Mrdalj v Allianz Australia Insurance Limited

The issue in this application

1. The issue initially debated in correspondence between the solicitors for Allianz and those for GIO, and further pursued between counsel in written submissions, was whether there was an operative exclusion clause which meant that this Court should refuse leave because the insurer can establish that it is entitled to disclaim liability under the contract of insurance.
2. That issue was conceded this morning by counsel for GIO, and accordingly the purpose of this judgment is to articulate how the material tendered on the application persuaded me that I should exercise my discretion to grant leave to proceed against GIO to both the plaintiff and the cross-claimant Allianz.
3. Section 4 of the Act provides: 4 Claimant may recover from insurer in certain circumstances (1) If an insured person has an insured liability to a person (the claimant), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court. (2) The amount of the insured liability is the amount of indemnity (if any) payable pursuant to the terms of the contract of insurance in respect of the insured person's liability to the claimant. (3) In proceedings brought by a claimant against an insurer under this section, the insurer stands in the place of the insured person as if the proceedings were proceedings to recover damages, compensation or costs from the insured person. Accordingly (but subject to this Act), the parties have the same rights and liabilities, and the court has the same powers, as if the proceedings were proceedings brought against the insured person. (4) This section does not entitle a claimant to recover any amount from a re-insurer under a contract or arrangement for re-insurance.
4. As submitted by Mr Lloyd, counsel for Allianz, "person" should be considered to include a claimant organisation that has issued a cross-claim. Proceedings pursuant to that cross-claim are "proceedings to recover damages and costs", and so his client Allianz is able to proceed under s 4 and s 5 of the Act.
5. Section 5 of the Act provides: 5 Leave to proceed (1) Proceedings may not be brought, or continued, against an insurer under section 4 except by leave of the court in which the proceedings are to be, or have been, commenced. (2) An application for leave may be made before or after proceedings under section 4 have been commenced. (3) Subject to subsection (4), the court may grant or refuse the claimant's application for leave. (4) Leave must be refused if the insurer can establish that it is entitled to disclaim liability under the contract of insurance or under any Act or law.
6. Mr Reynolds, counsel for GIO conceded first, that there is an arguable case against Calcono in respect of the claim brought against Calcono by the parties to the action, second, that Allianz has an arguable case that the policy issued by GIO responds to the claim and third, that there is a real possibility that Calcono would not be able to meet a judgment.
7. It was common ground that what remained for consideration by me was whether there was a potential disclaimer of liability under the contract of insurance because of one or other or both of two operative exclusion clauses in the policy.
8. The first is clause 12: This policy section does not insure liability arising directly or indirectly out of a cause by, through, or in connection with, or for: … 12. Building works The erection, demolition of and/or alteration or addition to buildings or structures by you or on your behalf except where the completed value of such work does not exceed $250,000 in total.
9. The second is clause 17: This policy section does not insure liability arising directly or indirectly out of a cause by, through, or in connection with, or for: 17. … any liability assumed under any contract or agreement. However this exclusion does not apply to: (a) Liability which would to have been implied or imposed by law in the absence of such contract or agreement; (b) …
10. In my view all of the concessions made by Mr Reynolds, counsel for GIO, were made appropriately. I find that there is an arguable case as to the liability of Calcono for the plaintiff's injuries and contribution on the cross-claim, there is an arguable case that the policy issued by GIO responds to the claim, and there is a real possibility that Calcono will not be able to meet the judgment.
11. In terms of the question as to whether GIO is able to establish that it is entitled to disclaim liability under the contract of insurance or under any act or law, I accept the submission made by Mr Lloyd that GIO bears the onus of establishing at trial that the exclusion applies, and GIO bears the onus on this application of establishing that it is entitled to disclaim liability.
12. I accept Mr Lloyd's submission that on this application, the principles stated in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 apply to the question of whether GIO is entitled to disclaim liability: Zaki v Better Buildings Constructions Pty Limited [2017] NSWSC 1522 [28].
13. Whilst there were sensible arguments articulated by Mr Reynolds in his written submissions as to why there may be a basis to disclaim liability, it is at least arguable that GIO is not entitled to disclaim liability under the contract of insurance. It seems to me that counsel for GIO has very properly conceded that the test of arguability of this proposition has been met.
14. I emphasise that I am in no way determining whether, on the balance of probabilities, the insurer can or cannot establish that it is entitled to disclaim liability under that contract of insurance. That question, and associated issues of indemnity must be left to the trial judge. My determination on this application in no way determines the question of GIO's right to disclaim liability, or whether the policy in fact responds to provide successful indemnity to Calcono.
15. All that I am concluding, based on the material tendered, is that it is arguable, and so the requirements of the Act have been met that allow me to exercise my discretion to grant leave to the plaintiff and to Allianz to proceed against GIO.
16. The parties have agreed upon the form of orders and I accept that those orders are an appropriate resolution of the Notices of Motion before me.
17. I make orders as follows: 1. The first defendant, Allianz Australia Insurance Limited, is granted leave pursuant to s 5(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) to proceed against AAI Limited trading as GIO in substitution for the cross-defendant on the first cross-claim, ACN 119 491 511 Pty Ltd previously known as Calcono Pty Ltd (in liquidation) under s 4 of the Act; 2. Allianz is granted leave pursuant to rules 19.1 and 19.2 of the Uniform Civil Procedure Rules 2005 (NSW) to file and serve an Amended First Cross-Claim, naming Allianz as the cross-claimant and GIO as the cross-defendant in the form annexed to the affidavit in support of the Notice of Motion, within seven days; 3. GIO is to pay the costs of and incidental to the first defendant's application on the ordinary basis; 4. The plaintiff is granted leave pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 to proceed against AAI Limited trading as GIO in substitution of Calcono Pty Ltd, ACN 119 491 511; 5. Calcono Pty Ltd, which is externally administered and in liquidation and now known as ACN 119 491 511 Pty Ltd, be substituted by its insurer AAI Limited trading as GIO, as a defendant, pursuant to s 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW); 6. The plaintiff has leave to proceed against the entity referred to in paragraph 5 above; 7. Grant leave to the plaintiff to file and serve a Further Amended Statement of Claim within 14 days in pursuit of that order; 8. The GIO is to pay the plaintiff's costs of and incidental to the plaintiff's application on the ordinary basis.;The proceedings are listed before the Registrar at 9.00am on 22 March 2019 for Directions.

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 February 2019