Dariusz Koper v Zurich Insurance PLC

[2021] NSWSC 1587

Supreme Court

New South Wales

Medium Neutral Citation:

Dariusz Koper v Zurich Insurance PLC [2021] NSWSC 1587

Hearing dates:

30, 31 August and 12 November 2021

Date of orders:

8 December 2021

Decision date:

08 December 2021

Jurisdiction:

Equity

Before:

Rein J

Decision:

Leave granted pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW)

Catchwords:

INSURANCE — Application for leave pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (“Claims Act”) — Parties agreed that the requirements for leave under s 5 of the Claims Act were met, subject to the issue of the territorial scope of the legislation and the Court’s exercise of its residual discretion to refuse leave — Whether the Plaintiff’s application for leave itself was all that was required to enliven the jurisdictional scope of the Claims Act or whether the Plaintiff was required to establish that he could have brought proceedings in a New South Wales court against the insured (a New Zealand company) in respect of tortious conduct in New Zealand with damage suffered in New Zealand and whether, in fact, the Plaintiff could have done so — Consideration of the Court of Appeal’s decision in Chubb Insurance Company of Australia Limited v Moore [2013] NSWCA 212, including as to its applicability to the Claims Act and in ascertaining the “hinge” of the territorial scope of the Claims Act — Further, whether, assuming the requirement for leave was otherwise established, the Court should, in its residual discretion, refuse leave

CONSTITUTIONAL LAW — Commonwealth Constitution — Legislative power — Service and execution of process — Challenge to the validity of ss 9 and 10 of the Trans-Taman Proceedings Act 2010 (Cth) (“TTPA”), upon which the Plaintiff sought to rely — Consideration of whether the Commonwealth Government, by the TTPA, sought to confer jurisdiction upon State courts in a manner inconsistent with Chapter III of the Constitution — Consideration of the High Court’s decision in Flaherty v Girgis (1987) 162 CLR 574 and whether the contentions of the Defendants were inconsistent with the reasoning in that case — Held: ss 9 and 10 of the TTPA are not inconsistent with Chapter III of the Constitution

INSURANCE — Application for leave pursuant to s 5 of the Claims Act — Consideration of the Court’s residual discretion to refuse leave — Whether the Court should refuse leave on the basis that by granting leave, the Court may be interfering with the insolvency regime of New Zealand — Held: the alleged inconsistency is hypothetical only and various further factors considered as not supporting the refusal of leave — Leave granted pursuant to s 5 of the Claims Act

Legislation Cited:

Acts Interpretation Act 1901 (Cth)

Australian Constitution

Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW)

Commonwealth Public Service Act 1922 (Cth)

Companies Act 1993 (NZ)

Corporations Act 2001 (Cth)

Criminal Procedure Act 2004 (WA)

Extradition Act 1988 (Cth)

Foreign Evidence Act 1994 (Cth)

Interpretation Act 1987 (NSW)

Inter-State Destitute Persons Relief Act 1910 (SA)

Judiciary Act 1903 (Cth)

Law Reform Act 1936 (NZ)

Law Reform (Miscellaneous Provisions) Act 1946 (NSW)

Misuse of Drugs Act 1981 (WA)

Service and Execution of Process Act 1901 (Cth)

Service and Execution of Process Act 1992 (Cth)

Supreme Court Rules 1970 (NSW)

Trans-Tasman Proceedings Act 2010 (Cth)

Trans-Tasman Proceedings Bill 2009 (Cth)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Antico v Heath Fielding Australia Pty Ltd (1997) 188 CLR 652

ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559

Backhouse v Moderana (1904) 1 CLR 676

Barcelo v Electrolytic Zinc Co of Australasia Limited (1932) 48 CLR 391

Barker v Palmer (1881) 8 QBD 9

Baxter v Commissioners of Taxation (NSW); Flint v Webb (1907) 4 CLR 1087

Body Corporate 326421 v Auckland Council [2013] NZHC 753

Body Corporate 346799 v KNZ International Co Ltd [2017] NZHC 511

Burns v Corbett (2018) 265 CLR 304

Cambridge Credit Corporation Ltd v Lissenden (1987) 8 NSWLR 411

CGU Insurance Ltd v Blakeley (2016) 259 CLR 339

ChubbInsurance Company of Australia Limited v Moore [2013] NSWCA 212

Crosby v Kelly (2012) 203 FCR 451

Dixon v Royal Insurance Australia Ltd (1991) 105 ACTR 1

Doyle’s Farm Produce Pty Ltd v Murray Darling Basin Authority (No 2) [2021] NSWCA 246

DSHE Holdings Ltd (recs and mgrs apptd) (in liq) v Abboud [2017] NSWSC 579

Ex parte Bucknell (1867) 6 SCR 96

Federal Capital Commission v Laristan Building and Investment Co Pty Ltd (1929) 42 CLR 582

Felton v Mulligan (1971) 124 CLR 367

Fencott v Muller (1983) 152 CLR 570

Flaherty v Girgis (1987) 162 CLR 574

Fleming v Marshall [2011] NSWCA 86

Garsec v His Majesty the Sultan of Brunei [2008] NSWCA 211

Gosper v Sawyer (1985) 160 CLR 548

Habib v Commonwealth (2010) 183 FCR 62

Insight Vacations v Young (2011) 243 CLR 149

John Russell & Co Ltd v Cayzer, Irvine & Co Ltd [1916] 2 AC 298

Laurie v Carroll (1958) 98 CLR 310

Le Mesurier v Connor (1929) 42 CLR 481

Lipohar v The Queen (1999) 200 CLR 485

Ludgater Holdings Ltd v Gerling Australia Insurance Co Pty Ltd [2010] 3 NZLR 713

Luke v Mayoh (1921) 29 CLR 435

McCullagh v Underwriters Severally [2015] NZHC 1384

McDonald v Mabee (1917) 243 US 90

McNamara (McGrath) v Consumer Trader & Tenancy Tribunal (2005) 221 CLR 646

Meyer Heine Pty Ltd v China Navigation Co Ltd (1966) 115 CLR 10

Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457

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

Neilson v Overseas Projects Corp of Victoria (2005) 223 CLR 331

New South Wales v Commonwealth (1975) 135 CLR 337

Noyce v Parnell Property Investments Ltd [2015] NZHC 2037

Obeid v R (2015) 91 NSWLR 226

Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197

Peacock v Newtown, Marrickville and General Co-operative Building Society (No 4) Ltd (1943) 67 CLR 25

Petterson v McConnell Dowell Constructors Ltd [2018] NZHC 2379

R v Hughes (2000) 202 CLR 535

R v Kirby; Ex parte Boilermakers’ Society of Australia (1956) 94 CLR 254

R v Reid [1999] VSCA 98

R v Schildkamp [1969] 3 All ER 1640

Re Macks; Ex parte Saint (2000) 204 CLR 158

Re Wakim; Ex parte McNally (1999) 198 CLR 511

Regie National des Usines Renault SA v Zhang (2002) 210 CLR 491

Renton v Renton (1918) 25 CLR 291

Rizeq v Western Australia (2017) 262 CLR 1

Robinson v Vogelsang (No 1) [2015] NSWSC 1670

Ruhani v Director of Police (2005) 222 CLR 489

Tana v Baxter (1986) 160 CLR 572

The Commonwealth v Dalton (1924) 33 CLR 452

The Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479

The Ombudsman v Moroney [1983] 1 NSWLR 317

Truong v The Queen (2004) 223 CLR 122

Victoria v Commonwealth (1996) 187 CLR 416

Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538

Wayland v Bird [2017] NSWCA 26

Webster v Brewer [2020] FCA 622

Westpac Banking Corporation v ASIC (2009) 181 FCR 379

XYZ v The Commonwealth (2006) 227 CLR 532

Texts Cited:

D C Pearce, Statutory Interpretation in Australia (7th ed, 2011, LexisNexis)

James Stellios, The Federal Judicature – Chapter III of the Constitution (2nd ed, 2020, LexisNexis)

Leslie Zines, The High Court and The Constitution (5th ed, 2008, The Federation Press)

Mark Leeming, Authority to Decide – The Law of Jurisdiction in Australia (2nd ed, 2020, The Federation Press)

N Rein, “Choosing your life raft: A review of Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 6 and its analogues” (2007) 81 ALJ 180

North (ed), Cheshire Private International Law (9th ed, 1974, Butterworth)

R D Giles, “Reflections on Section 6” (1996) 7 Insurance Law Journal 152

Second Reading Speech, Trans-Tasman Proceedings Bill 2009 (Hansard, House of Representatives, 25 November 2009, 12769-71)

Category:

Principal judgment

Parties:

Dariusz Koper (Plaintiff)
Zurich Insurance PLC (First Defendant)
Aspen Insurance UK Limited (Second Defendant)

Representation:

Counsel:
Mr P Braham SC with Mr B O’Connor and Ms M Caristo (Plaintiff)

Mr G Rich SC with Mr G Ng (Defendants)

Mr B Lim (Intervener)

Solicitors:
Piper Alderman (Plaintiff)

Wotton & Kearney (Defendants)

Australian Government Solicitor (Intervener)

File Number(s):

2021/91398

Publication restriction:

Nil

Judgment

1. The Plaintiff in these proceedings owns (or owned) an apartment in Auckland, New Zealand, in a complex known as the Victopia Apartments. The complex suffered from significant building defects. The Plaintiff, as representative of all the other affected owners, sued, inter alia, the builder, Brookfield Multiplex Constructions (NZ) Limited (in Liquidation) (“BMX”), in the New Zealand High Court and recovered a judgment of NZD 53,124,719.76 against BMX. The judgment of the New Zealand High Court is recorded in Body Corporate 346799 v KNZ International Co Ltd [2017] NZHC 511, and I shall refer to that judgment as “the New Zealand Judgment”. BMX is a wholly owned subsidiary of Multiplex Constructions Pty Ltd (formerly known as Brookfield Multiplex Pty Ltd) (“BMPL”).

2. A portion of the New Zealand Judgment debt was paid by the Auckland City Council, possibly as part of a settlement, and BMX subsequently went into liquidation. NZD 23,124,719.76 remains owing by BMX under the New Zealand Judgment to the Plaintiff and the group members whom he represents. There are significant other debts owed by BMX and the total of those debts is said to be approximately NZD 83,000,000. Some of those debts arise out of claims of a similar kind to those brought by the Plaintiff against BMX but in respect of another building in New Zealand known as Century on Anzac. As at 3 December 2020, BMX had a cash balance of NZD 1,716,519: see page 429 of Exhibit ASM-1.

