New South Wales Supreme Court CITATION : Mabbett by his tutor Noeline Apiata v CGU Workers Compensation (NSW) Ltd [2009] NSWSC 519 HEARING DATE(S) : 12 May 2009 JURISDICTION : Civil JUDGMENT OF : McClellan CJatCL EX TEMPORE JUDGMENT DATE : 12 May 2009 1. Leave to file a third Further Amended Statement of claim in the form of Annexure "D" to the affidavit of Robert Andrew Algie sworn on 4 February 2009 2. Leave to commence proceedings against HIH Casualty and General Insurance Ltd pursuant to s 471B of the Corporation Act 2001 DECISION : 3. Leave to commence proceedings against HIH Casualty and General Insurance Ltd pursuant to s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946. 4. Leave to commence proceedings against Gordian Runoff Ltd pursuant to s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946. 5. An order substituting CGU Workers Compensation (NSW) Limited as the first defendant 6. Costs will be costs in the cause. CATCHWORDS : PROCEDURE - Supreme Court procedure - New South Wales - procedure under rules of court - parties - joinder and addition of parties LEGISLATION CITED : Corporations Act 2001 Law Reform (Miscellaneous Provisions) Act Sidney Mabbett by his tutor Noeline Apiata (Pltf) CGU Workers Compensation (NSW) Ltd (1D) PARTIES : NSW Land & Housing Corporation (2D) HIH Casualty & General Insurance Limited (In Liquidation and subject to schemes of arrangement) (3D) Gordian Runoff Limited (4D) FILE NUMBER(S) : SC 20529/2006 A J Bartley SC/K Pryde (Pltf) COUNSEL : P Neil SC/D Hooke (1D) J Poulos QC (2D) D Williams SC (3D/4D) Carroll & O'Dea (Pltf) SOLICITORS : Edwards Michael Lawyers (1D) McCabe Terrill, Lawyers (2D) Wotton + Kearney (3D) LOWER COURT JURISDICTION : Compensation Court IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION McCLELLAN CJ at CL TUESDAY 12 MAY 2009 20529/06 MABBETT bhnf Noelene Apiata v CGU WORKERS' COMPENSATION (NSW) LIMITED & ORS JUDGMENT – On N/M to join additional parties to the proceedings 1 HIS HONOUR: The plaintiff in these proceedings was allegedly injured in an accident in the work place which occurred on 3 March 1993. At the time he was engaged in demolition work. 2 The accident was reported to WorkCover, and through the first defendant, Josef & Sons Contracting Pty Limited, he accessed workers compensation payments which were paid to him for a period of time. 3 As I understand the situation, he was thereafter injured in a second accident, the consequences of which will be an issue in the proceedings. 4 The plaintiff did not immediately commence these proceedings. The Statement of Claim was not filed until 23 November 2001 when proceedings against the first defendant were commenced in the District Court. 5 The first defendant was sued as the plaintiff's employer in the original Statement of Claim. 6 Thereafter preparation of the matter proceeded and an amended Statement of Claim joining the Department of Housing was filed on 1 August 2002. As I understand the position, the work in which the plaintiff was engaged at the time of his accident was on a site being developed by the Department of Housing. 7 On 22 July 2004 a summons was filed in this Court seeking to have the proceedings transferred from the District Court. 8 Orders were also sought granting the plaintiff an extension of time to bring proceedings pursuant to the relevant Workers Compensation legislation and also a declaration for the purposes of the Limitation Act, it being said that the plaintiff had suffered from a relevant disability. 9 Those proceedings were heard and determined by Adams J. His Honour granted the application for the transfer, granted the relevant extension of time, and also made a declaration under s 11 of the Limitation Act to the effect that the plaintiff had been a person under a disability at least from a date before the expiration of the limitation period. 10 The proceedings before Adams J occupied a number of days. During the course of those proceedings there was discussion about whether the plaintiff had been employed at the time of his accident by the first defendant or whether he had been employed by another firm. 11 The suggestion that he may have been employed by a firm other than the first defendant was contained in a number of statements which were primarily relevant to the circumstances of the accident, but in which a suggestion that the person making the statement and that the plaintiff were employed by a different firm was raised. 12 Adams J discussed that matter in his reasons for decision, but was satisfied that there was evidence which enabled his Honour to conclude that: "The issue of employment is also sufficiently clear, even at this point in time, to enable a just and fair determination of this issue to be made in the proceedings." 13 The suggestion of an issue with respect to the plaintiff's employment was given greater significance when a statement from Mr Robert Josef, the principal of the first defendant, was served upon the plaintiff. The statement is dated 22 February 2007, but was not served until 29 May 2008. Adams J gave his reasons for decision on 6 November 2006. 