Plaintiff v Defendants

1. BHI's proposed statement of claim notes the factual background described above concerning Gobel's role in the proceeding, the notice of contribution filed by BHI against Gobel, and the judgment entered by the plaintiff against Gobel in default of appearance.[1]
2. The pleading then refers to the existence of the insurance policy between Gobel and the Underwriters, and alleges that the circumstances of the crash that is the subject of this proceeding were covered by that policy.[2]
3. The critical part of the proposed pleading comes at paragraphs 18 to 20, which read as follows:
   1. By reason of the matters pleaded above, Gobel is entitled to be indemnified by the Underwriters, in accordance with the Hull Policy, in respect of:

(a) the claims made against Gobel by the plaintiff;

(b) the damages assessed pursuant to the default judgment entered by the plaintiff against Gobel; and

(c) the contribution claim made against Gobel by BHI.

19. The Underwriters have not, to date, so indemnified Gobel.

Particulars

The absence of any grant of indemnity to Gobel by the Underwriters is to be inferred from the circumstances in which no notice of appearance has been filed by Gobel and judgment in default of appearance was filed against Gobel.

Further particulars may be provided following discovery and interrogation.

1. Pursuant to s 562 of the Corporations Act, any amount received by Gobel or its liquidator from Underwriters pursuant to the Hull policy in respect of the claims made in these proceedings must paid to the plaintiff or BHI.
2. In the premises, BHI is entitled to the relief sought as set out more fully in the prayer for relief below.

1. Ultimately, BHI seeks a declaration that the Underwriters are liable to pay any damages and costs awarded to the plaintiff against Gobel, and any contribution orders to be paid in favour of BHI in its claim against Gobel.

1. In support of the application, BHI relied upon three affidavits of its solicitor, Abbey Clark, affirmed on 6 May 2024, and 5 and 13 June 2024.
2. The Underwriters relied on an affidavit of their solicitor, Ian Ross Adrian, sworn on 17 June 2024.
3. Both BHI and the Underwriters filed written submissions and made oral submissions in support of their positions.
4. The history of the parties' interactions on this topic is involved and somewhat lengthy, however for the purposes of the present application the relevant features can be summarised relatively economically. The key facts, which were not in dispute between the parties, are as follows:

(a) Gobel is in liquidation, but the liquidators have not filed an appearance on behalf of Gobel in this proceeding.[3] There had been some correspondence previously in which the liquidators had apparently expressed an openness to doing so,[4] however this has not occurred to date.

(b) Mr Mohamed has entered judgment against Gobel in default of an appearance.

(c) The Soar entities (including Gobel) and the Underwriters are parties to the Hull Policy contract.[5] BHI is not.

(d) Gobel has not to date made any claim under the Hull Policy in respect of the incident that is the subject of Mr Mohamed's proceeding.

(e) The Underwriters have therefore not agreed or refused to provide indemnification under the Hull Policy to date - in the absence of a claim being made, no occasion has arisen for the question of indemnity to be considered.

1. In the course of oral submissions, BHI suggested that the position of the liquidators as to either making a claim under the Hull Policy, or seeking to have Gobel participate in the proceeding, may yet change. Neither event has occurred yet, however, and there is no evidence to suggest that either outcome is particularly likely or under active consideration - although equally, those possibilities could not be excluded.

