QBE CORPORATE LTD (T/AS 'DA CONSTABLE SYNDICATE 386 AT LLOYDS')

Equity - Declarations - Whether plaintiffs have arguable claim for declaration against defendant's insurer that insurer obliged to indemnify insured defendant against plaintiffs' claim - Where insured defendant does not join insurer - Whether any declaration would have foreseeable consequences for plaintiffs - Whether declaration in favour of plaintiffs would bind insurer in subsequent proceedings brought by insured - Whether insurer may arguably be precluded from challenging liability by doctrine of abuse of process

Practice and procedure - Amendment - Addition of new parties - Whether O 18 r 4 empowers the addition of new defendants to an existing action - Discretion - Whether arguable case for declaration against defendant's insurer

Rules of the Supreme Court 1971 (WA), O 18 r 4, O 18 r 6, O 21 r 5

Proposed Second Defendants : Mr S M Davies SC & Mr A J Musikanth

ABB Service Pty Ltd v Hetherington [2001] WASCA 417

Amon v Raphael Tuck & Sons Ltd [1956] 1 QB 357

Anjin No 13 Pty Ltd v Allianz Australia Insurance Ltd [2009] VSC 371

APT Finance Pty Ltd v Bajada [2008] WASCA 73

Ashmere Cove Pty Ltd v Beekink (No 2) [2007] FCA 1421; (2007) 244 ALR 534

Beneficial Finance Corporation Ltd v Price Waterhouse (1996) 68 SASR 19

Brandsma & Crockett Pty Ltd v Heindal Pty Ltd [2002] WASCA 96; (2002) 26 WAR 323

CE Heath Casualty & General Insurance Ltd v Pyramid Building Society (In Liq) [1997] 2 VR 256

Cohen v Curchin [2008] WASC 8

Elovalis v Elovalis [2008] WASCA 141 (S)

Employers Reinsurance Corporation v Ashmere Cove Pty Ltd [2008] FCAFC 28; (2008) 166 FCR 398

Graham Geoffrey Walker and Thelma Jean Walker as trustees for the Walker Superannuation Fund v Clough Property Claremont Pty Ltd [2009] WASC 367

Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd [1998] QCA 180; [2000] 2 Qd R 301

JN Taylor Holdings Ltd (In Liq) v Bond (1993) 59 SASR 432

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Kendall v Hamilton (1879) 4 App Cas 504

La Macchia v Minister for Primary Industries and Energy (1992) 110 ALR 201

Mansfield v Director of Public Prosecutions for Western Australia [2006] HCA 38; (2006) 226 CLR 486

Morgan v Banning (1999) 20 WAR 474

Mustac v Medical Board of Western Australia [2007] WASCA 128

National Companies & Securities Commission v Monsoon Nominees Pty Ltd [No 3] (1990) 3 ACSR 491

Norilya Minerals Pty Ltd v Easterday [2009] WASC 191

Payne v Young [1980] HCA 54; (1980) 145 CLR 609

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355

Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34

Renovation & Finance Co Pty Ltd v Kott Gunning (A Firm) [2006] WASC 29

Richardson v Trautwein [1942] HCA 5; (1942) 65 CLR 585

Skin-Plex Laboratories Pty Ltd v Baker [1999] WASC 81

South-West Forest Defence Foundation (Inc) v Executive Director of Conservation and Land Management (1996) 131 FLR 225

Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699

Stewart v Biodiesel Producers Ltd [2009] WASC 145

The Bell Group Ltd (In Liq) v Westpac Banking Corporation [2001] WASC 315

Warner Music Australia Ltd v Swiftel Communications Pty Ltd [2005] FCA 1127

Western Australian Planning Commission v Dungey [2010] WASC 52

Woodings v Stevenson [2001] WASC 174; (2001) 24 WAR 221

1 What rules are available to a plaintiff who wishes to add a new defendant to an existing action? This application turns on that question, on which there is little authority.

2 In this application the plaintiffs seek leave to join, as second defendants, the insurers of the existing defendant.

3 Each plaintiff paid money into the defendant's trust account. The defendant was a solicitor. The plaintiffs claim that the defendant paid the moneys out of his trust account in breach of trust; alternatively they claim the consideration for the moneys paid has totally failed.

4 On 26 February 2010, the defendant was made bankrupt and trustees in bankruptcy were appointed.

5 The claims the subject of this action were first made against the defendant in the financial year ending 30 June 2009. Although not then a certificated legal practitioner, he was entitled to the benefit of professional indemnity insurance cover provided to former practitioners under an insurance policy and certificate of insurance. The proposed second defendants (the Insurers) are the insurers under that policy.

6 The defendant made a claim on the policy. The Insurers have denied liability. The defendant and his trustees in bankruptcy have not joined the Insurers as third parties. The trustees have said that they have no available funds.

7 The plaintiffs seek to join the Insurers as second defendants in the action and to claim a declaration that the Insurers are jointly and severally, alternatively proportionately, liable pursuant to the policy to indemnify the [first] defendant against the liabilities incurred by the [first] defendant with respect to the claims of the plaintiffs in this action.

8 There is a threshold question regarding which rules empower the court to add a defendant to an existing action. The plaintiffs rely on O 18 r 4. The Insurers submit that O 18 r 4 does not empower the court to add new defendants to an existing action, but is concerned only with joinder before commencement. The Insurers contend that only O 18 r 6 empowers the court to add a new defendant. The plaintiffs do not contend that, in the present case, O 18 r 6 empowers the joinder of the Insurers. Rather, they rely solely on O 18 r 4.

9 For the reasons that follow, in my opinion O 18 r 4 does not empower the court to add a new defendant to an existing action. Consequently I would dismiss the application.

10 For completeness, I deal with the question of discretion, which would arise if joinder was empowered by O 18 r 4. I resolve that question in the plaintiffs' favour.

11 I begin by outlining the relevant provisions of the rules.

12 Order 18 r 4 and O 18 r 6 are in the following terms:

(1) Subject to Rule 5(1), 2 or more persons may be joined together in one action as plaintiffs or as defendants with the leave of the Court or where -

(a) if separate actions were brought by or against each of them, as the case may be, some common question of law or fact would arise in all the actions; and

(b) all rights to relief claimed in the action (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions.

(2) Where the plaintiff in any action claims any relief to which any other person is entitled jointly with him, all persons so entitled must, subject to the provisions of any Act and unless the Court gives leave to the contrary, be parties to the action and any of them who does not consent to being joined as a plaintiff must, subject to any order made by the Court on an application for leave under this paragraph, be made a defendant.

This paragraph shall not apply to a probate action.

(3) Where relief is claimed in an action against a defendant who is jointly liable with some other person and also severally liable, that other person need not be made a defendant to the action; but where persons are jointly, but not severally, liable under a contract and relief is claimed against some but not all of those persons in an action in respect of that contract, the Court may, on the application of any defendant to the action, by order stay proceedings in the action until the other persons so liable are added as defendants.

...

(1) No cause or matter shall be defeated by reason of the misjoinder or nonjoinder of any party; and the Court may in any cause or matter determine the issues or questions in dispute so far as they affect the rights and interests of the persons who are parties to the cause or matter.

(2) At any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application -

(a) order that any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

(b) order that any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, be added as a party,

but no person shall be added as a plaintiff without his consent signified in writing or in such other manner as may be authorised.

