Clark v Avant Insurance Ltd; Stevens v Avant Insurance Ltd

Case •

[2022] NSWCA 175

•

07 September 2022

Court of Appeal


Supreme Court


New South Wales

Medium Neutral Citation: Clark v Avant Insurance Ltd; Stevens v Avant Insurance Ltd [2022] NSWCA 175
Hearing dates: 5 September 2022
Date of orders: 5, 7 September 2022
Decision date: 07 September 2022
Before: Meagher JA; Beech-Jones JA; Lonergan J
Decision:

In proceedings 2022/8808 and 2022/8818:

(3) Order pursuant to s 14 of the Civil Procedure Act 2005 (NSW) that the requirement in UCPR r 51.4(1) that Leslie Blackstock must be joined as a party to the present leave applications and proposed appeal proceedings be dispensed with.

Catchwords:

PROCEDURE – applications for leave to appeal – where plaintiffs claimed damages from defendant doctor for medical negligence – where plaintiffs sought leave to proceed against defendant’s insurer under Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) s 5(1) – where primary judge found plaintiffs’ claims “first made” before commencement of relevant policy period – whether primary judge erred in refusing leave on basis that no arguable case that policy responded to plaintiffs’ claims

Legislation Cited:

Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), ss 4, 5

Civil Procedure Act 2005 (NSW), ss 14, 56, 57, 58

District Court Act 1973 (NSW), s 127(2)(a)

Insurance Contracts Act 1984 (Cth), s 54

Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 6(4)

Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 (Cth), ss 26A(1), 26A(4), 26D(1)

Medical Indemnity Act 2002 (Cth), Pt 2 Div 2B

Uniform Civil Procedure Rules 2005 (NSW), rr 51.4, 51.8, 51.10(1)(a)

Cases Cited:

Avant Insurance Ltd v Burnie [2021] NSWCA 272

FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd (2001) 204 CLR 641; [2001] HCA 38

Gosford City Council v GIO General Ltd (2003) 56 NSWLR 542; [2003] NSWCA 34

Guild Insurance Ltd v Hepburn [2014] NSWCA 400

HIH Casualty & General Insurance v Pade [2000] NSWCA 325

John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19

Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627

News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410

Prepaid Services Pty Ltd v Atradius Credit Insurance NV [2013] NSWCA 252; (2013) 302 ALR 732

Ross v Lane Cove Council (2014) 86 NSWLR 34; [2014] NSWCA 50

Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369

Walton v National Employers’ Mutual General Insurance Association Limited [1973] 2 NSWLR 73

Wayland v Bird [2017] NSWCA 26

Wilkiev Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17

Zurich Insurance PLC v Koper [2022] NSWCA 128

Category:Principal judgment
Parties: Rachael Clark (Applicant, proceeding 2022/8808)
Linda Stevens (Applicant, proceeding 2022/8818)
Avant Insurance Limited (Respondent)
Representation:

Counsel:

AD Campbell (Applicants)
M Windsor SC (Respondent)

Solicitors:
Gerard Malouf & Partners (Applicants)
Carter Newell Lawyers (Respondent)
File Number(s): 2022/8808; 2022/8818
Publication restriction: Nil
 Decision under appeal 
Court or tribunal:
District Court of New South Wales
Jurisdiction:
Civil
Date of Decision:
16 December 2021
Before:
Kearns ADCJ
File Number(s):
2021/873339; 2021/104103

Judgment

  1. THE COURT: Following the oral argument in these two applications for leave to appeal, each heard concurrently with the argument on its proposed appeal, the Court made the following orders:

In proceeding 2022/8808:

  1. Extend the time for the filing of the summons seeking leave to appeal to 3 June 2022.

  2. Dismiss the summons seeking leave to appeal with costs.

In proceeding 2022/8818:

  1. Extend the time for the filing of the summons seeking leave to appeal to 10 June 2022.

  2. Dismiss the summons seeking leave to appeal with costs.

  1. The Court reserved delivery of its reasons for the making of those orders. Those reasons now follow.

  2. Each of the applicants, Ms Rachael Clark and Ms Linda Stevens, as plaintiff, brought a claim in the District Court for damages for personal injury suffered as a result of the negligence of the first defendant doctor, Leslie Blackstock, in performing breast augmentation surgery. In relation to Ms Clark, that surgery was performed on 13 October 2016. The doctor performed surgery on Ms Stevens on 4 March 2012 and again in about February or March 2014. (As he is no longer registered as a medical practitioner, these reasons refer to the defendant as Mr Blackstock). The respondent, Avant Insurance Limited (Avant), was named as second defendant in each proceeding as commenced, although no part of the pleading was directed to the reason for its presence as a party.

