(re Vasiliou) Chubb Australia Limited v Mercantile Mutual Insurance (Australia) Ltd

[2007] NSWDDT 20

Dust Diseases Tribunal

of New South Wales

CITATION:	(re Vasiliou) Chubb Australia Limited v Mercantile Mutual Insurance (Australia) Ltd & Ors [2007] NSWDDT 20
PARTIES:	Chubb Australia Limited Mercantile Mutual Insurance (Australia) Limited Government Insurance Office of New South Wales AMP General Insurance Limited Insurers Guarantee Fund - NEM General Insurance Association Limited (in liquidation) MMI Insurance Limited Mercantile Mutual Insurance (NSW) Workers Compensation Limited AMP General Insurance Ltd
MATTER NUMBER(S):	160/1997/CC1 of
JUDGMENT OF:	Kearns J
CATCHWORDS:	Dust Diseases Tribunal :-
LEGISLATION CITED:	Dust Diseases Tribunal Act 1989
CASES CITED:	MMI Insurance Compensation (NSW) Ltd v Baker and Others (1997) 41 NSWLR 289; Francesco Cinzano and CIA Australia Pty Limited v Mercantile Mutual Insurance (Workers' Compensation) Limited & Ors (No 2) (1992) 8 NSWCCR 169
DATES OF HEARING:	11/05/2007; 21/05/2007
EX TEMPORE JUDGMENT DATE:	11 May 2007
LEGAL REPRESENTATIVES:	Mr D Toomey, instructed by Eakin McCaffery Cox, appeared for the cross-claimant Mr J de Greenlaw, instructed by McCulloch & Buggy, appeared for first and sixth cross-defendants; Ms W Strathdee, instructed by Moray & Agnew, AMP General Insurance Limited and AO Ellison & Co, appeared for second, third and fifty cross-defendants; Mr D J Ruggess QC, instructed by N W Aussel, appeared for fourth cross-defendant

JUDGMENT:

Dust Diseases Tribunal of New South Wales

Matter Number DDT160 of 1997/1

(Re: George Vasiliou)

C.C: Chubb Australia Limited (ACN 000 096 122)

v
C.D: Mercantile Mutual Insurance (Australia) Limited
C.D: Government Insurance Office of NSW
C.D: AMP General Insurance Limited
C.D: Insurers Guarantee Fund -
NEM General Insurance Association Limited (in liquidation)
C.D: MMI Insurance Limited
C.D: Mercantile Mutual Insurance (NSW Workers Compensation) Limited

11 May 2007

RULING

KEARNS J

1. I propose to deliver ex tempore reasons. I will not make formal orders during or at the conclusion of these reasons as there are some complexities relating to particular parties and particular dates and particular periods. I would ask the parties to bear that in mind because I will be asking the parties to bring in short minutes of order representing the reasons that I give. Also, these reasons being ex tempore and the substantive proceedings having been heard before another judge of this Tribunal should there be any matter of fact or evidence that I overlook in the course of delivering these reasons I ask the parties to draw them to my attention at the conclusion of these reasons so that any errors or omissions may be attended to. Likewise should I make any error in any statement of law or fact I ask the parties to do likewise.

2. The matter is before me to determine what costs orders should be made in respect of this lengthy litigation. The upshot of cross-claims brought by Chubb Australia Limited (Chubb) against its various insurers was that it succeeded against Mercantile Mutual Insurance (NSW Workers Compensation) Limited. There is a consensus that the principle applicable is that, as a prima facie position at least, Chubb, as the successful party against Mercantile, is entitled to its costs. Mr de Greenlaw who appears for Mercantile argues that the general principle should not apply in this case and he proffers a number of alternative suggestions. The reason the general principle should not apply in this case, and again there is a consensus about this, at least as to the law, is that he argues that the conduct of Chubb is such as to disentitle it to the benefit of the general rule that a successful party is entitled to its costs.

3. Orders were made about the filing of written submissions in relation to costs but regrettably my attempts to get a reasonable understanding of what this argument was all about yesterday were thwarted by my inability and that of my staff and that of the registry to be able to find written submissions on the part of Mercantile. When his instructing solicitor arrived at court this morning Mr de Greenlaw was able to provide me with a copy of his written submissions. I asked Mr de Greenlaw to identify in particular in precise terms what conduct it was of Chubb that disentitled it to the benefit of the general rule that a successful party is entitled to its costs. Several matters were adumbrated and they will be dealt with successively hereafter.

