Gentle Dental Care Group Pty Ltd v Al-Mozany

Background facts

1. The defendant was last registered on the register of practitioners maintained by the Australian Health Practitioner Regulation Agency ("National Agency") on 23 October 2018. The defendant commenced to practise as a dentist with the plaintiff in or about 2010. At no time is he said by anyone to have worked for the plaintiff under a contract of service. In 2011 he graduated as a Doctor of Clinical Dentistry in orthodontics and became registered as a specialist orthodontist with the National Agency. He continued to practise his profession with the plaintiff providing dental and orthodontic services to patients of the plaintiff's dental practice.
2. Over the years between 2010 and 2016 the plaintiff's practice expanded greatly and by 2016 it was operating from clinics at Liverpool, Claymore, Campbelltown, Wetherill Park and Double Bay. From time to time the defendant worked at each of the clinics.
3. During the early part of 2018 the plaintiff undertook a review of the clinical records of patients treated by the defendant. From the affidavit of Michael Bartholomew Russo sworn on 16 March 2020, and read without objection, this was a very extensive review. The review was initiated following patient complaints. By 13 April 2018 the other directors of the practice (the defendant was also a director) had formed sufficient concerns about the standard of the defendant's professional work that they considered themselves bound under s 141 of the Health Practitioner Regulation National Law (NSW) to notify the National Agency of their belief that the defendant's professional work was of a sufficiently poor standard to constitute notifiable conduct within the meaning of s 140 of the National law. This notice was given by letter dated 13 April 2018 (Joint Tender Bundle ("JTB") 618).
4. On 15 April 2018, the plaintiff wrote to the defendant requiring him to show cause why he should not be removed as a director of the company, suspending him "forthwith from all rights and privileges to practise" at any of the clinics until further notice, and informing him of the notification made to the National Agency (JTB 630).
5. On 28 April 2018, the plaintiff wrote again to the defendant informing him that it held him "personally and professionally liable for all loss and damage sustained by the patients who [he] purported to treat and by reason of [his] gross negligence have suffered loss, damage and have been greatly inconvenienced". The practice requested details of the defendant's professional indemnity insurer and certificates of currency, which he was obliged to supply under the terms of contract with the practice, and advised him to alert the insurer, inter alia, "to a formal demand for compensation, which is constituted by this letter" (JTB 632). Receipt of the demand was acknowledged by Messrs Sparke Helmore, lawyers, who were apparently then acting for the defendant (JTB 634). By letter dated 6 July 2018, other solicitors wrote to the plaintiff enclosing the defendant's written resignation as a director of the plaintiff "with immediate effect".
6. Apparently in response to the plaintiff's mandatory notification under the National Law, the National Agency imposed a condition upon the defendant's registration that he was not to practise dentistry until reviewed by the Dental Council of New South Wales and the condition was removed (JBT 646).
7. As part of its evidence the plaintiff has provided a schedule detailing, in respect of 518 patients treated by the defendant, the patient's name, the period of treatment, the particulars of negligence relevant to the particular patient and the loss suffered by the plaintiff in relation to each patient (JBT 647-692). The total amount of the claim as at the hearing before me was $3,185,505 .76. Of that sum, $38,460 represented the total amount of fees paid by the patients for treatment by the defendant refunded by the plaintiff.

