HIH Casualty & General Insurance Ltd v Insurance Australia Ltd
[2005] VSC 342
•26 August 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL & EQUITY DIVISION
No. 5769 of 2000
| HIH CASUALTY & GENERAL INSURANCE LIMITED (IN LIQUIDATION) (ACN 008 482 291) & RONALD STEELE (T/AS DRAGON SCAFFOLDING) | Plaintiffs |
| v | |
| INSURANCE AUSTRALIA LIMITED (ACN 000 016 722) (FORMERLY SGIC GENERAL INSURANCE LTD) | Defendant |
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JUDGE: | BONGIORNO J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 21, 25 & 26 July 2005 | |
DATE OF JUDGMENT: | 26 August 2005 | |
CASE MAY BE CITED AS: | HIH Casualty & General Insurance v Insurance Australia | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 342 | |
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Insurance – exclusions – construction – applicability – HIH Support Scheme – question of its nature, characteristics – whether it is an insurer – liability to contribute as co-insurer – what constitutes indemnity – when applicable.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J. R. Dixon | Tress Cox Lawyers |
| For the Defendant | Mr M. W. Thompson | Norris Coates Lawyers |
HIS HONOUR:
Screenco Pty Ltd, a Sydney company, engaged in the business of hiring out large video screens for use at sporting and other similar events. Pursuant to a contract made on 23 February 1998, it agreed with the Australian Grand Prix Corporation to erect such a video screen at the Australian Grand Prix track at Albert Park for use during the Australian Formula One Grand Prix in March of that year. Almost immediately Screenco engaged R L Dew & Co Pty Ltd to erect scaffolding at Albert Park to support the screen. Dew subcontracted the erection of that scaffolding to a Melbourne scaffolder, one Ronald Steele, who traded as Dragon Scaffolding.
On 3 March 1998 Mr Steele attended at Albert Park and erected a large scaffold comprised of components which he had hired from a scaffolding supplier, Highrise Group Pty Ltd. On the same day, whilst the screen was being put up on the scaffolding erected by Steele, the scaffolding gave way causing the screen to fall. The cause of the collapse was that the main beam incorporated into the scaffolding was inadequate to hold the weight of the screen which was about 4.88 tonne. This case concerns some of the legal and insurance consequences of that accident.
Although no-one was injured in the accident, the screen, called a Jumbotron, was effectively destroyed. Screenco sued R L Dew, Steele and Highrise in the Supreme Court of New South Wales for damages for the loss of the screen and consequential losses and, after a trial before McLellan J, obtained judgment for $1,461,045 with costs against R L Dew and Steele. R L Dew obtained judgment for an indemnity against Steele on a cross-claim. Highrise was exonerated. Both judgments were entered on 11 November 2002.
At the time the accident occurred Steele was insured in respect of his activities as a scaffolder with World Marine and General Insurances Pty Ltd, a company which was part of the HIH Group which, not unlike Mr Steele’s scaffolding, notoriously collapsed in 2001 with enormous unmet liabilities. This financial catastrophe had the potential to have such a devastating effect on such a large number of people that in July of that year the Federal Government instituted a scheme to alleviate the financial distress caused by the insurer’s insolvency. This scheme involved the Federal Parliament appropriating $640m from consolidated revenue to a fund to be administered by a not-for-profit company called HIH Claims Support Limited. This company, in turn, appointed functioning insurance companies to act as its agents in the investigation and payment of claims from the fund.
HIH was ordered to be wound up in insolvency by the Supreme Court of New South Wales on 27 August 2001. Prior to HIH being placed into liquidation, the relevant HIH company had accepted Mr Steele’s claim under his policy and paid $80,684.03 towards his legal costs incurred in defence of the proceeding brought against him by Screenco in the Supreme Court of New South Wales. After the HIH Claims Support Scheme was established by the Federal Government on 1 July 2001, Mr Steele applied for assistance from the Scheme.
The only legislative basis for the HIH Support Scheme appears to be a one line Act of the Commonwealth Parliament appropriating the $640m from consolidated revenue. There is no statutory description of the nature of the support fund, the rights and liabilities of claimants upon it or even any criteria for determining eligibility for assistance. In particular, it confers no right on any HIH policy holder to participate in the fund. It leaves all matters of administration to private agreement between HIH Claims Support Limited and the original HIH policy holders.
