Kyriackou v ACE Insurance Ltd

[2009] VSC 647

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 6953 of 2009

MICHAEL KYRIACKOU	Plaintiff
v
ACE INSURANCE LTD	Defendant

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JUDGE:	VICKERY J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	1 DECEMBER 2009
DATE OF JUDGMENT:	3 DECEMBER 2009
CASE MAY BE CITED AS:	KYRIACKOU v ACE INSURANCE
MEDIUM NEUTRAL CITATION:	[200910] VSC 647

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PRACTICE AND PROCEDURE — Judgments and orders — Summary judgment — Appeal under Rule 77.06 Supreme Court (General Civil Procedure) Rules 2005 - Whether real question of fact or law to be determined.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M. J. Arthur	Issac Brott & Co
For the Defendant	Mr M. Thompson SC	Moray & Agnew

HIS HONOUR:

1           This is an appeal brought by the Plaintiff from the order of Evans AsJ made on 28 October 2009. The appeal is made pursuant to rule 77.06 of the Supreme Court (General Civil Procedure) Rules 2005 (the “Rules”). The appeal was conducted as a rehearing de novo of the application made to the associate judge. 

2 By its summons dated 12 August 2009, the Defendant, Ace Insurance Ltd (“Ace Insurance”), made application pursuant to rule 23.03 of the Rules that it have judgment in the proceeding entered against the Plaintiff, Michael Kyriackou (“Mr Kyriackou”). Rule 23.03 provides:

On application by a Defendant who has filed an appearance with the court at any time may give judgment for that Defendant against the Plaintiff if the Defendant has a good defence on the merits. 

3           By his order dated 28 October 2009, Evans AsJ dismissed the Plaintiff's proceeding upon the hearing of the application for the Defendant pursuant to rule 23.03. That rule has been the subject of some considerable judicial determination.

4           In Dey v Victorian Railway Commissioners [1] (“Dey”), Dixon J said of the forerunner to rule 23.03:

It is peculiar to Victoria, it is the counterpart for the Defendants of order 14.  It confers a power of summarily dealing with an action which should be reserved for the exercise as to the actions that are absolutely hopeless. 

[1](1949) 78 CLR 62 at 90.

5           These observations were cited with approval by Tadgell J in respect of an application under the present rule of 23.03 in Holland‑Stolte Pty Ltd v Bill Acceptance Corporation Ltd & Princess Theatre Holdings Pty Ltd, [2], where hHis Honour said:

That the proposition of Dixon J, in Dey, holds good, as His Honour observed, whether you subscribe to the view that the Defendant will fail to obtain summary judgment unless hopelessness is readily discernible or whether you concede that it suffices that the Defendant must demonstrate it even after thorough and protracted investigation and argument.

[2]30 March 1992, unreported.

6           The test was stated in not dissimilar terms in Camberfield Pty Ltd v Klapanis [3]
(“Camberfield”), where Batt JA said, [4], after referring to the well‑known text of Dixon J which I have already referred to in Dey, of the requirement for the Plaintiff's case to be absolutely hopeless before an order 23.03 application may succeed:

Dixon J also said the case must be very clear indeed to justify summary intervention under the inherent jurisdiction and that once it appears that there is a real question to determine, whether of fact or law, and the rights of the parties depend on it, then it is not competent for the court to dismiss the action. 

[3][2004] VSCA 104.

[4]Ibid at [12].

7           The judge at first instance in Camberfield, as Batt JA observed, also set out the well‑known passage from the judgment of Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) [5] where the Chief Justice stressed the great care which must be exercised to ensure that, under the guise of achieving expeditious finality, a Plaintiff is not improperly deprived of his opportunity of a trial of his case by the appointed tribunal. Barwick CJ went on to state that: 

I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the Plaintiff's claim.

[5](1964) 112 CLR 125 at 130. .

8           In this case, I bear these principles squarely in mind when dealing with the issues that have been raised.

9           The Plaintiff's case is broadly this: in his writ issued 2 June 2009, to which a statement of claim is annexed, he alleges that by a policy of insurance made in or about August 2006 between the Plaintiff and the Defendant (“the Policy”), the Defendant agreed to indemnify the Plaintiff against loss arising from any claim in respect of civil liability for breach of duty owed in a professional capacity by the Plaintiff.

10         The Plaintiff further alleged that, as an officer of Austral Vic Home Loans Pty Ltd, which is now in liquidation, he was involved in various property developments and investment schemes in the course of the company’s business. 

