NORSWORTHY & ENCEL v SGIC No. SCGRG-99-1083 Judgment No. S496 [1999] SASC 496

These present proceedings arise from what were initiated in the Magistrates Court as two separate actions, albeit that there was some overlap of parties between them.

Both actions arose from a mishap which occurred during a scuba diving excursion organised by the Glenelg Scuba Diving Club near Cape Spencer on 30 December 1993. The various plaintiffs were on board a chartered boat named the "Blue Devil", which was owned and operated by what is said to be a now de-registered company known as Glenelg Dive Charters Pty Ltd ("GDC"). The boat was the subject of a policy titled as being one of "marine insurance" issued by SGIC.

It was said that, by reason of a Department of Marine and Harbours' Certificate of Survey issued on 28 February 1994, the Blue Devil was certified to carry a total of eight persons, being two crew and six passengers. On the day of the excursion there were eleven persons on board, together with a substantial quantity of diving equipment.

The plaintiffs plead that, whilst manoeuvring in an area of surf, the boat was swamped, capsized and thrown onto a reef. In the course of this incident two passengers sustained personal injury and various passengers sustained loss of, or damage to, their equipment.

The defendant Milobara, the operator of the boat and an alleged employee of GDC, was, it is said, subsequently convicted of the offence of carrying passengers in excess of the number specified in the certificate of survey. He was fined.

One of the actions ("the injury action") above referred to was initiated, on 30 December 1996, by the two injured passengers (the present appellants), claiming damages in respect of the personal injuries sustained by them. The other, to which they were also parties ("the property action"), had, earlier, been commenced on 9 March 1994. It sought damages in respect of the lost or damaged diving equipment. GDC was joined as an initial defendant in the latter action, but not the former.

As the learned magistrate described in reasons published by him on 18 August 1999, the two actions became intertwined over time. Some changes took place in relation to parties and their status.

As I understand the situation the two actions were never formally consolidated but, by consensus of those involved, they seem to have gone forward, at least in more recent times, as if they had been joined. Moreover, following a series of procedural manoeuvres (some of which may be somewhat suspect as to their validity in view of a default judgment obtained against GDC in the property action on 30 January 1995) SGIC eventually became a defendant in both actions. This occurred at a point when it was apparent that, following an attempt to enforce the default judgment against GDC, that entity went into liquidation and was de-registered, ie it no longer existed.

It appears to me that the liability of GDC and its employee/operator (if that was the legal status of Milobara) to the several plaintiffs has never seriously been in doubt. However, as a consequence of the insolvency and liquidation of GDC, the real issue which ultimately arose was as to whether, having regard to the terms of the policy issued by it and in the events which happened, SGIC as its insurer was, directly or indirectly, liable to the plaintiffs to meet the claims against GDC.

It is difficult, on a reading of the record, to determine precisely what it was that the learned magistrate ultimately purported to determine by his order which is the subject of the present appeal.

When the two actions came before him on 5 March 1998 he, inter alia, directed as follows:-

"Matter set down for an argument on law as to the applicability of the policy of insurance maintained by Glenelg Dive Charters - in statement of agreed facts parties are requested to define what the legal issue is."

In the statement of agreed facts filed all that is relevantly said is that GDC is in liquidation and unable to pay the property claim judgment debt; and that SGIC claims that it has no liability to indemnify GDC by reason of breach, by the latter, of the terms of the policy referred to ("the relevant policy") "including overloading of passengers".

When SGIC was joined as a defendant to the property action the statement of claim was amended to plead the refusal of SGIC to indemnify GDC and to seek a declaration that SGIC "is liable to indemnify the First Defendant [GDC] in respect of any claim made by the plaintiffs as a consequence of the negligence, breach of contract or duty or statutory duty of ... [GDC] ... of its directors, agents or employees in respect of the vessel 'Blue Devil'".

