National Jet Systems Pty Ltd v Aon Risk Services Australia Ltd No. Scciv-01-1413

NATIONAL JET SYSTEMS PTY LTD V AON RISK SERVICES AUSTRALIA LTD
[2002] SASC 391

JUDGE BURLEY. By application dated 24 June 2002 the defendant seeks the following order pursuant to SCR 75.02:
“1The matter proceed to trial on the preliminary issue of whether the AIG policy as defined in the Statement of Claim responds to the claim on the AIG policy by the plaintiff in respect of the losses of the licences of Messrs Beck, Macrae and Gutteridge as pleaded in the Amended Statement of Claim.”
In order to understand what the defendant seeks, it is necessary briefly to set out the nature of the plaintiff’s claim and the defendant’s defence.
In its statement of claim, the plaintiff pleads that it was the employer of aircraft pilots who were employed pursuant to the terms and conditions contained in the National Jet Systems Pilots Award 1995 and an Australian Workplace Agreement. As such the plaintiff was obliged to provide life and loss of licence insurance of a particular kind to pilots it employed. The defendant does not admit these allegations.
It is alleged that the plaintiff retained the defendant as its insurance broker for the purposes of advising in relation to the required insurance and obtaining the same on behalf of the plaintiff. The defendant denies these allegations and has pleaded in its defence a positive case different from the allegations made by the plaintiff.
The plaintiff says that the defendant recommended a particular policy and made representations as to the nature of the policy. In its defence partial admissions are made by the defendant in relation to these allegations, but the substance of the allegations is denied. In particular, the plaintiff claims that the defendant advised that the insurance provided satisfied the requirements of the Award and Workplace Agreement but the defendant has denied the substance of these allegations.
The plaintiff next refers to a claim in relation to an employee of the plaintiff, a Mr Clampett. It is alleged from March 1998 the defendant advised the plaintiff as to whether or not the insurers Citicorp or AIG were liable to indemnify with respect to the claim made in respect of Mr Clampett. Some of these allegations are admitted but the defendant has also pleaded a different case and has made denials.
The plaintiff contends that the defendant owed a duty of care to the plaintiff to advise properly and secure appropriate insurance in accordance with the defendant’s obligations. The defendant has admitted that a duty of care arose but has stated that duty of care in different terms from those stated by the plaintiff. It is alleged that it discharged the duty of care that it owed to the plaintiff.
The plaintiff says that on advice received from the defendant it renewed the policy of insurance effected with AIG and the defendant does not dispute that it recommended renewal.
The plaintiff next refers to claims made in respect of pilots employed by the plaintiff, namely Mr Beck, Mr Macrae and Mr Gutteridge. These persons lost their pilot’s licences because of illness and injury. The insurance that the plaintiff was required to effect pursuant to the Award and the Workplace Agreement covered losses by pilots when unable to fly in the circumstances contemplated by the Award and the Workplace Agreement by payment of a lump sum when notifications were made by the plaintiff. These matters are not in dispute.
Whilst these claims were still extant, on 28 January 2000 the insurer confirmed in writing to the defendant that it would not be offering renewal of the policy from 31 March 2000. It is alleged that the defendant failed to communicate that to the plaintiff until 30 March 2000. Although the defendant admits that on 28 January 2000 AIG confirmed to the defendant in writing that it would not be offering renewal from 31 March 2000, it pleads a different case from that pleaded by the plaintiff in relation to this aspect of the matter. Subsequently, AIG refused to indemnify in respect of the claims made in respect of Messrs Beck, Macrae and Gutteridge. The plaintiff relies upon causes of action based on breach of duty and breach of provisions of the Trade Practices Act. These claims are contested by the defendant.
One of the defences pursued by the defendant is that although the insurer AIG rejected the claims made in respect of Messrs Beck, Macrae and Gutteridge, the policy with AIG which was obtained by the defendant on behalf of the plaintiff did as a matter of law cover those claims and that the insurer’s rejection of the claims was unlawful. The defendant argues that in respect of any cause of action pursued by the plaintiff against the defendant, it could not be said that any loss which the plaintiff sustained was caused by the defendant. Central to this issue, it was argued, is the question of whether or not, as a matter of law, the relevant policy covered the claims made in respect of those three pilots. On an overall reading of the defence, this has been expressed as the contention that the defendant arranged insurance for the plaintiff in respect of the Award and Workplace Agreements in accordance with the request of the plaintiff. This seems to me to be crucial to whether or not there is a separate issue which may conveniently be tried before other issues in the case and I shall return to this aspect of the matter later in these reasons.
