Bluescope Steel Limited v Allianz Australia Limited
[2013] NSWDDT 3
•15 March 2013
Dust Diseases Tribunal
New South Wales
Medium Neutral Citation: Bluescope Steel Limited v Allianz Australia Limited [2013] NSWDDT 3 Hearing dates: 10, 11, 12, 13, 14 December 2012; 7 February 2013 Decision date: 15 March 2013 Before: Judge MJ Finnane QC Decision: See Paragraph 114
Catchwords: DUST DISEASES - asbestos - mesothelioma - exposure during course of employment
INSURANCE - indemnity - breach of insurance contract - deed of release - claim of prejudice by insurer - failure to notify insurer of claim against insured - breach of term of contract - existence of insurance contract
PROFESSIONAL NEGLIGENCE - same solicitor and counsel appearing for both defendants in substantive proceedings - prejudicial conductLegislation Cited: Insurance Act 1902
Workers Compensation Act 1926
Dust Diseases Tribunal Legislation 2007
Uniform Civil Procedure Rules 2005Cases Cited: Browne v Dunn (1894) 6 R. 67 HL
Bluescope Steel Ltd v Allianz Australia Ltd [2008] NSWDDT 24
James Hardie v Seltsam (1998) 196 CLR 53Category: Principal judgment Parties: Bluescope Steel Limited (Cross-Claimant)
Allianz Australia Limited (Cross-Defendant)Representation: Mr TGR Parker SC with Mr GJ Parker SC (Cross-Claimant)
Mr GF Little SC with Mr DT Miller SC (Cross-Defendant)
Piper Alderman (Bluescope Steel Limited)
Ellison, Tillyard, Callanan (Allianz Australia Limited)
File Number(s): 6166/06/1
Judgment
Facts
On 5 July 2006, Youden Richard Jackson filed a statement of claim against BlueScope Steel Ltd and BHP Billiton Ltd in the Dust Diseases Tribunal.
Mr Jackson claimed that he that he was employed by the first defendant between1957 and 1965 as a bricklayer and was exposed to asbestos with the consequence that he contracted malignant mesothelioma.
He also claimed that the first defendant required him to work at the premises of the second defendant in the steelworks at Newcastle during those years and that he became exposed to asbestos whilst working in the steelworks. He claimed that this also caused him to contract malignant mesothelioma.
BlueScope Steel at the time Mr Jackson was working for it was known as John Lysaght Australia Limited, which later became a subsidiary of BHP.
Because the matter was urgent, it was brought before the President, His Honour Judge 0'Meally who directed that it be heard before his Honour Judge Kearns on 12 July 2006 at the bedside of the plaintiff. When the matter came before his honour Judge O'Meally, both defendants were represented by the same firm of solicitors, Piper Alderman and that was the position on 12 July 2006 when Mr Scott Hay, now a partner in that firm, appeared at the bedside of Mr Jackson, instructing Mr Luke Morgan of counsel. Mr Jackson was represented by Mr Brian Ferrari of counsel and his instructing solicitor.
As was usual in cases where a very sick plaintiff was going to give evidence from his bed, a Browne v Dunn undertaking was given by the plaintiff's counsel, Mr B Ferrari that no objection would be made to the adducing of evidence subsequently that was not put to the plaintiff.
Some years earlier on 10 May 2002, BHP Steel Ltd by deed had separated various of its subsidiaries into separate companies and groups. BHP Billiton was to operate separately and John Lysaght Ltd, now named BlueScope Steel, was to operate separately. BHP agreed to indemnify both these companies against any workers compensation liability but the deed provided that if the company had workers compensation insurance, it should seek indemnity from the insurer.
On 10 July 2006, Michael Miller who was working for BHP told Mr Hay that there was a policy of insurance covering BlueScope before 1979. Mr Hay asked Mr Miller to provide him with the necessary documents. There was no relevant policy covering BHP Billiton, which at no time employed Mr Jackson
However, Mr Hay did not attempt to contact anybody at Allianz, the insurer that was bound to indemnify BlueScope for any liability under the relevant workers compensation policy for the pre-1979 period. In the case of BlueScope, that would have been for the employment of the plaintiff in the period before 30 September1979.
On 12 July 2006, at the hearing before his Honour Judge Kearns, an affidavit of the plaintiff was tendered. Before that time a statement of particulars in the format that is usual in the Dust Diseases Tribunal had been filed.
What the particulars and the affidavit revealed was that Mr Jackson worked for John Lysaght Limited between 1957 and 1965 except for a period of six months at some time between 1961 and 1965 when he worked for Simon Carves Proprietary Limited, a contractor at the BHP steel works in Newcastle. He claimed that he was exposed to asbestos in both these employments and gave considerable detail of his work at John Lysaght with less particularity about his work at BHP.
It is clear and beyond dispute that if there were no insurer involved for either of the defendants, the BHP indemnity in the deed to which I have referred above would have covered both defendants and it would have been entirely appropriate for one solicitor to represent both.
At the hearing before his Honour Judge Kearns, a certificate of service showing Mr Jackson's employment with John Lysaght was tendered.
The transcript of the proceedings before His Honour Judge Kearns was tendered in the present proceedings. As well as that, a tape recording of the evidence was also tendered as Marked For Identification 1. I listened to that tape recording with the assistance of a transcript and some handwritten amendments made by counsel to represent what they heard when they listened to the tapes. The transcript became a document Marked for Identification 2. I substantially agreed with the amendments made by counsel.
During the evidence taking, Mr Jackson spoke in a quite indistinct voice and at times appeared to me not to be entirely clear about some of the answers he was giving. On many occasions the indicated he could not remember and as far as his employment with Simon Carves was concerned, he thought that the work he was doing was acid work but he could not remember what type of bricks he was using apart from the fact that they were different from the bricks he was using as John Lysaght. He was asked what acid work was and he said that it was a different type of brick and it was acid work. This evidence was relevant to the claim against BHP, the second defendant in those proceedings.
