CGU Insurance Ltd v Watson
[2007] NSWCA 301
•31 October 2007
NEW SOUTH WALES COURT OF APPEAL
CITATION: CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301
FILE NUMBER(S):
40339/07
HEARING DATE(S): 18 September 2007
JUDGMENT DATE: 31 October 2007
PARTIES:
CGU Insurance Ltd - Appellant
David Patrick Watson (as trustee of the deed of arrangement in respect of John Huyshe Greaves) - Respondent
JUDGMENT OF: Spigelman CJ Giles JA Basten JA
LOWER COURT JURISDICTION: Supreme Court
LOWER COURT FILE NUMBER(S): ED 50198/06
LOWER COURT JUDICIAL OFFICER: Hammerschlag J
LOWER COURT DATE OF DECISION: 4 May 2007
LOWER COURT MEDIUM NEUTRAL CITATION:
Watson v CGU Insurance [2007] NSWSC 450
COUNSEL:
A W Street SC & K Rees - Appellant
C Adamson SC & R Scruby - Respondent
SOLICITORS:
Colin Biggers & Paisley - Appellant
Kemp Strang - Respondent
CATCHWORDS:
Practice and procedure - stay of proceedings if costs of prior proceedings unpaid - whether proceedings on the same or substantially similar cause of action - meaning of cause of action - whether claim to declaration a cause of action - nature of claims under contract of insurance - essential facts on which claimant relied in the two proceedings were different - not the same or substantially similar cause of action - no stay.
LEGISLATION CITED:
Bankruptcy Act 1966 (C'th), Pt X
CASES CITED:
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564;
Bowen v Hickey (1958) 78 WN 820;
Bowes v Chaleyer (1923) 32 CLR 159;
British American Tobacco Australia Ltd v Eagle Star Reinsurance Co Ltd [2006] NSWCA 156;
Burghes v Attorney-General (1911) 2 Ch 139;
Carter v Egg and Egg Pulp Marketing Board (Vic) (1942) 66 CLR 557;
Conquer v Boot (1928) 2 KB 336;
Dunbee Ltd v Gilman & Co (Australia) Pty Ltd (1969) 89 WN (Pt 1) 259;
Dyson v Attorney-General (1912) 1 Ch 158;
Firma C-Trade SA v Newcastle Protection and Indemnity Association (1991) 2 AC 1;
Gouriet v Union of Post Office Workers (1978) AC 435;
Guaranty Trust Co of New York v Hannay & Co (1915) 2 KB 356;
Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404;
Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWCA 202;
Johnston v The Salvage Association (1887) 29 QBD 458;
Kone Elevators Pty Ltd v Popa [2006] VSCA 26;
Letang v Cooper (1965) 1 QB 232;
Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543;
Martin v Earl Beauchamp (1883) 25 Ch D 12;
McCabe v Bank of Ireland (1889) 14 App Cas 413;
Onerati v Phillips Constructions Pty Ltd (in liquidation) (1989) 16 NSWLR 730;
Peter Turnbull & Co Pty Ltd v Mundus Trading (A'Asia) Pty Ltd (1954) 90 CLR 235;
Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564;
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 598;
Reichel v McGrath (1889) 14 App Cas 665;
Republic of India v India Steamship Co (1993) AC 410;
Rice v Henley (1915) 32 WN 54;
Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198;
Sankey v Whitlam (1978) 142 CLR 1;
Sinclair v British Telecommunications plc (2001) 1 WLR 38;
State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Rep 81-423;
Stingel v Clark (2006) 80 ALJR 1339;
West Wake Price & Co v Ching (1956) 3 All ER 821;
Williams v Milotin (1957) 97 CLR 465.
DECISION:
(1) Grant leave to appeal; (2) Direct the appellant's notice of appeal and the respondent's notice of contention be filed within 7 days; (3) Dismiss the appeal with costs.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40339/07
ED 50198/06SPIGELMAN CJ
GILES JA
BASTEN JAWednesday 31 October 2007
CGU INSURANCE LTD v WATSON
Judgment
SPIGELMAN CJ: I agree with Giles JA.
GILES JA: The respondent is the trustee of a Deed of Arrangement entered into by Mr John Greaves under Pt X of the Bankruptcy Act 1966 (C’th). There were assigned to the respondent Mr Greaves’ rights under a D & O policy of insurance (“the policy”) issued by the appellant. He brought proceedings against the appellant claiming payment under the policy of $20 million ordered to be paid by Mr Greaves to One.Tel Ltd as compensation for contravention by Mr Greaves of his duties as director.
The appellant applied for a stay of the respondent’s proceedings until the costs of proceedings which Mr Greaves had earlier brought against it, but had discontinued with an order for costs in the appellant’s favour, were paid. The application was made pursuant to r 12.4 of the UCP Rules, which provides -
“12.4 If:
(a)as a consequence of the discontinuance of proceedings, a plaintiff is liable to pay the costs of another party in relation to those proceedings, and
(b)before payment of the costs, the plaintiff commences further proceedings against that other party on the same or substantially the same cause of action as that on which the former proceedings were commenced,
the court may stay the further proceedings until those costs are paid and may make such consequential orders as it thinks fit.”
Hammerschlag J held that the respondent’s proceedings were within the rule notwithstanding that the respondent, rather than Mr Greaves, was the plaintiff: he considered that “the substance of the matter” was that Mr Greaves’ claim was being prosecuted by the respondent. His Honour held, however, that the respondent’s proceedings were not on the same or substantially the same cause of action as that on which Mr Greaves had brought his proceedings. He therefore dismissed the application for a stay.
His Honour’s decision was interlocutory, and leave to appeal is required: Supreme Court Act 1970, s 101(2)(e). The appellant applied for leave to appeal from the decision so far as it was held that the causes of action were not the same or substantially the same. The respondent sought by a notice of contention, if leave to appeal were granted, to reverse the decision that there was identity of plaintiffs. There were full submissions as if on appeal.
Under the Deed of Arrangement the appellant is not entitled to enforce the costs order and will not receive a dividend in respect of the costs. If it is obliged to pay the $20 million it may be that it can set the costs off against that sum, but if it successfully defends the respondent’s proceedings it will not recover the costs. The costs are significant: the judge noted that it was common ground that a bill of costs for over $750,000 had been served on Mr Greaves. The lever of a stay is important to the appellant. Leave to appeal should be granted, and hence I have referred to the parties as appellant and respondent.
For the reasons which follow, in my opinion the judge was correct in his decision that the causes of action were not the same or substantially the same. It is not necessary to consider the challenge to the decision that there was identity of plaintiffs. The appeal should be dismissed.
The policy
The relevant insuring clause in Section 1 of the policy was:
“The Insurer will pay on behalf of the Directors and Officers any Loss for which the Directors and Officers may not be legally indemnified by the Corporation arising out of any Claim, by reason of any Wrongful Act committed by them in their capacity as a Director or Officer, first made against them jointly or severally during the Period of Insurance and notified to the Insurer during the Indemnity Period.”
The definition of Loss relevantly included -
“the amount payable in respect of a Claim made against the Directors and Officers for a Wrongful Act and shall include damages, judgments, settlements, interest, costs and Defence Costs. … ”
It is not necessary to set out the definitions of Claim and Wrongful Act; for present purposes it can be taken that the proceedings in which Mr Greaves was ordered to pay the $20 million were a Claim for Wrongful Acts.
