Cheng Nian Zhang v Vlado Popovic

Cheng Nian Zhang v Vlado Popovic - [2010] NSWSC 1019 - NSWSC 2010 case summary — Zoe

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JUDGMENT (Leave to amend statement of claim; to change name of defendant; join insurer) 1 HER HONOUR: By amended notice of motion filed 16 August 2010, the plaintiff seeks, firstly, an order grant leave to amend the name of the third defendant from Interfreight Transport Pty Ltd to Interfreight (Aust) Pty Ltd pursuant to s 64 of the Civil Procedure Act 2005; secondly, leave to amend the statement of claim to join as the sixth defendant to the proceedings pursuant to s 6(1) of the Law Reform (Miscellaneous Provisions) Act 1946 ("the Act") and s 64 of the Civil Procedure Act, National Transport Insurance by its manager NTI Limited; and thirdly, leave to proceed against Interfreight (Aust) Pty Ltd in these proceedings pursuant to s 471B of the Corporations Act 2001 (Cth). 2 The plaintiff is Cheng Nian Zhang ("Mr Zhang"). The first defendant is Valdo Popovic ("Mr Popovic"). The second defendant is Calabro Real Estate Pty Limited ("Calabro"). The third defendant is currently named Interfreight Transport Pty Ltd ("Interfreight") but it is sought to change the name of this defendant to Interfreight (Aust) Pty Ltd. The fourth defendant is Popovic Haulage Pty Limited ("Popovic Haulage"). The fifth defendant is Insurance Australia Limited trading as NRMA Insurance ("NRMA") and it consents to the orders sought in the notice of motion. The proposed sixth defendant is National Transport Insurance by its manager NTI Limited ("the insurer"). Mr Zhang relied on the affidavit of his solicitor Bryan Gorman sworn 2 August 2010. 3 For the purposes of this application, I accept the Mr Zhang's version of events as pleaded. On 16 September 2007 Mr Zhang was injured in an accident at a container terminal at Botany, New South Wales. The accident involved a trailer attached to a prime mover ("the trailer"). The trailer comprised of two ramps at the rear of the trailer, one on the left side and one on the right. The trailer had two hydraulic lifting devices, one on the left and one of the right and two safety chains. The ramps were each fixed to the rear of the trailer in the area of the floor of the tray of the trailer and each could be lifted down to the ground so that each ramp formed a platform from the ground to the tray of the trailer and each ramp could be lifted to a vertical position relative to the floor of the trailer. 4 Hydraulic lifting devices controlled the movement of each ramp. When not in use, each ramp was brought into the vertical or upright position, drawn alongside the vertical frame of the trailer and fixed in place by the use of the safety chain. On the day of the accident the left ramp had been moved into an almost vertical or upright position using the hydraulic lifting device but it was necessary to manually push the ramp further towards the trailer in order to bring the ramp into a full vertical position and in order to engage and fasten the left safety chain to the left ramp. Calabro was the owner of the trailer at the time of the accident. It is alleged that Mr Popovic was employed by Interfreight Transport (Aust) Pty Ltd or by Popovic Haulage. Interfreight is currently in liquidation. 5 On the day of the accident, Mr Zhang was at the container terminal with his own truck waiting to collect a container, nearby the trailer. Mr Popovic was the driver of the trailer at the time of the accident. At the request of Mr Popovic, Mr Zhang went to assist Mr Popovic and manually pushed the left ramp of the trailer while Mr Popovic controlled the hydraulic lifting device relevant to the left ramp. The arm of the hydraulic lifting devise relevant to the left ramp broke or snapped away from the trailer and the left ramp fell from the vertical position towards the ground and in the process crushed and pinned Mr Zhang underneath the left ramp. Mr Zhang sustained serious injuries. 6 Mr Zhang claims that the accident was a "motor accident" within the meaning of the Motor Accidents Compensation Act 1999. Alternatively, if the accident was not a motor accident, as such, and fell outside the Motor Accidents Compensation Act, liability in respect of the accident was to be determined pursuant to the Civil Liability Act 2005 rather then the Motor Accidents Compensation Act. 7 In relation to the Motor Accidents Compensation Act claim, Mr Zhang claims that Mr Popovic and/or Popovic Haulage is liable to compensate him in relation to the accident and the NRMA is liable to indemnify each of them under the compulsory third party insurance policy. Mr Zhang has joined NRMA as the fifth defendant and claimed against it under s 6(4) of the Act.