(3) An application by any person for an order under paragraph (2) adding him as a defendant must, except with the leave of the Court, be supported by an affidavit showing his interest in the matters in dispute in the cause or matter.

1. Provisions consequential on making of order under Rule 6 or 7

(1) Where an order is made under Rule 6, the writ by which the action in question was begun must be amended accordingly and must be indorsed with -

(a) a reference to the order in pursuance of which the amendment is made; and

(b) the date on which the amendment is made,

and the amendment must be made within such period as may be specified in the order or, if no period is so specified, within 14 days after the making of the order.

(2) Where by an order under Rule 6 a person is to be made a defendant, the rules as to service of a writ of summons shall apply accordingly to service of the amended writ on him, but before serving the writ on him the person on whose application the order was made must procure the order to be noted in the Cause Book.

(3) Where by an order under Rule 6 or 7 a person is to be made a defendant, the rules as to entry of appearance shall apply accordingly to entry of appearance by him, subject, in the case of a person to be made a defendant by an order under Rule 7, to the modification that the time limited for appearing shall begin with the date on which the order is served on him under Rule 7(4) or, if the order is not required to be served on him, with the date on which the order is noted in the Cause Book.

(4) Where by an order under Rule 6 or 7 a person is to be added as a party or is to be made a party in substitution for some other party, that person shall not become a party until -

(a) where the order is made under Rule 6, the writ has been amended in relation to him under this Rule and (if he is a defendant) has been served on him; or

(b) where the order is made under Rule 7, the order has been served on him under Rule 7(4) or, if the order is not required to be served on him, the order has been noted in the Cause Book,

and where by virtue of the foregoing provision a person becomes a party in substitution for some other party, all things done in the course of the proceedings before the making of the order shall have effect in relation to the new party as they had in relation to the old, except that entry of appearance by the old party shall not dispense with entry of appearance by the new party.

14 Joining an additional party to an existing action requires an amendment to the writ.

15 Order 21 r 1(1) provides a general liberty for a plaintiff to amend the writ once, without leave, at any time before the pleadings are deemed to be closed. However, that general provision is subject to par (3) of O 21 r 1. Among the exceptions stated in par (3) is an amendment which adds a party to an action, or adds a new cause of action. Amendments of the writ of that character are outside O 21 r 1 and thus require leave.

(a) Order 18 Rules 6, 7 and 8;

(b) Order 20 Rule 19(2) to (5); and

(c) the following provisions of this Rule,

the Court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleading, on such terms as to costs or otherwise as may be just and in such manner (if any) as the court may direct.

17 The primary question is whether O 18 r 4 empowers the court to add new defendants to an existing action, or whether it is concerned only with regulating the joinder of parties before an action is commenced.

18 Order 18 r 4 permits two or more persons to be 'joined together in one action' as plaintiffs or as defendants with the leave of the court, or where the conditions in O 18 r 4(1)(a) and (b) are established. Thus, where the conditions in O 18 r 4(1)(a) and (b) are established, there is no need for leave. In that case, the parties may be joined, at the commencement of an action, as of right. The leave element of O 18 r 4 permits a party, prior to commencing an action, to seek leave of the court to join multiple defendants notwithstanding that the conditions in O 18 r 4(1)(a) and (b) are not established. The question is whether that is the whole of the intended operation of the leave aspect of O 18 r 4(1) (the narrower construction), or whether it is intended also to empower the court to give leave to join multiple defendants subsequent to the commencement of the action (the broader construction).

19 There are also closer related questions of construction of O 21 r 5. Is the general power to give leave to amend a writ excluded in relation to adding new parties, in favour of the powers of O 18 r 6 and r 7? Is the effect of O 21 r 1 and O 21 r 5 that an amendment to add a party can be made only under O 18 r 6, r 7 and r 8? Obviously, an affirmative answer to that latter question is consistent only with the narrower construction of O 18 r 4. The converse is not true.

20 In my opinion, it is important to ensure that these questions are considered together, not in isolation from each other. That is necessary in order to ensure, so far as possible, that the rules are given a harmonious construction (Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69] - [71]).

21 I do not propose to set out the relevant principles of statutory construction in any detail. I refer to the outline of principles in Western Australian Planning Commission v Dungey [2010] WASC 52 [27], [29] - [31] and in Graham Geoffrey Walker and Thelma Jean Walker as trustees for the Walker Superannuation Fund v Clough Property Claremont Pty Ltd [2009] WASC 367 [21]. In broad summary:

(b) nevertheless, considerations of context, in a broad sense, object, and inconvenience or improbability of result are relevant;

(c) the statute must be read as a whole. Each provision should be construed consistently with the language and purpose of all the provisions.

22 Order 1 r 4B(2) requires that the rules are to be construed so as best to ensure the attainment of the objects in O 1 r 4B(1). I will say more about when that comes into play when I outline the plaintiffs' submissions.

23 So far as my researches and the researches of counsel reveal, there is very little authority on whether O 18 r 4 empowers the court to join additional defendants after the commencement of the action.

24 The question was recognised, but not decided in South-West Forest Defence Foundation (Inc) v Executive Director of Conservation and Land Management (1996) 131 FLR 225, 226 - 227; and in The Bell Group Ltd (In Liq) v Westpac Banking Corporation [2001] WASC 315 [209].

25 In Renovation & Finance Co Pty Ltd v Kott Gunning (A Firm) [2006] WASC 29, Jenkins J considered whether an additional plaintiff could be added to an existing action under O 18 r 4. Her Honour held that a plaintiff can be added to an existing action only under O 18 r 6(2)(b) and not under O 18 r 4. Her Honour said that three considerations led to that conclusion. First, the language of the rules supported it. Secondly, O 18 r 8 sets out the effect of adding a party under r 6. Order 18 makes no such provision for the effect of joining a party under O 18 r 4. That is consistent with O 18 r 4 being applicable where the joinder occurs at the commencement of the action, so that there is no need for provisions of the kind in O 18 r 8. Thirdly, her Honour pointed to the fact that in a case that satisfied the conditions in pars (a) and (b) of O 18 r 4(1), no leave was required and it would be odd if no leave were required to add an additional party to a proceeding. As will emerge, I agree with the first two of these points, but respectfully disagree on the third point. I think it is based on an incorrect view of the result of the broader construction of O 18 r 4.

26 In their submissions, the plaintiffs identified one Western Australian case in which a party was joined pursuant to O 18 r 4 without discussion of whether that rule empowered adding a new defendant to existing proceedings: Norilya Minerals Pty Ltd v Easterday [2009] WASC 191 [44] - [46]. My research has identified another such case: Skin-Plex Laboratories Pty Ltd v Baker [1999] WASC 81 [26]. Given the apparent absence of an issue about the scope of whether O 18 r 4 empowered adding a new defendant to existing proceedings in these cases, they do not seem to me to provide any real assistance on the question of construction I must resolve.

27 The fact that there seems to be only two cases in which an amendment to add a party has been said to be based on O 18 r 4 might be thought to suggest a common understanding that O 18 r 4 does not empower such an amendment. However, that consideration is not of assistance to the task of construction. There are many examples of statutory or equitable powers that have been revitalised after a period of dormancy in which they were rarely, if ever, invoked.

28 The decision of Jenkins J in Renovation & Finance Co Pty Ltd v Kott Gunning is a considered decision on this question of construction, made after hearing submissions. I am, of course, not bound by that decision. As a matter of judicial comity, a court of first instance will usually follow the decision of another judge of first instance unless convinced that the judgment was wrong: Mustac v Medical Board of Western Australia [2007] WASCA 128 [38] citing La Macchia v Minister for Primary Industries and Energy (1992) 110 ALR 201, 204; Cohen v Curchin [2008] WASC 8 [30].

