Australian Gourmet Pastes Pty Ltd v Endeavour Packaging Pty Ltd
[2016] VCC 455
•22 April 2016
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for publication |
AT MELBOURNE
COMMERCIAL DIVISION
GENERAL CASES LIST
Case No. CI-15-03161
| AUSTRALIAN GOURMET PASTES PTY LTD | Plaintiff |
| v. | |
| ENDEAVOUR PACKAGING PTY LTD & ANOR | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 April 2016 | |
DATE OF JUDGMENT: | 22 April 2016 | |
CASE MAY BE CITED AS: | Australian Gourmet Pastes Pty Ltd v. Endeavour Packaging Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 455 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Application for a stay of the proceeding – Appropriate court to determine the dispute – Policy of insurance entered into in New Zealand – Claim made relating to events occurring primarily in Victoria – Litigation against the insurer pursued pursuant to rights of subrogation or an assignment of rights – Whether “exclusive choice of court agreement” in the insurance policy determinative – Proceeding stayed – Section 20 Trans-Tasman Proceeding Act 2010 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. McWilliams | Wotton + Kearney |
| For the First Defendant | No appearance | |
| For the Second Defendant | Ms C Harris | Gilchrist Connell |
HIS HONOUR:
1The issue for determination in the present application is whether a New Zealand court is “the more appropriate court to determine the matters in issue” between the plaintiff Australian Gourmet Pastes Pty Ltd (“Gourmet Pastes”) and the second defendant IAG New Zealand Ltd (“IAG”). The application is made by IAG pursuant to section 17 of the Trans-Tasman Proceedings Act 2010 (Vic) (“the Trans-Tasman Act”).
2In the proceeding, Gourmet Pastes sued Endeavour Packaging Pty Ltd (“Endeavour”) and was later given leave to join IAG as a second defendant and to file an amended statement of claim. Gourmet Pastes is a “commercial producer and supplier of garlic paste”. Endeavour is a “supplier of packaging products including jars and lids for the packaging of fresh food products”.
3In 2011 and 2012, Endeavour supplied Gourmet Pastes with “caps for use on [Gourmet Pastes’] jars of garlic paste”. Gourmet Pastes alleges that Endeavour had represented to it that Endeavour would be able to supply an “identical cap” to the cap that Gourmet Pastes had been using previously, but “at a cheaper price”.
4Many of the caps supplied by Endeavour proved not to be capable of “maintaining a complete and airtight seal”, which had not been a problem with the previous seals. As a consequence, Gourmet Pastes claimed losses totalling $363,764, including for “loss of stock”, “loss of profit”, “combined recall costs” and “other costs”.
5Endeavour was insured with IAG for “public and product liability” (“the insurance policy”). Both were companies incorporated in New Zealand. Endeavour made a claim on the policy. The claim was denied by IAG on the basis of certain limitations and exclusions in the policy, namely:
a.“withdraw or recall” costs were limited to “the withdrawal or recall of products within New Zealand”, and not Australia (Extension L);
b.Endeavour was “not insured for sums that [it becomes] legally liable to pay for damage in connection with [its] products” (Exclusion C);
c.Endeavour was not insured for “loss of use of tangible property that has not suffered physical loss or physical damage, where that loss of use is caused solely by…the failure of products to meet a level of performance, quality, fitness or durability expressly represented by [it]” (Exclusion L);
d.Endeavour was not insured for sums that “it became legally liable to pay in connection with [its] development or formulation of any design” (Exclusion D).
6Endeavour currently has an administrator appointed. If Endeavour were in liquidation, Gourmet Pastes would have a right pursuant to section 562 of the Corporations Act 2001 (Cth) to recover from Endeavour any amount it had received from an insurer in respect of the Endeavour’s “liability” to Gourmet Pastes. It is necessary to consider what rights Endeavour has during its administration.
7In May 2015, a deed of variation of Endeavour’s company arrangement (“the deed of variation”) excluded “product liability creditors” (including Gourmet Paste) from participating in the “Deed Fund”. However, the deed of variation provided that:
a.“a product liability creditor is at liberty to lodge a claim” under a policy of insurance which Endeavour has “in place that may respond” to a claim by such a creditor; and
b.if such a creditor “is successful in its claim, [Endeavour] will ensure that the proceeds of the insurance claim are made available” to the creditor.
