Supreme Court New South Wales Medium Neutral Citation: Buses + 4WD Hire Pty Limited v Oz Snow Adventures Pty Limited [2016] NSWSC 1017 Hearing dates: 19 July 2016 Date of orders: 22 July 2016 Decision date: 22 July 2016 Jurisdiction: Common Law Before: Adamson J Decision: (1) Grant leave to the first cross-defendant to have separate legal representation from those solicitors and counsel appearing on behalf of the plaintiffs in the principal proceedings in order to defend the First Cross-Claim. (2) Unless an application for a different order is made in writing to my Associate within seven days, order the plaintiffs to pay the defendants' costs of the notice of motion. Catchwords: PRACTICE AND PROCEDURE – application by insured plaintiff for leave for separate legal representation in order to defend the first cross-claim – legal representatives for insured plaintiff in recovery proceedings instructed by compulsory third-party insurer under Motor Accidents Compensation Act 1999 (NSW) – cross-claim against first plaintiff – actual conflict of interest between position of first cross-defendant and its insurer would prevent legal representative acting on behalf of the first cross-defendant if also instructed by the compulsory third party insurer in the principal proceedings – order allowing separate legal representation for same party only made under exceptional circumstances – inherent jurisdiction of the Supreme Court – interests of justice favour orders – leave granted INSURANCE – statutory insurer dominus litis in proceedings brought in insured's name for recovery of monies paid to claimants injured as a result of negligence of owner or driver – s 78 Motor Accidents Compensation Act Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56 - 60 Motor Accidents Compensation Act 1999 (NSW), ss 3, 10, 16, 78, 112 Motor Vehicles (Third Party Insurance) Act 1942 (NSW), s18 Supreme Court Act 1970 (NSW), s 23 Cases Cited: Buses + 4WD Hire Pty Ltd v Oz Snow Adventures Pty Ltd [2015] NSWSC 1687 Carter v Marine Helicopters Ltd (1996) 9 ANZ Insurance Cases 61-299 GPI Leisure v Herdsman Investments (No. 3) (1990) 20 NSWLR 15 McCann v Parsons (1954) 93 CLR 418 Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; 53 NSWLR 198 Tindle v Ansett Transport Industries (1990) 21 NSWLR 492 Wilkins v Kingsley-Strack (unreported, Supreme Court of NSW, 12 December 1996) Texts Cited: S Mullins, "Conducting an Action on Behalf of the Insurer in the Name of the Insured (A Case for Schizophrenia)" (1991) 4 Insurance Law Journal 83 Category: Procedural and other rulings Parties: Buses + 4WD Hire Pty Limited (1st Plaintiff, 1st Cross-Defendant) Shannon Baglee (2nd Plaintiff) Oz Snow Adventures Pty Limited (1st Defendant, 1st Cross-Claimant) Matthew Goodall (2nd Defendant, 2nd Cross-Claimant) Zurich Australia Insurance Limited (2nd Cross-Defendant) Representation: Counsel: JA Gracie (1st & 2nd Plaintiff; 2nd Cross-Defendant) D O'Dowd (1st Cross-Defendant) J Rose (Defendants/ Cross-Claimants) Solicitors: Vardanega Roberts (1st & 2nd Plaintiffs, 2nd Cross-Defendant) Gillis Delaney Lawyers (1st Cross-Defendant) Stevens Cottee Lawyers (Defendants/ Cross-Claimants) File Number(s): 2013/374167 Judgment Introduction 1. On 2 June 2016, Gilles Delaney, solicitors, filed a notice of motion on behalf of Buses + 4WD Hire Pty Ltd (Buses), which was described in the motion as the first cross-defendant. The motion seeks the following order: "An order pursuant to the inherent jurisdiction of this Honourable Court that leave be granted to the first cross defendant to have separate legal representation from those solicitors and Counsel appearing on behalf of the first and second plaintiff in the principal proceedings in order to defend the claims made by the first and second cross claimants in the First Cross Claim." 1. Mr O'Dowd of counsel, who was instructed by Gilles Delaney, appeared on behalf of Buses at the hearing of the motion. Mr Gracie of counsel, who was instructed by Vardanega Roberts, on behalf of Buses and Shannon Baglee, the plaintiffs, supported the application. As Mr O'Dowd and Mr Gracie supported each other's submissions I propose to refer to them jointly as the applicants although the notice of motion was filed by Gilles Delaney. Mr Rose, of counsel, who appeared on behalf of the defendants, opposed the notice of motion. 2. In summary, Buses contended that there was an irreconcilable conflict between its own position (as first cross-defendant) and the position of its compulsory third party insurer, Zurich Australia Insurance Ltd (Zurich), which had the effect that no solicitor would (or could properly) act on its behalf on both the plaintiffs' claim and in defence of the cross-claim, thereby depriving it of the right to legal representation. It argued that, in these exceptional circumstances, the order sought ought be granted. Background to the application 1. It is necessary to outline, in brief form, the underlying facts and the allegations made by the parties in the pleadings in order to address the issue raised by the notice of motion. The following summary, which is sufficient for present purposes, is not intended to reflect each precise allegation made. 2. These proceedings were commenced by statement of claim filed in the District