Supreme Court New South Wales Medium Neutral Citation: Globe Church Incorporated v Allianz Australia Insurance Ltd [2018] NSWSC 1367 Hearing dates: 30 August 2018 Date of orders: 06 September 2018 Decision date: 06 September 2018 Jurisdiction: Common Law Before: Davies J Decision: (1) Order pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 28.2 that the following questions be determined separately from and prior to any other questions in the proceedings: (a) In respect of any of the alleged damage to the Properties that occurred between 8 June 2007 and 31 March 2008, which (if any) of the plaintiff's claims in these proceedings in respect of the 2008 Policy accrued at the time of alleged damage, for the purposes of s 14(1) of the Limitation Act 1969 (NSW)? (b) In light of the answer to (a), which (if any) of the plaintiff's claims in these proceedings in respect of the 2008 Policy for that damage are maintainable? (2) Order pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 1.21 that these proceedings be removed into the Court of Appeal for determination of the separate questions. (3) Costs of the Notices of Motion filed by the first and second defendants be costs in the determination of the separate questions provided that the plaintiff is not to be liable for more than one set of the defendants' costs. (4) Stand the proceedings into the Registrar of the Court of Appeal's List on Wednesday, 19 September 2018. Catchwords: CIVIL PROCEDURE – separate determination of questions – UCPR r 28.2 – where appropriate – defendant insurers denied indemnity for damage suffered by plaintiff because inter alia proceedings were statute barred – whether limitation period commenced to run from time damage was suffered or from time indemnity was denied – order sought by all parties – when damage suffered not in issue – other relevant facts agreed and unlikely to be traversed at final hearing – considerable expense avoided if question determined favourably to defendants – separate determination ordered CIVIL PROCEDURE – court administration – removal to Court of Appeal – UCPR r 1.21 – order sought by first defendant – relevant factors in exercise of discretion to remove proceedings – conflict between single State and Federal judges relying on conflicting intermediate appellate authorities – appeal probable if question determined adversely to defendants by single judge – removal ordered Legislation Cited: Civil Procedure Act 2005 (NSW) ss 64, 65 Limitation Act 1969 (NSW) s 14 Uniform Civil Procedure Rules 2005 (NSW) rr 1.21, 13.4, 28.2 Cases Cited: Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103 Associated Forest Holdings Pty Ltd v Gordian Runoff Ltd [2015] TASFC 6 AVS Group of Companies v Commissioner of Police [2010] NSWSC 659 Callaghan v Dominion Insurance Co Ltd [1997] 2 Lloyd's Rep 541 Carillion Construction Ltd v AIG Australia Ltd [2016] NSWSC 495; (2016) 19 ANZ Ins Cas 62-115 CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301 Cigna Insurance Asia Pacific Ltd v Packer (2000) 23 WAR 159; [2000] WASCA 415 Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd [2018] NSWSC 1284 Commonwealth of Australia v Vero Insurance Ltd (2013) 306 ALR 182; [2013] FCAFC 152 Commonwealth of Australia v Vero Insurance Limited [2014] HCATrans 136 Crawley v Vero Insurance Ltd [2012] NSWSC 593 Kang v Bishop [2018] NSWSC 46 Kone Elevators Pty Ltd v Popa [2006] VSCA 26 Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564 Southwell v Bennett [2010] NSWSC 1372 Stewart v Ronalds [2009] NSWSC 455 The Commonwealth v Vero Insurance Ltd (2012) 291 ALR 563; [2012] FCA 826 Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 Texts Cited: Nil Category: Procedural and other rulings Parties: Globe Church Incorporated (Plaintiff) Allianz Australia Insurance Ltd (First Defendant) Ansvar Insurance Ltd (Second Defendant) Representation: Counsel: S Docker (Plaintiff) P Herzfeld (First Defendant) G Sirtes SC & J Clark (Second Defendant) Solicitors: Conditsis Lawyers (Plaintiff) Wotton & Kearney (First Defendant) Curwoods Lawyers (Second Defendant) File Number(s): 2016/330379 Publication restriction: Nil Judgment 1. The plaintiff had an Industrial Special Risks Insurance Policy for the period 31 March 2007 to 31 March 2008 (the 2008 Policy). The policy covered a church building and its contents at 78 Felton Street, Gateshead. The insurers were Allianz Australia Insurance Ltd (the First Defendant) with 60% and AIG-Ansvar Insurance Ltd (the Second Defendant) with 40%. 2. The policy was thereafter renewed for a number of years but Ansvar Insurance alone was the insurer in those subsequent years. 3. In a Further Amended Statement of Claim filed 17 May 2018 the plaintiff alleged that damage occurred to its property first between 8 June 2007 and 31 March 2008. The damage was said to be the undermining of the pier footings to the church hall and the car park as a result of rainwater and flooding in or about 8 - 10 June 2007; the sinking and settling of the strip footings to the church hall as a result of the clay underneath them being wet and cracks appearing in walls; and the sinking and settling of parts of the car park as a result of it being undermined. 4. The plaintiff also alleged that further damage of a similar type occurred in the period 31 March 2008 and 31 March 2009, in the period 31 March 2009 and 31 March 2010 and in the period 31 March 2010 and 31 March 2013. 5. The plaintiff first made a claim on 29 September 2009. Indemnity was denied by the first defendant on 30 September 2011 and by the second defendant on 5 April 2011. The statement of claim was filed on 4 November 2016. 6. The Further Amended Statement of Claim alleges that the denial of indemnity was in breach of the 2008 Policy, and the plaintiff suffered loss and damage by reason of the breaches of that policy. 