29 The relevant rules in other Australian jurisdictions are materially different. For example, in New South Wales and in the Federal Court there is an express provision authorising an application for leave under the equivalent of O 18 r 4 to be made before or after the institution of proceedings. In South Australia and Victoria there are much broader provisions empowering the court to permit the addition of defendants after proceedings have commenced. There are also material differences in their rules about amendment. Consequently the authorities from other Australian jurisdictions seem to me to be of no real assistance.

Construction of O 18 r 4: The plaintiffs' submissions

30 The plaintiffs point to a number of matters in support of the broader construction of O 18 r 4.

31 First, the plaintiffs point to the generality of the language of O 18 r 4: multiple parties 'may be joined'. They point to the absence of any prescription or limitation of the time at which the joinder is to occur. I accept the second point. However, as I will explain, I do not think that the language of O 18 r 4 supports the broader construction.

32 Secondly, the plaintiffs point to the nature of the court as the repository of the power conferred by O 18 r 4. They submit, correctly, that the principles stated in the decision in Mansfield v Director of Public Prosecutions for Western Australia [2006] HCA 38; (2006) 226 CLR 486 [10] apply to the question of construction in this case. Because the rule confers a power on a court, so that the power will necessarily be exercised judicially, the grant of power should not be construed as subject to limitations not appearing in the words of the grant. A grant of power should be construed in accordance with ordinary principles so that words should be given their full meaning unless there is something to indicate to the contrary. The necessity for the power to be exercised judicially tends in favour of the most liberal construction. Those principles require the words granting the power to be given their 'full meaning'. The question is what that meaning is. In particular, the scope and subject matter of the grant of power must be identified in the process of construction.

33 Further, there are many statements in cases concerning similar rules to the effect that the rules are remedial and should be construed beneficially or liberally. See, for example, Payne v Young [1980] HCA 54; (1980) 145 CLR 609, 611, dealing with a High Court rule substantially similar to O 18 r 4, but without the provision permitting joinder by leave. There is authority that O 18 r 6 is a remedial rule which should be given a beneficial interpretation and should be given the widest interpretation which its language will permit: Woodings v Stevenson [2001] WASC 174; (2001) 24 WAR 221, [12]; APT Finance Pty Ltd v Bajada [2008] WASCA 73 [34]; Elovalis v Elovalis [2008] WASCA 141 (S) [6].

34 Next, the plaintiffs emphasise the requirement, by O 1 r 4B(2), that the rules be construed so as best to ensure the attainment of the objects in O 1 r 4B(1). The plaintiffs submit that the Insurers' construction of O 18 r 4 does not best ensure the attainment of the objects of O 1 r 4B(1). That is because, the submission continues, it constrains the court from permitting the addition of new parties unless the case is brought within O 18 r 6. Consequently, a plaintiff who could have joined an additional defendant under O 18 r 4, but did not do so, will be precluded from joining that defendant subsequently, unless the case is able to brought within the narrower sphere of O 18 r 6. In such circumstances, the plaintiff would be required to commence new proceedings against the additional defendant and then seek consolidation under O 83 r 1. That, the plaintiffs submit, is antithetical to contemporary case management.

35 In some respects, I think that the plaintiffs' submissions exaggerate the narrowness of O 18 r 6(2). For example, the phrase 'all matters in dispute' in the proceedings should not be construed as limited to matters arising on the existing pleadings: Elovalis v Elovalis [7]; National Companies & Securities Commission v Monsoon Nominees Pty Ltd [No 3] (1990) 3 ACSR 491, 497. Nevertheless, I accept that there will be cases within O 18 r 4(a) and (b) that are not covered by O 18 r 6(2)(b).

36 By O 1 r 4B(2), the rules are to be construed so as best to ensure the attainment of the objects in O 1 r 4B(1). I do not think that that provision means that whenever an alternative construction can be identified, however tenuous, it must be chosen if it better advances the O 1 r 4B(1) objects, regardless of what is indicated by textual, contextual and historical considerations, or by other provisions in the rules. It does not amount to a licence to rewrite the rules under the guise of interpretation, so as to better advance the case management objects of O 1 r 4B(1). Order 1 r 4B(2) prescribes something about how the rules are to be construed. The process of construction involves all the considerations I have identified. If, taking into account all those considerations, there are two reasonably available constructions, O 1 r 4B(2) requires the choice of the construction that better ensures (ie advances) the attainment of the goals of O 1 r 4B(2). It does not require or justify the adoption of a construction that, having regard to all the considerations relevant to the process of construction, is not reasonably available.

37 Finally, the plaintiffs submit that O 18 r 4 and O 18 r 6 have different subject matters and purposes. Order 18 r 4 is concerned with whether a separate cause of action may legitimately be prosecuted in a proceeding in which there are other causes of action being prosecuted by or against other persons. On the other hand, O 18 r 6(2)(b) is concerned with joinder to existing causes of actions so as to properly constitute the action and ensure that all necessary parties, and only such parties, are before the court. The plaintiffs submit that that view of the purposes of these rules is supported by the analysis of corresponding rules in the Federal Court by Branson J in Warner Music Australia Ltd v Swiftel Communications Pty Ltd [2005] FCA 1127 [12] - [18], and by the analysis of the then New South Wales Rules by Mahoney JA in Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34, 45, 50. The plaintiffs submit that these different purposes support a construction that permits both rules to operate in parallel after commencement of an action. I accept that the two rules have different purposes, but I do not accept that that supports the broader construction. The history of the English predecessors to O 18 r 4 and O 18 r 6, referred to below, is relevant in this regard.

Order 18 r 4: Linguistic and textual considerations

38 I start with the language of O 18 r 4. The rule states that multiple persons 'may be joined together in one action'. Like Jenkins J, I consider that that language and syntax favours a construction of the rule as empowering the combination (joining together) of claims against multiple parties into 'one action'. The inclusion of the word 'together' seems to me one of the indications to that effect. The rule is not expressed to empower a plaintiff to 'join [a] person as a party' or to obtain leave to 'join a person as a party' to or into an action: compare O 18 r 3.

39 I think that view of the language and syntax of O 18 r 4 is supported by consideration of the history of the English predecessor rules to O 18 r 4. I will come to that history shortly.

40 In my view, that reading of O 18 r 4 is also supported by the use of the word 'joinder' in the heading. That word is apt to refer to the process of identifying which persons are to be made parties to proceedings. See O 18 r 6, where the terms 'misjoinder' and 'nonjoinder' have corresponding meanings, and the heading of O 18 r 1, where the phrase 'joinder of causes of action' has a corresponding meaning.

41 Another consideration pointed to by Jenkins J is that O 18 r 8 sets out the effect of joining a party under r 6 and provides machinery for the steps to be taken in consequence of an order for joinder. No corresponding provision is made in O 18 for the effect of joining a party under O 18 r 4. That is consistent with r 4 being applicable only where the joinder occurs at the commencement of the action, so that there is no need for provisions of the kind in O 18 r 8. I agree with her Honour that the presence of r 8, and the absence of a similar provision with respect to r 4, is a consideration in favour of the narrow construction. Amendment is not mentioned in O 18 r 4. By contrast, although it is not mentioned in O 18 r 6 itself, O 18 r 8 expressly recognises that amendment of the writ is an element or consequence of an exercise of power under O 18 r 6(2)(b).

