Solicitors for applicants/defendants: Douglas and Collins

Solicitors for respondent/third party: Clarke and Gee

Summons for directions dismissed, third party proceedings struck out.

UNDERWOOD J On 29 April 1996 an order was made that the defendants have leave to issue and serve a third party notice on TGIO Limited (ACN 060 936 450). The notice was duly issued and served. On 15 May 1996 the defendants filed an application for directions with respect to the exchange of pleadings between the defendants and the third party and with respect to the conduct of the trial of the issues between the defendants and the third party. The authority for making the orders sought is the Rules of Court, O18, r62(1).

2. Mr Simon Brown, who appeared for the third party, submitted that no order should be made as there was no "question or issue proper to be tried between the defendants and the third party" as provided in O18, r62(1)(b). The issue on this application is the proper meaning of the opening words of that subrule, "... if satisfied that there is a question or issue proper to be tried as between ... the defendant and the third party."

3. The plaintiff's claim is for damages for assault. His case is that on or about 23 May 1994, he was assaulted by the second-named defendant. The plaintiff pleads that as a result of the assault he "suffered an episode of acute adjustment disorder with depressed mood." The plaintiff and the second defendant were both employees of the first defendant. The plaintiff alleges that the assault occurred in the course of his employment with the first defendant and accordingly claims that the first defendant is vicariously liable for the wrongful act of the second defendant.

4. The Workers Compensation Act 1988, s97(1) requires the first defendant to maintain a policy of insurance with a licensed insurer that (inter alia) indemnifies it and its employees in respect of any liability arising independently of the Act in respect of an injury suffered by a worker employed by it, and in respect of which the employer is liable to pay compensation pursuant to the Act, s25. At the relevant time the third party, a licensed insurer, indemnified the defendants in accordance with the Act, s97(1). Accordingly, the defendants claim that they are entitled to indemnity from the third party with respect to the plaintiff's claim against them.

5. The third party denies liability to indemnify the defendants in the following circumstances. The assault is alleged to have occurred on 23 or 25 May 1994. The records of the first defendant disclose that the plaintiff worked on Friday 27 May 1994 but on the following Monday the plaintiff advised the second defendant by telephone that he would cease work on 1 June 1994. This he did, and the defendants neither heard from nor saw the plaintiff until on or about 15 July 1994 when he sent the first defendant a claim for workers compensation and a medical certificate. The claim for compensation identified stress as the relevant injury and the relevant circumstances as "verbally and physically assaulted by employer - J A Dunn." The medical certificate showed a provisional diagnosis of depression and provided that the "disease" was stated to be caused by stress due to assault at work. The certificate stated that the plaintiff was unfit for any work from 27 May 1994 until 5 June 1994. The first defendant did not send the claim for compensation and medical certificate to the third party nor otherwise notify the third party that a claim for compensation had been made. No weekly payments or other compensation have been paid.

6. On 10 February 1995 the plaintiff issued the writ in this action. It was served on 14 February 1995 and on or about 22 February 1995 the defendant's solicitors sent it to the third party with an accompanying letter. This was the first notice of the alleged events in May 1994 that the third party received.

7. The third party denies that it is liable to indemnify the defendants with respect to the plaintiff's claim as the second defendant has not given notice in accordance with the terms of the policy of insurance. On behalf of the third party it was submitted that as there was no dispute about any of the foregoing facts and no issue in law, the defendants could not succeed on the third party proceedings and consequently there was no question or issue to be tried between the defendants and the third party. Mr Brown submitted that in these circumstances the appropriate orders were that the application for directions be dismissed and that the third party notice be struck out.

8. Mr Pearce, who appeared for the defendants, submitted that once it was shown that the claim made on the third party proceedings was a claim by way of contribution or indemnity within the meaning of O18, r57(1) the court should not enquire into the merits of the claim at this stage but merely give appropriate directions with respect to pleadings and the trial. In the alternative, Mr Pearce submitted argument to the effect that on a proper construction of the relevant provisions of the policy of insurance, notice had been given in accordance with its terms.

