FEDERAL COURT OF AUSTRALIA McAlister v State of New South Wales [2014] FCA 702 Citation: McAlister v State of New South Wales [2014] FCA 702 Parties: PAUL LESLIE MCALISTER BY HIS LITIGATION REPRESENTATIVE NSW TRUSTEE & GUARDIAN v STATE OF NEW SOUTH WALES, AVIBIN PTY LTD (ACN 2669267) and ADRIAN ALAN POWELL File number: NSD 1968 of 2013 Judge: EDMONDS J Date of judgment: 3 July 2014 Catchwords: PRACTICE AND PROCEDURE – application by non-party for joinder under r 9.05, in the alternative r 1.32, of Federal Court Rules 2011 – whether power exists – no application to intervene but relevant principles on application for intervention under r 9.12 considered – consideration of merits of present application if power of joinder exists – joinder refused Legislation: Federal Court of Australia Act 1975 (Cth) s 37M Federal Court Rules 2011 rr 1.32, 9.05, 9.12 Federal Court Rules O 6 r 8 Uniform Civil Procedure Rules 2005 (NSW) r 6.24 Cases cited: Sensis Pty Ltd v Bivami Pty Ltd [2012] FCA 1365 Date of hearing: 25 June 2014 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 34 Counsel for the Applicant on the application: Mr JE Sexton SC with Mr DA Lloyd Solicitor for the Applicant on the application: Lee & Lyons Lawyers Counsel for the Applicant: Mr MBJ Lee SC with Ms K Jones Solicitor for the Applicant: Maurice Blackburn Lawyers Pty Ltd Solicitor for the First Respondent: Crown Solicitor's Office (Ms Z Braybrooke) Counsel for the Second and Third Respondents: Mr SR Donaldson SC Solicitor for the Second and Third Respondents: DLA Piper IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1968 of 2013 BETWEEN: PAUL LESLIE MCALISTER BY HIS LITIGATION REPRESENTATIVE NSW TRUSTEE & GUARDIAN Applicant AND: STATE OF NEW SOUTH WALES First Respondent AVIBIN PTY LTD (ACN 2669267) Second Respondent ADRIAN ALAN POWELL Third Respondent JUDGE: EDMONDS J DATE OF ORDER: 3 JULY 2014 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The interlocutory application dated 11 March 2014 be refused. 2. The applicant on the interlocutory application dated 11 March 2014 pay the costs of the second and third respondents, as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1968 of 2013 BETWEEN: PAUL LESLIE MCALISTER BY HIS LITIGATION REPRESENTATIVE NSW TRUSTEE & GUARDIAN Applicant AND: STATE OF NEW SOUTH WALES First Respondent AVIBIN PTY LTD (ACN 2669267) Second Respondent ADRIAN ALAN POWELL Third Respondent JUDGE: EDMONDS J DATE: 3 JULY 2014 PLACE: SYDNEY REASONS FOR JUDGMENT INTRODUCTION 1 This is an interlocutory application, dated and filed 11 March 2014, on behalf of certain underwriters at Lloyd's of London ("the Underwriters"), subscribers to a policy of insurance bearing reference 02080235 ("Underwriters' Policy"), to be joined as a cross-respondent in these proceedings, commenced as outlined in [5] below ("Proceedings"). 2 The Underwriters are not a party to the Proceedings and no party to the Proceedings seeks their joinder. The second and third respondents oppose it. 3 There is currently no cross-claim to which the Underwriters could be joined as cross-respondents. Senior counsel for the Underwriters conceded as much and submitted that the application should be treated as one to join the Underwriters as defendants or respondents, rather than as cross-respondents. 4 For the reasons which follow, assuming I have the power to order joinder which I think, at best, is doubtful, I am not prepared to exercise it by acceding to the Underwriters' application, even in its modified form. BACKGROUND 5 The Proceedings were commenced by Originating Application and Statement of Claim filed 20 September 2013 by the applicant ("McAlister") against the first respondent ("the State"), the second respondent ("Avibin") and the third respondent ("Powell"). 6 Various claims are made by McAlister against the State, Avibin and Powell in respect of acts and/or omissions which allegedly occurred sometime within the period of 1 January 2000 to 15 August 2011 ("Relevant Period"). 7 Throughout the Relevant Period, Avibin and/or Powell held policies of insurance with various insurance companies, including: (1) The Underwriters' Policy, from 4.00 pm on 15 August 2002 to 4.00 pm on 15 August 2003 ("Policy Period"); and (2) Ansvar Insurance, which insured Avibin and/or Powell from about August 2005. 8 The solicitors on the record for Avibin and Powell act on instructions from Ansvar Insurance. 9 On the hearing of the interlocutory application for joinder, senior counsel for the Underwriters made it abundantly clear that the "real nub" and "crux" of the impetus driving the Underwriters to seek joinder was "not just [avoidance of] multiplicity of proceedings" but "the interests of one insurer against another insurer": The real problem is a problem between two insurers, one of whom has the advantage of being able to conduct the proceedings to its advantage factually. And he's maintaining a position which will result in my insurer having to stand, looking over the fence, and then do the best it can, after factual findings have been made in these proceedings, to recoup its position. 