R and B Directional Drilling Pty Ltd (in liq) v CGU Insurance Limited

[2018] FCA 904

FEDERAL COURT OF AUSTRALIA

R & B Directional Drilling Pty Ltd (in liq) v CGU Insurance Limited [2018] FCA 904

File number:	WAD 226 of 2018
Judge:	ALLSOP CJ
Date of judgment:	13 June 2018
Date of hearing:	13 June 2018
Registry:	Western Australia
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance Insurance List
Category:	No Catchwords
Number of paragraphs:	8
Counsel for the Applicant:	Mr T Castle
Solicitor for the Applicant:	Cullen Macleod Lawyers
Counsel for the Respondent:	Mr D Mitchell
Solicitor for the Respondent:	SRB Legal

ORDERS

WAD 226 of 2018

BETWEEN:

R & B DIRECTIONAL DRILLING PTY LTD (IN LIQ) (ACN 163 164 234)

Applicant

AND:

CGU INSURANCE LIMITED (ABN 27 004 478 371)

Respondent

JUDGE:	ALLSOP CJ
DATE OF ORDER:	13 JUNE 2018

THE COURT ORDERS THAT:

1.On or before 4 July 2018, the respondent file and serve a short narrative statement in answer to the applicant’s concise statement that:

(a)clearly states the respondent’s basis for the refusal to indemnify; and

(b)clearly identifies such further information that the respondent says is required from the applicant in order to understand and determine the applicant’s claim.

2.On or before 18 July 2018, the applicant file and serve a short statement and submissions as to the necessity or otherwise of the requested information.

3.Leave be granted to the parties to approach the National Operations Registrar to arrange a mediation of the matter.

4.The matter be listed for further case management at 11:00am on 27 July 2018.

5.Liberty to apply on three days’ notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
(Revised from the transcript)

ALLSOP CJ:

1. In this matter, a claim is made under a business insurance policy in relation to work undertaken by the applicant in northwest Western Australia, near Port Hedland, in connection with the laying of conduit pipes to carry high voltage cables underneath a railway line operated by BHP Billiton and Fortescue Metals Group.

2. The background to the dispute, in general terms, is very clearly set out in the concise statement of three pages in length.  The work involved the placing of conduit pipes into other pipes, and the fixing of the conduit pipes by the pumping of concrete into the void between the conduit pipe and the carrying pipe.  After the conduit pipe was thus fixed, it was intended to thread high voltage cables through the conduit pipe.  Provisions in the documentation between the applicant and the relevant principal provided for the passing of title in relation to the pipes and the work.  Apparently, the concrete seeped into the conduit pipes and set before it could be flushed out, thereby damaging the property and making the conduit pipes and the carrying pipes useless.

3. There was an exchange of correspondence (before the liquidation of the applicant) in December 2016, the terms of which were discussed before me today.  One would be forgiven, when examining those terms, for thinking that the insurer at that point, through its representative, was accepting that Section 5 of the policy applied, subject to the operation of two particular exclusions.  There was some suggestion earlier in the piece, I am told, that Section 1 of the policy may have applied, but there is no claim made under Section 1.  It is to be noted that the concise statement and the application are drafted on the basis that Section 5 of the policy applies.

4. Mr Mitchell, who appeared for the insurer, today indicated that there were various matters of specificity required by his client before the dispute could be properly examined by it.  One of the difficulties with that proposition is that his client has declined the claims under the policy.  With respect, I do not see any advantage, cost or otherwise, in having a pleading in the light of the concise statement.  It may be that further particular information is required, but the insurer has seen fit to decline this claim. It must be on some basis.  Therefore, we are to know what that basis is before we go any further.

5. What I propose to do is order a short narrative statement in answer to the concise statement which clearly states the basis for the refusal to indemnify and identifies such further information as the insurer says is required from the insured to understand and determine the claim.  That answer to the concise statement is to be filed within 14 days.

6. A question of security for costs was raised by the insurer.  There is no application on.  I do not propose to delay the order, and the performance of the order, that I have just identified. The company is in liquidation.  Therefore, some arrangements will indeed be required to deal with the costs of the respondent, either through the personal liability of a liquidator or some fund.  However, that issue can be heard in due course, if agreement cannot be reached.  An essential part of that application as to security would be understanding, from an insurer who has already denied liability, what it says the issues in the case will be.  And, it is more than appropriate that that take place before the hearing of any security for costs application.

7. I am on leave from 25 June.  I will bring the matter back before me in late July, or earlier before another judge if that is thought appropriate.  On the next occasion in late July or, if it needs to be, before then before another judge, I or that other judge will decide how to resolve this matter and, if necessary, set this matter down for hearing in September.

8. Therefore, the orders I will make are:

   1.On or before 4 July 2018, the respondent file and serve a short narrative statement in answer to the applicant’s concise statement that:

   (a)clearly states the respondent’s basis for the refusal to indemnify; and

   (b)clearly identifies such further information that the respondent says is required from the applicant in order to understand and determine the applicant’s claim.

   2.On or before 18 July 2018, the applicant file and serve a short statement and submissions as to the necessity or otherwise of the requested information.

   3.Leave be granted to the parties to approach the National Operations Registrar to arrange a mediation of the matter.

   4.The matter be listed for further case management at 11:00am on 27 July 2018.

   5.Liberty to apply on three days’ notice.

I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop.

Associate:

Dated:        15 June 2018