3. It is no secret that the litigation brought by the Plaintiff has been funded by a litigation funder. That the Plaintiff’s representation is funded by a litigation funder was raised by the Defendants on the Plaintiff’s application for leave pursuant to s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (“the Claims Act”). I shall return to the significance of the ligation funding later in these reasons.

4. BMX is a named insured in a policy of insurance effected by BMPL with Zurich Insurance PLC (“Zurich”) as lead insurer. There are many other insurers who are named in that policy, but I shall refer to Zurich in the balance of these reasons as comprehending all of them unless the context requires otherwise. After the hearing on 30 and 31 August 2021, the Plaintiff amended its claim to join Aspen Insurance UK Limited (“Aspen Insurance”), one of the other insurers. This proposed amendment was not opposed by Zurich.

5. In August 2021, the Plaintiff commenced proceedings against Zurich in the Commercial List, a List within the Equity Division, seeking to recover the balance of the judgment debt from Zurich relying on the provisions of the Claims Act. I shall refer to those proceedings as “the Commercial List Proceedings”.

6. Mr P Braham SC with Mr B O’Connor and Ms M Caristo appeared for the Plaintiff. Mr G Rich SC with Mr G Ng appeared for Zurich.

7. The Claims Act requires a person who wishes to claim against an insurer pursuant to that Act to obtain leave of the Court. The Plaintiff, by these proceedings in the General List, seeks the leave required by the Claims Act. Zurich resists the application for leave. Its primary and fundamental opposition is based on its contention that this Court has no jurisdiction to entertain proceedings under the Claims Act given that:

1. the claimant is a New Zealand resident with no connection with Australia;

2. the insured is a New Zealand company with no presence in Australia;

3. Zurich has no presence in Australia; and

4. proceedings against the insured have been commenced and determined in a New Zealand court.

8. There is no contest that each of [7(1)], [7(2)] and [7(4)] are correct. Item [7(3)] applies to Zurich itself but does not apply to Aspen Insurance (and possibly some other named insurers), which does have a presence in New South Wales.

9. On the question of connection with New South Wales, there is one further matter of potential importance; namely, that the insurance policy issued by Zurich provides (see CB 156):

“The interpretation of the terms conditions and exclusions of this Policy (and any phrase or word contained therein) shall be governed and construed in accordance with the law of the Commonwealth of Australia and the Insurers and the Insured hereby agree to submit to the exclusive jurisdiction of any competent Court in the Commonwealth of Australia. Any dispute or Claim arising out of or in connection with this insurance, its formation or existence or the breach, termination or validity thereof shall be settled in accordance with the law of the Commonwealth of Australia.”

10. The parties are agreed that to obtain leave pursuant to s 5 of the Claims Act, a claimant must establish that he has an arguable case that the insured is liable to him, that the policy responds and that the insured is not able to meet his claim in full: see Murphy, McCarthy & Associates Pty Limited v Zurich Australian Insurance Limited [2018] NSWSC 627 at [17] per Hammerschlag J (“Murphy”). However, even where these conditions are met, there still exists a “residual discretion to refuse leave”: Murphy at [17].

11. Zurich accepts that the three conditions referred to in [10] are met but advances the following reasons why the Plaintiff’s Summons should be dismissed:

1. The Claims Act does not cover a claim against an insurer by a New Zealand resident in respect of a tort committed in New Zealand by a New Zealand tortfeasor and where all the loss and damage suffered by the claimant is in New Zealand – i.e. the present case does not fall within the territorial scope of the Claims Act. BMX, it asserts, could not have been properly sued in New South Wales. I shall refer to this as “the jurisdictional point”.

2. Even if the first proposition is not accepted, the residual discretion to refuse leave pursuant to s 5 of the Claims Act should be exercised against the Plaintiff because these proceedings would involve an intrusion into the New Zealand insolvency scheme which would undermine the New Zealand insolvency legislation producing a result which is inconsistent with that scheme. I shall refer to this point as “the inconsistency point”.

12. The jurisdictional point has two aspects. The first is whether all that is required is that a claimant commence proceedings in a New South Wales court (as the Plaintiff contends) as a matter of construction of the section and whether that is supported by the authority of the Court of Appeal’s decision in ChubbInsurance Company of Australia Limited v Moore [2013] NSWCA 212 (“Chubb”). The second aspect is that Zurich contends that the Plaintiff could not have brought proceedings against BMX because BMX is a New Zealand resident and none of the events the subject of the Commercial List Proceedings have a New South Wales element and because Schedule 6 to the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) provides no basis for service on BMX. The Plaintiff contends that Schedule 6 is not relevant because, he asserts, the relevant provisions are ss 8-10 of the Trans-Tasman Proceedings Act 2010 (Cth) (“TTPA”). Zurich contends that:

1. as a matter of construction, the TTPA is not available in the present circumstances; and

2. if it otherwise is to be interpreted as giving power, it is an invalid exercise of Commonwealth legislative power (“the Constitutional Issue”).

13. At the heart of the dispute with which the Court is now concerned are the terms of the Claims Act, which I shall set out below in conjunction with other pieces of legislation and rules which do, or may, have a bearing on the matter, but before doing so, I should make reference to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (“the LRMPA”). That enactment was the predecessor to the Claims Act and is a piece of legislation which gave rise to much litigation. There are a number of articles on the Claims Act and, in “Choosing your life raft: A review of Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 6 and its analogues” (2007) 81 ALJ 180, I sought to summarise the effect of the Act and in an earlier article, “Reflections on Section 6” (1996) 7 Insurance Law Journal 152, R D Giles, writing extrajudicially, explained, in his characteristically lucid fashion, the intricacies of the legislation and called for its reform. Included in the legislative material are the terms of relevant sections of the TTPA and sections of the Australian Constitution (“Constitution”).

14. The LRMPA is important not only because it is the direct progenitor of the Claims Act but because, in a five judge bench, the Court of Appeal, in Chubb, expressed views on the section’s operation on which both parties in this litigation rely as applicable to the Claims Act.

15. As a result of the constitutional issue which has arisen, several s 78B notices have been given to the Attorneys-General of the States, Territories and Commonwealth. The Commonwealth has decided to intervene pursuant to s 78A of the Judiciary Act 1903 (Cth) (“Judiciary Act”) and issued its own s 78B notice. Mr B Lim of Counsel appeared for the Commonwealth Attorney-General (“CAG”).

16. There is no dispute that the Claims Act introduces a new statutory cause of action. The cause of action is based on X having been damaged by the tortious act of Y and permits X to sue Y’s insurer directly. In that suit, X has all the rights against Y’s insurer as X has against Y and Y’s insurer has all the rights that Y has against X and can run all of the defences against X that it (as insurer) could have run against Y (such as non-disclosure or absence of cover for the particular claim or breach of terms of the insurance contract).

17. The principal questions which I am called on to decide in this case are, in essence:

1. What is the territorial reach of the Claims Act?

2. Is the territorial reach established by the commencement of proceedings in this Court against the insurer?

3. Does Chubb support the contentions of the Plaintiff or Zurich?

4. What is the precedential status of Chubb?

5. If the answer to [17(2)] is no, does the Plaintiff have to establish that he could have sued BMX in New South Wales?

6. If the answer to [17(5)] is yes, would the Plaintiff have been able to rely on the TTPA to have sued BMX in New South Wales with the consequence that the proceedings against Zurich are within the territorial reach of the Claims Act?

7. If the answer to [17(6)] is yes, should the Court nevertheless refuse leave on the basis of the inconsistency point?

18. The Plaintiff contends that:

1. the commencement of proceedings against Zurich under the Claims Act is sufficient;

2. alternatively, if Zurich’s first contention is accepted (that is, that the Plaintiff must establish that he could have sued BMX in New South Wales), he could have sued BMX in New South Wales;

3. he can sue Aspen in New South Wales because Aspen has a corporate presence in the jurisdiction (and hence can join the other insurers by virtue of Schedule 6 of the UCPR); and

4. he can sue Zurich and all the other insurers because, by the policy, the parties have agreed that Australian courts are to have exclusive jurisdiction and that the contract of insurance is governed by and to be construed in accordance “with the law of the Commonwealth”.

19. The Plaintiff accepts that Chubb does not support [18(3)] or [18(4)] above, but wishes to preserve that argument should an appeal need to be brought.

20. The case, it will be recognised, is one of some complexity and I wish to record my appreciation of the extensive assistance which all Counsel and their instructing solicitors have provided to the Court in this matter.

Legislative Background to the Dispute

21. The legislation and related materials are these:

1. Sections 3-10 of the Claims Act, which provide:

“3 Definitions

(1) In this Act:

claimant—see section 4.

court means a court or tribunal of New South Wales.

insured liability means a liability in respect of which an insured person is entitled to be indemnified by the insurer.

insured person means a person who is, in respect of a liability to a third party, entitled to indemnity pursuant to the terms of a contract of insurance, and includes a person who is not a party to the contract of insurance but is specified or referred to in the contract, whether by name or otherwise, as a person to whom the benefit of the insurance cover provided by the contract extends.

liability means a liability to pay damages, compensation or costs.

Note—

The Interpretation Act 1987 contains definitions and other provisions that affect the interpretation and application of this Act.

(2) Notes included in this Act do not form part of this Act.

4 Claimant may recover from insurer in certain circumstances

(1) If an insured person has an insured liability to a person (the claimant), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court.

(2) The amount of the insured liability is the amount of indemnity (if any) payable pursuant to the terms of the contract of insurance in respect of the insured person’s liability to the claimant.

(3) In proceedings brought by a claimant against an insurer under this section, the insurer stands in the place of the insured person as if the proceedings were proceedings to recover damages, compensation or costs from the insured person. Accordingly (but subject to this Act), the parties have the same rights and liabilities, and the court has the same powers, as if the proceedings were proceedings brought against the insured person.

(4) This section does not entitle a claimant to recover any amount from a re-insurer under a contract or arrangement for re-insurance.

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.

(2) An application for leave may be made before or after proceedings under section 4 have been commenced.

(3) Subject to subsection (4), the court may grant or refuse the claimant’s application for leave.

(4) Leave must be refused if the insurer can establish that it is entitled to disclaim liability under the contract of insurance or under any Act or law.

6 Time for commencing proceedings

(1) Proceedings to recover an amount from the insurer under section 4 must be commenced within the same limitation period that applies under the Limitation Act 1969 or other Act to the claimant’s cause of action against the insured person in respect of the insured liability.

