HER HONOUR: By amended notice of motion filed 13 April 2018, Zurich Australia Insurance Limited, as an interested party, seeks firstly, an order pursuant to the inherent jurisdiction of this Court that leave be granted to it to have separate legal representation from the solicitors and counsel presently appearing for the defendant in order to defend the plaintiff's claim for damages from the defendant as "host employer" during the period 6 June 2010 to 26 May 2013; and secondly, an order that costs be costs in the cause.
The plaintiff is Michael Elliot Stewart. The defendant is Nestle Australia Limited. Zurich Australian Insurance Limited ("Zurich") is an interested party. Zurich relied upon the affidavits of its solicitor Claire Tingey sworn 30 April 2018. The defendant relied upon the affidavit of Ivan Medak filed 5 April 2018.
All parties agreed that the orders set out in paragraphs (1) and (2) of the amended notice of motion should be made.
The plaintiff claims damages from the defendant. The plaintiff alleges that he sustained psychiatric injury as a result of bullying which occurred while he worked at the defendant's premises.
Initially, the plaintiff alleged that the bullying occurred only between May 2013 and 25 March 2014. That is, only during the period of his direct employment by the defendant. Accordingly, Employers Mutual Limited (the workers compensation insurer of the defendant) was the only interested insurer of the defendant with respect to the proceedings.
However, the plaintiff by pleading in the amended statement broadened his claim to allege that the bullying occurred between 2010 and 25 March 2014. That is, not only the period of his direct employment by the defendant mentioned above, but also the prior period during which the plaintiff was employed by another entity (whom is not a party to the proceedings) but working at the defendant's premises. The plaintiff sues the defendant as the "host employer" in relation to that prior period from 2010 to May 2013.
The consequence of this amendment is that there is now not one, but two interested insurers of the defendant involved in these proceedings. Firstly, Zurich (the public liability insurer of the defendant) in relation to the earlier period between 2010 and May 2013 during which the defendant was the "host employer" of the plaintiff. Secondly, Employers Mutual (the workers compensation insurer of the defendant) in relation to the subsequent period between May 2013 and 25 March 2014 during which the defendant employed the plaintiff directly.
[2]
The law
Counsel for Zurich has helpfully extracted the relevant authorities. They are Tindle v Ansett Transport Industries (Operations) (1990) 21 NSWLR 492 ("Tindle"); Elphick v Westfield Shopping Centre Management Co Pty Ltd [2011] NSWCA 356 ("Elphick"); and Spotlight Pty Ltd v Maintek Roofing Pty Ltd [2017] NSWSC 165 ("Spotlight").
Tindle concerned a worker who sustained personal injury in the course of his employment as a result of an accident involving a truck. The defendant (employer) was represented by legal practitioners instructed by its workers compensation insurer. An issue was whether the Court had the power to order separate representation of the defendant in relation to the separate interests of the compulsory third-party insurer of the truck.
Elphick involved a worker who sustained personal injury at a shopping centre in the course of his employment with an independent cleaning contractor. The independent cleaning contractor was represented by separate counsel instructed by (a) its workers compensation insurer and also (b) the independent cleaning contractor directly, in order to argue against the shopping centre relying on an indemnity in the contract between the cleaner and the shopping centre.
Spotlight concerned a tenant who sustained losses as a result of a storm which damaged stock. One insurer indemnified the tenant in relation to the losses. That insurer then commenced the subrogated proceedings in the name of the tenant against defendants said to have negligently caused the loss.
In Spotlight, a defendant cross claimed against the tenant. A second insurer partially insured the tenant in relation to the damages sought by the cross claim. It was contended that the interests of the tenant as a plaintiff differed from the interests of the tenant as a cross defendant such that the solicitor who was on the record as representing the tenant as a plaintiff had a conflict of interest in continuing to properly represent the tenant in relation to the cross claim. The issue was whether the tenant could be represented by separate counsel and solicitors in the proceedings.
[3]
Power of the Court to Order Separate Representation
Australian Courts have allowed one party to be separately represented "in a case where the interests of justice so demand" for decades.
In Tindle, the Court of Appeal assumed that the Court has power to allow separate representation for a party.
In Elphick at [3], the Court of Appeal observed that there is no specific provision in the rules either permitting or forbidding a party appearing by different counsel and solicitors:
"…However, in my view it is contrary to the proper practice in this Court unless the Court gives leave for it to occur." (Emphasis added).
Recently in Spotlight, N Adams J confirmed at [28]:
"... allowing separate representation should be rare and only to avoid injustice."
N Adams J concluded at [29]:
"…I am prepared to assume ... that this Court has the power to Order that the Plaintiff can be separately represented in these proceedings. That power derives from either the Court's inherent jurisdiction or s 23 of the Supreme Court Act 1970 (NSW)."
The assumed power of the Court to allow one party to be separately represented has been said to be of a discretionary character. What then are the factors relevant to the exercise of the discretionary power?
The possible duplication of litigation and the disadvantages of any insurer not being represented at the trial are considerations to be weighed.
The Court must be careful to ensure the proceedings in Courts are conducted economically and efficiently.
An application for separate representation is also determined in the context of the relevant case management principles provided for in ss 56 and 60 of the Civil Procedure Act 2005 (NSW).
A factor in determining whether to grant leave to a party to be separately represented is the balance between the prejudice caused to that party should leave not be granted and the prejudice caused to the opposing party if leave is granted.
In Spotlight, N Adams J discussed conflict of interest as a factor relevant in determining whether to grant leave for separate representation. Her Honour considered a scenario where an insurer and its representatives (whom had conduct of the proceedings on behalf of the named insured) were faced with a conflict of interest as between the rights of the insured and the rights of the insurer.
