Lend Lease Ins Ltd v Glenmont Invest P/L & Ors No. Scgrg-91-2240 Judgment No. S171

LEND LEASE INSURANCES LTD v GLENMONT INVESTMENTS
PTY LTD and ORS
[1999] SASC 171

Full Court: Perry, Duggan and Debelle JJ

PERRY J. On 6 April 1999 Millhouse J commenced the trial of this action in which the first respondent, Glenmont Investments Pty Ltd (“Glenmont”), is the plaintiff, and the appellant, Lend Lease Insurances Ltd (“Lend Lease”), formerly MLC Insurance Ltd (“MLC”) is the sixth defendant. The five other defendants are the remaining respondents to this appeal. They did not seek to be heard on the hearing of the appeal.
The appeal is brought by leave, against an interlocutory ruling made by the learned trial judge soon after the commencement of the trial.
The plaintiff’s claim is for damages arising out of a fire which occurred on 27 September 1985 and which destroyed what was described as a mechanical dinosaur then housed at the Wayville Showgrounds. At the time the fire started, two of the defendants, who are now the respondents David Parker and Tony Peter Edwards, were alleged to have been engaged in welding work being carried out by their employee Foote, using oxyacetylene equipment. The action is brought against Parker and Edwards on the ground that they are vicariously liable for Foote’s negligence, which in turn is alleged to have caused or contributed to the occurrence of the fire.
Lend Lease (then still known as MLC Insurance Ltd) was joined in the proceedings as a defendant by order of a Master made on 21 December 1993. An appeal from the order that it be so joined was dismissed by Prior J on 15 February 1994.
As against Lend Lease, Glenmont claims a declaration that, pursuant to a policy described as a Liability Policy of Insurance issued on 30 July 1985, Lend Lease owes a duty to indemnify Parker and Edwards against any liability established by the plaintiff against Parker and Edwards.
A second element in Glenmont’s claim against Lend Lease is its assertion that Lend Lease is liable by way of damages to Glenmont for what is alleged to be a breach of a duty of care owed by Lend Lease to Glenmont “to pay any claim made by the plaintiff against Parker and Edwards which fell within the terms of the policy within a reasonable time” (statement of claim, paragraph 59).
With respect to the declaration sought against Lend Lease, at the time that Lend Lease was joined in the proceedings it was in dispute with Parker and Edwards as to the latters’ claim for indemnity on the policy. In those circumstances, the plaintiff contended that it was entitled to seek a declaration against the insurer on the principle identified in the decision of this Court in J.N. Taylor Holdings (In Liq) v Bond.[1]
[1] (1993) 59 SASR 432.
Shortly before the commencement of the trial, it appears that Lend Lease resolved its differences with Parker and Edwards. In consequence of that, at the commencement of the hearing Mr Trim QC, who appeared for Lend Lease, announced to the trial judge that Lend Lease had compromised its differences with Parker and Edwards and would indemnify them according to the terms of the policy. That intimation was confirmed by counsel appearing for Parker and Edwards.
In those circumstances, Mr Trim QC asked that the statement of claim, insofar as it sought a declaration against Lend Lease, be struck out on the footing that there was now no issue to be tried which could justify continuance of the action against Lend Lease. At the same time, Mr Trim QC indicated that Lend Lease was in effect exercising its right of subrogation and would be conducting the defence of Parker and Edwards at the trial.
When counsel for Glenmont pointed out that there was nonetheless a possibility that there could be a breach of policy in the future which might entitle Lend Lease to decline indemnity, Mr Trim QC assured the learned trial judge that the “insurer will meet any claim in respect of the subject action in accordance with the terms of the policy. That is a matter between it and Parker and Edwards”. However, quite properly, he could not, when pressed, offer an assurance to the learned trial judge that there could not be some development in the future which might entitle Lend Lease to decline indemnity.
It was Mr Trim QC’s inability to give an assurance as to the willingness of Lend Lease to indemnify Parker and Edwards in absolute terms, notwithstanding any eventuality which might arise in the future, which prompted the learned trial judge to decline to strike out the claim for a declaration. So much appears clear from the exchange which occurred between him and Mr Trim QC. Although the learned trial judge did not see fit to deliver any extended or considered reasons for the decision which he made in that respect, he said, when giving his ruling:
“I make it clear I am not going to do anything by way of altering the pleadings and deleting things that would prejudice the plaintiff”.

