Johnston v Endeavour Energy

[2015] NSWSC 1117

Supreme Court

New South Wales

Medium Neutral Citation:

Johnston v Endeavour Energy [2015] NSWSC 1117

Hearing dates:

26 March 2015, 27 March 2015, 1 May 2015

Date of orders:

19 August 2015

Decision date:

19 August 2015

Before:

Garling J

Decision:

Proceedings stood over to 21 August 2015 at 9.30am for final orders

Catchwords:

PRACTICE AND PROCEDURE – representative proceedings – validity of opt out notices – where Insurers opted insureds out from existing proceedings – whether solicitor had authority to file opt out notices on behalf of insureds – whether insurer can commence proceedings in name of insured without authority – PRACTICE AND PROCEDURE – representative proceedings – standing – definition of group member in Insurers proceedings excludes an individual from being a member in both proceedings – where plaintiff in initial proceedings not opted out by Insurers – whether standing to bring motion and obtain relief sought – whether interference in Insurers proceedings by ‘stranger’ not part of proceedings – plaintiff represents interests of whole group – s 158(3) Civil Procedure Act – that plaintiff not personally opted out does not reduce his standing to contest validity of the opt out notices – CONTRACT – construction – insurance contracts – assignment of rights – whether assignment of insured’s right to insurer – need for explicit contractual basis for insurer to have authority to discontinue an insureds participation in existing proceedings – EQUITY – subrogation – rights of insurers – whether right to recover uninsured losses – STATUTORY INTERPRETATION – scope and application of s 183 Civil Procedure Act 2005 – general power of court to make any order appropriate or necessary to do justice – whether power broad enough to make orders sought – CONSTITUTIONAL LAW – whether Court engaged in an exercise of judicial power arising under Ch III of the constitution – meaning of ‘matter’ – whether matter of legitimate and real controversy – issues raise a matter such that the Court can legitimately exercise Federal jurisdiction – Court not precluded from determining relief sought

Legislation Cited:

Civil Liability Act 2002
Civil Procedure Act 2005
Court Suppression and Non-Publication Orders Act 2010
Evidence Act 1995
Federal Court of Australia Act 1976 (Cth)
Insurance Contracts Act 1984 (Cth)
Limitation Act 1969
Uniform Civil Procedure Rules

Cases Cited:

AFG Insurances Ltd v City of Brighton (1972) 126 CLR 655
Arthur Barnett Ltd v National Insurance Co of New Zealand Ltd [1965] NZLR 874
Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243
Buckee v The Commonwealth of Australia [2014] FCA 242
Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398
Castellain v Preston (1883) 11 QBD 380
Commercial Union Assurance Co Ltd v Lister (1874) Vol IX LR Chancery Appeals 483
Courtney v Medtel Pty Ltd [2002] FCA 957; (2002) 122 FCR 168
Earglow Pty Ltd v Newcrest Mining Ltd [2015] FCA 328
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7
Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570
Globe & Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659
In re Judiciary and Navigation Acts [1921] HCA 20; (1921) 29 CLR 257
Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UK HL 28; (1998) 1 WLR 896
Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 56
Johnstone and Williams v FAI Home Security Pty Ltd (No.3) [2000] FCA 1438
Johnstone v HIH Ltd [2004] FCA 190
Kirby v Centro Properties Ltd [2008] FCA 1505
Lopez v Star World Enterprises Pty Ltd (In Liq) (VG 133 of 1997, unreported, Finkelstein J 31 October 1997)
Lord Napier and Ettrick v Hunter [1993] AC 713
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
McMullin v ICI Australia Operations Pty Ltd (1998) 84 FCR 1
Mobil Oil Australia Pty Ltd v State of Victoria [2002] HCA 27; (2002) 211 CLR 1
Morley v Moore [1936] 2 KB 359
Re Dalma (No.1) Pty Ltd (In liq) [2013] NSWSC 1335
Re McBain; Ex Parte Australian Catholic Bishops Conference [2002] HCA 16; (2002) 209 CLR 372
Stewart v Atco Controls Pty Ltd [2014] HCA 15
Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [2000] HCA 11; (2000) 200 CLR 591
Williams v FAI Home Security Pty Ltd (No.3) [2000] FCA 1438

Texts Cited:

MacGillivray on Insurance Law 5th Ed
Meagher Gummow and Lehane’s Equity Doctrines and Remedies 5th Ed

Category:

Procedural and other rulings

Parties:

Sean Johnston (P)
Endeavour Energy (D1)
Osborne Aviation Services Pty Ltd (D2)

Representation:

Counsel:

L Armstrong QC / H Tiplady (P)
I Pike SC / M Izzo (D1)
No appearance (D2)

M B J Lee SC/ S Habib SC (1 May 2015) / G Donnellan / A Edwards (Respondent Insurers and More)

Solicitors:
Maddens Lawyers (Johnston)
William Roberts Lawyers (Respondent Insurers and More)
Lander & Rogers (D1)
Carroll & O’Dea (D2)

File Number(s):

2014/148790

Publication restriction:

Not applicable

___________________________________________________________________

Judgment

1. On 17 October 2013, significant areas of the Blue Mountains to the west of Sydney, were burnt out by a fire which is alleged to have started in Links View Road, Springwood.

2. Fortunately, no lives were lost. However, the bushfire which spread through the Springwood area also impacted on adjoining areas such as the township of Winmalee. Considerable property was lost. Houses were destroyed. The contents of houses, motor vehicles and other personal property were destroyed. Many of the residents suffered personal injury, particularly by way of post-traumatic stress disorder.

3. Some, but not all of the houses which were destroyed were covered by insurance. Those that were covered by insurance were not always insured for the full value of the replacement cost. Some, but not all, of the personal property, being the contents of the houses that were destroyed, or motor vehicles or other personal property, were insured. Often, not all of the value of the contents or personal property was insured.

A Representative Action is Commenced

4. On 16 May 2014, Mr Sean Johnston as plaintiff commenced representative proceedings pursuant to Part 10 of the Civil Procedure Act 2005 (“the Civil Procedure Act”) in this Court against Endeavour Energy. Mr Johnston described the group which he was representing in the following terms:

“4.   The group members (“group members”) to whom this proceeding relates are:

4.1   all those persons who suffered personal injury (whether physical injury, or psychiatric injury as defined below) as a result of:

4.1.1   the Springwood/Winmalee bushfire (including, without limitation, an injury suffered as a result of attempts to escape the Springwood/Winmalee bushfire or other emergency action taken by any person in response to the Springwood/Winmalee bushfire); and/or

4.1.2   the death of or injury to another person as a result of the Springwood/Winmalee bushfire where “psychiatric injury” in this group definition means nervous shock or another psychiatric or psychological injury, disturbance, disorder or condition which has been diagnosed as such in a diagnosis given to the person by a medical practitioner prior to 31 December 2014; and

4.2   all those persons who suffered loss of or damage to property as a result of the Springwood/Winmalee bushfire (including, without limitation, loss or damage resulting from emergency action taken by any person in response to the Springwood/Winmalee bushfire); and

4.3   all those persons who at the time of the Springwood/Winmalee bushfire resided in, or had real or personal property in, the Springwood/Winmalee bushfire area and who suffered economic loss, which loss was not consequent upon injury to that person or loss of or damage to their property; and

4.4   the legal personal representatives of the estates of any deceased person in (b) and/or (c) who were group members as at the date of commencement of this proceeding”

It will be convenient to refer to these proceedings as the “Johnston proceedings”.

5. Endeavour Energy defends the Johnston proceedings, denying that it was negligent and denying that it is legally liable for the loss and damage which occurred. In an Amended Defence filed by Endeavour Energy, it relied upon the provisions of Part 4 of the Civil Liability Act 2002 (“the Civil Liability Act”), nominating Osborne Aviation Services Pty Ltd, as a concurrent tortfeasor. In March 2015, Osborne Aviation Services Pty Ltd (“Osborne Aviation”) was joined to the proceedings as a second defendant. Osborne Aviation also denies that it is legally liable to pay damages arising out of the October 2013 bushfire. Cross‑claims between the defendants have been filed.

6. Prior to the opt out process being put into place by consent order, Maddens Lawyers (“Maddens”) who are acting for the plaintiff, Mr Johnston, had received a letter from William Roberts Lawyers (“William Roberts”) informing them that they, William Roberts, acted for Insurance Australia Group Ltd. The letter requested a copy of the Statement of Claim in the Johnston proceedings.

7. In August 2014, in the course of the usual case management procedure, orders were made with respect to the opt out process in accordance with s 182 of the Civil Procedure Act. The Court required the plaintiff to advertise in identified newspapers, and to place a public notice on the website of Maddens. The Court also ordered that a copy of the relevant documents be sent by pre-paid post to people who had registered their interest in the proceedings with Maddens. As well, the opt out orders, notices and documents were posted on the Court’s website.

8. The Court’s orders specified 4pm on 10 October 2014, as the time by which any person who was a group member was required to opt out of the Johnston proceedings. This needed to be done by filing an appropriately completed opt out notice with the Court.

9. Prior to the last date and time for opting out, seven opt out notices were filed, by individuals on their own behalf.

10. On the afternoon of 10 October 2014, Mr Bill Petrovski, a partner of William Roberts, signed six opt out notices in his capacity as a solicitor (“the insurer opt out notices”) which were filed that afternoon which purported to opt out all of the individuals named in the notices, either directly, or as listed in a schedule. Collectively, the insurer opt out notices identify a total of 565 individuals and entities. That number includes individual members of a family who may have suffered the same loss. For example, a husband and wife are listed as individuals on that list, although they may jointly have lost their home.

A Second Representative Action is Commenced

11. Two weeks later, on 24 October 2014, Peter and Yvonne St Barbe More also commenced representative proceedings pursuant to Part 10 of the Civil Procedure Act against Endeavour Energy, claiming damages arising out of the October 2013 bushfire. Mr William Petrovski of William Roberts, is the solicitor acting for Mr and Mrs St Barbe More.

12. It will be convenient to refer to these proceedings as “the Insurers proceedings”.

13. The Insurers proceedings initially defined the group members being represented by Mr and Mrs St Barbe More in the following way:

“1.   The plaintiffs:

a.   had or had acquired an interest in or owned personal and/or real property (Property) in New South Wales;

b.   suffered loss and damage by reason of the breaches of duty and nuisance of the defendant (Endeavour) pleaded in this Statement of Claim; and

c. pursuant to section 157 of the Civil Procedure Act 2005 (NSW) represent persons (Group Members) being natural and artificial persons who are listed in Schedule 1 to this Statement of Claim.”

14. In Schedule 1, referred to in that paragraph, the 565 individuals identified in the insurer opt out notices filed in the Johnston proceedings, were specifically named, as group members of the Insurers proceedings.

15. Subsequently, the definition of group members was amended to specifically exclude existing group members in the Johnston proceedings. That amendment meant that the group members in the Insurers proceedings were defined in these terms:

“1.   The plaintiffs:

a.   had or had acquired an interest in or owned personal and/or real property in New South Wales;

b.   suffered loss and damage by reason of the breaches of duty and nuisance of the defendant (Endeavour) pleaded in this Statement of Claim; and

c. pursuant to section 157 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) represent persons (Group Members) being natural and artificial persons who:

i.   are listed in Schedule 1 to this Statement of Claim; and

ii.   are not group members of the proceedings in Johnston Endeavour Energy (2014/148790) (as defined in those proceedings).”

