Sydney Trains v Argo Syndicate AMA 1200

Does the policy of insurance respond?

1. Clause 3 of the public liability policy issued by Argo to Infrastruction included an exclusion that "any negligent act or omission in the performance of the Insured's professional activities or duties, including product design" (emphasis added).
2. The exclusion is said to arise given the findings of the primary judge. Negligence was not found in the manner of laying of the tiles, but rather in the choice of tile used for the refurbishment. At [34], Curtis ADCJ found: The defendant was negligent in that it failed to lay tiles on the platform on which the plaintiff slipped that had a Slip-Resistant Value greater than 54.
3. It was on this basis that Argo submitted that the claim made by Sydney Trains against Infrastruction triggers the professional activities exclusion.
4. Sydney Trains disputes that the exclusion is enlivened and says that it has to be viewed in the context of the contract, which obliged Infrastruction to take out public liability cover (as distinct from professional indemnity insurance).
5. It was submitted for Argo that the exclusionary provision should be interpreted in the manner in which it contends, both by reason of the words of the policy and by considering other facts including that Infrastruction took out a professional indemnity policy of insurance with Sterling Insurance, which was initially named as third defendant in the proceedings. The proceedings by Sydney Trains against Sterling Insurance were discontinued upon realisation that the policy of insurance was a claims made policy.
6. The submission for Argo is if its policy was intended to cover acts such as the selection of appropriate tiles, then there would have been no need for a professional indemnity policy.
7. Whilst I accept that it is necessary to look at all of the surrounding facts and circumstances, I do not accept that the interpretation of the Argo policy is to be informed by other policies taken out by the insured.
8. The question then arises as to whether it is possible or appropriate to determine whether the exclusionary provision operates at this time. That is, whether it operates in an interlocutory application for leave to proceed against the insured.
9. In Eastern Creek Holdings Pty Ltd v Access Specialty Europe Pty Ltd [2010] NSWSC 840 Hammerschlag J, in the course of considering the predecessor provision to s 5 of the Act [1] stated: [20] The parties were agreed that to obtain the leave it seeks, the plaintiff must show that: (a) firstly, there is an arguable case against the Insured; (b) secondly, there is an arguable case that the Policy responds; and (c) thirdly, there is a real possibility that if judgment is obtained, the Insured would not be able to meet it: see Bede Polding College v Limit (No 3) Ltd [2008] NSWSC 887 at par 6. [21] The defendant accepts that the plaintiff has satisfied the first and third requirements but puts, for two reasons, that the plaintiff has fallen short of satisfying the second, namely that the Policy arguably responds. … [27] It is neither possible nor appropriate to determine at this stage of the proceedings whether the conduct complained of in the proposed Amended Technology and Construction List Statement (including the asserted misleading and deceptive conduct) amounts to activities in the conduct of the business of project/construction managers, within the meaning of those words in the Policy. The meaning to be attributed to those words may be affected by evidence. It will be informed by other provisions of the Policy (including the Schedule and the Proposal) so as to give the entirety of the instrument congruent operation: Wilkie v Gordian Runoff (2005) 221 CLR 522.
10. In my opinion, the same question arises here. I do not consider it either possible or appropriate to determine whether the conduct complained of by Sydney Trains against Infrastruction in selecting tiles comes within the latter's "professional activities or duties".
11. In Chubb Insurance Company of Australia Limited v Robinson [2016] FCAFC 17, the Full Federal Court held that a professional services exclusion is interpreted more narrowly than a professional indemnity policy insuring clause. The Court also held that the exclusion did not apply as there was no evidence to show that project management was regarded as a profession in 2011.
12. In Ritchie v Advanced Plumbing and Drains Pty Ltd [2019] NSWSC 1028, Campbell J said at [4]: The repeal and replacement of s 6 of the 1946 Act was driven by Report 143 of the New South Wales Law Reform Commission, Third Party Claims on Insurance Money; review of s 6 of the Law Reform (Miscellaneous Provisions) 1946 of November 2016 ("NSWLRC report"). In Zaki v Better Building Constructions Pty Ltd [2017] NSWSC 1522, I said (at [27]): As paragraph [2.46] of Report 143 indicates, a grant of leave will be determined by reference to what the authors of the report refer to as "well settled criteria": that there is an arguable case of liability against the defendant; that there is an arguable case that the insurer's policy responds to that liability; and there is a real possibility that, if the plaintiff obtains judgment against the defendant, the defendant will not be able to meet it. Given the interlocutory nature of the leave application, it is appropriate that contestable issues as to the liability of the insured person, and the availability of cover under an insurer's policy, should be determined at the ultimate hearing. (My emphasis.) As the language of s 5(3) makes clear, even if a consideration of the "well-settled criteria" points in the direction of a grant of leave there remains a residual discretion to refuse leave in appropriate cases. The factors relevant to the exercise of the residual discretion need not be considered here. Sub-section 5(4) makes clear that leave must be refused if the insurer "can establish it is entitled to disclaim liability" under the policy, by statute or otherwise at law. It is implicit in s 5(4) that an insurer should be given that opportunity on the leave hearing if it seeks it.
13. Of the 3 considerations first referred to by Hammerschlag J in Eastern Creek and then by Campbell J in Ritchie, I make the following observations: 1. Sydney Trains does have an arguable case of liability against the defendant, both in tort and in contract. In respect of the former, the claim by the alleged joint tortfeasor may be affected by limitation provisions; 2. there is an arguable case that the insurance policy responds to that liability, notwithstanding Argo's submission as to the effect of the exclusionary provision; and 3. there is certainty that if Sydney Trains obtains judgment against Infrastruction, the company will not be able to meet it, since the company no longer exists.
14. Accordingly, in relation to the first ground raised by the insurer, I find that there is an arguable case that the policy responds. I do not, however, consider it appropriate to finally determine that question at this time. It shall remain a question for the judge presiding over the hearing of these proceedings. For present purposes, it is not a bar under s 5(4) to the granting of leave.