The learned trial judge thereupon dismissed the application. He then gave leave for an appeal to be brought to this Court.

In the meantime, the trial is proceeding.
In my opinion, whatever may have been the legitimacy of the claim for a declaration in the first place, a matter upon which I have serious reservations, there can be no question but that the claim could not be pursued once any existing issue as to Lend Lease’s liability to indemnify according to the terms of the policy had been resolved in favour of indemnity being afforded in terms of the policy.
A somewhat analogous situation arose in Beneficial Finance Corporation Ltd and Ors v Price Waterhouse.[2] In that case, a firm of chartered accountants was sued by a finance company for damages alleged to be payable with respect to various breaches of duty on the part of the accountants in the preparation of audits performed by them as to the financial position of certain other companies. Discovery was sought by the plaintiff against the accountants of documents which would have indicated the identity of their professional indemnity insurer and details of any professional indemnity policy of insurance. The Full Court on appeal quashed an order granting the discovery sought.
[2] (1996) 68 SASR 19.
During the course of my judgment in that case I observed:[3]
“The most which can be said is that there is no present indication that liability will, at any stage, be denied, let alone that any such common question of fact will arise before the trial of the proceedings as presently constituted.”
[3] Ibid at 37.
My reference in that passage to a “common question of fact” relates to one of the bases upon which the joinder of the insurer was permitted in the J.N. Taylor case, namely, that questions of fact common to both the action against the insurer and the other defendants in that case would arise at the trial.[4]
[4] See J.N. Taylor Holdings Ltd (In Liq) v Bond (supra) per King CJ at 440.
In the Beneficial Finance case, I went on to observe:[5]
“What the foreshadowed application for joinder boils down to is that it represents an attempt by the plaintiffs to lock the insurer into a position not only where it acknowledges a present willingness to indemnify under the policy, but to obtain a certainty that it will do so, come what may. ..... For the plaintiffs to be permitted to join the insurer for the purposes of advancing a claim for declaratory relief, they will necessarily have to invent issues which at the present time do not exist, that is, create issues between the defendant and its insurer which, as between the defendant and the insurer, do not presently exist and may never exist.”
[5] 68 SASR at 38.
In the same case Lander J made observations to the same effect.[6]
[6] Ibid at 56.
In my opinion, similar considerations should have led the learned trial judge in this case to strike out the statement of claim against Lend Lease insofar as it sought the declaration to which I have referred.
I do not overlook the argument put forward by the respondent that the strike-out application was not supported by an affidavit, and the learned trial judge was informed of the fact of the compromise of the dispute between Lend Lease and its insureds by Mr Trim QC, over the bar table.
Further, Mr Holland, for Glenmont, submitted during the hearing of the appeal that more detail should have been given to the court as to the terms of the compromise.
It may have been better that an affidavit be filed. But the assertion that the matter had been compromised was, after all, given by counsel for all three parties concerned. Furthermore, the learned trial judge said that he was prepared to act on it. The court often quite properly acts upon assurances given by counsel, for example, in adjourning cases, in entering judgment by consent, and in taking other steps in an action. There was no irregularity on the part of the learned trial judge in acting upon what he was told by counsel.
As to the detail of the compromise, it was enough for the court to note Mr Trim QC’s intimation that Lend Lease would indemnify Parker and Edwards in accordance with its obligations under the policy of insurance. Glenmont could not have obtained more than that, even if the declaration which it sought had been made.
What eventually motivated the learned trial judge to reject the application was his view that the action should proceed unless there was an assurance from Lend Lease that it would indemnify Parker and Edwards “come hell or high water”. But with respect to him, that was asking too much. There being no present issue between Lend Lease and its insureds, there was no longer any basis upon which that part of the claim against Lend Lease could be sustained.
For the reasons which I have given, in my opinion, the learned trial judge failed to deal with the real question, which was whether or not, given the compromise, there was then any issue left to which the claim for a declaration could be directed.
As to the other basis upon which Glenmont sued Lend Lease, in my opinion, the claim was doomed to failure and should have been struck out at the time the issue was raised before the learned trial judge, rather than leaving Lend Lease in the action to go on defending what was predicted to be a ten-week trial. This is particularly so, having regard to the fact that Mr Trim QC, on instructions from the solicitors for Lend Lease, was representing Parker and Edwards at the trial, which circumstance gave rise to the potential of a serious conflict of interest arising if the action was permitted to proceed against Lend Lease.
Of course, it should have been allowed to proceed against the insurer if there was an arguable case against Lend Lease. But in my opinion, the pleadings do not disclose an arguable cause of action against Lend Lease.
The relevant paragraphs of the statement of claim are as follows:
“49A..... It was a further implied term of the Insurance Contract that MLC would act in its relationship with Parker and Edwards with the utmost good faith and in particular pay any claims made by Parker and Edwards under the Policy within a reasonable time.
..........