(2) Subsection (1) does not apply if the claimant has brought proceedings against the insured person in respect of the insured liability before the expiry of the limitation period applying to those proceedings, including any extension of the limitation period granted under the Limitation Act 1969 or other Act by a court.

7 Matters on which insurer may rely

In proceedings brought under section 4, the insurer is entitled to rely on any defence or any other matter in answer to the claim or in reduction of its liability to the claimant:

(a) that the insurer would have been entitled to rely on in a claim made by the insured person under the contract of insurance, or

(b) that the insured person would have been entitled to rely on in proceedings brought by the claimant against the insured person in respect of the insured liability.

8 Judgment against insured person no bar to claim against insurer

A judgment or order for damages, compensation or costs in favour of the claimant against the insured person in respect of an insured liability does not prevent the claimant from recovering an amount for the damages, compensation or costs under section 4, except to the extent that the judgment or order has been satisfied.

9 Discharge of insurer’s liability

Any payment made by the insurer to the claimant under this Act in respect of an insured liability discharges, to the extent of the payment, the liability of the insurer to make a payment to the insured person under the contract of insurance in respect of the insured liability.

10 Effect of payments made by insurer to insured person

An insurer’s liability to a claimant under this Act is not reduced, discharged or otherwise affected by:

(a) any compromise or settlement between the insurer and the insured person in respect of the insured liability, or

(b) any payment by the insurer to the insured person in respect of the insured liability unless and to the extent that the amount of the payment is or has been paid by the insured person to the claimant in respect of the insured liability.”

2. Section 6 of the LRMPA, which provides:

“6 Amount of liability to be charge on insurance moneys payable against that liability

(1) If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of the person’s liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability.

(2) If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured (being a corporation) is being wound up, or if any subsequent winding-up of the insured (being a corporation) is deemed to have commenced not later than the happening of that event, the provisions of subsection (1) shall apply notwithstanding the winding-up.

(3) Every charge created by this section shall have priority over all other charges affecting the said insurance moneys, and where the same insurance moneys are subject to two or more charges by virtue of this Part those charges shall have priority between themselves in the order of the dates of the events out of which the liability arose, or, if such charges arise out of events happening on the same date, they shall rank equally between themselves.

(4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured:

Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken.

(5) Such an action may be brought although judgment has been already recovered against the insured for damages or compensation in respect of the same matter.

(6) Any payment made by the insurer under the contract of insurance without actual notice of the existence of any such charge shall to the extent of that payment be a valid discharge to the insurer, notwithstanding anything in this Part contained.

(7) No insurer shall be liable under this Part for any greater sum than that fixed by the contract of insurance between the insurer and the insured.

(8) Nothing in this section shall affect the operation of any of the provisions of the Workers Compensation Act 1987 or the Motor Vehicles (Third Party Insurance) Act 1942.

(9) Despite subsection (8), this section applies in relation to a policy of workers compensation insurance entered into by an employer (whether entered into before or after the commencement of this subsection), where the employer:

(a) being a natural person, has died, or is permanently resident outside the Commonwealth and its Territories, or cannot after due inquiry and search be found, or

(b) being a corporation (other than a company that has commenced to be wound up), has ceased to exist, or

(c) being a company, corporation, society, association or other body (other than a company that has commenced to be wound up), was at the time when it commenced to employ workers to which the policy relates incorporated outside the Commonwealth and its Territories and registered as a foreign company under the laws of any State or Territory and is not so registered under any such law, or

(d) being a company, is in the course of being wound up.”

3. Rules 11.3-11.5 of the UCPR, which provide:

“11.3 Division does not apply to service in New Zealand of documents for or in certain trans-Tasman proceedings

This Division (which contains rules on service outside of Australia) does not apply to service in New Zealand of an originating process for, or of any other document to be served in or for, a proceeding an originating process for which may be served in New Zealand under Division 2 of Part 2 of the Trans-Tasman Proceedings Act 2010 of the Commonwealth.

11.4 Cases for service of originating process

(1) Originating process may be served outside of Australia without leave in the circumstances referred to in Schedule 6.

(2) This rule extends to originating process to be served outside Australia in accordance with the Hague Convention.

11.5 When allowed with leave

(1) In any proceeding when service is not allowed under Schedule 6, an originating process may be served outside of Australia with the leave of the court.

(2) An application for leave under this rule must be made on notice to every party other than the person intended to be served.

(3) A sealed copy of every order made under this rule must be served with the document to which it relates.

(4) An application for leave under this rule must be supported by an affidavit stating any facts or matters related to the desirability of the court assuming jurisdiction, including the place or country in which the person to be served is or possibly may be found, and whether or not the person to be served is an Australian citizen.

(5) The court may grant an application for leave if satisfied that—

(a) the claim has a real and substantial connection with Australia, and

(b) Australia is an appropriate forum for the trial, and

(c) in all the circumstances the court should assume jurisdiction.”

4. Schedule 6 of the UCPR, which provides:

“Schedule 6 Service outside of Australia without leave

An originating process may be served outside of Australia without leave in the following cases—

(a) when the claim is founded on a tortious act or omission—

(i) which was done or which occurred wholly or partly in Australia, or

(ii) in respect of which the damage was sustained wholly or partly in Australia,

(b) when the claim is for the enforcement, rescission, dissolution, annulment, cancellation, rectification, interpretation or other treatment of, or for damages or other relief in respect of a breach of, a contract which—

(i) was made or entered into in Australia, or

(ii) was made by or through an agent trading or residing within Australia, or

(iii) was to be wholly or in part performed in Australia, or

(iv) was by its terms or by implication to be governed by Australian law or to be enforceable or cognizable in an Australian court,

(c) when the claim is in respect of a breach in Australia of any contract, wherever made, whether or not that breach was preceded or accompanied by a breach outside of Australia that rendered impossible the performance of that part of the contract that ought to have been performed in Australia,

(d) when the claim—

(i) is for an injunction to compel or restrain the performance of any act in Australia, or

(ii) is for interim or ancillary relief in respect of any matter or thing in or connected with Australia, where such relief is sought in relation to judicial or arbitral proceedings commenced or to be commenced, or an arbitration agreement made, in or outside Australia (including without limitation interim or ancillary relief in relation to any proceedings under the International Arbitration Act 1974 of the Commonwealth or the Commercial Arbitration Act 2010), or

(iii) without limiting subparagraph (ii), is an application for a freezing order or ancillary order under Division 2 of Part 25 in respect of any matter or thing in or connected with Australia,

(e) when the subject matter of the claim is land or other property situated in Australia, or any act, deed, will, instrument, or thing affecting such land or property, or the proceeding is for the perpetuation of testimony relating to such land or property,

(f) when the claim relates to the carrying out or discharge of the trusts of any written instrument of which the person to be served is a trustee and which ought to be carried out or discharged according to Australian law,

(g) when any relief is sought against any person domiciled or ordinarily or habitually resident in Australia (whether present in Australia or not),

(h) when any person outside of Australia is—

(i) a necessary or proper party to a proceeding properly brought against another person served or to be served (whether within Australia or outside Australia) under any other provision of these rules, or

(ii) a defendant to a claim for contribution or indemnity in respect of a liability enforceable by a proceeding in the court,

(i) when the claim is for the administration of the estate of any deceased person who at the time of his or her death was domiciled in Australia or is for any relief or remedy which might be obtained in any such proceeding,

(j) when the claim arises under an Australian enactment and—

(i) any act or omission to which the claim relates was done or occurred in Australia, or

(ii) any loss or damage to which the claim relates was sustained in Australia, or

(iii) the enactment applies expressly or by implication to an act or omission that was done or occurred outside Australia in the circumstances alleged, or

(iv) the enactment expressly or by implication confers jurisdiction on the court over persons outside Australia (in which case any requirements of the enactment relating to service must be complied with),

(k) when the person to be served has submitted to the jurisdiction of the court,

(l) when a claim is made for restitution or for the remedy of constructive trust and the alleged liability of the person to be served arises out of an act or omission that was done or occurred wholly or partly in Australia,

(m) when it is sought to recognise or enforce any judgment,

(n) when the claim is founded on a cause of action arising in Australia,

(o) when the claim affects the person to be served in respect of his or her membership of a corporation incorporated in Australia, or of a partnership or an association formed or carrying on any part of its affairs in Australia,

(p) when the claim concerns the construction, effect or enforcement of an Australian enactment,

(q) when the claim—

(i) relates to an arbitration held in Australia or governed by Australian law, or

(ii) is to enforce in Australia an arbitral award wherever made, or

(iii) is for orders necessary or convenient for carrying into effect in Australia the whole or any part of an arbitral award wherever made,

(r) when the claim is for relief relating to the custody, guardianship, protection or welfare of a minor present in Australia or who is domiciled or ordinarily or habitually resident in Australia (whether present in Australia or not),

(s) when the claim, so far as it concerns the person to be served, falls partly within one or more of the above paragraphs and, as to the residue, within one or more of the others of the above paragraphs.”

5. Relevant parts of sections 3, 4, 8, 9, 10, 17 and 20 of the TTPA, which read:

“3 Purpose of, and guide to, this Act

The purpose of this Act is to:

(a) streamline the process for resolving civil proceedings with a trans‑Tasman element in order to reduce costs and improve efficiency…

4 Definitions

…

Australian court means:

(a) a federal court; or

(b) a court of a State or Territory.

…

civil proceeding means a proceeding that is not a criminal proceeding.

…

excluded matter means:

(a) the dissolution of a marriage; or

(b) the enforcement of:

(i) an obligation under Australian law to maintain a spouse or a de facto partner (within the meaning of the Acts Interpretation Act 1901); or

(ii) an obligation under New Zealand law to maintain a spouse, a civil union partner (within the meaning of the Civil Union Act 2004 of New Zealand) or a de facto partner (within the meaning of the Property (Relationships) Act 1976 of New Zealand); or

(c) the enforcement of a child support obligation.

…

8 Application of this Part

(1) This Part applies to:

(a) a civil proceeding commenced in an Australian court; and

(b) a civil proceeding commenced in an Australian tribunal, but only if:

(i) the tribunal’s procedural rules permit an initiating document relating to the proceeding to be served outside Australia; and

(ii) the tribunal is prescribed by the regulations.

(2) However, this Part does not apply to:

(a) a civil proceeding that relates wholly or partly to an excluded matter; or

(b) a civil proceeding that relates wholly or partly to an action in rem; or

(c) a civil proceeding in an Australian tribunal, being a civil proceeding of a kind prescribed by the regulations; or

(d) a civil proceeding that relates to a matter of a kind prescribed by the regulations.

