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Supreme Court of the ACT |
Last Updated: 30 September 2008
THE AUSTRALIAN NATIONAL UNIVERSITY v CHUBB INSURANCE COMPANY OF AUSTRALIA LIMITED & ORS [2007] ACTSC 82 (12 OCTOBER 2007)
PRACTICE AND PROCEDURE - leave to amend statement of claim - widely expressed pleadings - no finding of inconsistency in pleadings - no finding of abuse of process.
PRACTICE AND PROCEDURE - costs - amendments arose consequential to discovery and mediation - costs of and resulting from amendment awarded - indemnity costs not awarded.
Court Procedures Rules 2006 (ACT), r 21, r 501, r 507, r 513, r
1520
Insurance Contracts Act 1984 (Cth), s 28
Civil
Procedure Act 2005 (NSW), s 56, s 57, s 58, 64
Australian Securities
and Investment Commission Act 2001 (Cth)
Court Procedures Act 2004
(ACT), s 5
The State of Queensland and Anor v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR
146
Cropper v Smith (1884) 26 Ch D 700
Clough and Rogers v
Frog (1974) 48 ALJR 481
State of NSW v Mulcahy [2006] NSWCA 303 (3
November 2006)
Bedraie v Commonwealth of Australia & Ors [2005] NSWSC 1195; (2005)
195 FLR 119
Sterling Engineering Co Ld v Patchett [1955] 501 AC
534
Kinch v Walcott [1929] 475 AC 482
River Ribble Joint
Committee v Croston UDC [1897] 1 QB 251
Re South American and Mexican
Co [1895] 1 Ch 37
Reichel v McGrath (1889) 14 App Cas 665
Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404
Osalack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Rosniak v
Government Insurance Office (1997) 41 NSWLR 608
Fairplay Newspaper and
Printing Works Pty Ltd v Currico Nominees Pty Ltd [1998] FCA 680 (22 May
1998)
Hansard, NSW Legislative Assembly, Second Reading Speech, 6 April
2005
Spencer Bower and Turner, Res Judicata,
3rd ed, Butterworths, London, 1996
No. SC 808 of 2004
Judge: Gray J
Supreme Court of the ACT
Date: 12 October 2007
IN THE SUPREME COURT OF THE )
) No. SC 808 of
2004
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN: THE AUSTRALIAN NATIONAL UNIVERSITY
Plaintiff
AND: CHUBB INSURANCE COMPANY OF AUSTRALIA LIMITED
ACN 003 710 647
First Defendant
AND: CGU INSURANCE LIMITED
ACN 004 478 371
Second Defendant
AND: ACE INSURANCE LIMITED
ACN 001 642 020
Third Defendant
AND: AON RISK SERVICES AUSTRALIA LIMITED
ACN 000 434 720
Fourth Defendant
ORDER
Judge: Gray J
Date: 12 October 2007
Place: Canberra
THE COURT
ORDERS THAT:
1. Leave be given to the plaintiff to amend its statement of claim by filing a
second further amended statement of claim in the terms
of the document marked
with the letter “A” to the affidavit of Kent Linden Owen filed on 22
November 2006.
2. The plaintiff pay to the fourth defendant the costs of and
resulting from this amendment.
1. The plaintiff, the Australian National University (ANU), seeks leave pursuant
to rule 507 of Court Procedures Rules 2006 (ACT) (Court Procedures Rules)
to amend its statement of claim in these proceedings. The amendment proposed
would become the second
further amended statement of claim.
2. ANU had
claimed initially against the first defendant, Chubb Insurance Company of
Australia Limited (Chubb), the second defendant,
CGU Insurance Limited (CGU),
and the third defendant, ACE Insurance Limited (ACE), as insurers under an
insurance policy held by
the insurers with ANU as the insured. The claim made
under the policy is in respect of certain of ANU’s buildings and their
contents located at Mt Stromlo and which were lost or damaged as a
consequence of a bush fire on 18 January 2003.
3. The proceedings were
commenced on 10 December 2004. After defences had been filed by each of these
defendants, ANU amended the
originating application and statement of claim on
6 June 2005 which joined as a fourth defendant AON Risk Services Australia
Limited (AON). Put shortly, the claim made against AON is that as ANU’s
insurance broker, both under its contract and in breach
of its duty, it failed
to exercise reasonable care, skill and diligence in arranging the renewal of the
insurance cover.
4. ANU’s claim against AON, which was amended, but not
in any significant respect, in a further amended statement of claimed
filed on
19 September 2005, is particularly directed to what was said to be the
failure on AON’s part to arrange the insurance
cover that had been put in
issue by the insurer defendants in their respective defences to the
plaintiff’s original statement
of claim.
5. The insurance cover is
referred to in paragraphs 8, 25 and 29 of the further amended statement of claim
in the following terms:
(a) the first defendant: 50%
(b) the second defendant: 20%
(c) the third defendant: 30%
whereby the first, second and third defendants agreed in consideration or receipt of the premium, to, as at that date, insure the interests of the plaintiff against certain loss in the period 31 December 2002 to 31 December 2003.