No oral evidence was tendered on the trial of this proceeding as to the structure of the fund or the way it operated and the only documents tendered were in the nature of information brochures apparently issued by or under the authority of the Commonwealth Government or HIH Claims Support. One such brochure, headed: “Notes for Australian small businesses proprietors (June 2002)”, described the scheme thus:
“The HIH Claims Support Scheme is a discretionary administrative scheme funded by the Commonwealth. The Commonwealth may vary the terms of the Scheme, suspend the Scheme or withdraw the Scheme at any time.”
Another brochure describes HIH Support Services as not being an insurance company. No other evidence casts any doubt on the accuracy of these statements as correct descriptions of the HIH Claims Support Scheme and of HIH Support Services.
In order to make a claim on the HIH Claims Support Scheme, Mr Steele filled in a simple application form incorporated in a multi-page brochure which explained the details of the Scheme in terms similar to those set out above. It said that subject to the limitations of the Scheme, the Commonwealth Government would, in certain cases, provide the benefit that would have been provided by the insolvent insurer. Inexplicably, on the following page, the brochure appears to qualify that statement by stating that an HIH policy holder whose claim was accepted by the Scheme would receive “at least 90% of the amount that would have been provided by the original HIH insurer under your insurance policy.”
In the area of the brochure which Mr Steele signed, the following “terms of the offer” are set out:
“The terms of this offer are that you offer to assign to HCS Limited (sic):
(a)all rights to receive or to demand the receipt of any benefit arising from any claim which you made or make under your HIH policy, where the claim is the subject of the payment of a benefit under the Scheme; and
(b)any rights, however arising, which you may have or obtain against any person or organisation other than the HIH insurer, in connection with the matters which have given rise to your needs to make a claim under the policy.
You also agree not to revoke this offer for a period of 12 months from the date it is received by HCS Limited.”
Mr Steele’s offer was accepted by the issue of an “Eligibility Confirmation Certificate” by HIH Claims Support dated 31 August 2001. He was subsequently advised by QBE by letter of 10 October 2001 that it would manage his claim under the Scheme and as to what benefits would be provided to him. This letter also advised Mr Steele that Ligeti Partners, a firm of Melbourne solicitors, had been appointed to act for him in defence of Screenco’s claim and that, subject to the establishment of his entitlement to indemnity under his original HIH policy, he would receive a benefit under the scheme equal to 90% of the amount which would have been paid by HIH had it been solvent. It pointed out to him that he would remain personally liable for the remaining 10% of any court judgment, any costs awarded by a court and the costs and disbursements of any firm of solicitors retained by QBE to conduct the defence of the claim.
On 13 December 2002, in part satisfaction of the judgments against Steele entered in the New South Wales Supreme Court in favour of Screenco and R L Dew, QBE paid Screenco $1,314,941.01, being 90% of the judgment sum. It also paid 90% of the costs of all parties ordered to be paid by Mr Steele except those of R L Dew. Its costs have not yet been assessed.
The Australian Grand Prix Corporation is a corporation established by the Australian Grands Prix Act 1994 to facilitate the holding of the Formula One Grand Prix at Albert Park each year and to facilitate motor cycle Grand Prix racing at Phillip Island. In effect, it runs the Albert Park Grand Prix. At the time of the Screenco accident the Australian Grand Prix Corporation was the insured under a policy of insurance issued by Insurance Australia Ltd (formerly called SGIC General Insurance Limited). The policy is entitled: “Contract Works Material Damage and Third Party Legal Liability Policy – Australian Grand Prix Corporation”. Originally issued in respect of the 1996 Australian Formula One Grand Prix, by 1998 it had two operative endorsements numbered 2 (28 July 1997) and 4 (6 February 1998). The policy covered not only the Australian Grand Prix Corporation but its contractors and sub-contractors. There is no argument that it extended to cover Mr Steele, subject to the exclusions relied upon in this litigation. It insures them, among other risks, for legal liability to third parties for death, personal injury or loss or damage to property as a result of an occurrence happening in connection with the business as defined in the policy.
