Morrell v Mercantile Mutual Insurance (Australia) Ltd
[1999] WASCA 250
•12 NOVEMBER 1999
MORRELL -v- MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD & ORS [1999] WASCA 250
| (1999) 21 WAR 451 | |||
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [1999] WASCA 250 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:77/1999 | 13 OCTOBER 1999 | |
| Coram: | MALCOLM CJ KENNEDY J PIDGEON J | 12/11/99 | |
| 28 | Judgment Part: | 1 of 1 | |
| Result: | Application refused | ||
| PDF Version |
| Parties: | HELEN WINIFRED MORRELL MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD IAN WAYNE GIBBS PARAGLIDE PTY LTD |
Catchwords: | Procedure Application by applicant plaintiff to be joined as respondent to appeal Issue on appeal was liability of appellant insurer to indemnify respondent defendant for liability to applicant Applicant had no claim against appellant insurer Mere commercial interest in appeal No legal interest Application refused Re IG Farbenindustrie AG Agreement [1944] 1 Ch 41 applied |
Legislation: | Rules of the Supreme Court 1971, O 63 r 10(1) Bankruptcy Act 1966 (Cth), s 117 Corporations Law, s 562 |
Case References: | Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 Aintree Holdings Pty Ltd v Corderoy (1996) 16 WAR 416 Amon v Raphael Tuck & Sons Ltd ([1956] 1 QB 357 Andrews v Nominal Defendant [1963] NSWR 359 Bradley v Eagle Star Insurance Co Ltd [1989] AC 957 Cunard Steamship Co Ltd v Marten [1903] 2 KB 511 Cuthbertson v Hobart Corporation (1921) 30 CLR 16 Dorrough v Bank of Melbourne Ltd (1995) 8 ANZ Insurance Cases 61-290 Eden v Weardale Iron & Coal Co (1885) 28 Ch D 333 Edison and Swan United Electric Light Co v Holland (1889) 41 Ch D 28 FAI General Insurance Company Ltd v Interchase Corporation Ltd (1999) 10 ANZ Insurance Cases 61-428 Fire Auto and Marine Insurance Ltd v Greene [1964] 2 QB 687 Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 Gowar v Hales [1928] 1 KB 191 Gurtner v Circuit [1968] 2 QB 587 Harman v Crilly [1943] 1 KB 168 Holman & Sons Ltd v Merchants Marine Insurance Co Ltd [1919] 1 KB 383 Homestyle Pty Ltd v City of Belmont & Anor [1999] WASCA 59 Hood's Trustees v Southern Union General Insurance Co of Australasia Ltd [1928] 1 Ch 793 In Re Bradford Navigation Co [1870] 5 Ch App 600 In Re Compania Merabello San Nicholas SA [1973] 1 Ch 75 Israelson v Dawson [1933] 1 KB 301 JN Taylor Holdings Ltd v Bond (1993) 59 SASR 432 Joyce v Kennard [1871] 7 QB 78 News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 Oceanic Crest Shipping Company v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626 Oil Basins Limited v The Commonwealth (1993) 178 CLR 643 Pegang Mining Co Ltd v Choong Sam & Ors [1969] 2 MLJ 52 Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34 Re Gasbourne Pty Ltd [1984] VR 801 Re Harrington Motor Co; Ex parte Chaplin [1928] 1 Ch 105 Re IG Farbenindustrie AG Agreement [1944] 1 Ch 41 Robinson v Western Australian Museum (1977) 138 CLR 283 The Result [1958] P 174 Trident General Insurance Co Ltd v McNiece Pty Ltd (1988) 165 CLR 107 United States Tobacco Co v Minister for Consumer Affairs (1988) 20 FCR 520 Woodside Petroleum Development Pty Ltd v H&R - E&W Pty Ltd, unreported; FCt SCt of WA; Library No 990124; 16 March 1999 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : MORRELL -v- MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD & ORS [1999] WASCA 250 CORAM : MALCOLM CJ
- KENNEDY J
PIDGEON J
- Applicant (Plaintiff)
MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD
Appellant (Third Party)
AND
IAN WAYNE GIBBS
PARAGLIDE PTY LTD
Respondents (Second Defendants)
Catchwords:
Procedure - Application by applicant plaintiff to be joined as respondent to appeal - Issue on appeal was liability of appellant insurer to indemnify respondent defendant for liability to applicant - Applicant had no claim against appellant insurer - Mere commercial interest in appeal - No legal interest - Application refused
(Page 2)
Re IG Farbenindustrie AG Agreement [1944] 1 Ch 41 applied
Legislation:
Rules of the Supreme Court 1971, O 63 r 10(1)
Bankruptcy Act 1966 (Cth), s 117
Corporations Law, s 562
Result:
Application refused
Representation:
Counsel:
Applicant (Plaintiff) : Mr R E Keen
Appellant (Third Party) : Mr G R Hancy
Respondents (Second Defendants) : Mr W L Goodlet
Solicitors:
Applicant (Plaintiff) : Greenland Brooksby
Appellant (Third Party) : Srdarov Richards Burton
Respondents (Second Defendants) : Unmack & Unmack
Case(s) referred to in judgment(s):
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Aintree Holdings Pty Ltd v Corderoy (1996) 16 WAR 416
Amon v Raphael Tuck & Sons Ltd ([1956] 1 QB 357
Andrews v Nominal Defendant [1963] NSWR 359
Bradley v Eagle Star Insurance Co Ltd [1989] AC 957
Cunard Steamship Co Ltd v Marten [1903] 2 KB 511
Cuthbertson v Hobart Corporation (1921) 30 CLR 16
Dorrough v Bank of Melbourne Ltd (1995) 8 ANZ Insurance Cases 61-290
Eden v Weardale Iron & Coal Co (1885) 28 Ch D 333
Edison and Swan United Electric Light Co v Holland (1889) 41 Ch D 28
FAI General Insurance Company Ltd v Interchase Corporation Ltd (1999) 10 ANZ Insurance Cases 61-428
Fire Auto and Marine Insurance Ltd v Greene [1964] 2 QB 687
Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421
(Page 3)
Gowar v Hales [1928] 1 KB 191
Gurtner v Circuit [1968] 2 QB 587
Harman v Crilly [1943] 1 KB 168
Holman & Sons Ltd v Merchants Marine Insurance Co Ltd [1919] 1 KB 383
Homestyle Pty Ltd v City of Belmont & Anor [1999] WASCA 59
Hood's Trustees v Southern Union General Insurance Co of Australasia Ltd [1928] 1 Ch 793
In Re Bradford Navigation Co [1870] 5 Ch App 600
In Re Compania Merabello San Nicholas SA [1973] 1 Ch 75
Israelson v Dawson [1933] 1 KB 301
JN Taylor Holdings Ltd v Bond (1993) 59 SASR 432
Joyce v Kennard [1871] 7 QB 78
News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410
Oceanic Crest Shipping Company v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626
Oil Basins Limited v The Commonwealth (1993) 178 CLR 643
Pegang Mining Co Ltd v Choong Sam & Ors [1969] 2 MLJ 52
Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1
Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363
Qantas Airways Ltd v AF Little Pty Ltd [1981] 2 NSWLR 34
Re Gasbourne Pty Ltd [1984] VR 801
Re Harrington Motor Co; Ex parte Chaplin [1928] 1 Ch 105
Re IG Farbenindustrie AG Agreement [1944] 1 Ch 41
Robinson v Western Australian Museum (1977) 138 CLR 283
The Result [1958] P 174
Trident General Insurance Co Ltd v McNiece Pty Ltd (1988) 165 CLR 107
United States Tobacco Co v Minister for Consumer Affairs (1988) 20 FCR 520
Case(s) also cited:
Woodside Petroleum Development Pty Ltd v H&R - E&W Pty Ltd, unreported; FCt SCt of WA; Library No 990124; 16 March 1999
(Page 4)
