ESTATE OF DARRYL ARTHUR HERBERT C/- THE PUBLIC TRUSTEE

Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Citation : WEBB -v- THE ESTATE OF DARRYL ARTHUR HERBERT care of THE PUBLIC TRUSTEE & ANOR [2005] WADC 27

Practice and procedure - Appeal against summary judgment - Action against liability insurer - Death of insured - Insurance Contracts Act 1984 (Cth) s 51 - Meaning of "is liable in damages"

Corporations Act 2001 (Cth), s 601AG

Insurance Contracts Act 1984 (Cth), s 51, s 54(1)

Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd [2005] NSWCA 19; (2005) 62 NSWLR 148

Bayswater Car Rental Pty Ltd v Hannell [1999] WASCA 34; (1999) 29 MVR 35

Bradley v Eagle Star Insurance Co Ltd [1989] AC 957

Campbell v Amaca Pty Ltd [2005] WASC 272

Morris v Betcke [2005] NSWCA 308; (2005) 13 ANZ Ins Cas 61-665

Pagnon v Workcover Queensland [2000] QCA 421; [2001] 2 Qd R 492

Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363

Tatterson v Wirtanen (as Executrix of the Estate of Wirtanen) [1998] VSC 88

The Distillers Co (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1

Vollstedt v Calibre Enterprises Pty Ltd [1999] VSC 128; (1999) 10 ANZ Ins Cas 61-440

Webb v The Estate of Darryl Arthur Herbert C/- The Public Trustee & Anor [2003] WADC 193

Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; (2005) 79 ALJR 1079

Antico v Heath Fielding Australia Pty Ltd [1997] HCA 35; (1997) 188 CLR 652

Aspioti v Leigh [2003] NSWSC 1224

Australian Iron & Steel Pty Ltd v Government Insurance Office (NSW) [1978] 2 NSWLR 59

Bailey v New South Wales Medical Defence Union Ltd [1995] HCA 28; (1995) 184 CLR 399

Cacciola v Fire and All Risks Insurance Co Ltd [1971] 1 NSWLR 691

Corti v Rodwell [1985] VicRp 26; [1985] VR 287

Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62

Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87

FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd [2001] HCA 38; (2001) 204 CLR 641

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365

Ilevska-Dieva v SGIO Insurance Ltd [2000] WASCA 161

In re Coleman's Depositories Ltd v Life and Health Assurance Association [1907] 2 KB 798

Langridge v Insurance Commission of Western Australia [2003] WASC 24; (2003) 27 WAR 504

Lotus Manufacturing Co Ltd v Sun Alliance Insurance Ltd (1987) 4 ANZ Ins Cas 60-782

Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] HCA 14; (2004) 218 CLR 273

Orica Ltd v CGU Insurance Ltd [2003] NSWCA 331; (2003) 59 NSWLR 14

Ripper v Gatenby [2002] TASSC 45; (2002) 10 Tas R 435

1 On 20 September 1994, the appellant, Mr Webb, was allegedly injured during the course of a horse trail ride operated by Cable Stable Trail and Equestrian Centre in Broome. A horse he was riding allegedly bolted, throwing him off and causing him to injure his wrists. At the time of the accident, the Cable Stable Trail and Equestrian Centre was owned by Mr Darryl Herbert, whose estate is named as the first respondent. Mr Herbert appears to have sold the business in early 1995. He married in 1997, and, unfortunately, died in the month following his marriage; that is, apparently during June 1997.

2 Although the plaintiff (appellant) had instructed a firm of Queensland solicitors in 1995, and that firm had retained the services of Clayton Utz to act as their agents in Western Australia in December 1995, there were thereafter a series of inexplicable delays by those solicitors. The sorry history is outlined in the reasons for decision of Deane DCJ in Webb v The Estate of Darryl Arthur Herbert C/- The Public Trustee & Anor [2003] WADC 193.

3 Briefly, Clayton Utz sent a letter of demand to the Cable Stable Trail and Equestrian Centre in May 1998, and shortly thereafter the Public Trustee advised that firm that Mr Herbert's Will dated January 1997 had been revoked by his subsequent marriage in May of that year. As a result, there seems to have been no reason for anyone to suppose that the Public Trustee would have had any involvement in the administration of the estate, and it is curious that the Public Trustee is named in the title of the action. Following advice from the Public Trustee, nothing whatever seems to have happened until July 2000, when a writ was filed in the District Court commencing proceedings against SGIO, as second defendant (second respondent), and incorrectly nominating the first defendant (first respondent) as the estate of Mr Herbert, "care of the Public Trustee". For reasons which are again not clear, that writ was not served upon the second defendant until July 2001. The second defendant has entered an appearance. No person representing the estate of Mr Herbert appears to have been served within 12 months of the writ being filed (or, as far as I can see, ever). The limitation period expired on 20 September 2000.