1. As noted above, BHI's aim appears to be to enable the proceeds of the Hull Policy to become available in respect of any damages awarded in Mr Mohamed's proceeding. BHI says that the preferable course to enable the determination of the insurance issues in the present circumstances would have been for the Underwriters to appoint lawyers to represent Gobel in this proceeding pursuant to a right of subrogation under the Hull Policy, however this has not occurred. The only way BHI has to access any insurance proceeds arising under the Hull Policy is by seeking declaratory relief against Gobel and the Underwriters. As such, BHI seeks to have determined in this proceeding the question of the Underwriters' obligation to indemnify Gobel concerning the claims made by Mr Mohamed and its own contribution claim.
2. In the absence of such a determination, and should the status quo persist, it would appear that the plaintiff would be entitled to proceed to have his damages assessed against Gobel, following the entry of judgment in default, however without indemnification from the Underwriters under the Hull Policy there may be no funds available to satisfy the claim. BHI could thereby be left in a position where it considers it has meritorious contribution arguments against Gobel but no practical way to give effect to them in the proceeding.
3. The Underwriters' position is that the claim proposed by BHI is impermissible as there is no justiciable controversy between the parties, since Gobel has not to date sought indemnification from the Underwriters under the policy. They contend that the making of a claim under the Hull Policy is a necessary precursor to BHI's application, the absence of which means that there is nothing to be resolved by the proposed pleading.
4. Further, the Underwriters noted that they would suffer prejudice if BHI's application was allowed, as it is arguable that the effect of the new claim would be that they could be bound by Gobel's liability arising from the default judgment,[6] in circumstances where it considers it would have good arguments to deny liability on the basis of the facts present in this case (including Gobel's failure to file an appearance, which might be in breach of a clause of the Hull Policy requiring the insured not to act in a manner detrimental to the Underwriters' interests).[7] If the application was allowed, the Underwriters may be put in a position where it would have lost the ability to defend against the claim, where they consider they have good defences available to them.
5. In addition, the Underwriters raised further arguments concerning the timing and form of the proposed amendments, neither of which were expanded in any great detail in oral submissions. It is not necessary to dwell on these issues, however, as I do not consider they would have affected the outcome of this application compared to the parties' primary arguments.

1. The Court has the power to order amendments to court documents pursuant to r 36.01 of the Rules. Rule 36.01(1) provides that:

(1) For the purpose of -

(a) determining the real question in controversy between the parties to any proceeding; or

(b) correcting any defect or error in any proceeding; or

(c) avoiding multiplicity of proceedings -

the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.

1. Rule 11.15 addresses the procedure and form in which claims for contribution between parties to a proceeding are pursued. Ordinarily, contribution claims under s 23B of the Wrongs Act 1958 (Vic) are not required to be accompanied by pleadings, however in certain circumstances courts have granted leave for pleadings to be filed in respect of contribution claims between parties.[8] The present situation appears to be an appropriate occasion for this to occur, as the Corporations Act argument advanced by BHI is not raised by Mr Mohamed's pleading.
2. The parties proceeded on the basis that the principles concerning amendments to pleadings applied to this application. Those principles are well known and were not in dispute. An amendment that is futile because it is obviously bad in law, or a defective amendment that would be struck out if it was contained in an original pleading, will not be allowed.[9]
3. Order 13 of the Rules deals with requirements for pleadings. Rule 13.02(1) provides that every pleading is to "contain in a summary form a statement of all the material facts on which the party relies, but not the evidence by which those facts are to be proved". Requirements related to this principle were enumerated by John Dixon J in the well-known passage in Wheelahan v City of Casey (No 12),[10] including that:

(a) "the function of a pleading in civil proceedings is to alert the other party to the case they need to meet (and hence satisfy basic requirements of procedural fairness) and further, to define the precise issues for determination so that the court may conduct a fair trial";[11]

(b) "the cardinal rule is that a pleading must state all the material facts to establish a reasonable cause of action (or defence). The expression 'material facts' is not synonymous with providing all the circumstances. Material facts are only those relied on to establish the essential elements of the cause of action";[12] and

(c) "it is not sufficient to simply plead a conclusion from unstated facts. In this instance, the pleading is embarrassing".[13]

1. In considering BHI's application, the Court is required[14] to seek to give effect to the overarching purpose in s 7 of the Civil Procedure Act, 'to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute'.

1. BHI's submissions did not always seem to engage directly with the arguments being raised by the Underwriters in opposition to the application. BHI submitted, essentially, that it has standing to seek the declaratory relief, that the application was not bound to fail and was arguable, and that therefore the application should be allowed. The Underwriters' primary submission was that there is no justiciable controversy between the parties that was raised by the proposed amendments, and the application must therefore fail.
2. The question of whether there is a justiciable controversy is a 'threshold' issue that may be determinative of the application, which is appropriate to deal with first.
3. BHI's claim for declaratory relief relies upon s 562(1) of the Corporations Act 2001 (Cth), which provides:

Application of proceeds of contracts of insurance

(1) Where a company is, under a contract of insurance (not being a contract of reinsurance) entered into before the relevant date, insured against liability to third parties, then, if such a liability is incurred by the company (whether before or after the relevant date) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount must, after deducting any expenses of or incidental to getting in that amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability, or any part of that liability remaining undischarged, in priority to all payments in respect of the debts mentioned in section 556.