Is the claim statute-barred?

1. For the claim in contract, the Limitation Act provides as follows: 14 General (1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims - (a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed,
2. As the work the subject of the allegation of contractual breach was completed in April 2016, it is open to Sydney Trains to seek recovery against Infrastruction (or, in the circumstances, its insurer) until April 2022.
3. The claim for indemnity under s 5 of the Law Reform (Miscellaneous Provisions) Act is, however, different.
4. The limitation period for contribution between tortfeasors is governed by s 26 of the Limitation Act 1969 (NSW). S 26(1) provides: (1) An action on a cause of action for contribution under subsection (1) of section 5 of the Law Reform (Miscellaneous Provisions) Act 1946 is not maintainable if brought after the first to expire of - (a) a limitation period of two years running from the date on which the cause of action for contribution first accrues to the plaintiff or to a person through whom the plaintiff claims, and (b) a limitation period of four years running from the date of the expiration of the limitation period for the principal cause of action.
5. The date on which the cause of action for contribution first accrued to Sydney Trains was the date on which judgment was given by Curtis ADCJ, namely 5 July 2018 (s 26(2)(a)). The 2 years expired on 4 July 2020. These proceedings were commenced on 4 November 2020 and are, prima facie, statute-barred. Sydney Trains opposed this finding on 2 bases: 1. that upon the filing of the appeal, the judgment in the District Court was extinguished and that the operative date, so far as 26(1)(a) is concerned, is the date upon which the notice of discontinuance was filed in the Court of Appeal, being 6 November 2018. This would mean that the proceedings were brought within time; and 2. as the contractual claim survives any limitation challenge and will proceed if leave is granted, then I should leave open the question of whether the limitation period for the s 5 claim expired before the commencement of the proceedings.
6. I respectfully reject the submission that the cause of action for contribution did not first accrue to Sydney Trains on 5 July 2018. The fact that the proceedings were appealed and that the appeal was discontinued does not affect the date upon which the cause of action first accrued. S 26(2)(a) of the Limitation Act provides: (2) For the purposes of paragraph (a) of subsection (1), the date on which a cause of action for contribution first accrues is - (a) if the plaintiff in the action for contribution or a person through whom the plaintiff claims is liable in respect of the damage for which contribution is claimed by judgment in a civil action or by arbitral award - the date on which the judgment is given or the award is made, whether or not, in the case of a judgment, the judgment is afterwards varied as to quantum of damages, …
7. Curtis ADCJ entered judgment for the plaintiff in the sum of $429,390.40 on 5 July 2018. The quantum of the judgment was varied as a term of the notice of discontinuance filed in the Court of Appeal on 6 November 2018, in that the judgment sum was reduced to $409,000.00. In my opinion, the commencement of the appeal, the variation of the judgment sum or the filing of the notice of discontinuance do not act so as to extend the limitation period beyond the date on which judgment was first entered.
8. As to the second submission for Sydney Trains, and having regard to the overriding purpose in s 56 of the Civil Procedure Act 2005 (NSW), it would cause unnecessary expense and delay to permit the s 5 claim to continue, notwithstanding the possibility that the breach of contract claim may be sustainable.
9. Accordingly, pursuant to s 5(3) of the Act, leave is refused for the plaintiff to bring a claim for indemnity and/or contribution under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