  3. Each applicant then filed a motion in the District Court seeking leave pursuant to Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (Third Party Claims Act), s 5 to bring the proceedings against Avant as second defendant. That section relevantly provides:

5 Leave to proceed

(1) Proceedings may not be brought, or continued, against an insurer under section 4 except by leave of the court in which the proceedings are to be, or have been, commenced.

  1. Under that Act, if an insured person has an insured liability to a claimant, the claimant may recover the amount of that liability from the insurer. The recoverable amount is the amount of the indemnity to which the insured person is entitled in respect of that person’s liability to the claimant (s 4).

  2. Those motions were heard by Kearns ADCJ (the primary judge) on 18 November 2021. The arguments made and issues raised by each application were the same. On 16 December 2021, his Honour delivered oral reasons for judgment in the proceedings commenced by Ms Clark, and made orders refusing the application for leave and ordering that she pay Avant’s costs. The same orders were then made in the proceedings brought by Ms Stevens. Apart from those reasons for judgment, there is no transcript of anything said when the latter orders were made. In this Court, the parties proceeded on the basis that the orders in Ms Stevens’ application were made for the same reasons as were delivered in relation to Ms Clark’s application.

  3. Pursuant to District Court Act 1973 (NSW), s 127(2)(a), each applicant required leave to appeal because the challenged orders were interlocutory. Each also required an extension of the time in which to file her summons seeking leave to appeal.

Application for extension of time

  1. Each applicant filed a notice of intention to appeal on 11 January 2022, which was served on Avant on 17 January 2022. Accordingly, neither notice of intention to appeal was “filed and served” within 28 days of the “material date” (16 December 2021) as required by Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.8. That being so, a summons seeking leave to appeal was required to be filed within 28 days of the material date, i.e. by 13 January 2022 (UCPR, r 51.10(1)(a)). Ms Clark’s summons was filed on 3 June 2022, and Ms Stevens’ on 10 June 2022.

  2. The principles governing such an application to extend time look to the interests of justice as between the parties, having regard also to the principles in ss 56, 57 and 58 of the Civil Procedure Act 2005 (NSW). The factors generally relevant are the length of the delay, the reason for the delay, whether the applicant has a fairly arguable case, and the extent of any prejudice suffered by the respondent: Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 at [55] (Basten JA, Ipp JA agreeing).

  3. Each applicant relied on an affidavit of their common solicitor, Mr Leslie Abboud. His evidence was that he was unable to obtain a transcript of the judgment (having been delivered orally) until 12 April 2022 because until that time the draft transcript remained with the primary judge for revision. Advice was then taken from counsel. That advice was received on 28 April and was that leave to appeal should be sought. A period of about one month passed before the proceedings were commenced.

  4. In circumstances where Avant does not identify any prejudice it has suffered by reason of that delay, and where the applications for leave to appeal turn on the same issue, the extensions of time sought should be granted.

Joinder of Mr Blackstock

  1. There is a further preliminary issue which, although raised by Avant as a reason why leave to appeal should not be granted, was not further addressed in the oral argument. UCPR r 51.4(1) requires that each person who is “directly affected by the relief sought” or is “interested in maintaining the decision of the court below” be joined as a respondent. The former stipulation gives statutory effect in appeal proceedings to the test for joinder of a “necessary party” stated by a unanimous High Court in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at [131]; see also News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 524–526; and Ross v Lane Cove Council (2014) 86 NSWLR 34; [2014] NSWCA 50 at [51]-[58] (Leeming JA).

  2. Notwithstanding that he has been named as first defendant, Mr Blackstock has not filed a defence or otherwise participated in the underlying proceedings. Nor, according to other material before the Court, has he defended earlier claims for medical negligence brought against him. There is also no evidence to suggest that either applicant has taken any steps to join him in the present proceedings.

  3. Nonetheless, in circumstances where it is likely that Mr Blackstock would not have sought to participate in the appeal even if he had been joined, there is no material prejudice occasioned by the applicants’ non-compliance with UCPR r 51.4(1). Nor would someone in Mr Blackstock’s position be likely to wish to be heard against the application for leave to appeal. A favourable result for the applicants in the proposed appeal and the consequential competent joinder of Avant to the proceedings below would not alter the liability which Mr Blackstock is alleged to have incurred; and in permitting recovery in respect of that liability directly from his insurer rather than him, that joinder might even be said to produce a favourable outcome for him.

