to and inhaled asbestos. Austral was deregistered on or about 20 June 2004 pursuant to the provisions of s 601AA of the Corporations Act 2001 (Cth). From August 1975 the second defendant, or its predecessors for which it is responsible, was the insurer on risk for Austral. The plaintiff sues the second defendant pursuant to the provisions of s 601AG of the Corporations Act. Section 601AG provides:

"A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if:

(a) the company had a liability to the person; and

(b) the insurance contract covered that liability immediately before deregistration."

4 The jurisdiction or power of the court to recall an order that has not been perfected by being drawn up and sealed was discussed by Murray J in Norman v Norman (1992) 6 WAR 372. An order pronounced by a Judge can be withdrawn, or altered, or modified by him until it is drawn up, passed and entered. The Judge retains control over the matter until the order is formally completed. This control must be used in accordance with the Judge's discretion, exercised judicially and not capriciously. In Queensland it has been held that one Judge may not vary the order of another Judge except by authority of the Rules, or if the other Judge is unavailable to hear the application: Commissioner of Water Resources v Federated Engine Drivers' and Fireman's Association of Australasia Queensland Branch [1988] Qd R 385 at 389. The order joining the second defendant was made by another Judge in the expedited list. To require the application to be heard by the same Judge rather than the Judge now sitting in the expedited list would involve unnecessary inconvenience to the parties and the court. In any event, the parties agreed that I should hear the application and exercise the discretion to recall the order.

5 Order 18 r 6(2)(a) of the Rules of the Supreme Court 1971 (WA) provides that at any stage of the proceedings the court may order that any person who has been improperly or unnecessarily made a party cease to be a party. In Lotus Development Corporation v Mayne Nicholas Ltd (1991) 100 ALR 167 the first and second respondents brought an application pursuant to O 6 r 9 of the Federal Court Rules 1979 (Cth) which is in similar terms to O 18 r 6(2)(a) of the Rules of the Supreme Court (supra). The parties and Foster J accepted that the appropriate test to be applied in determining the application is that set out in the judgment of Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129 where his Honour said, in relation to earlier authorities:

" ... these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the court is satisfied cannot succeed'; under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'."

6 Counsel for the plaintiff submitted that the proper basis of the second defendant's application is not an application to recall the order joining the second defendant but rather that it is "more akin to an application to strike out the writ or the indorsement on the writ insofar as it concerns the second defendant or alternatively for summary judgment". Counsel for the plaintiff submitted that the application should be treated as an application to strike out the writ or for defendant's summary judgment.

7 In my view the court has power to recall the order made joining the second defendant. Furthermore, the court has power under O 18 r 6(2) to order that the second defendant cease to be a party. In any event, the appropriate test to be applied in determining whether the order should be recalled or the second defendant should cease to be a party is the General Steel Industries test to which I have earlier referred. The plaintiff could issue a separate writ against the second defendant. If the plaintiff was to do so and the defendant sought to have the action struck out the appropriate test to be applied in determining the second defendant's application would be that set out in General Steel Industries (supra).

8 The second defendant raises three arguments in support of its application. The first is that allegedly before its deregistration Austral did not have a liability to the plaintiff and hence s 601AG of the Corporations Act does not give the plaintiff a right of recovery from the second defendant. The second argument is that immediately before the deregistration of Austral, the second defendant was not liable to indemnify Austral, that is the insurance contract between the second defendant and Austral did not cover Austral's liability to the plaintiff for common law damages and hence the plaintiff may not recover from the second defendant pursuant to s 601AG. The second defendant's third argument is that it is inappropriate to join one or two insurers pursuant to s 601AG where there are multiple insurers of the deregistered company who might be liable to indemnify the company.

First argument - Did Austral have a liability to the plaintiff?

9 The first step in the second defendant's argument is that the time for determining the existence of the first pre-condition in s 610AG of the Corporations Act, namely, whether the deregistered company had a liability to the person claiming, is immediately before deregistration: Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd [2005] NSWCA 19; (2005) 62 NSWLR 148. The second step is that the deregistered company only had a liability to the person claiming if the person claiming had an accrued cause of action at the time. The third step is that the plaintiff's cause of action did not accrue until the onset of mesothelioma.

