Forstaff Adelaide Pty Ltd v Hills Industries Ltd - [2006] SASC 88

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
FORSTAFF ADELAIDE PTY LTD v HILLS INDUSTRIES LTD
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Duggan and The Honourable Justice Anderson)
28 March 2006
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
GUARANTEE AND INDEMNITY - INDEMNITIES - CONSTRUCTION OF CONTRACT
WORKERS' COMPENSATION - ENTITLEMENT TO COMPENSATION - PERSONS ENTITLED TO COMPENSATION
PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS - DECLARATIONS - APPROPRIATE FORM OF RELIEF -- DISCRETION OF COURT
Appeal against decision of the District Court - respondent obtained declarations which the appellant argued were hypothetical, futile and unfair - whether respondent was entitled to an indemnity from the appellant pursuant to a written contract - indemnity was in relation to any sums found due by the respondent to the WorkCover Corporation in proceeding commenced in the Workers’ Compensation Tribunal pursuant to section 54(7) of the Workers’ Rehabilitation and Compensation Act 1986.
Held: for a declaration to be made, there must be a real as opposed to a theoretical question - the rights of the appellant are entirely dependent upon the resolution of issues to be litigated between the respondent and WorkCover - the declaration will bind the appellant without the appellant having any input into the judgment - this results in unfairness - generally, questions of indemnity should not be determined in advance of determining liability - declarations are futile and hypothetical until other matters before the Workers’ Compensation Tribunal are resolved - declarations lack utility and are unfair - appeal allowed.
Workers' Rehabilitation Act 1986 s 54(7); District Court Act 1991 s 37, referred to.
Allianz Australia Insurance Ltd v National Jet Systems Pty Ltd [2004] SASC 438; Swift Australian Co Pty Ltd v South British Insurance Co Ltd [1970] VR 368; AMP Fire & General Insurance Company Limited v Dixon & Anor [1982] VR 833; Kings College v Allianz Insurance Australia Ltd [2004] 1 QdR 394; Insurance Exchange of Australasia v Dooley & Anor [2000] NSWCA 159; (2000) 50 NSWLR 222; Outboard Marine Australia Pty Ltd v Byrnes [1973] 2 NSWLR 102; Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518; Shoard v Palmer (1989) 98 FLR 402, applied.
Carter Marine Helicopters Ltd (1996) 9 ANZ Ins Cas 61-299 (HC NZ); SA Housing Trust v State Government Insurance Commission (1988) 51 SASR 1; Workers Rehabilitiation and Compensation Corporation v Commonwealth of Australia (1993) 62 SASR 325; Manners v Transfield (1992) 8 WAR 111, considered.

FORSTAFF ADELAIDE PTY LTD v HILLS INDUSTRIES LTD
[2006] SASC 88
Full Court: Doyle CJ, Duggan and Anderson JJ

DOYLE CJ I would allow the appeal.
I agree in substance with the reasons of Anderson J.
I propose to state briefly my reasons for allowing the appeal. I will not repeat the facts. They are to be found in the reasons of Anderson J.
Hills Industries Ltd (“Hills”) claims that its contract with Forstaff Adelaide Pty Ltd (“Forstaff”) entitles Hills to be indemnified by Forstaff if Hills is liable to pay to the WorkCover Corporation (“WCC”) the payment that WCC claims from Hills in proceedings before the Workers’ Compensation Tribunal (“the Tribunal”) under the Workers’ Rehabilitation and Compensation Act 1986 (SA) (“the Act”).
Before the Tribunal, WCC claims to recover from Hills, relying on a statutory cause of action under s 54(7) of the Act, payments of compensation under the Act by WCC to Mr Memisoglou. WCC alleges that Mr Memisoglou was injured while employed by Forstaff but while working for Hills, the injury giving rise to a disability in respect of which Mr Memisoglou was entitled to payments of compensation under the Act. To succeed against Hills, WCC will have to prove that Mr Memisoglou suffered his injury as a result of negligence or breach of statutory duty by Hills.