Particulars
The contract of insurance was in writing and comprised the following documents:
(a) Industrial Special Risks Insurance Policy wording marked VS10/WOR7/DS on the first page and SMV 30.6.88 on the footer of each page (“standard wording”)
(b) Document titled “Endorsements attaching to and forming part of the Industrial Special Risks Insurance Policy in the Names of Australian National University and Others” marked FORMS ISR_ENDO SAM (“Endorsement)
(c) Document titled “Industrial Special Risks Renewal Endorsement” issued 1 April 2003 with an effective date 31 December 2002;
(d) Document titled “Industrial Special Risks Renewal Endorsement” issued 24 May 2002 with an effective date of 31 December 2001;
(e) Letter dated 16 October 2002 from the first defendant to Aon Risk Services Australia Limited;
(f) Letter dated 31 October 2002 from Aon Risk Services Australia Limited to Chubb Commercial Insurance annexing two lists of buildings that comprised Schedule C, entitled:
- (i) “The Australian National University (Schedule C) Property and Business Interruption Period 31 December 2001 to Period 31 December 2002”; and
- (ii) “The Australian National University Properties Not Insured Period 31 December 2001 to Period 31 December 2002”;
...
(a) “The Australian National University (Schedule C) Property and Business Interruption Period 31 December 2001 to Period 31 December 2002”
(b) “The Australian National University Properties Not Insured Period 31 December 2001 to Period 31 December 2002”.
...
6. It may be noted that the joinder of issue as to what comprised the insurance policy is not uniform as between the insurer defendants. Paragraph 30 of the further amended statement of claim sets out those aspects of the defences that the first, second and third defendants had filed and summarises the differences. That paragraph stated:
Particulars
(a) Para 5(c) and 13(b) of the defence of the first defendant;
(b) Paras 2(b), 11 and 13 of the defence of the second defendant;
(c) Paras 2.5, 11, 12, 13, 14 and 19 of the defence of the third defendant.
7. The claim against AON is set out in paragraph 31 of the further amended statement of claim:
(i) in breach of the Aon retainer:
(ii) in breach of the duty of care identified in paragraph 28 above
failed to arrange that insurance, failed to advise the plaintiff that it had not arranged that insurance and the plaintiff has thereby suffered loss and damage.
Particulars
(a) the plaintiff has not received the sums set out in Schedule A hereto from the first second and third defendants;
(b) the first second and third defendants have raised the defences referred to in paragraph 30 above;
(c) if the defences raised by the first second and third defendants are upheld and they are entitled to refuse to indemnify the plaintiff for the reasons raised in those defences then the plaintiff will be deprived of indemnity in respect of some or all of the buildings and contents referred to in paragraph 29;
(d) the plaintiff has been delayed in making a commitment to, commencing or carrying out reinstatement work to the buildings;
(e) the plaintiff has been delayed in replacing plant machinery and contents;
(f) the delay has given rise to further loss in the form of escalating prices;
(g) the plaintiff has incurred legal cost.
8. The insurer defendants, by their defences, accepted that they were liable to indemnify the plaintiff in respect of the buildings (and plant, machinery and equipment) set out in the list referred to in the further amended statement of claim in paragraph 8(f)(i) (the Schedule C Buildings) but not those set out in the list referred to in paragraph 8(f)(ii) of that statement of claim (the PNI Buildings). All the insurer defendants put in issue the question of whether certain of the plant, machinery and equipment comprising the New Infrared Integral Field Spectrograph is excluded from cover because of the exclusion under the policy as to property under construction where the value of the work exceeds the specified sum. Those items would otherwise be covered as part of the Schedule C Buildings. Chubb, the first defendant, and CGU, the second defendant, also claimed that they were entitled to reduce their liability in reliance upon s 28(3) of the Insurance Contracts Act 1984 (Cth). Both these defendants pleaded a misrepresentation as to the values that had been declared in respect of certain of the Schedule C buildings. Section 28(3) of that Act entitles an insurer who can show that the insured made a misrepresentation to the insurer before the contract was entered into to reduce its liability to the position in which the insurer would have been if the misrepresentation had not been made.
The course of the proceedings
9. The proceedings were set for trial on 13 November 2006 and four weeks were
allocated for the court to hear the matter. On 24 July
2006, I had refused
an earlier application by the first, second and third defendants under
r 1520 of the Court Procedures Rules for a question or questions to be
tried separately from questions of quantum. Issues of discovery between AON and
the plaintiff
and the time for the defendants to file the affidavits upon which
they intended to rely were not finalised until shortly before the
date set for
trial. A mediation conference was arranged which all parties attended on the
first day of the trial.
10. On 15 November 2006, the matter settled as
between the plaintiff and the first, second and third defendants. I made orders
at
the request of the parties.
11. In each case I gave leave to the first,
second and third defendant to file amended defences to the plaintiff’s
further amended
statement of claim.
12. The defences so filed raised issues
concerning the declared values of certain of the Schedule C Buildings. As
far as the
first and second defendants were concerned, further matters were
pleaded as to the effect that this declaration would have in relation
to their
participation in the insurance contract.
13. In the case of Chubb, the first
defendant, the proceedings were dismissed.
14. In the case of CGU, the second
defendant, judgment was entered for the plaintiff in the sum of
$750,000.00.
15. In the case of ACE, the third defendant, judgment was
entered for the plaintiff in a sum that the plaintiff and third defendant
asked
to be kept confidential. I was asked to note a number of matters which had
specific reference to the quantum of the plaintiff’s
claim.
The second further amended statement of claim
16. As a consequence of these matters, the plaintiff made application for leave
to amend its claim by filing a second further amended
statement of claim.
17. The application was made in reliance upon Court Procedures Rule 501
which provides:
All necessary amendments of a document must be made for the purpose of—
(a) deciding the real issues in the proceeding; or
(b) correcting any defect or error in the proceeding; or
(c) avoiding multiple proceedings.
