TREMOLADA v ENERGIZE FITNESS [2011] NSWSC 1166

Supreme Court New South Wales

Medium Neutral Citation: TREMOLADA v ENERGIZE FITNESS [2011] NSWSC 1166 Hearing dates: 17 August 2011 Decision date: 07 October 2011 Jurisdiction: Common Law Before: RS Hulme J Decision: The Notice of Motion is dismissed Category: Interlocutory applications Parties: Alan Tremolada (Plaintiff) Energize Fitness Pty Limited (First Defendant) Belrose Wellness Centre Pty Ltd (Second Defendant) Calgym Manufacturing Pty Limited (First Cross-Defendant) Cal-Gym Equipment Pty Limited (Second Cross-Defendant) Representation: Mr D Ronzani Plaintiff/Respondent Keddies Lawyers McCabe Terrill Lawyers Pty Limited File Number(s): 2008/289376

Judgment 1RS HULME J: On 14 November 2006 the Plaintiff in these proceedings was injured at a gymnasium in Belrose when using a barbell that formed part of a Smith Weight Machine. On 19 June 2008 a Statement of Claim was filed in his behalf alleging that the First Defendant, Energize Fitness Pty Limited, was conducting the gymnasium. 2In an Amended Statement of Claim filed on 20 July 2009, Belrose Wellness Centre Pty Limited was joined as a Second Defendant and the Plaintiff alleged that the gymnasium was conducted by either the First or Second Defendant. 3In a First Cross-Claim filed on 5 August 2009, the Defendants alleged that Calgym Manufacturing Pty Ltd had manufactured the Smith Machine, supplied the machine to Life Fitness Australia Pty Ltd and that that company had sold the machine to Vital Fitness who had on-sold the machine to Energize Fitness Pty Limited in or around 1999. It will be convenient hereafter to refer to Calgym Manufacturing Pty Ltd as "Manufacturing". 4In a Second Cross-Claim filed on 21 February 2011 the Defendants alleged that Cal-Gym Equipment Pty Ltd was the manufacturer, or pursuant to s 74A(3) and s 75AB of the Trade Practices Act deemed to be the manufacturer, of the machine and the company that had supplied it to Life Fitness Australia Pty Ltd. There is no express statement that this claim is in the alternative to that advanced in the First Cross Claim although the inference that it is, is irresistible. It will be convenient hereafter to refer to Cal-Gym Equipment Pty Ltd as "Equipment". 5By an Amended Notice of Motion filed on 23 May 2011, the Defendants seek a number of orders. The only one pressed before me was that they be granted leave pursuant to s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 to file and serve Amended Cross-claims joining Vero Insurance Limited which is claimed to be the liability insurer of the cross-defendants. Vero opposes the order that the Defendants seek, substantially on the grounds that the Defendants have no arguable case against Manufacturing and Vero was not the insurer of Equipment. 6Curwoods Lawyers are the solicitors for Manufacturing and have advised that they act on the instructions of Vero. Curwoods say that that they do not act for Equipment and there is no evidence that they do. 7A number of documents bearing on the issue of insurance were in evidence. Produced by Aon Risk Services Australia Limited was the Broker Copy of what appears to be a Vero Insurance policy for the period 30 September 2006 to 30 September 2007. The document refers to Cal-Gym Manufacturing Pty Ltd as the insured and describes its business as "Manufacturer, Supplier and Distributor of Gymnasium and Fitness Equipment, General Engineering and welding work ..." 8Also produced by Aon Risk Services Australia Limited (or perhaps some associated company) was a "Client Risk Review Survey" noted as updated in July 2006. In that document the Insured is said to be "Cal-Gym Manufacturing Pty Ltd", that its business included the manufacture, supply and distribution of gymnasium equipment, that it had occupied its premises for 14 years and had been in business for 20 years. 9A third document on the letterhead of Aon Risk Services Australia Limited envisages the renewal of insurance coverage by Vero for the period from 30 September 2006 to 30 September 2007. In the "Insurer Coverage Summary" the insured is named as "Cal-Gym Manufacturing" Pty Ltd although on the "Insurer Closing - Broker Tax Invoice" the Client is named as Calgym Group Holdings Pty Ltd. 10Aon Risk Services Australia Limited also produced a Renewal Declaration in respect of a Liability Policy with QBE Insurance dated 16 August 2006. That describes the business of Cal-Gym Manufacturing Pty Ltd in similar terms to the documents previously mentioned. A table entitled "Claim Listing" for that company purporting to cover "All (ex CTP) claims with Date of Loss from 01/01/1997 to 17/08/2006" and also produced refers, inter alia, to claims where the dates and description of Losses were:- 22/5/1999 Gym Equipment Failed 29/11/1999 Gym Machine Overbalanced 19/01/2001 Pipa alleged Gym Equipment failure. 