In the injury action similar relief was claimed, save that the alleged indemnity in issue was said to be in respect of the directors of GDC.

In the reasons ultimately published by him the learned magistrate recites submissions made to him by Mr Britton in terms which appear to promote the proposition that, at least in the injury action, the relevant appellants have a direct cause of action against SGIC as persons said to be "entitled to the benefit of " the relevant policy.

Be that as it may, he later summarises the issue with which he is dealing in these terms:-

"The plaintiffs in both sets of proceedings now seek a declaration that SGIC is under a duty to indemnify them with respect to property damage or loss and for damages for personal injury causing pain, suffering and loss arising from the incident which occurred on 30 December 1993."

It will at once be observed that this seems to envisage a declaration of right direct as between SGIC and the appellants, despite the pleaded claims for relief which primarily focused on rights, inter se, as between SGIC and GDC.

As I read the file the learned magistrate, when he produced his final reasons, made an order, the relevant terms of which were:-

"In both actions claim against SGIC by plfs dismissed and judgment in favour of SGIC on both actions ... "

The statement of agreed facts filed by the parties was expressed in these terms:-

"STATEMENT OF AGREED FACTS 1. The action involves a claim for damages for personal injury and property loss by the plaintiffs. 2. The plaintiffs were all members of the Glenelg Scuba Diving Club ("the Club"). 3. The first defendant, Glenelg Dive Charters Pty Ltd, was at all material times a registered company. 4. On 30/12/93 the plaintiffs were partaking in a scuba diving excursion organised by the Club at Cape Spencer in South Australia aboard a boat named the "Blue Devil" which was registered in the name of an [sic] operated by the first defendant, Glenelg Dive Charters Pty Ltd. 5. The vessel was certified that at all material times the boat could carry 8 people, 2 crew and 6 passengers. 6. On 30/12/93 the first defendant held itself out as an experienced dive charter operator and employed Tony Milobara ("Milobara") as its operator. 7. On 30/12/93 the boat was carrying 10 passengers including the plaintiffs, a total of 11 people. 8. The boat was taken to a place known as "the Gap" where the passengers completed a dive. 9. The boat was then driven from the shore into the surf, after which it was turned by Milobara and was again turned by him towards shore at which time the boat was swamped and the passengers and their equipment thrown into the water. 10. SGIC, the second defendant, was at all times the public risk insurer of the first defendant Glenelg Dive Charters Pty Ltd. 11. The first defendant is in liquidation and unable to pay a judgement debt entered into by consent in respect of its alleged negligence and/or breach of contract. 12. SGIC claims that it has no liability to indemnify the first defendant by reason of breach by the first defendant of the terms of the policy including overloading of passengers."

This statement of facts seems to have been supplemented by some documentation, including the relevant policy, which was placed before the learned magistrate and is on file. A perusal of that policy reveals that SGIC agreed to indemnify GDC, up to a limit of $5,000,000 in respect of third party liability. The relevant portion of clause 11 was expressed as follows:-

"11.1 The Underwriters agree to indemnify the Assured for any sum or sums which the Assured shall become legally liable to pay and shall pay, by reason of interest in the insured Vessel and arising out of accidents occurring during the currency of this insurance, in respect of 11.1.1 loss of or damage to any other vessel or property whatsoever 11.1.2 loss of life, personal injury or illness, including payments made for life salvage, caused on or near the Vessel or any other vessel 11.1.3 any attempted or actual raising, removal or destruction of the wreck of the insured Vessel or the cargo thereof or any neglect or failure to raise, remove or destroy the same."

On at least one construction of the submissions made by Mr Britton to the learned magistrate, it was the stance of the plaintiffs in the two actions that, by one procedural route or another, SGIC was liable to provide indemnity under the relevant policy in respect of both property damage and personal injury damages to GDC; and that the plaintiffs in the two actions were entitled to enforce that liability for their benefit by action taken direct against SGIC. At the very least, the plaintiffs sought a declaration of liability of SGIC to indemnify GDC, however the appellants might be able to avail themselves of the benefit of such indemnity in procedural terms.

