Lambert Leasing Inc & Anor v QBE Insurance Australia Ltd & Ors

The Illinois Proceedings 4On 4 May 2007, the dependants of 12 of the 13 passengers and two pilots (Relatives), who are all resident in Australia, commenced proceedings in the State Court in Cook County in Illinois, USA against, inter alia, Lambert Leasing, SAL and Partnership 818 (Illinois Proceedings). 5On 6 October 2008 the Court dismissed the Illinois Proceedings on terms that did not include an order that the Relatives pay Lambert Leasing's and SAL's costs (Illinois Proceedings Legal Costs). In the Australian Proceedings, Lambert Leasing and SAL claim indemnity from Partnership 818 for those costs pursuant to Article 7.01 of the Purchase Agreement.

The Missouri Proceedings 6On 5 May 2008 the Relatives (comprising 58 Australian residents) commenced proceedings against, inter alia, Lambert Leasing and Partnership 818 in Missouri ( Missouri Proceedings). The Relatives did not commence proceedings against SAL and SAL is not party to the Missouri Proceedings. Shortly stated, in the Missouri Proceedings the Relatives assert that the aircraft was defective and that those defects caused the accident. They seek damages for wrongful death. 7In May 2009 Partnership 818 filed a motion to dismiss the Missouri Proceedings for, inter alia, lack of jurisdiction and forum non conveniens on the basis that the matter should be heard in Australia. In May 2009, Lambert Leasing filed a similar application. 8The applications were dismissed: (1)firstly, by the Greene County Circuit Court without reasons (7.12.09); (2)secondly, by the Missouri Court of Appeals without reasons (24.2.10); and (3)thirdly, by the Missouri Supreme Court without reasons (24.3.10). 9It is noteworthy that in the Missouri Court of Appeals (and presumably at first instance and in the Missouri Supreme Court) Partnership 818 denied the jurisdiction of the Missouri Court, submitting: "...[their] only contact with Missouri related to their inspection of the Aircraft while the Aircraft was hangared for a short period of time in Missouri. The Aircraft was subsequently ferried to Australia upon Partnership 818's purchase of the Aircraft from Lambert. [Partnership 818] did not make a contract or transact any business in Missouri, nor did they commit any tortious act in Missouri. The uncontroverted evidence before the trial Court established that Partnership 818 negotiated, agreed to and executed the Purchase Agreement to purchase the Aircraft in Australia." 10The Missouri proceedings remain on foot. Lambert Leasing and Partnership 818 both continue to maintain that the Missouri Proceedings are in an inappropriate forum. 11Lambert Leasing has incurred legal costs and continue to incur legal costs relating to the Missouri Proceedings ( Missouri Proceedings Legal Costs). 12In the Australian Proceedings, Lambert Leasing claim indemnity from Partnership 818 for the Missouri Proceedings Legal Costs and claim indemnity for any liability it may have to the Relatives, whether it be pursuant to a judgment or a settlement. Lambert Leasing rely upon Article 7.01 of the Purchase Agreement in support of its claims for indemnity. 13The discovery process in the Missouri Proceedings began in about March 2010 and is expected to continue through to December 2011. The trial is expected to take place in December 2014. The Relatives' legal representatives expect the Missouri Proceedings to ultimately settle.

The Australian Proceedings - Lambert Leasing's Claim v Partnership 818 and QBE

(i) Indemnity 14Lambert Leasing claim that Partnership 818 is liable to indemnify it for the Illinois Proceedings Legal Costs, the Missouri Proceedings Legal Costs and any liability it may have to the Relatives arising out of the Missouri Proceedings, whether it be pursuant to a judgment or a settlement. Lambert Leasing assert that the indemnity is triggered by reason of Article 7.01 of the Purchase Agreement which relevantly provides: "...[Partnership 818] agrees to indemnify and hold harmless...by reason of...death of any person resulting from or in any way connected with [Partnership 818's] possession, maintenance, modification, use or operation of the Aircraft..." 15Lambert Leasing allege that Partnership 818 used and operated the aircraft by providing it by way of lease to Transair which conducted passenger flights within Australia.