(3) For the purposes of subparagraph (1)(b)(ii), the regulations must not prescribe a tribunal unless, at the time of making the regulations, the tribunal is declared under section 55 of the NZ Act to be a tribunal to which subpart 5 of Part 2 of that Act applies.

9 Service of initiating documents in New Zealand

(1) An initiating document issued by an Australian court or tribunal that relates to the proceeding may be served in New Zealand under this Part.

(2) However, the document must be served in New Zealand in the same way that the document is required or permitted, under the procedural rules of the Australian court or tribunal, to be served in the place of issue.

Note: For service of the initiating document in New Zealand under this Part, it is not necessary for the Australian court or tribunal:

(a) to give leave for the service; or

(b) to be satisfied that there is a connection between the proceeding and Australia.

10 Effect of service under section 9

Service of an initiating document in New Zealand under section 9:

(a) has the same effect; and

(b) gives rise to the same proceeding;

as if the initiating document had been served in the place of issue.

Note: For initiating documents issued by an Australian court, the defendant may apply to the Australian court to stay the proceeding on the grounds that a New Zealand court is the more appropriate court: see Part 3. In some cases, the defendant and the defendant’s lawyer may appear remotely in that stay proceeding without the court’s leave: see subsection 18(4).

…

17 Application to stay Australian proceeding on forum grounds

(1) A defendant in a civil proceeding in an Australian court may apply to the court for an order staying the proceeding on the grounds that a New Zealand court is the more appropriate court to determine the matters in issue.

(2) The application must be made within:

(a) 30 working days of the Australian court after the day on which the defendant was served with the initiating document for the proceeding; or

(b) if, before or after the end of that period, the plaintiff or defendant applies to the Australian court for a shorter or longer period—any shorter or longer period the Australian court considers appropriate.

…

20 Exclusive choice of court agreements

(1) On application under section 17 (and despite section 19), the Australian court:

(a) must, by order, stay the proceeding, if satisfied that an exclusive choice of court agreement designates a New Zealand court as the court to determine the matters in issue; and

(b) must not, by order, stay the proceeding, if satisfied that an exclusive choice of court agreement designates an Australian court as the court to determine those matters.

(2) Paragraph (1)(a) does not apply to an exclusive choice of court agreement if the Australian court is satisfied that:

(a) it is null and void under New Zealand law (including the rules of private international law); or

(b) a party to it lacked the capacity to conclude it under Australian law; or

(c) giving effect to it would lead to a manifest injustice or would be manifestly contrary to Australian public policy; or

(d) for exceptional reasons beyond the control of the parties to it, it cannot reasonably be performed; or

(e) the court designated by it as the court to determine the matters in issue between the parties to the proceeding has decided not to determine those matters.

(2A) Paragraph (1)(b) does not apply to an exclusive choice of court agreement if the Australian court is satisfied that it is null and void under Australian law (including the rules of private international law).

(3) Exclusive choice of court agreement, in relation to matters in issue between parties to a proceeding, means a written agreement between those parties that:

(a) designates the courts, or a specified court or courts, of a specified country, to the exclusion of any other courts, as the court or courts to determine disputes between those parties that are or include those matters; and

(b) is not an agreement the parties to which are or include an individual acting primarily for personal, family, or household purposes; and

(c) is not a contract of employment.”

6. Sections 51(xxiv), 51(xxix), 71, 75, 76 and 77 of the Constitution, which read:

“51 Legislative powers of the Parliament

The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:

…

(xxiv) the service and execution throughout the Commonwealth of the civil and criminal process and the judgments of the courts of the States;

…

(xxix) external affairs;

…

71 Judicial power and Courts

The judicial power of the Commonwealth shall be vested in a Federal Supreme Court, to be called the High Court of Australia, and in such other federal courts as the Parliament creates, and in such other courts as it invests with federal jurisdiction. The High Court shall consist of a Chief Justice, and so many other Justices, not less than two, as the Parliament prescribes.

…

75 Original jurisdiction of High Court

In all matters:

(i) arising under any treaty;

(ii) affecting consuls or other representatives of other countries;

(iii) in which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party;

(iv) between States, or between residents of different States, or between a State and a resident of another State;

(v) in which a writ of Mandamus or prohibition or an injunction is sought against an officer of the Commonwealth;

the High Court shall have original jurisdiction.

76 Additional original jurisdiction

The Parliament may make laws conferring original jurisdiction on the High Court in any matter:

(i) arising under this Constitution, or involving its interpretation;

(ii) arising under any laws made by the Parliament;

(iii) of Admiralty and maritime jurisdiction;

(iv) relating to the same subject‑matter claimed under the laws of different States.

77 Power to define jurisdiction

With respect to any of the matters mentioned in the last two sections the Parliament may make laws:

(i) defining the jurisdiction of any federal court other than the High Court;

(ii) defining the extent to which the jurisdiction of any federal court shall be exclusive of that which belongs to or is invested in the courts of the States;

(iii) investing any court of a State with federal jurisdiction.

22. It will be observed that the Claims Act, in contrast to s 6 of the LRMPA, does not rely on the concept of charge at all. The right is a right to sue the insurer directly and, unlike s 6 of the LRMPA, s 4 of the Claims Act does not specify that the proceedings against the insurer must be brought in the same court as if the action were one to recover damages.

Factual Background

23. Sufficient factual background to the underlying dispute that led to the New Zealand Judgment is conveniently found in the summary by Thomas J (as her Honour then was) at [7]-[18] of the New Zealand Judgment:

“7. In 2002 the first defendant, KNZ [International Co Limited], engaged ADC Architects to prepare designs for the construction of the Building being a 16 level (including two basement levels) 203 unit apartment building at the Property to be known as Victopia Apartments.

8. In 2002/2003 ADC Architects prepared plans and a specification for the construction of the Building. KNZ engaged Tonkin & Taylor to provide a geotechnical report and the engineer Stephen Mitchell to provide structural designs for the Building.

9. In July 2003 KNZ took title to the Property.

10. On 1 November 2003 KNZ entered into a contract with [Brookfield] Multiplex [Constructions (NZ) Limited (In Liquidation)] to construct the Building (the Contract). KNZ engaged Brian Duffy of Contrado Ltd as engineer to the Contract.

11. On 21 July 2003 ADC Architects applied to the [Auckland City] Council on behalf of KNZ for building consent for stage one of the Building, being the basement structure up to podium level. On 15 September 2003, the Council issued a building consent for the stage one works.

12. On 22 September 2003 Multiplex applied to the Council on behalf of KNZ for a building consent for stage two of the Building, being the structure and fire report. On 7 November 2003 the Council issued building consent for the stage two works.

13. On 8 December 2003 Multiplex applied to the Council on behalf of KNZ for a building consent for stage three of the Building, being the architectural building services and balance of structure (roof and canopies). On 27 May 2004 the Council issued building consent for the stage three works. It is the stage three works which are the subject of the claims in this proceeding.

14. In the period from July 2003 until May 2005, Multiplex and its subcontractors constructed the Building. The Council undertook inspections.

15. On 17 May 2005 the Council issued Code Compliance Certificates (CCCs) for the construction of the Building.

16. In November 2011, the first plaintiff, Victopia body corporate 346799 (the Body Corporate), engaged Maynard Marks Building Consultants to investigate defects in the Building including cracking to the exterior cladding and leaks in the podium and level 14 balconies. The Body Corporate asked Maynard Marks to advise on the remedial works necessary to remedy the defects and to prepare designs for the remedial work.

17. From 2012 until 2015 Maynard Marks and its subconsultants undertook investigations of the Building. They identified four main defects, the cracking of the Eterpanel cladding system (one of three cladding systems on the Building), the failure of the balcony membranes, defective waterproofing to the ground level podium (carpark) and passive fire (fire stopping) defects.

18. The plaintiffs issued proceedings against the defendants on 19 October 2012.”

24. On 3 December 2012, BMX was placed into liquidation.

25. For the period from 31 March 2012 to 31 March 2013, Zurich issued various professional indemnity policies to BMPL and its subsidiaries, including BMX, which constituted what has been described as a professional indemnity “tower” of insurance for BMPL and its subsidiaries, with the First Excess Policy, the Second Excess Policy and the Third Excess Policy “following form” with the Primary Policy. The Primary Policy was a “claims made and notified” policy of insurance. The total amount of cover under all layers is £40,000,000: see T58.21 at the hearing on 30 August 2021.

26. Although the Primary Policy contained many exclusions, only exclusion 9 is relevant to the present dispute. That exclusion is referred to as the “defective workmanship exclusion” and provides:

“The Insurer shall not be liable under this Policy to indemnify the Insured in respect of any Claim:

…

9. arising out of defective workmanship by or on behalf of the Insured, defective materials, manual labour operations, or any defective materials, workmanship or production techniques used in the actual manufacture of any product.

This Exclusion shall not apply where such liability is otherwise indemnifiable hereunder and arises from:

(a) an act of neglect or error or omission with respect to the design or specification of materials; or

(b) an act of neglect or error or omission with respect to advice given in connection with the selection of materials

undertaken by professionally qualified persons or personnel as per item a) of Definition of Professional Activities and Duties”

27. Zurich claims that any problems with the Plaintiffs’ apartment and the building were as a result of defective workmanship either wholly or in part and the Plaintiff contends that the cause was defective design. I am not required to consider that issue further because Zurich, as I have noted, accepts that the Plaintiff has an arguable case that the exclusion does not apply.

The Law Reform’s Report

28. I have earlier set out the terms of s 6 of the LRMPA. In November 2016, the New South Wales Law Reform Commission delivered its review of s 6 of the LRMPA in “Report 143 - Third Party Claims on Insurance Money: Review of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946” (“the Report”), by which the Commission recommended the abolition of s 6 of the LRMPA and the enactment of new legislative provisions which recommendations were adopted in large measure by the New South Wales Government leading to the enactment of the Claims Act.

29. The Plaintiff relies in his submissions on the following paragraph of the Report:

“4.59 The NSW Court of Appeal has recently expressed the view that s 6 applies to an action that a plaintiff brings in a NSW court; however, it did not do so “without doubt”, questioning, in particular, how the section might apply under cross-vesting arrangements. Recommendation 11 confirms the Court of Appeal’s position. It is implemented by the definition of “court” in cl 6 of the Draft Bill.”

(citations omitted)

Footnote 38 to the Report, which is contained in paragraph 4.59, refers to [197]-[206] of Chubb: see page 42 of the Report.

