(re Jackson) BlueScope Steel Limited v Allianz Australia Limited

[2010] NSWDDT 1

Dust Diseases Tribunal

of New South Wales

CITATION:	(re Jackson) BlueScope Steel Limited v Allianz Australia Limited [2010] NSWDDT 1 This decision has been amended. Please see the end of the judgment for a list of the amendments.
PARTIES:	Bluescope Steel Limited (formerly known as John Lysaght (Australia) Limited) Allianz Australia Limited
MATTER NUMBER(S):	156 of 2009
JUDGMENT OF:	Kearns J
CATCHWORDS:	DUST DISEASES TRIBUNAL - Proceedings :- earlier proceedings brought by injured person against insured and another defendant; earlier proceedings settled with insured subject to a verdict and the other defendant obtaining the verdict; claim by insured on policy; insurer resists claim on several grounds set out in its defence; Application to strike out parts of defence; two contentious grounds of defence - (1) defence alleged counsel in earlier proceedings failed to elicit evidence from the injured person that would have assisted insured in later cross-claims. This ground struck out on the basis that counsel had no duty to elicit such evidence, (2) defence also alleged that solicitors for the insured, being privy to insured’s file and instructions, though they ceased to act for the insured, continued to act for the other defendant securing an advantageous outcome for it to the detriment of the insured; whether solicitors were in a position of conflict; held that they were on a prima facie basis; this ground of defence held to be good
CASES CITED:	James Hardie & Coy Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53
DATES OF HEARING:	15/02/2010
DATE OF JUDGMENT:	17 February 2010
LEGAL REPRESENTATIVES:	Mr T G R Parker SC, instructed by Piper Alderman, appeared for the plaintiff Mr G Little SC, instructed by Ellison Tillyard Callanan, appeared for the defendant

JUDGMENT:

KEARNS J

1. On 5 July 2006 Mr Jackson filed a statement of claim in the Tribunal against BlueScope Steel Limited (Bluescope) and BHP Billiton Limited (BHP).

2. Mr Jackson sued for damages for the contraction of mesothelioma from exposure to asbestos in the course of his employment by BlueScope, which was then known as John Lysaght (Australia) Limited (Lysaght), and on sites occupied by BHP. The exposure was over a number of years from 1957. In July 2007, Mr Jackson died and his wife, being his executrix, was substituted as the plaintiff.

3. On 21 August 2007, proceedings were settled. There was verdict and judgment against BlueScope for $225,000 plus costs. Verdict and judgment were entered in favour of BHP with each party to pay its own costs. On 2 October 2007, BlueScope paid the judgment sum and on 27 February 2009, it paid the costs.

4. At all relevant times, BlueScope had a policy of insurance indemnifying it in respect of liability incurred to its employees by reason of its negligence. Cover was with Manufacturers Mutual Insurance Limited (MMI).

5. Allianz Australia Limited (Allianz) acquired MMI's rights and obligations in respect of all relevant policies of insurance. BlueScope has made a claim on Allianz and Allianz has declined indemnity.

6. BlueScope now brings these proceedings seeking declarations and orders that it be indemnified by Allianz, or alternatively, seeking damages for breach of contract the insurer. BlueScope seeks its relief by statement of claim filed on 16 June 2009. Allianz filed a defence on 27 July 2009. It filed a second amended defence on 14 October 2009. On 2 December 2009, the matter was before Curtis J concerning the state of the defence. His Honour ordered that the second amended defence be amended in accordance with concessions made by counsel in submissions. Pursuant to that order, Allianz amended the second amended defence by way of a document entitled “Third Amended Defence”. It was filed on 8 December 2009.

7. On 21 December 2009, BlueScope filed a motion seeking orders that parts of the Third Amended Defence be disallowed or struck out, and it is that motion that is now before me.

8. Mr Parker SC, who appeared for BlueScope, indicated that there were three aspects of the amendments that he objected to. The first matter Mr Parker objected to related to paras 1 and 2 of the Third Amended Defence. I need not dwell on this matter. In the course of discussions, it became apparent that the issue that arises here can be overcome if BlueScope amends its statement of claim to rename the Allianz entity in accordance with its proper name and style.