7. In the Defence to the Further Amended Statement of Claim filed by the first defendant on 7 June 2018, the first defendant answered the various paragraphs in the Further Amended Statement of Claim by admissions, non-admissions and denials. Thereafter, three substantive defences were pleaded. First, it was pleaded that the plaintiff had made a claim in 2007 for damage that it had suffered from the thunderstorm on 8 June 2007, that the insurer accepted that claim and indemnified the plaintiff under the policy. The first defendant pleaded that no claim was made for the damage now alleged. 8. Secondly, the first defendant pleaded an exclusion under cl 6.2.7 which provided that the policy did not cover damage occasioned through normal settling, seepage, shrinkage or expansion in buildings or foundations, walls, pavements, roads and other structural improvements. 9. Thirdly, the first defendant pleaded that the claim was statute-barred because it accrued more than six years prior to the commencement of the proceedings on 4 November 2016: s 14 Limitation Act 1969 (NSW). 10. In its Defence filed 24 May 2018 the second defendant pleaded to each of the paragraphs of the Further Amended Statement of Claim by admissions, non-admissions and denials. It addition, it pleaded two substantive defences being reliance on the exclusion clause already referred to, and reliance on the Limitation Act in the same way as the first defendant. 11. On 24 May 2018 each of the defendants filed a notice of motion seeking that the Court determine a separate question prior to the final hearing in the matter. The question in each case differed in its terms but related to the defence relying on the limitation period. The first defendant's question was this: Is the Plaintiff barred from bringing the current proceeding against the First Defendant by reason of s 14(1) of the Limitation Act 1969 (NSW) as alleged in paragraphs 33-38 of the First Defendant's Defence to Amended Statement of Claim? 1. The second defendant's question was this: Are the plaintiff's claims for relief against the second defendant in the Further Amended Statement of Claim maintainable given the effect of section 14(1)(a) of the Limitation Act 1969 (NSW)? 1. The second defendant's motion sought also that the proceedings be dismissed pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW), but Senior Counsel for the second defendant said that such an order was not, at present, being pursued. Senior Counsel also handed to the Court an Amended Notice of Motion in which two questions were posed as follows: (a) For the purpose of s 14(1)(a) of the Limitation Act 1969 (NSW) (the Limitation Act) did the plaintiff's causes of action against the second defendant as alleged in the further statement of claim (sic) first accrue upon the occurrence of damage to Property Insured or upon the second defendant's denial of indemnity? (b) Are the plaintiff's claims for relief against the second defendant in the Further Amended Statement of Claim maintainable in respect of any damage that occurred prior to 4 April 2011 given the effect of section 14(l)(a) of the Limitation Act? Senior Counsel informed me, however, that if a separate question was ordered to be determined, the Second Defendant would agree with the First Defendant's question. 1. The plaintiff, after initially opposing any separate question going forward in relation to the second defendant, agreed that it was appropriate that two questions subsequently put forward by the defendants jointly should be determined separately. Those questions were: (a) In respect of any of the alleged damage to the Properties that occurred between 8 June 2007 and 31 March 2008, which (if any) of the plaintiff's claims in this proceeding in respect of the 2008 Policy accrued at the time of alleged damage, for the purposes of s 14(1) of the Limitation Act 1969 (NSW)? (b) In light of the answer to (a), which (if any) of the plaintiff's claims in this proceeding in respect of the 2008 Policy for that damage are maintainable? 1. The parties agreed on the facts which should form the basis of any separate determination as follows: 1. Paragraphs 2-22 below are agreed facts pursuant to s 191 of the Evidence Act 1995 (NSW). The parties 2. The plaintiff is an association incorporated under the Associations Incorporation Act 2009 (NSW). The defendants (Allianz and Ansvar, respectively) are each corporations registered under the Corporations Act 2001 (Cth). The Properties 3. Since at least 1 January 2007, the plaintiff has operated as the Eastlakes Christian Life Centre from 78 and 80 Felton Street, Gateshead (the Properties). It is the beneficiary of a trust pursuant to a trust deed entitled "Declaration of Trust" dated 28 April 2004 under which Assemblies of God New South Wales Ltd (AOG) is the trustee. AOG is also the registered proprietor of the Properties. The plaintiff uses a church, church hall and car park constructed on the Properties. 4. Pursuant to the terms of the trust, the plaintiff: (a) has an equitable interest in the Properties; (b) is legally responsible for the Properties; and (c) agreed to keep the Properties insured. The Policy 5. The plaintiff is the insured under an Industrial Special Risks Policy comprising a Schedule and Policy Wording (the Policy). A copy of the Policy is annexed and marked "A". The defendants are each "Insurers" on the Policy, Allianz as to 60% of the risk and Ansvar as to 40% of the risk. 6. By cl 2 of the Policy Wording, the Insurers agree, among other things, to "indemnify the Insured against Damage occurring to Property Insured during the Period of Insurance". 7. The Properties form part of the "Property Insured" as defined in cl 1.3 of the Policy Wording. 