Provident Capital Ltd v Gould

CATCHWORDS : PROCEDURE - insurance - construction and effect of s.6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) - circumstances in which a plaintiff can proceed directly against insurer of party alleged to be liable to pay damages to the plaintiff - claims-made policy - coincidence of year of claim and completion of tort - claim for exclusion of liability for dishonesty - issue arguable and matter for trial judge

Civil Procedure Act 2005 LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946 Uniform Civil Procedure Rules 2005

Campbell v Mutual Life and Citizens Fire and General Insurance Co (New Zealand) Limited [1971] NZLR 240 Commonwealth v Cornwell [2007] HCA 16; (2007) 229 CLR 519 FAI General Insurance Co. Ltd v Brian Albert McSweeney & Ors; Travel Compensation Fund v FAI General Insurance Co. Ltd [1997] FCA 152; (1997) 73 FCR 379 Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 McCarthy v St Paul International Insurance Co Ltd [2007] FCAFC 28; (2007) 157 FCR 402 Oswald v Bailey (1987) 11 NSWLR 715 CASES CITED : Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 Scarcella v Lettice [2000] NSWCA 289; (2000) 51 NSWLR 302 Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 157 CLR 424 The Owners - Strata Plan No. 50530 v. Walter Construction Group Limited (In Liquidation) & Ors. [2007] NSWCA 124 Triden Properties Ltd v Capita Financial Group Ltd (NSWCA, Clarke, Scheller and Powell JJA, 15 November 1995, unreported) Tzaidas v Child [2004] NSWCA 252; (2004) 61 NSWLR 18 Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514

Provident Capital Ltd (Plaintiff) PARTIES : John Gould (Defendant) Lexon Insurance Pte Ltd (Respondent)

B K Nolan (Plaintiff) COUNSEL : D Grant (Solicitor) (Defendant) C Needham SC (Respondent)

Tiernan & Associates Lawyers (Plaintiff) SOLICITORS : Watson & Watson Solicitors (Defendant) Middletons Lawyers (Respondent)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT 1 HIS HONOUR: By motion on notice, the plaintiff, Provident Capital Ltd ("Provident"), seeks to join Lexon Insurance Pte Ltd ("Lexon") to these proceedings, pursuant to the provisions of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 ("the Act"). Provident seeks to rely on the position of Lexon as the insurer of the defendant, Mr John Gould, who is sued in his capacity as a solicitor, operating in Queensland. 2 Provident, in the substantive proceedings, claim damages for conduct in which Mr Gould was allegedly negligent, engaged in misleading and deceptive conduct and breached an undertaking. The affidavits in support of the motion evidence a professional indemnity insurance policy under which Mr Gould is the insured and Lexon is the insurer. Provident alleges that Mr Gould does not have the capacity to meet the damages, or all of the damages, that may be awarded as a result of the successful completion of the proceedings. 3 Lexon submits that it ought not be joined to the proceedings, because: the insurance policy, indemnifying Mr Gould, does not cover the period during which the events giving rise to the claim occurred; and, the conduct of Mr Gould was dishonest and/or fraudulent and the relevant insurance policy excluded cover for acts of dishonesty. Facts 4 The background factual situation relates to a building development and the proposed sale of lots in a community titles scheme. The developer was Clucor Pty Ltd ("Clucor") and the property was situated in Milton, Queensland. In or about October 2003, Clucor approached Provident, requesting a loan of approximately $7 million for the development project. By letter dated 22 October 2003, Provident indicated its willingness to lend the money subject to conditions, one of which was "satisfactory evidence that all lots have been pre-sold on unconditional contracts with 10% deposit." 5 The principal of Clucor was the son of Mr Anthony Taylor. Mr Anthony Taylor had been disqualified from managing a company and was, at the relevant time, disentitled from so doing. While the date is not absolutely clear, it seems some time prior to 23 October 2003, Mr Anthony Taylor (or his son, the distinction being irrelevant for present purposes) paid, himself, the deposits for the sale of the units. 6 The deposits were paid from Mr Taylor's Ozecard account, into a Holding Account in the name of Mr Gould. The Ozecard account, while expressed in dollar amounts, is not in legal tender. It is a form of barter card, which operates a sophisticated barter system, in which persons who hold accounts buy and sell from each other in "trade dollars". 7 On 23 October 2003, Mr Gould, in a letter addressed "To Whom It May Concern", advised "we are holding in our Holding Account the following amounts in respect of the Deposits for the sale of the following properties totalling $1,120,000." The letter was unsigned. The parties have referred to it as the "first communication". On 11 November 2003, an identical letter was signed ("the second communication"). 8 On 18 November 2003, Provident, by letter, agreed to lend $6.9 million to Clucor, subject to conditions, one of which was the same as that set out in paragraph 4 above. On 20 November 2003, solicitors for Provident sent an e-mail to Mr Gould seeking confirmation of the identity of the person holding the deposits and also seeking confirmation that the contract was unconditional. Mr Gould sent (by facsimile) that e-mail to Clucor, as well as forwarding the e-mail. On 21 November 2003, Mr Gould faxed Clucor in relation to "Cook Terraces" enclosing the previous e-mail and asking, again, for the necessary responses either by Tony Taylor or Praeger Batts (the solicitors for Clucor) in which Mr Gould described his state of knowledge, as "not sure what is going on with these or anything much else". 9 Correspondence occurred between Praeger Batts, Clucor and Mr Gould relating to the deposits, confirmating that they would not be released prior to settlement, and the satisfaction of the request from Provident's solicitors. 10 On 25 November 2003, Mr Gould sent a facsimile ("the third communication") to Provident's solicitors, in the following relevant terms: "We refer to previous communications herein and advise:-

