CGU Insurance v Blakeley
[2015] VSCA 153
•19 June 2015
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| S APCI 2015 0022 | |
| CGU INSURANCE LTD | Applicant |
| v | |
| ROSS BLAKELEY, MICHAEL RYAN AND QUENTIN OLDE AS JOINT AND SEVERAL LIQUIDATORS OF AKRON ROADS PTY LTD (IN LIQUIDATION) (ACN 004 769 895) | First Respondents |
| AKRON ROADS PTY LTD (IN LIQUIDATION) (ACN 004 769 895) | Second Respondent |
| TREVOR PAUL CREWE | Third Respondent |
| ROBERT MARK SILL | Fourth Respondent |
| JOHN MARTIN SILL | Fifth Respondent |
| CREWE SHARP PTY LTD (IN LIQUIDATION) (ACN 066 670 013) | Sixth Respondent |
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JUDGES: | ASHLEY, BEACH and McLEISH JJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 15 June 2015 | |
DATE OF JUDGMENT: | 19 June 2015 | |
MEDIUM NEUTRAL CITATION: | [2015] VSCA 153 | |
JUDGMENT APPEALED FROM: | [2015] VSC 34 (Judd J) | |
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PRACTICE AND PROCEDURE – Application for leave to appeal against order joining third party insurer as a defendant – Insurer of defendants joined on application of plaintiffs – Declaratory relief sought against insurer by strangers to the insurance policy – Whether court has jurisdiction to grant declaration at suit of stranger to insurance policy – Multiplicity of proceedings – Proceeds of insurance – Discretionary decision on question of practice and procedure – Whether discretion miscarried – Test for leave to appeal – Whether appeal has real prospect of success – Residual discretion – Application for leave to appeal granted – Appeal dismissed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr D J O’Callaghan QC with Ms R L Enbom | Norton Rose Fulbright Australia |
| For the First and Second Respondents | Mr P D Crutchfield QC with Dr O Bigos | King & Wood Mallesons |
ASHLEY JA
BEACH JA
McLEISH JA:
Introduction
The proceeding below is a claim under s 588M(2) of the Corporations Act 2001 (Cth) in which the plaintiffs allege that the directors of Akron Roads Pty Ltd (in liquidation) breached s 588G(2) of that Act by failing to prevent Akron Roads from incurring debts when it was insolvent. The liquidators of Akron Roads and Akron Roads itself (who are the first and second respondents in this Court) are the plaintiffs in the proceeding. The defendants (the third to sixth respondents in this Court) are alleged to be the directors of Akron Roads during the relevant period when Akron Roads is alleged to have been insolvent. The relevant directors so far as the present matter is concerned are Trevor Crewe (the third respondent) and Crewe Sharp Pty Ltd (in liquidation) (the sixth respondent). As particularised in the plaintiffs’ points of claim, the amount sought in the proceeding is in excess of $28 million.
By an application filed on 20 August 2014, the first and second respondents sought an order pursuant to r 9.06(b) of the Supreme Court (General Civil Procedure) Rules 2005 (the ‘Rules’) that CGU Insurance Ltd be joined as a defendant in the proceeding. Additionally, the first and second respondents sought leave to file and serve amended points of claim in which they seek a declaration that CGU is liable to indemnify Mr Crewe and Crewe Sharp under an insurance policy in respect of any judgment obtained by the first and second respondents against them.
The application to join CGU and amend the points of claim was heard by a judge in the Commercial Court on 10 December 2014. CGU appeared on the
application and opposed it. None of the defendants (including Mr Crewe and Crewe Sharp) participated in the application.
On 13 February 2015, the judge granted the application and made orders joining CGU as the fifth defendant in the proceeding.[1]
[1]Akron Roads Pty Ltd (in liq) & Ors v Crewe Sharp Pty Ltd & Ors [2015] VSC 34 (‘Reasons’).