The definition of Defence Costs was -
“all reasonable costs, charges and expenses (other than regular or overtime wages, salaries or fees of any Director or Officer) incurred with the prior written consent of the Insurer in defending, investigating, attending or monitoring any Claim or proceedings, including but not limited to official investigations, examinations, inquiries and the like, or appeals therefrom, together with all reasonable costs of bringing any appeal.”
Section 2 of the policy stated a number of Extensions, which provided further cover subject to the terms and conditions of the policy. Some Extensions were automatic, that is, applicable unless specified otherwise. Other Extensions were optional. The automatic Extensions included, in cll 2.1 and 2.6 -
“2.1 Advancement of Defence Costs
Where the Insurer elects not to take over and conduct the defence or settlement of any Claim in the name of any Director of Officer, the Insurer shall meet the Defence Costs of any Director or Officer in defending or settling any Claim made against them as they are incurred and prior to the finalisation of the Claim provided always that indemnity in respect of such Claim has been confirmed in writing by the Insurer.
Where the Insurer has not confirmed indemnity and it elects not to take over and conduct the defence or settlement of any Claim, it may, in its discretion, pay Defence Costs as they are incurred and prior to the finalisation of the Claim, provided that it has consented in writing to such Defence Costs prior to their being incurred, such consent not to be unreasonably withheld.
The Insurer reserves the right to recover any Defence Costs from the Directors or Officers and/or the Corporation severally according to their respective interests in the event and to the extent that it is subsequently established by judgment or other final adjudication that the Directors and Officers and/or the Corporation were not entitled to the Defence Costs so advanced.”
“2.6 Attendance at Official Investigations or Inquiries
The Insurer will pay Defence Costs incurred with its prior written consent by or on behalf of a Director of Officer in attending any official investigation, examination or inquiry or other proceedings ordered or commissioned by any official body or institution, where a Director or Officer is legally compelled by such body or institution to attend such investigation, examination, inquiry or proceeding and which involves an allegation of a Wrongful Act against a Director or Officer which is the subject of indemnity under this Policy.”
Section 3 of the policy contained Exclusions, to which it is not necessary to refer, and section 4 contained General Conditions, which included that the appellant’s aggregate liability was limited to the amount stated in the schedule. The amount stated in the schedule was $20 million.
An outline history
For periods prior to 31 March 2001 Mr Greaves was a non-executive director and chairman of One.Tel Ltd. One.Tel Ltd went into liquidation on 24 July 2001.
By inference from the claims in Mr Greaves’ proceedings, after the liquidation Mr Greaves was required to attend an investigation conducted by the Australian Securities and Investment Commission (“ASIC”) in relation to One.Tel Ltd, and was examined in an investigation conducted by the liquidators of One.Tel Ltd.
In December 2001 ASIC brought proceedings against Mr Greaves, together with others, alleging breach of duties as director and claiming declarations as to contravention of s 180 of the Corporations Law, an order prohibiting him from managing a corporation, and an order that he pay compensation to One.Tel Ltd.
Mr Greaves commenced proceedings against the appellant on 5 July 2002. His summons was in the form appropriate to a summons in the Commercial List, commencing with the relief claimed and containing thereafter Mr Greaves’ statements of the nature of the dispute and the issues likely to arise, and then a summary of his contentions. Sufficiently for the present, Mr Greaves claimed relief in relation to payment of Defence Costs. In order properly to appreciate the appellant’s submissions, it will be necessary to go in some detail to his further amended summons filed on 30 September 2002.
For reasons which did not appear, Mr Greaves’ proceedings were not brought to an early hearing. Their course prior to their discontinuance was not revealed in the evidence, save that the appellant filed points of defence contesting the interpretation of the policy and whether the claimed Defence Costs fell within it, relying on an exclusion clause, and asserting avoidance of the policy or reduction of the appellant’s liability to nil.
On 6 September 2004 consent declarations and orders were made against Mr Greaves in ASIC’s proceedings, including the order that he pay $20 million to One.Tel Ltd.
On 24 September 2004 leave was granted to Mr Greaves to discontinue his proceedings. He was ordered to pay the appellant’s costs.
On 30 November 2004 Mr Greaves entered into the Deed of Arrangement. The Deed of Arrangement was thereafter varied, for a reason and in a manner which it is not necessary to describe. The property assigned to the respondent included Mr Greaves’ “rights under or in relation to [the policy] including any rights to damages in respect thereof”.
On 18 October 2006 the respondent commenced proceedings against the appellant in the Federal Court, claiming payment under the policy of the $20 million. The proceedings were transferred to the Supreme Court of New South Wales. On 8 January 2007 the respondent filed his summons in the Supreme Court, again in the Commercial List. It will be necessary also to go to it in a little detail.
On 23 February 2007 the appellant filed a notice of motion applying for a stay of the respondent’s proceedings. The application was heard on 4 May 2007, and the judge gave judgment on that date: Watson v CGU Insurance [2007] NSWSC 450.
Mr Greaves’ further amended summons
The substantive relief claimed was -
“(a)A declaration, that upon the proper construction of Directors and Officers Liability Insurance Policy No 01 DO 0298798 (‘the Policy’) and in the events that have happened, the defendant is obliged to indemnify the plaintiff in respect of all sums reasonably paid and payable by him that are characterised as Defence Costs (as defined in the Policy) in respect of proceedings 5934 of 2001 in the Supreme Court of New South Wales, Equity Division (‘the ASIC proceedings’).
(b)An order that the defendant indemnify the plaintiff in respect of all sums that have been reasonably paid by him, that are characterised as Defence Costs (as defined in the Policy) in respect of the ASIC Proceedings.
(c)A declaration, that upon the proper construction of the Policy and in the events which have happened, the defendant is obliged to pay to the plaintiff all sums that have been reasonably paid by him, that are characterised as Defence Costs (as defined in the Policy) incurred on his behalf in attending an investigation commenced by the Australian Securities and Investment Commission (‘ASIC’) on or about 1 June 2001 pursuant to its powers under Part 3 of Division 1 of the Australian Securities and Investments Commission Act 1989 (‘the ASIC Investigation’).
(d)An order that the defendant indemnify the plaintiff in respect of all sums that have been reasonably paid by him, that are characterised as Defence Costs (as defined in the Policy) incurred on his behalf in attending the ASIC Investigation.
…
(g)An order that the defendant indemnify the plaintiff in relation to his reasonable costs incurred in relation to the ASIC Investigation.
(h)A declaration, that upon the proper construction of the Policy and in the events which have happened, the defendant is obliged to pay to the plaintiff all sums that have been reasonably paid by him, that are characterised as Defence Costs (as defined in the Policy) incurred on his behalf in respect of and incidental to, an examination of the plaintiff conducted by the Liquidators of One.Tel Ltd under the Corporations Act being Federal Court proceedings N3016 of 2001 (‘the Liquidators’ Examination’).
(i)An order that the defendant indemnify the plaintiff in respect of all sums that have been reasonably paid by him, that are characterised as Defence Costs (as defined in the Policy) incurred on his behalf in attending the Liquidators’ Examination.”
The description of the nature of the dispute referred to Mr Greaves’ position as director of One.Tel Ltd and the company’s fate, and to the policy, and stated -
“3.The plaintiff claims indemnity for sums that have been reasonably paid by him, that are characterised as Defence Costs (as that expression is defined in the Policy) paid or payable by him in respect of the ASIC Proceedings, the ASIC Investigation and the Liquidators’ Examination.