14 In Mr Josef's statement he indicates that the plaintiff was included on the first defendant's employment records at the insistence of another person who he identifies as Mr Dave Brown. He says in his statement that Mr Brown approached him saying there was a problem and that he wanted Mr Josef to put the plaintiff: "on the books as he could not afford to have Mr Mabbett lodge a claim against his workers compensation insurance. I understood the term 'putting him on the books' to mean Dave wanted me to record Sydney Mabbett as an employee." 15 The balance of the statement indicates that Mr Josef had concerns for his own safety and that of his family, and for that reason responded to Mr Brown's request and recorded the plaintiff as an employee. 16 If Mr Josef is telling the truth in that statement, it is apparent that he has been party to a fraudulent transaction. It is not clear whether the plaintiff was complicit in that fraud, if in fact that be the case, and by reason of his now apparently permanent disability he would be unable to give any evidence in relation to that issue in any event. 17 The first defendant resists the plaintiff's claim because, amongst other reasons, it says that it was not the plaintiff's employer at the relevant time. That position rests primarily upon the evidence of Mr Josef to which I have just referred, which is contrary to his account of the relevant events in earlier statements. 18 One significant issue at the trial will obviously be whether the later assertions by Mr Josef are correct. 19 There is evidence, as I have indicated, from other persons which touches upon this issue, but whether that evidence would be admissible in the proceedings, at least in respect of the issue of employment, is uncertain. However, there seems to me to be a strong argument that the evidence which the first defendant asserts to be relevant to that issue may not be admitted in the proceedings. 20 After the decision by Adams J the matter has proceeded, but not with any expedition. Indeed, to the contrary. In August of last year an attempt was made to settle the matter through mediation, but that failed. 21 Given the employment issue, and as I understand it a significant contest in relation to the facts concerning the accident, the matter may be difficult to resolve through negotiation. 22 The plaintiff has now brought a motion in which he seeks to join two insurers, HIH Casualty and General Insurance Limited and Gordian Runoff Limited. 23 HIH is in liquidation and subject to schemes of arrangement, and as a consequence, before proceedings may be commenced against it, leave of the Court is required pursuant to s 471B of the Corporations Act 2001. 24 Otherwise, the plaintiff seeks leave pursuant to s 6(4) of the Law Reform (Miscellaneous Provisions) Act to join HIH and Gordian to the proceedings. 25 The motivation for these motions, as the parties have explained the position, is that, as the parties have explained the position pursuant to relevant insurance policies, if the first defendant is found not to be the employer, there is a potential liability under a policy issued to the first defendant, and to the first defendant is an additional insured under the Department of Housing policies, pursuant to an extended definition of the word "insured". 26 The Department of Housing is insured for its liability, if any, in these proceedings pursuant to a joint policy issued by Gordian and HIH. 27 The plaintiff submits that the court should exercise its discretion to join HIH and Gordian in their capacity as the insurer of the first defendant other than for any liability of the first defendant as employer of the plaintiff in order to ensure that there is not a multiplicity of proceedings being one of the purposes lying behind section 6(4) of the Law Reform Miscellaneous Provisions Act. 28 It is submitted that because there is now to be a real issue in the proceedings in relation to whether or not the plaintiff was employed by the first defendant at the relevant time, unless HIH and Gordian are joined in accordance with the plaintiff's motion, there will be a significant risk that the plaintiff may fail in its action against the first defendant, as his employer but leaving him with an action against the first defendant being the occupier of the site to which the public liability policy will respond making it necessary, if the plaintiff is to recover, for him to bring separate proceedings. 29 Both the first and second defendants support the plaintiff's motion and submit that the issues which have now emerged must be resolved in the proceedings and should be resolved with all relevant parties present. 30 Mr Williams of senior counsel appears for both HIH and Gordian to defend their interests in the motion. As I understand it he has been retained by both companies for the purposes of defending the present motion but whether their interests would require separate representation at any hearing should they be joined would require further consideration. However, Mr Williams tells me that it is likely that separate representation would be necessary by reason of their disparate interests in the insurance arrangements. 31 The motion is resisted for a number of reasons. There is substance in each of them and I have not found the matter easy to resolve. However I should first acknowledge the practical response of Mr Williams' clients to the current dilemma. Although the motion was resisted, Mr Williams indicated to the court that he had instructions that if I was to order that a separate question, being whether or not the plaintiff was employed by Josef was defined, his clients would not pursue their resistance to a joinder confined to that limited question. 