Supreme Court of WA|2021-12-21|Before: Allanson J

JKC AUSTRALIA LNG PTY LTD (ACN 154 383 409) -v- AIG AUSTRALIA LTD (ACN 004 727 753) [2021] WASC 471 (21 December 2021)

CITATION : JKC AUSTRALIA LNG PTY LTD (ACN 154 383 409) -v- AIG AUSTRALIA LTD (ACN 004 727 753) [2021] WASC 471

BETWEEN : JKC AUSTRALIA LNG PTY LTD (ACN 154 383 409)

MITSUI SUMITOMO INSURANCE COMPANY, LTD (ARBN 000 525 637)

CERTAIN UNDERWRITING MEMBERS OF LLOYD'S SYNDICATE 4444

HELVETIA SCHWEIZERISCHE VERSICHERUNGS-GESELLSCHAFT AG

BETWEEN : INPEX OPERATIONS AUSTRALIA PTY LTD (ACN 150 217 626)

AIOI NISSAY DOWA INSURANCE COMPANY LTD (ARBN 096 302 466)

MITSUI SUMITOMO INSURANCE COMPANY, LTD (ARBN 000 525 637)

HELVETIA SCHWEIZERISCHE VERSICHERUNGS-GESELLSCHAFT AG

Practice and procedure - Application by assignee under Deed of Assignment to be substituted as plaintiff - Where defendants question validity of assignment - Whether validity of assignment a condition for exercise of power to substitute - Whether order for substitution summarily determines whether cause of action has been validly assigned or whether that remains a question for trial

Practice and procedure - Consolidation of actions - Where plaintiffs in each action bring claims for substantially the same damage under insurance policy with same defendants - Where properly drawn pleadings would avoid any prejudice to defendants from consolidation - Where consolidation consistent with case management objects

Matters to be consolidated. INPEX substituted as the plaintiff in the CIV 1620 of 2020 action

1 Both of these actions were commenced by writ on 27 May 2020.

2 JKC Australia LNG Pty Ltd is the plaintiff in CIV 1620 of 2020, and INPEX Operations Australia Pty Ltd is the plaintiff in CIV 1631 of 2020. In other respects, the writs are identical.

3 INPEX filed a chamber summons in each action. In CIV 1620 of 2020, INPEX sought orders pursuant to O 18 r 7(2) of the Rules of the Supreme Court 1971 (WA) that it be substituted as the plaintiff in that action as the assignee of JKC. In both actions, INPEX sought orders for consolidation.

4 The defendants (except for the sixth defendant which is separately represented) opposed both applications.

5 After a short hearing, I made the orders sought and said that I would provide reasons later.

6 INPEX relies on three affidavits of David Ashley Jenaway, legal practitioner, the first sworn 29 October 2021, the second sworn 9 December 2021, and the third also sworn 9 December 2021 for which the plaintiff sought orders restricting access.

7 The plaintiff filed written submissions in support of both applications.

9 The defendants filed an affidavit of Kristine Louise Vale, legal practitioner, sworn 13 December 2021 in each action. Objection was taken to some parts of Ms Vale's affidavit. On the way the applications progressed, it is not necessary to deal with those objections.

11 INPEX is the project principal for a gas field development in the Northern Territory. JKC is the engineering procurement and construction contractor.

12 INPEX and JKC are parties to an engineering, procurement, supply, construction and commissioning contract (EPC Contract) in relation to that project, pursuant to which INPEX agreed to obtain and maintain a Construction RISKS Insurance Policy to cover the onshore plant under construction, and to cause JKC, and other contractors, to be added as additional assureds.

13 INPEX put part of the EPC Contract in evidence through the affidavits of Mr Jenaway. It is unnecessary to consider the contract in any detail.

14 INPEX is the Named Insured under an Onshore Construction Risks - Material Damage - Project Insurance Policy (CAR Policy) for the period 16 November 2012 to 31 December 2017 (as extended) 'in respect of the design, fabrication, construction, correction, testing, and commissioning of the Ichthys Gas Field Development LNG Onshore Project'. JKC is also an insured within the definition of that policy.

16 In CIV 1631 of 2020, INPEX claims from each of the defendants, in specified proportions, an indemnity against damage to insured property in relation to specified coating and insulation systems on piping and equipment used in the Project.

17 In CIV 1620 of 2020, JKC makes the same claims under the policy.

Where at any stage of the proceedings in any cause or matter the interest or liability of any party is assigned or transmitted to or devolves upon some other person, the Court may, if it thinks it necessary in order to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, order that other person to be made a party to the cause or matter and the proceedings to be carried on as if he had been substituted for the first-mentioned party.

An application for an order under this subrule may be made ex parte.

19 Although the application for joinder could have been made separately and ex parte, INPEX combined it in the summons for consolidation.