4.The defendant has failed and refuses to indemnify the plaintiff in relation to sums that have been reasonably paid by him, that are characterised as Defence Costs identified above.”
The statement of the issues likely to arise relevantly began -
“1.Whether the Defence Costs in respect of which indemnity is sought fall within the indemnity afforded under the Policy.”
The summary of contentions first referred to the policy, and then said -
“4A.It was a term of the Policy that where the defendant had not confirmed indemnity and elected to not take over the defence of any Claim it would pay Defence Costs as they were incurred and prior to the finalisation of the Claim (‘Defence Costs Clause’).
Particulars
The Defence Costs Clause was express and in writing and formed clause 2.1 of the Policy.
5.It was a further term of the policy that the defendant would pay on behalf of, inter alia, the plaintiff, any Loss for which he may not be legally indemnified by One.Tel Ltd arising out of any Claim, by reason of any Wrongful Act committed by him in his capacity as director (‘Insuring Clause’).
Particulars
The Insuring Clause was express and in writing and was described as Directors and Officers Liability Insuring Agreement A.
6.It was a further term of the Policy that the defendant would pay Defence Costs incurred by or on behalf of the plaintiff in attending any official investigation examination, inquiry or other proceedings ordered or commissioned by any official body or institution where:
(a)the plaintiff was legally compelled by such body or institution to attend; and
(b)the investigation, examination, inquiry or other proceeding involved an allegation of a Wrongful Act against him (‘Inquiry Clause’).
Particulars
The Inquiry Clause was express and in writing and formed clause 2.6 of the Policy.”
After reference to relevant definitions, there were alleged in paras 8 and 9 of the summary of contentions terms as to good faith and reasonableness in relation to consent to the incurring of Defence Costs.
The summary of contentions then referred to the ASIC proceedings, and to the allegations against Mr Greaves and the relief claimed against him. It continued -
“19.The initiating process in the ASIC Proceedings is a Claim within the terms of clause 5.1 of the Policy.
20.In the ASIC Proceedings, ASIC has alleged that the plaintiff has committed one or more ‘Wrongful Acts’ within the terms of the Policy.
21.In the circumstances, the plaintiff is entitled to be indemnified by the defendant in respect of any loss he suffers as a result of the ASIC Proceedings.
22.Further, the plaintiff has retained solicitors and Counsel in respect of his defence of the ASIC Proceedings and has incurred solicitor’s costs and disbursements pursuant to those retainers.
Particulars
Particulars will be provided in due course.
23.The costs and disbursements referred to in paragraph 22 above are costs and disbursements that fall within the definition of ‘Defence Costs’ under the Policy.
24.The plaintiff has sought to be indemnified by the defendant in respect of some of those costs and disbursements.
Particulars
(i)Letter dated 16 January 2002 from Watson Mangioni to Colin Biggers & Paisley.
(ii)Letter dated 4 April 2002 from Watson Mangioni to Colin Biggers & Paisley.
(iii)Letter dated 14 May 2002 from Watson Mangioni to Colin Biggers and Paisley.
25. In breach of:
(a) The Defence Costs Clause;
(b) alternatively, the Insuring Clause; and
(c)the terms identified at paragraphs 8 and 9 above,
the defendant has:
(d)refused to indemnify the plaintiff in respect of the costs and disbursements identified in paragraph 22 above;
(e)advised the plaintiff that it does not intend to indemnify the plaintiff in respect of any losses, including costs and disbursements incurred by him, in respect of the ASIC Proceedings.
Particulars
Letter dated 21 May 2002 from the defendant to Watson Mangioni.”
The letter dated 21 May 2002 was not in evidence before the judge, but was by consent put before this Court. The letter was not in like terms to para 25(e) of the summary of contention. Rather, it conveyed to Mr Greaves’ solicitors that the appellant avoided a number of contracts of insurance, including the policy, for fraudulent misrepresentation and/or fraudulent non-disclosure pursuant to s 28(2) of the Insurance Contracts Act 1984 (C’th), alternatively the appellant’s view that by reason of non-disclosure and/or misrepresentation the appellant was entitled to reduce its liability to nil pursuant to s 28(3) of the Insurance Contracts Act. The letter explained the basis for the appellant’s avoidance and view, and the appellant reserved to itself reliance upon further matters either entitling it to decline indemnity for non-disclosure and/or misrepresentation or “as grounds giving rise to the operation of Clause 3 of the contract of insurance if avoidance is not upheld”. Clause 3 was the clause setting out the Exclusions.
The summary of contentions then referred to the investigation conducted by ASIC in relation to One.Tel Ltd and in para 31 to the incurring of Defence Costs in that connection by Mr Greaves, and said -
“32. In breach of:
(a) the Inquiry Clause; and
(b) the terms identified at paragraphs 8 and 9 above,
the defendant has:
(c)refused to indemnify the plaintiff in respect of the Defence Costs identified in paragraph 31 above;
(d)advised the plaintiff that it does not intend to indemnify the plaintiff in respect of those Defence Costs.
Particulars
Letter dated 21 May 2002 from the Defendant to Watson Mangioni.”
The summary of contentions finally referred to the examination conducted by the liquidators of One.Tel Ltd, and in para 42 to the incurring of Defence Costs by Mr Greaves in relation thereto. In para 43 it alleged breach in similar terms to the allegation in para 32 last set out.
In general terms, by the further amended summons Mr Greaves sought to recover Defence Costs incurred in defending the ASIC proceedings in reliance on the insuring clause and cl 2.1 in its provision for advancement of Defence Costs, and to recover Defence Costs incurred in relation to ASIC’s investigation and the liquidators’ investigation in reliance on the insuring clause and cl 2.6. The further amended summons was not particularly clear on recovery of, or at least establishing an entitlement to recover, Defence Costs yet to be incurred as distinct from Defence Costs already incurred. Perhaps because the investigations were at an end and so no further Defence Costs would be incurred in relation to them, paras 32 and 34 alleged refusal to pay Defence Costs already incurred, and the relief in claims (c), (d), (h) and (i) referred to sums paid; the relief in claim (g) was more general, but was probably intended to catch sums incurred but not yet paid. The paragraphs culminating in para 25 referred to Defence Costs already incurred, but appear to go beyond them, and the relief in claims (a) and (b) was probably meant to extend to an entitlement to recover Defence Costs yet to be incurred.
The respondent’s summons
The substantive relief claimed was -
“1.An order that CGU Insurance Ltd ACN 004 478 371 pay the Trustee the sum of $20 million, together with interest pursuant to section 51A of the Federal Court of Australia Act 1976 (C’th).”
In the statement of the nature of the dispute the order for payment of the $20 million was described as the Compensation Order. I will use that label hereafter. The dispute was said to be whether the appellant was liable under the policy to indemnify Mr Greaves for the amount of the Compensation Order.
In his contentions the respondent alleged that the appellant “agreed to indemnify Greaves in respect of certain losses”, particularising the insuring clause in the policy. He alleged Mr Greaves’ directorship of One.Tel Ltd, the commencement of ASIC’s proceedings and notice to the appellant thereof. In para 7 he said that “Greaves sought to be indemnified under the Policy”. The contentions then alleged the making of the declarations and orders in ASIC’s proceedings, including the Compensation Order, and continued -
“9.Greaves is entitled to be indemnified by CGU in respect of his liability to comply with the Compensation Order by reason of the terms of the Policy.
