GLG Australia Pty. Ltd. v. The Nominal Defendant & Ors. (No.2) [2004] NSWCA 282

Court of Appeal (NSW)|2004-08-23|Before: Hodgson JA, Tobias JA, McColl JA, Coll JA

CITATION : GLG Australia Pty. Ltd. v. The Nominal Defendant & Ors. (No.2) [2004] NSWCA 282 revised - 17/12/2004 HEARING DATE(S) : Matter dealt with on submissions in Chambers JUDGMENT DATE : 23 August 2004

JUDGMENT OF : Hodgson JA at 1; Tobias JA at 22; McColl JA at 23 DECISION : 1. Appeal allowed. 2. Verdict and judgment entered against the Appellant and the Third Respondent in the District Court be set aside. 3. Verdict and judgment for the 2nd Respondent against the 3rd Respondent in the sum of $72,541.98. 4. Verdict and judgment for the 2nd Respondent against the Appellant in the sum of $213,330.92. 5. The First Respondent is to indemnify the Appellant with respect to the verdict and judgment referred to in paragraph 4 above, and pay interest at the court rate on judgment monies in the sum of $132,370.34 paid by the Appellant on 20 May 2003. 6. The Appellant and the Third Respondent are to pay the Second Respondent's costs of the District Court proceedings as agreed or assessed. 7. The First Respondent is to indemnify the Appellant with respect to the costs order referred to in paragraph 6 above. 8. The First Respondent is to pay the Appellant's costs of the District Court proceedings incurred since 31 May 2002. 9. The First Respondent is to pay the Appellant's costs of the appeal. 10. The Second Respondent to bear his own costs of the appeal but to have a certificate under the Suitors Fund Act if otherwise qualified.

CATCHWORDS : TORTS - Motor vehicle accident - Scope of third party insurance - Power of court to award interest and costs - INSURANCE - Indemnity against liability in respect of injury - Whether extends to liability of insured to its own lawyers in defending a claim based on injury - Whether extends to interest. Boyle v. The Nominal Defendant (1958) 76 WN(NSW) 598 Club Motor Agency Pty. Ltd. v. Sargent (1969) 118 CLR 658 Commercial & General Insurance Co. Ltd. v. Government Insurance Office of NSW (1973) 129 CLR 374 Emad Trolley Pty. Ltd. v. Shigar [2003] NSWCA 231 Genders v. Government Insurance Office of NSW (1958) 76 WN(NSW) 381 Genders v. Government Insurance Officer of NSW (1959) 102 CLR 563 CASES CITED : GIO Australia Ltd. v. Robson (1997) 42 NSWLR 439 Leo M. Dunn & Sons v. McPhillamy [2000] NSWCA 363 National Vulcan Engineering Insurance Group Ltd. v. Pentax Pty. Ltd. [2004] NSWCA 218 Owen v. State of NSW [2004] NSWCA 165 State Government Insurance Office (Queensland) v. Crittenden (1966) 117 CLR 412 State of New South Wales v. Thomas [2004] NSWCA 52 Yellow Express Carriers Ltd. v. Government Insurance Office of NSW [1960] SR(NSW) 227 PARTIES : GLG Australia Pty. Ltd. - appellant The Nominal Defendant - first respondent FILE NUMBER(S) : CA 40446/03 COUNSEL : Mr. J. Maconachie QC with Mr. N. Polin for appellant Mr. P. Deakin QC with Mr. P. Nolan for the first respondent SOLICITORS :

LOWER COURT District Court JURISDICTION : LOWER COURT DC 788/01 FILE NUMBER(S) : LOWER COURT Delaney DCJ JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40446/03

HODGSON JA TOBIAS JA McCOLL JA

Monday 23 August 2004 GLG AUSTRALIA PTY. LIMITED V. NOMINAL DEFENDANT & ORS. (No.2) Judgment (On Orders) 1 HODGSON JA: Judgment in the appeal in this matter was delivered on 1 June 2004. The only orders made were orders concerning the submission of Short Minutes of Order. 2 Short Minutes of Order have now been submitted, and the only remaining disagreement as to the appropriate orders consequent upon the judgment of this Court is a disagreement between GLG and the Nominal Defendant on two matters. First, in circumstances where GLG had paid $132,370.34 to the plaintiff on 20 May 2003, whether GLG was entitled to interest on that sum from 20 May 2003. Second, whether GLG was entitled as against the Nominal Defendant to be reimbursed for its own costs of defending the District Court proceedings. I will deal first with the latter question, and then with the former question.

