HIH Casualty & General Insurance Limited (in liq) v SGIC General Insurance Limited [2004] VSC 519

(a) dismissed the application of the defendant by summons dated 15 June 2004 (as amended by leave) for judgment for the defendant against the second plaintiff in respect of the second plaintiff's claims for relief (including declaratory relief) regarding:

(i) the sum of $1,314,941.01 paid on his behalf in December 2002 by HIH Claims Support Limited to Screenco Pty Ltd in part satisfaction of a judgment against him in a proceeding in the Supreme Court of New South Wales ("the NSW proceeding");

(ii) legal costs incurred by the second plaintiff in defence of the NSW proceeding; and

(b) granted leave to the second plaintiff to amend the further amended statement of claim pursuant to the plaintiff's summons dated 8 June 2004.

The Background to this Proceeding

8. In order to understand the arguments raised on the appeal it is necessary to set out the background to this proceeding. Unless stated to the contrary, what is set out below was common ground between the parties.

11. In 1998 the Australian Grand Prix Corporation ("AGPC") contracted with Screenco Pty Ltd ("Screenco") for the erection of a Jumbotron video screen at AGPC's Albert Park racetrack in order to broadcast video pictures of the car races to the crowd. Screenco sub-contracted the erection work to RL Dew Pty Ltd ("Dew"). That company, in turn, sub-contracted the erection work to the second plaintiff, Ronald Steele, trading as Dragon Scaffolding ("Steele").

14. On 3 March 1998 Steele was proceeding to erect the screen at the Albert Park racetrack. The erection work included the provision of a support beam, from which the screen would be suspended. An accident occurred and the screen fell to the ground causing it to be severely damaged.

17. At the relevant time, AGPC held liability insurance with the defendant, SGIC General Insurance Limited ("SGIC"), which extended cover to contractors and sub-contactors undertaking construction work for the Grand Prix, and Steele held liability insurance with the first plaintiff, HIH Casualty & General Insurance Limited ("HIH").

20. In May 1999 Screenco commenced the NSW proceeding against Dew and Steele in respect of the loss resulting from the accident. Dew sought indemnity or contribution from Steele. HIH conducted Steele's defence in the NSW proceeding pursuant to his policy of insurance with that company ("the HIH policy").

23. Initially, Steele made no claim for indemnity under AGPC's policy of insurance with SGIC ("the SGIC policy") in respect of any liability established in the NSW proceeding. However, on 15 June 2000 HIH and Steele commenced this proceeding against SGIC claiming a declaration that SGIC was liable to make contribution to HIH in such a manner as was just and equitable towards all sums in respect of which Steele might be held liable to Screenco and/or Dew in the NSW proceeding, or otherwise by reason of the accident. At that time the NSW proceeding had not been resolved.

26. HIH was put into provisional liquidation in March 2001. Subsequent to the collapse of HIH, the Commonwealth Government set up a compensation scheme for certain HIH insureds left effectively uninsured by the collapse. It was entitled the "HIH Claims Support Scheme" ("the Scheme"). The corporate vehicle engaged by the Commonwealth Government to assist in the administration of the Scheme was HIH Claims Support Limited ("HCSL"). It described itself in its material as "a not-for-profit company established by the insurance industry to administer" the Scheme, but it was said not to be "an insurance company". A number of insurance companies, including QBE Management Services Pty Ltd ("QBE"), were also involved in the administration of the Scheme. Under the Scheme, Commonwealth Government moneys were provided to pay 100% of the amount which HIH would have been obliged to pay in respect of certain types of policies and 90% of that amount in respect of other types of policies, including Steele's policy with HIH. In the latter situation, the balance of 10% was to be paid by the insured.