20 In his first affidavit, Mr Jenaway attached a Deed of Assignment, made 15 October 2021, between JKC Australia (as Assignor) and INPEX (as Assignee). By clause 2.1:

(a) Pursuant to s 20 of the Property Law Act 1969 (WA), the Assignor hereby assigns absolutely to the Assignee free from all Encumbrances of the Assignor's claims (which comprise choses in action) under the CAR Policy and the EAR Policy in respect of any Damage (as defined in the CAR Policy and the EAR Policy) to or involving the P&I Systems. For the avoidance of doubt, this assignment includes the Assignor's choses in action the subject of the Insurance Proceedings.

(b) The Parties agree that:

(i) the legal assignment in clause 2.1(a) above his for valuable consideration, including the Parties agreeing to execute Deed No 21 on or around the date of this deed; and

(ii) if the legal assignment in clause 2.1(a) above is found to be invalid for any reason, then the assignment will instead take effect as and equitable assignment.

21 Mr Jenaway attached a redacted copy of Deed No 21 to his third affidavit. Relevantly, by cl 3, the parties (INPEX and JPC) settled claims between them, without admission of liability, and agreed to make efforts to maximise recovery from third parties, including in these proceedings.

22 INPEX has given notice of the assignment in writing to each of the relevant insurers.

23 The deed of assignment complies with s 20(1) of the Property Law Act 1969 (WA). Provisions to the same effect as s 20 have been described as machinery provisions, not altering the substantive law in relation to assignments: 'A chose in action not assignable at common law prior to the enactment of [s 20] was not rendered assignable by its enactment'.[2]

24 The defendants oppose the application to substitute the plaintiff, and do not accept that the assignment is valid and enforceable. They submit that they should at least be able to preserve their ability to challenge its validity and enforceability. The defendants submit that substitution and consolidation risk creating prejudice to them and difficulties for the court, and are premature.

25 The defendants submit that the assignment is of a bare right to litigate, not supported by a genuine commercial interest. They submit that the current application is not the occasion to determine whether INPEX has an interest to support the purported assignment and that must be determined at the final hearing.

26 At the heart of the dispute between the parties in this application was whether, were the court to allow the application, that would summarily determine the validity and enforceability of the assignment, and thus prejudice the defendants by locking them out from raising that issue. In particular, counsel for the defendants submitted that, on the wording of the rule, a finding of a valid assignment is a condition for the exercise of the court's power under O 18 r 7 to substitute the plaintiff, so that it was necessary for the court to make that determination.

27 The validity of the assignment, unless admitted, is an issue for trial. The question of a genuine commercial interest is a mixed question of fact and law, completely unsuited for determination on a summary basis: see, for example, the comments of Bell P in Bakewell v Anchorage Capital Master Offshore Ltd [2019] NSWCA 199 [72]. If substituted as plaintiff, INPEX will need to plead the assignment and, should it be in issue, establish the validity of the assignment at trial. In my opinion, an order under O18 r 7 would not obviate those requirements.

28 I would not construe O 18 r 7 as requiring a final finding as to the validity of the assignment. First, the application is an interlocutory application in which it would be unusual for the court to finally determine a matter of mixed fact and law. Second, the rule contemplates the application being dealt with ex parte, and a final determination binding a party would not normally be made in that way. Third, as the Court said in APT Finance Pty Ltd v Bajada [2008] WASCA 73 [46] - [47], a substitution application is not the occasion for a detailed consideration of the merits. What INPEX must show, in my opinion, is that there is sufficient merit in its claim to be a valid assignee for the application not to be pointless.

29 On the evidence in Mr Jenaway's affidavits, I am satisfied that JKC and INPEX have entered agreements by which JKC has purported to assign its choses in action in these proceedings to INPEX. The contractual provisions governing the relationship between INPEX as principal and JKC as contractor show, on the evidence now before the court, a sufficiently arguable case that, before the assignment, INPEX had a genuine commercial interest in the claim which JKC has now assigned to it.

30 Once I am satisfied that the rule applies, the test in O 18 r 7 is whether the court thinks it 'necessary in order to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon' that INPEX be substituted. If the assignment is effective, JKC may no longer recover under its claim. INPEX must be a party and plead the assignment of the cause of action, and the court must determine whether INPEX is entitled to relief under that cause of action if it is to determine all matters in dispute.

31 I do not accept that the application is premature. Without the substitution, INPEX is not a party to the action. INPEX must necessarily plead that it is the assignee of JKC's claim. Until INPEX is joined, that cannot be pleaded. It is not premature to act now.

32 I am satisfied that the joinder of INPEX as a party is necessary in the relevant sense. There was a possible alternative course, in joining INPEX pursuant to O 18 r 6(b). The same test of necessity would be engaged. But in my opinion, INPEX having sought substitution, the proper exercise of the court's discretion is to allow the application that has been made. If it is to be done, it is conducive to good case management to make the substitution now before pleadings.