11         He says that it was a term of the policy of insurance that the Defendant would indemnify the Plaintiff in respect of all losses which, pursuant to the Policy, included all amounts payable by the insured, as civil compensation or civil damages in respect of a claim including judgments, settlements, legal costs and expenses awarded against the insured; and payments for defence costs.

12         On 28 May 2007, during the period of insurance, the Australian Securities & Investments Commission (“ASIC”) commenced proceedings against the Plaintiff and others in the Federal Court of Australia in action VID 448 of 2007.  In that action, ASIC sought interlocutory final relief, including declarations against the Plaintiff, Mr Kyriackou, alleging against him civil liability for breach of duty owed by the Plaintiff in his professional capacity. 

13         It is alleged that the claim was made during the period of the insurance.  It is further alleged that as a result of the ASIC proceeding, the Defendant engaged solicitors and conducted a defence in respect of the proceeding, and incurred substantial legal costs. 

14         He says that on 22 July 2008, ASIC sought leave to discontinue the ASIC proceeding, and thereafter the matter was settled.

15         On or about 20 March 2009, Mr Kyriackou made a claim under the Policy against the Defendant, Ace Insurance, in respect of the payment of his legal costs.  However, the insurance company refused to indemnify the Plaintiff.  As a result, Mr Kyriackou claims the Defendant's failure to indemnify him under the policy caused him loss and damage, which he claims in the present proceeding.

16         The originating process in the Federal Court initiated by ASIC against Mr Kyriackou and others was an application made in respect of a scheme known as the Australian Property Syndicate.  Pursuant to that scheme, it was alleged by ASIC that investors gave money or moneys worth to the Defendants in that proceeding, who included Mr Kyriackou, to acquire rights to benefits produced under the scheme.  The Defendants, it was alleged, pooled and used the contributions to facilitate a return for investors.  It was alleged the Defendants intended that the contributions would be used to generate a financial return, and other benefits, for the investors and, finally, it was alleged that the investors under the scheme had no day‑to‑day control over the use of the contributions to generate the return or benefits under the scheme.

17         The application was made under various provisions of the Corporations Act 2001, including sections 459B, 461L and K, 464, 472(2), 473(1), 600EE, section 1323 and section 1324. Further allegations were made pursuant to provisions of the Australian Securities & Investments Commission Act 2001 and the Federal Court of Australia Act 1976.

18         The applicant, ASIC, in its proceeding, sought final relief which included injunctions restraining Mr Kyriackou from operating the scheme and winding up the scheme.  By way of interlocutory relief in the proceeding, ASIC also claimed, amongst other things, injunctions restraining the transfer of property held in the name of the Defendants.  These claims were set out in detail in the originating process to include the following orders:

(a)       an order that the first Defendant, that is Mr Kyriackou, whether by himself, his servants or agents, be restrained from transferring, disposing of or otherwise dealing in any way with the funds held in the account name Michael Kyriackou, and the nominated account number; [6]

[6]See paragraph 5 of the originating process.

(b)      an order providing:[7]

[7]See paragraphs 6(a) and (b) of the originating process.

Andrew James McLellan with such powers as receiver of the property of the first Defendant as may be necessary including; (a) the power to do all things necessary or convenient to be done for or in connection with or is incidental to the identification, preservation and securing of all of the first Defendant's property for the benefit of potential creditors, and, (b), without limiting the generality of the power in the preceding paragraph, the power to enter into possession and take control of the relevant property to the extent that the exercise of the power is reasonably necessary to achieve the purposes set out in the preceding paragraph.

(c )      an order that the first Defendant, Mr Kyriackou:[8]

Shall, within five days of service of a copy of the order upon him, swear, file and serve on the Plaintiff, " that is ASIC, ", and Andrew McLellan, an affidavit setting out the name, address of all banks, building societies or other financial institutions at which there is an account in his name or under his control, together with the number of such account and the name in which it is held.

(d)      orders seeking such further or other interlocutory orders as the court considers just or necessary. [9]

[8]See paragraph 8 of the originating process.

[9]See paragraph 13 of the originating process.

