HIH Casualty and General Insurance Ltd v The Meadows Indemnity Co Ltd

[1999] NSWSC 158

CITATION:	HIH Casualty and General Insurance Ltd v The Meadows Indemnity Co Ltd [1999] NSWSC 158 revised - 03/09/99
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	50062/98
HEARING DATE(S):	26 February 1999
JUDGMENT DATE:	9 March 1999
PARTIES :	HIH Casualty and General Insurance Ltd v The Meadows Indemnity Co Ltd
JUDGMENT OF:	Hunter J

COUNSEL :	Plaintiff: Mr R W White SC with Mr T D Castle Defendant: Mr M Walton SC
SOLICITORS:	Plaintiff: Dan MacCallum Defendant: Dibbs Crowther & Osbourne
CATCHWORDS:	Stay of proceedings - submission to arbitration not admitted by applicant - readiness of applicant to arbitrate - summary judgment - admission outside of pleadings - Pt 18 r 3 considered - admissions insufficiently clear - no defence to limited portion of claim - Pt 13 r 2 applied.
CASES CITED:	Ellis v Allen [1914] 1 Ch 904 In the Matter of the Trade Marks Act 1955-1958 and in the Matter of Registered Trade Marks "Certina" and "Certina DS" (1970) 44 ALJR 191 Kelly v Mawson [1981] 1 NSWLR 184 Termijtelen v Van Arkel [1974] 1 NSWLR 525 General Steel Industries Incorporated v Commissioner for Railways (NSW) (1964) 112 CLR 125 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Webster v Lampard (1993) 177 CLR 598.
DECISION:	Application for stay of proceedings refused - motion dismissed - judgment for plaintiff in sum of $438,832 - defendant to pay plaintiff's costs of both motions.

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

HUNTER J

TUESDAY 9 MARCH 1999

50062/98 HIH CASUALTY AND GENERAL INSURANCE LTD v THE MEADOWS INDEMNITY CO LTD

REASONS FOR JUDGMENT
1 In these proceedings, the plaintiff, HIH Casualty and General Insurance Ltd, formally known as CE Heath Casualty & General Insurance Ltd (Heath), seeks damages in the sum of $1,114,666.03 under quota share reinsurance agreements (the agreement) in respect of professional indemnity policies for the periods 1 April 1989 to 31 March 1990 (the first policy year) and 1 April 1990 to 31 March 1991 (the second policy year). It is alleged that the agreement in respect of the first policy year was for a quota share of five per cent of $5,000,000 any one policy any one risk in excess of $5,000,000 any one policy any one risk and that the agreement in relation to the second policy year was for 7.5 per cent.
2 In the summary of Heath’s contentions in the summons (the contentions), it is alleged as follows in respect of the first policy year:

“C2. The following claims and expenses in excess of $5m were incurred and paid by the Plaintiff in respect of policies commencing during that period.

Policy No Insured Claim and Expenses
Amount (Excess $5m)
9PNK2813 ASA Day Neilson $11,712,500.00

C3. The Defendant’s share of those losses is 5% of $11,712,500.00 ie $585,625.00”

3 It is further alleged in the contentions in respect of the second policy year as follows:

“C6. The following claims and expenses in excess of $5m were incurred and paid by the Plaintiff in respect of policies commencing during that period.

Policy No. Insured Claim and Expenses
Amount (excess $5m)
90PNK4184 Freehills $1,239,045.00
90PNK4203 Priestley Morris $5,814,835.41

C15. The Defendant’s share of those losses is 7.5% of $7,053,880.41 ie $529,041.03”

4 In its defence, the defendant, The Meadows Indemnity Co Ltd (Meadows), denies the allegations in paragraphs C3 and C15 of the contentions and does not admit the allegations in paragraphs C2 and C6. Nor does Meadows admit the terms of the agreement. Meadows asserts, however, that if the terms are those relied upon by Heath, then the agreement in respect of the first policy year limited its share of the reinsurance to $250,000 calculated at five per cent of $5,000,000 and, in respect of the second policy year, to $375,000 calculated at 7.5 per cent of $5,000,000. It denies that the agreement called for the payment of legal costs and expenses in addition to those limits. While Meadows admits that it has not paid the claims made upon it by Heath, it denies any obligation to pay those claims. That is a bare denial without any matter pleaded in support of it.
5 In purported answer to the whole of the claim, Meadows asserts that if the terms of the agreement were as alleged by Heath, then Heath was in breach of article VIII of those terms which gave rise to an equitable set-off in respect of damages for that alleged breach. Meadows further asserts that by reason of the terms of article XVIII, the parties were required to submit disputes under the agreement to arbitration by reason whereof it is alleged that the “commencement of these proceedings is barred by reason that the plaintiff is not entitled to bring or maintain these proceedings”.
6 Article VIII was in the following terms:

“LOSSES AND LOSS ADJUSTMENT EXPENSES:
The Company will settle all losses incurred under its Policies and such settlements shall be binding on the Reinsurer in proportion to its participation in this Agreement. In addition, the Reinsurer will be liable for its pro-rata share of expenses incurred by the Company in connection with such losses. The Reinsurer is entitled to, and will be paid or credited with, any amounts the Company recovers as salvage. The Reinsurer agrees to reimburse the Company, promptly, when so requested by the Company for losses paid by the Company. Requests for such reimbursement must be accompanied by an executed reinsurance proof of loss. Alternatively losses shall be handled in the quarterly accounts and need not be individually reported.
It is understood that, when so requested, the Company will afford the Reinsurer an opportunity to be associated with the Company, at the expenses of the Reinsurer, in the defense or control of any claim or suit or proceeding involving this reinsurance, and the Company and the Reinsurer shall cooperate in every respect in the defense of such claim or suit or proceeding.
Nothing in this Article shall be construed as meaning that losses are not recoverable hereunder until the loss to the Company has been ascertained.
The date of loss as defined in the Company’s original insurance policies shall apply as respects loss under this Agreement, and the Company shall be the sole judge of what shall constitute the date of loss.”

7 Article XVIII provided as follows:

“ARBITRATION:
Disputes arising out of this Agreement or concerning its validity shall be submitted to the decision of a Court of Arbitration, consisting of three members, which shall meet in Australia.”

8 In respect of the claimed equitable set-off, no damages are specified, no cross-claim is pleaded and no particulars are provided by which any such damages could be quantified.
9 There are two motions before me. One by Meadows seeks orders that the proceedings be summarily dismissed and, in the alternative, that they be stayed until the matters in dispute have been arbitrated pursuant to article XVIII. It is only the latter order which is pressed.
10 Heath’s motion seeks orders as follows:

“2. An order that the Plaintiff have leave to enter Judgment against the Defendant for part of the claim in the amounts of:
…

(b) $375,000.00 in respect of the claim but not expense relating to Priestley and Morris for the period 1 April 1990 to 31 March 1991 and interest thereon.

without prejudice to the Plaintiff’s right to proceed with the balance of the claim.

3. Alternatively, an order that paragraph 5 of the Defence be struck out.
4. Alternatively to Paragraphs 2 and 3, an order that the following questions be determined separately under Part 31 of the Rules before any trial or further trial in the proceedings:
(a) whether the Defendant is party to contracts for reinsurance with the Plaintiff for each of the years ended 21 March 1990 and 31 March 1991, and if so, under what terms;
(b) whether under the terms of the contract or contracts identified in answer to (a) above, the Plaintiff is entitled to indemnity from the defendant for:
(i) $375,500.00 in respect of the claims relating to ASA Day Nielson referred to paragraph C2 of the Summons.
(ii) $357,000.00 in respect of the claims relating to Priestley and Morris referred to in paragraph C6 of the
Summons.
(iii) $93,399.00 in respect of the claims relating to Freehill Hollingdale and Page.
(iv) the expenses relating to ASA Day Nielson and Priestley and Morris referred to in paragraphs C2 and C6 of the Summons.”

