QBE Insurance Ltd v Nguyen

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SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

QBE INSURANCE LTD v NGUYEN

[2008] SASC 138

Judgment of The Full Court

(The Honourable Chief Justice Doyle, The Honourable Justice Gray and The Honourable Justice Layton)

23 May 2008

INSURANCE - GENERAL - POLICIES OF INSURANCE - CONSTRUCTION

INSURANCE - THIRD-PARTY LIABILITY INSURANCE - OTHER THIRD-PARTY LIABILITY INSURANCE - PUBLIC LIABILITY

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - APPEARANCE AND DEFAULT OF APPEARANCE

PROCEDURE - JUDGMENTS AND ORDERS - INTEREST ON JUDGMENTS - IN GENERAL

EQUITY - GENERAL PRINCIPLES - EQUITABLE DOCTRINES AND PRESUMPTIONS - ELECTION - IN GENERAL

Appeal by defendant insurer against a judgment for damages in favour of plaintiff in his capacity as the assignee of the Official Trustee in Bankruptcy of insured – plaintiff was seriously injured during knife attack outside suburban town hall – plaintiff brought proceedings in negligence against the insured, the proprietor of the security firm on duty at function in hall – at the time of the incident the insured held a contract of public liability insurance – insurer initially sought to avoid contract of insurance on ground of fraudulent misrepresentation – plaintiff sought to join insurer in damages action - insurer successful in resisting joinder - purported avoidance by insurer subsequently abandoned – judgment in default of appearance entered in favour of plaintiff against insured for damages which were subsequently assessed – insured declared bankrupt subsequent to default judgment – pursuant to section 117(1) of Bankruptcy Act 1966 (Cth), insured’s right to indemnity under contract of insurance vested in Official Trustee in Bankruptcy – pursuant to section 134 of Bankruptcy Act, by deed of assignment, Official Trustee in Bankruptcy assigned to plaintiff the insured’s right to indemnity under contract of insurance – plaintiff brought proceedings in contract against defendant insurer to recover against the defendant the amount of damages awarded to plaintiff – defendant denied liability but did not challenge assessment of damages – plaintiff’s claim successful and defendant declared liable under contract of insurance and ordered to pay damages including interest pursuant to section 57 Insurance Contracts Act 1984 (SA) – defendant appealed decision to Full Court – whether insured entitled to be indemnified by defendant – whether default judgment established legal liability of insured to pay judgment sum in respect of bodily injury to plaintiff – whether plaintiff’s bodily injury happened as “a result of” an “occurrence” or “event” in connection with the insured’s business – whether judge erred in award of interest on judgment sum – whether judge erred in declining to rule that defendant had elected to restrict its denial of indemnity to the ground of fraudulent misrepresentation – consideration of principles relevant to construction of contract of insurance.

Held, dismissing the appeal: (Per Doyle CJ and Gray J, Layton concurring): Contract of insurance indemnified the insured against sums which the insured became legally liable to pay – default judgment created a legal liability of insured to pay judgment sum in…

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Details
Case
[2008] SASC 138
Decision Date

CaseChat Overview and Summary

The appeal was brought by QBE Insurance Ltd against a judgment for damages in favour of Michael Luu Nguyen, who sued as the assignee of the Official Trustee in Bankruptcy of Angelo Hiotis. Nguyen was seriously injured during a knife attack outside a suburban town hall, and Hiotis, the proprietor of the security firm on duty at the function, was found liable in a negligence action. At the time of the incident, Hiotis held a public liability insurance contract with QBE. Initially, QBE sought to avoid the contract on the ground of fraudulent misrepresentation, but this was abandoned. A default judgment was entered against Hiotis, and he was later declared bankrupt. Nguyen, as the assignee of Hiotis's right to indemnity, brought proceedings against QBE for the damages awarded to him. The primary issues were whether Hiotis was entitled to indemnity under the insurance contract, whether the default judgment established a legal liability of Hiotis to pay the judgment sum, and whether the plaintiff's injury was a result of an "occurrence" in connection with Hiotis's business. Additionally, the court considered whether the Judge erred in awarding interest on the judgment sum and whether QBE had elected to restrict its denial of indemnity to the ground of fraudulent misrepresentation.