29. On 10 July 2001, as part of his application for assistance under the Scheme, Steele signed an offer to assign to HCSL:

(a) all rights to receive or to demand the receipt of any benefit arising from any claim which he had made or might make under his HIH policy, where the claim was the subject of the payment of a benefit under the Scheme; and

(b) any rights, however arising, which he might have or obtain against any person or organisation other than the HIH insurer, in connection with the matters which had given rise to his need to make a claim under the policy.

Such offer could only be accepted by HCSL paying a benefit under the Scheme. It was a condition of the Scheme that if HCSL accepted his offer, Steele would no longer have a right to recover any funds from HIH when it was "eventually liquidated". Thereafter, QBE on behalf of the Scheme assumed the conduct of Steele's defence in the NSW proceeding.

35. In late 2002, following the trial in the NSW proceeding, judgment was entered in favour of Screenco against Dew and Steele in the sum of $1,461,045.57 plus costs. Dew obtained judgment on its cross-claim against Steele. The claims by Steele against Dew and against Highrise Group Pty Ltd (the supplier of the collapsed beam) were dismissed with costs.[1]

38. On 10 December 2002 QBE drew a cheque for $1,314,941.01, payable to Screenco. The cheque was forwarded to Michell Sillar, the solicitors acting for Screenco in the NSW proceeding. The covering letter, dated 13 December 2002, indicated that this sum represented 90% of Steele's liability to Screenco of $1,461,045.57. It appears that Dew and not Steele has paid the remaining 10% of the judgment debt to Screenco and that Steele has not paid any of Screenco's costs nor reimbursed Dew for any amount it has paid to Screenco nor paid Dew any of its costs.

41. On 17 September 2003, leave was granted to the plaintiffs by Dodds-Streeton J to deliver a further amended statement of claim. In effect, the claim was altered from being one by HIH for equitable contribution between insurers to one brought on the following basis:

(a) first, HIH claimed equitable contribution from SGIC in respect of the sum of $80,684.03, being costs said to have been expended by HIH, as the insurer of Steele, in the NSW proceeding prior to the liquidation of HIH;

(b) secondly, Steele claimed a declaration that SGIC was liable to indemnify him under the SGIC policy in respect of all sums which he had paid or had been held liable to pay to Screenco and/or Dew in the NSW proceeding, and payment of those amounts, namely:

(i) the judgment debt of $1,461,045.57 including the amount of $1,314.941.01 paid by him in partial discharge of that liability; and

(ii) the legal costs incurred by him in the NSW proceeding after HIH stopped paying them.

47. By its defence filed on 7 April 2004 SGIC pleaded:

(a) that the payment of $1,314,941.01 was not made by Steele but by QBE, as agent for HCSL, and that the payment of $1,314,941.01 extinguished, to the extent of the amount so paid, all liability of Steele to Screenco and Dew in the NSW proceeding and that, to that extent, there existed no liability in Steele to be indemnified under the SGIC policy;

(b) further, or in the alternative, that Steele had assigned all of his rights and benefits under the HIH policy to HCSL or to a related entity and that accordingly he had no right to claim indemnity under the policy; and

(c) that for SGIC to pay to Steele any sum claimed in this proceeding would be to unjustly enrich him in that he had suffered no loss for which he should be indemnified or compensated.

Further, SGIC denied that Steele had incurred costs in defence of the NSW proceeding and pleaded that all liabilities to pay the costs of Steele's legal representation in the NSW proceeding were incurred only by one or more of HIH, QBE and HCSL.

53. In his reply filed on 10 May 2004 Steele pleaded that:

(a) by his agreement with HCSL ("the HCSL agreement") he assigned to HCSL any rights, howsoever arising, which he might have or obtain against any person or organisation other than HIH, in connection with the matters which might have given rise to his need to make a claim under the HIH policy;

(b) pursuant to the HCSL agreement HCSL paid a benefit under the Scheme, being the payment of $1,314,941.01 and the legal costs incurred in the NSW proceeding after HIH stopped paying them;

(c) the matters alleged by Steele in his further amended statement of claim were rights, howsoever arising, which he might have or obtain against any person or organisation other than HIH, in connection with the matters which might have given rise to his need to make a claim under the HIH policy;

(d) the HCSL agreement was a contract of indemnity; and

(e) further, and/or alternatively, that Steele had, in equity, assigned to HCSL the benefit of this proceeding.

