Icon Co (NSW) Pty Ltd v Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets
[2024] FCA 840
•1 August 2024
FEDERAL COURT OF AUSTRALIA
Icon Co (NSW) Pty Ltd v Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets [2024] FCA 840
File number: VID 954 of 2023 Judgment of: MOSHINSKY J Date of judgment: 1 August 2024 Catchwords: PRACTICE AND PROCEDURE – application for permanent stay or strike out of a particular claim – where the applicants (the insureds) claimed that the first respondent (the insurer) had breached its duty of utmost good faith – where the insurer contended that the claim should be permanently stayed or struck out on the basis of Anshun estoppel and/or abuse of process principles – whether it was unreasonable not to have brought the claim in an earlier proceeding – held: application for permanent stay or strike out of claim dismissed Legislation: Federal Court of Australia Act1976 (Cth), ss 37M, 37N
Insurance Contracts Act 1984 (Cth), ss 13, 58
Federal Court Rules 2011, rr 16.02, 16.21
Cases cited: Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; 75 NSWLR 245
Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486
Gibbs v Kinna [1999] 2 VR 19
Hungerfords v Walker [1989] HCA 8; 171 CLR 125
O’Brien v Tanning Research Laboratories (1988) 14 NSWLR 601
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589
Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507
UBS AG v Tyne [2018] HCA 45; 265 CLR 77
Williams v Spautz [1992] HCA 34; 174 CLR 509
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 108 Date of hearing: 17 July 2024 Counsel for the Applicants: Mr JP Slattery KC with Ms J Collins Solicitor for the Applicants: K&L Gates Counsel for the First Respondent: Dr MD Rush KC with Ms V Blidman Solicitor for the First Respondent: Lander & Rogers Counsel for the Second and Third Respondents: Mr DS Weinberger Solicitor for the Second and Third Respondents: McCabes ORDERS
VID 954 of 2023 BETWEEN: ICON CO (NSW) PTY LTD (ACN 604 790 409)
First Applicant
ICON CO PTY LIMITED (ACN 604 136 683)
Second Applicant
KAJIMA AUSTRALIA PTY LTD (ACN 604 351 966)
Third Applicant
AND: LIBERTY MUTUAL INSURANCE COMPANY AUSTRALIAN BRANCH (ABN 61 086 083 605) TRADING AS LIBERTY SPECIALTY MARKETS
First Respondent
CHUBB INSURANCE AUSTRALIA LIMITED (ABN 23 001 642 020)
Second Respondent
TOKIO MARINE & NICHIDO FIRE INSURANCE CO LTD (ABN 80 000 438 291)
Third Respondent
ORDER MADE BY:
MOSHINSKY J
DATE OF ORDER:
1 AUGUST 2024
THE COURT ORDERS THAT:
1.The first respondent’s interlocutory application dated 15 April 2024 be dismissed.
2.The applicants’ interlocutory application dated 30 April 2024 be dismissed.
3.Paragraph 38(d) of the statement of claim be struck out.
4.Subject to paragraph 5, the costs of the interlocutory applications be reserved.
5.If either party seeks a different costs order, that party may file and serve, within three business days, a short written submission, in which case the other party may file and serve, within a further three business days, a short responding written submission, and the issue of costs will be determined on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MOSHINSKY J:
Introduction
There are two interlocutory applications before the Court:
(a)an interlocutory application filed by the first respondent, Liberty Mutual Insurance Company Australian Branch (Liberty), dated 15 April 2024; and
(b)an interlocutory application filed by the applicants, Icon Co (NSW) Pty Ltd (Icon), Icon Co Pty Ltd (Icon Co) and Kajima Australia Pty Ltd (Kajima), all companies in the Icon group of companies, dated 30 April 2024.
The proceeding relates to a contract of third party liability insurance between Icon (as insured) and Liberty (as insurer) for the 2015/2016 policy period (the Liberty Policy) and a construction project for the Opal Tower that experienced cracking and other problems in December 2018, which was after practical completion of the project (in August 2018) and during the 12-month defects liability period for the project.
Liberty’s interlocutory application seeks an order that a particular paragraph of the applicants’ statement of claim (paragraph 38(d)) be permanently stayed or struck out. In that paragraph, the applicants plead a claim based on an alleged breach of the duty of utmost good faith. Liberty contends, in summary, that, in light of an earlier proceeding in this Court between Icon and Liberty (the First Proceeding) relating to the same insurance policy and the same construction project (which was heard and determined by Lee J in 2020 and then the subject of an appeal to the Full Court in 2021), the applicants are precluded from bringing this claim by the principles of Anshun estoppel and/or it is an abuse of process for the applicants now to bring this claim.
It should be noted that Liberty’s application is limited to the applicants’ claim based on breach of the duty of utmost good faith; Liberty does not seek a stay or strike out of the balance of the statement of claim, in which the applicants seek indemnity and/or damages based on the insuring clause in the Liberty Policy.
The applicants accept that, even though Icon Co and Kajima were not parties to the First Proceeding, they are “privies” of Icon, such that they are to be treated in the same way as Icon for the purposes of the Anshun estoppel and abuse of process issues.
The applicants’ interlocutory application seeks leave to amend the statement of claim to re-plead the claim based on breach of the duty of utmost good faith contained in current paragraph 38(d). There are three iterations of Icon’s proposed pleading before the Court:
(a)a proposed amended statement of claim dated 30 April 2024 (annexed to the affidavit of Mr Groves, referred to below);
(b)a proposed amended statement of claim dated 22 May 2024 (annexed to the Second Stojanovich Affidavit, referred to below, commencing at page 13); and
(c)a proposed amended statement of claim dated 31 May 2024 (annexed to the Second Stojanovich Affidavit, commencing at page 131).
Consistently with the way the parties’ oral submissions were presented, it is sufficient to refer to the latest version of the applicants’ proposed pleading, namely the version dated 31 May 2024. I will refer to this proposed pleading as the Proposed Amended Statement of Claim in these reasons. The re-pleading of the claim based on breach of the duty of utmost good faith is the main focus of the proposed amended pleading, but some other refinements or adjustments to the pleading are also sought to be made. Liberty relies on the same arguments relating to Anshun estoppel and abuse of process to oppose leave to amend being granted.
There are two other respondents to the present proceeding. The second respondent is Chubb Insurance Australia Ltd (Chubb) and the third respondent is Tokio Marine & Nichido Fire Insurance Co Ltd (Tokio Marine). The interlocutory applications do not affect them and they did not take an active part in the hearing.
The two interlocutory applications were heard together over one hearing day.
Liberty relies on the following affidavits in connection with the applications:
(a)an affidavit of Natasha Stojanovich, a partner at Lander & Rogers, the solicitors for Liberty, dated 15 April 2024 (the First Stojanovich Affidavit); and
(b)an affidavit of Ms Stojanovich dated 3 June 2024 (the Second Stojanovich Affidavit).
The applicants rely on the following affidavits:
(a)an affidavit of John Kelly, a partner of K&L Gates, the solicitors for the applicants, dated 22 April 2024; the redactions in the affidavit represent parts of the affidavit that were not read by the applicants;
(b)an affidavit of Angus Groves, a special counsel employed by K&L Gates, dated 30 April 2024; and
(c)an affidavit of Andrew Ford, the Chief Financial Officer of Icon Co, dated 23 May 2024.
During the hearing, I raised with the applicants whether, if I did not accept Liberty’s arguments based on Anshun estoppel and/or abuse of process, there were in any event problems with the way in which the claim based on breach of the duty of utmost good faith is pleaded, both in the current statement of claim and the Proposed Amended Statement of Claim. In summary, in relation to the statement of claim, I raised whether sufficient material facts have been pleaded to support this claim. In relation to the proposed pleading, I noted that it is proposed to plead and rely on a series of findings said to have been made in a judgment of the Court in an earlier proceeding. I queried whether this was a proper approach to the pleading of the claim.
