Reported Decision : (2003) 12 ANZ Insurance Cases 61-582 New South Wales Supreme Court CITATION : Leighton Contractors v AMP General Insurance [2003] NSWSC 839 HEARING DATE(S) : 2 September 2003 JUDGMENT DATE : 11 September 2003 JURISDICTION: Common Law Division JUDGMENT OF : Master Malpass DECISION : The application for leave is refused. The Summons is dismissed. The plaintiff is to pay the costs of the Summons. CATCHWORDS : statutory charge - application of section - status as claimant - futile exercise - liability to pay damages or compensation - discretionary power and onus - proscription - entitlement to disclaim. LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946 Pt 4, s 6, s 6 (1), s 6 (4). Bailey v New South Wales Medical Defence Union Limited (1995) 184 CLR 399. Kinzett v McCourt and Others (1999) 46 NSWLR 32. CASES CITED : Lissenden v Yorkville Nominees Pty Ltd (In Liq) and Others (1984) 3 NSWLR 138. McMillan v Mannix (1993) 31 NSWLR 538. Nigel Watts Fashion Agencies Pty Limited v GIO General Limited (1995) 8 ANZ Ins Cas 61-235. Leighton Contractors Pty Limited (Plaintiff) PARTIES : v AMP General Insurance Limited (Defendant) FILE NUMBER(S) : SC 13435 of 2002 COUNSEL : Mr C Hoeben SC (Plaintiff) Mr R A Cavanagh (Defendant) SOLICITORS : John Sharpe Solicitor for CGU Workers Compensation (NSW) Pty Limited (Plaintiff) Henry Davis York (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Master Malpass Thursday 11 September 2003 13435 of 2002 Leighton Contractors Pty Limited v AMP General Insurance Limited JUDGMENT 1 MASTER: On 27 August 1992, an employee (Mr Smith) suffered personal injury in an accident whilst working on a building site. Subsequently, he brought proceedings in this Court against the head contractor (the plaintiff) and a sub-contractor (B & B). By that time, B & B had gone into liquidation. It was subsequently deregistered. 2 At the time of the accident, B & B had insurance cover with the defendant. It was a small business policy of insurance which included a public liability policy. General Exclusion 1, excluded inter alia any liability arising from a contractual indemnity. 3 The sub-contract between the plaintiff and B & B required B & B to indemnify the plaintiff for all losses arising out of the sub-contracted works (condition 17). The plaintiff brought a Cross-Claim against B & B seeking a contractual indemnity for any liability found against it. 4 On or about 19 March 1996, the defendant instructed solicitors to act on behalf of B & B. 5 The proceedings in this Court resulted in judgment in favour of Mr Smith against both the plaintiff and B & B. The Cross-Claim was dismissed. 6 Damages and costs awarded against B & B were paid by the defendant to Mr Smith. 7 The plaintiff brought an appeal against the decision on the Cross-Claim. The appeal was upheld. B & B was ordered to indemnify the plaintiff in respect of its liability to Mr Smith pursuant to the contractual indemnity in the sub-contract. 8 On 15 May 2000, the solicitors for the defendant advised the plaintiff and the liquidator of B & B that the liability of B & B pursuant to clause 17 was not a liability covered under the terms of the public liability policy and that the defendant would not be indemnifying B & B in respect of those contractual obligations to the plaintiff. 9 The plaintiff commenced these proceedings by Summons filed on 30 December 2002. It seeks leave to commence proceedings pursuant to s 6 (4) of the Law Reform (Miscellaneous Provisions) Act 1946 (the Act). A proposed Statement of Claim has been placed before the court. 10 Section 6 has had a troubled history. It has been regarded as providing an unsatisfactory remedy. The construction of it has produced a diversity of conflicting views. Its language throws up logical and conceptual difficulties. 11 The court has been referred to a number of decided cases in which its application has been considered (including Nigel Watts Fashion Agencies Pty Limited v GIO General Limited (1995) 8 ANZ Ins Cas 61-235; McMillan v Mannix (1993) 31 NSWLR 538; Bailey v New South Wales Medical Defence Union Limited (1995) 184 CLR 399 and Kinzett v McCourt and Others (1999) 46 NSWLR 32). 12 The Act is expressed to be an Act to make certain provisions in relation to inter alia actions of tort. The Act has its ancestry in New Zealand legislation (dealing with workers' compensation). The first reading speech of the Bill presents the section as a remedy to prevent the mischief of an injured person being deprived of the fruits of judgment (see Bailey at p443). 13 Section 6 appears in Pt 4 of the Act. It has the heading "Attachment of insurance moneys" and the sub-heading "Amount of liability to be charge on insurance moneys payable against that liability". 