Baycorp Advantage Limited v Royal and Sun Alliance Insurance Australia Limited

[2003] NSWSC 985

CITATION:	Baycorp Advantage Limited v Royal and Sun Alliance Insurance Australia Limited [2003] NSWSC 985
HEARING DATE(S):	28/10/03
JUDGMENT DATE:	28 October 2003
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Separate questions answered and orders made.
CATCHWORDS:	Separate questions - Part 31 rule 6 Supreme Court Rules - precise wording of separate questions proposed by plaintiff in short minutes of order - defendant proposes orders should not be made - counsel for defendant applies for leave from the bar table to amend current pleading so as to allege the settlement reached was not a reasonable settlement - proposed amendment would have required a differently worded separate question to that already answered - issue not raised until after hearing and following determination of separate questions - importance of precision in wording of separate questions for determination - Reference by the Court to a referee - referral on hold until determination of separate questions - order sought by plaintiff for remaining question to be referred to a referee pursuant to Part 72 rule 2 for enquiry and report - defendant submitted referral not appropriate pending application for leave to appeal and the appeal - reference to treat with both alternative approaches to the question - plaintiff in the present circumstances should not be prevented from having benefit of reference - Practice and procedure - Commercial List - List established for the purpose of giving the commercial community, as swift as it practicable in the circumstances, a result in a given set of proceedings
PARTIES :	Baycorp Advantage Limited (Plaintiff) Royal and Sun Alliance Insurance Australia Limited (Defendant)
FILE NUMBER(S):	SC 50035/02
COUNSEL:	Mr MA Pembroke SC, TM Faulkner (Plaintiff) Mr DL Davies SC (Defendant)
SOLICITORS:	Allens Arthur Robinson (Plaintiff) Hunt & Hunt (Defendant)

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

Einstein J

Tuesday 28 October 2003 ex tempore
Revised 31 October 2003

50035/02 Baycorp Advantage Limited v Royal and Sun Alliance Insurance Australia Limited

JUDGMENT

The Proceedings

1 These proceedings were the subject of a reserved judgment following an order that certain questions be decided separately and in advance of all other issues in the proceedings. That order was made by McClellan J, the then list judge, on 20 June 2003. A judgment on the separate questions for determination was delivered on 23 October 2003. The matter is presently before the Court:

· pursuant to leave granted in paragraph 83 of the judgment where the parties were to be given an opportunity to address as to the precise wording of the answers appropriate to the separate questions; and

· for the purpose of taking submissions as to costs.

2 The defendant has made plain that it seeks to investigate and may very well seek leave to appeal from the judgment. In that regard my own usual practice in relation to a decision handed down at the end of a non-separate question contest is to grant an automatic stay of the orders for a period of 28 days to facilitate or permit the losing party to appeal. It does not seem to me that there is any real difference as between on the one hand that usual practice in a situation in which a judgment disposes of every aspect of the litigation at first instance and on the other hand, a situation where an answer to separate questions has been handed down. If orders are made today I am disposed to so stay the operation of the orders. Mr Pembroke SC has indicated that the plaintiff has no difficulty with that course being followed.

3 A set of short minutes of order has been furnished to the Court by the plaintiff. The first order seeks to generally, in the terms provided for in the judgment, but with immaterial variations agreed to by both parties, provide the answers to the separate questions.

4 The problem which has arisen concerns firstly the defendant’s stance in relation to the claim by the plaintiff which is now pursued for the declaration and orders to be found in paragraphs 2, 3 and 4 of the short minutes of order. Those orders would be:

“2. Declares that, under the Directors and Officers Insurance Policy No. F1000082ZF8 for the period from 26 October 1999 until 26 October 2000, the Defendant is liable to reimburse the Plaintiff for loss in the amount of $9,998,000.
3. Orders that there be judgment for the plaintiff in the amount of $9,998,000 in respect of the claim for reimbursement of the amount paid pursuant to the Deed of Settlement dated 4 October 2002.
4. Orders that the defendant pay the plaintiff interest in the amount of $961,451.51.”

5 Mr Davies’ proposition is that those orders should not now be made but that the defendant should be granted leave to amend its current pleadings for the purpose of alleging that the settlement in fact reached, was not a reasonable settlement. No notice of motion or form of pleading by way of the precise amendment to be propounded has been relied upon and the approach which the defendant seeks to take in that regard has simply been a matter put from the bar table.