The pleaded claim

1. From the proposed ASOC, the plaintiff claims that the defendant is liable to it concurrently in contract and tort for breach of his professional duty to exercise the ordinary care and skill in the treatment of patients expected of reasonable members of the dental and orthodontic professions in his position (see for example Astley and Ors v Austrust Limited (1999) 197 CLR 1; [1999] HCA 6 at [44] - [48], by Gleeson CJ, McHugh, Gummow and Hayne JJ.)
2. Given that the alleged negligence is said to have covered the whole period of the defendant's professional association with the plaintiff, three separate agreements covering different aspects of the relationship between the defendant and the plaintiff are pleaded. In Part B of the proposed pleading, an oral agreement referred to as the First Dental Services Agreement is pleaded together with a variation in 2012, also oral, following the defendant's qualification as an orthodontist. In summary, the essential terms were that the defendant was entitled to practise out of the plaintiff's clinics, and using its facilities, providing dental and orthodontic services to patients of the dental practice. The defendant was required to carry professional indemnity insurance. He was entitled to receive 100 per cent of the fees paid by the patient less certain fees payable by him including "a facility fee of 55 per cent (plus GST) of the amounts paid by patients" of the plaintiff (SOC [3] - [6]).
3. It is averred that it was an implied term of the First Dental Services Agreement that the defendant would exercise reasonable care, skill and diligence in the provision of dental services and orthodontic services and that he would perform these services in accordance with the standards, inter alia, expected by the Dental Board of Australia.
4. By Part C of the ASOC, it is averred that the plaintiff and the defendant entered into a written contract on 1 July 2014, referred to as the 2014 Dental Services Agreement. From the averments, the essential terms remained the same however with a greater degree of elaboration as one would expect of a written agreement. It is averred that the 2014 Dental Services Agreement was subject to the same implied conditions as the oral first dental services agreement.
5. The third agreement relied upon is the Shareholders' Agreement entered into on 4 September 2014 between the defendant and his service company, Salus Dental Pty Limited, on the one hand, and the plaintiff and associated persons and entities on the other (Part D ASOC). The terms of the Shareholders' Agreement included the requirement that the defendant was to use his best endeavours to ensure the success of the plaintiff's practice and to comply with practitioner performance standards set by the plaintiff. The shareholders agreement is also said to be subject to the same implied terms as the dental services agreements
6. Particulars of breach of the agreements are set out in Part E of the ASOC which pleads the results of the 2018 review. Particulars of breach are set out at [30] of the ASOC. Each particular is alleged to be a breach of each of the three agreements relating to the performance by the defendant of his professional work in diagnostic matters, dental and orthodontic treatment, post-treatment care, co-operation with other professionals associated with the plaintiff's practice and the unauthorised waiver of fees for certain patients. At [31] the general particulars provided at [30] are amplified in practical terms by reference to the quality (or otherwise) of the defendant's professional work in specific cases. By [32] it is alleged that by reason of the defendant's breaches of the agreements the plaintiff has suffered loss and damage, the general nature of which is particularised.
7. By Part F of the ASOC the plaintiff pleads a delictual duty of care owed, together with particulars of negligence. Conventionally, the particulars of breach of contract are repeated and recited as particulars of negligence. Importantly by [35AA] - [35AC] the plaintiff seeks to engage with the requirements, in particular, of s 5B Civil Liability Act 2002 (NSW).
8. By Part F2 the plaintiff sets out its claim against the insurer under the 2017 Act to which I will return. And by Part F1 its claim for statutory contribution or indemnity is set out. I interpolate that the insurer complains about the form of this pleading. It is true that the pleading does not follow what might be referred to as the familiar path usually adopted when pleading a claim for statutory contribution and indemnity. For instance, the pleading does not follow the pattern provided by s 5 of the 1946 Act faithfully. There is no averment that the plaintiff is a tortfeasor liable in respect of the same damage as the defendant. But it is substantially clear from the express reference to the 1946 Act and the nature of the remedy sought, in the alternative, that the requirements of the statute have been engaged with.

Consideration of joinder of additional plaintiffs and leave to file and serve the Amended Statement of Claim

1. It seems logical to deal with these matters separately from and before the question of leave under the 2017 Act. I will Leave then to one side for the moment the proposed amendments in Part F2 of the ASOC.
2. It is important to bear in mind that although unrepresented at the hearing, the defendant did not object to either the joinder of the Clinic Companies as additional plaintiffs or to the other amendments sought. The Clinic Companies also consent to their joinder. It is apparent from both the proposed amendments in respect of them and the evidence read at the hearing before me that each of the clinic companies is the trustee of a unit trust through which one of the separate clinics is operated. It was at these clinics that the patients received the treatment at the hands of the defendant of which the plaintiff complains. I am satisfied in accordance with the terms of Rule 6.24 that their joinder is necessary For the determination of all matters in dispute in the proceedings. The Court, of course, has broad powers to permit amendments under s 64 Civil Procedure Act 2005 (NSW). The proceedings are at a comparatively early stage and I am of the view that it is consistent with the requirements of s 58 that the clinic companies be joined.
3. I am also of the view, subject to dealing with the arguments of the insurer when I consider whether leave should be granted to join it under the 2017 Act, that it is appropriate to permit the amendments sought generally, including adding the claim under the 1946 Act. Most of the amendments to Parts A to Part F of the Statement of Claim are consequential upon the joinder of the additional plaintiffs, or by way of amplification only by the provision of further particulars of the plaintiff's claim. One notable exception to that may be the added provisions of [35AA] - [35AC]. But I am satisfied that those matters are included to comply with current practice in relation to claims involving negligence under the Civil Liability Act as explained by Garling J in Garzo v Liverpool/Campbelltown Christian School Limited & Anor [2011] NSWSC 292.
4. Whatever the outcome of the application involving the insurer, I will make orders in respect of Prayers 1 and 3 in due course.

