Protec Pacific Pty Ltd v WMC (Olympic Dam Corporation) Pty Ltd
[2006] VSC 208
•8 June 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 5797 of 2000
| PROTEC PACIFIC PTY LTD (ACN 009 534 552) | Plaintiff |
| v | |
| WMC (OLYMPIC DAM CORPORATION) PTY LTD (ACN 007 835 761) | Defendant |
| BY COUNTERCLAIM | |
| WMC (OLYMPIC DAM CORPORATION) PTY LTD (ACN 007 835 761) | Plaintiff by Counterclaim |
| PROTEC PACIFIC PTY LTD (ACN 009 534 552) | First Defendant by Counterclaim |
| and | |
| STEULER INDUSTRIEWERKE GmbH (ARBN 083 733 966) | Second Defendant by Counterclaim |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 31 MAY 2006 | |
DATE OF JUDGMENT: | 8 JUNE 2006 | |
CASE MAY BE CITED AS: | PROTEC PACIFIC PTY LTD v WMC (OLYMPIC DAM CORPORATION) PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 208 | |
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Practice and Procedure – Pleadings – Strike-out application – Plaintiff’s right to damages when compensation already recovered from plaintiff’s insurer for the same loss and damage – Whether a general principal that insurance policy proceeds are irrelevant in the calculation of damages – No general principal - Intention of insurer the critical question – Pleading silent on intention of insurer – Pleading struck-out with leave to replead – Supreme Court (General Civil Procedure) Rules 2005 r.23.01; r.23.02
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | No appearance | |
| For the Defendant | Mr P. Riordan SC with Mr I. Percy | Middletons Lawyers |
| For the Third Party | Mr F. Tiernan | Anderson Rice |
HIS HONOUR:
By a summons dated 16 May 2006 the defendant and plaintiff by counterclaim, WMC (Olympic Dam Corporation) Pty Ltd ("WMC"), applied to strike out paragraphs 28V to 28Z8 of the amended defence of the second defendant by counterclaim, Steuler Industriewerke GmbH ("Steuler"), to the second amended counterclaim of WMC, pursuant to r.23.02 of the Supreme Court (General Civil Procedure) Rules 2005 ("the Supreme Court Rules").
It is sufficient for present purposes to note that the proceeding concerns a dispute arising out of the failure of the HDPE lining to concrete tanks and ponds for WMC's Olympic Dam expansion project in South Australia. In its second amended counterclaim WMC alleged that Steuler was in the business of manufacturing HDPE lining materials and lining systems including products marketed under the name "Bekaplast" and that the plaintiff and first defendant by counterclaim, Protec Pacific Pty Ltd ("Protec"), was an agent or partner of Steuler in the business of designing, supplying and installing Steuler HDPE lining materials and "Bekaplast" lining systems in Australia. WMC alleged that in 1997 Protec submitted on its own behalf and on behalf of Steuler a proposal for the complete design, supply and installation of a "Bekaplast" lining system for the tanks and ponds. It is further alleged that certain false representations were made by Protec and Steuler, as a result of which WMC has suffered substantial loss from having to replace the lining system earlier than represented.
Steuler's amended defence was filed on 5 October 2005. The paragraphs of that pleading sought to be struck out by WMC appear under the heading "WMC has already received compensation from its insurer with respect to the replacement of the Bekaplast lining system with the FRP lining system." The pleaded facts set out therein are as follows:
(a)pursuant to an Industrial Special Risks Insurance Policy No. 016/01/1 ("the policy") Westminer Insurance Pte Limited ("Westminer") provided insurance to WMC for material damage and business interruption anywhere in the world where WMC had property or carried on business during the period from 31 March 2001 to 31 March 2002 (paragraph 28V);
(b)WMC sought indemnity under the policy after a fire occurred at the Olympic Dam site on 21 October 2001 (paragraph 28W);
(c)the claims under the policy included the cost of replacing the Bekaplast lining in all of the tanks in the uranium and copper mixer settlers and tank farms at the Olympic Dam site (paragraph 28Y);
(d)Westminer and WMC agreed that WMC would be paid $175 million in full and final settlement of its claims, including the claims under paragraph 28Y (paragraphs 28Z2 and 28Z3);
(e)the loss and damage claimed by WMC against Steuler included the same loss and damage in respect of which WMC had already received compensation from Westminer (paragraph 28Z4);
(f)WMC had no obligation under the policy or otherwise to account to Westminer in respect of any damage it recovered from Steuler in this proceeding (paragraph 28Z5).
