Supreme Court New South Wales Medium Neutral Citation: In the matter of Reed Constructions Australia Pty Ltd (in Liquidation) – Walley v Chubb Insurance Australia Ltd [2019] NSWSC 1007 Hearing dates: 8 August 2019 Decision date: 08 August 2019 Jurisdiction: Equity Before: Leeming JA Decision: 1. Notice of motion filed 11 June 2019 dismissed. 2. Applicants to pay the costs of Chubb Insurance Company of Australia Ltd of the notice of motion filed 11 June 2019, such costs to be enforceable forthwith. Catchwords: CORPORATIONS LAW – claim by liquidators against director for insolvent trading – D&O policy responded to claim – director entered into personal insolvency agreement – liquidators agreed only to enforce judgment against proceeds of insurance policy – whether insurer should be joined to proceedings pursuant to Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) – whether any evidence of dispute between insurer and insured director – whether improved prospects of obtaining a costs order against insurer foreign to discretion to join – application refused – Opes Prime Stockbroking Ltd (in liq) v Stevens [2014] NSWSC 659 and DSHE Holdings v Abboud [2017] NSWSC 579, followed COSTS – whether unsuccessful liquidators should pay costs of separately represented insurer and insured – general principle that unsuccessful party not ordered to pay two sets of costs where no possibility of conflict between successful separately represented parties – liquidators ordered to pay one set of costs – Local Democracy Matters Inc v Infrastructure NSW (No 2) [2019] NSWCA 118 applied Legislation Cited: Bankruptcy Act 1966 (Cth), Part X Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), ss 3, 4, 5, 6, 12 Civil Procedure Act 2005 (NSW), s 98 Corporations Act 2001 (Cth), ss 199B, 199C, 588M Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 6 Uniform Civil Procedure Rules 2005 (NSW), r 42.1 Cases Cited: Damm v Coastwide Site Services Pty Ltd [2018] NSWSC 611 DSHE Holdings Ltd (Recs and Mgrs Apptd) (In Liq) v Abboud; National Australia Bank Ltd v Abboud [2017] NSWSC 579 Energize Fitness Pty Ltd v Vero Insurance Ltd [2012] NSWCA 213 Guild Insurance Ltd v Hepburn [2014] NSWCA 400 Insurance Australia Ltd v Dent [2019] NSWCA 134 Local Democracy Matters Inc v Infrastructure NSW (No 2) [2019] NSWCA 118 Opes Prime Stockbroking Ltd (in liq) (Scheme Administrators apptd) v Stevens [2014] NSWSC 659 Rushleigh Services Pty Ltd v Forge Group Ltd (In Liq) (Recs and Mgrs Apptd) [2018] FCA 26; 355 ALR 248 Selig v Wealthsure Pty Ltd (2015) 255 CLR 661; [2015] HCA 18 Wayland v Bird [2017] NSWCA 26 Texts Cited: New South Wales Law Reform Commission, Report 143: Third party claims on insurance money, (November 2016) Category: Procedural and other rulings Parties: Daniel Austin Walley and Christopher Clarke Hill in their capacity as joint and several liquidators of Reed Constructions Australia Pty Ltd (in liquidation) ACN 003 340 878 (First Plaintiffs/Applicants on notice of motion) Reed Constructions Australia Pty Ltd (in liquidation) ACN 003 340 878 (Second Plaintiff) Geoffrey Vere Reed (First Defendant) Derry Bernard Hill (Second Defendant) Chubb Insurance Australia Limited (Respondent on notice of motion) Representation: Counsel: M Ashhurst SC with J Shepard (Plaintiffs/Applicants) M Darke SC with A Campbell (Respondent) D L Williams SC with J D Little (First Defendant) Solicitors: Corrs Chambers Westgarth (Plaintiffs/Applicants) Clyde & Co (Respondent) Norton Rose Fulbright Australia (First Defendant) File Number(s): 2016/00271479 Publication restriction: Nil EX TEMPORE Judgment 1. HIS HONOUR: By notice of motion filed 11 June 2019, the applicant liquidators of Reed Constructions Australia Pty Ltd seek leave pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) to bring proceedings against Chubb Insurance Australia, (Chubb) and to join Chubb as a defendant to pending proceedings in the Equity Division which they are bringing against Mr Geoffrey Vere Reed, a director of the company. The application is opposed, separately, by Chubb and Mr Reed. 2. The underlying proceedings are for declarations and orders for the payment of money pursuant to s 588M of the Corporations Act 2001 (Cth) for debts incurred between 31 January 2012 and 15 June 2012 (when voluntary administrators were appointed pursuant to s 436A) by the company while it is said to have been insolvent. The claim is in an amount of some $11.795 million. The proceedings were commenced in 2016 and are presently listed for hearing in October 2019 (some two months' time) with an estimate of slightly more than two weeks. No point has been taken about the delay in bringing this application (which should also presumably have been by way of interlocutory process rather than notice of motion, although nothing turns on that). I have had the benefit of full written submissions, including written submissions in reply, in advance of the hearing and oral submissions today. In light of the imminence of the hearing it is desirable that the application be resolved promptly. 