Al Khaled v Jacaranda Property Developments Pty Ltd
[2012] NSWSC 755
•04 July 2012
Supreme Court
New South Wales
Medium Neutral Citation: Al Khaled v Jacaranda Property Developments Pty Ltd & Ors [2012] NSWSC 755 Hearing dates: 04/07/2012 Decision date: 04 July 2012 Jurisdiction: Common Law Before: S.G. Campbell J Decision: (1) Each of the first to third defendants be granted leave under s 500(2) Corporations Act 2001 to continue its cross-claim already filed and served against Neatrule Cement Rendering Pty Ltd ACN 125 742 761 (In Liq).
(2) Reserve liberty to the liquidator of the company to apply to revoke the grant of leave.
(3) Neither of the first to third defendants be permitted to enforce any judgment against the company without further leave of the Court.
(4) Calliden Insurance Limited to pay the costs of and incidental to the motion of each of the first, second and third defendants on the ordinary basis forthwith after they have been agreed or assessed, such costs extending to the costs thrown away by reason of Calliden Insurance Limited's successful application for adjournment made on Friday 29 June 2012.
(5) The plaintiff's costs of today and of Friday 29 June 2012 are his costs in the cause.
Catchwords: PRACTICE AND PROCEDURE - application by defendants for leave to proceed against company in liquidation pursuant to s500(2) Corporations Act 2001 - insurer seeks joining order under s 6(4) Law Reform (Miscellaneous Provisions) Act 1946 - HELD - leave to proceed as sought by defendants granted - COSTS - application for costs order against a non-party pursuant to 98(1)(b) Civil Procedure Act 2005 - order made - COSTS - order sought that costs be payable forthwith pursuant to r 42.7 Uniform Civil Procedure Rules 2005 - order made. Legislation Cited: Civil Procedure Act 2005
Corporations Act 2001 (Cth)
Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Uniform Civil Procedure Rules 2005
Workers Compensation Act 1987 (NSW)Cases Cited: Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (Receivers and Managers Appointed) (in liq) (No 2) [2009] FCA 42
Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266
Woollahra Municipal Council v Jefferies [1981] 1 NSWLR 377Category: Procedural and other rulings Parties: Said Al Khaled (Plaintiff)
Jacaranda Property Developments Pty Ltd (in liq) (First defendant/First cross claimant)
Waco Kwikform Pty Ltd (Second defendant/Third cross claimant)
Solidscaff Pty Ltd (Third defendant/Second cross claimant)
Neatrule Cement Rendering Pty Ltd (Fourth cross claimant)
Allianz Australia Workers Compensation (NSW) Pty Ltd (Cross defendant on the fourth cross claim)Representation: Counsel:
T. Davy (Plaintiff)
J. Sheller with T. Holmes (First defendant/First cross claimant)
S. Waring-Lambert (solicitor) (Second defendant/Third cross claimant)
J. Carroll (solicitor) (Third defendant/Second cross claimant)
N. Bountros (solicitor) (Cross defendant on the fourth cross claim)
C. Colquhoun (Calliden Insurance Ltd)
Solicitors:
Keddies Lawyers (Plaintiff)William Roberts Lawyers (First defendant/First cross claimant)Yeldham Price O’Brien Lusk (Second defendant/Third cross claimant)Wotton + Kearney Lawyers (Third defendant/Second cross claimant)Lee & Lyons Lawyers (Fourth cross claimant)DLA Piper Australia (Cross defendant on the fourth cross claim)
File Number(s): 2010/113640
EX TEMPORE Judgment
HIS HONOUR: Mr Said Al Khaled suffered personal injures on 12th November 2007 when he was electrocuted whilst working on scaffolding at a building site in Caringbah in the south of Sydney.
His work was that of a cement renderer and he suffered electrocution when an aluminium straight edge he was using in the course of his work came into contact with an energised power line.
By an amended statement of claim filed on 4 November 2010 the plaintiff claims damages from three defendants. He avers that the first defendant is the developer of the building site and that the second or third defendants were responsible for erecting the scaffolding from which he was working. He says that either of the defendants, and I am speaking in general terms, was responsible for his accident in terms of having a duty of care recognised in the law of negligence which extended to the exercise of reasonable care to take steps to de-energise the power line during the course of the work, or to so place the scaffolding that tools and equipment used by workers in the course of their ordinary work would be unlikely to come into contact with the power line.
Each of the defendants has issued a cross-claim against a company named Neatrule Cement Rendering Pty Ltd (Neatrule). That company is now subject to a creditors voluntary winding up and has been placed in liquidation. The liquidator's firm is RMG Partners and Mr Darren Vardy is the liquidator. Neatrule is said to have provided the plaintiff's labour for the purpose of the construction work. There is a question in the proceedings as to whether the plaintiff was engaged to perform work for Neatrule under a contract of service on the one hand or a contract for services on the other. This is not an unusual issue to arise in industrial accidents involving building sites.