On the basis of those facts Steuler went on to plead that WMC was estopped from recovering in the proceeding loss and damage already received from Westminer on the grounds that it would be either unconscionable or unjust enrichment for WMC to recover twice for the same loss, alternatively that the loss and damage otherwise payable by Steuler was extinguished or reduced to the extent that such loss and damage had already been paid to WMC by Westminer.
Mr Tiernan, who appeared on behalf of Steuler, correctly submitted that because this was a strike out application under r.23.02 no evidence was admissible on the question[1] and that the application had to be approached on the assumption that the pleaded facts were made out. Mr Tiernan further submitted that the purpose of an application under r.23.02 was to secure compliance with the rules of pleading and nothing else[2] and that such an application assumed that the other party had an arguable claim or defence but that objection was taken to the manner of expression of the claim or defence. Finally, Mr Tiernan submitted that before a pleading or part thereof is struck out, it must be "clear and beyond all doubt"[3] that the pleading is hopeless. As Cross J said in Brimson v Rocla Concrete Pipes Limited:
"The mere fact that the case is weak and not likely to succeed is not a ground for striking out a validly formulated pleading."[4]
A similar view was expressed by Byrne J in Opat Decorating Service (Vic.) Pty Ltd v Jennings Group Limited:
"A plaintiff will be stopped from putting a claim forward only where, assuming the facts pleaded have been established, the claim is so manifestly hopeless that a trial would be a futility."[5]
[1]See r.23.04(2) of the Supreme Court Rules.
[2]Meckiff v Simpson [1968] VR 62 at 70 per Winneke CJ, Adams and Gowans JJ
[3]Kellaway v Bury (1892) 66 LTR 599 at 602 per Lindley LJ
[4][1982] 2 NSWLR 937 at 942
[5]Unreported, 16 September 1994; BC 9405102 at p.5
Mr Riordan SC, who appeared with Mr Percy on behalf of WMC, submitted that, even assuming that the above facts were established at trial, Steuler's contention that damages should be reduced by reason of the payment by the insurer must fail as a matter of law. He submitted that there was a general principle that benefits that a plaintiff has received from any source other than the defendant were not to be regarded as mitigating his loss if they were received as a result of a contract he made before the loss occurred. In support of this proposition, Mr Riordan relied on a number of authorities, commencing with the decision of the High Court of Australia in National Insurance Co of New Zealand Ltd v Espagne[6]. In that case it was held that the damages of an injured plaintiff, who was permanently blinded in an accident, should not be reduced by the amount of an invalid pension to which he became entitled by reason of the injury.
[6](1961) 105 CLR 569
Mr Riordan submitted that the principle he relied on was to be found in the judgments of Dixon CJ and Windeyer J in Espagne.[7] As well as agreeing "generally" with the judgment of Windeyer J, Dixon CJ said:
"There are certain special services, aids, benefits, subventions and the like which in most communities are available to injured people. Simple examples are hospital and pharmaceutical benefits which lighten the monetary burden of illness. If the injured plaintiff has availed himself of these, he cannot establish or calculate his damages on the footing that he did not do so. On the other hand there may be advantages which accrue to the injured plaintiff, whether as a result of legislation or of contract or of benevolence, which have an additional characteristic. It may be true that they are conferred because he is intended to enjoy them in the events which have happened. Yet they have this distinguishing characteristic, namely they are conferred on him not only independently of the existence in him of a right of redress against others but so that they may be enjoyed by him although he may enforce that right: they are the product of a disposition in his favour intended for his enjoyment and not provided in relief of any liability in others fully to compensate him. This is readily seen in the case of benevolence. If a fund is raised by subscription for the benefit of a badly injured neighbour obviously this cannot operate in relief of the liability of a man who negligently caused the injury. So in a contract of accident insurance; where in the absence of special stipulation the insurer will not succeed by subrogation or otherwise to the insured's right of recourse against others in the case of injury by their negligence. But for the reason given it does not follow that the negligent parties can treat the insurance as operating in relief of their liability. It was effected by the money of the plaintiff for his own benefit in the event of an accident, a benefit both independent of and cumulative upon whatever right of redress against others might arise out of the circumstances of the accident."[8] [Emphasis added]
[7]Fullagar J agreed with the judgments of both Dixon CJ and Windeyer J.
