May v Vero Insurance Limited

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FEDERAL COURT OF AUSTRALIA

May v Vero Insurance Limited [2012] FCA 727

Citation: May v Vero Insurance Limited [2012] FCA 727
Parties: STEPHEN MAY v VERO INSURANCE LIMITED
File number: NSD 360 of 2012
Judge: COWDROY J
Date of judgment: 9 July 2012
Catchwords: PRACTICE AND PROCEDURE – claim against individual under guarantee – proceedings in District Court – individual claims guarantee invalid as reinsurance – whether these proceedings duplicate District Court proceedings – whether proceedings are vexatious or an abuse of process
Legislation: Commonwealth of Australia Constitution Act s 51(xiv)
Commonwealth Criminal Code 1995 (Cth) s 6.1
Corporations Act 2001 (Cth) s 180
Federal Court Rules 2011 (Cth) rr 26.01, 16.21
Insurance Act 1973 (Cth) ss 9, 12
Trade Practices Act 1974 (Cth)s 52
Cases cited: AttorneyGeneral v Barker [2011] 1 FLR 759
Henry v Henry (1996) 185 CLR 571
Logan v Bank of Scotland (No 2) [1906] 1 KB 141
Moore v Inglis (1976) 9 ALR 509
Slough Estates Ltd v Slough Borough Council
[1968] Ch 299
Date of hearing: 2 July 2012
Date of last submissions: 2 July 2012
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 36
Solicitor for the Applicant: The Applicant appeared in person
Counsel for the Respondent: Mr G Johnson SC with Mr D Brogan
Solicitor for the Respondent: Mills Oakley Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 360 of 2012
BETWEEN:

STEPHEN MAY
Applicant
AND:

VERO INSURANCE LIMITED
Respondent

JUDGE:

COWDROY J

DATE OF ORDER:

9 JULY 2012

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Pursuant to Rule 16.21 of the Federal Court Rules 2011, the Applicant’s Amended Statement of Claim and Further Amended Statement of Claim be struck out on the ground that the pleadings constitute an abuse of the process of the Court.

2.The Applicant pay the costs of the Respondent.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 360 of 2012
BETWEEN:

STEPHEN MAY
Applicant
AND:

VERO INSURANCE LIMITED
Respondent

JUDGE:

COWDROY J

DATE:

9 JULY 2012

PLACE:

SYDNEY

REASONS FOR JUDGMENT

  1. Before the Court is an interlocutory application brought by the respondent (‘Vero’) for an order that judgment be entered in favour of Vero pursuant to r 26.01(1) of the Federal Court Rules 2011 (‘the Rules’). Vero claims that the applicant has no reasonable prospect of successfully prosecuting the proceedings; that the proceedings are frivolous and/or vexatious; that no reasonable cause of action was disclosed and that the proceedings are an abuse of the process of the Court.

  2. It is necessary to refer to the history of the proceedings and associated proceedings before turning to the subject matter of the interlocutory application.

    FACTS

  3. Vero is registered by APRA as an Authorised Insurer pursuant to s 12 of the Insurance Act 1973 (Cth) (‘the Act’). As such, Vero is authorised to conduct new or renewal insurance…

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Details
Case
[2012] FCA 727
Decision Date

CaseChat Overview and Summary

The case of May v Vero Insurance Limited involves a dispute between Mr. May and Vero Insurance Limited, which arose out of claims made against a company for which Mr. May was a director, Belltree Constructions Pty Limited. Mr. May had signed an indemnity on behalf of Belltree Constructions, promising to pay Vero Insurance on demand all amounts paid by Vero due to claims made under any policy or certificate of warranty insurance issued by Vero. Vero had paid out $362,076.27 due to claims made by three homeowners in respect of work carried out by Belltree Constructions. Vero subsequently claimed this amount from Mr. May under the indemnity. The District Court proceedings were initiated by Vero against Mr. May to recover the amount, but Mr. May filed a defence in the District Court asserting that the indemnity was invalid. Mr. May subsequently filed a claim against Vero in the Federal Court, raising similar issues. Vero argued that Mr. May's claims in the Federal Court proceedings were invalid, vexatious, or an abuse of process, and sought an order to strike out Mr. May's claims. The court had to decide whether Mr. May's claims in the Federal Court were vexatious or an abuse of process and whether they duplicated the District Court proceedings. The court found that Mr. May's claims in the Federal Court were vexatious or an abuse of process and that they duplicated the District Court proceedings. The court found that Mr. May's claims in the Federal Court proceedings were identical to the claims he raised in his defence in the District Court proceedings, and that he had no valid grounds to challenge the indemnity he had signed on behalf of Belltree Constructions. The court also found that Mr. May's claims under various statutes were not valid, and that his claims were an abuse of process. The court struck out Mr. May's claims in the Federal Court proceedings and ordered him to pay Vero Insurance's costs.

Orders

Orders of the court

1. Pursuant to Rule 16.21 of the Federal Court Rules 2011, the Applicant’s Amended Statement of Claim and Further Amended Statement of Claim be struck out on the ground that the pleadings constitute an abuse of the process of the Court.