Court on 12 December 2013. The solicitors on the record for the plaintiffs are Vardanega Roberts. The accident 1. Buses, the first plaintiff, was the registered owner of a bus with the registration number TV 3777 (the bus). The first defendant, Oz Snow Adventures Pty Ltd (Oz Snow), hired the bus from Buses for the period from 4pm 10 June 2011 until 4pm on 12 June 2011 for the purposes of carrying passengers from Sydney to Thredbo. The second defendant, Matthew Goodall, was a director of Oz Snow. 2. In June 2011, during the hire period, the bus failed to complete a turn at or near the intersection of Alpine Way and Kosciuszko Road, Jindabyne, crashed through a guard rail and overturned on the adjoining embankment. As a result of the accident, 21 people who were injured in the accident (the claimants), made claims against the plaintiffs for damages in negligence. The plaintiffs' insurance 1. Mr Baglee (the second plaintiff) was the driver at the time and was therefore taken to be Buses' agent, acting within the scope of his authority in relation to the bus, by reason of the presumption of agency effected by s 112 of the Motor Accidents Compensation Act 1999 (NSW). Zurich was liable to indemnify the plaintiffs for "liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle" by reason of the statutory third party policy: ss 10 and 16 of the Motor Accidents Compensation Act. Zurich resolved the claimants' claims by payments in excess of $1m. 2. Australian Coach and Underwriting, the property insurers of the bus, also instructed Vardanega Roberts to recover through the named plaintiffs (by way of subrogation) from the defendants. This claim is included in the further amended statement of claim. 3. I note that an uninsured claim by Buses for demurrage (loss of income from the bus because of the damage sustained in the accident) was also foreshadowed. It is common ground that if Buses wishes to propound such a claim it would be necessary for it to seek leave to amend the further amended statement of claim to include it. The plaintiffs' claim against the defendants 1. In the statement of claim (and its subsequent iterations, the most recent being the further amended statement of claim filed on 11 September 2015) the plaintiffs seek contribution from the defendants as joint tortfeasors, as well as damages for negligence and for breach of the hiring agreement between Buses and the defendants (or either of them). In [17] of the further amended statement of claim Buses alleges that its liability (to the claimants) was caused in whole or in part by the defendants' breaches of the hiring agreement; Oz Snow's negligence; and the negligence of Mr Baglee for whom Oz Snow, as his employer, was vicariously liable at common law. 2. In their defences to the further amended statement of claim, the defendants admitted the hiring agreement and, in [13] (which was a response to [17] in the further amended statement of claim), alleged that the liability of Buses was caused by: its own conduct or omission (including the conduct or omission of its servants, contractors and agents); and/ or the fact that the bus was defective and not in a fit and proper working condition to be hired. In [36] of its defences, Oz Snow alleges that the damage to the bus was caused by matters and events outside its reasonable care. The particulars to [36] set out the bases on which the Oz Snow alleges that the bus was not in a fit and proper working condition, including that its brakes and brake lining were defective and that the seat belts in the bus were not in working order. The defendants' cross-claim against Buses and Zurich 1. On 19 November 2015 the defendants filed a cross-claim against Buses (the first cross-defendant) and Zurich (the second cross-defendant). They claim damages against Buses for negligence and breach of contract, including: loss of income; loss of profits; passenger losses; legal and forensic costs in respect of the investigation conducted by the NSW Office of Transport Safety Investigations; and the damages, interest and costs claimed by the plaintiffs in the proceedings. In the particulars to [9] of the cross-claim, the defendants incorporated [36] of Oz Snow's defence (being the allegation that the bus was defective). Buses is relevantly uninsured for the amounts claimed in the cross-claim. Buses' legal representation 1. As referred to above, the solicitors on the record for Buses (as plaintiff) are Vardanega Roberts. Buses' defence to the cross-claim was filed on its behalf by Gillis Delaney. Zurich's defence to the cross-claim was filed on its behalf by Vardanega Roberts, the solicitors for the plaintiffs. Buses' representation does not comply with the practice that each party is entitled only to one set of legal representatives: hence the present notice of motion for leave for separate representation. The evidence on the application 1. Mr O'Dowd, who appeared for Buses on the notice of motion and the cross-claim, relied on an affidavit of Naomi Tancred affirmed on 2 June 2016 in support of its notice of motion. Ms Tancred is a partner of Gillis Delaney, which filed the defence to cross-claim on behalf of Buses. She deposed that there is a possible conflict of interest between Buses and Zurich in that a finding that there was a relevant defect in the bus could give rise to different consequences for each party. Ms Tancred also deposed as to her understanding that Vardanega Roberts was not prepared to appear on behalf of Buses in its defence to the cross-claim. 