1. Section 562(1) of the Corporations Act does not create a cause of action through which a non-party to an insurance contract can pursue a claim against an insurer.[15] Rather, it creates a priority interest in respect of funds actually received by an insured or its liquidator from an insurer in respect of a liability covered by that contract. The declaratory relief sought by BHI is directed at establishing a liability to indemnify under the Hull Policy so that it can, ultimately, have the benefit of this priority.
2. In Ashmere Cove Pty Ltd v Beekink (No 2),[16] French J stated:

"... the want of a legal right or a cause of action is not a bar to the grant of declaratory relief. It is, nevertheless, necessary that declaratory relief be sought in respect of a real question that is not abstract or hypothetical. It must be directed to the determination of a legal controversy. Moreover the party seeking the relief must have a real interest in raising it ... ."[17]

1. In the present application, it is necessary to consider whether the proposed amendments satisfy these requirements.
2. It is not in dispute between the parties that Gobel's liquidator has not to date made any claim under the Hull Policy. BHI is not a party to the Hull Policy and did not suggest that it has any method available to it to compel such a claim to be made.
3. It follows, as the Underwriters submit, that there has been no denial or acceptance of indemnity in respect of Gobel under the contract.
4. It is trite to observe that a necessary precursor to funds being paid under an insurance contract is a claim being made in accordance with that contract by the insured party. As the Underwriters submitted, insured parties have a choice in this regard as to whether or not to make such a claim (one consideration in which would likely be the effect that such a claim would be on subsequent periods' premiums). As noted above, in the absence of a claim, the insurer would ordinarily have had no occasion to consider and determine whether an obligation to indemnify the insured party arises under the terms of the contract.
5. Viewed against this background, the present case must be seen as analogous to other authorities cited in which courts were not satisfied that any denial of liability under an insurance contract had occurred, leading to a conclusion that there was no extant justiciable controversy in applications where insurers were sought to be joined to existing proceedings.[18] BHI did not identify any authority in its submissions in which a contrary position had been reached by a court, to the effect that there was a justiciable controversy in existence in circumstances where no decision on liability had yet been made by an insurer.
6. Perhaps the simplest way to approach this issue is to consider what would happen if BHI was allowed to make its amendments, and it ultimately succeeds in obtaining the relief it seeks. BHI would obtain a declaration that the Underwriters would be liable to pay amounts that are ordered against Gobel in this proceeding, for which a claim is made under the Hull Policy. Critically, however, absent something more, nothing would change in terms of the parties' rights or substantive positions as a result of that declaration. A claim on the Hull Policy by Gobel is the event that could trigger payment obligations and, in turn, the priority provided by s 562 of the Corporations Act. Without such a claim, no money would change hands and no new obligations to pay - or indeed to do anything - would arise.
7. If the Underwriters had denied any obligation to indemnify Gobel, following a claim being made, then the declaration sought by would (if BHI succeeded) have the effect of determining the indemnity question arising under the Hull Policy. If a declaration was made as sought by BHI, the Underwriters would be required to satisfy the claim that had been made, and BHI would then be able to rely upon s 562 of the Corporations Act where Mr Mohamed's claim or BHI's contribution claim succeeded and the Underwriters paid out funds in respect of Gobel as a result. In this way, the proposed amendments could have real implications for the parties if a claim had been made and denied. It could not be said to be hypothetical or abstract.
8. However, in the absence of a claim being made on the Hull Policy, even if Mr Mohamed's claim or BHI's contribution claim succeeded, it would seem that nothing would be paid by the Underwriters, and so s 562 would have no work to do. In response to a question in the course of oral submissions, BHI acknowledged that in the event the liquidator takes no further steps and never makes a claim under the Hull Policy, then the declaration sought in the proposed pleading would have no effect.
9. BHI relied on the decision of CGU Insurance Ltd v Blakeley[19] in support of its position on the question of standing. It is apparent that this case concerned a proposed claim under s 562 of the Corporations Act, and that the majority considered that the interest of the applying liquidators in that matter, combined with the insurer's denial of liability under the insurance policy in question, were "sufficient to constitute a justiciable controversy" between them.[20] Those conditions are not identical to the ones present in this case.
10. The specific passages of Nettle J's judgment in CGU that were relied upon by BHI identify that the factors leading to the Court's conclusion in that case differ in material respects from the circumstances present in this case. For example:

"There are a number of reasons why the approach in Ashmere Cove is to be preferred. To begin with, Byrne J's reasoning in Interchase assumes that it was a condition of the power to grant declaratory relief that the declaration be determinative of an issue which directly affected property, a legal right or an obligation of the claimant. As has been seen, that is not the case. Depending upon the circumstances, it is sufficient that a claimant will derive some benefit or advantage from the declaration over and above any benefit or advantage that might be derived by an ordinary citizen."

"Second, although it is true that declaratory relief will not ordinarily be granted in relation to circumstances that have not yet occurred and might never happen, the liquidators' claim for a declaration is in relation to events which, ex hypothesi, have occurred, namely, the directors' past breaches of s 588G of the Corporations Act."

"Third, although it may not be known until the conclusion of the trial whether the circumstances which afford the liquidators a right of priority in relation to the proceeds of the insurance policy have occurred, that is not to say that those events have not yet occurred. The purpose of allowing CGU to be joined as a defendant to the proceeding is so that the claim for a declaration may be determined at the same time as and on the basis of the same evidence as the liquidators' claims against the directors

"Fourth, the issue in this case is not theoretical but, even if it were, the court does not lack jurisdiction to make a declaration concerning a theoretical issue, in the sense of an issue that does not presently exist but which is likely to arise in future, where the issue is productive of a real and pressing dispute, is of real practical importance or is one in which the claimant has a real commercial interest. Thus, for example, it is now well established that, where a claimant intends to take action which would subject him or her to a "theoretical" possibility of being subjected to legal process, the risk of being so subjected to that process is sufficient to ground standing to claim a declaration that the basis of the process (in that case, the offence) is invalid and, co-ordinately, that in such cases there is a matter upon which the court has jurisdiction to adjudicate. Similarly, where a claimant has a real commercial interest in establishing the claimant's legal status or entitlement in relation to proposed commercial conduct and there is a real controversy with some contradictor as to the existence or extent of the claimant's legal status or entitlement, the claimant may have standing to obtain, and the court co-ordinately will have jurisdiction to grant, a declaration as to the existence or extent of the status or entitlement."[21]

1. In contrast to the situation in CGU, in the absence of a claim having been made, there does not appear to be a benefit to BHI from the declaratory relief it seeks that is "over and above any benefit or advantage that might be derived by an ordinary citizen": it would get an understanding of the resolution of the legal question raised by that paragraph of the pleading, but have no practical ability to do anything with it. It is also known that the relevant precursor events have not occurred - no claim has been made under the Hull Policy - and there is no evidence to suggest that the position will necessarily be different by the conclusion of the trial. And notwithstanding BHI's real commercial interest in Gobel's insurance position, the outcome concerning the declaratory relief it seeks will not establish or clarify any legal status or entitlement it might have. These matters are all conditional upon action by Gobel (that is outside BHI's control) to make a claim in the first place.
2. As such, I do not think the passage relied upon by BHI is sufficiently on-point to displace the Underwriters' arguments as to the nature of any question or controversy that exists between those parties.
3. In this way, I cannot avoid the conclusion that the proposed amendment does not raise a real issue as between the parties in the present circumstances, rather than an abstract or hypothetical question. I accept that BHI has a real interest in the issue of indemnity arising under the Hull Policy, however at best the issue sought to be raised by the proposed amendments is contingent upon further action by the liquidators (that is, the making of claim under the insurance contract) which has not occurred to date and for which there is no evidence to suggest that it will occur in the future.[22] In the absence of such action, the question raised would not have any practical consequences for any party.
4. It follows that the proposed amendments do not raise any justiciable issue for determination. I accept the Underwriters' submissions in this regard. It is therefore unnecessary to consider arguments about potential prejudice or timing.
5. In closing, I note that in the event I am wrong about the 'justiciable controversy' issue, however, and BHI has an argument available to it by which it could gain access to a payment from an insurance policy against which no claim has yet been made (although this was not raised in submissions), there is a further problem for BHI's position. The proposed amended pleading merely asserts (in paragraph 21) that it is BHI that has an entitlement to the declarations it seeks, but does not identify how that entitlement accrues to BHI on the basis of the facts pleaded or the operation of s 562 of the Corporations Act. Further material facts would be required to make this clear, in order for the pleading to satisfy r 13.02(1) of the Rules.
6. The end result is therefore that there is presently no justiciable controversy between the parties to this application, and therefore the amendment is obviously futile and ought not be permitted to proceed, or otherwise the proposed pleading is missing material facts that would be necessary for the Court and the other parties to understand, and ought not be permitted to proceed in its present form on that basis. In either case, on the evidence available, I do not consider the application can be allowed.

