Allison Pty Ltd (ACN 056 940 437) T/as Pilbara Marine Port Services v Lumley General Insurance Ltd - [2004] WASC 99

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ALLISON PTY LTD (ACN 056 940 437) T/as PILBARA MARINE PORT SERVICES -v- LUMLEY GENERAL INSURANCE LTD [2004] WASC 99

CORAM: MASTER NEWNES

HEARD: 13 APRIL 2004

DELIVERED : 21 MAY 2004

FILE NO/S: CIV 1264 of 2004

BETWEEN: ALLISON PTY LTD (ACN 056 940 437) T/as PILBARA MARINE PORT SERVICES
Plaintiff
AND
LUMLEY GENERAL INSURANCE LTD (ACN 000 036 279)
Defendant

Catchwords:

Practice and procedure - Application to strike out statement of claim - Limitation period - Whether continuing obligation - Whether claim outside indorsement on writ - Turns on own facts

Legislation:

Nil

Result:

Statement of claim struck out in part

Category: B

Representation:

Counsel:

Plaintiff: Ms G S Pitt
Defendant: Ms E Clapin

Solicitors:

Plaintiff: Williams & Hughes
Defendant: Phillips Fox

Case(s) referred to in judgment(s):

Allison Pty Ltd (ACN 056 940 437) T/as Pilbara Marine Port Services v Lumley General Insurance Ltd [2004] WASC 98
Banque Financiere de la Cite v Westgate Insurance Ltd (1991) 2 AC 249
Banque Kyser Ullman SA v Skandia (UK) Insurance Co Ltd [1990] 1 QB 665
Banque of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd (1989) 3 All ER 628
Clutha Ltd (In Liq) v Millar (No 3), unreported; SCt of NSW; 24 July 2002
Khoury v Government Insurance Office of New South Wales (1984) 165 CLR 622
Larking v Great Western Gravel (1940) 64 CLR 221
Neilson v Overseas Projects Corporation of Victoria Ltd [2002] WASC 231
Sheldon v McBeath (1993) Aust Torts Rep 81‑209
Wardley v The State of Western Australia (1992) 175 CLR 514

Case(s) also cited:

Cigna Insurance Asia Pacific Ltd v Packer (2000) 23 WAR 159
Lidden & Anor v Composite Buyers Ltd & Ors (1996) 139 ALR 549
McKechnie v Campbell (1966) 17 WAR 62
Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233
Water Authority of Western Australia v AIL Holdings Pty Ltd (No 2) (1992) 10 WAWR 233
Western Australia v Rothmans of Pall Mall (Aust) Ltd [2001] WASCA 25