4 Eventually, in April 2002, the plaintiff's solicitors filed a chamber summons seeking to reamend the amended statement of claim so as to substitute Mr Herbert's widow, who was the administrator of his estate, as the first defendant. Although Mr Herbert's widow did not appear, there was evidence before the District Court Registrar, and on appeal from his decision before Deane DCJ, which was broadly to the effect that Mr Herbert's widow had had no personal involvement with the equestrian business, that Mr Herbert had sold it before they met, that she had disposed of certain records which she vaguely recalled having seen which might have been relevant to the action, and that persons whom she had nominated as being possibly able to assist could not recall details of any accident. The delay being almost wholly unexplained, and the apparent prejudice being substantial, Deane DCJ did not permit the amendment.

5 During the course of her Honour's decision, Deane DCJ also considered certain submissions made to her in respect of the operation of s 51 of the Insurance Contracts Act 1984 (Cth) ("the Act"), in relation to the alleged failure of Mr Herbert to provide notice to the second defendant of the occurrence of the accident, and in relation to prejudice which was alleged to flow to the second defendant from those matters. However, they seem to me to have been strictly irrelevant to the application before her Honour, which concerned the potential prejudice to the proposed first defendant, should the amendment to join her be allowed.

6 It is against that unfortunate background that it is necessary to consider the present appeal. I refer to the second respondent as "SGIO", that being the term used until now, although pursuant to an order of Registrar Kingsley dated 9 February 2006, Insurance Australia Ltd was substituted for SGIO Insurance Ltd.

7 In December 2003, SGIO sought leave to bring out of time an application for summary judgment pursuant to O 16 of the Rules of the Supreme Court 1971 (WA). Leave to bring the application out of time seems to have been granted, and there is no issue in relation to the extension of time in the present appeal. The Deputy Registrar granted summary judgment, and the plaintiff appealed to O'Sullivan DCJ, who dismissed the appeal, although for reasons which were different from those relied upon by the Deputy Registrar. I consider the reasons of the Deputy Registrar and of his Honour shortly. In order to understand them, it is necessary, however, to set out s 51(1) of the Act and what appear from the appeal book to be the relevant provisions of the contract of insurance.

8 Section 51(1) of the Act provides:

(a) the insured under a contract of liability insurance is liable in damages to a person (in this section called the third party);

(b) the insured has died or cannot, after reasonable enquiry, be found; and

(c) the contract provides insurance cover in respect of the liability;

the third party may recover from the insurer an amount equal to the insurer's liability under the contract in respect of the insured's liability in damages."

9 It is not presently in dispute that Mr Herbert was insured under a contract of liability insurance by SGIO, although there is an issue, which SGIO may wish to ventilate at some future time, as to whether he was "the insured" for the purpose of s 51. It is not in dispute that he has died. However, the issues raised by this application appear to be whether Mr Herbert was or is "liable in damages" to the appellant for the purposes of the Act, and whether the contract provides insurance cover in respect of that liability. The relevant provisions of the insurance policy appear to be the following:

"Section 1 - 'Public Liability'

The Insurer will pay to or on behalf of the Insured all sums which the Insured shall become legally liable to pay for compensation ... in respect of

(a) bodily injury (which expression in this Policy includes death and illness) ...

CONDITIONS

1. Notice in writing shall be given as soon as possible to the Insurer of

NOTICE OF CLAIMS

(a) every occurrence, claim, writ, summons, proceedings, impending prosecution or inquest in respect of which there may arise liability under the Policy ...

OBSERVANCE OF TERMS AND CONDITIONS

7. If the Insured fails to observe or fulfil the terms and conditions of this Policy insofar as they relate to anything to be done or complied with by the Insured, then the liability of the Insurer in respect of any claim shall be reduced by the amount that fairly represents the extent to which the interests of the Insurer have been prejudiced thereby." (Emphasis supplied)

10 The Deputy Registrar took the view that it was "conceivable" that s 51 of the Act would allow for recovery in cases other than cases where the insured died at a time after liability in damages had been found by a Court. That is, it was arguable that Mr Herbert "is liable" for the purpose of s 51(1)(a). However, he concluded that there was no basis for contending that the relevant indemnity provision of the policy was intended to express an entitlement on the part of the insured arising at any point prior to the determination of the sum which the insured "shall become legally liable to pay". As a result of both the death of Mr Herbert and the inability, since the decision of Deane DCJ, of the plaintiff to join Mr Herbert's personal representative to the writ, that condition could not be satisfied. The "insurer's liability under the contract", in the concluding words of s 51(1), could never arise.