It became clear to me that as Mr Morgan was cross-examining, Mr Jackson was getting weaker and weaker and less and less clear. For example, on page 5 of the transcript when he was being asked about bricks and whether there was asbestos in the bricks, he was not sure. He was also not sure about some of the matters that appeared in his affidavit. It is also clear that on a number of occasions his voice trailed off and his wife, who was present, intervened. Mr Morgan asked him about the work he carried out subsequently for a firm that was an asbestos remover and Mr Jackson gave details about wearing masks and other safety procedures. At that point, his voice appeared to become quite soft and Mr Morgan turned to matters such as his intention to work, his share of household expenses and other matters going to an economic loss claim.
Mr Ferrari did not seek to extract any further information about Mr Jackson's work at the BHP steel works, nor did he seek to clarify any of the answers Mr Jackson gave.
Mr Jackson's wife then gave some evidence but it is not important that I deal with what she said.
Mr Jackson died on 18 July 2006.
On 13 July 2006 when he got back to Sydney, Mr Hay contacted Mr Miller and established that there was a workers compensation insurance policy in place covering BlueScope Steel. On 14 July 2006, Mr Hay notified the current defendant, Allianz Australia by ringing Allianz and speaking to Mr Tolhurst, an employee of that company and telling him that a claim would be made on the policy. There was a further directions hearing before Judge Kearns on 14 July 2006.
Mr Hay contacted Elison, Tillyard, Callanan on 18 and 19 July 2006, on the basis that this latter firm represented Allianz, sought indemnity under the policy of insurance. He also told Mr Anderson of that firm that a hearing would be held on 20 July 2006 before His Honour Judge Kearns. Mr Anderson was not willing to agree that Allianz would indemnify.
On 17 July 2006, Mr Morgan sent a letter to his solicitors setting out what had happened at the hearing. In particular, he pointed out that the cross-examination of Mr Jackson was limited by some very obvious constraints and in particular that the plaintiff was making use of an oxygen machine; he appeared to be in considerable discomfort, he was confused, short of breath and tired rapidly. Mr Morgan's observations make it clear, in my opinion that the plaintiff Mr Jackson, when he was giving evidence was very weak and at times confused and tired. Nevertheless, according to Mr Morgan Mr Jackson conceded that his exposure to asbestos was highest during his years as an apprentice with John Lysaght.
Mr Morgan swore an affidavit (See Exhibit 1) in the present proceedings and subsequently gave evidence during which he was cross-examined on the affidavit and generally. He agreed that before he attended the bedside hearing he was aware of the possibility that there might be an insurer, which was not identified to him but nevertheless he felt that he had to be very careful in cross examination. Nevertheless, his actual instructions in his brief were to the effect that BHP was fully liable for injuries to employees of Lysaght's and any third parties arising from any exposure at the Newcastle steelworks and he was to be impartial as between the two defendants. He saw his role as needing to obtain a chronology or history of what Mr Jackson did when he was working for the two organisations.
He claimed that his instructions were not to put anything to Mr Jackson that would implicate specifically either BHP or BlueScope. He came to the conclusion as he was proceeding through the cross-examination that Mr Jackson was not really in a position to give any real detail about anything.
In my opinion Mr Morgan gave evidence in an honest and straightforward manner. He was a reliable witness and I accept what he says. I accept that he tried to get in chronological fashion what employment the plaintiff had. It is clear that he did ask him about his employment with BHP. It is also clear that he got answers on this topic and on others that were not entirely clear and some answers that were contradictory of the plaintiff's affidavit.
As I have recounted earlier in this judgment, I have heard a tape recording of the plaintiff's evidence and it is evident that he was very ill and quite weak at the time of the hearing. At times his voice trailed off and at times it was not easy to understand what he said. At other times he appeared to be quite clear in what he said. The evidence of the plaintiff stopped when it was clear that he was not really responding meaningfully to the questions of counsel.
This tape recording was put into evidence after Mr Morgan gave evidence for the first time. He was recalled to give evidence again at a time when he had been able to listen to the tape recording. He maintained that the tape recording substantiated what he had said in his affidavit and his earlier evidence. In my opinion, he was quite correct in expressing that opinion.
Mr Scott Hay was also called to give evidence. He swore an affidavit (See Exhibit 3) and gave evidence, like Mr Morgan, on two occasions.
On the first occasion, he was cross-examined about the bedside hearing and his failure to notify Allianz before the hearing took place. It was put to him that he had knowledge of the insurance position of BlueScope in 2004, since he had acted for BlueScope in proceedings to recover indemnity from Allianz arising out of an asbestos related claim in the Tribunal brought by a plaintiff named Cizzio. The case is reported at [2008] NSWDDT 24.
Importantly for present purposes, His Honour Judge Curtis sets out some uncontested facts as to the knowledge of Mr Hay of the Allianz policy covering BlueScope:
"In 2004 Mr Michael Miller was employed by BHP Billiton as its Workers Compensation Coordinator NSW. He knew that the claim of Mr Cizzio was referred by Mr Hammond to Mr Hay, and he also knew that before John Lysaght became a self insurer in 1979, MMI was one of a number of workers compensation insurers with whom policies had been held. In a rather confusing affidavit, Mr Miller says in paragraph 14 that he did not then instruct Mr Hay to make a claim upon Allianz because he did not hold any documents that confirmed the existence or terms of any workers compensation insurance for John Lysaght, nor did he have any records in respect of Mr Cizzio's period of employment. In paragraph 29 he says that a possible recovery against Allianz was simply overlooked by him at the time.
On 3 November 2004 Mr John Harvey, the loss assessor retained by Mr Hay, sent an e-mail to Mr Miller. Mr Harvey said that he assumed that this was not the first dust claim against John Lysaght and asked whether Mr Miller may have any statements, which had been gathered in other matters.