INDEMNITY AS TO INSURED'S COSTS 3 The relevant indemnity provided by the statutory insurance under the Motor Accidents Act 1988 is against liability in respect of injury to a person caused by the fault of the owner or driver of a motor vehicle. The question is whether this covers costs incurred by an insured in defending a claim for damages brought on the basis of an allegation of such an injury. 4 If the claim for damages is unsuccessful, and it is not established that there was injury caused by the fault of the owner or driver of a motor vehicle, it is plain in my opinion that costs incurred by the insured in that successful defence are not within the indemnity, because there is no relevant liability falling within the words of the indemnity. 5 However, if the claim is successful, and if it is established against the insurer that the relevant injury was in fact caused by the fault of the owner or driver of a motor vehicle, then it could be argued that the liability "in respect of" that injury extends not merely to the insured's liability to the injured person for damages and costs, but also to the insured's liability to the insured's own legal advisers for costs reasonably incurred in defending the claim. In accordance with the width and generality of the words "in respect of", that liability would arguably be "in respect of" the injury: cf. the line of authority discussed in GIO Australia Ltd. v. Robson (1997) 42 NSWLR 439 at 441, 444-8, and cf. also National Vulcan Engineering Insurance Group Ltd. v. Pentax Pty. Ltd. [2004] NSWCA 218. 6 However, it was submitted for the Nominal Defendant that this view was contrary to three cases, namely Yellow Express Carriers Ltd. v. Government Insurance Office of NSW [1960] SR(NSW) 227, Commercial & General Insurance Co. Ltd. v. Government Insurance Office of NSW (1973) 129 CLR 374, and Owen v. State of NSW [2004] NSWCA 165. I will consider these cases in turn. 7 In Yellow Express, the Full Court of the Supreme Court of New South Wales held that a motor vehicle insurer was obliged to pay the insured's costs reasonably incurred by the insured in defending a claim which was found to be covered by a policy indemnifying the insured against liability incurred "in respect of" injury caused by the use of a motor vehicle; but only because of an implied term in an agreement made between the insurer and the insured as to the conduct of the proceedings. Owen J (with whom Street CJ concurred) followed the views expressed by Owen J in two earlier cases, Genders v. Government Insurance Office of NSW (1958) 76 WN(NSW) 381 and Boyle v. The Nominal Defendant (1958) 76 WN(NSW) 598, that the liability insured against is the liability to the injured person or (in the case of death) his relatives; and held that it did not extend to liability for costs incurred by the insured person. Herron J adhered to his dissent in the previous two cases, and left open the question as to whether the liability insured against extended to the liability for costs incurred by the insured person. (The judgment at 237 refers to "costs incurred by an injured person", but this must be a typographical error for "insured person"). 8 However, as discussed by Stein JA in Robson at 444-446, Owen J's views in Genders were repudiated by a series of High Court decisions (Genders v. Government Insurance Office of NSW (1959) 102 CLR 363, State Government Insurance Office (Queensland) v. Crittenden (1966) 117 CLR 412, and Club Motor Insurance Agency Pty. Limited v. Sargent (1969) 118 CLR 658); and in my opinion that deprives the views expressed consequentially in Yellow Express of the authority they would otherwise have. 9 In Commercial & General, a worker had sued his employer in respect of a workplace injury involving a mobile crane. The action was defended by the workers' compensation insurer, and the worker recovered damages and costs which the workers' compensation insurer paid. In separate proceedings, the workers' compensation insurer sought contribution from the motor vehicle insurer, on the basis that the injury arose out of the use of a motor vehicle; and the workers' compensation insurer recovered contribution of 50 per cent of the damages and costs paid to the worker. However, it did not recover any contribution in respect of the costs it had incurred in defending the worker's proceedings. The Court (Menzies, Walsh and Mason JJ) said this (at 384): There is a further matter. The claim for contribution extended to one half of $30,283.41 (i.e. judgment of $28,000 with $925.26 costs, plus the employer's costs of defending the action $1358.21): For the respondent it was argued that no part of $1358.21, the costs of defending the action, was proper subject matter for contribution. With that we agree. The costs were incurred by the appellant in the exercise of its right to defend the action brought against the employer which it had insured. The indemnity granted to the employer, however, was against claims for which the employer should be liable for any injury to an employee. Accordingly, the policy of the appellant did not cover the costs which the appellant incurred in defending the action. Nor did the third party policy. The indemnity thereby granted was against liability "incurred by the owner and/or the driver in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle ". Neither policy, therefore, covered the costs incurred by the employer or the appellant in defending the rigger's action. Accordingly, in our opinion, the liability of the respondent is limited to one half of $28,925.20, i.e. $14,462.60. 