9. The second aspect of the amendments that Mr Parker objected to relates to para 3 of the Third Amended Defence. Again I need not dwell on this. In discussion Mr Little SC, who appeared for Allianz, stated he did not need this amendment and it was not pressed.

10. The third aspect of the amendments that Mr Parker objected to related to para 9(e)(viii) and (ix) of the Third Amended Defence. I think they are two discrete points and it is necessary now to set out some factual background against which those matters need to be resolved.

11. Mr Jackson sued both BlueScope and BHP. His case was that he was employed by BlueScope and that in the course of his employment, his duties sometimes took him to premises occupied by BHP. His case was that he was exposed to asbestos in the course of his employment generally and when he went to BHP sites. The case against both BHP and BlueScope was settled as earlier indicated. BlueScope alleges that it was first aware of Mr Jackson's claim when it was served with the statement of claim on 5 July 2006. On 13 July 2006, the Allianz policy was received by Piper Alderman who were then acting for both BlueScope and BHP. Piper Alderman notified Allianz of Mr Jackson's claim on 14 July 2006. Mr Jackson died on 18 July 2006. BlueScope made a claim on its policy on 19 July 2006 and Allianz declined the claim on 20 July 2006.

12. Meanwhile, because of Mr Jackson's state of health, his case was brought on urgently. His evidence was taken on 12 July 2006 as was the evidence of his wife. At this stage, the conduct of the proceedings on behalf of BlueScope and BHP continued to be undertaken by Piper Alderman.

13. Following Allianz declining BlueScope's claim on the policy, Piper Alderman ceased to act for BlueScope, and on 26 July 2006, Sparke Helmore took over the defence of the proceedings on behalf of BlueScope. Notice of change of solicitor was filed on 31 July 2006. Piper Alderman continued to act for BHP.

14. Some of the facts I have recited are in issue but they may be taken as given for the purposes of this application.

15. Allianz resists the claim for indemnity by BlueScope on the following grounds.

(1) In breach of the policy, BlueScope did not give notice of the claim to Allianz, as soon as practicable after the claim came to its knowledge or before the filing of notice of intention to act.

(2) In breach of the policy, BlueScope incurred the expense of litigation without the written authority of Allianz and made a payment, settlement or admission of liability without the written authority of Allianz.

(3) In breach of the policy, BlueScope failed to provide Allianz with any information relevant to the claim before the evidence of Mr Jackson was taken.

(4) BlueScope acted contrary to the interests of Allianz in relation to the contract of insurance in that:

(a) it was represented by solicitors who also acted for BHP whose interests were inimical to the interests of BlueScope;

(b) it, by its solicitors, Piper Alderman, instructed a single counsel to represent both defendants when there was a conflict of interest between them;

(c) before 5 November 2004, BlueScope knew and from that date Piper Alderman knew that BlueScope was insured by Allianz.

(d) BHP was known by itself by BlueScope and by Piper Alderman to be self insured.

(e) it was in the interests of BHP that it be exculpated and that liability be attributed to BlueScope.

(f) when Mr Jackson's evidence was taken, questions asked by counsel were designed to achieve the result mentioned in (e) above.

(g) BlueScope was under a duty to protect the interests of Allianz and had a duty to obtain evidence from Mr Jackson that would assist in the prosecution of cross-claims against both BHP and the suppliers of asbestos. No counsel properly instructed, should have asked questions of the kind referred to in (6) above.

(h) ”Further, no attempt was made by counsel appearing for the plaintiff and BHP to elicit evidence which would have been likely to assist with the identification of manufacturers and/or suppliers of asbestos products so as to provide an evidentiary foundation to assist in the future prosecution of cross claims for contribution against such parties in breach of duties described in para (vii) above." This is para 9(e)(viii) of the Third Amended Defence, and the emphasis has been added.

(i) Piper Alderman, having been privy to BlueScope's file, and in receipt of instructions concerning the litigation, continued to act for BHP securing an advantageous outcome for it to the detriment of BlueScope and Allianz in breach of solicitors' obligations not to use confidential information obtained on behalf of a client against that client and in breach of the duty mentioned in (g) above. This is para 9(e)(ix) of the Third Amended Defence.