1 MALCOLM CJ: This is an application on the part of the applicant ("Mrs Morrell") for an order that she be joined as second respondent in this appeal. Mrs Morrell was the plaintiff in two actions heard together in the District Court at Perth in December 1998. In the first action the respondent Ian Wayne Gibbs ("Mr Gibbs") was the second defendant. Paraglide Pty Ltd ("Paraglide") was the second defendant in the second action. The appellant was joined as a third party in both actions. In the first action the applicant sued one Paul Harford as first defendant and Mr Gibbs as second defendant. In the second action the first defendant was Blue Lagoon Water Sports Pty Ltd, a company said to be controlled by Mr Harford, and the second defendant Paraglide was said to be controlled by Mr Gibbs. Mrs Morrell brought an action against Mr Harford and Mr Gibbs and their respective companies for damages for negligence. It appears that by the time of the trial in December 1998, Blue Lagoon had ceased to exist. At the same time the learned trial Judge heard a consolidated action by Mr Gibbs and Paraglide against the appellant claiming indemnity under a contract of insurance with the appellant.
2 Mrs Morrell's claim arose out of a para-sailing accident on 30 January 1989 as a result of which she suffered serious injuries. Mr Harford had given Mrs Morrell certain instructions before she set out. Mr Gibbs was driving the speedboat which was towing Mrs Morrell. Mrs Morrell had never been para-sailing before. The learned Judge found that the accident was caused by the negligence of Mr Gibbs. As the learned trial Judge put it:
"The accident was entirely Gibbs' fault. This was an avoidable accident: Gibbs was too close to the land, he brought Mrs Morrell in too close to land when she was heading for the trees. Had he powered on he could have pulled her clear, but he did not."
- The learned Judge also found that Mr Harford was not negligent. In the result Mr Gibbs and Paraglide were held liable to Mrs Morrell for damages to be assessed.
3 The appellant declined liability to indemnify Mr Gibbs and Paraglide. The denial was based on a number of grounds summarised by the learned trial Judge as follows:
"In general terms the third party says that whoever they insured they did not insure Gibbs alone, that they were insuring Gibbs and Soderberg trading as Paraglide Pty Ltd and it was not in
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- that capacity that he sailed Mrs Morrell and therefore he is not their insured. It is further argued that it is necessary for me to determine whether this was a contract of marine insurance or a contract of general insurance because the contract included an obligation to notify changes in circumstances and here there were changes in circumstances of which they were not notified. If it is a contract of marine insurance they are entitled to cancel the policy, but if it is not marine insurance then under the Insurance Contract Act they have a right to cancel. They have lost the opportunity to exercise that right with the result that they are entitled to reduce their liability by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of the insured's behaviour. It is pointed out to me that the test in each case is slightly different because the test under the Marine Insurance Act turns on what would be material to a prudent insurer whereas with the Insurance Contract Act it is more concerned with what the insured knows and would know to be a matter relevant to the decision of the actual insurer.
The third party further submits that there was no notification that an accident had taken place until some four years after the event and under the Marine Insurance Act that would bring an end to any right to claim but under s54 of the Insurance Contract Act the insurer is prevented from avoiding liability unless its interests have been prejudiced and in this case there is no evidence of any prejudice.
They further argue that in the policy there is a warranty of lawful adventure and given that in this case there was no Department of Civil Aviation exemption and that at the time of the accident the vessel was not in survey, it was not a lawful venture."
4 Her Honour concluded that the appellant was liable to indemnify Mr Gibbs and Paraglide in respect of Mrs Morrell's claim and costs.
5 At trial Mrs Morrell's counsel was permitted by the trial Judge to argue the issue whether the insurance policy was a policy of marine insurance or a policy of general insurance and, if the latter, whether the pleadings in the action were wide enough to cover a claim based on general insurance. It appears that counsel for the appellant objected to counsel for Mrs Morrell making submissions concerning the issues in the
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- third party proceedings. Counsel for Mrs Morrell, however, asserted that he had:
"… a duty as an officer of the Court, if I can assist the Court, to bring to the Court's attention any matters which are relevant in relation to the law."
7 The appellant's grounds of appeal contend that the learned Judge should have found that Mr Gibbs and Paraglide were not entitled to indemnity under the policy as the insured under that policy were "R Soderberg and I Gibbs trading as Paraglide Pty Ltd". This was a business venture involving "those entities" carried on at the Narrows Bridge site on the Swan River in relation to their interest in a vessel called the Lone Ranger. It is contended that the accident occurred at a different site in respect of a distinct commercial para-sailing venture, after the business of R Soderberg and I Gibbs trading as Paraglide Pty Ltd had terminated and when the vessel Lone Ranger had gone out of survey and was up for sale. The grounds also contend that the learned Judge was in error in concluding that the insurance policy was not a contract of marine insurance in respect of which Mr Gibbs and Paraglide were not entitled to indemnity by reason of material non-disclosure and failure to observe notification obligations. Finally, it is contended that there had been a failure by the insured under the policy to notify of a series of changes of circumstances in breach of express conditions of the insurance contract which entitled the appellant to decline liability to indemnify them in respect of their liability to Mrs Morrell.
8 Counsel for Mr Gibbs and Paraglide supported the application by Mrs Morrell for joinder on the basis that their resources had been almost exhausted in the conduct of the defence to Mrs Morrell's claim and of their third party claim against the appellant. It was contended that the Court might be better assisted if Mrs Morrell was joined as a respondent in the appeal.