As to these contentions the following questions arose:-

(1) Whether, at common law, the plaintiffs were directly entitled to claim the benefit of any insurance indemnity against SGIC, there being no privity between those parties;

(2) Whether the provisions of the Insurance Contracts Act 1914 ("the ICA") were rendered inapplicable to these proceedings by virtue of the applicability of the provisions of the Marine Insurance Act 1907 ("the MIA") to them; and

(3) If not, whether, in the circumstances, s 51 of the ICA in any event conferred on the plaintiffs a right to sue SGIC.

The first question, in fact, potentially involved two possible, distinct strands of argument, to which I shall come in due course.

The learned magistrate held that there was no privity of contract - the contract evidenced by the relevant policy was between SGIC and GDC and the plaintiffs were not expressed to be a party insured. Moreover, he concluded, the situation was on all fours with that in Visic v State Government Insurance Office (1990) 3 WAR 122. The plaintiffs could not, therefore, rely on the principle stemming from Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107 ("Trident").

He was further of the opinion that the MIA was inapplicable to the matters before him because the relevant policy did not cover losses caused by "marine adventure" as defined.

He found that it was potentially open to the plaintiffs to invoke the ICA, but that, on the facts as revealed by the material before him, s 51 of that statute did not operate to confer a right of action on the plaintiffs and that, in terms, the statute did not otherwise apply. However, he went on to find that, because the relevant policy contained a specific provision which read:-

"WHERE APPLICABLE THIS INSURANCE IS SUBJECT TO THE PROVISIONS OF THE INSURANCE CONTRACTS ACT 1984 AS AMENDED AND/OR THE MARINE INSURANCE ACT 1909",

SGIC cannot rely upon an assertion that the ICA is inapplicable, because it had elected to be bound by it. He commented:-

"... despite my view that SGIC does come within the concept of carrying on State Insurance I find that it is estopped from denying that in the light of the Schedule working that it is bound by the Insurance Contracts Act."

He went on to hold that, notwithstanding such conclusion, "for the plaintiffs as third parties to make use of ... [the ICA] ... they need to bring themselves within s 51 ... ". He concluded that they had not been able to do so. It followed that they had no cause of action against SGIC and that their actions necessarily failed.

The appellants now seek to challenge certain of these conclusions. Their stated grounds of appeal are:-

1. The learned Special Magistrate erred in law in finding that Section 51(1) of the Insurance Contracts Act did not provide a remedy for the appellants. 2. The learned Special Magistrate erred in law in applying the principles arising from Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [(1987) 8 NSWLR 270 and [1988] HCA 44; (1988) 165 CLR 107.]."

It is convenient to address these contentions in turn, although it emerged, on the hearing of the appeal, that Mr Britton, of counsel for the appellants, really sought, as to the second ground, to cast his net rather wider than the Trident principle.

Section 8 of the ICA stipulates that, subject to s 9, it extends, in its operation, to contracts of insurance the proper law of which is, or would be, the law of a State or the law of a Territory in which the statute applies. Section 9(1)(d) expressly excludes contracts of insurance to which the MIA is applicable.

Section 6 of the MIA provides that it is applicable to marine insurance "other than State marine insurance".

The MIA does not define the expression "State Marine Insurance", nor is that phrase adverted to in the ICA.

Given that both statutes are plainly intended to be read as complementary to one another, some assistance can be gleaned from s 9 of the latter. This excludes from its operation contracts of insurance entered into "in the course of State insurance or Northern Territory insurance".

A perusal of relevant texts indicates that the expression "State insurance" is something of a term of art, which has been used to encompass instrumentalities established by State governments to write insurance. (See discussion in Australian Insurance Law, Second Edition, Tarr, Liew and Holligan at 46-48.)