The claim under the 2017 Act

1. The 2017 Act replaces s 6 of the 1946 Act permitting a party having a claim against an insured person to proceed directly against the insurer, with the leave of the court, granted where the provisions of the 2017 Act are otherwise satisfied. Section 4 of the 2017 Act creates a statutory cause of action against the insurer. Section 4(1) is in the following terms: If an insured person has an insured liability to a person (the claimant), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court. The provision does not increase or expand an insurer's liability. Section 4(2) and, for that matter, s 5(4) make clear that the statutory cause of action against the insurer is subject to the terms of the contract of insurance. Under s 5 of 2017 Act proceedings may not be brought or continued against the insurer under s 4 except by leave of the court in which the proceedings are to be or have been commenced, which leave may be granted nunc pro tunc: s 5(2).
2. The replacement of s 6 of the 1946 Act with the 2017 Act was based upon Report 143 of the New South Wales Law Reform Commission, Third Party Claims on Insurance Money; Review of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 of November 2016. At [2.46] - [2.47] of the report, the authors indicated that the question of whether leave will be granted will be determined by reference to "well settled" criteria. As the plaintiff and the insurer both accepted before me, those criteria are: there is an arguable case of liability against the person insured; there is an arguable case that the insurer's policy responds to that liability; and there is a real possibility that, if the plaintiff obtains judgment against the insured person, the insured person will not be able to meet it.
3. In a clear case, leave must be refused if the insurer can establish it is entitled to disclaim liability under the contract of insurance or under any Act or law (s 5(4)). However, the burden on the insurer of establishing this at the leave stage is a heavy one, akin, in my opinion, to the General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69 standard. It is clear that generally, given the interlocutory nature of a leave application, it is appropriate that contestable issues as to the liability of the insured person, and the availability of cover under an insurer's policy, should be determined at the final hearing.
4. It should be said in the present case that the insurer did not undertake the burden of attempting to establish to that high standard that it was entitled to disclaim its liability under any applicable contract of insurance. I will return to the question of the applicable contract of insurance when considering whether it is arguable that the insurer's policy responds to any liability that the defendant may owe the plaintiff.

Is there an arguable case of liability against the defendant?