The Jurisdictional Point

30. Zurich’s contentions can be summarised as follows:

1. This Court has no jurisdiction to deal with a s 4 claim because:

1. BMX is not resident in New South Wales (or Australia);

2. the Plaintiff is not resident in New South Wales (or Australia);

3. the property the subject matter of the proceedings is not in New South Wales (or Australia);

4. the tortious claims and the claims for breach of contract on which the Plaintiff sued BMX occurred in New Zealand and nowhere else;

5. the judgment obtained was one in New Zealand; and

6. the Claims Act is limited to claims against insurers where the claimant has sued the insured in New South Wales or could properly have brought proceedings in New South Wales against the insured.

31. The Plaintiff’s response to these points is that the only limit imposed by s 4 of the Claims Act is that proceedings must be commenced against the insurer in New South Wales; that is, the Plaintiff contends on the basis of Chubb, sufficient. A further point made is that the Claims Act, like the LRMPA, is remedial legislation which should be beneficially construed so as to give the most complete remedy consistent with the actual language used; reference being made in support of that proposition to Antico v Heath Fielding Australia Pty Ltd (1997) 188 CLR 652.

The Decision in Chubb

32. Chubb was concerned with two sets of proceedings. The Plaintiffs, investors in agricultural schemes, sued directors and executives of Great Southern Limited and Great Southern Managers Australia Limited, to both of which I shall refer as “Great Southern”, in the Supreme Court of Western Australia (in respect of what were described as the Transform Proceedings) and in the Supreme Court of Victoria (in what were described as the PDS Proceedings). Chubb Insurance Company of Australia Limited and other insurers commenced proceedings in the Commercial List of the Equity Division of this Court and the Commercial List Judge referred the matter to the Court of Appeal.

33. In Chubb, the insurers not only had not denied liability to its insured but were funding the defence of the claims against the insureds as the policy included cover for legal costs. The claimants in the two sets of proceedings contended that the insurers should not be extending funding to the insureds because that was reducing the amount of cover available under the policy and from which they hoped to obtain recompense if successful in the proceedings. Because of the contentions advanced by the claimants and their claim that the insurers were acting in a manner which did not properly reflect the charge imposed by reason of s 6 of the LRMPA, the insurers felt it necessary to seek declaratory relief as to whether s 6 applied to the policy and its effect.

34. A number of issues concerning the operation of s 6 of the LRMPA were ventilated, most of which are not pertinent to the present dispute. A critical matter however is that amongst the questions referred to the Court of Appeal was whether s 6 had any application to the claims made by the plaintiffs in the Transform and PDS Proceedings.

35. The Court of Appeal (Emmett JA and Ball J, with whom Bathurst CJ, Beazley P (as her Excellency then was) and Macfarlan JA concurred) unanimously held that s 6 did not apply to the claims made by the claimants: see [206].

36. Whatever the significance of the conclusion in Chubb to the outcome in the present case, a matter to which I shall return, in approaching the question of the territorial ambit of s 6 of the LRMPA, the Court of Appeal in Chubb referred to some important matters of principle, to which I must adhere in considering the issue of the territorial reach of s 4 of the Claims Act:

1. The territorial scope of legislation is, in the absence of an express provision, a question of construction: [144].

2. The primary rule of construction requires one to have regard to the context and subject matter of the legislation in question: [144].

3. The Court must therefore focus on what is the central concern of the relevant legislation or that on which the legislation is shown to “hinge”, citing Insight Vacations v Young (2011) 243 CLR 149 at 159-160 and 162 per French CJ, Gummow, Hayne, Kiefel (as her Honour then was) and Bell JJ (“Insight Vacations”): [144].

4. What the Court said at [145]:

1. “A basic canon of statutory interpretation is that legislation is presumed not to have extra-territorial effect”;

2. “Under the general law, there is a presumption that legislation does not apply to persons and matters outside the territory of the legislature that enacted the legislation”; and

3. “Since s 6 is silent about any extra-territorial application or restriction, the extra-territorial application of s 6 should be construed as being limited in its operation to New South Wales”.

5. The presumption that legislation does not apply to persons and matters outside the territory of the legislature “must be applied … by reference to the central concern of the legislation or hinge”: [146].

6. Where the territorial limits of state legislation cannot be determined from its context and subject matter, the general rule of construction is to be adopted that:

“in the absence of any countervailing consideration, general words should not be understood as extending to cases that, according to the rules of private international law, are governed by foreign law (see Wanganui-Rangitikei Electric Power Board v Australian Mutual Providence Society [1934] HCA 3; (1934) 50 CLR 581 at 601 (Wanganui)).”

7. What the Court said at [147]:

“The ambit of particular legislation is not a question of constitutional power but one of statutory interpretation. The question is not what the Parliament of New South Wales could have done but what, as a matter of construction, it has done, in enacting the relevant legislation.”

37. Of importance to the present dispute is the fact that each of the parties in Chubb put forward contentions concerning various matters that should, they submitted, be accepted as producing the result that s 6 of the LRMPA did apply to the claims. These various factors or matters included singly or collectively:

1. that the law governing the claimant’s cause of action against Great Southern was New South Wales law;

2. that the event giving rise to the claim for damages occurred in New South Wales;

3. that the proper law of the contract of insurance was the law of New South Wales;

4. the contract of insurance had its closest connection with New South Wales;

5. the situs of the insured’s choses in action under the policies of insurance was New South Wales; and

6. the statutory cause of action is “a derivative of, and dependent on, the contract of insurance”: see [191].

38. Further, the insurers in Chubb submitted that s 6 of the LRMPA was limited by s 562 of the Corporations Act 2001 (Cth) (“Corporations Act”).

39. The Court of Appeal rejected each of the matters referred to in [37] as determinative either alone or collectively and held at [200]-[205]:

“200. The reference in s 6(4) to "an action ... in the same court" is directed partly at the jurisdictional limit, as between courts within New South Wales, that applies to the statutory cause of action. That indicates that s 6 is directed at claims instituted in New South Wales courts, and that that is the territorial connection with New South Wales that is required for s 6 to operate.

201. Assuming that a claim against an insurer was within the jurisdiction of a court, the parties to that proceeding would have such rights and liabilities, and the court would have such powers, as would be applicable to a proceeding in that court. It is unlikely that the Parliament of New South Wales would endeavour to confer rights and impose liabilities, or confer judicial power, in respect of a proceeding conducted in a court other than a court of New South Wales, over which the New South Wales legislature had no control. It is unlikely that the New South Wales Parliament would purport to confer rights and impose liabilities on parties in a proceeding in a court other than a court of New South Wales. Apart from anything else, there would be a question as to the constitutional validity of the provision if the reference to "the same court" encompassed the courts of other states so as to confer jurisdiction upon the courts of other states or to direct the manner in which they should exercise their jurisdiction (see Re Wakim; ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 at [108]).

202.The fundamental legislative purpose behind s 6 is to protect claimants who have obtained a judgment or settlement, or who are entitled to obtain a judgment, and to secure the payment of that judgment or settlement when the defendant is insured from moneys that would otherwise be payable to the insured in respect of that judgment or settlement. It is difficult to see why the New South Wales legislature would not have intended to protect any person who properly brings a claim in New South Wales, even where that claim is governed by some other law, given the focus in s 6(4) upon the powers of the court in the s 6 enforcement process. Section 6(4) provides the essential enforcement mechanism, by the claimant against the insurer, without which the claimant will not be protected by s 6. Put another way, s 6 may be described as a procedural mechanism by which that fundamental purpose is achieved. At the heart of that mechanism is s 6(4). The s 6(4) enforcement mechanism is the hinge or central concern of s 6, and the references to courts in s 6(4) referred to above indicate that s 6 is focused on New South Wales courts.

203. On the other hand, it is not obvious that the New South Wales Parliament would have intended that s 6 should protect any claimant who chose to bring a claim against an insurer elsewhere, even if that claim is in relation to a contract of insurance the proper law of which is New South Wales.

204. In all of the circumstances, the preferable approach is to treat s 6 as applying to all claims brought in a court of New South Wales, and as not applying to a claim brought in a court that is not a court of New South Wales. None of the Great Southern Proceedings has been brought in a New South Wales court. It follows that s 6 has no application to any of the claims being prosecuted in the Great Southern Proceedings.

205. Question 1 is not without its difficulties and the answer suggested above is certainly not without doubt. The answers advanced by the various parties discussed above have some merit, despite the anomalies that may result. Indeed, no doubt there are anomalies in the approach suggested above. Nevertheless, the suggested approach accords with the language and policy of s 6 and has the additional merit of providing, despite the complexity and opacity of s 6, some measure of certainty as to whether s 6 will apply in any particular case.”

(emphasis added)

40. The Court of Appeal noted the insurers’ contentions that s 6 of the LRMPA provided a more beneficial outcome to claimants than s 562 of the Corporations Act but the Court did not appear to accept that as a reason to read down s 6: see [200]-[205].

41. Mr Braham placed particular emphasis on the following words in Chubb:

“[a]t the heart of that mechanism is s 6(4). The s 6(4) enforcement mechanism is the hinge or central concern of s 6, and the references to courts in s 6(4) referred to above indicate that s 6 is focused on New South Wales courts”

found in [202], and he submitted that the Court of Appeal was determining that the territorial limit of the section was thereby linked or tied to one thing and one thing only: the commencement of proceedings under s 6 of the LRMPA. He contended that that reasoning is pertinent to the Claims Act. Whilst the Claims Act does not make any reference to a charge (the mechanism used in s 6) and removes the words “in the same way and in the same court”, it is otherwise very similar. Mr Braham also draws attention to the fact that the Law Reform Commission saw the new provision as “confirming the Court of Appeal’s position” in Chubb.

42. Mr Rich pointed to the words earlier in [202] of Chubb and placed particular reliance on the word “properly” in that paragraph.

43. There are five other cases to which my attention has been drawn in which the issue of the territorial scope of s 6 of the LRMPA and its New Zealand equivalent have been considered.

44. In Ludgater Holdings Ltd v Gerling Australia Insurance Co Pty Ltd [2010] 3 NZLR 713 (“Ludgater”), the plaintiff (“Ludgater”), the owner of a building in New Zealand, purchased from a Victorian registered company, Atco Controls Pty Ltd, fluorescent lights. A fire causing substantial damage broke out on the property owned by Ludgater and it claimed that the fire was caused in the property by reason of the defective capacitors used in the lights. Ludgater claimed that the capacitors were negligently manufactured or supplied. Atco went into liquidation shortly after the fire. Atco had a policy with Gerling Australia Insurance Company Pty Ltd (“Gerling”). Ludgater brought proceedings under s 9 of the Law Reform Act 1936 (NZ) (“LRA”) against Gerling. Section 9 of the LRA is in very similar terms to s 6 of the LRMPA. The Supreme Court of New Zealand held that s 9 could not be relied on by Ludgater because the situs of the insurers’ obligation to Atco was Australia – that was where the insured was entitled to be paid rather than New Zealand. The Court held that s 9 had to be interpreted in accordance with the rules of private international law and would not be read as applicable where the transaction was according to the relevant choice of law governed by foreign law. That foreign law, and in particular s 562 of the Corporations Act, required application to proceeds in a different form to the priorities found in the LRA.