10 He elaborated as follows: That's the problem we're seeking to avoid. And it's quite plain that it is a real problem because once Avibin and Powell are free of their obligation to permit insurers' choice of solicitors to conduct the case on their behalf, they will make a claim against my clients. Alternatively, if they're insolvent and/or bankrupt by that stage, then it's very much in the applicant's interest as well. But in the meantime, as I say, we will be not just on the sidelines but outside the arena, peering over the fence. And it's that problem that we submit justifies our intervention in a way which is constrained, as formulated in those orders, that is, that we would have very limited involvement, the limit of our involvement being to protect insurers' interests in relation to what's said by any of the other parties about what occurred between 2002 and 2003. 11 The reference to the Underwriters' intervention being constrained as formulated "in those orders" is a reference to draft orders which senior counsel for the Underwriters handed up at the commencement of the hearing and which he said had been agreed with the applicant on the premise that the Underwriters were joined as a cross-respondent. Relevantly, those draft orders provided in paras 2 and 3 as follows: 2. The issues upon which Underwriters are entitled to be heard in the proceeding are confined to: (i) Whether Underwriters are liable to indemnify the second and/or third respondents under Policy of Insurance 02080235 and if so to what extent; (ii) the extent of the liability of the second and third respondents to the applicant in respect of the period from 15 August 2002 to 15 August 2003 for which Underwriters are alleged to be liable to indemnify the second and third respondents; having regard to the Policy Defences relied upon by Underwriter referred to in the document annexed and marked A. 3. Subject to order 4, the Underwriters' involvement in the proceeding is confined to: (i) the inspection of documents produced by the parties to the proceeding in accordance with the orders of the Court; and (ii) the cross-examination of witnesses at the hearing of the proceeding, on topics or matters which relate directly to the issues in order 2. POWER TO ORDER JOINDER 12 The application for joinder is expressed to be made pursuant to r 9.05(b)(iii) of the Federal Court Rules 2011 ("Rules"); in the alternative, pursuant to r 9.05(b)(i). 13 Rule 9.05 of the Rules relevantly provides as follows: 9.05 Joinder of parties by Court order (1) A party may apply to the Court for an order that a person be joined as a party to the proceeding if the person: (a) ought to have been joined as a party to the proceeding; or (b) is a person: (i) whose cooperation might be required to enforce a judgment; or (ii) whose joinder is necessary to ensure that each issue in dispute in the proceeding is able to be heard and finally determined; or (iii) who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings. (2) A person must not be added as an applicant without the person's consent. (3) If a person is joined as a party under this rule, the start date of the proceeding for the person is the date on which the order is made. (4) An application under subrule (1) need not be served on any person who was not served with a copy of the originating application. 14 Literally construed, this rule only permits a party to extant proceedings to make an application to join a person who is a non-party to the proceedings. On such a construction, Underwriters have no right to make an application under r 9.05. This question does not appear to have arisen for determination before although I am aware that in Sensis Pty Ltd v Bivami Pty Ltd [2012] FCA 1365, Griffiths J, on the application of a company which was not a party to extant proceedings, ordered the joinder of the company as a party under r 9.05(1)(b)(ii) and/or (iii) (at [24]). The issue does not appear to have been raised before his Honour, perhaps because the company's application for joinder was neither consented to, nor opposed (at [17]). 15 This question did not arise for determination under the predecessor provision to r 9.05, being O 6 r 8 of the repealed Federal Court Rules, because O 6 r 8 was in materially different terms from r 9.05. Order 6 r 8 was in the following terms: O 6 r 8 Addition of parties (1) Where a person who is not a party: (a) ought to have been joined as a party; or (b) is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon; the Court may order that the person be added as a party and make orders for the further conduct of the proceeding. (2) A person shall not be added as an applicant without the person's consent. 16 On behalf of the Underwriters, it was submitted that there are a number of factors which point to a different construction from the literal construction articulated in [14] above. 