2. Mr Gracie, who appeared for the plaintiffs (Buses and Mr Baglee) on the primary claim, relied on an affidavit affirmed on 13 July 2016 by Bethany Russell, an employed solicitor at Vardanega Roberts, the firm retained by Zurich to bring the plaintiffs' claim in these proceedings. Ms Russell deposed as to the conflict referred to by Ms Tancred (in her affidavit referred to above) as follows: "The interests of Zurich and of Buses and 4WD are in conflict as a result of the incorporation of Buses and 4WD in a cross claim at the suit of the First Defendant. The conflict has been articulated in correspondence between this firm and Messrs Gillis Delaney. The correspondence is a confidential document containing confidential communications as defined in section 117 of the Evidence Act, 1995. Buses & 4WD is the relevant client under section 117. In the exercise of subrogated rights the underwriter is to have regard to the interests of the insured. The communication is also a protected confidence under section 126A of the Act. If no objection is raised by Buses and 4WD under section 118 of the Evidence Act; and consent is forthcoming under section 122(1) of the Act the First Plaintiff will seek to tender the correspondence on a strictly confidential basis for consideration of the Court only. The Court will thereby be seized of relevant evidence and the confidentiality maintained." 1. I admitted into evidence the document referred to in that paragraph and marked it a confidential exhibit. I did not permit Mr Rose to inspect it because it was a privileged document. 2. The defendants (the respondents to the motion) relied on an affidavit of Warwick Cottee, their solicitor, sworn on 4 July 2016. He annexed a request for particulars of the alleged conflict referred to in Ms Tancred's affidavit; the communication by which Vardanega Roberts advised Buses that it is not prepared to act on behalf of Buses on the cross-claim; and the facts and matters on which Buses relied in support of the orders sought in the motion. No relevant particulars were provided (on the grounds that provision would amount to a waiver of privilege and no instructions to waive the privilege were forthcoming). The parties' submissions 1. It was accepted that an order such as the one sought in the present case is exceptional and will only be granted in a rare case. The defendants did not contend that this Court did not have power to permit Buses to appear by different solicitors and counsel on the main claim and the defence to the cross-claim. Rather, the defendants submitted that it would be inappropriate to exercise the power in the present case. The applicants' submissions 1. Buses (through the submissions of Mr O'Dowd and Mr Gracie) submitted that the order sought was required in the interests of justice because its position and that of its insurer on a matter identified in the confidential exhibit were in conflict. Attempts to resolve the conflict had been unsuccessful. Buses submitted that, in light of the conflict, no solicitor could act on behalf of Buses on the principal claim and in defence of the cross-claim since the instructions of Zurich as to the relevant matter (on the basis of which the solicitors for Buses on the principal claim would be bound to act, subject to the obligation to take into account the interests of Buses) would be at odds with the instructions of Buses on the defence to the cross-claim. Accordingly, Buses submitted that the consequence of the refusal to make the order sought would be that Buses would be unrepresented in the proceedings. The defendants' submissions 1. The defendants submitted that Buses was, in respect of the principal claim and the cross-claim, the dominus litis (master of the suit) and that it could not have a conflict with itself. 2. The defendants submitted that any conflict between Buses and Zurich (and any other insurer seeking to be subrogated to the rights of Buses) was no more than a potential conflict and that the court was not an appropriate forum for the resolution of any such conflict. They contended that the many practical reasons for requiring a party to be represented by one set of legal representatives weighed strongly against a grant of leave. They pointed to the inevitable prejudice which they would suffer if they had to face different contentions put on behalf of Buses, depending on whether it was the principal claim or the cross-claim. They argued that the same, or similar, issues arose in the principal claim as on the cross-claim. 3. Mr Rose, who appeared on behalf of the defendants, conceded that if there was an actual conflict of interest between Zurich and Buses, it might be appropriate to order separate representation, but submitted that no such conflict had been established. 