11 O'Sullivan DCJ dismissed the appeal for reasons which were based on a construction of s 51 of the Act, rather than upon the terms of the policy. His Honour's view was that the plaintiff would never be able to establish that Mr Herbert or his estate "is liable in damages" to him. His Honour's understanding of that expression seems to have been that it was intended to refer to a liability which had been determined to exist by a Court.

12 The principles governing applications of this kind are well-known. Summary judgment should not be granted unless it is clear that there is no real question to be tried. In that legal context, I consider first the conclusion reached by his Honour, and then turn to deal with that of the learned Deputy Registrar.

Is it arguable that the appellant has an action against SGIO?

13 In the present case, the issue under the Act appears to be whether the words "is liable" have the effect of meaning "is determined by a Court to be liable", or perhaps "has an enforceable liability", as opposed to meaning "has been responsible for an act or omission which gives rise to liability". It seems to me that it is difficult to say that it is not arguable that the section proceeds from a view that a liability for negligent behaviour arises at the time of the accident, when the negligence and damage coincide (see for example, Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 at 373 per Lord Denning MR). A view of that kind is supported by the relevant extrinsic materials, and by what judicial consideration there has been of s 51 and of arguably similar provisions.

14 Section 51 appears to have had its genesis in the Australian Law Reform Commission Report No 20. The explanatory memorandum to the Bill for the Act, at par 170, reads as follows:

"Rationale - As the law stands, the third party may be faced with a number of difficulties in pursuing his claim against an insured. For example, he may, in the case of a deceased insured, need to bring initial proceedings to appoint a guardian ad litem. The third party's rights may well be defeated where an insurer insists that the third party pursue his claim against an absent insured on the basis that it should not be required to conduct a defence of an action in the absence of the insured. While the insurer is clearly in an unfortunate position in the absence of the insured, the third party should be able to claim directly from the insurer which has accepted premiums to cover the loss concerned. Any prejudice the insurer suffers is outweighed by the loss the innocent third party would otherwise suffer. (ALRC para 340)."

15 It seems, therefore, that Parliament contemplated that the action which the third party might be able to pursue in the absence of the insured would be an action in which the liability of the insured to the third party would be a live issue. It is difficult to see any other reason for the references to the unfortunate position of the insurer in defending an action in the absence of the insured.

16 In Vollstedt v Calibre Enterprises Pty Ltd [1999] VSC 128; (1999) 10 ANZ Ins Cas 61-440, Beach J in the Supreme Court of Victoria considered that it was arguable that a third party may institute proceedings against the insurer with a view to establishing the liability of the insured in that proceeding, rather than being able to proceed only where the insured's liability had already been determined (at [28]). His Honour's reasons on the point are brief, being delivered in the course of an application for summary termination of a proceeding. They appear to stem from a "purposive" construction of s 51(1).

17 A purposive construction of s 601AG of the Corporations Act 2001 (Cth), taken in two cases in other States, has led to the view that that provision has the effect that the insurer "stands in the shoes of" the insured, so far as the third party is concerned: Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd [2005] NSWCA 19; (2005) 62 NSWLR 148, at [41] - [46] per Ipp JA, Pagnon v Workcover Queensland [2000] QCA 421; [2001] 2 Qd R 492, at [17] per McPherson JA. That provision relevantly reads:

"A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if:

(a) the company had a liability to the person; and

(b) the insurance contract covered that liability immediately before deregistration."

18 It can be seen then, that although the wording is different, there are similar concepts involved. That is, there is a reference to the question of whether the insurance contract covered the liability in s 601AG(b), which is comparable with par (c) and the concluding words of s 51(1), and the reference to the question of whether the company "had a liability" is very close to the question of whether an insured "is liable" to a person in par (a) of s 51(1), although the tense is different.

19 It seems to me therefore that his Honour erred in concluding that it was not arguable that the appellant might be able to establish that Mr Herbert "is liable in damages" to him. Although SGIO did not formally concede that point, no argument was directed to it. Rather, SGIO directed its argument principally to the reasons of the Registrar. Although we heard that argument, at the conclusion of the hearing, since it appeared that counsel for the appellant had been taken by surprise, we required SGIO to formalise its position by the filing of a notice of contention. We also granted the appellant leave to file further written submissions in reply.