42 All of this seems to me to suggest that amendment is not part of the subject matter of the power conferred by O 18 r 4. Further, that view is supported by O 21 r 5, to which I will shortly come.

43 This view of the scope of the power in O 18 r 4 also derives support from a consideration of the history and purpose of these rules, to which I will come. The problem to which (the predecessor of) O 18 r 6(2)(b) was directed necessarily involved an amendment to the writ, since it was about ensuring all necessary and appropriate parties were before the court in resolving the proceedings then on foot. By contrast, the problem to which O 18 r 4 was directed did not involve any amendment to the writ - it was about who could be made parties to and which causes of action could be dealt with in the writ.

44 To my mind, this view of the scope of O 18 r 4 is consistent with what is required by Mansfield [10]. It is based on identifying the subject matter and scope of the grant of power, not implying a limitation into a conferral of power.

45 The third consideration pointed to by Jenkins J in Renovation & Finance Co Pty Ltd v Kott Gunning was that in a case that satisfied the condition in pars (a) and (b) of O 18 r 4(1), no leave was required and it would be odd if no leave were required to add an additional party to a proceeding. The plaintiffs submit that the answer to that is that joinder of an additional party could not be effected without leave of the court, because the effect of O 21 r 1(3) is that leave is required. I agree with the plaintiffs' submission in that respect. However, to my mind, it points to the need to give attention to O 21 r 5, which is the rule concerned with the grant of leave to amend a writ. Attention should be given to O 21 r 5 on two questions:

(2) does its proper construction influence or assist in the construction of O 18 r 4?

46 This submission of the plaintiffs about the need to get leave to amend the writ creates a difficulty for the broader construction of O 18 r 4. On that construction of O 18 r 4, when leave is granted under O 18 r 4 no leave is needed under O 21. The leave under O 18 r 4 supplies the authority to amend the writ. That means the plaintiffs' broader construction of O 18 r 4 involves giving the rule a differential operation on the question of amendment, depending whether pars (a) and (b) are satisfied or whether leave is given. If pars (a) and (b) are satisfied, leave to amend the writ is still needed. But if leave is given under O 18 r 4, no further leave to amend is required. In itself this militates against the broader construction.

47 If, contrary to my understanding, the plaintiffs rely on leave under O 18 r 4 in combination with leave under O 21 r 5, for the reasons to be developed in the next section of these reasons, O 21 r 5 cannot assist the plaintiffs in this application.

49 Order 21 r 5 expresses the general power of the court to permit an amendment to the writ (and statement of claim) to be subject to, among other things, O 18 r 6, r 7 and r 8. O 18 r 4 is not mentioned.

50 That leads to a question of the effect of the words 'subject to' in this rule. In what sense is the general power to amend the writ and statement of claim 'subject to' O 18 r 6, r 7 and r 8? That invites attention to the intersection of those rules with O 21 r 5. The intersection of O 18 r 6 with O 21 r 5 is, I think, limited to O 18 r 6(2), which permits, in certain prescribed circumstances, the court to order that persons cease to be parties or be joined as parties. Relevantly, O 18 r 7(2) permits the court to make the assignee of an interest or liability a party. Order 18 r 8 prescribes relevantly:

1. The procedure for amendment of a writ following an order under r 6: O 18 r 8(1); and
2. That persons will not become a party when added as a party under r 6 or 7 until the writ has been amended in relation to him and served on him: O 18 r 8(4).

51 Although it involves some linguistic inelegance, one reading of the provision that the general power to amend writs and pleadings is 'subject to' O 18 r 6, r 7 and r 8 is as follows. Within the sphere of amending a writ or pleading to add a party, the general power in O 21 r 5 is excluded in favour of the specific powers in O 18 r 6 and r 7, with the consequences and requirements prescribed by O 18 r 8.

52 That is the construction invited by the Insurers. The Insurers submit that there is an apparent purpose for that construction, namely to ensure that the doctrine of relation back does not apply to the addition of a new defendant.

53 Support for these submissions of the Insurers can be found in what was said by Murray J in Brandsma & Crockett Pty Ltd v Heindal Pty Ltd [2002] WASCA 96; (2002) 26 WAR 323 [5]. That case concerned an order made granting leave to amend a defendant's name pursuant to O 21 r 5(3). The case did not involve any question about the possible application of O 18 r 4. In the course of his reasons, Murray J said [5] - [6]:

Order 21 r 5(1) makes it clear that the rule operates subject to the provisions of O 18 r 6, which provides the procedural power to delete and add parties. Clearly the intention is that in a case where that is the proper characterisation of what is sought, that is the power which should be used, the deletion and joinder of a party taking effect from that date, thereby preserving any limitation defence. Generally under those circumstances the joinder would be refused as serving no useful purpose: Ketteman v Hansel Properties Ltd [1987] AC 189.

On the other hand, as O 21 r 5(2) makes clear, in my opinion, an amendment to a pleading allowed under that rule will relate back to the date of service of the original pleading; in this case the counterclaim. The Court is given the power to grant leave even under such circumstances 'if it think it just to do so' but, as was held in Morgan v Banning (1999) 20 WAR 474, the rule cannot be applied so as to have the effect of overriding the substantive law provided by the Limitation Act 1935 (WA) or any other statutory provision in respect of the limitation of actions: see also John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503.

54 In this passage, his Honour seems to me to express the view, obiter, that:

(a) it is O 18 r 6 which provides the power to delete and add parties; and

(b) the requirement to add parties pursuant to that order ensures that joinder takes effect from the date of the amendment, by engaging O 18 r 8.

(1) the doctrine of relation back can never defeat a limitation defence;

(2) consequently, there is no need to restrict amendments that add a party to O 18 r 6 in order to avoid relation back defeating a limitation defence.

56 I accept the first proposition. If a party added to an action by amendment has a limitation defence, it is not defeated by the amendment, whether by leave or otherwise or by any doctrine of relation back: Morgan v Banning (1999) 20 WAR 474, 483; ABB Service Pty Ltd v Hetherington [2001] WASCA 417 [9], [12] and [19]. However, that was not a matter overlooked by Murray J in Brandsma & Crockett Pty Ltd v Heindal Pty Ltd [6], set out above. In this context, it may be that the position as regards the doctrine of relation back was less clear in 1971 than it subsequently became after appellate decisions in this state.

57 In any event, the plaintiffs did not, in written or oral submissions, identify an alternative construction for O 21 r 5(1)(a). In particular, they did not identify what is meant by the statement in O 21 r 5 that the general power to amend a writ is 'subject to' O 18 r 6, r 7 and r 8.

58 I am unable to identify an available alternative reasonable construction.

59 If a party obtained leave to amend to add a party under O 18 r 6 there will, of course, be no need to seek leave under O 21 r 5. But that cannot be what is intended to be conveyed by the statement that the general power in O 21 r 5 is 'subject to' O 18 r 6, r 7 and r 8. The language is 'subject to', not 'in addition to'. Moreover, the central function of O 21 r 5 is to confer a power: 'the court may'. It is that conferral of power that is made subject to O 18 r 6, r 7 and r 8. That supports reading the rule to mean that the power is not conferred in relation to the subject matter of O 18 r 6, r 7 and r 8: amendment to add or substitute a party.

