Meachelle Dixon v Royal Insurance Australia Limited; Cigna Insurance (Australia) Limited Formerly Known As Insurance Company of North America (Australia) Limited and Ledenhall Insurance Limited [1991] ACTSC 59; (1991) 105 ACTR 1 (19 (14 August 1991)

SUPREME COURT OF THE ACT

MEACHELLE DIXON v. ROYAL INSURANCE AUSTRALIA LIMITED; CIGNA INSURANCE
(AUSTRALIA) LIMITED formerly known as INSURANCE COMPANY OF NORTH AMERICA
(AUSTRALIA) LIMITED and LEDENHALL INSURANCE LIMITED
S.C. No. 748 of 1989
Insurance Contract
[1991] ACTSC 198; (1991) 105 ACTR 1
(1991) 105 FLR 129

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Higgins J.(1)

CATCHWORDS

Insurance Contract - Application for leave to commence proceedings against insurer of tort-feasor - Aircraft accident - Judgment in favour of plaintiff against tort-feasor - Charge created in favour of plaintiff - S.25 Law Reform (Miscellaneous Provisions) Act 1955 (ACT) - Enforceability of charge - Requirements to be satisfied before leave is granted to proceed.

Application of Law Reform (Miscellaneous Provisions) Act 1955 (ACT) to present proceedings - Jurisdiction of Court - Whether leave nunc pro tunc can be granted - New South Wales decisions not applied - situs of charge to which ACT legislation is applicable.

Law Reform (Miscellaneous Provisions) Act 1955 (ACT), s.25(1), s.26(3)

Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s.6

ACT Supreme Court Act and Rules, O.10

Andjelkovic v AFG Insurances Ltd (1980) 31 ACTR 17; 47 FLR 348

AFG Insurances Ltd v Andjelkovic [1981] FCA 104; (1981) 54 FLR 398

Andjelkovic v AFG Insurances Ltd [1981] FCA 104; (1982) 58 ALJR 52; 49 ALR 245

Jenkins v Mercantile Mutual Insurance Limited (1987) 89 FLR 360; 71 ACTR 18

Breavington v Godleman [1988] HCA 40; (1988) 169 CLR 41

Laurie v Carroll [1958] HCA 4; (1958) 98 CLR 310

Boyle v Sacker (1888) 39 Ch D 249

Granowski v Shaw (1896) 7 QLJ 18

Perkins v Williams (1900) 17 WN (NSW) 135

Delaney v Great Western Milling Co Ltd [1916] HCA 46; (1916) 22 CLR 150

Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261

Yrttiaho v Public Curator (Qld) [1971] HCA 29; (1971) 125 CLR 228

Cambridge Credit Corp v Lissenden [1981] FCA 104; (1987) 8 NSWLR 411

National Mutual Fire Insurance Co Ltd v Commonwealth of Australia (1981) 1 NSWLR 400

Ratcliffe v VS and B Border Homes Ltd (1987) 9 NSWLR 390

Spautz v Kirby (1989) 21 NSWLR 27

Spain v Metropolitan Meat Industry Board (1971) 1 NSWLR 91

HEARING

CANBERRA
14:8:1991

Counsel for the Plaintiff: Mr R. Refshauge

Instructing solicitors: Messrs Macphillamy Cummins and Gibson

Counsel for the Defendants: Mr Rundell

Instructing solicitors: Messrs Blake Dawson Waldron

ORDER

The plaintiff be granted leave pursuant to Section 26(3) of the Law Reform (Miscellaneous Provisions) Act 1955 (ACT) to commence proceedings against the defendants.

DECISION

This is an application for leave to commence proceedings against the insurer of an alleged tort-feasor pursuant to s.26(3) of the Law Reform (Miscellaneous Provisions) Act 1955 (ACT).

2. The proceedings seeking leave were commenced by an originating summons dated 11 December 1989.

3. On 1 December 1984, the plaintiff says she was a passenger in an Aero Commander 500A aircraft, registration number VH-AGA. The aircraft was then being piloted by Mr Edward Joseph Priest ("Priest"). Priest was also the registered owner of the aircraft. The flight was from Canberra to Goulburn. On board was an instructor employed by the Canberra Aero Club, a Mr Richard East. It appears that the purpose of the flight was a training session at the end of which (or at least that leg of it) the parties would attend a social function organised by the Goulburn Aero Club.