[8](1961) 105 CLR 569 at 573
After a detailed examination of the authorities, Windeyer J asked himself whether there was any "governing principle in all these cases." His Honour continued:
"So far as any rules can be extracted, I think they may be stated, generally speaking, as follows: In assessing damages for personal injuries, benefits that a plaintiff has received or is to receive from any source other than the defendant are not to be regarded as mitigating his loss, if: (a) they were received or are to be received by him as a result of a contract he had made before the loss occurred and by the express or implied terms of that contract they were to be provided notwithstanding any rights of action he might have; or (b) they were given or promised to him by way of bounty, to the intent that he should enjoy them in addition to and not in diminution of any claim for damages. The first description covers accident insurances and also many forms of pensions and similar benefits provided by employers: in those cases it is immaterial that, by subrogation or otherwise, the contract may require a refund of moneys paid, or an adjustment of future benefits, to be made after the recovery of damages. The second description covers a variety of public charitable aid and some forms of relief given by the State as well as the produce of private benevolence. In both cases the decisive consideration is, not whether the benefit was received in consequence of, or as a result of the injury, but what was its character: and that is determined, in the one case by what under his contract the plaintiff had paid for, and in the other by the intent of the person conferring the benefit. The test is by purpose rather than by cause."[9] [Emphasis added]
[9](1961) 105 CLR 569 at 599-600
The relevant part of Windeyer J's judgment was largely based on the decision in Bradburn v Great Western Railway Company[10] in which it was held that the damages to be awarded to the plaintiff for personal injury caused by the negligence of the defendant were not to be reduced by a payment made to the plaintiff under a policy of accident insurance which he had taken out. Windeyer J said of the decision in Bradburn that it had:
"… stood too long and on too firm a foundation of policy and justice to be unsettled by demands for logical consistency. It does not depend upon general doctrines of subrogation; for accident policies are not contracts of indemnity and subrogation does not apply (Halsbury, 3rd ed. vol. 22, p. 261), although an accident policy may require that the insured in the interests of the insurer shall prosecute any claim for damages that he may have."[11]
[10](1874) LR 10 Ex 1
[11](1961) 105 CLR 569 at 588
Bradburn, Espagne and Redding v Lee[12], another relevant High Court decision, were all personal injury cases. Nevertheless, Mr Riordan further submitted that it was well established that the principle was not limited to personal injury cases and referred to the decision of the Full Court of this Court in Wollington v State Electricity Commission of Victoria (No. 2)[13] and the decisions of the Full Court of the Federal Court of Australia in Monroe Schneider Associates (Inc) v Nol Raberem Pty Ltd[14] and Masters Dairy Ltd v Nagy[15].
[12](1983) 151 CLR 117
[13][1980] VR 91
[14](1991) 33 FCR 1
[15](1998) 156 ALR 262
Mr Tiernan did not dispute that the statements of principle by Dixon CJ and Windeyer J in Espagne had been applied in cases other than personal injury cases. He submitted, however, that the flaw in WMC's argument was that these statements in Espagne were only generalisations and that each judge had qualified their statement of principle by adding that each collateral benefit had to be looked at on a case by case basis, and in the case of an insurance policy, by looking at the terms of the particular contract and the relevant facts and circumstances. Mr Tiernan therefore submitted that there was no basis for any finding that the pleaded matters under paragraphs 28V to 28Z8 were completely hopeless.