18. The second further amended statement of claim pleads with a great deal more specificity and particularly the contract between the plaintiff and AON as its broker. The pleading adds a number of new allegations concerning the obligations of the fourth defendant said to arise under it:
7A. The plaintiff appointed the fourth defendant as its insurance broking and advisory services provider with effect from 1 July 1999 (“Services Contract”).
Particulars
(a) letter from Chris Burgess, Pro Vice Chancellor (Administration) to Paul D’Arcy dated 29 June 1999;
(b) Contract between the plaintiff and the fourth defendant for the supply of insurance broking and advisory services contract number 99/017 dated June 1999;
(c) Submission to the plaintiff by the fourth defendant for extension of contract for insurance and broking services dated June 2002;
(d) Letter from Brian Burke, Manager University Purchasing and Contracts Office to R Rankin dated 30 July 2002;
(e) Letter to B Burke from R Rankin dated 1 August 2002.
7B. It was a term of the Services Contract that –
(a) the fourth defendant would provide insurance broking and advisory services to the plaintiff for reward;
Particulars
Clause 5.1 and Schedule 1 Services Contract
(b) the fourth defendant would review the plaintiff’s existing and proposed policies to ensure that the plaintiff was familiar with the scope of insurance and that any additional requirements were met and in particular would address policy limits and cover, property valuations, contractual obligations, consequential loss exposures and other non-insured exposures;
(c) the fourth defendant would prepare a comprehensive underwriting submission for submission to insurers to assist insurers in determining their underwriting criteria and to ensure that all material facts were disclosed to insurers;
(d) the fourth defendant would provide a report to the plaintiff outlining all options obtained as a result of marketing the plaintiff’s insurance program which would be reviewed with the plaintiff and decisions reached on appropriate action to be taken;
(e) the fourth defendant would with the plaintiff’s instructions arrange for the placement of the plaintiff’s insurance program with insurers;
(f) the fourth defendant would deliver policy documentation to the plaintiff in accordance with its quality assurance guidelines;
(g) [the] fourth defendant would have at least fortnightly meetings with the plaintiff with a set agenda to ensure a continuing process of review and analysis of the plaintiff’s program and which would be minuted by the fourth defendant to ensure that action was taken and outstanding items followed up;
(h) that the fourth defendant would provide a stewardship report for the plaintiff annually;
Particulars
Annexure A to the Services Contract
7C. The fourth defendant expressly warranted –
(a) that it would exercise skill, care, and diligence to a high professional standard in supplying the services;
(b) that it would ensure that the services were free from defects in performance, meet their purpose and were complete;
Particulars
Clause 10 Services Contract
(c) That it had extensive knowledge of the insurance broking and advice needs of higher educational institutions;
7D. In late 1999 the plaintiff informed the fourth defendant that values of properties and contents disclosed to its Industrial Special Risk insurers had not been updated for several years.
Particulars
(a) Conversations between Paul D’Arcy and Jane Sutton in about December 1999;
(b) Conversation between Neil Hemmings and Jane Sutton in February 2000.
7E. The fourth defendant advised the plaintiff that there was a risk of underinsurance of buildings as a consequence of values disclosed to insurers not being updated. In response to such advice the plaintiff instructed the fourth defendant to arrange for a valuation of the buildings on the plaintiff’s Acton campus, at Mt Stromlo and at Siding Spring.
Particulars
Letter from P D’Arcy of fourth defendant to C Burgess of plaintiff.
7F. On the recommendation of the fourth defendant the plaintiff engaged International Valuation Consultants Pty Limited (“IVC Pty Ltd”) to carry out a valuation of its buildings at its Acton campus, at Mt Stromlo and at Siding Spring for insurance purposes as at 30 June 2000 and reviewed in October 2000 to bring values up to date for insurance renewal negotiations with ‘on-desk’ revaluations in 2001, 2002, 2003 and 2004. The plaintiff also engaged IVC Pty ltd to conduct a valuation of its buildings for financial reporting purposes.
7G. Valuations of the plaintiff’s buildings were carried out by IVC Pty Ltd in 2000. On 11 July 2000 the plaintiff provided to the fourth defendant a schedule of buildings insured by the first, second and third defendants which identified building values determined by IVC Pty Ltd and requested the fourth defendant to inform it of the premium to be paid on those increased values for the balance of 2000. The plaintiff paid the additional premium advised to it by the fourth defendant.
7H. In 2001 and subsequently valuations of the plaintiff’s buildings for insurance and financial reporting purposes were provided to the plaintiff by International Valuation Consultants (“IVC”), a division of the fourth defendant.
7I. The fourth defendant knew or ought to have known that no valuation for insurance purposes of the contents of the plaintiff’s buildings had been undertaken by the plaintiff or on its behalf and that the only valuation of such contents conducted by the plaintiff or on its behalf was a valuation of its plant and equipment conducted by Australian Valuation Office for financial reporting purposes.
7J. Prior to the placement of insurance in 2002 and 2003 the plaintiff provided schedules to the fourth defendant which incorporated the values for buildings determined by the fourth defendant for insurance purposes. The plaintiff also provided copies of its most recent annual report to the fourth defendant in each of those years.
7K. The fourth defendant knew or ought to have known that disclosure to the first second and third defendants of true replacement values of both buildings and the contents of buildings to be insured were material to the first, second and third defendants in the determination of their respective underwriting criteria, their decision whether to insure those buildings and the contents of them and if so, on what terms including –
(a) the premium to be charged;
(b) reinsurance of the risks to be insured;
(c) capacity;
(d) limit of liability;
(e) policy terms.
