Reid v Allianz Australia Insurance Ltd

National Mutual Fire Insurance Co v Commonwealth of Australia [1981] 1 NSWLR 400 Devine v Devine and Queensland Insurance Co (1928) 28 SR (NSW) 503 Brakespeare v Northern Assurance Co Ltd (1959) 101 CLR 661 CASES CITED: Coleman v Mercantile Mutual Insurance Co Ltd (1933) WCR 231 Spain v Metropolitan Meat Industry Board [1971] 1 NSWLR 91 Bailey v Medical Defence Union (1995) 132 ALR 1 GIO General Ltd v Malathounis [1997] NSWCA 124 Longo v Sydney Water Corporation (2003) 25 NSWCCR 125.

Mr S Tzouganatos instructed by Turner Freeman appeared for the plaintiff LEGAL REPRESENTATIVES:

Mr J L Sharpe instructed by Ellison Tillyard Callinan appeared for Allianz Australia Insurance Limited

Dust Diseases Tribunal of New South Wales Matter Number 278 of 2009 Edward James Joseph Reid v Allianz Australia Insurance Ltd 30 October 2009 CURTIS J AMENDED RULING

1. The plaintiff, by statement of claim filed on 22 September 2009, purported, pursuant to s6(4) of the Law Reform (Miscellaneous Provisions) Act 1946, to sue Allianz Australia Insurance Ltd (Allianz) as the former workers compensation insurer of two deregistered companies, namely Action Insulation Engineers Pty Limited and Thos Clarke & Sons Pty Limited.
2. Because the plaintiff had not, as required by s6(4), first obtained leave of the court to commence the action, it was in consequence a nullity, and incapable of being revived by leave given retrospectively (National Mutual Fire Insurance Co Ltd v Commonwealth of Australia [1981] 1 NSWLR 400).
3. Accordingly, on the application of Allianz, the proceedings against that defendant were this morning dismissed.
4. Mr Tzouganatos for the plaintiff now moves the court for an order that the plaintiff have leave to sue Allianz directly. This is opposed by Mr Sharpe for Allianz who contends that the plaintiff cannot secure a judgment against Allianz without first obtaining a judgment against the insured companies. Mr Sharpe is wrong. The issue
5. Does s6(9) of the Law Reform (Miscellaneous Provisions) Act 1946, inserted by Schedule 3 of the Workers Compensation Legislation Amendment (Dust Diseases And Other Matters) Bill 1998, permit a plaintiff to proceed directly against the insurer of a deregistered Corporation, without the necessity of restoring the defunct company to the register for the purpose of suit? The legislation
6. S6(1) of the Law Reform (Miscellaneous Provisions) Act 1946, upon the happening of any event giving rise to liability, creates a charge over insurance moneys payable in respect of the liability although the amount of the liability has not yet been determined.
7. Relevant further provisions are as follows: 6(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, …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. (Emphasis added). … 6(8) Nothing in this section shall affect the operation of any of the provisions of the Workers Compensation Act 1987 or the Motor Vehicles (Third Party Insurance) Act 1942 . 6(9) Despite subsection (8), this section applies in relation to a policy of workers compensation insurance entered into by an employer (whether entered into before or after the commencement of this subsection), where the employer: (a) being a natural person, has died, or is permanently resident outside the Commonwealth and its Territories, or cannot after due inquiry and search be found, or (b) being a corporation (other than a company that has commenced to be wound up), has ceased to exist, or (c) being a company, corporation, society, association or other body (other than a company that has commenced to be wound up), was at the time when it commenced to employ workers to which the policy relates incorporated outside the Commonwealth and its Territories and registered as a foreign company under the laws of any State or Territory and is not so registered under any such law, or (d) being a company, is in the course of being wound up.
8. S155 of the Workers Compensation Act 1987 requires an employer to obtain and maintain in force a policy of insurance that complies with the act.
9. S159(2) of that act, reproducing the language of s18(3) of the former Workers Compensation Act 1926 stipulates that: A policy of insurance shall provide that: (a) the insurer as well as the employer is directly liable to any worker insured under the policy and, in the event of the worker's death, to the dependants or other persons to pay the compensation under this Act or other amount independently of this Act for which the employer is liable , and (b) the insurer is bound by and subject to any judgment, order, decision or award given or made against the employer of any such worker in respect of the injury for which the compensation or amount is payable. (Emphasis added) Discussion
10. S6, upon the happening of the event giving rise to liability, creates a charge over insurance moneys in favour of an injured person and provides a procedure to enforce that charge. As Moffitt J said in National Mutual Fire Insurance Co v Commonwealth of Australia [1981] 1 NSWLR 400 at 402: "the section recognises that the need for enforcement of the charge may arise after a judgment has been obtained against the insured (s6(5)) or may arise although there is no such judgment (s6(4)". (emphasis added)
11. S159(2) also creates a charge over insurance moneys upon the happening of the event which gives rise to liability, however that liability is conditional upon the plaintiff first establishing the liability of the employer by judgment. This is because the insurer is bound to pay only that amount for which the employer is liable (Devine v Devine and Queensland Insurance Co (1928) 28 SR (NSW) 503; Brakespeare v Northern Assurance Co Ltd (1959) 101 CLR 661).
12. Isaacs J in Spain v Metropolitan Meat Industry Board [1971] 1 NSWLR 91, suggested that it was because of this inconsistency between the two provisions that s6(8) was inserted in the Act: (Nothing in this section shall affect the operation of any of the provisions of the Workers Compensation Act 1987…).