10 The evidence is that the plaintiff did not suffer symptoms of mesothelioma until about May 2005. Austral was deregistered on 20 June 2004. The plaintiff submits that immediately before deregistration of Austral the plaintiff did not suffer from mesothelioma and hence Austral did not have a liability to the plaintiff at that time.

11 The second defendant relies upon the decision of the Full Court in GRE Insurance Ltd v Bristile Ltd (1991) 5 WAR 440, to which I will refer shortly and the decision of the New South Wales Court of Appeal in Orica Ltd v CGU Insurance Ltd [2003] NSWCA 331; (2003) 59 NSWLR 14.

12 In Orica (supra) the worker was employed by Orica over a period of three years between 1959 and 1961. During that time he was exposed to asbestos dust and fibre and ultimately contracted mesothelioma, although symptoms of the disease did not become apparent until August 2001. The disease was diagnosed in October 2001 and the following year the worker successfully compromised a claim in negligence against his employer. For each of the years 1959 to 1961 Orica held three consecutive workers compensation insurance policies with CGU. Following settlement of the worker's common law action, Orica sought indemnity from CGU in respect of one or more of the earlier statutory policies. At the time of the worker's employment, s 18 of the Workers' Compensation (Amendment) Act 1960 (NSW) provided relevantly as follows:

"Every employer shall obtain from an insurer licensed under this Act to carry on business in the State, a policy of insurance or indemnity for the full amount of liability under this Act to all workers employed by him and for an amount of at least £20,000 in respect of his liability independently of this Act for any injury to such worker and shall maintain such policy in force ... every such policy shall provide that the insurer shall as well as the employer be directly liable to any worker insured under such policy..."

13 CGU rejected the claim on the basis, amongst others, that it was not legally responsible to indemnify Orica because liability only arose when the worker suffered damage which, on the facts of the worker's claim, occurred in August 2001 and therefore well outside the period of insurance. In considering the circumstances in which an employer may be "liable" for damages, all members of the NSW Court of Appeal agreed that words such as "liable" and "liability" are terms capable of varying meanings in particular circumstances. The ascertainment of their specific meaning must depend on the context, broadly defined, in which they are used. In particular, Spigelman CJ noted that determination of the meaning of the word "liability" in the context of this case would also turn on the precise words of the policy and their specific context. Even though the policy was in a mandatory statutory form, Spigelman CJ noted that the policy had to be construed as a contract and the extent of any indemnity in favour of the worker must be found in the language of the policy. Spigelman CJ and Mason P found that the worker, in order to obtain the benefit of the statutory policy, must establish that the employer became "liable to pay" an amount with respect to its liability to the employer between the two dates identified in each policy. Santow JA reached a different conclusion. In his Honour's analysis, the policy did not require that sufficient events had needed to come to pass to establish a cause of action in negligence against the employer within the year of cover. Santow JA considered that the narrower meaning of "liability" was not the sense in which the policy used that term, and to find otherwise would produce an unreasonable, even oppressive result, which would defeat the main commercial object of the policy. His Honour continued at [87]:

"By denying insurance cover to workers suffering diseases like mesothelioma, simply because injury in temporal terms occurs well before damage, would leave a large gap in that insurance safety net, contrary to the evident purpose of the legislation and the policy ..."

14 Whereas all members of the NSW Court of Appeal accepted that inhalation of asbestos fibres during the policy period was an "injury" for the purpose of the policy, Spigelman CJ and Mason P found that liability did not accrue or vest immediately on injury. Having regard to the wording of the policy, their Honours found that for liability to accrue there must be "actual liability" in the form of damage as opposed to some contingent, potential or inchoate liability. It followed that without a cause of action in negligence completed by damage, their Honours considered that there was no corresponding liability on the part of the employer.