8Gourmet Pastes relies upon the provisions of the deed of variation:
a.to join IAG as a defendant to the present proceeding;
b.to seek the following relief in the proceeding:
i.against Endeavour, an order that Endeavour “pay to [Gourmet Pastes] any amount that it receives from [IAG] pursuant to the [insurance] policy, in respect of its liability to discharge that liability”;
ii.against IAG:
(A) a declaration that IAG indemnify Endeavour “for its liability to” Gourmet Pastes;
(B) an order that IAG pay to Gourmet Pastes “any amount that is required to be paid by [Endeavour] to [Gourmet Pastes] to discharge its liability to [Gourmet Pastes]”.
9In the proceeding, Endeavour has not filed an appearance and its solicitor has apparently indicated that it would not be defending the proceeding. At present, the only relief Gourmet Pastes is likely to pursue against Endeavour is its claim for damages. In these circumstances, Gourmet Pastes could at any time enter judgment against Endeavour in default of appearance with damages to be assessed. It is likely that a date would be fixed for the assessment of damages within about 3 to 4 months.
10This would leave, as the only outstanding dispute in the proceeding, the claims by Gourmet Pastes against IAG. The two issues for determination in relation to those claims are:
a.whether Gourmet Pastes has the standing to bring an action seeking the relief if does against IAG, either in its own name or, in Endeavour’s name;
b.if Gourmet Pastes does have standing, whether Gourmet Pastes, through Endeavour, should recover damages from IAG in respect of Endeavour’s liability to Gourmet Pastes, under the terms of the insurance policy.
I must decide whether it is more appropriate for those matters to be determined by a New Zealand Court.
11Pursuant to section 19(1) of the Trans-Tasman Act, the Court may
“stay the proceeding if it is satisfied that a New Zealand court:
(a) has jurisdiction to determine the matters in issue between the parties to the proceeding; and
(b) is the more appropriate court to determine those matters”.
12Section 4 of the Tran-Tasman Act relevantly defines “proceeding” as including:
“(a) an interlocutory proceeding in the court…, and
(b) a proceeding that relates to an application made to the court…”
The phrase, “matters in issue” is not defined in the Act.
13I consider that the “proceeding” for the purpose of the present application is the action between Gourmet Pastes and IAG, although it may also be necessary to consider the action (or “proceeding”) between Gourmet Pastes and Endeavour and proceeding no. CI-15-03161, ie the “proceeding” commenced by the amended writ in this Court.
14I have earlier in these reasons defined the “matters in issue” between Gourmet Pastes and IAG. They are the matters which require determination, as raised by the present amended statement of claim in the paragraphs relating to the claims by Gourmet Pastes against IAG. Gourmet Foods’ counsel, Mr McWilliams did not contend that a New Zealand Court did not have jurisdiction to determine those matters. His submissions focussed on whether a New Zealand court was “the more appropriate court to determine those matters”.
Whether there is an “exclusive choice of court agreement”
15Section 20(1)(a) requires the Australian court hearing an application for a stay, to order a “stay of proceedings, if satisfied that an exclusive choice of court agreement designates a New Zealand court as the court to determine the matters in issue”. Section 20(3)(a) provides that, “Exclusive choice of court agreement in relation to matters in issue between parties to a proceeding, means a written agreement between those parties that:
(a) designates the courts, or a specified court or courts, of a specified country, to the exclusion of any other courts, as the court or courts to determine disputes between those parties that are or include those matters”.
16IAG’s counsel, Ms Harris, relied in this regard upon a clause of the insurance policy which is under the heading, “B. Laws & Acts that govern this policy”, and reads as follows:
“2. Disputes about this policy
The law of New Zealand applies to disputes about this policy, and the New Zealand Courts have exclusive jurisdiction” (“the exclusive choice clause”).
17Mr McWilliams submitted that the exclusive choice clause could not be relied upon for the purposes of section 20(1)(a) of the Trans-Tasman Act for the following reasons:
a.the exclusive choice clause is not part of an agreement between Gourmet Pastes and IAG;
b.the “matters in issue” or the “disputes” between Gourmet Pastes and IAG are not confined to “disputes about this policy”, to which the exclusive choice clause is restricted;
c.the exclusive choice clause would not be enforced by an Australian court, as the clause was contrary to section 8 of the Insurance Contracts Act 1984 (Cth). Therefore, section 20(2)(c) of that Act applied, as “giving effect to [the exclusive choice clause] would lead to a manifest injustice or would be manifestly contrary to Australian public policy”.