4. The first article of disentitling conduct was that when the cross-claim between the parties was first heard no case was sought to be made at that hearing by Chubb or by anybody, as I understood Mr de Greenlaw, that Mercantile was liable to indemnify. That article of disentitling conduct is just wrong in fact in that in the hearing of that first cross-claim, Insurers Guarantee Fund - NEM General Insurance Association Limited (NEM) argued that it was not the insurer liable. One of its submissions was that there was evidence in what Judge Armitage described as the original proceedings, which I take to be the plaintiff's proceedings, and tendered subsequently implicating Chubb in the use of asbestos in its processes until 1988. That is a time when Mercantile was in fact at risk. The first point fails.

5. The second article of conduct disentitling Chubb to its costs, it was argued, was that it made no submission that Mercantile should be liable until the second hearing of the cross-claim after the Court of Appeal decision. Chubb's position was described by Judge Armitage as essentially neutral, which one might think is not an unreasonable position for an insured to take when it has lined up at the Bar table every potential relevant insurer, and I do not see this point, even if made good in fact, as being conduct disentitling.

6. The next article of conduct disentitling was that Chubb called no evidence at the second hearing of the cross-claim to inculpate Mercantile, that evidence being called by an insurer. As Mr Toomey submitted to me, evidence is evidence. There was an expert report that had been tendered by Chubb at the second hearing of the cross-claim. In a forensic sense I would not see any need by Chubb to call any particular piece of evidence to inculpate Mercantile. Plainly with six insurers lined up along the Bar table down from Chubb it must have been evident to everybody involved in the litigation including even Mercantile that bullets were going to be fired at it in the course of the conduct of the case. The fact that Chubb did not call evidence on this particular point I do not find to be conduct disentitling. In any event I note that a report was tendered by Chubb in that hearing, an expert report which set out various areas in the factory of Chubb where asbestos was to be found.

7. The next article of disentitling conduct relied upon by Mr de Greenlaw was that there would have been no necessity for a trip to the Court of Appeal after the first hearing of the cross-claim if the first one had run as the second one did. That submission by Mr de Greenlaw is made in the face of a submission by his client at the first hearing of the cross-claim "The submission of the first and sixth cross-defendants" that is both Mercantile companies "is that the cross-claimant is not entitled to be indemnified in respect of its liability in respect of the plaintiff's cause of action by an insurer who is not on risk in respect of that cause of action." It succeeded at that point, to the cost of NEM, which went to the Court of Appeal and NEM's position in the Court of Appeal was upheld.

8. I do not understand how that submission can be made, that is the submission that a visit to the Court of Appeal would not have been necessary if the first cross-claim had run the way the second one did. It possibly helps to bear in mind in understanding this point that there were two matters that were not going to be sorted out at first instance and on which the Court of Appeal was going to be called upon and they were whether a plaintiff could effectively determine which insurer would be liable by when he closed off his period of claim in the statement of claim and what the proper "causation" test was for the purpose of s 151AB. In the end the Court of Appeal distinguished MMI Insurance Compensation (NSW) Ltd v Baker and Others (1997) 41 NSWLR 289 and held that a plaintiff could not, in effect, determine which insurer would be liable by when he closed off his claim in a statement of claim and it gave a broad approach to the "causation" test so that causation in fact was not required.

9. The significance of the first of those points was that in a hearing loss case Baker's case had held that where a plaintiff claimed damages for exposure to noise up to 30 June 1987 insurers on risk after that time could not by reason of s 151AB be liable to indemnify the employer. Mesothelioma, being an indivisible disease, as distinct from a divisible one, in the meaning in which those terms are used in this jurisdiction, provided a point of distinction such that even though a plaintiff closed off his claim at a particular point, as had been done in this case, an insurer on risk after that time could still be liable to indemnify an employer. That point of Mr de Greenlaw, in my view, is not made good.