3. Reed Constructions Australia was a subsidiary of Reed Building Group Pty Ltd which was the insured under a ForeFront Portfolio policy of insurance issued by Chubb providing, relevantly, coverage for Directors' and Officers' liability of up to $11 million inclusive of costs - see cl V.(A)(3) ("Defence Costs are part of and not in addition to the applicable maximum Limit of Liability ... the payment by the Company of Defence Costs erodes such Limit of Liability"). 4. The detail of the insurance policy does not presently matter. It is accepted that Mr Reed notified Chubb of the claim represented by the proceedings brought against him in October 2016. The detail of Chubb's response to that notification has been the subject of extensive submissions before me and needs to be reproduced quite fully. 5. Chubb's letter of 21 November 2016 provides: "Having reviewed the documentation and information provided to us, we are pleased to confirm that cover is available under the Policy for the advancement of reasonable Defence Costs incurred by you on account of the Insolvent Trading Proceedings, subject to the terms and conditions of the Policy, as set out below." The letter then summarises the proceedings pending in this Court and goes on to deal with Mr Reed's notification on 18 October 2012. The letter states: "Chubb considers that the Insolvent Trading Proceedings is a Claim which arises from the circumstances notified in the Liquidator's Notification. Further, Chubb accepts that by clause VII.(A)(2) of the General Terms and Conditions of the Policy, the Insolvent Trading Proceedings is a Claim considered to have been made during the Extended Reporting Period." The letter then deals with the Insuring Clause and concludes that it "has been triggered in respect of the claims made against you in the Insolvent Trading Proceedings, and the Policy therefore responds subject to its terms and conditions as more fully set out below." Page 3 of the letter then deals with exclusions, including exclusions which relate to the operation of ss 199B and 199C of the Corporations Act and a dishonesty exclusion in familiar terms. In relation to the first exclusion, the letter provides: "Noting the nature of the allegations in the Insolvent Trading Proceedings, and without in any way imputing wrongdoing on your part, to the extent that there is a finding by a Court that you wilfully breached your director's duty to RCA, then the prohibition on indemnification under sections 199B and 199C will apply and the carve out under paragraph (iv) of the definition of Loss will be triggered. Accordingly, Chubb specifically reserves its rights on the potential application of the carve out under paragraph (iv) of the definition of Loss." A similar paragraph is reproduced in relation to the potential application of the dishonesty exclusion, which, once again, expressly states that it is "without imputing any wrongdoing on your part". 1. The letter goes on to say: "Accordingly, pending a final adjudication of the claims made against you in the Insolvent Trading Proceedings, Chubb: • will advance Defence Costs to you in accordance with Extension II.(A) of the D&O Section of the Policy ... • reserves all of its rights under the Policy and at law, and particularly with respect to the potential application of the carve out from the definition of Loss and the Dishonesty Exclusion." The balance of the letter explicitly and expressly reserves Chubb's rights under the policy with regard to any potential non-disclosure or misrepresentation, confirms the advance provision of defence costs but subject to a proviso that they are to be repaid if it be ultimately determined that cover is not available and concludes with the heading "Reservation of Rights" under which is said: "Our position outlined above is based on the information provided to date and we continue to reserve all rights available to us at law, as well as rights afforded under the Policy based on the terms, conditions, exclusions, endorsements and provision of the Policy including representations, statements, declarations and/or omissions in connection with the application of the Policy." 