(ii) Insurance 16Article 7.02 of the Purchase Agreement obliged Partnership 818 to maintain aircraft liability insurance on behalf of Lambert Leasing and SAL, which, inter alia, expressly insures Partnership 818 for its contractual liability assumed to Lambert Leasing pursuant to Article 7.01 of the Purchase Agreement. 17Article 7.02 also obliged Partnership 818 to employ reasonable efforts to require any third party leasing the aircraft (such as Transair) to maintain aircraft liability insurance of the type described above which also insures the Australian plaintiffs. 18A policy of insurance ( Policy) was effected with the first defendant, QBE Insurance (Australia) Ltd (QBE). It is not entirely clear whether the Policy was effected by Partnership 818 or Transair. The Australian plaintiffs are insureds under the Policy. QBE has declined to indemnify the Australian plaintiffs for the Illinois Proceedings Legal Costs, for the Missouri Proceedings Legal Costs and for any liability which the Australian plaintiffs may have to the Relatives. 19Lambert Leasing and SAL allege that if, as QBE alleges, the Australian plaintiffs are not covered by the Policy for the Illinois Proceedings Legal Costs, the Missouri Proceedings Legal Costs and any liability to the Relatives, Partnership 818 has breached Article 7.02 by failing to maintain the requisite insurance .

(iii) QBE 20In the Australian Proceedings, Lambert Leasing and SAL allege that QBE has wrongfully denied indemnity and seek damages and the appropriate declaratory relief. 21Unsurprisingly, the QBE policy provides "This insurance is subject to Australian law and practice" (policy endorsement 16).

Applicable Principles 22Section 67 of the Civil Procedure Act 2005 confers the Court with a discretion to stay proceedings subject to the rules of the Court. It follows that any such application stands to be determined by reference to the facts, matters and circumstances peculiar to it. 23There are however, some basal principles which bear on an application such as this, namely: (1)a party who has regularly invoked the jurisdiction of a competent Court has a prima facie right to insist upon its exercise and to have his claim heard and determined; [ RSL Com Personal Communications Pty Ltd v Mobile Tron Pty Ltd [2001] NSWSC 819 at [6]]; (2)a mere balance of convenience is not a sufficient ground for depriving a plaintiff of the advantages of prosecuting his action (in a Court of its choice) if it is otherwise properly brought; [ St Pierre v South American Stores (Gath & Chaves) Ltd [1936] 1 KB 382 at 398] (3)in order to justify a stay: (a)The defendant must satisfy the Court that the continuance of the action would work an injustice because it would be oppressive or vexatious or would be an abuse of process of the Court in some other way; and (b)The stay must not cause an injustice to the plaintiff. [ St Pierre v South American Stores (Gath & Chaves) Ltd [1936] 1 KB 382 at 398]; (4)the mere co-existence of proceedings in different countries does not constitute vexation or oppression; it is necessary to show that an abuse of process would stem from the prosecution of litigation in a clearly inappropriate forum [ CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 389-393]; (5)the discretion is not exercised simply by an inquiry as to which is the more appropriate forum [ Keenco v South Australia & Territory Air Service Ltd (1974) 23 FLR 155 at 162-3.] ; (6)it is not sufficient for a defendant/applicant relying upon lis alibi pendens ground to point out that there are two proceedings being taken with reference to the same subject matter. It is necessary to go further and demonstrate vexation in the sense that there is no necessity for "harassing the defendant by double litigation". It does not apply to cases where the plaintiff (in the local jurisdiction) is the defendant in a foreign Court because there is no question of his commencing double litigation so as to harass [ The Hagen [1908] P 189]; (7)a plaintiff is, prima facie, entitled to retain his status as dominus litis and the advantage of control over the conduct of the litigation [ The Hagen [1908] P 189] ; (8)it is incumbent upon the defendant/applicant to show that the party instituting the proceedings sought to be stayed can gain no advantage from it and the existence of some motive other than a bona fide desire to determine the dispute [ Cohen v Rothfield [1919] 1 KB 410 at 414] ; (9)where the plaintiff has not himself commenced both proceedings the case against interference is strong [ Cohen v Rothfield [1919] 1 KB 410 at 444] ; (10)whether the involvement of a third party would mean that an injunction would generate a multiplicity of proceedings [ Sokana Industries Inc v Freyre & Co Inc [1994] 2 Lloyd's Rep 57] ; (11)the burden of proof is on the defendant/applicant [ St Pierre v South American Stores (Gath & Chaves) Ltd [1936] 1 KB 382 at 398; Environmental Group Ltd & Anor v Croudace & Crodace Holdings Pty Ltd (per Santow J, Supreme Court of New South Wales, 7 August 1998,unreported)] . 24There is a further principle which is apposite to proceedings in the Commercial List of the Equity Division. It is best summarised by reference to my own decision in Rexam Australia Pty Ltd v Optimum Metallising Pty Ltd & Anor [2002] NSWSC 916 where I said at [29]-[30]: "The Commercial List proceedings have comprised the regular invoking by parties to a commercial contract of the jurisdiction of the Commercial List which operates upon the basis of the speedy determination of commercial proceedings in the interest of the commercial community and of all parties to commercial contracts. Speed is very often of the essence in these proceedings and the Commercial List endeavours to case manage and determine proceedings in its list with the expedition necessary, but always consistent with the interests of justice, in order to ensure that no party to a commercial contract will, if this can be avoided, suffer by dint of delay in the fixing of a final hearing and in the production of a relatively speedy judgment. ...the continued stay of the Commercial List proceedings over an extended period of time, comprise as it seems to me, an overwhelming consideration in favour of not justifying the stay. Whilst it is of course possible that prior to the determination of these proceedings, the Industrial Relations Commission proceedings could conceivably lead to orders setting aside or varying the very contract upon which these proceedings are based, in a case such as this that circumstance is only one of the circumstances to be taken into account..." 25To pull these threads together, the basal propositions seem to be : (1)A party who has regularly invoked the jurisdiction of a competent court has a prima facie right to insist upon its exercise and to have his claim heard and determined; (2)The onus lies on the applicant to establish a reason why this prima facie right should be displaced. The generally accepted relevant considerations are set out by Lockhart J in Sterling Pharmaceuticals Pty Ltd v Boots & Co (Aust) (1992) 34 FCR 287; (3)An important concern of the Court is to prevent a situation of issue estoppel, where two Courts may be asked to determine the same matter; (4)My own judgment in Rexam affirms the above principles and notes a particular although by no means absolute reluctance to stay matters in the commercial list.