The learned authors note that "... State offices such as the SGIO [sic] (SA) have agreed to adhere voluntarily to the provisions of legislation such as ... " the ICA. Here, then, lies the explanation for the endorsement on the front of the relevant policy which I have earlier recited.

In his reasons the learned magistrate seems to have concluded that this gave rise to an estoppel against SGIC. With respect, I do not consider that this is a correct technical description of the situation. It is clear that the endorsement is, and is intended to be, an actual term of the contract entered into between the parties. What is in question is an issue of contractual terms and not one of estoppel.

I agree with the learned author of "Insurance Contracts Act (Layman Professional Statute Guides)" at 16 that the resultant effect of documents such as the relevant contract is to incorporate the provisions of the ICA or MIA, as appropriate, into the agreement between the parties as contractual rights, as if the SGIC had not been a "State insurer". As the learned author reflects "Difficulties may still arise, however, where what is being sought to be enforced is not a right which is held by the insured but, for instance, by some other person to whom the ... [ICA] ... extends protection". I also note that this author argues that it is not necessarily beyond doubt that entities such as the SGIC are writing State insurance, merely because they exist by virtue of a statutory charter. There may well be force in both of his contentions.

Section 7 of the MIA defines a contract of marine insurance as one which indemnifies the assured "against marine losses, that is to say, the losses incident to marine adventure". The concept of "marine adventure" is discussed in s 9 of the MIA. This is expressed as follows:-

"Marine adventure and maritime perils defined 9.(1) Subject to the provisions of this Act, every lawful marine adventure may be the subject of a contract of marine insurance. (2) In particular there is a marine adventure where: (a) any ship, goods, or other movables are exposed to maritime perils. Such property is in this Act referred to as "insurable property"; (b) the earning or acquisition of any freight, passage money, commission, profit, or other pecuniary benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of insurable property to maritime perils; (c) any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils. 'Maritime perils' means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the seas, fire, war, perils, pirates, rovers, thieves, captures, seizures, restraints, and detainments of princes and peoples, jettisons, barratry, and any other perils, either of the kind, or which may be designated by the policy."

There is no doubt that the relevant policy bears, in bold print on its first page the title "MARINE POLICY". Furthermore, its detailed provisions are apt to encompass all manner of losses or damage pertinent to any type of vessel or its contents, or the property of or injury to third parties. It was clearly intended, in form, to be a policy falling within the MIA.

Section 51 of the ICA specifically confers upon third parties the specific right to recover direct from an insurer in certain circumstances. It reads:-

"51 Right of third party to recover against insurer (1) Where: (a) the insured under a contract of liability insurance is liable in damages to a person (in this section called the third party); (b) the insured has died or cannot, after reasonable enquiry, be found; and (c) the contract provides insurance cover in respect of the liability; the third party may recover from the insurer an amount equal to the insurer's liability under the contract in respect of the insured's liability in damages. (2) A payment under subsection (1) is a discharge, to the extent of the payment, in respect of: (a) the insurer's liability under the contract; and (b) the liability of the insured or of the insured's legal personal representative to the third party. (3) This section does not affect any right that the third party has in respect of the insured's liability, being a right under some other law of the Commonwealth or under a law of a State or Territory.

The MIA does not contain any provision akin to that of s 51 of the ICA.

The learned magistrate seems to have rejected the potential application of the MIA to the relevant policy in somewhat summary terms. However, I do not consider that he was justified in doing so.

It is to be borne in mind, at the outset, that the statutory definition of a contract of marine insurance seeks to characterise the contract of insurance and not the individual risks spanned by it, extracted and considered individually.

For a contract, properly, to be characterised as a contract of marine insurance it must relate to losses incident to "marine adventure". To fall within the concept of "marine adventure" the situation contemplated must have any one of these features:-

(1) a ship or its contents exposed to maritime perils, that is to say, perils consequent on, or incidental to, the navigation of the sea;

(2) (relevantly) the endangering of the earning of any passage money or other pecuniary benefit by exposure of the ship or its contents to maritime perils; or

(3) the incurring by the owner of the ship of liability to a third party by reason of maritime perils.

