ROSS BLAKELEY, MICHAEL RYAN & QUENTIN OLDE AS JOINT AND SEVERAL LIQUIDATORS OF AKRON ROADS PTY LTD (IN LIQUIDATION) & ORS RESPONDENTS
CGU Insurance Limited v Blakeley
[2016] HCA 2
11 February 2016
M221/2015
ORDER
Appeal dismissed with costs.
On appeal from the Supreme Court of Victoria
Representation
D J O'Callaghan QC with R L Enbom for the appellant (instructed by Norton Rose Fulbright Australia)
P D Crutchfield QC with O Bigos for the first and second respondents (instructed by King & Wood Mallesons)
No appearance for the third to sixth respondents
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
CGU Insurance Limited v Blakeley
Procedure – Joinder of third parties – Where liquidators of company brought action in Supreme Court of Victoria against company directors for order under s 588M(2) of Corporations Act 2001 (Cth) – Where liquidators sought to join third party insurer after directors' claim for professional indemnity rejected – Where directors not in position to challenge denial of liability under contract of insurance – Whether Supreme Court had jurisdiction to join third party insurer and grant declaratory relief in relation to private insurance contract between directors and third party insurer.
Jurisdiction – Federal jurisdiction – Meaning of matter – Meaning of justiciable controversy.
Words and phrases – "declaratory relief", "federal jurisdiction", "joinder", "justiciable controversy", "matter", "privity", "real interest".
The question on this appeal is whether federal jurisdiction invested in the Supreme Court of Victoria authorises that Court to entertain a claim for a declaration, by a plaintiff against a defendant's insurer, that the insurer is liable to indemnify the defendant.
On 9 April 2013, the liquidators of Akron Roads Pty Ltd (In Liq) ("Akron") commenced proceedings in the Supreme Court against three former directors of the company including Mr Trevor Crewe. Also named as a defendant was Crewe Sharp Pty Ltd (In Liq) ("Crewe Sharp"), a company of which Mr Crewe was a director and which provided consultancy services to Akron. The liquidators allege that Crewe Sharp was a director of Akron within the extended meaning of "director" in s 9 of the Corporations Act2001 (Cth) ("the Act")[1].
[1]Paragraph (b) of the definition provides that "director" includes a person who is not validly appointed as a director if they act in the position of a director or if the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes.
The liquidators sought an order under s 588M(2) of the Act that the directors and Crewe Sharp…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
CGU Insurance Ltd v Blakeley [2016] HCA 2
Case
[2016] HCA 2
Decision Date
CaseChat Overview and Summary
The High Court of Australia considered an appeal by CGU Insurance Ltd ("CGU") against a decision of the Court of Appeal of Victoria. The liquidators of Akron Roads Pty Ltd (in liq) had commenced proceedings in the Supreme Court of Victoria against the directors of Akron Roads for breaches of section 588G(2) of the Corporations Act 2001 (Cth). Following the directors' insurer, CGU, denying a claim for indemnity, the liquidators sought to join CGU as a third party and obtain a declaration that CGU was liable to indemnify the directors for any amounts they were ordered to pay.
The central legal issues before the High Court were whether the Supreme Court of Victoria had jurisdiction to join CGU as a third party and grant declaratory relief concerning a private insurance contract between the directors and CGU, and whether the claim involved a "matter" for the purposes of federal jurisdiction, requiring a justiciable controversy. CGU argued that the declaratory relief sought would not finally resolve the dispute between the directors and CGU, and therefore lacked practical utility, suggesting the court should decline to grant it.
The High Court reasoned that the existence of a "matter" for federal jurisdiction does not require a dispute that is purely theoretical, but rather one that is productive of a real and pressing dispute, of practical importance, or in which the claimant has a real commercial interest. The Court noted that a real interest can exist even if the impact on the claimant is only a possibility. The Court found that the liquidators had an undeniable interest in obtaining a declaration of CGU's liability concurrently with the directors' liability, as this would ensure a practical means of recovering any judgment obtained against the directors. The Court also considered that a declaration, if granted, would be binding and therefore capable of resolving the issue.
The appeal was dismissed with costs.
Orders
Orders of the court
Appeal dismissed with costs.