11A second table on the same page entitled "Summary for Cal-Gym Manufacturing Pty Ltd" of yearly amounts paid refers to policy periods the first of which commenced on 7 August 1998. (An interesting feature of the policy periods referred to in that table is the variation even within the one year. This is suggestive of more than one policy although as the matter was not explained or explored during argument, it may presently be put aside.) 12No document indicates in express terms that Vero also insured Equipment but the Defendants sought to rely on the possibility that Equipment was a subsidiary of Manufacturing. What appears to be a copy of the policy between Manufacturing and Vero defines the "Insured" to include the named insured and- Any subsidiary company (including subsidiaries thereof) of the Named Insured and any other organisation under the control of the Named Insured and over which it is exercising active management; 13Section 46 of the Corporations Act (2001) defines a subsidiary. It provides:- A body corporate (in this section called the first body) is a subsidiary of another body corporate if, and only if: (a) the other body: (i) controls the composition of the first body's board; or (ii) is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the first body; or (iii) holds more than on-half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or (b) the first body is a subsidiary of a subsidiary of the other body. 14There were a number of extracts of company searches also in evidence. 15Those for Manufacturing show that the company was first registered on 15 October 1998 and was de-registered on 8 December 2010. They indicate that the date when the company or name became active was 4 June 2000. Its original director and secretary resigned on 15 October 1998 and Mr Meier and a Leonard Young then became the company's sole directors, ceasing to hold their positions in 2010. The sole shareholder named in the "Current Company Extract" at Tab 4 to the affidavit of Rachael Arnold is Calgym Group Holdings Pty Ltd with 300 ordinary shares but the extract at Tab 11 shows a considerably wider number of shareholders and movements in the holdings of "A", "E", and ordinary shares that are not easy to follow. Beneficial holders of shares other than Calgym Group Holdings Pty Ltd are named as Mr Meier (with 75 ordinary and 6 "E" shares), Cal-Gym Equipment Pty Ltd with 6 "A" class shares, Young Finance (with 18 "E" shares), and Michelle Brown (with 10 ordinary shares). 16The extracts for Equipment show the company was first registered on 7 July 1992, with its place of business and registered office at that time being "Rapid Companies" at a specified office and street address. On the day of its incorporation its original directors and secretary resigned and Mr Manfred Ernest Meier and Maree Pierre Simon became its directors and Mr Meier its secretary. These persons remained in these positions thereafter. The only shareholders referred to on the extracts were the persons just mentioned with indications that it was in 1993 they had been first notified to ASIC as shareholders. The company was de-registered on 19 December 2010. 17These searches show that both companies had the same registered offices for some time - at Nevin Wright, 11 Connors Close Buderim and then Wrights Accounting, Shop 4, 9 Ocean St Maroochydore during the period February 2003 to 3 December 2007 - and the same principal place of business, - 228 Old Gympie Rd, Mooloolah Valley during the period 1 October 2007 to 8 December 2010. 18Mr Meier was also a director of a number of other companies the names of which included "Calgym". In the case of some of these, he only became a director in 2009 but in the case of Calgym Holdings Pty Ltd he was a director from 15 October 1998 to 30 July 2010. One document suggests he was a director of Calgym Group Holdings Pty Ltd only after 16 June 2009. 19There was little evidence as to the date and circumstances of manufacture of the Smith Machine. In the main it is provided by a copy of a statement of Martin Dunkerley who says that he is a director of the Second Defendant and was Managing Director of the First Defendant from 1997 to 2006. He said that he had purchased the Smith Machine in around 1999 and would estimate it as being about 10 years old at the time of the Plaintiff's accident. Given that the Plaintiff's accident occurred in November 2006, that evidence would suggest the machine was manufactured in about November 1996, i.e. prior to Manufacturing, but not Equipment, coming into existence. The reliability of Mr Dunkerley's estimate was, of course, not the subject, of evidence in the proceedings before me. 20The only other evidence before me bearing on these issues included a statement in a letter Ms Arnold, a principal of the solicitors for the Defendants wrote on 21 February 2011 to a Mr Meier, the former director of both Manufacturing and Equipment. In the letter, Ms Arnold wrote:- We have been advised that in or about 1993 Cal-Gym Equipment Pty Limited was the entity that designed and manufactured the subject machine. 