16. Mr Parker confined his submissions to the last two points, but I have set out the whole of the grounds that Allianz relies on so that they may be seen in their context. Mr Parker did raise point (g) above, but I do not understand him to have pressed any submission in relation to it. In any event, it was the subject matter of discussion between Curtis J and counsel when the matter was before him and it seems to me, Allianz has simply complied with the order made by Curtis J in relation to this item.

17. I deal then with the last two points. I can dispose of para 9(e)(viii) of the Third Amended Defence briefly. This, in effect, alleges a duty on the part of a defendant to cross-examine a plaintiff so that evidence might be obtained that might be useful in extraneous proceedings against persons not party to the existing litigation. Not only in my view is there no such duty, but questions asked of a plaintiff in such circumstances would be irrelevant to any issue in the proceedings, and would properly be rejected if objected to, and even if not objected to. In my view, this paragraph is objectionable and it should be struck out.

18. That leaves the last of the above points. Mr Little stated that Allianz did not know what information Piper Alderman had that enabled that firm to secure an outcome to the detriment of BlueScope and Allianz, but he did refer to some transcript of the proceedings brought by Mr Jackson.

19. One issue that has arisen is whether Piper Alderman and counsel instructed by them were in a position of conflict. In my view, they were, at least on a prima facie basis. That arises in a number of ways.

20. One way in which the conflict arises is that in the contested litigation, it was in the interests of BHP to seek to avoid liability altogether. That would have been feasible if Mr Jackson was not present on its premises or was rarely at its premises and on those occasions, credible evidence could show that when it was he was there at times when or at sites where asbestos was not liberated into the atmosphere. That appears to have been BHP's position and it was the duty of BHP's legal representatives to conduct the case to seek to achieve that result. Indeed, Mr Little complains that that is what happened, and he draws my attention to part of Mr Jackson's evidence as follows:

Question - You only worked on the John Lysaght premises as an apprentice.

Answer - No. I worked on the brick - on the BHP as well.

Question - But during your apprenticeship you only ever worked with John Lysaght on their premises.

Answer - No I worked on other premises too.

21. In a later part of the questioning, counsel appears to be trying to confine Mr Jackson's exposure or the bulk of it to his time as an apprentice with BlueScope. Whilst Mr Jackson's affidavit was not before me, it was apparent that in the affidavit, he stated that during his apprenticeship he did not work outside of BlueScope's premises. When, in his oral evidence, he said that in that time he also worked on the BHP site, there was a conflict. If the defendants were then separately represented, counsel for BlueScope would be questioning Mr Jackson to seek to develop details of the times, places and conditions of employment when he was at BHP sites, and counsel for BHP would be questioning him to seek to establish that he was wrong. It did not need this development for experienced lawyers to realise the potential for conflict. They could, and probably should, have seen it coming.

22. I have indicated that lawyers properly acting for BHP would be seeking to secure a verdict for BHP. That gives rise to another way in which conflict arises, and that is, it would be in the interests of BlueScope to ensure that the plaintiff obtained a verdict against BHP. Underlying what I have said so far, on this and the previous point, is the probability that BlueScope would be found to be liable to the plaintiff. A verdict for the plaintiff against BHP would not relieve BlueScope of its liability to Mr Jackson, but it would leave open the possibility of a cross-claim against BHP. A verdict for BHP would deny BlueScope a cross-claim against it - James Hardie & Coy Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53. Accordingly, right from the outset, the two defendants had two opposing objectives thereby placing the legal advisers in a position of conflict. It would not be possible for them to pursue one objective without acting contrary to the other.

23. A further way in which conflict arises concerns the position of the defendants in settlement negotiations. Presumably from the outset, there was no agreement between them as to respective sharing arrangements, as they both continued to be involved in the litigation. Further, when Piper Alderman ceased to act for BlueScope, that would suggest there was no agreement between them.

24. There is one other factual matter that arises. In the proceedings before Curtis J there was reference to an investigation undertaken possibly on behalf of BlueScope. The investigation was in relation to Mr Jackson's employment and exposure circumstances. The material in relation to this was referred to in a letter from Piper Alderman to Allianz's solicitors dated 18 March 2009. That letter was in evidence before Curtis J but it has not been put in evidence before me. Mr Little maintained before Curtis J that there was an inference available from that letter that information was obtained by BlueScope and ultimately used against it. This appears to be a reference at least to the questions asked by counsel of Mr Jackson that I referred to earlier.

