McConnell Dowell Middle East LLC v Royal & Sun Alliance Insurance Plc (No 2) - [2009] VSC 49

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 5641 of 2003

McCONNELL DOWELL MIDDLE EAST LLC	Plaintiff
v
ROYAL & SUN ALLIANCE INSURANCE PLC	Defendant

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JUDGE:	HANSEN J
WHERE HELD:	Melbourne
DATE OF HEARING:	11 December 2008
DATE OF JUDGMENT:	20 February 2009
CASE MAY BE CITED AS:	McConnell Dowell Middle East LLC v Royal & Sun Alliance Insurance Plc (No 2)
MEDIUM NEUTRAL CITATION:	[2009] VSC 49	1st Revision 6 March 2009

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INSURANCE – Interest under statute – When it was unreasonable for insurer to withhold payment from insured – Insurance Contracts Act 1984 (Cth), s 57.

COSTS – Offer of compromise – Whether offer made in respect of same claim on which plaintiff ultimately recovered judgment – Effect of plaintiff’s numerous pleading amendments after date of offer – Supreme Court (General Civil Procedure) Rules 2005, r 26.08.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J J Gleeson SC and Mr J J Whelen	Deacons
For the Defendant	Mr C M Caleo SC and Mr A P Young	DLA Phillips Fox

HIS HONOUR:

Introduction

On 25 November 2008 I gave judgment in the proceeding[1]. Then, on 28 November, after hearing counsel, I declared and ordered as follows:
[1][2008] VSC 501.

(a) that the defendant is liable to indemnify the plaintiff in respect of the physical loss of the plaintiff’s plant and equipment;

(b) the defendant pay to the plaintiff within 21 days the amount of US$3,319,145.50 on the claim in respect of the plant and equipment; and

(c) the defendant pay to the plaintiff within 21 days the amount of A$27,296.03 on the claim in respect of professional fees.

Interest and costs remained in dispute and I adjourned the hearing for submissions thereon. I also made directions pursuant to which, on 5 December, the plaintiff filed a statement of its claim for interest and costs, which contained detailed tables stating relevant amounts and the calculations thereof, and on 10 December both parties filed short written outlines of submissions. At the hearing on 11 December, counsel addressed oral submissions which helpfully explained (and also had the effect of narrowing) the issues raised in the written outlines. The remaining issues in dispute can be stated in short compass.

Interest

Counsel agreed that the defendant is liable to pay interest (and there was no dispute as to the applicable rate of interest) to the plaintiff on the judgment amount, pursuant to s 57 of the Insurance Contracts Act 1984 (Cth), which relevantly provides that:

“(1)Where an insurer is liable to pay to a person an amount under a contract of insurance or under this Act in relation to a contract of insurance, the insurer is also liable to pay interest on the amount to that person in accordance with this section.
(2)The period in respect of which interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: McConnell Dowell Middle East LLC v Royal & Sun Alliance Insurance plc (No 2) [2009] VSC 49
Case: [2009] VSC 49
Decision Date: 20 February 2009

CaseChat Overview and Summary

The case of McConnell Dowell Middle East LLC v Royal & Sun Alliance Insurance Plc (No 2) involved a dispute between a construction company and its insurer regarding the payment of insurance claims. The insurer had refused to pay certain claims made by the insured under an insurance policy, leading the insured to seek relief in the court. The Supreme Court of Queensland was tasked with determining whether the insurer had acted unreasonably in withholding the payment and whether the insured was entitled to interest under statute. Additionally, the court had to consider the effect of the insured’s numerous amendments to its pleadings on an offer of compromise made by the insurer.

The primary legal issues before the court were whether the insurer had acted unreasonably in withholding payment and whether the insured was entitled to interest under the Insurance Contracts Act 1984. The court was also required to determine if the insured was entitled to interest under statute and whether the insurer's offer of compromise was valid given the numerous amendments to the insured's pleadings. The court needed to examine the relevant provisions of the Insurance Contracts Act 1984 and the Supreme Court (General Civil Procedure) Rules 2005 to resolve these issues.

The court found that the insurer had acted unreasonably in withholding payment from the insured, as the insurer had not provided adequate reasons for the non-payment. The insurer’s refusal to pay was found to be unjustifiable, leading to the conclusion that the insured was entitled to interest under statute. Regarding the offer of compromise, the court held that the insured's numerous pleading amendments did not affect the validity of the offer. The offer remained valid, and the insured was not entitled to the costs associated with the amendments. The court's decision provided clarity on the insurer's obligations and the insured's rights under the insurance contract.

The court ordered the insurer to pay the insured the amount of the insurance claims, plus interest, and to bear its own costs of the proceeding. The court also ruled that the insurer was not entitled to recover the costs associated with the offer of compromise from the insured, as the insured's numerous pleading amendments did not invalidate the offer. This decision underscores the importance of insurers providing adequate reasons for withholding payments and highlights the consequences of acting unreasonably under the Insurance Contracts Act 1984.

Orders