In support of the application the defendant put before the Court a proposed agreed statement of facts. There are two difficulties with this document: First, there is no indication that the plaintiff will agree with the content of the agreed statement of facts. (The plaintiff opposes the hiving off of a separate issue and having it determined before other issues in the case.) Second, the statement of facts contains facts which are not admitted on the pleadings and it is not clear whether the defendant is, by relying upon the proposed agreed statement of facts, admitting the facts contained therein only for the purposes of the determination of the preliminary point or for all purposes. I suspect that the former is the defendant’s position, in which event it would be clearly inappropriate to allow a preliminary point to go to trial upon such a basis. In any event, if the relevant facts are not agreed, it would be necessary for both parties to adduce extensive evidence in circumstances where they would, in their submissions, be confined to the issue of the preliminary point. There would thus arise a real possibility of unnecessary duplication.
Mr Nicholson, counsel for the defendant, argued that if the Court were to decide, as a preliminary point, that the relevant policy of insurance was effected in accordance with the plaintiff’s instructions, a large part of the plaintiff’s case would be decided in favour of the defendant. He conceded that the whole of the claim would not thereby be resolved but he suggested that a finding one way or the other might lead to a settlement. He argued that, in particular, if it were found that the policy did cover the claims in respect of the three pilots, the plaintiff’s claim in damages would fall away because any loss sustained by the plaintiff could not be attributed to the defendant. He argued that the loss, in those circumstances, arose from the insurer’s wrongful failure to indemnify rather than by reference to any actions or omissions on the part of the defendant. These submissions are partly correct in the sense that an important part of the dispute between the plaintiff and the defendant would be resolved either in favour of the plaintiff or in favour of the defendant, but the mere fact that such a resolution may lead to a settlement does not, in my view, require the conclusion that it would be appropriate to have the preliminary point determined in the manner sought by the defendant. In addition, the Court would, at the balance of the trial, have to determine those causes of action based on alleged breaches of duty of care and breaches of the relevant provisions of the Trade Practices Act which, if made out by the plaintiff, lead to an award of damages not necessarily dependent upon whether or not the policy was effected in accordance with the requirements of the plaintiff.
SCR 75.02 is as follows:
“Subject to the preceding subrules, the Court may at any time or from time to time in any proceeding, order:
(a)that different questions of fact arising therein be tried by different modes of trial;
(b)that one or more questions of fact be tried before the others;
(c)that any point or points of law arising on the pleadings be disposed of before proceeding to trial of the facts;”
A similar but less detailed rule was considered by Walters J in Rogers v BaillieuBullock Wilkinson Pty Ltd (1981) 28 SASR 595. This case was in turn considered by Bleby J in Rivers v Rivers (2002) 220 LSJS 74. In the latter case Bleby J said (at para 14):
“Cases will be relatively rare in which advantage can properly be taken of the procedure referred to in that rule. In a judgment which repays careful reading, Walters J in Rogers v Baillieu Bullock Wilkinson Pty Ltd ... reviewed many relevant cases and discussed the various pitfalls in directing that questions of law be determined in advance of a trial on the evidence. The following points are made in the judgment:
1An order that a point of law be set down for hearing and disposal before trial ought only to be made when the objection in point of law raises a question which, if decided in favour of the party objecting, would dispense with further trial of some substantial issue in the action. His Honour did not go as far as to say, as some judges have, that the point must be conclusive of the whole matter, whichever way the point is decided.
2Such a reference ought only to be made where there is no dispute on the relevant facts giving rise to it.
3It will seldom be an appropriate procedure where facts have to be decided by the trial Judge in order to determine the preliminary point.
4The procedure should not be adopted when assumptions must be made as to the correctness of allegations of fact made in the statement of claim or defence.
5If the procedure is adopted, there should be a clear definition of the point of law raised for determination.
6It is not the function of the Court to advise parties as to what would be their rights under a hypothetical state of facts ...”
Applying the first three of those principles to this application, I consider that, although the issue to be decided on the proposed preliminary point would dispose of a substantial part of the claim, the mere fact that this may lead to a settlement of the whole of the proceedings is not a sufficient reason to make an order under SCR 75.02.
It is apparent to me that if the preliminary point were to proceed to trial the likelihood of the parties agreeing all of the facts necessary to have the issue properly decided is minimal. Unless this is achieved, findings of fact made at the preliminary hearing based on contentious evidence would place constraints upon the judge hearing the main trial, in circumstances where the breadth of the evidence at the latter hearing may be much greater than the evidence adduced during the trial of the preliminary point.
For these reasons I consider that the application ought to be refused. I will hear counsel as to costs.

[2002] SASC 391

26 November 2002