14 For present purposes, the relevant provisions of the section are as follows:- "(1) If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of the person's liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability. ……………………………….. (4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured: Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken. ……………………………….." 15 The remedy provided by the section is given the name "charge". The suggestion is that it is created by statute to secure payment or performance. It may be created in favour of a claimant. 16 The section is expressed to apply where an insured has entered into a contract of insurance by which he is indemnified against liability to pay any damages or compensation. It is expressed to create a charge on all insurance moneys that are or may become payable in respect of that liability on the happening of the event giving rise to the claim for damages or compensation. 17 The charge is enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured. 18 The second paragraph of subsection (4) commences in the form of a proviso. A part of this paragraph has been described as a proscription (the last sentence). For present purposes, it requires that no action to enforce the charge shall be commenced in any court except with the leave of that court. It confers on the court a discretionary power to grant leave in the circumstances contemplated by the section. The proscription prohibits the granting of leave in the circumstances mentioned therein (where the insurer has an entitlement to disclaim). It is common ground that leave may be refused in other cases (see Bailey at p448). The plaintiff bears the onus of demonstrating an entitlement to leave. 19 In exercising the discretionary power to grant leave the court takes into account the relevant circumstances of the particular case before it. In some cases it may suffice to show that there is an arguable case (of liability against the insured, being a liability against which the insured is indemnified by a contract of insurance in force at the time of the happening of the event said to give rise to the claim) but that is not necessarily so. There may be other relevant considerations (inter alia such as is there a perfectly good common law defendant available). The demonstration of such an arguable case does take away the proscription against granting leave. There is always an onus requiring the plaintiff to demonstrate that in the then relevant circumstances leave should be granted. 20 The contention of the plaintiff is that it has an arguable case that the insurer is not entitled to disclaim liability (see inter alia Lissenden v Yorkville Nominees Pty Ltd (In Liq) and Others (1984) 3 NSWLR 138 at 143) and that accordingly it should be granted leave. The defendant takes issue with this contention. 21 Both parties have prepared written submissions and these have been orally supplemented. For present purposes, it is unnecessary to repeat the detail set forth therein. 22 There is no dispute that the public liability policy contained an exclusion provision which excluded liability for the contractual indemnity propounded in the Cross-Claim. 23 The plaintiff places great emphasis on the decision in Nigel Watts (which concerned a dispute between insured and insurer and did not involve s 6 considerations). It contends that the court is now faced with a similar (but indeed stronger) factual situation which demonstrates that the plaintiff has an arguable case that the defendant is estopped from disclaiming liability on the basis of the exclusion clause. Broadly speaking, it relies on the conduct of the defendant during the period between March 1996 and 15 May 2000. 24 In my view, the section is not invoked in the circumstances of the present application. 25 The reading speech suggests that the legislature had in mind providing a remedy for claimants who had suffered personal injury. Despite this, successful applications have been more frequently made by corporations and/or in respect of property damage or economic loss. The decline in applicants making a claim for personal injury may be due to remedies now available under other legislation. 26 In the light of this history, I shall proceed on the basis that the plaintiff falls within the category of claimants contemplated by the section. 27 The purpose of a grant of leave is to place the plaintiff in a position where it may enforce a charge that has been created by the section. 28 The charge is created by force of the section where the insured has entered into the requisite contract of insurance (by which it is indemnified against liability to pay any damages or compensation) and on the happening of the event giving rise to the claim for damages or compensation. The charge is said to have then descended (see Bailey at p449). 29 It is a charge on "all insurance moneys that are or may become payable in respect of that liability". The charge may be subsequently affected by the insurer disclaiming liability (see Bailey at pp 448-449). 