The Full Court dismissed the appeal, affirming that the contract of insurance indemnified Hiotis against sums he became legally liable to pay. The Full Court held that the default judgment created a legal liability of Hiotis to pay the judgment sum for bodily injury to Nguyen. The court found that Nguyen's injury occurred as a result of an "occurrence" in connection with Hiotis's business. The Full Court also concluded that the Judge was correct to award interest under the relevant statute. The court rejected QBE's argument that the default judgment did not establish a legal liability, noting that until set aside, it was enforceable in the same manner as a judgment obtained after a trial. The Full Court found no other grounds for QBE denying liability to indemnify Hiotis and dismissed the appeal.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

The Judge, in his reasons for judgment, made restricted findings of fact. He did not make findings concerning the breach of a duty of care on the part of Mr Hiotis. The Judge had been informed that the parties agreed that the question whether there was sufficient evidence before the Court to establish a breach of a duty of care was not an issue for decision in the proceedings. The Judge observed:[8]Although the evidence as to the events of the evening is of some relevance in providing the factual background against which to consider the issues in the case, I do not regard it as necessary to resolve all aspects of the conflicting versions which I have set out above.Both parties agreed that the question whether there was sufficient evidence before me to establish a breach of duty of care was not an issue for decision in this case. On the plaintiff’s case, the legal liability relied upon by him was established in the previous proceedings. The further question whether the circumstances answer to the other requirements of the indemnity clause does not require resolution of the competing versions which emerge from the evidence.[Emphasis added]At the trial, the plaintiff’s position was that the judgments in the earlier proceedings established the essential common law elements of the tort of negligence – duty, breach and loss and damage. QBE’s position was that the plaintiff had to make out his case in contract and that there had been no attempt in the present trial to make out a case in negligence against Mr Hiotis. It was in these circumstances that the Judge made the observation emboldened above. [8] Nguyen v QBE Insurance Ltd (2007) 99 SASR 443 at [53]-[54]. The Judge proceeded to make the following general findings:[9] [9] Nguyen v QBE Insurance Ltd (2007) 99 SASR 443 at [55]-[56].Generally speaking, I prefer the evidence of Mr Hiotis and Mr Marinus to that of the plaintiff and the Tran sisters. Understandably, the plaintiff went through a frightening experience which happened quickly and caused him great pain. I accept that he was attacked almost as soon as he left the premises and while he was on the footpath a few steps from the front doors. He stressed that the fight in this location lasted for a long time, but other evidence suggests that it moved fairly quickly to the kerb and then further out into Woodville Road. There is no doubt that the Tran sisters sought help from the security guards and I accept that while the fight was going on they were screaming out. However, I also accept the denials of Mr Hiotis and Mr Marinus that there were three attempts to get them to assist. I accept the evidence that their aid was sought on one occasion and that they responded in the manner described by them in their evidence.The Judge in the course of his reasons addressed the contract of insurance. The indemnity clause of the contract provided:QBE will pay to or on behalf of The Insured all sums which The Insured shall become legally liable to pay by way of compensation (excluding punitive or exemplary damages) in respect of:-(a) bodily injury (which expression includes death and illness)(b) property damage (which expression includes loss of property)happening during the Period of Insurance as a result of an Occurrence in connection with The Business.The Judge then addressed the question of whether the plaintiff had established that QBE was legally liable to pay a sum by way of compensation in respect of bodily injury:[10]As stated above, the defendant’s first argument addresses the phrase “legally liable to pay”. According to the argument, the policy provides an indemnity only in those cases where liability is established by a judgment entered after a trial or following an informed settlement. It is argued that, for the purposes of the policy, a default judgment which is never final cannot be equated with a final judgment.In my view, this argument must be rejected. Any differences which might exist between a default judgment and a judgment entered after a trial of the issues are irrelevant for the purposes of the indemnity clause in the contract of insurance.The consideration that a default judgment can be set aside does not alter the fact that, until set aside, it is enforceable in the same manner as a judgment obtained after a trial or by consent.The Judge concluded that the default judgment created a legal liability to pay, by way of compensation, a sum in respect of bodily injuries. Leaving aside the question of whether the judgment established a legal liability within the meaning of the policy, it was accepted both at trial and on appeal that the judgment was in respect of bodily injury.[10] Nguyen v QBE Insurance Ltd (2007) 99 SASR 443 at [18]-[20].