59. Subsequently, Steele's advisers apparently decided that the pleading of the assignment should be included in the statement of claim rather than in the reply. Thus, the plaintiffs' summons dated 8 June 2004 was filed. It was supported by an affidavit sworn the same day by Philip Anthony Jones, the solicitor for the plaintiffs. Mr Jones deposed that:

"It is the principal claim by the second plaintiff that his action against the defendant is pursued under a right of subrogation held by HCSL which arises under its agreement with the second plaintiff to provide assistance to the second plaintiff."

Having referred to the defendant's amended defence, Mr Jones further deposed that:

"The plaintiffs ... wish to plead, as an alternative claim, that there was an assignment in equity by the second plaintiff to HCSL of the second plaintiff's rights of indemnity under the policy issued by the defendant, and that the second plaintiff is pursuing those rights of indemnity on behalf of HCSL."

65. A week later the defendant filed its summons seeking summary judgment for the defendant against the second plaintiff pursuant to r.23.03 of the Supreme Court (General Civil Procedure) Rules 1996 ("the Supreme Court Rules"), although the order sought was subsequently amended to that set out in paragraph 1 above. As previously stated, the learned Master dismissed the defendant's application for judgment and granted leave to the plaintiffs to deliver a second further amended statement of claim. That pleading was filed on 28 July 2004 and a defence to it was filed on 5 August 2004. In the meantime, however, the defendant had filed its notice of appeal dated 27 July 2004.

69. The parties were agreed that the outcome of the appeal depended on the decision in respect of the defendant's application for judgment. If that were not successful then the defendant accepted that it had no other grounds for opposing the leave granted to the second plaintiff to amend again his further amended statement of claim.

72. No issue was raised by the defendant in respect of HIH's claim for equitable contribution from SGIC in respect of the costs expended by HIH in the NSW proceeding before its liquidation. Despite this, it is helpful to have a clear understanding of the doctrine of contribution between insurers. It was discussed by the High Court of Australia in Albion Insurance Co Ltd v Government Insurance Office (NSW)[2]. In a joint judgment Barwick CJ, McTiernan and Menzies JJ said:

"There is double insurance when an assured is insured against the same risk with two independent insurers. To insure doubly is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has been evolved. It began in the second half of the eighteenth century with Lord Mansfield's decisions with respect to marine insurers and there is no doubt that it now applies generally to insurance which provides the insured with an indemnity. There is no reason why the doctrine should not apply to insurance against liability to third parties and there is every reason in principle that it should. The doctrine, however, only applies when each insurer insures against the same risk, although it is not necessary that the insurances should be identical. ... The element essential for contribution is that, whatever else may be covered by either of the policies, each must cover the risk which has given rise to the claim. There is no double insurance unless each insurer is liable under his policy to indemnify the insured in whole or in part against the happening which has given rise to the insured's loss or liability."[3]

"What attracts the right of contribution between insurers, then, is not any similarity between the relevant insurance contracts as regards their general nature or purpose or the extent of the rights and obligations they create, but is simply the fact that each contract is a contract of indemnity and covers the identical loss that the identical insured has sustained; for that is the situation in which 'the insured is to receive but one satisfaction' (to use Lord Mansfield's expression) and accordingly all the insurances are 'regarded as truly one insurance' ..."[4]

78. The focus of the defendant's application was Steele's claim for indemnity under the SGIC policy. Mr Thompson of counsel, who appeared on behalf of SGIC, referred to r.23.01 of the Supreme Court Rules which allows the Court to stay the proceeding generally or in relation to any claim or to give judgment in the proceeding generally or in relation to any claim where, for example, the proceeding generally or any claim in the proceeding did not disclose a cause of action. He submitted that, for the reasons explained below, there should be judgment for the defendant in respect of part of Steele's claim, namely, the payment of 90% of the judgment debt and the costs incurred in the NSW proceeding after HIH stopped paying them. He accepted, however, that Steele's remaining liability for 10% of the judgment debt plus costs was not affected by SGIC's application.