4. Further, the defendants submitted that regard should be had to ss 56-60 of the Civil Procedure Act 2005 (NSW) in deciding whether the order for separate representation ought be made. They contended that substantial injustice would be occasioned to them by reason of the increased costs of the proceedings. The matters they submitted would give rise to real prejudice to them included the following: the potential for cross-examination of their witnesses by two counsel; the extra costs associated with Buses using two counsel and two firms of solicitors; uncertainty relating to service which would effectively require the defendants to serve both firms of solicitors; difficulties with the form and content of offers of compromise and to whom they should be addressed and on whom they should be served. The applicants' submissions in reply 1. The applicants submitted that any prejudice occasioned to the defendants if the order were made could be ameliorated by directions or an agreed protocol, including the following: 1. A single address for service could be specified (being one or other of the two firms) so that the defendants would not be disadvantaged by dual representation. 2. An agreement that the solicitors for the plaintiffs and Zurich (Vardanega Roberts) would not incur any costs at all on the cross-claim and Buses' solicitors on the cross-claim (Gillis Delaney) would not incur any costs on the principal claim. 1. The applicants also submitted that, in so far as the interests of Buses were the same on the principal claim and the cross-claim, only one counsel would be permitted to cross-examine any of the defendants' witnesses in any event, in accordance with the convention outlined in GPI Leisure v Herdsman Investments (No. 3) (1990) 20 NSWLR 15, 16E-F and 17C per Young J. Consideration 1. For present purposes I am prepared to assume that this Court has power to make the order sought in the notice of motion, either in its inherent jurisdiction or under s 23 of the Supreme Court Act 1970 (NSW): Tindle v Ansett Transport Industries (1990) 21 NSWLR 492 at 498F and Wilkins v Kingsley-Strack (Unreported, Supreme Court of NSW, Giles CJ Comm D, 12 December 1996). 2. The starting position is that each party to proceedings is entitled only to be represented by one firm of solicitors and a barrister or barristers (in the case of lead and junior counsel) instructed by that firm. There are obvious reasons for this: a party is bound by the conduct of its counsel. Where there are two counsel appearing for a party, who are separately instructed, there is the potential for the party to be putting propositions which are inconsistent. This, in turn, has a substantial potential to create confusion, increased cost and prejudice to the administration of justice and, accordingly, is only warranted when the interests of justice require it. The authorities cited are redolent with references to the deleterious consequences of allowing separate representation such that the present application must be approached with a high degree of caution. 3. I am satisfied, on the basis of the confidential exhibit, that there is an actual, unreconciled (and possibly irreconcilable) conflict between the interests of Zurich and of Buses and that the only way in which it can be reconciled would be for one party to give way to the other. The requirement that Zurich (and any other insurer) must act in good faith and in the interests of Buses is not sufficient to resolve the issue. It is not suggested by Buses that the position taken by Zurich on the principal claim (as revealed by the confidential exhibit) is in any way at odds with Zurich's obligations as insurer to its insured. The conflict arises from the way in which Zurich wishes to proceed on the plaintiffs' claim (relating to a single factual issue) as opposed to the way in which Buses wants to defend the cross-claim (relating to the same factual issue). The factual issue arises both on the principal claim and on the cross-claim, although it is not a matter that needs to be proved by the plaintiffs on the principal claim. The factual issue itself cannot be disclosed because of the privileged nature of the communications that establish it. 4. The insurer's exercise of the right of subrogation in the present case involves a party's (Zurich's) suing to enforce the rights of another (Buses and Mr Baglee) in that other's name, but for its own benefit. Because the right of subrogation is concerned only with the rights of the insured and insurer inter se, the defendants are not concerned with the resolution of those rights. Accordingly, but for the order sought, the defendants would be entitled to assume that anything done by Buses on the cross-claim would affect Buses' conduct of the principal claim, and that Buses would not be permitted to do anything on the cross-claim that would be inconsistent with, for example, a concession made on the principal claim. 