10 One basis for denying contribution in respect of costs is suggested in the first half of the paragraph, namely that the costs were not incurred by the insured under the motor vehicle policy, but by the insurer under the workers' compensation policy. However, the second half of the paragraph is more widely expressed, to the effect that not even costs incurred by the employer in the first proceedings would be liability incurred by the owner in respect of injury caused by the use of the motor vehicle. It appears to have been accepted that the employer was the owner of the vehicle; so the Court does seem to be saying that the employer's liability to its own lawyers for costs reasonably incurred by it in defending proceedings, in which it is established that the employer is liable for injury caused by the use of a motor vehicle, is not liability of the employer in respect of such an injury. Although the decision could have been reached on the narrower ground that the costs were incurred by the workers' compensation insurer, not the employer, I do not think this view of the High Court can be classed as mere obiter dicta. 11 Owen concerned an alleged injury caused to the prisoner's back by his being transported in a prison van at a time when he was suffering from a back injury. The primary judge had held that negligence was not established. The Court of Appeal set aside that decision and ordered a new trial. It rejected a defence based on non-compliance with the requirements of the Motor Accidents Act 1988, on the basis that the claim did not arise out of a motor accident but was based on injury caused progressively over a period of time: cf. Leo M. Dunn & Sons v. McPhillamy [2000] NSWCA 343, Emad Trolley Pty. Ltd. v. Shigar [2003] NSWCA 231. The Court also considered a cross-appeal by the State against the motor vehicle insurer, challenging the primary judge's dismissal of its claim to be indemnified for its costs of defending the claim. 12 In my opinion, that cross-appeal had to be dismissed, because there had not been established to be any injury caused by the fault of the owner or driver of a motor vehicle; so no occasion had arisen as yet to consider the extent of any liability in respect of such injury. However, the Court dismissed the cross-appeal on the basis that liability in any event would not extend to costs, relying on Yellow Express and Commercial & General. Again, although dismissal of the cross-appeal could be justified on a narrower basis, I do not think the views expressed can be classed as mere obiter dicta. 13 In those circumstances, I think this Court should follow Commercial & General and Owen, and hold that the liability of an insured to the insured's own lawyers incurred in defending a claim of injury caused by the fault of the owner or driver in the use of a motor vehicle is not within the words "liability in respect of" such injury. 14 However, that is not the end of the matter. This Court, in disposing of these proceedings, has power to award costs, and can make orders based on its assessment as to the responsibility of parties for costs incurred by other parties. In this case, GLG had apparently sought indemnity from the Nominal Defendant, and on 31 May 2002 the Nominal Defendant denied that indemnity. 15 Sections 45-47 of the Motor Accidents Act 1988 are as follows: 45 Duty of insurer to try to resolve claim etc (1) It is the duty of an insurer to endeavour to resolve a claim, by settlement or otherwise, as expeditiously as possible. (2) Once liability has been admitted (wholly or in part) or determined (wholly or in part) against the person against whom the claim is made, it is the duty of an insurer to make payments to or on behalf of the claimant in respect of: (a) hospital, medical and pharmaceutical expenses, and (b) rehabilitation expenses, subject to Part 4, and (c) respite care in respect of a claimant who is seriously injured and in need of constant care over a long term, as incurred. (2A) The duty of an insurer under subsection (2) to make payments applies only to the extent to which those payments: (a) are reasonable and necessary, and (b) are properly verified, and (c) relate to the injury caused by the fault of the owner or driver of the motor vehicle to which the third-party policy taken to have been issued by the insurer relates. (3) It is a condition of a third-party insurer's licence that the insurer must comply with this section. (4) A payment made under this section to or on behalf of a claimant before the claimant obtains judgment for damages against the defendant is, to the extent of its amount, a defence to proceedings by the claimant against the defendant for damages.