1. As I have said, the plaintiff's case is pleaded with great elaboration, but I regret to say not always with admirable clarity. However, it is more than tolerably clear that the plaintiff sues the defendant in both contract and tort principally relying upon the term implied by law in the contract and the delictual duty owed by all professionals of rendering their professional services with reasonable care and skill. The plaintiff's claim is that it ('they', following joinder of the Clinic Companies) has suffered loss and damage as a result of the negligent dental and orthodontic treatment of its patients by the defendant. All of this arises clearly out of the language of the ASOC. These losses are formulated in various ways at [32] of the Amended Statement of Claim, some of which may be contestable. However, according to the schedule of claim to which I have referred above are the provision of remedial treatment to the affected patients amounts to about $3.1m.
2. It seems to me that the law is clear. In Lister v Romford Ice and Cold Storage Company [1957] AC 555 an employer was held entitled to recover the amount of its liability to an injured employee from the co-worker whose negligent driving injured him. Although the effect of this decision in employment relationships covered by a contract of service has been substantially abrogated by statute (see now Employees Liability Act 1991 (NSW)), the principle underpinning the decision has not. The principle was explained by Viscount Simonds in this way (at 572): "It is, in my opinion, clear that it was an implied term of the contract that the appellant would perform his duties with proper care. The proposition of law stated by Willes J in Harmer v Cornelius [(1858) 5 CBNSW 236, 246)] has never been questioned: 'When a skilled labourer,' he said, 'artizan, or artist is employed, there is on his part an implied warranty that he is of skill reasonably competent to the task he undertakes, - Spondes peritiam artis. Thus, if an apothecary, or watch-maker, or an attorney be employed be employed for reward, they each impliedly undertake to possess and exercise reasonable skill in their several arts … An express promise or express representation in the particular case is not necessary'."
3. Viscount Simonds also noted that the obligation may arise both in contract and in tort. This is consistent with the judgment of the plurality of the High Court in Astley v Austrust, to which I have already referred. The plurality justices stated that "concurrent liabilities in both contract and tort may arise in cases of professional negligence". Having reviewed the authorities, their Honours concluded (at [47]): "The implied term of reasonable care in a contract of professional services arises by operation of law. It is one of those terms that the law attaches as an incident of contracts of that class. It is part of the consideration that the promisor pays in return for the express or implied agreement of the promisee to pay for the services of the person giving the promise. Unlike the duty of care arising under the law of tort, the promisee in contract always gives consideration for the implied term. And it is a term that the parties can, and often do, bargain away or limit as they choose."
4. As against these considerations, the insurer principally relies upon the decision of Ward CJ in Eq in Sergienko v AXL Finance Pty Ltd [2019] NSWSC 1610 in which a claimant was unsuccessful in seeking leave to proceed directly against Lawcover in a case of professional negligence against a solicitor. I accept the plaintiff's argument that the case was a somewhat unusual one in that the claimant was a party claiming to be beneficially entitled to trust property which the trustee had charged to secure the payment of a personal judgment debt. The solicitor who had acted for the beneficiary on the creation of the trust and the transfer of legal title to the trustee also controlled the trustee company.
5. Ward CJ in Eq refused leave to join the insurer because on the pleadings it was unclear, not whether the claimant had a claim against the solicitors, but whether it was arguable that Lawcover's policy responded. Her Honour said (at [50]): "In the present case, the principal complaint is a failure to give proper advice about the risks associated with conveying property to AXLF in its capacity as trustee. As Lawcover notes, the risk which is said to have materialised appears to be a very serious breach of trust by the trustee. In essence, the applicants' case is that AXLF, as trustee, has used trust property for its own use (to provide security for obligations owing under the Deed of Settlement in proceedings unrelated to the trust). There is no allegation of dishonesty or fraud as such. However, what is alleged is the (seemingly improper) use by a trustee of trust property for its own purposes. That raises not simply a pleading issue but has a broader significance in that, if there were to be an allegation of fraud, then the insurer might be in a position to rely upon an exclusion clause in the policy. Hence, the need for the pleading precisely to articulate the claim alleged against the insured (even apart from the fact that if fraud is alleged, that must be pleaded properly having regard to the seriousness of such an allegation)."
6. In my judgment, Sergienko does not establish any principle that informs a determination of the question in the present case whether the plaintiff has an arguable case against the defendant. I accept that the insurer argued that Sergienko raised a logically anterior question about whether the pleading adequately disclosed an arguable case against the insured. However, I do not accept that argument arises here. The circumstances in Sergienko were such that the question of the adequacy of the pleading had the broader significance of whether it was to be said that the solicitor, who was a director of both the incorporated legal practice and the trustee company, was tainted by the apparent fraud of the trustee. No similar question arises in the present case.
7. On the facts, as pleaded, the defendant is said to be legally responsible to the plaintiff for the consequences of his negligent treatment of the plaintiff's patients under either the Dental Services Agreement or the law of negligence. In my view as pleaded this is arguable as is the alternative that the defendant and plaintiff are tortfeasors liable in respect of the same damage to the patients of the practice and the plaintiff is entitled to claim either statutory contribution or indemnity.
8. The claim under the shareholder agreement may fall into a different category. It may be questionable whether a shareholder in a company owes the same duty as a professional engaged to provide professional services under contract and in tort. However, from the pleadings, it is clear that the "shareholders" were no mere passive investors. The terms of the agreement imposed substantial positive obligations on them in their capacity as dental professionals. I could not say that the case based upon express and implied terms of that agreement is unarguable.

Is it arguable that the insurer's policy responds to the defendant's putative liability to the plaintiff?