Hills will be entitled to be indemnified by Forstaff if it can satisfy two conditions. I will state these conditions by reference to the circumstances of the case in hand.
First, Hills must prove as against Forstaff that Hills is or was or will be legally liable (as a result of the operation of s 54(7) of the Act) to make a payment to WCC by which WCC will recoup a loss it incurred (payments of compensation to Mr Memisoglou) as a result of an injury to an employee of Forstaff (Mr Memisoglou) suffered while the employee was working at Hills premises.
The second condition to be satisfied is that Hills must establish, as against Forstaff, that correctly understood one or other of the two indemnity clauses in the contract between Hills and Forstaff requires Forstaff to indemnify Hills in respect of that liability to make payment to WCC. The meaning of those indemnity clauses, or their proper interpretation, is the issue raised by Hills’ claim in the District Court for a declaration as against Forstaff.
In the District Court proceedings the parties raised, and the Judge decided, issues as to the meaning of the those indemnity clauses and their application to a claim by Hills, were the first condition to be satisfied.
Putting things this way identifies the hypothetical nature of the issue posed by Hills’ claim against Forstaff. The first condition has not been satisfied. It might never be satisfied. The Judge’s decision in relation to the second condition might never have an operative effect as between Hills and Forstaff.
The difficulty (from Hills’ point of view) is not just that the proceedings in the Tribunal are still pending.
Even if WCC had obtained a judgment against Hills in the Tribunal, that judgment would not bind Forstaff so as to require it to admit that the first condition is satisfied. Forstaff is not a party to those proceedings, and so will not be bound by the findings made as between WCC and Hills: see Insurance Exchange of Australasia v Dooley & Anor [2000] NSWCA 159; (2000) 50 NSWLR 222 at [9] and 42] Handley JA; Allianz Australia Insurance Ltd v National Jet Systems Pty Ltd [2004] SASC 438 at [6] Doyle CJ, at [60]-[61] Anderson J.
The general rule is that a judgment is not binding on a person who is not a party to the proceedings in which it is granted: see Outboard Marine Australia Pty Ltd v Byrnes [1973] 2 NSWLR 102 at 104 Reynolds JA; Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518 at 522-524 Ipp J; Shoard v Palmer (1989) 98 FLR 402 at 406-409 Kirby P; cf Manners v Transfield (1992) 8 WAR 111; 110 ALR 70. There are some exceptions to that general rule. An exception might arise by the terms of a contract, or by estoppel, but no relevant exception has been identified in the present case. It could not be an abuse of process for Forstaff to contest the liability of Hills to WCC: SA Housing Trust v State Government Insurance Commission (1988) 51 SASR 1.
That being so, even if WCC had obtained a judgment against Hills in the Tribunal, Forstaff would still be entitled to require Hills to prove as against Forstaff its liability to WCC. That liability would not be proved merely by proving the judgment recovered against Hills in the Tribunal. That judgment would rest on findings of fact that could not bind Forstaff. For example, the judgment of the Tribunal would presumably rest on a finding that Mr Memisoglou was injured, that Mr Memisoglou was entitled to compensation under the Act, and that the injury was due to negligence or other breach of duty by Hills. Each of these matters is something that has to be established by Hills as against Forstaff, to secure a finding (against Forstaff) that Hills was liable to WCC.
If the Tribunal had power to join Forstaff as a third party in the proceedings before it, and in those third party proceedings had jurisdiction to determine Hills’ claim for an indemnity, the first and second conditions could be decided in the Tribunal, and without the disadvantages of separate proceedings in different courts. In those circumstances a judgment in favour of WCC against Hills would also bind Forstaff. But Forstaff is not a third party before the Tribunal, and authority suggests that the Tribunal lacks the jurisdiction to decide the issues as between Hills and Forstaff: Workers Rehabilitation and Compensation Corporation v Commonwealth of Australia (1993) 62 SASR 325.