11 Order 2(a), which sought summary judgment in the sum of $357,500 under the agreement in respect of the first policy year, was not pressed.
12 Meadows’ defence and application have been filed by Meadows without prejudice to its challenge to the jurisdiction of this Court to determine these proceedings. That challenge is the subject of a decision by Rolfe J of 16 December 1998 (Rolfe J’s judgment). In that judgment Rolfe J dismissed Meadows’ application that the summons be set aside for want of jurisdiction or that the Court should decline to exercise jurisdiction on discretionary bases. Meadows has applied for leave to appeal against Rolfe J’s judgment.
13 Much of the material which was before Rolfe J in that application has been re-tendered in the applications before me. In particular, Heath read the affidavit of Meadows’ solicitor, Dale James Kemp, sworn 25 September 1998 (Kemp’s affidavit) as to paragraphs 1 to 34, while the balance of Kemp’s affidavit was read by Meadows. That balance of Kemp’s affidavit was objected to by counsel on behalf of Heath on the ground of relevance. I deferred ruling on that ground in the interest of expedition. In my view, the material is relevant to the bases of defence relied upon by Meadows.
14 The affidavit of Gregory Ernest Brown, sworn 17 November 1998 was admitted into evidence before Rolfe J and, before me, Heath read paragraphs 1 to 5, 7 to 10 and 12 to 29.
15 In my view, Meadows’ application is without substance and should be dismissed. It is founded upon reliance on the terms of article XVIII of the agreement, a term it does not admit it is bound by. As a consequence, Meadows does not admit that it is a party to any submission to arbitration.
16 Consistently with that stance, there has been no evidence advanced by Meadows that it was, at all material times, and remains, ready and willing to arbitrate the subject disputes. Moreover, the application lies uncomfortably beside the position adopted by Meadows before Rolfe J. There, in reliance upon the Kemp affidavit, it was submitted that matters touching the discretionary basis of the relief sought included the fact that all of the possible witnesses and documents of Meadows were situated in Europe or the United States. Yet the submission to arbitration upon which Meadows relies in this application requires arbitration in Australia.
17 It was put to Rolfe J in the following terms (at pp 9-10):

“In relation to the discretionary grounds Mr Walton submitted that New South Wales is a clearly inappropriate forum because any contracts of reinsurance were made and intended to beperformed outside Australia; all communications involving the defendant in relation to the reinsurance occurred in England; the administration of all claims on behalf of the plaintiff was conducted by Heath England in England; the plaintiff’s files in relation to professional liability claims are kept in England; and all documents, and presumably witnesses, necessary to substantiate a claim against the reinsurer are in England. In so far as these matters related to the position of the plaintiff they hardly assisted the defendant at a discretionary level, the real question being what problems would confront the defendant. The submission continued that in relation to the issues raised in the Summons regarding “the alleged contract of reinsurance”, the relevant witnesses and the records relied on by the defendant are in England, Guernsey or the United States, but not Australia. The evidence established, in my opinion, that in so far as the defendant had documents they were, in all probability, in Tennessee. No relevant witnesses were identified.
In paragraph 42 of his affidavit of 25 September 1998, Mr Kemp said that at no time had any terms of any reinsurance contract been conveyed by the plaintiff to the defendant.

In paragraph 16 of his affidavit of 1 December 1998 he referred to the administration of claims made upon the defendant, and said:-

“All witnesses and evidence as to the administration of reinsurance claims, as well as to the agreements and correspondences between Meadows and Heath England is located in England, Guernsey and/or the United States.”

In paragraph 18 he said that through the usual practice of administering reinsurance claims, all documents necessary to substantiate a claim against the reinsurer, both on the merits and as to quantum, would be provided by the plaintiff to Heath England to satisfy the legitimate concerns of the reinsurer. He continued that all such documentation is in England or would be required to be transferred to England for administration of the claims with the defendant and the other reinsurers.”

Those are not the submissions of a party ready to arbitrate and requiring arbitration of disputes in Australia.
18 I note in passing that inconsistently, in my view, with those submissions, it was also advanced on behalf of Meadows before Rolfe J that in the exercise of discretion his Honour should have regard to the operation of article XVIII. The matter was dealt with at pages 16 to 31 of Rolfe J’s judgment, the first reference to which reads as follows:

“Article XIX provided for arbitration by a Court of Arbitration consisting of three members “which shall meet in Australia”. Mr Walton submitted that if this was the proper wording of the policy, which he did not concede, the dispute should be referred to arbitration and, on that ground, the present proceedings should be stayed. There was no elaboration of this bald submission.”

Article XIX referred to by Rolfe J reflects a restructuring of agreement terms in subsequent years to the relevant policy years.