The word "ship" is not defined and is obviously to be construed according to its widest normal usage. According to its usual connotation the word "ship" is taken to be any vessel intended or used for navigating the water (see The Macquarie Dictionary, Second Revision). It is clearly apt to encompass a 6.5 metre commercial charter vessel of the type here in contemplation.

When one peruses the relevant policy it is immediately apparent that the primary object of it is the hull, engines, trailer and special equipment of the Blue Devil. Classically, the bulk of the policy is directed towards subject matters of the nature contemplated by s 9 of the MIA. The third party clause is, within that context, merely an incidental, optional cover. That clause is specifically annotated "This Clause only to apply when a sum is stated for this purpose in the Schedule to the policy". An amount was actually so stated in the schedule to the relevant policy, so as to enliven it in this instance.

In my view the relevant policy, upon which the present proceedings are founded, was plainly intended to be a contract of marine insurance to which the provisions of the MIA and the ICA, as appropriate, according to their terms, were to be contractually applicable. It follows that, by reason of the incorporated provisions of s 9(1)(d) of the ICA, the content of that statute had no application.

However, lest I am incorrect in that conclusion I will briefly direct attention to the detailed provisions of s 51 of the ICA.

It is apparent, on a fair reading of the section, that the appellants may only derive comfort from it if they can make good the proposition that the circumstances of the present cases fall within the scenario described as where "the insured has died or cannot, after reasonable enquiry, be found".

What occurred in the instant case was that the insured, GDC, was never joined as a party to the injury proceedings. Its alleged employee Milobara was sued. It was joined as a defendant to the property action. In the latter action it filed a defence admitting the ownership of the Blue Devil, but asserting that it was operated by Milobara, who, it was pleaded, was not its employee. It joined Milobara as a third party. He was later joined as a defendant. GDC joined SGIC as a third party to the property action.

The property action was called on for trial on 30 January 1995. At that time the claim against Milobara was discontinued and a default judgment entered against GDC in the sum of $13,925.25 plus costs. Plainly it could not then be argued, on any basis, that GDC could not be found. For some reason which is not entirely apparent, GDC discontinued the third party proceedings against SGIC on 5 January 1995. SGIC was joined as a defendant by order dated 12 November 1997. At the same time it was also joined as a defendant to the injury action.

An affidavit filed in the property action deposes that GDC went into liquidation in about October 1995. There does not appear to be any information before the court as to the precise course of the liquidation, although, as already appears, it is common ground that de-registration had already occurred when the SGIC joinder took place.

(I mention this because it may be that, dependent on my decision on the various issues argued on the appeal, the plaintiffs will need to consider pursuing SGIC via GDC in liquidation, even if the latter has to be re-registered for that purpose. However, that is for another day.)

Considerable debate arose before the learned magistrate as to the correct interpretation of s 51(1)(b) of the ICA. This largely focused on the reasoning of David DCJ in a case of Shimmin v AMP General Insurance Ltd & Anor (1998) 199 LSJS 359 ("Shimmin").

In that case a policy was issued by the insurer to the plaintiffs pursuant to the provisions of the Builders Licensing Act 1986 against the risk of being unable to enforce or recover, under a statutory warranty, by reason of "the insolvency, death, or disappearance of the builder". It was argued on behalf of the insurer that such a description was not apt to include the mere de-registration of the corporate builder.