8. The "Period of Insurance" is defined in cl 1.6 of the Policy Wording to mean "the period referred to in the Schedule or any further period for which renewal has been agreed". The period referred to in the Schedule is 31 March 2007 at 4pm to 31 March 2008 at 4pm. 9. For the five years following 31 March 2008, the plaintiff was insured pursuant to policies on which Ansvar was the sole insurer. Allianz was not the insurer on any of those policies. Accordingly, there was no period for which renewal was agreed by Allianz for the purposes of cl 1.6 of the Policy Wording. 10. The Policy does not contain a choice of law clause. The governing law of the Policy is New South Wales law, as the law with the closest and most direct connection to the Policy. The alleged damage 11. In paragraph 10 of the Further Amended Statement of Claim the plaintiff alleges that between 8 June 2007 and 31 March 2008, damage occurred to the Properties, being: (a) the undermining of the pier footings to the church hall and the car park as a result of rainwater and flooding in or about 8-10 June 2007; (b) the sinking and settling of the strip footings to the church hall as a result of the clay underneath them being wet and cracks appearing in walls; and (c) the sinking and settling of parts of the car park as a result of it being undermined. 12. The defendants deny or do not admit that the damage occurred as alleged. 13. The defendants accept that, to the extent that any such damage occurred during the Period of Insurance as defined in the Policy, it constituted Damage to the Property Insured within the meaning of the Policy. The claims and the denials 14. On 29 September 2009, the plaintiff made claims on the defendants in respect of the alleged damage. 15. On 30 September 2011, Allianz denied indemnity in respect of the claim. 16. The plaintiff alleges, and Allianz denies, that Allianz's denial of indemnity constituted a breach of the Policy. 17. On 5 April 2011, Ansvar denied indemnity in respect of the claim. 18. The plaintiff alleges, and Ansvar denies, that Ansvar's denial of indemnity constituted a breach of inter alia the Policy. The limitations defences 19. The plaintiff commenced this proceeding on 4 November 2016. 20. The plaintiff claims inter alia a declaration of breach of contract for the denials of the Policy, specific performance of the Policy and, further or in the alternative, damages for breach of the Policy. 21. The defendants allege, and the plaintiff denies, that the plaintiff's causes of action against them in respect of the Policy are barred by s 14(1) of the Limitation Act 1969 (NSW). Pleadings 22. Copies of the parties' pleadings are annexed and marked "B". 1. The first defendant's motion also sought an order pursuant to UCPR r 1.21 that the proceedings be removed into the Court of Appeal for determination of the separate question. In relation to the first defendant's desire for any separate question to be determined in the Court of Appeal, the basis for that is said to be conflicting decisions about whether the limitation period commences to run from the time the damage is suffered or from the time of the denial of indemnity. 2. In The Commonwealth v Vero Insurance Ltd [2012] FCA 826; (2012) 291 ALR 563, Yates J held that the cause of action against a notional reinsurer accrued at the time the claimant on that policy accepted the happening of the damage as an insured event. On the other hand, in Carillion Construction Ltd v AIG Australia Ltd [2016] NSWSC 495; (2016) 19 ANZ Ins Cas 62-115 Stevenson J, following Giles J in Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564, held that the cause of action does not accrue until the claim is denied. I shall return to a discussion of these cases later in the judgment. Should a separate question be ordered? 1. The principles governing the ordering of separate questions are set out by Hallen ASJ (as his Honour then was) in Southwell v Bennett [2010] NSWSC 1372 at [15]; by Beech-Jones in J Crawley v Vero Insurance Ltd & Ors [2012] NSWSC 593 at [16]-[20]; and by Ward J (as her Honour then was) in Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103 at [87]-[92]. Since, in the present matter, the orders are not opposed I will not set out those passages. They may be found set out together in Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd [2018] NSWSC 1284 at [11]-[13]. 2. Whilst I note that all parties agree to the determination of the separate question, it is still ultimately a matter for the Court to determine if it is appropriate in the light of the principles in those cases. 3. The following matters persuade me that it is appropriate to order a determination of the separate questions: (a) If the defendants are successful on the separate determination, the proceedings will not be maintainable against the first defendant, and the proceedings against the second defendant will be confined to damage suffered from either 4 November 2010 (six years prior to the filing of the Statement of Claim) or 17 May 2012 (six years prior to the filing of the Further Amended Statement of Claim where the further claim was first made); (b) The parties have agreed all of the facts on which the questions will be determined; (c) The agreed facts are unlikely to be traversed at any final hearing even if the defendants are unsuccessful on the separate questions; (d) No issues of credibility of witnesses are involved; (e) The separate hearing involves a discrete question of law which is likely to be heard at a far earlier time than any final hearing, and will involve a hearing that will not exceed one day; (f) If the defendants are successful at the separate hearing, considerable expense will be avoided in the preparation of the proceedings for a final hearing; (g) The parties agree that the separate questions should be determined. 1. Wherever a separate question is sought to be determined based on the Limitation Act it is always necessary to consider what was said by the High Court in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 at 533. 