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9 The application was opposed by the appellant on the ground that Mrs Morrell was not a necessary or proper party on the hearing of the appeal because:
"1.1 this is an appeal as to the rights and liabilities of other parties;
1.2 there was no issue at trial between [Mrs Morrell] and the appellant;
1.3 there is no issue on the appeal between [Mrs Morrell] and the appellant;
1.4 the rights of or liabilities of [Mrs Morrell] will not be directly affected by the outcome of the appeal."
10 It was accepted by counsel for the appellant that a judgment creditor has a commercial interest in the capacity of a judgment debtor to satisfy a judgment, and hence in the right or otherwise of the judgment debtor to claim indemnity under an insurance policy. It was submitted, however, that the presence or absence of that right to claim indemnity does not directly affect any property, legal right or obligation of the judgment debtor. It was further submitted that at best the outcome of the appeal on the rights of or liabilities to Mrs Morrell would be indirect or consequential.
11 Appeals to the Full Court are governed by O 63 of the Rules of the Supreme Court 1971. There are no rules dealing specifically with the joinder of parties to an appeal. However, O 63 r 10(1) provides that:
"The Full Court on any appeal shall have all the powers and duties as to amendment and otherwise of the Court, Judge or Master appealed from …"
- This would include power relating to joinder so that a party who had not been involved in the trial could be joined in the appeal: Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 at 31 per Lord Sumner; and Oceanic Crest Shipping Company v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626 at 672 per Brennan J. That is not this case. Mrs Morrell was the plaintiff in the action. While the appellant was joined in the actions as a third party, the actions were consolidated. While there was no legal issue directly involving any right of Mrs Morrell as against the appellant, the facts are that she has a very real commercial interest in advancing a case against the appellant because, unless the
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- appellant is bound to indemnify Mr Gibbs and Paraglide, there is very little prospect of recovery of the damages awarded to her.
12 The question raised by her application to be joined as a respondent to the appeal is whether that is a sufficient interest for the purposes of the Rules of the Supreme Court 1971 in the context of an appeal by the appellant insurer against the respondents as insured on the issue of liability to indemnify them in respect of their liability to Mrs Morrell.
13 The appellant contends that the issue should be determined by reference to O 18 r 6(2) which provides that:
"At any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application -
(a) order that any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;
(b) order that any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, be added as a party,
but no person shall be added as a plaintiff without his consent signified in writing or in such other manner as may be authorised."
14 This rule is in substantially the same terms as the English Rule O 16 r 11 as it stood prior to 1971. In Pegang Mining Co Ltd v Choong Sam & Ors [1969] 2 MLJ 52, a decision of the Privy Council in respect of the relevant Malaysian Rule which was in the same terms as the English Rule, Lord Diplock said at 55 - 56:
"To come within the words of the rule the party to be added must be one 'who ought to have been joined, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter'. These words have been the subject of voluminous judicial exegesis and Amon v Raphael Tuck & Sons Ltd ([1956] 1 QB 357) contains a useful collection of citations to Devlin J of many of the authorities
(Page 9)
- prior to 1956. Devlin J's analysis of these authorities led him to reject the view expressed by Lord Esher MR in Byrne v Brown ((1889) 22 QBD 657) that the rule ought to be given a wide interpretation so as 'to secure that, when a court can see in the transaction brought before it that the rights of one of the parties will or may be so affected that under the forms of law other action may be brought in respect of that transaction, the Court shall have power to bring all the parties before it, and determine the rights of all in one proceeding'. Devlin J himself accordingly propounded in Amon's case a much narrower interpretation of the rule which it is unnecessary to repeat here for it was over-ruled, in their Lordships' view rightly, by the Court of Appeal in Gurtner v Circuit ([1968] 2 QB 587) a case decided after the date of the judgment of the Federal Court of Malaysia in the present case.
The cases illustrate the great variety of circumstances in which it may be sought to join an additional party to an existing action. In their Lordships' view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard. To achieve this object calls for a flexibility of approach which makes it undesirable in the present case, in which the facts are unique, to attempt to lay down any general proposition which could be applicable to all cases.
It has been sometimes said as in Moser v Marsden ([1892] 1 Ch 487) and in In Re IG Farbenindustrie AG ([1944] Ch 41) that a party may be added if his legal interest will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party they do not find the dichotomy between 'legal' and 'commercial' interests helpful. A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?"
(Page 10)
15 The second and third paragraphs in that passage were cited with approval by Templeman J (with whom Malcolm CJ and Owen J agreed) in Homestyle Pty Ltd v City of Belmont & Anor [1999] WASCA 59 at [30] as stating the test to be applied in considering the joinder of a party. The same passage was adopted by the Full Court of the Federal Court in News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410. In a joint judgment Lockhart, Von Doussa and Sackville JJ said at 525:
"The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent. This is particularly so with remedies in the nature of an injunction: see Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 at 322 per Kirby P. The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases where the effect of the order on non-parties can be characterised as only indirect or consequential."
16 This statement was made in the context of r 7 and r 8(1) of the Federal Court Rules 1979 (Cth). Rule 7 is substantially to the same effect as r 6(1) of the Rules of the Supreme Court. Rule 8(1) is to the same effect as r 6(2)(b) of our Rules.
17 It is apparent that, as a practical matter, the prospect of Mrs Morrell recovering her damages against Mr Gibbs and Paraglide is dependent upon the appellant being liable to indemnify them. It is equally apparent, however, that the appellant is under no legal liability to Mrs Morrell. The plain fact is that the judgment she has obtained against Mr Gibbs and Paraglide is of no commercial value unless the appellant is liable to indemnify them.
18 At common law a person injured by reason of another person's wrongdoing has no right of action against insurers who have undertaken to indemnify the wrongdoer; the only cause of action available is against the wrongdoer, whether the wrong was a tort or a breach of contract. This is the reason why in England the Third Parties (Rights against Insurers) Act 1930 was enacted which enabled a third party who had a claim against
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- an assured to establish a direct right of action against the insurers in the event that the insured became insolvent. If this condition was fulfilled, the third party was afforded such remedies as the assured had against insurers. It follows that the common law rule applies in any insurance context except to the extent modified by statute. In the past there were attempts by a third party who had recovered damages against an assured to seek a remedy against insurers by way of garnishee proceedings. Israelson v Dawson [1933] 1 KB 301 is an example of such a case. It was held that no debt was due from an insurer to his assured. There was only a promise to indemnify the assured against such payment as the assured was legally liable to make. If the promise was not honoured, the assured had a claim for breach of contract, but since no debt was due there was nothing which could be garnished in the hands of the insurers. Furthermore, the obligation of the insurer could be discharged by satisfying any judgment obtained against the assured by the third party. Such a payment would discharge the insurer's obligation to the insured.