For the reasons that follow, I have concluded, in summary, as follows:
(a)I am not satisfied that the relevant paragraph of the statement of claim (paragraph 38(d)) should be permanently stayed or struck out on the basis of Anshun estoppel or abuse of process. In summary, in the circumstances that existed at the time of the First Proceeding, and having regard to the nature and scope of that proceeding, I am not satisfied that it was unreasonable for Icon not to have brought this claim in the earlier proceeding. I am also not satisfied that it is an abuse of process to bring the claim. It follows that Liberty’s interlocutory application is to be dismissed.
(b)I do not consider it appropriate to grant the applicants leave to amend their statement of claim to the form of the Proposed Amended Statement of Claim. This is because I consider there to be problems with the way in which the applicants propose to re-plead the claim based on breach of the duty of utmost good faith contained in current paragraph 38(d). In particular, I do not consider it appropriate to plead findings made in an earlier court judgment as the factual basis of the claim. Rather, the material facts should be alleged. Liberty can respond to these allegations in its defence. If the factual allegations are denied, then the applicants may be able to plead an issue estoppel in their reply. Accordingly, I do not give leave to the applicants to amend their statement of claim and their interlocutory application will be dismissed.
(c)I consider the applicants’ current pleading of their claim based on breach of the duty of utmost good faith (paragraph 38(d) of the statement of claim) to be defective in that the material facts said to support the claim are not pleaded. Accordingly, of my own motion, I will strike out paragraph 38(d) of the statement of claim.
The orders that I propose to make do not preclude the applicants again seeking leave to amend to re-plead the claim based on an alleged breach of the duty of utmost good faith set out in paragraph 38(d) of the statement of claim. However, I have concerns as to whether any such claim would add anything to the applicants’ existing claims in the proceeding in circumstances where the heads of loss claimed on the basis of breach of the duty of utmost good faith are the same as those claimed on the basis of breach of the insuring clause, and it is not clear whether there is a plausible argument that the applicants could succeed on the basis of a breach of the duty of utmost good faith if they do not succeed on the basis of a breach of the insuring clause. Given that the claim based on breach of the duty of utmost good faith would add significantly to the complexity and costs of the proceeding, I consider it incumbent on the applicants to give careful consideration to this matter before seeking leave to amend to re-plead the claim in paragraph 38(d).
To the extent that the Proposed Amended Statement of Claim contains refinements or adjustments to the pleading (apart from re-pleading paragraph 38(d)), there does not appear to be any objection to the amendments. It is assumed that these amendments could be made by consent upon the applicants preparing a revised pleading containing these changes.
Background
Events leading to Icon’s claim under the policy
Between 2012 and 2017, Icon and Liberty entered into several successive third party liability insurance contracts. Each contract was for a 12-month period. The relevant annual third party liability insurance policy to which the First Proceeding and the current proceeding relate is the Liberty Policy (a copy is annexed to the First Stojanovich Affidavit at page 1). I note that clause 2 of the insuring clause in the Liberty Policy states that Liberty agrees to “defend at their expense in the name of and on behalf of the Insured any claim or suit against the Insured to recover compensation in respect of and/or arising out of Occurrences covered hereby”, and clause 3.2 states that Liberty agrees to “pay in addition to the Limit of Liability expressed in the Schedule … all expenses incurred by or with the permission of Insurer(s) for investigation, negotiation and defence of claims and suits”.
In October 2015, Icon entered into a contract to design and build a high-rise mixed residential and commercial development known as the Opal Tower in Sydney.
On 2 November 2015, Austbrokers Countrywide (Austbrokers) (agents for Icon) notified Chase Underwriting Pty Ltd (Chase) (agents for Liberty) by email that the Icon group had been awarded a new project described as “Opal Tower” and that the time to build until the anticipated date of completion was from 16 November 2015 to 10 August 2018.
On 9 December 2015, in response to the email dated 2 November 2015, Chase sent Austbrokers an email informing it that “cover” was in place for the Opal Tower from 16 November 2015 and ending on 10 August 2018 and that all other terms and conditions were as per the annual policy.
On 22 December 2015, Daniel Hingston, an employee of Liberty, signed an “endorsement” for the Opal Tower project that noted that the annual third party liability floater policy was amended to include the Opal Tower contract with an “Estimated Project Period” of 16 November 2015 to 10 August 2018.
Practical completion of the Opal Tower project occurred on 8 August 2018, triggering the commencement of a 12-month defects liability period for that project.
In late December 2018, major cracks were observed at the Opal Tower across three floors in certain wall panels, floor slabs and hobs (the Incident). Following the observation of cracking on 24 December 2018, all residents and tenants were evacuated from the Opal Tower. The residents and tenants of the Opal Tower were subsequently allowed to re-enter the Opal Tower and then asked to evacuate again on 27 December 2018.
On 24 December 2018, Austbrokers notified Chase that it had been reported that cracking had appeared at the Opal Tower and that the tower had been evacuated.
On 10 January 2019, Liberty informed Chase that because the policy period for Opal Tower expired on 10 August 2018 and the damage to Opal Tower appeared to have occurred after the expiry of coverage, Liberty’s preliminary view was that the Liberty Policy would not respond to the claim. On 15 February 2019, Liberty provided Austbrokers a copy of that preliminary indemnity position. On 22 February 2019, Liberty informed Austbrokers that Liberty did not consider that Icon had requested “run off” cover pursuant to condition 15 of the Liberty Policy and invited Icon to respond to Liberty’s position. On 4 June 2019, Liberty confirmed its position on indemnity, which was that the policy period for the Opal Tower expired on 10 August 2018.
On 18 June 2019, K&L Gates (solicitors acting on behalf of the Icon group) notified Liberty, among other things, that:
(a)Icon considered it had exercised its rights under condition 15 of the Liberty Policy by obtaining run off cover for the Opal Project “including any testing and/or defects liability and/or maintenance periods”; and
(b)Icon requested that Liberty reconsider its position and confirm indemnity for Icon, failing which Icon reserved its right to immediately commence legal proceedings against Liberty seeking appropriate declaratory relief without further notice.
On 25 June 2019, Lander & Rogers (solicitors for Liberty) wrote to K&L Gates contending: that insofar as the Liberty Policy insured claims made against Icon for legal liabilities arising from the Opal Tower project, the period of cover in respect to the Opal Tower project had expired on 10 August 2018; that no written instructions requesting run off cover prior to the expiry of the Period of Insurance had been received; and that, accordingly, the Liberty Policy did not respond to any claims that arose from the cracking observed at Opal Tower on 24 December 2018.
The First Proceeding – first instance
On 24 July 2019, Icon commenced the First Proceeding by originating application and a statement of claim (proceeding VID 781 of 2019). Icon Co and Kajima were not parties to the First Proceeding (but were named insureds in the Liberty Policy). In addition to Liberty, QBE Underwriting Ltd (QBE) was a respondent to the First Proceeding. However, the claim against QBE can be put to one side for present purposes.
Icon sought declaratory relief as against Liberty to the effect that the Incident reflected or was the result of an “Occurrence” within the period of cover of the Liberty Policy. Icon advanced three alternative claims in support of that relief. These were, in summary:
(a)first, that its notification to Liberty of the Opal Tower project engaged condition 15 of the Liberty Policy (providing for run off cover), thus allowing for the insurance to cover the 12-month defects liability period which followed the date of practical completion of the project, during which the Incident occurred (Run Off Claim);
(b)secondly, by operation of s 58 of the Insurance Contracts Act 1984 (Cth), Liberty was precluded from denying indemnity for the period during which the Incident occurred; and
(c)thirdly, that the Liberty Policy should be rectified by the addition of an “endorsement” in terms that would entitle Icon to such cover (Rectification Claim).
It seems that the main focus of the First Proceeding was the first and third of the above claims. It is sufficient for present purposes to focus on those two claims. This is consistent with the way in which Liberty’s submissions on the present interlocutory applications were presented.
On 13 September 2019, a first case management hearing took place before Allsop CJ.