9. In England prior to 1929, and in Tasmania prior to 1935, third party proceedings were only permitted in the case of a claim for indemnity or contribution. See Rules of Court, O16, r48 (UK); Rules of Court, O18, r58 (Tas). In Tasmania and in England, the relevant rule then provided that the court may give a defendant claiming indemnity or contribution leave to issue a third party notice. However, it appears that in England the practice with respect to making an application for leave to issue a third party notice depended upon whether the application was made in the Queen's Bench Division or the Chancery Division of the Supreme Court Judicature. See Furness Withy and Co Limited v Pickering (1908) 2 Ch 224. In that case, Joyce J referred to the desirability of uniformity of practice in the divisions of the court and concluded that an application by a defendant for leave to issue a third party notice should be made ex parte although (226) "it is always competent to the Master or judge to require the plaintiff or any other person to be served."

10. In Tasmania prior to 1935, the Rules of Court were silent with respect to the practice adopted on an application for leave to issue a third party notice. However, by an amendment to the Tasmanian Rules, gazetted on December 24, 1935 (O18, r58(2)), and by the 1929 amendment to the English Rule (O16A, r1(2)) it was provided:

"The Court or Judge may give leave to issue and serve a

'third-party notice' on an ex parte application supported by

affidavit, or, where the Court or Judge directs a summons to

the plaintiff to be issued, upon the hearing of the summons."

11. Thus, by 1935, the procedure in England and Tasmania on an application for leave to issue a third party notice was in conformity with that proposed by Joyce J in Furness Withey and Co Limited v Pickering (supra) viz, unless a court or a judge otherwise directed, a third party notice would issue and be served without either the plaintiff or the third party being heard.

12. At the same time as provision was made by the Rules for this practice on an application for leave to issue a third party notice, the Rules, both in the United Kingdom and in Tasmania, were amended (O16A (UK); O18, rr58 - 69 (Tas)) to considerably widen the ambit of third party proceedings. By these amendments third party proceedings were permissible not only in cases of contribution and indemnity, but also in the cases presently prescribed for by O18, r57(1) viz:

"(a) ...

(b) (where the defendant) is entitled to any relief or remedy

relating to, or connected with, the original subject matter of

the cause or matter, and substantially the same as some relief

or remedy claimed by the plaintiff; or

(c) (where) any question or issue relating to, or connected

with, that subject matter is substantially the same as some

question or issue arising between the plaintiff and the

defendant, and should properly be determined not only as between

the plaintiff and the defendant, but as between the plaintiff,

the defendant, and the third party or between any or either of

them."

13. The expanded ambit of third party proceedings made it necessary to expand the ambit of the directions rule in cases where the third party entered an appearance. The result was O18, r62(1). This rule (so far as is material for the present proceedings) is in the same form today as it was when enacted in 1935. It comprises a single sentence of approximately 168 words prescribing the orders that can be made when "there is a question or issue proper to be tried"] The best way of making sense of this rule, so far as is relevant for present purposes, is to set it out as follows:

"... a judge may

(a) ...

(b) if satisfied that there is a question or issue proper to be

tried as between:

the plaintiff and the defendant and the third party or between

any or either of them as to the liability of the defendant to the

plaintiff

or

as to the liability of the third party to make any contribution

or indemnity claim, in whole or in part,

or

as to any other relief or remedy claimed in the notice by the

defendant

or

that a question or issue stated in the notice should be

determined not only as between the plaintiff and the defendant

but as between the plaintiff, the defendant and the third party

(or any or either of them),

order such question or issue to be tried in such manner as the

court or judge may direct."

14. In Baxter v France and Ors (1895) 1 QB 455 Lord Esher MR referred to the directions rule. It was to the same effect as O18, r62(1) (Tas) but its terms were much simpler as third party proceedings were then only permitted in the case of a claim for indemnity or contribution. His Lordship said at 457:

"The rule applicable to the case is O16, r52. The third party

has appeared pursuant to the notice, which is exactly the case

provided for by the rule. The rule further provides that the

defendant giving the notice may apply to the Court or a judge

for directions. On that summons for directions, the first

thing to be considered under the rule, is whether the Court

or a judge is 'satisfied that there is a question proper to be

tried as to the liability of the third party to make the

contribution or indemnity claim, in whole or in part.' If so

satisfied of this, the Court or a judge 'may order the

question of liability to be tried'."