81. Mr Thompson submitted that Steele could not claim indemnity from SGIC in respect of the 90% of the judgment debt paid by HCSL because, HCSL having paid that debt, Steele's liability to Screenco for that amount no longer existed. It was submitted that it was well established that an insured who has been indemnified by one insurer has no claim for indemnity against another insurer which would also have been bound to indemnify him. As Jacobs JA (as his Honour then was) put it in Sydney Turf Club v Crowley:

"A public liability policy and employer's liability policy are essentially insurances of indemnity. That being so any insured can recover no more than the amount required to indemnify him. If he has recovered the whole of the loss from one insurer then it is a defence at law to another insurer so to allege. ... The legal defence that the insured has already been indemnified is only available when the insured seeks to be indemnified in the strict sense twice over. The insured may sue at law any person who is liable to make good to him the damage which he has suffered and in respect of which he is insured whether that liability arises from tort or from contract. If the insured has already been indemnified by his insurer then the insurer is subrogated to the insured's right against the party primarily liable in contract or in tort for the amount of the damage. There is, however, no subrogation in the strict sense when there is double insurance. At the most there is in equity contribution."[5]

"As Jacobs JA has pointed out it is a good defence to an action against an insurer that the insured has recovered his loss, albeit from another insurer. The defence was pleaded by the respondent and the facts upon which it was based were not disputed because it was common ground that the appellant had recovered from the Government Insurance Office. In its pleading and in argument the appellant has sought to escape from the inevitable consequences of this situation by submitting that in the action the insured sues, not for his benefit, but by way of subrogation for the benefit of the Government Insurance Office. The submission misconceives the nature and effect of the doctrine of subrogation. Where an insurer is subrogated to the rights of the insured against a third party, the insured [sic - insurer?] does not acquire an independent cause of action in his own right. He succeeds to the insured's cause of action against the third party, in this case a right of action on the policy issued by the Jockey Club. That right of action remains in all respects unaltered; it is brought in the name of the insured and it is subject to all the defences which would be available if the action had been brought by the insured for his own benefit. Thus payment in full by the Government Insurance Office on account of the risk is a defence to the action by the appellant against the Jockey Club and it is no answer to that defence that the action is brought for the benefit of the insurer. In truth there was no relevant right in the appellant to which the Government Insurance Office could become subrogated. Once the insured was paid in full by that insurer, the insured had no cause of action which he could enforce against the Jockey Club on its policy either for his own benefit or for the benefit of the other insurer. The Government Insurance Office could, in an action in its name, recover a pro rata contribution from the Jockey Club as an insurer against the same risk under the doctrine of contribution (Albion Insurance Co Ltd v Government Insurance Office of NSW), but that is not the present proceeding. The present action has its origin in a failure to distinguish between the doctrine of subrogation and that of contribution. As it is put in Preston and Colinvaux, The Law of Insurance, 2nd ed., at p.135: 'Subrogation ensures that the assured shall receive no more than an indemnity; contribution ensures that the insurers shall not directly suffer injustice inter se because of that rule'."[6]

89. An appeal from the decision of the New South Wales Court of Appeal was dismissed by the High Court of Australia.[7] McTiernan J stated as follows:

"The Sydney Turf Club has brought this claim against the defendant, the chairman for the time being of the Australian Jockey Club, for indemnity under its policy with the Australian Jockey Club in respect of its liability arising out of the accident. ... Since it has already, however, been indemnified by the Government Insurance Office in respect of that same liability the claim must fail. The claim appears to have been based on the misconception that the doctrine of subrogation operated in this case. That doctrine operates when the insurer is subrogated to the right of the insured against a third party. The insured, The Sydney Turf Club, has here no right against the third party, the Australian Jockey Club. There is therefore no question of the doctrine being invoked."[8]

93. Mr Thompson submitted that this principle was not limited to cases of double insurance. He referred to the decision of the Court of Appeal in New South Wales in Stratti v Stratti[9] in which it was held that a partner's statutory right to indemnity from the partnership did not permit him to recover contribution from another partner where he had already been fully indemnified, half by the third party insurer and half by the public liability insurer. Further, in Burke v LFOT Pty Ltd[10] Gaudron ACJ and Hayne J stated that the principle of equitable contribution had in appropriate circumstances regularly been applied between co-sureties, co-insurers, co-owners and co-trustees.

96. Mr Thompson therefore submitted that the first way in which the second plaintiff's case was put, namely, that it was brought under a right of subrogation held by HCSL, was misconceived. Whether or not HCSL enjoyed any rights of subrogation was irrelevant because such rights could only be co-extensive with the rights of Steele. It was submitted that Steele's rights against SGIC in respect of 90% of the judgment debt had been extinguished by the payment made by QBE on behalf of HCSL and his rights against SGIC in respect of legal costs incurred in the NSW proceeding after HIH stopped paying them had never existed because they had all been paid by HCSL, not Steele. It was further submitted by Mr Thompson that if HCSL had any rights, they were limited to rights of equitable contribution claimed in a proceeding brought in its own name.

99. Mr Thompson also submitted that the second plaintiff could not succeed in the alternative way in which the case was put, namely, that there had been an assignment in equity by Steele to HCSL of Steele's rights of indemnity under the SGIC policy and that Steele was pursuing those rights of indemnity on behalf of HCSL. Mr Thompson did not dispute that if the assignment was equitable and not legal then Steele was the proper plaintiff. However, he submitted that the assignor could only assign the rights that he had and for the reasons already given Steele had no rights against SGIC in respect of the 90% of the judgment debt paid by HCSL and the legal costs incurred in the NSW proceeding after HIH stopped paying them.

102. Finally, Mr Thompson submitted that the defendant had satisfied the requirement that it show that it was "very clear indeed" that the particular claims would not succeed.[11] He further submitted that an application of this type should not be dismissed merely because extensive argument might be required to establish that proposition.[12]

105. Mr Dixon of counsel, who appeared for the plaintiffs, first submitted that SGIC could not succeed in its application because of the conceded fact that its application did not affect Steele's remaining liability for 10% of the judgment debt plus costs. Mr Dixon drew attention to the precise wording of r.23.01 of the Supreme Court Rules, which permitted the Court in certain circumstances to stay or give judgment in "the proceeding generally or in relation to any claim." It was submitted that it was significant that there was no power to stay or give judgment in relation to a part of a claim, which was what the defendant SGIC was seeking to do in this case. Mr Dixon contrasted the wording of r.23 with that of r.22, which dealt with summary judgment for the plaintiffs. He emphasised the frequent reference to the concept of a part of a claim in r.22 - see r.22.02(1), r.22.03(1), r.22.06(1)(b) and (c), r.22.08(1) (in respect of a counterclaim), r.22.11 and r.22.12.

108. Whilst this submission seemed an unduly technical approach at first, on reflection it appears to me that the difference in the wording of the two rules makes sense. Where the plaintiff considers that there is no defence on the merits to even a part of a claim there are good reasons for permitting or even encouraging a plaintiff to seek summary judgment in respect of that part of the claim so that the continuing litigation is narrowed and time is not wasted on the part of the claim to which the defendant has no defence.