60 In construing the words 'subject to', consideration should also be given to pars (b) and (c) of O 21 r 5. The application of that phrase to par (c) provides no difficulty. The general power in O 21 r 5(1) is subject to the more particular provisions in the following subsections. Paragraph (b) however is difficult to make sense of. It makes the general grant of power to amend subject to O 20 r 19(2) - (5). For example, the reference to O 20 r 19(2) does not make sense. I infer that that is either a clerical error or a reference to an earlier version of O 20 r 19. Broadly, however the intention is reasonably apparent. The general power to give leave to amend in O 21 r 5 is subject to the more particular powers to amend or strike out provided for in the relevant parts of O 20 r 19.

61 In summary, therefore, in my view, the only reasonable construction of O 21 r 5(1)(a) is as follows. The general power of amendment in O 21 r 5 does not arise in relation to an amendment to add a party. Rather, an amendment to add a party is governed by O 18 r 6, r 7 and r 8. That seems to me to carry a strong if not necessary implication that there are no other rules that empower amendment to add a party.

62 On the face of it, that construction of O 21 r 5 would be fatal to the plaintiffs' broader construction of O 18 r 4. However, the plaintiffs submit that:

(1) the predecessor English Rules and the WA Rules have been amended on numerous occasions;

(2) consequently, complete coherence and consistency cannot always be expected; and

(3) the absence of reference to O 18 r 4 in O 21 r 5(1)(a) might be seen as a drafting slip, rather than as revealing an intention that O 18 r 6, r 7 and r 8 be the exclusive source of power to add a party.

I accept the first two propositions, but not the third.

63 A construction of that kind, so as to correct an apparent error in a legislative instrument, is available in the abstract. It will be adopted when other parts of the instrument reveal an unambiguous intention that manifests an obvious error. In the present case, no such unambiguous intention is revealed by O 18 r 4, or by other provisions of the rules. To the contrary, as I have said, in my view, the textual considerations in O 18 r 4, viewed in isolation from O 21 r 5, favour the narrow construction. Moreover, consideration of the history of the predecessor rules provides no support for the invitation to infer a clerical error in omitting reference to O 18 r 4 in O 21 r 5(1)(a). I turn to the legislative history.

64 In my view, consideration of the history of the English predecessor rules reinforces the narrow construction and the view that amendment is not part of the subject matter of the power conferred by O 18 r 4.

65 The history of the English Rules on which O 18 r 4 and O 18 r 6 were based was explained in some detail by Mahoney JA in Qantas Airways Ltd v AF Little Pty Ltd (45 - 54). With one or two minor differences, what follows reflects that outline. I also add reference to the rules about amendment which, as I have said, seem to me to be relevant.

66 Up to the 1880s, there were two significant procedural limitations which were required to be remedied. Mahoney JA called these the 'combination of claims problem' and the 'parties problem'. Essentially the combination of claims problem arose, because at law an action could be brought only upon one cause of action. In equity, the position was less absolute, but the boundaries were unsatisfactually unclear. The 'parties problem' stemmed from Equity's desire to do complete justice and the consequent need for all necessary parties to be parties to a suit.

67 In the 1875 Rules, O 16 was created to deal with the parties problem and O 17 to deal with the joinder of causes of action. Mahoney JA set out the original form of those rules (47). Order 16 r 13 was substantially in the form of what is now WA O 18 r 6(1) and (2).

68 These parts of the 1875 Rules were incorporated in the 1883 Rules. In the 1883 Rules, what had been O 16 and O 17 became, respectively, O 15 and O 16.

69 As a result of judicial interpretation of these two orders, amendments to the rules were seen to be necessary. An amendment was made to O 16 r 1, dealing with plaintiffs, so as to provide as follows:

All persons may be joined in one action as plaintiffs in whom any right to relief in respect of or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative, where if such persons brought separate actions any common question of law or fact would arise; provided that, if upon the application of any defendant it shall appear that such joinder may embarrass or delay the trial of the action (49).

70 As Mahoney JA observed, this amendment was directed in part to expanding the ambit of the claims which could be joined in the single proceeding, yet it was made in O 16, concerned with parties, rather than in O 17, which otherwise dealt with joinder of causes of action.

71 No corresponding amendment was made to O 16 r 4, the corresponding rule which dealt with defendants. However, the view was taken that O 16 r 4 operated to allow not only joinder of parties, but also causes of action which otherwise could not have been joined: Richardson v Trautwein [1942] HCA 5; (1942) 65 CLR 585.

72 The 1963 Annual Practice sets out O 16 r 1 and O 16 r 4 substantially in this form. At that stage, O 28 governed amendments. Order 28 r 1 provided a broad power to permit amendment on such terms as are just. By 1963, the Annual Practice recorded that if either party desired to amend to add a new plaintiff or a new defendant, the applicant must apply under the then equivalent of O 18 r 6, citing Kendall v Hamilton (1879) 4 App Cas 504.

73 At this stage there was no provision for leave to join parties.

74 In the 1964 Annual Practice, the relevant rules had been amended. The previous O 16 r 1 and r 4 had been combined into O 15 r 4, in terms corresponding to our O 18 r 4 and including provision for the court to give leave for two or more persons to be joined in one action. Also, the order dealing with amendment (O 20) was substantially rewritten. It was in a form that materially mirrors our O 21 r 1 and O 21 r 5 (but without our O 21 r 5(1)(b) and (c)).

75 From this, it can be seen that the rule providing that the power to allow the plaintiff to amend the writ or pleadings was subject to (the English equivalent of) O 18 r 6, r 7 and r 8 was inserted at the same time as, or substantially the same time as, the inclusion in (the equivalent of our) O 18 r 4 of a power for the court to give leave for a joinder of two or more persons as plaintiffs or defendants in an action. That removes the foundation for the plaintiffs' argument that the omission to mention O 18 r 4 in O 21 r 5(1)(a) is explicable as a clerical error arising from the piecemeal amendment process.

76 Moreover, the terms of O 20 r 5 (our O 21 r 5) can, in light of what was said in the 1963 Annual Practice, be seen as having embodied the position established by case law.

77 In the English Rules, there is nothing to suggest that the equivalent of O 18 r 4 was thought to empower the amendment of a writ and statement of claim so as to add a party. To the contrary, the position under the English Rules would seem to have been that it was intended that only under the equivalent of O 18 r 6, r 7 and r 8 could parties be added.

78 Before the English Rules were amended to empower the court to grant leave to join parties, there is dicta that the equivalent to O 18 r 4 did not empower the court to permit an amendment so as to add a party. Rather, the plaintiff wishing to add a defendant would need to invoke the equivalent of O 18 r 6: Amon v Raphael Tuck & Sons Ltd [1956] 1 QB 357, 386.

79 The 1971 WA rules O 18 r 4, O 18 r 6 and O 21 r 5 were taken directly from the then English rules O 15 r 4, O 15 r 6 and O 20 r 5 respectively. Since then our O 18 r 4 and O 18 r 6 have not been amended.

80 Of course, this historical view should not be given excessive weight in the process of construing our rules, in their present form, by reference to the text, context, object, and evident purpose. Nevertheless, to my mind it reinforces what I think is indicated by the language and syntax of O 18 r 4, O 18 r 6 and O 21 r 5. The mischief to which O 18 r 4 is directed is not about amendment of existing proceedings, but is about permitting, in prescribed circumstances, multiple parties and causes of action in one writ and thus one action.

