Phillip Ellul v Active Home Improvements Pty Limited (Now Deregistered) and Nzi Insurance Australia Limited [1993] ACTSC 4 (27 January 1993)

SUPREME COURT OF THE ACT

PHILLIP ELLUL v. ACTIVE HOME IMPROVEMENTS PTY LIMITED (NOW DEREGISTERED) and
NZI INSURANCE AUSTRALIA LIMITED
No. SC 603 of 1992
Number of pages - 15
Companies

COURT

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

CATCHWORDS

Companies - Dissolution - Power of Court to declare dissolution void - Action for personal injury against deregistered company - Balancing of interests - Prejudice to company's insurer against prejudice to plaintiff in forgoing claim.

Workers' Compensation Act 1926 (NSW)

Limitation Act 1985, s.36

Q M Cool Rooms Pty Ltd (in liq.) (1986) 4 ACLC 641

Donna Susan McLeod v The Commonwealth of Australia (SC 31/91; 22 July 1991; Higgins J; unreported)

Re: H R Cody Pty Ltd; Drysdale v Australian Securities Commission (1922) 8 ACSR 563

Randel v Brisbane City Council (1990) 2 Qd R 440

Meagher (19

Re: Steelmaster Pty Ltd (in liq.); Kenney v McCann (1992) 10 ACLR 176

Daroczy v B and J Engineering Pty Ltd (In Liq.) (1986) 67 ACTR 3; 83 FLR 423

HEARING

CANBERRA, 4 December 1992
27:1:1993

Counsel for the Applicant: Ms Pamela Burton

Instructing solicitors: Pamela Coward and Associates

Counsel for the Second Respondent: Mr B. Meagher

Instructing solicitors: Messrs Mallesons Stephen Jaques

ORDER

THE COURT ORDERS THAT:
1. The dissolution of the first respondent company be declared void.

2. The period in which the applicant may commence proceedings against
the first respondent company for damages for personal injuries be
extended to 1993 pursuant to Section 36(2) of the Limitations Act
1985.
3. The applicant be at liberty to commence proceedings in this Court
for damages for personal injuries against the first respondent
company.

DECISION

HIGGINS J. The applicant seeks a number of orders. Substantively, these are as follows:-

". That the dissolution of the first respondent company be declared
void.
. That the period in which the applicant may commence proceedings
against the first respondent company for damages for personal
injuries be extended ... pursuant to Section 36(2) of the
Limitations Act 1985.
. That the applicant be at liberty to commence proceedings in (this
Court) for damages for personal injuries against the first
respondent company."

Other ancillary orders are also sought.

The Facts
2. For the purposes of this application it is not my function to make findings of fact. Those facts of which the plaintiff seems likely to be able to adduce evidence will be assumed for the purpose of this application.

3. On 12 March 1983 the plaintiff was working on a building site at Deakin. He was engaged by the first respondent to carry out certain building work, namely, aluminium cladding to a residence. He was working on the first floor balcony. It collapsed. He suffered injury to his back, right ankle and right leg.

4. It is alleged that the balcony had been constructed by the first respondent, through its servants and agents.

5. Those facts raise a prima facie case of negligence on behalf of the first respondent.

6. At the date of injury the first respondent had taken out insurance against (inter alia) public liability through Builders' Insurance Services ("BIS"), a firm of Insurance Brokers. The insurer was General Accident Fire and Life Assurance Corporation ("General Accident").

7. On 17 March 1983, BIS advised the first respondent that insurance had been effected, "for a period of 21 DAYS pending payment of the premium". The "Attaching Date" was specified as "25.2.83". That which was to be effected once the premium was paid was "RENEWAL FOR PERIOD: 25.2.83 to 25.2.84". $714.00 had been paid. A further $4,807.72 was due "on or before 9.4.83".

8. It may be inferred from these facts that the first respondent had "public liability" insurance from General Accident which was in effect at the date of the accident.

9. That insurance covered all liability (up to the specified limit of $1,000,000.00) for bodily injury arising out of the first respondent's construction operations. Excepted from such cover was liability covered under the relevant workers compensation legislation.

10. On 4 March 1985 a winding up order was made in respect of the first respondent. Brian Raymond Silvia of Ferrier Hodgson and Co was appointed liquidator. The applicant was informed of this information, via his solicitors, on 6 May 1985.