  4. In these circumstances an order also should be made pursuant to Civil Procedure Act 2005 (NSW), s 14 dispensing with the requirement in UCPR r 51.4(1) that Mr Blackstock be joined for the purpose of determining the present applications. We propose to make that order at the time these reasons are delivered.

The applicants’ claims against Mr Blackstock

  1. As noted above, each of the applicants underwent breast augmentation procedures performed by Mr Blackstock. His alleged failure to exercise due care and skill in the performance of those procedures is the subject of each applicant’s claim for damages in the District Court.

  2. On 7 March 2019 the applicants’ solicitor sent separate letters addressed to “Dr Leslie Blackstock” and to Avant on behalf of Ms Clark and Ms Stevens. The letter addressed to Mr Blackstock on behalf of Ms Clark stated:

We have received instructions to act on behalf of Ms Rachael Clark in relation to a personal injury claim for medical negligence against you for a medical procedure carried out in October 2016 at your Penrith clinic.

We hereby put you on notice that our client intends to make a claim for damages against you for the injuries, loss, and damages she has suffered.

We ask that you provide a copy of this correspondence to your indemnity insurer as a matter of urgency. (emphasis added)

  1. An identical letter (save for its reference to Ms Stevens in place of Ms Clark, and consequential differences to the dates and location of the procedures) was sent on behalf of Ms Stevens on the same day. Letters in the same terms were sent to Avant, each attaching a copy of the corresponding letter to Mr Blackstock. As appears below, at the time these letters were sent, Mr Blackstock did not have a current professional indemnity policy with Avant.

  2. On 27 August 2020 the applicants’ solicitor sent further letters to Avant on behalf of each applicant. The letter sent on behalf of Ms Clark stated:

We refer to previous correspondence. We act on behalf of Ms Rachael Clark in relation to the medical negligence claim against Dr Leslie Blackstock. We advise that Ms Clark was a patient of Dr Blackstock, and that he performed bilateral breast augmentation surgery on Ms Clark on 13 October 2016. We enclose the following:

1. Copy of our letter to Avant Mutual Group Limited dated 7 March 2019, putting Avant on notice in relation to Ms Clark’s medical negligence claim against Dr Blackstock, and

2. Copy of our letter to Dr Blackstock dated 7 March 2019 putting Dr Blackstock on notice in relation to Ms Clarke’s medical negligence claim against him.

We now refer to the recent decision of her Honour Judge Strathdee in Tara Burnie v Dr Leslie Blackstock [2020] NSWDC 452. In light of the above decision, we hereby put you on notice that we intend to make a claim against Dr Blackstock. However, we intend to direct the claim to you, as his medical indemnity insurer. We are currently in the process of obtaining expert medical evidence on liability and damage. Once we receive evidence in favour of Ms Clark’s claim, we will commence formal legal proceedings.

  1. Ms Clark’s statement of claim was filed in the District Court on 29 March 2021, and Ms Stevens’ statement of claim was filed on 25 April 2021. Each named Avant as second defendant.

Mr Blackstock’s insurance with Avant

  1. Mr Blackstock had medical practitioner indemnity insurance for periods commencing from 1 February 2000. That policy was renewed annually and, as issued by Avant, was last renewed for the period from 1 July 2017 to 30 June 2018 (the 2017-2018 policy). That policy was terminated by Avant with effect on and from 24 April 2018 for non-payment of deductibles. Thereafter Mr Blackstock had no cover until 16 May 2019, when he was declared permanently incapacitated for work as a medical practitioner.

  2. On the happening of that event, Avant was required under s 26A(1) of the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 (Cth) to provide medical indemnity cover to him that satisfied the requirements in s 26A(4) of that Act. Addressing that obligation, Avant issued to Mr Blackstock a policy schedule and wording with respect to “ROCS Indemnity Insurance” for a policy period commencing on 16 May 2019 and continuing for an indefinite period (the ROCS policy). Its doing so was in accordance with its obligation under s 26D(1) of the Medical Indemnity (Prudential Supervision and Product Standards) Act to give him notice of the cover provided. The schedule to the ROCS policy described the “Run-off period” as “14 September 2006 to 24 April 2018”. Thus the run-off insurance provided by the ROCS policy only covered claims made in relation to healthcare provided by Mr Blackstock during that period.

  3. Before the primary judge the applicants did not contend that Mr Blackstock was arguably entitled to an indemnity against each of their claims under the 2017-2018 policy. Rather, their argument was limited to the ROCS policy; and the version of the policy wording applicable was the “1 July 2017 (v 5.1)” version, i.e. the same wording as applied to the 2017-2018 policy.