Whether leave should not be granted because of delay

1. At [37] of MFI 3, it is submitted on behalf of Argo that: Sydney Trains had made a number of informed forensic decisions, namely: 1. not to join Infrastruction to the proceedings brought by Ms Michael and seeking contribution at a time when the evidence was accessible, memories were fresher and Infrastruction remained a registered corporate entity; and 2. not to pursue any claim until 28 July 2020 when it sought to pursue insurers only. This was some 6 weeks after Infrastruction was deregistered, 3 years after the liquidators were appointed and more than 2 years after judgment.
2. The following chronology has been prepared from evidence tendered on the application: Date Event 1 February 2013 Infrastruction became a panel member for construction and building works for Sydney Trains for works up to $1 million. Clause 9.1 required Infrastruction to obtain and maintain, for the panel term, a public liability insurance policy with a minimum cover per occurrence of $50 million. 30 April 2016 Works completed by Infrastruction at Penshurst railway station for Sydney Trains. 31 July 2016 - 31 July 2017 Period during which relevant policy of insurance was in force. 24 August 2016 Nicole Michael slipped and fell on tiles which had been laid by Infrastruction at Penshurst railway station. 2017 Proceedings commenced by Ms Michael against Sydney Trains. 29 June 2017 Liquidators appointed to Infrastruction. 30 June 2017 Creditors of Infrastruction voluntarily resolve to wind up the corporation. 5 July 2018 Judgment handed down in favour of Ms Michael against Sydney Trains in the sum of $429,399.40. On a date unknown, Sydney Trains filed an appeal in respect of this judgment. 6 November 2018 Notice of discontinuance filed in the NSW Court of Appeal, in which the parties agreed to vary the judgment sum to $409,000.000. 16 June 2020 Infrastruction was formally wound up and deregistered. 28 July 2020 Argo was first notified of a potential claim on the policy by way of letter from McCabe Curwood, legal representatives for Sydney Trains, and EBM Insurance Brokers, Argo's broker. 23 September 2020 Sydney Trains' claim was articulated in correspondence. 15 September 2020 Argo enquired of Coverlink as to the relevant contact details for Infrastruction. 4 November 2020 Proceedings commenced by Sydney Trains against Argo claiming damages pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act and also for breach of contract. From 22 March 2021 Some relevant documents in the possession of Sydney Trains were provided the legal representatives of Argo. 7 April 2021 Coverlink provided contact details for Infrastruction's former principle, Mos El-Haj. 8 June 2021 Attempts commenced on behalf of Argo to contact Mr El-Haj. These attempts continued on numerous occasions between this date and 22 July 2021 without any success. 10 June 2021 Enquiries made on behalf of Argo of O'Brien Palmer, liquidators for Infrastruction seeking information and records in their possession. This enquiry did not yield the production of any information or documents.