19         On 28 May 2007, the day that the originating process was issued, Finkelstein J of the Federal Court made the following orders in the nature of a Mareva injunction.  His Honour made orders to the following effect: 

1.That until 4 pm on 29 May 2007 or further order, each Defendant, which included the first Defendant, Mr Kyriackou be restrained from parting with possession of, encumbering or disposing of his or its assets, as the case may be;

2.Until 4 pm on 29 May 2007, or further order, each of the second to seventh Defendants, which did not include Mr Kyriackou, be restrained from disposing of, destroying, amending, altering or parting with, possession of its books of account or other financial records.

3.Until 4 pm on 29 May 2007, or further order, the first Defendant, that is Mr Kyriackou, “"be and is hereby restrained from disposing of, destroying, amending, altering, parting with, possession of or causing or procuring any of these things to happen to any books or records that evidence or relate to receipt by the first Defendant of any money or property from the second to seventh Defendants inclusive.”

20         The restraining orders by way of Mareva injunction made on 28 May 2007 were extended from time to time during the currency of the Federal Court proceeding.

21         The relevant clauses of the Policy being the Ace Insurance Ltd professional indemnity policy, which are central to this application, include the following:

1.1 Civil Liability

Ace will indemnify the insured against loss arising from any claim in respect of civil liability for breach of a duty owed in a professional capacity first made against an insured during the period of insurance.

…

5.13 Loss 

Loss means the aggregate of all amounts payable by the insured, or Ace, as civil compensation or civil damages in respect of a claim including judgments, settlements, legal costs and expenses awarded against an insured, and payments for defence costs.

…

5.4 Claim 

Claim is a written demand for or an assertion of a right to civil compensation or civil damages arising out of the firm's business or a written intimation of an intention to seek such compensation or damages.

22         Defence costs were defined in clause 5.5 to include the following: 

Defence costs are legal costs and disbursements and related expenses reasonably incurred in (a) defending any proceedings; (b) conducting any proceedings for contribution or recovery; or; (c) investigating, avoiding producing or settling any claim. 

23         Another section of the Policy relied upon was the schedule which described the business, which was the subject of the insurance, as involving the following business activities, namely: financing originators, finance intermediaries, finance brokers, finance consultants, mortgage aggregators as more fully described in the proposal form which was dated 22 September 2006.

24         There are provisions of the Corporations Act2001 which provided for the award of monetary compensation for damages to persons who have suffered loss as a result of breaches of the regulatory provisions of the Act, in particular, section 1324. It is to be noted that this section was specifically referred to as one of the sections in the introductory paragraphs to the originating process which was initiated by ASIC.

25 Section 1324(10) of the Corporations Act2001 provides that:

Where the court has power under this section to grant an injunction restraining a person from engaging in particular conduct or requiring a person to do a particular act or thing, the court may, either in addition to or in substitution for the grant of the injunction, order that person to pay damages to any other person. 

26         Further, section 1325(2) provides that:

The court may on, application of a person who has suffered or is likely to suffer loss or damage because of the conduct of another person that was engaged in a contravention of chapter 5(c), 6(c)(a) or 6(d) or part 7(1) or on the application of ASIC in accordance with sub‑section 3 on behalf of such a person or two or more such persons, may make such order or orders as the court thinks appropriate against the person engaged in the conduct or a person who was involved in the contravention including all or any of the orders mentioned in sub‑section 5 if the court considers that the order or orders concerned will compensate a person who made the application or the person or any part of the persons on whose behalf the application was made in whole or in part for the loss or damage or will prevent or reduce the loss or damage suffered or likely to be suffered by such person. 

27         Section 1325(3) provides for ASIC to make an application on behalf of the parties who have been injured or damaged.

28         The terms of section 5.4 of the Policy are critical to the resolution of this appeal.  I refer in particular to a claim which may be constituted by a written “intimation” of an intention to seek such compensation or damages.  The Oxford dictionary[10] ascribes two meanings to the word “"intimation”".  The first definition is as follows: 

[10]2^nd ed. 1989.

The action of intimating, making known or announcing formal notification or announcement. 

Then follows a reference to: “"Formally a declaration of war”."  

However, there is a thirdsecond definition which is ascribed to the word “intimation” in the Oxford dictionary: 

The action of making known or expressing merely an expression by sign or token an indication, a suggestion or a hint.

29         It is at least arguable, that the thirdsecond definition ofto the word “"intimation”" is the meaning to be ascribed to the word “intimation” as it is used in clause 5.4 of the Policy.