2. In my opinion, the issue in the present case falls into the exception referred to by the High Court. It is clear that when damage was suffered is not the issue in the present case. The claim is one in contract, unlike the position in Wardley where the issue concerned whether damage was contingent or actual at a particular point in time. In the circumstances of the present case, and subject to the provisions of ss 64 and 65 of Civil Procedure Act 2005 (NSW) for the amendments against the second defendant, the only possible dates on which the limitation period could have accrued would be the date on which damage was suffered in June 2007, the date on which the claim was made in September 2009 or the dates on which indemnity was denied in April and September 2011. I note that no party is arguing for the date on which the claim was made. 3. In my opinion, the agreed questions should be determined separately from and prior to the final hearing of the proceedings. Referral to the Court of Appeal 1. Rule 1.21 of the UCPR provides: 1.21 Removal to Court of Appeal (cf SCR Part 12, rule 2) (1) The Supreme Court in a Division may, in relation to proceedings commenced in the Division, make an order that the proceedings be removed into the Court of Appeal: (a) if it makes an order under rule 28.2 for the decision of a question of law, or (b) if, having stated the question to be decided or determined, it is satisfied that special circumstances exist that render it desirable to make an order for their removal into the Court of Appeal. (2) If an order is made under subrule (1): (a) the Court of Appeal may order that the whole or any part of the proceedings be remitted to a Division for the determination, by trial or otherwise, of the proceedings or of any question arising in the proceedings, or (b) the proceedings may be continued and disposed of in the Court of Appeal. (3) Proceedings may be removed into the Court of Appeal under subrule (1) even if any decision or determination in the proceedings is expressed by any Act or law to be final or without appeal. (4) In this rule, question includes any question or issue in any proceedings, whether of fact or law or partly of fact and partly of law, and whether raised by pleadings, agreement of parties or otherwise. 1. Mr Herzfeld of counsel for the first defendant submitted that the following principles applied when considering whether it was appropriate to make an order for removal under r 1.21: (a) If removal is to be ordered following the statement of separate questions of law, it is not necessary to show that there are "special circumstances''' which make it "desirable" that such an order be made. However, it is necessary for the Court to be satisfied that there are at least sufficiently unusual circumstances to warrant removal; (b) The fact that a separate question involves a matter of public importance militates in favour of removal; (c) The fact that the separate question involves significant and difficult questions of law militates in favour of removal; (d) The absence or conflict of previous authority militates in favour of removal; and (e) The fact that the separate question may require findings of fact militates against removal. Conversely, the fact that it may be decided on the basis of agreed or uncontroversial facts and documents militates in favour of removal. 1. I accept that those principles, which are derived from Stewart v Ronalds [2009] NSWSC 455, AVS Group of Companies v Commissioner of Police [2010] NSWSC 659, and Kang v Bishop [2018] NSWSC 46, are the relevant principles to consider. 2. In my opinion, the existence of a conflict in legal authority in relation to the determination of the separate questions in this case is a sufficient basis to justify removal of the proceedings into the Court of Appeal. The circumstances in the present matter arise in this way. 3. In The Commonwealth v Vero Insurance Ltd the Commonwealth sought indemnity under the terms of a policy with Vero for remediation and related costs of damage to land caused by an oil spill on or about 20 July 1999. The facts are complicated from an insurance point of view but the Commonwealth's claim was notionally one against a reinsurer in respect of an indemnity it had provided to a particular Commonwealth instrumentality. The proceedings brought by the Commonwealth were commenced on 14 June 2011. The insurer argued that the cause of action accrued on the date of the oil spill, which resulted in the claim being statute barred. 4. The Commonwealth relied on two later dates, both of which were within the limitation period, being the date on which the Commonwealth notified its instrumentality that indemnity would be provided, or a later date on which the Commonwealth had made a payment to its instrumentality. Although the Commonwealth relied at [87] on what Giles J had said in Penrith City Council, that there is no breach of the contract of insurance until there is a refusal to pay, the date of that refusal was not relied upon: see at [91]. 5. Justice Yates held at [93] that time did not commence to run from 20 July 1999 (the date of suffering the damage), but rather from the date on which the Commonwealth accepted the suffering of the damage as an insured event (at [98]), with the result that the Commonwealth's claim under the policy was not statute barred. 6. In the course of the judgment, his Honour noted that the Commonwealth's reliance on the decision of Giles J in Penrith City Council, and its submission that what Giles J had said at pp 568-569 had been quoted with approval by the NSW Court of Appeal in CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301 at [59] and [61]. His Honour noted that the same passage had been cited with approval by the Victorian Court of Appeal in Kone Elevators Pty Ltd v Popa [2006] VSCA 26 at [21]. 