1. Argo complains that it has suffered both presumptive and actual prejudice as a consequence of the delay by Sydney Trains to notify either Infrastruction or Argo of its claim until 28 July 2020.
2. The actual prejudice relied upon by Argo is set out at [39] of MFI 3 as follows: 1. it is unable to obtain any documents or relevant information from the liquidators of Infrastruction; 2. despite exhaustive attempts, it has been unable to obtain cooperation from Mr El-Haj, the former principle of Infrastruction; 3. it has thereby lost or been compromised in its ability to gather information necessary to defend the claim; and 4. it suffers far more than usual presumptive prejudice occasioned by delay where it now has to meet allegations of negligence and contractual breach more than 5 years after those breaches allegedly occurred.
3. Mr Catsanos SC, who appeared for Argo, said that he was unable to even confirm that his client's former insured performed the subject works but, for the purposes of this application, was prepared to proceed on the basis that it had.
4. Sydney Trains submitted that, accepting the work was done by Infrastruction, the only question is why they used the tiles which were laid at the train station. That is because the breach found by Curtis ADCJ related only to the slipperiness of the tiles laid, not to the manner in which they were laid.
5. Sydney Trains' position is that no amount of information or instructions from Infrastruction can inform the question of breach.
6. There was a scope of works agreement between Sydney Trains and Infrastruction which defined the nature and extent of the works to be performed, and the manner in which they were to be performed.
7. Clause 1.4.6 of the scope of work provides as follows: Replace all stairstring of tiles to all stairs cases. Propose tile options matching the station décor. Tiles are to be R-12 slip rating and approved by Sydney Trains prior to installation. Installation is to be in line with the Sydney Trains tiling specification and Australian Standards. …
8. The contractual obligation for works to be performed was to replace all stairstring of tiles to all stair cases, propose tile options matching the station décor, and ensure tiles are to be of a certain slip rating and approved by Sydney Trains prior to installation.
9. Importantly, prior to the laying of tiles, it was necessary for Infrastruction to have the approval of Sydney Trains as to the tiles to be laid. In the judgment of Curtis ADCJ the following appears at [9]: The tiles were laid by contractors in March 2016. On 26 March 2016 Mr Paul Sorial, an engineer employed by Worksafe Slip Testing Pty Ltd, tested a sample tile at a place remote from the landing where the plaintiff fell. He reported to Sydney Trains that the slip resistant value was SRV 41, corresponding to classes P3 and X, indicating that the service made a Moderate contribution to the risk of slipping when wet.
10. According to the judgment, Sydney Trains' specifications for the renovation works required that the tiles be slip rated R-12. His Honour found that this required an SRV greater than 54, where the contribution of the surface to a slip was rated "very low".
11. It would appear from that judgment that Sydney Trains engaged Mr Sorial to perform slip testing on a sample tile and, further, that he reported back to Sydney Trains the results of that testing, demonstrating that the tile selected by Sydney Trains was sub-standard in terms of slipperiness.
12. Counsel for the respondent referred to authorities including Longman v R [1989] HCA 60 and Brisbane South Regional Authority v Taylor [1006] HCA 25 in highlighting the "prejudicial effects of the passage of time". It is well settled that delaying the commencement of proceedings, civil or criminal, has the potential to complicate the gathering and presentation of evidence.
13. In addition to the effect of the passage of time itself, counsel for the respondent further contended that the delay in bringing proceedings further complicated the chances of a fair hearing. Mr Catsanos SC submitted, at [43] of MFI 3, that: in the present case, not only is there prejudice by the effluxion of time, there is no longer an insured entity, there are no documents available to Argo in relation to the events in question and the only person able to assist is not prepared to co-operate, even if he can remember anything relevant.
14. Whilst Argo may possibly have access to Mr Sorial's engagement by Sydney Trains, the experiment which he conducted and the report which he generated, it does not have access to any information or instructions from Infrastruction as to what in fact occurred. It may have been, for example, that Infrastruction told Sydney Trains that the tiles were sub-standard but Sydney Trains told them to lay the tiles nevertheless. This is a significant matter which would have a material bearing upon the outcome of the claim by Sydney Trains against Argo.
15. Accordingly, the claim by Sydney Trains waited until 28 July 2020 to agitate a claim against Argo in circumstances where: 1. Sydney Trains were aware of the fact that the tiles were laid by Infrastruction or its predecessor; 2. Sydney Trains were aware of the contractual obligation for Infrastruction to have a public liability policy in respect of the works; 3. liquidators were appointed to the company on 29 June 2017; 4. the company was wound up on 30 June 2017; 5. Infrastruction was deregistered on 16 June 2020; 6. Sydney Trains were aware of the claim brought by Ms Michael at the very latest in 2017 when proceedings were commenced; 7. Sydney Trains were aware that the negligence alleged against them by Ms Michael was that the tiles were not sufficiently slip resistant when wet; and 8. that from 5 July 2018, Sydney Trains was aware that judgment had been entered against it in favour of Ms Michael because of the slipperiness of the tiles said to be laid by Infrastruction.
16. This occurred, as submitted by the respondent, in circumstances comprising "a product of Sydney Trains' Management of the litigation", and "was clearly avoidable".
17. In light of those facts, I am inclined to exercise my discretion under section 5 (3) and refuse the Applicant leave to proceed on the case in contract. In making that decision I have borne in mind the remarks of Bell P in Moubarak v Holt [2019] NSWCA 102 as to "the corrosive effect of the passage of time and its consequences for the quality and integrity of the trial process". The President then set out extracts of earlier judgements by Justice McHugh and his remarks about the effect of the expiration of a limitation period in that it creates prejudice and injustice.
18. Although the Applicant is within time to proceed on a claim in contract, I consider that it would be unfair and potentially lead to injustice on the part of Argo. The trial process as between the Applicant and the respondent has been compromised by the conduct of the Applicant. Accordingly, I exercise my discretion under subsection 3 and refuse the Applicant's application for leave.

