Nhung Tuyet Vu v GVS Group

The 2017 Act

1. Sections 3, 4 and 5 of the 2017 Act provide as follows: "3 Definitions (1) In this Act: claimant - see section 4. court means a court or tribunal of New South Wales. insured liability means a liability in respect of which an insured person is entitled to be indemnified by the insurer. insured person means a person who is, in respect of a liability to a third party, entitled to indemnity pursuant to the terms of a contract of insurance, and includes a person who is not a party to the contract of insurance but is specified or referred to in the contract, whether by name or otherwise, as a person to whom the benefit of the insurance cover provided by the contract extends. liability means a liability to pay damages, compensation or costs. Note - The Interpretation Act 1987 contains definitions and other provisions that affect the interpretation and application of this Act. (2) Notes included in this Act do not form part of this Act. 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. 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."
2. To be granted leave to proceed against Hollard, the plaintiff must demonstrate that: 1. She has an arguable case against the first defendant. 2. There is a real possibility that if judgment is obtained against the first defendant, it will not be able to meet the judgment. 3. She has an arguable case that the policy responds to her claim against the first defendant.
3. All three matters must be established by the plaintiff in order to obtain a grant of leave: Zaki v Better Building Constructions Pty Ltd [2017] NSWSC 1522 at [27]; Murphy, McCarthy & Associates Pty Ltd v Zurich Australian Insurance Limited [2018] NSWSC 627 at [16]-[17]; Count Financial Limited v Pillay [2021] NSWSC 99.

Arguable Case Against the First Defendant

1. Counsel for Hollard made no submission on this issue. Quite clearly if a patron goes to a café and a pot of boiling tea is spilt upon her, there will almost inevitably be an arguable case in negligence. Further, the plaintiff put forward liability evidence in the affidavit of her solicitor Ms To dated 1 June 2020 (PX 1). That material included a USB containing a video of how the teapot tipped from an unstable table.
2. I find that the plaintiff has an arguable case against the first defendant.

Real Possibility that Judgment will not be met

1. The plaintiff's evidence was contained in the annexures to PX 1.
2. Annexure "F" is an extract from the ASIC database in relation to the first defendant. This shows that the first defendant was incorporated on 25 August 2013 and is still a registered company. It has issued capital of one $1 share. There are no external administration documents for the company and there are no charges recorded on the ASIC register.
3. Annexed to PX 1, but not marked with an annexure letter, is a Credit Report in relation to the first defendant. There is one court action recorded against the first defendant, being a default judgment for $2,900 obtained on 14 March 2017 by the Workers Compensation Nominal Insurer. There are no payment defaults registered. There are no mercantile enquiries registered. Under the heading "Credit Score" the first defendant is given a rating of "Acceptable". The Credit Advice is that it has "an adequate aptitude to meet credit commitments". The first defendant is said to have "a 6.50% chance of failure within the next 12 months". There has been one credit inquiry made in the last twelve months, but that is the inquiry made by the plaintiff's solicitors.
4. Annexure "G" is an Asset Search in relation to the first defendant. The first defendant does not own any real property in any State or Territory in Australia. The Asset Search does not relate to any type of property apart from real estate.
5. There was no evidence put forward as to the balance sheet or the profit and loss statement of the first defendant. There was no evidence put forward as to its bank account. There was no evidence of any statement made by a director of the first defendant which would suggest that the first defendant would be unable to meet a judgment if one was recorded against it.
6. Applications for leave under the 2017 Act are commonly brought against corporate defendants which are in administration or which have gone into liquidation. In those circumstances the only fund of money against which a plaintiff might recover is that provided by an insurer.
7. Another type of case is where an officer of the company has made statements which cause a plaintiff to have concern as to whether a judgment might be satisfied. An example is to be found in Guild Insurance Ltd v Hepburn [2014] NSWCA 400. That case concerned an application for leave to join an insurer as a defendant, made under the precursor to the 2017 Act. Justice Macfarlan said at [3]: "Section 6(4) allows a plaintiff to take court proceedings directly against such an insurer but only with the leave of the court. The court will not ordinarily grant such leave unless the plaintiff demonstrates… that there is a real possibility that the insured will not be able to satisfy any judgment against it..."
8. Those proceedings concerned a patient who had sued a dentist Dr White. Paragraph [5] of the decision of Justice Macfarlan is as follows: "The evidence concerning Dr White's ability to meet a judgment against her was as follows: (1) A letter dated 14 August 2013 from Dr White to the Registrar of the District Court enclosing documents for lodgment and stating that due to her "sever[e] financial hardship" she was representing herself in the proceedings was in evidence. Ms Hepburn tendered the letter as relevant to the present issue. The insurer objected to the tender but the letter was admitted into evidence and the insurer does not seek to challenge that ruling on appeal; (2) At least four other persons have commenced proceedings against Dr White claiming damages in respect of negligent or otherwise wrongful dental treatment; (3) Dr White ceased to practice as a dentist in about December 2010 and there is no evidence that she has resumed remunerative employment; (4) A property ownership search suggests that Dr White probably owns properties situated at Lightning Ridge, Batehaven and Stuarts Point, although there is no evidence of those properties' values or their encumbrances, if any."
9. Justice Macfarlan concluded at [40] that Ms Hepburn had shown that it was arguable that Dr White may not be able to meet a judgment obtained by Ms Hepburn against her. He considered that the evidence was "sufficient to satisfy the low standard of arguability that is applicable here". His Honour emphasised the letter from Dr White of 14 August 2013 stating that she was experiencing severe financial hardship.
10. By contrast, there is no evidence in the present case of any statement by the first defendant that it is suffering financial hardship or that it is unlikely to be able to pay a judgment. There is no evidence of any other proceedings against the first defendant. There is no evidence that the first defendant has ceased to trade. While the evidence shows that the first defendant does not own any real property, there is no evidence to demonstrate that it does not have other assets, or a cash flow, or that it might have recourse to a financier who could assist in meeting any judgment obtained by the plaintiff. Finally, the Credit Report referred to above does not suggest a company in financial difficulties.
11. I find that the plaintiff has not established that there is a real possibility that if judgment is obtained against the first defendant, it will not be able to meet that judgment.