The plaintiffs’ claims in this proceeding
This proceeding has been instituted by HIH (in liquidation) and by Mr Steele against the defendant making the following claims:-
●a claim by HIH, as a co-insurer with Insurance Australia Ltd, for equitable contribution from the defendant in respect of the $80,684.03 expended by it in legal costs defending Mr Steele before it went into liquidation; and
●a claim by Mr Steele for a declaration that the defendant is liable to indemnify him for the damages and costs awarded against him by the New South Wales Supreme Court in favour of Screenco and the other parties to proceeding number 50067 of 1999 in that Court, being both the amounts which have been paid on his behalf by HIH Claims Support for the fund and those amounts (10%) which he has not yet paid but for which he remains liable; and
●a claim by Mr Steele for indemnity in respect of his own legal costs incurred after HIH went into liquidation in defending the New South Wales Supreme Court proceeding.
Insurance Australia Ltd defends these claims by reliance upon three exclusion clauses in the Australian Grand Prix Corporation Policy and by denying Mr Steele’s right to indemnity from it in respect of those amounts which have been paid on his behalf by HIH Claims Support.
The exclusion clauses
Clause 3 of the Insurance Australia Ltd policy lists a number of exclusions relevant to claims brought under Section C, the public liability section of the policy. The defendant maintains that three such exclusions apply on the facts of this case. They are those contained in Clause 3(b), (h) and (m).
Clause 3(b)
Clause 3b excludes liability:-
“. . . for damage to property owned, leased, occupied or used by, or in the care, custody or control of the Insured.”
The property damaged in this case was the Jumbotron screen. The defendant submits that it was in the care, custody or control of Mr Steele at the time the scaffolding collapsed. However, the facts do not support this submission.
The scaffolding which collapsed was erected by Mr Steele and his crew on the morning of 3 March 1998. Mr Greg Potter, the General Manager of Screenco, gave evidence that at about 1.00pm on that day, after the erection of the scaffolding was completed, he began the work of lifting the 16 modules of the Jumbotron screen onto the scaffolding. This is effected by the use of electric winches connected to the I-beam on the scaffold. Mr Steele had not completed his work. He still had to position a tarpaulin over the whole of the scaffold for both visual effect and weather protection of the video equipment. He was unable to do that until he obtained the services of a cherry picker as a WorkCover inspector had prevented him and his crew from placing the tarpaulin on the scaffolding manually on occupational health and safety grounds.
It was whilst Mr Potter and his assistant were lifting the screen modules into place that he saw the I-beam begin to twist and he heard a crack. As he and his companion lunged forward the screen came crashing down, narrowly missing them.
In his evidence Mr Potter said that the components of the screen were always under his care and control and that at no point were they under the care and control of Mr Steele.
The defendant argued that as Mr Steele had not completed his sub-contract and handed over the scaffolding to Screenco the screen modules were in his care, custody or control. Its counsel referred to Commercial Union Insurance Company Limited v Willetts Radio and TV Limited,[1] in which Cook J considered an exclusion clause which operated in respect of property “in the . . . legal control of the Insured”. His Honour considered that loss or damage to property would be excluded where the insured had a responsibility for such property and over which he could exercise rights by reason of, or arising from, contract or bailment or actual possession connected with his business. He thought that the property must, for some reason, be under the influence or control of the insured as opposed to property belonging to people with whom he had no such dealings.
[1]Unreported High Court of New Zealand 1 October 1985.
In the instant case Mr Steele had no control whatsoever over the Jumbotron screen or any of its components. They remained in the control of Screenco through its General Manager, Mr Potter.
The defendant also referred to Botany Fork and Crane Hire Pty Ltd v New Zealand Insurance Company Limited[2] a decision of the Full Federal Court which was concerned with the question of possession of an object which was resting on the tines of the forklift. The Court held that the driver of the forklift had a certain degree of possession in respect of the object. However, once again, that is not the fact situation in this case. At the time of the accident the Jumbotron screen was in the sole possession and under the control of its owner, Screenco.
[2](1993) 44 FCR 27.
In the circumstances the exclusion contained in Clause 3(b) of the Insurance Australia Ltd policy does not apply.
Clause 3 (h)
This clause excludes liability in Insurance Australia Ltd where the liability of the insured is with respect to:-
“Property Damage to any property which forms part of the Works prior to the issue of the Certificate of Practical Completion.”