Her Honour considered the principles restraining legal practitioners from acting for a party by reason of conflict of interest including (a) where to act for a person is inconsistent with the fiduciary duty of loyalty owed by the lawyer to a client, (b) where there is a potential breach of the duty of confidence, and (c) where restraint is necessary for the protection of the integrity of the judicial process and the due administration of justice.
Regarding conflict of interest, N Adams J concluded at [36]-[37]:
"36 …I am not satisfied that actual conflict must necessarily be established in every case before an Order permitting separate representation may be made. ... the duty to avoid conflict found in the Solicitors' Conduct Rules extends to potential conflict. ... Rule 11 deals specifically with a conflict of duties concerning two or more current clients and r 11.2 provides that, if there is a "conflict or potential conflict" of the duty to act in the best interests of each client, the solicitor or law practice must not act, except in certain specified circumstances.
37 It seems to me that it would be an unsatisfactory result and inconsistent with the overriding purpose of the CPA to require the parties to wait for a potential conflict to materialise before seeking an Order permitting separate representation. It would inevitably increase the costs of the litigation should an anticipated conflict not materialise until the final hearing, which conflict would then require the hearing to be vacated."
[4]
Conflict of Interest
The parties say that as a consequence of the plaintiff widening his pleading to cover a period involving, not only a claim for damages under the Workers Compensation Act 1987 (NSW) involving Employers Mutual, but also a claim for damages under the Civil Liability Act 2002 (NSW) involving Zurich, the solicitor whom has long been on the record for the defendant has become conflicted between the opposing interests of Employers Mutual and the defendant.
On one hand, Employers Mutual are interested to argue that any injury was caused by negligence occurring during Zurich's earlier period of risk rather than being caused by negligence occurring during Employers Mutual's subsequent period of risk. This would reduce Employers Mutual's potential liability in damages to the plaintiff.
Employers Mutual only insures the defendant in relation to sums for which the defendant becomes liable during or in respect of the period of insurance. That is, only from 27 May 2013 to 25 March 2014 and not the prior period from 6 June 2010.
On the other hand, the defendant is interested to argue the opposite. That is, that any injury was caused by negligence occurring during Employers Mutual's later period of risk rather than being caused by negligence occurring during Zurich's earlier period of risk. This would reduce the defendant's potential liability in damages to the plaintiff.
That is because the assessment of damages with respect to the earlier period will be assessed pursuant to the Civil Liability Act while the assessment of damages with respect to the subsequent period will be assessed pursuant to the Workers Compensation Act.
The different legislative regimes will have a bearing on the admissibility of evidence at trial; the determination of liability; and the quantum of any damages awarded to the plaintiff.
Any award of damages pursuant to the Civil Liability Act is likely to be greater than any award of damages pursuant to the Workers Compensation Act.
[5]
Efficiency - Duplication of proceedings
If the order for separate representation is not made, it is likely that an additional and subsequent set of proceedings between Employers Mutual and Zurich will need to be commenced in order to determine the apportionment of damages awarded to the plaintiff in the subject proceedings. The subsequent proceedings would be expensive and cover largely the same ground as the subject proceedings. The payment of any damages awarded to the plaintiff in the subject proceedings might be delayed until the resolution of the subsequent proceedings.
Alternatively, the parties say that if the order for separate representation is made in the subject proceedings, the Court may make orders in relation to apportionment of damages relating to Employers Mutual and Zurich which will negate the need for an additional and subsequent set of proceedings between those insurers.
In the subject proceedings, the Court may give judgment or make such orders as the nature of the case requires. If necessary, this will enable appropriate orders to be made in favour of the plaintiff and against the defendant which will properly deal with apportionment of any damages caused by negligence occurring during (a) Zurich's period of risk, assessed pursuant to the Civil Liability Act, as distinct from (b) Employers Mutual's period of risk, assessed pursuant to the Workers Compensation Act.
[6]
Assist the defendant to comply with different obligations under to the two insurance contracts
Further, the parties say that separate representation may assist the defendant in complying with its differing contractual obligations to Employers Mutual and Zurich. This may avoid the expense of unnecessary costs and delay should a conflict arise at some point prior to the final hearing between competing obligations.
On one hand, it is a condition of the workers compensation policy that the defendant must comply with all reasonable requests by Employers Mutual for information, assistance and documents to enable Employers Mutual to settle or resist a claim. The indemnity provided by the policy is conditional on compliance by the defendant with the provisions of the policy.
On the other hand, it is a condition of indemnity under the Zurich public liability policy that Zurich be entitled to conduct the defence and protect the interests of the defendant where there may be a liability on the part of the defendant which might be covered under the terms of the Zurich policy.
It is my view that Zurich should have separate representation from the solicitors and counsel presently appearing for the defendant. If it does not, the defendant's interest will not be properly protected and therefore an injustice will occur. In the exercise of my inherent jurisdiction, I make the orders sought in paragraph (1) and (2) of the amended notice of motion filed 13 April 2018.
[7]
The Court orders that:
(1) Leave is granted to the defendant to have separate legal representation from the solicitors and counsel presently appearing for the defendant in order to defend the plaintiff's claim for damages from the defendant as "host employer" during the period 6 June 2010 to 26 May 2013.
(2) Both Zurich and Employers Mutual are to file defences by 16 July 2018.
(3) The matter is listed for directions before the Registrar at 9.00 am on 27 July 2018.
(4) Any orders for directions previously made are vacated.
(5) Costs are costs in the cause.
[8]
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Decision last updated: 19 June 2018