It is no answer to say, as the Judge seems to have said, that if WCC recovers judgment against Hills in the Tribunal, that liability will be covered by one or other of the indemnity clauses, properly interpreted. To say that is merely to say that in due course a liability on the part of Hills might be established that will fall under one of the indemnity clauses. A finding for WCC against Hills does not establish as against Forstaff that Hills is liable to make the payment in question. The decision as to the interpretation of the indemnity clauses remains hypothetical. The general rule is that the liability of a potential third party to a defendant will not be determined before the liability of the defendant to the potential plaintiff has been determined: AMP Fire and General Insurance Company Ltd v Dixon [1982] VR 833. The principle underlying that general rule rests on the fact that to proceed otherwise is to decide a hypothetical issue.
The decision made by the Judge lacks practical utility, because the application of the indemnity clauses might never arise for decision as between Hills and Forstaff.
As well, the making of the declaration denies Forstaff the right to contest the first condition. The declaration implicitly treats the first condition as raising issues that will be settled before the Tribunal. But as Forstaff is not a party to those proceedings, the issues raised by the first condition will not be satisfied as between Hills and Forstaff by proceedings in the Tribunal.
Accordingly, the appeal should be allowed and the declarations should be set aside.
It is not appropriate for the Court to deal with the issues decided by the Judge. To do so would be to decide hypothetical issues and, moreover, to decide on the construction of the indemnity clauses removed from an actual set of facts.
There is a question whether Hills is entitled now to claim from Forstaff payment of costs incurred and to be incurred in defending the claim before the Tribunal. If it is, one or other of the indemnity clauses would have to be interpreted as entitling Hills to an indemnity in respect of those costs without reference to the outcome of the proceedings in the Tribunal, and presumably on the basis that Hills’ entitlement arises on the mere making of a claim.
The Judge decided that Hills is entitled to be indemnified in respect of the costs incurred before the Tribunal: at [47]. But as far as I can tell the premise for that decision was that the first condition had been satisfied, by the institution of proceedings in the Tribunal making a claim to which, on the Judge’s findings, one or other of the indemnity clauses will apply if the claim in the Tribunal succeeds. It is not clear to me that the Judge would have reached the same decision were the entitlement to costs to be considered on the basis that a claim to indemnity (other than in respect of costs) might never arise, and on the basis that the claim to an indemnity in respect of costs is made on the basis that it does not matter whether or not the claim by WCC against Hills ultimately succeeds. I express no view on the prospects of that claim succeeding.
If Hills claims that it is entitled to be indemnified in respect of the costs incurred and to be incurred before the Tribunal, before the proceedings are finalised and regardless of the outcome of those proceedings, it is entitled to have that issue decided now. That is not a hypothetical issue. Accordingly, subject to submissions, I would be inclined to order, if Hills makes an application, that the matter be remitted to the Judge to consider and decide that issue only.
Conclusion
I would allow the appeal, and set aside the declarations made by the District Court. I would give Hills the opportunity to consider whether it wishes the matter to be remitted to the District Court for further consideration of a claim by Hills that it is entitled to be indemnified in respect of the costs incurred and to be incurred before the Tribunal.
DUGGAN J In my view, the appeal should be allowed and the declarations made by the District Court set aside. I agree that we should provide the parties with an opportunity to make submissions on whether the matter should be remitted to the District Court on the issue relating to indemnity for costs before the Workers’ Compensation Tribunal.
I agree with the comments made by Doyle CJ and Anderson J to the effect that the claim for indemnity gives rise to issues of a hypothetical nature such as to render the declaratory orders made by the District Court judge inappropriate.
I also agree with the Chief Justice’s view that the procedural difficulties occasioned by the fact that the appellant is not a party to the proceedings between the Workers’ Rehabilitation and Compensation Corporation and the respondent place another difficulty in the way of making declarations of this nature.