15. Thus, Baxter's case is authority for the proposition that upon the summons for directions the court will consider whether the claim is one for contribution or indemnity. There are other cases to the same effect eg, Pontifex v Foord (1884) 12 QBD 152. The practice was to rely upon the affidavit used to support the application for leave. See Annual Practice (UK) 1941, notes to O16A, r7. Are these cases support for the proposition that on a directions hearing the court will only concern itself with the question of whether the claim is for indemnity or contribution or otherwise within the ambit of O18, r57? I think not. It must be remembered that at the time Baxter's case was decided the practice in the Queen's Bench Division was to make the application (except in unusual cases) for leave to issue and serve a third party notice ex parte. It follows that the first opportunity open to the plaintiff, or indeed any other party for that matter, to show that this was not a proper case for the issue of a third party proceedings was on the directions hearing. Baxter's case is not authority for the submission put by Mr Pearce that the only matter the court will consider on the directions hearing is whether the third party claim is one for contribution or indemnity.

16. In the Chancery Division there are a number of reported cases, decided long before the enactment of the rule of practice governing applications for leave to issue a third party notice, to the effect that on that application the court will not go into merits other than to satisfy itself that prima facie the claim is for contribution or indemnity. See Edison and Swan United Electric Light Company v Holland (1886) 33 Ch D 497; Birmingham and District Land Company v London and North Western Railway Company (1887) 34 Ch D 261; Carshore v North Eastern Railway Company (1885) 29 Ch D 344.

17. In Tasmania, it was not until the enactment of Statutory Rule 9/1971 that an application for leave to issue a third party notice had to be served on a plaintiff (unless one was issued and served before delivering a defence). See Rules of Court, O18, r57.

18. This over-long and, I fear, tedious excursion into history establishes:

(i) there is no authority for the proposition that on a directions hearing the court only has to be satisfied that the claim is for contribution or indemnity or is otherwise within the scope of O57, r1; and

(ii) early Chancery decisions in which the court refused to enquire into the merits of a prima facie claim for contribution or indemnity are confined to applications for leave to issue a third party notice which, by Chancery practice, was served upon the plaintiff.

19. It seems to me that there may be authority for the proposition that on an application for leave to issue a third party notice the court enquires no further than is necessary to satisfy itself that the proposed claim falls within one or more of the categories prescribed by O18, r57(1) but I see no authority for the proposition that the court's inquiry is similarly confined on the directions hearing after the third party has entered an appearance. Order 18, r62(1) does not prescribe any fetter upon the matters that are to be taken into account when considering whether there is a question or issue proper to be tried between (inter alia) the defendant and the third party. I see neither authority nor reason to impose any such fetter. Each case will turn upon its own circumstances. For example, in a case such as this if there were no dispute over the liability to indemnify, there would be no issue between the third party and the defendants, but directions could be given to enable the third party to take part in the issue to be tried between the plaintiff and the defendants.

20. In this case the third party does not want to be involved in any issue between the plaintiff and the defendants. The third party accepts that if the plaintiff obtains a judgment against the defendants there is a risk that the defendants may then commence separate proceedings against it with attendant increased costs. If the defendants do not properly defend the plaintiff's claim, the third party may suffer the consequences in subsequent proceedings. All of that is a matter for the third party.

21. If on this application there had been disputed factual material, obviously there would be a question "proper to be tried". Equally obviously if there is a reasonable legal argument to be determined, then there would be a question "proper to be tried". The submission on behalf of the third party is that although the claim is for indemnity, there is no factual issue to be determined with respect to that claim and no legal argument to refute the third party's contention that by reason of failure to comply with a condition precedent, the third party has no obligation to indemnify either defendant. I turn to consider that submission.

22. After identifying the cover provided, the policy states, "provided always that the indemnity granted by this policy is subject to the due observance and fulfilment of the conditions of the policy ... which conditions ... shall be conditions precedent to any liability of ours under this policy."