11. They had been instructed by the applicant in September 1983 to advise him concerning the accident. They briefed counsel to advise. In July 1984 counsel delivered advice. That advice indicated that certain further issues relevant to liability should be investigated. By letter dated 25 September 1984 the solicitors informed counsel of the results of a site inspection by the applicant. They provided further details relevant to liability but advised that they were having difficulty locating the first respondent.

12. A company search, done on 30 November 1984, indicated that the first respondent was then still trading. After the solicitors were informed of the winding up order, they wrote to Mr Silvia for details of the insurance held by the first respondent at the relevant time.

13. The liquidator, apparently, got the impression that the applicant had been an employee. On 9 July 1985 he advised the solicitors that the workers' compensation insurer was the Government Insurance Office of NSW ("GIO"). Subsequent correspondence elicited a policy purportedly issued under the Workers' Compensation Act 1926 (NSW) in respect of works being carried on "ANYWHERE IN ACT".

14. On 30 August 1985, counsel advised the solicitors that the insurance referred to appeared to be inappropriate as the applicant did not appear to have been a "worker" at the relevant time.

15. On 10 October 1985, the applicant's solicitors wrote to the Housing Industry Association requesting details of insurances held by the first respondent at the date of the accident. An answer came from BIS dated 9 December 1985. It referred only to the workers' compensation policy. Further enquiries elicited a response of 22 April 1986 which directed enquiries to the GIO. The solicitors wrote to GIO seeking confirmation of insurance cover. No reply appears on their file, although one was given ultimately to the applicant's current solicitors.

16. No other effective measure appears to have been taken until new solicitors were instructed in July 1987. Those solicitors caused a claim for damages to be instituted in the District Court of New South Wales on 10 March 1989. It was served on the liquidator personally. It appears that, at that time, the first respondent, albeit in liquidation, remained on the Company register. However, no application was made by those solicitors for leave to commence or continue the proceedings.

17. Again nothing effective happened.

18. In December 1989, the applicant instructed his current solicitors. It appears the file was finally obtained from the previous solicitors in November 1990. I do not know why that rather extraordinary delay occurred.

19. On 12 November 1990 the applicant was advised by his current solicitors that the appropriate indemnity to the first respondent would be under a public liability policy. However, nothing effective happened until 20 February 1992 when the documents held by the liquidator were inspected. Again, I have no explanation for this lengthy delay.

20. It was on 20 February 1992 that evidence of the public liability insurance to which I have referred was located.

21. It should be noted, however, that the liquidator was advised of the applicant's potential claim as a subcontractor as early as June 1985. The insurance broker was similarly advised in October 1985. They, for some reason not explained to me, referred the applicant's then solicitors to the workers' compensation insurer. Equally extraordinarily, the solicitors in question, and their next successors, saw nothing wrong with that. They seemed to accept that the GIO was the appropriate insurer. The GIO did nothing, so far as can be ascertained, to disabuse those solicitors of their apparent error.

22. An affidavit of the applicant dated 11 November 1992 has detailed the injury and disability from which he has suffered. Those details would, if accepted, constitute a serious level of ongoing disability. It is a substantial claim.

23. The situation is further complicated by the deregistration of the first respondent on 23 November 1989. Documentation relating to the liquidation has been retained by the liquidator. However, the letter to the liquidator of June 1985 was not amongst that documentation. There was a letter dated 10 March 1989 and a copy of the District Court claim served by the applicant's former solicitors. It follows, of course, that the liquidator was certainly aware of the applicant's claim and the material facts on which it was based before the first respondent was deregistered. The liquidator was also aware that the claim had been properly instituted before the expiry of the six year limitation period. The first respondent was prima facie amenable to the jurisdiction of the District Court in respect of that claim.

24. In March 1983, New Zealand Insurance Australia Ltd ("NZI"), the second respondent, took over the liabilities of General Accident, the insurers for whom BIS was a broker. Notwithstanding the correspondence to BIS and the liquidator, the second respondent itself did not receive notification of the applicant's claim until it received a letter from the applicant's current (Sydney) solicitors.

25. Subsequently, loss assessors engaged by the second respondent made enquiries. Those enquiries revealed that one former director of the first respondent, a Mr Binkowski, had no personal knowledge of the circumstances giving rise to the applicant's claim. He was, he said, overseas at the time. The other director, a Mr Clarke, went to Western Australia in March 1985. Mr Binkowski had no contact with him after that time.

26. The first respondent's supervisor, Mr McCullough, was located. He did recall being called to a house where a balcony, under construction by the first respondent, had suffered damage. That seems to have been the same project on which the applicant was engaged at the time of his injury.