46 Insured not to admit liability etc (1) A person shall not, without the consent in writing of the person's insurer: (a) enter upon, or incur any expense in, any litigation, or (b) make any offer or promise of payment or settlement, or (c) make any payment or settlement, or (d) make any admission of liability, in respect of a claim, but this section shall not prevent any person from truthfully answering any question reasonably asked of the person by a member of the Police Force. (2) An offer, promise or admission made in contravention of this section is of no effect. (3) (Repealed)

47 Power of insurer to act for insured (1) When a claim is made against a person, the person's insurer may: (a) conduct and control negotiations in respect of the claim, and (b) conduct, or take over the conduct of, any legal proceedings in respect of the claim and may conduct those proceedings in the name and on behalf of the person, and (c) at any stage of those negotiations or proceedings, compromise or settle the claim, and (d) exercise any function conferred by this Part on the person in respect of the claim. (2) The person against whom the claim is made shall sign all such warrants, authorities and other documents as may be necessary to give effect to this section. (3) If the person fails to do so or is absent or cannot be found, the insurer may sign the warrants, authorities or other documents on behalf of the person. (4) Nothing said or done by an insurer under this section in connection with the settlement of a claim or the conduct of proceedings in respect of a claim shall be regarded as an admission of liability in respect of or in any way prejudice any other claim, action or proceeding arising out of the same occurrence. 16 The decision in this case means that the Nominal Defendant's denial of liability put it in breach of s.45(1). It was submitted for the Nominal Defendant that GLG was in breach of s.46(1)(a). However, once the Nominal Defendant had denied liability, GLG had no alternative. I would not interpret s.46(1)(a) as precluding a party from defending itself when its insurer has denied indemnity; and I would interpret it as requiring consent only from an insurer that has not denied indemnity. 17 The probability is that, if the Nominal Defendant had not denied indemnity, it would have complied with its obligation under s.45, and also would have taken over the proceedings under s.47. Costs incurred by GLG after 31 May 2002 are fairly regarded as being due to the Nominal Defendant's incorrect denial of indemnity. 18 In those circumstances, in my opinion it is appropriate to order the Nominal Defendant to pay GLG's costs incurred after 31 May 2002.

INTEREST 19 In my opinion, the debate concerning interest can be resolved without considering whether the indemnity against liability extends to interest, as a matter of contractual interpretation. 20 The verdicts and judgments that are to be given are verdicts and judgments that will take effect in substitution for those given by the primary judge, and accordingly will take effect as at 2 May 2003. Accordingly, the verdict and judgment in respect of which GLG is to be indemnified by the Nominal Defendant is a verdict and judgment taking effect on 2 May 2003. In my opinion, it is incidental to the granting of that indemnity that, in addition to indemnifying GLG against interest accruing on the judgment until it is fully satisfied, it also indemnify GLG in respect of interest on the judgment saved by earlier payment. 21 Further, GLG was required to pay the $132,370.34 on 20 May 2003, because the Nominal Defendant refused an indemnity which it should have granted. Although a cross-claim against the Nominal Defendant has not been filed, the parties have proceeded as if a claim for indemnity was being made against the Nominal Defendant. Although the proceedings have not been in form "proceedings for recovery of any money" within s.83A of the District Court Act, they are so in substance. It would be open to this Court now to give leave for such a cross-claim to be put on, and determined: see State of New South Wales v. Thomas [2004] NSWCA 52. In my opinion, it is open to this Court to order interest under s.83A, and it should do so.

CONCLUSION 22 For those reasons, in my opinion the following orders should be made: 1. Appeal allowed. 2. Verdict and judgment entered against the Appellant and the Third Respondent in the District Court be set aside. 3. Verdict and judgment for the 2nd Respondent against the 3rd Respondent in the sum of $72,541.98. 4. Verdict and judgment for the 2nd Respondent against the Appellant in the sum of $213,330.92. 5. The First Respondent is to indemnify the Appellant with respect to the verdict and judgment referred to in paragraph 4 above, and pay interest at the court rate on judgment monies in the sum of $132,370.34 paid by the Appellant on 20 May 2003. 6. The Appellant and the Third Respondent are to pay the Second Respondent's costs of the District Court proceedings as agreed or assessed. 7. The First Respondent is to indemnify the Appellant with respect to the costs order referred to in paragraph 6 above. 8. The First Respondent is to pay the Appellant's costs of the District Court proceedings incurred since 31 May 2002. 9. The First Respondent is to pay the Appellant's costs of the appeal. 10. The Second Respondent to bear his own costs of the appeal but to have a certificate under the Suitors Fund Act if otherwise qualified. 23 TOBIAS JA: I agree with Hodgson JA 24 McCOLL JA: I agree with Hodgson JA. **********

Last Modified: 12/17/2004 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.

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