15 GRE Insurance Ltd v Bristile (supra) concerned the interpretation of an employer's indemnity policy. The plaintiff was exposed to asbestos dust during the course of his employment by Bristile between 1962 and 1982. GRE entered into an employer's indemnity contract of insurance with Bristile which was in force from 1963 until 1975. In September 1989 the plaintiff developed mesotheliomia and for the first time experienced symptoms of mesotheliomia. In January 1990 he was diagnosed as suffering from mesotheliomia. The plaintiff became disabled from earning full wages in September 1989. By reason of the negligence of Bristile which caused an injury either during the period when GRE were the insurer for Bristile or when the mesotheliomia developed in September 1989 Bristile became liable to pay damages to the plaintiff. GRE did not admit that the injury occurred when GRE were on risk. GRE denied liability to indemnify Bristile on the ground that the plaintiff did not sustain an injury within the meaning of that word in the GRE policy during the period when GRE were on risk, that Bristile did not become liable to the plaintiff nor did GRE become liable to Bristile while GRE were on risk and that GRE did not become liable to pay compensation under the Workers' Compensation Act 1912 or under s 33 of the Workers' Compensation and Assistance Act 1981 and thus could not be held liable to indemnify Bristile for the damages payable to the plaintiff.

16 There was evidence that the inhalation of asbestos fibres does not lead to the disease of mesothelioma until the point when the presence of the fibres produces a malignant cell. The inhalation places the person at risk but until the cell changes take place it was not possible to predict whether there would be an onset of the disease. It was only a short interval of time between the contraction of the disease and diagnosis. Nicholson J found that the entry of the asbestos fibres into the plaintiff's body, which eventually caused the mesothelioma in the plaintiff, constituted an injury. When the plaintiff inhaled fibres he suffered an injury because the inhalation was the external excitement of the disease of mesothelioma. GRE addressed an argument to the condition in the policy that there be an entitlement to recover damages at common law. Nicholson J accepted that no such entitlement exists until some damage which is more than negligible occurs; that is, the cause of action in tort is only complete when appreciable or other than purely nominal damage occurs. His Honour continued:

"Once the injury is seen truly to be the disease of mesothelioma, I do not consider this condition precedent presents any obstacle to the respondent seeking the indemnity provided for in the policy."

17 Murray J agreed with Nicholson J. Pidgeon J delivered a separate judgment in which he said:

"The grounds of appeal claim that no damage occurred until late 1989. I agree with Nicholson J that the injury occurred when the fibres were inhaled. In my view sufficient damage occurred at that particular time to give rise to an action in tort. The damages at that stage may have been no more than to compensate for a prospect or chance of the disease subsequently developing and of a shortening of life expectancy."

18 In my view there are three reasons why the second defendant's first argument should not be upheld. First, it is undesirable that this question, which is analogous to a limitation question, should be decided in interlocutory proceedings in advance of the hearing of the action and where insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question. There is evidence of the onset of symptoms of mesothelioma but there is no, or no sufficient, evidence of the aetiology of mesothelioma and such matters as when the cells became malignant. Secondly, the decision of the Full Court in GRE Insurance Ltd v Bristile (supra) is at least some support for the plaintiff's argument that Austral had a liability to the plaintiff immediately before its deregistration. At that time the plaintiff had suffered injury and it is arguable that sufficient damage had occurred at that time to give rise to an action in tort and that is sufficient to entitle the plaintiff to recover from the second defendant pursuant to s 601AG of the Corporations Act. Thirdly, it is arguable that "liability" in s 601AG includes a contingent or inchoate liability.

19 I do not consider that the second defendant's first argument is so plainly right that the plaintiff should be denied the opportunity to argue its case fully at trial.

Second argument - Insurance contract did not cover that liability

20 The second defendant's second argument is that its policy did not cover the common law liability, if any, of Austral. The second defendant accepts that there is evidence that the second defendant, or its predecessor, had entered into a workers compensation policy with Austral but says that there is no evidence that the policy covered Austral for common law liability. The second defendant has led evidence that the insurance contract between Austral and the second defendant very probably was in the same form as the SGIO employer's indemnity policy of 1972. That policy contained the following relevant clause (omitting unnecessary words):

"It is hereby agreed that ... the insurer will indemnify the employer against liability to pay damages ... at common law for personal injury sustained by any person employed by the employer under a contract of service who is a "worker" within the meaning of the Workers' Compensation Act 1912 and any amendments thereof and any amendments thereof if such injury is an injury in respect of which such person is entitled to recover from the employer both compensation under the said Workers' Compensation Act and (subject to s 7 of such Act) damages independently thereof and if the employer would be entitled to indemnity hereunder in respect of any compensation so recovered from him."