By an application dated 13 March 2015, CGU seeks leave to appeal against the order joining it as a party. CGU’s proposed ground of appeal is in the following terms:
The learned judge erred in law in joining the applicant/appellant as a defendant to the proceeding because courts have no jurisdiction at the suit of a stranger to grant declaratory relief as to the meaning and effect of a private contract between parties who will not pursue any claim relating to rights or duties under that contract.
This is the hearing of CGU’s application for leave to appeal and, if leave is granted, the hearing of the appeal.
Background
Mr Crewe was appointed a director of Akron Roads on 19 July 2001. Mr Crewe was also a director of Crewe Sharp, which operated a consultancy business. Crewe Sharp provided consultancy services to Akron Roads. In the proceeding below, the plaintiffs allege that Crewe Sharp was a shadow director of Akron Roads.
On 4 December 2013, Crewe Sharp made a claim for indemnity with respect to the proceeding under a professional indemnity policy of insurance that it had with CGU. As Mr Crewe was a director of Crewe Sharp, he was also an insured under the insurance policy.
On 6 March 2014, CGU sent a letter to Crewe Sharp denying its claim on the insurance policy on the basis that the insurance policy did not provide cover in respect of the proceeding.
On 20 June 2014, Crewe Sharp went into liquidation. On the same day, the liquidators of Crewe Sharp informed the liquidators of Akron Roads that it was unlikely that Crewe Sharp would defend the proceeding. On 16 July 2014, CGU provided to the liquidators of Crewe Sharp a copy of its letter to Crewe Sharp dated 6 March 2014 denying liability under the insurance policy. Neither Crewe Sharp nor Mr Crewe have indicated any intention to challenge CGU’s denial of liability.
While Mr Crewe did not participate in the joinder application, prior to the hearing, Mr Crewe’s solicitors informed the first respondents that Mr Crewe consented to the joinder of CGU and that he disagreed with CGU’s decision to deny indemnity to Crewe Sharp.
While Crewe Sharp did not participate in the joinder application, its position (as disclosed by its liquidators) was that Crewe Sharp was unfunded and not in a position to investigate a potential claim against CGU.
When CGU was first given notice of the application to join it as a defendant in the proceeding, it initially advised, through its solicitors, that it consented to being joined. However, as the judge noted, by the time this application came on for hearing, CGU vigorously opposed the application.
CGU defended the application before the judge on two bases: first, CGU contended that it should not be joined because the Court did not have jurisdiction at the suit of the first and second respondents to make the declaration they sought in relation to the insurance policy; and secondly, CGU resisted the joinder application on the basis that the policy did not, in any event, provide cover in respect of the proceeding. In this Court, CGU seeks only to agitate the first point: namely, that the Court does not have jurisdiction at the suit of strangers to the insurance policy to make a declaration in respect of the insurance policy.
The relevant rule
The application to join CGU was made pursuant to r 9.06 of the Rules. Rule 9.06 of the Rules relevantly provides:
At any stage of a proceeding the Court may order that –
…
(b) any of the following persons be added as a party, namely –
…
(ii)a person between whom and any party to the proceeding there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding;
The judgment below
In carefully expressed and detailed reasons, the judge considered CGU’s contention that leave to join it ought be refused because the proposed declaratory relief could only be granted at the suit of a person entitled to assert that their right was infringed. In rejecting this submission, the judge analysed relevant authority about which the parties had made submissions, including Anjin No 13 Pty Ltd v Allianz Australia Insurance Ltd;[2] Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd;[3] CE Heath Casualty & General Insurance Ltd v Pyramid Building Society (in liq);[4] Ainsworth v Criminal Justice Commission;[5] The Owners-Strata Plan 62658 v Mestrez Pty Ltd,[6] Belcastro v Nakhl;[7] Austcorp Project No 20 Pty Ltd v LM Investment Management Ltd, in the matter of Bellpac Pty Ltd (receivers and managers appointed) (in liq);[8] Interchase Corporation Ltd (in liq) v FAI General Insurance Co Ltd,[9] JN Taylor Holdings Ltd (in liq) v Bond;[10] QBE Insurance (Aust) Ltd v Lois Nominees Pty Ltd;[11] Ashmere Cove Pty Ltd v Beekink (No 2);[12] and Employers Reinsurance Corporation v Ashmere Cove Pty Ltd.[13]
[2](2009) 26 VR 148.