1. In a nutshell, Chubb has by that letter formally advised that it will advance defence costs to Mr Reed during the conduct of the defence of the proceedings, subject to the possibility that they may need to be repaid, has made it plain that it is reserving its rights under the policy, but nonetheless has confirmed that the policy responds to a claim which has been properly notified to it. There is no direct evidence before me on point, but I see no reason to doubt that Chubb has, on the basis summarised above, made indemnity to Mr Reed in respect of substantial defence costs incurred by him to date. 2. The liquidators originally joined another director, Mr Derry Bernard Hill, suing him in respect of the same debts incurred by the company in respect of the same period. The proceedings against him have relatively recently been compromised. The terms of that compromise are confidential. The application before me has been conducted today on the basis that notwithstanding allowance being made for such settlement, the liquidators' claim remains sufficiently large to exhaust whatever is left of Chubb's $11 million policy. 3. The litigation predates the 2017 Act. Even so, it is that statute, rather than s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), that applies. The latter applies only to "actions brought against insurers under that section before the commencement" of the 2017 Act: see s 12. Although the litigation was commenced in 2016, the application to proceed against Chubb was made in 2019 so it is the 2017 Act that is applicable. 4. Provisions of this kind have a long history. In addition to the 1946 Act, provision has long been made in compulsory third party insurance for the insurer to be joined to proceedings between a plaintiff who alleges negligence on behalf of an insured driver in circumstances where there is a dispute between insured and insurer: see Insurance Australia Ltd v Dent [2019] NSWCA 134. 5. Section 4 of the 2017 Act provides: "4 Claimant may recover from insurer in certain circumstances (1) If an insured person has an insured liability to a person (the claimant), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court. (2) The amount of the insured liability is the amount of indemnity (if any) payable pursuant to the terms of the contract of insurance in respect of the insured person's liability to the claimant. (3) In proceedings brought by a claimant against an insurer under this section, the insurer stands in the place of the insured person as if the proceedings were proceedings to recover damages, compensation or costs from the insured person. Accordingly (but subject to this Act), the parties have the same rights and liabilities, and the court has the same powers, as if the proceedings were proceedings brought against the insured person. (4) This section does not entitle a claimant to recover any amount from a re-insurer under a contract or arrangement for re-insurance." Section 4 speaks in terms of an "insured liability" which is defined to mean "a liability in respect of which an insured person is entitled to be indemnified by the insurer". That, of course, cannot presently be determined, in light of the exclusions in Chubb's policy, and will turn on what is ultimately found at trial. However, it must be the case that "insured liability" includes an insured liability which has not yet been established, or one which is claimed by a plaintiff, or one which is subject to the possibility of a finding of dishonesty or non-disclosure or some other basis entitling an insurer to avoid. 1. The background to the 2017 Act is helpfully reproduced by Markovic J in Rushleigh Services Pty Ltd v Forge Group Ltd (In Liq) (Recs and Mgrs Apptd) [2018] FCA 26; 355 ALR 248 at [37]-[48], including the portion of the New South Wales Law Reform Commission report which stated that "proceedings can be instituted against the insurer before [relevantly, the insurer's liability] have been finally established, but only with leave of the court": 4.24. The following paragraph of the report states: "It is our intention that the court's general discretion to grant leave will continue to be exercised under these proposed provisions in the same way that it is exercised under the existing s 6." 