5. However, the differences between claims involving the exercise of a right of subrogation and those that do not can be illustrated by the following example. Suppose Claimant A brings proceedings against Tortfeasor T, who is insured for his liability to A by Insurer, J. T in turn brings a cross-claim (the first cross-claim) against Wrongdoer W. W makes allegations against T in its defence to cross-claim and repeats those allegations in a second cross-claim against T. In normal circumstances T would be required to be represented by the same counsel and solicitors in the proceedings as a whole, including: its defence to the claim; its prosecution of the first cross-claim; and its defence to the second cross-claim. However, if T died, A could move to have J substituted as the named defendant on the principal claim. However, T's personal representative would be the party named as the cross-defendant on the second cross-claim. In these circumstances, J and T's personal representative could be separately represented (since they are different parties) and could, accordingly, take different positions on issues. However, counsel for J and T would not be entitled to separately cross-examine witnesses in situations where their interests were the same: GPI Leisure v Herdsman Investments (No. 3) (1990) 20 NSWLR 15. 6. The situation in the present case is not substantially different from the example postulated above save for the following: first, the plaintiffs are in T's position (the claims by the Claimants having been resolved before the commencement of the recovery proceedings); secondly, the plaintiffs in the present case are not merely bringing recovery proceedings for the benefit of Zurich but also bring claims for the benefit of the property insurer; and may, if they amend to add a claim for demurrage, be claiming for Buses' own benefit; and, thirdly, Buses and Zurich are both defendants on the cross-claim and have potentially different interests as a result. However, because Buses is a registered company and must be named as a plaintiff (unlike T who has, in the example, died) in the recovery proceedings, it is bound to have the same representation in the principal proceedings as on the cross-claim, unless leave is granted. 7. There are several situations in which a party might seek two sets of representation. The issues that can arise between an insurer and an insured in an action brought in the latter's name for the benefit of the former include the following: 1. The insurer does not insure a loss which its insured wishes to claim against a third party. 2. The insured brings a cross-claim on a different issue unrelated to the subrogated claim. 3. The insurer and its representatives (which have conduct of the proceedings on behalf of the named insured) are faced with a conflict of interest as between the rights of the insured and the rights of the insurer. 1. In situation (1), the position is relatively clear. The insurer is obliged to include the claim which the insured wishes to bring in its pleading against the third party (which includes the subrogated claim). The reason for this is that otherwise the insured would be prejudiced in that the insured could be subject to an issue estoppel or Anshun estoppel in respect of the insured's own claim. This situation is not regarded as creating any conflict of interest between an insured and an insurer (although their interests do not coincide) and does not give rise to any need for separate representation. 2. Situation (2) is also relatively clear in that the obligation of the solicitors instructed by the insurer on the subrogated claim is to act in good faith and in the interests of the insured. In this situation, the cross-claim could be brought and, since it is on a separate issue, the interests of the insurer and the insured would be unlikely to conflict. 3. Situation (3) is the present case. Because there is a substantial overlap between the principal claim by Buses and the cross-claim brought by the defendants against it which it seeks to defend, a position taken by the insurer in the name of the insured on the principal claim which is different from the position which the insured wants to take in defence of the cross-claim causes a conflict. An actual conflict in this scenario has the effect of preventing a legal representative from acting, because of the nature and extent of the fiduciary duties owed by a solicitor to a client. 4. The obligations of a solicitor instructed by an insurer in proceedings where the insured is the named party were summarised in Conducting an Action on Behalf of the Insurer in the Name of the Insured (A Case for Schizophrenia) (1991) 4 Insurance Law Journal 83 at 87 as follows: "(1) The insurer may not act arbitrarily in deciding tactics or the conduct of the action. It must act bona fide in the best interests of both insurer and insured. (2) The insurer is not entitled to pursue some advantage outside the litigation in question. (3) The solicitor nominated by the insurer must act reasonably in the interests of both insurer and insured. (4) As the insured is the litigant, the solicitor is his solicitor and owes him duties as such. (5) The solicitor is also solicitor for the insurer and owes it corresponding duties. (6) The insured is deprived of his right to control the action to the extent that the insurer is entitled to give instructions to the solicitor pursuant to the policy. (7) However, to the extent that the insurer requires the solicitor to do something not empowered under the policy, the solicitor cannot do so without the insured's consent. " 1. For the reasons given below, the effect of s 78 of the Motor Accidents Compensation Act needs also to be considered since it affects the relationship between insurer and insured in proceedings for recovery of damages paid by an insurer as a result of the statutory third party policy. 