10. In breach of the Policy, CGU has:
(a)refused to indemnify Greaves in respect of the Compensation Order; and
(b) purported to avoid the Policy.
11.By reason of CGU’s breach of the Policy, Greaves has suffered loss and damage.
12.Greaves, pursuant to the Deed, assigned his rights under the Policy to the Trustee (‘the Assignment’).”
Neither Mr Greaves’ request for indemnity (para 7) nor the appellant’s refusal and avoidance (para 10) was particularised. The avoidance may reasonably be taken to have been by the letter of 21 May 2002. Whether there was a request for indemnity other than the requests for indemnity in respect of costs and disbursements particularised in para 24 of Mr Greaves’ further amended summons, either generally or specifically in relation to the Compensation Order, was not revealed in the application for a stay. Perhaps Mr Greaves did not make a specific request in relation to the Compensation Order because refusal was inevitable given the letter of 21 May 2002. It is clear, however, that he did not accept the validity of the avoidance and reduction of liability to nil, and I do not think it can be assumed that a specific request was not made.
The judge’s reasons
The judge said in his description of Mr Greaves’ proceedings -
“3 All of the orders sought in the prior proceedings were directed to enforcing his rights under the policy to claim under an automatic extension of it “defence costs” [sic], being costs incurred in the defence or settlement of any claim made against him in his capacity as a director or officer. Proceedings had been instituted against Mr Greaves by the Australian Securities and Investments Commission (“ASIC”) on or about 12 December 2001. ASIC alleged against him breaches of duties in his capacity as chairman of a company known as One.Tel Limited (“One.Tel”).
4 Each of the prayers for substantive relief in the prior proceedings was directed towards the enforcement of the indemnity for sums incurred by him as defence costs.”
The dispositive paragraphs of his Honour’s reasons were -
“26 In the further amended summons in the prior proceedings the only relief sought was directed towards the payment of defence costs. That was at a time before the ASIC proceedings had come to an end by the making of the compensation order which is the subject of the second proceedings. The claim presently being made is made under section 1 of the policy under which the insurer will pay on behalf of the directors and officers any loss for which the directors and officers may not be legally indemnified by the court, arising out of any claim by reason of any wrongful act committed by them in their capacity as a director or officer, whereas the claim under the earlier proceedings was brought under the section of the policy entitled, ‘Extensions’ and, in particular, the one in paragraph 2.1 of the policy entitled, ‘Advancements of defence costs’.
27 The claims being made by the trustee relate to a different response under the policy to a different risk. An essential element of the present cause of action is the making of the compensation order. That had not occurred at the time that the prior proceedings came to an end. It played no role in them. Further, the alleged breach by the insured is different. The cause of action in the prior proceedings had as its elements the incurring of defence costs and the failure of the defendant in breach of the policy to respond to the coming home of that risk. The breach was the failure to pay particular amounts incurred as a consequence of the coming home of that particular risk. The breach asserted here is a breach of an obligation that CGU is obliged to respond to a different risk depending on a different factual foundation.
28 I was taken to the judgment of Clarke JA in Macquarie Bank Ltd v National Mutual Life Association of Australia Limited (1996) 40 NSWLR 543, at 561, where the distinction was drawn between the case where there are a number of claims arising out of the same breach of a contractual obligation and the case where there are a number of failures each of which is a separate breach of contract. The final sentences of the passage on page 561 are, in my view, apposite to the present case. There his Honour said:
‘Conversely, separate breaches of the same term may be litigated in a second proceeding, although I would agree with O'Brien J when he said in Van Amstel a party cannot bring separate actions to recover different losses for the breach of the same clause in a contract arising from the same act or omission’.
29 In my view, the present case is an example of the former rather than the latter category. It follows, therefore, I consider, that CGU has not established that Pt 12 r 12.4(b) has been satisfied.”
Cause of action in r 12.4
The Supreme Court has an inherent jurisdiction to prevent abuse of its procedures, and may stay or dismiss proceedings the bringing or continuance of which is an abuse of process. Even if principles of res judicata or Anshun estoppel do not apply, there may be abuse of process in relitigating an issue decided against a party in previous proceedings (Reichel v McGrath (1889) 14 App Cas 665; Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404; State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Rep 81-423; Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198). There may also be abuse of process if a plaintiff brings against the defendant second proceedings “in the same cause” without having paid the costs of the first proceedings; this will ordinarily found a stay of the second proceedings until the costs have been paid.
The necessity for the second proceedings to be in the same cause as the first, an expression which I have taken from Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWCA 202 at [104], has been variously stated. In Rice v Henley (1915) 32 WN 54 at 54 the expression used was “for the same cause”, but with reference to the plaintiff relying on “the same facts and the same evidence”. In Bowen v Hickey (1958) 78 WN at 820 at 822 the expression was “based on the same facts”, but citing amongst other cases Rice v Henley and its expression “for the same cause”. The other cases cited in Bowen v Hickey used the expressions “action for the same matter” (Martin v Earl Beauchamp (1883) 25 Ch D 12 at 15) and “suing … by virtue of the same title” and “asserting the same rights” (McCabe v Bank of Ireland (1889) 14 App Cas 413 at 415, 416). In Idoport Pty Ltd v National Australia Bank Ltd the sameness of cause was later expressed at [110] as “identity of issues” and at [112] as “an identity of the central issue”. The language reflected the citation in that case from Sinclair v British Telecommunications plc (2001) 1 WLR 38 at 50 of a passage referring to second proceedings “arising out of the same issues”.
The variety of expressions can be found in Dunbee Ltd v Gilman & Co (Australia) Pty Ltd (1969) 89 WN (Pt 1) 259, but at 261 Macfarlan J described the second proceedings as “a second action for substantially the same cause of action”. That may not have been the source of the words used in Pt 21 r 8 of the Supreme Court Rules, the predecessor to r 12.4, and repeated in r 12.4, since the then English rule was already in terms of causes of action. Be that as it may, the rule now ties a stay to the form of words “on the same or substantially the same cause of action”.
The exercise of the inherent jurisdiction is not tied to a particular form of words, and the various expressions I have noted were in aid of the concept of abuse of process; it was the true measure of whether the second proceedings were to be stayed. In an application pursuant to r 12.4, however, the words of the rule must govern. Avoidance of abuse of process may underlie and inform the meaning and application of the rule, but it is necessary in the first instance to identify the causes of action in the two proceedings; then it must be asked whether they are the same or substantially the same; and then there is a discretion (“the court may stay … ”) whether or not to stay the second proceedings until the costs of the first proceedings have been paid.
Use by r 12.4 of “cause of action” brings something of a mare’s nest. Instead of the relatively flexible concept of abuse of process, consideration of a stay requires identification of causes of action; even the room allowed by “substantially the same” requires the identification. What is meant by cause of action is notoriously difficult. Further, proceedings for declaratory relief (as Mr Greaves’ proceedings were in part) may not be proceedings on a cause of action as ordinarily understood. The rule can be difficult to apply, and it may not extend, or readily extend, to the full range of proceedings which can be brought.
In Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 598 Brennan J said at 610-611 -
“There is an imprecision in the meaning of the term cause of action, which is sometimes used to mean the facts which support a right to judgment (see per Williams J in Carter v Egg and Egg Pulp Marketing Board (Vic) (1942) 66 CLR 557 at 600–1); sometimes to mean a right which has been infringed (see Serrao v Noel (1885) 15 QBD 549), and sometimes to mean the substance of an action as distinct from its form (see Krishna Behari Roy v Brojeswari Chowdranee (1875) LR 2 Ind App 283). Imprecision in the meaning of cause of action tends to uncertainty in defining the ambit of the rule that a judgment bars subsequent proceedings between the same parties on the same cause of action.”