10. The next article of conduct disentitling Chubb from its costs it was argued was that witnesses were called in the second cross-claim that were not called on the first. They were Mr Pickford and Mr Wilson. So far as Mr Wilson was concerned that does not seem to matter as he had been called in the plaintiff's case and I take it that his evidence was before Judge Armitage in the first hearing of the cross-claim although some of the evidence that he gave in the second hearing of the cross-claim was not. Mr Pickford was no part of Chubb's case. Chubb could not have called him at the first hearing of the cross-claim because he had not even been qualified at that stage and it was not within Chubb's power to do anything about him at the first hearing of the cross-claim. I do not see any conduct disentitling in relation to that point and in a sense this point also ties in with the earlier one, that is that this case looked like it was on its way to the Court of Appeal in any event.

11. The next article of conduct said to disentitle Chubb from its costs is that it should have applied to have had an insurer appointed as a designated insurer under s 151AC. I asked Mr de Greenlaw whether Chubb should have so acted in response to a request from Mercantile and the answer was no. Mercantile had not made such a request of Chubb, nor did it apply or make any move or do anything to have anybody appointed a designated insurer. His written submission says it is fairly clear that Mercantile would have been made fairly obviously the designated insurer. If that is the case one wonders why it did not do anything about it. In response to the submission Mr Toomey has drawn my attention to s 151AC(14) being the transitional provision and that provides that s 151AC applies to causes of action that arise before the commencement of the section and that it extends to proceedings instituted before that commencement so that up to that point the section would apply but it adds "but only if no hearing in the proceedings has started before that commencement".

12. Mr Toomey argues that hearing in the proceedings had started before the commencement, the argument being that the initial hearing of the cross-claim before Judge Armitage was a hearing in the proceedings. There is a recent decision of the Court of Appeal dealing with the meaning of proceedings in the context of s 12B of the Dust Diseases Tribunal Act, that being the provision that allows general damages to survive the death of a person and it was held in that case, by majority, that proceedings in that section referred to the actual proceedings against the particular defendant against whom the general damages were sought and not to the institution of the proceedings generally. In this case, however, it is clear, at least in my view, that proceedings when it is referred to in ss (14) refer to cross-claim proceedings by a party against multiple insurers and the question is then whether a hearing in "the" proceedings has commenced before the section.

13. In my view the hearing of these cross-claim proceedings did commence before Judge Armitage when the first hearing of the cross-claim was commenced and accordingly, in my view, s 151AC does not apply. However, even if it did apply I do not consider that Chubb, not having applied for the appointment of a designated insurer, was guilty of conduct disentitling it to its costs as against Mercantile. This is essentially for reasons I have already mentioned, namely that it was as available to Mercantile as it was available to anyone to seek to have an insurer appointed a designated insurer and experience tells us that it is not unknown for insurers to apply to have that done from time to time. Where Mercantile has sat back and has done nothing about having itself or anybody else appointed a designated insurer it is hardly available to it to criticise Chubb for not having done so. Not only did it not make any positive step towards having itself or some other insurer appointed a designated insurer, but it did not even volunteer the suggestion. I do not consider that to be conduct disentitling Chubb to its costs.

14. I was not sure as to whether the next point argued by Mr de Greenlaw was tied in with the point just discussed or a separate point, and that was he relied on a decision of Judge O'Meally in a matter of Francesco Cinzano and CIA Australia Pty Limited v Mercantile Mutual Insurance (Workers’ Compensation) Limited & Ors (No.2) (1992) 8 NSWCCR 169 where Judge O'Meally did not allow an employer to recover costs against a number of insurers after a particular point. Mr Toomey seeks to distinguish Cinzano on two bases. One is that at the time Cinzano was determined there was no controversy about the meaning of s 151AB. In fact that may have been his only point of distinction. I think that is a legitimate point of distinction, particularly where in this case, as I pointed out earlier in these reasons, Mercantile was actively arguing that it was not liable to indemnify. I do not think Cinzano operates in a way which requires me to, or suggests that I should, make a finding that Chubb was guilty of conduct disentitling it to its costs against Mercantile.

15. For the reasons I have indicated so far I am of the view that the general rule that costs follow the event and that a successful party should have his costs applies so that my view is that Chubb should have an order for costs against Mercantile.

16. The next matter to consider is the costs as between Chubb and the insurers against whom it did not succeed. Before proceeding with that I should note that there was a period in respect of which there is a concession that Chubb would not be entitled to costs against Mercantile and I would expect the parties to cover that in short minutes of order that will be brought in, in due course. As to the costs as between Chubb and the other insurers there is a concession in relation to MMI Insurance Limited and I expect the short minutes of order will reflect that. Otherwise, there does not seem to be any resistance to the position that each of the insurers successful in the Chubb cross-claim should be entitled to their costs. I will expect short minutes of order to reflect that.