19 In the 19th Century and into the 20th Century, policies of marine insurance which contained provision for liability to third parties, as distinct from loss arising from maritime perils and casualties, were regarded as exceptional: see Joyce v Kennard [1871] 7 QB 78; Cunard Steamship Co Ltd v Marten [1903] 2 KB 511; and Holman & Sons Ltd v Merchants Marine Insurance Co Ltd [1919] 1 KB 383. In the latter case, it was held that where a contract which is substantially one of marine insurance contains an ancillary clause covering the assured's liability to third parties, the special rules governing the contract of marine insurance will be held applicable to this ancillary clause.
20 Until Parliament enacted legislation making provision for a person injured to sue the insurer of a driver of a motor vehicle to recover damages caused by a negligent driver, there was no basis upon which any claim could be made against the insurer by the person injured. In this State, so far as motor vehicle insurance in respect of liability to third parties is concerned, the matter is covered by s 7 of the Motor Vehicle (Third Party Insurance) Act 1943. Section 7(1) of the Act provides that a person who has obtained a judgment against an insured in respect of negligence causing death or bodily injury caused by or by the driving of a motor vehicle specified in a policy of insurance under the Act, may recover by action against the Insurance Commission of Western Australia the amount unsatisfied under such judgment as relates to death or bodily injury. Such a provision does not give the third party any right to sue the insurer before the liability of the assured has been established: Post Office
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- v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363; and Bradley v Eagle Star Insurance Co Ltd [1989] AC 957.
21 In the context of motor vehicle third party insurance following the enactment of the relevant legislation in England in 1930, early attempts to an insured person to join the insurer as a third party in an action for damages for negligence by issuing a third party notice were rejected. The reason for the rejection was that such actions for negligence were tried before a jury. It was thought that the jury might be prejudiced if it knew of the existence of a policy of insurance: Gowar v Hales [1928] 1 KB 191; Harman v Crilly [1943] 1 KB 168 at 170 per Lord Greene MR. In the latter case, at 171, Lord Greene MR noted that the old practice was out of date and that the reason for it had disappeared as actions of the kind had ceased to be tried by juries. The purpose of such third party proceedings was to enable the insured to obtain a declaration of liability to indemnify against the defendant's liability to the plaintiff in the action. It thus became a matter of convenience that the question whether or not there was a contract of indemnity or a liability to indemnify should be tried in third party proceedings between the defendant and the insurer at the same time as the action in which the liability of the defendant to the plaintiff would be determined. In the course of giving judgment in Harman v Crilly at 170, Lord Greene MR pointed out that:
"The issues between the several parties in this litigation are distinct, and it is the duty of the judge not to allow the result of his decision on one issue to affect his mind in considering his issue on the other issue."
22 It was made clear in that passage as it has been clear in many other cases that the issue of liability to indemnify as between a defendant insured and his insurer is a separate and distinct issue from the issue between the issue of liability for damages as between the plaintiff and the defendant insured. The insurer's liability is directly affected by the existence of the claim if it is one which, if made out, would give rise to the insurer's liability to indemnify the insured. However, whether or not the defendant was insured and, if so, whether the insurer was liable to indemnify the defendant, are issues which do not affect the liability of the defendant insured to the plaintiff. For relevant purposes, the existence of insurance increases the commercial chance of the plaintiff actually recovering the amount of a judgment in the event that the insurer is liable to indemnify the defendant.
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23 All of these authorities suggest that Mrs Morrell has no direct legal or equitable right which would be directly affected by the existence or otherwise of a liability on the part of the appellant to indemnify Mr Gibbs and Paraglide. Whether or not as a matter of commercial reality she will be able actually to recover the damages awarded to her against Mr Gibbs and Paraglide will be directly affected as a matter of fact by the existence or otherwise of the liability of the appellant to indemnify Mr Gibbs and Paraglide. It was on this basis that it was accepted by counsel for the appellant that a judgment creditor has a commercial interest in the capacity of a judgment debtor to satisfy a judgment and, consequently, in the right or otherwise of the judgment debtor to claim indemnity under an insurance policy. It was submitted, however, that the presence or absence of that right to claim indemnity did not directly affect any property, legal right or obligation of the judgment creditor. In support of this submission counsel for the appellant relied upon the decision of the Court of Appeal of Queensland in FAI General Insurance Company Ltd v Interchase Corporation Ltd (1999) 10 ANZ Insurance Cases 61-428. In that case, Interchase Corporation Ltd ("Interchase") commenced proceedings against Colliers Jardine (Qld) Pty Ltd and its employee, a Mr Tidbold, (together referred to as "the insured"). Interchase had engaged Colliers as its valuer in connection with the development of retail and commercial premises in Brisbane. Interchase claimed to have lost some $60 million as a result of Mr Tidbold's negligent valuation of the premises. FAI was the insurer of Colliers and Tidbold under a professional liability indemnity policy. FAI refused to indemnify the insured. The insured accepted that decision. Interchase sought to join FAI as an additional defendant to its action against the insured. It sought a declaration that FAI was liable to indemnify the insured for their liability to Interchase. Unless FAI indemnified the insured, they would not have been able to satisfy any judgment that Interchase might obtain against them. The Rules of the Supreme Court (Qld) were similar to the provisions of O 18 r 6 of our Rules. In particular, O 3 r 11(2) of the Queensland Rules provides that:
"The Court or a judge may, at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court or judge to be just order … that the names of any persons who ought to have been joined, or whose presence before the court may be necessary in order to obtain the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter, be added either as plaintiffs or defendants."
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24 The trial Judge granted Interchase's application and joined FAI. FAI appealed against that decision. McPherson JA and Byrne J allowed the appeal. Davies JA dissented. The judgment of Byrne J was the leading judgment. Byrne J said at 74,823 that:
"Interchase's object in joining FAI is to obtain a declaration concerning FAI's obligations to parties other than Interchase."
25 A footnote to that passage notes that:
"At the moment, the declaration is sought only against FAI. An application to amend the prayer for relief to seek the declaration against the two insured has been foreshadowed."