7L. At all material times the fourth defendant knew or ought to have known that the values of the contents of buildings insured by the first, second and third defendants had not been valued for insurance purposes and that the true replacement cost of those contents had not been disclosed to the first, second and third defendants.
7M. At all material times subsequent to the fourth defendant’s appointment, the fourth defendant knew or ought to have known that the plaintiff required insurance against material damage, including fire, of the buildings and contents of buildings of the Institute.
Particulars
Fourth defendant’s December 2000 Insurance Renewal Report
7N. In 2001 the plaintiff provided to the fourth defendant three schedules which provided a description of each of its buildings, the values ascribed to each of those buildings by IVC and a value for the contents of each of those buildings.
Particulars
(a) The Australian National University, Anutech Pty Ltd and Other Ancillary Interests (Schedule A) Property and Business Interruption Period 31/12/01 to 31/12/02 (“Schedule A”);
(b) The Australian National University (Schedule C) Property and Business Interruption Period 31/12/01 to Period 31/12/02 (“Schedule C”);
(c) The Australian National University Properties Not Insured Period 31/12/01 to 31/1/02 (“the PNI List”).
7O. On 21 December 2001 the plaintiff instructed the fourth defendant to arrange for the calendar year 2002 Industrial Special risks Insurance cover including material damage and consequential loss for all of its buildings. With respect to buildings listed on the schedules identified in paragraphs (b) and (c) of the preceding paragraph the declared values were $1,393,000,000 and the deductible $1m for each and every loss.
Particulars
Letter from A Bunsell of the plaintiff to R Rankin of the fourth defendant dated 21 December 2001.
7P. The fourth defendant was aware that the plaintiff required renewal of Industrial Special Risks Insurance cover including material damage and consequential loss for the same buildings and their contents in 2003 as it had instructed to be insured in 2002.
Particulars
Letter from R Rankin of fourth defendant to J Leafe of first defendant dated 31October 2002 and annexures.
7Q The fourth defendant failed adequately or clearly to identify to the first, second and third defendants each of the building and their contents over which the plaintiff required Industrial Special Risks Insurance cover including material damage. Further the fourth defendant advised those defendants of values for buildings and their contents that it knew or ought to have known did not reflect the true replacement cost of those buildings and their contents.
Particulars
(a) Letter from J Leafe of first defendant to R Rankin of fourth defendant dated 16 October 2002;
(b) Letter from R Rankin of fourth defendant to J Leafe of first defendant dated 31 October 2002 and annexures;
(c) Facsimile from E Romero of second defendant to R Rankin of fourth defendant dated 6 November 2002;
(d) Email from J Leafe of first defendant to R Rankin of fourth defendant dated 16 December 2002;
(e) Email from R Rankin of fourth defendant to N Woods of third defendant dated 16 December 2002;
(f) Email from R Rankin to E Romero dated 16 December 2002;
(g) Facsimile from N Ostrognay of fourth defendant to E Romero dated 17 December 2002 and annexure;
(h) Email from N Wood to R Rankin dated 17 December 2002;
(i) Facsimile from E Romero to R Rankin dated 23 December 2002;
(j) Email from R Rankin to J Leafe dated 24 December 2002;
(k) Email from J Leafe to R Rankin dated 24 December 2002;
(l) Email from W Cassel of the fourth defendant to R Rankin dated 31 December 2002.
7R. As a consequence of the exchange of correspondence particularised in the preceding paragraph the fourth defendant did not arrange material damage and consequential loss insurance cover over the buildings and contents described in the PNI List for 2003 and arranged insurance on declared values it new or ought to have known wee not true replacement values.
7S. The fourth defendant advised the plaintiff that it had renewed material damage and consequential loss insurance with the first defendant for 2003 in respect of ‘all tangible property both real and personal of every description (except as excluded) belonging to the insured or for which the insured is responsible or has assumed responsibility prior to the occurrence of any loss or destruction or damage including all such property in which the insured may acquire an insurable interest (provided is similar business) during the period of the policy’ and that declared values for material damage were $1,393,000,000 and for consequential loss were $5,000,000.
Particulars
Coverage summary broker copy dated 20 December 2002.
19. A number of other amendments to the further statement of claim are made to
accord with the matters the subject of the amended
defences that I had given to
leave to file and to reflect the matters arising out of the settlement with the
other defendants and
the consequential monetary values that had been paid or
agreed.
