Courtly Reo Pty Ltd v AAI Limited trading as GIO
[2018] FCA 1626
•1 November 2018
FEDERAL COURT OF AUSTRALIA
Courtly Reo Pty Ltd v AAI Limited trading as GIO [2018] FCA 1626
File number: NSD 1738 of 2018 Judge: ALLSOP CJ Date of judgment: 1 November 2018 Catchwords: INSURANCE – claim for indemnity – application to transfer matter to Supreme Court of New South Wales – good faith litigation Legislation: Insurance Contracts Act 1984 (Cth), ss 13, 54
Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth)
Cases cited: Bass v Permanent Trustee Company Ltd (1999) 198 CLR 334 Date of hearing: 29 October 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Category: Catchwords Number of paragraphs: 20 Counsel for the Applicant: TD Castle Solicitor for the Applicant: Kells The Lawyers Counsel for the Respondents: MT McCulloch SC Solicitor for the Respondents: Moray & Agnew Lawyers ORDERS
NSD 1738 of 2018 BETWEEN: COURTLY REO PTY LTD ACN 103 569 062
Applicant
AND: AAI LIMITED ABN 48 005 297 807 TRADING AS GIO
Respondent
JUDGE:
ALLSOP CJ
DATE OF ORDER:
29 OCTOBER 2018
THE COURT ORDERS THAT:
1.The matter, including the interlocutory application filed 9 October 2018, be stayed to 12 November 2018.
2.Leave be granted to the applicant to, on or before 4pm on 30 October 2018, file submissions of no more than half a page in length addressing the interlocutory application filed 9 October 2018.
THE COURT NOTES THAT:
3.The stay is made for the purpose of allowing the applicant to consider whether it wishes the proceedings in this Court to remain on foot, as a stayed matter, pending the outcome of the matter before the New South Wales Supreme Court, or whether it would prefer all matters to be heard at one time in the New South Wales Supreme Court.
4.The parties have liberty to apply on 5 days’ notice.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
ALLSOP CJ:
This matter concerns a claim under an insurance policy for indemnity in respect of claims made by a third party and pursued in the New South Wales Supreme Court.
The applicant, Courtly Reo Pty Ltd (Courtly), provides concreting services to the construction industry. Courtly obtained Business Insurance Policy (Policy) cover from the respondent, AAI Limited t/a GIO (GIO) for the period 18 March 2013 to 18 March 2014.
While it is premature to go into an in-depth exposition of the facts of this case, it is worth explaining the foundations of the dispute.
The relevant insuring clause, cl 6, is as follows:
“If ‘Public and products liability’ is shown under ‘Sections Insured’ in the schedule, we will insure you for your legal liability, provided the property damage, personal injury, or advertising liability
a)occurs during the period of insurance;
b)is caused by an occurrence in connection with the business or your products; and
c)occurs within the geographic limitations.
On 12 March 2014, there was a fire at a project site in Barangaroo. The fire damaged a crane owned by Titan Cranes and Rigging Pty Ltd (Titan). On 25 January 2018, Titan commenced proceedings in the New South Wales Supreme Court against Courtly, alleging that the fire was caused by Courtly or its employees in breach of their duty of care and seeking damages in the sum of $932,065 and interest.
Courtly made a claim under the Policy on 5 October 2017 for indemnity in respect of those proceedings.
GIO refused the claim on 10 April 2018 by letter. In that letter, GIO acknowledged that several requirements under the policy were satisfied, but relied on a number of exclusions and conditions to exclude the claim: primarily, Exclusion 21 and General Condition 3.
Exclusion 21 in the Policy excludes “Hot Work”; that is, “flame cutting, flame heating, arc or gas welding, metal grinding or any similar operation in which welding, metal grinding or cutting equipment is used, except where such use is carried out in strict compliance with all relevant statues and Australian Standards 1674.1 and 1674.2 (or any subsequent amendments).”
General Condition 3 on “Reasonable care and reducing risk” is also relevant, and specifies that the insured must take all reasonable steps to ensure that it and its tenants:
…
c)avoid or minimise loss or damage to property or injury to other people;
d)comply with all statutory obligations, by-laws, regulations, public authority requirements and safety requirements
Courtly brought its claim for indemnity to this Court and, specifically, to the Insurance List. Pursuant to an interlocutory application filed on 9 October 2018, GIO seeks an order under the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) that the matter be transferred to the New South Wales Supreme Court. Courtly opposes this application.