ANDERSON J

Background

In this matter the respondent (“Hills”) sought and obtained declarations in the District Court that it was entitled to an indemnity from the appellant (“Forstaff”) pursuant to the terms of a written contract. The indemnity claimed was in relation to any sums found due by Hills to the WorkCover Corporation (“WorkCover”) in proceedings which WorkCover commenced in the Workers’ Compensation Tribunal (“the Tribunal”) in 2002. Those proceedings have been stayed pending the result of the appeal.
Hills is a manufacturer and employs labour. Amongst those engaged in labour for Hills were workers hired by Hills from Forstaff. Forstaff was in the business of hiring out the services of its employees, and did so pursuant to the terms of a written contact with Hills. The indemnity was said to be contained in two clauses of the written contract as follows:
1.Forstaff will pay the WorkCover levy for our employees on your site and meet any claims for accidents or injuries to our employees.
2.In the event that one of Forstaff’s employees is injured in the course of his or her work at Hills Industries Ltd Forstaff indemnify Hills against any claim made by any organisation for any loss it may incur.
Mr Memisoglou was an employee of Forstaff and hired at the relevant time to Hills when he sustained an injury at work. He was paid compensation by WorkCover. In the proceedings issued in the Tribunal, WorkCover sought to recover from Hills the amounts of compensation paid to Memisoglou by WorkCover and issued proceedings pursuant to s 54(7) of the Workers’ Rehabilitation and Compensation Act 1986 (“the Act”).
The Declarations
Section 37 of the District Court Act 1991 (SA) enables that court to grant declaratory relief. The declaratory relief granted by the learned Judge is based on the terms of the contract entered into between the appellant and the respondent. Hills obtained from the learned Judge, in the proceedings under appeal, declarations as follows:
1.That the defendant do indemnify the plaintiff in relation to any sums found due by the plaintiff to the WorkCover Corporation in action 5736 of 2002 in the Workers Compensation Tribunal.
2.That the defendant do indemnify the plaintiff on a solicitor and own client basis for all costs incurred by the plaintiff in the said Workers Compensation Tribunal proceedings.
3.That the defendant do pay the plaintiff’s costs incurred in this action to be agreed and in default to be taxed.
It was argued in the proceedings in the District Court that the indemnity was a term of the contract by the express provisions set out earlier and also based on oral representations which had been made in discussions between the parties. It was argued, that the effect of the oral representations was that Hills, in the case of an injury to any person hired by Forstaff to Hills, “would not be liable in any circumstances”. Forstaff denied that it was liable to indemnify Hills pursuant to the terms of the contract.
Findings of the Trial Judge
His Honour analysed the arguments relating to the terms of the contract. He made findings based on the evidence presented to him and on the interpretation of the clauses.
There was also a question of whether the indemnity extended to cover negligence by Hills itself. His Honour analysed the relevant authorities on this topic. Following that analysis, his Honour concluded that the words contained in the two clauses, set out above, were sufficiently wide to include indemnity for any liability caused by Hills’ negligence.
His Honour concluded at [44]:
In my opinion, requiring the defendant to indemnify the plaintiff against its own negligence does not produce an absurd result as was submitted on behalf of the defendant, but achieves the commercial consequence that the parties had intended.
The learned trial Judge found that the two clauses set out previously were part of the contractual arrangement between the parties. His Honour found that there was no ambiguity or uncertainty about these clauses, and that, therefore, it was not necessary to deal with the argument which had been put to him regarding the contra proferentem rule. Having interpreted the clauses in favour of Hills, his Honour then found that there was no impediment to his making the declarations because there was a real, as distinct from a theoretical or hypothetical question in issue.
Amended Grounds of Appeal
The grounds of appeal are:
1.The learned trial Judge erred in law in exercising the court’s jurisdiction to grant declaratory relief in circumstances where the declaratory relief sought
1.1    was premature;
1.2    lacked utility in the circumstances;
1.3    was based on or depended on findings still to be made with respect to an hypothetical set of circumstances.