56A...... In breach of the implied term referred to in paragraph 49A hereof MLC failed to act with the utmost good faith and failed to indemnify Parker and Edwards in respect of the plaintiff’s claim under the Policy within reasonable time. The plaintiff alleges that in all the circumstances a period of six months from the 27th September 1985 was a reasonable time for MLC to assess the claim.
56B.By reason of the matters pleaded in paragraph 56A hereof the amount of the plaintiff’s claim is now greater than what it would have been had the claim been paid by MLC within a reasonable time.
57......... By reason of the matters referred to in paragraphs 46 to 56 hereof and by virtue of Section 54 of the Insurance Act, MLC was and is liable to indemnify Parker and Edwards for any losses incurred by Parker and Edwards as a consequence of any Judgment being entered in these proceedings against Parker and Edwards within the meaning of Section 1 of the Policy.
58.MLC has denied liability to indemnify Parker and Edwards pursuant to the policy.
58A...... Further to the failure of MLC to indemnify Parker and Edwards in respect of the plaintiff’s claim under the policy within a reasonable time as pleaded in paragraph 56A hereof and/or the denial of liability by MLC to indemnify Parker and Edwards pursuant to the policy as pleaded in paragraph 58 hereof amounted to a repudiation of the Insurance Contract by MLC.
58B.By reason of the matters pleaded in paragraph 58A hereof the amount of the plaintiff’s claim is now greater than it would have been had the claim been paid by MLC within a reasonable time and/or MLC had not denied liability as the case may be.
...........
59.Further or in the alternative MLC owed a duty of care to the plaintiff to pay any claim made by the plaintiff against Parker and Edwards which fell within the terms of the Policy within a reasonable time.
60......... MLC breached its said duty of care to the plaintiff by failing to indemnify Parker and Edwards pursuant to the Policy within a reasonable time.
61.As a result of the negligence of MLC the plaintiff has suffered loss and damage.”
In my opinion, those pleadings represent an attempt to erect a claim in negligence against an insurer who has, even taking the pleadings at their face value, done no more than, for a time, deny liability to indemnify Parker and Edwards pursuant to the policy. Whether its denial of liability was soundly based or not has nothing to do with the plaintiff Glenmont. Whatever may be the circumstances in which it denied liability to indemnify, it was inconceivable that such a circumstance, standing alone, could give rise to a cause of action in negligence against the insurer where the plaintiff was not a party to the policy of insurance, which was, so far as it was concerned, strictly res inter alios acta.
Furthermore, even if Lend Lease was at all times liable to indemnity Parker and Edwards on the policy, and it has now belatedly accepted an obligation to indemnify them, that did not in any way oblige Lend Lease to acknowledge the soundness of Glenmont’s claim against Parker and Edwards. Lend Lease as insurer was at all times entitled to stand in the shoes of Parker and Edwards and defend any claim made by Glenmont until the liability of Parker and Edwards had been established in the proceedings against them.
The liability to indemnify Parker and Edwards did not arise under the policy, if it was otherwise of application, unless and until Glenmont succeeded in its claim against them.
Lend Lease has at all times been entitled to wait until the end of the trial, and for that matter, until any appeal processes may have been completed, before answering to any liability which might by them be established against Parker and Edwards.
To allow Glenmont’s claim against Lend Lease for damages to be pursued in these proceedings would be to countenance the legitimacy of a claim for damages against every insurer who exercises a right of subrogation and puts a claimant against the insured to proof of the claim.
The claim for damages by Glenmont against Lend Lease is clearly untenable. This should have been recognised by the learned trial judge, and the claim should have been struck out.
If Glenmont ultimately succeeds in establishing liability on the part of Parker and Edwards to pay damages, no doubt in the calculation of those damages allowance will be made for whatever might be due by reason of delay in Glenmont’s recovery of its entitlement, either by way of Hungerford damages[7] or by way of interest under the Supreme Court Act (1935).
[7] See Hungerford v Walker (1989) 171 CLR 125.
Insofar as the appellant refers to the decision of Kirby J in Pan Laboratories Pty Ltd v Commonwealth of Australia and Anor,[8] I would distinguish that case on the ground that it concerned an attempt to interrupt the criminal trial process, as to which special considerations apply, quite apart from certain constitutional points.
[8] Legal Reporter, Vol 20, para 5, 23 March 1999.
This Court does not encourage interlocutory appeals in civil matters once a trial has commenced. But in this case it had barely commenced, and the points were taken at the beginning of the hearing.
It is true that applications to strike out a claim should succeed only when the pleading, taken at its highest, could not on any view of the matter sustain the claim as pleaded, but in my view, this is such a case.
While that observation, in my view, is fully justified when one has regard to the statement of claim in question, Mr Holland suggested during the course of argument that, given an opportunity to do so, an amended pleading might be put forward which pleaded material facts which could arguably sustain a cause of action against Lend Lease. As to that suggestion, the Court gave every opportunity during the course of argument for Mr Holland to identify facts or matters which might conceivably be pleaded and which could possibly justify the claim being pursued against Lend Lease. He was unable to do so. However the matter is approached, I am quite unable to accept that there is any basis upon which an arguable case against Lend Lease could properly be pleaded.
I would allow the appeal, and substitute for the order dismissing Lend Lease’s applications, an order:

(a)striking out those parts of the statement of claim which relate to Glenmont’s claims both for a declaration and for damages against Lend Lease, namely, paragraphs 6A, 46 - 61 (inclusive) and the prayer for relief as against Lend Lease; and

(b) dismissing the action as against Lend Lease.

DUGGAN J. I agree that the appeal should be allowed for the reasons given by Perry J and I concur in the making of the orders which he has proposed in his judgment.
I also agree with the additional observations made by Debelle J as to the inappropriateness of granting declaratory relief in the absence of any immediate or real controversy between Glenmont and Lend Lease.

DEBELLE J. This is an appeal from a decision dismissing an application to strike out a portion of a statement of claim. The application was made at an early stage of a trial which is still proceeding. The application was made by the sixth defendant, Lend Lease Insurances Ltd (formerly MLC Insurances Ltd) which now appeals by leave against the order dismissing the application. The respondent to the appeal is the plaintiff. None of the other parties have appeared in this appeal and appear to have no interest in it. I set out the circumstances leading to this appeal. It is convenient to refer to the parties by their names.
Glenmont Investments Pty Ltd (“Glenmont”) is the plaintiff in this action. It owned a very large mechanical dinosaur some 12 metres high and 30 metres long. The dinosaur was constructed of polyurethane foam covered with a polyester material. In August to September 1985 it was displayed at the Royal Adelaide Show. In September 1985 the dinosaur was destroyed by fire when the enclosure at the Adelaide Showgrounds in which it was housed was being dismantled. In 1991 Glenmont commenced proceedings against five defendants claiming damages for the loss of the dinosaur.
The first defendant, O’Loughlin, was a scrap metal buyer who, it is alleged, contracted to dismantle and remove the enclosure in which the dinosaur was housed. O’Loughlin employed a man called Foote, who is the second defendant. The third and fourth defendants, Parker and Edwards, carry on business as operators of mobile cranes. Parker and Edwards had supplied a mobile crane to O’Loughlin to be used in the process of dismantling the enclosure in which the dinosaur was housed. It is alleged that Parker and Edwards employed Foote and O’Loughlin. Glenmont alleges that the fire was caused because, contrary to its instructions to O’Loughlin, Foote used oxy acetylene equipment to cut parts of the steel framework which formed the enclosure. The claim against Parker and Edwards is grounded on what Glenmont alleges is their vicarious liability for the actions of Foote. One important issue at the trial is whether Parker and Edwards or O’Loughlin was the employer of Foote.