16. Significantly, the next paragraph of the Further Amended Statement of Claim set out the nature of the claims made on behalf of the group members, so required by s 160 of the Civil Procedure Act. The nature of the claims related only to loss and damage “to property”, or “to property and person”, caused by the alleged breaches of duty or negligence. No claims were included solely for personal injury or mental harm. Whether the nature of the claims were intended to include any claim for personal injury or mental harm is not entirely clear. The phrase “loss and damage … to property and person” is not apt to include a claim for personal injury or mental harm. This issue need not be resolved here.

17. Later in the course of the Insurers proceedings, Mr and Mrs St Barbe More, also joined Osborne Aviation to the insurers action, as a second defendant.

18. In the Insurers proceedings, Endeavour Energy and Osborne Aviation both deny that they are legally liable for any loss and damage flowing from the October 2013 bushfire.

19. Both the Johnston and the Insurers proceedings have been fixed for final hearing by the Court in February 2016. Both have in place an interlocutory timetable of the necessary steps to achieve a hearing at that time. The Court has indicated that both matters will be heard at the same time, with evidence in one proceeding being evidence in the other.

20. The nature of the cases being brought is largely, but not entirely, identical on liability issues. There are many common allegations of fact and law.

Who are the Insurers?

21. According to the evidence put before the Court, the insurer of each of the 565 individuals who were opted out of the Johnston proceedings by the insurer opt out notices, and who are included as members of the defined group in the Insurers proceedings, include a number of entities which are part of Insurance Group Australia Ltd. They include:

1. NRMA Insurance;

2. CGU Insurance Ltd; and

3. Wesfarmers General Insurance.

22. Between these insurers, 24 policies are relevantly involved. The details of the policies and the number of insureds under the policies are addressed later.

23. One of the policies offered by CGU is entitled “Bendigo Bank Listed Events Home Insurance”. Wesfarmers offered policies in its own name, in the name of Lumley Insurance, and also Coles Insurance.

24. It will be convenient to refer to these entities collectively as “the Insurers” unless necessary to specify an individual company.

Some Relevant Facts about the Johnston Group Members

25. In the Johnston proceedings, by the end of 2014, Maddens had received registrations from a total of 348 people and entities identifying themselves as group members. The effect of this registration is that these individuals and entities, having identified themselves as group members, have indicated their interest in being included in the Johnston proceedings.

26. The way in which the registration system at Maddens works has the effect that, differently from the listing of the individuals in the insurer opt out notices, or in the Schedule to the Statement of Claim in the Insurers proceedings, one registration is to be recorded for multiple members of families who may have suffered losses including different losses.

27. Of the 348 registrants, 137 have signed a costs agreement with Maddens. The full and complete terms of the costs agreements are not before the Court, although a redacted version is in evidence. This version has had removed references to the hourly rates by which legal costs are to be charged.

28. The 137 who have signed costs agreements have thereby retained Maddens as their lawyers to act for them in the recovery of all their losses arising from the bushfire. That recovery was to be undertaken through a representative action, namely, the Johnston proceedings.

29. According to the evidence of Mr Pendergast, who is the solicitor on the record in the Johnston proceedings, and the principal solicitor of Maddens, of the 137 group members who have signed costs agreements with his firm, 90 of them are listed in the insurer opt out notices. Of the remaining 211 group members who have registered with Maddens, 117 individuals are listed in the insurer opt out notices.

30. The fact that a number of people have been opted out from the Johnston proceedings by the insurer opt out notices was, I infer, not the subject of direct instructions from the client to William Roberts. It is necessary to exclude the plaintiffs, Mr and Mrs St Barbe More, from this conclusion, and more generally from the following remarks with respect to evidence and authority.

31. Although there is no direct evidence relating to Mr and Mrs St Barbe More giving instructions to Williams Roberts to commence proceedings on their behalf, the fact that each of these plaintiffs completed the necessary affidavits in the Statement of Claim is, in the absence of any evidence to the contrary, more than sufficient to enable me to draw the conclusion that they gave specific instructions to commence the Insurers proceedings in their name as plaintiffs.

32. It seems that on or around 14 October 2014, NRMA Insurance sent letters to their insureds informing them that it had filed opt out notices in the Court. The other IAG insurers sent out letters which were largely to a similar effect. After these letters were sent, a number of group members contacted Maddens and explained their circumstances and their concern with what had occurred. This evidence was objected to on the basis that it was inadmissible hearsay. I regard it as admissible for the reasons which will be explained in due course.

33. The Court also received correspondence from a group member expressing concern as to what had occurred, saying, in general terms, that they had given no authority to be opted out of the Johnston proceedings, seeking to have the position reversed, and asking to be restored to the Johnston proceedings. That group member was informed that they should seek legal advice with respect to their concerns.

34. The objected to, but admissible, evidence provides four examples of specific individuals affected by their insurer opt out notice. Their names were not provided to the Court but, for reasons which are far from clear, they were referred to by a pseudonym initial. Apparently, their identities were known to the parties and no objection was taken on the basis that the names were not revealed.

35. This approach to the evidence about these individuals, adopted unilaterally by Maddens, and apparently concurred in by the other parties to the Motion, is to be deprecated. It pays no attention to the fact that this Court, if asked to consider making a suppression or non-publication order, must take into account that a primary objective of the administration of justice is “… to safeguard the public interest in open justice”: s 6 Court Suppression and Non‑Publication Orders Act 2010 (“the Court Suppression and Non-Publication Orders Act”).

36. In order to make a suppression or non-publication order of the names of such individuals on the material put before the Court on this Motion, the Court would have to be persuaded that it was necessary in the public interest to make such an order, and that public interest significantly outweighed the public interest in open justice: s 8 Court Suppression and Non-Publication Orders Act. The Court was not asked to, and did not engage in, such an exercise. The following references to individuals by pseudonym, merely reflects the evidence before the Court.

Evidence of Individuals

37. In an affidavit sworn by Mr Pendergast, he set out the specific facts and circumstances as they had been reported to him, or his firm, by individuals identified as “A”, “B”, “C” and “D”. The pseudonyms “C” and “D” seem to in fact be two sets of spouses, or partners, either in life or in property ownership. I would take from Mr Pendergast’s evidence that there are a number of individuals providing instructions to him or his firm, and who are the source of his stated information and belief.

38. Speaking generally, Mr Pendergast, or staff in his firm, received phone calls from these individuals, each of whom had registered with Maddens as claimants in the Johnston proceedings. As well as the evidence of Mr Pendergast, one of the employed solicitors at Maddens has annexed ten file notes, each of which refers to and notes (to the extent which the file note remains unredacted) the receipt of a phone call from a person seeking advice about their position in light of the insurer opt out notices.

39. Objection was taken to this evidence being admitted on the Motion on the basis that it was hearsay, as it undoubtedly was. However, on any interlocutory application, evidence which is given on information and belief is admissible providing the source of that material is identified: s 75 Evidence Act 1995 (“the Evidence Act”). Accordingly, there is no basis on which to reject this evidence, when considering any of the interlocutory relief which is being sought.

40. Further objection was taken when the Amended Notice of Motion was filed on 2 April 2015, in which one group of the orders sought included declarations of invalidity of the insurer opt out notices. It was submitted by the insurer that the declarations sought were in the nature of final relief and that the evidence objected to could not be admitted in proceedings which encompassed a form of final relief. The applicant, Mr Johnston, accepted that this was so, but submitted that the fact of the communications and their content was, insofar as declarations were sought, admissible not for the truth of the content of the communications but for the fact of when the calls were made, by whom and what was said.

41. In my view the material is admissible. The material is fully admissible as I have indicated above because the proceedings are interlocutory, and it is based on information and belief. If the Court comes to consider “final relief” by way of declarations, than it may need to set the evidence to one side other than on the basis submitted by the applicant, Mr Johnston, namely as establishing the fact of the communications, but not the truths of the content of them. Ultimately, not much may turn on this distinction.

42. In light of these conclusions, I will review the evidence about these individual cases. According to Mr Pendergast’s evidence, the circumstances applying to the individuals were as follows.

43. Individual A held an insurance policy with CGU for a camper trailer and its contents. He received a total payment of $12,500 for the trailer and contents which were destroyed in the bushfire. In addition, he owned a home which was completely destroyed, together with its contents. From an insurer, other than one of the Insurers for which William Roberts act, he received a payment of about $1M in respect of his home and contents loss. However, as is not uncommon in cases of this kind, he claims that there were further financial losses, either because items were uninsured or because his house and contents were underinsured. It is anticipated that these further losses would amount to approximately $500,000 over and above the $1M paid to him under his insurance policy.

44. As well, it appears that Individual A is likely to have a claim for personal injury. Individual A had signed a conditional costs agreement with Maddens on 6 September 2014. He did not opt out of the proceedings on his own behalf, although he received the relevant notice.

45. Individual B had a residential property which was completely destroyed by the fire, including all of its contents. He also had an investment property which suffered loss and damage. Both properties were insured, as was their contents, with the NRMA. However, he suffered additional losses over and above the sums insured.

46. This individual has sought advice directly from Mr Pendergast on a number of occasions. He instructed Mr Pendergast that, as a consequence of the initial correspondence received from the NRMA, he was required by a stipulated date (14 November 2014) to provide details of his losses which were not covered by insurance because if he did not do so by that date he would be “shut out” from pursuing those losses in the proceedings brought by the Insurers.

47. He had chosen not to opt out of the Johnston proceedings and wished to remain a group member of those proceedings.

48. Individual C had signed a costs agreement with Maddens with respect to their claim for the total loss and damage of their property and contents which was significantly undervalued and underinsured. Individual C was insured with NRMA for home building and contents. Individual C had two children living at home at the time of the fire. Mr Pendergast anticipates that the family of Individual C, including the two children, are each likely to have a claim for personal injury arising as a result of the fire. One child is disabled.

49. Individual C has sought advice directly from Mr Pendergast. A question arises as to the desirability of the children of Individual C being group members in the Johnston proceedings, and their parents being group members in the Insurers proceedings.

50. Individual D actually describes two partners who suffered a total loss to their residential property as a result of the fire, and held insurance policies for home buildings, contents and a motor vehicle through NRMA. They were significantly under-insured.

51. The payout between NRMA and Individual D has not yet been finalised. The home was insured for about $420,000 – a figure reached after using NRMA’s online home building value calculator. The cost to rebuild the home of Individual D is anticipated to be in the range of $750,000. The contents were also significantly under-insured.

52. Individual D has consulted with NSW Legal Aid, as apparently have a number of other registrants in the Johnston proceedings, for assistance in lodging a dispute with Insurance Council of Australia about the impact that their use of the NRMA’s on-line home building value calculator has had on the sum insured. Individual D contends that the under-insurance of their home building property was a direct consequence of the inadequacies in the NRMA’s calculator. It is Individual D’s contention that the home building value calculator did not take into account additional “flame zone” rebuilding requirements which were applicable to their property and, no doubt, other properties in the Blue Mountains.

53. At the date Mr Pendergast made his affidavit in December 2014, Individual D had received a payout pursuant to their contents policy, but had not received any payment in respect of their home buildings policy. There is no evidence of any change in that position at the time judgment was reserved.

Notice of Motion

54. Against this background, on 15 January 2015, the solicitors for Mr Johnston, filed a Notice of Motion in the Johnston proceedings. The Notice of Motion named as respondents each of the insurers to which I have referred above and Mr and Mrs St Barbe More, who are the named plaintiffs in the Insurers proceedings, because they are persons affected by the orders sought. Endeavour Energy was also named as a respondent to the Notice of Motion. It took little part in the hearing on the Motion, concentrating its submissions on one issue only.