17 It was observed that the heading of r 9.05 states that the provision applies to the joinder of "parties" rather than "persons", which suggests that the term "party" may be intended to include a person who is not a party at the time the joinder application is made. If the rule was intended to be confined to the joinder of non-parties only on the application of a person who is a "party" to extant proceedings at the time of the application, one would expect the heading to read "Joinder of persons by Court order". The heading, it was submitted, suggests a broader construction of "party". 18 Further, it was pointed out that there is no other provision in the Rules dealing with the joinder of parties which permits a person who is not a "party" to extant proceedings to apply to be joined to the proceedings. It was submitted that it would be curious if the intention in enacting the Rules was to preclude applications by persons who were not parties to extant proceedings. There are many situations in which the interest of justice would require the Court to permit a non-party to make an application to be joined to proceedings. Examples include in some circumstances a beneficiary of an estate or a co-executor of a will, or a borrower where the loan is secured by guarantee where there are proceedings by the guarantor against a lender seeking to set aside the guarantee under the Contracts Review Act 1980 (NSW) or in equity. 19 The Underwriters submitted that the better construction of r 9.05 is that the term "party" in that rule includes a person in the position of the Underwriters, because the Underwriters are a "party" to this application and this application is a "proceeding" as defined. That is, a person who applies to be joined to proceedings under r 9.05 is a "party" within the meaning of the rule. The Underwriters submitted that that construction would better fulfil the fundamental purpose of the rule which, as r 9.05(1)(iii) expressly states, is "to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings". According to the Underwriters, it is a construction which is consistent with the operation of the predecessor provision of r 9.05 (O 6 r 8) and is a construction which achieves a common sense operation for r 9.05; that construction also best achieves the purpose identified in s 37M of the Federal Court of Australia Act 1975 (Cth). 20 On behalf of the Underwriters it was noted that the broader construction of r 9.05 for which the Underwriters contended, so that the rule permits an application for joinder to be made by a person who is not a party to the proceedings prior to the application being made, would see the rule operate more consistently with a similar provision in the Uniform Civil Procedure Rules 2005 (NSW): see r 6.24. 21 I am not sufficiently persuaded by any of these arguments to be satisfied that one can construe r 9.05 such as to give me the power, on the application of a person who is not a party to extant proceedings, to join that person as a party. Just as importantly, even if I was of the view that r 9.05 could be so construed, I am not, on the facts of the present application, satisfied that the threshold requirements that need to be satisfied to exercise the power of joinder in reliance on either sub-paras (b)(iii) or (b)(i), are satisfied in this case. At this point in time, there is no related dispute for determination and the joinder of the Underwriters is not sought because their co-operation is required to enforce judgment. 22 The Underwriters submitted that if they do not fall within r 9.05, the Court has power to make an order for joinder as sought under r 1.32. In that event, the Underwriters rely upon r 1.41 of the Rules and seek an order that they be joined to the Proceedings as a cross-respondent pursuant to the Court's power under r 1.32. Rule 1.32 provides: The Court may make any order that the Court considers appropriate in the interests of justice. 23 Again, for the reasons referred to in [26]–[33] below, I am not persuaded that it would be appropriate in the interests of justice to join the Underwriters and that is sufficient to dispose of the application under this alternative general head of power. If there is power under r 9.05 for a non-party to be joined as a party on its own application, there is a further reason for rejecting reliance on an alternative general head of power, namely, that a general power should not be exercised in a way that transcends the threshold requirements placed on the exercise of discretion under the specific power. INTERVENTION: RULE 9.12 OF THE FEDERAL COURT RULES 24 There is no proposed claims for relief by or against the Underwriters. Rather, they seek to participate in the Proceedings because they perceive that the findings of the Court may have some impact upon their interests. In those circumstances, senior counsel for Avibin and Powell submitted that the proper course would be to seek to intervene under r 9.12. 