27. However, Mr McCullough had no association with the site before 13 March 1983. He could not recall the name of the site foreman. He had no recollection of the cladding subcontractor. No other relevant witnesses have been identified or located.

28. The second respondent submits that to permit the applicant to have the first respondent restored to the register and to grant leave to proceed against it will cause it prejudice.

29. The first respondent has not sought representation.

30. The sources of prejudice identified by the second respondent are these-

. It cannot now expect to locate anyone (other than the applicant)
with personal knowledge of the circumstances of the accident.
. It will have difficulty ascertaining the cause of the accident.
. It will have difficulty establishing the precise contractual
nature of the relationship between the applicant and the first
respondent.

31. So far as delay itself is concerned, it is clear that had the applicant begun proceedings before the winding up order was made, leave would have been granted to continue them whether or not other creditors were likely to be affected. If proceedings had been commenced after the winding up order was made but within the relevant limitation period and before completion of the liquidation, it would, again, be unlikely that leave to proceed would be refused. It would, in each case, be the duty of the liquidator to protect the interests of creditors and contributories by ensuring that the relevant insurers were notified of the claim.

32. However, in the present case, the applicant is only able to seek leave to proceed against the first respondent if it is restored to the register. He does not seek leave to proceed directly against the second respondent or to litigate the issue as to whether the second respondent is the relevant insurer at risk. It is at least possible that the applicant could seek to recover any verdict he might obtain against the first respondent from the GIO. It is even conceivable that he might seek recovery from the liquidator personally if the latter had negligently failed to notify and keep on risk the relevant insurer.

33. I was referred to Re: Q M Cool Rooms Pty Ltd (in liq.) (1986) 4 ACLC 641. That was a case where, in 1986, the plaintiff company sought to have the dissolution of the defendant company, effected in 1983, declared void pursuant to s.458(1) of the relevant Companies Code. The plaintiff alleged that, in 1974, the defendant company's servants or agents caused damage by fire to its premises. The defendant company, in addition to a denial of liability, claimed indemnity from its brokers on the brounds that they had failed to arrange valid indemnity. Alternatively, it claimed that it was entitled to be indemnified by the insurer that the broker had agreed to insure it with. Proceedings embodying those issues were commenced in 1976. Notice for trial was given, eventually, on 26 April 1979. However, although some interlocutory steps were thereafter taken, nothing further was done to have the matter heard until after the defendant was put into liquidation. The fact that the defendant was in liquidation did not, apparently, come to the notice of the solicitors for the plaintiff. The defendant company was dissolved pursuant to s.411 of the Code on 26 December 1983.

34. Correspondence followed as a result of which the solicitors became aware of these matters. There was, nevertheless, an unexplained delay between February 1984 and 10 July 1986 when the application before the Court was made.

35. Only the broker and the insurer appeared to oppose the application. The insurer pointed out that an issue in the case, so far as it was concerned, was as to the circumstances in which the insurance had been procured in 1973.

36. Ambrose J noted that there was no satisfactory explanation for the delay of nearly 2 1/2 years after the plaintiff company first learned of the defendant company's dissolution. Indeed, delay in progress of the action had been such as to require leave for the action to proceed. His Honour considered that the revival of the risk to the insurer, which otherwise ceased on the dissolution of the alleged insurer was a relevant factor militating against the making of the orders sought. His Honour summarised the position as follows:-

(644) "I am satisfied upon the whole of the evidence and from a
general consideration of the great time that has elapsed since
the occurrence of the events that give rise to the issues in both
the action that was taken by Jacuna against Q.M. Cool Rooms and
the third party proceedings that were taken by Q.M. Cool Rooms
against Marsh and McLellan and Australian Eagle Insurance, that
there would be significant prejudice to both Marsh and McLellan
and Australian Eagle Insurance should the dissolution of Q.M.
Cool Rooms be set aside. There could hardly be any prejudice of
course to Q.M. Cool Rooms which, in law, has ceased to exist. If
as a result of Jacuna's application it is resurrected that will
only allow it to be used to enable the plaintiff to attempt to
obtain indirect access to the funds of either Marsh and McLellan
or Australian Eagle Insurance if perchance it succeeds upon a
cause of action that ceased to exist with the dissolution of Q.M.
Cool Rooms. If that dissolution is set aside then once more
Marsh and McLellan and Australian Eagle Insurance must face the
risk involved in meeting a case of the sort raised in the third
party proceedings against them nearly six years ago in respect of
events that occurred nearly fifteen years ago and in respect of
which it will now be very difficult indeed to collect evidence to
prepare a defence."