55. At the time the Notice of Motion was filed, Osborne Aviation was not a defendant in the proceedings. After being joined to the proceedings, it was notified of the Notice of Motion and the issues raised. It was given an opportunity to appear and make submissions either orally or in writing. It elected not to participate in the proceedings on the Notice of Motion.

56. The Notice of Motion sought orders pursuant to s 183 of the Civil Procedure Act for a process that would result in each of the Insurers compiling and distributing to each of the named individuals in the insurers opt out notice, a further notice about a number of identified matters.

57. The purpose of the proposed procedure was to enable any one or more of the group members named in Schedule 1 to the Insurers proceedings, the opportunity to register any claims that they wished to make in the Johnston proceedings with Maddens, and to the extent of those claims, be permitted to become group members in the Johnston proceedings.

58. The orders sought also provided for the setting aside of the insurer opt out notices to the extent necessary in respect of those wishing to elect to have any of their claims dealt with in the Johnston proceedings. The orders also sought court approval of the contents of the various Notices.

59. On 2 April 2015, an Amended Notice of Motion was filed pursuant to leave being granted. The final version of the Amended Notice of Motion was filed on 5 May 2015.

60. The principal relief sought in that Amended Notice of Motion is as follows:

“NRMA and Coles

1. Pursuant to section 183 of the Civil Procedure Act 2005 (the CP Act), alternatively section 75 of the Supreme Court Act 1970 (SC Act), alternatively the inherent jurisdiction of the Court – a declaration that:

(a)   Insurance Australia Limited (trading as NRMA) was not, by the terms of the policies of indemnity insurance identified in rows A to G inclusive of Annexure A (NRMA Policies); further or alternatively

(b)   Wesfarmers General Insurance Limited (trading as Coles Insurance) was not, by the terms of the policy of indemnity insurance identified in row H of Annexure A (Coles Policy);

authorised or entitled to opt out the insured person from proceeding 2014/148790 (Johnston v Endeavour Energy) (Johnston Action)

2. Further and in the alternative to paragraph 1 above, pursuant to section 183 of the CP Act an order that the notices filed pursuant to section 162 of the CP Act on or about 10 October 2014 in respect of persons insured by:

(a)   the NRMA Policies; and

(b)   the Coles Policy;

be set aside.

CGU, WFI and Lumley

3. Pursuant to section 183 of the CP Act, alternatively section 75 of the SC Act, alternatively the inherent jurisdiction of the Court –

(a)   a declaration that:

(i)   CGU Insurance Limited was not, by the terms of the policies of indemnity insurance identified in rows I to O inclusive of Annexure A (CGU Policies);

(ii)   Wesfarmers General Insurance Limited was not, by the terms of the policy of indemnity insurance identified in row P of Annexures A (WFI Policy); further or alternatively

(iii)   Wesfarmers General Insurance Limited (trading as Lumley Insurance) was not, by the terms of the policy of indemnity insurance identified in row Q of Annexure A (Lumley policy);

authorised or entitled to opt out the insured person from the Johnston Action, other than in respect of subrogated claims for recovery of the loss insured by the said policy;

(b)   a declaration that the policies identified in paragraph 3(a):

(i)   do not oblige the insured person to claim, or to authorise the insurer to claim, in proceeding 2014/313883 (More v Endeavour Energy) (More Action) any uninsured or underinsured (together ‘uninsured’) losses suffered by the insured person; and

(ii)   do not prevent the insured person from exercising any right to claim uninsured losses as a group member in the Johnston action.

4. Further and in the alternative to paragraph 3 above, pursuant to section 183 of the CP Act an order that the notices filed pursuant to section 162 of the CP Act on or about 10 October 2014 in respect of persons insured by:

(a)   the CGU policies;

(b)   the WFI policy; for or alternatively

(c)   the Lumley policy;

be set aside to the extent that they opted out the insured persons in respect of uninsured losses.

Election

5. Further and in the alternative to each of paragraphs 1 to 4 inclusive above, pursuant to section 183 of the CP Act, the solicitors of the plaintiff in the More Action (WRL) within seven (7) days after the determination of this Motion deliver to the solicitors for the plaintiff in the Johnston Action (Maddens) the proposed terms for notices in respect of the matters detailed in paragraph 6 hereof (Insurer Disclosure Notices) to be sent by or on behalf of each of the insurers represented by WRL (WRL Insurers) to their respective insureds (Affected Claimants) identified in notices filed pursuant to section 162 of the CP Act on or about 10 October 2014 (Section 162 notices).

6.   The Insurer Disclosure Notices address, for each Affected Claimant to whom any Notice is sent, each of the following matters:

(a)   the effect of paragraphs 1 to 4 above (as applicable) in respect of the Affected Claimant;

(b)   whether the WRL Insurer is willing to include in the More action the Affected Claimant’s claims which, by reason of paragraphs 1 to 4 above (as applicable), were not validly opted out of the Johnston action;

(c)   if the WRL Insurer is willing to include in the More action the claims referred to in paragraph 6(b) – a statement of the order of priority which the WRL Insurer intends to apply in distributing any sums recovered from:

(i)   a compromise of; or

(ii)   a judgment for damages in;

the More Action;

(d)   a statement of the order of priority which the Affected Claimants would be entitled to apply in distributing any sums recovered in the event of:

(i)   a compromise of; or

(ii)   a judgment for damages in;

the Johnston Action;

(e)   the costs agreements applying to the legal work done in the More action and the Johnston action, and the means by which the Affected Claimant may obtain further information about the costs agreements.

7.   Within seven (7) days after delivery of the proposed Insurer Disclosure Notices pursuant to Orders 5 and 6, WRL and Maddens (and the solicitors for Endeavour Energy and Osborne Aviation Services Pty Ltd, if they wish) confer (in person or by teleconference) in relation to the terms of the Insurer Disclosure Notices.

8.   Within three (3) days after the conference pursuant to Order 7, the plaintiff in the Johnston Action (Johnston) file and serve upon the Defendants and each respondent to this Motion proposed minutes of order:

(a)   for the giving of Insurer Disclosure Notices by WRL Insurers to the Affected Claimants, at WRL Insurers’ costs;

(b)   setting a date by which Affected Claimants must register with Maddens any claims that the Affected Claimants wish to have represented in the Johnston Action instead of the More Action;

(c) setting aside the Section 162 Notices to the extent necessary to give effect to any registrations made pursuant to “(b)” hereof; and

(d)   for Court approval, pursuant to section 175(5) of the Act, of notices to Affected Claimants informing them about the matters set out in subparagraph (a) to (c) inclusive hereof.”

61. In order to consider the issues raised by the Motion, the nature of the Johnston proceedings and the relevant provisions of Part 10 of the Civil Procedure Act need consideration.

Nature of Representative Proceedings

62. Part 10 of the Civil Procedure Act provides a range of powers with respect to representative proceedings.

63. It is important to note that a plaintiff in representative proceedings occupies a position which, in many respects, differs from that of a plaintiff in an individual claim.

64. The first feature of the Part 10 procedure is that a plaintiff can nominate themselves, by commencing proceedings under Part 10, as a representative of people who have claims which arise out of or in respect of the same, similar or related circumstances, and which otherwise comply with the provisions of s 157. The plaintiff can nominate themselves without the knowledge of, or the consent of, individuals to their inclusion in the proceedings. The issue of consent to participation in the proceedings is dealt with by the opt out procedure set out in s 162 of the Civil Procedure Act and the following sections.

65. At the time of the commencement of the proceedings, there needs to be at least seven people who have claims against the same person, but there are no other provisions relating to the size of the group. In many cases the likely, and the maximum, size of the defined group is unknown, although estimates which may or may not be well informed, are often made.

66. The second feature is that a plaintiff in representative proceedings retains standing to commence the proceedings against more than one defendant, even though the plaintiff does not have a claim against all of the defendants: s 158(2) Civil Procedure Act.

67. The third feature is that a plaintiff, having commenced representative proceedings, retains standing to continue proceedings, including bringing an appeal from a judgment in proceedings, even though the plaintiff personally has ceased to have any claim against any defendant: s 158(3) Civil Procedure Act.

68. Put differently, a plaintiff in a representative proceeding retains standing to participate, and to continue to conduct proceedings, in which he has no personal interest or available claim against any defendant. The rationale for this is that the named plaintiff is a person authorised, and permitted, by statute to represent the interests of all individuals who fall within the group membership description.

69. Even though the plaintiff may have standing overall to conduct the proceedings, where a question requires determination that relates only to the claims of a particular member, that group member may be entitled to appear with respect to that question: s 169 Civil Procedure Act. Whether the Court permits that to occur is a matter for the Court’s discretion in the circumstances. It is not mandatory.

70. Even if such a person is permitted to appear, the plaintiff remains a party to the proceedings although not personally directly affected by the determination of that individual’s claim.

71. A court may give directions, including establishing a sub-group, and may appoint a person to be the representative of that sub-group where it is appropriate to deal with questions common to that sub-group: s 168 Civil Procedure Act. The plaintiff remains a party with respect to the proceedings in which the sub-group claims are being determined.

72. A particularly important feature is that the Court retains control over the proceedings generally and, in particular, over the plaintiff who is the representative party. Where it appears to the Court on an application made by a group member, that a representative party is not able adequately to represent the interests of group members, the Court may substitute another group member as a representative party: s 171 Civil Procedure Act.

73. Ultimately, the Court retains control over representative proceedings because approval of the Court is required for settlement or discontinuance: s 173 Civil Procedure Act. Even if an individual wishes to settle their claim, that settlement must be approved by the Court: s 174 Civil Procedure Act.

74. Division 3 of Part 10 of the Civil Procedure Act deals with the giving of Notices. Division 4 of Part 10 deals with powers of the Court with respect to the determination of a matter in the representative proceedings. The Court is given extensive powers to grant relief in a wide variety of ways. Division 5 of Part 10 deals with appeals.

75. Division 6 of Part 10 of the Civil Procedure Act contains a series of provisions described with the ubiquitous term “Miscellaneous”. Those provisions nevertheless contain important substantive matters. Two of the sections deal with costs. Section 182 deals with the suspension of limitation periods, and overrides the provisions in the Limitation Act 1969 (“the Limitation Act”).

76. The final feature worth noting and examining, is the Court’s general power to make any order thought appropriate or necessary to do justice.

62. Section 183 of the Civil Procedure Act, which is central to these proceedings, appears in that Division. It is in the following terms:

“183.   General power of court to make orders

In any proceedings (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order that the Court thinks appropriate or necessary to ensure that justice is done in the proceedings.”

78. Whilst not all of the provisions in Part 10 precisely mirror the provisions in the Federal Court of Australia Act 1976 (“the Federal Court of Australia Act), many do. Section 183 is the precise equivalent of s 33ZF of the Federal Court of Australia Act.

79. As will be seen, there are a number of authorities referrable to s 33ZF of the Federal Court of Australia Act which express principles and views with respect to this general power provision. There is no decision directly on the provisions of s 183 of the Civil Procedure Act.

80. It is also important to note that s 183 empowers the Court to make an order “of its own motion”. Whilst it is unnecessary in this judgment to examine whether, or to what extent, the rules of procedural fairness apply to the exercise of such a power, it is important nevertheless to note that it is not necessary for a party to proceedings, or a group member, to seek an order under this provision.