111. However, in my opinion, the same thinking does not apply to an application by either a plaintiff or a defendant for a stay or judgment in respect of a part of a claim based on the kind of broad grounds set out in r.23.01(1) and (2). For example, it would not be cost effective or efficient to allow defendants to seek to stay or obtain judgment not in respect of the whole proceeding, nor in respect of a particular cause of action, but in respect of only a part of a claim or cause of action. There is a risk, in my opinion, that this would lead to unnecessary and wasteful duplication of hearings as defendants sought to restrict the plaintiff's claim before trial by seeking a stay or judgment in respect of a part of a claim.

114. Mr Thompson's response to this submission was twofold. First, he submitted that r.23.01 must be read as including a power to stay or give judgment in relation to a part of a claim. I do not agree. The comparison with the wording of r.22 shows that the concept of a part of a claim as distinct from "the proceeding generally" or "any claim" was in the minds of those drafting the Supreme Court Rules. Effect should, in my opinion, be given to the different wording of r.23.01.

117. Secondly, Mr Thompson submitted that the amount of $1,314,941.01, being 90% of the judgment debt, and the costs incurred in the NSW proceeding after HIH stopped paying them were, and were pleaded by Steele as, separate claims. Again, I do not agree. In my opinion, both of these items are part of the one claim for indemnity under the SGIC policy. In r.23.01 "claim" means, in my opinion, "cause of action" and the various amounts in respect of which Steele was seeking indemnity are all part of the one cause of action under the SGIC policy. In Australian and New Zealand Bank Limited v Colonial and Eagle Wharves Limited[13] McNair J defined the word "claim" in the context of an excess clause in a liability insurance policy as meaning "the occurrence of a state of affairs which justifies a claim on underwriters."[14] That is, in the present situation, a claim is the state of affairs, namely the damage to the screen in circumstances which justified Steele seeking indemnity from SGIC in respect of all of these amounts. They are not separate claims. It is true that, in this case, the claim in question is unusual in that it can be broken down into one part in respect of which Steele has received indemnity and another part in respect of which he has not, nevertheless, in my opinion, it is still the one claim for indemnity under the SGIC policy.

120. Mr Thompson also submitted that it was desirable to have the claims (or the parts of the claim, as I regard it) in respect of 90% of the judgment debt and the costs incurred in the NSW proceeding after HIH stopped paying them stayed or struck out because what would then be left was so small that the proceeding would probably be transferred to the County Court of Victoria and, in any event, despite the other defences relied upon by SGIC, it would in all probability be settled because the costs involved would be out of all proportion to the amount then in issue. I do not regard such hypothetical considerations to be relevant to the issue I have to decide.

123. In my opinion, the submission made by Mr Dixon on behalf of Steele is correct and SGIC is not permitted by the Supreme Court Rules to bring an application seeking a stay or judgment in relation to only a part of Steele's claim for a declaration that SGIC is liable to indemnify him in respect of all sums in respect of which he has paid (or which have been paid by HCSL on his behalf) or has been held liable to pay to Screenco and/or Dew in the NSW proceeding, including costs and for payment of those amounts.

126. In case I am wrong in my construction of r.23.01, or its application to the facts of this case, I turn then to consider Mr Dixon's alternative submissions, that either by subrogation or assignment Steele's claim for a complete indemnity from SGIC in respect of all of the above amounts could not be characterised as so hopeless or untenable that it should not be allowed to proceed to trial.