In the Alternative to Ground 1:
2.The learned trial Judge erred in law in finding that the Corporation’s claim fell within the terms of the first provision, on its proper construction (Judgment at paragraph [37]).
3.The learned trial Judge erred in law in finding that the Corporation’s claim fell within the terms of the second provision, on its proper construction (Judgment, [38]).
4.The learned trial Judge erred in law in finding that the appellant is liable to indemnify the respondent in respect of the Corporation’s claim (Judgment, [42]).
5.In the alternative to paragraphs 2 and 4 above, the learned trial Judge erred in law in finding that the first provision required the appellant to indemnify the respondent with respect to its legal costs incurred in defending the Corporation’s claim (Judgment, [47], [48]).
6.In the alternative to paragraphs 3 and 4 above, the learned trial Judge erred in law in finding that the second provision required the appellant to indemnify the respondent with respect to its legal costs incurred in defending the Corporation’s claim (Judgment, [47], [48]).
7.In the alternative to paragraphs 5 and 6 the learned trial Judge erred in law in finding that the appellant was obliged to indemnify the respondent with respect to costs on a solicitor and own client basis.
Arguments on Appeal
Mr Nicholson, for the appellant, argued that this was a case in which the declarations should not have been made. He first argued that the declarations were hypothetical and lacked utility. He submitted that the declarations on their face would bind Forstaff to findings yet to be made by the Workers’ Compensation Tribunal. Forstaff was not a party to these proceedings and could not be made a party and therefore Forstaff would have no say in the outcome of those proceedings, which would bind Forstaff to the outcome and could potentially result in an unfairness to Forstaff.

It was asserted by Mr Nicholson that the declarations were premature because WorkCover’s right to recovery pursuant to s 54 of the Act required that the following matters would first need to be established by WorkCover:
§That Mr Memisoglou suffered a disability;
§That the disability arose from his employment with Forstaff; and
§That Mr Memisoglou has received or is entitled to damages from Hills pursuant to rights arising from the same trauma as gave right to the compensation under the Act.
WorkCover’s claim was denied by Hills in its defence. The matters set out above are required to be established in a hearing in the Workers’ Compensation Tribunal inquiring into the circumstances in which Mr Memisoglou alleges he suffered a disability, and whether in turn, such alleged disability resulted from the negligence and/or breach of statutory duty on the part of Hills. Mr Nicholson argued that WorkCover has at this time no present right of recovery against Hills, and may never obtain such right.
Mr Nicholson argued further that the decision of the Full Court in Allianz Australia Insurance Ltd v National Jet Systems Pty Ltd [2004] SASC 438 was pertinent to the decision in this case. In that case it was held by the court that the declarations made in that instance were hypothetical for a variety of reasons set out in the reasons of Doyle CJ at [6], and Anderson J at [60] – [61], in which Duggan J agreed.
The declarations made in that case were as follows at [31]:
National Jet Systems is entitled to be indemnified by Allianz Australia in respect of any liability that is determined in action number SC 509 of 2001 in the Supreme Court of the Australian Capital Territory that National Jet Systems has to Susan Rawson in respect of injuries sustained by her within the Australian Capital Territory in the course of her employment with National Jet Systems in the period from the 18^th day of September 1994 until the 31^st day of July 1997.
To that extent, it was argued that the nature of the declaration made in Allianz v National Jet Systems and the declaration made in this matter are not dissimilar. The declaration in that case merely stated the obvious, namely, that the insurer would be held liable if the claim came within the policy.
Apart from the question of the prematurity of the declarations, Mr Nicholson also argued that it was an important factor that Forstaff had no ability to be involved in the Workers Compensation Tribunal proceedings, and that there was therefore, an unfairness created in the circumstances if the declaration was made. The basis of the argument was that the right to conduct the defence lay with Hills, subject only to Hills’ duty to act reasonably and bona fide with regard to Forstaff’s interest. This was argued by analogy from an insurance case of Carter v Marine Helicopters Ltd (1996) 9 ANZ Ins Cas 61-299 (HC NZ).