"Notice of Claim. You shall give notice to us in the manner

set out under the section of this policy headed 'Claims

procedure' of any injury to an Employee or claim for compensation

by an Employee as soon as practicable after information as to

the happening of such or of any incapacity arising therefrom

comes to your knowledge or any representative of yours for

the time being and shall forward to us forthwith every written

or verbal notice of claim and all proceedings or information

relating to such injury or claim, and in the case where the

claim is for compensation under the Act, no later than 5 days

after receiving the claim".

24. Under the heading "Claims Procedure" the policy provides, "in the event a worker suffers an injury or a disease arising out of and in the course of the worker's employment a claim form comprising 'Worker's Report and Employer's Report' being part of Worker's Compensation Board Form 1 together with the appropriate medical certificate is to be forwarded to us within 5 days."

25. By virtue of the provisions of the Insurance Contracts Act 1984 (Cth), s9(1) this policy of insurance, being a workers compensation insurance policy, is excluded from the operation of that Act. Failure to comply with the provisions of the policy with respect to giving notice entitles the third party to repudiate the particular claim (but not the contract) for breach of condition. See Allen v Robles (1969) 1 WLR 1193.

26. The defendants claim to be entitled to indemnity in respect of liability to pay "any sum independently of the Act in respect of an injury suffered by (the plaintiff) and in respect of which (the first defendant) is liable under s25 of the Act to pay compensation".

27. On behalf of the third party, Mr Simon Brown submitted that the condition precedent was quite clear. He submitted that by its terms the first defendant was obliged to give notice to the third party "of any injury to an Employee or claim for compensation by an Employee as soon as practicable after information as to the happening of such ... and to further forward to us forthwith every written or verbal notice of claim ... relating to such injury or claim ..." . Mr Brown submitted that on or about 15 July 1994 the first defendant was informed as to the happening of an injury to an employee and a claim for compensation. The claim for compensation identified 23 May 1994 as the date and time the injury or condition was first noticed or identified; the relevant type of injury or disease was identified as stress and by way of description with respect to what happened, the claim disclosed that the plaintiff was verbally and physically assaulted by employer - J A Dunn.

28. Mr Brown submitted that as no notice was given to the insurer until after service of the writ in February 1995 there was a clear breach of the condition precedent and the defendants have no reasonable argument that the third party is obliged to indemnify it with respect to the plaintiff's claim.

29. On behalf of the defendants, Mr Pearce submitted that the provisions of the policy requiring notification of the claim for compensation had no application because no indemnity was sought with respect to any liability to pay workers compensation. With respect to the provision that notice must be given as soon as practicable "of any injury to an Employee", Mr Pearce submitted that it was disputed that the plaintiff suffered any injury and therefore the fact that brings the condition precedent into operation has not been established. I reject these submissions. Notice of any injury to an employee must be given as soon as practicable "after information as to the happening of such" comes to the knowledge of the first defendant. Such information came to the knowledge of the first defendant with the delivery of the claim for compensation on or about 15 July 1994. To construe the clause on the basis that in a case of a claim for indemnity for liability other than under the Act, notice of injury need not be given except in cases where the policy holder accepts that there was an injury, would defeat the whole purpose of the clause. The event that triggers the requirement to give notice is not the occurrence of injury but the receipt of information that injury has happened to an employee. Further, if a claim for compensation is made as it was in this case, notice must also be given as prescribed, as soon as there is information of the happening of that event, regardless of whether the indemnity sought is for liability to pay compensation under the Act or damages at common law. The terms of the condition precedent require notice to be given as soon as practicable after information as to the happening of either injury or claim for compensation or both, comes to the knowledge of the policy holder irrespective of the nature of the indemnity sought. The clause continues to provide in effect, that if the information is that a claim for compensation has been made then the notice must be given as soon as practicable and in any event not later than five days after receipt of the claim. The first defendant has not complied with the condition precedent and the defendant's claim for indemnity from the third party cannot succeed. I am satisfied about that to the degree that I conclude that there is no question or issue proper to be tried between the defendants and the third party.

30. The summons for directions will be dismissed and the third party proceedings struck out.