The response of David DCJ to that contention was:-

"There seems to be no argument that the policy obviously applies to builders who are both natural and corporate. The defendants in argument agreed that that must be so. Therefore resort can only be made to the policy on the defendants argument by virtue of the fact of 'insolvency'. The defendants argue that the words 'death or disappearance' do not apply to a corporation. In my view such a narrow interpretation is ill founded. There is no reason why the word 'disappearance' set out in the policy should not cover situations where the company no longer exists for whatever reason. It would seem illogical to afford an insured person easier access to the policy because of the fact that the builder is a natural person and limit the scope of the policy because the builder happens to be a company. The fact that the plaintiff may be able to pursue the assets of the company through other means if the company is deregistered in my view is irrelevant to the present question and it does not alter the fact that by the company being deregistered it is no longer a legal entity and it is no longer in existence and for all intents and purposes has disappeared. I therefore find that the policy applies to a corporation that has been deregistered. I find that for the purposes of the policy the building company has 'disappeared'."

With respect, it seems to me that, in the context of that case, the above reasoning is plainly correct. It is to be remembered that one of the normal meanings of the word "disappear" is "to cease to exist or be known" (The Macquarie Dictionary, Second Revision).

Section 51 (1)(b) uses different terminology. It speaks of an insured who "has died or cannot, after reasonable enquiry, be found".

As in the case of Shimmin there can be no question that the relevant text of s 51 has been written against the background that policies of insurance are frequently issued to both natural persons and corporate bodies. In the commercial environment it is likely that the latter situation will, in fact, be more frequent than the former. Given that the obvious intention of the legislation (which is remedial in nature) is to empower a party having a valid claim against an insured to recover direct against the insurer when the insured no longer exists, it is appropriate, on normal canons of statutory construction, to give the provision a liberal construction.

The concepts of death and inability to find are clearly disjunctive. I see no compelling reason to restrict the phrase "cannot ... be found" to human beings and to exclude corporations. To do so would be to substantially emasculate the obvious concept of what is intended to be a remedial statute in a very arbitrary, illogical and unjust manner. There is simply no reason to suppose that the legislature had such an end result in mind. Just as a person can disappear and not be found, so also can a corporation vanish by reason of deregistration; and thus not be found.

In my view s 51(1)(b) is capable of extending to a factual scenario such as the de-registration of a corporation, so that it has ceased to exist.

Such a conclusion does not, however, assist the appellants. That scenario simply did not exist in the instant case, at least so far as the property claim was concerned. GDC was sued by the relevant plaintiffs at a time when it was still registered. It became the subject of a judgment against it. It could also have been joined in the injury claim when it was instituted. However, that is not to the point, although it is something of a mystery as to why this was not done.

As I have indicated, the relevant policy was expressed to be a contract of marine insurance and excluded from the operation of the incorporated provisions of the ICA. Section 51 was, accordingly, inapplicable.

Next, it is necessary to consider whether the appellants can derive any comfort from the principle espoused by the High Court in Trident.

Trident was the product of a very specific and discrete set of circumstances. An insurer under a public liability insurance policy agreed to indemnify a company against all sums which it should become liable to pay in respect of injury to persons at specified building sites. "The insured" was defined in the policy to include the company's contractors. A person recovered damages against such a contractor, which, in turn, sought to enforce the indemnity against the insurer direct.

The High Court held that the insurer was liable. The majority in Trident arrived at such a result by divergent processes of reasoning. In essence, their collective conclusion was that a person who, though not a party to a public liability insurance policy, falls within the class of persons specifically expressed to be insured by it, may enforce the indemnity for which the policy provides.

It is to be noted that the case of Visic v State Government Insurance Office (1990) 3 WAR 122 focused on a significantly different factual scenario. There an employee, who obtained a judgment for common law damages against his employer, sought to recover direct from his employer's insurer under an employer's liability policy which covered the type of liability in question. He was, at best, an intended ultimate beneficiary, but not one of the defined insured under the policy. Seaman J held that the employee could not avail himself of the Trident principle, because he was not one of the defined insured.