1. The requirement of leave is imposed by s 5, which is as follows: "5 Leave to proceed (1) Proceedings may not be brought, or continued, against an insurer under section 4 except by leave of the court in which the proceedings are to be, or have been, commenced. (2) An application for leave may be made before or after proceedings under section 4 have been commenced. (3) Subject to subsection (4), the court may grant or refuse the claimant's application for leave. (4) Leave must be refused if the insurer can establish that it is entitled to disclaim liability under the contract of insurance or under any Act or law." 1. Although the requirement of leave is preserved, the 2017 Act proceeds quite differently from s 6 of the 1946 Act. Rather than conferring a proprietary interest in the form of a statutory charge over "insurance moneys", as was the case with former s 6, s 4 of the 2017 Act speaks directly of a right of recovery against the insurer. Where an insured apparent has an insured liability to a person, who is known as the claimant, then s 4 permits the claimant to recover the amount of the insured liability from the insurer in proceedings before a court. 2. It has long been the case that in an application under s 6 of 1946 Act it was necessary to establish an arguable case that there was a policy which responded to the claim and a real possibility that if judgment were obtained the insured defendant would not be able to meet it: see Guild Insurance Ltd v Hepburn [2014] NSWCA 400 at [44] and the authorities there cited. It is common ground today before me that these prerequisites are satisfied. 3. Mr Reed's inability to meet any substantial judgment arises from the facts established before me that in January 2014 he executed a personal insolvency agreement under Part X of the Bankruptcy Act 1966 (Cth). In 2015 the trustee purported to terminate it. However, orders made by consent in the Federal Court binding Mr Reed, the former liquidator and Chubb declared that the purported termination was void and provided that: "Without further leave of the Court, the Applicants are not to take any steps to enforce any judgment or settlement in respect of the Insolvent Trading Claim obtained by them against Reed otherwise than by resort to the proceeds of insurance or indemnity under the Policy." 1. So far as I can see, all that presently matters of this history is that by consent order made in the Federal Court, the liquidators' predecessor obtained leave to bring the insolvent trading claim, subject to a condition that subject to obtaining further leave of the Federal Court, they could only execute against the proceeds of Mr Reed's insurance. No party made any submission that the history was otherwise relevant. 2. It is also common ground that an application for leave, whether it be under s 6 of the 1946 Act or s 5 of the 2017 Act, remains subject to the exercise of a discretion. That common ground accords with a line of authority binding me, most recently Wayland v Bird [2017] NSWCA 26 at [26]: "However, while those are matters which must be established before such an order will be made, the establishment of each those matters does not mandate the making of such an order. That question remains one within the discretion of the Court." 1. In Energize Fitness Pty Ltd v Vero Insurance Ltd [2012] NSWCA 213 at [59], Campbell JA said: "Ordinarily an insurer has the right under a policy to choose whether or not to take over the defence of proceedings brought against an insured. The purpose of s 6(4) is to provide a filter against insurers being unjustifiably made parties in litigation that, apart from the grant of leave, they would be free to stay out of. The standard for when it is unjustifiable to bring an insurer in is fairly low, namely that there is an arguable case, but an arguable case exists only when there is both an arguable case that certain facts exist, and an arguable case that those facts provide grounds for legal relief." 1. Of greatest significance for present purposes are four first instance decisions. The first two are decisions of this Division. In Opes Prime Stockbroking Ltd (in liq) (Scheme Administrators apptd) v Stevens [2014] NSWSC 659 and DSHE Holdings Ltd (Recs and Mgrs Apptd) (In Liq) v Abboud; National Australia Bank Ltd v Abboud [2017] NSWSC 579, a policy responded to a claim against a defendant. The defendant was actively defending the claim but would likely be unable to meet a judgment. The insurers had not admitted liability in unequivocal terms, but had done so pursuant to a qualification which preserved their rights to deny liability if facts emerged during the litigation which engaged an exclusion. In both cases leave was refused. 