Does the Policy respond to the Plaintiff's claim against the First Defendant?

1. Hollard relied upon an affidavit of Nicholas Rowe dated 8 July 2021 (DX 1). Mr Rowe is employed as a Personal Injury Specialist in the Liability Claims Team for Hollard. He annexed correspondence between Hollard and the first defendant by which Hollard denied indemnity under the policy.
2. By a letter dated 28 May 2020, Hollard acknowledged that it issued a business policy to the first defendant for the period 27 March 2018 to 27 March 2019. That letter referred to the duty of disclosure of the insured. The letter enclosed a copy of the Policy Schedule and drew attention to the "Primary Occupation" and "Business Description" fields on the Policy Schedule. Hollard said that business activity associated with the operation of a café had not been disclosed to the insurer. The letter asserted that had Hollard been informed of the true nature of the business operation of the first defendant, it would have "cancelled or never incepted noting your business activities were a declined risk".
3. Hollard sent a second letter to the first defendant denying indemnity. In a letter dated 2 July 2021 it pointed to the insuring clause on p 23 of the Policy which provided cover for legal liability to pay compensation for personal injury "which happens during the period of insurance and is caused by an occurrence in connection with your business within the geographical limit".
4. The letter said: "We enclose a copy of the Business Insurance Certificate dated 27 March 2018 which describes the "occupation of business owner" as "General Maintenance - NOC Property Maintenance/Handyman Work". It also describes the "Premises" as "…Green Valley NSW 2168". The Plaintiff's claim for personal injury occurred in relation with GVS' operation of a café in Mount Pritchard. The claim is not in any way related to GVS' Property Maintenance/Handyman business in Green Valley that Hollard agreed to insure. Accordingly, the insuring clause has not been enlivened and we are of the opinion indemnity is not available on this occasion."
5. That letter from Hollard does not refer fully and completely to what was recorded in the "Business Insurance Certificate", which is Annexure "A" to the affidavit of Mr Rowe. Under the heading "Premises at Location 1", there is reference to an address in Green Valley. The words which then follow are: "Insurance cover is provided as the business owner Occupation of Business Owner - General Maintenance - NOC Property Maintenance/Handyman work Type of deep frying or wok cooking Are the premises connected to town water?"
6. Both bases put forward by Hollard for refusing indemnity focus upon this part of the Business Insurance Certificate dealing with the occupation of the insured.
7. Counsel for the plaintiff submitted that the inclusion of the phrase "Type of deep frying or wok cooking", in the description of the occupation of the business owner, was sufficient to extend the insurance beyond the handyman business to some sort of business involving food preparation. It was further submitted that this could include the operation of a café. Counsel for Hollard submitted that those words should simply be ignored as they did not make sense.
8. The Business Insurance Certificate is a document of the insurer. There was no explanation provided by the insurer for the inclusion of the words "Type of deep frying or wok cooking" and no reason was advanced as to why those words should be ignored. Further, there was no explanation for the question "Are the premises connected to town water?" which do not make sense in relation to a business occupation, but which could be a question related to the location address in Green Valley. Why a question would be included in a Business Insurance Certificate is even more mysterious.
9. In Mrdalj v Allianz Australia Insurance Ltd [2019] NSWSC 101 Justice Lonergan had to consider whether there was an operative exclusion clause in a policy which meant that the court should refuse leave sought under the 2017 Act, because the insurer could establish that it was entitled to disclaim liability under the contract of insurance. Her Honour applied the principles in General Steel Industries Inc v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125. Her Honour found that it was arguable that GIO was not entitled to disclaim liability under the contract of insurance. She said at [20]-[21]: "20 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. 21 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."
10. I accept the submission of counsel for the plaintiff that it is arguable that the policy does respond, as it may cover a business activity such as running a café and further, that the question of whether the claim falls within the policy of the insurance is one which should be left to the trial judge.
11. But for the conclusion which I have reached in relation to capacity to pay, I would have granted leave to the plaintiff to bring these proceedings against Hollard.