In the course of his reasons in the instant case the learned magistrate pointed out that the present facts led to a precisely similar conclusion. The appellants were not one of the defined insured under the relevant policy. Accordingly, the Trident principle had no application to them. I consider that this conclusion was undoubtedly correct.

I took Mr Britton further to seek to argue that, quite apart from the Trident principle, the appellants were, in the circumstances, entitled to enforce their rights direct against SGIC on what was contended to be the principle established by a line of authority stemming from the case of J N Taylor Holdings Ltd (In Liq) & Anor v Bond & Ors (1993) 59 SASR 432 ("J N Taylor").

J N Taylor was the product of a somewhat discrete set of circumstances.

The two plaintiff companies, which were both in liquidation, sued three of their former directors, alleging breach of duty. A policy of insurance had been issued indemnifying them against conduct amounting to breach. Two of the directors had left the company and one was bankrupt. In the case of the bankrupt director his trustee had agreed to assign the right of indemnity to the plaintiffs, subject to the consent of the insurer.

When the liquidator of the plaintiff companies wrote to the insurer, the latter intimated that it denied liability to indemnify the directors under the relevant policy.

In those circumstances the liquidator sought to join the insurer as a defendant to the principal proceedings for the purpose of obtaining a declaration against it to the effect that it was obliged to indemnify the director defendants in respect of any judgment obtained in the proceedings against them.

The judge at first instance refused the joinder, but the Full Court held that the plaintiffs were entitled to the orders sought by them.

That decision was heavily influenced by the factors that:-

(1) the plaintiffs' only realistic prospect of having any judgment against the defendant directors satisfied was by means of the indemnity under the insurer's policy;

(2) the relevant issues arose out of the same transaction or transactions and gave rise to a need to consider common questions of law and fact; and

(3) the joinder would avoid a multiplicity of proceedings, by binding the insurer, for the purposes of subsequent proceedings, by any relevant findings of fact and declaration of liability.

A similar approach was also adopted in AMP Fire & General Insurance Co Ltd v Balfour & Ors [1993] SASC 4365; (1993) 61 SASR 492. This also appears to have been a situation in which the insurer had rejected liability under the policy, or, at least, it seemed likely that it would do so.

It is, of course, true that, in Beneficial Finance Corporation Limited & Ors v Price Waterhouse (1996) 68 SASR 19 and C E Heath Casualty & General Insurance Ltd & Anor v Pyramid Building Society (In Liq) [1997] VR 256, joinder of the insurer was held to be inappropriate. However, these cases are readily distinguished from J N Taylor, on the basis that, in neither instance, had the insurer declined liability to indemnify. That this is a critical consideration readily appears from Lend Lease Insurances Ltd v Glenmont Investments Pty Ltd & Ors (1999) 202 LSJS 253.

In the instant case it is clear that SGIC does intend to dispute liability to indemnify under the relevant policy. As earlier recited it has actually pleaded to that effect in both actions.

It seems to me that, with respect, there has been a significant degree of confusion in what the appellants have been attempting to achieve in the two actions, with ultimate submissions extending beyond their express pleadings in the proceedings. Moreover, the debate appears to have gone forward upon the footing that the two issues are common in both actions - a proposition which, for reasons which I will express - is fallacious.

In the property action it seems beyond question that the joinder of SGIC was effected solely as an aid to enforcement of an already existing judgment in those proceedings in favour of the plaintiffs against GDC. There were no outstanding legal or factual issues which fell to be decided and were common to contentious proceedings between both the relevant appellants and GDC on the one hand and GDC and SGIC on the other. Liability had been established against GDC and the only outstanding issues were as between it and SGIC, given that the original third party claim had been discontinued.

In such circumstances there was simply no scope for the principle espoused in J N Taylor to operate. If the plaintiffs desired to pursue any claim under the relevant policy then that could only be done via GDC in some appropriate procedural fashion. On any view, such an endeavour would necessitate the resuscitation of that entity, by bringing about its re-registration.