[3](2000) 200 CLR 591 (‘Truth About Motorways’).
[4][1997] 2 VR 256 (‘CE Heath’).
[5](1992) 175 CLR 564 (‘Ainsworth’).
[6][2012] NSWSC 1259.
[7][2014] NSWSC 1305.
[8][2013] FCA 883.
[9][2000] 2 Qd R 301 (‘Interchase’).
[10](1993) 59 SASR 432 (‘JN Taylor’).
[11][2012] WASCA 186.
[12](2007) 244 ALR 534 (‘Ashmere Cove’).
[13](2008) 166 FCR 398.
In the course of this analysis, the judge adopted, as a ‘useful summary of principles’,[14] what was said by Lindsay J in The Owners-Strata Plan 62658 v Mestrez Pty Ltd, namely:
[14]Reasons [28].
The reasoning underlying Anjin, and its antecedents, can be summarised as follows in an NSW context:
(a)When an insurer has denied indemnity, the insured can, uncontroversially, file a cross claim against it for the purpose of enforcing their contract.
(b)It would be an abuse of the processes of the court if a third-party Plaintiff, without a cause of action against the insurer, simply sought to join the insurer as a co-defendant with an insured defendant against which the Plaintiff had a cause of action.
(c)However, the interests of justice, and the convenient administration of justice, may authorise an order that an insurer be joined as a co-defendant with its insured, whether on the application of the third-party Plaintiff or otherwise, if:
(i)the insurer has denied liability to indemnify the insured against the Plaintiff’s claim.
(ii)there is a bona fide dispute as to the entitlement of the insurer to deny liability.
(iii)there is a substantial impediment (including insolvency on the part of the insured) standing in the way of the proceedings being conducted simply by the Plaintiff against the insured defendant, with a cross claim filed by the defendant against the insurer.
(vi)the dispute as to the liability or otherwise of the insurer to indemnify the insured defendant can properly be made the subject of a grant of declaratory relief pursuant to the Supreme Court Act 1970 (NSW), s 75.
(v)there is, in particular, a true legal controversy between the Plaintiff and the insurer such as would ensure that each of those parties might reasonably be relied upon by the court to serve as a contradictor for the other.
(vi)joinder of the insurer as a co-defendant with its insured might reasonably be relied upon to avoid a multiplicity of proceedings, and to enable all matters in controversy between the parties (namely, the Plaintiff, the insured and the insurer) to be completely and finally determined.
(d)A true legal controversy between the Plaintiff and the insurer may be taken to exist where, on the facts of the particular case, there is a realistic prospect of s 562 of the Corporations Act having scope for operation.
(e)A decision to allow joinder of the insurer as a co-defendant is one which is discretionary and fact-based, not available as of right.[15]
[15]The Owners-Strata Plan 62658 v Mestrez Pty Ltd [2012] NSWSC 1259, [54].
As the judge noted, these principles had been applied by Campbell J in the New South Wales Supreme Court[16] and Jacobson J in the Federal Court.[17]
[16]Belcastro v Nakhl [2014] NSWSC 1305, [28].
[17]Austcorp Project No 20 Pty Ltd v LM Investment Management Ltd, in the matter of Bellpac Pty Ltd (receivers and managers appointed) (in liquidation) [2013] FCA 883, [25].