On 11 November 2019, in advance of the second case management hearing, Icon filed and served an outline of submissions that included:
Declaratory nature of the proceeding
10.Liberty and QBE contend that the declaratory relief sought by Icon will not conclusively and finally determine the rights and liabilities of Icon and the respondents, such that the court should refuse to grant the relief claimed. That position is not correct. If the Court determines this proceeding in favour of either respondent, the controversy between Icon and that respondent will be at an end.
11.Icon accepts, however, that this proceeding will not resolve the whole of the controversy between it and any respondent against whom it is successful in this proceeding. In particular, there will remain questions as to whether any particular category of loss claimed by Icon falls within the insuring clause and whether any exclusion clauses apply. …
(Footnotes omitted.)
On the present applications, both sides rely on the above passage to support their submissions. Liberty places emphasis on the confined way in which Icon described any future proceeding, that is, it would deal with questions “as to whether any particular category of loss claimed by Icon falls within the insuring clause and whether any exclusion clauses apply” (as distinct from a broader allegation of breach of the duty of utmost good faith). Liberty submits that this was the basis upon which the First Proceeding went forward. On the other hand, the applicants emphasise that Icon always made clear that another proceeding may be necessary and that a claim for damages for breach of the Liberty Policy falls within the scope of what was flagged.
On 12 November 2019, the second case management hearing took place before Allsop CJ.
On 14 November 2019, Allsop CJ made orders including granting Icon leave to amend its originating process and statement of claim. The amendments (in respect of which leave was granted) included deletion of the words “such further and other orders as the court sees fit” as part of the relief sought.
Those orders also provided that Liberty and Icon were required to make discovery concerning:
(a)the formation and construction of the “Third Party Liability” policies entered into between Icon and Liberty commencing from about September 2012 to about September 2017, including documents relating to any endorsements in respect of such policies; and
(b)the period of insurance coverage provided by Liberty for the Opal Tower project.
In compliance with the orders for discovery, on 13 January 2020, Liberty produced a list of documents with a schedule of documents approximately 110 pages long, identifying 2,993 documents. The documents produced by Liberty covered a date range from 2010 to 2019.
The documents produced to Icon in the First Proceeding included the documents maintained by Liberty on its underwriting file in respect of the third party liability insurance acquired by the Icon group, including the communications between Liberty and Chase in respect of each successive annual third party liability policy obtained by the Icon group. Ms Stojanovich deposes that, based on the searches conducted at the time, Liberty discovered any document that was relevant to the question of Liberty’s intention in underwriting any of the annual liability policies offered to the Icon group.
On 28 February 2020, the parties filed an agreed statement of facts in the First Proceeding.
In advance of trial, Icon filed eight lay witness affidavits, as well as an expert report. Details of the witnesses and an overview of their evidence are set out in paragraph 60 of the First Stojanovich Affidavit. Icon also relied on an expert report of Neil Bovington. Mr Bovington’s evidence related to his experience in the construction insurance sector spanning 20 years, and whether there were standard types of construction liability cover available in Australia between 2012 and 2018.
Liberty filed two lay witness affidavits in advance of trial: an affidavit of Mr Hingston and an affidavit of Ms Stojanovich.
On 19 May 2020, the parties filed a court book comprising 1,575 pages.
Prior to the commencement of the trial, the parties filed written opening submissions.
On 25 May 2020, the trial of the First Proceeding before Lee J commenced. The hearing occupied five days and was conducted remotely due to the COVID‑19 pandemic. Lee J required the parties, at the conclusion of the trial, to prepare closing submissions. These were updated and marked-up versions of the opening submissions. In its opening and closing submissions, Icon submitted:
16.Icon acknowledges that the declaratory relief it seeks in this proceeding may not finally resolve the whole controversy between it and the respondents concerning Icon’s claim for indemnity in relation to claims arising from the Incident. If Icon is successful, the parties may still need to address whether the amounts claimed against and paid by Icon properly fall within the scope of the relevant insuring clauses and whether any exclusion clauses apply. Resolution of such issues may require detailed and complicated factual analysis, at least some of which is likely to be the subject of the Class Action. However, if Icon is unsuccessful in this proceeding against one or more of the respondents, its claims for indemnity against that respondent in relation to claims arising from the Incident will be at an end. In the circumstances, Icon submits that, if it is successful in establishing its claims in this proceeding, the making of the declarations sought will further the overarching purpose of promoting the just resolution of disputes according to law “as quickly, inexpensively and efficiently as possible.”
As with the outline of submissions of 11 November 2019 (discussed above), on the present applications, both sides rely on the above passage to support their submissions.
On 19 October 2020, Lee J delivered his reasons for judgment in Icon Co (NSW) Pty Ltd v Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets [2020] FCA 1493 (the First Instance Reasons). In summary, his Honour concluded:
(a)on the proper construction of condition 15 and in the events that happened, run off cover had not been engaged for the Opal Tower project; accordingly, the Run Off Claim failed (at [90], [95]); and
(b)the common intention of the parties at the time they entered into the Liberty Policy was that this would be a “contracts commencing” policy, that is, that it would apply to contracts commenced within the period of the policy (and thus provide cover until the end of the defects liability period under the Opal Tower contract); accordingly, the Rectification Claim succeeded (at [278]).
In the First Instance Reasons at [7], Lee J stated: “Icon seeks declarations designed to progress its claims for indemnity against both Liberty and QBE as both insurers have denied indemnity.” This sentence reflects the fact that Icon was not seeking a declaration of entitlement to indemnity in the First Proceeding.
On 26 October 2020, Lee J made final orders in the First Proceeding. These orders gave effect to his Honour’s conclusion that Icon succeeded on the Rectification Claim.
Mr Kelly, an experienced litigation solicitor, gives evidence at paragraphs 46-49 of his affidavit that:
(a)Had Icon sought to pursue a full claim for indemnity in the First Proceeding, issues would have arisen about the interpretation and application of other policy terms, giving rise to a need for detailed evidence, discovery, and a much longer trial.
(b)Accordingly, in July 2019, Icon commenced the First Proceeding, seeking limited relief aimed at deciding central and important questions that had the capacity to affect the length and cost of a potentially very large piece of litigation.
(c)He considers that, if Icon had pursued a full claim for indemnity, the proceeding would have taken significantly longer than 12 months to be ready for trial, and the trial would have taken significantly longer than five days.
The above evidence was not challenged and I accept that it represents Mr Kelly’s opinions.
The First Proceeding – appeal to the Full Court
On 16 November 2020, Liberty filed an appeal to the Full Court. This related to the Rectification Claim.
Subsequently, Icon filed a notice of cross-appeal. This related to the Run Off Claim.
On 10 and 11 May 2021, the appeal and cross-appeal were heard by a Full Court comprising Allsop CJ, Besanko and Middleton JJ.
On 20 July 2021 the Full Court delivered its reasons for judgment: Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126; 396 ALR 193. In a joint judgment, the Full Court concluded as follows:
(a)The Full Court first considered Icon’s cross-appeal (relating to the Run Off Claim). The Full Court considered that, on the proper construction of condition 15 and in the events that happened, run off cover had been engaged for the Opal Tower project (at [10], [156], [180]). Thus, there was cover during the defects liability period under the Opal Tower contract. Accordingly, the Full Court allowed Icon’s cross-appeal.
(b)It was therefore unnecessary for the Full Court to determine Liberty’s appeal (relating to the Rectification Claim). However, given the detailed submissions that had been made, the Full Court did consider the appeal. The Full Court concluded that, if it had come to a different conclusion in relation to the Run Off Claim, it would have agreed with the primary judge in relation to the Rectification Claim and would have dismissed Liberty’s appeal (at [10], [350]).
On 29 July 2021, the Full Court made final orders in the appeal, giving effect to the above conclusions. The orders appear at pages 733-734 of the First Stojanovich Affidavit.
Events after the Full Court judgment
On 13 August 2021, Liberty issued to Icon a grant of indemnity letter.
