Wigge v Allianz Australia Insurance Ltd

Supreme Court of NSW|2020-02-26|Before: Adamson J

Solicitors: AC Lawyers (Plaintiff) McCabe Curwood (First Defendant) Holman Webb Lawyers (Second Defendant) File Number(s): 2017/176508

Introduction

On 13 June 2017 Dr Susanne Wigge (the plaintiff) commenced proceedings in the District Court for damages arising from an injury she sustained in 2014 when she was undertaking a yoga teacher training course at Kangaroo Valley. The statement of claim named KMYOGA (Holdings) Pty Ltd (KMY) as first defendant and Kathryn McCusker as second defendant. The proceedings were subsequently transferred to this Court.
Following KMY's deregistration on 16 March 2018, the plaintiff filed an amended statement of claim on 22 May 2019 in which she purported to substitute Allianz Australia Insurance Limited (Allianz) for KMY as the first defendant.
Allianz objected to its joinder and filed a notice of motion on 31 July 2019 for orders including that the amended statement of claim be struck out. On 23 August 2019 the plaintiff filed a notice of motion for leave under s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (the Act) to continue the proceedings against Allianz.

The contract of insurance

It was common ground that KMY was party to a contract of insurance with Allianz for the period 1 October 2013 to 1 October 2014. The contract comprised a policy schedule and a document entitled "Blue Eagle Office Pack" (together referred to as "the Policy").
Section 7 of the Policy relevantly provided: "The cover Where this Section is shown as insured on the Schedule, We will insure You for all amounts which You become legally liable to pay as compensation (excluding punitive, exemplary and aggravated damages) for: - Personal Injury … Occurring within the Territorial Limits as a result of an Occurrence in connection with Your Business, up to the Limit of Indemnity stated in the Schedule."
The Business set out in the Schedule, beside the word "Occupation", is "yoga & meditation centre".
The "General definitions" in the Policy include, of present relevance: "Business" means the Business described in the Schedule carried on by You or on Your behalf at or from the Situation and any occupation incidental to that Business. ... "Situation" means the Situation(s) stated in the Schedule."
The definitions applicable to Section 7 include: "'Occurrence' means an event including continuous or repeated exposure to substantially the same general conditions which results in Personal Injury, Property Damage or Advertising Injury neither expected nor intended by You. With respect to Personal Injury or Property Damage, all events of a series consequent upon or attributable to one source or original cause shall be deemed to be one Occurrence. … 'Territorial Limits' means: a. anywhere within Australia or its external territories: …"
Section 7 includes exclusions and relevantly provides: "Specific exclusions applicable to this Section This section does not cover any actual or alleged liability: … 13. Participation for Personal Injury to any person or Property Damage to the property of any person arising directly or indirectly out of or in any way connected with, the actual participation of such person in any sport exercise or activity such as but not limited to aerobics, athletics, football, aquatic, aerial or equestrian activity. The term 'participation' as used in this exclusion includes the participation, training or practice for, supervision or control of such activities. This exclusion does not apply to Personal Injury or Property Damage, caused by any fault or defect in equipment provided by You at any location owned and/or occupied by You for the purpose of Your Business."

The events giving rise to the plaintiff's claim

For the purposes of the notices of motion, the factual narrative may be relatively shortly stated.
As at 10 June 2014 KMY operated a yoga studio at Bondi Junction. Ms McCusker operated KMY from 19 October 2011 to 16 March 2018 when KMY was deregistered. KMY is now in liquidation. The plaintiff is a general practitioner who attended the yoga studio. In 2014 KMY and Ms McCusker promoted a Kundalini yoga teacher training course which was to be conducted at Kangaroo Valley in association with two senior Kundalini practitioners. The course was to be conducted over three separate weeks. Ms McCusker was present and involved in this course. The plaintiff paid a course fee of $4,500 to KMY in order to participate in the course, of which 10% was retained by KMY and the balance remitted to the senior practitioners who were teaching the course. Although the plaintiff had no intention of becoming a yoga teacher, the course was not restricted to those with that intention.
The plaintiff participated in the first week of the course, 15-22 March 2014, without incident.
The plaintiff alleges that on 10 June 2014, during the second week of the course, she took part in what is described as a "Circle of Trust" exercise where students would stand in a circle and "catch" one of their number who stood in the middle. When the plaintiff allowed herself to "fall", she was not caught by her fellow students. Instead, she fell onto the floor and, as she subsequently learned, suffered a fracture of her thoracic spine. She alleges that her fall was caused by the negligence of KMY and Ms McCusker in allowing this exercise to be performed and in failing to supervise it properly.
The plaintiff also claims damages for breach of the statutory guarantee in s 60 of the Australian Consumer Law alleging that KMY and Ms McCusker failed to provide the services (yoga teacher training) with due care and skill.

