Supreme Court New South Wales Medium Neutral Citation: Wrigley v Axis Specialty Europe Limited [2013] NSWSC 30 Hearing dates: 01/02/2013 Decision date: 01 February 2013 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Revoke order for separate and prior determination of questions Catchwords: PRACTICE & PROCEDURE - preliminary questions - judicial power - purpose of judicial determinations - questions based on facts assumed, but not proved or admitted - need to identify all essential facts Legislation Cited: Corporations Act 2001 (Cth) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) Cases Cited: Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 Jacobson v Ross [1995] 1 VR 337 Category: Procedural and other rulings Parties: Philip Wrigley (First Plaintiff) Judith Wrigley (Second Plaintiff) Brian Sweep (Third Plaintiff) Linda Sweep (Fourth Plaintiff) Axis Specialty Europe Limited (Defendant) Representation: Counsel: M R Elliott (Plaintiffs) J Simpkins SC / D F Villa (Defendant) Solicitors: Henry Davis York (Plaintiffs) Minter Ellison (Defendant) File Number(s): 2011/266650 Judgment (EX TEMPORE - REVISED 1 fEBRUARY 2013) 1HIS HONOUR: The plaintiffs assert that they relied upon a financial adviser known as Prosperity Advisers Pty Limited (Prosperity) for advice in relation to certain investments. Further, the plaintiffs say, they acted on that advice by making certain investments which proved to be anything but profitable. The plaintiffs say that the advice given to them was negligent, and that Prosperity engaged in misleading or deceptive conduct (perhaps, extending beyond its name), as a result of which they suffered substantial losses. 2The plaintiffs made a claim against Prosperity. Prosperity went into administration. The plaintiffs now pursue the defendant insurer, which issued a policy of insurance to Prosperity which, the plaintiffs say, would respond to the claims that they would have pressed against Prosperity. The plaintiffs assert rights under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) against the insurer. 3Prosperity entered into a deed of company arrangement, which deed was subsequently amended. It is convenient to refer to the deed, as amended, simply as "the deed". 4Under that deed, as is usual, there was provision for the rights of claimants against Prosperity to be satisfied by distribution of the deed fund in a specified manner. 5The deed (through the amendment) made specific provisions for claimants who said that they were entitled to the benefit of insurance. In effect, the insurers involved were to pay agreed amounts to the administrators, and those agreed amounts were to be distributed in substance for the benefit of the "insured" claimants. 6The deed provided, in respect of those insured claimants, that upon payment of their entitlements under the relevant clause of the deed, their claims would be released and extinguished. 7The amendments which introduced the specific provisions relating to insurance and insured claimants were made, I think, after these proceedings had been commenced. The insurer wishes to amend its commercial list response so as to assert specific defences arising out of the matters that I have summarised. One of those defences would say, in substance, that by operation of the deed, the claims that insured claimants, including the plaintiffs, have against Prosperity are released and extinguished. According to the insurer, that gives Prosperity a "right" on which the insurer may rely pursuant to s 6(4) of the Law Reform (Miscellaneous Provisions) Act. The plaintiffs deny that there is such a right. Thus, they say, that aspect of the amendments lacks utility. 8The defendants also wish to assert that the action is no longer maintainable. That too is said to arise under and by virtue of the execution of the relevant provisions of the deed. Again, the plaintiffs say, that amendment would lack utility. 9It may be noted, at the outset, that the proposed amendments do not assert that the insurer has paid the agreed sum to the administrators as trustees of the deed, and do not assert that the sum so paid has been distributed in accordance with the relevant provisions of the deed. However, the Court has been told that, in fact, those steps have been taken. It would follow that if the amendments are to be made, they should include allegations of those material facts. 10The argument as to whether or not the insurer should be given leave to amend was dealt with, I think, late last year. In the result, the parties agreed on the formulation of what they said were questions to be determined separately from and prior to the determination of any other questions in the proceedings (UCPR r 28.2). 11The first of those questions enquired whether, on certain assumptions that were set out and on the proper construction of the Law Reform (Miscellaneous Provisions) Act and the deed, specified clauses of the deed gave "Prosperity a right that the [insurer] may rely on under s 6(4) of the Act by way of complete answer to the plaintiff's claims?" 