32 That arrangement was resisted by all other parties, primarily because of the complications by way of appeal rights which can arise when a separate question is defined, but also because they submitted that at least some of the witnesses relevant to the question of employment would also give evidence in relation to the circumstances of the accident and the current disabilities of the plaintiff. The consequence it was argued, would be an extension of the time necessary to dispose of the proceedings with a risk that credit findings may be necessary in relation to witnesses as to the separate question and the general proceedings being credit findings in relation to the same witnesses. 33 Although I was attracted initially to Mr Williams' proposition, I have ultimately come to the conclusion that the considerations to which I have referred are such that it would be inappropriate to define a separate question in the proceedings. 34 There was also discussion between the parties about whether if Mr Williams' clients were joined the litigation could be managed to confine their participation so that they were only present if they chose to be to deal with the evidence in relation to employment and make submissions on that question leaving it to the other defendants to deal with all of the other issues in the proceedings. 35 Although I can foresee some difficulties in achieving significant efficiencies, except by separating the question of damages in the course of the trial, I am satisfied that arrangements could be made which would confine the participation of HIH and Gordian if they chose to take this course to matters relevant to the issue of employment. 36 It was submitted that by commencing the proceedings against the first defendant as his employer, the plaintiff had taken a deliberate forensic decision to which he should now be bound. It was submitted that at the very least by the time of the hearing before Justice Adams, the possibility of a successful argument on behalf of Josef that it was not the plaintiff's employer, had surfaced because the plaintiff did not take the step of joining HIH and Gordian against the eventuality that Josef was found not to be the employer, it was submitted that the plaintiff should now be precluded from joining them in these proceedings. 37 It was further submitted that the plaintiff's motion should be rejected because it is founded upon an assumption that his primary case fails. It was submitted that that primary case is supported, as indeed is the case, by significant documentary material created about the time of the accident through which he accessed the workers' compensation payments. It was submitted that if he was now to be allowed to pursue a case against HIH and Gordian as public liability insurers of the first defendant, he would be effectively in the position of denying any liability in the workers' compensation insurer and effectively admitting that the benefits which he had previously obtained were fraudulently provided. It was submitted that the alternative case which is now suggested, being contrary to the primary position previously maintained, was weak and accordingly, given the problems which would be occasioned to the litigation and the fact that HIH and Gordian would be drawn into otherwise complex litigation, the motion should be rejected. 38 It was emphasised that if joinder was permitted, two additional parties would be added to this litigation and their interests may diverge requiring separate representation. 39 Finally it was submitted that the joinder of HIH raises separate issues because of the potential impact upon the creditors and the diminution of the funds in the pool which has been created pursuant to the schemes of arrangement. In particular, Mr Williams emphasised the fact that if HIH is joined, but the plaintiff fails in the suggested claim against it, it is unlikely that there would be a recovery of its costs given the apparent impecunious position of the plaintiff. 40 It was further submitted that the court should be mindful of the fact that before these proceedings could be pursued, it was necessary for the court to deal with the question of the Limitation Act and in contested proceedings which did not involve HIH and Gordian, those issues were resolved in the plaintiff's favour. Neither HIH nor Gordian were parties to those proceedings and accordingly would not be bound by Justice Adams' decision raising the possibility that that issue would be further litigated if those companies were now joined. 41 In different circumstances that submission may have greater force than it does in the present situation. Although not bound by the decision, it has been made apparent to me, and I don't understand Mr Williams to resist this proposition, that both HIH and Gordian have been aware of these proceedings for a significant period of time. Certainly and perhaps as insurers under different policies, they were aware of these proceedings at the time of the hearing before Justice Adams. 42 WILLIAMS: I think that's right your Honour. There is a difference between HIH and Gordian your Honour that I just need to understand. My preliminary instructions, if I can put it that way, are that HIH did not know about the proceedings before Adams J but I need to ask some questions about those instructions before I finalise them if it is important to your Honour's judgment. 