  4. Part A:2 of that policy wording insured Mr Blackstock for amounts which he became legally liable to pay as compensation for civil liability “in respect of claims made against you in the policy period in relation to healthcare in private practice”. The policy period as described in the policy schedule was on or from 16 May 2019.

  5. “Claim” was defined to mean:

A demand for compensation or damages in relation to healthcare which:

(a)   is first made against you during the policy period; and

(b)   you tell us about in writing during the policy period.

  1. Thus under the ROCS policy any relevant claim had to be a “demand for compensation or damages in relation to healthcare” which was “first made” and communicated by Mr Blackstock to Avant on or after 16 May 2019 and accordingly during the period of that policy. That claim also had to be one which arose out of healthcare provided by him during the run-off period.

Reasoning of the primary judge

  1. It is accepted that an applicant for leave under Third Party Claims Act, s 5 must establish three elements. They are, first, that they have an arguable case that the insured is liable to the plaintiff; secondly, that there is an arguable case that the insurer’s policy responds to that liability; and thirdly, that there is a real possibility that the insured will be unable to satisfy any judgment against them in full. See Avant Insurance Ltd v Burnie [2021] NSWCA 272 at [8] (McCallum JA and Simpson AJA); Zurich Insurance PLC v Koper [2022] NSWCA 128 at [8] (Bell CJ). See also Wayland v Bird [2017] NSWCA 26 at [24]–[26] and Guild Insurance Ltd v Hepburn [2014] NSWCA 400 at [3] (Macfarlan JA), [44] (Meagher JA), both in relation to the now-repealed predecessor provision in Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 6(4).

  2. However, even if these three requirements are met there remains a residual discretion to refuse leave: Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627 at [17]; Wayland v Bird at [26].

  3. Before the primary judge the first of these elements was conceded (J[19]). Attention was directed primarily at the second element. Avant contended that there was no arguable case that Mr Blackstock was entitled to an indemnity under the ROCS policy because there was no demand for compensation or damages which was first made during the period of that cover. Those demands had been first made by the letters of 7 March 2019.

  4. The applicants made three responses to that contention. First, they submitted that the letters of 7 March 2019 did not contain a demand for compensation, but rather a notification of an intention to make such a demand by the bringing of proceedings in the District Court. Secondly, it was submitted that there was no evidence that Mr Blackstock had received the letters of 7 March 2019. Accordingly, any demand made by the letters had not been made to and “against” Mr Blackstock. Finally, it was suggested that the language “first made against you during the policy period” addressed attention to the first claim which was made against Mr Blackstock during a period when he had insurance. Any claims made by the letters of 7 March 2019 did not answer that description, whereas those made by the commencement of proceedings did.

  5. The primary judge expressly rejected the first two of these arguments. As to the first, his Honour held that the letters of 7 March 2019 constituted a demand for compensation, in circumstances where they asserted an existing and unsatisfied right of each of the applicants to damages for Mr Blackstock’s negligence in the procedures he had carried out (J[25]-[30]). As to the second, his Honour held that the letters had been received at Mr Blackstock’s residential address in March 2019 (J[32]-[34]).

  6. Neither of these conclusions of the primary judge was challenged in the written or oral submissions to this Court. Rather, the applicants’ submissions focussed on the third of these arguments, and in that context relied on the application of s 54 of the Insurance Contracts Act 1984 (Cth) in respect of any omission of Mr Blackstock to notify Avant of the commencement of the District Court proceedings.

The proposed grounds of appeal

  1. The applicants raised two proposed grounds of appeal:

1   His Honour erred in finding that a claim had been made under the ROCS Policy prior to 16 May 2019.

2   His Honour erred in failing to find that there was an arguable case that the ROCS Policy responded to the Appellant’s claim.

  1. In argument, counsel for the applicants accepted that in substance these grounds only raised one question, namely whether the commencement of each District Court proceeding constituted a “claim” which was “first made” and notified under the ROCS policy.

  1. Addressing each of the limbs of the definition of “Claim”, the applicants’ argument proceeded as follows. The District Court proceedings were commenced during the ROCS policy period, and satisfied the requirement that they be “first made” during that policy period because they were the first demands made at a time when Mr Blackstock had insurance, and accordingly had any “policy period”. The satisfaction of the para (a) limb of the definition was sufficient to engage the insuring clause in Part A:2 because the insurer could not rely on Mr Blackstock’s omission to notify in accordance with the para (b) limb by reason of the application of s 54 of the Insurance Contracts Act.