26 The learned Judge continued at 74,823:
"What utility could attend such an adjudication? Interchase is not a party to the policy. The policy was procured for the protection of the insured, not for claimants against them like Interchase. Although Colliers and Tidbold may sue on the policy, Interchase has no entitlement under the general law or statute to enforce it. Of course, like every prospective judgment creditor, Interchase has a commercial interest in the capacity of judgment debtors to satisfy a money judgment. But the declaration sought - relief that relates exclusively to FAI's liability to Colliers and Tidbold - could not directly affect any property, legal right or obligation of Interchase. Nor could it effectively determine FAI's rights or duties. A judicial determination of the issues pertaining to Interchase's claim for declaratory relief cannot shut out FAI from litigating about them again, as, for example, should Interchase's damages claim succeed, in proceedings instigated by the liquidator or by Tidbold's trustee claiming indemnity. The order for joinder does proceed on a contrary assumption: viz that a question as to the rights and duties of insurer and insured is concluded by a judgment on such issues between Interchase and one or other or the insured. This, however, is not the law."
27 McPherson JA agreed with Byrne J "completely". However, his Honour went on to say of O 3 r 11:
"That rule enables persons to be added as defendants 'who ought to have been joined' as well as those 'whose presence before the Court may be necessary in order to enable the Court effectually
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- and completely to adjudicate upon and settle all the questions involved in the cause or matter'. The first of these categories covers persons who must be included in the action, unless there is a valid excuse for their non-joinder; the second covers those whose joinder is so important to a just resolution of the case that, if they cannot be joined, the action should not be allowed to proceed. In the language of courts and text writers of America on this topic (from which or whom this classification is taken) the first are described as 'necessary', the second as 'indispensable', parties. See James, Hazard & Lebsdorf, Civil Procedure, 4th ed, para 10.11 at 524-525."
28 McPherson JA at 74,820 held that FAI was not a necessary party to the action because:
"The cause instituted by Interchase against those two defendants is for damages for negligence or breach of contract arising out of what is alleged to have been a negligent valuation by Tidbold. It followed that the first criterion for joinder was not satisfied."
29 His Honour continued at 74,820:
"The question then is whether FAI is, in the American terminology, an 'indispensable' party to the action. Byrne J is rightly cautious about expressing an opinion on this question, but I must say I am disposed to think, and to hold, that FAI does not fulfil this criterion for joinder under O 3 r 11. Whether or not a party is indispensable and should be joined (as distinct from severed and struck out as a party) does not under O 3 r 11 fall to be determined by considerations of convenience. See In Re Vandervell's Trusts [1971] AC 912, 930, 931, 935-936, 940, applied in White v London Transport Executives [1971] 2 QB 721, 728-729; and see Qantas Airways v AF Little Pty Ltd [1981] 2 NSWLR 34, 53-54. The case of White v London Transport is in some respects not dissimilar to this. … The plaintiff's action against London Transport was capable of being determined or adjudicated upon quite adequately, effectually or completely without the bureau joining as a party."
30 McPherson JA went on to say at 74,821:
"In the absence of statute or contract [requiring one or other of the defendants to make and enforce a claim against FAI for
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- indemnity] there is no procedure for compelling an insured person to make a claim under a policy of insurance issued for his or her benefit, or for requiring the proceeds of a successful claim made by the insured be applied in satisfaction of a liability incurred to some other party. … The insured, if solvent, is at liberty to apply insurance proceeds in any way he pleases."
31 McPherson JA also noted that s 562(1) of the Corporations Law requires that insurance proceeds received from an insurer by a company or its liquidator are to be paid "by the liquidator" to the third party in respect of whom the liability insured was incurred. There is a corresponding provision in s 117 of the Bankruptcy Act 1966 concerning insurance proceeds received by the trustee of a bankrupt individual. McPherson JA concluded at 74,821 that:
"It follows that it is only if the plaintiff were to succeed in obtaining judgment in the action against either of the two defendants, whose liquidator or trustee in bankruptcy were then to demand and receive from FAI an amount in respect of its liability as professional indemnity insurer, that s562 of the Corporations Law or s117 of the Bankruptcy Act would operate to require that the amount, less expenses of recovering it, be paid to the plaintiff."
32 His Honour went on to say at 74,822 that FAI disputed its liability under the insurance policy and the two defendants were not intending to pursue or seek to enforce it.
33 McPherson JA also pointed out at 74,822 that the "cause or matter" in this context means the action as it stands between the existing parties: see Amon v Raphael Tuck & Sons Ltd ([1956] 1 QB 357 at 369 per Diplock J; and The Result [1958] P 174 per Wilmer J at 184. His Honour noted that the authority of those decisions has since been displaced in England by the addition of what is now O 15 r 6(2)(b), which provides for the joinder of any person between whom and any party to the cause or matter there may exist a question or issue "arising out of or relating to or connected with any relief claimed in the cause or matter" which the court considers it would be just and convenient to determine as between him and that party, as well as between the parties to the cause or matter. A similar provision has been adopted by r 27.05(b) in South Australia: JN Taylor Holdings Ltd v Bond (1993) 59 SASR 432 ; by O 8 r 8 in New South Wales and by O 6 r 8(1)(b) of the Federal Court Rules, which have been broadly construed: Qantas Airways Ltd v AF Little Pty Ltd [1981] 2
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- NSWLR 34. In both JN Taylor and Dorrough v Bank of Melbourne Ltd (1995) 8 ANZ Insurance Cases 61-290, the joinder of an indemnity insurer was ordered in circumstances similar to those in FAI v Interchase.
34 With respect, I have some difficulty with the interpretation of a defendant "who ought to have been joined" as one who was "necessary" and one "whose presence before the court may be necessary in order to enable the court … to adjudicate upon … all the questions involved in the cause or matter" meaning that the additional party had to be "indispensable". My own view would be that the classification should be expressed the other way round.
35 In his dissenting judgment Davies JA held that the court did have the power to make the joinder. While FAI was not a person who "ought to have been joined", it was a person whose "presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter". Davies JA said at 74,818:
"It has been said on more than one occasion that O 3 in general and O 3 r 11 in particular should be construed liberally or beneficially or generously (Bailey v Curzon [1932] 2 KB 392 at 398. See also Birtles v Commonwealth [1960] VR 247 at 251; Black v Houghton [1968] Qd R 179 at 187; Qantas Airways v AF Little Pty Ltd [1981] 2 NSWLR 34 at 54, 56; In Re Vandervell's Trusts [1971] AC 912 at 940.) Nevertheless, I am prepared to accept, for the purposes of this case, as the other members of this Court have, that FAI was not a person who 'ought to have been joined' within the meaning of r 11(2)."