In Onerati v Phillips Constructions Pty Ltd (in liquidation) (1989) 16 NSWLR 730, in which a question was whether a proprietor’s second proceedings for breach of contract against the builder for defects discovered after judgment in the first proceedings was barred by res judicata, I said at 738-9 -
“Different forms of words have been used to describe what is meant by a cause of action. Brennan J referred to three descriptions; others are every fact which it would be necessary for a plaintiff to prove, if traversed, in order to support his right to a judgment (Read v Brown (1888) 22 QBD 128 at 131 per Lord Esher); the essential ingredients in the title to the right which it is proposed to enforce (Williams v Milotin (1957) 97 CLR 465 at 474 per Dixon CJ, McTiernan, Williams, Webb and Kitto JJ; Cartledge v E Jopling& Sons Ltd [1963] AC 758 at 783-784 per Lord Pearce); the act on the part of the defendant which gives the plaintiff his cause of complaint (Jackson v Spittall (1870) LR 5 CP 542 at 552 per Brett J for himself, Bovill CJ and Keating and Montague Smith JJ; Bass v The King [1948] NZLR 777 at 781 per Gresson J; Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 at 467 (PC); and rights which can be enforced, or liabilities which can be redressed, by legal proceedings: Sugden v Sugden [1957] P 120 at 133 per Denning LJ. I do not find minute examination of the verbal formulae particularly helpful. The form of words may vary according to the purpose for which the description is required, and in any event may not be illuminating. For example, take the first two descriptions given by Brennan J: are the facts which support a right to judgment to be identified at the level of particularity of failing to install adequate flashing (one cause of action) and leaving mortar bridging the cavity (another cause of action), or at the more abstract level of failure to carry out the work in a good and workmanlike manner? Is the right which has been infringed the right to have adequate flashing installed (one right) and the right to have a cavity not bridged by mortar (another right), or a right to have the work carried out in a proper and workmanlike manner? Is there a right to have a cavity not bridged by mortar as a separate right from a right not to have a cavity bridged by meshing?”
Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543, from which the judge cited in his [28] set out above, again considered the meaning of “cause of action”. Macquarie had advanced money on security which turned out to be inadequate. As part of more complex litigation, it sued Westgarths, its solicitors, alleging breach of contract or negligence in failing to ensure security over certain life policies. The claim against Westgarths was dismissed. Macquarie then brought second proceedings against Westgarths, alleging breach of contract or negligence in failing to warn that certain guarantees and mortgages taken as security may not have been validly executed. One question was whether Westgarths had a good defence of res judicata, for which it was necessary to determine the cause of action in the first proceedings which operated as an estoppel.
The reasons of Clarke JA, with whom Priestley JA relevantly agreed, were extensive. I take from them in part the following -
there can be added to the forms of words those of Diplock LJ in Letang v Cooper (1965) 1 QB 232 at 243, referred to by Lord Goff in Republic of India v India Steamship Co (1993) AC 410 at 419, to the effect that a cause of action consists of the minimum facts which a plaintiff is required in law to plead and (if traversed) prove in order to obtain the relief he claims; this is similar to the statement by Williams J in Carter v Egg and Egg Pulp Marketing Board (Vic) (1942) 66 CLR 557 to which Brennan J referred in Port of Melbourne Authority v Anshun Pty Ltd (at 558);
a technical approach should not be taken; the doctrine of res judicata is concerned with substance not form, and where parties plead facts without identifying the cause of action “it is far more helpful to focus on the facts which are said in each instance to support the right of relief” (at 558-9);
as to the approach of focussing on the facts -
“That was the approach of Lord Goff in Republic of India v India Steamship Co and it seems to me to accord with the weight of authority. In that case both claims arose out of the single incident and it was said that different breaches of contract had been committed. Lord Goff acknowledged that there might have been more than one breach of contract but found against the plaintiff because ‘the factual basis relied upon by the plaintiffs as giving rise to the two breaches is the same’.
…
What I think is necessary is an examination of the factual circumstances relied upon to establish the right to relief in each case in order to determine whether there is a sufficient identity between them to found the conclusion that the same cause of action was in question in both cases. One matter which may be of importance in contract cases is whether, in substance, both actions are based on breaches of a particular term in a single contract. This factor may be conclusive in some cases while in others it may not be.” (at 559)
In his Honour’s discussion of a number of building cases he observed at 560 that the problem lies in identifying the level of particularity at which the examination of factual similarities is conducted. He considered that the conduct relied on by Macquarie as constituting Westgarths’ breaches in the second proceedings was quite distinct from that relied on in the first proceedings, and said at 561 that, although it could be argued that there was but one breach of a promise by Westgarths to exercise due care -
“On the other hand, I think the better view is that the alleged failures in respect of the insurance policies constituted one set of breaches of contract, particularly as the failure to register occurred after settlement, and there were quite distinct breaches in respect of the mortgage securities which all occurred prior to or on settlement. In my opinion, it is unnecessary to explore this question further. As India Steamship demonstrates, a determination that a plaintiff is relying on a breach of a term of the contract not explored in the first action is not determinative. Conversely, separate breaches of the same term may be litigated in a second proceeding, although I would agree with O'Bryan J when he said in Van Amstel, a party cannot bring separate actions to recover different losses for the breach of the same clause in a contract arising from the same act or omission.
In the present case Macquarie's second action sought relief in respect of conduct on the part of Westgarths entirely different from the conduct which had been in issue in the first trial. The factual issues in the second trial, upon which the right to relief depended, were entirely outside the ambit of the first trial and involved an investigation of the steps taken by the solicitors in relation to entirely different commercial documents, albeit that those documents formed part of the total security. Quite simply the questions raised in the second proceedings did not bear in any way on the questions raised in the first. What is more, the better view is that the right to relief was complete at different times.
In simple terms, the issues raised in the second proceedings were not litigated in the first. The relief claimed in each was different and depended on the resolution of essentially different factual issues arising out of different alleged acts and omissions on the part of Westgarths, so that it cannot be said that in substance Macquarie was endeavouring again to litigate the same cause of action.”
The appellant relied in particular on the words of Dixon CJ and McTiernan, Williams, Webb and Kitto JJ in Williams v Milotin (1957) 97 CLR 465 at 474, that “when you speak of a cause of action you mean the essential ingredients in the title to the right which it is proposed to enforce”. He pointed out that their Honours’ words were cited by Gummow J (in dissent in the result) in Stingel v Clark (2006) 80 ALJR 1339 at [46], there used by his Honour to support continued distinction between a cause of action in negligence for personal injury and a cause of action in trespass to the person. As I understand the appellant’s submissions, the right in the present case was the right to indemnity under the policy, and the ingredients to the title to that right in Mr Greaves’ proceedings were the same as the ingredients in the respondent’s proceedings because Mr Greaves sought to make out the right.