On or about 22 September 2021, Icon provided to Liberty a loss adjuster’s report prepared by MSM Loss Management dated 17 September 2021 (MSM Report), which detailed amounts alleged to have been paid by Icon to third parties that MSM considered fell for cover within the terms of the policy, as well as other costs that MSM considered were recoverable under the terms of the Liberty Policy.
Liberty ultimately agreed to pay Icon approximately $12.5 million in respect of third-party payments (that is, payments made by Icon to third parties) claimed by Icon. Liberty also agreed to pay Icon approximately $10 million in respect of defence costs Icon had incurred in defending itself in proceedings brought against it.
However, there remains a dispute between Icon and Liberty as to certain other amounts. On page 4 of the MSM Report (page 746 of the First Stojanovich Affidavit), a number of heads of claim are identified. Some of these are disputed by Liberty and form the subject-matter of claims made by the applicants against Liberty in the current proceeding. The following four categories of claim remain in dispute between the applicants and Liberty:
(a)A claim referred to as “unpaid defence costs” – these are costs that the applicants contend they incurred in defending third party claims against them, but which Liberty disputes, for example, on the basis that they were not properly and reasonably incurred; this claim is for approximately $2.5 million;
(b)A claim referred to as the costs of “temporary propping”;
(c)A claim referred to as “claims handling costs” – in simple terms, these are costs incurred by the applicants (by their own staff) in dealing with third parties; the amount claimed by the applicants is approximately $1.125 million; in simple terms, the applicants contend that, had Liberty granted indemnity to Icon in early or mid-2019, these costs would have been incurred by Liberty rather than by the applicants (whether as a matter of obligation under the insuring clause or as a matter of practical reality); and
(d)A claim (apparently based on Hungerfords v Walker [1989] HCA 8; 171 CLR 125) for loss of the use of money, in respect of amounts paid out or incurred by the applicants – this claim has not yet been quantified; in the alternative to this claim, the applicants claim interest.
The current proceeding
On 14 November 2023, the applicants commenced the current proceeding by originating application against Liberty, Chubb and Tokio Marine. In the paragraphs that follow, I provide an outline of the statement of claim.
In section A.2 of the statement of claim, the pleading outlines the Liberty Policy. This section includes, in paragraph 8(j), the allegation that the Liberty Policy contained a term to the effect that Liberty would act towards Icon and the Icon group with the utmost good faith in respect of any matter arising under or in relation to the policy (defined as the “Liberty Duty of Utmost Good Faith”). The particulars indicate that the applicants rely on s 13 of the Insurance Contracts Act.
In section C of the statement of claim, the pleading alleges facts relating to the Opal Tower incident. Section C.1 deals with the Opal Tower development. Section C.2 deals with the observed damage. Section C.3 pleads claims by and payments to third parties.
Section D of the statement of claim contains the applicants’ claims against Liberty. Section D.1 (comprising paragraphs 36-38) is headed “Notification of claims and Liberty’s response”. This section (omitting particulars other than for paragraph 38(d)) is in the following terms:
36.On 24 December 2018 and on numerous occasions thereafter, Icon and the Icon Group:
(a)informed Liberty of the Observed Damage;
(b)asked Liberty to confirm that the Observed Damage occurred within the period of cover of the Liberty Policy; and
(c)asked Liberty to confirm that they were entitled to indemnity in relation to the claims arising out of the Observed Damage.
37.In response, Liberty:
(a)adopted the position that the Liberty Policy was a ‘turnover’ type policy under which insurance cover ended on 20 September 2016, and not a ‘contracts commencing’ type policy, under which Icon and the Icon Group bought and obtained insurance cover for the Opal Tower Development until the end of any testing and/or defects liability and/or maintenance period for the Opal Tower Development;
(b)based on the assertion alleged in sub-paragraph (a):
(i)denied that the claims in relation to the Observed Damage were covered by the Liberty Policy;
(ii)refused to indemnify Icon and the Icon Group in relation to claims and suits against Icon and the Icon Group for compensation in respect of and/or arising out of the Observed Damage;
(iii)failed to defend at its expense in the name of and on behalf of Icon and the Icon Group the claims and suits brought against Icon and the Icon Group for compensation in respect of and/or arising out of the Observed Damage; and
(iv)failed to authorise and pay reasonable expenses for the investigation, negotiation and defence of claims and suits against Icon and the Icon Group for compensation in respect of and/or arising out of the Observed Damage.
38.Liberty’s conduct alleged in paragraph [37] above constituted a breach of:
(a)Insuring Clause 1 of the Liberty Policy;
(b)further or alternatively, Insuring Clause 2 of the Liberty Policy;
(c)further or alternatively, Insuring Clause 3.2 of the Liberty Policy;
(d)further or alternatively, the Liberty Duty of Utmost Good Faith,
(together, the Liberty Denial of Policy Breaches).
Particulars of paragraph [38(d)]
(A)At the time that Liberty entered into the Liberty Policy and at all material times thereafter (including during the denial of cover), Daniel Hingston (the “key decision maker and the man with primary responsibility for Icon’s insurance programme at Liberty”) knew and intended that the Liberty Policy should operate as a “contracts commencing” type policy. See Icon Co (NSW) Pty Ltd v Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets [2020] FCA 1493, especially at [188] – [203], [237] – [249].
(B)Liberty adopted the position alleged in paragraph 37(a) opportunistically, and contrary to Mr Hingston’s intention at the time of entering into the Liberty Policy, having identified two weeks prior to the occurrence of the Observed Damage that: “It seems they think the policy is based on turnover during the period with contracts being declared, but if they are attaching separate policies when they come on for the entire period then effectively it is contracts commenced. They could have an issue whereby we could say that despite the period noted in each endorsement we could rely on the actual policy period.” See Icon Co (NSW) Pty Ltd v Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets [2020] FCA 1493, [201] – [202].
(C)Further particulars may be provided following discovery, subpoenas or other interlocutory processes.
Section D.2 is headed “Consequences of the Liberty Denial of Policy Breaches”. This section (comprising paragraph 39) alleges various consequences as flowing from the alleged breaches.
Section D.3 deals with Liberty’s appeal in the First Proceeding and its subsequent admission of liability.
Section D.4 is headed “Liberty’s failure to indemnify Icon in relation to the Third Party Payments”. Paragraph 47 contains an allegation that Liberty’s conduct in failing to pay the totality of the “Indemnified Third Party Payments” (as defined) in the period from September 2021 to June 2022 constituted a breach of Liberty’s duty of utmost good faith. Little, if any, attention was given to this paragraph in the course of the hearing. It is not the subject of Liberty’s application for a permanent stay or strike out.
Section D.5 is headed “Liberty’s failure to fully indemnify Icon in relation to Defence Costs”.
Section D.6 is headed “Liberty’s failure to indemnify Icon in relation to the costs of Temporary Propping”.
The statement of claim contains a second section numbered “D.6”. This is headed “Loss or damage suffered by Icon as a result of Liberty’s breaches of the Liberty Policy”. In paragraph 59, it is alleged that, as a result of the breaches pleaded earlier in the statement of claim, Icon and the Icon group have suffered loss or damage.
Section D.7 contains a claim for interest against Liberty.
The Proposed Amended Statement of Claim
By the Proposed Amended Statement of Claim, the applicants seek to re-plead, in more detail, the claim based on breach of the duty of utmost good faith.
In paragraph 8 (which sets out alleged terms of the Liberty Policy), it is proposed to add an additional sub-paragraph as follows. It is proposed to allege that the policy contained a term to the effect that:
(k)further or alternatively to sub-paragraph (j), Liberty would not deny indemnity on the basis of, or otherwise seek to rely on, an asserted interpretation of the Liberty Policy which was capricious, or unreasonable, or which did not accord with the intentions of the parties (Liberty Duty of Fidelity to the Bargain).