7. Justice Yates said at [87] that he did not read the passage from the judgment of Giles J as supporting the submission the Commonwealth made. His Honour then went on to say at [88]: It is true that in later passages of his reasons his Honour seems to suggest that there will be no breach by the insurer until the insurer has been required to pay under the policy and has refused to do so: see at 571F–G. This part of his Honour's reasons was not quoted in CGU or cited in Kone. It seems to me that his Honour's observations in this regard were made purely by way of obiter dicta in the context of his Honour discussing other possible accrual dates in respect of which it was not necessary for his Honour to choose because none resulted in any violation of the limitation period. 1. His Honour then went on to discuss the decision of the Full Court of the Supreme Court of Western Australia in Cigna Insurance Asia Pacific Ltd v Packer (2000) 23 WAR 159. In that case Pidgeon J considered that Penrith City Council should not be followed because it was contrary to earlier Western Australian authority. 2. On the appeal by the Commonwealth, the Full Court of the Federal Court in Commonwealth of Australia v Vero Insurance Ltd [2013] FCAFC 152 held, when considering Vero's Notice of Contention relating to limitation issues, per Jagot J (Dowsett and Logan JJ agreeing) at [115]-[116], that Yates J's analysis concerning whether the action accrued in 1999 was correct. However, the Full Court said nothing about that part of the judgment of Yates J that discussed the correctness of Penrith City Council. Special leave to appeal was refused by the High Court, but the application did not concern the limitation determination: Commonwealth of Australia v Vero Insurance Limited [2014] HCATrans 136. 3. A different view of the correctness of Penrith City Council was reached by Stevenson J in Carillion Construction Ltd. The policy under consideration in that case was one for indemnity for property damage. Justice Stevenson held at [126] that the insured's cause of action arose when the insurer refused indemnity under the policy. His Honour noted that there was much English authority for the proposition that under an indemnity policy the insured's cause of action accrued, and time began to run, on the occurrence of the peril the subject of the indemnity. His Honour made reference to a number of texts that relied on the judgment of Sir Peter Webster in Callaghan v Dominion Insurance Co Ltd [1997] 2 Lloyd's Rep 541 at 544. 4. The different view adopted by Stevenson J from that of Yates J is best demonstrated by setting out the following portion of Stevenson J's judgment: [134] There is Australian authority consistent with the English authority. [135] Thus in Cigna Insurance Asia Pacific v Packer Ltd [2000] WASCA 415, the Full Court of the Supreme Court of Western Australia held that the insured's cause of action under a "Permanent Total Disablement" policy accrued, and time began to run, on the happening of the relevant event (disablement lasting 12 months): per Pidgeon J at [96] with whom Malcolm CJ and Kennedy J agreed (at [32] and [56]). [136] In Commonwealth v Vero Insurance Ltd [2012] FCA 826, Yates J seemingly accepted, albeit in obiter, the insurer's submission (advanced, as it happens, by Mr McArthur) that the position stated in Callaghan is correct (at [82] to [90]). Contrary to Mr McArthur's submissions before me, I do not read the judgment of the Full Court of the Federal Court in that case as endorsing that point of view: cf Commonwealth v Vero Insurance Ltd [2013] FCAFC 152 at [19] per Dowsett J at [19], Logan J at [53] and Jagot J at [115] to [116]. [137] In Associated Forest Holdings Pty Ltd v Gordian Runoff Limited [2015] TASFC 6, the Full Court of the Supreme Court of Tasmania endorsed the conclusions in Cigna and reached a corresponding conclusion concerning a policy in which the insurer provided cover for losses exceeding a stated sum in relation to work place accidents (per Blow CJ at [94] to [97], Porter and Wood JJ agreeing at [101] and [102]). [138] This state of the law appears to be born of a judicial apprehension that, were the accrual of an insured's cause of action against an insurer to occur only when the insured had made a claim and the insurer failed to pay (or refused) that claim, "an insured could postpone the beginning of the relevant limitation period by delaying giving notice" (Sir Peter Webster in Callaghan at 546). [139] I am not sure how well placed such apprehension is. Most indemnity policies impose on an insured an express obligation to make claims in a timely manner. If an insured delayed unduly in making a claim, the insurer may well be able to resist the claim on that basis (subject, of course, to showing prejudice for the purposes of s 54 of the Insurance Contracts Act 1983 (Cth)). [140] On the other hand, the conclusion that a cause of action under an indemnity policy occurs at the time of the peril may lead to the conclusion that, where an insured does not become aware of the occurrence of the insured peril until after the expiry of the applicable limitation period, the cause of action would arise and become barred before either the insured or the insurer became aware of it. Thus, to take the example of a fidelity policy referred to in the extract from Colinvaux referred to above, a fraudster might cover his or her tracks so effectively that the insured peril (the fraud) did not come to light until after the passage of the limitation period; measured from the date of the fraud. No doubt, the object of many fraudsters is to conceal the fraud they have committed. [141] A different opinion was expressed by Giles J (as his Honour then was) in Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564. [142] In that case, his Honour was dealing with a professional negligence policy, that is, a liability policy. [143] However, his Honour's observations appear