The fifth defendant is the Royal Agricultural and Horticultural Society of SA Inc, which leases the Adelaide Showgrounds. It is alleged that it failed to provide adequate fire fighting equipment in the vicinity of the building in which the dinosaur was housed and that such equipment as was provided was not in working order.
The claim against Lend Lease Insurances Ltd arose in the following way. Parker and Edwards had contracted with MLC Insurances Limited to provide a policy of public liability insurance. Subsequent events have resulted in MLC Insurances Ltd changing its name recently to Lend Lease Insurances Ltd. I will refer to it as “Lend Lease”. Parker and Edwards gave notice to Lend Lease of the fire on the day it occurred. Lend Lease denied that it was liable to provide indemnity. It is unnecessary for present purposes to examine the grounds on which it denied liability under the policy. Glenmont obtained leave to add Lend Lease as the sixth defendant and to amend its statement of claim to claim a declaration that Lend Lease was not entitled to deny liability to indemniFy Parker and Edwards under the policy of insurance. Glenmont claimed the declaration on a number of grounds. It also claimed that Lend Lease owed Glenmont a duty of care to pay within a reasonable time any claim made by it against Parker and Edwards which fell within the terms of the policy and that Lend Lease had acted in breach of that duty of care thereby causing damage to Glenmont in that it had caused its claim to be greater than if Lend Lease had not denied liability to Parker and Edwards.
The order joining Lend Lease as a defendant was made on 21 December 1993. Lend Lease appealed against the order. The appeal was dismissed on 15 February 1994. The order was made applying the reasoning in J N Taylor Holdings Ltd v Bond (1993) 59 SASR 432. It is unnecessary and inappropriate now to examine the correctness of the decision in J N Taylor Holdings Ltd v Bond. Thereafter, pre-trial proceedings were conducted on the footing that Lend Lease had denied liability.
The trial commenced on 6 April 1999, the Tuesday after Easter. At the very outset Mr Trim QC, who appeared for Lend Lease, announced that, after close of business on Maundy Thursday, Lend Lease had agreed to indemnify Parker and Edwards in accordance with the terms of the policy and, exercising its rights of subrogation, had agreed to take over the conduct of the action on behalf of Parker and Edwards. The solicitors for Lend Lease had also given notice that they were acting for Parker and Edwards. Mr Trim’s announcement was confirmed by counsel for Parker and Edwards who then applied for leave to withdraw from the proceedings. The trial judge granted him leave to withdraw subject to the hearing of an application for costs by Glenmont which was reserved for a later hearing.
Mr Trim QC then gave notice of an oral application to strike out that part of the pleadings dealing with the claim against Lend Lease and asked for time to be set aside to argue the application. The application acknowledged that the question of the costs of Glenmont in respect of its claim against Lend Lease would have to be considered at an appropriate time. The application was heard a few days after the trial had begun. After hearing argument, the trial judge dismissed the application giving very brief reasons. He said:
“I am not going to rob the plaintiff of a chance of succeeding by deleting this claim. If there is the slightest possibility, I am not going to do it.” (see page 193 lines 27 to 31).

These remarks could be a reference to the terms of R25.04 and to the fact that a defendant must show that the plaintiff’s case cannot succeed on any possible view of the facts or the law, that is to say, that there is no real question to be tried. Alternatively, the remarks could refer to a view that the judge seemed to hold that Glenmont should not be at any risk that Lend Lease would indemnify Parker and Edwards. It seems that one of the factors which influenced the judge to dismiss the strike out application is that Mr Trim QC, on behalf of Lend Lease, reserved its right to refuse to indemnify Parker and Edwards if they were subsequently to act in breach of a term of the policy. When reserving that right, Mr Trim reiterated that Lend Lease would provide an indemnity in accordance with the terms of the policy. The judge then made the ruling quoted above. In the result, whichever of those alternatives is correct has no bearing on the outcome of this appeal.