Particulars
The duty was implied by law as a manifestation of the Liberty Duty of Utmost Good Faith and/or stemmed from that duty, limiting the exercise by Liberty of its power to grant or deny indemnity under the Liberty Policy.
For the purposes of the present applications, the parties did not distinguish between the duty of utmost good faith pleaded in current paragraph 8(j) and the term proposed to be pleaded in paragraph 8(k). I will adopt the same approach in these reasons.
Some relatively minor changes are proposed to paragraph 37.
It is proposed to insert a new section D.2, headed “Breach of Liberty Duty of Utmost Good Faith”, in place of existing paragraph 38. The new section is as follows:
37A. In the Federal Court Insurance Appeal, the Court found that:
(a)There were, and are, two approaches to the coverage of construction third party liability risks by annual policies of insurance. There could be policies based on annual turnover covering all projects on hand during the year and covering liability for damage or occurrences within the annual policy period, with premium calculated upon the turnover of the business for the policy year. An alternative was a so-called “contracts commencing” policy which covers liability for damage or occurrences in connection with building contracts commenced in the policy year, the coverage being for damage or occurrences during the life of the building contracts, which were expected to extend beyond the policy period. In such circumstances, premium is calculated for each project by reference to the total contract value of the project: in effect the contribution to turnover of the company from that contract: Full Federal Court Judgment, [16].
(b)In the former type of arrangement, damage or occurrence needs to occur within the annual policy period and premium was referable to the turnover of the policy period. In the latter, damage or occurrence needs only to occur in the life of the building contract which commenced within the policy period, and premium is referable to the total contract value of the projects commenced within the policy period. Contracts commencing policies provide cover that includes the defects liability period: Full Federal Court Judgment, [17].
(c)Some policies would have options for both turnover, and contracts commencing: Full Federal Court Judgment, [211]-[212].
(d)Here, the market context known to the parties to the policy (Icon and Liberty) and to their respective experienced intermediaries was the provision of third party liability cover in the construction industry. Insureds such as Icon and insurers such as Liberty would be taken to understand that contractors (such as Icon) are required to maintain third party liability insurance during the construction period and the defects liability period. They would also be taken to understand that such insurance when purchased on an annual basis was generally purchased in one of two ways: on a contracts commencing basis or on a turnover basis: Full Federal Court Judgment, [153].
(e)Condition 15 was wide enough to be invoked conformably and harmoniously with condition 8 and the balance of the policy by Icon giving instructions for run off cover for individual contracts, contract by contract, at its choice. That is, Condition 15 was to be objectively understood as the contractual machinery for enabling a form of contracts commencing cover to be issued under the policy as an alternative or in addition to annual turnover cover for which condition 8 provided for premium adjustment: Full Federal Court Judgment, [162]-[170].
(f)Business people familiar with the market would understand how conditions 8 and 15 were able to work together: Full Federal Court Judgment, [60], [152]-[153], [159], [161]-[167].
(g)Commercially sensible parties in the position of Icon and Liberty would have expected that the Liberty Policy covered Icon during the defects liability period: Full Federal Court Judgment, [153], [159], [310].
(h)The question whether the parties invoked Condition 15 was to be answered by an examination of what the parties actually did: Full Federal Court Judgment, [43], [57], [65], [67], [150], [171]. In September 2012, at the time of renewing Icon’s annual third party liability policy with Liberty, Mr O’Reilly, on behalf of Icon, requested cover on a “contracts commencing” basis: Full Federal Court Judgment, [31], [74], [84], [172]-[173], [280]-[282]. Mr O’Reilly and Mr Burgess of Chase had conversations to the effect that the Liberty Policy could provide “contracts commencing” cover pursuant to Condition 15: Full Federal Court Judgment, [74]-[87], [172]-[173], [211], [243]-[246], [280]-[282], [306], [308]-[309], [334]-[336]. Thereafter, Mr Burgess had a conversation with Mr Hingston about Icon’s request, from which Mr Hingston understood that Icon had requested a form of cover that could be described as contracts commencing: Full Federal Court Judgment, [75], [199]-[203], [231]-[233]; [320]-[321], [334]-[337]. Mr Hingston agreed: Full Federal Court Judgment, [200]-[203], [308]-[309], [320]-[321], [334]-[337]. Mr Hingston said to Mr Burgess that he left it to him to confirm with Icon or its broker the nature of the changes to bring about the result desired. That included the grant of authority to Mr Burgess to engage Condition 15, if that was how he thought he could effect Icon’s wishes: Full Federal Court Judgment, [173], [320]-[321], [334].
(i)Thereafter, Mr O’Reilly (on behalf of Icon) gave instructions to Liberty of individual contracts commenced by Icon throughout the annual period of insurance under each successive Liberty Policy, thereby invoking or seeking to invoke Condition 15: Full Federal Court Judgment, [88]-[97], [154], [174].
(j)Mr Burgess of Chase knew that Icon was invoking or seeking to invoke Condition 15. That knowledge is attributable to Liberty. Further, Mr Hingston knew that Icon had requested, and Liberty had agreed to provide, a form of contracts commencing cover: Full Federal Court Judgment, [172]-[173], [321].
(k)Icon routinely gave instructions about individual contracts to be given life of contract cover. There is no reason why these instructions should not be seen as directly referable to Condition 15. That is, in effect, what Mr O’Reilly said they would be, after Mr Burgess pointed out the availability of Condition 15: Full Federal Court Judgment, [174].
(l)At the time that Liberty entered into the Liberty Policy, Liberty (by its directing mind and will, Mr Hingston) knew and intended that the Liberty Policy would apply during the construction period and the defects liability period of any project:
(i)commenced by Icon during the annual period of insurance;
(ii)declared by Icon to Liberty; and
(iii)for which an additional upfront premium was calculated by Chase (as agent for Liberty) based on the total project value and paid by Icon,
(the Contracts Commencing Intention): Full Federal Court Judgment, [228]-[239], [248]-[261], [268]-[337].
(m)At the time Liberty entered into the Liberty Policy, Liberty understood that the mechanism by which the Contracts Commencing Intention was given effect was Condition 15 of the annual Liberty Policy: Full Federal Court Judgment, [334]-[338].
(n)Premium was calculated from 2012 onwards on the basis of total contract values for declared projects. In September 2013 there was one change: a small deposit premium was taken for the annual cover. It was up to Liberty to set it. It was prepared to set it, and to some degree set it off against premium based on total contract value for contracts delayed by instructions one by one. This, in effect, was using the policy, the premium provisions and condition 15, to effect contract commencing cover. Liberty and Mr Hingston knew at least from 2013 that they were providing life of contract cover to contracts about which they were given instructions and for which Liberty was charging premium in the amount and method of calculation precisely provided for in condition 15: Full Federal Court Judgment, [337].
(o)At the time Liberty entered into the Liberty Policy, Liberty understood that, upon declaration of the project and payment of the premium (as had occurred with respect to the Opal Tower Contract), the Liberty Policy attached to the project for the life of the project including the defects liability period: Full Federal Court Judgment, [310]-[314].
(Relevant Findings).
Particulars
(A)Full Federal Court Judgment.
(B)Judgment of Justice Lee.
37B.The matters pleaded in paragraph 37 occurred in circumstances where:
(a)at the time that Liberty entered into the Liberty Policy, Liberty:
(i)had the Contracts Commencing Intention;
(ii)understood that the mechanism by which the Liberty Policy was to provide a form of contracts commencing cover was Condition 15 of the annual Liberty Policy;
(iii)understood that, upon declaration of the project and payment of the premium (as had occurred with respect to the Opal Tower Contract), the Liberty Policy attached to the project for the life of the project including the defects liability period;
(b)alternatively, at the time of the matters pleaded in paragraph 37, Liberty knew of the matters pleaded in sub-paragraph (a) above.