4. The aircraft crashed near Goulburn, in the State of New South Wales, and the plaintiff was injured as a result.

5. The plaintiff says that so far as she was aware, Priest was not, at the time of the accident, flying in an abnormally hazardous manner; nor was he experimenting with or testing new parts, devices or design. If he had been doing any of those things it would have been a breach of the terms of the policy of insurance applicable to the aircraft.

6. In action No. 570 of 1985 the plaintiff sued Priest for damages for negligence. On 15 November 1988 she obtained judgment against Priest in the sum of $148,696,32 and costs.

7. On 13 May 1987, the plaintiff's solicitor, Mr McArthur, caused a search to be made to determine whether Priest owned any property in the Australian Capital Territory. A search of his residential address revealed the dwelling erected on it was the property of the Commonwealth. He was not registered as owner of any other property.

8. Other enquiries, detailed by Mr McArthur, revealed that (apart from any share to which he was entitled of the proceeds of the recovery of insurance monies after the accident), Priest had a Ford Falcon and a Datsun motor vehicle. He had one share to the value of $1.00 in Canberra Avionic Pty Ltd. No source sufficient for the satisfaction of the judgment against Priest was thereby indicated.

9. It does not follow, of course, that one could conclude from this that Priest had no sufficient assets to satisfy the judgment, either when it was entered or subsequently. On the other hand, it was not a situation where it could be considered that there was any real likelihood of Priest being able to satisfy such a large debt out of his own assets.

10. On 7 February 1989 Mr McArthur wrote to Priest. This letter invited Priest to produce his policy of insurance and to say whether or not he could satisfy the judgment. There was no reply.

11. The plaintiff's solicitors obtained what purported to be a copy of the relevant policy from the solicitors for Mr East, the other passenger in the aircraft at the time of the accident. He had also been injured and had sued Priest for damages.

12. The policy was issued by "Aviation and General Underwriters" (13-15 O'Connell Street, Sydney, NSW) to "E.J. Priest and B.W. Hoitink Trading as Diamond Air (owners) Fairburn (sic) Aviation Services (operators)". The period of the original policy was 21 May 1984 to 21 May 1985. The "Assurers" underwriting the policy were listed as "Royal Insurance Australia Limited" (60%), "Insurance Company of North America (Australia) Limited" (20%) and "Leadenhall Insurance PLC" (20%). The aircraft itself was insured against loss or damage to the extent of $39,000.00 (inclusive of $500.00 excess). Liability to passengers was limited to $100,000.00 each, to a total of $250,000.00. The relevant term of the policy was as follows:-
"SECTION 3

LEGAL LIABILITY TO PASSENGERS
Subject to the terms conditions and limits hereof the
Assurers will indemnify the Assured in
respect of all sums which the Assured shall become
legally liable and shall pay as compensation (including
costs awarded against the Assured) in respect of
accidental bodily injury (fatal or non-fatal) to
passengers which on board the aircraft or in the course
of any of the operations of embarking into or
disembarking from the aircraft and for loss of or
damage to the registered baggage and personal effects
of such passengers whilst in the course of carriage by the Assured.
The liability of the Assurers under this Section shall
not exceed the amount stated in the Schedule. The
Assurers will however in addition defray any law costs
incurred with their written consent in defending any
action which may be brought against the Assured in
respect of any claim covered by this Section but should
the amount paid or awarded in settlement of such claim
exceed the limits of indemnity hereunder then the
liability of the Assurers in respect of such law costs
is limited to that proportion of the costs which the
limit of indemnity hereunder bears to the amount paid or damages."

13. The uses covered for indemnity by the policy were sufficiently wide ("Private Business, Pleasure...") to include the subject flight.

14. The policy was renewed to 21 May 1986.

15. Prima facie, therefore, this policy would require the "Assurers" to indemnify Priest in respect of the legal liability he incurred to the plaintiff, at least up to the apparent policy limit of $100,000.00. That conclusion is corroborated by an affidavit of Peter John Miller (24 April 1991), the relevant underwriter who issued the policy referred to above.

