Joinder of AIG
58 Section 4 of the Civil Liability (Insurers) Act provides:
(1) If an insured person has an insured liability to a person (the "claimant"), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court.
(2) The amount of the insured liability is the amount of indemnity (if any) payable pursuant to the terms of the contract of insurance in respect of the insured person's liability to the claimant.
(3) In proceedings brought by a claimant against an insurer under this section, the insurer stands in the place of the insured person as if the proceedings were proceedings to recover damages, compensation or costs from the insured person. Accordingly (but subject to this Act), the parties have the same rights and liabilities, and the court has the same powers, as if the proceedings were proceedings brought against the insured person.
(4) This section does not entitle a claimant to recover any amount from a re-insurer under a contract or arrangement for re-insurance.
59 Section 5 of that Act provides:
(1) Proceedings may not be brought, or continued, against an insurer under section 4 except by leave of the court in which the proceedings are to be, or have been, commenced.
(2) An application for leave may be made before or after proceedings under section 4 have been commenced.
(3) Subject to subsection (4), the court may grant or refuse the claimant's application for leave.
(4) Leave must be refused if the insurer can establish that it is entitled to disclaim liability under the contract of insurance or under any Act or law.
60 Section 5 is the successor to s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). AIG accepted that the three pre-conditions to the exercise of the relevant discretion, identified in Bede Polding College v Limit (No 3) Limited [2008] NSWSC 887 at [6] in relation to s 6(4), were satisfied because:
(1) there is an arguable case against the insured, here Thorn and Mr Marshall;
(2) there is an arguable case that the policy responds; and
(3) there is a real possibility that, if judgment is obtained, the insureds would not be able to meet it.
61 AIG explicitly did not dispute the Court's power to grant leave pursuant to s 5.
62 In DHSE Holdings Ltd (receivers and managers appointed) (in liq) v Abboud; National Australia Bank Ltd v Abboud [2017] NSWSC 579, Stevenson J declined to grant leave under s 6(4) where, although the three pre-conditions above were satisfied, the insurers had confirmed coverage for the insureds albeit subject to reservations. At [41], his Honour concluded that it was not appropriate to grant leave where there was currently no insurance controversy for the Court to quell.
63 At [21], Stevenson J stated that the discretion "must be exercised for the purpose for which it was conferred; namely, to ensure that insurers are not exposed to unnecessary, unwarranted or inappropriate claims", citing Oswald v Bailey (1987) 11 NSWLR 715 at 717F-G, 725E; Tzaidas v Child [2004] NSWCA 252; (2004) 61 NSWLR 18 at [17], [107]; Opes Prime Stockbroking Ltd (in liq) (Scheme Administrators Appointed) v Stevens [2014] NSWSC 659 at [17] and Wayland v Bird [2017] NSWCA 26 (Wayland) at [20]-[26].
64 In Wayland at [20], Ward JA noted with apparent approval the statement of Campbell JA in Energize Fitness Pty Ltd v Vero Insurance Ltd [2012] NSWCA 213 at [59] that the purpose of s 6(4) was "to provide a filter against insurers being unjustifiably made parties in litigation that, apart from the grant of leave, they would be free to stay out of". Her Honour noted, also with apparent approval, Campbell JA's statement that the standard for when it is justifiable to bring an insurer in was "fairly low".
65 In Opes at [18] and [19], after identifying the purpose of the discretion conferred by s 6(4), Ball J stated:
[18] Generally, where leave is sought, that is because there are difficulties in pursuing the claim against the insured or the insurer has denied liability. In those cases, the question whether the insurer should be exposed to proceedings against it will usually be answered by considering whether the 3 matters identified by Grove J are satisfied. For example, in Bede Polding College itself, the defendant had entered into administration, the business no longer traded and the former principals of the business were deceased. In those circumstances, it was not unreasonable to expose the insurer to proceedings against it if the plaintiff had an arguable claim and it was arguable that the insurer was liable to indemnify the defendants in respect of it.
[19] The question, however, in each case must be whether it is reasonable for the insurer to be joined, and that question will not always be answered by the 3 conditions identified by Grove J. As Simpson J said in Gorczynski v W & FT Osmo Pty Ltd [2009] NSWSC 693; (2009) 258 ALR 189 at [60]:
[T]he grant of leave under s 6(4) nevertheless remains discretionary, and may be refused for other proper reasons. Ordinarily, for example, leave would not be granted where it could clearly be seen that a claim was, by reason of limitation of actions legislation, statute-barred. It may not be granted where the insurer was able to demonstrate irreparable prejudice.
66 AIG identified the following matters against the exercise of the discretion:
(1) The representative nature of the proceeding, by which the Court is first asked to determine liability in relation to a single application, so that there is no prospect of a large money judgment immediately following the October 2019 trial.
(2) Relatedly, the possibility of Thorn being unable to satisfy a judgment from its own resources is one that will not crystallise at or immediately following the October hearing.
(3) Joinder is not necessary to enable Thorn to conduct a proper defence of the proceeding.
(4) Although AIG has denied liability to indemnify Thorn, AIG does not suggest that it will not be bound by the outcome of the proceeding; that is, by this Court's determination as to whether, for what amount, and on what bases Thorn is liable to Ms Simpson and or group members. Accordingly, there is no prospect of the existing issues in the case being litigated twice. The only question is whether those issues should be expanded now to include an insurance dispute that may not otherwise need to be litigated.
(5) Whether and to what extent the insurance issues are hypothetical will be known only once the Court delivers its judgment on the common issues, following the October hearing.
(6) If joined, AIG's costs of defending the proceeding are likely to be in the order of $750,000. Joinder may also be expected to increase the costs of the existing parties to some extent. If joined, it may be anticipated that AIG will seek security for its costs. All of this would be unnecessary if Ms Simpson failed in her case against Thorn.
67 I accepted that joinder of AIG is not necessary to enable the rights of Ms Simpson and the group members against Thorn (and Mr Marshall) to be fully enforced. However, senior counsel for AIG, Mr Rich SC, did not contend that this was a matter that precluded the grant of leave in the proper exercise of the Court's discretion.
68 In this case, AIG has denied the claims made by Thorn and Mr Marshall under the relevant insurance policies, and Mr Marshall signalled his intention to file a cross-claim against AIG in the event of his joinder to the proceeding. In those circumstances, there is presently an insurance dispute that is relevant to the proceeding. Furthermore, given the real possibility that if judgment is obtained, the insureds would not be able to meet it, it is preferable that the insurance dispute be determined with minimal delay. I accepted that, in the circumstances of this case, this is most likely to be achieved by the grant of the leave sought so that the insurance dispute can be determined by the judge who also determines the principal proceeding. Given the presence of Thorn and Mr Marshall as respondents to the proceeding, AIG will be in a position to make forensic choices about the extent of its participation having regard to the matters that it has identified, set out above.