Particulars
At the time that Liberty entered into the Liberty Policy and at all material times thereafter (including during the denial of cover), Daniel Hingston (the “key decision maker and the man with primary responsibility for Icon’s insurance programme at Liberty”) knew and intended that the Liberty Policy should operate as a “contracts commencing” type policy. See the email that Mr Hingston sent to Mr Vernon of Chase on 19 November 2018 and the email Mr Hingston sent to Mr Tucker of Liberty on 14 December 2018. That knowledge was also held by Mr Burgess of Chase whose knowledge was attributable to Liberty as Chase was its agent for the purposes of the Liberty Policy.
37C.Liberty is estopped from denying the matters alleged in paragraph 37B(a) by reason of the Relevant Findings.
Particulars
(A)As to paragraph 37B(a)(i), Icon refers to subparagraph 37A(l) above.
(B)As to paragraph 37B(a)(ii) and (iii), Icon refers to subparagraphs 37A(a)-(k) and (m)-(o) above.
(C)The Second and Third Applicants are privies of interest with the First Applicant for the purposes of the Relevant Findings on the basis that (a) they are members of the Icon Group of companies; (b) they are insureds under the Liberty Policy; and (c) the Federal Court Insurance Proceeding was brought for the benefit of all members of the Icon Group of companies.
38.By reason of the matters alleged in:
(a)paragraph 37B(a);
(b)alternatively paragraph 37B(b),
Liberty’s conduct alleged in paragraph [37] above constituted a breach of the Liberty Duty of Utmost Good Faith and/or the Liberty Duty of Fidelity to the Bargain (First Liberty Utmost Good Faith Breach).
Section D.3 of the proposed pleading is headed “Breach of duty to defend and/or pay expenses for investigation, negotiation and defence of claims and suits” and comprises the following paragraph:
38A.Further or alternatively, Liberty’s conduct alleged in paragraphs [37(b)(iii) and (iv)] above constituted a breach of:
(a)Insuring Clause 2 of the Liberty Policy;
(b)Insuring Clause 3.2 of the Liberty Policy,
(together, the Liberty Duty to Defend Breaches).
As noted above, Liberty’s application (for a permanent stay or strike out) does not relate to the applicants’ claims based on the insuring clause in the Liberty Policy. It follows that Liberty has no objection to the applicants amending their statement of claim to refine the pleading of breach of the insuring clause as set out in proposed paragraph 38A.
Section D.4 of the proposed pleading is headed “Costs incurred and expended as a result of Liberty’s breaches”. This section includes proposed new paragraph 39A, which pleads loss or damage. That paragraph (omitting some particulars) is as follows:
39A.By reason of the First Liberty Utmost Good Faith Breach and further or alternatively the Liberty Duty to Defend Breaches, Icon has suffered loss and damage.
Particulars
(A)The Claims Handling Costs: Icon and the Icon Group refer to and repeat paragraphs [39(a) and (b)] above. Further detail in respect of the Claims Handling Costs is set out in the MSM Report as follows: …
(B)Loss of use of funds: Icon and the Icon Group refer to subparagraphs [39(a)-(e)] above. Icon has suffered loss by reason of the loss of the use of the funds used to meet the Defence Costs and/or the Third Party Payments. Further particulars may be provided prior to trial.
(C)Unpaid Defence Costs: If Liberty had complied with its obligations under the Liberty Policy, Icon would not have incurred any Defence Costs, as the costs of its defence would have been met by Liberty. Alternatively to the claims for indemnity in respect of the Unpaid Defence Costs set out in paragraphs [48] to [52] below, Icon is entitled to recover the Unpaid Defence Costs as damages suffered as a result of the First Liberty Utmost Good Faith Breach.
Further particulars may be provided prior to trial.
As is apparent from proposed paragraph 39A, the applicants plead the same loss and damage for the purposes of their claims based on breach of the duty of utmost good faith and breach of the insuring clause.
The balance of the Proposed Amended Statement of Claim contains other drafting changes to the current pleading, some of which are consequential upon the amendments set out above. Paragraph 47 contains a minor amendment to allege breach of the Duty of Fidelity to the Bargain (in addition to breach of the duty of utmost good faith). The alleged breaches of both terms are proposed to be defined as the “Second Liberty Utmost Good Faith Breach”. Little, if any, attention was given to this paragraph of the proposed pleading during the hearing.
Additional evidence relating to finality and fairness
At the end of the First Stojanovich Affidavit, Ms Stojanovich (an experienced litigation solicitor who acted for Liberty in the First Proceeding) provides the following additional evidence relating to the issues of finality and fairness:
104.The preparation for, and conduct of, the First Proceeding, consumed considerable time, cost and resources of the parties, and the time and resources of this Court. In particular, time, cost and resources were dedicated to the issue of ascertaining Liberty’s “intention” with respect to the operation of the Liberty Policy.
105.At the time of the First Proceeding, I did not understand from anything that had been said or done on behalf of Icon that allegations of breach of utmost good faith by my client would be raised only after the First Proceeding had concluded. My understanding was that issues relevant to Liberty’s intention in relation to the Liberty Policy would be addressed in the First Proceeding and, more specifically, be addressed as part of a rectification claim by Icon. My understanding was that if a subsequent proceeding were required it would focus on whether any loss claimed by Icon was covered by the relevant insuring clause in the Liberty Policy, and whether any exclusions applied. Had I known that allegations of breach of utmost good faith would be raised by Icon in a subsequent proceeding, based on documents, evidence and findings in the First Proceeding, I would have sought instructions from Liberty to object to that approach and believe from experience that I would have obtained such instructions, on the basis that it would involve:
(a)duplication of the discovery process, including identification of any documents which may be relevant to a claim relating to utmost good faith not captured by a claim relating to rectification;
(b)duplication of preparation of evidence;
(c)the possibility of witnesses having to give evidence and be subject to cross examination more than once;
(d)duplication of time in preparation for and the conduct of a trial; and
(e)additional time, cost and resources required in this process.
106.The same documents on which Icon now relies as part of its claim for breach of utmost good faith in paragraph 38(d) of its statement of claim were made available to Icon as part of the discovery process in the First Proceeding. Similarly, the basis for Icon’s claim of utmost good faith breach – which rests upon the intention of Liberty with respect to the operation of the Liberty Policy – was in issue and tested in the First Proceeding.
107.If the Icon Group is permitted to now raise the arguments identified in paragraph 38(d) of its statement of claim:
(a)Liberty, and the Court, would again be required to prepare for and conduct a trial on factual matters spanning the period of 2012 to 2019 in circumstances where those factual matters (i.e. matters of Liberty’s intention as to the operation of the Liberty Policy) were already the subject of discovery, evidence, submissions and two decisions of this Court (including an appeal).
(b)Mr Hingston may again be required as a witness in the proceeding, at which time Mr Hingston’s intention will once again be the subject of evidence before the Court and in respect of which, the Court will once again be asked to make factual findings.
(c)Liberty is again required to meet an application for discovery and to consider possible witnesses, to address issues relating to breach of utmost good faith which could have been addressed if this issue had been raised in the course of preparation for and discussion regarding the scope of the First Proceeding and any subsequent proceeding.
The above evidence was not challenged and I accept that it represents Ms Stojanovich’s understandings and opinions. Insofar as discovery is concerned, although there was an issue relating to discovery in relation to the claim based on breach of the duty of utmost good faith in the current proceeding, during the hearing of the present applications senior counsel for the applicants said that the applicants would not require any discovery beyond that made in the First Proceeding (T74).
Applicable principles
There is no dispute between the parties as to the applicable principles relating to Anshun estoppel and abuse of process. The following statement of those principles is substantially based on Liberty’s outline of submissions.
Anshun estoppel
Anshun estoppel precludes the making of a claim or raising of an issue so connected with the subject matter of an earlier proceeding such that it would have been unreasonable not to have been brought forward in the earlier proceeding: Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589 at 598, 602-603 per Gibbs CJ, Mason and Aickin JJ; Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507 (Tomlinson) at [22] per French CJ, Bell, Gageler and Keane JJ.