45. In Body Corporate 326421 v Auckland Council [2013] NZHC 753, Gilbert J considered, inter alia, an application by the owners of another New Zealand building constructed by BMX (Nautilus) to join the insurers under a similar policy as here. The application was made under s 9 of the LRA and s 6 of the LRMPA. His Honour rejected the first claim on the authority of Ludgater as none of the insurers were resident in New Zealand. The owners corporation sought to distinguish Ludgater on the basis that the proceeds of the policy were payable in New Zealand because BMX was a New Zealand company and the insurance debt would be payable to it in New Zealand. Gilbert J held that the situs of the debt was London, not New Zealand, and at [23] said:

“It follows that the New Zealand courts have no subject-matter jurisdiction in respect of the monies payable by the Underwriters under the policy.”

46. The claim made under s 6 of the LRMPA was also rejected because the debt was not payable in New South Wales and further, because (see [25]):

“a New Zealand court is not empowered to make orders pursuant to s 6 of the New South Wales legislation. The powers conferred by s 6 on “the Court” are conferred on the court in New South Wales”.

47. In McCullagh v Underwriters Severally [2015] NZHC 1384, Wylie J held that s 9 of the LRA did not apply because, on the authority of Ludgater, the Act did not apply to overseas insurance companies. The applicants in that case were the liquidators of BMX and the claims with which the Court was concerned included the Victopia proceedings, the Century on Anzac proceedings and the Sylvia Park proceedings.

48. Cambridge Credit Corporation Ltd v Lissenden (1987) 8 NSWLR 411 and Dixon v Royal Insurance Australia Ltd (1991) 105 ACTR 1 are two cases in which the Supreme Court of New South Wales and the Supreme Court of the Australian Capital Territory considered that for the purposes of s 6 of the LRMPA (and its ACT equivalent), the territorial scope of the Act was determined by where the indemnity under the insurance policy was payable and not where the negligent act of the insured had occurred. These cases, it appears, were not cited in Chubb but, at [196] of Chubb, the Court of Appeal commented on the contentions of some of the defendants that s 6 applies only to insurance monies that are or may be payable in New South Wales in the following terms (at [196]):

“However, it is difficult to see why the New South Wales Parliament would have been concerned about the place of payment. Further, the place of payment can be manipulated in the same way that the proper law of the contract can be manipulated.”

49. A decision on s 6 of the LRMPA which referred to Chubb is Robinson v Vogelsang (No 1) [2015] NSWSC 1670. That was a case in which the plaintiff sought leave to join the insurer of one of the defendants. Although the case concerned an accident in South Australia, the proceedings against alleged tortfeasors were on foot in New South Wales and extra-territoriality was not an issue.

50. On the question of jurisdiction, several important matters were raised by Mr Braham.

51. In Obeid v R (2015) 91 NSWLR 226 (“Obeid”), the Court of Criminal Appeal pointed out that (at 230 per Bathurst CJ, Beazley P and Leeming JA):

“Jurisdiction divides into subject-matter and personal jurisdiction: see PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission (2012) 247 CLR 240; [2012] HCA 33 at [14]–[17]. A court must, if it is to have authority to decide a controversy, have jurisdiction both over the parties and also in respect of its subject matter.”

52. This topic is discussed by Justice Leeming in his work Authority to Decide – The Law of Jurisdiction in Australia (2^nd ed, 2020, The Federation Press) at [6.1] (“Authority to Decide”) and the learned author draws attention to the fact that many State courts have no or few limitations as opposed to the nature of the controversy. In Federal Capital Commission v Laristan Building and Investment Co Pty Ltd (1929) 42 CLR 582, Dixon J (as his Honour then was) expressed the view that jurisdiction “depends in the main on service of process and not upon subject matter”: see 586.

53. The theme that jurisdiction is generally defined by the rules of service finds expression in Luke v Mayoh (1921) 29 CLR 435 at 439 per Knox CJ, Rich and Starke JJ (“Luke v Mayoh”), Laurie v Carroll (1958) 98 CLR 310 at 323-4 per Dixon CJ, Williams and Webb JJ (“Laurie v Carroll”) and Gosper v Sawyer (1985) 160 CLR 548 at 557-8 per Gibbs CJ, Wilson and Dawson JJ (“Gosper”), in which Mason and Deane JJ referred to the fact that “a court’s power to authorize service of its writs is ordinarily a measure of its jurisdiction in an action in personam”: at 564. There are matters which were once the province of the Supreme Court such as matrimonial causes and bankruptcy which have now been removed by statute. There are limits to the jurisdiction of lower courts in the judicial system which deprive those courts from entering judgment in excess of their jurisdictional limits. Absent some statutory enactment, the Supreme Court of New South Wales has “subject matter” jurisdiction over most matters and for present purposes, certainly torts and contractual claims.

54. The distinction between subject matter jurisdiction and territorial jurisdiction was discussed in Flaherty v Girgis (1987) 162 CLR 574 (“Flaherty v Girgis”). This case has assumed considerable importance in the present dispute, and I shall return to it later in these reasons.

55. In Regie National des Usines Renault SA v Zhang (2002) 210 CLR 491 (“Regie”), the High Court confirmed that the Supreme Court of New South Wales had jurisdiction to hear a claim in tort against the manufacturer of Renault cars in connection with an accident in Noumea. This was because the plaintiff was a resident of New South Wales and suffered damage that would continue in New South Wales and hence, the case fell within the long-arm jurisdiction of the Court; that is, within Schedule 6 of the UCPR, which specifies the basis on which writs can be served outside of New South Wales.

56. I should emphasise that whether or not there is jurisdiction entails different issues to whether or not that jurisdiction should be exercised. It is open to a defendant properly served with a writ to contend that the Supreme Court of New South Wales is not a convenient venue for the case to be heard. Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 sets out the criteria which should generally be applied to such a contest: see also Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538. No issue of forum non conveniens has been raised in this case. The Claims Act, by s 5(3), itself recognises that even in a case that falls within the statute, the Court may refuse leave to proceed. Section 20 of the TTPA prohibits a stay of proceedings if the Court is satisfied that a choice of court agreement designates an Australian court as the court to determine a matter.

57. The Plaintiff’s contention is that the Supreme Court has jurisdiction to hear a claim based on s 4 of the Claims Act by any person (wherever he resides or is domiciled) in respect of any tort wherever committed and in respect of any damage wherever incurred. Thus, Mr Braham submitted in answer to an enquiry of mine, a Spanish citizen who has a claim against a Spanish insolvent defendant who has a policy of insurance with a Spanish insurer can bring a claim against the Spanish insurer under s 4 of the Claims Act and the Court has jurisdiction because the Claims Act confers jurisdiction on the Court. All it requires is an application for leave to be launched in this Court pursuant to s 5.

58. Mr Braham, whilst conceding that the result might be a “surprising outcome” and also might “be eyebrow raising” (see T70.20 and T71.1), submitted that this result was supported by the conclusion reached by the Court of Appeal in Chubb, since the Court rejected any need for the parties to have a connection with New South Wales, to have a policy of insurance that made New South Wales law the law of the contract, for the tort to have been committed in New South Wales or for the damage to be suffered in New South Wales.

59. The steps in Zurich’s argument were these:

1. Where an Act of Parliament is reliant on its territorial operation, it should not be interpreted as having an ambit beyond the borders of the State of New South Wales: see Meyer Heine Pty Ltd v China Navigation Co Ltd (1966) 115 CLR 10 at 23 per Kitto J, 30-1 per Taylor J, 38 per Menzies J and 43 per Windeyer J.

2. Although the Claims Act does not expressly state what the territorial limitations of its scope are by stating that the insurer stands in the place of the insured as if the proceedings were proceedings to recover damages, compensation or costs from the insured person and that the parties have the same rights and liabilities, this must carry the restriction that the claimant cannot bring proceedings against the insurer if he could not bring proceedings in New South Wales against the insured in respect of the principal claim.

3. The claimant here (i.e. the Plaintiff) could not bring proceedings in respect of the principal claim because the principal claim involved a tort in New Zealand committed by a New Zealand company against a New Zealand citizen with damage to a New Zealand property. That claim has no connection whatsoever with New South Wales and the claimant could not establish that this claim falls within any of the subparagraphs of Schedule 6 of the UCPR. There is thus no personal jurisdiction even if there is subject matter jurisdiction.

4. Chubb precludes reliance both on the fact that one of the insurers is resident in New South Wales and on the exclusive jurisdiction clause.

5. The Plaintiff relies on the TTPA in seeking to establish that a claim against BMX could properly have been brought in New South Wales but the TTPA should be narrowly construed or is invalid because it exceeds the scope of the Constitution.

60. I have referred to Mr Lim’s involvement in the present case. Mr Lim has provided, on behalf of the CAG, two sets of detailed submissions on the constitutional issues, but in the course of those submissions, he put forward an argument which he asserted, if accepted, would effectively avoid the need for any consideration of the Constitutional Issue. The Constitutional Issue relates to whether or not the TTPA is a valid exercise of Commonwealth power. The Plaintiff relies on the TTPA to support its case that if there is any requirement to meet the test advanced by Zurich, which the Plaintiff does not accept, then the test is met by virtue of the TTPA. Zurich contends that the TTPA infringes the constitutional limitations on Commonwealth power because it confers on State courts State jurisdiction when the Commonwealth is only permitted to confer jurisdiction in federal matters. I shall return to this issue later in these reasons, but I shall, at this point, refer to the argument advanced by the Commonwealth as to how s 4 of the Claims Act should be interpreted. That an intervener can put arguments that are not strictly constitutional was considered recently and resolved in the affirmative in Doyle’s Farm Produce Pty Ltd v Murray Darling Basin Authority (No 2) [2021] NSWCA 246 at [22] per Leeming JA, with whom Bathurst CJ and Bell P agreed.

61. The CAG’s argument has these steps:

1. Section 4(3) uses the phrase “as if” twice – first in the phrase “as if the proceedings were proceedings to recover damages, compensation or costs” and secondly, in the phrase “as if the proceedings were proceedings brought against the insured person”.

