New South Wales Supreme Court CITATION : Ace Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 175 HEARING DATE(S) : 23 February 2009 JURISDICTION : Equity Division Duty Judge List JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 23 February 2009 DECISION : Short adjournment ordered pending clarification of position in foreign forum CATCHWORDS : Procedure – adjournment – application for anti-suit injunction – where local plaintiff's position in foreign proceeding to be protected by local defendant/foreign plaintiff in interim LEGISLATION CITED : (NSW) Civil Procedure Act 2005 CATEGORY : Procedural and other rulings PARTIES : Ace Insurance Ltd (plaintiff) Moose Enterprise Pty Ltd (defendant) FILE NUMBER(S) : SC 1103/09 COUNSEL : A S Bell SC w J R Williams (plaintiff) J R Sackar QC w R M Foreman (defendant) SOLICITORS : Wotton + Kearney Lawyers (plaintiff) Arnold Bloch Leibler (defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST BRERETON J Monday 23 February 2009 1103/09 Ace Insurance Ltd v Moose Enterprise Pty Ltd JUDGMENT (ex tempore) 1 HIS HONOUR: The defendant Moose Enterprises Pty Limited is an Australian company that manufactures toys and has directly or indirectly distributed them inter alia in the United States of America. Moose is the defendant in a number of class actions which have been brought in various States of the United States – including some, at least initially, in California, although most of them have now been consolidated into a proceeding in the State of Illinois. Moose has a product and public liability policy of insurance with the plaintiff Ace Insurance Ltd, also an Australian company. The policy contains clauses by which the parties agreed that their contract will be governed by Australian law and procedure, and to submit to the jurisdiction of the courts of the Commonwealth of Australia and its States. 2 Until late 2008, while reserving its rights and investigating the matter, Ace paid the defendant's costs in connection with Moose's defence of the various proceedings in the United States. On 28 November 2008, however, Ace indicated that it did not consider itself obliged to continue to do so and did not propose to do so, save that it offered to pay half of the defence costs of one of the proceedings. On 23 December 2008, Moose commenced proceedings against Ace (and various other defendants, including Ace USA Inc) in the Superior Court of the State of California in San Francisco seeking declaratory and other relief, the effect of which, if granted, would be to bind Ace to defend the proceedings brought against Moose in the United States and bear the defence costs of those proceedings. By Summons filed in the present proceedings on 15 January 2009, Ace seeks an anti-suit injunction restraining Moose from taking any further step in the Californian proceeding or, alternatively, compelling Moose to discontinue those proceedings as against it. 3 On 15 January 2009, Harrison J, sitting as Vacation Judge, granted an interim injunction restraining Moose until 20 January from taking any step directly or indirectly in the United States or elsewhere to restrain the hearing of the present Australian proceedings including the Notice of Motion for interlocutory relief. The matter returned before the Court, before Fullerton J, as Vacation Judge, on 20 January 2009 when, by consent, her Honour noted Moose's undertaking until further order that it would not take any step directly or indirectly in the United States or elsewhere to restrain the hearing of the present proceedings including the Notice of Motion, and also would not take any further step in the Californian proceeding as against Ace. Directions were made for Moose to file and serve any affidavit upon which it intended to rely by 6 February, for Ace to file any evidence in reply by 11 February, for the parties to exchange written outlines of submissions by 13 February, and setting the matter down for final hearing before the Equity Duty Judge today, 23 February 2009. The Court noted that Moose consented to an extension of time in the Californian proceeding for Ace, if so advised, to file any response or motion challenging jurisdiction or seeking a stay, until seven days after the delivery of judgment in the Australian proceedings. 4 The intent of the regime established by the orders of 20 January 2009 including the hearing today was to enable the application for the anti-suit injunction to be determined on a final basis before the time at which Ace would have to decide whether or not to take any step in the Californian proceedings to protect its position. At present, that time is 1 March 2009, by when Ace must either file a jurisdictional challenge in the Californian proceedings (whereby, if unsuccessful, it will to be taken to have submitted to the jurisdiction of the State of California), or at least file a motion seeking an extension of time in which to do so. 5 Moose did not file affidavit evidence or serve submissions in accordance with the directions of the Fullerton J or at all. Its default in this respect is egregious. At first, the explanation for the failure to do so was somewhat elusive, but it emerged that on 3 February, Moose had received initial advice, albeit of a very preliminary character, from an expert in Californian law which suggested that Californian expert evidence would be of little utility in resisting the application for an anti-suit injunction, but subsequently, as a result of a further conference on 19 February, Moose came to the view that Californian expert evidence might well be of assistance in demonstrating that there were forensic advantages available to it in California which were not available in Australia, the availability of which might well weigh against the grant of an anti-suit injunction in this jurisdiction. In short, those potential advantages are said to be that under Californian law, and arguably regardless of the choice of law clause, an insurer which has a right to defend proceedings on behalf of an insured is under a duty to defend those proceedings and to pay the whole of the defence costs, including in respect of matters not covered by the scope of the insurance policy. It is inappropriate at this stage to embark on any close review of the arguability of that position, but it cannot at this stage be said to be unarguable. 