It is accepted by all parties that no Certificate of Practical Completion was ever issued in respect of the scaffolding which collapsed. Nor did any of the parties to the contracts which led to its erection ever expect such a certificate to be issued. It was not contemplated by the contract between the Australian Grand Prix Corporation and Screenco, nor that between Screenco and R L Dew, nor that between R L Dew and Steele. Indeed the evidence before the Court was that it was not normal practice for Certificates of Practical Completion to be issued for any work carried out in respect of the Grand Prix. Mr Timothy Bamford, the Chief Executive Officer of the Australian Grand Prix Corporation gave evidence that the practice of the corporation with respect to works being undertaken for it was to ascertain that the works were complete and functioning. It did not issue Certificates of Practical Completion nor did anyone on its behalf.
The term “Practical Completion” is not defined in the insurance policy but the defendant accepted that to give any meaning to the exclusion at all it must be given “a common sense meaning”. It argued that the exclusion was to apply until the time of completion of the works and not later. It proceeded to submit that Mr Steele had not completed his contract and that accordingly, as the works were not complete, the exclusion applied.
Mr Dixon, for the plaintiffs, argued that the clause was unable to be given a reasonable construction capable of giving effect to the intentions of the parties to the policy. Given its literal meaning, as no Certificate of Practical Completion was ever likely to be issued, its existence would exclude every possible claim. This would destroy the policy and so could not have been the intention of the parties to it.
At the time this accident occurred the structure which collapsed was, for all practical purposes, complete. It lacked only a tarpaulin covering which added nothing to its structural integrity, its capacity to carry out the function for which it was erected or anything else other than its aesthetic appearance. Mr Potter, of Screenco, considered that it was complete. It was suitable, so far as he could see, for the erection of the Jumbotron screen and the lack of a tarpaulin did not affect that operation.
Accepting the defendant’s contention that the clause should be given a common sense meaning, that meaning must be that it operates not until completion of works under a relevant contract but until practical completion of those works. The word “practical” must be given a meaning. Completion of a contract means full and final completion In Morgan v S S Constructions Pty Ltd[3] the Full Court of this Court distinguished “completion” from “substantial completion”. “Practical completion” must be similarly distinguished here. On the facts in this case Mr Steele’s contract to erect the scaffolding which later collapsed was practically complete at the time the accident occurred. The clause, accordingly, has no operation in this case.
[3][1967] VR 149.
It may be, of course, that the clause is, as the plaintiffs contend, void for uncertainty. Indeed, not only is it possibly uncertain with respect to the question of Certificates of Practical Completion but it is very difficult to give a sensible meaning to the opening words of the clause which refer to “the Works” in the context of this policy and its endorsements. However, having regard to the defendants’ argument and the evidence to which reference has been made, there is no need to examine these questions further.
Clause 3(h) does not operate to exclude the plaintiffs’ claims.
Clause 3(m)
This clause excludes liability:-
“. . . for compensation arising out of any negligent act, error or omission in the professional conduct of the Insured and execution of the Insured’s professional activities and/or persons for whom the Insured may be legally liable . . .”
There are two provisos to this exclusion. One of them has no application to this case. The word professional will be considered below.
The clause is concerned with professional conduct and professional activities of the Insured. The defendant contends that Mr Steele made an error in the execution of his professional activities, that is to say he made an error in activities which can be described as being of a skilful nature according to an established discipline, when he erected the scaffold using an inadequate I-beam.
The parties to this proceeding have specifically accepted the factual findings made by McLellan J in the New South Wales Supreme Court proceeding. His Honour rejected Mr Steele’s evidence that an employee of Highrise selected the inadequate beam from its stock for him to use to erect the scaffolding. He found that the beam was, in fact, selected by Mr Steele himself. He concluded that he should have sought competent advice from someone able to advise him as to the characteristics of the beam necessary to hold the screen and the capacity of the chosen beam to perform in accordance with the required specifications.
The evidence revealed that the specifications given to Mr Steele consisted only of three sheets of drawings which, although they gave dimensions of the required scaffold, did not specify the strength of any of its components, including the I-beam.
Kirby P in GIO v Newcastle City Council[4] considered the meaning of the term “professional” in the context of professional indemnity insurance. His Honour was considering whether the examination and analysis of building proposals with a view to granting consent, constituted professional advice or services. He held that such activity, in the context of a policy written for a local government authority, involved the provision of a service of a skilful character according to a discipline and was therefore included within the term “professional”. It did not matter whether the persons who were alleged to have given faulty advice and service were in fact professionally qualified or not. It was the type of service which was provided which would properly be characterised as “professional service”.