MASTER NEWNES: This is an application by the defendant to strike out the writ and statement of claim as disclosing no reasonable cause of action, alternatively to strike out the statement of claim as embarrassing. The plaintiff seeks leave to amend the writ to add a claim for damages for breach of a duty of utmost good faith.
The current action was commenced by the plaintiff on 26 February 2004 in an endeavour to overcome any difficulties it might have in amending the writ and statement of claim in CIV 2195 of 1995, in which it seeks to add claims for breach of an implied term of a contract of insurance and for damages for breach of a duty of utmost good faith in relation to a contract of insurance.
The subject matter of this litigation is described in my reasons for decision in CIV 2195 of 1995 in Allison Pty Ltd (ACN 056 940 437) T/as Pilbara Marine Port Servicesv Lumley General Insurance Ltd [2004] WASC 98. In short, the plaintiff claims to be entitled to damages in respect of a policy of insurance by which the defendant agreed to indemnify the plaintiff for any loss or damage to a vessel known as the "Pilbara Pilot". The vessel was lost as a result of Cyclone Bobby in November 1995. The defendant has denied liability under the policy on a number of grounds.
The statement of claim in the present action is identical to the statement of claim in CIV 2195 of 1995, save that the latter statement of claim does not contain pleas in terms of pars 16 to 19 of the statement of claim in this action. Those paragraphs plead causes of action for breach of an implied term of the contract of insurance and of a duty of utmost good faith. It is those pleas that the plaintiff sought to add in CIV 2195 of 1995.
If all of the amendments sought in CIV 2195 of 1995 had been allowed, this action would have been unnecessary. In fact those amendments were disallowed for the reasons which I published as Allison Pty Ltd (ACN 056 940 437) T/as Pilbara Marine Port Services v Lumley General Insurance Ltd (supra).
The plaintiff has also brought an application to consolidate this action with CIV 2195 of 1995.
The essential question on this application is whether the claims for damages for breach of an implied term of the contract of insurance and for breach of a duty of utmost good faith are maintainable. The relevant parts of the statement of claim are as follows:
"16.Further and or in the alternative, both parties to the Insurance Contract were under a duty to the other to act, alternatively it was an implied term of the Insurance Contract that the parties would act, with the utmost good faith. The duty arises or the term is implied as a matter of law.
17.The duty or implied term referred to at paragraph 16 required the Defendant not to act in a manner which offended notions of fairness or reasonableness or offended community standards, alternatively not to act in a manner which was capricious or unreasonable, when assessing the Plaintiff's claim under the Insurance Contract.
18.In breach of the duty or term referred to at paragraph 16, the Defendant acted unfairly, capriciously, unreasonably and/or in a manner which offended notions of fairness or reasonableness or community standards when:-
18.1assessing the Plaintiff's claim under the Insurance Contract and/or
18.2refusing the Plaintiff's claim under the Insurance Contract on 10th May 1995 on and maintaining the refusal to pay the claim thereafter;
18.3defending this action,
on the basis that the Plaintiff had breached the warranties referred to at paragraphs 3.3 and 3.4 of the Defence and,
18.4when claiming to avoid the Insurance Contract by letter dated 7th December 1995 and defending this action,
on the basis the Plaintiff had failed to make disclosure in the manner referred to at paragraphs 21, 22 and 23 of the Defence.
19.In support of the averment at paragraph 16 the Plaintiff relies on the following facts:-
19.1the Defendant refused the Plaintiff's claim under the Insurance Contract, maintained the refusal to pay the claim thereafter and defended this action on the basis that:-
(a)the Plaintiff had not applied to the Harbour Master of the Port of Dampier for approval of the Pilbara Pilot’s usual mooring, and/or had not made that application on an approved form (Defence para 6.1.A.1.1), when it was the fact that and the Defendant knew:-
(i)the Harbour Master had given his approval;
(ii)the Dampier Port Authority did not have an approved form;
(b)the Harbour Master had not received an application for approval of the use of the mooring of the Pilbara Pilot, had not satisfied himself that the location of the proposed or any mooring was appropriate, had not satisfied himself that the mooring was generally suitable for the 'Pilbara Pilot', and had not granted approval for the use of a mooring by the 'Pilbara Pilot' by a notice in writing to the Plaintiff (Defence para 6.1A.1.2), when it was the fact that and the Defendant knew:-
(i)the Port Authority did not have an approved form;
(ii)the Harbour Master usually approved moorings in the Dampier Port informally, and did not usually give approval by notice in writing;
(iii)the Harbour Master had given his approval to the mooring of the Pilbara Pilot on its usual mooring, from which it could reasonably be inferred:-
(1)that the Harbour Master was satisfied:-
(i)the mooring was appropriate;
(ii)the mooring was suitable for the Pilbara Pilot, and
(2)that if requested to do so by either Plaintiff or Defendant he would have confirmed his consent in writing;
(c)the Harbour Master had not approved the Pilbara Pilot's mooring (to the 'Pilbara Jarrah') at the time she was lost (Defence paras 6.1A.2, 6.1A.3 and 6.1A.4), when it was the fact that and the Defendant knew:-
(i)the facts referred to at paragraph 9 of the Reply;
(ii)that the Harbour Master regarded the removal of the Pilbara Pilot from its usual mooring as Cyclone 'Bobby' approached was made in the interests of safety and was good seamanship;