6 The difficulties with the Court acceding to that proposition inhere in the fact of the making of the separate Part 31 orders and in the terms in which those orders were propounded. As Mr Pembroke has pointed out, if this issue had been raised at a time anterior to the commencement of the hearing before me, it would have been necessary for questions 2 and 3 to be differently worded. Question 2 would have had to have been worded:

“If the answer to question 1 is “yes”, whether, subject to the answer to question 3 and subject to whether the settlement sum is reasonable , the defendant is thereby liable under the policy to indemnify the plaintiff for the said amount of $10 million.”

7 Likewise separate question 3 would have had to have been differently worded by consequential changes to accommodate not only the question of unconscionability which presently is part of that question, but also to raise the question of reasonableness.

8 A short transcript of what occurred on occasion when the separate questions were ordered is now part of the record. From that transcript it appears that his Honour in the course of the submissions as to whether or not separate questions should be ordered, expressed his inclination to make the orders sought but recognised that once the proceedings were exposed to argument, if the separate determination of the questions did not work out, the process could be halted and the orders could be revoked.

9 To my mind that strongly suggests an adherence by his Honour to the generally adopted approach, in most instances where separate determination question applications are before the Court, which is that the making of Part 31 orders will be seen as appropriate where there is some preliminary question, usually of law but sometimes of fact or law, that is critical to the disposition of the proceedings, in the sense that if it is decided in one way it will necessarily dispose of the proceedings.

10 Whilst the making of separate question orders can occur outside of that criterion, to my mind the making of the separate orders in relation to the present dispute should be read as a course taken by the Court against a background in which question 2 in the form carefully formulated was self explanatory. In short if the answer to question 1 was in the affirmative, whether, subject to the question of unconscionability:

“The defendant is thereby liable under the policy to indemnify the plaintiff for the said amount of $10 million.”

11 It seems to me that the proper exercise of the Court’s discretion in the circumstances which now obtain, is to make orders in terms of paragraphs 2, 3 and 4 of the draft short minutes as well as to answer the separate questions. In that regard the slight variation in terms of the precise amounts has been explained by reference to the fact that one is dealing with the said amount less the deductibles. Part 31 Rule 6 empowers the Court to make orders 2, 3 and 4 as here sought.

12 It must be said that the manner in which the Commercial List generally operates and the accommodation granted to the parties where separate question orders are made, is against a background in which the notion that following the making of the separate orders, a party may effectively come forward and be in a position, as here, to undermine or outflank the wording [in this instance of question 2 and in part of question 3], should be carefully guarded against.

13 A party faced with an application for the making of separate Part 31 questions has quite obviously an obligation to pay the most extreme attention to the particular wording of the questions which the Court is being asked to order be heard separately from other questions. And where, as here, had the matter been pressed before the list judge on the occasion of the application for the Part 31 orders, the orders may very well never have been made, it seems to me to be inappropriate in terms of the usual case management procedures available to the Court, for the Court following a determination of separate questions adverse to a party, to permit that party to re-open issues now said to be ripe for litigation.

14 At transcript page 67 [of the argument on the separate questions], Mr Davies did submit that in the event that the answer to the first separate question was as the plaintiff contended, the Court should not answer question 2 by saying that the defendant was liable to indemnify the plaintiff for the amount of $10 million, for the reason that notice had been given to the plaintiff that if the Court found there to be a legal liability in all the directors and officers to pay that amount, the defendant would want to challenge the reasonableness of the settlement that was entered into by challenging the amount that was effectively apportioned to the directors by that $10 million liability. He said:

“In other words we are not going to challenge the whole sum as being unreasonable but if it is found that they committed themselves the directors (sic) to pay $10 million we will say that that was not a reasonable settlement vis a vis the directors.”

15 Following that submission the transcript records the following:

“His Honour: Well, make no mistake, I am going to be answering agreed questions and I am not doing anything else. That is what I am sitting to hear.”

16 No application was made at that time for leave to file an amended defence and the matter proceeded to judgment.

17 It follows then that the sections of the short minutes of order by way of paragraphs 1, 2, 3 and 4 in my view are appropriate to be reflected in orders to be made.

18 The next matter which has been the subject of submissions this morning concerns paragraphs 6 through to 8. This is where the plaintiff seeks a direction that the usual order for reference be made in relation to separate question 4 which, as the judgment delivered on 23 October 2003 made plain, was a question which McClellan J had ordered be referred to a referee pursuant to Part 72 Rule 2 for enquiry and report. That reference had not been furthered for the reason that the parties determined to await a decision on the separate questions.