The equation of the ingredients because of the one right is flawed, but more fundamentally reference to the title to the right has its own problem of the level of particularity at which the right is identified. Is it a right to have the appellant pay money, without going further? Are there rights to have the appellant pay the amounts of the Defence Costs (one right) and to have the appellant pay the amount of the Compensation Order (another right)? Defence Costs could be subdivided into costs of defending a Claim and costs incurred in relation to an investigation or other official proceedings. The definition of Loss is strangely worded, but could suggest other rights, and rights could (and for reasons later given do) turn on what the appellant is called upon to pay – it can be said that there are as many rights as there are occasions on which it must pay money. Reliance on the words used in Williams v Milotin does not provide a simple answer. The “ingredients in the title to the right” are what mark out the right, and if the form of words is adopted there must be ascertained what facts are relied on for the right.
The forms of words used to describe what is meant by a cause of action may guide, but do not dictate the answer in a given case. There must be regard to the facts relied upon to establish the right to relief. If the claim is founded in contract, the facts include the terms of the contract invoked for the claim, what the defendant promised to do, and what it did or failed to do. There may be different breaches of the one contract arising out of the same facts (Republic of India v India Steamship Co), there may be one breach of the contract despite partly different facts (Conquer v Boot (1928) 2 KB 336; Onerati v Phillips Constructions Pty Ltd (in liquidation)), or there may be different breaches of the contract arising out of different facts.
All this presupposes a cause of action; it just has to be identified. Under s 75 of the Supreme Court Act, replicating the inherent power of a superior court (Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581), proceedings may be brought for declaratory relief, and the Court “may make binding declarations of right whether any consequential relief is or could be claimed or not”. As long ago as 1915 it was said by Pickford LJ of the power under a rule in similar terms, in Guaranty Trust Co of New York v Hannay & Co (1915) 2 KB 356 at 562 -
“I think therefore that the effect of the rule is to give a general power to make a declaration whether there be a cause of action or not, and at the instance of any party who is interested in the subject-matter of the declaration.”
This had been preceded in, for example, Dyson v Attorney-General (1912) 1 Ch 158 and Burghes v Attorney-General (1911) 2 Ch 139, in which declarations were sought to the effect that the plaintiff was under no obligation to the defendant: there was no cause of action as ordinarily understood. In Gouriet v Union of Post Office Workers (1978) AC 435 Diplock LJ said at 501 -
“The early controversies as to whether a party applying for declaratory relief must have a subsisting cause of action or a right to some other relief as well can now be forgotten. It is clearly established that he need not. Relief in the form of a declaration of right is generally superfluous for a plaintiff who has a subsisting cause of action. It is when an infringement of the plaintiff’s rights in the future is threatened or when unaccompanied by threats, there is a dispute between the parties as to what their respective rights will be if something happens in the future, that the jurisdiction to make declarations of right can be most usefully invoked. But the jurisdiction of the court is not to declare the law generally or to give advisory opinions; it is confined to declaring contested legal rights, subsisting or future, of the parties represented in the litigation before it and not those of anyone else.”
The width of the power to grant declaratory relief has been accepted in Australia; for example, in Sankey v Whitlam (1978) 142 CLR 1 Gibbs CJ said at 23 that it extended to a plaintiff having it declared that he is under no duty or liability to the defendant.
Borchard, Declaratory Judgments, 2nd ed (1941) says at 48-9 -
“The fact that under declaratory procedure so many types of legal issues are presentable for determination which are incapable of any other form of relief, has imposed upon the courts at the outset the function of determining whether the facts justify the grant of judicial relief, and more particularly, whether the plaintiff has a ‘legal interest’ in the relief he seeks. In the more familiar executory action, the legal interest is sought in the ‘cause of action’, but, as already observed, the narrow scope often given to this ambiguous term has served to conceal from view the many occasions and situations in which a plaintiff not yet physically injured or one seeking escape from dilemma and uncertainty by a clarification of his legal position has need for judicial relief not of the traditional kind. The wider opportunity and necessity for judicial usefulness disclosed by the declaratory judgment make necessary either a more flexible and comprehensive connotation of the term ‘cause of action’ or the employment of a less chameleonic term to indicate when the petitioner may be accorded judicial protection. Without losing sight of the necessity for jurisdictional facts, it is suggested that the term ‘legal interest’ meets the need.”
Rule 12.4 still uses the “chameleonic term”. (The current equivalent in England, rule 38.7 of the Civil Procedure Rules 1998, has changed to “arises out of facts which are the same or substantially the same”.) It is used in many places in the rules, apart from in the unwritten law such as in connection with res judicata. It is difficult to give it a special meaning in r 12.4. The appellant’s submissions at one point included, as an application of the words “the essential ingredients to the title to the right which it is proposed to enforce”, that Mr Greaves’ proceedings involved a “right to a declaration”, as I understand it with the suggestion that the essential ingredients of the right were the same as the ingredients in the respondent’s proceedings. Implicitly, it was said that the right to a declaration, or at least the claim to a declaration, was a cause of action for the purposes of r 12.4. I do not think this should be accepted. Declaratory relief may be claimed by way of establishing and enforcing a cause of action, but the claim to declaratory relief is not the cause of action; nor does a claim to declaratory relief become a cause of action if one does not otherwise exist.
The nature of the claims against the appellant
Mr Greaves’ further amended summons claimed relief expressed, broadly speaking, in the terms of indemnity to Mr Greaves in relation to Defence Costs. A contract of insurance is often described as a contract of indemnity. The policy went further in providing for advancement of Defence Costs, and neither the insuring clause nor cl 2.6 was in terms of indemnity. The appellant’s promises were relevantly to pay on behalf of Mr Greaves any Loss for which he was not indemnified by One.Tel Ltd (the insuring clause) and to advance or pay Defence Costs (cll 2.1, 2.6). What remedies were available in law?
Subject to the appellant’s avoidance and reduction of liability to nil, Mr Greaves had a remedy, if the appellant did not pay any Loss or advance or pay Defence Costs, in damages for breach of contract. In Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564, involving professional indemnity insurance, the insurer contended that the proceedings against it were statute-barred because the insured’s cause of action accrued either when the Mitora claim was made against the insured or when the insured gave notice of the claim to the insurer. I said at 568 -
“It is not in question that the plaintiff was entitled to indemnity when the Mitora claim was made against it, or when it gave notice of the claim to the defendant, in the sense that it was then entitled to the benefit of the defendant's promise to indemnify it against the claim. But the plaintiff's cause of action was for unliquidated damages for breach of contract: see Luckie v Bushby (1853) 13 CB 864; 138 ER 1443; E Pellas & Co v Neptune Marine Insurance Co (1879) 5 CPD 34; William Pickersgill & Sons Ltd v London and Provincial Marine and General Assurance Co Ltd [1912] 3 KB 614 at 622; Chandris v Argo Insurance Co Ltd [1963] 2 Lloyd's Rep 65 at 74 and Reynolds v Phoenix Assurance Co Ltd [1978] 2 Lloyd's Rep 440 at 462. It had to establish a contract (the policy) by which the defendant promised to do something (indemnify it against Mitora's claim), and breach of that contract (failure to indemnify it against Mitora's claim). It could then recover the loss suffered as a consequence of that breach..”
See also British American Tobacco Australia Ltd v Eagle Star Reinsurance Co Ltd [2006] NSWCA 156; Kone Elevators Pty Ltd v Popa [2006] VSCA 26.