2. I have been referred by the parties to several authorities. The facts of the present case are such that few are of assistance. In order to provide reasons for this decision I propose to refer to a few of them briefly. Tindle v Ansett Transport Industries (Operations) Pty Limited 1. In Tindle v Ansett Transport Industries (Operations) Pty Limited (1990) 21 NSWLR 492, the appellant appealed against the decision by the trial judge to permit the defendant, Ansett Transport Industries (Operations) Pty Limited (Ansett), to have separate representation in the trial of his action for damages. The appellant's claim against the defendant arose from an accident which occurred on 2 August 1984 when he was unloading a trailer. Ansett's liability to the appellant was covered by insurance policies with different insurers. QBE Insurance Co Ltd was the liability and workers compensation insurer; and State Government Insurance Commission of South Australia (SGIC) was the compulsory third party insurer. Ansett's two insurers agreed that they would contribute 50% to any damages recovered by the appellant; and that QBE Insurance Co Ltd should have carriage of the matter on behalf of Ansett. However, the appellant had a second accident on 22 March 1985 which was covered by workers compensation insurance (for which QBE Insurance Co Ltd was the relevant insurer). SGIC was concerned that QBE Insurance Co Ltd might endeavour to minimise the effect of the second accident on the appellant's physical condition. 2. The trial judge permitted SGIC to be separately represented from QBE Insurance Co Ltd, which would represent Ansett by rights of subrogation. The Court of Appeal assumed, without deciding, that the trial judge had power to make the order for separate representation but allowed the appeal, principally on the basis that the trial was to be conducted before a jury. It noted that any issues of indemnity between Ansett and its insurers could be the subject of separate proceedings. It adverted to the practical difficulties, particularly before a jury, of two sets of counsel representing the insurer's respective interests. 3. As this case was decided principally on the basis that two sets of representatives would be inappropriate in a jury trial, I do not consider it to be of assistance other than as an illustration of the general undesirability of making the order sought. Carter v Marine Helicopters Ltd 1. In Carter v Marine Helicopters Ltd (1996) 9 ANZ Insurance Cases 61-299, Carter sued Marine Helicopters for damage caused to his crops by over-spraying. Marine Helicopters was only covered by insurance for part of the period during which the over-spraying was alleged to have occurred. There were separate legal advisers for the insurer and the Marine Helicopters who advised with respect to the different periods. A disagreement arose between the legal advisers with respect to the conduct of the claim. It was not established that the disagreement was such as to give rise to a conflict which would cause the legal representatives to cease to act. After adverting to the difficulties for the plaintiff of having to deal with two sets of legal representatives, Williams J said: If the divisions between Marine Helicopters and its insurer and between their respective solicitors and counsel are irreconcilable, it may well be the case that counsel might need to give consideration as to whether or not they can continue to act. Even if such is not the case, the authorities already cited make it clear that the prime right to conduct the defence lies with Marine Helicopters. Litigants in its position effect insurance to lay off the cost to them of possible liability, but it none the less remains the case that it is they who are sued and it is they who, prima facie, have the right to defend, subject only to their obligations to their insurers as appearing in the authorities discussed. Declining Marine Helicopters' application does not, in this Court's view, leave it in an irretrievably difficult situation. Without in any way attempting to prejudge the outcome of any application which might be brought, its solution may be, as outlined in McKnight v Davis, to apply to join its insurer as a party — either a defendant in relation to the 1988-90 years or as a third party in relation to the global claims — notwithstanding the usual bias against defendants joining other defendants, or it might consider issuing separate proceedings against its insurer seeking contribution against any sum which may be awarded against it and in respect of which it claims to be insured. Those, in this Court's view, are much more appropriate and practical solutions to the problems which it faces rather than the difficulties and impracticality of making the orders sought. 