25. It is against that background that I need to consider para 9(e)(ix) of the Third Amended Defence. In my view, this para does plead sufficient facts. It pleads as follows:

(a) that Piper Alderman was privy to the contents of BlueScope's file. That would be self-evident;

(b) that Piper Alderman was in receipt of instructions concerning the subject matter of the litigation. That also would be self-evident although the precise content of the instructions is not known to all interested parties;

(c) that Piper Alderman continued to act for BHP. That also is self-evident;

(d) that Piper Alderman secured an advantageous outcome for BHP. That also is self-evident, though no doubt it will be argued that the result was no more advantageous to BHP than the result it was entitled to in any event;

(e) that in securing the advantageous outcome, Piper Alderman did so to the detriment of BlueScope and Allianz. That no doubt is contentious but the fact is appropriately pleaded;

(f) that Piper Alderman in securing the advantageous outcome for BHP was in breach of solicitors' obligations not to use confidential information obtained on behalf of a client against that client. For convenience I have not broken this up and I have rolled up several facts in that allegation, and they would be contentious, but the facts are appropriately pleaded;

(g) that Piper Alderman in securing the advantageous outcome for BHP was in breach of the duty to protect the interests of Allianz. That no doubt is contentious, but the fact is appropriately pleaded.

26. Mr Parker submitted that I should not overlook the fact that Sparke Helmore acted for BlueScope throughout almost the whole of the conduct of the litigation and there is no suggestion that they were not independent and they could have sought any information they wished from Piper Alderman. This is true and it may be a knockout point at hearing, but in my view, it does not cut across the pleading that Allianz makes. The complaint is that Piper Alderman were in a position of conflict and Sparke Helmore, taking over for BlueScope, did not remove that conflict. There was the first period which, though it was only short, was in fact a period where Piper Alderman acted for both BlueScope and BHP. Then, Piper Alderman having acted for BlueScope, continued to act for BHP and, it would seem inherent in that, against BlueScope. That may well be a fair complaint. Whether Allianz can establish that anything flows from it is not to be determined here but is really a trial issue.

27. In the circumstances, I am of the view that para 9(e)(ix) of the Third Amended Defence may remain.

28. Mr Parker indicated that the plaintiff would wish to file an amended statement of claim to deal with the matter concerning the appropriate naming of the defendant and also to tidy up some spelling and perhaps other errors in the document, and I propose to grant leave accordingly.

29. The defendant will accordingly need to file and serve yet another defence in answer to the further statement of claim, and I shall make an order covering that. The defence, of course, should be in conformity with the existing documents and subject to such matters as were conceded by Mr Little in the course of argument here and subject to other orders I make in relation to it.

30. The orders I make are:

(1) the second sentence of para 3 of the Third Amended Defence is struck out;

(2) paragraph 9(e)(viii) of the Third Amended Defence is struck out;

(3) the plaintiff to file and serve an amended statement of claim by 23 February 2010;

(4) defendant to file and serve defence in response to the amended statement of claim by 26 February 2010;

(5) the matter listed for directions before his Honour the President O'Meally J on 1 March 2010.

31. Mr Phelps, on behalf of BHP seeks costs. Mr Cho, on behalf of the defendant is without instructions. Mr Phelps makes the point fairly that there was no response to some correspondence that had been sent by BHP's solicitors to Allianz's solicitors. The explanation for that lies in the fact that this was largely over the vacation period and responsible persons were on vacation. I guess that still does not cover the whole of the period because this matter came before me only a couple of days ago. We are a few weeks into the new term now. Had there been response, it seems likely the point about the appropriate name of the defendant would have been cleared up and that need not have been an issue. In the end, it was not really an issue. The second point that was raised by Mr Parker concerning para 3 of the Third Amended Defence fell away with Mr Little's concession. There were really two substantive issues that were fought out before me and it has really gone 50:50 on that. In the circumstances, I think the appropriate order to make is that the costs in this motion be costs in the cause.

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