Mr Miller's reply of 4 November 2004 included this paragraph:
"John Lysaght (Australia) Ltd became self-insured on 30 September 1979 and Allianz (MMI) were on risk prior to this date."
This e-mail of Mr Miller was copied to Mr Hay"
Mr Hay, who read Mr Miller's e-mail at the time it was sent, says that he did not investigate the matter further because he was not provided with documents confirming the suggested policy of insurance." (Page 3 of judgment).
As well as this, Mr Little SC confronted him with the email of Mr Miller, an employee of BHP, which in November 2004 showed that MMI, the predecessor to Allianz insured John Lysaght before 30 September 1979.
In the Cizzio proceedings, BlueScope, relying on section 18 of the Insurance Act 1902, sought orders for indemnity in respect of its liability to Mr Cizzio and for its legal defence costs. His Honour, Judge Curtis was presented with a factual situation, where, notwithstanding the knowledge of BlueScope Steel and Mr Hay in 2004 of the existence of a relevant Allianz policy, the case was settled between the plaintiff and BlueScope on 8 August 2005, without any notification having been given to Allianz that a claim had been made.
Mr Hay sought indemnity from Allianz for the first time in the Cizzio matter only on 2 November 2006 almost four months after the bedside hearing of Mr Jackson. From my reading of His Honour's judgment, it appears that Mr Hay simply overlooked the knowledge he acquired in November 2004. It certainly did not prompt him to make any inquiries, even of a tentative nature about insurance.
In evidence before me, he asserted that he could not have made a claim for indemnity before he got positive information about the insurance policy.
Mr Cizzio was employed in the same premises as Mr Jackson.
His Honour described the conduct of Mr Hay as "extraordinary" for reasons set forth in pages 4 and 5 of the Cizzio judgment, pointing out Mr Hay's undoubted familiarity with the terms of the standard workers compensation policy in force at the time, his knowledge of the identity of the solicitors for Allianz, his knowledge of the plaintiff's employment and his ability to make a simple search in the records of the Tribunal that would have identified John Lysaght, the predecessor in title to BlueScope as being a defendant in five previous actions in the Tribunal.
I agree with his Honour's views about Mr Hay. Additionally, I have to say that I found him to be a far from convincing witness, but I reject suggestions put by Senior Counsel for Allianz that he came along to the Tribunal and told deliberate lies.
He impressed me as being a highly stressed individual. Perhaps it was stress that led him in July 2006 to overlook his knowledge from 2004 that there was a relevant policy of insurance with Allianz. His actions in making no relevant inquiries were, to say the least, negligent, but I agree with his Honour, that he acted inadvertently, not dishonestly.
There is no evidence, in my opinion that would suggest that he was acting deliberately to conceal matters from the appropriate insurer.
The findings by his Honour Judge Curtis, in my opinion, created an issue estoppel on the question of when BlueScope and when Mr Hay got actual knowledge of a policy of insurance covering BlueScope in relation to claims by employees who were working at John Lysaght's premises in Newcastle before 30 September 1979.
I find that Mr Hay and BlueScope had actual knowledge on 4 November 2004 of the existence of a policy of insurance putting Allianz at risk for claims by employees of John Lysaght in respect of their pre 30 September 1979 employment. However, in 2006, when he got the case of Mr Jackson, he simply failed to advert to this knowledge, probably because he had put it out of his mind.
It is important, however, to make clear at this point what happened in this case at the bedside hearing and what happens in most cases in this Tribunal.
Ever since Dust Diseases Tribunal Regulation 2007 was brought into operation on 1 July 2005, a plaintiff suing for damages because of his contracting a dust disease caused by asbestos has his case placed in the claims resolution process and it cannot be removed from that process unless all the parties agree, or the Tribunal, on application by a party determines that it should be removed because a party has failed to comply with a claims resolution process and that has resulted in substantial prejudice to the applicant or substantial delay or; The Tribunal determines on application that the claim should be removed because the claim is urgent, that is to say that the Tribunal is satisfied that, as a result of the seriousness of the claimant's condition, his life expectancy is so short as to leave insufficient time for the requirements of the claims resolution process to be completed and the claim finally determined by the Tribunal, if required, on an expedited basis (See Clause 22).
This is the only court, of which I am aware, in which a litigant cannot get a hearing unless a judge on medical advice being tendered, makes an order. The judges of the Tribunal cannot hear cases because the case is ready or the plaintiff wants to have it heard. Only if the parties all agree or the Judge is presented with evidence showing the plaintiff is likely to die, can he hear a case.
This case was removed from the claims resolution process by His Honour Judge O'Meally on 12 July, a hearing was arranged on 14 July and the plaintiff died on 18 July. At the time of the hearing, the plaintiff was very gravely ill and was in fact close to death.
Most of the plaintiffs that come before the Tribunal are in a similar position. At times the hearing gets almost no evidence or very little evidence. On many occasions, what the plaintiff has put in an affidavit is not something he is able to talk about clearly. The disease can progress extremely rapidly and it is relatively common to encounter plaintiffs who swear to facts in affidavits but who are unable within a few days to speak lucidly about the facts deposed to in the affidavit
The solicitors and counsel who appear usually in the Tribunal are very used to this. At times, all the plaintiff's evidence confirms orally is that he is very sick. Sometimes he cannot say anything useful at all.
Counsel and solicitors appearing for the parties in this case at the bedside hearing were very experienced in this jurisdiction. Counsel and solicitors who later appeared for Allianz were also very experienced in this jurisdiction.
Counsel for defendants have to be able to grapple with the difficulty of dealing with evidence that often is quite uncertain, particularly when there are a number of parties. It is common for a hearing at a bedside to be conducted with counsel and solicitors representing the plaintiff, perhaps a number of defendants and a number of cross defendants. Each person or company represented usually seeks to ask the plaintiff something. Frequently, the answers they get are not very enlightening.
This leads to the plaintiff's legal representatives having to call additional evidence on factual matters associated with exposure to asbestos, to bolster the plaintiff's case. Any defendant or cross defendant is in the same position.