81. The general context and purpose of representative proceedings is readily identified. In Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398, Brennan J noted a particular feature of representative proceedings at 408, where he said:

“It is precisely because of the flexible utility of the representative action that judicial control of its conduct is important, to ensure not only that the litigation as between the plaintiff and the defendant is efficiently disposed of, but also that the interests of those who are absent, but represented, are not prejudiced by the conduct of litigation on their behalf.”

82. In Mobil Oil Australia Pty Ltd v State of Victoria [2002] HCA 27; (2002) 211 CLR 1 at [12], Gleeson CJ noted that the primary object of legislation in establishing representative proceedings was clear. His Honour said that the object was:

“To avoid multiplicity of actions, and to provide a means by which, where there are many people who have claims against a defendant, those claims may be dealt with consistently with the requirements of fairness and individual justice together. The discretionary powers conferred upon the Court in dealing with a group proceeding are consistent with that objective. To point to the theoretical possibility that in a particular case, those powers might not be exercised wisely, or might operate unfairly, is not to deny the existence of the legislative power to establish such a regime.”

83. In this context, the provisions of s 183 are of importance, and ought be given a generous interpretation. The section is the legislative wellspring of the Court’s discretionary power to make orders where thought appropriate or necessary in, and thereby control, representative proceedings so as to ensure that justice is done, and to also ensure that large numbers of claims are dealt with consistently and fairly.

84. This conclusion about the extent of the power in s 183 of the Civil Procedure Act accords with authorities in the Federal sphere, about s 33ZF of the Federal Court of Australia Act.

85. In McMullin v ICI Australia Operations Pty Ltd (1998) 84 FCR 1 at 4, Wilcox J said of s 33ZF of the Federal Court of Australia Act:

“[It] was intended to confer on the Court the widest possible power to do whatever is appropriate or necessary in the interests of justice being achieved in a representative proceeding.”

86. Sackville J observed in Courtney v Medtel Pty Ltd [2002] FCA 957; (2002) 122 FCR 168 at [48], that s 33ZF was couched in broad terms, and that there were good reasons for it to be given a generous interpretation. One feature which his Honour identified as important to that approach, was that the Court was given power to act of its own motion. As well, Sackville J at [51], noted the remarks of Brennan J in Carnie, referred to above in [81], about the importance of judicial control of the conduct of representative proceedings, and concluded that s 33ZF “… is directed to just such an issue”.

87. The use of s 33ZF of the Federal Court of Australia Act has also been considered in a different variety of circumstances. Tamberlin J, in Johnstone v HIH Ltd [2004] FCA 190, said of s 33ZF, at [104], that:

“This power is not limited to the actual determination of the matter in question, but extends to encompass all procedures necessary to bring the matter to a fair hearing on a just basis.”

88. In a number of cases including Johnstone and Williams v FAI Home Security Pty Ltd (No.3) [2000] FCA 1438, the provision was used as the basis for an order for the correction of misleading communications to group members or potential group members, both in respect of the nature of the claims being brought, and in respect of the opt out process.

89. Finkelstein J in Kirby v Centro Properties Ltd [2008] FCA 1505, considered that role of s 33ZF in dealing with “competing” class actions. At [26] he said:

“The section gives the Court generous power to ensure that class actions are run fairly and expeditiously. In Courtney v Medtel … Sackville J observed … that one of the reasons for the section was that the new procedures for representative proceedings would likely throw up novel problems that would require close supervision by the Court. I agree. The power the section confers, while not unlimited, is certainly wide enough to permit the Court to regulate how multiple class actions should be conducted.”

90. It seems that s 33ZF was used by his Honour to resolve opt out questions between competing class actions in Lopez v Star World Enterprises Pty Ltd (In Liq) (VG 133 of 1997, unreported, Finkelstein J 31 October 1997).

91. In exercising any power under Part 10 of the Civil Procedure Act, including under s 183, the Court is obliged to give effect to the overriding purpose of the Civil Procedure Act. That purpose is to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56 Civil Procedure Act.

92. I am conscious that even though s 183 of the Civil Procedure Act is properly to be regarded as a broad power, it is not an unlimited one. It is not to be used as a vehicle to rewrite the legislative precision of Part 10 of the Civil Procedure Act: Courtney at [52]. Nor is the statutory formulation “… to ensure that justice is done …:” to be ignored: Earglow Pty Ltd v Newcrest Mining Ltd [2015] FCA 328 at [33].

93. Having regard to the nature of the relief sought in the Amended Notice of Motion, in my view the power granted to the Court by s 183 of the Civil Procedure Act is broad enough to ground the making of the orders sought in the Amended Notice of Motion provided that the Court is otherwise persuaded that it is a proper matter in which to exercise its discretion.

Standing

94. The respondents, being the Insurers, and Mr and Mrs St Barbe More, submit that Mr Johnston has no standing to obtain any of the relief sought. Endeavour Energy did not join in with that submission.

95. The respondents’ submission comprises the following elements:

96. First, by reason of the definition of the represented groups in each of the two representative proceedings, the groups are discrete. That is, by reason of the definition of the group in the Insurers proceedings, one individual cannot be a group member in both proceedings. One can only be a group member in either the Johnston proceedings or the Insurers proceedings. The orders in the Amended Notice of Motion in the Johnston proceedings are targeted at “affected claimants”, being individuals who have been opted out of the Johnston proceedings and who, by group definition, are now members only of the Insurers proceedings. Accordingly, so it is submitted, the Amended Notice of Motion brought by Mr Johnston ought be characterised, in effect, as a process filed in one proceeding (the Johnston proceeding) seeking relief in another (the Insurers proceedings) a discrete proceeding to which Mr Johnston is a stranger, “… purportedly on behalf of other persons (“affected claimants”) whom he does not represent, and driven by lawyers who do not have an existing retainer with the persons on whose behalf they purport to seek relief”. The result of this, so it is submitted, is that there is no justiciable controversy properly before the Court about the present status of any individual as group members in the Johnston proceedings.

97. Secondly, Mr Johnston, who has not opted out of his own proceedings is, as is the group which he represented, and now represents, not an interested party, in the sense of being a person affected by the insurer opt out notices. The only appropriate person to bring a motion such as the one brought by Mr Johnston, would be a person who was actually affected by the opt out procedure. That would mean that a person who was initially a group member in the Johnston proceedings could argue that the opt out procedure, so far as they were concerned, was invalid and therefore they remained a group member in the Johnston proceedings and ought not be a group member in the Insurers proceedings. The plaintiff, it is submitted, is not such a person.

98. Thirdly, the relief sought by Mr Johnston requires a determination as to the authority of William Roberts to sign and file the opt out notices on behalf of the 565 individuals named. That authority derives from the relationship between the Insurers and their insured, which is dependent either in whole or in part on the principles of subrogation, or else the contract of insurance which each insured entered into with their insurer, or both. Whilst the respondents accept that notionally there may be a “matter in the constitutional sense” between one of the insureds and their insurer, in respect of whether the insurer had authority, or was otherwise entitled, to instruct solicitors to opt out of the Johnston proceedings, that matter is not justiciable as between Mr Johnston and the insurer respondents, in this Amended Notice of Motion, because Mr Johnston is not a party to the relevant contract of insurance.

99. As it developed, this submission first identified the fact that any such controversy about the insurance policy was, with respect to the respective rights of the insured and insurer under a contract of insurance, which was regulated by Federal legislation: the Insurance Contracts Act 1984 (Cth) (“the Insurance Contracts Act”).

100. It was submitted that, as a consequence, because there would be an adjudication of rights and liabilities under a contract which owes its existence to a Federal law, this Court in determining that issue was engaged in an exercise of judicial power arising under Chapter III of the Constitution.

101. It was submitted that viewed in that way, there was no justiciable controversy because the parties to the contract were not active parties in the controversy before the Court.

102. This submission concluded in this way:

“This is a further point to the conclusion that if there is a controversy to be quelled as to opt out, it should be done in an orthodox way, calling for the exercise of judicial power in a properly joined controversy between the actors to the controversy. Most obviously, this could be done by declaratory or other relief being sought by [an affected] group member as to the validity of opt out.”

103. I am unpersuaded by the submissions that Mr Johnston has no standing. To the contrary, I am satisfied that Mr Johnston has the requisite standing to bring this Amended Notice of Motion, and thus obtain any of the relief sought in its amended form.

104. I do not accept the submission that, properly characterised, what is being sought is for a stranger to the Insurers proceedings to interfere in those proceedings. It is clear that what is being attacked is the validity of the insurer opt out notices filed by William Roberts in the Johnston proceedings. The basal question which needs to be determined, and upon the determination of which the relief to be granted falls for consideration, is the validity of the insurer opt out notices. If those notices are invalid, then the integrity of the Court’s orders for the opt out process, and the integrity of the opt out process itself, which is in the Johnston proceedings, has been adversely affected. Mr Johnston, as the plaintiff, has standing and an interest to, by a notice of motion, explore that question. The fact that he may not be personally interested, in the sense of personally adversely affected, does not reduce his standing in a representative proceeding. As the plaintiff he represents the interests of all who fall within the group description. One cannot approach this question as the insurer respondents do, by first assuming the validity of the opt out process and then urging that Mr Johnston no longer represent those who have opted out.

105. What is at issue with respect to the insurer opt out notices is a part of the membership of the group represented by Mr Johnston, namely the part which consists of the 565 individuals. Mr Johnston is entitled to know whether some or all of those members are part of the group which he represents in the litigation. He is entitled to know whether, in the conduct of this litigation, he is obliged to have regard to their interests or not.

106. After all, the essence of proceeding under Part 10 of the Civil Procedure Act is that the plaintiff may not in fact have a claim against all parties that is viable, yet he can maintain his position as the plaintiff. Whilst he may not be a person named in the insurer opt out notices, that does not prevent him from having the standing to invite the Court to examine the validity of those notices.

107. First, it is a matter relevant to the group which he represents, and on whose behalf he has commenced proceedings, for the Court to determine the membership of that group. The validity of the insurer opt out notice relates to the membership of the group.

108. Secondly, assuming that the Insurers are correct about the determination of the present issues involving the Court in the exercise of Federal jurisdiction, which is a proposition which is by no means uncontroversial: see Buckee v The Commonwealth of Australia [2014] FCA 242, I am satisfied that the issues raise a “matter” as that term is used in a constitutional sense, such that this Court can determine in the legitimate exercise of Federal jurisdiction, and Mr Johnston’s claim for the relief set out in the Notice of Motion, as finally amended.

109. The issue which falls for determination here is whether the insurer opt out notices are valid. That question involves the Court determining whether Mr Petrovski had authority, as a solicitor, to sign those notices on behalf of each of the individuals listed in the Schedules to the notices. As I have earlier held, Mr Johnston has sufficient standing to raise such an issue and to contend that the notices are invalid. The Insurers who instructed Mr Petrovski to file the insurer opt out notices are respondents to the Motion. They contend that the notices are valid and that Mr Petrovski was authorised by them to sign and file them. The dispute about the validity of the notices is not a hypothetical one. It concerns the membership of the group in the Johnston proceedings.

110. In Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570, the majority (Mason, Murphy, Brennan and Deane JJ) said at 608:

“The unique and essential function of the judicial power is the quelling of such controversies by ascertainment of the facts, by application of the law, and by exercise, where appropriate, of judicial discretion.”