to me to have been intended to be of general application, and have since been endorsed by the New South Wales Court of Appeal (constituted by himself, as Giles JA, together with Spigelman CJ and Basten JA, both of whom agreed with his Honour) in a case that did concern an indemnity policy: CGU Insurance Ltd v Watson [2007] NSWCA 301. [144] In Penrith, the council had settled a claim from a third party, and sought indemnity under the relevant policy. Relevantly, the question was whether the council's cause of action against the insurer accrued when it settled with the third party or when the insurer later denied liability to indemnify. [145] Gilles J said (at 568F-G and 571F): "It is not in question that the [council] was entitled to indemnity when the [claim by the third party] was made against it, or when it gave notice of the claim to the [insurer], in the sense that it was then entitled to the benefit of the [insurer's] promise to indemnify it against the claim. But the [council's] cause of action was for unliquidated damages for breach of contract: [his Honour set out a number of authorities]. It had to establish a contract (the policy) by which the [insurer] promised to do something (indemnify it against [the third party's] claim), and breach of that contract (failure to indemnify it against [that] claim). It could then recover the loss suffered as a consequence of that breach. The plaintiff's cause of action accrued upon breach. Thus it must be asked what the [insurer] was required to do in performance of its promise, and when it failed to do what was required of it. Only when the [insurer] failed to do what was required of it could a cause of action for damages for breach of contract accrue to the [council]. There was no cause of action simply because [the third party] made its claim or the claim was notified to the [insurer] – the [insurer] could have thereafter fully performed its promise… Unliquidated or not, the damages [that an insured can claim] are damages for breach of contract, and there will be no breach until the insurer has been required to pay or do some other act in performance of its promise and has failed or refused to do so." [146] Thus, his Honour's conclusion was that an insured's cause of action for damages for breach of contract only accrues when the insurer "failed to do what was required of it". [147] On the facts, his Honour concluded that the insured council's cause of action accrued, and time began to run, either when the council's liability to the third party was established (by a settlement) or, alternatively, by reason of there being a "continuing refusal to provide indemnity so that the [insurer] was in breach when liability was established", or, alternatively, when the insurer confirmed its refusal of indemnify after the settlement (at 571B-C). The fact that his Honour contemplated that the insured council's cause of action accrued at any one of these times makes clear that his Honour's conclusions did not depend on the policy under consideration being a liability policy, rather than an indemnity policy. [148] His Honour was thus drawing a distinction between the chose in action of the insured council, namely the right of indemnity provided by the policy (to indemnify the council against the third party's claim) and any cause of action open to the council to "then and there claim damages from the insurer for breach of contract in failing to provide indemnity" (see 570E). [149] Giles J's statements were referred to in each of Cigna, Vero and Associated Forest. [150] In Cigna, Pidgeon J held that if Giles J's statements were intended to be a "principle of general application" they were inconsistent with an earlier Western Australian decision in Tillotson v ANZ Life Assurance Co Ltd (1997) 9 ANZ Ins Cas 77,131 and should not be followed (at [70] and [90]). [151] In Vero, Yates J discounted the weight of Giles J's remarks (without actually rejecting them) because they were obiter and not "quoted in CGU" (see [88]). I do not read Giles J's conclusions as obiter. It was also not correct for Yates J to say that Giles J's statements were not "quoted in CGU" (see [61] of CGU). [152] In Associated Forest, Blow CJ held that Penrith was distinguishable on the facts (at [94]). [153] As I have said, the Court of Appeal has now endorsed Giles J's statements. [154] I have held that the proper law of the Policy is that of the Northern Territory. My attention has not been drawn to any authority relevant to this question from the Northern Territory. Neither counsel suggested, and I see no reason to conclude, that the law of the Northern Territory is or should be different from the law of another state or territory on this question. [155] In those circumstances, faced with what I see to be conflicting intermediate appellate authority on the question, and for the reasons I have set out at [138] to [140] above, I prefer to follow the decision of Giles J in Penrith, as endorsed in the New South Wales Court of Appeal in CGU. [156] As Giles J pointed out, a distinction is to be drawn between the time when an insured's entitlement to indemnity arises and the time when its entitlement to sue for damages for breach of contract arises (see [148] above). It may well be that an insured under an indemnity policy would be entitled, immediately on the occurrence of the peril, to seek a declaration of its entitlement to indemnity. But its entitlement to sue for damages for breach of the promise of indemnity only arises only when the insurer has not done "what was required of it" under the policy. (emphasis added) 1. In 2015 the Full Court of the Supreme Court of Tasmania in Associated Forest Holdings Pty Ltd v Gordian Runoff Ltd [2015] TASFC 6 at [94]-[96] followed Cigna and distinguished Penrith City Council. 