As I have said earlier in this judgment, there is no doubt that BlueScope employees knew before 10 July 2006 and in fact as long before this as November 2004, that there was in existence an insurance policy that bound Allianz to indemnify BlueScope in relation to any workers compensation claim, including a claim for damages for negligence as an employer. Mr Hay did not know the terms of the policy as at 10 July 2006, but, as his Honour Judge Curtis found, he would have been aware of the terms of policies that applied, since they were all in a standard form.
There was some confusion as to whether it had an unlimited common law damages indemnity or whether it had a cover that was very limited. However, on 13 July 2006, it became clear that the policy had an unlimited common law damages indemnity clause (See the letter of BHP Billiton to Piper Alderman of 13 July 2006).
On 14July, 2006, Mr Hay confirmed that MMI, whose liabilities were taken over by Allianz, was the insurer of John Lysaght in respect of its workers from 1 January 1961 to 30 September 1979. He was also seeking, through the retention of private investigators, evidence of the plaintiff's employment at BHP. The plaintiff's claim about his employment at BHP in his affidavit and his evidence, was vague and far from clear. By 18 July, he had obtained information that suggested the plaintiff had never worked at BHP premises and there was some doubt about the extent to which he was exposed to asbestos when he was working for John Lysaght.
As I have earlier set out, the solicitors for Allianz made it clear on 18 and 19 July that they would not agree to indemnify BlueScope Steel.
On 20 July, there was a further directions hearing before Judge Kearns. Mr G Little S.C appeared for BlueScope, but really representing Allianz. Mr T.G.R Parker S.C. and Mr L Morgan appeared for both BHP and BlueScope. Mr B Ferrari (now deceased) appeared for the plaintiff.
I will set out in full what Mr Little said:
"Perhaps if I can be seen, your Honour, and I have rushed down here at pretty short notice. The position is that the one firm of solicitors acted for both BlueScope and BHP as your honour is aware of course, evidence was taken in this case by the solicitors acting on behalf of the two defendants. It is now alleged that the people who I have been asked to come along for as amicus curiae it has been suggested they were an insurer of BlueScope they should take over the conduct of the case. We see a number of difficulties about that, that is that the firm that represented both defendants had a conflict between different insurers and the case has the potential to be run in that way with one suffering a disadvantage in the running of the case. There are other insurance issues that arise, and it seems to us that the solicitors who were for both defendants probably would find themselves in an even worse position if they got rid of one and retained the running of it for the other, and it looks as though the whole question of defendants representation will have to be reviewed. We certainly do not want at this late stage in the day to take over the conduct for one defendant, the other defendant being privy perhaps to information to our detriment and remaining in the case. So it is a question of fixing up representation first, your Honour as we see it."
Mr Little, appearing curiously, amicus curiae, on behalf of BlueScope, but really on behalf of Allianz, was seeking to make clear, it seems to me, that he and his instructing solicitors regarded the conduct of Mr Hay and Mr Morgan in representing both defendants on 12 July as prejudicing Allianz in a way that could not be fixed up and Allianz would not take over the running of the case on behalf of BlueScope.
Mr Little seemed to me to make those propositions clear by talking about it being "this late stage in the day" something his Honour challenged.
Having paid full regard to what happened at the taking of evidence on 12 July, I find it difficult to understand how Mr Little could characterise events on 20 July as being "this late stage in the day". The case had barely started and it must have been clear to Mr Little and to his instructing solicitors that the plaintiff's case would need to have much more evidence called than merely his affidavit and oral evidence, if the plaintiff were to succeed against either or both defendants. The oral evidence of the plaintiff also seemed to make the case against BHP rather tenuous as he claimed he worked with acid bricks and failed to confirm that he did any work involving asbestos when working at BHP premises. This was a different claim to the one he made in his affidavit.
There could be no doubt in my mind that his case against BHP would have had little chance of success if he did not have more evidence from other persons and perhaps, supporting documentary evidence, to establish that he did work on BHP premises, that he was exposed to asbestos on those premises and that BHP, in breach of its duty of care to him, exposed him to that asbestos.
On 21 July 2006, Mr Hay advised Mr L Hammond of BlueScope Steel, that his firm would be ceasing to act for BlueScope and on the same day, he filed a notice of ceasing to act and contacted Sparkes Helmore requesting that they take over conduct of the defence on behalf of BlueScope and that they get instructions on whether BlueScope wanted them to cease to act for BHP.
On 31 July 2006, Sparkes Helmore filed a notice that they were now the solicitors for BlueScope and they commenced to run the case for BlueScope. On 9 May 2007, Ellison, Tillyard, Callanan solicitors for Allianz sent Sparkes Helmore a letter in which they repeated the claim of Mr Little SC made on 20 July 2006, that the conduct of BlueScope and its previous lawyers had "irretrievably prejudiced" the defence of the claim by Allianz Australia Insurance Limited, that this could not be remedied because of the death of the plaintiff and, finally that Allianz had instructed them, " as advised on 20 July 2006, that they shall not take over the running of the case nor indemnify your client".
On 29 May 2007, Sparkes Helmore again sought to get Allianz to change its mind, pointing out that Mr Little did not tell Judge Kearns on 20 July 2006 that the situation could not be remedied because of the death of the Plaintiff and asked that Ellison Tillyard Callanan " advise specifically of the provisions of the statutory policy between your client and our client which you say have been breached and the manner in which you say the breach has occurred"
On 6 July 2007 Ellison Tilyard Callanan replied in the following terms:
"1. Our counsel, Mr Little SC, advised Judge Kearns that the death of the plaintiff may have the result that the insurer was now irretrievably prejudiced in that it could no longer obtain evidence from the plaintiff that would indicate whether it should indemnify or not stop
2. The insured had been in breach of the policy conditions in failing to notify the insurer of the claim, forwarding the proceedings and any served material and the like so that the insurer was in a position to decide whether or not it was required to indemnify at the outset of the matter, bearing in mind that there may have been highly relevant questions to be answered about the date the liability of the defendant arose, to identify the appropriate indemnifiers (if any) the policy limits and other like matters.