111. In the judgment of the High Court in In re Judiciary and Navigation Acts [1921] HCA 20; (1921) 29 CLR 257, at 265, the majority (Knox CJ, Gavan Duffy, Powers, Rich and Starke JJ) said:

“… we do not think that the word ‘matter’ in sec 76 means a legal proceeding, but rather the subject matter for determination is a legal proceeding. In our opinion, there can be no matter within the meaning of the section unless there is some immediate right, duty or liability to be established by the determination of the Court.”

112. Hayne J expressed it in this way in Re McBain; Ex Parte Australian Catholic Bishops Conference [2002] HCA 16; (2002) 209 CLR 372 at 458 [242]:

“At the heart of the constitutional conception of ‘matter’ is a controversy about rights, duties or liabilities which will, by the application of judicial power, be quelled. … Hypothetical questions give rise to no matter.”

113. Here, the Insurers argued that the substantive dispute was in fact about the meaning and effect of the terms of the insurance policies entered into between the individuals named in the insurer opt out notices and the insurance companies which issued and underwrote the policies. The Insurers submitted that as the plaintiff, Mr Johnston, was not an insured under any of the policies, and that there was no application being made by any party to any of the policies, then the determination of the rights, or the extent of the rights granted under the policies was an entirely hypothetical question which could not constitute a “matter” sufficient to allow the Court to exercise any Chapter III powers, or any Federal jurisdiction.

114. There are a number of reasons for rejecting these submissions. First, and perhaps most fundamentally, the dispute which falls for determination is not properly described as being limited to the questions of the proper construction of the insurance policies, or the rights arising under the policies. None of the relief sought is directed solely to any such question or questions. Rather, in seeking the relief set out in the Amended Notice of Motion, by reference to the evidence adduced, Mr Johnston seeks to persuade the Court that the solicitor who executed and filed the insurer opt out notices, was not authorised so to do.

115. The insurer respondents contend that he was, and they adduced evidence of the terms and conditions of the insurance policies to establish Mr Petrovski’s authority. The question of Mr Petrovski’s authority to execute and file the insurer opt out notices is one of fact which the Court will need to determine. It is not the only question of fact to be decided before the Court considers whether the relief sought ought to be granted. The authority of Mr Petrovski, whilst it can be proved from the terms of the insurance policies, can also be proved in other ways and by other evidence, for example, by production of evidence of instructions being given to him directly by individuals, either orally or in writing.

116. The reliance by the Insurers upon the terms of the policies as sufficiently authorising Mr Petrovski to execute and file the insurer opt out notices in order to resist the relief sought, raises the necessity for the Court to determine the questions of fact, relevant to his authority, including but not limited to the effect of the insurance policies.

117. In no sense is this a hypothetical question. On the contrary, it is a real issue about the authority of the Insurers to instruct Mr Petrovski to do what he did.

118. The second and additional reason to reject the respondents’ arguments relates to my earlier conclusion that Mr Johnston has sufficient standing to seek the relief set out in the Amended Notice of Motion. Questions of standing are intimately related to the nature of the relief claimed. As Gaudron J said in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [2000] HCA 11; (2000) 200 CLR 591 at [48]-[50]:

“48.   There is no matter within the constitutional meaning of that term unless there is a remedy available at the suit of the person instituting the proceedings in question …

…

50. Provided there is a remedy which is appropriately related to the wrong in question, whether the remedy derives from the general law or is created by statute, nothing in Chapter III of the Constitution prevents Parliament from … permitting any person to institute proceedings of that kind. If it does so, and if there is a remedy appropriate to the asserted wrong, this is, in my view, a matter for the purposes of Ch III of the Constitution.”

119. In the same case, Gummow J said at [122]:

“122.   Moreover, Ch III does not impose a universal requirement for adjudication under it of mutual or reciprocal relations between right and duty, power and liability, each the correlative of the other. The notion of ‘standing’ is an implicit or explicit element in the term ‘matter’ throughout Ch III, identifying the sufficiency of the connection between the moving party and the subject-matter of the litigation. However, it would be an error to attribute to this notion a fixed and constitutionally mandated content across the spectrum of Ch III. In particular, for Parliament to provide a remedy for enforcement of its laws by federal courts and courts exercising federal jurisdiction which, in effect, removes the need for the Attorney-General's fiat, is not to go beyond what may be a matter arising under a law made by the Parliament for the purposes of s 76(ii).”

120. It seems to me that if Mr Johnston has standing to seek the relief in the Amended Notice of Motion, and the determination of his entitlement to that relief requires a decision from the Court on the question of whether the insurance policies gave Mr Petrovski the authority to execute and file the insurer opt out notices, then there is a sufficient controversy to be “quelled”, and there is a matter in the constitutional sense.

121. There is a third reason for declining to accept the submissions of the Insurers. The Insurers did not argue, nor could they have done so, that the principal proceedings in which Mr Johnston claims damages from Endeavour Energy and Osborne Aviation, was not a matter of legitimate and real controversy. If that is a necessary criterion to be adjudged, then clearly it is accepted by the Insurers that it is so. Mr Johnston seeks relief by way of damages for the tortious breach of a duty which he claims is owed to him.

122. The determination of an interlocutory motion seeking to deal with one of the many steps taken in the preparation of the substantive proceedings for a final hearing will, provided it is a relevant step to ensuring the integrity of the proceeding so that the matter is made ready for a final hearing on all issues, be a matter in the relevant sense. Each question of fact to be determined will be part of the “matter”.

123. Here there can be little doubt that the disposition of this interlocutory motion, will provide for the end of an interlocutory dispute which is a real and not hypothetical dispute, namely the validity of the insurer opt out notices. And, as well, the determination of an interlocutory application to the Court to exercise its powers under s 183 of the Civil Procedure Act, as a part of ensuring that the proceedings are ready for a final hearing.

124. For each of these reasons, I am not persuaded that the Insurers submission that this Court is precluded from determining the relief sought in the Motion ought be upheld.

125. It is convenient now to proceed to determine the question of the integrity of the insurer opt out notices.

Facts Relating to Insurer Opt Out Notices

126. Mr Petrovski, although he swore an affidavit which was read in the proceedings, did not give any evidence in that affidavit as to the basis of his authority to execute and file the insurer opt out notices. Importantly, he did not suggest that he had instructions from any of the individuals named to opt out of the Johnston proceedings.

127. The basis of his authority is to be gleaned from correspondence sent at the time. It will be necessary to refer to the significant features of the correspondence which is in evidence.

128. On 27 May 2014, William Roberts wrote to Maddens informing them that they acted for Insurance Australia Ltd t/as NRMA Insurance. The letter informed Maddens that it was likely that the Johnston proceedings incorporated claims of:

“… persons insured by our client in respect of the Event (whose rights have been subrogated to our insurer client)”.

129. On 30 May 2014, Maddens sent to William Roberts a copy of the Statement of Claim which had been filed.

130. On 22 August 2014, Maddens provided to Mr Petrovski a copy of the “Important Notice” which the Court ordered to be distributed to relevant people and publicly advertised. This “Important Notice” set out the procedure for opting out.

131. On 10 October 2014, William Roberts wrote a letter to Maddens in the following form:

“1.   We refer to the matter above and confirm we act for certain group members within your class action, pursuant to instructions from their subrogated insurers.

2.   Please find enclosed six opt out notices for the above group members that have been filed with the Supreme Court of NSW.”

132. The number of individuals or companies, the subject of those six opt out notices, is 565. There was no suggestion from Mr Petrovski that he had spoken to, or taken instructions directly from, the 565 individuals or companies, prior to executing and filing the insurer opt out notices.

133. On 13 October 2014, NRMA Insurance sent a letter, which I infer is in standard form, to those who held insurance policies with it. I infer that the other Insurers in the IAG Group, sent a letter to a similar effect.

134. The letter was signed by an officer of NRMA Insurance, who is described as a “Litigation Specialist – Bushfire Class Action Unit”. It included the following:

“As you will be aware, a bushfire ignited on 17 October 2013 at Links View Road, Springwood NSW, causing extensive damage to homes and other property in Springwood, Winmalee, Yellow Rock and surrounding areas.

You hold a policy of insurance with us that covered you for damage caused by the bushfire and you made a claim for the loss you suffered from the bushfire, which we have settled and paid.

Since we have paid you according to your policy, we will be taking recovery action in your name against whoever was responsible for the cause of the bushfire to recover both insured and uninsured losses. We will be taking a single recovery action for and on behalf of all our customers who made claims in the Springwood Bushfires.

As a valued customer, we owe you a distinct duty of utmost good faith to look after your interests. It is with this in mind that we are seeking to make claims for recovery of your uninsured and under-insured losses.

Please note, as with any recovery action we undertake on your behalf, we will incur the costs of conducting such action on your behalf, and we will not be seeking a payment directly from you for such costs.

The purpose of this letter is to inform you of the action we are taking, as an Insurance Australia Group (IAG) member company, to pursue recovery of losses against those responsible for the bushfire, which we believe at this stage to be Endeavour Energy.

We will be claiming any loss suffered by you that was not covered and paid for under any of your insurance policies (uninsured losses). We will be doing this on behalf of all our customers affected by bushfire for whom we have paid claims.

For example, if you held insurance for your home building but not your home contents, and the cost to repair or replace your contents was $60,000, we intend to recover the full amount of $60,000 on your behalf.

We will also claim for any loss where the amount paid under your insurance policy was not enough to cover the total loss you suffered (under-insured losses).

For example, it may have cost you $800,000 to rebuild your insured home, but the sum insured under your policy was limited to $600,000. In this example, the uninsured loss that we intend to recover for you would be $200,000, the difference between the two amounts.

We also intend to make claims to recover the amount we paid to you under your insurance policy (insured losses).

…

You may be aware that in May 2014, Victorian-based firm Maddens Lawyers commenced a class action in the Supreme Court of NSW on behalf of Mr Sean Johnston and all persons who suffered a loss from the bushfire, were referred to as group members … You were therefore a group member in the Maddens class action.

…

As a well resourced insurer experienced in recovery actions, it is our view that we are in a better position and it is in our mutual interest for us to manage this recovery action against those responsible for the bushfire.

We have decided to exercise our rights under your insurance policy to take recovery action separately from the Maddens class action. Accordingly, we submitted an “opt out notice” with the Court in the Maddens class action on your behalf pursuant to our rights under the policy of insurance with you.

This means that you are no longer a group member in the Maddens class action. Instead you will be a group member in the recovery action that we will commence shortly.

…

William Roberts Lawyers will conduct a recovery action on behalf of all our affected customers. You will be contacted in due course for information concerning your claim by either ourselves or William Roberts Lawyers.

As stated above, we will be claiming uninsured and under-insured losses you have suffered – loss suffered by you that was not covered and paid for under your insurance policy. We reiterate the importance of you completing and returning the attached questionnaire by the due date concerning any uninsured losses you may have suffered.”

135. Attached to that letter were five pages seeking details of uninsured losses. The recipient of the letter was given a month to complete that detail and return it to IAG. The recipient was informed that if that did not occur within one month, IAG would assume that they did not have any uninsured loss or, alternatively, did not wish to claim for it.

136. The questionnaire with respect to uninsured losses asked the recipient to identify the types of uninsured losses which they had suffered, including personal injury, disease or illness (physical or psychological), property damage, and “other economic or financial loss”. The recipients of the letter and questionnaire were asked to set out supporting information for their claim for uninsured losses including photographs, documents providing proof of ownership or in support of the value of items, invoices and quotes of the cost of repair or replacement.