In O’Brien v Tanning Research Laboratories (1988) 14 NSWLR 601 at 609-610, Kirby P explained that Anshun estoppel is founded on: (a) the protection of private interests including “protecting litigants from the costs and uncertainties of repetitious litigation; upholding the finality and conclusiveness of formal orders; and preventing persons from being troubled twice by what is, in substance or in fact, the same litigation”, and (b) the protection of public interests, including “upholding the authority of orders formally disposing of disputes; preventing the pro-longation of disputes by continuous litigation of things earlier concluded; and the efficient use of the scarce resources available for the administration of justice by requiring parties to conclude, in one proceeding, matters which might otherwise be brought in a series which would occasion cost, delay, inconvenience and uncertainty”.
The fact that a claim or issue could have been raised in a previous proceeding will generally not, of itself, be sufficient to conclude that it should have been raised. Rather, it must be shown to have been unreasonable in all the circumstances not to have done so: Gibbs v Kinna [1999] 2 VR 19 at [1] per Ormiston JA; Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; 75 NSWLR 245 at [4] per Allsop P. Relevant circumstances may include, for example, “the character of the previous proceeding, the scope of any pleadings, the length and complexity of any trial, any real or reasonably perceived difficulties in raising the relevant claim earlier, and any other explanation for the failure to raise the claim previously”: Gibbs v Kinna [1999] 2 VR 19 at [28] per Kenny JA.
An Anshun estoppel also extends to a party’s privies. A party to a subsequent proceeding may be privy in interest with a party in an earlier proceeding if, for example, the party to a subsequent proceeding had a legal interest in the outcome of the earlier proceeding: see Tomlinson at [23], [33] per French CJ, Bell, Gageler and Keane JJ.
Abuse of process
The power of this Court to strike out proceedings or claims for an abuse of process is reflected in r 16.21(1)(f) of the Federal Court Rules 2011.
The use of a court’s process will amount to an abuse if it occasions unjustifiable oppression to a party or serves to bring the administration of justice into disrepute: UBS AG v Tyne [2018] HCA 45; 265 CLR 77 (UBS) at [1] per Kiefel CJ, Bell and Keane JJ. The circumstances that amount to an abuse do not lend themselves to exhaustive statement. Each case requires a broad, merits-based judgement taking into account public and private interests: UBS at [7] per Kiefel CJ, Bell and Keane JJ, at [69] per Gageler J. Oppression can be found in a party’s misuse of a process of the court by raising issues which could have been raised previously (UBS at [7]), and the vexation of a party being required to deal with claims that should have been resolved earlier: UBS at [45], [58], [72], [75].
The doctrine of abuse of process has been described as broader and more flexible than the principles governing estoppels. It “is available to relieve against injustice to a party or impairment to the system of administration of justice and so to provide the basis for staying a claim that may not be barred by cause of action, issue or Anshun estoppel”: UBS at [121] per Nettle and Edelman JJ in dissent, referring to the majority judgment in Tomlinson at [25].
The procedural law administered by the court whose processes are engaged must also be considered: UBS at [34], [38], [45]. Relevantly, the Court on this application must consider s 37M of the Federal Court of Australia Act1976 (Cth), which provides that the overarching purpose of civil litigation is to facilitate the resolution of disputes as quickly, inexpensively and efficiently as possible. This includes objectives such as the efficient use of judicial and administrative resources, the efficient disposal of the Court’s caseload, and the disposal of proceedings in a timely manner.
The onus of satisfying a court that a proceeding (or part of a proceeding) is an abuse of process has been described as a heavy one: Williams v Spautz [1992] HCA 34; 174 CLR 509 at 529.
Liberty’s interlocutory application
Liberty seeks a permanent stay or strike out of paragraph 38(d) of the statement of claim (being the paragraph in which the applicants allege that Liberty breached its duty of utmost good faith) on the basis of Anshun estoppel and/or abuse of process. Liberty has no issue with the applicants making claims on the basis of the insuring clause in the policy (including a claim for damages for breach of that clause); Liberty accepts that, in the First Proceeding, it was foreshadowed that there may be disputes as to what amounts fell within the insuring clause or the exclusions, and that these might need to be dealt with in a subsequent proceeding. However, Liberty contends that the claim based on breach of the duty of utmost good faith in paragraph 38(d) of the statement of claim is of an altogether different character and falls foul of the principles of Anshun estoppel and/or abuse of process.
Liberty accepts that it has the burden of showing that the relevant claim in the current proceeding should be stayed or struck out on the basis of Anshun estoppel and/or abuse of process. It also accepts that this burden is not lightly discharged. Liberty relies on the following submissions (both for Anshun estoppel and abuse of process).
(a)There is a high, almost total, overlap between the facts relied on for the claim based on breach of the duty of utmost good faith and the facts of the First Proceeding. Indeed, this is demonstrated by the form of the Proposed Amended Statement of Claim, which pleads a series of findings said to have been made by the Full Court.
(b)There was no impediment to Icon putting the Court and Liberty on notice of this claim at the time of the First Proceeding. All of the elements of the utmost good faith claim existed at the time of the First Proceeding. The alleged breach is failing to indemnify and meet the claims handling costs. This had already occurred at the time of the First Proceeding. The applicants have not put on any evidence that they were not aware of this claim at the time of the First Proceeding or that there was any impediment to it being raised.
(c)Icon positively told the Court and Liberty that the purpose of the First Proceeding was so that Icon could pursue its claim for indemnity under the policy. That is the basis upon which Liberty agreed to conduct the First Proceeding and upon which the Court conducted the First Proceeding.
(d)By taking the approach that it did, Icon denied Liberty and the Court the opportunity to consider how the utmost good faith claim should be managed in the context of this litigation.
(e)Had Icon raised the claim based on breach of the duty of utmost good faith in the First Proceeding, there were options available to avoid duplication of costs and effort. For example, Icon could have sought declaratory relief in relation to the utmost good faith claim; Icon could have sought final relief in relation to the costs that had been incurred up to that point in time; or Icon could have just proceeded on the question of construction (not rectification). Submissions could have been made by Liberty that Icon should not be entitled to “have it both ways”.
(f)The concerns raised by Mr Kelly and Mr Ford in their affidavits relating to financial pressures and speed substantially fall away if one is only considering whether the claim based on breach of the duty of utmost good faith could be tried with the rectification case.
(g)If the applicants are permitted to pursue the claim based on breach of the duty of utmost good faith in this proceeding, it would have all the vices that the principles of Anshun estoppel and abuse of process are designed to avoid. It would add significantly to the time and cost of this proceeding. It would result in wasted judicial resources in dealing with the same issues again. It may lead to one witness (Mr Hingston) being recalled. It would lead to Liberty being “harassed” by an issue that should have been dealt with in the First Proceeding.
(h)Icon can still pursue these claims of loss by way of indemnity under the insuring clause or damages for breach of the insuring clause. Thus, unlike in many other cases in which Anshun estoppel is invoked, the applicants are not shut out altogether from pursuing these claims of loss.
Notwithstanding these submissions, I am not satisfied that it was unreasonable of Icon not to raise the claim based on breach of the duty of utmost good faith in the First Proceeding. My reasons are as follows.
At the time the First Proceeding was commenced (and continuing up until the time of trial), the sole basis upon which Liberty had denied indemnity was that the policy had expired before the Incident occurred. The only issue between the parties was whether the Liberty Policy in relation to the Opal Tower project expired:
(a)upon practical completion of the project on 10 August 2018 (as contended by Liberty); or
(b)at the end of the defects liability period on 10 August 2019 (as contended by Icon).
At no point before July 2021 (when the Full Court made its final orders) did Liberty indicate which costs and expenses it would or would not indemnify (if it were wrong in its position as to expiry of the policy).
In that context, it was understandable that Icon sought to pursue, in the First Proceeding, two threshold issues, namely: (a) the question whether, on its true construction and in the events that happened, condition 15 of the Liberty Policy was engaged; and (b) the question whether the policy should be rectified as claimed by Icon. It was also understandable that the Court and Liberty would be prepared to allow the First Proceeding to be conducted on that basis, namely, that it was only dealing with threshold issues.