In defending the joinder application before the judge, CGU contended that, while the authorities were in conflict, the better view was that there should be no joinder of an insurer at the suit of a stranger to the insurance policy in circumstances where a court would not grant such a stranger any relevant declaratory relief. However, the judge was not persuaded that there was ‘a clear conflict of relevant authorities about the jurisdiction to grant interlocutory relief in a case such as’ the present.[18] Further, the judge concluded that even if there was a relevant conflict of authority, this was no reason to refuse the application provided the circumstances justified the exercise of the relevant discretion under the Rules.[19]
[18]Reasons [35].
[19]Ibid [35].
In granting the application, the judge said:
I am persuaded that there is a proper basis under r 9.06(b)(ii) to join CGU as a defendant. The proposed case to be advanced by the plaintiffs is not hopeless, or bound to fail. Nor is it fanciful, without any reasonable prospect of success.
Claims have been made by the insured under the policy. Liability has been denied. Mr Crewe consents to the joinder of CGU as a party to a proceeding in which he is defendant. There will be a contest between CGU and the liquidator concerning CGU’s liability to indemnify the insured. Mr Crewe is a central participant in the proceeding. In contrast to the assumption made by the Court of Appeal in Interchase, CGU accepted that it would not be open to CGU and Mr Crewe to re‑litigate the question of liability under the policy in different proceedings.
The liquidators of Crewe Sharp have no funds. That company is a defendant and central participant in the proceeding. If CGU is joined as a defendant, the liquidators must decide whether they will actively participate in the controversy between CGU and the plaintiffs. They, too, may be bound by the outcome, unable to re-litigate any issue concerning CGU’s liability in another proceeding.
It is unlikely that the joinder of CGU as a defendant will be prejudicial to the efficient and cost-effective management of the trial, or extend the duration of the proceeding by any disproportionate amount of time. It is possible that as a defendant, CGU may choose to shoulder some or all of the burden of Crewe Sharp and Mr Crewe in defending the allegations against them. That is for CGU to decide. As presently framed, the live issues at trial are likely to be confined to whether the directors failed to prevent the relevant debts being incurred. The trial is expected to last days, not weeks. Were it otherwise, it might have been appropriate to consider an earlier determination of the insurer’s liability to indemnify, although such a course would fragment the proceeding.
The claim by the plaintiffs, that CGU is bound to indemnify the insured, arises out of, or relates to, or is connected with their claim against the insured as defendants. The plaintiffs have a sufficient interest in the proceeds of insurance to provide them with standing to apply for declaratory relief. Furthermore, by reason of s 562 of the Act, and the duty of liquidators to creditors of Akron Roads, there is a justiciable dispute consequent upon CGU’s denial of liability under the policy. The limited scope of the issues at trial, the likely duration and the important role that CGU may play as a party in the resolution of issues between the plaintiffs and the insured, makes it just and convenient that the dispute between the plaintiffs and CGU be resolved at the same time, and in the same proceeding, as the dispute between the plaintiffs and the insured. Such an approach is also consistent with the overarching purpose under the Civil Procedure Act 2010.[20]
[20]Reasons [44]–[48].
Analysis
In this Court, CGU submitted that the Court has no jurisdiction at the suit of a stranger to grant declaratory relief as to the meaning and effect of a private contract between parties who will not pursue any claim relating to rights or duties under that contract.[21] Reliance was placed on the following passage in the judgment of Mason CJ, Dawson, Toohey and Gaudron JJ in Ainsworth:[22]
[The power to grant declaratory relief] is a discretionary power which ‘(i)t is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise.’ However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have ‘a real interest’ and relief will not be granted if the question ‘is purely hypothetical’, if relief is ‘claimed in relation to circumstances that (have) not occurred and might never happen’ or if ‘the Court’s declaration will produce no foreseeable consequences for the parties’.[23]
[21]CGU did not contest the jurisdiction of the Court to order joinder. It is plain that joinder could be ordered in respect of a claim notwithstanding that there may be doubt as to the Court’s ultimate jurisdiction to grant the relief sought. The joinder would enable the Court to exercise the implied jurisdiction every court enjoys to determine whether it actually has jurisdiction: see Mark Leeming, Authority to Decide – The Law of Jurisdiction in Australia (Federation Press, 2012) 33ff.