19 Mr Davies’ position on instructions from the defendant, has been that, pending the application for leave to appeal and the appeal, it is not appropriate for the Court to now give directions for the reference out order to be engaged.

20 I would accept that if the net result of an appeal from the answers I have given to the separate questions could be that the whole of the reference out orders should be vacated because there would not be any longer any need at all, for a reference out, then the Court should be cautious indeed in now making orders for the reference out.

21 However as has been carefully explained by Mr Pembroke, the reference out will have to take place in any event and that notwithstanding that, for example, the Court of Appeal may set aside completely each of the answers that I have given to the separate questions.

22 The plaintiff has accepted that an amendment to separate question 4 would be proper in the circumstances, so that regardless of the decision of the Court of Appeal on an appeal, the referee would be treating with each of the alternative approaches to question 4.

23 It seems to me that the plaintiff in the present position should not be prevented from having the benefit of an order for reference, but if, and only if, the order for reference is expanded so as to encompass whatever may be the approach taken by the Court of Appeal to the separate questions which I have answered.

24 For those reasons subject to the variation necessary to be made to question 4, it seems to me that the facilitative directions ie orders 6, 7 and 8, are appropriate to be made.

25 Order 9 simply seeks to stand the balance of the summons over for further directions on 27 February 2004. To my mind that is an unexceptional order.

26 The only matter then that remains is order 5 which is sought in terms of an order that the defendant pay the plaintiff’s costs of the separate questions.

27 That order obviously follows from the judgment which has been delivered and will be made in due course.

28 Following the ex tempore judgment set out above, Mr Davies has sought leave to further address on the question of the proper approach to the reference order, and I have permitted the matter to be reopened to the extent that he wished to be heard further on that matter.

29 The essential burden of the submission is that it is inappropriate to now make orders for the reference out on the bifurcated basis to which I have referred because there would be a degree of duplication in what the referee had to do and that it would be far simpler once the Court of Appeal had dealt with the matter, for the referee to then know precisely what was the approach which was appropriate to be taken in the circumstances and to have to carry out a single task not a bifurcated task.

30 The answer to that submission to my mind reposes in the practice and procedure of the Commercial List of the Supreme Court of New South Wales. The list is established for the purpose of giving the commercial community, as swiftly as is practicable in the circumstances, a result in a given set of proceedings. This is just such a case. The defendant is entitled to seek leave to appeal from the decision and apparently will give that matter close consideration and I have proceeded on the assumption that an appeal will be lodged. The defendants’ rights to appeal accordingly are obviously important rights to be safeguarded.

31 On the other hand (and although I may be mistaken in the precision of the matter), my general understanding is that absent some very urgent consideration being thrown up by the particular proceedings, an application for leave to appeal from an interlocutory decision of the Court is unlikely to be determined by the Court of Appeal for some months. I am not certain, bearing in mind the present time of year, whether the Court of Appeal could reach the matter before the end of term but it is possible that the leave application will not be heard before early next year.

32 As the parties will know, there is something akin to an examination of the matter before a date is given, and applications for leave to appeal, absent some special urgency, simply take their place in the line of matters which the Court of Appeal has for determination. Then of course the leave application having been determined, there may be a period of time in which judgment on the leave application is reserved. Sometimes of course the Court of Appeal in hearing the leave application, hear the appeal as well, although that is very instant specific.

33 Then if leave to appeal be granted, a further period of time will expire before the Court of Appeal actually hears the appeal proper. That period of time is really inchoate. It may be, for example, a matter of a year or more. Then the parties will have to await the reserved judgment of the Court of Appeal. Then whichever party loses may seek leave to appeal to the High Court of Australia.

34 Quite obviously, simply looking at the usual way in which proceedings which are bitterly contested walk their way through the judicial hierarchy, one can have up to a number of years of hiatus between the decision which is appealed from, and the ultimate decision. That is why the Commercial List must require that wherever possible steps still requiring to be taken regardless of who may win on an appeal, should be taken. That is why it is it seems to me appropriate in this case for the reference out procedure to be mobilised notwithstanding the invoking of the appellate procedures by the defendant.

35 The proceedings will be stood over to 27 February 2004.

36 Final short minutes are to be brought in.

I certify that paragraphs 1 - 36
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 28 October 2003 ex tempore
and revised on 31 October 2003

___________________
Susan Piggott
Associate

31 October 2003

Last Modified: 11/06/2003