(d)the 'Pilbara Pilot's' usual mooring was not a 'cyclone proof mooring' (Defence para 6.2), when it knew that any mooring in the Port of Dampier for which the Harbour Master had given approval, was in the Harbour Master's opinion (formed after analysis of the application and supporting information and in particular the underkeel clearance) a secure mooring for the vessel to be placed on during cyclone conditions, and was an approved mooring which was a cyclone proof mooring. Dampier Port Authority Regulations 1989 Reg 44;
PARTICULARS OF KNOWLEDGE
The Defendant's knowledge of the facts referred to at paragraph 19.1(a) to (d) arose (at least) from a facsimile addressed by the Dampier Port Authority to its investigator and agent Manu Marine Pty Ltd (Manu Marine) dated 1st November 1995;
(e)it wished to substitute its own opinion as to whether the Pilbara Pilot’s usual mooring was a cyclone proof mooring, for the Harbour Master’s opinion (Defence para 6.2);
19.2the Defendant:-
(a)did not give discovery of the facsimile referred to at paragraph 19.1(d);
(b)served and relied upon a report from Manu Marine dated 21 September 1995 ('the fourth report') which:-
(i)inferred that the Harbour Master had not approved the usual mooring as a cyclone proof mooring;
(ii)attached correspondence from the Dampier Port Authority stating that an application for approval of the usual mooring as a cyclone proof mooring, and an approval of that mooring, had not been located;
(c)did not disclose the contents of a further report from Manu Marine dated 2 November 1995 ('the fifth report'); the fifth report:-
(i)stated that the Dampier Port Authority had approved the Pilbara Pilot's usual mooring as a cyclone proof mooring;
(ii)annexed the facsimile referred to at paragraph 19.1(d);
(d)in the premises referred to at paragraphs 19.2(a) to (c) withheld documents which disclosed that the cases made in those paragraphs of the Defence referred to at paragraphs 19.1(a), (b) and (d) were not fairly or reasonably advanced;
(e)in the premises referred to at paragraph 19.1(a)-(d) and 19.2 has raised and persisted in a case or cases which have unreasonably increased the Plaintiff's costs of this action and of its claim under the Insurance Contract;
19.3the Defendant made allegations of non disclosure in terms of paragraphs 21, 22 and 23 of the Defence when it knew believed or could readily have ascertained that:-
(a)the Plaintiff knew or believed that it had the Harbour Master’s approval for the Pilbara Pilot's usual mooring;
(b)the Plaintiff knew or believed that, because the Harbour Master had approved the Pilbara Pilot's usual mooring as a cyclone proof mooring, it was a cyclone proof mooring;
(c)the Plaintiff knew or believed that it had complied with the terms of the Dampier Port Authority Regulations;
(d)the Defendant knew on or about the 1st of November 1995 that the Pilbara Pilot’s usual mooring was approved by the Dampier Port Authority as a cyclone proof mooring."
The defendant says that the claim for breach of the implied term is statute‑barred. It says that the cause of action for the alleged breach of the duty of good faith is not contained within the indorsement on the writ, so it cannot be brought in this action without an amendment to the writ, and, in any event, the plea discloses no reasonable cause of action first, because a breach of the duty of good faith does not give rise to a remedy in damages and, secondly, because the claim is statute‑barred.
The plaintiff alleges that the defendant breached both the implied term and the duty of utmost good faith first, when "assessing the plaintiff's claim under the insurance contract"; secondly, by refusing the plaintiff's claim on 10 May 1995 "and maintaining the refusal to pay the claim thereafter"; thirdly, by defending the action on the basis of a breach of warranty by the plaintiff; and fourthly, by a letter of 7 December 1995 claiming to avoid the contract on the ground of material non-disclosure by the plaintiff and by defending the action on that ground.
It is not pleaded when the relevant assessment of the plaintiff's claim was alleged to have occurred, but I take it that it occurred before the rejection of the claim by the defendant's letter of 10 May 1995.
I will turn first to the claim for breach of an implied term of the contract. It is clear that a cause of action for damages for breach of contract accrues at the time of the breach. The defendant contended that in this case the cause of action accrued when the plaintiff suffered a loss against which the defendant had promised to indemnify it. That occurred with the loss of the "Pilbara Pilot" in February 1995. The limitation period expired six years from that date. The proposed claim is therefore clearly statute‑barred.
The plaintiff, on the other hand, submitted that the implied term gave rise to a continuing contractual duty. It submitted that a failure to discharge a continuing contractual duty gives rise to a series of causes of action while the failure continues. Counsel referred to Clutha Ltd (In Liq) v Millar (No 3), unreported; SCt of NSW; 24 July 2002, Neilson v Overseas Projects Corporation of Victoria Ltd [2002] WASC 231 at [67] and Sheldon v McBeath (1993) Aust Torts Rep 81‑209 at 62,073. It was argued that continuing breaches of contract had occurred within the last six years and therefore no limitation issue arose.
The defendant contended that the cases relied upon by the plaintiff were not on point, but referred to a situation where the contract involved a continuing obligation to perform a series of acts or an act a number of times. They did not apply where, as is alleged here, there was a failure to pay under a contract of indemnity so that the cause of action remained live while the indemnity remained unpaid. Such a conclusion, it was submitted, would effectively defeat the Limitation Act in respect of claims for breach of contract.
I take the relevant principle to be that stated in Larking v Great Western Gravel (1940) 64 CLR 221 at 236 ‑ 237 where Dixon J said:
"If a covenantor undertakes that he will do a definite act and omits to do it within the time allowed for the purpose, he has broken his covenant finally and his continued failure to do the act is nothing but a failure to remedy his past breach and not the commission of any further breach of his covenant. His duty is not considered as persisting and, so to speak, being forever renewed until he actually does that which he promised. On the other hand, if his covenant is to maintain a state or condition of affairs … then a further breach arises in every successive moment of time during which the state or condition is not as promised …
… If the covenant names a time for the doing or completion of a definite act, it is clear that failure to do the act within the time involves a breach once for all, and … the same conclusion will follow where no time is limited but a specified thing is to be done and a reasonable time elapses for the performance of the covenant …"
In Sheldon v McBeath (supra), the plaintiff had engaged the defendant, an architect, to supervise the construction of a house. It was later found that the house contained serious defects. The plaintiff claimed that the defects were due to the defendant's failure to inspect the footings and to draw attention to the deficiencies in them before they were covered up and built over. The action was commenced more than six years after the defective work had been completed, but less than six years after completion of the house. The Court of Appeal of New South Wales held that, properly construed, the defendant's promise to supervise was a promise to inspect the footings during the course of his supervision of the construction from commencement to completion and handover, not simply a promise to inspect the footings and foundations before they were covered up. Since the architect failed to inspect the footings before they were covered up, he continued to be under a duty to inspect them until completion and handover, the latter taking place within the limitation period. The plaintiff was entitled to maintain a claim for damages if he was able to point to evidence from which the Court could properly infer the ability of the builder to rectify the defective workmanship (by work or payment) before the building work was completed.
On the question of whether or not a covenant gives rise to a continuing obligation, Priestly JA said (at 62,072) that there are no general principles of law requiring particular answers in different categories of factual situations. What must be looked at in each case is the meaning of the words of the promise in the relevant context of the particular contract. His Honour also pointed out that, where a continuing series of breaches occurs, the same cause of action does not arise out of each breach. Successive causes of action arise. Although each cause of action may be identical for practical purposes, each is distinct from the others. On the facts, the successive causes of action arose day by day following the architect's initial breach and any one could be the subject of separate proceedings. Only proceedings on causes of action that resulted from breaches of promises more than six years before the commencement of the proceedings by the owner were not maintainable by virtue of the Limitation Act. All those within the six‑year period were available to the owner as causes of action.
Priestly JA observed that it may be thought there is no practical point in distinguishing between the successive causes of action, except as they fall on one side of the time bar or the other, but they are, as a matter of legal reasoning, all separate causes of action.
In the present case, the claim is for breach of an implied term of utmost good faith. I understand the alleged term to be coterminous with the obligation of good faith which arises as an incident of the relationship of insurance, as described in Khoury v Government Insurance Office of New South Wales (1984) 165 CLR 622 at 637. That obligation of good faith operates not merely in relation to the making of a contract of insurance but also to aspects of the performance of it. I understood it is on that basis the plaintiff says the implied term gives rise to a continuing obligation on the part of the defendant. Accordingly, the plaintiff says it is entitled to bring an action for breach of the implied term in respect of breaches that occurred not more than six years from the date upon which the writ in this action was issued.
I do not consider that this is an issue appropriately to be determined on an interlocutory application of this nature. It is well established that a limitation point should not be determined on an interlocutory application except in the clearest case: Wardley v The State of Western Australia (1992) 175 CLR 514. I do not regard the present case as such a case. The appropriate course is for the defendant to plead any limitation point it wishes to take by way of defence and for the matter to be determined at trial. For reasons I will come to shortly, I consider that that course should be taken in this case even in respect of alleged breaches which appear clearly to have occurred more than six years before this action was commenced.
I will turn next to the claim for damages for breach of the duty of utmost good faith. In my view, for the reasons I gave in Allison Pty Ltd (ACN 056 940 437) T/as Pilbara Marine Port Services v Lumley General Insurance Ltd (supra), that claim falls outside the current indorsement of claim on the writ, which is in the following terms:
"INDORSEMENT OF CLAIM
The plaintiff's claim against the Defendant is for damages for breach of a contract of marine insurance made between the Plaintiff and the Defendant in December 1994 with respect to the Plaintiff's vessel, the 'Pilbara Pilot'. And the Plaintiff claims against the Defendant:
1.damages;
2.interest;
3.a declaration that the same contract of marine insurance is in full force and effect and an order that the Defendant specifically performs the same."