Background
Background to the litigation
The first respondents ("the liquidators") are the liquidators of the second respondent, Akron Roads Pty Ltd (in liq) ("Akron Roads"). In 2013, the liquidators and Akron Roads instituted a proceeding in the Supreme Court of Victoria against, inter alia, the third and sixth respondents ("the directors") as directors of Akron Roads for damages for breach of s 588G(2) of the Corporations Act 2001 (Cth) ("the proceeding"). During the early interlocutory stages of the proceeding, the primary judge (Judd J) granted the liquidators leave to join the directors' professional indemnity insurer ("CGU") as an additional defendant to the proceeding and to amend the liquidators' points of claim to include a claim for a declaration that CGU is liable to pay the directors the amount which the directors are ordered to pay to the liquidators. CGU applied for leave to appeal to the Court of Appeal (Ashley, Beach and McLeish JJA) on the ground that Judd J did not have jurisdiction to make the declaration that was sought. Leave was granted but the appeal was dismissed. By grant of special leave, CGU now appeals to this Court. For the reasons which follow, this appeal should be dismissed.The facts The liquidators were appointed as liquidators of Akron Roads in March 2010. A little over three years later, they instituted the proceeding in the Commercial and Equity Division of the Supreme Court of Victoria against the third, fourth and fifth respondents, who were formerly directors of Akron Roads, and the sixth respondent, Crewe Sharp Pty Ltd ("Crewe Sharp"), a company controlled by the third respondent ("Mr Crewe"). The liquidators alleged that either Crewe Sharp acted in the position of a director, or, alternatively, Akron Roads' directors were accustomed to acting in accordance with Crewe Sharp's wishes, and therefore that Crewe Sharp was a "director" as defined in s 9 of the Corporations Act. The liquidators alleged that, as directors of Akron Roads, the third to sixth respondents breached s 588G(2) of the Corporations Act by failing to prevent Akron Roads from incurring debts while insolvent. Pursuant to s 588M(2) of the Corporations Act, the liquidators applied for an order that the third to sixth respondents pay, as a debt due to Akron Roads, an amount equal to the loss or damage suffered by Akron Roads' creditors as a result of Akron Roads' insolvent trading. In December 2013, Crewe Sharp claimed indemnity from CGU for any amount for which Crewe Sharp might be held liable to the liquidators. Mr Crewe was also an insured under the policy. CGU denied the claim on the basis, it was said, that the policy did not provide cover in respect of the claims made against Crewe Sharp. CGU has since also alleged non-disclosure as a basis for denying liability. Crewe Sharp was put into liquidation in June 2014 and the liquidators of Crewe Sharp immediately told the liquidators that it was unlikely that Crewe Sharp would be defending the proceeding. Since then, Crewe Sharp has not participated in the proceeding.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
FRENCH CJ, KIEFEL, BELL AND KEANE JJ
NETTLE J
The reasoning of the primary judge and the Court of Appeal focused on the availability of the declaratory relief sought. The written submissions filed by counsel followed a similar path. The reasoning appears to have proceeded on the basis that non-federal rather than federal jurisdiction was engaged. Nevertheless, much of what was said may be treated as a surrogate for argument on the question whether the Akron liquidators' claim against CGU involved a controversy cognisable in the exercise of federal jurisdiction. There was reference in the Supreme Court and in argument before this Court to differences of view expressed in intermediate courts of appeal concerning the availability of the relief.The decisions of intermediate courts of appeal Intermediate courts of appeal have not always drawn a clear distinction between jurisdiction and power in this class of case. That is not least because argument before those courts has focused on matters such as utility going to discretion to grant the declaratory relief, which overlaps with issues of standing and justiciability relevant to the availability of the remedy. In JN Taylor Holdings Ltd (In liq) v Bond[33], King CJ, with whom Prior and Perry JJ agreed[34], considered whether the Supreme Court of South Australia had "jurisdiction" to grant a declaration sought by the liquidators of the appellant companies against the directors' insurer. The Chief Justice said that the Court's power to grant declaratory relief was limited only by its own discretion and the boundaries of judicial power[35]. In so saying, he acknowledged a distinction between the jurisdiction to entertain the action at all and a settled practice of the Court to exercise its discretion by withholding the relief in certain factual situations[36]. The reference to "jurisdiction" may be understood as a reference to the limits of the Court's jurisdiction. It was not suggested that a "settled practice" going to discretion defined the limits of jurisdiction or of the Court's power. Nevertheless, the discretionary considerations to which the Chief Justice referred would be relevant to the existence of a "matter" in federal jurisdiction[37].