16. He confirmed also that the "Assurers", the present defendants, paid $39,000.00 to the aircraft owners for its loss or damage. This purported to be without confirmation or refusal of indemnity under the policy. It was in satisfaction of all claims in respect of that loss or damage. The excess was not deducted.

17. I am satisfied that the present application has been sufficiently notified to each of the defendants.

18. Section 25 of the Law Reform (Miscellaneous Provisions) Act 1955 (ACT) creates a charge in favour of the plaintiff, enforceable by action against the insurer, in respect of any moneys payable by the insurer by way of indemnity against the liability of Priest.

19. Section 26(3) requires that the enforceability of the charge thus created is subject to the leave of this court being first had and obtained.

20. That provision is, in its terms, similar to s.6 Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

21. In both jurisdictions, leave is to be refused,

26(3)"...where the court is satisfied that the insurer is
entitled under the terms of the contract of insurance
to disclaim liability, and that any proceedings,
including arbitration proceedings, necessary to
establish that the insurer is so entitled to disclaim
have been taken."
(See also s.6(4) NSW Act.)

22. It is also necessary, of course, that the applicant for leave demonstrates at least an arguable case that the conditions referred to in s.25(1) do, in fact, exist. The final determination as to whether in fact those preconditions for liability are satisfied, will await a final hearing.

23. The proviso to s.26(3) requires positive satisfaction that the insurer is entitled to disclaim liability to the insured for refusal of leave to be required. That amounts to a positive satisfaction that the insured has no right to the indemnity which the contract of insurance prima facie gives. If there is at least an arguable case that there is no such entitlement to disclaim liability, the proviso will not prevent the grant of leave.

24. An example of the latter situation (as well as of the contrary situation) is Andjelkovic v AFG Insurances Ltd (1980) 31 ACTR 17; 47 FLR 348.

25. In that case, Blackburn C.J. explained the effect of ss.25(1) and 26(3) as follows:-

(24) "The main purpose of the provision requiring leave to
commence the statutory action is to prevent the substitution of
a statutory claim for a claim against the insured where the
latter is available and will apparently be effective. Leave may
also be refused where the applicant's claim is unarguable, ie
where the applicant's contention, that the statutory conditions
for the vesting in him of a right of action have been fulfilled,
could not possibly succeed. But if on such an issue there is an
argument in the applicant's favour which could be seriously put,
then in my opinion, on the proper construction of the Ordinance,
leave should be granted and the issue should be determined in
the action in any available way."

26. His Honour considered that the relevant policy could be construed in such a way that the insured could have claimed to have been indemnified under it against its undoubted liability to the applicant.

27. On appeal ((1981) [1981] FCA 104; 54 FLR 398 sub. nom. AFG Insurances Ltd v Andjelkovic), the test outlined above was accepted. The Full Court disagreed, however, with the conclusion that the policy of insurance could be construed so as to give rise to an arguable case for the indemnification of the insured pursuant to the policy. The High Court, ((1982) [1981] FCA 104; 49 ALR 245; 58 ALJR 52; sub.nom. Andjelkovic v AFG Insurances Ltd) refused an appeal from this latter decision. It accepted that the liability of the insured was not arguably within the terms of the relevant policy, notwithstanding that the same was "obscurely worded and quite inappropriate to the circumstances of the insured" (246).

28. The policy of insurance produced in these proceedings seems, prima facie, to provide for an indemnity of Priest (up to a limit of $100,000.00) in relation to the latter's liability to the plaintiff. No evidence has been adduced by the defendants to satisfy the Court that they are entitled to disclaim liability under that policy of insurance.

29. There is nothing to show that the insured in this case has lost that prima facie right to indemnity and, certainly, it is not suggested that the insurer has, by proceedings, established any such right of disclaimer (see Jenkins v Mercantile Mutual Insurance Limited (1987) 89 FLR 360; 71 ACTR 18, 21 per Kelly J).

30. In the latter case, the insurer contended that the insured had failed to give notice of the plaintiff's injury. However, no evidence sufficient to discharge the insurer's onus of establishing such a failure was tendered. Accordingly, leave was granted.