I should mention that the statement of claim contains no claim for specific enforcement of the contract of insurance.
The plaintiff now seeks to amend the indorsement by adding after the words " Pilbara Pilot", the following:
"alternatively for breach of duty of good faith arising as a matter of law".
That is, the plaintiff seeks to add a claim for damages for breach of the alleged duty of good faith.
I consider that such a claim is not arguably open to the plaintiff. For the reasons I have given in Allison Pty Ltd (ACN 056 940 437) T/as Pilbara Marine Port Services v Lumley General Insurance Ltd (supra), I consider that a breach of the duty of good faith does not sound in damages: Banque Kyser Ullman SA v Skandia (UK) Insurance Co Ltd [1990] 1 QB 665, affirmed on appeal by the House of Lords, reported as Banque Financiere de la Cite v Westgate Insurance Ltd (1991) 2 AC 249; Banque of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd (1989) 3 All ER 628.
Accordingly, I would refuse leave to amend the writ as proposed and would strike out the claim in the statement of claim so far as it pleads a claim for damages for a breach of the duty of utmost good faith.
It is the case that the statement of claim also contains a claim for breach of contract in identical terms to a claim made in CIV 2195 of 1995. The defendant says that that cause of action, which accrued in 1995, is clearly statute‑barred and, in addition, because it repeats the plea in CIV 2195 of 1995, the statement of claim in this action is to that extent an abuse of process. Moreover, the claims in respect of the implied term of good faith which rely on alleged breaches that occurred more than six years before this action was commenced, such as the assessment and rejection of the claim in 1995, would also appear clearly to be statute‑barred.
In the circumstances of this case, however, I do not think it is productive on this application to dissect the statement of claim in an endeavour to strike out those parts where there is repetition of claims pleaded in CIV 2195 of 1995 or where they are statute‑barred in these proceedings. It seems to me that to do so is apt to lead to even greater fragmentation of the plaintiff's total claims in the two actions and to cause more problems than it solves. The most practical course would appear to be to refuse to strike out those parts of the statement of claim. It will, of course, be open to the defendant to plead in its defence any limitation defences it considers are available to it. So far as the duplication of claims is concerned, it is clear that, in one way or another, this action will have to be heard with CIV 2195 of 1995 and, if no agreement can be reached between the parties, any difficulties in that regard can be adequately catered for by directions at trial.
In that context, I might observe that the primary action, CIV 2195 of 1995, was commenced in November 1995, so it has now been on foot for more than eight years. The plaintiff's vessel was lost some nine years ago. It is important that attention should now be directed to getting the matters ready for trial.
That leaves the question of whether this action should be consolidated with CIV 2195 of 1995. As I have said, it seems to me plain that this action must be heard together with CIV 2195 of 1995 so that all issues between the parties are resolved at the same time. The question of the form in which that should be done is a matter upon which I will hear the parties after they have had the opportunity to consider my reasons in this matter and in CIV 2195 of 1995 in Allison Pty Ltd (ACN 056 940 437) T/as Pilbara Marine Port Services v Lumley General Insurance Ltd (supra).
I would therefore strike out the claim for damages for breach of the duty of utmost good faith but would otherwise dismiss the defendant's application. I would refuse the plaintiff's application to amend the writ of summons.