37. The application was refused.

38. I accept that the prejudice identified in Re: Q M Cool Rooms Pty Ltd (in liq.) is present in this case. Indeed, in some respects, the delay is more pronounced. Of course, there are differences. In this case, the applicant's solicitors were not correctly advised by the liquidator or the broker of the true identity of the alleged public risk insurer. It is, also, not a commercial claim, where certainty and expedition are of great significance, but a personal injury claim where substantial injury appears to have been suffered. The policy of the law, if s.36 of the Limitation Act 1985 may be taken as a guide, regards the "revival" of such claims as being more readily effected even after long delay (see, for example, Donna Susan McLeod v The Commonwealth of Australia (SC 31/91; 22 July 1991; Higgins J; unreported)).

39. Re: H R Cody Pty Ltd; Drysdale v Australian Securities Commission (1992) 8 ACSR 563 was a case involving personal injury to an employee of the dissolved company. The accident had occurred on 5 May 1975. Following its liquidation on 7 September 1978, the company was dissolved on 7 October 1978. The applicant had applied for compensation in 1975 but those payments had continued only for about five months. The claim was not revived until 1992.

40. Murray J noted that the reinstatement of the company would not prejudice the company itself. It had no assets or funds which could be drawn upon. As the company had been uninsured, the Workers' Compensation and Rehabilitation Commission would have assumed liability for the claim. His Honour does not seem to have considered that consequence to have unfairly prejudiced the Commission. It was, of course, prejudicial to the liquidator who would be restored to office by the declaration. However, his Honour made consequential orders to lessen the burden on the liquidator. The most telling factor was the irremediable prejudice to the applicant if the order was to be refused. The applicant's claim was not statute-barred and was, prima facie, able to be met if, but only if, the company was restored to the register.

41. I have, therefore, to consider whether prejudice to the insurer, and, to a lesser extent, the broker and the liquidator, in this case, outweighs the prejudice to the applicant in foregoing his claim.

42. The case differs from Re: Q M Cool Rooms Pty Ltd (in liq.), in that the second respondent had not previously been made expressly aware of its potential liability. It has not, as a result, altered its position in any way as a result of the dissolution of the first respondent. The dissolution of the company is, for it, entirely adventitious. Given that it collected premiums from its policy holders (or gained the benefit of the collections of its predecessor) against such claims as the applicant now seeks to bring, I cannot see any unfairness in removing that adventitious circumstance. Of course, it is possible that the insurer could successfully resist a claim for indemnity by the company in any event, but there is no evidence before me to suggest that the applicant's claim will be futile. As I have already noted, there may be alternative sources of indemnity such as were sought to be litigated in the Re: Q M Cool Rooms Pty Ltd (in liq.) case.

43. (See also, Randell v Brisbane City Council (No 2) (1990) 2 Qd R 440 and Steele Master Pty Ltd (in liq.); Kenney v McCann (1992) 10 ACLR 176.)

44. It is possible, of course, that, if the application is refused, the applicant could sue one or other or both of his previous firms of solicitors. The evidence does not enable me to say that such a claim could be successfully prosecuted. The possibility of such a claim is, of course, relevant (see Daroczy v B and J Engineering (In Liq.) (1986) 67 ACTR 3; 83 FLR 423). However, it would not usually be a sufficient reason to deny recovery against the original tortfeasor if that can be accomplished without creating injustice.

45. The difficulties locating witnesses and ascertaining the cause of the accident are real. However, the first respondent and the broker were aware of the claim relatively shortly after the accident. Even the GIO, though not apparently on risk, was notified of it at an early stage. They could and should have then made enquiries as to the facts of the claim. If there is prejudice, as a result of delay in notifying the second respondent, the applicant should not be prejudiced because of it. That consequence, even if his solicitors should have been more astute, is largely the responsibility of the broker and the liquidator. That does leave uncertainty as to the relationship between the insurer and the first respondent but the existing records have not been shown to be insufficient for the purpose. In any event, the applicant is not responsible for that.

46. In the circumstances, I consider it would be unjust not to grant the relief sought.

47. I propose to make the orders sought and grant leave to commence proceedings against the first respondent, extending time for that purpose. However, I propose to hear the parties as to the appropriate ancillary orders and as to costs.