31. In this matter, the defendants placed greater reliance on two other submissions. The first was that leave should be refused on the ground that it had not been demonstrated positively that recovery against the actual tort-feasor would be unsuccessful. The second was that, as the accident occurred in New South Wales and the policy of insurance was issued in New South Wales, the Law Reform (Miscellaneous Provisions) Act 1955 (ACT) has no application.

32. I will deal first with the latter submission.
Application of Law Reform (Miscellaneous Provisions) Act 1955 (ACT):

33. There is no doubt that the law of New South Wales was the law to be applied in determining the liability of Priest to the plaintiff (see Breavington v Godleman [1988] HCA 40; (1988) 169 CLR 41). However, because the defendant in those proceedings was a resident of the Australian Capital Territory, the plaintiff was entitled to sue on that tort and recover damages in the Territory. (See Order 10, ACT Supreme Court Rules.) There is no suggestion that the judgment entered on 15 November 1988 was not validly and properly entered.

34. The defendants have each filed a notice of appearance in this jurisdiction. They have, in these proceedings, each been represented by counsel. In such a case this Court has procedural jurisdiction (see Laurie v Carroll [1958] HCA 4; (1958) 98 CLR 310; Boyle v Sacker (1888) 39 Ch D 249; Granowski v Shaw (1896) 7 QLJ 18; Perkins v Williams (1900) 17 WN (NSW) 135).

35. The only real issue is as to the substantive law to be applied by this Court in exercising that procedural jurisdiction. (See Delaney v Great Western Milling Co Ltd [1916] HCA 46; (1916) 22 CLR 150.)

36. A provision requiring leave before an action can be commenced or pursued would usually be construed as procedural. (See Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261; Yrttiaho v Public Curator (Qld) [1971] HCA 29; (1971) 125 CLR 228; Cambridge Credit Corp v Lissenden [1981] FCA 104; (1987) 8 NSWLR 411, 420.) This is confirmed by the fact that leave may be granted nunc pro tunc (Andjelkovic v AFG Insurances (supra); Cambridge Credit Corp v Lissenden (supra)).

37. It was asserted in argument that National Mutual Fire Insurance Co Ltd v Commonwealth of Australia (1981) 1 NSWLR 400 was authority for the proposition that leave could not be granted under s.26(3) nunc pro tunc.

38. It is true that Glass J.A., with whom Moffitt P and Samuels J.A. agreed, decided that a proceeding commenced without leave is a nullity. However, given that Moffitt P had already decided that leave should have been refused in any event as a matter of discretion, a conclusion with which Glass J.A. agreed, the decision, insofar as it so held, may be viewed as obiter dicta. Neither Cambridge Credit Corp v Lissenden (supra) nor Andjelkovic v AFG Insurances (supra) was cited on the point. It is noteworthy, also, that neither the Federal Court nor the High Court in the latter case expressed any disagreement with the view of Blackburn C.J. that leave could be granted nunc pro tunc.

39. With all due respect to their Honours in the National Mutual case, I cannot see why the legislature should be taken to have adopted a different approach to leave applications under this legislation to that taken under the various limitation Acts. I see nothing strange in the view that lack of leave may be pleaded as a defence in the same way as the expiry of a limitation period may be so pleaded.

40. The decision in National Mutual Fire Insurance Co Ltd v Commonwealth of Australia (supra), of course, has been followed in New South Wales (see Ratcliffe v VS and B Border Homes Ltd (1987) 9 NSWLR 390, 393; Spautz v Kirby (1989) 21 NSWLR 27, 30).

41. However, the manifest injustice of the conclusion to which the Court came to in the National Mutual case on this point leads me to conclude that, unless persuaded by compelling reasons or higher authority, I would not be disposed to regard it as applicable to the legislation of this Territory.

42. It needs only to be pointed out that proceedings for leave can (as here) be protracted so that a relevant limitation period, perhaps not an extendable one, could well expire before leave to commence the substantive proceedings can be given notwithstanding that the application for leave was commenced before that expiry.

43. It may be the case that the drafting of the relevant provisions (creation of the charge and the procedure for enforcement) in two separate sections was intended, in the ACT, to emphasise that there should be a distinction observed between them. One provision may, as a result, be regarded as substantive and the other as a procedural provision. That distinction has not been accepted in New South Wales in respect of the New South Wales Act.