Mr Tiernan was quite correct that the statements of principle in Espagne were qualified. In his judgment Dixon CJ said before the passage quoted above that:
"… no legal rule exists that can be applied to every case where an advantage accrues to the injured man which but for the injuries he would not have obtained."[16]
And:
"It is hardly possible to work out any principle which would apply to every case."[17]
Windeyer J said in his judgment immediately following the passage quoted above:
"Nevertheless it is not, I think possible, to enunciate an exhaustive rule for all parts of this vexed topic. And the questions that arise can never be determined in the abstract. Each must depend on the terms of the particular contract, pension scheme, charitable benefaction or statute governing the benefit conferred."[18]
[16](1961) 105 CLR 569 at 572
[17](1961) 105 CLR 569 at 573
[18](1961) 105 CLR 569 at 600
In Redding v Lee Gibbs CJ said:
"The common law has clearly recognized two types of receipts that are not to be brought into account in the assessment of damages for financial loss, notwithstanding that the sums have been received in consequence of the injuries for which the plaintiff sues, namely, moneys payable to the plaintiff under a contract of insurance which he has taken out, and gifts made by a benevolent third party seeking to ameliorate the situation in which the plaintiff has been placed by his injuries."[19]
Later in his judgment Gibbs CJ referred to the statement of principle by Dixon CJ in Espagne and continued:
"… the principle which he enunciated was broad enough to cover other cases (such as the receipt of the proceeds of an insurance policy or of a private benefaction) in which advantages received by the plaintiff are disregarded. The statement of Windeyer J expressly covers such cases. The test suggested is a general one, and it requires the court to consider the nature of the benefit which the defendant seeks to set off against the damages, and to inquire whether the person or body supplying the benefit intended that the plaintiff should enjoy it in addition to whatever damage he might recover from the defendant."[20] [Emphasis added]
[19](1983) 151 CLR 117 at 122
[20](1983) 151 CLR 117 at 124-125
The leading judgment in Redding v Lee was the joint judgment of Mason and Dawson JJ. Both Wilson J and Deane J agreed with the statement of general principle contained in that judgment. One such statement was as follows:
"The subsequent decisions in this Court apply the principles expressed by Dixon CJ and Windeyer J in Espagne. They make it clear that the issue turns on the character and purpose of the particular financial benefit which the plaintiff receives: Was the benefit conferred on him independently of any right or redress against others and so that he might enjoy the benefit even if he enforced the right?"[21] [Emphasis added]
[21](1982) 151 CLR 117 at 137
Further, after expressing the view that the course marked out by Espagne accorded with "the approach adopted by the courts to the receipt of proceeds of insurance policies and benevolent gifts", Mason and Dawson JJ continued:
"It would be unjust and unreasonable to reduce the damages of the prudent plaintiff who insures himself against accident by allowing the premiums which he paid and the proceeds of the policy to enure for the benefit of the tortfeasor and make the existence of the insurance the occasion for giving the plaintiff a lesser award of damages than he would have obtained had he not been insured. If he had not taken up the policy his assets would not have been depleted by the payment of premiums and his damages could not then have been reduced by reference to the greater worth of his assets.
Again, it has been acknowledged that it would be unjust and unreasonable to reduce damages on account of benefits received by the plaintiff resulting from benevolence. Benefits of this kind spring from a desire to assist the plaintiff, not from any wish to relieve against the tortfeasor's liability.
A similar comment may be made about pension and superannuation benefits whose purpose is to ameliorate the plaintiff's situation irrespective of his right to recover compensation against the tortfeasor. For this reason no distinction should be drawn between pension and superannuation benefits to which the plaintiff has contributed and those to which he has made no contribution, although there is a stronger reason for refusing to reduce the plaintiff's damages on account of payments which he has himself made, thereby diminishing the assets which he otherwise owns.
…
In addition to pension and superannuation benefits and benefits arising from benevolence, all of which may be disregarded provided their purpose is to confer a benefit on the plaintiff irrespective of the plaintiff's right of action against the tortfeasor, it is necessary to identify two other broad categories of benefits, the first of which will in general be disregarded and the second of which will in general have to be brought into account in the assessment of damages.
The first category concerns proceeds from insurance policies, such as those received by the plaintiff in Bradburn."[22]
[22](1983) 151 CLR 117 at 137-138
In Wollington Young CJ and Menhennitt J decided that ex gratia payments made by the State Government to bushfire victims should not be taken into account when assessing damages in a claim against the State Electricity Commission arising out of the same fire. It was said by their Honours that:
"The answer to the question whether a particular receipt by a plaintiff does or does not diminish the liability of the wrongdoer must in our opinion in the absence of any other rule of law depend as a matter of principle upon the character of the receipt. In other words, it is necessary to ask whether the receipt is of such a character that it does diminish the liability of the wrongdoer. No legal rule exists which enables a court to say whether this or that receipt by a plaintiff does diminish the liability of a wrongdoer and the Court is thus perforce thrown back upon general reasoning. It is in that way that the cases concerned with personal injuries approach the question and accordingly we think that the principles to be extracted from those cases are applicable to the present problem."[23] [Emphasis added]