3. We agree that the hearing on 20 July 2006 did not resolve the insurer question. That question is now unable to be resolved because of your client's breach of the policy conditions, leading to the prejudice to the insurer by a claim at a late stage at which it was made.
4. The policy wording provides "the above indemnity is made subject to the due and proper observance and fulfilment by the employer of the conditions hereunder...
CONDITIONS
1 Notices
2 . Claims
3. Employer not to make admissions
4. No waiver of conditions"
On 21 August 2007, Miss Brewster caused an order for judgment and an agreement as to judgment to be filed in the Tribunal. It was her recollection that she recommended this course of action because she believed that the plaintiff would establish his case against BlueScope steel. Amongst other things, she noted that the plaintiff's affidavit had been tendered without any objection being made by counsel for the defendants to the use by the plaintiff of the word "asbestos". She concluded that the defendants' counsel accepted that the plaintiff used asbestos during the course of his duties with BlueScope.
An unusual feature of the settlement was the entry of a verdict in favour of the defendant BHP and an agreement that the plaintiff would pay BHP certain costs. Miss Brewster was of the opinion of there were very serious doubts about whether the plaintiff could establish any case against BHP. She referred to this in paragraph 26 of her affidavit.
She also recollected recommending the settlement because she believed that BlueScope would be held liable and was at risk of a verdict in excess of the settlement amount and would be required to pay the plaintiff's costs and its own costs of the further hearing. She was also concerned that if the matter proceeded BlueScope could be made liable under a Bullock order in favour of BHP if the plaintiff obtained judgment against BlueScope but failed against BHP.
During the course of her oral evidence, she was cross-examined about the apparent conflict in her evidence. She had said that when she assumed carriage of this matter she proceeded on the basis that she should act as if there were no indemnity deed, even if arguably that could involve her in trying to attribute liability to BHP, that when she decided to enter into settlement negotiations in August 2007, her position changed. Her counsel, who was at the hearing considered that the plaintiff's case against BHP was collapsing and that BlueScope should get the best settlement it could get, even if this meant agreeing that there would be a verdict for BHP against the plaintiff. She was told that there was evidence that would be called to show that the plaintiff had not ever entered the premises of BHP.
It was her view and that of her counsel that they could not object to the verdict in favour of BHP unless they were prepared to issue a cross claim against BHP, something they were not prepared to do because there was no evidence that would enable them to mount such a case and in any event, the deed of indemnity prevented them from issuing such a cross claim.
Her views on this matter do not determine this issue, but the case of James Hardie v Seltsam (1998) 196 CLR 53 gives support to the view she expressed concerning the fact that there was no evidence to mount a cross claim.
She did not consider BlueScope's position with respect to Allianz when she recommended settlement because Allianz had refused indemnity and she was satisfied that the agreement with BHP Billiton at the time of settlement would result in BlueScope being indemnified by BHP Billiton for those proceedings and in respect of any other proceedings brought by it against Allianz.
There then followed negotiations with the plaintiff's solicitor about costs and the plaintiff's costs were ultimately agreed in the sum of $80,000.
It is important to note at this point in the judgment that the plaintiff sued both BlueScope and BHP Billiton. There were no cross claims before judgment was entered in favour of the plaintiff against BlueScope and in favour of BHP Billiton against the plaintiff.
As I have already explained, in her evidence, Miss Brewster made it plain that she had no part in organising the verdict for the defendant in favour of BHP Billiton. Rather, the solicitor for the plaintiff wanted as part of the settlement to have a verdict entered in favour of BHP Billiton with a defined order for costs against the plaintiff.
Her consent was sought to this course of action and she agreed. She did not seek any consent from Allianz. It was her opinion that if she had objected to the verdict in favour of BHP Billiton being entered she would have had to issue a cross claim against BHP Billiton which in the circumstances she would not have done for two reasons;
a. Because on counsel's advice, there was no case to be made out for the plaintiff against BHP Billiton; and
b. Secondly because of the deed of indemnity between BlueScope and BHP Billiton, BlueScope could not have issued that cross claim.
Mr Michael Miller who is the BHP Billiton workers compensation coordinator for New South Wales swore an affidavit and gave evidence. The most important part of his evidence was that he learned of the claim by Mr Cizzio in about October 2004 and on 3 November 2004 and the following day he became involved in the question of who was at risk before 30 September 2009. He established that Allianz was at risk and he sent an email to Mr Scott Hay on the same day, telling him this. Thus, quite apart from any question of issue estoppel created by the judgment in Cizzio, this evidence established that Mr Hay had knowledge in November 2004 of the insurance position of workers compensation claims arising from employment by John Lysaght in Newcastle before 1979.
Mr Nicholas Prentice, a partner in the firm of Ellison, Tillyard, Callanan, solicitors swore an affidavit and gave oral evidence. What he said, in essence was that if he had been notified of a bedside hearing, on even a few hours notice, he would have made arrangements for someone to be present to represent his client, Allianz. I accept what he says about this.
He also accepted that the plaintiff had a good case against BlueScope Steel and would have recovered damages from BlueScope, but was also of the view that a cross claim could have been brought against BHP Billiton from whom he would have sought a 25% contribution, something that became impossible when BlueScope represented by Miss Brewster's firm consented to the plaintiff agreeing to a judgment in favour of BHP Billiton.
I am of the opinion that Mr Prentice is wrong when he expresses the opinion that he could have brought a cross claim against BHP. I am of this opinion, without needing to consider the terms of the indemnity deed.
