Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries

REASONS FOR JUDGMENT 1 On 12 July 2013 I extended to that day the time within which the applicant QBE Insurance (Australia) Limited ACN 003 191 035 ('QBE') might appeal from orders made by Gray J on 19 March 2013 in Visy Packaging Pty Ltd v Siegwerk Australia Pty Ltd [2013] FCA 231. Pursuant to leave granted at the same time, QBE then filed its notice of appeal in Court. I ordered QBE to pay the respondent's ('Nuplex') costs of the application. These are my reasons for making those orders. 2 The trial before Gray J was a three cornered affair. Siegwerk Australia Pty Ltd ('Siegwerk'), a manufacturer of lacquer, sued Nuplex, a manufacturer of resin, which had been used in the production of the lacquer. The lacquer had been applied to cans of tuna. The cans failed and the tuna was ruined. Siegwerk had earlier settled with other parties responsible in various ways for the ruined cans. It then sought to recover from Nuplex. Nuplex, in turn, sued its insurer QBE on a liability policy. The parties found themselves in this imbroglio because the lacquer which had been used in the cans of tuna had failed. That failure had occurred as a result of what was said to be the brittle nature of the lacquer and the unexpectedly corrosive effect of the vinaigrette in which the tuna had come, at length, to rest. 3 At trial Nuplex achieved a total victory. It repelled Siegwerk's case that its resin was defective and it succeeded in having the Court declare that QBE was liable to indemnify it within respect of the Siegwerk claim. 4 Siegwerk was dissatisfied with the outcome and appealed on 5 April 2013 within the 21 days required by r 36.03 of the Federal Court Rules 2011 (Cth) ('the Rules'). Between 19 March 2013 and 5 April 2013 QBE found itself in something of a quandary. Although it had lost its case against Nuplex, the terms of its policy in all likelihood meant that it would not be required to pay Nuplex any money. This arose because it would be liable only to pay Nuplex its costs of the trial less whatever was recovered from Siegwerk as a result of a costs order. The policy was subject to an excess of $500,000 per claim and this was likely to be more than Nuplex's out of pocket position. A view was therefore formed by QBE's solicitor, Mr Newey, that an appeal by QBE might have little commercial point unless Siegwerk had itself first appealed. In effect, this must be correct. The debate in economic terms would at that stage only have been about QBE's costs of the trial. 5 In practical terms therefore QBE would not know whether it should appeal unless Siegwerk appealed. This did not occur until 5 April 2013. By that time, however, there remained only four days before the 21 day period to file a notice of appeal expired. 6 QBE decided to appeal on 24 April 2013 which I do not think, in the circumstances, was unreasonable. Counsel was then retained to settle a notice of appeal the same day and this was provided to Mr Newey's firm on 8 May 2013. Mr Newey gave evidence that he had delegated the task of engrossing and filing the notice of appeal to a subordinate solicitor. It appears that this person did not do so and this failure became known to Mr Newey only on 2 July 2013 when shortly afterwards the present application was prepared. Although the reasons for the failure of the subordinate solicitor were not explained in any detail Mr Newey did not suggest that responsibility lay otherwise than with him. He identified the failure as his own inaction in not properly supervising the staff who were working for him. 7 Although some criticism was levelled at Mr Newey for failing to identify precisely which staff member had committed what failure I do not think that this criticism should be accepted. I have no difficulty inferring that the reason the subordinate solicitor did not file the notice of appeal was because it was overlooked. These sorts of things happen with litigation files from time to time and the real problem lies, in my view, not in the foreseeable failure by a subordinate to file a document but, just as Mr Newey says, in his failure to supervise that subordinate. The responsibility was his and he was quite right in his evidence to accept that responsibility rather than seeking to deflect it onto others. That he took that position reflects well upon him. 8 Mr Newey also gave evidence which explained his own difficulties. A series of misfortunes has stalked Mr Newey's professional and private lives any one of which could probably have been accommodated in an orderly fashion but which in combination have conspired to deny him the personal resources to keep his affairs in order. His firm in the relevant period has been consumed with a partnership dispute; he has suffered a debilitating health condition which interfered with his work and degraded the quality of his sleep; and a close relation of his has been critically ill. Obviously this is regrettable but I accept that it is an adequate explanation for why Mr Newey's powers of supervision were diminished. 9 I turn then to the question of the merits of the proposed appeal. Siegwerk did not oppose QBE being granted the extension of time, however, Nuplex did. Mr Donaldson SC for Nuplex submitted that no serious injustice would be visited upon QBE if the time to bring the appeal was not enlarged because, when examined with care, it could be seen that the proposed appeal had little in the way of merit. He drew particular attention to clause 2.1 of the insurance policy which was in the following terms: 2.1 Liability QBE will pay in respect of Personal Injury or Property Damage first happening during the Period of Insurance and cause by an Occurrence within the Territorial Limits in connection with Your Business: 2.1.1 all sums which You become legally liable to pay by way of compensation; 2.1.2 all costs awarded against You. 10 'Property Damage' was defined in clause 1.17, and subclause 1.17.1 relevantly provides the term to mean, 'physical damage to or physical loss or physical destruction of tangible property including any result in the loss of use of that property'. Clause 1.11 defines an 'occurrence' as 'an event which results in … property damage neither, of which is expected nor intended from any person's standpoint.' In this case the occurrence was to be seen as the defective preparation of the cans and the property damage was the damage to the cans and the tuna themselves. So viewed it was submitted that it was difficult to see how QBE could succeed. 11 But QBE submitted that the occurrence was the breakdown of the cans and this occurred after the defective resin entered the picture. Under clause 2.1 the occurrence had to occur before the damage. In any event, the property damage was the cost of recalling the defective cans and not the harm to the cans (or the tuna) themselves. 12 The construction of insurance policies is a notoriously contestable topic. Whilst I see force in Mr Donaldson's point I do not accept in an application such as the present that I can be sure that QBE's argument is without merit. Largely for similar reasons I do not think that I should say, at least at this stage, that QBE's contention that what was suffered was, in truth, economic loss rather than property damage is devoid of merit. A related argument was made by the respondent about some exclusion clauses in the policy, but this should be rejected for the same reasons. 13 Accordingly, the delay in the present case was explained satisfactorily and the proposed appeal is not a waste of time. It was for those reasons that I granted the extension of time within which to appeal. In order to appeal from the orders of a single judge in this Court the parties are ordinarily required to file the notice of appeal in the District Registry in the State or Territory where the proceeding was last heard before judgment or the order was made (per r 36.02(a) of the Rules). However, given that counsel attended in the Sydney Registry of this Court and the obvious advantages of proceeding the matter swiftly I granted leave for the notice of appeal to be filed in Court. QBE did not resist the costs order against it which accordingly was made. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.