Standing back from the respective arguments 26It seems convenient to at this stage to shortly identify the arguments for and against a stay.

Arguments for a stay 27The salient arguments are as follows : (1)Failing to grant a stay will require Partnership 818 to fight two expensive pieces of litigation in two separate jurisdictions; (2)The applicants submit that the New South Wales Court will be required to decide on issues very similar to those in the Missouri Proceedings and that this may give rise to issue estoppel. [I do not agree with this contention]; (3)The suit against QBE is a discreet matter and can be determined without needing to involved Partnership 818. Only if Lambert fails in this suit will it need to involve the partnership. [I do not agree. The issues are sufficiently discreet].

Arguments against a stay 28The arguments against a stay are as follows : (1)All parties deny the jurisdiction of the Missouri Court, including the applicants in this case. As a result the partnership does not want to agitate its indemnity argument in the Missouri Proceedings through a cross claim. Bringing the proceedings in New South Wales is the appropriate forum to bring the claim in and it ensures that the partnership is not seen as accepting the jurisdiction of the Missouri Court; (2)Very importantly, one of the Plaintiffs is not a party to the Missouri matter and therefore has already sustained a liability. This liability is independent of the Missouri Proceedings and there is no reason why they should await the outcome of these proceedings; (3)The evidence, necessity of contractual interpretation and the pre-trial processes are similar in respect of QBE and the partnership. Staying the action against the partnership only is inappropriate. 29Contrary to the submission of the applicant, the Missouri proceedings and the New South Wales proceedings concern two distinct issues and do not give rise to issue estoppel. The New South Wales proceedings turn on whether under the sale agreement the plaintiffs are indemnified. This will not be an important issue in the Missouri proceedings, which will concern the liability of each party to the families. No cross claims have been raised and therefore no issue about indemnity will arise.