Costs

1. There is a general rule that costs follow the event, as dictated by rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW). If that rule were to be applied in these circumstances then the respondent's costs or to be paid by the Applicant. The application for leave under the State Act was unsuccessful and under the Commonwealth Act was unnecessary.
2. To be clear, the costs of this motion ought to be awarded to the Respondent for the following reasons: 1. the Applicant was unsuccessful in its application for leave to proceed under s 5(1) of the Civil Liability (Third Party Claims Against Insurers) Act; 2. it was accepted by both parties that it was unnecessary for the Applicant to bring this application in relation to the s 601AG question, in that leave from this court is not required; 3. the Applicant's decision to nonetheless bring the application under s 601AG caused the Respondent unnecessary expense.

Orders

1. In respect of the Applicant's motion filed 5 May 2021, I make the following orders: 1. the application for leave to proceed against the Respondent pursuant to s 5(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) is refused; 2. the Applicant is to pay the Respondent's costs of the notice of motion filed 5 May 2021; 3. the Applicant is entitled to proceed against the Respondent pursuant to s 601AG of the Corporations Act 2001 (Cth), although this requires no formal order; 4. the Applicant is to file and serve an amended statement of claim which removes any claim under the Civil Liability (Third Party Claims Against Insurers) Act 2017 within 28 days; 5. leave to apply within 14 days to vary cost order if necessary; and 6. exhibits returned.

I certify that the previous 56 paragraphs are the reasons for the Judgment of his Honour Judge D Wilson SC. J Bailey Associate

Endnote

1. Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

Amendments 17 December 2021 - Catchwords updated DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 December 2021