18Not part of an agreement: The insurance policy is between Endeavour and IAG. However, Gourmet Pastes, can only bring a proceeding against IAG because it has been granted the right pursuant to the deed of variation to stand in the position of Endeavour. I consider, therefore, that the relevant “parties” to take account of when considering the “written agreement” under section 20(1) are the parties to the insurance policy between Endeavour and IAG, which Gourmet Pastes wishes to enforce in the place of Endeavour and pursuant to rights of subrogation or the assignment of rights.
19“Matters in issue”: Mr McWilliams submitted that the issue of Gourmet Paste’s right to sue would involve an analysis of the terms of the deed of variation, an agreement not involving IAG, and one entered into in Australia. The question of whether Gourmet Pastes has standing to sue, either in its own name or in the name of Endeavour, is likely to be a significant issue in the proceeding.
20I consider, however, that the principal issue for determination is the proceeding between Gourmet Pastes and IAG is whether IAG is entitled to be indemnified pursuant to the insurance policy. Section 20(3)(a) provides that if the contract between the parties designates that the disputes between the parties “that are or include” the “matters in issue between” the parties, are to be determined by specific courts to the exclusion of others, that the provision in the agreement is an “exclusive choice of court agreement”.
21Enforceability of the exclusive choice clause: Section 8 of the Insurance Contracts Act 1984 provides that the inclusion of a provision in an insurance contract that purports to limit the proper law of the contract is ineffective to exclude what would be the proper law by reference to the law of the relevant Australian state.
22In this case, Mr McWilliams submitted that the proper law would be Victorian law and therefore the exclusive choice of court agreement was, pursuant to section 52 of the Insurance Contracts Act 1984, void as it would have the effect of “excluding, restricting or modifying, to the prejudice” of Endeavour.
23In Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418 (“Akai”), the High Court struck down a provision in a contract of insurance between a New South Wales company and a Singapore insurer which included a provision that the policy was governed by the Laws of England, and that disputes must be litigated in the courts of England.
24The majority in the High Court held that a stay of proceedings commenced in New South Wales was not appropriate as sections 8 and 52 of the Insurance Contracts Act 1984, taken together, “manifest a legislative intent not only that there should be no power to contract out the provisions of the Act, but also that the regime of the Act should be respected as regards contracts the proper law of which is, or but for selection of another law would be, that of a State or Territory” (at page 433).
25Ms Harris sought to distinguish Akai from the present case on the following basis:
a.section 52 of the Insurance Contracts Act 1984 has no application. The insurance policy does not by the exclusive choice clause purport to “exclude, restrict or modify the operation of section 8 of that Act to the prejudice of Gourmet Pastes”;
b.the proper law to be applied to the insurance policy was always New Zealand, for various reasons including that the policy was made in New Zealand between two New Zealand companies;
c.the exclusive choice clause was not seeking to change that position; it simply reinforced what was the proper law to apply;
d.“there would be nothing prejudicial to [Gourmet Pastes or Endeavour] if the matter [were] determined, as intended, by a New Zealand court or by reference to New Zealand law”, particularly as that was the express intention of the parties to the insurance policy;
e.section 7 of the Insurance Contracts Act 1984 provides that it is not to “affect the operation of any other law” of the Commonwealth or States, “except so far as this Act…otherwise provides”. It would be inappropriate to conclude that the intentions of the Trans-Tasman Act should be overridden by section 52 of the Insurance Contracts Act 1984 (see Akai at page 432 and John Kaldor Fabricmaker Pty Ltd v Mitchell Cotts Freight (Aust) Pty Ltd (1989) 18 NSWLR 172 at page 191).
26Gourmet Pastes has brought the present proceeding against IAG pursuant to the application of rights of subrogation, or an assignment of rights, in accordance with the deed of variation. Whether that claim should properly be brought in the name of Endeavour is a matter which does not require a decision at this stage. What, however, is clear from the amended statement of claim on the amended writ is that the “claim against NZI [IAG]” is made by Gourmet Pastes pursuant to its classification as a “product liability creditor”, as referred to in the deed of variation.
27In these circumstances, I consider that, in the present case:
a.Endeavour’s right to bring a claim against IAG under the insurance policy has been subrogated to Gourmet Pastes;
b.the “parties” to the written agreement are Endeavour and IAG;
c.the “written agreement” referred to in section 20(3) of the Trans-Tasman Act is the insurance policy;
d.the insurance policy contains an “exclusive choice of court agreement”;
e.the exclusive choice clause “designates a New Zealand court as the court to determine the matters in issue”;
f.the exclusive choice clause is not affected by the Insurance Contracts Act 1984;
g.I must therefore, by order, stay the present proceeding.