The construction of O 18 r 4 and O 21 r 5: Conclusions

81 I am not satisfied that the construction of O 18 r 4 adopted by Jenkins J in Renovation & Finance Co Pty Ltd v Kott Gunning is wrong. To the contrary, I agree with it. It is supported by substantial textual and linguistic considerations in O 18 r 4 itself. It also draws substantial support from O 21 r 5. I construe O 21 r 5 as revealing an intention that the general power to give leave to amend the writ is excluded in relation to amendment to add a party. Amendment to add a party is governed by O 18 r 6, r 7 and r 8. Indeed, I am unable to identify an alternative construction of O 21 r 5(1)(a). These considerations are reinforced by the legislative history.

82 In my view, the scheme of O 18 and O 21, read as a whole, is relevantly as follows. Order 21 governs amendment generally. Amendment to add a new party requires leave: O 21 r 1(3). The court has a general power under O 21 r 5 to permit amendment of a writ or statement of claim on such terms as are just. That general power is subject to, among other things, O 18 r 6, r 7 and r 8. That means that the general discretion to permit amendment does not apply to an application to amend so as to add a new party. Applications to add a new party are governed by O 18 r 6, r 7 and r 8. Order 18 r 4 is not directed to amendment of a writ or statement of claim. It concerns joinder of parties. It does not itself permit amendment of a writ or statement of claim to add new parties.

83 It is true that this construction results in what is, to my mind, a less than optimal position. There will be cases in which joinder at the outset would have been permissible under O 18 r 4(1), either by satisfaction of par (a) and (b) or by leave, but which do not engage the narrower power in O 18 r 6. For those cases, a plaintiff must commence new proceedings against the additional defendant and apply for consolidation. Greater flexibility in the court's powers would be desirable. However, in the process of construction, those considerations of consequence and inconvenience seem to me to be significantly outweighed by the textual and linguistic considerations, the structure of O 18 and O 21, and, to a lesser extent, the history of the relevant rules as I have outlined. When all these matters are considered, I do not think that the broader construction is a reasonably available construction. Thus I do not think that the requirements of O 1 r 4B(2) in construing the rules, and any advantage that the broader construction has in advancing the O 1 r 4B(1) goals, justifies or requires the adoption of the broader construction.

84 For these reasons, I adopt the narrower construction. Order 18 r 4, alone or in combination with O 21 r 5, does not empower a court to add a party to an existing action. As the plaintiffs relied on O 18 r 4 as the sole basis for their application, the application must be dismissed.

85 For the sake of completeness, I will deal with the question of discretion, on the assumption that there was power to make the order sought by the plaintiffs.

86 A major issue arose between the parties as to whether the plaintiffs have an arguable case for a declaration against the Insurers. It is common ground that unless that is shown, the discretion would not be exercised in favour of the plaintiffs.

87 The Insurers contend that the plaintiffs do not have an arguable case against the Insurers because:

(1) the plaintiffs are not a party to the contract of insurance;

(2) if a declaration were granted in favour of the plaintiffs, it would have no foreseeable consequences for them. That is because:

(a) a bare declaration in favour of the plaintiffs would not enable the plaintiffs to bring any recovery proceedings;

(b) the trustees in bankruptcy of the insured defendant would need to bring a new action against the Insurer to claim indemnity under the policy;

(c) in a new action brought by the trustees in bankruptcy, the Insurer would not be bound by the declaration and would not be precluded from defending that action;

(3) in these respects, the contrary is not arguable.

88 The plaintiffs submit that there is a substantial line of authority to the effect that, in the present circumstances, the Insurers would, arguably at least, be bound by a declaration, either by the doctrine of res judicata or, in practical effect, by the prospect that any attempt by the Insurers to defend subsequent proceedings by the trustees in bankruptcy would be liable to be struck out as an abuse of process.

89 I accept that there is a substantial body of authority in support of the plaintiffs' contentions regarding abuse of process. Moreover, the cases on which the plaintiffs rely were subsequent to the case on which the Insurers rely. Those subsequent cases gave consideration to the earlier case and, notwithstanding it, determined that there was sufficient prospect that the Insurer would be precluded from defending subsequent proceedings if a declaration were made in favour of the plaintiffs to mean that the granting of a declaration would, arguably at least, have foreseeable consequences for the plaintiffs. That is the position which I would adopt. However, in deference to the arguments presented on the application, I will survey the cases and deal with the main submissions made on behalf of the Insurers.

Is it arguable that the Insurers would be bound in subsequent proceedings brought by the insured: The authorities

90 In JN Taylor Holdings Ltd (In Liq) v Bond (1993) 59 SASR 432, the plaintiffs were both companies in liquidation. They sued three of their former directors alleging breaches of duty as directors. The directors were insured for their liability in respect of any wrongful act committed in their capacity as directors of the plaintiff companies. One of the directors was bankrupt and the other two had left the country. The insurer denied liability to indemnify the directors in respect of the plaintiff companies' claims. The plaintiffs sought leave to join the insurer as an additional defendant, seeking a declaration that the insurer was obliged to indemnify the directors in respect of any judgment in favour of the plaintiff companies arising out of any wrongful act within the terms of the policy. The judge at first instance refused leave on the ground that the question raised was theoretical. The Full Court upheld an appeal and ordered the joinder of the insurers. Special leave to appeal against the decision was refused by the High Court.

91 In determining whether the court's discretion should be exercised in favour of joinder, King CJ (with whom Prior and Perry JJ agreed) held that the insurer, if joined as a defendant, would be bound, in subsequent proceedings by the defendant directors or their trustee in bankruptcy by a declaration of liability and by findings of fact made in the then present action (441). That holding was subsequently not followed by the Queensland Court of Appeal, in a case to which I will come.

92 In the exercise of discretion, the court emphasised the overriding principle that a multiplicity of proceedings was to be avoided. In that case, there was a great deal of common ground between the issues concerning the primary liability of the defendant directors to the plaintiffs, and the grounds on which the insurers denied liability.

93 JN Taylor Holdings Ltd v Bond was distinguished by the Court of Appeal of Victoria in CE Heath Casualty & General Insurance Ltd v Pyramid Building Society (In Liq) [1997] 2 VR 256. In that case, the insurers were conducting the defence of the claim made against former auditors of the building society in liquidation. The plaintiff enquired of the insurers whether they admitted liability. On enquiry, the insurers neither admitted nor denied liability to indemnify the auditors.

94 In Beneficial Finance Corporation Ltd v Price Waterhouse (1996) 68 SASR 19, the Full Court of South Australia followed CE Heath. In Beneficial Finance, the insurer had accepted liability, so that the case was a clearer one than CE Heath.

95 The Insurers rely heavily on the decision of the majority of the Queensland Court of Appeal in Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd [1998] QCA 180; [2000] 2 Qd R 301. The plaintiff (Interchase) commenced proceedings against valuers. FAI was the professional indemnity insurer of the valuers. After conducting the defence of the litigation on behalf of the valuers for some time, FAI declined indemnity. The valuers did not object to that decision, or foreshadow contesting it. Interchase sought to join FAI as an additional defendant to obtain a declaration that FAI was liable to indemnify the valuers in respect of their liability to Interchase. The primary judge made an order joining FAI. The majority upheld FAI's appeal and set aside the order.