[4](1996) 38 NSWLR 558.
Mr Steele was a scaffolder who held an advanced certificate of competency. He acquired this certificate by on-the-job training and had since worked as a scaffolder for about 30 years. His evidence was that he could work in charge of scaffolding crews.
The service provided by Mr Steele could not, realistically, be described as “professional conduct” or “professional activities”. They were the activities of a tradesman having a particular skill effectively acquired by experience. Extending Kirby P’s analysis to its fullest, Mr Steele’s activities could not be encompassed within the term “professional”.
Reference was made above to two provisos to the exclusion clause being considered. Even if Mr Steele was engaged in professional conduct or professional activities when he erected the scaffold which collapsed, the second of those two provisos would operate to render the exclusion clause inoperative. It has that effect where the property damage occurs as a consequence of “faulty or wrongful design and/or specification of any goods, products or property manufactured by the Insured in the course of the construction operations”.
The scaffolding fell within the definition of “Construction Operations” contained in endorsement 4 to the policy. The property damage occurred as a consequence of the faulty design and/or specification of that scaffold which constituted “goods, products or property” manufactured by the insured, Mr Steele. The design and/or specification was faulty in that the I-beam was inadequate. This was because the drawings given to Mr Steele by R L Dew (another insured under the policy) did not contain adequate information as to its strength.
In the circumstances the exclusion clause relied upon by the defendant is not effective in this case.
Indemnity in respect of the judgement debt
The defendant contends that even if none of the exclusion clauses referred to operate so as to relieve it of liability, it is nevertheless not liable to indemnify Mr Steele in respect of the judgments entered against him for damages and costs in the Supreme Court of New South Wales. It maintains that as he has already been indemnified by the HIH Support Scheme, he cannot claim indemnity again from it.
It relies on Sydney Turf Club v Crowley.[5] It submits that this case falls squarely within the principles there discussed, namely that where one insurer indemnifies an insured, the insured has no right to any further indemnity from another insurer covering the same risk even if equity would entitle the first insurer to contribution from the second. This principle was subsequently affirmed in the same terms in the High Court.[6]
[5](1971) 1 NSWLR 724.
[6](1972) 126 CLR 420.
That the HIH Support Scheme has paid Screenco damages and costs and the other parties’ costs in the proceeding litigated in the New South Wales Supreme Court is undoubted. The question is whether, in the particular circumstances of this case, such payments were made by way of indemnity so as to preclude Mr Steele from now seeking an indemnity from the defendant.
Is the HIH Claim Support Scheme an Insurer?
The first questions which need to be addressed are whether HIH Claims Support is an insurer and whether the agreement between it and Mr Steele constituted an insurance policy. If it is an insurer who has provided an indemnity pursuant to a policy, the principles expounded in Sydney Turf Club v Crowley would appear to be applicable. If not, other consequences may follow. As already noted, the evidence before the Court as to the nature of the HIH Support Fund is somewhat sparse. However, on the material available, it could not be concluded that it was an insurer.
A useful definition of a contract of insurance is found in the judgment of Channell J in Prudential Insurance Company v Commissioners of Inland Revenue.[7]His Lordship said:
“Where you insure a ship or a house you cannot insure that the ship shall not be lost or the house burnt, but what you do insure is that a sum of money shall be paid upon the happening of a certain event. That I think is the first requirement in a contract of insurance. It must be a contract whereby for some consideration, usually but not necessarily for periodical payments called premiums, you secure to yourself some benefit, usually but not necessarily the payment of a sum of money, upon the happening of some event. Then the next thing that is necessary is that the event should be one that involves some amount of uncertainty. There must be either uncertainty whether the event will ever happen or not, or if the event is one which must happen at some time there must be uncertainty as to the time at which it will happen. The remaining essential is that which was referred to by the Attorney-General when he said the insurance must be against something. A contract which would otherwise be a mere wager may become an insurance by reason of the assured having an interest in the subject matter – that is to say, the uncertain event which is necessary to make the contract amount to an insurance must be an event which is prima facie adverse to the interest singular of the assured.”
[7][1904] 2KB 658.
