Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) and 10 Ors

[2005] NSWSC 1167

CITATION:	Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) & 10 Ors [2005] NSWSC 1167
HEARING DATE(S):	11/10/05, 12/10/05, 17/10/05 - 21/10/05, 24/10/05-26/10/05, 31/10/05, 1/11/05-3/11/05, 7/11/05 - 10/11/05, 14/11/05, 15/11/05
JUDGMENT DATE :	15 November 2005
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Direction to legal advisers to communicate observations of court to chief executives of parties

CATCHWORDS:	Courts - Responsibility of Court to remind parties that common sense can sometimes lead to a negotiated accommodation
PARTIES:	Baulderstone Hornibrook Engineering Pty Limited ABN 95 003 898 397 (Plaintiff) Gordian Runoff Limited (formerly GIO Insurance Limited) ABN 11 052 179 647 (First Defendant) CGU Insurance Limited (formerly Commercial Union Assurance Company of Australia Limited, trading as, inter alia, Pacific Indemnity) ABN 27 004 478 371 (Third Defendant) AMP General Insurance Limited ABN 30 008 405 632 (Eleventh Defendant)
FILE NUMBER(S):	SC 50176/03
COUNSEL:	Mr S Finch SC, Mr A McInerney (Plaintiff) Mr R Smith SC, Mr A Jones (First Defendant) Mr Robb SC, Mr C Ellis (Third Defendant) Mr S T White, Mr R Hollo and Mr M O'Meara (Eleventh Defendant)
SOLICITORS:	Freehills (Plaintiff) Corrs Chambers Westgarth (First Defendant) Colin Biggers & Paisley (Third Defendant) Moray & Agnew (Eleventh Defendant)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Tuesday 15 November 2005 ex tempore
Revised 16 November 2005

50176/03 Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) & 10 Ors

This is a corrected version of observations at transcript 1648-1651

Observations of Justice Einstein

1 The construction between August 1992 and August 1994 of the 2,400 metre third runway [“the parallel runway”] extending into the Botany Bay at Sydney’s Kingsford Smith airport has spawned at least two major pieces of litigation.

2 The present litigation initially joined approximately 11 insurers. Many of those claims were discontinued. However, the continuing litigation is now pursued by way of claims by Baulderstone Hornibrook Engineering Pty Ltd [“BHE”] against:

· the first defendant Gordian Runoff Limited ["Gordian"];

· the third defendant CGU Insurance Pty Limited ["CGU"];

· the 11th defendant AMP General Insurance Limited [“AMPG”].

3 The litigation stems from sand loss from the reinforced earth sea wall and millstream wall ("the walls"). The sand loss is alleged to have been accompanied by voids, sink holes and settlement. A principal factual issue in the proceedings concerns whether the sand loss occurred by reason of (1) defects in the design of the wall or (2) defects in the construction of the walls or (3) partly as a result of both design and construction defects.

4 There are a number of causes of action relied upon including a claim that as a result of alleged failures to confirm indemnity by 13 February 2004 and alleged breaches of the contracts of insurance, BHE lost the opportunity to settle the SACL proceedings on the basis of an offer which BHE claims to have been available for acceptance from 24 December 2003 to February 2004 ("the lost settlement claim").

Relief Presently Claimed By BHE

5 In these proceedings BHE seeks, inter alia, declaratory relief that it is entitled to:

(1) a declaration that each of HIH, Gordian, CGU and AMPG are bound to indemnify BHE for BHE's liability pursuant to the settlement agreements;

(2) a declaration that each of HIH, Gordian, CGU and AMPG are bound to indemnify BHE in respect of costs and expenses incurred by BHE in the defence or settlement of the claim made by SACL;

(3) a declaration that each of HIH, Gordian, CGU and AMPG are bound to the limit of coverage under each relevant insurance contract as BHE incurs loss, cost, expense or liability in the performance of its obligations under the settlement agreements;

(4) a declaration that there is double insurance between AMPG and HIH and that AMPG is entitled to equitable contribution from HIH with respect to the first claim made under the AMPG policy;

(5) damages against Gordian and CGU for breach of good faith for failing to

(a) promptly investigate BHE's claim (or otherwise sufficiently inform themselves in respect of the subject claim so as to be in a position to grant indemnity to BHE) and make a decision about indemnity;

(b) consider fully and properly in a timely manner the materials provided to them by BHE in respect of the subject claim; and

(c) to provide written consent to BHE in connection with the incurring of defence costs as soon as reasonably practicable (and not unreasonably withhold consent to the incurring of defence costs).

6 It is not an exaggeration to suggest that the proceedings raise a veritable myriad of difficult issues both factual as well as legal. In a real sense there are three cases being heard together as the cases against each of the defendant insurers.

7 Each of the subject policies requires extremely careful attention in terms of the proper construction of particular clauses and exclusion clauses and in terms of the manner in which each policy may or may not respond when examined in terms of

· the complex of insurance arrangements;

· the liability or lack of liability of the other insurers (which in turn depend inter alia upon factual findings).

8 It seems that the cause of the alleged voids and sinkholes is the most crucial of a number of expert issues litigated having a bearing on policy responses. Other important issues include the occasions when the voids and sinkholes first came to the attention of the insured and the content of the communications between the insured and the respective insurers in that regard. Cross-contentions alleging conduct constituting lack of good faith are raised by the insured against the insurers as well as by the insurers against the insured.

9 I am satisfied that the respective cases appear to be being competently presented by competent counsel and solicitors faced with an enormous amount of documentation to be located, comprehended and presented to the court.

Overview of the Present Position

10 These observations are made from a courtroom with hundreds of volumes of documentary evidence lining the walls. We are presently at the end of the 20th hearing day. The transcript currently extends to across 1500 pages. The outline overview submissions extend to approximately 450 pages. There are nine counsel briefed, eight of whom are regularly at the bar table every day. The amounts and matters at stake are of high moment, including a dispute over legal obligations to remediate the problems encountered at a major piece of infrastructure, namely the third or parallel runway at Sydney airport.

11 The Court is well aware that the parties will from time to time have given close consideration to their respective positions and by now may well have determined that the proceedings must continue to curial determination. Nonetheless, in my view common sense suggests that even at this stage the parties revisit the prospects of settlement. The amount of time likely to be taken in the ultimate determination of the parties' rights at first instance and on appeal should be closely considered. The panorama of legal and factual issues falling for determination plainly bespeaks the need for a calm re-assessment of the current path being pursued. Likewise, the huge legal costs as well as the cost to the parties of the continuing involvement of officers and staff bespeaks a need to revisit the parties' current positions.

12 In that environment I have come to the view that it is now appropriate to direct the legal advisers to each party to communicate these observations to their respective clients and in particular to the chief executive of each party. The Court so directs.

13 Nothing in these observations should be taken as suggesting that the Court has reached any decision on any issue. The decision will be reached after the taking of all evidence and after the parties have been heard in final submissions.

14 At times such as the present the Court has a responsibility to remind the parties that common sense can sometimes see a result by way of a negotiated accommodation as opposed to the parties taking the risks always associated with litigation of any order, let alone litigation of the present scale.

Direction

15 I direct that the legal advisers to the respective parties communicate those observations to their respective clients and in particular to the chief executive of each party.

I certify that paragraphs 1 -15
are a true copy of observations
of the Hon. Justice Einstein
made on 15 November 2005 and
revised 16 November 2005

___________________
Susan Piggott
Associate
16 November 2005