19 The application by Heath under paragraph 2(b) of its notice of motion is based, alternatively, upon Pt 18 r 3 of the Supreme Court Rules and Pt 13 r 2. Pt 18 r 3 is in the following terms:

“3 (1) Where admissions are made by a party, whether by his pleading or otherwise, the Court may, on the application of any other party, give any judgment or make any order to which the applicant is entitled on the admissions.

(2) The Court may exercise its powers under subrule (1) notwithstanding that other questions in the proceedings have not been determined.”

20 It is clear that the admissions to which Pt 18 r 3 applies extend to informal admissions: while it is recognised that reliance upon such admissions will require the facts and terms of the admission to be established and may require evidence of the circumstances of the making of the alleged admission.
21 In Ellis v Allen [1914] 1 Ch 904 at 908-909, the object of a comparable rule was described in the following terms:

“The object of the rule was to enable a party to obtain speedy judgment where the other party has made a plain admission entitling the former to succeed. I do not think r. 6 should be confined as suggested. In my judgment it applies wherever there is a clear admission of facts in the face of which it is impossible for the party making it to succeed.”

22 A similar provision in the High Court Rules was considered in In the Matter of the Trade Marks Act 1955-1958 and in the Matter of Registered Trade Marks “Certina” and “Certina DS” (1970) 44 ALJR 191 at 192-193. There Barwick CJ expressed the care with which such a power should be exercised in the following terms:

“The power which the rule gives to a Justice in chambers must be exercised with great care. This aspect of the rule was examined in General Steel Industries Inc. v. Commissioner for Railways … But in a clear case a proper exercise of the power will obviate the delay involved in a hearing and will save unnecessary expense.”

I have occasion to return to General Steel later in these reasons.
23 Certina and Ellis were followed by Needham J in Kelly v Mawson [1981] 1 NSWLR 184 as decisions in which evidence of the facts surrounding the admission relied upon were admitted in support of the application for judgment.
24 The discretionary nature of the relief provided by Pt 18 r 3 was emphasised in Termijtelen v Van Arkel [1974] 1 NSWLR 525, a decision of the Court of Appeal in which the following passage appears in the judgment of Hope JA (at 529):

“Thus the power of the court to grant relief on motion for decree in any of these three ways is discretionary, and the court is not bound to grant it because of admissions arising in the pleadings, or because of default in pleading. There seems to be implicit in the practice of the court, as illustrated in relation to these three forms of application, a right to refuse to act on admissions, whether arising as a result of s. 38 of the Equity Act or otherwise.”

25 That case was concerned with deemed admissions on the pleadings. However, I think the principle holds good in considering the exercise of power under Pt 18 r 3.
26 The reference in the order sought in paragraph 2(b) of Heath’s notice of motion to a claim relating to Priestley & Morris is a reference to a claim for indemnity in the second policy year arising out of a damages claim against Priestley & Morris (the Priestly & Morris claim) brought by trustees of certain trusts for the negligent performance by Priestley & Morris of their duties as auditors of the trusts.
27 The claim was brought in the Supreme Court of Victoria in 1991 and was settled by agreement in writing bearing date 1 April 1997 (the settlement agreement) to which the trustees, Priestley & Morris, AMP General Insurance Ltd (AMP), Heath, FAI General Insurance Company Ltd (FAI) and GIO Insurance Ltd (GIO) were parties. The settlement agreement provided for payment by those insurers to the trustees on behalf of Priestley & Morris the sum of $33,000,000 in full and final settlement of the claim against Priestley & Morris. The obligation of those insurers to make the payments was several in the following shares:

“(i) AMP $2,000,000 all inclusive;
(ii) FAI $18,000,000 all inclusive;
(iii) (Heath) $10,000,000 all inclusive;
(iv) GIO $3,000,000 all inclusive.”