[23][1980] VR 91 at 98
Mr Riordan also referred me to the decision of the New South Wales Court of Appeal in Tyco Australia Pty Ltd v Optus Networks Pty Ltd[24]. In that case Handley JA delivered the leading judgment and Giles and Hodgson JJA[25] agreed with his Honour on the relevant question of whether the damages payable by the appellant should be reduced because of the benefit the respondent received as a result of the casualty when it cancelled certain arrangements with a third party and thereby saved the costs it otherwise would have incurred. In affirming the trial judge's decision that the expenditures avoided were collateral, Handley JA said:
"Insurance arrangements by an injured party have traditionally been viewed as collateral. Their benefits do not have to be brought to account for the benefit of the wrongdoer even where the subrogation and indemnity principles do not apply: Bradburn v Great Western Railway Co …"[26]
[24][2004] NSWCA 333
[25][2004] NSWCA 333 at [231] and [288] respectively
[26][2004] NSWCA 333 at [188]
Given the differing views expressed in these cases, it seems to me that Mr Tiernan was correct when he submitted that it could not be said that there was an absolute rule that the proceeds of an insurance policy would not be deducted from the amount of damages otherwise payable. This issue was put beyond doubt, I consider, by the recent judgment of Nettle JA, with whom Winneke P agreed, in Transport Accident Commission v Sweedman[27]. Nettle JA stated:
"Counsel referred to a number of cases concerning insurance policies and social service pensions in which it has been held that the amount paid by an insurer or by government or other provider to a plaintiff cannot be taken into account in calculating damages for personal injury recoverable from a wrongdoer. It was submitted that those authorities support the existence of a general principle that insurance policy proceeds and social security benefits cannot be deducted from the amount of damages otherwise payable in a claim for personal injuries. But plainly that is not so."[28] [Emphasis added]
After then quoting the passage from the judgment of Windeyer J set out in paragraph 12 above, his Honour continued:
"Broadly speaking it may be accepted that benefits like insurance which are paid pursuant to contract are not deductible from the amount of damages recoverable where the intention of the contract is that the beneficiary should have the benefits notwithstanding rights of action which he or she may have against the wrongdoer. It makes no difference that the insurer is entitled to be subrogated to the insured’s rights of action against the wrongdoer because, as Windeyer J explained, if the wrongdoer were entitled to set off what the plaintiff was entitled to recoup or had recouped under his policy the wrongdoer would in effect be depriving the plaintiff of all benefit to himself. In other words it is regarded as unjust that money spent by an injured man on premiums should inure to the benefit of the tortfeasor. Equally it may be accepted as a general proposition that benefits given by way of bounty are not to be deducted if given on the basis that the beneficiary should enjoy them in addition to and not in diminution of any claim for damages. That is so because gifts of that kind are given for the benefit of the sufferer and not of the wrongdoer. But contrastingly if a donor makes a gift to the victim of an accident out of sympathy for the man unfortunately responsible for the accident, making it plain that the gift is made in the interests of the tortfeasor so as to diminish the damages that the tortfeasor has to pay, effect will be given to the donor’s intention and the damages recoverable will be reduced accordingly."[29] [Emphasis added]
[27](2004) 10 VR 31
[28](2004) 10 VR 31 at [39]
[29](2004) 10 VR 31 at [40]
This means, in my opinion, that WMC's submission, that the question of whether it recovered under its insurance policy for the same loss and damage now sought to be recovered from Steuler was simply irrelevant, must fail. The paragraphs in question, therefore, cannot be struck out on this basis.
However, as the emphasised passages from the above judgments show, the critical question is what was the intention of the insurer when it paid money to the insured under the policy. This squarely raises the question of whether the pleading by Steuler is defective.[30] Mr Riordan correctly pointed out that nowhere in the relevant paragraphs of the amended defence was it alleged that Westminer intended that WMC should have the payment notwithstanding rights of action it might have against a wrongdoer. Without such an allegation it seems to me that the relevant part of Steuler's amended defence does not satisfy "the requirement that pleadings and particulars be sufficient to enable" the opposing party to know what case it has to meet.[31] I consider that WMC is entitled to know precisely why it is said that any damages payable by Steuler should be reduced by any payment received by WMC under its contract of insurance with Westminer. That question is not dealt with in the pleading and it therefore seems to me that the pleading is deficient. Accordingly, paragraphs 28V to 28Z8 of Steuler's amended defence should be struck out, with leave to replead if so advised.
[30]Brimson v Rocla Concrete Pipes Limited [1982] 2 NSWLR 937 at 942 per Cross J
[31]Opat Decorating Service (Vic) Pty Ltd v Jennings Group Limited, Unreported, 16 September 1994; BC 9405102 at p.4 per Byrne J
Finally, I note that WMC has foreshadowed an intention to apply under r.23.01 should the question of the payment by the insurer remain a live issue. Without in any way prejudging this argument, I simply point out that, given the wording of the policy, Steuler would probably need to plead, or give particulars of, why it was said in paragraph 28Z5 of the existing amended defence that WMC had no obligation "under the Policy or otherwise" to account to Westminer in respect of any loss or damage it recovered from Steuler, if that pleading were to be repeated.
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