30         The terms of clause 5.13 of the Policy are also important.  In particular, clause 5.13 makes reference to civil compensation or civil damages in respect of a claim.  The words “"in respect of”" have been the subject of judicial observation. According to their natural and ordinary meaning, the words “"in respect of”" have a very wide scope.  These words have been held to be difficult of definition but to have the widest possible meaning of any expression intended to convey some connection or relation between two subject matters to which the words refer.  In this regard, I refer to the observations of Mann CJ in the Trustees Executors & Agency Co Ltd v Reilly.[11].

[11][1941] VLR 110 at 111.

31         The width of the phrase “"in respect of”" or “"in relation to”" was also expressed in the English case of Paterson v Chadwick, [12], where Boreham J adopted the comments of Mann CJ.  These or similar observations have been cited in numerous cases, for example, Powers v Maher[13] through Kitto J, Smith v Federal Commissioner of Taxation[14] through Toohey J, Construction Industry Long Service Leave Board v Irving(as administrator of Bettaform Constructions South Australia Pty Ltd)[15] at [13] per Spender, Drummond and Sackville JJ in relation to the Corporations Act 2001 section 5561G(ii) and 556LG(iv).

[12][1974] 2 All ER.

[13](1959) 103 CLR 478 at 484, 489.

[14](1987) 164 CLR 513 at 533.

[15](1997) 145 ALR 158.

32         In GIO Australia Ltd v Robson & Anor, [16], it was held that a compulsory third party insurance policy providing cover against liability in respect of the death or injury to a person caused by the fault of a driver included liability to an injured person's employer under a claim for loss of services.  One of the reasons advanced by Mason P for this interpretation [17] was that it gives to the words “"in respect of”" their well‑established amplitude.

[16](1997) 42 NSWLR 439.

[17]GIO Australia Ltd v Robson & Anor (1997) 42 NSWLR 439 at 441.

33 In my opinion, the originating motion issued by ASIC at least signalled, indicated, suggested or hinted that an application for damages or compensation was intended to be made. The application specifically was made under section 1324 amongst the other provisions of the Corporations Act 2001, all of which were referred to in the originating process.  The application described a scheme which was the subject matter of the application as being a scheme in which members of the public, as investors, gave money to the Defendants for an expected financial return.  The application sought freezing orders in the nature of Mareva injunctions, freezing the assets of Mr Kyriackou, amongst others.

34         On the first directions day on 28 May 2007, the same day the originating motion was issued and served, Finkelstein J of the Federal Court ordered that Mr Kyriackou's assets be frozen under the terms of the Mareva injunction which was granted on that day.  I infer that the order of Finkelstein J was served on Mr Kyriackou or otherwise brought to this attention in order to achieve what was intended by that injunction.

35         Mareva injunctions, variously known as freezing orders or Mareva orders, are orders made by a court which freezes assets so that a Defendant to an action cannot dissipate assets from beyond the jurisdiction of the court with the effect of frustrating a future judgment.  This type of order is named after the 1975 case of Mareva Compania Naviera SA v International Bulkcarriers SA. [18] .  In Victoria, the civil procedure rules now provide for Mareva injunctions, which are  styled “‘freezing orders”’.

[18]1975] 2 Lloyd's Rep 509.

36         A freezing order will usually only be made where the claimant can show that there was at least a good arguable case that they would succeed at trial and that the refusal of an injunction would involve a real risk that a judgment or award of damages in favour of the applicant would be unsatisfied.  This description can be found in Ninemia Maritime Corp v Trave GmbH & Co KG (The Niedersachsen). [19]. 

[19](1983) 1 WLR 1412.

37         It follows that the Federal Court application and the order for the Mareva injunction granted in the course of that proceeding, both of which I infer were served upon Mr Kyriackou and brought to his attention, at least arguably comprised a written information to him of an intention to seek compensation or damages. Otherwise there would have been no point in seeking or being granted a Mareva injunction unless it was intended to preserve assets to satisfy a judgment for damages or compensation which at that time was indicated by or in the contemplation of ASIC.

38         It further follows that Mr Kyriackou's claim against Ace Insurance was at least arguably a claim within the terms of the policy.  Put another way, it could not be said, in my opinion, that his action is absolutely hopeless.In my view, there is a real question to be determined.

39 In these circumstances, it is not competent to dismiss the Plaintiff's proceeding pursuant to rule 23.03. It follows that I allow the appeal and will order that the costs of the appeal be paid by the Defendant.

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