28 The settlement agreement also called for a possible further payment of $2,000,000 by GIO in the circumstances there stipulated. Heath’s obligations were satisfied by payment of $10,000,000 to the plaintiffs on 21 March 1997. That is not disputed. Nor does the defence assert that the claim fell outside the indemnity relating to the second policy year. The evidence disclosed that notice of circumstances that could give rise to the Priestley & Morris claim was given on 31 December 1990 and received on 4 January 1991. Under the terms of the professional indemnity policy for the second policy year, the claim was deemed to be made upon the giving of that notice.
29 It will be observed that the payments by the insurers under the settlement agreement involved a payment that went beyond the layer in respect of which Meadows held a 7.5 per cent quota share of $5,000,000 in excess of $5,000,000 any one policy any one risk. The layers of insurance in conformity with the several liability of those insurers under the settlement agreement was evidenced in the Kemp affidavit as being as follows: AMP was the primary insurer for $2,000,000: FAI carried the layer of $18,000,000 in excess of $2,000,000 and Heath carried $10,000,000 in excess of $20,000,000. It is not clear from that evidence where GIO fits into the insurance layers. I have not found it necessary to resolve that matter.
30 Prior to the settlement agreement, Meadows had been informed of the Priestley & Morris claim. This is evidenced in the Kemp affidavit which showed that, sometime prior to 3 March 1993, extensive details of the claim, and of the proceedings based upon the claim, had been forwarded to Meadows’ office at the Island of Guernsey during 1992.
31 Meadows relied upon the affidavit of Alice Palacio sworn 24 February 1999 (the Palacio affidavit), which, in many respects, complemented the affidavit evidence of Meadows’ solicitor as contained in the Kemp affidavit. Palacio was a director of Meadows and admitted that Meadows had undertaken reinsurance risks written by Heath for each of the two policy years which she asserted limited Meadows’ liability for the first policy year to five per cent of $5,000,000 in excess of $5,000,000, namely $250,000, and for the second policy year to 7.5 per cent, or $375,000. She evidenced receipt of notification from Heath in 1992 of the Priestley & Morris claim and then asserts there was a gap in information received until being informed of the settlement agreement in April 1997.
32 While the Palacio affidavit sets out some detail of discussions said to have taken place with CE Heath Insurance (Brokering) Ltd concerning consideration of the “commutation” of accounts as between Meadows and Heath, it is common ground that the commutation subject matter has no bearing upon the issues I am required to determine. She testified to the holding of a meeting with a representative of Heath on 1 May 1997. Shortly prior to that meeting she said she received voluminous material relating to the Priestley & Morris claim which had not been provided to her previously.
33 Among the matters for discussion at the meeting was the basis of a Heath broadsheet which presented a balance debit said to be owed by Meadows to Heath in the sum of $1,026,263. It was her evidence that at the meeting she complained about the absence of adequate information and of the manner in which the alleged liabilities of Meadows to Heath had increased in the statements provided by Heath from time to time.
34 There was nothing in that meeting, in my view, as evidenced by Palacio, that could be regarded as an admission. Communications which had passed between Meadows and Heath in the months that followed the 1 May 1997 meeting were evidenced by the Palacio affidavit and, for her part, she treated those communications as evidencing her challenge to the correctness of the Heath accounts and thus evidencing a failure on the part of Heath to provide information as requested to enable Meadows to further consider the claims.
35 She raised in her affidavit a number of hypothetical considerations that could give rise to a defence to Heath’s claim. However, these are little better than conjecture without any factual basis and have neither been pleaded by way of defence, nor notified as being the subject matter of any proposed application to amend the defence or of a proposed cross-claim in these proceedings.
36 A good illustration, I think, of the nature of that aspect of the Palacio affidavit is found in paragraph 46. Having recounted the several months in 1997 when she claimed that she had unsuccessfully sought information from Heath, she testified as follows:

“One of the reasons why the information requested by Meadows is critical and why I would never have admitted that Meadows was liable to the plaintiff in any amount, is because the risks alleged to be re-insured were based on claims-made policies. If the claims upon which the plaintiff seeks indemnification were first made in years other than 1989 and 1990, Meadows is simply not liable. Moreover, when these claims were made will directly effect the amount of indemnification, if any, for which Meadows may be liable. Further, if these claims arose prior to Meadows execution of the slips, and Meadows was not advised of the pendency of these matters (which it was not), Meadows was fraudulently induced to enter into these re-insurance treaties.”