1. The pleadings against the second defendant are at [2A] ASOC and Part F2, [35A] ASOC. At [2A] the plaintiff pleads the existence of five identified dental indemnity policies issued by the insurer to the defendant covering him for the consequences of his professional negligence according to their terms between 1 July 2013 and 30 June 2018. The policy number in respect of each is provided. By [35A] it is averred that the defendant is entitled to be indemnified "under [the insurer's] policies". The relevant terms of each of the five separate policies are then particularised.
2. It is obvious that it cannot be arguable that the defendant is entitled to an indemnity for his liability to the plaintiff under all, or each one, of the five separate policies. In general terms as professional indemnity insurance policies each of the policies issued by the insurer to the defendant is a 'claims made and notified' policy. Again, in general terms, such policies are usually expressed to inure for the current year only. They are not, as it were, renewed from year to year, but a new policy is 'incepted' at the commencement of each new policy year. The act or omission constituting professional negligence may occur during the currency of one policy; the cause of action may accrue on the occurrence of actual economic loss during the currency of a second policy; and a claim may not be made until the currency of yet a third.
3. Looking at the evidence in the present case, policy number 556599/01072017/V.5 covers the period 1 July 2017 to 30 June 2018. It has a retroactive date of 1 June 2011 (JTB 365ff) (as do each of the policies). The insuring clause is in the following terms (JTB 377): "What we insure you for Civil Liability We will indemnify you for civil liability for a claim against you arising directly out of your provision of dental services, but only when: (a) the claim against you is first made during the period of insurance; and (b) you tell us about the claim against you in writing during the period of insurance; and (c) the claim against you arises from an act or omission occurring on or after the retroactive date and not within any non-practising period."
4. Without going through each of them, although there are variations in wording from time to time, the other four policies provide cover in substantially the same terms. Considering the nature of the insurance and the language of the insuring clauses, it is clear that only the policy for the financial year commencing on 1 July 2017 is capable of applying to the plaintiff's claim, whether or not cover under it is arguable. This is for the simple reason that on the evidence read on the application, as I have pointed out above (at [10]), the plaintiff first made a claim or demand upon the defendant on 28 April 2018. Accordingly, it cannot be said that the claim had first been made against the defendant during the period covered by an earlier policy. It can also be pointed out that it appears that the defendant has been in a non-practising period (see JTB 394) under the condition imposed by the National Agency (see [11]), at least since the expiration of that last policy.
5. Moreover, I would be prepared to infer, for the present limited purpose of determining whether cover is "arguable", given that the defendant had competent legal advice when the plaintiff's demand was made, the insurer was notified in writing. Many arguments were advanced as to why it was not arguable that the insurer was liable to indemnify the defendant. The failure of the defendant to make a claim in writing during the period of insurance was not one of them.
6. As I have said, the insurer did not seek to undertake the onus of engaging s 5(4) at the preliminary stage. Again, it called Sergienko in aid. It argued that insufficient facts had been pleaded about the legal relationship among the plaintiff, the defendant and each of the 518 patients said to be affected by the defendant's negligence. However, to the contrary, the ASOC clearly pleads in various places that the defendant was rendering professional services to the plaintiff's patients. For instance, at [2] the following averment is advanced: "The first defendant … : … b. From 2010, practised as a dental practitioner at the dental practice, providing dental services to the patients of the Dental Practice, at the Clinics." In each of subparagraphs (c) and (d) the averment is repeated that the patients were "patients of the Dental Practice".
7. When pleading the first Dental Services Agreement (at [5] ASOC) the patients are referred to as "patients of the Dental Practice". Likewise, at [9] ASOC in relation to the 2014 Dental Services Agreement, and also at [17] v.5 concerned with the shareholders agreement, "patients of the Dental Practice" are referred to. These averments are repeated and recited for the purpose of Part F, dealing with the duty of care under the law of negligence.
8. I consider it arguable that any liability to the plaintiff on the pleaded claim is a "civil liability for a claim against [the defendant] arising directly out [his] provision of dental services". In my opinion the expression "arising directly out of" incorporates in the policy the legal standard of 'proximate cause' familiar in the law of insurance.