The Insurance List was set up in consultation with underwriters, brokers, insureds, and representatives thereof. It requires, in its despatch, a measure of what can be called “litigation good faith”, being the identification of issues, honestly, reasonably and expeditiously. That is because the very idea behind setting up the Insurance List was to assist insurers, brokers and insureds to deal with insurance issues as effectively and quickly as possible.
Courtly claims that the basis on which the declinature was made in the letter from GIO dated 10 April 2018 was merely the existence of the pleading in the commercial division of the Supreme Court that Courtly was in breach of relevant Australian standards. GIO emphasises that the determination of the facts in this case is essential to determining whether the exclusion is triggered, and that determination of these facts is before the Supreme Court.
I have read all the correspondence filed as annexures to affidavits in this case.
Pursuant to my directions in a case management hearing on 10 October 2018, there was some correspondence between the parties in respect of the provision of a number of documents and the claims in this Court, namely relating to whether the parties would be able to identify an issue for determination that was not merely hypothetical: cf Bass v Permanent Trustee Company Ltd (1999) 198 CLR 334.
On 24 October 2018, the solicitors for the applicant Courtly reiterated their position that there was real dispute about GIO’s ability to rely on Exclusion 21 to deny liability, and identified the following question for determination:
Whether the Respondent is entitled under Policy SB 90000845 to refuse to pay the claim made by the Applicant on 5 October 2017 by reason only of any non-compliance by the Applicant with Australian Standards AS 1674.1 and 1674.2.
GIO responded on the same day, maintaining its application to transfer the proceedings and stating:
2.We do not agree with your position.
3.Respectfully, the question that you have posed is purely hypothetical and academic. It does not identify the relevant operative provisions of exclusion 21, presumably because you no doubt recognise there are factually sensitive issues to determine in relation to its operation.
…
With the utmost respect, I am not persuaded that the respondent is bringing to bear the necessary spirit which informed the founding of this List. As is apparent from the correspondence between the parties filed in these proceedings, the legal representatives of GIO have (presumably acting on instructions from GIO) engaged in what appears to be detailed and repetitive point-taking. The anchor that has been thrown out appears to have a long chain.
If it can be found that, notwithstanding a particular attitude of one or more parties, a party can be dragged to a useful result in this Insurance List, that will be done. The difficulty with this case is that it is founded on a body of facts, a fire on a construction site where grinding and welding was being done. These facts yet to be determined, and their determination in the New South Wales Supreme Court will inform responsibility. The Insurance List was designed to provide a specialised forum for the targeted and co-operative resolution of discrete legal issues and avoid more costly and protracted litigation. It is not the forum for matters resting on complex factual findings, in particular where those are being litigated elsewhere.
Looking at the insurer’s first denial, it might have been thought that, notwithstanding this unpromising beginning, there may well have been a way of sorting out the insurer and insured’s issues in the absence of the fight with, perhaps, a common enemy. The total correspondence would indicate that that is, if it is a hope still held by Courtly, probably a forlorn one. As those appearing for the parties understand, litigation is not always a clean-cut operation. It can be made so with the kind of cooperation I have identified, but where that cooperation is absent, and in a case founded on such a real life practical body of events where the operation of terms of the policy and of s 54 of the Insurance Contracts Act 1984 (Cth) depend upon the outcome of the analysis of those facts, it may well be proper to conclude that forcing the matter on in this List will only be productive of more cost to the parties, here Courtly, than other courses.
Whether I make an order to cross-vest at the moment depends upon whether Courtly wishes to cross-claim in the Supreme Court proceedings against GIO or have its case against GIO stayed in this Court until that the Supreme Court proceedings are resolved. It may or may not be a matter for this Court in due course, but it might be difficult to see how, in the conduct of modern litigation, it would necessarily be a course that would have to be adopted to protect Courtly against Anshun. If Courtly takes the view, on its own advice, that it is appropriate to bring the claim forward against GIO now, I would be prepared to cross-vest the matter to the Supreme Court. For now, I propose to stay the proceedings, including the application to cross-vest, and to give the parties liberty to apply.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop. Associate:
Dated: 1 November 2018
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