36 In footnote 2 his Honour noted that it did not follow that FAI could not have been joined as a defendant in the first place. Davies JA also said at 74,818:
"Whether it was a person 'whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause' is, however, another matter. It may be that, where a person is sought to be joined as a defendant in an action over the opposition of the plaintiff, what is necessary for the purposes of this phrase should be viewed strictly so as to prevent a plaintiff from being compelled to sue someone whom he or she does not wish to sue (that is the way in which the
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- whole phrase was viewed in Amon v Raphael Tuck & Sons Ltd [1956] 1 QB 357, 369 and The Result [1958] P 174, 184 both of which were cases of that kind. See also Australian Tape Manufacturers Association Ltd v Cth (1990) 64 ALJR 530 at 532.) But it has also been held that the phrase should be construed more liberally where the plaintiff is seeking to join a defendant (Qantas Airways, supra, at 37-8, 43; see also Birtles, supra, at 252. This appears to have been recognised by Devlin J in Amon at 386.) I would adopt that view and accordingly construe the phrase as empowering the joinder of FAI by Interchase where, as has occurred here, FAI has declined to indemnify the valuers, the valuers have failed to join FAI and Interchase cannot obtain an effective judgment against the valuers."
37 In my opinion, this is a stronger case because the insurers were joined as a third party below and have declined to indemnify Mr Gibbs and Paraglide and are endeavouring to set aside the judgment that they are required to indemnify, without which Mrs Morrell's judgment against Mr Gibbs and Paraglide will be ineffective. While in this case the insurer was not joined as a defendant but joined as a third party and, as already indicated, counsel for Mrs Morrell was permitted to address the Court on the issue of the liability to indemnify.
38 In Gurtner v Circuit [1968] 2 QB 587 Lord Denning MR expressed his disagreement with the narrow construction adopted by Devlin J in Amon (supra) and followed by Stephenson J in Fire Auto and Marine Insurance Ltd v Greene [1964] 2 QB 687. His Lordship said at 595:
"I am afraid I do not agree with them. I prefer to give a wide interpretation to the rule, as Lord Esher MR did in Byrne v Brown ([1964] 2 QB 687). It seems to me that when two parties are in dispute in an action at law, and the determination of that dispute will directly affect a third person in his legal rights or in his pocket, in that he will be bound to foot the bill, then the court in its discretion may allow him to be added as a party on such terms as it thinks fit. By so doing, the court achieves the object of the rule. It enables all matters in dispute to 'be effectually and completely determined and adjudicated upon' between all those directly concerned in the outcome."
39 That was a case in which the Motor Insurers' Bureau sought to be added as a defendant. The Bureau would be liable to indemnify the
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- defendant insured, depending upon the outcome, and were also prepared to undertake to pay any damages for which the defendant insured in the action may be held liable. I do not consider, however, that Gurtner v Circuit is authority for the proposition that a party whose commercial interests may be affected by the outcome between two other parties in the action may be joined by that reason alone. If the action was successful the Bureau would be liable to indemnify the defendant insured. That is what Lord Denning meant by saying that the determination of the dispute between the plaintiff and the defendant insured would "directly affect a third person in his legal rights or in his pocket in that he will be bound to foot the bill". That is not this case.
40 It was submitted that Mrs Morrell had a sufficient interest to be heard as a party in the appeal because the outcome could affect her legal rights, commercial or personal interests. In support of this proposition, counsel for Mrs Morrell relied upon Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581. The question in that case was whether the appellant had standing to seek a declaration. Mason CJ, Dawson, Toohey and Gaudron JJ noted that, although the findings and recommendations of the report had no legal effect or consequence, it had the practical effect of blackening the appellants' reputations. This was sufficient to give the court jurisdiction to make a declaration. As their Honours said:
"The present case involves no mere hypothetical question. At all stages there has been a controversy as to the Commission's duty of fairness. A report has been made and delivered … That report has already had practical consequences for the appellants' reputations. For all that is known, those consequences may extend well into the future. It is appropriate that a declaration be made in terms indicating that the appellants were denied natural justice. That may redress some of the harm done."
41 In my opinion, such a decision on standing to obtain a declaration is of no assistance in the present context. Courts have been reluctant to fetter the broad discretion regarding standing to obtain, and the making of, a declaration by laying down rules as to the manner of its exercise. For example, in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437 - 438, after making that point Gibbs J (as he then was) said:
"It does, however, seem to me that the Scottish Rules summarised by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd ([1921] 2
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- AC 438 at 448), should in general be satisfied before the discretion is exercised in favour of making a declaration:
'The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say someone presently existing who has a true interest to oppose the declaration sought.'
Beyond that, however, little guidance can be given. As Lord Radcliffe said in Ibeneweka v Egbuna ([1964] 1 WLR at 225):
'After all, it is doubtful if there is more of principle involved than the undoubted truth that the power to grant a declaration to be exercised with a proper sense of responsibility and a full realisation that judicial pronouncements ought not to be issued unless there are circumstances that call for their making. Beyond that there is no legal restriction on the award of a declaration.' "
"Here the plaintiff does not seek performance of a public duty; nor does he assert that he will suffer special damage through
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- interference with a public right - cases which are notorious for their difficulties. Here the legislation, if it is valid, deprives the plaintiff of a right of reimbursement which he would otherwise have or be entitled to claim. It also imposes obligations upon him which he would not otherwise be subject. This is enough to support locus standi in an action for a declaration of invalidity. As Latham CJ said, with reference to Commonwealth legislation in Toowoomba Foundry Pty Ltd v The Commonwealth [(1945) 71 CLR 545 at 570]:
'It is now, I think, too late to contend that a person who is, or in the immediate future probably will be, affected in his person or property by Commonwealth legislation alleged to be unconstitutional has not a cause of action in this court for a declaration that the legislation is invalid.'
In my view the circumstances in that case are clearly distinguishable because Mr Robinson stood to be deprived of a right and to be subject to certain legal duties."
43 In my opinion this decision, also being a decision on standing to obtain a declaration, is of no assistance to Mrs Morrell.