The plain fact of the matter is that if the plaintiff wanted to discontinue his case against BHP, BlueScope had no entitlement to object. Indeed, it had no standing at all to do so. If the plaintiff was unwilling to present evidence that he worked at BHP premises in Newcastle at any time during which he was exposed to asbestos, there was no possibility for BlueScope to prove that he had done so. There was evidence before me of an affidavit of Mr Joseph Abercrombie who did work for BHP at Newcastle that exposed him to asbestos, but Mr Abercrombie did not claim that the plaintiff worked with him, nor did he claim that he worked at any time in the BHP premises at Newcastle with anyone from John Lysaght's. The plaintiff in his affidavit and in his oral evidence gave contradictory evidence about working at BHP premises in Newcastle, but that evidence did not show any exposure of a proveable type to asbestos. His written evidence was vague about his working at BHP.
There was also an affidavit tendered from Mr Kenneth Brian Fischer (See Exhibit D3) who brought proceedings in 2011 against BHP Billiton and BlueScope Steel (AIS). He had contracted mesothelioma, according to his affidavit because of his exposure to asbestos while working in the BHP blast furnaces in Newcastle in the 1970's and at Whyalla in the same period and at the premises of BlueScope (AIS) in Wollongong. He gave no evidence of working with Mr Jackson or anyone from John Lysaght's.
The evidence of Mr Abercrombie and Mr Fisher, in my opinion could not have been relied on by Mr Jackson to establish his case against BHP Billiton.
As far as I can determine, Mr Jackson had no realistic prospect of establishing a case against BHP.
In my opinion, also, there is no basis for Mr Prentice's opinion that he could have expected to get from BHP a 25% contribution, even assuming he could have successfully objected to the plaintiff consenting to judgment in favour of BHP. I am entitled to infer from the evidence, that the plaintiff's counsel, the late Mr Brian Ferrari, (a very experienced counsel in matters in which plaintiffs who were workers sought damages), would not have advised his client to agree to a judgment in favour of BHP and an order that he pay a defined sum for the costs of BHP, unless he considered that he had no chance of success in the case against BHP. The evidence to which I have referred is supportive of his advice to Mr Jackson.
In its written submissions, (Page 42 paragraph 95) Allianz contends that the affidavit of Mr Powell could be relied on as establishing that Mr Jackson may have been working at BHP as an employee of Lysaght's when Lysaght's had a contractual role to fulfil at the BHP site.
However, in my opinion, that is not correct at all since it establishes at best evidence of a possibility. Even if Mr Jackson had been working at various times as a John Lysaght employee at the BHP steelworks in Newcastle, he would have had to prove exactly what work he was doing, that it subjected him to asbestos exposure and that someone from BHP was directing him in what to do. Mr Powell's affidavit would have been of no assistance.
FINDINGS OF FACT
I make the following findings of fact:
1. Mr Hay knew before the bedside hearing on 12 July 2006 that BlueScope was insured under a workers compensation policy covering the pre 30 September 1979 period for workers employed by John Lysaght's at Newcastle.
2. Mr Luke Morgan of counsel had no instructions that there was an insurance policy and attempted to the best of his ability to get evidence from the plaintiff at the bedside hearing of his employment at John Lysaght's at Newcastle and of any work he did at the BHP Steelworks in Newcastle
3. The plaintiff was gravely ill during the hearing and at times was unresponsive to questions, at times was obviously ill and unable to say very much at all. Some of his oral evidence contradicted his written evidence.
4. Because of his advanced state of illness, he ceased to be able to give any meaningful evidence before Mr Morgan had completed his cross examination
5. At the time the bedside hearing date was fixed, the legal representatives gave the court a Browne v Dunn undertaking, i.e., if the defendants did not raise a matter with the plaintiff at the bedside hearing, they would not be prevented from adducing evidence about it subsequently. This undertaking is given in every case of a bedside hearing and it enables defendants to adduce evidence that was not available at the time of the hearing or which could not be put because of the advanced state of illness of the plaintiff.
6. Mr Hay took no steps to notify Allianz or its solicitors, whom he knew to be Ellison, Tillyard and Callanan, at any time before the bedside hearing. He could have done so and should have done so.
7. On 13 July 2006 Mr H spoke to Mr Miller of BHP Billiton and confirmed that there was in place a workers compensation policy covering BlueScope steel.
8. 14 July 2006 Mr Hay notified Allianz that a claim would be made on the policy. He did this by speaking to Mr Tolhurst.
9. On the 18 and 19 of July, Mr Hay contacted Ellison Tilyard, Callanan, the solicitors for the insurer and sought indemnity under the policy. Mr Anderson declined to agree to an indemnity.
10. On 20 July, Mr Little appeared amicus curiae for the insurer and made it clear that the insurer would not take over the action. Mr Little also claimed that the conduct of BlueScope and its lawyers "irretrievably prejudiced" the defence of the claim by the insurer.
LEGAL ISSUES
1. Allianz does not contend that the quantum of the verdict paid to Mr Jackson was unreasonable, nor that the amount paid to his solicitors for their costs was unreasonable (See Allianz written submission paragraph 43).
2. BlueScope claimed that it notified Allianz on 14 July 2006 of the claim made against BlueScope by Mr Jackson and sought indemnity under the policy but Allianz refused indemnity and intimated that BlueScope should act as a "prudent uninsured" with respect to the claim.
3. BlueScope makes the following additional claims:
(i) BlueScope had a policy of insurance with Allianz covering its liability to Mr Jackson
(ii) Mr Jackson recovered a judgment and costs
(iii) BlueScope paid the judgment amount and the costs
(iv) BlueScope incurred legal costs in defending the proceedings brought by Mr Jackson
(v) The defence costs were incurred with the consent of Allianz
(vi) BlueScope was entitled to indemnity under the policy of insurance with Allianz for the judgment, the costs of the plaintiff and the defence costs
(vii) The policy was one of utmost good faith
4. Allianz breached its obligation of utmost good faith in failing, upon notification of the claim to it, to consider in good faith and with proper expedition and reasonably whether:
(i) To grant indemnity under the claim and/or
(ii) To take over the conduct of the claim and/or
(iii) To consent to BlueScope incurring reasonable costs in defending the claim (if consent had not already been given)
The expenses incurred by BlueScope in defending and settling the claim resulted from one or more of those breaches and/or from steps reasonably taken by BlueScope to mitigate the losses resulting from one or more of the alleged breaches (See Cross claim paragraphs 21 and 22).