2. The position is, therefore, that two intermediate appellate courts (the Full Court of the Supreme Court of Western Australia and the Full Court of the Supreme Court of Tasmania) lend support to the view of Yates J in the Federal Court, whereas Stevenson J calls in aid of his decision the approval of the New South Wales Court of Appeal. In addition, although it was not referred to by Stevenson J, the decision of the Victorian Court of Appeal in Kone Elevators at [21] accepts the correctness of the judgment of Giles J in Penrith City Council in saying that the right of action for breach of contract accrued at the time of the breach and not at the time of suffering the damage. It should be noted also that the New South Wales Court of Appeal in CGU v Watson made express reference at [60] to the judgment in Kone Elevators. 3. This is not simply a dispute between the NSW and Victorian Courts of Appeal on the one hand and the Tasmanian and Western Australian Full Courts on the other. If that were so, no occasion would arise to refer the present matter to the Court of Appeal because any single judge of this Court would be bound by what was decided in CGU. The focus of the submission of the first defendant in the present case is the extent to which the Court of Appeal in CGU endorsed the conclusion of Giles J in Penrith where his Honour said (at 571E-G): In looking to breach of contract, my approach is in accord with that of Nathan J in Hunter v Stronghold Insurance (Aust) Ltd (Supreme Court of Victoria, 18 January 1991, unreported), where his Honour held that the cause of action of the insured under a burglary policy arose only upon the insurer refusing indemnity and not when the burglary occurred or when the insured gave notice of his loss. In Chandris v Argo Insurance Co Ltd (at 74), Megaw J said that because the proceedings were for unliquidated damages the insured could bring proceedings "without alleging that demand for payment has been made on the insurer". His Lordship went on to say that this produced the curious result that "the insurer may technically be in breach of his contract before any demand is made of him and before it is possible for him, or the assured, to compute the amount which he ought to pay". For my part, I do not see why the nature of the insured's proceedings has these consequences. Unliquidated or not, the damages are damages for breach of contract, and there will be no breach until the insurer has been required to pay or do some other act in performance of its promise and has failed or refused to do so. It is true that many cases concerning liability policies seem to equate the establishing of liability to the third party with the accrual of the cause of action, including some of the cases to which I next refer. But it is not often that the difference is material, and in principle it seems to me that proceedings on a liability policy for damages (with declaratory proceedings there are different considerations) require regard to breach of contract. 1. The first defendant submitted that this passage was not referred to by the Court of Appeal in CGU and that it, therefore, does not follow that Stevenson J was correct in following it on the supposed basis that it had been endorsed by the Court of Appeal. The first defendant submitted that the passage at 571E-G was obiter dicta, and that only the ratio only of Giles J's decision (at 568-569) was endorsed by CGU at [59] and [61]. 2. The first defendant submitted that a judge of this Court at first instance would be in an invidious position if called upon to determine the separate questions. That judge would feel bound to follow Stevenson J unless clearly persuaded that his Honour was in error, but would also be expected to follow interstate intermediate appellate courts. The first defendant submitted that, if the matter was referred to the Court of Appeal, that Court could authoritatively rule on the correctness of Penrith City Council and clarify what had been endorsed in CGU. The first defendant submitted that it would seek leave to argue that, to the extent that CGU had endorsed Penrith City Council at 571, the Court of Appeal should review its decision in CGU. 3. The first defendant submitted that, if the question was decided by a single judge adversely to the defendants, an appeal was very likely with the added costs and time involved in that process. 4. The second defendant submitted that the cases, when examined, did not disclose any inconsistency. The second defendant submitted that although it was "not wedded either way", it considered that a single judge would be able to reach a correct decision notwithstanding what appears to be a façade of inconsistency in the cases. The second defendant submitted that the Court of Appeal may consider it would be assisted by having a judgment from a judge at first instance if it came to consider the matter on an appeal. The second defendant submitted that the inevitability of an appeal from one or other party was not a sufficient justification for sending the proceedings directly to the Court of Appeal. 5. The plaintiff indicated that its position was simply that it would rather have one hearing. In that way if the matter was referred to the Court of Appeal, that would eliminate the risk of two hearings, with a single judge reaching a decision on the basis of the authorities followed by an appeal to the Court of Appeal. The plaintiff's concern was principally, however, about the risk that it might bear the costs of two other parties if it was unsuccessful on the hearing of the separate question. For that reason, the plaintiff sought an order that if the matter was referred directly to the Court of Appeal any costs that the plaintiff would have to pay should be limited to one set of defendant's costs. 