Marine Helicopters was sued by Carter for damage caused to his crops by over-spraying. It was only covered by its insurance policy for some of the period during which the damage was suffered. There were separate legal advisors for both the insured and uninsured period. A conflict arose between the respective advisors and the insured sought a declaration that it was entitled to be represented by separate counsel in respect of the claims made against him.
The High Court of New Zealand considered that, so long as there was nothing to the contrary in the policy, the prime right to conduct the defence lay with the insured who remained dominus litus, subject only to his obligation to act reasonably and bona fide with due regard to the insurer’s interests.
Mr Nicholson referred to the proposition set out in Desmond Derrington, The Law of Liability Insurance (2005) 2^nd Ed at p 708 where the learned author states:
However, in the absence of an express or implied term, the insured has the right to conduct the defence, even if the costs of it come within the cover.
The case cited for this proposition by the learned author was Continental Insce Co v Dia Met Minerals Ltd (1994) BCSC C941834.
The learned trial Judge dealt extensively with the question of the declarations and the general inappropriateness or otherwise of the declarations in his reasons at [45] to [55] inclusive.
Although Mr Nicholson emphasised the futility aspect of the declarations, and also the unfairness to his clients, these matters were not the subject of the written summary of argument prepared by the respondent.
Mr Soulio, for Hills, argued that the learned trial Judge had a very wide discretion in relation to the making of a declaration. Although that is correct, it is also the case that the exercise of any discretion would not be relevant if it were the case that the declarations were entirely hypothetical. In other words, if it can be shown that the trial Judge has made an error of law, then the discretion would have no part to play.
Mr Soulio also argued against the proposition of any unfairness to Forstaff. He was, however, unable to provide us with any authority against the proposition contended, namely, that Forstaff could not be bound by any findings in the litigation between WorkCover and Hills because it simply was not a party to those proceedings.
As indicated, these were the first grounds of appeal argued by the appellant. Although there were other grounds developed in some detail by Mr Nicholson, I do not consider it necessary to deal with the alternative grounds because I have concluded that the earlier grounds of appeal should succeed.
The Decision Under Appeal
The learned trial Judge, having made his findings relating to the indemnity, dealt with the question of whether it was appropriate in the circumstances of this case to make a declaratory order. His Honour set out in his reasons a discussion of the relevant cases. As previously indicated, his Honour was not referred to the decision of Allianz v National Jet Systems. This decision was only mentioned, we were informed by counsel, during an argument which subsequently took place on the question of costs. It was not however put to the Judge during argument on the substantive matters in issue.
That decision, although it relates to an indemnity clause in a policy of insurance, is in my view a relevant authority in this matter.
His Honour reasoned that because a claim had been made by WorkCover Corporation, and because Hills had sought an indemnity in respect of the claim made by the corporation, there was a real question to be determined. His Honour said at [47]:
It is true that the liability of the plaintiff depends upon the outcome of the claim against the plaintiff by the Corporation. However, the Corporation has made a claim and the plaintiff has sought an indemnity in respect of that actual claim. There is a real question to be determined.
His Honour formed the view that this was not a case where there was a hypothetical statement of facts, and thus it would not and could not be a case of making a declaration in the abstract. His Honour said at [53]:
For the reasons which I have stated, the present application does not require a declaration in abstract. The plaintiff seeks an indemnity in respect of a claim which has actually been made by the Corporation.
Finally his Honour goes on to say at [55]:
The court is not faced with a hypothetical situation. A claim has been made against the plaintiff and whether it is entitled to be indemnified by the defendant is a real issue. The court will sometimes refuse to make a declaration where the rights of the parties are subject to some future contingencies. Lunn: Civil Procedure, paragraph 63.01.10. I think there is a difference between contingencies which may affect the rights of the parties as between themselves and a contingency which is concerned with the position vis-à-vis the plaintiff and a third party such as the Corporation.
