Thursday 26 April 2007
NETTLE V. MATHIESON GROUP PTY. LIMITED & ANOR.
Judgment
1 HODGSON JA: On 20 September 2006, the judicial registrar of the District Court dismissed a notice of motion by which the claimant (the plaintiff) sought an order that the second opponent (Vero) be joined as an additional defendant in proceedings in which the plaintiff was suing the first opponent (MG) for breach of contract and negligence in respect of the provision of engineering services.
2 The plaintiff seeks leave to appeal from that order. It is perhaps surprising that an appeal from the judicial registrar comes direct to the Court of Appeal. In any event, the application for leave to appeal has been heard on the basis that, if leave is granted, the appeal will be dealt with without further argument.
3 The appeal requires consideration of two statutory provisions. First, s.6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), which is in the following terms:
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.
(2) If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured (being a corporation) is being wound up, or if any subsequent winding-up of the insured (being a corporation) is deemed to have commenced not later than the happening of that event, the provisions of subsection (1) shall apply notwithstanding the winding-up.
(3) Every charge created by this section shall have priority over all other charges affecting the said insurance moneys, and where the same insurance moneys are subject to two or more charges by virtue of this Part those charges shall have priority between themselves in the order of the dates of the events out of which the liability arose, or, if such charges arise out of events happening on the same date, they shall rank equally between themselves.
(4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured:
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.
(5) Such an action may be brought although judgment has been already recovered against the insured for damages or compensation in respect of the same matter.
(6) Any payment made by the insurer under the contract of insurance without actual notice of the existence of any such charge shall to the extent of that payment be a valid discharge to the insurer, notwithstanding anything in this Part contained.
(7) No insurer shall be liable under this Part for any greater sum than that fixed by the contract of insurance between the insurer and the insured.
(8) Nothing in this section shall affect the operation of any of the provisions of the Workers Compensation Act 1987 or the Motor Vehicles (Third Party Insurance) Act 1942.
(9) Despite subsection (8), this section applies in relation to a policy of workers compensation insurance entered into by an employer (whether entered into before or after the commencement of this subsection), where the employer:
(a) being a natural person, has died, or is permanently resident outside the Commonwealth and its Territories, or cannot after due inquiry and search be found, or
(b) being a corporation (other than a company that has commenced to be wound up), has ceased to exist, or
(c) being a company, corporation, society, association or other body (other than a company that has commenced to be wound up), was at the time when it commenced to employ workers to which the policy relates incorporated outside the Commonwealth and its Territories and registered as a foreign company under the laws of any State or Territory and is not so registered under any such law, or
(d) being a company, is in the course of being wound up.
4 Second, s.54 of the Insurance Contracts Act 1984 (Cwlth), which is in the following terms:
54 Insurer may not refuse to pay claims in certain circumstances
(1) Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer's liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of that act.
(2) S ubject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim.
(3) Where the insured proves that no part of the loss that gave rise to the claim was caused by the act, the insurer may not refuse to pay the claim by reason only of the act.
(4) Where the insured proves that some part of the loss that gave rise to the claim was not caused by the act, the insurer may not refuse to pay the claim, so far as it concerns that part of the loss, by reason only of the act.
(5) Where:
(a) the act was necessary to protect the safety of a person or to preserve property; or
(b) it was not reasonably possible for the insured or other person not to do the act;
the insurer may not refuse to pay the claim by reason only of the act.
(6) A reference in this section to an act includes a reference to:
(a) an omission; and
(b) an act or omission that has the effect of altering the state or condition of the subject-matter of the contract or of allowing the state or condition of that subject-matter to alter.
5 The circumstances giving rise to the application are as follows.
6 In 2002, the plaintiff contracted with MG for design and supervision of construction of rooms to accommodate his practice as a plastic surgeon. The work was carried out in 2002. The plaintiff says the design and work was defective, leading to delay in occupation of the rooms and need for rectification.
7 The sole director and shareholder of MG, Mr Mathieson, died in a motor vehicle accident on 3 August 2003, and it appears that MG has ceased trading. On 26 October 2005, ASIC gave notice to MG that it would be deregistered because its review fee had not been paid, but it appears that ASIC has deferred deregistration for the time being.
8 The plaintiff commenced proceedings against MG in October 2005. On 20 July 2006 the plaintiff filed a notice of motion seeking to join Vero as an additional defendant. MG had a policy of professional indemnity insurance with Vero or its predecessor from 1 March 2001 to 28 February 2003.
9 The relevant parts of the policy that was in force from 1 March 2002 to 28 February 2003 are the insuring clause and the run off provision. They are in the following terms:
1. INSURING CLAUSE
The Company will indemnify the Insured against liability at law for compensation and claimant's costs and expenses arising from any claim or claims first made against the Insured and notified to the Company during the Period ofI11surance resulting from any Breach of Duty m connection with the Business or Practice but not in respect of any such claim or claims resulting from any act error or omission occurring or committed prior to the Retroactive Date.