This remedy was on a cause of action for breach of contract, the breach being the appellant’s failure to pay as promised. The failure as to advancement of Defence Costs could only occur if the appellant had been required to advance them and did not do so, and the failure as to payment of Loss or payment of Defence Costs could only occur if and to the extent that there were Loss or Defence Costs which the appellant had been required to pay and did not do so. In Penrith City Council v Government Insurance Office of New South Wales the insurer’s contention was not accepted. The passage last set out continued, at 568-9 -
“The plaintiff's cause of action accrued upon breach. Thus it must be asked what the defendant was required to do in performance of its promise, and when it failed to do what was required of it. Only when the defendant failed to do what was required of it could a cause of action for damages for breach of contract accrue to the plaintiff. There was no cause of action simply because Mitora made its claim or the claim was notified to the defendant — the defendant could have thereafter fully performed its promise.
…
Putting legal costs aside for the moment, the defendant could not have been required to perform its promise by making a payment to Mitora or to the plaintiff when the claim was made against the plaintiff, if for no other reason than that the defendant knew nothing of it at that time. Even when the plaintiff had given it notice of the claim, the defendant was not required to perform its promise by making a payment then and there to Mitora or to the plaintiff— whether there was anything against which the plaintiff was to be indemnified depended upon whether it was liable to Mitora and in what amount, which would not be known until established by agreement, arbitration or judgment. What then was the defendant required to do in performance of its promise? When taxed with this, the defendant responded that it was required to indemnify the plaintiff. That takes the matter no further.
In my view the submissions confused being the beneficiary of a contractual promise with a cause of action for failing to perform that promise.”
The appellant had purported to avoid the contract of insurance, and had asserted that its liability was reduced to nil. There is no indication that Mr Greaves accepted that position, indeed he plainly did not. Nor was there any indication that he treated the appellant’s conduct as a repudiation of the contract of insurance and terminated the contract for that reason; again, he plainly did not. The appellant’s conduct may well have made it unnecessary for Mr Greaves to require, or further require, the appellant to advance Defence Costs or to pay any Loss or Defence Costs as a condition of performance of the appellant’s promises: Peter Turnbull & Co Pty Ltd v Mundus Trading (A’Asia) Pty Ltd (1954) 90 CLR 235. But it did not dispense with the necessity that there be Loss or Defence Costs to be paid by the appellant; the appellant could only fail to pay Loss or Defence Costs to the extent that there were amounts to be paid. The cause of action for breach of contract was still for breach by failure to pay amounts which, as at the time Mr Greaves brought his proceedings, the appellant had failed to pay.
I have referred to the further amended summons’ concern with recovery of Defence Costs yet to be incurred. Save perhaps as to advancement, Mr Greaves had no remedy in damages in relation to those Defence Costs. The appellant could not have broken a promise to pay Defence Costs which had not yet been incurred. By the appellant’s avoidance and assertion of reduction of liability to nil there may have been so-called anticipatory breach, but unless Mr Greaves exercised a right to terminate the contract of insurance for that reason, which he did not, it provided no further cause of action: Bowes v Chaleyer (1923) 32 CLR 159 at 169 (Knox CJ), 190 (Higgins J), 197 (Starke J); Peter Turnbull & Co Pty Ltd v Mundus Trading (A’Asia) Pty Ltd at 250 (Kitto J).
Mr Greaves may have had a remedy in specific performance of the contract of insurance. Ordinarily specific performance will not be granted if damages are an adequate remedy. However, as Lindley LJ said in Johnston v The Salvage Association (1887) 29 QBD 458 at 460-1 -
“In equity a contract to indemnify can be specifically enforced before there has been any such breach of the contract as would sustain an action at law. In equity the plaintiff need not pay or perhaps ruin himself before seeking relief. He is entitled to be relieved from liability.”
See also Firma C-Trade SA v Newcastle Protection and Indemnity Association (1991) 2 AC 1 at 28 per Lord Brandon; 36 per Lord Goff; 40-41 per Lord Jauncey.
However, whether Mr Greaves had that remedy involved whether the policy was truly one of indemnity, at least as regards Loss, so that Mr Greaves did not first have to pay the Loss (compare the “pay to be paid” provision in Firma C-Trade SA v Newcastle Protection and Indemnity Association). It may also have involved whether the remedy would be confined to such liability as Mr Greaves had incurred: as is said in MacGillivray on Insurance Law, 10th ed (2003) at 28-2, “Equity … accepted that a loss was suffered once the fact and extent of the liability of the party seeking to enforce the indemnity had been ascertained in proceedings or otherwise”. I do not take these questions further; it is enough that the law permitted Mr Greaves to claim the remedy.
Mr Greaves could claim declaratory relief; that would be an appropriate course in relation to Defence Costs yet to be incurred. West Wake Price & Co v Ching (1956) 3 All ER 821 illustrates a claim to a declaration that the insurer was obliged to provide indemnity. Given the avoidance and assertion of reduction of liability to nil, there was a contest over legal rights apt for resolution by declaration. So far as Mr Greaves sought to establish an entitlement to recover from the appellant Defence Costs yet to be incurred, however, the remedy did not rest upon a cause of action as ordinarily understood.
Mr Greaves’ further amended summons, considered against these possible remedies, is rather confusing. As I have noted, the relief was claimed in terms of indemnity. Damage was not alleged and damages were not claimed, but nor were the orders in terms of specific performance. Mr Greaves did not claim orders for performance of the contract of insurance as a whole, notwithstanding the avoidance and assertion of reduction of liability to nil; the relief was confined to relief in relation to Defence Costs. Declarations were claimed as to Defence Costs paid by Mr Greaves, when if he were to succeed he would succeed on perfectly good causes of action to which the declarations were superfluous.
What I have said in relation to the further amended summons can be applied to the respondent’s summons. The Compensation Order had been made, and it was within Loss as defined. It is unclear whether the appellant had been specifically required to pay the Compensation Order, but if it had not it may be that the avoidance and assertion of reduction of liability to nil made it unnecessary. The respondent had an available remedy on a cause of action for damages for breach of contract, the breach being the appellant’s failure to pay as promised. But the summons was again rather confusing. Loss and damage was alleged (para 11), indicating a remedy in damages, but the claim was not overtly to damages. The merits of the respondent’s claim of course do not presently arise, but the terms of the insuring clause and the fact of the Deed of Arrangement may bring some importance to the remedy when the merits are addressed.
Were the two proceedings on the same cause of action?
As I have indicated, the appellant relied in particular on the description of a cause of action as the essential ingredients in the title to the right which it was proposed to enforce. His submissions can, I think, be summarised to the following effect -
(a)quite apart from advancement under cl 2.1 of the policy and payment under cl 2.6, Defence Costs were within Loss as defined and so were within the promise in the insuring clause;
(b)Mr Greaves had –
(i)asserted an entitlement to indemnity with respect to Defence Costs under the insuring clause (paras 5, 25(b)) as well as under cl 2.1 (paras 4A, 25(a)) and cl 2.6 (paras 6, 32(a));
(ii)claimed, beyond indemnity with respect to Defence Costs already paid by him, declarations and orders with respect to Defence Costs yet to be incurred (claim (a));
(iii)asserted breach not only by refusal to indemnify in respect of Defence Costs he had paid (paras 22, 25(d)), but also by the appellant advising that it did not intend to indemnify in respect of any losses (paras 25(e)); and
(iv)alleged a Claim, Wrongful Acts and that he was entitled to be indemnified “in respect of any loss he suffers as a result of the ASIC proceedings” (paras 19, 20, 21), beyond claiming indemnity with respect to Defence Costs;
(c)from these matters in the further amended summons, Mr Greaves’ cause of action was for breach of the insuring clause, being the right which he sought to enforce, the breach being the refusal to indemnify attributed to the letter of 21 May 2002 (at one point counsel for the appellant described the breach as “declining of indemnity generally”);
(d)in his proceedings the respondent asserted that Mr Greaves had “sought to be indemnified under the Policy” (para 7), and alleged breach not only by refusal to indemnify in respect of the Compensation Order but also by purporting to avoid the policy;
(f)from this, the cause of action in the respondent’s proceedings was also for breach of the insuring clause and the breach was declining indemnity generally;
(i)the causes of action were therefore the same.