Matters the Court would otherwise need to take account of
28If I had not concluded under section 20(3) of the Trans-Tasman Act that I was bound to stay the proceeding, I would be required by section 19(2) of the Trans-Tasman Act in determining “whether a New Zealand court is the more appropriate court”, and to take into account a number of specified matters. In view of the decision I have reached, it is unnecessary for me to undertake this exercise. However, as the matter was argued by counsel before me, I shall consider each of the specified matters in turn.
29Principal place of business of the parties: Both Endeavour and IAG are New Zealand companies. Endeavour principally operates in New Zealand although it supplies its packaging products to other countries, including Australia. IAG’s policies of insurance may, as in the present case, cover an insured’s worldwide liability.
30Places of residence of likely witnesses: The likely witnesses in the claim by Gourmet Pastes against IAG will deal with the following issues:
a. formal matters of proof in relation to the insurance policy, although it is unlikely this will be an issue at trial;
b. Gourmet Pastes’ standing to make the claim against IAG;
c. whether Endeavour was entitled to be indemnified under the insurance policy.
31The operation of Endeavour’s deed of company arrangement, and any variations, is governed by a Commonwealth statute, the Corporations Act2001. It is unlikely that evidence from witnesses will be needed to establish the basic facts relating to the administration of Endeavour, the deed of variation and Gourmet Paste’s notification as a product liability creditor.
32Mr McWilliams submitted that, in order to determine IAG’s liability under the insurance policy to Endeavour, it will be necessary to examine the history of the business relationship between Gourmet Pastes and Endeavour and the effect upon Gourmet Pastes of Endeavour having supplied defective caps for the jars containing Gourmet Pastes’ product. In this regard, there was some dispute between counsel as to the extent to which IAG would contest the factual matters surrounding the supply of Endeavour’s packaging material.
33In the present proceeding between Gourmet Pastes and Endeavour, it is likely that a default judgment will shortly be entered and at some stage Gourmet Pastes will seek to quantify the damages to which it is entitled. If a stay were not granted in respect of Gourmet Pastes’ claim against IAG, IAG could participate in the hearing for the assessment of damages. If the proceeding against IAG is stayed, the assessment will go ahead without IAG, and probably, without the participation of Endeavour.
34It is likely, therefore, that within a relatively short period, Gourmet Pastes will have secured a default judgment against Endeavour and its damages will have been assessed. Ms Harris conceded that there was no doubt that New Zealand law allowed the recognition and enforcement of such a judgement in New Zealand courts. What is not clear is the extent to which this would impact on the issues which would need to be considered in order to determine IAG’s liability under the insurance policy to Endeavour.
35Ms Harris, in this regard, tendered to the Court a written statement of her client’s position and submitted that, if necessary, the matters contained in the statement might be incorporated as a condition of any stay order, pursuant to the power given by section 19(3) to the Court to impose “any conditions [it] considers are appropriate in order to facilitate, without delay or undue expense, the determination of the matters in issue between the parties to the proceeding”.
36The written statement, produced by Ms Harris to the Court reads as follows:
“Australian Gourmet Pastes v Endeavour Packaging Pty Ltd and IAG New Zealand Limited
County Court proceeding No CI-15 03161
The Second Defendant IAG New Zealand Limited accepts that judgment entered in this proceeding by the Plaintiff against the First Defendant in default of appearance, with damages to be assessed separately, would be entered upon an acceptance of the truth of the matters alleged by the Plaintiff against the First Defendant in the Amended Statement of Claim dated December 2015, and that in any proceeding brought by the Plaintiff against the Second Defendant in an appropriate New Zealand Court, the Second Defendant would not contend otherwise,
PROVIDED THAT
The second Defendant does not concede that it would be bound by the assessment of damages, and does not for that reason accept that if the judgment is entered in default of appearance it is bound to accept as true the matters in the particulars to paragraph 60 of the Amended Statement of Claim.
The Second Defendant does not concede the truth of any of the allegations in the claim by the Plaintiff against the Second Defendant in the Amended Statement of Claim, specifically paragraphs 2A, 61 to 74 inclusive, and the associated claims for relief against the Second Defendant”.