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Leave under s 6(1) and (4) of the Law Reform (Miscellaneous Provisions) Act 1946 generally 10 Section 6(1) and (4) of the Act relevantly read: "6 Amount of liability to be charge on insurance moneys payable against that liability (1) If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of the person's liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability. … (4) …. Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken." 11 So far as s 6(4) if concerned, no proceedings have been taken by the insurer to disclaim liability. 12 Both parties referred to Tzaidas v Child & 3 Ors 61 NSWLR 18; [2004] NSWCA 252; Fishwives Pty Ltd v FAI General Insurance Co Ltd [2001] NSWCA 193; (2002) 12 ANZ Insurance Cases 61-515; Allianz Australia Insurance Limited v GSF Australia Pty Ltd (2005) 221 CLR 568; [2005] HCA 26; and Eastern Creek Holdings Pty Limited v AXIS Speciality Europe Limited [2010] NSWSC 840. 13 In Tzaidas v Child, the New South Wales Court of Appeal explained the history and operation of s 6 at [14] - [23]: "14 Section 6 of the Law Reform (Miscellaneous Provisions) Act creates "a new right with an associated remedy to enforce it" ( Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 at 446 per McHugh and Gummow JJ). The right is the charge established by s 6(1). There is conceptual difficulty in a charge attaching at the time of the event giving rise to the claim against the insured if that time is before the contract of insurance is made, as may occur with claims made policies, and differing views have been expressed as to the application of s 6 in those circumstances. …

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23 In the exercise of the general discretion, satisfaction that the insurer is entitled to disclaim liability will normally mean that leave should be refused, since (as McHugh and Gummow JJ described in Bailey v New South Wales Medical Defence Union Ltd at 448-50) if there is an entitlement to disclaim liability there can be no moneys payable and nothing on which the charge under s 6(1) can operate. Leave will be refused although proceedings to establish entitlement to disclaim liability have not been taken ( Fishwives Pty Ltd v FAI General Insurance Co Ltd at 75,997). But the exercise of the general discretion is not confined by the prohibition, with its reference to entitlement to disclaim liability under the terms of the contract of insurance. The focus is on the outcome - if the insured is liable, what are the prospects that the insurer will be obliged to provide indemnity - and anything bearing on the outcome is relevant." 14 In Fishwives Pty Ltd v FAI General Insurance Co Ltd the New South Wales Court of Appeal stated at [47]: "47 I do not accept the appellant's submission that the judge was bound to grant leave if there was an arguable case on the non-disclosure issue. I can readily accept that leave may be given where the Court is satisfied that there is an arguable point on the insurer's indemnity issue. It is now established that the grant of leave to proceed against an insurer does not foreclose the insurer's right to litigate issues going to its liability to indemnify the insured in the substantive proceedings. Dixon's Case shows the insurer lives to fight another day. But it does not follow, in my view, that a court that is positively satisfied of the insurer's entitlement to disclaim, after issue has been joined on that matter as between the plaintiff and the insurer, must exercise the discretion in favour of the grant of leave. The court is 'seized of the discretion to grant leave' ( National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1996) 138 ALR 409 at 418 per Lindgren J), but it is not driven to exercise the discretion in a particular way." 15 As shortly stated by Hammerschlag J in Eastern Creek Holdings Pty Limited v Axis Speciality Europe Limited [2010] NSWSC 840 at [20] when seeking leave pursuant to s 6(4) of the Act, the plaintiff must show that: firstly, there is an arguable case against as to the liability of the insured; secondly, there is an arguable case that the policy responds; and thirdly, there is a real possibility that if judgment is obtained, the insured would not be able to meet it: see also N G Rein SC, "Choosing your life raft: A review of Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 6, and its analogues" (2007) 81 ALJ 180, 182-183. The insurer did not contend that there was not an arguable case against the third defendant, or that if judgment was obtained the insured would not be able to meet it.