Neatrule was insured as at the date of the injury. First, Calliden Insurance Limited (Calliden) insured it for public liability purposes, and secondly Allianz Australia Workers Compensation (NSW) Pty Ltd (Allianz) insured it under the Workers Compensation Act 1987.
Prior to the liquidation of Neatrule, Allianz, who had been paying Workers' Compensation for a period to Mr Al Khaled denied indemnity in respect of any contractual liability of Neatrule if the cross-claims against it are made good, and reserved its position in respect of tortious liability. Calliden had instructed its solicitors to act on behalf of Neatrule but strictly on a reservation of rights basis.
As I understand Calliden's position, the rights it reserves relate to three matters:
(1) an exclusion in respect of liability to persons covered by the Workers' Compensation Act ( I am putting that matter generally);
(2) an exclusion in respect of contractual liabilities not otherwise arising or implied by law;
(3) a breach of a condition relating to the prompt giving of notice of any claim.
From the material before me, which consists of the affidavits of three solicitors which have been read, one can certainly appreciate that there was a live issue as to Calliden's obligation to indemnify Neatrule in respect of what I will call the "worker exclusion". It is less obvious that the contractual liabilities exclusion may run, but I can see the possibility of it. There is simply no material before me from which I can assess whether the late notification matter is a real issue.
Whilst it was acting on that limited basis, Calliden joined Allianz as a cross-defendant alleging that Mr Al Khaled was a worker or deemed worker under the Workers' Compensation legislation and asserting that Allianz was obliged to indemnify Neatrule in respect of any liability under the cross-claims.
I observe in passing that nobody argues that there was any conflict or difficulty with Calliden instructing solicitors to represent Neatrule, and at the same time to use Neatrule's name in a cross-claim against its workers' compensation insurer. That may be a material consideration given the position adopted by the parties in this case.
I should also record that following Neatrule being placed in liquidation, Calliden instructed its solicitors to cease to act on behalf of Neatrule, and I understand that a notice of intention to file a Notice of Intention to Cease to Act was filed some time ago, and a Notice of Ceasing to Act yesterday.
As I have said the three defendants seek leave to continue the cross-claims as they are. The plaintiff neither consents nor objects to any order being made in that regard. If I have not already said it, I should say that the plaintiff has not sued Neatrule. Calliden does not say that it should not be involved in the proceedings. Rather its position is that given the insurance issues it has referred to, the appropriate course is for leave to be granted to the three defendants to institute fresh proceedings seeking relief under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946. Calliden makes clear that it will consent to the Court granting leave for that purpose under s6(4). It is important to point out that none of the defendants who are the moving parties seek that leave and indeed all of them oppose an order in that regard being made.
I have raised with counsel the operation of Rule 36.1 of the Uniform Civil Procedure Rules 2005 which is in the following terms:
At any stage of proceedings, the court may give such judgment, or make such order, as the nature of the case requires, whether or not a claim for relief extending to that judgment or order is included in any originating process or notice of motion.
Mr Sheller, of Counsel, who appears for the first defendant and upon whose oral submissions the second and third defendants are content to rely, accepts that the rule would empower me to make an order under s6(4) irrespective of the absence of any initiating process seeking it. Mr Colquhoun, of Counsel, who appears with leave for Calliden invites me to make an order under s 6(4) relying upon the Rule.
For a time I was very attracted to the idea that an order under s 6(4) should be made. After all, if there were to be issues about whether or not either insurer was bound to indemnify in respect of any liability that may be found to repose in Neatrule, those issues could be conveniently heard in the present proceedings and, if appropriate, orders could be made directly against the insurer concerned.
However, on reflection I am persuaded that I should make the orders sought by the three defendants, for reasons that I will seek to express succinctly.
Section 500(2) of the Corporations Act 2001 is in the following terms:
After the passing of the resolution for voluntarily winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.
All parties accept that the Court has a wide discretion under this provision. In Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266, Besanko J said at paragraph 21:
The effect of s 500(2) is to require the claimant to adopt the course of lodging a proof of debt unless he can demonstrate that there is some good reason why a departure from that procedure is justified in the case of the particular claim in dispute. It is impossible to state exhaustively all the circumstances in which it may be appropriate to grant leave to proceed. Relevant factors are the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and, if proceedings have already been commenced, the stage to which those proceedings may have progressed. The fact that the company is insolvent and will not be able to satisfy a judgment is a factor against the grant of leave (citations omitted) because the Court will not give its imprimatur to fruitless proceedings. Nor will leave be granted if the claimant does not have a genuine claim. On the other hand, the fact that the claimant has an arguable claim for proprietary relief against the assets of the company is a factor in favour of a grant of leave (citations omitted).