2. In the former Ball J said at [20]: "In my opinion, there is no utility in joining QBE to the proceeding. It has admitted liability to indemnify Mr Stevens and Mr Gillooly in respect of the claim brought by Opes Prime. That admission is qualified, but not in a way that suggests that, for the purposes of determining its liability under the Policy, QBE will not be bound by the outcome of the proceeding. There is a real possibility that, if judgment is obtained, Mr Stevens and Mr Gillooly will not be able to meet it. But that possibility is not affected if QBE is joined. There is no suggestion that, if Opes Prime is not permitted to enforce its charge, some other claimant will obtain priority in respect of the moneys payable by QBE. The evidence suggests that there is no other such claimant. At most, all that could be said is that the advantage of giving leave to Opes Prime to proceed against QBE now is that it may protect Opes Prime's position in the event circumstances change. However, in my opinion, that does not provide an adequate ground to give that leave now." In the latter case Stevenson J said at [39]-[41]: "I see the situation as being akin to that described by Ball J in Opes Prime at [20]; namely, that the insurers have admitted liability to indemnify the directors, subject to a qualification, but "not in a way that suggests that, for the purposes of determining its liabilities under the [policies], [the insurers] will not be bound by the outcome of the proceeding". In his submissions, Mr Giles emphasised that the plaintiffs wish to avoid the multiplicity of proceedings and pointed to the possibility that, if leave were not granted, there may be two rounds of litigation; namely, the current claim by DSHE, NAB and HSBC against the directors and officers, then a later round of litigation between the directors and officers and the insurers. But that is a matter of speculation. It may happen. It may not. There is no reason at the moment to conclude that it will. Currently, there is no insurance controversy for the Court to quell. And I do not think it appropriate to grant leave under s 6(4) "just in case" one arises." 1. In the third case, Rushleigh v Forge, the defendant insured was in liquidation and an earlier decision had refused leave to proceed against the company. In those circumstances leave was sought and obtained against the insurer. Markovic J distinguished Opes Prime and DHSE Holdings on the basis that "it could not be said there was no utility, because the claimant was unable to proceed against the insured": see at [80]-[81]. 2. The fourth case is a decision of McCallum J in Damm v Coastwide Site Services Pty Ltd [2018] NSWSC 611. The facts were unusual. The decision was an ex tempore grant of leave, by consent, in circumstances where one of the defendants had somewhat unexpectedly become deregistered ("without the knowledge of the lawyers or the insurers"). In those circumstances, her Honour granted leave to join the insurers to the litigation. It is no criticism of her Honour's consent judgment, but there was no analysis of the judgments to which I have referred above in that decision. 3. The liquidators, as I understand it, accept that, if they succeed against Mr Reed after trial, they have bound themselves, by reason of the Federal Court orders made on 19 May 2016, from seeking to recover any unpaid balance from Mr Reed which cannot be recovered from the proceeds of the policy. They also accept, as I understand the position, that they cannot recover from Chubb any more than the total policy limit in respect of a judgment that they might obtain. No submissions were made to me as to the circumstances in which leave might be granted to alter the present effect of the Federal Court order. 4. There was a change in emphasis between the written submissions exchanged before the application and the oral submissions I have heard this morning. The liquidators' written submissions correctly anticipated that the gravamen of their application would turn not so much on the statutory prerequisites but on the acknowledged residual discretion to the grant of leave under s 5. Dealing with the discretionary basis for their application, the written submissions provided as follows: "The 2017 Act provides to plaintiffs a statutory action to "recover the amount of the insured liability from the insurer", being "the amount of indemnity (if any) payable pursuant to the terms of the contract of insurance in respect of the insured person's liability to the claimant". The utility of proceeding directly against the insurer in circumstances where the defendant is impecunious and the insurer has not admitted liability in respect of a claim that ought to be indemnified is self-evident. Further, since the inception of the substantive proceedings in September 2016: a. Mr Reed has had, and continues to have, no real financial interest in their outcome; b. Chubb has been funding Mr Reed's defence from moneys advanced under the Policy; c. Chubb's real interest in pursuing Mr Reed's defence has been and continues to be to