2. The Applicant pay the costs of the Respondent.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

It is necessary to refer to the history of the proceedings and associated proceedings before turning to the subject matter of the interlocutory application.FACTS Vero is registered by APRA as an Authorised Insurer pursuant to s 12 of the Insurance Act 1973 (Cth) (‘the Act’). As such, Vero is authorised to conduct new or renewal insurance business in Australia. The respondent to the interlocutory application (who is the applicant in these proceedings and who shall be referred to hereafter as ‘Mr May’) was at all relevant times one of the directors of a company known as Belltree Constructions Pty Limited (‘Belltree’), a now deregistered company. Belltree was engaged in the construction industry which included domestic building work. In 1989 the New South Wales government enacted legislation to regulate home builders. Such legislation required a builder to enter into a policy of insurance with an insurer to indemnify home owners in respect of any claims made for breach of statutory warranties given for building works and for incomplete work resulting from the death, disappearance or insolvency of the builder under his building contract with the home owner. Vero was an insurer who carried on the business of a Home Owners Warranty Insurer pursuant to the Act. In consideration of Vero providing Home Owners Warranty Insurance to Belltree, Mr May signed documents together described as a Group Trading Agreement on 29 September and 4 October 2005 by which he undertook to pay Vero on demand all amounts paid by Vero pursuant to any claim made under any policy or certificate of warranty insurance issued by Vero (‘the indemnity’). Claims were made by three home owners in respect of work carried out on residential buildings by Belltree and in consequence Vero was required to pay the sum of $362,076.27 for such claims. These claims arose out of Certificates of Insurance provided by Vero to Belltree numbered 372590, 73058502 and 311383. The claims made by the building owners and the amounts paid by Vero are not disputed. On 26 November 2009 Belltree was ordered to be wound up by the Supreme Court of New South Wales in proceedings 3524 of 2009 resulting from proceedings by one of the claimants. Thereafter Vero claimed the amount paid by it to the claimants from Mr May pursuant to the indemnity he had provided.DISTRICT COURT PROCEEDINGS On 6 December 2011 Vero commenced proceedings with file number 2011/394410 in the District Court of New South Wales (‘the District Court proceedings’) against Mr May claiming the amount of $362,076.27 pursuant to his indemnity. On 3 January 2012 Mr May filed a defence in the District Court which asserted that the indemnity was not a personal guarantee and that such indemnity was invalid. Simultaneous with the filing of his defence Mr May filed a Notice of Motion seeking two orders. The grounds relied upon by Mr May are set out verbatim:1.To Strike out the Statement of Claim By Vero Insurance As the insurance policy being Home owner Warranty insurance is illegal, as it required the Builder to be the re insurer and therefore this doesn’t comply with the Insurance Act of 1973.2.Or in the Alternative transfer the proceedings to the Federal Court, for determination of the above.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The proceedings came before the Court for a directions hearing on 17 May 2012 when the Court made orders granting leave to the applicant to file the Second Further Amended Statement of Claim and directing that an affidavit be filed stating precisely the grounds upon which Mr May relied to support his claim. Orders were also made concerning Vero’s foreshadowed strikeout motion. CONSIDERATION Mr May’s defence to the proceedings raised in the District Court contains matters which are identical to the matters which he seeks to raise in his claim before this Court. Mr May’s claims as pleaded fall into various categories. The first claim alleges that the undertaking is invalid. Two reasons are advanced by Mr May for such invalidity. First, he claims that the indemnity constitutes a form of reinsurance by him for Vero and since he was not licensed to carry out insurance business in Australia the indemnity is invalid because it constitutes a breach of s 9 of the Act which lays down requirements of conducting an insurance business with which he did not comply. Alternatively, it is submitted that the indemnity was provided after various beaches of the then Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’), as amended, had occurred. A second category of claim concerns the conduct of Vero. A declaration is sought that Vero has breached certain sections of the Act and that Vero’s conduct in requiring an indemnity was ‘illegal’. It appears that Mr May also submits that the requiring of such indemnities thereby negatived Vero’s authorisation to act as an insurer. As a third claim, Mr May submits that Vero ‘breached the Corporations Act 2001, s 180’. The facts relied upon to support such assertion relates to an announcement that Mr May claims was made by Vero. The announcement stated that Vero had settled 10,000 claims. Mr May claims this is untrue. Lastly, Mr May seeks a declaration that ‘an offence has been committed under section 6.1 of the Criminal Code because of Vero’s claimed breaches of the Act and of the Corporations Act 2001’. Vero has made several submissions in response to the allegations raised by Mr May. Such submissions have pointed out certain perceived shortcomings in some of the pleadings raised by Mr May, especially in relation to his allegations of breaches of the Trade Practices Act and his claims under the Act, the Criminal Code Act 1995 (Cth) and the Corporations Act 2001 (Cth) (‘the Corporations Act’). In respect of the Trade Practices Act claims, Vero maintains that the sections under which Mr May is claiming relief cannot succeed. For example, his claim under s 52 cannot succeed because s 51AF excludes that section from operation in relation to financial services, which includes ‘a contract of insurance’. As to the claim under s 180 of the Corporations Act, Vero submits that such section provides a statutory remedy to a limited class of persons and that the applicant does not fall within such class. Accordingly Vero submits such course of action is also doomed.