1. The Deposits held by us in our holding Account as detailed in our 'To whom it may concern' letter of 11 November 2003 (copy attached) shall not be released to any person pending settlement of the contracts of sale referred to therein.

2. We enclose copies of confirmation of 'Unconditional Contracts' notifications in our possession [and then set out the names of purchases of six units, but noted that they were not in possession of correspondence for the purchases of the sixth unit]." 11 On 27 November 2003, Mr Gould, the principal of Compass Legal Solutions, allegedly gave an irrevocable undertaking not to release deposits as described in that letter, being deposits "held in our Trust Account". There is then set out next to each lot an amount, the total of which is described as "$1,120,000.00". Those amounts are not, expressly, described as the deposits held, but an inference to that effect is available. This communication has been described as "the fourth communication". 12 On 28 November 2003, Mr Gould is alleged to have undertaken, by letter ("the fifth communication"), to account to Provident for any deposits that are forfeited in the event of default in relation to the contracts provided to him for the sale of Lots 1 to 6 of The Cook Terraces and not to release deposit monies to any purchaser, until Mr Gould had satisfied Provident's solicitor that the purchaser was lawfully entitled to terminate their contract. 13 On 28 November 2003, after the undertakings had allegedly been given, Provident lent $6.9 million to Clucor. 14 On 22 December 2003, Clucor purported to reverse the transaction in relation to the sale of units 2, 4 and 5 and advised that Mr Gould had ceased to act on its behalf. In or about mid-2004, Clucor defaulted on the repayments to Provident under the loan agreement. In or about August 2004, each of the purchases of the six lots defaulted under the contracts for sale. In or about September 2004, Provident sought to recover the deposits from Mr Gould at which time they were informed that the deposits were not in a trust account, that the deposits comprised "trade dollars" and not money, Mr Gould could not account for the Deposits and they were incapable of being redeemed. 15 On 4 May 2005, Provident wrote to Mr Gould in terms that referred to the aforesaid irrevocable authority, the undertaking regarding $1,120,000 and the representation that that amount was held in Mr Gould's trust account as deposit monies for the purchases of Lots 1 to 6. The letter referred to the reasonable inference that the funds were held in Australian dollars. Provident advised Mr Gould that Clucor had defaulted on its obligations and that Provident was then mortgagee in possession. The letter advised Mr Gould to inform his insurers of a potential claim against him. Mr Gould informed Lexon on 24 May 2005. 16 It is unnecessary for the Court to find, on a final basis, whether any, and, if so, how much, damage was suffered by Provident. It is sufficient for present purposes to note that there is evidence of damage and, at least arguably, it is significant. 17 The insurance policy issued by Lexon covered Mr Gould (and/or Compass Legal Solutions of which Mr Gould was principal) for the years ending 30 June 2004 and 30 June 2005. It was an insurance policy arranged for the members of the Queensland Law Society Inc and was intended as coverage for professional indemnity insurance for a solicitor's practice in Queensland. Relevantly the policy provided: " Insuring Clauses