25 Rule 9.12 provides: (1) A person may apply to the Court for leave to intervene in a proceeding with such rights, privileges and liabilities (including liabilities for costs) as may be determined by the Court. (2) The Court may have regard to: (a) whether the intervener's contribution will be useful and different from the contribution of the parties to the proceeding; and (b) whether the intervention might unreasonably interfere with the ability of the parties to conduct the proceeding as the parties wish; and (c) any other matter that the Court considers relevant. (3) When giving leave, the Court may specify the form of assistance to be given by the intervener and the manner of participation of the intervener, including: (a) the matters that the intervener may raise; and (b) whether the intervener's submissions are to be oral, in writing, or both. 26 It was submitted on behalf of Avibin and Powell that viewed in context, the matter in para (2)(a), that "the intervener's contribution will be useful and different from the contribution of the parties to the proceeding", is directed towards the utility of the contribution to determining the issues in dispute in the Proceedings. It was observed that no submission was advanced in support of the application, nor could it be, which suggests that the resolution of any issue in dispute between the parties will be assisted by the Underwriters' contribution. The Underwriters seek to involve themselves in the Proceedings to pursue different and additional ends raising different and additional issues. That will only serve as a distraction from, and an impediment to, the determination of the issues in the Proceedings. 27 In relation to the matter in para (2)(b), "whether the intervention might unreasonably interfere with the ability of the parties to conduct the proceeding as the parties wish", it was submitted on behalf of Avibin and Powell that the intervention of the Underwriters would serve to interfere significantly with the way in which Avibin and Powell wish to conduct the Proceedings. They wish to exercise the right enjoyed by any contracting party to make their own decisions as to whether to direct their resources towards pursuing indemnity under the Underwriters' Policy. Avibin and Powell also prefer not to be exposed to the unfairness that will arise if the Underwriters are given leave to participate in the Proceedings; including by cross-examining witnesses and adducing evidence unconfined by the constraints imposed by procedures which define and confine the issues, and serve to enable the parties to know the case they have to meet. 28 Senior counsel for Avibin and Powell submitted that on the back of the contentions put in [26] and [27] above, application in reliance on r 9.12 would fail, and that any reliance on an alternative general head of power such as r 1.32 should be rejected on the basis that: "Where a specific power exists, a general power should not be exercised in a way that transcends limitations placed on the exercise of discretion under the specific power". 29 Senior counsel for the Underwriters effectively conceded that any application under r 9.12 was bound to fail: We note – and as always, we're weary of Greeks bearing gifts – that Mr Donaldson suggests that we should be making an application to intervene under rule 9.12. But intervention under rule 9.12 has long been construed as being very limited in application, and in particular, an intervener under rule 9.12 can't raise any issues which are not issues between the existing parties. So that all of those issues that I've just taken your Honour through couldn't be raised if Underwriters were joined as interveners, and that's why, to achieve any meaningful purpose in this application, we need to come within either rule 9.05 or rule 1.32. THE MERITS 30 Finally, I agree with the submission on behalf of Avibin and Powell that the suggestion that the application should be granted on the basis that it serves to reduce the risk of further litigation in connection with the same issues is both inaccurate and unpersuasive. 31 It is inaccurate because: (1) Absent a claim by Avibin for relief based upon the Underwriters' refusal to grant indemnity, the issues between them cannot be finally resolved; (2) it is by no means self-evident that there will ever be occasion for Avibin and Powell to seek indemnity under the Underwriters' Policy, or if they do, that it will be refused. 32 It is unpersuasive because it calls in aid a commonly cited principle in support of a course of action which it is not generally regarded as supporting. Assuming, for example, that these Proceedings had not been commenced as a class action, and that McAlister was the only claimant, while it might well be suggested that joining residents who were not presently minded to make a claim but who were likely to do so in the future would serve to reduce the risk of multiple proceedings, the joinder of those persons as parties to the proceedings would not be ordered over their objection. The Rules of Court would not be used so as to deprive them of their entitlement to exercise their own judgment as to whether and when to bring proceedings. 33 Similarly, any discretion under the Rules would not be exercised so as to require McAlister to bring proceedings against another party against whom no relief is sought, upon application of that other party or otherwise. CONCLUSION 34 For these reasons, the interlocutory application must be refused with costs. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. Associate: Dated: 3 July 2014