In its defence to the cross claim, Allianz admitted that it had indicated that the cross claimant needed to act as a prudent uninsured, claimed that the cross claim owed a duty of utmost good faith to the cross defendant but denied that it owed a duty of utmost good faith to the cross claimant. It also made the following allegations:
1. It admitted that it declined to exercise the right to take over the conduct of the proceedings for the cross claimant but says that the conduct of the cross claimant had prejudiced it as to the defence of the claim.
2. In breach of condition two of the policy, the cross claimant did not give notice to the cross defendant of the plaintiff's claim as soon as practicable after it came to the knowledge of the cross claimant and in particular
(i) The cross claimant became aware of the claim on about 5 July 2006 and should have advised the insurer.
(ii) Forthwith and before filing a notice of intention to act and/or brief counsel to take the plaintiff's evidence
(iii) Did not forward a statement of claim on 6 July 2006 to the insurer
3. In breach of condition three of the policy the cross claimant
(i) Incurred the expense of litigation without the written approval of the insurer; and
(ii) Made a payment, settlement or admission of liability in respect of the claim without the written authority of the insurer
4. The cross claimant acted contrary to the interests of the cross defendant in relation to the contract of insurance, the same being a contract of the utmost good faith in that:
(i) It was represented by solicitors who acted for another defendant whose interests were inimical to the interests of the cross claimant in a situation of conflict of interest between the cross claimant and the other defendant.
(ii) These solicitors instructed a single counsel to represent both defendants when there was a clear conflict of interest between them.
(iii) The cross claimant knew before 5 November 2004 and its solicitor knew before that date that BlueScope was insured by Allianz during the relevant period.
(iv) BHP was known by itself, the cross claimant and the cross claimants solicitors to be self-insured.
(v) It was clearly in the interests of BHP that it be exculpated and that liability in the proceedings be attributed instead to the cross claimants as the insured entity;
(vi) When the plaintiffs evidence was taken the questions asked by counsel appearing for the cross claimant and BHP were designed to achieve the outcome in (v) above (See Rule 7.25, Uniform Civil Procedural Rules 2005).
(vii) The cross claimant was under a duty to protect the interests of the cross defendant and had a duty to the cross defendant to endeavour to obtain evidence from the plaintiff that would assist in the prosecution of claims against BHP, such obligations arising out of the relationship between insurer and insured. No counsel properly instructed and advised by his instructing solicitors as to the conflict of interest existing between the two defendants should have asked any of a series of enumerated questions.
(viii) The cross claimant's solicitors having been privy to the contents of the cross claimant's file and in receipt of instructions concerning the subject matter of the litigation between Jackson, the cross claimant and BHP continued to act for BHP securing an advantageous outcome for it to the detriment of the cross claimant and the cross defendant in breach of the solicitors' obligation not to use confidential information obtained on behalf of a client against that client and in breach of the first mentioned duty described in paragraph (vii) above
(ix) Contrary to the interests of Allianz and in breach of the obligation it owed to Allianz, the cross claimant consented to the solicitors for the cross claimant continuing to act in the proceedings.
Further, the cross defendant denied all liability and denied it had acted wrongfully in any way.
On most of these issues, the parties agreed on the facts of what actually occurred but differed in their interpretation of the facts. So the cross claimant persisted in claiming that the cross defendant was under an obligation of utmost good faith to it and alleged that in breach of that obligation, the cross defendant failed to consider in good faith and as quickly as reasonably possible whether to grant indemnity, to incur further expenses in defending the litigation or whether to take over conduct of the litigation and thereby breached its obligations under the policy.
Further the cross defendant by denying liability, according to the cross claimant, breached its obligations under the policy, which resulted in an intimation that the cross claimant need not comply with its obligations and the cross claimant was discharged of any liability it had to the cross defendant
Finally, If I should find the cross claimant in breach of any of the pleaded obligations the cross claimant has sought to be excused under the provisions of s 18 of the Insurance Act 1902.
THE INSURANCE POLICY
The policy was a standard policy, the terms of which were set out in the appendix to the regulations to the Workers Compensation Act 1926. The policy obliged the insurer to provide a complete indemnity for any sums the insured had to pay by way of damages to the plaintiff.
For the purposes of this action, the important clauses are clauses 2, 3 and 4, which are in the following terms:
" Claims
2. The employer shall give notice to the insurer of any personal injury as soon as practicable after information as to the happening of such, or of any incapacity arising therefrom, comes to the knowledge of the Employer or of the Employer's representative for the time being and shall forward to the insurer forthwith after receipt thereof, every written notice of claim or proceedings, and of all information as to any verbal notice of claim or proceedings.
Employer not to make admissions
3. The employer shall not, without the written authority of the insurer, incur any expense of litigation, or make any payment, settlement or admission of liability in respect of any injury to or claim made by any worker.
Defence of proceedings
4. The insurer shall in respect of anything indemnified under this policy, including the bringing, defending, enforcing or settling of legal proceedings for the benefit of the insurer, be entitled to use the name of the employer. The employer shall give all necessary information and assistance and forward all documents to enable the insurer to settle or resist any claim as the insurer may think so."
The Insurance Act 1902, s 18 is in the following terms:
18 Powers of court in relation to insurance contracts
(1) In any proceedings taken in a court in respect of a difference or dispute arising out of a contract of insurance, if it appears to the court that a failure by the insured to observe or perform a term or condition of the contract of insurance may reasonably be excused on the ground that the insurer was not prejudiced by the failure, the court may order that the failure be excused.