On the terms and conditions herein contained the Insurer shall indemnify the Assured up to an amount not exceeding the Sum Insured against all loss to the Assured (including Related Costs incurred by the Assured and claimants costs) whensoever occurring arising from any claim or claims first made against the Assured during the Period of Insurance in respect of any description of civil liability whatsoever incurred in connection with the Practice other than loss arising out of any circumstances or occurrence in respect of which the Assured is entitled to indemnity under any other insurance.

(e) This insurance shall not indemnify the Assured in respect of any liability:-

(v) directly or indirectly brought about by the dishonest or fraudulent act or omission of the Assured including any Partner or former Partner of the Assured or any person employed or retained in connection with the Practice.…" [Emphasis added.] Relevant period of insurance 18 The issue between the parties on this aspect is the operation of s 6 of the Act to a "claims made" insurance policy and the proper application of the principles outlined by the Court of Appeal in The Owners - Strata Plan No. 50530 v. Walter Construction Group Limited (In Liquidation) & Ors. [2007] NSWCA 124 ("Walter Constructions"). The parties have agitated the issue on the basis that the contract of insurance was one that ran between 1 July 2004 and 30 June 2005, although there is some evidence to suggest that there was a policy also in existence from 1 July 2003 to 30 June 2004. The earlier period will be ignored for the purposes of this analysis. 19 The plaintiff submits that (as is clear from the emphasised words in the extract of the insurance policy above), because the liability of Lexon arises when a claim is made by Provident against Mr Gould, s 6 of the Act operates, automatically, to render Lexon susceptible to suit in relation to a liability for which the claim was made during the period of insurance. Provident's analysis misunderstands the complexity associated with the judgment of the Court of Appeal in Walter Constructions. In fact, the submission of Provident would accord with the approach taken by Lindgren J in FAI General Insurance Co. Ltd v Brian Albert McSweeney & Ors; Travel Compensation Fund v FAI General Insurance Co. Ltd [1997] FCA 152; (1997) 73 FCR 379. 20 The issue is resolved not simply by an analysis of the liability of Lexon under the insurance policy, but also an appreciation of the limitations implicit in s 6(1) of the Act. It is appropriate for me to repeat the relevant provisions of that section: " 6 Amount of liability to be charge on insurance moneys payable against that liability (1) If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of the person's liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability. ... (4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured: Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken." 21 As can be seen from an analysis of s 6(1), above, the charge on all insurance monies payable in respect of a liability occurs only "on the happening of the event giving rise to the claim for damages or compensation" against the party that is insured. That event occurs when, relevant to this proceeding, the tort is complete. In terms of achieving what seems to me the purpose underpinning s 6(1) of the Act, the approach in FAI General Insurance, supra, seems more consistent with that purpose. But the purpose of the legislation ought generally be derived from its terms and the reasons for judgment of Lindgren J were before the Court of Appeal in Walter Constructions. 22 The decision of the Court of Appeal expresses the view that there is much force in the opinion of Lindgren J, but, in the circumstances of a "claims made" policy, does not create a charge if the cause of action has been completed at a time before the relevant contract of insurance has been made: (see Walter Constructions at [30], per Hodgson JA, with whom Giles JA and Tobias JA agreed). Thus, even though the claim under the policy, which claim gives rise to liability under the policy, may not be made until a later time, that is part only of the conditions necessary to satisfy the provisions of s 6 of the Act. With great respect to the Court of Appeal, I agree that the wording of the provisions of the Act require the interpretation they have expressed. In any event, I am bound by it. 23 However, the construction of s 6 outlined by the Court of Appeal in Walter Constructions does not, in this case, necessarily resolve the matter in favour of Lexon. The difficulty is determining the date of the happening of the event that gave rise to the claim for damages, which, even in a "claims made" policy, is the determinant of the right to sue under s 6 of the Act. 24 In the case of a tort, particularly a tort relating to economic loss, the tort is complete when the plaintiff has suffered some actual, measurable damage and that damage is beyond what is negligible. The date on which the action accrues is when the plaintiff first suffers actual damage (not including prospective loss): Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539; Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180; Commonwealth v Cornwell [2007] HCA 16; (2007) 229 CLR 519 at [5], [6]; and Scarcella v Lettice [2000] NSWCA 289; (2000) 51 NSWLR 302. 25 In Scarcella, Handley JA, with whom Powell and Giles JJA agreed, said: "[13] A cause of action in negligence is not complete until the plaintiff first suffers actual loss or damage. Damage which is prospective or contingent does not qualify as actual damage for this purpose. See Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 (Wardley) at 530, 531 per Mason CJ, Dawson, Gaudron and McHugh JJ.