96 Byrne J upheld the appeal on the basis that the joinder serves no useful purpose. His reasoning was as follows:

(a) the grant of a declaration in favour of Interchase would not preclude FAI from disputing its liability to the valuers in proceedings instigated by the valuers (or their liquidator or trustee in bankruptcy) claiming an indemnity;

(b) the status of being co-defendants does not mean that the valuers and their insurers were adversaries - there was no controversy between them;

(c) consequently, contrary to what was said by King CJ in JN Taylor Holdings, there would be no res judicata or issue estoppel between the valuers and their insurers;

(d) further, he rejected the contention that the declaration would have utility because any defence by FAI in later proceedings to enforce the policy inconsistent with a declaration would be struck out as an abuse of process. The considerations combining to mean that there was no 'appreciable prospect' of that were:

(i) it would not be a case of ulterior or collateral purpose;

(ii) the valuers, as plaintiffs in the later case, would have elected not to bring third party proceedings in this litigation;

(iii) it would be the defence, rather than prosecution of a claim, that would need to be shown to be an abuse; and

(iv) the subsequent proceedings would probably afford FAI procedural advantages that are not available to it in defending Interchase's actions, such as a capacity to interrogate, and given the issues between the parties, that could affect the result.

98 Davies JA dissented. He accepted that if the declaration would not effectively determine FAI's liability to indemnify the valuers, as between FAI and the valuers, the discretion was wrongly exercised. Davies JA agreed with Byrne J that res judicata and issue estoppel would not operate between the valuers and FAI in relation to a declaration obtained by the plaintiffs (309). However, Davies JA held that the declaration would effectively determine the question of FAI's liability to the valuers, as between those parties, because it would be an abuse of process for FAI to litigate the question in subsequent proceedings. In coming to that conclusion, Davies JA stated that '[t]here can be no doubt that, in the present case, both FAI and the valuers will have full opportunity of contesting the question in respect of which the declaration is sought' (310).

99 In a footnote to that passage, Davies JA stated that Byrne J had expressed the view that FAI will have procedural advantages in proceedings by the valuers against it, in particular a capacity to interrogate the valuers, which it does not have in the existing proceedings. If that is so, Davies JA said, it can be readily overcome, at little cost to FAI, by its seeking a declaration in these proceedings against the valuers in respect of the existing issue. Thus, Davies JA concluded, in practical terms there was no real disadvantage to FAI in having all issues resolved in these proceedings.

100 This footnote is part of why I reject the Insurers' submission that Davies JA did not address the matters raised by Byrne J as to why abuse of process would not apply.

101 Davies JA rejected FAI's contention that a declaration would not be granted because the question was purely hypothetical and that Interchase did not have a real interest. He held that the insolvency of the valuers, their failure to seek an indemnity from FAI, and the ineffectuality of any judgment by Interchase against the valuers unless FAI was liable to indemnify them combined to give Interchase a real interest in the relief sought (311).

102 The plaintiffs rely heavily on the decision of French J in Ashmere Cove Pty Ltd v Beekink (No 2) [2007] FCA 1421; (2007) 244 ALR 534, and on the decision of the Full Federal Court dismissing the appeal from that decision.

103 In that case, the applicants had commenced proceedings against the former directors of the company which was the responsible entity for the registered management scheme in which the applicants had invested. The company was covered by a professional indemnity insurance policy and gave notice to its insurers. The insurers declined to provide indemnity, relying on an exclusion clause. The liquidator of the company was not prepared to contest the insurers' refusal to indemnify. The applicants sought to join the insurers as respondents, seeking a declaration that the insurers were liable to indemnify the company. The insurers opposed the application on grounds of discretion. There was no issue that the court had power to join the insurers [35]. The thrust of the insurers' argument was that a declaration obtained against them would not legally prevent them from contesting a claim for indemnity by the liquidator in subsequent proceedings.

104 French J surveyed the authorities to which I have referred. He said that it was not necessary to decide the question of whether a res judicata would arise between insurer and co-defendant precluding the insurer from denying liability if a declaration were made in the original proceedings. His Honour held that joinder of an insurer was supportable on a wider basis as explained by Davies JA in Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd. French J also referred to his review of authorities relating to the concept of abuse of process by re-litigation in Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 [59] - [69]. Thus, his Honour concluded there was utility in a declaration against the insurer [58].

105 The Insurers submit that French J did not articulate any reasoning as to how the general abuse of process power could apply to this kind of situation. I do not agree. His Honour referred to what he had said in Spalla [59] - [69]. In that summary of the authorities, French J identified the breadth of the power and some of the considerations relevant to its exercise.

106 In the context of other discretionary considerations, French J in Ashmere Cove Pty Ltd v Beekink (No 2), observed that the priority right in the proceeds of a successful claim given by s 562 of the Corporations Act 2001 (Cth) gave the plaintiffs a very real interest in having the insurers' obligations to the defendant determined [59].

107 The Full Federal Court dismissed an appeal from the decision of French J: Employers Reinsurance Corporation v Ashmere Cove Pty Ltd [2008] FCAFC 28; (2008) 166 FCR 398. The insurers contended that the joinder did not involve an exercise of the judicial power of the Commonwealth because there was no justifiable controversy and thus no matter. Further, they contended that a declaration would not be binding as between the insurers and the insured. Further, it was argued that if there were a justiciable controversy, leave to join the insurers should be refused because a court could not authoritatively determine the rights and duties of the parties to the insurance contract. The Full Federal Court held that the investors had a real interest in establishing that the insurers were liable to indemnify the respondents. They pointed to the possible steps that might be taken by the investors to secure the benefits of an indemnity available to the insured. The court mentioned the following possibilities:

(a) the investors could invoke s 562 of the Corporations Act, if the liquidator received an amount from the insurer under the policy;

(b) if the respondent was deregistered, the investors might invoke s 601AG of the Corporations Act; and

(c) the investors might appeal to the court under s 1321 of the Corporations Act against the liquidator's refusal to file a cross-claim or proceed against the insurers [53].

108 The Full Court found that there was no error in French J's conclusion that the joinder of the insurers would have a practical utility [66], [73].

109 The court referred to the difference in view between JN Taylor and Interchase. The court stated that the approach in JN Taylor 'may be correct' [67], but that it was not necessary to decide between the two competing views. Adopting the view in Interchase, the court held that an attempt by the insurers to re-litigate their liability would give rise to an issue concerning the application of the Anshun principle. The outcome could not be predicted with certainty since it might be influenced by the course the trial takes. Nonetheless, the court observed, the likelihood was that the insurers would face formidable obstacles if they chose not to put forward all their defences in the current proceedings, or if they sought to re-agitate issues that were the subject of adverse findings or holdings by the primary judge [68].

If the Insurers have a full opportunity to agitate any defence they wish to raise in answer to the Investors' claim for declaratory relief (presumably they will have such an opportunity), it is difficult to see why the Anshun principle would not preclude them from relying on any such defence in subsequent proceedings involving the same parties. Among other things, relying on such a defence would create the risk of conflicting judgments. That the Anshun principle would apply was in substance the view taken by Davies JA in his dissenting judgment in Interchase at 310 - 311 and was adopted by the primary Judge. We see no error in it. In particular, in our view the primary Judge did not overlook the precise legal effect of any declaration that might be made against the Insurers.

Mr Donaldson suggested that it would be unfair for the Insurers to be put in the position, assuming them to be joined as respondents, of not knowing whether to contest the Investors' claims and facing the risk that an Anshun estoppel would apply to prevent them raising a defence in subsequent proceedings. In our view, any supposed dilemma would be entirely of the Insurers' own making. As we have indicated, a court hearing the hypothetical second proceedings would be unlikely to view with sympathy a decision by the Insurers not to play an active part in the first proceedings.