6 Ace contends that the choice of jurisdiction is an exclusive jurisdiction clause so that it was a breach of contract for Moose to commence proceedings in California. Again, it is not appropriate to embark on too close a review of that, but I think it can be said that the position contended for by Ace, while plainly arguable, is not beyond dispute. 7 Today, Moose seeks an adjournment of the final hearing on the basis that it wishes to put before the Court evidence of the Californian expert it has approached to address these issues. It offers to approach the Californian court to obtain ex parte an extension of time for Ace to respond in those proceedings. 8 If an adjournment is not granted, it will not be in a position to adduce any such expert evidence. Ace argued that an adjournment will occasion it prejudice in a number of respects. The first is that the purpose of having a final hearing at this stage was to ensure that the issues could be resolved before it had to take any step in the Californian proceedings, and that as by 1 March Ace must at least file a motion seeking an extension of time in which to file a jurisdictional challenge, an adjournment will involve the risk that it might not be dealt with prior to 1 March, or it might be declined notwithstanding that Moose proffers an undertaking to consent to it or indeed to advance itself. Secondly, and obviously enough, Ace will incur the costs thrown away by the adjournment and potential costs of preparing itself to meet the case in California. There is also a concern that, Moose having recently given active consideration to the appointment of an administrator, its offer to pay Ace's costs might prove to be worthless. Aside from that, however, Ace is protected by the interlocutory undertaking which Moose has given. 9 As I have said Moose's defaults are egregious, and I accept there is an element of risk as to Moose's ability to pay Ace's costs thrown away. I accept also that it may be necessary for Ace to take some steps which it otherwise need not have to to prepare itself for an application in California. However, I am unpersuaded that, by indicating consent to the application that Moose proposes to make for an extension of time in which Ace might file a jurisdictional challenge, Ace would have been taken to have submitted to the Californian jurisdiction, any more than it could have been taken to have done so by the consensual extension of time which has already been granted. 10 That said, all those risks are, I think, quite slight. 11 The other side of the coin is that if an adjournment is not granted, what might be a very significant right and benefit for Moose, namely, to have the extensive and costly class actions against it in the United States defended by the insurer, could be forever lost. As I have commented on other occasions, the injunction imposed on the Court by the (NSW) Civil Procedure Act 2005 to facilitate the just, quick and cheap determination of proceedings still leaves the word "just" in prime place. In refusing an adjournment Ace would certainly secure the quick and cheap resolution of the proceeding, but not their just resolution. 12 An adjournment until Wednesday morning – by which time it will be known whether the Californian Court will accede to Moose's proposal to extend time for Ace to file a jurisdictional challenge for sixty days or so –will preserve the Court's ability to ensure that there is no irremediable prejudice to Ace if the Californian Court does not accede to the application, yet at the same time keep alive the opportunity for Moose to file expert evidence and to contest these proceedings, in which I have found it has at least an arguable case. 13 Accordingly, it seems to me that I should vacate the final hearing today, adjourn the proceedings to Wednesday morning – at which time the Court can be informed of the outcome of the application in the Californian Court, so that if that application is unsuccessful and Ace's position may be prejudiced, then the hearing can proceed on Wednesday or Thursday this week, depending on the convenience of counsel, on a final basis; but if Ace's position is protected in California, then the Court will fix a final hearing for a later date, allowing time for Moose to file expert evidence in the meantime. Moose must pay the costs of the present application and costs thrown away by the vacation on an indemnity basis, together with any costs that Ace might incur in positioning itself to make an urgent application to the Californian Court if that becomes necessary later this week. Given the risks which attend Moose's financial position, those costs will be assessable forthwith. 14 Otherwise, I propose to make orders substantially in accordance with those proposed by Moose, and counsel will bring in short minutes to give effect to that. 15 Accordingly: (1) I order that the hearing fixed for today be vacated. (2) I adjourn the proceedings to Wednesday 25 February 2009 at 10am before me for further mention and if necessary, for final hearing. (3) I will add to paragraph 2 of the draft minute these words: ", the plaintiff for its part undertaking reasonably to co-operate in such application provided that such reasonable co-operation does not extend to any step which its Californian attorneys advise in writing might be taken to be a submission to the jurisdiction of the Californian Court." I make notations and orders in accordance with the document entitled Short Minutes of Order initialled by me, dated this day and placed with the papers, as amended. (4) I direct that these orders be entered forthwith. (5) I adjourn the proceeding to 9.45am on Wednesday 25 February 2009 before me. ********** 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. 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