9. It was argued that Sergienko imposed an obligation on the plaintiff to plead all facts which may be material to enable the insurer to determine whether it had remedies for non-disclosure, or an entitlement to rely upon an exclusion clause to disclaim liability. It gave examples of clauses which may come into play, for the third time I repeat, it did not seek to definitively establish their applicability. I do not regard Sergienko as standing for any such broad proposition. The question of the trustee's fraud was clearly in play on the pleaded facts in Sergienko. Given the relationship between the solicitor and the trustee, it was incumbent upon the claimant to make clear whether or not it was alleging the solicitor was tainted by the latter's fraud in terms of the misuse of trust property. The decision, with respect, turned upon its own facts and does not lay down a principle of general application.
10. The principle contended for by the insurer is contrary to the rules of Judicature Act pleading embedded in Division 3 of Part 4 Uniform Civil Procedure Rules 2005 (NSW). A pleading must be as brief as the nature of the case allows (UCPR 14.8). A party need not plead a fact if, inter alia, the burden of disproving the fact lies on the opposite party, except so far as it may be necessary to meet a specific denial of that fact by another party's pleading (UCPR 14.10). To borrow the heading from UCPR 14.11, conditions precedent are presumed to have been met. While UCPR 14.14(1) requires a plaintiff to plead specifically any matter that if not specifically pleaded may take the defendant by surprise, the matters referred to by the insurer by way of possible non-disclosure or exclusion do not fall into that category. Fraud, of course, would, which helps explain the particular outcome in Sergienko. The issues of non-disclosure and whether the claim is caught by an exclusion or exception are all matters in respect of which the insurer carries the onus. It is not incumbent upon the plaintiff to plead facts material to them.
11. A number of matters were put in written argument. For instance, Clause 14.2 permits the insurer to deny indemnity where the insured knew or ought to have known of an act founding the claim "before this policy began". No factual basis is put forward at this time by the insurer for raising this matter. And it carries the onus.
12. Clause 14.21 excludes indemnity for claims arising out of any contractual liability "unless you would have been otherwise liable in the absence of the contract liability, warranty or guarantee". This is a familiar exclusion. Here the basis of the putative liability of the defendant is his professional negligence which arises in both contract and tort. Clause 14.16 excludes indemnity in respect of a legal obligation to refund any fee charged. Clearly this exclusion may apply. But it goes to a mere matter of quantum. This amounts to about $38,000 of the present claim, around one percent of the total claim of about $3.1m. Hardly a wholly disentitling matter.
13. Reference is also made to Clause 14.1 which applies to the extent to which the defendant may be entitled to an indemnity under any other contract of insurance that is not a contract of insurance entered into by the defendant. It is alleged that "cover might be available under … other such insurance". However, if the insurer is aware of any such policy it has not brought forth any evidence of it before me. It has not identified it or proved its terms. It has not attempted to explain the interaction of its exclusion with the provisions of s 45 Insurance Contracts Act 1984 (Cth). These are not matters required to be pleaded by the plaintiff. That there may be a contest about such an exclusion at the hearing is not a matter which deprives the plaintiff's claim against the insurer of its arguable nature.
14. Clause 14.15 is also referred to, which in substance covers partnership disputes "other than a claim of professional negligence". This seems to contemplate that claims of professional negligence may arise among partners or co-owners of a "practice entity".
15. For the reasons I have given, I am not convinced that the pleading by the plaintiff is required to speculate about possible defences that the insurer may conceive are available to it and include such facts as may be relevant to those possible defences in the ASOC. Any such requirement would turn the normal rules and practices of modern pleading on their head.
16. In short, I am not satisfied that there is an arguable claim under any of the policies covering the period 1 July 2013 to 30 June 2017. I am satisfied that it is arguable that the policy to which I have referred covering the period 1 July 2017 to 30 June 2018 responds to the plaintiff's claim. This extends to the alternative claim under s 5 of the 1946 Act: National Mutual Fire Insurance Co Ltd v Commonwealth of Australia [1981] 1 NSWLR 400, 407. If I am otherwise satisfied that leave should be granted, it would be necessary to further amend the proposed amended statement of claim to take into account this aspect of my decision.