12The assumptions were that: (a) "each of the matters set out in the plaintiffs' commercial list statement are [sic] correct (save only to the extent the answer to the separate question would dictate otherwise)"; and (b) "here [sic] are no facts or circumstances that would enable the plaintiffs to pursue the defendant notwithstanding the terms of the deed." 13The second question inquired whether, having regard to certain "agreed facts", and to the assumptions that I have just set out, the proposed defence was maintainable having regard to s 444D(2) of the Corporations Act 2001 (Cth). It is not necessary to set out the agreed facts. 14The matter came to me only yesterday, and I took the view that there might be a problem with the form of the separate questions. That problem arose, I thought, because of what the majority in the High Court of Australia (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ) had said in Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 at [49] and following. In brief, their Honours warned against the undesirability of determining separate questions, and making declarations accordingly, based on facts that were neither found nor agreed, but merely hypothetical (at [49]). Their Honours of course, went somewhat further than that. It will be necessary to return to what they said, including as to the nature of the exercise of judicial power (see at [56]). 15I raised the matter with the parties yesterday because I thought it was appropriate to see if the questions could be reformulated in a way that would avoid any question of hypotheticality. 16This morning, the questions that were propounded, and which the parties sought to argue, remained unreformulated. Mr Elliott of counsel, for the plaintiffs, submitted that it could be possible to reformulate the questions so as to remove all but one assumed rather than agreed fact. That assumed fact, he submitted, would be the implicit assumption that the plaintiffs have the charge (under s 6 of the Law Reform (Miscellaneous Provisions) Act) on which they rely to base their action against the insurer. 17Mr Elliott submitted that if, on a final hearing, that were shown to be incorrect then the plaintiffs would lose anyway. Thus, he submitted, there would be no danger in answering the present questions notwithstanding that they involved hypothetical assumptions. 18Further, Mr Elliott submitted, there was utility in dealing with the questions, particularly in terms of shortening of ambit of the issues that might be raised at any hearing. 19Mr Simpkins of Senior Counsel, who appeared with Mr Villa of counsel for the insurer, submitted that this was really something analogous to proceedings in the nature of demurrer. He noted, correctly, that the procedure adopted had evolved from a challenge to his client's application for leave to amend its commercial list response. Mr Simpkins relied on what has been said in Bass at [50], where the majority identified a distinction between the procedure of answering preliminary questions, and making declarations accordingly, on the basis of assumed facts (on the one hand), and proceedings by way of demurrer (on the other). 20Mr Simpkins submitted, further, that if the separate questions were not to be dealt with, then his client should be given the leave to amend which it sought. He acknowledged that it would be necessary for the amendment to be reformulated so as to allege payment of the amount agreed between the insurer and the administrators, and distribution of that amount in accordance with the relevant provisions of the deed. 21In Bass, the majority said at [49] that answers given to separate questions, and declarations made accordingly, that were not based on facts agreed or found, "were purely hypothetical". In those circumstances, their Honours said the answers could "do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established." Their Honours noted that this process left open the question, "[w]hat facts are determinative of the legal issue involved." That, they said, would not "assist the efficient administration of justice", nor would it "finally resolve the dispute or quell the controversy". 22In the present case, if the questions are answered in favour of the insurer, that will not necessarily establish for all time and all purposes, the defences on which it relies. As Mr Elliott foreshadowed, the plaintiffs would then raise, presumably by way of reply, various defences including (by way of example only) estoppel defences. It would only be if the hypothetical question were answered in favour of the plaintiffs that some resolution would be achieved. 23Nor do I think that Mr Simpkins' reliance on the analogy of demurrer is appropriate. The demurrer process involves the assumption of the truth of the facts alleged in the pleading against which the demurrer is taken. It does not assume the truth of any facts outside that pleading (or the part demurred to). In this case, the assumptions on which the Court is asked to decide the separate questions travel well beyond the facts asserted in the particular paragraphs of the proposed pleading to which objection is taken. As I have noted already, they include the assumption of the truth of "each of the matters set out in the plaintiffs' commercial list statement". 24Mr Simpkins stated frankly, that not only were those matters not alleged for all purposes (that is to say, for all purposes related to these proceedings), they were not even admitted for the purposes of the separate determination of the questions involved. 