[14] In order for the plaintiffs' cause of action to be complete, the plaintiffs' actual damage must be 'measurable' (Wardley at 531), or, in the words of Lord Reid in a personal injuries case ( Cartledge v E Jopling & Sons Ltd [1963] AC 758 at 772) the damage must be 'beyond what can be regarded as negligible'.

[15] This was an action to recover damages for the plaintiffs' economic loss and the courts have developed special rules for distinguishing between actual and prospective damage in this area. Time commences to run under the Limitation Act when damage accrues, even if the plaintiff is not aware of it: see Cartledge v E Jopling & Sons Ltd [1963] AC 758 at 782-3; Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 at 543, 560-561, 587-8, and 598-602 and Wardley [1992] HCA 55; (1992) 175 CLR 514 at 540, 554-5.

[16] Where an owner suffers loss because of the existence of latent defects in a building, it is now established that such loss accrues when the defects become manifest or are otherwise discovered, and not before. What has become orthodox doctrine in much of the common law world concerning the nature of the damage in such a case can be traced to the judgment of Deane J in Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 157 CLR 424 at 503-5 where he said:

'... the respondent's claim ... is for the loss or damage represented by the actual inadequacy of the foundations, that is to say it is for the cost of remedying a structural defect in their property which already existed at the time when they acquired it ... It is arguable that any such loss ... should be seen as being sustained at the time of acquisition when, because of ignorance of the inadequacy of the foundations, a higher price is paid ... than is warranted by the intrinsic worth of the freehold or leasehold estate that is being acquired. Militating against that approach is the consideration that, for so long as the inadequacy of the foundations are neither known nor manifest, no identifiable loss has come home: if the purchaser or tenant sells the freehold or leasehold estate within that time, he or she will sustain no loss by reason of the inadequacy of the foundations. The alternative, and in my view preferable, approach is that any loss ... involved in the actual inadequacy of the foundations is sustained only at the time when the inadequacy is first known or manifest. It is only then that the actual diminution in the market value of the premises occurs'."

26 As his Honour Handley JA said, much of the principle derives from the judgment of Deane J in Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 157 CLR 424. See also the reference to that judgment in the Commonwealth v Cornwell, supra, particularly the judgment of Callinan J which, although in dissent, did not differ from the majority as to the expression of principle. 27 The majority (Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ) in Commonwealth v Cornwell, supra, referred also to the judgment of Gaudron J in Hawkins v Clayton, supra, and the judgment of the majority (Mason CJ, Dawson, Gaudron and McHugh JJ) in Wardley, and observed: "16. In Hawkins v Clayton , Gaudron J emphasised the importance for actions for negligence causing economic loss in identifying the interest said to be infringed, whether it be the value of property, the physical integrity of property, or the recoupment of moneys advanced. Thereafter, in Wardley Australia Ltd v Western Australia , Mason CJ, Dawson, Gaudron and McHugh JJ observed:

'To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events. In such a situation, there would be an ever-present risk of undercompensation or overcompensation, the risk of the former being the greater.'