37 It is a little difficult to reconcile that much of the Palacio complaint of lack of information of the Priestley & Morris claim after 1992, 1993 until April 1997 with the evidence of Meadows’ own solicitor in the Kemp affidavit. That evidenced the provision by Heath to Meadows in 1995 of “the latest documentation” relating to the Priestley & Morris claim. That information included a lengthy letter from Ebsworth & Ebsworth to their client, the primary insurer, detailing aspects of the litigation relating to the Priestley & Morris claim. Although Meadows was invited to confirm receipt of that material, and impliedly invited to confirm that the documentation was “in order”, there is no evidence in the Kemp affidavit or elsewhere that Meadows responded to any of the communications received by it in 1992, 1993 or 1995. The complaints of lack of information or any assertion of a right to participate in the litigation in accordance with article VIII of the agreement only came to light when a request for payment was made by Heath after settlement of the Priestley & Morris claim.
38 The principal material relied upon by Heath as an admission of liability as to $375,000, a portion of the Priestley & Morris claim, is evidenced in the Kemp affidavit. Following the 1 May meeting, Heath wrote to Meadows confirming “action points” agreed at the meeting and which included the following:

“1. Meadows agree the unpaid balances due to (Heath) total $535,625.
2. (Heath) require payment of the above monies within 10 days.”

39 Meadows responded in the following terms which was also noted in Rolfe J’s judgment:

“Meadows is in receipt of your fax dated May 2nd. Meadows agreed that the claims presented appeared to be in order and that the total amounts owing to (Heath) are Aud $535,625. Meadows is still reviewing the Priestley & Morris claim and may have further questions. As per the claims presented, Meadows’ exposure on the 1990 underwriting year has been maximised at Aud $375,000 and there are no further liabilities that can be presented.”

40 That letter concluded with the following:

“We are very interested in commuting this account with Winterthur but Meadows did not agree to any of the commutation terms noted in your fax. As discussed, Meadows is in run-off and has not written any new business since late which has forced us to be prudent with cash flow since the majority of premiums were collected by 1990 along with payment of the majority of its claims. Most of Meadows’ available cash at this time is pledged to secure letters of credit with other cedents. I advised in our meeting that a review would be made of Meadows’ current position to identify our availability of cash for this account along with Meadows’ other liabilities and this has been completed. We are willing to make an offer of $100,000 in full and final settlement of all claims for both the 1989 and 1990 underwriting years. We ask that you take this offer into serious consideration at this time. I await your reply.”

41 There are a number of aspects recorded in that evidence upon which Heath relies as going to matters affecting my discretion on this application and to which reference is later made in these reasons.
42 The sum of $535,625 had been identified in the facsimile of Heath to Meadows of 30 April 1997 as being made up of $375,000 on the Priestley & Morris claim and $160,625 in relation to the further claim which was the subject of the order sought in paragraph 2(a) in Heath’s notice of motion which is no longer pressed.
43 A summary of balances was submitted by Heath to Meadows on 15 May 1997 and Meadows responded to that in the following terms in relation to the second policy year:

“On the 1990 underwriting year, Meadows only participated for 7.5% on $5m xs $5m which again Meadows total exposure is $375,000 not $426,263 per your accounts.”

44 It is said that by that evidence Meadows has admitted liability in respect of the Priestley & Morris claim in the sum of $375,000. For my part, I would not be prepared to treat that material as a clear and unambiguous admission of liability sufficient to found a judgment under Pt 18 r 3. I do think the material goes close to such an admission and, consistently with that view, I think it is relevant evidence in considering whether Heath is entitled to the order sought pursuant to Pt 13 r 2. I think the probabilities are that Palacio accepted the correctness of the calculation of that part of Heath’s entitlement in relation to the Priestley & Morris claim, while reserving Meadows’ position. The claimed impecuniosity in the circumstances of run down of Meadows’ business outlined in its letter of 14 May 1997 may have had some bearing on that approach.
45 I have been left in little doubt that Palacio recognised that Meadows was liable for that amount at least in relation to the Priestley & Morris claim, but was not prepared to make an unequivocal admission to that effect.
46 The Pt 13 r 2 application is of a kind which is seen comparatively frequently in matters listed in the commercial list. Part 13 r 2(1) provides as follows:

“2 (1) Where, on application by the plaintiff in relation to any claim for relief or any part of any claim for relief of the plaintiff -
(a) there is evidence of the facts on which the claim or part is based; and (b) there is evidence given by the plaintiff or by some responsible person that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part, or no defence except as to the amount of any damages claimed, the Court may, by order, on terms, give such judgment for the plaintiff on that claim or part as the nature of the case requires.”