20. The plaintiff’s claim in the second further amended
statement of claim against AON is thus formulated as follows:
Particulars
(a) the fourth defendant failed to accurately and clearly identify to the first, second and third defendants the buildings and contents to be insured against material damage and consequential loss in 2003;
(b) the fourth defendant did not place material damage and consequential loss insurance for 2003 in accordance with the plaintiff’s requirements;
(c) the fourth defendant purported to accept on the plaintiff’s behalf an insurance proposal for material damage and consequential loss insurance for 2003 from the first defendant that did not include cover for the buildings and contents identified on the PNI List;
(d) the fourth defendant failed to request the second and third defendants to insure the buildings and contents identified on the PNI List against material damage and consequential loss in 2003;
(e) the fourth defendant failed to inform the plaintiff that it had not placed material damage and consequential loss insurance over the buildings and contents identified in the PNI List for 2003;
(f) the fourth defendant did not exercise skill and care to a high professional standard in placing material damage and consequential loss insurance on the plaintiff’s behalf for 2003;
(g) the fourth defendant did not ensure that its services in the placement of material damage and consequential loss insurance on the plaintiff’s behalf for 2003 were free from defects in performance, met their purpose or were complete;
(h) the fourth defendant did not prepare a comprehensive submission for the first, second and third defendants to ensure that all buildings and contents were disclosed to them;
(i) the fourth defendant did not provide a report to the plaintiff outlining all options obtained as a result of marketing the plaintiff’s material damage and consequential loss program for 2003;
(j) the fourth defendant did not obtain the plaintiff’s instructions before purporting to place material damage and consequential loss insurance on the plaintiff’s behalf for 2003;
(k) the fourth defendant advised the plaintiff that it had placed material damage and consequential loss cover on the plaintiff’s behalf for 2003 with the first, second and third defendants in respect of all its property both real and personal with declared values of $1.393 billion when it had not done so;
(l) the fourth defendant failed to advise the plaintiff adequately or at all of the effect of a $1 million deductible in the event of loss or damage by an insured occurrence to more than one building;
(m) the fourth defendant failed to advise the plaintiff adequately or at all of the necessity to include buildings valued at less than the deductible in any declaration of values to prospective insurers;
(n) the fourth defendant failed to advise the plaintiff adequately or at all about the consequences of not including buildings and contents valued at less than the deductible in the event of an insured event affecting more than one building;
(o) the fourth defendant failed to advise the plaintiff adequately or at all to include buildings valued at less than the deductible in the total values declared to the first, second and third defendants.
Particulars
(a) the fourth defendant advised values to the first and second defendants of the plaintiff’s buildings that it knew or ought to have known were not true replacement values for those buildings;
(b) the fourth defendant failed to establish the true replacement values for the plaintiff’s buildings;
(c) the fourth defendant failed to inform the plaintiff or the first and second defendants that it had not established true replacement values for the plaintiff’s buildings;
(d) the fourth defendant advised values to the first and second defendants for the contents of the plaintiff’s buildings which it knew or ought to have known were not true replacement values of those contents;
(e) the fourth defendant failed to advise the plaintiff adequately of the necessity to establish and to disclose to the first and second defendants true replacement values for the contents of its buildings.
Particulars
The plaintiff repeats the particulars pleaded in paragraphs 26(a) – (n) and 27(a) – (e) hereof.
21. A further or alternative claim is made concerning the valuations for use as the declared values:
29A. Further or in the alternative, in carrying out the valuations of the buildings in 2001 and 2002 for the purposes of providing them to the plaintiff for use as the declared values of the buildings for the ISR policy, the fourth defendant owed to the plaintiff a duty to take reasonable care to ensure that the valuations provided were accurate.
29B. In breach of that duty, the fourth defendant was negligent in and about the provision of valuations which were inaccurate and which did not represent a true valuation of replacement ad reinstatement value of the buildings.
Particulars
22. Further or alternative claims are also made based upon what is said to be the application of the Australian Securities and Investment Commission Act 2001 (Cth) to the conduct alleged against AON:
Particulars
The plaintiff repeats paragraph 26(k) hereof
Particulars
The plaintiff repeats the particulars pleaded in paragraphs 26(a)-(o) and 27(a)-(e)
The principles applicable to the application for amendment
23. Both parties drew attention to the provisions of the Court Procedures Rules relating to amendment. I have set out rule 501 in [17] above. Court Procedures Rule 501 is in Chapter 2 of the Rules and Court Procedures Rule 21 provides:
(1) The purpose of this chapter, and the other provisions of these rules in their application to civil proceedings, is to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense.
(2) Accordingly, these rules are to be applied by the courts in civil proceedings with the objective of achieving—
(a) the just resolution of the real issues in the proceedings; and
(b) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.
(3) The parties to a civil proceeding must help the court to achieve the objectives.
(4) The court may impose appropriate sanctions if a party does not comply with these rules or an order of the court.
24. Rule 21(2)(b) encompasses what can be referred to as case management principles. In The State of Queensland and Anor v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146, Dawson, Gaudron and McHugh JJ said (at 154):
Case management is not an end in itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim.
25. In J L Holdings (supra) the primary judge took into account the jeopardy to the hearing dates that would be occasioned by the amendment proposed in that case. The High Court judges concluded (at 155):
In our view, the matters referred to by the primary judge were insufficient to justify her Honour's refusal of the application by the applicants to amend their defence and nothing has been made to appear before us which would otherwise support that refusal. Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties. In taking an opposite view, the primary judge was, in our view, in error in the exercise of her discretion.
26. J L Holdings also specifically approved the principle referred to by Brown LJ in Cropper v Smith (1884) 26 Ch D 700 at 710:
Now, I think it is a well established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. Speaking for myself, and in conformity with what I have heard laid down by the other division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or of grace.
27. As well, the following passage from the judgment of McTiernan ACJ, Menzies, Gibbs and Mason JJ in Clough and Rogers v Frog (1974) 48 ALJR 481 (at 482) was cited:
As the defence, if established, would be a complete answer in either action, the amendments sought should have been allowed unless it appeared that injustice would thereby have been occasioned to the respondent, there being nothing to suggest fraud or improper concealment of the defence on the part of the appellants. With the exception of the suggestion of prejudice arising in respect of the loss of the possible claim against the nominal defendant, the matters relied upon by the respondent in opposition to the amendment sought go at the most to delay and irregularity only, matters which are relevant to costs but do not constitute injustice to the respondent in the sense in which that expression is used.