'The kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. With economic loss, as with other forms of damage, there has to be some actual damage. Prospective loss is not enough.'" ( Wardley , supra, as cited in Commonwealth v Cornwell , supra, at [16].) 28 The exact date on which Clucor defaulted is not disclosed in the evidence. It is described as mid-2004 in paragraph 13 of the statement of claim. But the default of Clucor on the loan is not the point at which Provident first suffered non-negotiable loss. The loan was always intended to be bridging finance to secure the completion of construction, pending settlement of the sales of units. The first time at which damage was suffered was when the purchasers of the units defaulted. Knowledge of the default and damage is not necessary, but actual damage was. It may be that, at that time, the loss was not measurable and may have first become measurable after the market price of the units was ascertained. But the preferable view is that the tort was complete when default occurred at which time, there was actual and measurable damage, first occasioned on the default of the purchaser, the calculation of which became certain when the market value was known. 29 Whatever be the ultimate finding of the trial judge as to the date upon which damage was first occasioned, it is at least more than arguable that the tort was not complete until after 1 July 2004. In those circumstances, the happening of the event that gave rise to the claim for damages was in the year during which insurance cover existed. It would seem that in a "claims made" policy, it is not only the happening of the event that must occur during insurance cover, but the making of the claim against the insured. In this case, the two events coincide (in terms of years). 30 The letter of 4 May 2005 from Provident to Mr Gould is plainly a claim by Provident against Mr Gould (and/or his firm) as a consequence of which there was a liability in Lexon to indemnify against the liability (subject to any other exclusion): see Triden Properties Ltd v Capita Financial Group Ltd (NSWCA, Clarke, Scheller and Powell JJA, 15 November 1995, unreported). Further, on 24 May 2005, Mr Gould notified Lexon of a claim on it in relation to this liability. That also was a notification within the year for which insurance cover operated. 31 As a consequence, subject to the issue of dishonesty, to which the Court will now turn, s 6 of the Act allows the Court to join Lexon as a party. Exclusion on account of dishonesty 32 The second aspect upon which Lexon relies to oppose its joinder to the proceedings under s 6 of the Act is that Lexon does not have a liability to pay damages or compensation in relation to these events, because the terms of Clause 5(e)(v) of the insurance policy, recited above, exclude liability brought about (directly or indirectly) by the dishonest or fraudulent act or omission of Mr Gould. Lexon submit that the conduct of Mr Gould is plainly and unarguably dishonest and/or fraudulent and therefore no liability attaches and s 6 of the Act cannot be invoked to join it as a party to the proceedings. 33 The evidence before the Court, at this interlocutory stage, includes a statement by Mr Gould in which he alleges: that he acted for Mr Taylor, or entities associated with him, for a period of 1 year and this purchase was the first occasion on which he so acted; that the contracts for sale were prepared in blank, the details to be inserted by another person not associated with Mr Gould's firm; that he did not act for the purchasers, although he witnessed the execution of one or more of the contracts; that he did not write each of the memoranda on which Provident relies (and suggests, in that regard, that some of those memoranda are forgeries). In particular, Mr Gould alleges that the "irrevocable authority" of 27 November 2003 and the 'undertaking' of 28 November 2003, to which reference has been made above, are each a forgery. 34 Lexon submits that a person who had received the communications from Mr Gould (even if confined to those which he acknowledges as his) would ordinarily understand that the monies were held on trust and the amounts to which Mr Gould referred were Australian dollars and/or held in legal tender. They point out that to hold a deposit in an account, other than a solicitors' trust account, is a breach of the law and a breach of ordinary conveyancing practice. 35 There is little doubt, albeit that the Court presently does not have before it evidence that would be adduced at trial, that the case for misleading and deceptive conduct is very strong. However, that is not the test for dishonesty. It may be that, at trial, Mr Gould will not be believed if he protests that he did not know what he asserted was not true, but the test is subjective. In McCarthy v St Paul International Insurance Co Ltd [2007] FCAFC 28; (2007) 157 FCR 402, the Full Court of the Federal Court of Australia had occasion to look at the meaning of the term "dishonesty" in an exclusion clause of the kind on which Lexon now relies. Her Honour Kiefel J (then a member of the Federal Court) (with whom Stone J and Allsop J, as he then was, agreed) said: "[33] MDRN submitted that dishonest conduct, of which the policy speaks, must be deliberate in the sense that there was an intention on the part of Mr Blackadder to deceive. Knowing that statements were false and might deceive, but being reckless or careless about whether they might have that effect was not enough. So much may be accepted. …