limit the amount paid under the Policy; d. the defence has expended significant costs, and continues to cause the plaintiffs to expend costs, where it may be inferred that the current and future defence costs will consume a significant portion of the balance of the indemnity that would otherwise be payable to the plaintiffs. As the ultimate beneficiary of any potential reward in continuing the defence, Chubb ought not be permitted to shelter behind Mr Reed with its potential exposure capped at the limit of the Policy. That is, the plaintiffs ought to be able to put themselves in a position to seek their costs against Chubb directly in the event that the Plaintiffs are successful. This requires Chubb to be joined as a party. While it is possible for the plaintiffs to seek a third party costs order against Chubb such orders are "exceptional". Further, a failure to join a non-party notwithstanding that there is a cause of action against that entity, as is the present case under the [2017 Act], may weigh against the exercise of the discretion to order costs against that party." (Footnotes omitted) 1. In oral submissions, Mr Ashhurst SC who appeared with Ms Shepard for the liquidators, candidly acknowledged that there might be a benefit obtained by joinder, as anticipated in their written submissions obviating the need to seek a third party costs order against the insurer, but stated that that was merely a collateral benefit. At the forefront of the oral submissions was an attempt to distinguish the insurer's responses in Opes Prime and DSHE, and to focus upon the qualifications in Chubb's response to Mr Reed's claim. It was put that Chubb had not to date made a determination to grant indemnity, and that there continued to be a risk that a dispute might arise. A smaller point was to contrast some aspects of the language of Chubb's letter to Mr Reed with what had been said in its response to Mr Hill's notification. I shall deal with that immediately. 2. I do not think anything turns upon those differences in wording which are, on any view, minor. The counterpart second paragraph of the letter to Mr Hill was as follows: "Having reviewed the documents and information provided to us, we are pleased to confirm that the D&O section of the Policy presently responds to provide cover for the advancement of reasonable Defence Costs incurred by your client on account of the Insolvent Trading Proceedings, subject to the terms and conditions of the Policy, as set out below." (Emphasis added). 1. Although emphasis was given to the adverb, and there were other minor differences in the otherwise comparable response written two days later by the same officer of Chubb, I do not consider that anything material today turns upon that difference in language. 2. The liquidators emphasised that joining the insurers to the litigation now would avoid the risk, and consequent disadvantages to them, of any later dispute, which might involve not only delay but separate proceedings between insurer and insured, which might in due course impact upon their rights to indemnity. They pointed to Chubb's solicitor's affidavit, on information and belief, to the effect that Chubb would "make a determination on coverage under the Policy for any liability found against Mr Reed if and when such loss crystallises", as confirming the fact that no determination had been made. 3. I agree with the stance evinced in the liquidators' oral submissions tending to minimise the "collateral" advantage that they might obtain, if orders were made on their application joining Chubb, in relation to what presently would be a third party costs order. The premise of the analysis is that the liquidators ultimately succeed and obtain judgment, whether after trial or by compromise. In those circumstances, it is likely that they will also obtain a favourable costs order. 4. As presently advised, although I have heard no submissions upon it, it would seem that attempting to enforce any such favourable costs order arising out of the underlying proceedings would also fall within the Federal Court order (it would be taking steps "to enforce any judgment or settlement in respect of the Insolvent Trading Claim obtained by them against Reed"). 5. If the insurers are not joined to the proceedings, it might be possible for the liquidators to seek and obtain a costs order against Chubb, which in those circumstances will have been funding Mr Reed's unsuccessful defence: see Selig v Wealthsure Pty Ltd (2015) 255 CLR 661; [2015] HCA 18 at [39]-[48]. I do not express any view as to the merits of such a claim. 