28. It was AON’s submission that greater emphasis should be placed on “case management” principles than had been placed on them in the citations set out above. This was said to follow from what was held by the NSW Court of Appeal in State of NSW v Mulcahy [2006] NSWCA 303 (3 November 2006) in considering the enactment of the Civil Procedure Act 2005 (NSW). The court said at [29]:
When regard is paid to all these provisions of the Civil Procedure Act the relative importance of changes in the way the action was conducted at earlier stages on the one hand, and of a party's wish to put forward some new matter as one of the real questions raised by or otherwise depending on the proceedings on the other hand, is significantly altered. The approach to amendments which the judgments in Queensland v JL Holdings treated as appropriate is significantly altered also.
29. In reaching its conclusion in Mulcahy (supra), the Court of Appeal had regard to a number of provisions of the Civil Procedure Act 2005 (NSW) that do not have an exact counterpart in the Court Procedures Rules, although there is a marked similarity in some of the language used and the expression of certain of the concepts.
The relevant provisions of the Civil Procedure Act 2005 (NSW)
30. Section 56 of the Civil Procedure Act 2005 (NSW) provides:
56 Overriding purpose
(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.
(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.
31. Section 57 of that Act sets out the objects of case management:
(2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1).
32. Section 58 of that Act then provides:
58 Court to follow dictates of justice
(1) In deciding:
(a) whether to make any order or direction for the management of proceedings, including:
(i) any order for the amendment of a document, and
(ii any order granting an adjournment or stay of proceedings, and
(iii) any other order of a procedural nature, and
(iv) any direction under Division 2, and
(b) the terms in which any such order or direction is to be made,
the court must seek to act in accordance with the dictates of justice.
(2) For the purpose of determining what are the dictates of justice in a particular case, the court:
(a) must have regard to the provisions of sections 56 and 57, and
(b) may have regard to the following matters to the extent to which it considers them relevant:
(i) the degree of difficulty or complexity to which the issues in the proceedings give rise,
(ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities,
(iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties,
(iv) the degree to which the respective parties have fulfilled their duties under section 56 (3),
(v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings,
(vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction,
(vii) such other matters as the court considers relevant in the circumstances of the case.
33. The court’s power of amendment under that Act and which is described
in s 64(2) of that Act is expressly made subject
to s 58 set out
above.
34. It may be noted, as Johnson J also noted in Badraie v
Commonwealth of Australia & Ors [2005] NSWSC 1195; (2005) 195 FLR 119 that in the course of the
Second Reading Speech which preceded the enactment of this legislation, the NSW
Attorney General, inter
alia, said (Hansard, NSW Legislative Assembly,
6 April 2005):
Part 6 of the Bill introduces a number of new provisions relating to the conduct of court proceedings. The provisions recognise the importance of case management as a tool for increasing the efficiency of the court system and for reducing the cost of litigation. They seek to strike a balance between protecting the interests of justice in an individual case and protecting the interests of justice for other litigants and the courts. ... It is important to note the dictates of justice will not be limited to the dictates of justice only as between the parties, which has been argued to be the effect of the majority judgment in one of the leading cases on case management: State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146.
35. The Court Procedures Act 2004 (ACT) which authorises the Court Procedures Rules, does not provide such specificity in its grant of the rule making power under that Act. Section 5(1) of that Act provides:
(1) The objects of this Act include—
(a) recognising the importance of court procedures in our system of justice; and
(b) facilitating cooperation between ACT courts in the common goals of—
(i) improved access to justice through the development of procedures that are, as far as practicable, the same for all ACT courts; and
(ii) better court procedures.
36. There are significant distinctions that may be made between the Civil
Procedure Act 2005 (NSW) and the Court Procedures Rules. The emphasis in the
Act is to create an “overriding purpose” to achieve what the Court
Procedures Rules merely expresses as the purpose of the rules. Without some
guidance from the Act under which the Court Procedures Rules were made, I am not
prepared to give the Rules the same emphasis of “overriding” purpose
that is given by the NSW Act.
Far greater emphasis is also given in s 57
of the NSW Act to matters such as “the efficient disposal of the business
of the court” and “the efficient use of available judicial and
administrative resources”. These concepts are not
specifically expressed
in the ACT Rules. A provision in terms similar to or of like effect to
s 58 of the NSW Act does not
form part of the ACT Rules. Section 58,
indeed, seems to be designed to give imperative emphasis to consideration of the
objects
of case management whilst providing what is to be taken into account.
That is certainly a different consequence to that adopted
in
J L Holdings. Without a counterpart to s 58 of the NSW Act, I do
not regard the provisions as requiring this court
to alter the emphasis on
approach that should be taken to the question of leave to amend from that taken
in J L Holdings.
37. That is not to say that I should not give appropriate
consideration to the matters referred to in Court Procedures Rule 21(2)(b)
as
“the timely disposal of the proceeding, and all other proceedings in the
court, at a cost affordable by the respective parties”.
In J L Holdings
(at 172), Kirby J made the observation that:
A court must accord justice to the particular litigant. But it must also maintain its responsible use of scarce public resources and consider, in a general way, the impact which its orders have on other litigants and on the public generally.
I consider that the matters set out in the Court Procedures Rules embrace such notions but should be considered by me in overall requirement to my approach for which J L Holdings stands as authority for, namely that justice is the paramount consideration in determining this application.