There were good case management reasons for dealing only with the threshold issues. These issues could be dealt with relatively quickly, and there was the prospect that (depending on the outcome on those issues) they could resolve the whole controversy between the parties: if the threshold issues were decided in Liberty’s favour, that would be the end of the dispute. (However, if either threshold issue was decided in Icon’s favour, there might be further disputes between the parties, necessitating a further proceeding.)
It may be accepted that it would have been possible for Icon to have sought a declaration of indemnity (in relation to the policy and the project) in the First Proceeding. However, the disadvantage of that course (assuming all issues were tried together) was that the time needed to prepare the matter for trial, and for the conduct of the trial, would have been significantly longer than the course that was adopted (of dealing only with threshold issues). Thus there were good case management reasons for not adopting that course.
It may also be accepted that, in theory, Icon could have brought the claim based on breach of the duty of utmost good faith in the First Proceeding, and this claim could have been tried together with the Rectification Claim. However, the question of unreasonableness (and abuse of process) needs to be assessed in the context of the dealings between the parties at the time the First Proceeding was commenced, and during the lead-up to the trial of the First Proceeding. As described above, the context was one in which the sole issue between the parties was when the policy expired. In that context, in my opinion, it was understandable that Icon focussed its attention on the threshold questions and did not make a claim that Liberty had breached its duty of utmost good faith (in denying indemnity). There was no apparent reason to make such a claim at that time.
It was well understood by both parties that the First Proceeding was not dealing comprehensively with all issues that might arise between the parties relating to the Liberty Policy and the Opal Tower project. True it is that Icon expressed the nature of possible further disputes in terms of “whether any particular category of loss claimed by Icon falls within the insuring clause and whether any exclusion clauses apply” (see [31] above) and did not refer to a claim based on breach of the duty of utmost good faith. However, to my mind, the important point to take from Icon’s submission at the case management hearing is that Icon made clear that the First Proceeding was not dealing comprehensively with all issues.
I accept that, if the claim based on breach of the duty of utmost good faith is permitted to go forward in the present proceeding: there will be overlap with matters of fact dealt with in the First Proceeding; Mr Hingston may need to give evidence again; and there is a risk of inconsistent findings of fact. This risk arises most obviously in relation to the findings in the First Proceeding as to Liberty’s state of mind at the time that it entered into the Liberty Policy. There is an open question as to whether an issue estoppel arises in relation to those findings. I do not consider it appropriate to determine that question now; it is properly a matter for trial. I will proceed on the assumption (favourable to Liberty for present purposes) that no issue estoppel arises in relation to the earlier findings. On this assumption, I accept that there is a risk of inconsistent findings. However, these matters are a consequence of the fact that the First Proceeding (for good reason) dealt only with threshold issues.
In light of the above, I am not satisfied that it was unreasonable for Icon not to bring the claim based on breach of the duty of utmost good faith in the First Proceeding. Accordingly, I do not accept that the applicants are estopped on the basis of Anshun principles from bringing the claim.
Further, having regard to the matters discussed at [89]-[96] above, I am not satisfied that it is an abuse of process for the applicants to bring the claim based on breach of the duty of utmost good faith in the present proceeding.
It follows that Liberty’s interlocutory application is to be dismissed.
The applicants’ interlocutory application
As noted above, Liberty opposed the applicants’ application for leave to amend on the basis of the same arguments relating to Anshun estoppel and abuse of process. For the reasons given above, those arguments have not been made out.
However, as noted earlier, during the course of the hearing I raised with the applicants whether, in any event, there were problems with the proposed pleading.
In my opinion, there are substantive problems with the way in which the claim based on breach of the duty of utmost good faith is proposed to be pleaded in the Proposed Amended Statement of Claim.
First, in sub-paragraph (a) to (o) of paragraph 37A of the proposed pleading, the applicants set out a series of matters that are said to have been found by the Full Court. This provides the context for the applicants’ pleadings in paragraphs 37B and 37C (set out above). It is apparent that the applicants seek to rely on the findings of the Full Court as facts (that is, the applicants do not merely seek to establish that the Full Court made findings to this effect). In these circumstances, I consider it incumbent on the applicants to plead these matters as material facts, rather than merely pleading that the Full Court made these findings: see r 16.02(1)(d) of the Federal Court Rules, which states that a pleading must “state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial …”. The difficulty with the applicants’ approach is exposed by considering the defence to be filed by Liberty. If the pleading were to go forward in its proposed form, Liberty’s defence would set out Liberty’s position on whether the Full Court made findings to the effect alleged, rather than setting out Liberty’s position on the facts set out in sub-paragraphs (a) to (o). Contrastingly, if the matters set out in sub-paragraphs (a) to (o) are pleaded as material facts, Liberty’s defence will indicate whether or not Liberty accepts those facts. In this way, the pleadings will serve their purpose of identifying the factual matters in dispute between the parties.
Secondly, the pleading (in paragraph 37C) that Liberty is estopped from denying that it had the state of mind alleged in paragraph 37B(a) is unduly pre-emptive: cf Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486 at [24] per French CJ, Gummow, Hayne and Kiefel JJ (“it was neither necessary nor appropriate for ASIC to attempt to use its statement of claim to meet an answer that had not yet been made”). The appropriate approach in the circumstances of this case is for the applicants to plead the material facts upon which they rely; Liberty can then respond to those facts in its defence; if some or all of the facts are denied, the applicants can plead an estoppel in their reply.
In light of these matters, I do not consider it appropriate to give the applicants leave to amend their pleading to the form of the Proposed Amended Statement of Claim.
Pleading issues with the statement of claim
Although I have not accepted Liberty’s application to permanently stay or strike out paragraph 38(d) of the statement of claim (set out at [59] above) on the basis of Anshun estoppel and/or abuse of process, as noted above, I raised with the applicants during the hearing whether there are pleading problems with that paragraph in any event. It is perhaps implicit in the application for leave to amend that the applicants perceived there to be issues with the way in which the claim based on breach of the duty of utmost good faith is pleaded. In my view, the present pleading of the claim suffers from the defect that the material facts upon which the claim is based are not set out. In these circumstances, of my own motion, I will strike out that paragraph of the statement of claim.
Conclusion
For the reasons set out above, I will dismiss both Liberty’s interlocutory application and the applicants’ interlocutory application. I will also strike out paragraph 38(d) of the statement of claim. In relation to costs, my preliminary view is that the appropriate order is that the costs of both applications should be reserved. I will make an order to that effect, but give the parties the opportunity to seek a different costs order.
During the course of the hearing of the present applications, I raised with the applicants whether the claim based on breach of the duty of utmost good faith adds anything to the applicants’ other claims in the proceeding. As discussed above, the heads of loss claimed by the applicants on the basis of breach of the duty of utmost good faith are the same as the heads of loss claimed on the basis of breach of the insuring clause. Senior counsel for the applicants described the claim for breach of the duty of utmost good faith, and the claims for breach of the insuring clause, as “alternatives” (T65). The question is whether it is plausible that, if the applicants fail on the basis of the insuring clause (in respect of one or more heads of loss), they might succeed on the basis of a breach of the duty of utmost good faith. In response to this question, senior counsel for the applicants submitted that this was possible. However, understandably, given the issue was only raised during the hearing, the submission was not developed. Given the obligations on the parties pursuant to ss 37M and 37N of the Federal Court of Australia Act, I consider it incumbent on the applicants to give careful consideration to this question before bringing any new application for leave to amend to include a claim based on breach of the duty of utmost good faith. Such a claim would add significantly to the complexity and costs of the proceeding. Unless it is possible to articulate a plausible basis upon which the applicants could succeed in this claim if they fail in their other claims, it would not be appropriate for the applicants to seek leave to amend to include such a claim.
I certify that the preceding one hundred and eight (108) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky. Associate:
Dated: 1 August 2024
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