6. In reply, the first defendant said that any argument before a single judge of the separate questions would mean that the first defendant would be hamstrung in that it could not suggest that the Court of Appeal was wrong in the view it took in CGU. It might be able to argue that Stevenson J's decision was wrong in the way he saw the endorsement of CGU for Penrith City Council, but a direct hearing in the Court of Appeal would remove that as an issue. The Court of Appeal could simply be asked to determine the correctness or otherwise of the other intermediate appellate courts. 7. Following the expression of concern by the plaintiff about being liable for two sets of defendant's costs, I enquired of counsel for both defendants what their positions were as far as agreeing that the plaintiff would only be liable for one set of defendant's costs at the hearing of any separate question. The solicitors for the defendants subsequently forwarded emails to my Associate saying that, if I was minded to make an order for the determination of the separate questions, their clients would not oppose such a limitation on any costs order. 8. On an application to remove the proceedings into the Court of Appeal following a decision for the separate determination of questions, it is not part of the function of the Court to do other than consider whether or not there is a sound basis for the Court of Appeal to determine the questions in the first instance. Where the basis for doing so is a conflict between decisions of intermediate appellate courts and a conflict between single judges in this Court and the Federal Court, it is sufficient to see that there is at least a serious argument that such a conflict exists. It is not for me to determine, for example, if Stevenson J was correct in the view he reached that the Court of Appeal in CGU had endorsed the totality of what was said in Penrith City Council. 9. I am satisfied that on the face of the decisions in Carillion Construction on the one hand and Commonwealth v Vero Insurance on the other there is a conflict inasmuch as the single judges deciding those cases have relied on authority from intermediate appellate courts that have taken a different view of the particular issue. The parties before me made no reference to the decision of the Victorian Court of Appeal in Kone Elevators, and that decision serves only to highlight the difference amongst the intermediate appellate courts of the country. 10. I accept the submissions of Mr Herzfeld that clarification is needed at an appellate level of the principle or principles referred to by Giles J in Penrith City Council. I accept his submission that an argument before a single judge of the Court would be hamstrung by various principles of stare decisis concerning judgments of other single judges of this Court and obligations with regard to appellate courts of other States. I accept also that if the first defendant intends to argue that CGU was wrongly decided, that argument can only be put to the Court of Appeal. This is also not a case where the Court of Appeal is likely to be further assisted by having a judgment of a single judge. It will have available not only the judgments of Stevenson J and Yates J but also the other judgments of intermediate appellate courts. 11. I accept also that the insurance point is a significant one for insurers and that there is a very strong likelihood of an appeal from a single judge if the questions were determined adversely to the defendants. I consider also that, bearing in mind the value of the claim (well in excess of $500,000), there is a reasonable likelihood that the plaintiff would appeal if the questions were decided adversely to it. Ordinarily, the likelihood of an appeal is not a strong reason to refer a matter to the Court of Appeal. In the present circumstances, however, where the principal reason for referral is an apparent conflict in decisions of various courts, the issue of a likely appeal from a single judge assumes greater significance. 12. I consider, however, that the plaintiff should be protected from having to pay two sets of defendants' costs in the event that the plaintiff is unsuccessful. The plaintiff was forced to join both defendants because of the arrangement of the policy, with each defendant bearing a proportion of any indemnity that has to be paid. It would be inappropriate for the plaintiff to pay two sets of costs where the same arguments were put by the defendants. Further, if different arguments are put to maximise the chances of success of the defendants, the plaintiff should not be required to pay for that. It will be for the Court of Appeal to determine how the defendants will be required to pay any costs ordered in the plaintiff's favour. Conclusion 1. Accordingly, I make the following orders: (1) Order pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 28.2 that the following questions be determined separately from and prior to any other questions in the proceedings: (a) In respect of any of the alleged damage to the Properties that occurred between 8 June 2007 and 31 March 2008, which (if any) of the plaintiff's claims in these proceedings in respect of the 2008 Policy accrued at the time of alleged damage, for the purposes of s 14(1) of the Limitation Act 1969 (NSW)? (b) In light of the answer to (a), which (if any) of the plaintiff's claims in these proceedings in respect of the 2008 Policy for that damage are maintainable? (2) Order pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 1.21 that these proceedings be removed into the Court of Appeal for determination of the separate questions. (3) Costs of the Notices of Motion filed by the first and second defendants be costs in the determination of the separate questions provided that the plaintiff is not to be liable for more than one set of the defendants' costs. (4) Stand the proceedings into the Registrar of the Court of Appeal's List on Wednesday, 19 September 2018. ********** 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: 06 September 2018