47 The principles upon which the power under this rule should be exercised have been stated clearly and often, referring particularly to the principles as stated in General Steel Industries Incorporated v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 in the judgment of Barwick CJ, Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 and Webster v Lampard (1993) 177 CLR 598. I think it is sufficient to extract the following passage from the joint judgment of Mason CJ, Deane and Dawson JJ in Webster at 602:

“It is important to note at the outset that the issue before the learned Master on the application for summary judgment was not whether Mr. and Mrs. Webster would probably succeed in their action against Sergeant Lampard. It was whether the material before the Master demonstrated that that action should not be permitted to go to trial in the ordinary way because it was apparent that it must fail. The power to order summary judgment must be exercised with “exceptional caution” and “should never be exercised unless it is clear that there is no real question to be tried”. As Dixon J. commented in Dey v. Victorian Railways Commissioners:
“A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.”

Nowhere is that need for exceptional caution more important than in a case where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact. In such a case, it is essential that “great care … be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by appointed tribunal”.”

48 The factual material I have examined so far in these reasons concerned primarily the ‘admission’ issue. In considering the operation of Pt 13 r 2, the exercise is principally concerned with the defence raised by Meadows to this aspect of Heath’s claim. The conclusion I have reached is that Meadows has no defence.
49 The claim of equitable set-off for damages for breach of article VIII, in my view, is an empty assertion. At the very best, it would sound in nominal damages. As earlier noted, the defence, not surprisingly, makes no attempt to quantify damages. I have no doubt that that is for the reason that there are no damages, other than nominal, to quantify. Senior Counsel for Meadows conceded, properly, I think, that he was unable to identify any damages other than nominal which could be claimed by way of equitable set-off against this part of the Priestley & Morris claim.
50 All of those observations assume that there is an arguable case for breach of article VIII available to Meadows. I very much doubt that it has such a case. On its own evidence, Meadows received communications through 1992, 1993 and 1995 from Heath forwarding substantial material outlining aspects of the claim, of the proceedings relating to the claim and steps being taken in relation to the proceedings. At no stage, the evidence disclosed, and it is not disputed, did Meadows make any request to take part, in any way, in the control or conduct of the claim, of the proceedings relating to it or in its settlement.
51 Article VIII predicates a request by Meadows so to participate and in the face of the information provided to it, and in the absence of any such request, I fail to see any possible basis upon which a breach of article VIII could be successfully raised. However, I prefer to deal with the question on the basis that there is some arguable case of breach, but one that could not amount to anything more than nominal damages.
52 I think it is important to record that it is only that claim for breach of article VIII that forms the basis for set-off that is asserted by Meadows in its defence. In particular, there is no claim for set-off in relation to items of credit that are noted in the general statements of accounts submitted by Heath to Meadows in relation to outstanding balances.
53 There is one further matter which I think is a legitimate one touching the exercise of the discretion under Pt 13 r 2. As noted in the form of order sought, it is a limited judgment which the Court is asked to give. In some circumstances there may be reasons why the Court would decline to give limited judgment, although no such considerations have been advanced on behalf of Meadows.
54 Nevertheless, I think the material disclosed by Meadows in its letter of 14 May 1997 to Heath of a claimed run down of its business and of the commitment of available funds to obligations other than those owed to Heath, indicates some utility in giving judgment in a limited form. This has the advantage of a comparatively inexpensive procedure for judgment against Meadows whose resources may turn out to be limited and insufficient to meet any judgment for a greater sum arrived at after more extensive and costly proceedings.
55 Accordingly, I give judgment in terms of order 2(b) in the orders sought in the plaintiff’s notice of motion. I dismiss the defendant’s motion and order the defendant to pay the plaintiff’s costs of both motions.
56 Judgment is to include interest. That has been calculated by Heath at court schedule rates from 21 March 1997, that being the date of its payment in satisfaction of its obligation under the settlement agreement. Having regard to the fact that no notification of the settlement agreement appears to have been given to Meadows prior to Heath’s letter to Meadows of 18 April 1997, I think interest should begin to run on and from 19 May 1997.
57 Accordingly, I give judgment in terms of paragraph 2(b) of the plaintiff’s notice of motion for $375,000 plus interest of $63,832 calculated at 10.5% from 19 May 1997; at 10% from 1 September 1997 and at 9.5% from 31 September 1998 to 8 March 1999. I direct the matter be placed in the list for further directions on 12 March 1999.

oOo

Last Modified: 06/30/2000