The relevant legislation and general principles

Section 4 of the Act relevantly provides: "4 Claimant may recover from insurer in certain circumstances (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. … (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. …"
Section 5 of the Act relevantly provides: "5 Leave to proceed (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."
It was common ground that the applicable legal principles were as stated by this Court in Zaki v Better Buildings Constructions Pty Ltd [2017] NSWSC 1522 (Campbell J); Murphy, McCarthy & Associates Pty Ltd v Zurich Australian Insurance Ltd [2018] NSWSC 627 (Hammerschlag J) (Murphy) and Ritchie v Advanced Plumbing and Drains Pty Ltd [2019] NSWSC 1028 (Campbell J). Of present relevance, Hammerschlag J said in Murphy: "[16] The requirement for leave under s 5(4) of the Act is one imposed to insulate insurers from exposure to untenable claims. The discretion to give leave to bring such a claim is to be exercised with this in mind. [17] [The plaintiff] must have an arguable case against [the insured], there must be an arguable case that the Policy responds to it and there must be a real possibility that if judgment is obtained [the insured] would not be able to meet it …"

Consideration

I did not understand it to be in issue that the plaintiff would, but for KMY's deregistration, have an arguable case against KMY and that judgment cannot be obtained against KMY because it has been deregistered. The sole question is whether it is arguable that the Policy would respond (in the sense that the liability would be covered and not excluded) to the claimed liability of KMY to the plaintiff. It was common ground that if it were arguable, leave should be granted. It was also common ground that Allianz bears the burden of demonstrating that it is not arguable that the Policy, on its proper construction, responds to the claim.
Mr Stone SC, who appeared on behalf of the plaintiff, submitted that there was an arguable case that the Policy responds to KMY's liability to the plaintiff on the following bases: 1. The plaintiff's injury was sustained in Kangaroo Valley, which is within the "Territorial Limits" as defined; 2. The plaintiff's injury resulted from an "Occurrence", being an event which results in personal injury, which was constituted by her falling onto the ground during the "Circle of Trust" exercise; 3. The Occurrence was "in connection with [KMY's] Business" since the conduct of a yoga teacher training course off-site at Kangaroo Valley was incidental to KMY's yoga and meditation business conducted at Bondi Junction; 4. There is no requirement for the Occurrence to occur at the "Situation" (the Bondi Junction premises).
I consider each of propositions (1)-(4) to be arguable. Proposition (1) cannot reasonably be in dispute. Proposition (2) is plainly arguable and may ultimately be common ground. Proposition (3) is supported by the evidence which established that KMY promoted the course to those such as the plaintiff who attended its classes at Bondi Junction and that KMY was paid a 10% commission in respect of fees paid by its students who attended the course. I also consider proposition (4) to be arguable. In these circumstances, it is neither necessary nor desirable for me to express a view on the relative strength of the arguments for or against each proposition.
It was common ground that the plaintiff could not obtain a judgment against KMY by reason of its deregistration.
The remaining area of dispute is the extent of the exclusion in clause 13 of the Policy. Mr Polin SC, who appeared on behalf of Allianz, contended that the argument that the exclusion did not apply was untenable. He submitted that, whatever be the limits of the words "sport exercise or activity", they clearly covered yoga which necessarily involved physical exercise of one description or another and that each of the examples in clause 13 included an element of physical exercise. He contended that the plaintiff's injuries were plainly sustained in the course of her participation in an exercise or activity and that therefore liability under the Policy was excluded. He also submitted that the "carve out" at the conclusion of clause 13 indicated that, in substance, the Policy was a public liability policy and was not intended to insure against the risk of activities conducted either at the Bondi Junction premises or elsewhere, as opposed to the risk of a defect in some aspect of the premises or the equipment provided.
Mr Polin relied on what Hammerschlag J said in the passage set out above that the purpose of s 5 of the Act was to ensure that insurers were not subjected to untenable claims and that the plaintiff's claim fell into that category.