2. The phrase “as if” is a drafting technique also used in the TTPA and it creates a statutory fiction for the purpose of reducing the “verbiage” of an enactment: R v Hughes (2000) 202 CLR 535 at 550-1 [23]-[24]; and see Re Macks; Ex parte Saint (2000) 204 CLR 158 at 203 per McHugh J.

3. In the context of s 4 of the Claims Act, the statutory fiction is that the proceedings are proceedings to recover from the insured person and are proceedings brought against the insured person. Mr Lim then submits:

“The better textual construction of s 4(3), having regard to that longstanding drafting technique, is that in proceedings brought by a claimant against an insurer under s 4(3), the court is required to proceed on the fictional hypothesis that the proceedings were proceedings to recover from the insured person and that the proceedings were proceedings brought against the insured person. It does not call for any inquiry into whether or how such fictional proceedings could have been brought “properly”. Such an inquiry would in fact be inconsistent with the text of s 4(3) which states the assumption that must be made in applying the provision, rather than any precondition to the application of the provision. That is, there is no scope for the Court to deny the statutory fiction. It is just that: a fiction, by reference to which the parties’ rights are defined and a fiction on which the Court must therefore proceed.”

(emphasis in original)

4. No inquiry is required, therefore, as to whether the insured may or may not have submitted to the jurisdiction of the court.

5. On this approach, no consideration needs to be given to whether BMX could have been sued in a New South Wales court.

62. It will be observed that whilst the result for which the CAG contends is the same result as that advanced by the Plaintiff, the reasoning is quite different.

63. The Attorney-General’s approach does not offer any answer to the question of what is the territorial reach of s 4 but it does implicitly assert that there is no qualification to the Court’s power to deal with a claim against an insurer by reason of s 4(3) and that argument must, therefore, entail the proposition that the words “the same rights and liabilities” does not include a right that could have been advanced by the insured that the Court had no jurisdiction. Mr Braham embraced this proposition.

64. That contention then raises the following questions:

1. What is the territorial reach of s 4(1) – i.e. which insureds or insurers are the subject of the Claims Act?

2. Should s 4(1) be seen as the key to the jurisdictional reach of s 4?

3. If the answer to [64(2)] is yes, then is there a tension between ss 4(1) and 4(3) because s 4(3) literally permits the insurer to raise any point the insured could have raised?

65. I will deal with [64(1)] first. To answer this question, I need to apply the approach to statutory interpretation set out in Chubb: see [36] above. Of particular relevance, it seems to me, are these matters:

1. the basic canon of statutory interpretation is that the legislation is presumed not to have extra-territorial effect (see also s 12(1)(b) and 31(1) of the Interpretation Act 1987 (NSW); Barcelo v Electrolytic Zinc Co of Australasia Limited (1932) 48 CLR 391 at 410 per Starke J, 423-4 per Dixon J, 443 per McTiernan J; Insight Vacations at 159-60);

2. the Court must have reference to the “central concern of the legislation”; and

3. if the territorial limits of State legislation cannot be determined from its context and subject matter, the general rule is that the legislation should not be understood as extending to cases that, according to the rules of private international law, are governed by foreign law.

66. On this basis, and for the moment putting aside the effect of Chubb on the substantive issue, the Claims Act does not make clear to which insurers and insureds it is intended to apply. It is presumed, therefore, not to have extra-territorial effect, and it should not be understood as extending to cases that are governed by foreign law. Regard needs to be had to the discernible purpose of the legislation which is to ensure that persons who have suffered loss and damage by reason of the negligence of a tortfeasor are able to obtain the benefits of the insurance held by the tortfeasor even if the tortfeasor has become insolvent.

(citations omitted)

126. I accept the proposition that the High Court’s acceptance in Flaherty v Girgis that there was no conflict between SEPA and the Supreme Court Rules, and that both could operate concurrently and the explanations as to how federal jurisdiction operates in R v Reid, Lipohar and Truong are inconsistent with the acceptance of Zurich’s contentions in this case.

127. Further support for the conclusion that there is no constitutional invalidity, if it were needed, can be found in the fact that ss 75, 76 and 77 all utilise the word “matter” in their chapeaus and a “matter” has been held authoritatively to encompass the requirement of “justiciability”; that is, “a justiciable controversy, identifiable independently of the proceedings which are brought for its determination and encompassing all claims made within the scope of the controversy”: Fencott v Muller (1983) 152 CLR 570 at 603 per Mason, Murphy, Brennan and Deane JJ, cited in CGU at 352 per French CJ, Kiefel (as her Honour then was), Bell and Keane JJ. Service is no part of the controversy, but rather, concerned with how the proceedings to determine the controversy are commenced: see also in this connection ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at 584-5 and 589-90 per Gleeson CJ, Gaudron and Gummow JJ.

128. Against the possibility that the Court might, contrary to the primary contentions of the CAG and the Plaintiff, hold that s 77(iii)’s reference to jurisdiction in the phrase “federal jurisdiction” included territorial jurisdiction, Mr Lim advanced an alternative argument that ss 9 and 10 of the TTPA have created new rights by reference to State and Territory laws and conferred jurisdiction to adjudicate those rights. Mr Lim acknowledged that there were some hurdles which would need to be overcome and there were other matters identified by Zurich in its submissions of 15 October 2021 that would need to be considered, but in view of my conclusion set out at [126]-[127] above, I do not need to venture into this topic further and do not need to consider Crosby v Kelly (2012) 203 FCR 451 or Webster v Brewer [2020] FCA 622 which deal with what has sometimes been described as “surrogate” federal law.

Conflicting Insolvency Regimes

129. At [10] above, I referred to Zurich’s contention that even if the conditions for leave have been met by the Plaintiff, the Court should nevertheless refuse to grant leave in the exercise of its residual discretion. The Court should exercise its discretion to refuse leave, in Zurich’s submission, because if the Court were to grant leave, it would be interfering with New Zealand’s insolvency regime.

130. The Court retains a residual discretion to refuse leave under s 5 of the Claims Act, notwithstanding that the criteria for leave have been met: see Murphy at [17]; see also Wayland v Bird [2017] NSWCA 26 at [26] per Ward JA (as her Honour then was) with whom Macfarlan JA and Emmett AJA agreed; DSHE Holdings Ltd (recs and mgrs apptd) (in liq) v Abboud [2017] NSWSC 579 at [20]-[21] per Stevenson J (“DSHE”). That discretion “must be exercised for the purpose for which it was conferred; namely, to ensure that insurers are not exposed to unnecessary, unwarranted or inappropriate claims”: DSHE at [21]. The Court ought also have regard, as Stevenson J acknowledged in DSHE, to the issue of “whether it is reasonable for the insurer to be joined”: DSHE at [22]. The matters to which the Court can have regard in assessing the reasonableness of joining an insurer are not closed.

131. Zurich submits that it would not be appropriate, nor reasonable, for the Court to exercise its discretion in joining Zurich in circumstances where the primary claim has the purpose or practical effect of avoiding the operation of the insolvency regime that governs the winding up of BMX. That insolvency regime is relevantly contained in the Companies Act 1993 (NZ) (“NZ Companies Act”).

132. Section 312 of the NZ Companies Act provides:

“312 Preferential claims

(1) The liquidator must pay out of the assets of the company the expenses, fees, and claims set out in Schedule 7 to the extent and in the order of priority specified in that schedule and that schedule applies to the payment of those expenses, fees, and claims according to its tenor.

(2) Without limiting clause 2(1)(b) of Schedule 7, the term assets in subsection (1) does not include assets subject to a charge unless the charge is surrendered or taken to be surrendered or redeemed under section 305.”

(emphasis in original)

133. Schedule 7 of the NZ Companies Act relevantly reads:

“(1) The liquidator must first pay, in the order of priority in which they are listed,—

…

(e) to any creditor who protects, preserves the value of, or recovers assets of the company for the benefit of the company’s creditors by the payment of money or the giving of an indemnity,—

(i) the amount received by the liquidator by the realisation of those assets, up to the value of that creditor’s unsecured debt; and

(ii) the amount of the costs incurred by that creditor in protecting, preserving the value of, or recovering those assets.”

134. Expert evidence was relied upon by both parties in support of their respective submissions on the operation of the NZ Companies Act and s 9 of the LRA. Mr David John Chisholm QC was engaged by the Plaintiff and Ms Jennifer Sarah Cooper QC was engaged by Zurich. Both experts provided independent expert reports. A joint report was also later provided by the experts.

135. The evidence given by Mr Chisholm and Ms Cooper can be summarised as follows:

1. The NZ Companies Act governs the liquidation of companies in New Zealand.

2. In the distribution of the companies’ assets, the liquidator must first make payment of all preferential claims, the priority of which is set out in Schedule 7 to the NZ Companies Act. All unsecured creditors will, thereafter, share equally in the distribution of the company’s assets in accordance with the pari passu principle.

3. For clause 1(1)(e) of Schedule 7 to the NZ Companies Act to apply, the following criteria must be met (which are expressly set out in that clause and supported (at least in part) by Noyce v Parnell Property Investments Ltd [2015] NZHC 2037 and Petterson v McConnell Dowell Constructors Ltd [2018] NZHC 2379 (“Petterson”)):

1. The creditor must have “paid money or given an indemnity”. A contribution of some other form, including the provision of goods or services, will not suffice.

2. The creditor must protect, preserve or recover “assets of the company”, which does not include assets subject to a charge unless the charge is surrendered or taken to be surrendered or redeemed under s 305 of the NZ Companies Act: see s 312 of the NZ Companies Act. In protecting, preserving or recovering “assets of the company”, the creditor is required (see Petterson at [28] per R M Bell AsJ):

“to show that their payments or indemnity did result in protection, value preservation or recovery of assets for the benefit of all creditors.”

3. The creditor must show that the payment or indemnity was for the benefit of the general body of creditors, rather than with a view to seeking to securing the net recovery for the sole benefit of the creditor or an entity related to it. Additionally, the creditor must show that the purpose of the payment or indemnity was to benefit creditors other than themselves. Although it need not be the sole or main purpose, it ought to have been a significant purpose.