44 In my opinion, one way of testing Mrs Morrell's entitlement to be joined in the appeal is to ask whether she would have standing to obtain a declaration that, in the events which have happened, the appellant was liable to indemnify Mr Gibbs and Paraglide in respect of their liability to her. The recognition of such a right on the part of a person actually named in the policy of insurance as falling within the definition of "the Insured" was a matter of some controversy as exemplified by the differences between the majority and the minority judgments in Trident General Insurance Co Ltd v McNiece Pty Ltd (1988) 165 CLR 107. In that case an insurer under a public liability insurance policy agreed to indemnify a company against all sums which it should become liable to pay in respect of injury to persons at specified building sites. "The Insured" was defined to include the company's contractors. A person who was injured as a result of the negligence of one of the company's contractors, which was not a contractor when the policy issued, recovered damages against the contractor. It was held by Mason CJ, Wilson, Toohey and Gaudron JJ that the contractor was entitled to enforce the indemnity against the insurer in respect of its liability to pay the damages. Brennan and Dawson JJ dissented. Brennan, Deane, Dawson and Gaudron JJ were all of the opinion that the contractor was not a party to
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- the insurance contract and could not enforce it. Mason CJ and Wilson J held that a person who, though not a party to a public liability insurance policy, falls within the class of persons expressed to be insured by it, may enforce the indemnity for which the policy provides. Toohey J adopted the approach that the terms of the liability insurance policy evidenced an intention, on the part of both insurer and insured, that the policy indemnify a third party in circumstances where it was reasonable to expect that the third party may order its affairs by reference to the existence of the policy, so that the contractor would have a right of action against the insurer. Gaudron J explicitly determined that a promisee who had accepted an agreed consideration for a promise to benefit a third party owed an obligation to the third party to fulfil that promise and the third party may sue to secure its benefit. In my opinion, the present is not a case in which Mrs Morrell would have a right of action against the appellant as insurer of Mr Gibbs and Paraglide.
45 Counsel for Mrs Morrell, however, also relied upon the decision of Dawson J sitting as a single Judge of the High Court in Oil Basins Limited v The Commonwealth (1993) 178 CLR 643. That case concerned the interpretation and application of the Petroleum Resource Rent Tax Assessment Act 1987 (Cth) ("the PRRT Act) which imposed tax on the taxable profit of a person in relation to a petroleum project. The Act provided for the issue of assessments and made the mere production of a notice of assessment, or a document under the hand of a specified officer purporting to be a copy of a notice of assessment, conclusive evidence of the due making of the assessment and, except in review or appeal proceedings under Pt IVC of the Taxation Administration Act 1953 (Cth) relating to the assessment, conclusive evidence that the amount and all particulars of the assessment were correct. A person who was dissatisfied with an assessment made in relation to that person was entitled to object against it in the manner set out in Pt IVc of the Taxation Administration Act.
46 A company which, under an agreement, was entitled to an "overriding royalty" of two and a half per cent of the gross value of the hydrocarbons produced and recovered from a particular area by the other parties to the agreement ("the producers"), was in dispute with the producers about the amount of the royalty payable. The dispute was submitted to arbitration. The producers claimed to be entitled to deduct from the royalty an amount as tax paid under the PRRT Act, asserting that they had paid the tax on behalf of the company. Assessments had been issued for 1991 and 1992 against the producers who had paid the tax. In 1993 the producers lodged a return which was accompanied by a
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- statement that they intended to lodge returns on behalf of the company and "amended and additional returns" on their own behalf. Assessments for the entire tax profits for 1993 were issued against the producers. They lodged notices of objection asserting in substance that the company had an interest in two and a half per cent of the production and claiming that the company should pay the tax in relation to that interest. No assessment was issued to the company. While the arbitration of the dispute between the company and the producers was pending, the company sued the Commonwealth, the Commissioner of Taxation and the producers in the High Court claiming declarations that the company was not liable to pay tax under the PRRT Act, that the producers had not paid the tax on its behalf and an injunction restraining them from paying the tax on its behalf. It was held that because the producers had a real interest in both declarations claimed, the Commonwealth and the Commissioner were proper parties and the court could exercise its discretion to make a declaration binding on the Commissioner, even if he had not formed a view about the company's liability. At 648 - 649 Dawson J held that the plaintiff had "a real interest" in obtaining a declaration that it was not liable to pay PRRT and applied the test formulated by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd (supra) cited in Forster v Jododex Australia Pty Ltd (supra), as well as the passage I have already cited in Ainsworth v Criminal Justice Commission (supra). His Honour said at 649:
"The question raised by the plaintiff is neither abstract nor hypothetical and the answer to that question will clearly produce consequences for the parties."
48 It was also submitted that joinder of Mrs Morrell was justified because, with the leave of the Court, she could have appealed against a judgment in favour of the appellant if the appellant had been successful at the trial. In this respect, reliance was placed on Cuthbertson v Hobart Corporation (1921) 30 CLR 16. In that case, Knox CJ and Starke J said at 25:
"Under the practice which exists in England 'parties to' an action and all persons served with notice of judgment may appeal without leave. But a person not a party to the proceedings cannot appeal from an order or judgment except by leave of the
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- Court. (See Yearly Practice 1913, p904). Leave to appeal is given as a rule if the person applying though not a party to the proceedings might properly have been one. 'The test is, could or could not the applicant by possibility be made a party to the action by service' (Crawcour v Salter (1882) 30 WR 329; In Re Youngs; Doggett v Revett (1885) 30 Ch D 421)."
49 The jurisdiction of the Full Court to hear and determine appeals is provided for in s 58(1)(b) of the Supreme Court Act 1935: Aintree Holdings Pty Ltd v Corderoy (1996) 16 WAR 416. This appeal is by the third party. A defendant may issue a third party notice against any person not already a party to the action as provided in O 19 r 1(1)(a) where the claim is for an indemnity. By O 19 r 1(3) the third party became a party to the action with the same rights in respect of his defence as if he had been sued by the defendant in the ordinary way. The leave of the court is required under O 19 r 1(3) unless the third party notice is issued before the defence is served on the plaintiff. The third party does not become a defendant to the plaintiff's action unless the plaintiff obtains an order to join him or her as such: Edison and Swan United Electric Light Co v Holland (1889) 41 Ch D 28 at 32 per Cotton LJ.
50 It follows that a third party cannot counterclaim against the plaintiff: Eden v Weardale Iron & Coal Co (1885) 28 Ch D 333 at 336 per Bowen LJ; and at 338 per Duffy LJ. If the third party claims relief against the plaintiff in respect of any judgment obtained by the defendant against the third party the plaintiff should be joined as a fourth party: Andrews v Nominal Defendant [1963] NSWR 359 at 364. In my opinion, had the learned Judge decided that the appellant insurer was not liable to indemnify Mr Gibbs and Paraglide in respect of their liability in damages to the applicant, the applicant, not being a party to the third party proceedings, would not have been entitled to appeal against that decision. That decision was not made in respect of a matter which was in issue between the appellant and Mrs Morrell.