17. Associated with that is a question as to whether a costs order in favour of those insurers ought to be made against Chubb with a flow on order against Mercantile, a Bullock order, or whether a direct order ought to be made against Mercantile, a Sanderson order. In the context of these proceedings which it should be does not matter. I asked Mr de Greenlaw if he had any submissions in relation to other parties' costs and he made some submissions to me which in the main seemed to be a repeat of submissions that went to the disentitling conduct submissions but he also made submissions to the effect that some insurers lying in the middle between NEM and Mercantile, that would be AMP General Insurance Limited (AMP) and Government Insurance Office of NSW (GIO), should not have been in the proceedings and it was unreasonable of Chubb to have them in the proceedings.

18. There are several answers to that. One is, when Chubb joined all its successive insurers over the relevant time it had no way of knowing how the evidence ultimately was going to fall out. It could have left AMP and GIO out. Had it done so it would have been at risk of finishing up with no indemnity had findings been made to the effect that one or other of those insurers was the one ultimately liable. The next answer is, if the matter was so clear it would have been just as easy for Mercantile to have indemnified those insurers and let them out. It did not even make any attempt to let out those insurers which it now argues before me were in a clear cut position and should have been let out. I do not accept the submission that Chubb had those insurers in the proceedings unreasonably. Accordingly in my view costs that Chubb has incurred, or by reason of these orders may incur, to insurers it ought to be able to pass on to Mercantile.

19. Mr Toomey puts his argument for costs on another basis as well and that is that under the policy he is entitled to an indemnity in respect of costs. I do not need to enter upon that argument in the light of the reasons I have just given. It seems to me that argument is sound. Mr de Greenlaw had no submissions in reply to those submissions of Mr Toomey and I would hold, if need be, that Chubb would be entitled to those costs on that basis. Because Chubb is entitled to those costs the option arises as to whether the order ought to be made in the form of a Bullock order or a Sanderson order. A Bullock order adds steps in the process that are unnecessary and I would propose that an order in the form of a Sanderson order ought to be made and I expect short minutes of order to reflect that.

20. GIO and other insurers for whom Ms Strathdee appeared sought indemnity costs on the basis of an offer of compromise that was made, I think, in 1998. The offer was an offer in effect to delete GIO from the proceedings with GIO and Chubb paying its own costs. There were no offers of compromise or Calderbank offers in respect of the other insurers that Ms Strathdee represents. The offer, in effect, put Chubb in an impossible position because again it had no way of knowing at the time the offer was made how the evidence was going to pan out and what the findings were going to be and it ran the risk if it accepted the offer that GIO might have been the insurer ultimately found liable which would have left Chubb with no indemnity. Whilst the Calderbank offer is a relevant matter to consider in determining whether I should award indemnity costs so also is the position in which Chubb was placed and I think that outweighs other considerations and accordingly I reject the submission that GIO or any other insurer is entitled to its costs on an indemnity basis. The short minutes of order should also reflect that ruling.

21. Insurers have sought an order for interest on costs paid. Mr Toomey for Chubb has nothing to say about that. Mr de Greenlaw's submission is that interest should run only from the date, in respect of each insurer, from when the costs were paid. That must be so. Accordingly there will be an order allowing interest on costs paid from the date in respect of which they have been paid by each and I will leave it to the parties to include in the short minutes of order in respect of each insurer the date from which it should run and the rate at which it should be and the principal amount on which it should run.

22. In respect of Chubb's entitlement to its costs against Mercantile those costs will be on an indemnity basis. I expect that will be reflected in the short minutes of order as well. I direct that short minutes of order reflecting those reasons be brought in on Monday, 21 May 2007.

**********

Mr D Toomey instructed by Eakin McCaffery Cox appeared for the cross-claimant

Mr J de Greenlaw instructed by McCulloch & Buggy appeared for first and sixth cross-defendants

Ms W Strathdee instructed by Moray & Agnew, AMP General Insurance Limited and AO Ellison & Co appeared for second, third and fifth cross-defendants

Mr D J Russell QC instructed by N W Aussel appeared for fourth cross-defendant