43 HIS HONOUR: It is but can I just put a flag in the draft that Mr Williams' will confirm the position. 44 WILLIAMS: I am told Gordian needs to confirm too. Can I confirm one way or another. 45 HIS HONOUR: Mr Poulos I assume has told both companies about these proceedings. 46 WILLIAMS: I just don't know enough about what has happening on the Department of Housing side to tell your Honour without making sure I am sure. 47 HIS HONOUR: All right. 48 BARTLEY: His client will be able to tell you probably quicker than Gordian or HIH. 49 POULOS: I have never heard of either of them your Honour. 50 HIS HONOUR: If for no other reason but that the second defendant, the Department of Housing, is insured under an arrangement with both HIH and Gordian Runoff, the existence of these proceedings was known to those companies for a significant period. 51 Mr Williams can you confirm that? 52 WILLIAMS: It might depend on whether it is notified your Honour. 53 HIS HONOUR: You can let me know whether it is before Adams J but I would be surprised. 54 Having given careful consideration to the competing submissions, I have come to the conclusion that the plaintiff's applications should be granted. Although I appreciate that a question as to the true employer of the plaintiff was raised at an earlier time, I am satisfied that the plaintiff should not be shut out from joining these further parties by reason of the fact that it did not move the court until after it received the statement of Mr Josef dated 7 May 2008. 55 I am mindful of the fact that Justice Adams formed at least a tentative view that there was significant documentary evidence which supported the plaintiff's initial position and furthermore, having looked at that material myself, I am satisfied that the plaintiff was entitled initially to assume it could succeed against Josef as the employer. However, the subsequent statement of Mr Josef places the matter in a very different perspective and there must be a serious issue in these proceedings as to whether the original position of the plaintiff can be sustained. 56 If the plaintiff fails to prove that Josef was his employer, then there is, as I understand the proceedings, a real issue as to whether there could be liability in HIH and Gordian as the public liability insurer of Josef. 57 Having regard to the purpose and object of section 6 of the Act, I am satisfied that that joinder should be made to enable resolution of all potentially relevant matters in the one proceedings. 58 In reaching my conclusion, I am not unmindful of the possibility that the issue of the plaintiff's incapacity may be sought to be relitigated by HIH and Gordian. However, because in another capacity they indemnify the second defendant, I do not believe that issue is likely to emerge in a manner which would indicate that joinder should not be made. 59 In coming to my conclusion, as I have previously indicated, I have also had regard to the fact that given the multiplicity of defendants, effective arrangements should be able to be made to confine the cost and expense of defending the whole action by a sharing of resources where the defendants have a common interest. I have in mind particularly the question of damages. This, of course, is a matter for each of the defendants to carefully consider but given the nature of the defendants and the common insurers' interests which to some extent are involved in the matter, I am confident that effective arrangements should be able to be arrived at against that conclusion. 60 I have put into the balance the prospect of the proceedings going forward without HIH and Gordian being joined with the prospect of appeals and in that respect I am mindful of the fact that Justice Adams' decision has been the subject of an appeal, and the possibility of a further trial if the plaintiff was to lose on the issue of employment. It seems to me that weighing all of these considerations the appropriate course as I have indicated is to provide for the joinder. 61 The only further caveat and matter requiring consideration is the fact that HIH is in liquidation and accordingly, it is necessary for me to consider the exercise of discretion under section 471B of the Corporations Act. 62 Although I appreciate the potential burden upon the pool, given that HIH is effectively already a participant in these proceedings through its liability as I understand it to the Housing Corporation, I am not persuaded that by their formal joinder in these proceedings an inappropriate burden would be imposed upon the pool. As I have already indicated, if it is not joined, and the plaintiff is unsuccessful on the issue of employment, there would be a risk of an even greater burden being placed on the pool in the future. If, as I contemplate, effective arrangements can be made between the parties to confine their tasks to be separately addressed by each defendant, it seems to me the most efficient way for the ultimate resolution of this dispute can be achieved by the joinder of HIH and Gordian. 63 Accordingly, I make orders 1 to 5 in the notice of motion. Costs will be costs in the cause. ********** 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.