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22 The insurer's counsel also referred to the report of Mr David Dubos, a safety engineer, dated 11 November 2008 (Ex PD4) together with portions the contents of Police and WorkCover files as reference to a "defect". The Police Report indicates that inspection of the trailer revealed that the hydraulic arm connection to the ramp which was welded to the rear of the trailer had snapped away from the trailer. Mr Dubos's report is based on assumptions of fact based on the instructions given by Mr Zhang's solicitor. 23 At best, as far as the insurer is concerned, Mr Dubos reports at paragraphs [46] and [113]: "46 It is apparent to me that Mr Zhang in interacting with the trailer which had a defective ramp, was working within the system of work provided by Mr Popovic. and Interfreight Transport. That is, he was called upon to handle a ramp which was, unsafely secured and he was subject to the defects in the system of work managed by Mr Popovic and Interfreight Transport. … 113 On my information, Mr Popovic and Interfreight were operating a trailer with inherent or unacceptable hazards associated with it. The strength and stability of the attachment point for the ramp in question was defective. It is apparent that Mr Popovic and Interfreight introduced the use of the trailer into the work system, and permitted use of the machinery by the Plaintiff without carrying out consultation, hazard identification, risk assessment, supervision or training or control of risks which would have prevented the accident to the Plaintiff. As a result the Plaintiff in using the machinery, experienced a failure of the machine where the attachment of a supporting mechanism failed, and the Plaintiff was severely injured as a result." 24 I accept that there is a reference to the trailer having a "defective ramp" and that "the strength and stability of the attachment point for the ramp was defective" and there is also reference to "failure of the machine." 25 In support of the proposition that clause (b)(8) contains words that are not simple in construction, Mr Zhang pointed to the consideration of causation of accidents by defects and other causes in the High Court cases of Allianz Australia Insurance Limited v GSF Australia and Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529; [2006] HCA 11 and the Court of Appeal in Zurich Australia Insurance Ltd v CSR Ltd (2001) 52 NSWLR 193; [2001] NSWCA 261 to indicate that the courts have grappled with these issues and come to differing conclusions. 26 Counsel for Mr Zhang submitted that the policy at best is ambiguous. In particular counsel relied on Allianz Australia Insurance v GSF Australia. Allianz Australia Insurance v GSF Australia dealt with the compound issue of whether the injury was caused for the purposes of the definition of "injury" in s 3(1) of the Motor Accidents Compensation Act, during the use or operation of a vehicle by a defect in the vehicle. In Nominal Defendant v GLG Australia the court dealt with the question of whether, for the purposes of s 3(1), the injury was caused by the driving of the vehicle in question. According to counsel for Mr Zhang, in Nominal Defendant v GLG Australia at [27], it was found, similarly in this respect to Allianz Australia Insurance v GSF Australia, that the cause of the injury was the designing and implementing an unsafe system of work. It is not necessary to refer in detail to Allianz Australia Insurance v GSF Australia. 27 In Zurich Australia Insurance Ltd v CSR Ltd the New South Wales Court of Appeal stated at [46], [47] and [70]: "46 In an approach which, in my opinion, is applicable to the Motor Accidents Act , machinery etc was found to be "defective" if it was not fit for the purpose for which it was designed or the use for which it was intended.