[22](1992) 175 CLR 564, 581–2; see also 596 (Brennan J).
[23]Ibid 581–2 (citations omitted).
Ainsworth concerned the power of the Supreme Court of Queensland to grant declaratory relief. It should be noted that their Honours did not in this passage state in terms that the Supreme Court lacked jurisdiction to grant declaratory relief when the criteria set out were absent. Rather, they indicated that to do so would involve the Court exceeding the boundaries of judicial power. There is of course no constitutionally mandated separation of State judicial power.[24] But whether or not going strictly to the Court’s jurisdiction, what is significant for present purposes is that the High Court identified the need for a ‘real interest’ on the part of the person seeking relief, together with foreseeable consequences for the parties, if a declaration is to be made.
[24]Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51, 65 (Brennan CJ), 77–80 (Dawson J), 92–4 (Toohey J), 109–110 (McHugh J). See also, eg, Assistant CommissionerCondon v Pompano Pty Ltd (2013) 252 CLR 38, 89-90 [124]–[125] (Hayne, Crennan, Kiefel and Bell JJ); Kuczborski v Queensland (2014) 314 ALR 526, 555–6 [104] (Hayne J).
The position is of course different in the context of federal jurisdiction, where there must be a ‘matter’ sufficient to attract the exercise of judicial power. For that reason, observations about limits on the power of courts exercising federal jurisdiction to grant declarations do not necessarily assist CGU’s jurisdictional argument.[25]
[25]Reliance was placed, in particular, on Truth About Motorways (2000) 200 CLR 591, [46] (Gaudron J); see also Plaintiff M61/2010E v Commonwealth (2010) 243 CLR 319, 359–60 [102]–[103] (the Court).
However, even in that context, authority is against the view that the court lacks jurisdiction. In Ashmere Cove,[26] investors in a registered management scheme sought to join the insurers of the responsible entity and its directors, whom they had sued for contraventions of the Corporations Law. The insurers had declined to provide indemnity. They resisted joinder on the basis that the declaration sought would not prevent them from contesting any subsequent claim for indemnity. French J rejected this argument, holding that, even if it was true to say (following the decision of the Queensland Court of Appeal in Interchase[27]) that an insurer joined as a co-defendant at the suit of a claimant against the insured would not be bound, by a declaration as to liability, as between itself and the insured, there was still utility in a declaration against an insurer in such circumstances. That was because, by analogy with the wider concept of estoppel enunciated in Port of Melbourne Authority v Anshun Pty Ltd,[28] it would be an abuse of process to permit either the insured or the insurer to litigate the question of liability in subsequent proceedings. As such, the declarations sought would effectively determine the proceedings. Accordingly, French J allowed the application for joinder. The analysis of French J was upheld on appeal by the Full Court.[29]
[26](2007) 244 ALR 534, 549–50 [58].
[27][2000] 2 Qd R 301, 309 (Davies JA), 312–3 (McPherson JA), 317–20 (Byrne J).
[28](1981) 147 CLR 589.
[29]Employers Reinsurance Corporation v Ashmere Cove Pty Ltd (2008) 166 FCR 398, 412–4 [66]–[71] (Heerey, Sackville and Siopis JJ).
The question whether, if a declaration as to liability were to be made in the present case, the insured and CGU would be bound by it as a matter of res judicata, is the subject of conflicting authority, because the Queensland Court of Appeal in Interchase declined to follow the view of King CJ, with whom Prior and Perry JJ agreed, in JN Taylor,[30] to the effect that the parties in such circumstances would be so bound.
[30](1993) 59 SASR 432, 441.