6. If, however, Chubb were joined as a defendant, as is adumbrated in the liquidators' written submissions, it might be possible to obtain a costs order directly against Chubb, for either the whole or perhaps part of the costs of the proceedings. Further, because Chubb's obligations under that costs order would be directly owed to the liquidators, it would at least arguably - again, I am not expressing any view about this - fall outside the policy limits. 7. I accept the submission of Mr Darke SC, who with Ms Campbell appeared for Chubb, that such a result is a purpose which would be foreign to the 2017 statute. True it is that the 2017 Act does not speak in terms of the separate liability for costs following an order made under s 98 of the Civil Procedure Act 2005 (NSW). However, "liability" is defined in s 3(1) to mean "a liability to pay damages, compensation or costs" (my emphasis) and s 4(3) provides that, subject to the balance of the statute, "the parties have the same rights and liabilities, and the Court has the same powers, as if the proceedings were proceedings brought against the insured person". That provision seems to me to be inconsistent with an outcome where the liquidators, if this application be granted and they succeed at trial and obtain a judgment which exhausts the policy, can then recover a favourable costs order directly against the insurer, so as to obtain benefits exceeding those available under the policy limits. That result would seem to place the liquidators in a materially improved position than they would otherwise have been, contrary to s 4(3). 8. On one view, s 4(3) may have the effect of circumscribing the discretion as to costs in s 98 of the Civil Procedure Act and Uniform Civil Procedure Rules 2005 (NSW), r 42.1. That is not a question that arises today. It would arise if, as the liquidators emphasised in their oral submissions before me today, there was some other, proper, basis for proceeding under the 2017 Act, and the consequences which I have outlined above would flow collaterally. 9. I turn then to the primary basis which was advanced orally. I do not regard there to be a material distinction between Chubb's response to the claim on its policy by Mr Reed, and the responses of the insurers in Opes Prime and DSHE. Indeed, insofar as the responses by the insurers in those cases are reproduced in the reasons for judgment, they seem to me to be on all fours with Chubb's response in this case. In DSHE the response of the insurer is partially reproduced at [28], and it made plain that the insurer will make provision for defence costs, subject to (a) a specific preservation in relation to the possible operation and exclusion, (b), the repayment obligation of defence costs if the exclusion operates and (c) a general reservation under the D&O policy and at law. That is precisely what Chubb has done in the present case. Further, the letter by the insurer in DSHE referred in terms to the dishonesty exclusion and an exclusion arising under s 199B of the Corporations Act and then stated: "Having regard to the nature of the allegations made in the Proceeding and without imputing any wrongdoing on the parts of your clients, Allianz must reserve its position in relation to the possible operation of Exclusion 3.1 of the D&O policy." 1. Less as to the specifics of the insurer's response in Opes Prime is included in the judgment, but nothing which has been reproduced at [9]-[10] suggests that any materially different stance was presented by that insurer. 2. Still further, the liquidators' submission to me bears a close resemblance to the unsuccessful submission recorded at [33] of DSHE, and rejected by Stevenson J: "In those circumstances, Mr Giles submitted that the insurers' reservation of position concerning the possible operation of Exclusion 3.1 ("the dishonestly exclusion") bespeaks an apprehension on the part of the insurers that the pleadings in each of the Company Proceedings and the Bank Proceedings raises the prospect of the dishonesty exclusion being enlivened; and this is a reason why leave should be given under s 6(4) of the LRMP Act. I do not agree. First, the reservation is stated to be "without imputing any wrongdoing on the part of your clients". Second, as Mr Rich SC, who appeared with Mr Lawrance for a number of the excess insurers submitted, the reservations: …are not only customary at this stage of proceedings, but are precautionary in nature, and not indicative of an extant or latent dispute about indemnity. As Mr Rich submitted, there is presently no reason to suppose that the insurers will refuse indemnity to their insureds against any relevant liability they are found to have to the plaintiffs upon a determination of the Company and Bank Proceedings. It is hard to see how much further the insurers could take the matter at the moment. It can hardly be supposed that the insurers would now undertake, no matter what emerged in the proceedings (or at all), unconditionally to meet any judgment that might be entered against their insured. Cover is, for the moment, "confirmed", albeit subject to those reservations." 