  2. This argument does not engage the ordinary meaning of the language in the definition of “Claim”. That language addresses two characteristics or requirements which must be satisfied before a demand for compensation or damages is taken to be a claim to which the ROCS policy responds. The first of those characteristics is that the demand is “first made against you during the policy period”. The “you” is a reference to Mr Blackstock, and the “policy period” a reference to the period on and from 16 May 2019. Thus the inquiry is whether the demand for damages made by the statements of claim in each proceeding had been made against Mr Blackstock at some time before 16 May 2019. It is not whether the demand had been made in any earlier policy period. The uncontroversial answer to that question is “yes” in circumstances where the primary judge’s conclusion that the letters of 7 March 2019 made the same demand or claim is not challenged.

  3. This construction of that language is confirmed by reference to the narrative in the policy wording under the heading “Claims made and notified policy”. That narrative states that the policy does not provide cover in relation to “claims made, threatened or intimated against you prior to the policy period” (emphasis added).

  4. In our view, the primary judge was right to conclude that, in addition to putting Mr Blackstock on notice that proceedings were to be commenced against him, the letters of 7 March 2019 constituted a demand for damages in respect of the negligence and injuries which were to be the subject of those proceedings. In communicating that their clients were entitled to damages and requesting that the letter be provided to Mr Blackstock’s “indemnity insurer”, the applicants’ solicitors were implicitly making a demand for compensation on behalf of their clients. See Bowen JA (as his Honour then was) in Walton v National Employers’ Mutual General Insurance Association Limited [1973] 2 NSWLR 73 at 82, cited by Mason P in HIH Casualty & General Insurance v Pade [2000] NSWCA 325 at [17] in a passage extracted by the primary judge at J[29].

  5. The absence of any claim “first made” during the policy period is fatal to the applicants’ contention that Mr Blackstock’s liability to them is the subject of an indemnity under the ROCS policy. The non-satisfaction of that requirement cannot be cured by the application of s 54 of the Insurance Contracts Act. As this Court (Sheller JA, Spigelman CJ and Meagher JA agreeing) observed in Gosford City Council v GIO General Ltd (2003) 56 NSWLR 542; [2003] NSWCA 34 at [36], in rejecting a similar argument as to the operation of s 54 in circumstances where the claimant had first made a claim against the insured Council outside the policy period of its “claims made” policy:

Section 54 does not permit the reformulation of the claim. It operates to prevent an insurer relying on certain acts or omissions to refuse to pay that particular claim. The actual claim made by the insured is one of the premises from which consideration of the application of s 54 must proceed. The section does not operate to relieve the insured of restrictions or limitations, such as the temporal limits within which the claim must be made upon the insured in a claims made policy, that are inherent in that claim.

See also FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd (2001) 204 CLR 641; [2001] HCA 38 at [40]-[42]; and Prepaid Services Pty Ltd v Atradius Credit Insurance NV [2013] NSWCA 252; (2013) 302 ALR 732 at [130]-[133].

  1. Finally, we should note that in support of his arguments as to the construction of the policy wording, counsel for the applicants also made reference to the provisions of the Medical Indemnity Act 2002 (Cth); and especially Pt 2 Div 2B which describes the circumstances in which “run-off cover indemnities” are payable by the Commonwealth to a medical defence organisation (MDO) or medical indemnity insurer. The short answer to this submission as made was that the policy wording to which the applicants’ arguments before the primary judge and in this Court were directed was to be construed by reference to its text, context and purpose as a commercial document and by giving preference to a “construction supplying a congruent operation to the various components of the whole” (Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [15]-[16]).

  2. More relevantly, the applicants made no argument before the primary judge or in this Court that the insurance described in the ROCS policy schedule (which constituted the notice given by Avant in accordance with its obligations under s 26D(1) of the Medical Indemnity (Prudential Supervision and Product Standards) Act) did not meet the requirements of s 26A(4). In the result, no part of the applicants’ argument before the primary judge or in this Court ventured beyond the schedule and language of the policy as described in that notice.

Conclusion and orders

  1. By way of conclusion, neither of the proposed grounds of appeal and the arguments sought to be made in support of them identified any arguable error on the part of the primary judge. For that reason, each of the applications for leave to appeal was dismissed with costs.

  2. As foreshadowed earlier, we make the following additional orders to those made on 5 September 2022:

In proceedings 2022/8808 and 2022/8818:

  1. Order pursuant to s 14 of the Civil Procedure Act 2005 (NSW) that the requirement in UCPR r 51.4(1) that Leslie Blackstock must be joined as a party to the present leave applications and proposed appeal proceedings be dispensed with.

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Decision last updated: 07 September 2022

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