For the reasons which follow, I think the trial judge should have made an order striking out those paragraphs of the statement of claim which plead Glenmont’s case against Lend Lease.
The first claim made by Glenmont against Lend Lease was for a declaration that Lend Lease is liable under the policy of insurance to indemnify Parker and Edwards in respect of Glenmont’s claim against them. As Lend Lease has now agreed to indemnify Parker and Edwards pursuant to the policy, there is no issue to be determined on the question of Lend Lease’s liability to indemnify. The fact that Lend Lease has agreed to indemnify Parker and Edwards has been announced in open court by counsel for Lend Lease. Lend Lease is bound by the conduct of its counsel. The question whether Lend Lease is bound to indemnify Parker and Edwards pursuant to the policy is no longer an issue in the action as the announcement by Mr Trim QC was tantamount to the declaration which was sought by Glenmont. To all intents and purposes Glenmont has secured the relief it sought against Lend Lease. As Mr Trim QC acknowledged, the only remaining issue is the question of Glenmont’s costs in respect of its claim against Lend Lease. That question has been reserved by the trial judge.
Mr Holland, who appeared for Glenmont, submitted that the judge was not entitled to dismiss the application in the absence of an assurance from Lend Lease that it would not refuse indemnity if Parker and Edwards were later to act in breach of the terms of the policy. At the trial, counsel for Glenmont had sought from Lend Lease an unqualified assurance that it would indemnify Parker and Edwards. For understandable reasons, Mr Trim QC did not give that assurance. Glenmont was not entitled to seek an assurance in such unqualified terms which failed to recognise that the liability to indemnify might be affected by events subsequent to the announcement that Lend Lease would indemnify. Lend Lease did not know whether Parker and Edwards might not at some later time act in breach of the policy, say, by refusing to co-operate in defence of the claim by Glenmont. It must be added that there is no fact which gives rise to any apprehension that either will act in breach of the terms of the policy. Nevertheless, there was no basis upon which Glenmont could seek the assurance. Glenmont is not entitled to a declaration which simply states that Lend Lease must indemnify Parker and Edwards, for such a declaration would deny Lend Lease the rights it has under the policy of insurance. The failure to give the assurance is not, therefore, a reason for dismissing the application by Lend Lease.
There is a further reason which reinforces that conclusion. The power to grant a declaration is, of course, wide: J N Taylor Holdings Ltd v Bond (supra). Although the power to make a declaration extends to cases which are dependent on future facts: Rediffusion (Hong Kong) v AG (Hong Kong) [1970] AC 1136 at 1158; Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297 at 305, that power will not be exercised when the court is called upon to answer a question that is purely hypothetical: University of NSW v Moorhouse (1975) 133 CLR 1 per Gibbs J at 10. As Brennan J noted in Re Trade Practices Act (1978) 19 ALR 191 at 208, the question whether a particular case falls on one side or the other of the line that divides the hypothetical from the non-hypothetical is a matter of degree. There is no precise test for determining in every case whether there is a real controversy between the parties. The question in each case is whether the facts alleged show that, under all the circumstances, there is a substantial controversy between parties having adverse legal interests of sufficient immediacy and reality to warrant a declaratory judgment: Maryland Casualty Co v Pacific Coal and Oil Co (1940) 312 US 270 at 273. A controversy as to the lawfulness of future conduct cannot be said to be immediate and real if it is unlikely that one party will engage in the conduct: Golden v Zwickler (1969) 394 US 103 at 109. If the prospects of a party engaging in the conduct are uncertain, the uncertainty may deprive the controversy of a sufficient immediacy and reality to warrant the making of a declaration: Steffel v Thompson (1973) 415 US 452 at 460. These decisions of the Supreme Court of the United States were followed and applied by Brennan J in Re Trade Practices Act (supra) at 208 to 209. Thus, the degree of uncertainty as to whether a party will engage in the conduct proposed will usually determine whether the circumstances call for the making of a declaration: Re Trade Practices Act (supra) at 209. Glenmont is unable to point to any fact which gives rise to any apprehension that Parker and Edwards will act in breach of the policy. There is nothing which shows that there is any present likelihood that Lend Lease will refuse indemnity or take some step which is adverse to the interests of Glenmont. There are, in short, no facts which give rise to any immediate or real controversy between Glenmont and Lend Lease. It is not sufficient merely to show that Glenmont has an apprehension that Lend Lease might take a step which is adverse to its interests, for the apprehension may be imaginary or speculative, rather than real.