21The source and reliability of this advice was also not the subject of evidence. 22It is clear law that, before leave is given under s 6 of the Law Reform (Miscellaneous Provisions) Act to join an insurer of another person said to be liable, there must be:- (i) An arguable case against that other person; (ii) An arguable case that the policy responds; and (iii) a real possibility that if judgment is obtained, that other person would not be able to meet it. -see e.g. Bede Polding College v Limit (No 3) Limited and Anor [2008] NSWSC 887 at [6]; 23There was no argument but that the third of these propositions was fulfilled in this case. 24Counsel for the Defendant submitted that the references to an "arguable case" involved nothing more than that, by reference to the pleadings, it appeared that there was an arguable case. In support he referred to Bede Polding College v Limit (No 3) Limited and Anor at [9] where Grove J said that the applicable test was as for summary dismissal and that "once it appears that there is a real question whether of fact or law and that the rights of the parties depend on it, then it is not competent for the Court to dismiss the action". To similar effect are remarks of Barrett J in Zhang v Minox Securities Pty Ltd [2008] NSWSC 689 at [16] and I accept the general proposition. 25Given the legitimacy these days of claiming against persons in the alternative when it appears that one is liable but it is uncertain which, I do not regard the mere fact that the Defendants have cross-claimed against both Manufacturing and Equipment as an impediment to the Defendants' success in the application to join Vero, even on the assumption that that company is the insurer of only Manufacturing. There remain however the issues of whether, in light of some of the particular evidence to which I have referred, it can be said that the Defendants have a sufficiently arguable case to justify the grant of leave under s 6 of the Act. 26The date upon which Manufacturing came into existence, viz. 15 October 1998, is incontrovertible. However it is not easy to reconcile this date with the policy commencement date of 7 August 1998 referred to in one of the QBE Insurance documents and also apparently for a company entitled Cal-Gym Manufacturing Pty Ltd. Nor is it easy to reconcile the date with the statements in the Client Risk Review to the effect that Manufacturing had occupied its premises for 14 years and been in business for 20 years. Of course one must recognise the possibility that there was some lack of precision in these latter statements and that, while the business had been accompanied by those attributes, the company Calgym Manufacturing Pty Ltd (or Cal-Gym Manufacturing Pty Ltd if this is not the same company) had only conducted the business since incorporation. 27Mr Dunkerley's estimate of the age of the machine is, of course, not incontrovertible although as he apparently saw the machine in 1999, it might be thought to be fairly strong evidence that it was not manufactured after Manufacturer's incorporation on 15 October 1998. 28In the result, it does not seem to me that I would be justified on the present state of the evidence in joining Vero as Manufacturer's insurer. I appreciate that this conclusion is to some extent inconsistent with the approach taken in the cases to which I have referred but the Act requires that leave be granted before Vero is joined and in that situation it does not seem to me that I should ignore the state and strength of the evidence before me. It may well be of course that further research, whether pursuant to UCP Rule 5 or otherwise, may assist the Defendants but in this Application, the claim to join Vero as Manufacturer's insurer must be dismissed. 29The claim to join Vero as the insurer of Equipment is more easily dealt with. There is simply no evidence that Equipment was a subsidiary of Manufacturing or that Vero insured Equipment. The fact that there was some similarity in name, that both companies for a time had the same registered offices and principal place of business and that Mr Meier was a director of both provides no basis for drawing any of the inferences that the Defendants seek in this regard. This claim also must be dismissed. 30Subject to any issue as to costs, which was not argued, the appropriate order is that the Notice of Motion is dismissed.