51 In Re IG Farbenindustrie AG Agreement [1944] 1 Ch 41, a decision of the Court of Appeal, Boots Pure Drug Co ("Boots") applied to be added as a party to an originating summons which had been taken out by Bayer Products Ltd ("Bayers") under s 51 of the Trustee Act 1925 and s 72 of the Patents and Designs Acts 1907 to 1932. The summons asked that a vesting order should be made in favour of Bayers in respect of certain patents standing in the name of IG Farbenindustrie AG ("IG") and for the rectification of the Register of Patents accordingly. The summons could not be served on IG. Boots had been granted the licence in respect of
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- some of the patents under the Patents Designs Copyright and Trademarks (Emergency) Act 1939. The licence was to last during the lifetime of the patent, and under it Boots were obliged to render accounts that the appropriate royalties might be ascertained. The royalties were to be paid and the accounts rendered to the Custodian of Enemy Property. Boots claimed to be interested in opposing the making of the order but Bayers resisted their claim to be joined as parties on the ground that Boots were not entitled to any legal interest in the subject matter of the proceedings. Morton J directed that Boots be joined. On an appeal by Bayers to the Court of Appeal, it was submitted that Boots had no standing in the proceedings and were strangers to them and that they had at most a commercial and not a legal interest in the subject matter of the proceedings. Lord Greene MR (with whom du Parcq and Uthwatt JJ agreed) said at 43:
"It seems, however, clear that such a right in a licensee has nothing to do with the subject-matter of these proceedings which relate solely to the legal title to these patents. Ought that title to be vested in Bayers, or ought it to remain vested in IG? Whichever way that question is answered the position of Boots cannot be affected from the legal point of view. When I say 'legal interest' I am not thinking of any distinction between a legal and equitable interest, but of an interest which the law recognises.
It is to be observed that Morton J certainly did not accept any argument addressed to him to the effect that Boots had a legal interest. He said that their interest was commercial. That they had a commercial interest is beyond dispute. … The fact that a person has a merely commercial interest in litigation gives him no right to demand to be added as a party to proceedings by the result of which that commercial interest may be affected and the court has no jurisdiction to add him any more than it has jurisdiction to add any man in the street. It is the practice of the court, and the court has power in proper cases, to add at his own request a party who claims to have a legal interest in the subject-matter of the suit. That frequently happens in proceedings in the Chancery Division where creditors, debenture holders, beneficiaries and other persons who have a legal, and not merely a commercial interest in the proceedings can, in proper circumstances, apply and obtain an order to be added as defendants in administration or other proceedings."
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52 The Court of Appeal also expressed the view that Boots should not be heard as amicus curiae either.
53 In Re Gasbourne Pty Ltd [1984] VR 801, Nicholson J at 835 distinguished the decision in Re IG Farbenindustrie on the basis, among others, that the court had a wider discretion to grant standing to persons on the hearing of a winding-up petition than it had on the hearing of an appeal from an order of a Master. No words of limitation such as "person affected" or "person aggrieved" appeared in the Companies Code or the Rules. While Nicholson J acknowledged that Lord Greene expressed the view in Farbenindustrie that Boots should not have been heard as amicus curiae, in the context of company legislation Nicholson J preferred to follow In Re Bradford Navigation Co [1870] 5 Ch App 600 and In Re Compania Merabello San Nicholas SA [1973] 1 Ch 75 at 93 per Megarry J. In each of those cases the relevant person had been heard as amicus curiae.
54 Section 117 of the Bankruptcy Act 1966 (Cth) provides that:
"(1) Where:
(a) a bankrupt is or was insured under a contract of insurance against liabilities to third parties; and
(b) a liability against which he is or was so insured has been incurred (whether before or after he became a bankrupt),
the right of the bankrupt to indemnity under the policy vests in the trustee and any amount received by the trustee from the insurer under the policy in respect of the liability shall, if the liability has not already been satisfied, be paid in full forthwith to the third party to whom it has been incurred.
(2) Subsection (1) does not limit the rights of the third party in respect of any balance due to him after the payment referred to in that subsection has been made.
(3) This section applies notwithstanding any agreement to the contrary, whether entered into before or after the commencement of this Act."
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55 This legislation was modelled on the Third Parties (Rights against Insurers) Act 1930 (UK). Prior to the adoption of this legislation, where the bankrupt was insured against liabilities to third parties, his or her right to indemnity was "property of the bankrupt" which passed to the trustee as part of the general assets divisible among creditors: Re Harrington Motor Co; Ex parte Chaplin [1928] 1 Ch 105; and Hood's Trustees v Southern Union General Insurance Co of Australasia Ltd [1928] 1 Ch 793. If the liability were for unliquidated damages for personal injury arising out of tort and if the injured party had not recovered judgment before the bankruptcy, he or she was not entitled to prove in the bankruptcy. If a judgment was obtained before a bankruptcy, the injured party was entitled to no priority and to no charge on the insurance moneys, but could prove his claim as an unsecured creditor. Both s 117 and the provision on which it was modelled constitute a departure from the general principle of bankruptcy law that property vesting in the trustee should be applied only in payment of obligations incurred by the bankrupt prior to the commencement of his bankruptcy. Under s 117, even if the liability of the bankrupt was incurred after his bankruptcy and so does not constitute a proveable debt, the trustee is bound to pay the insurance money to the third party on their receipt.
56 In my opinion, notwithstanding that this provision was not referred to in the course of the argument on the appeal, it demonstrates that Mrs Morrell has a contingent right to proceed directly against the trustee in bankruptcy of Mr Gibbs to recover the amount of liability, in the event that he should become bankrupt. As matters stand at present, the materials before the Court indicate that he has no prospect of meeting the liability.
57 Paraglide stands in the same position. Section 562 of the Corporations Law provides that where a company is insured against a liability to a third party and such liability is incurred either before or after the commencement of the winding up, in respect of which the liquidator receives an amount from the insurer, that amount is to be paid to the relevant third party, less only the expenses incurred in getting it in, in priority to all debts mentioned in s 556. Liability under this section means a liability in tort or in contract. It was common ground before us that Paraglide has no financial capacity to meet the judgment obtained against it.
58 In these circumstances Mrs Morrell would be entitled to seek the leave of the Court to appear at the appeal by counsel as amicus curiae and make submissions. The Court will permit such an appearance if good
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- cause is shown and the Court thinks it proper: United States Tobacco Co v Minister for Consumer Affairs (1988) 20 FCR 520 at 536 per Davies, Willcox and Gummow JJ. However, for the reasons I have already stated, she is not entitled to be joined as a respondent to the appeal.
59 For these reasons the application should be dismissed.
60 KENNEDY J: I have had the benefit of reading in draft the reasons published by the Chief Justice. Essentially for those reasons I agree that the application should be dismissed.
61 PIDGEON J: I agree with the reasons of the Honourable the Chief Justice.
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