Matters pertinent to the grant of leave in this case
38. AON claims that the plaintiff is now seeking to bring an entirely new case
against it. That is not the way that the plaintiff
puts the matter. The
plaintiff has previously pleaded that AON had breached its duty and its retainer
to use reasonable skill and
care in renewing the insurance. That pleading was
expressed widely and, in my opinion, not confined simply to a claim that AON had
failed to act in accordance with instructions which AON now claims to be the
case. It seems to me to be open on the original pleadings
for the plaintiff to
now particularise the breach that was alleged in terms of a requirement that the
buildings be insured, a failure
to advise that the consequence in that regard,
that instructions were not obtained and that the insurance was not arranged. I
do
not accept the submission that this case is totally inconsistent with the
case pleaded originally. It may not technically have been
what AON understood
to be the case against it but, in my view, the pleadings do not restrict the
case now sought to be brought.
That being so, AON does not make out what could
have been its best point, namely that the plaintiff had abandoned its former
claim
and replaced it with a completely new case.
39. As I understand the
point, AON makes a distinction between what is said to be the breach of
AON’s duty of care or breach
of its retainer to effect insurance in
accordance with instructions to a case that is now sought to be made of one that
is of effecting
the insurance without instructions. For AON to make this claim
good it must say that the matters referred to as particulars in the
proposed
paragraph 26 of the second further amended statement of claim (which are also
material to the duty of care pleaded in proposed
paragraph 29) are inconsistent
with the claim in what was paragraph 31 of the further amended statement of
claim being that of failure
to arrange the insurance and to advise the
arrangement of the insurance.
40. I do not consider that the claim of
failure to arrange insurance pleaded in paragraph 31 of the further amended
statement
of claim is limited to a failure to effect the insurance in accordance
with instructions. That being so, AON’s claim of inconsistency
is not
made out.
41. AON also says that the plaintiff had not made a case against it
in respect of the defences that the first and second defendants
have raised
under s 28(3) of the Insurance Contracts Act 1984 (Cth) and gives no
explanation for the delay in doing so.
42. Whilst conceding that there are
allegations in the proposed amendments that have not previously been pleaded,
the plaintiff seeks
to explain the delay in doing so by reference to receipt of
affidavits from Chubb and CGU just before the hearing as well as further
discovery relating to the underwriting process. Reference is also made to
discussions during mediation which caused the plaintiff’s
lawyers to
reassess the significance of the defences pleaded by Chubb and CGU in reliance
upon s 28(3) of the Insurance Contracts Act 1984 (Cth). In that regard, it
was said that AON’s involvement in the declared values of the
Schedule C Buildings had consequences
which the plaintiff’s lawyers
had not appreciated. This further led to consideration of claims by the
plaintiff against AON
based on the Australian Securities and Investment
Commission Act 2001 (Cth) concerning the conduct and representations made by
AON.
43. I am prepared to accept those explanations in general although I am
not entirely satisfied that the plaintiff’s explanations
account for the
oversight in not raising a significant number of the new allegations made.
However, I do not overlook the important
factor that the allegations raise real
triable issues between the plaintiff and AON. I am also mindful of the fact
that the trial
of this matter was set for four weeks and other litigants may be
said to have been disadvantaged by the allocated time of the trial
not being
taken up. On the other hand, it is significant that matters in issue, including
the issue of quantum, have been settled
as between the plaintiff and the other
three defendants.
44. On an overall consideration of all the matters put by
the plaintiff and by AON, I consider that leave should be given.
An additional objection
45. AON raised an additional objection to the grant of leave based upon what was
said to be an attempt by the plaintiff to seek to
obtain inconsistent judgments
in its favour in the one set of proceedings.
46. It was said that as the
plaintiff and CGU, the second defendant, had consented to judgment being entered
against the second defendant
in favour of the plaintiff, there was a conclusive
determination that the PNI buildings were insured. It was put that the second
amended statement of claim could not assert to the contrary.
47. When AON
made its submissions orally and in writing on this point, it was unclear whether
what was being alleged was some form
of estoppel. That is how the plaintiff, in
writing, responded to the submission.
48. In submissions in writing filed
after the plaintiff’s reply, AON elaborated the point as that of being an
abuse of process
for the plaintiff to seek to obtain inconsistent judgments in
its favour in the one set of proceedings.
49. AON’s submission seems to
be founded upon observations that were made in Spencer Bower and Turner, Res
Judicata, 3rd ed,
Butterworths, London, 1996 at pp 21-22 where it is
said:
38 A judgment or order by consent of the parties may be a res judicata. In such cases the court is discharged from the duty of investigating or further investigating the matters in controversy and does not pronounce a judicial opinion on them; but at the joint request of the parties it gives judicial sanction and coercive authority to what they have agreed and thus converts an agreement which, except by statute, could never operate as a bar into a judicial decision on which a plea of res judicata may be founded. Judgments, orders and awards by consent are as efficacious as those pronounced after a contest, in creating cause of action estoppels and effecting a merger of the causes of action sued on. Although it was suggested that the estoppel in such cases arises by representation, this has not been accepted. The extent to which a consent judgment, order or award may give rise to issue estoppels, however, has not been finally determined. ...