The appellant submitted that a further Loss subsequent to the incurring of Defence Costs, relevantly incurring liability under the Compensation Order, did not found a fresh breach and a different cause of action. He submitted that the judge was in error in saying at [3] that the orders sought in the further amended summons were directed to enforcing Mr Greaves’ rights to claim under the automatic extension, because the entitlement asserted was also under the insuring clause, and that his Honour was similarly in error in saying at [26] that the claim in Mr Greaves’ proceedings was brought under the Extensions section of the policy. Relying on the insuring clause meant asserting an entitlement which went beyond Defence Costs, and so the judge was in error in saying at [27] that the respondent’s claims related to a “response … to a different risk”. On the appellant’s submissions, the right to payment of Defence Costs otherwise than by advancement was dependent upon establishing the entitlement to indemnity under the insuring clause which, as I understand the submissions, was the same risk as the right to payment of the Compensation Order. The judge was accordingly in error in saying that the making of the Compensation Order was an essential ingredient in the respondent’s cause of action.
The judge appears to have overlooked that Mr Greaves’ further amended summons asserted an entitlement under the insuring clause, as well as entitlements under the Extensions in cll 2.1 and 2.6. In my opinion, however, the submissions should otherwise not be accepted.
The essential facts on which Mr Greaves relied, together with the terms of the policy, were that he had incurred Defence Costs (paras 22, 31, 42), for some of which he had claimed indemnity from the appellant (para 24) but the rest apparently not; but the appellant had refused to indemnify him with respect to any of the Defence Costs (paras 25, 32, 43), and had said as to the Defence Costs incurred in defending the ASIC proceedings that it would not indemnify him at all.
So far as claiming damages, Mr Greaves’ proceedings were on a cause (or causes) of action for breach of contract, breach when the appellant failed to do what it was required to do according to its contractual promises. The promises were in all of the insuring clause and cll 2.1 and 2.6, but the cause (or causes) of action was (or were) for damages for breach of the promises by failing to pay Defence Costs. Although inappropriately as orders for payment, claims (b), (c), (d), (g) and (i) in the claims to relief gave effect to the cause(s) of action. Alternatively, if the further amended summons should be regarded as a suit for specific performance, it was confined to performance so far as the appellant promised to advance or pay Defence Costs. The facts were the same; para 25(e) alleged refusal to pay any loss, but as I later state it was no more than an allegation of breach in failing to pay Defence Costs, and in any event the relief was limited to Defence Costs. So far as Mr Greaves claimed declaratory relief as to Defence Costs yet to be incurred, his proceedings were not on a cause of action as ordinarily understood, but even if regarded as on a cause of action the declaration in claim (a) would establish no more than an entitlement to have Defence Costs paid when incurred. While the insuring clause applied to Loss, of which Defence Costs was part, any breach of the insuring clause as to payment of Defence Costs could occur only when incurring of Defence Costs meant that the appellant had to carry out its promises.
Turning then to the respondent’s proceedings, the essential facts on which he relied together with the terms of the policy were that the Compensation Order had been made against Mr Greaves but the appellant had refused to indemnify him with respect to it. So far as claiming damages, the respondent’s proceedings were on a cause of action for breach of contract, breach when the appellant failed to perform its contractual promise in the insuring clause, but the breach was failure to carry out the appellant’s promise in relation to a different amount (the amount of the Compensation Order) and in different circumstances (after the Compensation Order had been made). The appellant could not fail to carry out its promise to pay the Compensation Order before the Compensation Order had been made. If the summons should be regarded as a suit for specific performance, it was confined to performance so far as the appellant promised to pay the amount of the Compensation Order.
Mr Greaves and the respondent relied on distinct breaches. Mr Greaves could not have relied on the breach on which the respondent relied. To the extent that specific performance was claimed, it was distinct performance. On the widest view of a cause of action, Mr Greaves did not proceed on a “cause of action” for specific performance or to establish an entitlement by declaration beyond payment of incurred and yet to be incurred Defence Costs. That the one insuring clause bringing Defence Costs within Loss was common to the two proceedings did not mean they were proceedings on the same cause of action. In my opinion, on examination of the factual circumstances relied on, the causes of action in the two proceedings were not the same.
The appellant relied particularly on the allegations in the further amended summons that the ASIC proceedings were a Claim of Wrongful Acts (paras 19, 20), that Mr Greaves was entitled to be indemnified in respect of any loss suffered in respect of the ASIC proceedings (para 21), and that the appellant had advised that it did not intend to indemnify in respect of any losses (para 25(e)). The allegations as to Claim and Wrongful Act were appropriate to invoke the contractual promises pay Defence Costs. The other allegations did not mean that Mr Greaves’ proceedings were on a “cause of action” to establish an entitlement to be indemnified in respect of all losses within the cover provided by the policy. The allegation of entitlement in para 21 was a superfluity, but when included in the further amended summons was to be read with the particular allegations of breach in the succeeding paragraphs. Paragraph 25(e) was from its context and the words “including costs and disbursements incurred by him, in respect of the ASIC Proceedings” an allegation of breach in failing to pay Defence Costs. It may be noted that the same letter of 21 May 2002 particularised the breaches of cl 2.6 in paras 32 and 43.
Miscellaneous
If the appeal had been successful, it would have remained to decide whether the discretion to grant a stay in r 12.4 should be exercised. The judge did not have occasion to determine that matter, and it should not be taken that a stay would have been granted if the appeal had been upheld.
Rule 12.4 refers also to proceedings on substantially the same cause of action. The appellant submitted, without developing the submission, that if the causes of action in the two proceedings were not the same they were substantially similar. It is enough that, on the examination in the preceding paragraphs, I do not think they were.
I have mentioned the Court’s inherent jurisdiction, one manifestation of which is staying proceedings for abuse of process if second proceedings are brought in the same cause without payment of the costs of the first proceedings. The appellant’s counsel was asked in the course of submissions whether he asserted in this Court that, if he was not within r 12.4, he “ought to get the same sort of order under the inherent jurisdiction”. He answered yes, but there the matter was left. The notice of motion of 23 February 2007 relevantly claimed a stay under Pt 21. r 8 of the Supreme Court Rules or r 12.4, and did not claim a stay in the exercise of the Court’s inherent jurisdiction. From the judge’s reasons, the inherent jurisdiction was not otherwise invoked before him. I do not think it is open to the appellant now to invoke it; but in any event, for reasons appearing in the examination in the preceding paragraphs I do not think that the respondent’s proceedings were an abuse of process because the costs of Mr Greaves’ proceedings had not been paid.
Orders
I propose the orders -
1.Grant leave to appeal.
2.Direct that the appellant’s notice of appeal and the respondent’s notice of contention be filed within 7 days.
3.Dismiss the appeal with costs.
BASTEN JA: I agree with the orders proposed by Giles JA, and with his Honour’s reasons.
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