New South Wales Supreme Court CITATION : GIO Workers Compensation -v- CGU Insurance [2000] NSWSC 243 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 50004/00 HEARING DATE(S) : 16 March 2000 JUDGMENT DATE : 30 March 2000 PARTIES : GIO Workers Compensation (NSW) Ltd -v- CGU Insurance Ltd & Rockdale Beef Pty Ltd & Riverina Agency Contracting Services Pty Ltd & Kelly Taupo JUDGMENT OF : Hunter J Plaintiff: P M Hall QC & L V Gyles First defendant: A D M Hewitt SC COUNSEL : Second defendant: N A Cotman SC & L S Einstein Third defendant: D Cross (solicitor) Fourth defendant: A J Black Plaintiff: Hunt & Hunt Lawyers First defendant: Curwood & Partners SOLICITORS : Second defendant: Terrett Lawyers Third defendant: Allen Allen & Hemsley Fourth defendant: Walsh & Blair Lawyers CATCHWORDS : Practice and Procedure - application for stay or summary dismissal - utility of declaratory relief LEGISLATION CITED : Jurisdiction of Courts (Cross-vesting) Act 1987 CASES CITED : Denham v Midland Employers Mutual Assurance Ltd [1955] 2 QB 437 BWIU of Australia v Odco Pty Ltd (1991) 99 ALR 735 DECISION : Summons dismissed IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST HUNTER J THURSDAY MARCH 30 2000 50004/00 GIO WORKERS COMPENSATION (NSW) LTD -V- CGU INSURANCE LTD & ROCKDALE BEEF PTY LTD & RIVERINA AGENCY CONTRACTING SERVICES PTY LTD & KELLY TAUPO REASONS FOR JUDGMENT 1 On this application CGU Insurance Limited (CGU) seeks summary dismissal of the summons or alternatively a stay of proceedings, The proceedings are brought by GIO Workers Compensation (NSW) Limited (GIO) seeking declaratory relief in the following terms: "1. A declaration that the fourth defendant was a party to a contract with the third defendant while working as a boner at the premises of the second defendant on 16 February 1998; 2. A declaration that the [fourth defendant] was not an employee of nor a party to any contract of any nature with nor had been engaged by the second defendant while working as a boner at its premises on 16 February 1998; 3. A declaration that the first defendant as public liability insurer of the second defendant is obliged to indemnify the second defendant in relation to any liability it is held to have to the fourth defendant in proceedings No. 149 of 1998 between the fourth defendant and second defendant commenced in the District Court at Wagga Wagga. 4. A declaration that the plaintiff is not obliged to indemnify the second defendant in relation to any liability it is held to have to the fourth defendant in proceedings No. 149 of 1998 between the fourth defendant and second defendant in the District Court at Wagga Wagga." 2 The defendants to the proceedings are CGU, Rockdale Beef Pty Ltd (Rockdale), as second defendant, Riverina Agency Contracting Services Pty Ltd (Riverina), as third defendant and Kelly Taupo (Taupo) as fourth defendant. Taupo's only fault which has brought him into these proceedings lies in the action which he has taken in the District Court at Wagga Wagga (the District Court proceedings) claiming damages for personal injuries suffered by him while working for Rockdale. Taupo supports CGU's application. Riverina and Rockdale are in the same interest and support GIO's claims for declaratory relief. 3 In the District Court proceedings Taupo alleges that he received injuries whilst employed by Rockdale or, alternatively, whilst working under the supervision and control of Rockdale. The alternative descriptions of his relationship with Rockdale arise out of the involvement of Riverina in his employment. 4 The evidence before me established that Taupo signed a document on the letterhead of Riverina, entitled "Agreement to Contract" by the terms of which he acknowledged and agreed that there was no relationship of employment with Riverina: that he would carry out all the work that he agreed to do through the agency of Riverina in a workmanlike manner: that he would "cover the work" for public liability and accident insurance, together with leave and superannuation entitlements. That document was dated 9 September 1997. 5 There was also in evidence a deed dated 3 February 1997 between Rockdale, Riverina and another (the deed) under which Riverina undertook to "use its best reasonable endeavours to provide independent contractors to perform such duties as Rockdale…may specify." It is Rockdale's case that the services of Taupo were supplied to it by Riverina under the deed: hence Taupo's alternative description of his relationship with Rockdale at the time of his injury. 6 It is reasonably clear that the arrangement involving Rockdale, Riverina and Taupo was one which had the effect, if valid, of relieving Rockdale of the onerous industrial obligations that direct employment of Taupo would entail. The evidence disclosed that Riverina was instrumental in some one hundred and eighty eight persons being engaged in Rockdale's enterprise, out of a total workforce of four hundred and thirty three persons. There is no dispute that the others were employees of Rockdale. 7 The claim of Taupo against Rockdale is the trigger for these proceedings, the underlying purpose of which is to resolve the difference between GIO and CGU as to the operation of their respective insurance indemnities granted to Rockdale. GIO is the provider of workers compensation cover in respect of Rockdale's employees while CGU provides public liability cover, excluding from that cover injury to employees of Rockdale. CGU and GIO have declined to accept liability to Rockdale in respect of Taupo's claim: the issue being whether Taupo was an employee of, or an independent contractor to Rockdale. In that context CGU was ambivalent about describing, as a sham, the arrangement between Rockdale and Riverina so far as it involved Taupo. CGU's assertion was that "at the very least [the deed] did not truly reflect the arrangement between the parties or was varied by substitution of a new arrangement". 