Like the courts in the Ashmere Cove proceedings, we find it unnecessary to resolve that conflict of authority. Neither of those decisions decided the question whether the making of a declaration would be determinative by virtue of abuse of process considerations (although Davies JA, in dissent in Interchase, addressed and decided that issue in terms with which French J in Ashmere Cove agreed[31]).It is unnecessary to decide the res judicata point because we find the analysis in Ashmere Cove compelling. In other words, the making of a declaration in the circumstances sought in the present case would be of practical utility and would not constitute the giving of an advisory opinion, because its practical effect would be to resolve the issue as between insured and insurer. It would be an abuse of process to permit either to litigate the question in subsequent proceedings. As the trial judge observed, CGU accepted that this was so, at least in relation to Mr Crewe.
[31][2000] 2 Qd R 301, 310–1; Ashmere Cove (2007) 244 ALR 534, 549–50 [58].
CGU relied on the dissenting judgment of McLure P in QBE Insurance (Australia) Ltd v Lois Nominees Pty Ltd,[32] in which her Honour doubted the correctness of the Full Court’s decision in the Ashmere Cove proceedings, to the extent that it held that a declaration as to liability under the policy of insurance would determine that issue as between insured and insurer. However, that doubt appears to have depended in part on the observations of Gaudron J in Truth About Motorways, which was a case in federal jurisdiction. Moreover, her Honour accepted that there did exist ‘very rare’ circumstances in which it was appropriate to grant a third party declaratory relief in respect of the private rights and duties of others.[33] Newnes JA did not accept that Ashmere Cove was wrongly decided and regarded the authorities as supporting the conclusion of French J.[34] Murphy JA appeared to be of the same opinion.[35]
[32][2012] WASCA 186, [34], [36].
[33]Ibid [40].
[34][2012] WASCA 186, [109].
[35][2012] WASCA 186, [226].
Reference should also be made to the decision of this Court in CE Heath.[36] In that case, joinder of insurers was refused on discretionary grounds. After referring to the judgments of the High Court in Ainsworth, Ormiston JA (with whom Tadgell JA) agreed, said:
As I would understand these judgments, whether or not the test should be expressed in terms of jurisdiction in the strict sense, there are claims for relief by way of declaration which the courts should not permit to proceed further if certain fundamental characteristics cannot be satisfied. Thus if there is ‘no real controversy to be determined’, ie if it can be demonstrated that there is no real legal controversy between the parties or that the controversy can be characterised as abstract or hypothetical in the sense that that characterisation should automatically lead to the dismissal of the action, then there would seem good reason why the court at an interlocutory stage should not allow the action to proceed further, whether by dismissing the claim summarily or by refusing to permit the joinder of a claim of that kind. Likewise, if the plaintiff has no proper interest in the resolution of the dispute or if there is no defendant who has a true interest to oppose the declaration sought, the action should not be allowed to proceed further. Of course these tests have posed problems over the years and, as the law relating to declaratory relief has developed, particularly in the last 20 or so years, it is harder to be confident that any particular claim goes outside the ‘boundaries of judicial power’ but, subject to resolving those difficulties, a defendant should not be required to suffer an action for declaratory relief merely because the bases for refusing ultimate relief are ordinarily described as discretionary rather than jurisdictional. In other words, the guidelines for the exercise of the discretions imposed in the court as to the granting of declaratory relief may be used as a basis for terminating any particular proceeding, as long as it can be shown beyond doubt that the claim is obviously unsustainable.[37]
[36][1997] 2 VR 256.
[37]Ibid 260.