For all of these reasons, Glenmont is not entitled to a declaration in absolute terms simply stating that Lend Lease is liable to indemnify Parker and Edwards.
The only other issue as between Glenmont and Lend Lease is whether Lend Lease owed a duty of care to Glenmont to settle the claim within a reasonable time. The claim is misconceived. There is no privity of contract between Glenmont and Lend Lease. Generally speaking, an insurer owes no duty of care to a party who has suffered loss and damage by reason of the conduct of the insured: Hoods Trustees v Southern Union General Insurance Co of Australasia Limited [1928] Ch 793 802, 808; Re Harrington Motor Co Limited [1928] Ch 105; Windsor v Chalcraft [1939] 1 KB 279, 287; Karamanolis v Prudential Insurance Co Limited (1983) 150 DLR (3d) 81. However, as at present advised, I am not prepared to say that under no circumstances could a duty of care arise as between an insurer and a third party who has made a claim against the insured. It is possible to envisage circumstances in which the insurer may act in such a way as to give rise to such a degree of proximity which will result in a duty of care to the third party. But in the circumstances of this case, as it has been pleaded by Glenmont, there is nothing which points to the possibility of such a duty of care. I have used the expression “possibility” since Lend Lease must show that Glenmont cannot succeed on any possible view of the facts or law. The facts as pleaded by Glenmont do not show how the alleged duty of care arises. Instead, facts are pleaded for the purpose of stating the claim for a declaration that Lend Lease should be ordered to indemnify under the policy. In the course of argument, Mr Holland was asked to identify the facts which gave rise to the duty of care but he was unable to do so. In the circumstances, Glenmont is not able to show any facts which could give rise to a duty of care on the part of Lend Lease vis-a-vis Glenmont to settle the claim within a reasonable time.
There are at least two other difficulties with this part of the claim. First, Glenmont’s statement of claim baldly asserts the existence of a duty of care to it to pay within a reasonable time any claim made by Glenmont against Parker and Edwards which fell within the terms of the policy. That assertion belies the entitlement of Lend Lease to require Parker and Edwards to defend the claim. That in turn leads to the second difficulty. If Parker and Edwards succeed in defending the claim, there will be no liability to Glenmont for which they will seek indemnity from Lend Lease. The alleged duty of care assumes too much. It assumes that Glenmont will succeed in its claim. That is a further indication that the alleged duty of care does not exist.
With some justification, Mr Holland emphasised that the strike out application was made by Lend Lease at an extremely late stage at the very commencement of the trial. He pointed to the fact that Lend Lease had not raised any issue on the pleadings after the appeal had been dismissed in December 1993. In other cases, such a submission would have considerable force. But it is apparent that, in this case, at the eleventh hour, there has been a very material change in circumstances which justifies the application. The decision by Lend Lease to indemnify Parker and Edwards rendered it unnecessary to deal with a substantial issue at the trial and, therefore, had an important bearing upon the future conduct of the trial. The removal of this issue will substantially shorten the length of the trial. It was appropriate to address both the question of the claim for the declaration and the claim that Lend Lease owed a duty of care to Glenmont to pay within a reasonable time the claim it had made against Parker and Edwards. The issue is of such importance that it is appropriate also that the court should take the unusual course of hearing an appeal against an interlocutory order of this nature.
Mr Holland also submitted that it was inappropriate for Lend Lease to rely only on the announcement made in open court by Mr Trim QC and not to file an affidavit in support of its application. In that way, he said, more detail as to the compromise would be available. In the circumstances of this case, nothing could be gained by filing an affidavit. The only relevant fact was that Lend Lease had agreed to indemnify pursuant to the policy. The court had been informed of that by counsel for both Lend Lease and Parker and Edwards. An affidavit would not advance the state of relevant information. The judge was entitled on act on the information given to him by Mr Trim QC. Courts will often act on the assurances of counsel given as officers of the court. I do not think that there was any aspect of the procedure which was irregular or inappropriate.
For all of these reasons, I would allow the appeal. I would set aside the decision of the trial judge and, in lieu thereof, make an order striking out paras 46 to 61 inclusive of the statement of claim and the prayers for relief as against the sixth defendant.

[1999] SASC 171

28 April 1999