137. On 12 November 2014, William Roberts served the Insurers proceedings. On that day a letter, which I infer was in standard form, was sent to all policy holders. It said:

“Following the letter we sent you last month, we wanted to share an update on the progress of our Springwood recovery action.

We have today served our Statement of Claim on Endeavour Energy, and will be seeking to recover both your uninsured losses and our insured losses. This means that the legal process has now started.

…

Prior to starting the proceedings we consulted with our legal team and obtained a large amount of evidence, including expert evidence and documentation from Endeavour Energy and other government authorities through Freedom of Information legislation. Our detailed research and examination of the evidence prior to starting the recovery action puts us in a good position to advance our claims in a timely and efficient manner.

In our previous communication with you, we requested that you outline any uninsured or under-insured losses by 14 November – please let us know if you require more time.”

138. In addition to these standard letters sent to each of the insured, the insurer opt out notices gave rise to correspondence between Maddens and William Roberts. It is unnecessary to set out the entirety of the exchange of views between those solicitors.

139. However, there are some statements, particularly by William Roberts, to which reference is relevant. In their letter of 30 October 2014 to Maddens, William Roberts included the following statements:

1. “The recovery proceeding is brought on behalf of the former group members in the Johnston v Endeavour Energy proceeding, whom our insurer clients have opted out of that proceeding”;

2. “The questions you have posed … are asked so that you may provide advice to those persons about the actions taken by NRMA Insurance (which is one of the insurer clients of our firm) in opting those persons out of the Johnston proceeding”;

3. “… it is plain that NRMA Insurance is contractually entitled to conduct recovery actions on behalf of its customers, and in order to do so, is entitled to opt them out of the Johnston proceeding. Consistently with the structure of Part 10 of the Civil Procedure Act 2005 (NSW) … the Johnston proceeding was commenced without obtaining the consent of group members. Equally, that Part provides an unfettered opportunity for such group members to opt out of the proceeding. Our clients, in determining the course that they considered best discharged their obligations of good faith to their customers, were under no obligation to consult with Maddens …”;

4. “NRMA Insurance has always made plain … that its recovery action would involve pursuing all of its clients claims (both insured and uninsured”; and

5. “… the Court has a protective and supervisory role in relation to group members and has, in the past, taken steps to ensure that matters communicated to them concerning their interests are accurate and not misleading or confusing.”

140. In a letter of 3 December 2014 from William Roberts to Maddens, William Roberts confirmed that they acted for Insurance Australia Ltd and for the following insurers, to whom I have already made reference, namely, NRMA Insurance, CGU Insurance, Coles, WFI and Lumley. The last three names are business names of Wesfarmers General Insurance Ltd.

141. The letter of 3 December 2014 includes this statement:

“We confirm that the IAG insurers have exercised their rights of subrogation in respect of these customers, and as a result of the opt out notices issued on 10 October 2014, they are no longer group members of the Johnston proceedings.”

142. In a letter of 12 December 2014 from Maddens to William Roberts, Mr Pendergast joined issue with the assertion in the earlier correspondence made by William Roberts on behalf of NRMA Insurance, that it was contractually entitled to conduct recovery actions and for that purpose to opt out its customers from the Johnston action. The letter drew attention to particular wording of the policy, and advanced a position that there was no contractual power to do what NRMA Insurance had done.

143. Mr Pendergast’s letter asserted that by reason of the Johnston proceedings, which had been commenced first, the group members in those proceedings, who were insured with the Insurers were “dominus litis” and accordingly, had the right to take first priority to the recovered sum

“… not merely to the extent necessary to fully indemnify the litigating party for its loss, but also to reimburse it (on an indemnity basis) for its unrecovered costs of the recovery action”.

144. The balance after such recovery costs were deducted was, so it was contended, then due to be paid to the insurer. Mr Pendergast contended that the effect of removing the group members from the Johnston proceeding, and including them as group members in the insurer proceeding, was to reverse the priority of payment:

“… so that its insurance outlays plus its costs of the recovery action are paid first, and only the balance accounted to the insureds for their uninsured losses”.

145. Assuming Mr Pendergast’s position is correct, one might be forgiven for thinking that the real issue is whether it is the insurer or the insured who will carry the shortfall on any sums recovered, and the shortfall created by the unrecovered solicitor/client component of the legal costs.

146. The facts to be derived from the correspondence suggest the following:

1. William Roberts, and Mr Petrovski, are instructed by Insurance Australia Group to act for the various Insurers who are part of that group, and their Insureds;

2. the Insurers assert a contractual right to be entitled to take recovery action for the Insureds to whom payments have been made by the Insurers;

3. the Insurers assert that their right to take recovery action includes a right, or perhaps an obligation, dictated by the obligation to act in good faith, to claim all losses of their Insureds, whether insured or not, and whether the subject of any payment by the insurance company to the insured or not;

4. those rights are properly to be regarded as rights of subrogation; and

5. It is the Insurers right to opt any insured out of any existing proceeding so as to include them as group members in the recovery proceeding to be commenced and controlled by the insurer.

147. The evidence before the Court includes each of the insurance policies pursuant to which instructions were given to William Roberts to act. It will be necessary in due course to analyse the relevant terms of those policies which are relied upon as giving the insurers their contractual rights. But, first, it is appropriate to identify the principles of subrogation as they exist in law. These principles are the context within which the insurance policies are written, and the context and background against which it is necessary to give content to the clauses in the insurance policy when interpreting them.

Subrogation

148. It can be accepted for the purposes of this judgment that subrogation is a creature of equity, and does not depend upon principles of contract. However, a search for a single unitary theory which explains when subrogation will be permitted is unlikely to be fruitful.

149. The right to subrogation arises from the conduct of particular parties in particular circumstances. In Australia, the defined circumstances, which according to principle give rise to subrogation, are those which would make it unconscionable for a defendant to deny a plaintiff’s right to subrogation: Re Dalma (No.1) Pty Ltd (In liq) [2013] NSWSC 1335 at [24].

150. With respect to insurance policies, Brett LJ (as Lord Esher then was) said in Castellain v Preston (1883) 11 QBD 380 at 388 this:

“As between the underwriter and the assured, the underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already insisted on, or in any other right, whether by way of condition or otherwise, legal or equitable, which can be, or has been exercised or has accrued, and whether such right could or could not be enforced by the insurer in the name of the assured by the exercise or acquiring of which right or condition the loss against which the assured is insured, can be, or has been diminished.”

151. Mason J said in AFG Insurances Ltd v City of Brighton [1972] HCA 70; (1972) 126 CLR 655 this at p 663:

“Although an insured person is in general not entitled to recover more than an indemnity under a policy of fire insurance, he is entitled to recover a full indemnity. …

The doctrine of subrogation … comes into operation when the insurer meets his liability under the policy by making payments to the insured in respect of his loss. The insurer is then subrogated to the relevant rights of the insured. Unless and until the insurer makes good the loss, the doctrine has no application. It therefore provides no support for the view that the respondent should, before the appellant meets the loss, exercise the right conferred by … the Crown lease.

I would reject entirely the notion, implicit in the appellant’s argument, that once the respondent meets its liability under the policy, it becomes subrogated to the respondent’s right under … the Crown lease. The rationale of the doctrine is the avoidance of a double indemnity. Here, as I have already pointed out, the respondent recovers no more than a full indemnity if it recovers the insurance monies and rebuilds. It is then restored to its enjoyment of its rights as a lessee of the demised premises …”

152. Mason J went on to consider what Bret LJ said in Castellain which I have set out above. Of that passage, Mason J said at p 664:

“These remarks say no more than that there passes to the insurer such rights of the insured as may be necessary to ensure that he receives no more than a full indemnity in respect of the loss. They give no support to the notion that by virtue of the doctrine there passes to the insurer rights of the insured in and over the insured property when the continued enjoyment of those rights by the insured is not inconsistent with the principle of indemnity.”

192. The clauses which are set out below are to be found in that part of the policy commencing at page 31, entitled “Claims”:

“Your responsibilities

You have a responsibility to cooperate fully with us, even if we have paid your claim.

…

We may

…

attempt to recover the amount we have paid to you from someone else if we find they are responsible for your loss and damage. If so, we will do this in your name.”

194. This policy does not include any specific mention of recovery action other than as noted immediately above. There is no mention of the recovery of any uninsured cases.

NRMA – Comprehensive Plus Motor Insurance

195. This policy covers five individual group members.

196. As the name implies, the policy covers a motor vehicle owned by an insured which is listed on the current certificate of insurance. The policy provides cover for incidents that occur in the period of insurance, and offers an agreed value cover. The loss and damage to the vehicle which is covered, includes loss and damage caused by a fire. The policy also covers loss and damage caused by the insured to someone else’s property.

197. On page 13 of the policy, the following is to be found:

“Your uninsured loss

If we pay your claim, and take steps to recover from a third party some or all of the amount we pay you, we may, if we choose to, also attempt to recover on your behalf, loss or damage which is not covered by your Policy, but that you suffer in connection with the incident. This means we may decide to recover your uninsured loss, as well as our claim payments, from a third party.

You must

●   have told us about your uninsured loss and asked us to seek recovery of it,

●   provide us with any documents you have that prove your uninsured loss, and

●   have entered into an agreement about the terms on which we or our recovery agents or lawyers will recover your uninsured loss on your behalf. You may need to contribute your share of any legal or recovery agent’s costs.

If we take steps to recover our claim payments, you agree that we can retain any amount we recover.

Not covered

We will not seek recovery of loss or damage covered under another insurance policy, or any loss or damage for or arising from personal injury or death.”

198. This clause is essentially the same as the clause in the first policy above. However, the last part of the clause contains, in the circumstances of these proceedings, a significant restriction on the extent of a recovery action.

199. On page 23 of the policy, under the heading “Recovery Against Another Party”, the following is recorded:

“If we cover you for an incident and pay your claim, we may, if another party was responsible of the loss or damage, recover any amount we pay from that party. If we do this, then you agree we can use your name in any recovery action.”

NRMA – Home Insurance Buildings and Contents

200. This policy covers the largest number of group members. There are 459 group members covered by this policy.

201. It will be convenient to set out this policy in more detail than the previous ones.

202. The policy provides for three alternative forms of insurance. The first is buildings and contents insurance, which covers the insured’s home and its contents, secondly, home building insurance, or thirdly, merely the contents of a home. The policy covers loss occasioned by listed events including fire.

203. The policy wording includes the following:

“Your insurance cover

Your policy is made up of cover for your home and cover for your contents.

The insurance cover we provide under your policy depends on:

●   the type of insurance you choose;

●   the level of cover you choose;

●   the amount of insurance your choose;

●   the listed events you are covered for, and any other cover that applies, and

●   any optional cover you add to your policy.”

204. I have already described the types of insurance. There are two levels of cover provided under the policy. The first is called “Home” which provides what is described as “Our standard level of cover”. The second level of cover is “Home Plus”, which “provides a higher level of cover – so you get our standard cover plus more”.

205. The policy makes it plain that the sum for which the building is insured or the contents are insured, are sums chosen by the insured to cover their home or contents.

206. In describing the listed events for which coverage is provided, the policy at page 22 says:

“Listed events

We cover your home or contents when certain things happen – for example, fire, theft, storm and earthquake. These are known as ‘listed events’.

You can make a claim if a listed event you are covered for takes place and causes loss or damage to your home or contents during the policy period.”