Channell J’s requirement that there be a contract for there to be insurance has been doubted by Mason J in the context of whether a statutory body which administered a no fault motor car accident compensation scheme was engaged in the “business of insurance” when it indemnified a person owning or using a motor vehicle in respect of liability incurred by him in respect of the death of or bodily injury to someone caused by that motor vehicle.[8] His Honour considered that there was much to be said for the view that it is the relationship of indemnity that exists between insurer and insured, rather than the source of that relationship that is the essence of the concept of insurance, so that it matters not whether the relationship arises by statute or by contract.
[8]R v Cohen and Ors; ex parteMotor Accident Insurance Board (1979) 141 CLR 577 at 588.
In another context, that of an employer providing health benefits for its employees in return for the payment of a premium, the Full Federal Court had little difficulty in finding that that arrangement constituted the carrying on by the employer of the business of health insurance.[9] That the premium charged by the employer was uneconomic was not to the point, Black CJ being of the opinion that whilst the proportionality of the premium to the risk undertake may help to distinguish the concept of insurance from other concepts it is not an indispensable element of an insurance relationship. Nor is it necessary that the party undertaking the risk should be doing so in the course of a profit making enterprise.[10]
[9]Australian Health Insurance Association Limited v Esso Australia Limited (1993) 41 FCR 450.
[10]Reg. v Cohen; ex parte Motor Accident Insurance Board (Tas) (1979) 141 CLR 577 at 590. See also R v Holmes; ex parte Manchester Unity Independent Order of Oddfellows in Victoria (1980) 147 CLR 65 at 68.
It seems that the obligation to indemnify in respect of the risk of an adverse event which may or may not occur are the essential elements of insurance. The obligation may arise in a number of ways, for example by contract or statute but, however it arises there must be such an obligation and there must be the risk of an adverse event.
In Medical Defence Union v Department of Trade[11] Sir Robert Megarry V-C was considering the question as to whether membership by a doctor in a medical defence fund constituted insurance. The rules of the fund provided that if a claim was made against the doctor the fund could, at its discretion, undertake the defence of the claim and grant an indemnity to the doctor in respect of any proceeding claim or demand concerning his professional character or interest. In every case an indemnity could be granted, restricted or declined in the fund’s absolute discretion. His Lordship considered that membership of the fund did not constitute insurance because, as he said:-
“No doubt one must not attach too much importance to the basic meaning of words; but terms such as ‘insure’ and ‘assure’ like ‘ensure’, seem to me to convey the sense of making something certain, and not merely of giving a hope or expectation, no matter how well founded. When a person insures, I think that he is contracting for the certainty of payment in specified events and not merely for the certainty of proper consideration being given to his claim that a discretion to make a payment in those events should be exercised in his favour.”
His Lordship contrasted an ordinary policy of insurance with a hypothetical policy which gave no contractual right to any payment but only the right to have any claims properly considered by the directors.
[11][1980] 1 Ch 82.
The HIH support fund is described in the brochures and other material tendered in this case as being discretionary in its nature and liable to suspension or withdrawal at the option of the Commonwealth at any time. The application for assistance from the fund which Mr Steele signed required to make an offer, irrevocable for 12 months, to HIH Claims Support to assign to that company all rights to demand the receipt of any benefit arising from any claim made under his HIH policy and any rights, however arising, which he may have or obtain against any person or organisation other than HIH in connection with the matters which have given rise to his need to make a claim under his HIH policy. The offer is expressed to be “in return for the payment of a benefit under the scheme”. No premium is payable and no event is being insured against.
The language of the application, the Eligibility Confirmation Certificate issued to Mr Steele when his application was successful and the terms of the letter from QBE to him of 10 October 2001 speak only of his being “eligible for assistance”. These matters together with the discretionary nature of the fund and the way in which it was set up lead to a conclusion that not only is it not an insurer but also that which it paid to or on behalf of Mr Steele was not an indemnity but rather a merciful benefit or subvention of the Commonwealth Government. Certainly, there is no contract of insurance between Mr Steele and HIH Claims Support by reason of which he was entitled to be indemnified by it in respect of the claim against him by Screenco.