1. In the circumstances, I accept the submissions made by the Underwriters as to the disposition of BHI's summons.
2. I recognise that this outcome, coupled with the circumstances of this case (in particular, the default judgments, the status of Gobel and the position of the liquidators), may create difficulties for at least some of the parties in arriving at a resolution of this proceeding. However, and as the parties noted in the course of the hearing, there is likely a number of other steps that could yet be taken to address the situation.
3. For present purposes, though, the application should be dismissed, and costs should follow the event.

CERTAIN UNDERWRITERS AT LLOYDS SUBSCRIBING TO POLICY NUMBER A039511

SOAR AVIATION AIRCRAFT HOLDINGS PTY LTD (IN LIQ) (ACN 613 275 853)

GOBEL AVIATION PTY LTD (TRADING AS SOAR ADVANCED FLIGHT TRAINING) (IN LIQ)

CERTAIN UNDERWRITERS AT LLOYDS SUBSCRIBING TO POLICY NUMBER A039511

[1] Proposed statement of claim at [9]-[12].

[3] The liquidators did not participate in the present application and there is no direct evidence available as to their attitude towards the litigation or any position they may take concerning it.

[4] E.g., affidavit of Ian Ross Anthony sworn 17 June 2024, exhibit "IRA-1", p99-100.

[5] Affidavit of Ian Ross Anthony sworn 17 June 2024, exhibit "IRA-1", p55.

[6] Relying on the reasoning in QBE Insurance Ltd v Nguyen [2008] SASC 138; (2008) 100 SASR 560.

[7] Hull Policy p 24; Affidavit of Ian Ross Anthony sworn 17 June 2024, exhibit "IRA-1", p74.

[8] See, e.g. Meli v Ceva Logistics (Australia) Pty Ltd [2017] VSC 603.

[9] See, e.g., ABL Nominees Pty Ltd v Mackenzie (No 2) [2014] VSC 529 [17]-[22], citing Commonwealth v Verwayen (1990) 170 CLR 394 and Hordon v Jones (No 2) [1939] NSWStRp 35; (1939) 39 SR NSW 305.

[10] [2013] VSC 316

[14] Civil Procedure Act 2010 (Vic), s 8(1).

[15] Anjin No 13 Pty Ltd v Allianz Australia Insurance Ltd [2009] VSC 371 at [30].

[16] [2007] FCA 1421; (2007) 244 ALR 534.

[18] In the authorities referred to by the parties, see e.g. CE Heath Casualty & General Insurance Ltd v Pyramid Building Society (in liq) [1997] 2 VR 256 and the authorities referred to by Vickery J in Anjin No 13 Pty Ltd v Allianz Australia Insurance Ltd [2009] VSC 371 at [46] and [52].

[19] [2016] HCA 2; (2016) 259 CLR 339.

[22] This may be contrasted against more concrete examples of likely future conduct, for example, as referred to by Nettle J in CGU Insurance Ltd v Blakely, above n 19 at [102].