After referring to the judgment of Gibbs J in Forster v Jododex Aust Pty Ltd[38] and the judgments in University of New South Wales v Moorhouse,[39] his Honour later said:
I should state that I do not think that the mere fact that the disputant is the liquidator of a possible creditor of the insured can prevent that liquidator from raising the issue and seeking declaratory relief. I say that largely because that question has been raised and resolved in the JN Taylor case, from which leave to appeal to the High Court was refused. If the matter were not free from authority I confess I would have had the gravest doubt whether it was ordinarily appropriate to permit an outsider to seek from the court declaratory relief as to the meaning and effect of a contract between two parties who had not themselves raised any issue as to its meaning and effect and at least one of whom objected to the court’s interfering in its private affairs. In substance I believe that was the conclusion reached by the English Court of Appeal in Meadows Indemnity Co Ltd v Insurance Corp of Ireland Plc [1989] 2 Lloyd’s Rep 298, albeit that that case depended in part on some observations of members of the House of Lords in Gouriet v Union of Post Office Workers [1978] AC 435. Perhaps the dicta in that case go too far and it may be conceded that it has been the subject of considerable criticism in Zamir and Woolf, The Declaratory Judgment, 2nd ed, (1986), esp paras 3.012-6.[40]
[38](1972) 127 CLR 421, 435–6.
[39](1975) 133 CLR 1, 9–10 (Gibbs J), 24 (Jacobs J).
[40]CE Heath [1997] 2 VR 256, 270.
CGU submitted that it was evident that Ormiston JA did not accept the reasoning of the Full Court of the Supreme Court of South Australia in JN Taylor and that, in light of the later, inconsistent decision of the Queensland Court of Appeal in Interchase, this Court should now, in effect, vindicate the doubts expressed by Ormiston JA by following the later decision. We have already explained why we do not think it necessary to resolve the conflict between those authorities. Moreover, it is plain from the extracts set out above that Ormiston JA did not decide the case on the basis of jurisdictional, as distinct from discretionary grounds. Consistently with that observation, it may be noted that his Honour did no more than doubt whether it was ‘ordinarily’ appropriate to permit an outsider to seek from the court a declaration as to the effect of a contract between two parties who had not themselves raised the issue. That doubt is, with respect, quite unexceptionable. It may also be noted that Phillips JA treated the question as one of discretion rather than jurisdiction and appeared not to doubt the reasoning in JN Taylor.[41]
[41]Ibid 287–9.
The judgments in CE Heath did not address the issue upon which the reasoning in Ashmere Cove depended. Nor, as indicated, did that case turn upon or decide the question whether the Court would have jurisdiction to grant the declaration sought. We are conscious that, in Ashmere Cove, the issue of jurisdiction was conceded and the matter was determined based on discretionary considerations. However, it is not to be thought that the question of jurisdiction was overlooked. Jurisdiction cannot, of course, be conferred by concession. The reasoning of both French J and the Full Court was clearly predicated on the existence of jurisdiction in the Federal Court to grant the declaratory relief that was sought on the joinder.
The first and second respondents point out that the learned authors of Meagher, Gummow and Lehane express the view that Australian case law implicitly supports the proposition that in exceptional circumstances a court will permit a plaintiff who is not a party to a contract to seek a declaration as to rights existing under that contract.[42] The authorities referred to above, in particular Ashmere Cove, but also QBE Insurance and CE Heath, bear out that opinion.[43] They also show that if there is practical utility in resolving a matter in which the plaintiff has a real interest, this may suffice to justify making a declaration in respect of that matter.
[42]J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5th ed), 631.
[43]See also Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406; Beneficial Finance Corporation Ltd v Price Waterhouse (1996) 68 SASR 19, 22 (Cox J), 36–8 (Perry J), 52–6 (Lander J); Anjin No 13 Pty Ltd v Allianz Australia Insurance Ltd (2009) 26 VR 148, 164–5 [71]–[74] (Vickery J).
In the circumstances, we consider that, to the extent that CGU submits that the judge’s discretion miscarried by virtue of the Court lacking jurisdiction to grant the declaratory relief sought, that submission must be rejected.