1. I respectfully agree with what Stevenson J there wrote, and in my view it is applicable to the present circumstances. Here, no differently from DSHE, it is difficult to see how much further Chubb could take the matter at the moment. 2. Mr Ashhurst realistically accepted that the insurer could not be expected at this stage irrevocably to confirm cover. In other words, he accepted, and in my view he was completely right to accept, that the insurer could not preclude itself from taking advantage of an exclusion or limitation of liability depending upon facts which might emerge and findings which might be made in the litigation in October of this year. When that is borne in mind, it seems to me that the qualifications in Chubb's letter go as far as an insurer could be expected to go in the present circumstances. The fact that Chubb's solicitor has deposed to Chubb's intention only to determine coverage if and when a liability crystallises may strictly speaking be accurate, but it does not detract from the force of what it has said in its correspondence to its insured. 3. It follows that in my view, the situation is on all fours with the result which was reached in Opes Prime and confirmed in DSHE. I do not think it is appropriate to grant leave under the 2017 Act in circumstances where there has not been demonstrated to be any controversy between insured and insurer. It is not necessary to address the further prejudice, in the form of costs, to which Chubb pointed. 4. There are two final matters. The first is that on the view I have reached it is not necessary to say anything about a point raised on behalf of Mr Reed, concerning the proposition that s 6(2), which deals with the time within which such application must be made, cannot defeat the six years provided for in s 588M of the Corporations Act. I mean no disrespect to anyone but that is not a submission as to which full submissions have been made and it strikes me as one which is not free from complexity. 5. The second and final observation is that nothing in this determination on this notice of motion would preclude the liquidators from making a further application, in the event that there is a material change of circumstances (most obviously, evidence of a real dispute between insured and insurer). 6. For those reasons, I shall dismiss the notice of motion filed 11 June 2019. 7. [Argument concerning costs]. 8. Following a constructive discussion as to costs, the unsuccessful liquidators accept that they should pay Chubb's costs of the application, and that as a third party to litigation, that order will be enforceable forthwith. 9. The larger issue concerns whether the liquidators should, as they seek, only have to pay Chubb's costs leaving Mr Reed to bear his own costs, or whether they should also bear Mr Reed's costs. 10. The parties have accepted that detailed reasons are not required (nor indeed sought) in relation to the exercise of discretion as to costs. I shall not seek to summarise the submissions that have been made. There was on any view overlap in the written submissions made by Mr Reed and his insurer. I fully accept that he had an entitlement to be here and to choose to be represented separately, by senior counsel. However, the ultimate question in the exercise of discretion in a case such as this where a plaintiff is unsuccessful but there are more than one set of costs of the successful parties is whether it is fair for the plaintiff to bear the entirety of those costs. The authorities are collected in Local Democracy Matters Inc v Infrastructure NSW (No 2) [2019] NSWCA 118 at [20]-[22], including the "general principle" that "the court will not normally allow two sets of costs to defendants where there is no possible conflict of intent between them in the presentation of their cases". In my view this an appropriate case to confine the costs order only to the sole respondent to the notice of motion, namely, Chubb. 11. The orders of the Court therefore as to costs will be: The applicants to pay the costs of Chubb Insurance Company of Australia Ltd of the notice of motion filed 11 June 2019, such costs to be enforceable forthwith. ********** 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: 09 August 2019