CIV 1620 of 2020 and CIV 1631 of 2020: consolidation

33 The relevant principles on an application for consolidation were not in dispute. The defendants accepted the statement in [32] to [34] of the submissions of INPEX:

32. Order 83 Rule 1 of the Rules provides that:

Whenever any issues between the same parties can be conveniently tried together, or whenever it appears desirable notwithstanding that the parties are not identical and that the evidence necessary to prove the issues is not identical, the Court may consolidate any number of causes or matters in order to quiet all claims relating to one subject matter, transaction or event, or to substantially similar subject matters, transactions or events.

33. In Lois Nominees Pty Ltd v QBE Insurance (Aust) Ltd [2011] WASC 208; (2011) 42 WAR 75 [77] - [81], Beech J listed the factors to be considered when determining whether to make orders for consolidation pursuant to Order 83 of the Rules. These are as follows:

(a) There is no presumption against consolidation.

(b) Each case depends on its own facts and circumstances.

(c) The rule is to be construed as a flexible rule of convenience in the administration of justice, suggesting that the court has the power to do what is necessary and appropriate to permit effective consolidation with a view to final determination of the real issues between the parties, with justice to all concerned.

(d) Broadly, the question on a consolidation application is whether in all the circumstances it is convenient, having regard to avoiding multiplicity of actions and to saving time and expense.

(e) Among the matters that may be relevant to the exercise of discretion regarding consolidation are:

(i) whether it is convenient to consolidate the actions, including whether it will prevent multiplicity of actions and ensure savings of time and cost;

(ii) whether there are common questions of law or fact or a common transaction or series of transactions;

(iii) whether consolidation will cause prejudice or unfairness to any parties;

(iv) whether consolidation will be conducive to a just resolution of the issues; and

(v) whether there are any practical matters which may make it inexpedient to consolidate.

34. Further, the Court of Appeal in Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80; (2019) 55 WAR 89 [408] approved the observations made by Beech J at [77] - [81], and went on at [410] to add that the application of Order 83 is to be construed and applied by regard to Order 1 Rule 4B of the Rules. This requires that Order 83 "must be construed and applied so as 'best to ensure the attainment' of (amongst other things) (1) promoting the just determination of litigation, (2) disposing efficiently of the court's business, (3) maximising the efficient use of available judicial and administrative resources, and (4) facilitating the timely disposal of business."

34 On 6 August 2021, I made orders by consent, including:

1. Proceedings numbered 1620 of 2020 and 1631 of 2020 be heard together and that the evidence in one case be evidence in the other.

2. A party to proceedings numbered 1620 of 2020 and 1631 of 2020 may make use of a document or information obtained in either proceeding for the purposes of:

(a) conducting proceedings 1620 of 2020 and 1631 of 2020; or

(b) communicating with the parties in proceedings 1620 of 2020 and 1631 of 2020, and the parties are released from the usual implied undertaking, to that limited extent.

35 Those orders were made before INPEX and JKC made the deeds of settlement and assignment, but they remain in force.

36 INPEX submitted that the claims in CIV 1620 of 2020 and CIV 1631 of 2020 involve almost identical questions of law and fact, such that it is desirable that the whole of the matters should be disposed of together and at the same time; and that the pleadings will be relevantly identical. Although that may be achieved, at least in part, by the existing orders, INPEX submitted that consolidating the actions, so that there would be one pleading and a single trial of all issues, would be the best use of the court's and the parties' resources.

37 The primary argument in opposition to consolidation appeared to be the concern that the two claims, INPEX's claim as a named insured and that purportedly assigned to it by JKC, may not be identical. It will be necessary for both the statement of claim and the defences to maintain that necessary separation. I accept, however, the submission on behalf of INPEX that the issue giving rise to the objection can be met by properly drawn pleadings. In reality, the defendants are in no different position from that if the assignment had occurred before the proceedings were commenced and INPEX had brought both claims in the one action.

38 The defendants also submitted that the consolidation application was premature. Although both actions were commenced in 2020, statements of claim have not been filed in either. It is, in my opinion, consistent with the objects set out in O 1 r 4A to immediately consolidate so that the pleadings and all further interlocutory processes will be in the one consolidated action.

39 For these reasons, I allowed both applications and made the orders sought.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] See first affidavit of David Ashley Jenaway sworn 29 October 2021 [4] - [7].

[2] Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498 [56] - [57].

JKC AUSTRALIA LNG PTY LTD (ACN 154 383 409) -v- AIG AUSTRALIA LTD (ACN 004 727 753) [2021] WASC 471 (21 December 2021)

At a glance

Court

Decision date

Before

Source

Judgment (58 paragraphs)

JKC AUSTRALIA LNG PTY LTD (ACN 154 383 409) -v- AIG AUSTRALIA LTD (ACN 004 727 753) [2021] WASC 471 (21 December 2021)

Legislation Cited (1)

Cases Cited (3)