His Honour therefore has correctly instructed himself that there must be a real, as distinct from a theoretical, question if declarations are to be made. He reasons that because WorkCover has made a claim and Hills have sought indemnity, that there is therefore a real question. However, WorkCover may never establish a right to recovery under s 54 of the Act and in that event there would not be any question of any indemnity.
The decision in Swift Australian Co Pty Ltd v South British Insurance Co. Ltd [1970] VR 368, is distinguished by his Honour. His Honour states at [48]:
The question in that case was whether the defendant was obliged to indemnity the plaintiff under an insurance policy against a claim by one of its workers for injuries sustained in the course of his employment. The court held that whether the defendant was liable to the plaintiff depended upon alternative states of facts which may or may not be found by the tribunal hearing the worker’s claim. The court said to answer the question in those circumstances would be opposed to the principle that the court will not advise parties under a hypothetical state of facts.
I think that the statement set out above from Swift v South British covers the situation which exists in this matter. In my view his Honour has made an error in law by saying that there is no uncertainty in the present case. It seems to me that the basis for any claim for indemnity is as yet not known, and cannot be known, until there are findings made in favour of WorkCover in the Workers’ Compensation Tribunal in its claim for recovery under s 54. This is a case where there is, by virtue of the denial by Hills, no agreed set of facts.
It also appears that his Honour may have been influenced by a decision of a Master in the District Court to the effect that the opposition to the application for a declaration was really a de facto stay application. This court has not been appraised of the background for the decision of the Master and the circumstances surrounding that aspect of the case, but in the view which I take, it is unnecessary to know anything more about that decision.
In this case, the rights of Forstaff are entirely dependant upon the resolution of the issues to be litigated between Hills and WorkCover. Forstaff has no ability to have any input into that litigation. The effect of the declaration is that the result will in due course, bind Forstaff without it having any input regarding some or all of the judgment. The learned Judge, in my view, is seeking by the declarations, to bind Forstaff to findings yet to be made. I do not consider that it is appropriate to bind Forstaff to findings in which it has no part to play.
The decision in Allianz v National Jet Systems does involve a similar indemnity, albeit contained in a policy of insurance.
The decisions in AMP Fire & General Insurance Company Limited v Dixon & Anor [1982] VR 833 and Kings College v Allianz Insurance Australia Ltd [2004] 1 QdR 394 referred to in Allianz v National Jet Systems are likewise, authorities in support of the view I take and contrary to the view taken by the learned trial Judge.
The declaration may amount to “a comfort” for Hills or it may be useful in negotiations, but in my view that does not entitle Hills to the declaration sought. AMP v Dixon is strong authority against determining questions of indemnity in advance of determining the liability which gives rise to the claim for indemnity, except in the most exceptional circumstances. I do not consider that there are exceptional circumstances in this matter.
In my view, the declaration in this matter would be futile if WorkCover is unable to establish that Mr Memisoglou suffered a disability which arose from his employment at Hills, and that as a result, he was entitled to damages arising from the same incident which entitled him to compensation. There is simply no real issue between Forstaff and Hills until WorkCover runs its case before the Workers’ Compensation Tribunal.
In my view, his Honour erred in his finding that this was not a hypothetical situation. It was entirely hypothetical until other matters before the Workers’ Compensation Tribunal were resolved. He should have found that the declaration lacked utility. For the reasons expressed I would allow the appeal on Ground 1.
The Alternative Grounds of Appeal
In the view I take, it is unnecessary to deal with the alternative grounds.
Since preparing my reasons, I have had the opportunity of reading a draft prepared by Doyle CJ. I agree with his approach to the question of costs and I agree with his suggestion of remitting the matter to the Judge.
I would allow the appeal, and set aside the declarations made by the District Court.