New South Wales Supreme Court CITATION : Kelley v Western Pacific Insurance Ltd [2010] NSWSC 1397 HEARING DATE(S) : 29/11/10 JUDGMENT DATE : 2 December 2010 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Short minutes to be brought in in the Common Law Division proceedings. CATCHWORDS : CORPORATIONS - deregistered company - action at law ostensibly commenced against non-existent company - personal injury claim for negligence - plaintiff files originating process in Corporations List seeking to add cause of action against insurer under s 601AG - orders to be made granting leave to amend in common law proceedings Corporations Act 2001 (Cth) s 601AG LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946, s 6(4) Supreme Court (Corporations) Rules 1999 Uniform Civil Procedure Rules 2005, rule 6.24 CATEGORY : Procedural and other rulings CASES CITED : Almario v Allianz Australia Workers Compensastion (NSW) Insurance Ltd [2005] NSWCA 19; (2005) 62 NSWLR 148 Dura (Australia) Constructions Pty Ltd v Victorian Managed Insurance Authority [2009] VSCA 171 Krystle Kelley - Plaintiff PARTIES : Western Pacific Insurance Ltd - First Defendant Checkmate New XGeneration Security Pty Ltd - Second Defendant RDL Investments Pty Ltd - Third Defendant FILE NUMBER(S) : SC 2010/356145 COUNSEL : Ms K Balendra - Plaintiff SOLICITORS : Slater & Gordon - Plaintiff IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J THURSDAY, 2 DECEMBER 2010 2010/356145 KRYSTLE KELLEY v WESTERN PACIFIC INSURANCE LTD & 2 ORS JUDGMENT 1 I am dealing with an originating process filed by Krystle Kelley on 27 October 2010 in which three defendants are named: Western Pacific Insurance Ltd ("Western Pacific"), Checkmate New Generation Security Pty Ltd ("Checkmate") and RDL Investments Pty Ltd ("RDL"). 2 The relief Ms Kelley seeks is: "Leave to substitute Western Pacific Insurance Ltd as second defendant in Supreme Court proceedings 2310/2008 before the Common Law Division of the Supreme Court." 3 The originating process commences: "This application is made under 601AG [sic] Corporations Act Corporations Regulations [sic] and s 6(4) of the Law Reform Miscellaneous Act [sic]." 4 Ms Balendra of counsel, who appeared for Ms Kelley and sought relief ex parte, made it clear that no reliance is placed on s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 and that s 601AG of the Corporations Act 2001 (Cth) is alone relevant. 5 The factual background is, in essence, that Ms Kelley suffered injury in an incident at a hotel in Wollongong in circumstances in which, she says, each of RDL (the hotel operator) and Checkmate (the provider of security guards or security services at the hotel) breached a duty of care in negligence owed to her. 6 In 2008, Ms Kelley commenced proceedings in the Common Law Division seeking damages for negligence against RDL. By means of an amended statement of claim filed on 29 February 2010, Checkmate was added to those proceedings as second defendant. Some three months earlier, however, Checkmate had ceased to exist by reason of its deregistration on 28 November 2009 following completion of its winding up. 7 Ms Kelley accepts that, because Checkmate does not exist (and did not exist when she purported to join it as a defendant to the Common Law Division proceedings), she cannot proceed against Checkmate. She considers herself to have, however, a separate cause of action against Western Pacific under s 601AG: "A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if: (a) the company had a liability to the person; and (b) the insurance contract covered that liability immediately before deregistration." 8 It was held by the Court of Appeal in Almario v Allianz Australia Workers Compensastion (NSW) Insurance Ltd [2005] NSWCA 19; (2005) 62 NSWLR 148 that s 601AG creates a new cause of action against an insurer to recover an amount that was payable to the deregistered company under the relevant insurance contract. Ipp JA said (at [19] – [20]) with the concurrence of Hodgson JA and Hunt AJA: "Section 601AG creates a new cause of action. The action is not a claim for damages. It is for an amount that was payable to the deregistered company under the relevant insurance contract. A claim in terms of s 601AG is subject to two conditions, namely, proof that the deregistered company "had a liability" to the person claiming and that the insurance contract covered that liability immediately before deregistration. The two conditions are expressed in the past tense. The inference is that the time for determining whether the deregistered company had a liability to the person claiming, and whether the insurance contract covered that liability, is "immediately before deregistration" (being the phrase qualifying condition (b)). This was not disputed." 9 The new cause of action, of its nature, does not arise until the company having the benefit of the insurance is deregistered; and any defences that the insurer may have had at that point to an action on the insurance contract may be pleaded by it in defence to the s 601AG claim. This follows from paragraph (b) of the section which has regard to the cover actually provided by the contract of insurance immediately before the deregistration. 10 In the present case, it appears at a prima facie level that Checkmate held relevant insurance from Western Pacific at the relevant time. There is thus at least an arguable basis for a s 601AG claim by Ms Kelley against Western Pacific. 11 Ms Balendra did not settle the originating process. She accepted that the statutory provisions are such that there is no such thing as an application for leave under s 601AG and that Ms Kelley's claim ostensibly advanced by originating process under the Supreme Court (Corporations) Rules 1999 by reference to that section is, in substance and reality, a claim for such leave as may be necessary to reconstitute the existing Common Law Division proceedings by adding Western Pacific as a defendant in place of Checkmate and adding a derivative cause of action against Western Pacific for recovery pursuant to s 601AG in place of the claim against Checkmate itself. 12 In terms of rule 6.24 of the Uniform Civil Procedure Rules 2005, Western Pacific should be seen as "a person whose joinder as a party is necessary to the determination of all matters in dispute in" the proceedings – one of those matters now being whether Western Pacific, as the insurer of the now defunct Checkmate, may be liable on account of Ms Kelley's injury upon a statutory cause of action that arose upon Checkmate's deregistration. An alternative characterisation of matters is that Ms Kelley is, on the view she takes, now entitled to proceed against Western Pacific for relief arising out of facts and circumstances substantially overlapping with those that form the basis of her action against RDL and that that proceeding should from the outset be joined with that against RDL. 13 Western Pacific should therefore be joined as a defendant in the Common Law Division action and the new cause of action should be pleaded against it, based, in part, on the current pleading as against Checkmate. Ms Kelley should be granted leave accordingly; and that leave should be granted even though Western Pacific (or, for that matter, RDL) has had no opportunity to be heard on the matter: Dura (Australia) Constructions Pty Ltd v Victorian Managed Insurance Authority [2009] VSCA 171 at [14]. Western Pacific's position is sufficiently protected by the ability to defend in the ordinary course and, if so advised, to seek to have the new claim struck out. 14 The best way forward, I think, is for Ms Kelley's legal advisers to submit through my Associate short minutes of appropriate orders to be made in the Common Law Division proceedings, together with the further amended statement of claim in respect of which leave is sought. I shall then deal with the matter in chambers unless there is some perceived need for it to be relisted. ********** 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.