(2) Where an order of the nature referred to in subsection (1) has been made, the rights and liabilities of all persons in respect of the contract of insurance concerned shall be determined as if the failure the subject of the order had not occurred.
CONSIDERATION OF ALL THESE MATTERS
In my opinion, Mr Hay had an obligation to inform the insurer and its solicitors before the bedside hearing on 12 July 2006 of the plaintiff's claim. BlueScope knew and Mr Hay knew, or ought to have known of the existence of insurance before the bedside hearing. Having regard to his actual knowledge of this insurance arising from his acting in the earlier proceedings concerning Mr Cizzio, his failure to inform the insurer and their solicitors is hard to understand, unless it be the case that this knowledge had totally gone from his mind. However, the information he was given on 10 July 2006 ought to have jogged his memory or caused him to make some enquiries. In my opinion, his failure to inform Allianz was in breach of clause 2 of the insurance policy.
For reasons I have already given, I do not accept that Mr Morgan in his cross-examination of the plaintiff acted to prejudice the insurer by deliberately refraining from asking any questions about BHP. In my opinion, the plaintiff did not give any certain evidence that would enable anybody to conclude that BHP exposed him at any time to asbestos. Indeed, His affidavit made it far from clear on what basis he was working on BHP, where he was working and what he was doing. He was asked questions about this during the oral cross-examination but his answers were far from clear, he was far from well and this is what led to his answers being quite contradictory.
Although Mr Hay did not inform Allianz of the policy or make any claim until 14 July, nothing happened between 12 July and 14 July that changed the position of the parties at all. Mr Jackson was still alive.
On 18 and 19 July when Allianz declined to take over conduct of the proceedings and declined to indemnify, it could rely on two matters only in taking these decisions, namely the delay by Mr Hayes in notifying it of the claim and the " irretrievable prejudice" it claimed to suffer as a result of conduct of the bedside hearing.
In my opinion, it was entitled to regard BlueScope as being in breach of condition 2 of the policy for its failure to notify as soon as practicable. However, it did not suffer any "irretrievable prejudice" as a result of the conduct of the hearing by Mr hay and Mr Morgan. Contrary to the claims it made in its pleadings, the fact that Mr Hay represented both parties at the bedside hearing did not confer any advantage on BHP Billiton, nor did this joint representation give BHP Billiton access to documents or information to the prejudice of BlueScope. The fact was that the claim concerned events so far distant that neither defendant had any records by the time of the bedside hearing of Mr Jackson's employment. Nothing that Mr Hayes obtained during the time up to 18 and 19 July enabled BHP Billiton to gain some unfair advantage over BlueScope Steel. It did not get access to confidential documents it otherwise might not have had.
Because of the giving by the plaintiff of the Browne v Dunn undertaking, either or both of the defendants was able to call evidence to add to or contradict anything said in the bedside hearing or provided in the plaintiff's affidavit.
I have already given reasons for rejecting the claim by Allianz that Mr Hay and Mr Morgan had acted improperly at the bedside hearing to the prejudice of the interests of Allianz and in favour of the interests of BHP Billiton. In my opinion, Mr Morgan did his best in very difficult circumstances and Mr Hay did not give him instructions to act otherwise.
The cross defendant also points to the fact that Piper Alderman, Mr Hayes' firm, continued to act for BHP in the proceedings and it complains that Piper Alderman should have ceased to act for BHP Billiton altogether. In submissions, it was put (Allianz submissions paragraphs 18-20) that Mr Hay was privy to information and results of investigations undertaken for both defendants and did not pass this information on in a timely manner to BlueScope.
When regard is had to what this information was, namely an affidavit of Mr Powell, it is, in my opinion, clear that BlueScope suffered no detriment whatsoever, since Mr Powell's affidavit contained no information about the employment by John Lysaght's of Mr Jackson at the BHP steelworks in Newcastle. The claim by Mr Jackson that he did work at the steelworks was of no evidentiary value unless he could make it plain that he was significantly exposed to asbestos.
The position then, in my opinion, is that Allianz declined to take over proceedings brought by Mr Jackson against BlueScope Steel, for reasons that lacked substance. Certainly, it could justifiably claim that BlueScope was in breach of condition 2 for not informing it of the claim at the earliest opportunity. But it could not point to any prejudice, apart from a theoretical one, that it had suffered as a result of the late failure to notify. From that point onwards, BlueScope was entitled to act as a prudent uninsured.
On 6 July 2007 Allianz declined indemnity. On 20 August 2007 the plaintiff obtained a consent judgment against BlueScope and consented to a judgment for the defendant in favour of BHP.
Allianz claims in its submissions that the settlements were in breach of the policy since its consent was not sought to them. BlueScope in reply urges that Allianz had no entitlement to be consulted since it declined indemnity without any reason.
In my opinion, the submissions of BlueScope should be accepted. It is clear to me that Allianz firstly declined to take over the proceedings and then more than a year later, declined indemnity substantially relying on the claim that it was "irretrievably prejudiced" by the conduct by Mr Hay and Mr Morgan at the bedside hearing. I have rejected Allianz submissions about this and it follows that Allianz could rely only on late notification of the claim.
In my opinion, that breach, in the circumstances, was not sufficient to entitle Allianz to decline to take over the proceedings, much less to decline indemnity.
In my opinion, Allianz was in breach of its contract to indemnify and its breach entitled BlueScope to act as a prudent uninsured and to settle the claim of Mr Jackson.
If I am wrong in this opinion, I am of the opinion that the failure of BlueScope to give notice as soon as possible caused no prejudice to Allianz and it may reasonably be excused on the ground that Allianz was not prejudiced by the failure and I order, pursuant to s 18 of the Insurance Act 1902 as amended, that the failure be excused.
DECISION
It follows that I find a verdict for the cross claimant for the amounts claimed and interest. I order the cross claimant to bring in short minutes of order reflecting my decision.
I list the matter for directions before me on Thursday 21 March 2013 at 10am.
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Decision last updated: 19 March 2013
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