1. I do not regard the practical alternatives postulated by Williams J in the passage set out above as being open in light of what I consider to be the actual conflict in the present case. Moreover, I consider Carter v Marine Helicopters Ltd to be distinguishable from the present case in that the effect of the Motor Accidents Compensation Act is to make the statutory insurer, not the named insured, the dominus litis (master of the suit). In McCann v Parsons (1954) 93 CLR 418, the High Court considered the effect of the Motor Vehicle (Third Party Insurance) Act 1942 (NSW) and said, at 430: In the present case it is of course clear that as a result of these provisions McCann is not and has never been under any risk of any personal liability falling upon him as a result of the plaintiff recovering a judgment in these proceedings for damages for the injuries she has sustained, that is, of course, unless the authorized insurer were able, notwithstanding s. 15 (1), to obtain relief in equity against the judgment on the ground of fraud. "Nor law nor duty bade him fight". Recognizing the unreality of the position of a defendant sued for damages for bodily injuries caused to a plaintiff by the management of a motor vehicle the legislature placed the authorized insurer in such a case in the position of dominus litis. The authorized insurer who has issued a third party policy may take over during such period as he thinks proper the conduct on behalf of such person of any proceedings taken or had to enforce a claim against any person in respect of a liability against which he is insured under the third party policy and he may defend such proceedings in the name and on behalf of such person: s. 18 (1) (b) and (c). 1. Section 78 of the Motor Accidents Compensation Act is the statutory successor to s 18 of the Motor Vehicle (Third Party Insurance) Act and relevantly provides: 78 Power of insurer to act for insured (1) When a claim is made against a person, the person's insurer may: . . . (b) conduct, or take over the conduct of, any legal proceedings in respect of the claim and may conduct those proceedings in the name and on behalf of the person, and (c) at any stage of those negotiations or proceedings, compromise or settle the claim, and . . . (2) The person against whom the claim is made is required to sign all such warrants, authorities and other documents as may be necessary to give effect to this section. (3) If the person fails to do so or is absent or cannot be found, the insurer may sign the warrants, authorities or other documents on behalf of the person. . . . 1. The effect of s 78(1)(b) is that Zurich is entitled to conduct the principal claim for recovery of monies paid for the negligence of Buses or Mr Baglee as it sees fit, having due regard to the interests of Buses and Mr Baglee as the insured. However, Buses is entitled to defend the defendants' cross-claim against it, as it sees fit, since its liability under the cross-claim is not covered by statutory policy and the cross-claim is not "legal proceedings in respect of the claim". The word "claim" is defined by s 3 of the Motor Accidents Compensation Act as a claim for damages in respect of the death of or injury to a person caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle". There are therefore two domini litis: Zurich in respect of those aspects of the principal claim that involve recovery of monies paid to claimants as a result of the alleged negligence of the owner or driver; and Buses, in respect of the balance of the principal claim (subject to any contractual right in the policy governing property damage for the property insurer to control the proceedings) and the cross-claim. Unlike Marine Helicopters, Buses does not have "the prime right to conduct" the principal aspect of the principal claim, by reason of s 78 of the Motor Accidents Compensation Act. Wilkins v Kingsley-Strack 1. In Wilkins v Kingsley-Strack Giles CJ (CommD) refused an application for separate representation by church wardens who were both plaintiffs and cross-defendants in the proceedings. The applicants argued that their interests as plaintiffs (where they were effectively suing on behalf of the church) were different from their interests as cross-defendants (where they were being sued in their personal capacity). They contended that, as plaintiffs, they had an interest in recovering from the relevant trust and the relevant bank, but as cross-defendants they had an interest in ensuring that the trust and the bank (the cross-claimants) were not liable and therefore could not recover against them. 2. In refusing the application, which was made without a notice of motion or evidence, Giles CJ (CommD) described the requirement of a conflict of interest (which had not been established by evidence) as "fundamental to the application". 3. This decision is to be contrasted with the present application where Buses has adduced evidence (albeit in a confidential, privileged exhibit) of an actual conflict of interest which cannot be resolved. Buses + 4WD Hire Pty Ltd v Oz Snow Adventures Pty Ltd 1. The defendants relied on Buses + 4WD Hire Pty Ltd v Oz Snow Adventures Pty Ltd [2015] NSWSC 1687 in which Schmidt J (in these proceedings) refused an order sought by the plaintiffs to split the primary claim by reference to particular paragraphs of the pleading. The basis of the application was that the pleading included claims for the benefit of Zurich (as the compulsory third party insurer) as well as claims for the benefit of Australian Coach and Underwriting (the property insurer of the bus). That application was an example of situation (1) above and is to be distinguished from the present application. Whether leave ought be granted in the present case 1. Although there are