8 Although GIO has not accepted liability in respect of Taupo's claim against Rockdale, it has undertaken the conduct of Rockdale's defence of the District Court proceedings. Notwithstanding the impasse created by the failure of either CGU or GIO to accept liability in respect of the Taupo claim, Rockdale has not sought to join those insurers by way of cross claim in the District Court proceedings. I do not think it can be suggested that such a failure is the result of GIO's conduct of Rockdale's defence in the District Court proceedings. 9 The declaratory relief sought by GIO in these proceedings is framed in terms of the potential liability of Rockdale to Taupo. However, the underlying point of the proceedings is to obtain a declaration of the effect of the deed and of the provision by Riverina of services to Rockdale under the deed, with the objective of resolving any further 'demarcation disputes' between GIO and CGU. 10 While that objective may be seen as having commercial merit, I think its attraction in the context of GIO's claim for declaratory relief is illusory. Rather, it is my view that the relief sought is hypothetical in nature and that the problem is one, essentially, for the insurers to resolve between themselves and with Rockdale. I have no evidence as to how the public liability premium is calculated, nor any evidence of the disclosures made by Rockdale in its taking out of public liability cover with CGU, nor any evidence of the calculations of actual wages paid by Rockdale upon which its workers compensation premium is based. No doubt all of those matters would have some bearing on a commercial resolution of the problem confronting the parties. 11 For the reasons that follow, I think the appropriate order is that the proceedings be dismissed. 12 It emerged during frank exchanges with senior counsel for GIO that it makes no claim for any utility in the declaratory relief sought unless this Court's determination could be obtained prior to the determination of the District Court proceedings. To use his words, the insurers "will all be down in Wagga" unless these proceedings are determined prior to the District Court proceedings: meaning that the insurers will be joined by way of cross claim in the District Court proceedings. 13 Senior counsel for GIO also stated that, in the event that it was found that Rockdale has no legal liability to pay Taupo in respect of his claim, GIO would not seek to amend the form of declaratory orders sought to extend the relief claimed to one in respect of a claim against Rockdale by any other of the persons introduced to it through Riverina, nor otherwise to seek a declaration as to the operation of the deed. 14 Those who are in the same interest as GIO, or support it in these proceedings, did not dissociate themselves from that approach of GIO. GIO's strategy was based upon the submissions that a) the insurance disputes were more appropriately the subject matter of determination by the Supreme Court in its Commercial List and b) the prior determination of these proceedings to the District Court proceedings was practical, on the basis of GIO's estimate that the determination of these proceedings could be achieved in a one day hearing. 15 It is expressly part of GIO's strategy in seeking declaratory relief that the declaratory orders be made prior to the hearing of the District Court proceedings: that this Court's orders would thus provide a decision binding upon all parties to the District Court proceedings and the insurers. The District Court proceedings are set down for hearing at the sittings at Wagga due to commence on 26 June 2000. It is likely that the matter will proceed to hearing early in those sittings as a result of priority arising from two adjournments, on the application of Rockdale, to enable it "to make an application seeking relief in the Supreme court": presumably the relief sought in these proceedings. 16 I think it is reasonable to proceed on the basis that the Court could provide a one day hearing of these proceedings prior to the commencement of the Wagga sittings of the District court. However, I have come to the view that the GIO strategy will not work. First, it is based upon the submission that CGU's case was bound to fail "even if it was established that Taupo was an employee pro hac vice of Rockdale at the time of the accident": relying upon Denham v Midland Employers Mutual Assurance Ltd [1955] 2 QB 437. However, Denham was concerned with the question of temporary employment in the context of employer's liability insurance, covering liability to "any person under a contract of service…with the insured" and a public liability policy excluding the employer's liability cover: whereas CGU cover excluded: "claims: … (b) in respect of Personal injury to any person arising out of or sustained in the course of the employment or deemed employment of such person in the service of the Insured or through a breach of any duty owed to that person". 17 Without expressing a concluded view on the matter, I would regard that exclusion as distinguishable from the exclusion the subject of Denham. 