44. Whatever may be the situation in New South Wales, it should not, in my opinion, entail in this jurisdiction any departure from the course endorsed by Blackburn C.J. in Andjelkovic v AFG Insurances (supra).

45. The requirement for leave in s.26(3) should be viewed as a procedural requirement supporting the substantive right created by s.25(1). Section 25(1) itself, however, is in the nature of a subsidiary right, supporting, in turn, the primary liability of the insured to the applicant/plaintiff.

46. In Cambridge Credit Corp v Lissenden (supra) it was submitted that the charge alleged to arise under s.6(4) (equivalent to s.26(3)) was situated outside New South Wales and, hence, not enforceable under that legislation. The policies in that case were underwritten by insurers outside of New South Wales. A claim to indemnity under the policy was regarded as a chose in action created by the policy. Section 6(4), if applicable, would have created a further dependant chose in action vesting in the claimant against the insured and creating an additional obligation on the insurer.

47. Clarke J. distilled the following propositions from previous authorities:-

(416)"1. In the case of a single residence obligor/debtor
the situs of the chose is the country in which
that residence is situated.
2. Where the obligor has two or more residences then
the chose is situated where the debt, or money, is
payable in accordance with the terms of the
contract. If no provision appears concerning the
place of payment then the question "Where it would
be paid according to the ordinary course of
business" needs to be answered... The basis of the
fundamental rule is that the chose is situated
where it is recoverable".

48. Applying those principles to the case of an accounting firm with a head office and state branches, his Honour noted as follows:-

(418) "In the present case the policy refers to the head
office and six branches of Fell and Starkey. This is
indicative of a recognition that that firm might be
sued in one of the States in which a branch operated
and seek cover in the same State in respect of its
potential liability. It follows, in my opinion, that
recovery would in the normal course of business be
achieved in the State in which the branch concerned was
situated. In this case the State is New South Wales.
Consequently, the chose is situated here and s.6(4) applies."

49. It may be noted that it was the situs of the claim to indemnity by the insured which his Honour found to be that to which s.6(4) applied, not, if it be different, the situs of the claim by the 3rd party claimant against the insured.

50. In this case, of course, loss or destruction of the aircraft or injury to passengers covered by the policy could have occurred anywhere in Australia (possibly even beyond). Nevertheless, the persons to be indemnified under the policy (the insured) were resident in this Territory. The aircraft was normally based here. The business names of the partnership utilising the aircraft were registered in the Territory. The claim against the insured was in fact brought in this Territory. The claim for indemnity by the insured for loss or damage to the aircraft was made in the Territory.

51. The insured signed, apparently in this Territory, a deed accepting a settlement of their claim. It is more likely than not that the payment thereof was made in the Territory.

52. Given the form of the policy and respectfully adopting the approach of Clarke J. (supra), it seems to me to follow that the claim by the insured to indemnity under the policy was sited in this Territory at the time when it arose. The charge created by s.25(1) therefore attached to it. The New South Wales Act has no application.
Discretion:

53. I respectfully adopt the approach proposed by Blackburn C.J. in Andjelkovic v AFG Insurances Ltd (supra):-

"The main purpose of the provision requiring leave to
commence the statutory action is to prevent the
substitution of a statutory claim for a claim against
the insured where the latter is available and will
apparently be effective..."

54. The latter observation was endorsed by Clarke J. in Cambridge Credit Corp v Lissenden (supra) 419. Clarke J. referred also, with approval, to a similar comment by Isaacs J. in Spain v Metropolitan Meat Industry Board (1971) 1 NSWLR 91, 97.

55. It follows that the question is whether the process of proceeding directly against the insurers has been made to appear to be the only likely effective means for the plaintiff to obtain satisfaction of the judgment debt herein.

56. In this respect, I consider that the size of the claim, the negative reports as to available realisable assets of Priest, his lack of response to correspondence and subsequent departure from the Territory, all lead to a compelling conclusion that proceeding to enforce the judgment debt against Priest is unlikely to be effective.

57. I note that this approach seems consistent with the test adopted (albeit with the opposite result) by Clarke J. in Cambridge Credit Corp v Lissenden (supra).

58. It follows that I grant the leave sought. I will hear the parties as to costs.