As a general proposition it may be accepted that only contracting parties have an interest in the contract to which they are parties. However, as was submitted by the first and second respondents, once an insured becomes insolvent, leaving behind an unpaid claimant in respect of whose claim an insurance policy responds, the situation becomes different from that of an ordinary private contract. As the first and second respondents put it:
It is the claimant, and only the claimant, that has an interest in the insurance contract. The insured no longer has any practical commercial interest in the policy. That is the effect in relation to both company liquidation and personal bankruptcy: s 562 of the Corporations Act 2001 (Cth) and s 117 of the Bankruptcy Act 1966 (Cth). Those sections provide for payment of the insurance proceeds ‘to the third party’. Insurance proceeds in the hands of a liquidator or trustee in bankruptcy of the insured are payable to the claimant, and are not divisible among the creditors of the insured.
We accept these submissions.
The circumstances of the present case raise a real prospect that, if the plaintiffs succeed in their claim below, a liquidator of Crewe Sharp or a trustee in bankruptcy of Mr Crewe may be put in funds to pursue CGU in respect of any judgment that may be entered against Mr Crewe and/or Crewe Sharp.
Again, as the judge noted below, every court exercising jurisdiction in Victoria in any civil proceeding must exercise its jurisdiction so that all matters in dispute between the parties are completely and finally determined ‘and all multiplicity of proceedings concerning any of those matters is avoided.’[44] Further, the Civil Procedure Act 2010 mandates the just, efficient, timely and cost-effective resolution of civil proceedings.
[44]Supreme Court Act 1986, s 29.
Whether the court that ultimately hears the trial of this proceeding grants any relief against CGU is a matter that cannot be known at this stage. In the circumstances of the present proceeding, the possibility that relief may ultimately be granted exists either because Mr Crewe or Crewe Sharp may change their position, or a liquidator of Crewe Sharp or trustee in bankruptcy of Mr Crewe may ultimately take a step against CGU. CGU urged upon us the consideration that it was hypothetical what the liquidators of Crewe Sharp, or Mr Crewe or any putative trustee in bankruptcy may do upon the making of the declaration sought. It was submitted that the insured parties themselves will have nothing to gain or lose in the resolution of the matters in dispute. The first and second respondents point to the mandatory terms of s 562 of the Corporations Act 2001 (Cth) and s 117 of the Bankruptcy Act 1966 (Cth) as a basis for confidence that any declaration would have effect by force of those provisions. Again, these are matters for determination at trial. For present purposes, all that matters is that the first and second respondents have a sound basis for seeking declaratory relief, on the basis that there may be practical utility in having an issue in which they have a real interest resolved in this manner.
In our view, consistently with the way courts are expected to exercise their jurisdiction in a modern world, one could not countenance the possibility of separate proceedings between the current parties and later proceedings between a relevant liquidator or trustee in bankruptcy and CGU. For these reasons, the judge’s analysis was correct and his orders should not be disturbed. Whether there are ultimately grounds for a declaration being made against CGU is a matter for trial. It is not a matter appropriate for final determination on a joinder application.
We should say for the sake of completeness, as has been said many times before, that appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure.[45] Necessarily, the judge managing this proceeding was in a better position than this Court to assess the prospects that the circumstances of this case may ultimately justify the making of a declaration against CGU should the policy be shown to be applicable and in force during the relevant period when Akron Roads was alleged to have been insolvent. To the extent that the present application concerns an interlocutory decision on a question of practice and procedure, the fact that the applicant has been unable to establish a HousevTheKing[46] error would ordinarily mandate the refusal of this application.
[45]See for example, Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170, 177 (Gibbs CJ, Aickin, Wilson, Brennan JJ).
[46](1936) 55 CLR 499.
However, in light of the issue of jurisdiction and the state of the authorities regarding the appropriateness of joinder of an insurer at the instance of a party other than the insured, this is an unusual case in which it is appropriate to grant leave to appeal. In the circumstances, the appeal had a real prospect of success, in the sense of not being fanciful.[47]
[47]Supreme Court Act 1986, s 14C. See further, Kennedy v Shire of Campaspe [2015] VSCA 47.
Conclusion
The application for leave to appeal should be granted but the appeal must be dismissed.
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