In my view there was no basis on which the relevant appellant could possibly secure any declaratory relief in the property action direct against SGIC. SGIC ought never to have been joined as a defendant, in the manner which I have recited, for the purpose of merely obtaining the relief sought in the amended statement of claim. In all fairness to the learned magistrate, however, it should be said that SGIC does not appear, itself, to have questioned the propriety of its joinder at the time.

The situation within the injury action stands on a rather different footing. At this time no judgment at all has been entered. GDC is not (and never has been) a party. The claim is solely against the directors of it for asserted breach of statutory or contractual duty - although how it is said that the directors, personally, were in breach, by way of contrast with GDC itself, is by no means clear to me. The statement of claim avers that SGIC was liable, pursuant to the relevant policy to indemnify the directors, as well as GDC.

Confusion seems to reign supreme as to who were actually intended to be the insured under the relevant policy. The policy document itself simply lists the insured as "Glenelg Marine and Scuba". The proposal was made out in the name "Glenelg Marine & Scuba" and apparently initiated by the defendant Fisk. In their defence filed in the proceedings, the personal defendants pleaded that the parties indemnified by the relevant policy were Goodna Pty Ltd trading as "Glenelg Marine & Scuba", the personal defendant Fisk and GDC.

The pleaded attitude of SGIC on this issue is not entirely clear. I glean from its defence that it does recognise GDC as being a party insured, but does not admit any potential indemnity liability to any other party. In so far as GDC is an insured party, SGIC denies liability by virtue of avoidance provisions of the relevant policy.

In such a confused situation one aspect is immediately apparent. This is by no means a straightforward situation of the nature of that in J N Taylor, in which there was no doubt that the defendants were the insured. The only issue there was as to whether, on the facts, the liability to indemnify arose, in a situation in which common questions of law and fact necessarily had to be resolved, both as between plaintiffs and the insured on the one hand and also the insured and insurer on the other. Here the issues are far more complex and diverse than that.

Although, undoubtedly, some common questions of fact and law may arise, the fundamental question of who were, nominally, the parties entitled to indemnity under the relevant policy is very much a question solely between the personal defendants and SGIC. Its infusion within the current proceedings would be likely to precipitate a significant trial within a trial.

To the extent to which the J N Taylor principle is fairly applicable to the injury action I do not consider that it would be appropriate to litigate the types of issue necessarily arising within the ambit of the present proceedings, at least as they are currently constituted. Once again, a very real issue arises as to whether GDC needs to be re-registered, both so as to be joined as a defendant in the injury action and also as a vehicle through which, ultimately, to pursue any rights of indemnity which may exist and be enforceable against SGIC.

In so far as the learned magistrate declined to make a declaration as sought in the injury action I consider that he was correct, albeit, perhaps, for reasons which are not on all fours with those which he expressed.

Finally, I should indicate that I do not overlook the provisions of s 601AG of the Corporations Law which now stipulates as follows:-

"A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if: (a) the company had a liability to the person; and (b) the insurance contract covered that liability immediately before deregistration."

However, this avails the present appellants nothing, because it was only enacted by Act No 61 of 1998, which came into operation on 1 July 1998. It is not merely a procedural provision. It erects a completely new cause of action.

What it does assist in underlining is that, in the instant cases, the appellants will only be able to enforce their rights by first seeking to reinstate GDC on the register, and then pursuing the rights via that entity. This, if it occurs, may give rise to a need to revisit issues of joinder in those proceedings and a potential reframing of pleadings.

The present appeal must inevitably fail as to the merits. On the other hand a question arises as to whether the form of the order which was made is actually appropriate.

It appears to me that such order ought merely to have been one declining to make the forms of declaration as sought and dealing with the costs of the relevant issue. It was unduly precipitate to purport to enter judgment in the actions at large until the plaintiffs in them elect as to what future steps, if any, they desire to take. I will hear counsel concerning that aspect.