13. I am not altogether convinced that this was so. Other inconsistencies exist favourable to workers. If a breach of condition in a workers compensation policy occurred after the date of injury, the liability of the insurer to the worker, which had crystallised at the moment of injury, remained extant, despite the fact that the insurer under the terms of the policy could have denied liability to the employer for that breach: (such as a condition that required the insured to give notice of injury) (Coleman v Mercantile Mutual Insurance Co Ltd (1933) 7 WCR 231.) This circumstance is more favourable to injured workers than s6(4) of the Law Reform (Miscellaneous Provisions) Act 1946, pursuant to which an action by a plaintiff against the insurer will not be permitted where the court is satisfied that the insurer was entitled under the terms of the policy to disclaim liability.
14. In Bailey v Medical Defence Union (1995) 132 ALR 1 McHugh and Gummow JJ at p36 said: However, the terms of s6(4) of the Law Reform Act are apt to include more than avoidance by reason of some vitiating factor in the formation of the contract of insurance. For example, in McMillan v Mannix a provision of the policy of insurance required the co-operation of the insured in the event of a claim; such cooperation was a condition precedent to liability and breach of it was a basis for disclaiming liability. It was true that the relevant event, failure to co-operate in the event of a claim, occurred only after, in the terms of s6(1) "the happening of the event giving rise to the claim for damages or compensation". Nevertheless, the entitlement to disclaim liability was conferred by the contract as it stood at the earlier date, albeit the entitlement became exercisable only after the happening of a later event.
15. This circumstance was apparently recognised by the Attorney General in the second reading speech to the Law Reform (Miscellaneous Provisions) Bill 1946 where he said: We are here dealing, I should point out, with insurance in fields where insurance is not compulsory, and, unlike the third party Act, recourse is not given here against an insurer irrespective of "equities" between it and the insured. Lastly, in subclause (8) it is provided that nothing in this Part is to affect the operation of the Workers Compensation Act or the Motor Vehicles (Third Party) Act. It is not desired that this part I should, by inadvertence, affect the rights of direct recourse against insurers which have already been conferred by those two Acts under which insurance is compulsory. That section is added to ensure that that will be so. (Hansard at 2811)
16. The Court of Appeal in GIO General Ltd v Malathounis [1997] NSWCA 124, following Devine v Devine and Queensland Insurance Co (1928) 28 SR (NSW) 503 and Spain v Metropolitan Meat Industry Board (1971) 1 NSWLR 91, confirmed that although the liability of an insurer created by s18(3) attached as soon as compensible injury occurred, that liability was conditional upon the plaintiff securing verdict and judgment against the insured.
17. Malathounis was a case in which the insured employer had moved to Greece many years before the plaintiff brought his action. Confronted with the difficulties of service and enforcement of a judgment against the employer, the plaintiff attempted to sue the employer's insurer directly. The Court of Appeal held that, because of the provisions of s18(3) and s6(8) this course was not permitted.
18. The procedural disadvantages faced by injured workers compared to persons injured in circumstances where the policy of insurance was not a workers compensation policy, were addressed by the Workers Compensation Legislation Amendment (Dust Diseases And Other Matters) Act 1998.
19. The Explanatory Notes to the Bill that introduced the Act include the following notes: Overview of the Bill The object of this Bill is to amend various Acts: as regards workers compensation generally: (i) to enable proceedings to be brought against an insurer under a policy of workers compensation insurance where the employer has died or is defunct Schedule 3 Amendment of Law Reform (Miscellaneous Provisions) Act 1946 Schedule 3 amends section 6 to enable proceedings to be brought directly against an insurer under a policy of workers compensation insurance (whether relating to dust diseases or otherwise) where the employer has died or is defunct. This overcomes the decision in GIO General Ltd v Malathounis. (Court of Appeal, 30 September 1997)
20. The amendment addresses the difficulties faced by persons in the position of Mr Malathounis, and in similar positions. In most cases s159(2) will require judgment against an employer for the purpose of determining that sum for which the employer is liable. However where that employer fits any of the descriptions within s6(9), then s6(4) applies in relation to [that] policy of workers compensation insurance, an enforceable charge is created on the happening of the event giving rise to the claim. Conclusion
21. Pursuant to s6(9) of the Law Reform (Miscellaneous Provisions) Act 1946 a plaintiff may, with leave, proceed directly against the insurer of a deregistered Corporation, without the necessity of restoring the defunct company to the register for the purpose of suit. This conclusion is consistent with a decision of Johns J in Longo v Sydney Water Corporation (2003) 24 NSWCCR 125.
22. I addressed discretionary considerations bearing upon the grant of leave in my previous ruling, and I do not wish to change those reasons. Orders
23. Pursuant to s6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 I grant leave to the plaintiff to issue proceedings against Allianz claiming damages in respect of injuries suffered by him in the employment of Action Insulation Engineers Proprietary Limited and Thos Clarke & Sons Pty Limited while working in New South Wales. Mr S Tzouganatos instructed by Turner Freeman appeared for the plaintiff Mr J L Sharpe instructed by Ellison Tillyard Callinan appeared for Allianz Australia Insurance Limited

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