Leave is commonly granted where the claim is likely to be covered by a policy of insurance. I should point out that this is not a proprietary claim against the assets of the company. In Altinova Nominees Pty Ltd v Leveraged Capital Pty Ltd (Receivers and Managers Appointed) (in liq) (No 2) [2009] FCA 42 Jacobsen J, at paragraphs 42 to 45, pointed out that where it is at least arguable that a policy of insurance would respond to a claim for indemnity by the company in liquidation, that is a sufficient basis for a grant of leave under s 500(2), but in the exercise of the Court's discretion it may be appropriate to fashion orders that protect the position of the liquidators.
I should say in the present case that the liquidator has given what he terms conditional consent to the orders sought by the defendants. Exhibit A is a letter from him to the solicitor for the first defendant dated 25 June 2012. In part he says:
I consent to the orders sought in the notice of motion filed on 8 June 2012 on the condition that no orders of any nature are made against myself in my capacity as liquidator of the company.
He goes on to point out that, inter alia, the cross-claimants may be entitled to file a claim with the company's pre-appointment insurer who will undertake independent assessment of any claim.
It seems to me that were it not for the dispute between Calliden and Allianz as to which of them is obliged to indemnify Neatrule, this application would be perfectly routine and of a type that orders would be made in very short order by the Registrar. The fact of that dispute is capable of being a reason telling against the grant of leave, but in my judgment it is insufficiently persuasive to forestall the relief sought by the defendants. It seems to me that I should not impose upon the defendants the additional burden in terms of time, cost and expense of redrafting their pleadings in order to bring claims directly against the insurers, which they are unwilling to do.
Each of the moving parties is a commercial entity and to the extent to which there is some risk that their preferred option of continuing the present proceedings under s 500(2) may at a later time lead to the necessity for them to bring further proceedings, then they are in a position to adopt that essentially commercial risk, and the Court should not seek to protect them, as it were, from themselves.
Moreover, although there must be some risk, which is part of the risk I have referred to, that Calliden will simply walk away from these proceedings and that there will be no-one representing Neatrule at the hearing who will press the cross-claim against Allianz. I am not convinced that that will certainly occur.
I acknowledge that if Calliden and Allianz, whom I should say I am informed would consent likewise to an order under s 6(4), decide not to seek to appear at the trial, that is a matter for them. They are fully apprised of the hearing date and the issues for determination. They are in possession of the pleadings. If they see it as being in their commercial interests to walk away from these proceedings and take no further part, then that is a commercial risk that they are fully entitled to take. Once again I do not consider it is for the Court to protect them from themselves, as it were.
In the circumstances, I am persuaded that the preferable course is, as it has been put in written submissions, to maintain the status quo and allow the proceedings to continue as they have been for some time. Should either Allianz or Calliden seek leave to be represented at the trial, given that I am case managing the proceedings, I feel confident the Court will be well disposed to such an application, but that is a decision to be made if and when such an application is made.
My orders are:
(1) That each of the first to third defendants be granted leave under s 500(2) Corporations Act 2001 to continue its cross-claim already filed and served against Neatrule Cement Rendering Pty Ltd ACN 125 742 761 (In Liq).
(2) Reserve liberty to the liquidator of the company to apply to revoke the grant of leave.
(3) Neither of the first to third defendants be permitted to enforce any judgment against the company without further leave of the Court.
Arguments as to Costs
Each of the successful first to third defendants seeks an order that Calliden Insurance Limited pays its costs of and incidental to the application I have just disposed of, extending to the costs thrown away by reason of the adjournment I granted on Friday 29 June 2012 on the application of Calliden. Costs are sought on the ordinary basis. Ms Davy, who appears for the plaintiff, seeks a similar order. Mr Colquhoun opposes the order and he also opposes me making an order that any costs which I award to the first to third defendants be payable forthwith.
Mr Colquhoun says that Calliden appeared merely as a friend of the Court to attempt to assist the Court in finding a way forward in the light of Neatrule going into liquidation. Despite the attractiveness with which that submission was put, I cannot accept it. Calliden appeared as a contradictor and actively opposed the relief sought by the first to third defendants.
In a written submission lodged with the Court on 2 July 2012 by Mr Colquhoun 's instructing solicitors the following appears:
(4) Calliden contends that leave should not be granted, or it should be granted on terms, because there is a dispute between Calliden and Allianz Australia Workers' Compensation (NSW) Pty Limited (Allianz) as to the insurance policy which may respond to the cross-claims.