Decision

Reasons for decision

GRAY J (dissent)
For those reasons, I agree with the Judge that the bodily injury of Mr Nguyen was a result of an occurrence in connection with the business.Conclusion No other grounds for QBE denying liability to indemnify Mr Hiotis were argued before the Judge or on appeal. I consider that, on the evidence before the Judge, Mr Nguyen was entitled to payment by QBE of the amount of the judgment recovered against Mr Hiotis. The Judge was correct to order that judgment be entered in favour of Mr Nguyen against QBE.Interest I am content to adopt the reasons of Gray J on this issue. I agree with his reasons and with his conclusion.Election I agree with the trial Judge that the present case is not one in which QBE had to elect as between strictly alternative or inconsistent remedies, one of which could not be exercised without extinguishing the other: see Meagher, Gummow and Lehane’s, Equity Doctrines and Remedies (4th ed, Butterworths Lexis Nexis, Australia, 2002) para [39-025]. On appeal, Mr Nguyen did not maintain the argument, based on estoppel, that was put to the trial Judge but rejected by him. For these reasons, I would not uphold the notice of alternative contention.Orders I would dismiss the appeal by QBE. Introduction This is an appeal by a defendant following a trial before a Judge of this Court. The judgments under appeal are in favour of the plaintiff and respondent, Michael Luu Nguyen, in his capacity as the assignee of the Official Trustee in Bankruptcy of an insured, Angelo Hiotis, against the defendant and appellant, the insurer QBE Insurance Ltd.[1] The plaintiff had obtained a judgment in earlier proceedings against Mr Hiotis, in his personal capacity as an injured person.[2] Mr Hiotis was relevantly insured under a public liability insurance contract issued by QBE (“the contract”). Mr Hiotis was subsequently declared bankrupt. Pursuant to section 117(1) of the Bankruptcy Act 1966 (Cth), Mr Hiotis’ right to indemnity under the contract vested in the Official Trustee in Bankruptcy upon Mr Hiotis being declared bankrupt. The Official Trustee assigned to the plaintiff by deed of assignment dated 5 May 2005, pursuant to section 134 of the Bankruptcy Act, the whole of the right of Mr Hiotis to indemnity under the QBE contract. The plaintiff then, as assignee, commenced the within proceedings against QBE. [1] Nguyen v QBE Insurance Limited (2007) 99 SASR 443 (Duggan J), on liability and damages; Nguyen v QBE Insurance Limited (2007) 252 LSJS 320 (Duggan J), on interest.[2] Nguyen v Hiotis [2002] SASC 244 (Bleby J). The substantive question arising in the appeal is whether the insured is entitled to an indemnity under the contract. At issue is the construction of the indemnification clause of the contract. A further question arises as to whether the insured is entitled to indemnity under the contract in the proven circumstances. A final issue raised was whether the Judge erred in his award of interest on the award of damages. The plaintiff, by notice of contention, claimed that the Judge erred in declining to rule that QBE had elected to restrict its denial of indemnity to the ground of fraud, and that, in the circumstance of this assertion being withdrawn, QBE was precluded from defending the claim. The Incident

Ratio Decidendi

Legal Principle Established

Established by:

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