21 The second defendant submits that it is a condition of the contract of insurance between Austral and the second defendant that the contract covered the company's liability to pay damages at common law for personal injury only if the injury is an injury in respect of which the worker is entitled to recover from the employer both compensation under the Workers' Compensation Act (or its successor, the Workers' Compensation and Assistance Act 1981, subsequently renamed the Workers' Compensation and Injury Management Act 1981) and damages at common law. The second defendant submits that s 41 of the Workers' Compensation and Injury Management Act makes the liability to the worker devolve on the last employer to employ the worker in asbestos work. That employer is, on the evidence, Commercial Industries not Austral. Although Commercial Industries has a right of recovery from earlier employers, pursuant to s 41(4) the earlier employers had no liability for workers compensation to the worker. That is, Austral had no liability to pay workers compensation to the plaintiff and hence Austral's insurance contract with the second defendant did not cover Austral's common law liability to the plaintiff.

22 In answer to that argument the plaintiff makes a number of points. First, it is said that the second defendant has not sufficiently established the wording of the workers' compensation or employers' indemnity policy. The second defendant has produced a copy of an SGIO policy in force in 1972 and led evidence that the second defendant's policy that was in force in 1975 "very probably included the wording quoted" in the SGIO policy. The plaintiff submits that the second defendant has not sufficiently established that the second defendant's policy did include that wording for the plaintiff's case to be summarily dismissed.

23 Secondly, the plaintiff submits that, accepting that the second defendant's insurance policy was in the terms asserted by the second defendant, it is a question of construction whether that contract covered the company's liability to the plaintiff and that should be decided at trial not summarily. Thirdly, the plaintiff submits that the plaintiff was entitled to recover compensation under the Workers' Compensation and Injury Management Act independently of s 33. Section 33 permits a worker suffering from mesothelioma to recover against an employer and has not changed substantially since the Act's institution in 1981. The plaintiff submits that s 18 of the Workers' Compensation and Injury Management Act provides that if an injury of a worker occurs, the employer shall, subject to the Act, be liable to pay compensation in accordance with Sch 1. The plaintiff submits that he suffered personal injury when the asbestos fibres entered into his body and that is sufficient to make Austral liable to pay to him compensation in accordance with Sch 1 of the Act.

24 I am not satisfied that the plaintiff's case on this point is so obviously untenable that it cannot possibly succeed. The first issue that will have to be determined is the wording of Austral's contract of insurance with the second defendant. It is inappropriate to determine that issue summarily. Furthermore, the plaintiff is entitled to fully argue its further arguments that I have referred to above.

25 The second defendant submits that it is inappropriate to join insurers under s 601AG of the Corporations Act when there are multiple insurers of the deregistered company who might be liable to indemnify it. It is submitted that to join one or two insurers when there were others covering the deregistered company during the plaintiff's employment is capable of producing the unfair result that the joined insurers are unable to recover a contribution from the others, since there is no double insurance.

26 The second defendant referred to Krstevska v ACN 010 505 012 Pty Ltd [2001] NSWSC 1093 and Hutchinson v ASIC [2001] VSC 465. Those cases were concerned with applications brought under s 601AH of the Corporations Act to reinstate the registration of a deregistered company to enable the plaintiff to sue the company. In each of those cases it was held to be appropriate to make an order bringing the company out of deregistration rather than to require the plaintiff to bring an action against the company's insurer pursuant to s 601AG. However, in both cases it was recognised that since the underlying purpose of s 601AG in a situation where it applies, is to obviate the need to apply to the court for an order of reinstatement of a company's registration, it ought be used against insurers where appropriate.

27 In any event, the short answer to the second defendant's argument is that if s 601AG of the Corporations Act applies then the plaintiff is entitled to rely upon it and there is no basis for the court to refuse joinder on the ground that the plaintiff could make an application for reinstatement of the company under s 601AH of the Corporations Act.

28 For the reasons stated I refuse to recall the order joining the second defendant or to make an order striking out the action against the second defendant or ordering that the second defendant cease to be a defendant in the action.