FAI General Insurance Company Ltd v Interchase Corporation Ltd

[1997] QCA 201

[1997] QCA 201

COURT OF APPEAL

DEMACK J
DOWSETT J

MACKENZIE J

Appeal No 4241 of 1997

FAI GENERAL INSURANCE Appellant (Fifth

Respondent) COMPANY LIMITED

and

INTERCHASE CORPORATION LIMITED Respondent (Plaintiff)

BRISBANE
..DATE 16/06/97
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DOWSETT J: In this action the plaintiff sues the first and
second defendants for damages for breach of duty. Those
defendants had a policy of professional indemnity insurance
with the fifth defendant. For some time before the fifth
defendant was joined as a defendant, it was intimately
connected in the conduct of the action, acting in concert
with the first and second defendants. It then concluded
that it had a basis for declining cover and did so.

When the plaintiff discovered this, it sought leave to join the fifth defendant in the action, seeking against it a declaration that it was obliged to indemnify the first and second defendants in connection with any judgment recovered against them. This order was made, and the fifth defendant participated in the action for some weeks thereafter, but then lodged an appeal against the decision. The fifth defendant now seeks to stay the action as against it pending determination of the appeal.

Since the completion of argument, as has been said by the presiding Judge, we have ascertained that it will be possible to expedite hearing of the appeal so that it will be heard at the end of July. The application should now be seen in that light.

The fifth defendant advances two main reasons for seeking a stay. The first is that the plaintiff is in liquidation and will not be able to meet any order for costs incurred in taking steps in the action whilst awaiting determination of the appeal. However, in the course of argument, counsel 170697 T2/SJ3 M/T COA130/97

conceded that there was only a limited amount of work likely
to be performed in that time and that therefore only a
relatively small amount in costs is likely to be incurred.
Further, the plaintiff is shown to have access to sufficient
funds held by a wholly owned subsidiary and available for
this purpose. This ground for granting a stay therefore
appears to be lacking in substance.

The second ground is that the joinder has widened the issues in the litigation to include issues arising between the first and second defendants on the one side and the fifth defendant on the other concerning the issue of indemnity. It is a little difficult to comprehend the full effect of this extension of the issues. One can well understand, however, that the first, second and fifth defendants would not be keen to allow the plaintiff access to documents concerning these issues if that could be avoided.

The cause of action asserted by the plaintiff against the fifth defendant is, in some respects, novel, although there is appellate authority supporting the plaintiff's position in South Australia and Victoria. I am, however, concerned that the plaintiff should not obtain any unfair advantage from the commencement of proceedings against the fifth defendant should those proceedings be found to be without proper foundation as a result of the appeal.

In those circumstances, and having regard to the expedition
of the appeal which has now been granted, it is appropriate
to stay the action as against the fifth defendant to the
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extent that its further prosecution might force disclosure
by the fifth defendant of documents concerning the
relationship between itself and the first and second
defendants or otherwise.

I therefore propose that we stay the plaintiff's action as against the fifth defendant to the extent of excusing the fifth defendant from making disclosure of documents in the action pursuant to any obligation it may have as a party, pending determination of the appeal against the order joining the fifth defendant in the proceedings. I should add that this is not intended to restrict the plaintiff's right to resort to other lawful means of obtaining access to such documents which may be available to it.

DEMACK J: I agree.

MACKENZIE J: I agree.

DEMACK J: So the orders of the Court will be in terms of the reasons given by Mr Justice Dowsett and also the Court orders that the hearing of the appeal be expedited.

DEMACK J: What do you want done with costs?

MR FREEBURN: I'd ask for costs on the basis that we have been successful.

MR MORRISON: Your Honour, I cannot say a lot about it except that it is a very limited stay and they sought a very much wider stay than that and they have been unsuccessful on their first advanced ground so may I suggest costs in the cause - in cause of the appeal so that if they win the disjoinder as it were they can get their costs of this application. If they do not then they do not.

DEMACK J: Ms Nichols.
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MS NICHOLS: Your Honours, I seek costs on behalf of my clients. This application was a matter which really dealt with issues relating to the fifth defendant and the plaintiff. I submit that the third and fourth defendants should be protected in relation to the costs of the application as a result. In relation to costs in the cause I just note that the third and fourth defendants are not parties to the appeal.

DOWSETT J: Why did you come then?

MS NICHOLS: Your Honour, we were served with the material.

DOWSETT J: But you were not interested, you did not have to come. This happens all the time. People come along and they sit there and say nothing and then say, "Well, we only came because we were served." I mean, it is your duty to ascertain whether or not there is not some useful function that you can perform here, not just come along in the expectation that you get an order for cots for doing nothing.

MS NICHOLS: I have not come along with the expectation that

I would get an order for costs-----

DOWSETT J: That is all right then.

MS NICHOLS: -----but I would just like some protection for the third and fourth defendants in relation to costs. If they are going to be in the cause then to ensure that we are not responsible for paying the plaintiff and the fifth defendant's costs.

DOWSETT J: I see.

MS NICHOLS: Perhaps, Your Honour-----

DOWSETT J: Yes, I see. Yes, that may be fair.

MS NICHOLS: Perhaps, Your Honour, costs reserved in relation to the third and fourth defendants would be adequate protection in the circumstances to be dealt with at a later time.

DEMACK J: How will that help anyone except add a bit of confusion at the end of the trial?

MR MORRISON: Can I withdraw the confusion by withdrawing my - the application for costs in the cause? I have been reminded about the decision in Cox and Mossman. Your Honours will be familiar with that similar decision about - in this area about stays. It is 1908 State Reports Queensland 210. At 214 to 215 I am reminded it is authority for the proposition that when you ask for a stay in this context you ask for an indulgence of the Court and so even a successful applicant pays the cost of doing so.

DOWSETT J: Well, I am not sure that would go that far. But it certainly seems to me that this is an application in the 170697 T2/SJ3 M/T COA130/97

administration of the action and in those circumstances as between you and the fifth defendant I would have thought the costs should be costs in the cause.

MR MORRISON: Well, I do not want to debate it any further.

I have made my points.

DEMACK J: Then Mr Lukin, what - you actually took some part in the argument yesterday.

MR LUKIN: That is right. And in response to Justice Dowsett's comment as to the reason for attending, it seemed to us that any decision in this Court had the potential to affect the legal conduct and management of the case and in particular the directions made on 12 June and indeed that seems from the decision that that is so, so that would be the basis upon which we attended.

DOWSETT J: What are you asking for?

MR LUKIN: Costs [indistinct].

DEMACK J: On the basis that you were brought along here and that you had an interest to protect even though the protection did not have to be asserted vigorously.

MR LUKIN: Well, the protection - even if not vigorously asserted - may have been even limited to the need - or potential protection in the event that submissions that orders were going to be made outside the main relief sought by the applicant. There is a position to protect in relation to the directions made today.

DEMACK J: Yes, thank you.

In the circumstances the order in relation to costs will be as between the plaintiff and the fifth defendant, the costs of the application to be costs in the cause of the appeal, and in relation to the costs of the appearance of the third, fourth and sixth defendants the costs of this appearance are reserved.

That seems to be about all we can sensibly do at this stage.

MR MORRISON: Thank you, Your Honour.
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