129. In respect of the subrogation argument, Mr Dixon relied on the maxim res inter alios acta alteri nocere non debet - a person ought not to be prejudiced by what has taken place between others or not affected by what is done behind his back. He submitted that this principle was relevant because having accepted a commercial risk in return for payment of the premium SGIC was not affected by, and should not be able to rely on, the arrangements which had come into place following the collapse of HIH. Mr Dixon pointed out that HCSL's involvement only arose as a result of a decision by the Commonwealth Government to provide some form of assistance to those insureds potentially facing very serious financial consequences as a result of the collapse of HIH. I assume that HCSL made its payments intending to assist the former policy holders of HIH, such as Steele, and not to remove or lessen the contractual obligations of other parties including other insurers such as SGIC. In Burnand v Rodocanachi[15], the House of Lords held that an insurer was not entitled to recover from the insured, who had been partly indemnified by the insurer, a payment made from a fund which had been set up by the United States to compensate for certain marine losses suffered as a result of the Civil War. Under the Act of Congress no claim was allowed for any loss for which the injured party should have received compensation from an insurer, but if such compensation was not equal to the loss actually suffered, then payment could be made for the difference. These facts are not the same as in the instant case, nevertheless the decision does suggest a possible argument which could be put on behalf of Steele. The same could be said of another case relied on by Mr Dixon, namely, The National Insurance Co of New Zealand Ltd v Espagne[16], which involved the question whether a charitable payment by a third party should be taken into account in assessing damages. It was also pointed out that if HCSL had not stepped in to assist Steele in the prompt way that it did, Steele may well have been able to recover a full indemnity from SGIC. Although this may be what the law provides, it does seem to me to be an unfortunate conclusion that the question of whether or not Steele and/or HCSL can recover anything under the SGIC policy may depend on the particular sequence in which the relevant events, such as payment of the $1,314,941.01, occurred.

132. In my opinion, therefore, the circumstances surrounding the creation of the Scheme and the rights arising thereunder are sufficiently unusual to warrant the conclusion that these issues should be fully investigated at trial. It is not beyond argument, in my opinion, that the principle of subrogation might be held to apply to payments made by HCSL on behalf of Steele.

135. In respect of the assignment argument, I also consider that the point is not beyond argument and should be fully investigated at trial. Steele's offer to assign to HCSL certain rights, including any rights, however arising, which he might have or obtain against any person or organisation other than HIH, in connection with the matters which had given rise to his need to make a claim under the HIH policy, could only be accepted by HCSL paying a benefit under the Scheme. It seemed to me that SGIC's argument proceeded on the basis that the assignment took place only at the same time as, or even after, HCSL paid the 90% of the judgment debt to Screenco, so that 90% of Steele's liability to Screenco having been extinguished, he could not assign any rights to HCSL in respect of that proportion of his liability. However, in my opinion, it is arguable that the assignment occurred as early as 29 November 2001 when, for example, QBE drew a cheque for $1,324.62 payable to the Victorian solicitors acting (apparently through Sydney agents) on behalf of Steele in the NSW proceeding in payment of the solicitors' tax invoice dated 7 November 2001. This may mean that HCSL could successfully argue that it can rely on the rights assigned to it by Steele to seek indemnity from SGIC in respect of all amounts paid by it on behalf of Steele. Again, I consider that this issue is one that should be fully investigated at trial. I would certainly not regard it as appropriate to decide this issue without further argument from the parties about the assignment and its consequences.

138. There is a further reason why I would not be prepared to stay or give judgment for SGIC in respect of the question of the costs incurred in the NSW proceeding after HIH stopped paying them. Paragraph 15B of the second further amended statement of claim is as follows:

"Further, Steele has incurred costs in defence of the NSW Proceeding

PARTICULARS

The NSW Proceeding has not been concluded in respect of issues of costs and interest. Particulars of Steele's costs liability and/or payment will be provided upon the conclusion of the NSW Proceeding."

This pleading is defective, in my opinion, because the particulars given seem quite inapposite. Indeed, they are simply a repetition of the particulars given in paragraph 15A which pleaded that:

"Steele remains liable on the unsatisfied part of the judgment including the costs of Screenco and RL Dew in the NSW Proceeding."

144. Evidence tendered by SGIC suggested that all of the costs incurred since HIH stopped paying them had been paid by HCSL. Certainly, there was no evidence from the plaintiffs' side that Steele had paid or was liable to pay any of those costs. Moreover, in paragraph 9(c) of the reply to the defence to the earlier amended statement of claim Steele stated that HCSL had paid a benefit under the Scheme, being the costs incurred in the NSW proceeding after HIH stopped paying them.