39 Though consent judgments and orders are decisions and their operative parts binding, it may not be clear what questions were concluded. The court will examine the available evidence to ascertain the matters in dispute. Any issue which the parties recognised was the subject of the litigation and was fundamental to the judgment or order will be conclusively determined. Where, however, there are no such materials neither party is estopped from disputing anything but the actual judgment or order. ... (Footnotes omitted) (My emphasis)
50. The sentence that I have emphasised in the passage cited above does not
appear in the citation quoted in AON’s written
submissions in reply in
this matter. That aspect seems to me to be a fundamental issue to making good
the submission being advanced
by AON. Nor does the case cited by AON in
support, Sterling Engineering Co Ld v Patchett [1955] 501 AC 534, say anything
more than that the court can consider the pleadings to see what is established
by the judgment.
51. In respect of the consent judgment that I entered in
this matter between the plaintiff and the second defendant, I am just not
able
to say that a fundamental aspect of the judgment that I entered by consent was a
determination that the PNI buildings were insured.
That issue is but one of the
matters put in issue in the pleadings between these parties. In each of the
cases cited in Spencer
Bower and Turner with respect to the ascertainment of an
issue fundamental to the consent order whether express or by necessary
implication
there was, in fact, the one issue in contest. For example, the
cases cited by AON such as Kinch v Walcott [1929] 475 AC 482, River
Ribble Joint
Committee v Croston UDC [1897] 1 QB 251 and Re South American and Mexican Co
[1895] 1 Ch 37, are all single issue cases. It is just not possible, at this
stage, to say that the consent judgment against the second defendant
determined
conclusively the issue that the PNI buildings were insured even as between the
plaintiff and the second defendant.
52. Further, the fact that judgment was
entered dismissing the plaintiff’s claim against Chubb, the first
defendant, would seem
to me to deny any determination of the issue that the PNI
buildings were insured by that defendant. That issue was the subject of
an
express denial in the pleadings between the plaintiff and Chubb and presumably
it could be asserted that the issue of the buildings
being insured was
determined adversely to the plaintiff in that case.
53. For AON to make
good the submission that it makes on this aspect, I think that it must show that
the only issue on the pleadings
which resulted in an adverse judgment against
the plaintiff was the question of whether the PNI buildings were insured. In my
view,
it has failed to do so.
54. It follows that I can see no point in
pursuing the further submissions made by AON that it is an abuse of process to
seek inconsistent
judgments. In my view, this is not a case where a litigant is
changing the form of the proceedings to set up the same case again
(cf Reichel v
McGrath (1889) 14 App Cas 665 and Haines v Australian Broadcasting Corporation
(1995) 43 NSWLR 404 cited by AON). If the issue cannot be precisely identified
as having been concluded between the parties to it, there is no circumstance
in
the present case to suggest an abuse of process in it being pursued against
another party.
Costs
55. Court Procedures Rule 513 provides:
The costs of and resulting from an amendment made under this part are to be paid by the party making the amendment unless the court otherwise orders.
56. The plaintiff concedes that AON is entitled to such a costs order. AON
seeks that the order be for costs on an indemnity basis.
57. AON submits that
there is a “relevant delinquency” on the part of the plaintiff
justifying such an order citing Osalack
v Richmond River Council [1998] HCA 11; (1998) 193 CLR
72 at 89 per Gaudron and Gummow JJ. Reference is also made to Rosniak v
Government Insurance Office (1997) 41 NSWLR 608.
58. Although I am not
entirely satisfied that the plaintiff has explained some aspects of why it was
necessary to make the amendments
proposed, I am prepared to accept the major
thrust of the plaintiff’s submissions namely that the amendments arose
consequential
to the discovery and mediation process that occurred just before
and at the time of the date set for hearing. That being so, I do
not regard
that AON has made out such a special and unusual feature of the case that would
justify the award of costs on a basis
different from that which the Rules
contemplate (cf Fairplay Newspaper and Printing Works Pty Ltd v Currico Nominees
Pty Ltd [1998] FCA 680 (22 May 1998)).
59. In the present case, there is some
explanation why significant amendments needed to be made to the
plaintiff’s case. The
fact that other amendments are also now sought to
be made and that there is no real explanation for the delay in doing so does
not,
in my view, make this such a special case which justifies an award of
indemnity costs.
Orders
60. I give leave to the plaintiff to amend its statement of claim by filing a
second further amended statement of claim in the terms
of the document marked
with the letter “A” to the affidavit of Kent Linden Owen filed on 22
November 2006.
61. The plaintiff is to pay to the fourth defendant the costs
of and resulting from this amendment.
62. I make the costs order strictly in
terms of Court Procedures Rule 513. If there are issues arising from that
order, they are
to be determined on the assessment of those costs.
I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Gray.
Associate:
Date: 12 October 2007
Counsel for the plaintiff: Mr P Garling C with Ms J Oakley
Solicitor for
the plaintiff: Sparke Helmore
Counsel for the first defendant: Mr G
McCarthy
Solicitor for the first defendant: Ebsworth & Ebsworth
Lawyers
By their agent
Elrington Boardman Allport
Counsel for the second defendant: Mr E
Muston
Solicitor for the second defendant: Curwood & Partners
By their agent
Phillips Fox
Counsel for the third defendant: Mr J E Marshall SC with Mr A
P Lo Surdo
Solicitor for the third defendant: Wotton & Kearney
By their agent
Meyer Vandenberg Lawyers
Counsel for the fourth defendant: Mr R Stitt QC
with Mr N J Owens
Solicitor for the fourth defendant: Corrs Chambers
Westgarth
Date of hearing: November 2006
Date of judgment: 12 October
2007
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