[33](1993) 59 SASR 432.[34](1993) 59 SASR 432 at 443.[35](1993) 59 SASR 432 at 436.[36](1993) 59 SASR 432 at 436, citing Rediffusion (Hong Kong) Ltd v Attorney-General of Hong Kong [1970] AC 1136 at 1155.[37](1993) 59 SASR 432 at 436. King CJ required that the plaintiff have a real interest in the determination of the question raised by the declaration — a purely theoretical question would weigh against the grant of relief[38]. On the other hand, a plaintiff could have a real interest in the question even though its impact on the plaintiff might be no more than a possibility[39]. The liquidators' interest in obtaining a declaration of the insurer's liability concurrently with that of the directors was "undeniable"[40]. In that case the Full Court was concerned with proceedings under the Companies Code of South Australia. It was not thereby concerned with the exercise of federal jurisdiction.[38](1993) 59 SASR 432 at 436–437.[39](1993) 59 SASR 432 at 437, citing Hordern-Richmond Ltd v Duncan [1947] KB 545.[40](1993) 59 SASR 432 at 438.
Ratio Decidendi
Legal Principle Established
Established by:
FRENCH CJ, KIEFEL, BELL AND KEANE JJ,
NETTLE J
Fourth, the issue in this case is not theoretical but, even if it were, the court does not lack jurisdiction to make a declaration concerning a theoretical issue, in the sense of an issue that does not presently exist but which is likely to arise in future, where the issue is productive of a real and pressing dispute, is of real practical importance or is one in which the claimant has a real commercial interest. Thus, for example, it is now well established that, where a claimant intends to take action which would subject him or her to a "theoretical" possibility of being subjected to legal process, the risk of being so subjected to that process is sufficient to ground standing to claim a declaration that the basis of the process (in that case, the offence) is invalid[106] and, co-ordinately, that in such cases there is a matter upon which the court has jurisdiction to adjudicate[107]. Similarly, where a claimant has a real commercial interest in establishing the claimant's legal status or entitlement in relation to proposed commercial conduct and there is a real controversy with some contradictor as to the existence or extent of the claimant's legal status or entitlement, the claimant may have standing to obtain, and the court co-ordinately will have jurisdiction to grant, a declaration as to the existence or extent of the status or entitlement[108]. [106]Croome v Tasmania (1997) 191 CLR 119; [1997] HCA 5; Kuczborski (2014) 254 CLR 51 at 61 [6] per French CJ, 86-88 [96]-[100] per Hayne J, 106-108 [175]-[181] per Crennan, Kiefel, Gageler and Keane JJ, 132-133 [281]-[283] per Bell J.[107]The Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297 at 305 per Barwick CJ; [1972] HCA 19; Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 355-357 [47]-[48]; [1999] HCA 9; Edwards (2011) 242 CLR 421 at 435 [37] per Heydon J; Kuczborski (2014) 254 CLR 51 at 59 [3] per French CJ. See also French, "Declarations: Homer Simpson's Remedy – Is There Anything They Cannot Do?", in Dharmananda and Papamatheos (eds), Perspectives on Declaratory Relief, (2009) 25 at 38.[108]Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406 at 415 per Lockhart J; Edwards (2011) 242 CLR 421 at 436 [38] per Heydon J.The declaration would be binding A further aspect of CGU's argument before this Court was to the effect that French J's and the Full Court's judgments in Ashmere Cove proceeded upon a misconception that, if a declaration of the kind sought were granted, the insurer would be estopped by operation of issue estoppel or the principle in Port of Melbourne Authority v Anshun Pty Ltd[109] in any subsequent proceeding between the insured and the insurer from disputing the insurer's liability to indemnify the insured. In CGU's submission, the insurer would not be so estopped and therefore the declaration would not finally resolve the issue. It followed, CGU contended, that there is no jurisdiction to grant the declaration sought and further or alternatively that Judd J should have declined to join CGU in the exercise of his discretion because the declaration sought would be devoid of practical utility. [109](1981) 147 CLR 589; [1981] HCA 45.