20 SGIO's submissions commence by turning to a line of authority to the effect that the expression "legally liable" in policies of liability insurance refers to a legal liability established in the sense of being crystallised by judgment, arbitral award or agreement. The authorities most directly on point appear to be English, being Post Office v Norwich Union Fire Insurance Society Ltd (supra) and Bradley v Eagle Star Insurance Co Ltd [1989] AC 957, at 964 - 966. That position appears, however, also to have been accepted by Stephen J in the High Court in The Distillers Co (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1, at 25 - 26. SGIO then refers to the decision of this Court in Bayswater Car Rental Pty Ltd v Hannell [1999] WASCA 34; (1999) 29 MVR 35, in which the Full Court took the view that s 51 was not intended to alter the terms of the contract of insurance, or to place the third party in a better position as against the insurer than that of the deceased (at [19], [43] and [73]). SGIO points out that the writ is now stale as against the first respondent, and the appellant's application to extend its validity was refused, as was the appeal from the refusal, and that the proper first respondent has never been joined to the proceedings and cannot now be joined. It is submitted therefore that there can never be a legal liability established, in the sense of being crystallised in the manner described in the authorities to which I have referred. SGIO also submits that a further reason for reaching that view is that the appellant's cause of action against the deceased is statute-barred; however, matters of limitation being strictly matters of defence, it seems to me that that contention is of little weight.

21 The combined effect of the line of authorities to which SGIO refers, taken with the decision of this Court in Bayswater, is to suggest that the appellant may not be able to succeed in his action. However, it seems to me that it cannot be said that the action must inevitably fail. So far as Bayswater is concerned, the terms of the policy there in question expressly provided indemnity only "on a court judgment". It is submitted that Bayswater is distinguishable on that basis. The appellant cites, in this context, Campbell v Amaca Pty Ltd [2005] WASC 272, in which Le Miere J considered it inappropriate to determine summarily the construction of an insurance contract, in the context of s 601AG of the Corporations Act.

22 Although the appellant does not, in his written submissions, expressly suggest that it is intended to submit that Bayswater was wrongly decided, the submission is made that if the effect of s 51 is to place the appellant "in the shoes" of the insured, it is "unnecessary and irrelevant" to require a judgment against the insured as a precondition of liability. Rather, it is submitted, a judgment may be sought directly against the insurer. It may be that the purposive approach to s 601AG of the Corporations Act, in the cases to which I have referred, if taken in relation to s 51, would support such a contention. These cases were decided subsequent to Bayswater, which seems not to have been cited to the Court in either of them. Further, prior to the decision in Bayswater, there had been an unreported decision in the Supreme Court of Victoria, being Tatterson v Wirtanen (as Executrix of the Estate of Wirtanen) [1998] VSC 88, a decision of Gillard J. His Honour in that case considered that it would be open to a third party in the position of the appellant to seek declaratory relief against the insurer, the declaration sought being that in the circumstances pleaded the insured is legally liable to pay compensation and that, such a declaration being made, the insurer is obliged to indemnify the insured. That case does not seem to have been cited to the Court in Bayswater. The Court of Appeal of New South Wales noted that there was some difference between those cases: Morris v Betcke [2005] NSWCA 308; (2005) 13 ANZ Ins Cas 61-665, at [60]. There may therefore be some basis for a submission, at an appropriate time, that a portion of the reasons in Bayswater should be reconsidered, if the decision is not distinguishable on other grounds.

23 Finally, the appellant raises certain other issues. It is submitted that the terms of the policy will ultimately be a matter for evidence. The claim by the appellant is said to be made under the "Equestrian Federation Member Horse Clubs' Policy". That appears from submissions made by SGIO. The policy which is contained in the appeal book, and upon which argument has been based, is simply headed "Liability Insurance Policy". There is no evidence that it contains the terms of the policy under which SGIO might have been liable to indemnify the deceased at the relevant time. Rather, it appears that it was simply a document provided during the course of pre-action discovery. The appellant submits, in my view correctly, that summary judgment should not be granted without clear evidence demonstrating what the terms of the policy were at the relevant time. Further, it is submitted that s 54(1) of the Act may prevent the insurer from denying liability by reason only of there being no judgment against the insured. That provision relevantly reads:

"Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim ... by reason of some act of the insured or of some other person ... the insurer may not refuse to pay the claim by reason only of that act but the insurer's liability ... is

reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of that act."

An act is defined to include an omission. The appellant submits that it may be arguable that its failure to obtain judgment against the deceased was an act excused by s 54(1).

24 I accept the appellant's submission that it is not appropriate that summary judgment be entered on the basis of facts which are assumed rather than proved. I also accept that the effect of s 51(1) in the present circumstances is a question of some complexity, in relation to which there is limited authority and in relation to which such authority as there is does not appear to be all one way. In those circumstances, the appellant's appeal should be allowed.

25 PULLIN JA: I have read the draft reasons prepared by Wheeler JA. I agree with those reasons and have nothing to add.

• Background
• This appeal
• The decisions below
• Is it arguable that the appellant has an action against SGIO?