Further, there is no uncertain event which might or might not occur with respect to Mr Steele’s relationship with HIH Claims Support. At the time Mr Steele made his application for assistance the Screenco accident had already occurred so it could not be the uncertain event being insured against. A submission was made by the defendant that at the time Mr Steele received the support of the fund no judgment had been entered against him so that the uncertain event being insured against was the result of the trial, then still to be heard, in the New South Wales Supreme Court. But this submission ignores the fact that upon being declared eligible for assistance Mr Steele began having the greater part of his legal costs paid by HIH Claims Support. Those payments were not dependant on any event which may or may not happen. They were a current reality which the fund accepted. Indeed, the nature of the fund is such that even if Mr Steele had already been found liable to Screenco at the time he made his application for assistance there is no reason to believe that HIH Claims Support would not still have made the payments which it did, including the payment of damages to Screenco for the damage to the Jumbotron caused when Mr Steele’s scaffolding collapsed.
Neither the HIH Support Fund nor HIH Claims Support was an insurer at any time relevant to this proceeding. Much less was it an insurer insuring the same risk as the defendant in this case. The principles in Sydney Turf Club v Crowley,[12] upon which the defendant heavily relies, have no application to this case.
[12](1971) 1 NSWLR 724.
The defendants submitted that even if there was no insurance contract between Mr Steele and the fund there has nevertheless been an indemnity provided to him. It referred to Stratti v Stratti[13] where the Court of Appeal of New South Wales applied the principle of Sydney Turf Club v Crowley in circumstances which arose outside an insurance context. The indemnity in that case was statutory. It was provided by Section 24(2) of the Partnership Act 1892 (NSW). Nevertheless, the Court held that a partner in the firm could not seek the statutory indemnity from another partner in circumstances where he had already been indemnified by an insurer.
[13](2000) 50 NSWLR 324.
But none of this is to the point in this case. The proper characterisation of payments made by HIH Claims Support to or on behalf of Mr Steele is that they are not indemnities. They are benefits provided by the Commonwealth Government in alleviation of financial distress caused by the catastrophic insolvency of HIH. They resemble social security payments, bushfire relief payments and the like; not indemnities provided by insurance companies.
When Mr Steele sought assistance from the HIH Support Fund he assigned all his rights in connection with the matters which had given rise to his need to make a claim under his HIH policy to HIH Support Services. One such right was his right to indemnity under the policy issued by the defendant to the Australian Grand Prix Corporation with respect to works at Albert Park. No notice of that assignment having been given to the defendant, HIH Claims Support is entitled to sue in Steele’s name to enforce the claim for indemnity under the defendant’s policy. It is no answer for the defendant to assert that because Screenco has been paid by HIH Claims Support and other parties have had their costs met there is no liability in Steele which it is required to indemnify. Nor is it an answer to say that HIH Claims Support is confined to seeking equitable contribution as a co-insurer from it by suing in its own name. It may be that upon meeting Steele’s claim the defendant has a right to prove in the liquidation of HIH for equitable contribution as a co-insurer but that question is not now before the Court.
The plaintiff, Ronald Steele, must succeed in his claim for the full amount of his liability arising out of the New South Wales Supreme Court proceeding and the costs incurred in his defence of that proceeding.
The only matter remaining is whether that part of Mr Steele’s legal costs which have not been met by HIH Claims Support are recoverable from the defendant.
Mr David Thomas, a solicitor with Ligeti Partners gave evidence that at the date of this trial Mr Steele was not indebted to his firm. Mr Steele had been referred to Ligeti Partners by QBE, the manager of his claim against the HIH Support Scheme. There was never any written retainer between Mr Steele and Ligeti Partners and it was clear from Mr Thomas’ evidence that the firm did not regard him as a debtor. Such fees as rendered were paid by HIH Claims Support and already form part of this claim. In the circumstances there would appear to be no legal liability in Mr Steele to Ligeti Partners and accordingly, no reason for the defendant in this case to provide an indemnity in respect of any such liability.
Conclusion
Subject to hearing from counsel as to form, interest and costs it is proposed that the following orders be made in this proceeding:-
1.That the first plaintiff recover the sum of $40,342.01 from the defendant by way of equitable contribution.
2.That there be a declaration that the defendant is liable to indemnify the second plaintiff in respect of all sums which he has paid or which have been paid on his behalf by HIH Claims Support Limited or has been liable to pay to Screenco Pty Ltd and/or R L Dew Pty Ltd in the Supreme Court of New South Wales in proceeding number 50067 of 1999.
3.That there be judgment for the second plaintiff against the defendant in the sum of $1,890,711.
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