Application of principles 30Lambert Leasing and SAL submit and the Court accepted that the application should be dismissed for the following reasons: (1)Lambert Leasing and SAL have not commenced proceedings in another jurisdiction and do not seek to. (2)Partnership 818 is domiciled in Australia. (3)QBE is domiciled in Australia. (4)The Purchase Agreement was executed in Australia. (5)The accident occurred in Australia. (6)The Relatives are Australian. (7)Transair is an Australian company. (8)The claims against Partnership 818 and QBE are inextricably linked such that they ought to be heard and determined together. (9)The plaintiffs' claim against QBE should not be held up (a stay would likely have such an effect). (10)Partnership 818 denies that the Greene County Circuit Court (Missouri) has jurisdiction over it to hear the Relatives' claim - and presumably would assert that it lacks jurisdiction to determine any claim which Lambert Leasing might bring against it. (11)Partnership 818 contends that the Green County Circuit Court (Missouri) is an inconvenient forum to hear the Relatives' claim - and presumably would assert that it is an inconvenient forum in which to determine Lambert Leasing's claim against it. (12)The Relatives accept that Missouri does not have general jurisdiction over Partnership 818. (13)Lambert Leasing also denies that the Green County Circuit Court (Missouri) is seized of jurisdiction to determine the claim against it and disputes that it is the appropriate forum. (14)Even if Lambert Leasing brought its claim against Partnership 818 in Missouri, it is questionable whether that would give rise to an issue estoppel for the purposes of the Australian Proceedings - it almost certainly would not unless both QBE and SAL were also parties to the Missouri proceedings. (15)The Missouri Proceedings are very likely to settle such that any issues pertinent to Lambert Leasing and Partnership 818 are unlikely to be determined. (16)In the event the Missouri Proceedings proceeds to trial it is likely to be determined at the earliest, in 2015. (17)SAL is not party to the Missouri Proceedings. (18)QBE is not a party to the Missouri Proceedings. (19)The QBE policy is governed by Australian law. (20)The Supreme Court proceedings as presently constituted are the only proceedings capable of effectively resolving all matters and controversies between the parties and there is a likelihood of multiplicity of proceedings and inconsistent findings only if Lambert Leasing litigates its claims against Partnership 818 in Missouri and then, together with SAL, re-litigates some or all of those issues against Partnership 818 and/or QBE in the Australian Proceedings. (21)Work done in the Australian Proceedings will not be wasted - if there is commonality of issues between the Australian Proceedings and the Missouri Proceedings then any work carried out in connection with the Missouri Proceedings can be marshalled for the purposes of the Australian Proceedings. (22)The issues as between the Australian plaintiffs and Partnership 818 are not the subject of litigation in Missouri such that there is no prospect of inconsistent findings pertaining to, for example, the construction of Articles 7.01 and 7.02. (23)The Court does not know whether Partnership 818 will put the construction of Article 7.01 and Article 7.02 in issue and should not be asked to speculate about that matter. (24)The Australian plaintiffs are entitled to retain their status as dominus litus . (25)The Australian plaintiffs are entitled to a speedy resolution of the dispute in the Commercial List. (26)Resolution of the dispute involves Australian law particularly given that the aircraft was registered in Australia in compliance with Australian laws and regulations. This much is common ground. (27)There is a likelihood that witnesses resident in Australia will be called including representatives of CASA. (28)Australia is the natural forum for the dispute as a whole.

Conclusion 31In all of the circumstances, the plaintiffs submit that Partnership 818 has not discharged its onus of demonstrating that the Australian Proceedings should be stayed, particularly in light of the presumption that the Australian plaintiffs have a prima facie right to insist upon the exercise of competent jurisdiction which has regularly been invoked by the commencement of proceedings in the Commercial List. 32For all these reasons the applicant has not demonstrated sufficient cause to have the application stayed.

Orders 33The Court makes the following orders: (1)The application for a stay of these proceedings is dismissed. (2)The applicant is to the pay the respondent's costs of the motion

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: 18 July 2011