4. The experts were of the opinion that clause 1(1)(e) of Schedule 7 to the NZ Companies Act would not have any application to the sum, if any, awarded to the Plaintiff in its claim against Zurich in the Commercial List Proceedings. That is because the sum (again, if any) payable to the Plaintiff would not pass through the hands of the liquidator. If the proceeds of the litigation were paid to the liquidator, the Plaintiff would not be entitled to any preference under clause 1(1)(e) of the NZ Companies Act for the following reasons:

1. firstly, because the Plaintiff has a litigation funder, he (and the other group members) are not providing any payment of money or indemnity towards the litigation; and

2. secondly, the purpose of the Commercial List Proceedings is to obtain recovery of the amount of the insured liability for the sole benefit of the Plaintiff (and the other group members).

136. Zurich submits that the insolvency regime contained within the NZ Companies Act, and helpfully clarified by both experts, produce a result quite distinct to that consequent upon an application of s 562(1) of the Corporations Act. That section reads:

“(1) Where a company is, under a contract of insurance (not being a contract of reinsurance) entered into before the relevant date, insured against liability to third parties, then, if such a liability is incurred by the company (whether before or after the relevant date) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount must, after deducting any expenses of or incidental to getting in that amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability, or any part of that liability remaining undischarged, in priority to all payments in respect of the debts mentioned in section 556.”

137. Section 562(1) of the Corporations Act is clearly congruent with the way in which insurance proceeds are paid to claimants under the Claims Act. Section 312 and clause 1(1)(e) of Schedule 7 to the NZ Companies Act do not, however, share that congruency because, as the Commercial List Proceedings are currently constituted, the Plaintiff (and the other group members) would not enjoy a right of priority over other unsecured creditors should the funds be paid to the liquidator of BMX. Zurich thus submits that the proper course is for the liquidators to bring those claims, such that any proceeds recovered from Zurich may be distributed by them pursuant to the provisions of the NZ Companies Act.

138. Chief among Zurich’s contentions on this issue are the following two rhetorical questions contained in its submissions on the Plaintiff’s application for leave (at [57]):

“Why should the Victopia Claimants be placed in a privileged position, relative to these other claimants, when, in the ordinary course under New Zealand law, any moneys payable under the Primary Policy would be distributed amongst all the unsecured creditors of BMX NZ, including those claimants, on a pari passu basis? No less importantly, why should this Court facilitate the Victopia Claimants being placed in such a preferential position by granting leave for them to invoke a mechanism unavailable to them under the law that governs the winding up of BMX NZ?”

139. The Plaintiff’s submissions in reply can be summarised as follows:

1. Firstly, notwithstanding that Zurich’s submissions are not expressly advanced as an application of the principle that statutes should be construed in conformity with the comity of nations, that principle is central to Zurich’s submissions on this issue. The Court should be circumspect in accepting Zurich’s submission in the Court’s exercise of its discretion to refuse leave, not least because:

1. there is no inconsistency between the Claims Act and the New Zealand insolvency regime; and

2. Zurich’s argument is entirely hypothetical.

Further, and in any event, significant doubt has been cast upon the application of principles of comity when considering issues of international law. For instance, in Neilson v Overseas Projects Corp of Victoria (2005) 223 CLR 331 Gummow and Hayne JJ relevantly said (at 363, citing North (ed), Cheshire Private International Law (9^th ed, 1974, Butterworth) at p. 4):

“comity is “either meaningless or misleading”; it is “a matter for sovereigns, not for judges required to decide a case according to the rights of the parties”.”

The Plaintiff also directs the Court’s attention to what was said by Perram J in Habib v Commonwealth (2010) 183 FCR 62 at 77:

“No doubt comity between the nations is a fine and proper thing but it provides no basis whatsoever for this Court declining to exercise the jurisdiction conferred on it by Parliament.”

2. Secondly, there would be no inconsistency between an application of the Claims Act and New Zealand insolvency law for the following reasons:

1. All proceeds of a judgment in the Commercial List Proceedings will flow directly to the Plaintiff and will not form part of BMX’s assets, thus not interfering with BMX’s liquidation in New Zealand.

2. Zurich’s submission that an application of the Claims Act in these (and the primary) proceedings would be inconsistent with the New Zealand insolvency regime is hypothetical. The liquidators have taken no steps to challenge the declinature of indemnity since 28 August 2018, including by applying to be joined to these proceedings to resist the Plaintiff’s application, and moreover, do not have the means to challenge the declinature. There is thus no tangible risk of inconsistency or interference, which Zurich bears the onus of establishing.

3. Any judgment in favour of the Plaintiff in the Commercial List Proceedings would be entirely consistent with the insolvency regime in New Zealand because the Plaintiff would rank in priority to the general body of unsecured creditors if he chose to fund the liquidators to commence proceedings in New Zealand. That the Plaintiff would rank in priority to the general body of unsecured creditors in those circumstances was accepted by both experts in their joint report, where they said (at (6.5]):

“6.5 the only way that the proceeds of the litigation would be paid to the liquidators/BMX is if the liquidators had procured BMX (as the insured) to commence the proceeding against the insurer. If a portion of the company’s creditors had been funding such a recovery action by the liquidators, potentially those creditors could still have utilised a litigation funder and also obtained the priority afforded by clause 1.1(e). This could theoretically be achieved as follows:

(a) the creditors would agree to pay the liquidators’ litigation costs to conduct the litigation in the company’s name and indemnify the liquidators for any cost exposure.

(b) the creditors would enter into a separate funding agreement with a litigation funder to pay a sum equivalent to the creditors’ funding/indemnity liabilities to the liquidators.”

3. Thirdly, Zurich has not given any evidence that it will not rely on the exclusive jurisdiction clause in the Primary Policy in proceedings commenced in New Zealand.

140. On the last day of the hearing, Zurich tendered some correspondence between its solicitors and the liquidator’s solicitors (see Exhibit 2) and the Plaintiff tendered other correspondence (which was heavily redacted to avoid any complaint by the liquidator that common interest privilege had been imperilled) between his solicitors and the liquidators. The correspondence establishes that:

1. In March 2021, the liquidator was made aware that the Plaintiff was taking steps to pursue his claim against Zurich in Australia.

2. In October 2021, the liquidator sought copies of the pleadings, application for leave and submissions filed in these and the Commercial List Proceedings.

3. On 27 October 2021, the material sought by the liquidator was sent to the liquidator’s solicitors.

4. On 9 November 2021, Zurich’s solicitors enquired as to the liquidator’s intentions.

5. On 10 November 2021, the liquidator’s solicitors advised Zurich’s solicitors that they had only recently become aware that proceedings had been commenced but did not intend to take any steps in the current proceedings. The solicitors for the liquidator advised that it was the liquidator’s intention to commence proceedings against Zurich in respect of both the Victopia Apartments and Century on Anzac, “subject to funding”.

141. It should be noted that whilst the statement “they only discovered that the proceedings had been commenced when a third party drew their attention to a media statement” seems to imply that the liquidator had no knowledge of the proceedings, the content of [140(1)] above makes it clear that the liquidator was well aware of the Plaintiff’s intention to commence these proceedings by March, even if they did not know that in fact the proceedings as foreshadowed had been commenced.

142. I do not regard it as appropriate for the Court to exercise a discretion to prevent the Commercial List Proceedings from continuing for these reasons:

1. The liquidator has not, to date, brought any proceeding against Zurich in New Zealand or Australia; BMX was placed in liquidation in December 2012 and cover was declined by Zurich in 2018. That is the short answer to the contention that these proceedings will interfere with New Zealand insolvency provisions. It seems clear that lack of funding for the liquidator is an issue in that regard and there is no explanation of how funding, not previously obtained, will now be obtained. If the liquidator were to continue to be unable to obtain funding and leave was refused to the Plaintiff, Zurich would benefit since, even if otherwise liable on the policy to indemnify BMX, it would never have to pay out to BMX, the general creditors of BMX, the Plaintiff or the claimants in the Century on Anzac case. If the liquidator was able to obtain funding, we know that he would only be able to pursue claims on behalf of creditors in Australia (because of the exclusive jurisdiction clause). The commencement of such proceedings, were that to occur, could itself give rise to the question of whether such proceedings should be consolidated with the Plaintiff’s proceedings and as to how the two claims inter se should be dealt with. These questions, interesting as they may be, do not presently, and may never, arise.

2. Whilst New Zealand insolvency law has a different operation to Australian insolvency law in relation to insurance proceeds, the effect of s 6 of the LRMPA and its analogues and the Claims Act is one recognised in New Zealand itself. If the Plaintiff could have brought his claim in New Zealand against Zurich under the LRA, the insurance monies would not have passed through the hands of the liquidator. The same will be the position here.

3. Both New South Wales law and New Zealand law provide for claims against insurers where the insured has become insolvent. The Supreme Court of New Zealand has held that the Plaintiff cannot bring a claim based on the LRA because Zurich is not resident in New Zealand. In taking the view that the situs of the debt (and also an exclusive jurisdiction clause) is a matter of significance, the Supreme Court of New Zealand has taken a position contrary to that adopted in Chubb. If this Court were to refuse leave on discretionary grounds, then the Plaintiff would have no redress from legislation enacted in both New Zealand and New South Wales designed to ensure that the insurer meets claims of persons who have suffered loss and damage caused by an insured who holds insurance to cover the insured for that type of claim because, on the authority of Ludgater, the occurrence of the tort and the bringing of proceedings against the insured in New Zealand is insufficient and on the basis of Chubb as applied to the Claims Act, the exclusive jurisdiction clause and residency of one of the insurers (i.e. Aspen) is insufficient. That would be a most jarring result in my opinion.

4. As Mr Braham pointed out, no application has been made by Zurich for a stay under s 17 of the TTPA. If it were, it would face the obstacle of s 20. The inconsistency point has the appearance of a backdoor s 17 application. I am inclined to think that s 20 cannot be evaded in this way, but on the assumption that s 20 does not apply, the fact that the insurance contract has an exclusive jurisdiction clause nominating Australian law and Australian courts is still a relevant matter on the issue of discretion, as is the fact that the only forum in which the relief sought by the Plaintiff (by means of a statutory claim against BMX’s insurer) is available is an Australian forum. The latter point is regarded as a relevant matter in the forum non conveniens context (see Garsec v His Majesty the Sultan of Brunei [2008] NSWCA 211 at [18]; Fleming v Marshall [2011] NSWCA 86 at [74]) and I think it is of importance here as well.

Conclusion

143. It follows that leave, pursuant to s 5 of the Claims Act, should be granted to the Plaintiff to proceed with his proceedings in the Commercial List.

Costs

144. The parties were agreed that the issue of costs should be dealt with only after the substantive issues have been determined. I will arrange for the matter to be listed for directions to ascertain the extent of issues in respect of costs and to fix a date for determination of that issue.

Decision last updated: 08 December 2021