147. Nevertheless, the position in respect of these costs is unsatisfactory because, in my opinion, the submission on behalf of SGIC mistakenly treated the Notes for Applicants for Assistance under the Scheme as advising that the Scheme would pay all of:

"the costs and disbursements incurred in conducting the defence and/or settlement of your claim including (but not limited to) the costs and disbursements of: - any lawyers and barristers appointed to act on your behalf; ..."

151. What I understand the Notes for Applicants to say was that under some policies the insurer would be obliged to pay such costs but that under the Scheme the applicant had to pay 10% of those policy benefits. Accordingly, this meant that as far as the applicant was concerned:

" * if it is necessary to appoint a third party service provider (such as a lawyer, barrister or an expert) you will be asked to enter into a separate retainer agreement with that service provider, under which you will agree to pay 10% of their costs and disbursements; * a service provider will not undertake any work on your matter until you have signed a retainer agreement relating to your share of their costs and disbursements; ..."

In the Conditions and Obligations part of the Scheme's "Offer to assign your policyholder rights" it was stated that if HCSL accepted the applicant's offer but the applicant did not comply with the requirements of the Scheme then HCSL could in its absolute discretion take various steps including withdrawing the provision of further assistance to the applicant under the Scheme in respect of the claim under the policy. Examples of what constituted a failure to comply with the terms of the Scheme were then set out including the following:

" * where you fail to pay the non-Scheme proportion (i.e. 10%) of the amount which HIH would have been obliged to pay under the policy including but not limited to the non-Scheme proportion of * the costs and disbursements incurred in conducting the defence and/or settlement of your claim (e.g. fees rendered by service providers such as lawyers, barristers and experts); ..."

157. Moreover, many of the tax invoices rendered by legal practitioners to QBE in respect of the NSW proceeding, which were exhibited to the affidavit of SGIC's solicitor, Steven Ronald Weybury, sworn 14 July 2004, state that only 90% of the bill is payable. It also appears that payment of only the lesser amount has been made by QBE.

160. All of this means that, in my mind, the question of whether or not Steele is liable for 10% of the costs incurred in the NSW proceeding after HIH stopped paying them remains unclear. In those circumstances, there should not be a stay or judgment in respect of this part of his claim.

164. In my opinion, for the reasons given above, the appeal from the Master's order should be dismissed.

[1] [2002] NSWSC 893 and [2002] NSWSC 1050

[2] [1969] HCA 55; (1969) 121 CLR 342

[3] [1969] HCA 55; (1969) 121 CLR 342 at 345-346

[4] [1969] HCA 55; (1969) 121 CLR 342 at 352

[5] [1971] 1 NSWLR 724 at 730

[6] [1971] 1 NSWLR 724 at 734-735

[7] Sydney Turf Club v Crowley [1972] HCA 25; (1972) 46 ALJR 336

[8] Sydney Turf Club v Crowley [1972] HCA 25; (1972) 46 ALJR 336 at 338-339. See also Commercial and General Insurance Co Ltd v Government Insurance Office (NSW) (1973) 129 CLR 374.

[9] [2000] NSWCA 358; (2000) 50 NSWLR 324

[10] [2002] HCA 17; (2002) 209 CLR 282 at 292

[11] Dey v Victorian Railways Commissioners [1949] HCA 1; (1948) 78 CLR 62 at 91 per Dixon J

[12] General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130 per Barwick CJ

[13] [1960] 2 Lloyd's Rep 241

[14] [1960] 2 Lloyd's Rep 241 at 255. See also Trollope & Colls Limited v Haydon [1977] 1 Lloyd's Rep 244.

[15] (1882) 7 App Cas 333

[16] [1961] HCA 15; (1961) 105 CLR 569