30 In this case it is said that the charge came into being on 27 August 1992 (when Mr Smith suffered personal injury in the accident). It was common ground that there was a charge created by the statute in his favour. 31 The contract of insurance did not indemnify B & B against its contractual liability to indemnify the plaintiff (pursuant to condition 17 of the subcontract). Such a liability was excluded (General Exclusion 1) and not part of the risk covered. The contract of insurance is that as it stood when the charge descended (see Bailey at p450). 32 The statutory charge related only to the insurance moneys payable to B & B in respect of the liability to pay damages or compensation to Mr Smith. Subsequently that charge was satisfied and there are no moneys upon which it can now operate. Upon Mr Smith suffering injury, there was no liability under the contract of insurance that was capable of giving rise to a charge in favour of the plaintiff. It seems to me that the plaintiff has no status to present itself as a claimant in respect of any charge. The granting of leave would be a futile exercise. 33 In these circumstances, the contention that by subsequent conduct the defendant has become estopped from disclaiming liability does not assist the plaintiff. 34 Before leaving these matters, I should mention another potential consideration. The liability had by B & B to the plaintiff arose by reason of contract between them. It is a liability to indemnify. 35 There may be a question as to whether or not such a liability is one "to pay any damages or compensation". The question has not been argued and for present purposes does not need to be decided. Accordingly, I put it aside. 36 In the circumstances, I do not consider that the plaintiff is entitled to leave. 37 Even if a different view were to be taken on the matters earlier considered, it seems to me that the application must otherwise fail. 38 I now return to the case advanced by the plaintiff in the proposed pleading. It seems to me to be academic. B & B has been deregistered for some years and there does not appear to be any suggestion of challenge to the defendant's refusal to indemnify B & B (by way of estoppel or otherwise). What transpired between B & B and the defendant is largely in the realm of the unknown. The question of entitlement to disclaim concerns those parties, not the plaintiff. 39 The proposed Statement of Claim alleges inter alia:- "…………………….. 10.Between April 1995 (the date when Mr Smith's statement of claim was filed) and 15 May 2000, the Defendant had agreed to indemnify B&B under the said public liability policy in respect of the claims by Mr Smith and the Plaintiff, and had conducted the defence of the proceedings brought by Mr Smith and the cross-claim brought by the Plaintiff on behalf of B&B. ………………………. 13.These proceedings are brought by the Plaintiff against the Defendant in reliance upon S.6 of the Law Reform (Miscellaneous Provisions) Act 1946 and upon the charge thereby created, as if it were in the position of B&B and could rely upon the public liability policy of insurance which existed between B&B and the Defendant. ………………………" 40 The nature of the alleged agreement and how it is to be proved remains unclear. The contention that the plaintiff should be treated as if it were in the position of B & B seems to be misconceived. The court would be required to deal with the plaintiff's action as if it was brought against B & B as the insured. 41 I merely mention these matters in passing as they were not the subject of argument. 42 For completeness, I should mention one other matter. Likewise, it has not been the subject of full argument and it does not require the expression of a view. It is the question of whether or not the reference to entitlement to disclaim as it appears in the proscription should be given a limited construction. In the context of the section, it might be said not to extend to cases where the contract of insurance does not indemnify against the liability that arises on the happening of the event that gave rise to the claim for damages or compensation. 43 I have not been taken to any authority in which the meaning of "disclaim" has been considered. The cases throw up examples of entitlement to disclaim (see Bailey at p448). Such examples include the right to rescind or avoid by reason of non-disclosure or misrepresentation where liability has been disclaimed subsequent to the creation of the charge. The dictionary meaning of "disclaim" is not helpful. "Disclaimer" has a meaning of repudiation or denial of a claim. 44 The application for leave is refused. The Summons is dismissed. The plaintiff is to pay the costs of the Summons. ********** Last Modified: 09/15/2003 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.