207. As I have earlier pointed out, both fire and bushfire are listed events pursuant to the policy.

208. On page 12 of the policy, the terms and conditions of the agreement are referred to. The policy records this:

“Our agreement with you

Your contract

Your policy is a contract between you and us as made up of:

●   your current statement of insurance, and

●   this Product Disclosure Statement (PDS), and

●   any applicable supplementary PDS.

Certificate of insurance

Your current certificate of insurance shows the optional cover you have chosen and any optional cover you have under your policy. It also shows the period your policy covers – we only cover you for incidents that happened during this time.

Exclusions and conditions

Exclusions and conditions may apply to the cover you have chosen:

●   in section 5 we set out the general exclusions that apply to your policy,

●   throughout this PDS we set out any specific exclusions and conditions with the cover they apply to,

●   on page 55 we set out your responsibilities when you are insured with us and make a claim.

…

Paying your premium

In return for paying your premium, we provide the cover you have chosen.”

209. Section 5 of the policy deals with general exclusions which apply to the policy. Section 6 of the policy is entitled “Claims and What We Pay”. It is necessary to set out some of this section in detail.

210. The section commences with identifying responsibilities which fall upon an insured when a claim is made. The first set of provisions involve prohibitions on the conduct of the insured. They are as follows:

“Settle claims and make admissions

You must not:

●   attempt to settle a claim that is made against you without our permission, or

●   make any admissions to anyone about any incident covered by your policy,

●   limit by agreement our rights to recover money from someone else.”

211. The section also provides for an obligation of co-operation. The clause is similar to those seen in previous policies. In full it is as follows:

“Co-operate

You must co-operate fully with us, even if we have already paid your claim. This may include:

●   providing us with all the information, documents, and help we need to deal with your claim,

●   immediately sending us letters, notices or court documents that you receive about any incident which has resulted, or may result, in a claim against you,

●   being interviewed by us,

●   attending court to give evidence,

You must be truthful and frank in any statement you make to us.”

212. On page 62 of the policy is a section about recovery. It is in the following form:

“Recovery against another party

We may need to recover the amount we pay to settle your claim from another party – for example when someone else is responsible for the loss or damage to your home or contents.

If we do this:

●   we will use your name in any recovery action,

●   we will decide upon the conduct and settlement of the recovery action,

●   you, or anyone else covered under your policy, must notify us if you want us to recover any loss or damage that was not covered under your policy.

If we are successful in the recovery action, we will keep the amount we paid you to settle the claim together with any interest awarded on this amount, and our costs in making the recovery. We will then pay you the balance.

213. There are two matters arising from this clause which ought to be noted here. The first is the meaning of the word “may” as it appears in the first part of the clause: “We may need to recover the amount we pay …”. Mr Johnston submitted that the word meant that the NRMA had to establish the existence of some necessity before exercising their recovery rights. In other words, the NRMA was under, or else had, a necessity to take the recovery action. The Insurers submitted that it meant “wish” or “want”, and that the NRMA did not need to establish any pre-condition of the kind to which Mr Johnston submitted.

214. The second matter to note is that, at the time the Insurer opt out notices were filed, there had been no notification by any insured under this policy of a wish for the NRMA to recover any loss for them which was not covered under the policy. The same position existed at the time when the Insurers proceedings were commenced.

215. It appears that in June 2013, a supplementary PDS for this home insurance policy was issued. It is of six pages. None of that supplementary PDS is of any relevance to the clauses to which reference has been made.

NRMA – Caravan and Trailer Insurance

216. This policy provides cover for 11 group members, including Individual A.

217. It provides cover for a touring caravan, an on-site caravan or trailer. Fire is one of the included events against which the insurance is provided. If the insured requires coverage for an annexe attached to a caravan then that has to be sought as an optional inclusion within the policy and for which an additional premium is payable.

218. In the event that a claim is made for loss or damage, the insurer notes that it is entitled to decide whether to repair the onsite caravan, touring caravan, annexe or trailer or to pay the cost of repairing those items, or, alternatively, to pay to the insured the applicable agreed value for the caravan, trailer or annexe. Contents which are located inside the caravan or trailer are also covered to a limited extent.

219. One of the exclusions from liability under this policy is “Death or bodily injury to you or any person who has your permission to use your [caravan]”.

220. On page 21 of the policy, the clause with respect to the insured having responsibility to co-operate fully with the insurer is repeated, but otherwise this policy contains no clauses relating to recovery actions, it contains no clauses or conditions relating to use of the name of the insured in any recovery action or clauses of the kind to which reference has been made in earlier policies.

NRMA – Landlord Insurance

221. This policy covers 12 group members. The cover provided by this policy is described in this way:

“Landlord insurance is made up of cover for your rental property and cover for your contents.

The cover we provide under your policy depends on:

●   the type of policy you’ve chosen,

●   the listed events you are covered for, and any extra cover we provide, and

●   the amount of insurance you choose.”

222. The types of policies which are available relate to buildings and contents or a combination of both. The listed events for which cover is provided includes fire.

223. Other cover is available dealing with building materials, furniture and furnishings, loss of rent and other minor items.

224. On page 36 of the policy, when dealing with the responsibilities of the insured in making a claim, the policy provides that the insured must co-operate fully with the insurer, including the various matters to which earlier reference has been made in other policies such as [211]. As well, the clauses similar to those in the Home Building and Contents policy with respect to not settling claims or making admissions are also applicable: see [210].

225. On page 44 of the policy, it includes reference to recovery against another party. It reads:

“Recovery against another party

We may need to recover the amount we paid to settle your claim from another party – for example, when someone else is responsible for the loss or damage to your rental property and contents.

If we recover money from someone else, then you agree that we can use your name in any recovery action.”

NRMA – Boat Insurance

226. There are four group members who are insured under this policy.

227. The policy provides cover for loss or damage to a boat owned by the insured. The coverage extends to include the hull of the boat, any motors, sails and trailer if applicable. The policy specifies that coverage is available if the boat or any part of it suffers loss or damage caused by fire. If that occurs, the insurer at its election may repair or replace the damaged item, pay the insured the reasonable cost of repairing or replacing the damaged item, or pay the insured the agreed value for the damaged item.

228. In the section of the policy dealing with claims, on page 39 of the policy is a clause describing the responsibilities upon the insured. The terms reflect, relevantly for these proceedings, the same terms as have earlier been described with respect to co-operating fully and providing information, documents etc: see [211]

229. On page 47 the policy, under the heading “Things that may put your claim or insurance cover at risk” the policy reads:

“You may put your claim or insurance cover at risk if you do not meet your obligations to us.

We may refuse a claim, cancel this policy or do both if you:

●   are not truthful and frank in any statement you make in a claim or in connection with a claim,

●   make admissions, settle or attempt to settle or defend claims without our agreement. Only we have the right to make admissions, settle claims and defend you. …”

230. The policy makes no reference to the bringing of a recovery proceedings or the use of the insured’s name in any proceedings. It contains no reference to uninsured losses.

Coles – Car Insurance

231. This policy is relevant for two group members. The policy provides cover being comprehensive cover, third party property fire and theft cover, or third party property damage cover, with respect to motor vehicles. Fire and explosion are insured events of the purpose of the policy.

232. At page 53, when dealing with the claims process, the policy has a heading “What you must do to help us manage your claim”. Underneath that heading is the following:

“Co-operate with us as we negotiate, defend or settle your claim and as we exercise your legal right of recovery against any other party. This might include giving evidence in court.”

233. Further on in the policy, the following appears:

“We may exercise our legal rights to act on your behalf to conduct, defend or settle any recovery action from other people. If we recover more than the claim settlement amount plus any costs we have incurred in the recovery action, we will pay you the balance.”

234. The policy does not include any reference to any under-insured or uninsured losses. It includes no other specific provision of the kind referring to these losses seen in some of the earlier policies.

Second Group of Policies

235. Each of the policies numbered 12, 13, 15, 16, 18-21 (inclusive), and 23 in the table at [176] have a clause which is in the same words, or with words to the same effect, with respect to possible recovery.

236. In the clause dealing with the responsibilities of the insureds when making a claim, there is in each of these policies (except the policy numbered 21) the following clause, or else a clause to this effect:

“In addition, you also give us your rights to claim from anyone else:

●   if you have a right to claim from anyone else for an incident covered by us, you give us your rights to make that claim, to conduct, defend or settle any legal action and to act in your name – you must not do anything which prevents us from doing this and you must give us all the information and co-operation that we require.”

237. The policy numbered 21, namely the Commercial Plan offered by Wesfarmers General Insurance, contains the following at page 8:

“What you must and must not do if you make a claim or an event happens that might lead you to making a claim

You must:

●   give us any information and help we may need in handling the claim,

You must not, without our prior consent:

…

●   admit liability for the event, loss, damage or injury,

●   negotiate, pay or settle a claim by or against anyone else for the loss, damage or injury.

What can affect your entitlements?

We may decline or reduce the amount of any claim or refuse to indemnify you, if you enter into an agreement which excludes or limits our right to recover damages or a contribution from another person.

…

What we may do

If an event happens that causes loss, damage or injury, we may:

●   take over and conduct in your name, the defence or settlement of any claim against you. We have sole discretion in how the defence is conducted or a claim is settled,

●   represent you at an inquest or official inquiry.

If we have paid or agreed to pay a claim, we have the right to proceed in your name against any person responsible for the loss, damage or injury. We take this action at our expense. You must not do anything which limits our right to do so.”

238. I note that the policy affects only 1 group member.

Conclusion with Respect to the Insureds Under the Group 1 Policies

239. It is convenient to draw some conclusions about the insureds who were covered under the Group Policies.

240. There is no clause in any of the policies by which the insured, explicitly, assigns to the insurer all or any part of the insured’s legal rights to take proceedings against an identified third party claiming damages arising out of the event which has given rise to the claim under the policy of insurance. No such assignment has occurred by virtue of the policy.

241. An insurer who has paid a claim under a policy, and who thereby has acquired an entitlement by law to be subrogated, is not in an equivalent position to that which would ensure if a complete assignment of rights had been taken.

242. There is in each of the policies a clause requiring co-operation on the part of the insured. Generally, this obligation is expressed in a part of the policy dealing with making claims on the insurer, either for monetary reimbursement or else with respect to proceedings being taken against the insured, who is indemnified for such claims. Whilst not providing an exclusive list for requirements upon the insured for co-operation, none of the specifically listed matters are apt to require an insured to cease pursuing legal proceedings which an insured may lawfully be doing.

243. Particularly in the light of the established legal principles at the time the insurance policy was entered into, I would not be prepared to find that an obligation not to commence or prosecute legal proceedings for which the insured had a legal entitlement, can be implied into the policy of insurance, nor can the co-operation clause be read as including such an obligation on the part of the insured.

244. Each of these policies (except Policy 5) includes a clause dealing with recovery from a third party. The clauses are not identical, but seem to have a similar substantial effect. The clause enables the insurer to commence proceedings in the name of the insured for the purpose of recovery from a third party of some, or all, of the amounts paid by the insurer to the insured. In my view, this clause would extend to include both the insurer taking action either by way of an individual action which names the insured as a plaintiff, or a representative action under Part 10 of the Civil Procedure Act, in which the insured was named as a plaintiff or else was a member of the group defined in the pleadings of the representative action.