UCPR Rules 6.19 and 19.2

1. Counsel for the plaintiff submitted that the insurer should be joined, apart from any question under the 2017 Act, pursuant to r 6.19 of the UCPR. This rule provides: "6.19 Proceedings involving common questions of law or fact (cf SCR Part 8, rule 2; DCR Part 7, rule 2; LCR Part 6, rule 2) (1) Two or more persons may be joined as plaintiffs or defendants in any originating process if-- (a) separate proceedings by or against each of them would give rise to a common question of law or fact, and (b) all rights of relief claimed in the originating process are in respect of, or arise out of, the same transaction or series of transactions, or if the court gives leave for them to be joined. (2) Leave under subrule (1) may be granted before or after the originating process is filed."
2. Rule 19.2 gives the court power to amend proceedings by adding or removing parties
3. These Rules are procedural only. They do not give a plaintiff a right to join a defendant unless the plaintiff has a cause of action against that defendant. The only cause of action which this plaintiff could have against Hollard would be under the 2017 Act. Rules 6.19 and 19.2 would come into play if the plaintiff obtained a grant of leave under the 2017 Act. It would then be appropriate to join Hollard as a second defendant in the proceedings because there are common questions of fact and law in the proceedings brought by the plaintiff against each defendant.
4. However, absent a grant of leave under the 2017 Act, there is no separate power to add Hollard as a defendant. Neither r 6.19 nor r 19.2 gives the plaintiff a cause of action against Hollard.

Conclusion

1. Because the plaintiff has failed to establish one of the three elements required to obtain a grant of leave under the 2017 Act, the Amended Notice of Motion will be dismissed. Counsel for Hollard submitted that if that was the end result, the court should also strike out the Amended Statement of Claim. I am reluctant to do that for two reasons.
2. Firstly, Hollard has not filed a motion seeking the strike out of the Amended Statement of Claim.
3. Secondly, there is nothing to stop the plaintiff bringing another motion seeking leave under the 2017 Act, if she can produce evidence to overcome her present difficulty, which is that she cannot establish that there is a real possibility that the first defendant may not be able to pay any judgment obtained. It would not be an abuse of process to bring a motion similar to the present one, based upon different evidence.
4. There is presently an Amended Statement of Claim on file which pleads a case against Hollard based upon the 2017 Act. It was filed without leave and is ineffectual to enable the plaintiff to sue or recover against Hollard. Both parties have their rights to take further steps in relation to that Amended Statement of Claim against Hollard.

Orders

1. In the current COVID-19 lockdown of Greater Sydney, the parties have very sensibly agreed that this judgment may be delivered by publication on Caselaw and a link to the published judgment being sent by email to the lawyers for the parties.
2. The orders of the court are: 1. Dismiss the plaintiff's Amended Notice of Motion filed on 3 June 2021. 2. Order the plaintiff to pay the costs of Hollard Commercial Insurance Company Pty Ltd of the Amended Notice of 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: 23 July 2021