The reality is that the joinder of the Insurers, as directed by the primary Judge, will prove to be of practical utility. There are good reasons, explained by his Honour, for all the issues to be litigated in the one proceeding. The directions that have been made will facilitate the orderly, expeditious and just resolution of the justiciable controversy.

In substance, the effect of the joinder orders made by the primary Judge is no different to the situation involved in the everyday case of an insured joining its insurer as a third party (by whatever procedural means may be appropriate in the particular court). This enables issues of liability and assessment of damages or compensation, both as between claimant and insured and as between insured and insurer, to be heard and determined in the one proceeding. There are obvious benefits in terms of efficiency and economy. There is no reason in modern times why form should trump substance, where the interests of justice suggest that all related issues should be resolved in a single proceeding [71] - [74].

111 The High Court dismissed an application for special leave: [2008] HCA Trans 296.

112 The Insurers criticise the reliance by the Full Federal Court on the Anshun principle. The Full Federal Court stated that Davies JA in Interchase and French J in Ashmere had applied the Anshun principle when they had not. I agree, with respect, that Davies JA and French J applied a general power of abuse of process, not the Anshun principle. To that extent, I respectfully disagree with the way in which the Full Federal Court expressed its reasons. However, as I observed in Stewart v Biodiesel Producers Ltd [2009] WASC 145 [6], in this area of the law there are numerous inconsistencies in terminology and taxonomy. In substance, the Full Federal Court approved the reasoning of French J and Davies JA.

113 In subsequent cases, having identified the differences of approach in Interchase and the other cases, judges of the Supreme Court of Victoria and New South Wales have followed the decision of French J and the Full Federal Court: Anjin No 13 Pty Ltd v Allianz Australia Insurance Ltd [2009] VSC 371 [84], [88]; Bazem Pty Ltd v Bureau of Urban Architecture [2010] NSWSC 978 [43]. In both these cases, leave was granted to a plaintiff to join, as a further defendant, the insurer of a defendant in the action, seeking a declaration that the insurer was obliged to indemnify the existing defendant in respect of the plaintiff's claim.

Would the Insurers arguably be bound in subsequent proceedings brought by the insured: Insurers' submissions

114 I have dealt with some of the Insurers' submissions in the preceding section of these reasons.

115 The Insurers further submit that the approach taken by Davies JA and by French J involved making an unjustifiable assumption that, in subsequent proceedings, the judge in the action between insured and insurer will regard the Insurers' conduct as involving an abuse of process. I do not accept that submission: no such assumption is required or made. The question on a joinder application is whether the plaintiffs have an arguable claim for a declaration. In that context, it is not necessary to determine that the Insurers' defence of subsequent proceedings would inevitably be dismissed as an abuse of process. Rather, it is enough that there is sufficient prospects of that to mean that it is arguable there would be foreseeable consequences for the plaintiffs. That is how I understand what was said by French J in Ashmere at [58] of his reasons. Moreover, it is clear from what the Full Federal Court said in Employers Reinsurance that that is how their Honours approached the matter: see [68] and [71].

116 The Insurers also submit that, if they successfully defend the declaration sought by the plaintiffs, they would nevertheless face the possibility of being sued subsequently by the insured. They say that that is particularly the case if the insured has an explanation for not bringing the claim in the earlier action, namely lack of funds. To my mind, it is difficult to see substantial force in the perceived threat. In any event, it is open to the Insurers to remove any such threat by instituting a counterclaim for a declaration and joining the trustees of the bankrupt estate of the defendant as a party to that counterclaim. When that possibility was raised in argument, the Insurers pointed to various reasons why they should not be 'required' to bring a counterclaim against the trustees in bankruptcy. I do not see it as a question of requiring the Insurers to take such steps. Rather, the availability of those steps seems to me to remove any substantial force from the Insurers' complaint of the risk of re-litigation after they succeed in defending the plaintiffs' claim for a declaration.

117 Finally, the Insurers submit that the reasoning of Davies JA, French J, the Full Federal Court, and the judges of those who have subsequently followed the case, has a 'circular quality' to it. I am not persuaded of that submission.

118 For these reasons, I reject the Insurers' submission that flaws in the reasoning in these decisions mean that they are not to be followed. I would follow this stream of authority. In my view, it is at least arguable that there is sufficient prospect that, if a declaration is made in favour of the plaintiffs, the Insurers would be precluded by abuse of process from defending a subsequent action by the trustees in bankruptcy to mean that a declaration would have practical consequences for the plaintiffs.

119 The Insurers also articulated written submissions that raised the issues of jurisdiction and standing. These submissions were founded on the absence of practical consequences for the plaintiffs. For the reasons already given, I do not accept the Insurers' contentions. The plaintiffs' position is arguable.

120 The Insurers submit that if the plaintiffs are permitted to join them and seek a declaration in the present action, they will be prejudiced by being placed at procedural and forensic disadvantages compared to the position if proceedings were brought against them by the insured. For example, the Insurers point to the apparent unavailability of discovery and interrogatories from the defendant in an action brought by the plaintiffs against the Insurers for a declaration. The Insurers also submit that in circumstances where the insured was bankrupt, it was unlikely that any party would call the defendant. The Insurers contend that in proceedings between insurer and insured they could invoke a Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 inference in the event that the defendant was not called, whereas that would not likely arise in an action between the plaintiffs and the Insurers.

121 In my view, there are two considerations which answer these submissions. First, in my view the Insurers' submissions exaggerate the perceived procedural disadvantages. Their submissions overlook the breadth of the power of the court to make such interlocutory order or case management direction as is just O 4A r 5. If the Insurers were joined, it would be within the power of the court to make orders for discovery and interrogatories by the defendant in the action between the plaintiffs and the Insurers. Secondly, any procedural and forensic disadvantages may be eliminated or reduced by the Insurers choosing to make a counterclaim for a declaration against the trustees in bankruptcy.

122 The Insurers also submit that because it is, at the least, uncertain whether the declaration would have utility and whether the Insurers would be precluded by abuse of process from defending subsequent proceedings, permitting the plaintiffs to join the Insurers and seek a declaration in this action creates a risk of multiplicity of proceedings and a risk of conflicting decisions. I accept that that is so. However, I am not persuaded that those risks outweigh the prospect that to permit joinder would avoid a multiplicity of proceedings, by determining, at least in a practical sense, the question of whether the Insurers are obliged to indemnify the defendant in respect of the liabilities to the plaintiffs that are the subject of this action.

123 The Insurers also contend that it is open to the plaintiffs to fund the trustee to join the Insurers and this is what should occur, rather than the joinder of the Insurers in the present action. I accept that it is open to the plaintiffs to fund the trustees to bring a claim against the Insurers in the present action. However, I am not persuaded that, as a matter of discretion, I should in effect treat that as a preferable course.

124 Like French J in Ashmere Cove, and the courts that have upheld or followed his Honour's decision, had I a discretion, I would exercise the discretion in favour of the plaintiffs.

125 The plaintiffs' application is based solely on O 18 r 4. In my opinion, O 18 r 4 does not empower the court to add a defendant to an existing proceeding. Consequently, the plaintiffs' application is dismissed.

126 I will hear from the parties on costs. The starting point is that costs should follow the event and should be fixed.