Is there a real possibility that the defendant will be unable to satisfy the plaintiff's claim if successful?

1. As I have pointed out already (at [12]) above the total claim asserted is in the sum of $3,185,505.76. To this must be added interest and costs on the ordinary basis. Of costs, it is pertinent to note that Mr Alistair Little, the solicitor for the insurer, in his affidavit affirmed on 29 May 2020, assuming a 3 week trial, estimated the insurer's costs of the proceedings at $733,465. Given his long experience in commercial litigation his estimate must provide some indication of the plaintiff's likely costs, if successful.
2. The insurer submits that this criterion has not been met. It says that the defendant would probably have retained the proceeds of the sale of his former home sold in 2018, even if he is not currently the registered proprietor of any real property. Moreover, he holds shares in a company, Salus Dental Pty Limited, formerly utilised as the legal vehicle through which his practice was conducted, and shares in a unit trust.
3. The plaintiff points out that although the evidence before me indicates that the defendant's home was sold in 2018 for $4,400,000. The net proceeds of the sale payable to the defendant are unknown. It is known that the home had been mortgaged to Westpac Banking Corporation, which mortgage was discharged at the time of sale on 14 September 2018. In fact, there appear to have been two mortgages to Westpac, AJ 519100 and AJ 519113. The evidence at the hearing indicated that the defendant was then still prohibited from practising. The defendant continues to be the sole shareholder in Salus Dental Pty Limited which in turn holds 10,000 participating non-voting shares in the plaintiff company. The defendant seems to have a parcel of the same size in his own name (Affidavit of Michael Holmes affirmed 16 March 2020, JBT 153­). The service company is the holder of the unit in a group unit property trust (Affidavit 16 March 2020, JBT 154). From Mr Holmes's affidavit, its assets are two properties in Campbelltown valued at $2.75m and a property at Fairy Meadow valued at $1.3m. The Campbelltown properties are mortgaged and net equity is in the vicinity of $1.45m. The Fairy Meadow property is valued at $1.3m and is also subject to a mortgage in the sum of $975,000 on an interest only basis. The plaintiff's one-fifth share through Salus Dental's holding is therefore valued at about $355,000 in respect of all properties.
4. It is clear that the defendant is not a man of straw. He has some assets. The value of his interest in the dental practice is, perhaps surprisingly, unknown. Given his inability to practise his profession, it seems likely that he has lent on whatever equity he recovered from the sale of his former home to support himself and any family. The value of his interest in the dental practice is unlikely to be easily realised and the value of his interest in the unit trust, if realised, would only cover about 10 per cent of the damages claimed, leaving aside any consideration of interest and costs.
5. While the defendant is not a man of straw, neither is he a very wealthy individual. That he is self-represented is perhaps telling. His financial situation is such that he is unable to comfortably afford to retain experienced lawyers to defend this commercial case.
6. Very few middle-class Australians would be able to comfortably manage the type of legal costs Mr Little has estimated. Few could comfortably financially absorb a loss in a case like that brought against the defendant by the plaintiff. I am satisfied that there is a real possibility that the defendant could not satisfy the judgment obtained by the plaintiff if it is successful in the litigation.

Residual discretion

1. The insurer submitted that even if I was satisfied as to each of the three "well-settled" criteria, I would exercise my residual discretion to refuse leave. I accept that there is a residual discretion to refuse leave for the purpose of protecting the insurer from defending in its own name unjustified claims. However, it is difficult to see why this claim falls into that category when all three criteria have been satisfied. Subject to the necessary amendments which follow from my reasons, I will grant leave to the plaintiff to sue the insurer direct under the provisions of the 2017 Act.

Security for costs

1. Against the prospect that it may be unsuccessful, the insurer invited me in a summary way to make an order for security for costs in its favour. It was for this purpose that Mr Little provided his estimate of costs. The invitation to make such an order in a summary fashion without the trouble of filing and serving initiating process in that regard, in the event that the Court acceded to the plaintiff's application, involves a degree of forensic arrogance which it is unnecessary, for present purposes, to plumb.
2. Suffice it to say that the plaintiff opposed me dealing with the question of security for costs summarily and I consider it inappropriate to proceed in this informal way. It may be that the insurer has a just claim for security, but it must establish it by invocation of the Court's usual procedures in a regular way.
3. For these reasons, my orders are: 1. Under Rule 6.24 Uniform Civil Procedure Rules 2005 (NSW), the plaintiff has leave to join the second to sixth respondent clinic companies to the proceedings as plaintiffs; 2. Under s 5 Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), the plaintiff has leave to commence and continue proceedings against MDA National Insurance Pty Ltd; 3. Subject to further amendment to give effect to these reasons, the plaintiff has leave to file and serve an Amended Statement of Claim substantially in the form of the proposed Amended Statement of Claim filed in Court on 23 July 2020; 4. The plaintiff's costs of the application are costs in the cause.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 September 2021