several factors to be taken into account in deciding whether the order ought be made (which are provided for in ss 56 – 60 of the Civil Procedure Act and referred to in the authorities set out above), the principal matter is the interests, or dictates, of justice. This requires a comparison between the prejudice to Buses (and Zurich) if the order was not made and the prejudice to the defendants if the order was made. 2. As referred to above, I am satisfied that there is an actual conflict which is present and unreconciled on an issue germane to the principal claim (in respect of which Zurich has the statutory power under s 78 of the Motor Accidents Compensation Act to control the proceedings and instruct the plaintiffs' solicitors) and the defence to the cross-claim (in respect of which Buses has an interest and Zurich has no apparent interest except to the extent that common issues might affect the principal claim). I am also satisfied that the conflict is such that, unless and until it is resolved, a single legal representative would not be entitled to act both for Buses on the principal claim and in defence of the cross-claim. Accordingly, if the order sought is not made, Buses will not be entitled to be legally represented, since no legal practitioner could act on its behalf. This would cause substantial prejudice, not only to Buses and Zurich, but also to the defendants who would be facing a trial which would be likely to be significantly longer on that account. 3. The consequences for Zurich would also be significant, but in a different way. As the statutory third party insurer, it is entitled, by reason of s 78 of the Motor Accidents Compensation Act, to conduct the litigation for recovery of the monies paid to the claimants, in the plaintiffs' names. It could not do so effectively if the plaintiffs were unrepresented. 4. Apart from making the order sought, the only way of solving this conundrum would be to separate the principal claim from the cross-claim which would otherwise be heard together. This prospect (for which no one contended) would be at odds with the principle that all issues in dispute between the parties ought be decided in the single proceedings. Moreover, it would be almost inevitable that the determination of the principal proceedings in advance of the cross-claim would create estoppels to the detriment of Buses on the cross-claim. These might take the form of issues estoppel or the estoppel which prevents a party who has lost on an issue, re-litigating it subsequently on the basis that it amounts to an abuse of process: Rippon v Chilcotin [2001] NSWCA 142; 53 NSWLR 198. In this event, Buses would almost inevitably suffer detriment by reason of Zurich's statutory entitlement to conduct the recovery claim as dominus litis. 5. Refusal of the order sought would have significant effects on the conduct of the litigation, and would tend to have a detrimental effect on the administration of justice by increasing the length of the hearing. This, in turn, would cause prejudice to all parties, including the defendants. 6. I am satisfied that it is appropriate, in the interests of justice, to make the order sought in the notice of motion. As I have not heard full argument on the directions which could be made to accommodate the exceptional nature of the order, I do not propose to make the directions proposed by Buses (such as a single address for service and so on). However, such directions, or protocol, can be sought in due course in the absence of agreement between the parties, with a view to minimising the prejudice to the defendants of having to deal with two sets of legal representatives rather than one. The principles set out in GPI Leisure v Herdsman Investments (No. 3) apply in any event. Costs 1. I have heard the parties only briefly on costs. Accordingly I will reserve the right of any party to seek an order other than the one that I propose. Although the defendants have been unsuccessful in opposing the order sought by Buses, it was reasonable of them to oppose it since they were not (and have not been) privy to the confidential material which established an actual conflict. The order could not have been made by consent in any event, since it is an exceptional order which required the balancing of various factors provided for in ss 56-60 of the Civil Procedure Act. Moreover, I was assisted by having a contradictor to the application. As Buses was seeking an order which, though necessary, was for its benefit, there is much to be said for an order that the plaintiffs pay the defendants' costs of the application. This is the order which will take effect in seven days in the absence of an application for a different order. Any such application can be determined on the papers. Orders 1. I make the following orders: 1. Grant leave to the first cross-defendant to have separate legal representation from those solicitors and counsel appearing on behalf of the plaintiffs in the principal proceedings in order to defend the First Cross-Claim. 2. Unless an application for a different order is made in writing to my Associate within seven days, order the plaintiffs to pay the defendants' costs of the notice of motion. ********** 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: 25 July 2016