245. In Policy 5, the NRMA Caravan and Trailer Insurance Policy, where there is no clause at all dealing with recovery actions which may be taken by the insurer, I can see no basis to imply into the policy a recovery right. In particular, I can see no basis to imply into the policy the right for the insurer to commence and pursue proceedings in the name of the insured. It may be entitled to take proceedings in its name, but without specific authority, not in the name of the insured.

239. In only two of the policies (those numbered 1 and 3), is there any specific clause dealing with an uninsured loss of the insured. Those two clauses are in identical terms. The clause gives to the insurer the right, at its unfettered election, to decide if it will or will not recover any uninsured loss for the insured. But there are preconditions fixed by the clause to the exercise of that unfettered election. Relevantly, those preconditions include that the insured must have notified the insurer of the uninsured losses, requested the insurer to recover those losses, and finally, have entered into an agreement about the terms, including as to costs, upon which the insurer or its agents, such as lawyers, will recover the uninsured losses on behalf of the insured.

240. The evidence in these proceedings does not suggest that any of these preconditions have been met with respect to any of the 62 insureds under either of these policies. In particular, there is no evidence that any agreement was entered into about the terms upon which uninsured losses would be recovered by lawyers appointed by the Insurers.

241. It follows that the Insurers had no contractual right which it was entitled to exercise, either at the time the insurer opt out notices were filed, or else at the time the Insurers proceedings were commenced, to claim any uninsured losses, that is, any sum over and above the moneys paid by the Insurers to the insured on their claims.

242. The rights of an insurer pursuant to the general law of subrogation do not include the right to claim any sum of money in excess of the amounts paid by the insurer in response to the claim of an insured under the policy in any proceedings commenced in the name of the insured.

243. It follows that at the time the insurer opt out notices were executed and filed, the Insurers had no entitlement to recover any uninsured losses. Expressed differently, the Insurers had no entitlement to commence proceedings against a third party seeking recovery, in the name, or on behalf, of the insured, where such proceedings claimed damages which exceeded the sums paid by the Insurers to the insured under the claim which had been made.

244. As has earlier been noted, the authority of Williams Roberts to execute and file the insurer opt out notices is entirely dependent upon the authority which the Insurers themselves had to take any step in the Johnston proceedings. On that basis it is appropriate to consider and determine whether the Insurers had an entitlement:

1. to remove all of their insureds from participating as group members in the Johnston proceedings; and

2. then to include the insureds as group members in the Insurers proceedings without limitation as to the sums being sought for damages,

as at the date of the execution and filing of the insurer opt out notices, and as at the date of commencement of the Insurers proceedings.

252. However, before proceeding to determine that question, which is the essential one upon which relief in the Motion depends, it is convenient to deal with the insureds who fell within the Group 2 policies.

Conclusions with Respect to Insureds Covered under Group 2 Policies

253. As noted above, except for the sole insured under Policy 21, each of the insureds under the Group 2 policies have given their insurer their “… rights to claim from anyone else …” for an incident (or event) covered under the policy.

254. I would interpret this clause although expressed in plain language, to be, in substance and effect, an assignment by the insureds to the insurer of their rights of recovery against third parties in respect of the sums paid by the insurer. So much seems to be accepted by counsel for Mr Johnston.

255. However, counsel submits that the uninsured losses of the insureds have not been effectively assigned by these contractual provisions and, accordingly, the authority or entitlement of the insurer to opt these insureds out of the Johnston proceedings was only a partial one. Counsel contended that the action of removing these insureds from the Johnston proceedings entirely exceeded the authority and entitlement of the Insurers.

256. Counsel for the Insurers contended that to place such a construction on the effect of the clause would be to permit a wholly non-commercial interpretation contrary to the principles of proper contractual interpretation.

257. In my opinion, the construction of the clause contended for by the counsel for Mr Johnston is incorrect. It does not adequately pay attention to all of the words in the clause, and the way in which the whole clause is expressed. The following parts of the whole clause support this conclusion:

1. on two occasions in the clause the phrase “your rights to claim from anyone else” (or a like expression) is used without any expressed limitation, restriction or qualification on those rights; and

2. the subject matter of the claim from “… anyone else …” is expressed to be “… for an incident covered by us ...”. That description does not suggest a monetary limitation referrable to the amount paid by the insurer to an insured on a claim made under the policy; and

3. that part of the balance of the clause which contains a prohibition on doing anything to prevent the insurer making a recovery claim, which again is expressed in the broadest terms, suggests that there is no restriction to be written in to the rights assigned; and

4. the balance of the clause requires provision of all information without limitation, and the provision of all co-operation, again without limitation.

258. In combination, these terms do not support any limitation on the rights given by an insured to an insurer with respect to an incident covered under the policy. It seems to me that the express words are to the contrary of such limitation. And that interpretation of the clause accords with a commercially workable interpretation. Such an interpretation will undoubtedly have the effect of placing onto the insurer some significant obligations owed to the insured with respect to litigation in which claims are made for losses over and above that which the insurer has paid. Such obligations would include but not be limited to obtaining the agreement of the insured to any settlement proposal. That is the insurer’s burden which arises by reason of its own choice, it having included the clause in the terms in which it was in the policy which the insurer offered.

259. This conclusion with respect to the insureds under the Group 2 Policies means that the Insurers were entitled to authorise the execution and filing of the insurer opt out notices, and the commencement of the Insurers proceedings. This conclusion will not apply to the sole insured under Policy 21.

The Central Question

260. It is convenient to return to the central questions that were earlier set out in [251] above.

261. For the insureds under the Group 1 policies, I am of the view that the Insurers did not have any entitlement to remove those insureds as group members of the Johnston proceedings. It follows from that conclusion that Williams Roberts did not have any authority to execute and file the insurer opt out notices. Accordingly, I conclude that those notices were invalid and of no effect to opt out those insureds from the Johnston proceedings.

262. Those insureds were group members of the Johnston proceedings upon the commencement of the proceedings, and they remain group members because they have not been validly opted out. They are not now group members of the Insurers proceedings because of paragraph 1(c)(ii) of the definition of the group members in those proceedings, which specifically excludes a group member in the Johnston proceedings from being a group member in the Insurers proceedings. See [15] above.

263. My reasons for reaching this conclusion can be relatively concisely stated. In order for the Insurers to have the authority and entitlement to act in a way which has the substantive effect of discontinuing an insured’s participation in existing litigation claiming damages from a third party, which damages include, but are not limited to, sums paid by the Insurers in respect of a claim, then there must be an explicit contractual basis for the Insurers so to do.

264. The rights of an insurer under the general law of subrogation do not extend to either:

1. requiring an insured to cease litigation which has been lawfully commenced; Lister at 486; Arthur Barnett at 883.

2. requiring an insurer to exercise any contractual rights which it may have, separately from the policy, for the benefit of the insurer: AFG Insurances at 664.

265. As well, any rights which an insurer acquires under the general law of subrogation are limited to the sums which they have paid to an insured. They have no rights of subrogation with respect to the total of damages (where those damages exceed the monies paid under the claim) which may be claimed from a third party with respect to an incident covered by a policy. The Insurers only rights under the general law of subrogation are for the reimbursement of the sums which they have paid out under the claim.

266. Since the insurer opt out notices had the substantive effect of both terminating the involvement of the insureds in litigation in which they were lawfully entitled to participate as group members and, as well, had the effect of dealing with the whole of the claims for damages, because limited opting out is not permitted under Part 10 of the Civil Procedure Act, there was no valid basis for the Insurers to act as they did, or for their solicitors to file properly authorised and valid opt out notices.

267. As the analysis above shows, the Insurers did not have a contractual entitlement to, in substance and effect, disenfranchise the insureds who were group members in the Johnston proceedings from pursuing their claim for damages, and they had no entitlement under the general law of subrogation so to do.

268. Even if it could be said that they had such an entitlement under the general law of subrogation, that entitlement could only extend to the sums paid by the Insurers to the insureds by reason of claims made under the policies. The insurer opt out notices and the Insurers’ conduct in removing the insureds from the Johnston proceedings and making them group members in the Insurers proceedings, contained no limitation on the claims which were being made. The Insurers simply had no authority to deal with claims for losses which exceeded the sums claimed, yet that is the effect of what they did in filing the insurer opt out notices.

269. The insurer opt out notices were not limited, nor could they have been. Rather, they opted the insureds completely out of the Johnston proceedings. There was no lawful entitlement for the Insurers to act in that way, and so it follows that the opt out notices are not valid.

270. Because the individuals who had coverage under Group 1 policies named on the insurer opt out notices, were not validly opted out of the Johnston proceedings, they remain group members in that proceedings. Since the definition of the class in the Insurers proceedings excludes individuals who are group members of the Johnston proceedings, the insureds cannot be part of the Insurers proceedings although named in the schedule attached to the Further Amended Statement of Claim in the Insurers proceedings.

271. Whilst it was open to the Insurers to commence proceedings for the insureds covered under the Group 1 policies, without express consent, the Insurers could not instruct their solicitors, Williams Roberts, to include in the claim being made by any such proceedings, any claim for loss and damage over and above the monies which the Insurers had paid out on the claims. It follows that the claims in the Insurers proceedings, which are or include claims for loss and damage over and above the Insurers expenditure, are made without valid instructions to Williams Roberts. A ready example of such a claim, but not the only example, is a claim for damages for personal injury. Williams Roberts has no sufficient authority, and no sufficient instructions, unless provided by an individual insured, to advance any claim over and above the monies to which the Insurers are lawfully entitled.

272. I conclude that the Insurers did not have any entitlement to include in the Insurers proceedings any claim over and above the monies paid to the insureds under the Group 1 policies. As the claims are expressed without limitation, they are made without full and complete instructions.

Relief

273. Because the definition of group members in each of the proceedings has the effect that an individual cannot be a group member of both proceedings, the Court is not confronted with the difficulties inherent in competing class actions. See, for example, Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 56.

274. The Court, however, needs to consider the appropriate relief in the Johnston proceedings.

275. I am not prepared to make a declaration with respect to the insurer opt out notices. A declaration is not required, relevantly, what is required here is a substantive order setting aside the insurer opt out notices. However, it will be necessary for the parties to consider with some care, the way in which that is attended to, because the effect of this judgment is that the insurer opt out notices were invalid for all of the insureds under the Group 1 policies, and policy 21, but not for other policies.

276. As well, the Insurers will need to consider, as a consequence of any such order seeking leave to amend Schedule 1 of the Insurers proceedings, so as to delete the names of the insureds who have not opted out of the Johnston proceedings, validly.

277. Having regard to the time at which the insurer opt out notices were filed, namely, on the last day of the opt out period - in the afternoon – and having regard to the fact that none of the named insureds opted out individually either before or since the insurer opt out notices, there does not appear to me, at least without the benefit of further submission from the parties, to be a need to extend the original opt out period for the Johnston proceedings, except insofar as it may be necessary to give effect to the finding that the opt out notices are invalid. However, if the parties take a different view about this, I will receive submissions.

Costs

278. The parties have not addressed the issue of costs.

279. Ordinarily, costs should follow the event. Mr Johnston has, so it seems to me, had substantial success. Unless there is good reason otherwise, I would order the respondents, Mr More and the Insurer respondents, to pay Mr Johnston’s costs of this part of the proceedings.

280. If there is to be any contention contrary to this preliminary view, then the parties will need to address the Court on that question.

281. The only order which is necessary at the moment is to stand the proceedings over until 21 August 2015 for the making of final orders.

Orders

282. I make the following orders:

1. Proceedings stood over to 21 August 2015 at 9.30am for final orders.

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