37It is likely, in my view, that this concession about the issue of Endeavour’s liability to Gourmet Pastes would reduce the evidence required to establish any entitlement by Endeavour under the insurance policy. Whilst the extent of any saving of time is unclear, it is obvious that all the witnesses relating to the issue of Endeavour’s liability to Gourmet Pastes are likely to be residents of Victoria or New South Wales.
38Situation of the subject matter of the proceeding: In this regard, the proceeding concerns:
a.the construction of a policy of insurance made in New Zealand between New Zealand companies, but with a world-wide cover and the anticipation that Endeavour’s operations would involve it in business dealings in the State of Victoria, and whether the circumstances of Endeavour’s claim were within the terms of the insurance policy and Endeavour was entitled it to be indemnified by IAG;
b. matters relating to the establishment of the business relationship between Gourmet Pastes and Endeavour, the supply of caps for jars, the fitness for purpose of the caps, the effect on the business operations of Gourmet Pastes and the losses it suffered as a consequence of Endeavour’s actions.
39I consider that these matters are “situated” both in New Zealand (the insurance policy to be construed) and Australia (the circumstances giving rise to the claim).
40 Any agreement about the location of the proceeding other than an exclusive choice of court agreement: If the exclusive choice clause were not one to which section 20 applies, it nevertheless reflects the agreement by Endeavour and IAG that “disputes about this policy” were to be determined exclusively by New Zealand courts and by the application of New Zealand law.
41Most appropriate law to apply: It is likely that New Zealand law would be applied to determine the issue of the standing of Gourmet Pastes to sue, on behalf of, or in the name of Endeavour under a New Zealand policy of insurance although this may also involve the application of Australian law if there were an issue surrounding Gourmet Paste’s rights under the deed of variation. New Zealand law will apply to questions of construction of the insurance policy. New Zealand law would likely apply because of the exclusive court clause. It is unlikely, however, that there would be any significant difference between Australian and New Zealand law in relation to these matters.
42Related proceedings: Not applicable.
43Financial circumstances of the parties: Not applicable.
44Any matter prescribed by regulation: Not applicable.
45Any other matter considered relevant: Mr McWilliams submitted that, if the proceeding between Gourmet Pastes and IAG were stayed, the proceeding would be heard by a separate court to the proceeding between Gourmet Pastes and Endeavour. The issues of both liability and quantum in the Endeavour proceeding will, because of the entry of a default judgment, involve the determination of liability on the basis of acceptance of the material facts pleaded in the amended statement of claim.
46The matter of quantum will be determined by evidence at a hearing for the assessment of damages. There is, therefore, the possibility of courts in Victoria and New Zealand reaching different and inconsistent decisions on matters of quantum. It is possible also that the question of quantum may include issues of causation.
47The fact that the proceeding was commenced in Victoria must not be taken into account. Having regard to all relevant matters, I consider that a New Zealand court is the more appropriate court to determine the matters in issue between Gourmet Pastes and IAG. I rely upon the following:
a.the non-participation by Endeavour in the present proceeding, and the likelihood that it will not take part in the assessment of damages, reduces the possibility of courts in Victoria and New Zealand reaching different conclusions on contested matters arising from the same circumstances;
b.Gourmet Pastes cannot be placed in a better position than Endeavour would have been, where Gourmet Pastes is pursuing a claim of Endeavour’s against its insurer pursuant to rights of subrogation or an assignment of rights;
c.Endeavour and IAG had agreed to their disputes under the policy being determined by New Zealand courts and according to New Zealand law.
Proposed orders
48Accordingly, I propose to order as follows:
1.The proceeding as between the plaintiff, Australian Gourmet Pastes Pty Ltd, and the second defendant, IAG New Zealand Limited, contained in paragraphs 61 to 74 of the amended statement of claim attached to the amended writ filed pursuant to the order of Judicial Registrar Burchell made 8 December 2015, is stayed on the grounds that, pursuant to section 17(1) of the Trans-Tasman Proceedings Act 2010 (Vic), a New Zealand court is the more appropriate court to determine the matters in issue.
49I will hear further from the parties in relation to the form of order and the question of the costs of the proceeding as between the plaintiff and the second defendant, including the costs of the second defendant’s summons filed 24 December 2015.
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Certificate
I certify that these 11 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 22 April 2016.
Dated: 22 April 2016.
Mi-Lin Chen Yi Mei
Associate to His Honour Judge Anderson
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