Mr Stone SC submitted that there was an issue to be tried on the question whether yoga and the associated "Circle of Trust" exercise fell within the exclusion in clause 13. He accepted that some forms of yoga may, indeed, involve strenuous physical exercise, but contended that other forms, which may be meditative, could involve no more physical exertion than a game of chess or cards or knitting, which may fall outside the exclusion. He contended that this was not a judgment that ought be made in the absence of evidence and that the evidence on the question would be available to the trial judge. He contended that Allianz had failed to discharge its onus in s 5(4) of the Act because it was arguable that clause 13 did not apply to exclude the relevant liability and that, accordingly, leave ought be granted to continue the proceedings against it.
The question is not without difficulty. The phrase "sport exercise or activity" is not entirely clear. Three separate constructions are at least arguably available. First, the phrase could be read as if there were a comma between "sport" and "exercise", as if it said "sport, exercise or activity". Secondly, if the word "sport" were read as qualifying, in an adjectival sense, what follows, it is not clear whether it qualifies only "exercise" or also "activity" as if the phrase were "sport exercise or sport activity". The third possible construction is that the word "sport" qualifies only the word "exercise" and not the word "activity". One might think that yoga was plainly an "activity" but whether it is a "sport activity" is a more difficult question. Whether it is an "activity" in a list of items which includes "sport" and "exercise" and which provides as examples, "aerobics, athletics, football, aquatic, aerial or equestrian activity" raises further issues. Similar issues arise in the context of the "Circle of Trust" exercise.
Even the assumption, which might on its face appear irresistible, that yoga involves physical exercise might be misplaced if Kundalini yoga is purely meditative and does not involve such poses as might be typical in other forms of yoga. The evidence on this form of yoga is scant. The following extract from the plaintiff's statement of 19 January 2019 suggests some physical activity although it is insufficiently clear as to what is involved to gain a clear picture: "I felt that Kundalini Yoga fed my soul. I enjoyed the physical challenges and the spiritual/mindfulness aspect of it."
These questions highlight the difficulty of concluding that there is no arguable case that the exclusion clause does not apply.

Conclusion

For the reasons given above, I am not persuaded that Allianz's entitlement to deny or disclaim liability under the Policy is unarguable. Accordingly, leave ought be granted to the plaintiff to continue the proceedings against Allianz.

Costs

Mr Stone submitted that costs ought follow the event. Mr Polin submitted that the plaintiff required leave of the Court to continue the proceedings against Allianz and that, accordingly, the plaintiff was obliged, by nature of the application, to expend costs in pursuing it and persuading the Court that leave ought be granted. He submitted that, if Allianz were successful, it should have an order for costs in its favour but that if the plaintiff were successful in obtaining leave, the order should be that the cost of the application be costs in the cause or that each party ought bear her, or its (as the case may be) costs of the application. Mr Stone submitted in response that such costs would have been de minimus if Allianz had not actively opposed leave and that Allianz's opposition had caused the plaintiff to incur costs.
I note that the defendant's notice of motion for an order striking out the amended statement of claim would appear to be what precipitated the plaintiff's notice of motion since the absence of leave under s 5 of the Act was the sole basis to strike out the pleading. Accordingly, the defendant's notice of motion need not be separately dealt with since the determination of the plaintiff's application for leave resolves that question in the plaintiff's favour.
I consider that the appropriate order is that the costs of the notices of motion be costs in the cause.

Orders

For the reasons given above, I make the following orders: 1. Grant leave to the plaintiff pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) to continue the proceedings against Allianz Australia Insurance Limited as first defendant. 2. Order that the costs of the defendant's notice of motion for strike out of the pleadings filed on 3 July 2019 and the cost of the plaintiff's notice of motion for leave filed on 23 August 2019 be costs in the cause.

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: 27 February 2020

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