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[96] Santow JA also emphasised that this question of causality was not at large or to be answered by "common sense" alone; rather, the starting point is to identify the purpose to which the question is directed. Those propositions should be accepted. …" 30 Allianz Australian Insurance v GSF Australia supports Mr Zhang's submission. 31 For current purposes, Mr Zhang refers to that case simply to highlight that the characterisation of an accident as being caused by (or, by analogy, connected with) a defect (or some other cause such as an unsafe work system) involves an exercise of characterisation by the court. Mr Zhang submitted that if clause (b)(8) of the insurance policy is held to apply to the accident (which is denied by Mr Zhang), a similar process of characterisation would be required after consideration of all relevant evidence in the current proceedings. In this regard, Mr Zhang says that it is open on the pleading for a court to find that the accident was caused or connected with one of a number of causes including a defect, an unsafe work practice or human error and the issue should be determined at trial after consideration of all relevant evidence. I agree. 32 On the interpretation of the policy the insurer further submitted that clause 2(a) sets out circumstances where it will pay and clause 2(b) sets out circumstances where it will not pay. The insurer submitted that considered as a whole, the matters forming "Section 2 Legal Liability" of the policy-wording appearing on pages 2 to 3 provide clear context for the conclusion that clause (b)(8) is an exclusion applying to the both Parts 1 and 2 of the section. Section 2 is concerned with legal liability and is divided into two parts each of which has its own separate limit of indemnity. The insurer submitted that the exclusions in clauses (b)(1)-(11) of Part 2 are of general application to the whole section and that no commercially sensible construction can be posited to the contrary. 33 Counsel for Mr Zhang submitted that, after reading the policy as a whole, it is arguable that the disclaimer does not apply to non-hazardous goods and that even if it is ultimately held to apply to non-hazardous goods, it contains words and concepts that are not simple and its true construction is a matter for determination at trial. 34 So far as the interpretation of an insurance policy is concerned, in Eastern Creek Holdings v Axis Speciality Hammerschlag J decided at [27], that it was neither possible nor appropriate to determine at this stage of the proceedings whether the conduct complained of amounts to activities in the conduct of the business of project/construction managers, within the meaning of those words in the policy. This was because, firstly, the meaning to be attributed to those words may be affected by evidence; secondly, it will be informed by other provisions of the policy (including the schedule and the proposal) so as to give the entirety of the instrument congruent operation. 35 Counsel for Mr Zhang submitted that as in Eastern Creek Holdings v Axis Speciality the meaning in the insurance policy in this case is far from clear. Counsel for Mr Zhang submitted that the meaning of words in the policy may, firstly, be affected by evidence and, secondly, will be informed by other provisions of the policy so as to give the entirety of the instrument congruent operation and therefore it is an arguable matter so leave should be granted. 36 It is my view that it is arguable that the disclaimer does not apply to non-hazardous goods. So far as the "we will pay", "we will not pay" analysis in section 2, there is a further exclusion in section 6 where it refers to "we will not pay". The interpretation of the meaning of clause (b)(8) is arguable whether Mr Zhang's bodily injury can be consider as "arising out of or in anyway connected with a defect" by the third defendant's motor vehicle is also arguable. These issues should be determined at trial. Leave is granted pursuant to s 6(4) of the Act to join the insurer as the sixth defendant. 37 Senior Counsel for the insurer further submitted that the first, third and fifth defendants are jointly insured by it is only in relation to the third defendant that it can be shown that there is a real possibility that if judgment were obtained, the insured would not be able to meet it. In response, Mr Zhang submitted that at the end of the trial he might only be successful against the third defendant. There is no authority on this issue that requires further legal argument. This issue is one for determination at trial. Whether this submission has any force may depend on factual findings.

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except with the leave of the Court and in accordance with such terms (if any) as the Court imposes." 44 On 2 March 2009, Interfreight (Aust) Pty Ltd was wound up pursuant to a creditors petition. It remains in liquidation. Mr John Morgan, the official liquidator of the third defendant, in his letter dated 16 August 2010 to Mr Zhang's solicitor advised that: "… since my appointment I have not received the books and records of the Company and I have not received cooperation from the director. I have written to the Australian Securities and Investments Commission and ask (sic) them to assist me to prosecute the director. At present, I have no information regarding the Company to assist you." 45 Counsel for Mr Zhang submitted that the purpose of the stay is to enable the liquidator to proceed with the liquidation without harassment from creditors and without delay, and leave applications mean that the finalising of the company's affairs are delayed before any finalisation of proceedings. The insurer submitted that Mr Zhang has to elect to proceed either by s 415B of the Corporations Act or s 6 of the Act. 46 It is my view that an election is not required. There may be some assets remaining in the company. Section 6(1) of the Act is only concerned with joining the insurer. In the circumstances, I grant leave pursuant to s 471B of the Corporations Act for Mr Zhang to proceed against the third defendant. 47 Leave is granted to join National Transport Insurance by its manager NTI Limited as sixth defendant pursuant to s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946. Leave is granted to change the name of the third defendant from Interfreight Transport Pty Ltd to Interfreight (Aust) Pty Ltd. I grant leave to proceed against Interfreight (Aust) Pty Ltd. Costs are costs in the cause. 48 In all of these circumstances it seems to me that the proper order to make, and one which is consistent with the usual practice of the court, is to order that the costs of the notice of motion be costs in the cause. There are no other facts, matters or circumstances which have been brought to my attention which cause me to vary from the court's usual practice in this respect: see Emanoil Alexiou v Chain & Power International Pty Limited & Ors [2010] NSWSC 1002.

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