25It will also be apparent that each of the questions is dependent (in the one case in whole, and in the other case in part) on those assumptions. 26One of the problems involved in dealing with separate questions is identifying the entire universe of relevant facts. That was pointed out by Brooking J in Jacobson v Ross [1995] 1 VR 337, in a passage cited with approval by the majority in Bass at [53]. 27In this case, counsel submitted, the entire universe of relevant facts had been identified, because the founding assumption was that all the matters asserted in the plaintiff's commercial list statement were correct. But that does not identify the particular facts which are relevant to the particular questions which are posed. It means that the Court is required, making the assumption as to all those matters, to draw from them that which may be relevant to the questions, and to deal with the questions of law which are entangled in those questions. That process is complicated by the parenthetical qualification to the assumptions. 28As the majority said in Bass at [53], "the failure to identify the relevant facts or the means by which they are to be ascertained may result in procedures which do not conform to the judicial process." 29In this context, I do not think that in talking of identification of relevant facts, their Honours had in mind that some entire universe of facts might be identified (let alone a universe potentially qualified as is the present one). Rather, I think, what they had in mind was identification of the particular facts which grounded, or were necessarily required to be admitted or proved (and in that sense were "relevant"), for a determination of the particular questions to be made. 30Thus, as their Honours said at [56], a question was raised as to the proper nature of judicial power. That power, they said, "involves the application of the relevant law to facts as found in proceedings conducted in accordance with the judicial process". It was contrary to that process, their Honours said, "and no part of judicial power to effect a determination of rights by applying the law to facts which are neither agreed nor determined by reference to the evidence in the case". 31In my view, the reasoning of the majority in Bass requires the conclusion that the Court should not embark upon the determination of the separate questions. To do so would require the Court to proceed, upon the basis of assumptions which may or may not be proved to be accurate (and some of which may not be "relevant" in any way), as to the underlying facts. It would require the Court to apply the law to facts which are neither agreed nor found in the ordinary way. Thus, it seems to me, the problem is not just one of utility, but a more basic one: a problem as to whether what would be involved, in answering these questions, does involve the exercise of judicial power. 32Thus, in my view, the proper exercise of the discretion to deal with the questions is to revoke the order made on 23 November 2012 for those questions to be determined separately from and before the determination of any other question in the proceedings. I will make that order in due course. 33That leaves the question of Mr Simpkins' fallback position. Mr Elliott opposed the grant of leave to amend, on the basis that the amendments would lack utility. But that is the very question which cannot be considered except upon the basis of assumptions that travel beyond the bounds of the facts that would be pleaded in the proposed amendments. I say that because the separate question mechanism, which was chosen by the parties as the means for dealing with this issue, does not depend solely upon the facts proposed to be pleaded. 34Thus, it seems to me, it would be appropriate in principle to give the insurer leave to amend. However, since the amendment as presently formulated does not go far enough, the grant of leave should be, as it were, indicated in principle only, and subject to the insurer's actually producing the precise amendment on which it proposes to rely. 35I would expect that, having regard to what I have just said, there would be no further objection (except perhaps of a formal nature) to an amendment that was in the form presently propounded and that asserted, in addition, relevant facts as to payment and distribution. But I will not express a final view. 36It follows, further, that the parties will need directions for the further conduct of the proceedings, and to enable them to be prepared for hearing. 37For those reasons I make the following orders in principle: (1) Revoke the order made on 23 November 2012 for the separate and prior determination, pursuant to UCPR r 28.2, of the questions then stated. (2) Direct the defendant to submit its proposed amended commercial list response to the plaintiff within 7 days. (3) Stand the matter over to the directions list on 15 February 2013, on which date any dispute as to the amendment will be dealt with. (4) Order that the costs involved in the separate question be costs in the proceedings. (5) Reserve liberty to apply on 3 days' notice. [Counsel addressed.] 38I make those orders ********** 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. Decision last updated: 11 February 2013