18 In any event, if the decision of BWIU of Australia v Odco Pty Ltd (1991) 99 ALR 735 is any criterion, a one day hearing of the issues sought to be raised by CGU would appear to be unjustifiably optimistic. 19 Moreover, CGU does not limit its case to one of a temporary employment of Taupo. CGU seeks to establish that the deed did not represent the "true agreement" and, alternatively, that it was varied by substituting a "new arrangement". CGU asserted that several witnesses would be called in support of that case. I think it follows and I think senior counsel for GIO accepts that, unless the makers of the statements of evidence in support of CGU's case were not required for cross-examination, then its estimate of a one day hearing could not be maintained. 20 Given the opposition of Taupo to GIO's claim for relief in these proceedings it is unlikely that witnesses would not be required for cross-examination. I also regard Riverina's interest in the proceedings and the implications to it of an adverse finding as to the operation of the deed, are such that it would be a courageous decision to proceed to a hearing without cross-examination of CGU's witnesses in relation to evidence affecting the operation of the deed. 21 Consequently, I see little practicality in putting the parties to the costs of preparing for a one day hearing when the strong likelihood is that the determination of these proceedings is likely to require a significantly longer hearing. 22 Further, putting aside my view as to the nature of the declaratory orders sought by GIO, the utility of a prior determination of these proceedings to the determination of the District Court proceedings, I think has little merit. In the District Court proceedings I doubt if anything turns on the label given to Taupo's relationship with Rockdale, whether it be as independent contractor or that of employee - given the industrial context in which the deed was entered into and the nature of the work undertaken by Taupo for Rockdale: work conventionally performed under a relationship of master and servant. 23 Rockdale, which supports GIO in these proceedings, submitted that the Court should exercise its jurisdiction under sec 8 of the Jurisdiction of Courts (Cross-vesting) Act 1987, to remove the District Court proceedings to this Court. Given the imminence of the hearing of the District Court proceedings, which were commenced in 1998, such a submission barely calls for response. It suffices to say that in my view it has no merit, amounting to a contention that Taupo should be asked to wait another year or two in order to have a dispute between insurers resolved: a dispute in which he has no discernible interest. 24 Finally, in my view, the GIO strategy makes no allowance for the effect of an appeal by a party dissatisfied with a determination in these proceedings. 25 In view of the stance taken by GIO and by those in the same interest that the declaratory relief sought in these proceedings ceases to have any utility if its strategy fails in having these proceedings determined prior to the District Court proceedings, I think the appropriate order is that the summons be dismissed. 26 But for that stance, I would have favoured a refusal of the application for summary dismissal of the summons and deferred any hearing of these proceedings until any liability of Rockdale to Taupo had been determined. 27 As noted earlier in these reasons the insurers will now be joined by way of cross claim in the District Court proceedings to ensure that they are bound by findings relevant to the insurance issues raised by CGU and GIO. 28 It was submitted on behalf of CGU that joinder by way of cross claim in the District Court proceedings was not necessary to bind the insurers in respect of findings in the District Court proceedings. Reliance was placed by senior counsel for CGU for this submission on the following passage in Spencer Bower, Turner and Handley "Res Judicata" 3rd ed. par 225: "Liability insurance 225 Policies of insurance against liability to third parties commonly provide that the insurer will indemnify the insured against all sums which the insured becomes legally liable to pay. Under such policies the obligation to indemnify arises when the insured's liability has been established by judgment or award. The insurer promises to pay in that event, and the insured is not obliged to prove legal liability again. It will be sufficient to prove the judgment or award. This flows from the contract and not the doctrine of res judicata ." 29 I do not understand that passage as intending to state that findings by a court establishing the nature of legal liability of the insured are binding on the liability insurer, as distinct from the legal liability to pay the judgment sum. In any event, the question does not arise given the anticipated joinder of the insurers in the District Court proceedings. 30 Initially, CGU was not required to file a notice of motion in respect of this application, which arose out of a directions hearing in the proceedings. However, in view of CGU's contention that the declaratory relief sought by GIO be summarily dismissed, I required CGU to move by notice of motion which was given by notice dated 20 March 2000. Leave is given to file that notice in Court returnable instanter. 31 I list the matter for 31 March 2000 to enable the parties to present any submissions as to costs and for the making of final orders. ********** Last Modified: 09/25/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.