...
(6) In circumstances where there is serious doubt as to whether an insurance policy will respond to the cross-claims, the appropriate course is either that:
(a)The applications for leave to proceed against Neatrule under s 500(2) be refused, but Jacaranda, Waco and Solidscaff apply for leave to proceed against Calliden directly pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW); or
(b) The application to proceed against Neatrule be conditional upon the cross-claimants agreeing to fund a formal cross-claim against Calliden Insurance.
I am not suggesting that Calliden did other than attempt to assist the Court in accordance with the obligations of all legal practitioners who appear before it. However, it is important to understand, in context, as I have said, that it offered real opposition to the relief sought and in those circumstances the ordinary rule which enlivens the Court's discretion to award costs should apply, namely that costs follow the event.
I am conscious that Calliden is not a party to the proceedings as such but Calliden has sought leave to appear which I have granted. It has sought to respond to the application made by the defendants and for all intents and purposes has acted as though it were a party, at least for present purposes: See Woollahra Municipal Council v Jefferies [1981] 1 NSWLR 377.
Mr Sheller, who appears for the first defendant, refers to s 98(1)(b) Civil Procedure Act 2005 which provides:
Subject to rules of court and to this or any other Act...the Court has full power to determine by whom, to whom and to what extent costs are to be paid.
It is sometimes said that special circumstances are required to justify an order for costs being made against a non-party. If that is so, then the circumstances to which I have referred in terms of Calliden directly involving itself in this application are sufficiently special to justify the order sought.
I should also point out that the learned editors of Ritchie's Uniform Civil Procedure New South Wales at page 2687, paragraph 98.25, identify as a sufficient circumstance the consideration that the proceedings are being carried on by or for the benefit of a non-party.
The order sought here is limited to the costs of and incidental to the present application. As I have said, and in a real sense, Calliden is carrying on its response to that application for its own benefit. I have no doubt that the circumstances are such that the Court has full power to order costs against a non-party, and also for the reasons I have given, my discretion in that regard is enlivened.
Mr Sheller also seeks an order that the costs be payable forthwith pursuant to Rule 42.7 of the Uniform Civil Procedure Rules 2005. I also think the circumstances are such to justify such an order. Mr Colquhoun has frankly said in his submissions that it is not clear whether or not Calliden will seek to continue to be involved in the principle proceedings, and in this regard it should be pointed out again that that company has already instructed its solicitors to file a Notice of Ceasing to Act, a matter I referred to in my judgment disposing of the application. I think this circumstance alone justifies an order that costs be payable forthwith. After all, Calliden's involvement in these proceedings may have come to an end today and there is no reason why the ordinary position should prevail.
In making that finding I wish to make it clear that I am not in any way, shape or form suggesting that Calliden Insurance Limited has other than acted with all due propriety. Neither it nor its lawyers have done anything other than to extend the usual courtesy and assistance required by the Court of litigants and practitioners. However the absence of any forensic dereliction is not of itself conclusive against making an order that costs be payable forthwith. As Mr Sheller has pointed out, it is sufficient, at least between commercial parties, that the costs order relates to a discrete segment or part of the proceedings. The costs order here clearly satisfies that requirement. For that additional reason I think it appropriate to make the order Mr Sheller seeks.
For a time I was attracted to the idea that Ms Davy's application, that the plaintiff have some relief in relation to costs from Calliden should be acceded to. However, the plaintiff has never joined Neatrule and more importantly seeks no relief against Calliden today.
In those circumstances I am of the view that it would be entirely unfair to Calliden to visit those additional costs upon it, and I decline that application so far as it relates to Calliden. I do think it fair to say that the plaintiff, although neither seeking nor opposing relief, was entitled to be represented today to protect his interests.
Having said that, I think there was force in Mr Sheller's submission that even were I to order that the plaintiff's costs stand as costs in the cause, the defendants may be entitled to some protection in that regard against Calliden, but to my mind that would be to visit a liability on Calliden indirectly which I think ought not to be visited against it directly.
In all the circumstances I think it appropriate that I order that the plaintiff's costs be part of his costs in the cause, but I decline to make anything in the nature of a Bullock order against Calliden in respect of them.
My orders in respect of costs therefore are:
(1) Calliden Insurance Limited to pay the costs of and incidental to the motion of each of the first, second and third defendants on the ordinary basis forthwith after they have been agreed or assessed, such costs extending to the costs thrown away by reason of Calliden Insurance Limited's successful application for adjournment made on Friday 29 June 2012.
(2) The plaintiff's costs of today and of Friday 29 June 2012 are his costs in the cause.
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Decision last updated: 06 July 2012
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