[34] A conclusion that something is said dishonestly requires reference to the state of the speaker's mind. A conclusion of dishonesty cannot be reached if they believe in the truth of the statement: Derry v Peek [1889] UKHL 1; (1889) 14 App Cas 337 at 361. A person is deceitful if they know or believe that that which they say is false: Derry v Peek 14 App Cas at 343, 351, 374. Deceit of course involves dishonesty. Dishonesty is assessed by reference to the standard of ordinary, honest persons and is not a term of art: Peters v The Queen (1998) 192 CLR 493; [1998] HCA 7 at [15] and [18]; McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] FCA 65 at [55]; Comino & Ors v Manettas & Ors (1993) 7 ANZ Insurance Cases 61 - 162, at 77,869; Harle v Legal Practitioners Liability Committee (2004) 13 ANZ Insurance Cases 61-605 at 77,302; [2003] VSCA 133. It is not however necessary that the person making the false statement understood it to be dishonest by that standard. As Toohey and Gaudron JJ pointed out in Peters v The Queen [1998] HCA 7; 192 CLR 493 at [15] it is incongruous to ask whether a person accused of dishonesty appreciated that to be the case. Ordinary honest persons determine whether a person's act is dishonest by reference to that person's knowledge or belief as to some fact relevant to the act in question or the intention with which it was done. They do not enquire whether the accused must have realised the act was dishonest. The ordinary person would consider it to be dishonest to assert as true something which is known to be false." 36 As earlier stated, the trial judge may find it difficult to believe that Mr Gould did not know that he was deceiving the reader of the letters (i.e. that what he was asserting was untrue) and did not have an intention to deceive, but such a finding of fact is for the trial judge. On the evidence before the Court, at this interlocutory stage, there is an assertion by Mr Gould that he did not know that what he was writing was false and he did not intend to mislead. It may be, although unlikely, that Mr Gould had a peculiar understanding of the reference to a dollar amount and had a particularly precise understanding of the meaning of the term "holding account", which allowed him to genuinely believe that a "holding account" was not a "trust account" (as he asserts) and that the reference to "holding account" necessarily involved an understanding that legal tender had not been received (because if it were legal tender it would, by law, have been required to be deposited in a trust account). Leave and conclusion 37 Provident provided a loan of $6.9 million to Clucor. Damages will be at least in excess of $1 million plus interest and costs. The evidence before the Court establishes that Mr Gould, even though an otherwise available common law defendant, is unlikely to be able to satisfy the amount awarded by the Court, should the plaintiff be successful. In those circumstances, it is unlikely that Provident could recover the amount awarded from Mr Gould and, subject to the operation of s 6 in other respects, leave should be granted: Campbell v Mutual Life and Citizens Fire and General Insurance Co (New Zealand) Limited [1971] NZLR 240 at 243; Oswald v Bailey (1987) 11 NSWLR 715 at 725. The alternative may involve a cross-claim (or later action) by Mr Gould against his insurer. Joinder is better means of facilitating the just, quick and cheap resolution of the real issues between the parties: s 56 of the Civil Procedure Act 2005. 38 On the basis of the foregoing, if leave be otherwise appropriate, the issues raised by Lexon are resolved against it. The evidence that is available to the Court, at this interlocutory stage, discloses that it is at least arguable that the insured had a claim under the relevant policy and that the insured (Mr Gould) is not in the relevant sense a common law defendant available to satisfy the amount that is likely to be awarded. The test is "a relatively modest hurdle": Tzaidas v Child [2004] NSWCA 252; (2004) 61 NSWLR 18 at [140]. 39 For the foregoing reasons, the Court makes the following orders:

(i) Leave be granted to the plaintiff under s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 to commence proceedings and/or join to the current proceedings Lexon Insurance Pte Ltd;

(ii) Pursuant to Rule 6.24(1) of the Uniform Civil Procedure Rules 2005, Lexon Insurance Pte Ltd be joined as a party to these proceedings;

(iii) Costs of the application be costs in the cause;

(iv) Each party's rights are reserved to apply for any special or different order as to costs.

01/02/2010 - [19] - "against Provident" amended to "by Provident against Mr Gould"; [28] - "non-negotiable" amended to "non-negligible". - Paragraph(s) 19, 28

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