Roy Atkin Johnstone v Broad Group Holdings Pty Limited

[2011] NSWDC 181

District Court

New South Wales

Medium Neutral Citation:

Roy Atkin Johnstone v Broad Group Holdings Pty Limited & Ors [2011] NSWDC 181

Hearing dates:

16 August 2011

Decision date:

18 August 2011

Jurisdiction:

Civil

Before:

Judge M Sidis

Decision:

1. I grant leave to the plaintiff to join Wesfarmers General Insurance Limited to the proceedings.

2. I grant leave to the plaintiff to file an amended statement of claim in the form annexed to the amended notice of motion filed on 22 July 2011 marked A. The amended statement of claim is to be filed and served by 1 September 2011.

3. Wesfarmers is to pay the costs of the motion of the plaintiff and of the second defendant.

4. The affidavits in support of the motion are returned.

Catchwords:

LIMITATIONS: named defendant deregistered - application to substitute insurer - onus of establishing that relevant insurance policy in place - nature of cause of action arising under s 601AG of Corporations Act 2001 - whether right of action against insurer statute-barred.

Legislation Cited:

Law Reform (Miscellaneous Provisions) Act 1946
Corporations Act 2001
Limitation Act 1969
Legal Profession Act 2004

Cases Cited:

Kelley v Western Pacific Insurance Limited [2010] NSWSC 1397.
Almario v Allianz Australia Workers Compensation NSW Insurance Limited [2005] NSWCA 19, (2005) 62 NSWLR 148,
Pagnon v WorkCover Queensland (2001) 2 Qd R 492
Foster v QBE Insurance (Australia) Limited [2008] NSWSC 1004
Caven v Women's and Children's Health [2007] VSC 7
Baker-Morrison v State of New South Wales [2008] NSWDC 129

Category:

Principal judgment

Parties:

Roy Atkin Johnstone (Plaintiff/Applicant)) Wesfarmers General Insurance (1st Defendant/Respondent) Broad Group Holdings Pty Ltd (2nd Defendant/Respondent)

Representation:

Mr C Hart (For Plaintiff/Applicant) Mr C.P Carter (For 1st Defendant/Respondent) Ms S Foley (For 2nd Defendant/Respondent)
Bale Boshev Lawyers (For Plaintiff/Applicant) Hunt and Hunt Lawyers (For 1st Defendant/Respondent) Sparke Helmore (For 2nd Defendant/Respondent)

File Number(s):

2010/00400806

Judgment

1. The plaintiff was injured on a building site on 12 December 2007. At the time of his injury he was working at the direction and under the control of SMS Formwork Pty Limited. The head contractor on the site was said to be Broad Group Holdings Pty Limited.

1. A statement of claim naming these two entities as defendants was filed on 2 December 2010. SMS was deregistered on 17 October 2010 and thus the proceedings commenced against it were a nullity.

1. By motion filed on 22 June 2011, the plaintiff sought leave to amend the statement of claim to substitute Wesfarmers General Insurance Limited for SMS on the basis of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946.

1. On 8 July 2011, the Registrar adjourned the motion for hearing before the presiding Judge on 16 August 2011.

1. On 22 July 2011, the plaintiff filed an amended notice of motion seeking to join Wesfarmers to the proceedings, and seeking leave to file an amended statement of claim naming Wesfarmers as the first defendant.

1. The basis of the claim sought to be brought against Wesfarmers was that there was in place, on 12 December 2007, a contract of insurance between Wesfarmers and SMS that responded to SMS's liability to the plaintiff in respect of the injury that he claimed he suffered on that date.

1. The plaintiff proposed to proceed against Wesfarmers in reliance on s 601AG of the Corporations Act 2001 that provides:

A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if:

(a) the company had a liability to the person; and

(b) the insurance contract covered that liability immediately before deregistration.

1. Wesfarmers resisted the application.

1. The issues raised were:

1. Was it established that there was an insurance contract that covered SMS's liability immediately before it was deregistered?

2. Did the provisions of s 601AG create a new cause of action arising on the date of deregistration?

3. If not, was the plaintiff's right of action under s 601AG statute barred?

The Insurance Contract

1. Wesfarmers argued and I accept that the plaintiff bore the onus of establishing that it was the insurer of SMS through an insurance contract that covered its liability to him before deregistration.

1. There was in evidence through the affidavits of Mr Blissett, the plaintiff's solicitor, and Ms Wild, Wesfarmer's solicitor, correspondence between their firms concerning the insurance cover held by SMS at the time of the plaintiff's injury.

1. On 24 May 2011, Hunt and Hunt forwarded to Bale Boshev a copy of an annual contract works and public liability insurance policy that ostensibly covered public liability and provided indemnity in respect of amounts that the insured became legally liable to pay for personal injury as defined, sustained during the period of the insurance.

1. A copy of t he policy was provided to the plaintiff on the basis that: there is no concession as to indemnity or the relevant limitation period.

1. On 12 August 2011, Hunt and Hunt confirmed that its client (presumably Wesfarmers) instructed that the policy wording of the document forwarded on 24 May 2011 was applicable as at 12 December 2007.

1. While Wesfarmers made it clear that it made no concession as to indemnity, it placed no evidence before the Court on this application that indicated that the public liability section of the policy would not have responded to the claim brought by the plaintiff against SMS but for its deregistration.

1. I was therefore satisfied on a prima facie basis that there was an insurance contract between Wesfarmers and SMS that covered SMS's liability, if any, to the plaintiff immediately before its deregistration.

1. I considered this to be sufficient to establish on a prima facie basis that the necessary insurance contract was in place and I found in favour of the plaintiff on the first issue.

The cause of action

1. I was referred by the plaintiff to a decision of Justice Barrett in Kelley v Western Pacific Insurance Limited [2010] NSWSC 1397.

1. Since the plaintiff relied on an extract cited by Justice Barrett from a decision of the Court of Appeal in Almario v Allianz Australia Workers Compensation NSW Insurance Limited [2005] NSWCA 19, (2005) 62 NSWLR 148, I decided to review that decision in its entirety.

1. At [15], Justice Ipp noted that his Honour Judge Walmsley of this Court, at first instance, relied upon Pagnon v WorkCover Queensland (2001) 2 Qd R 492 to hold that the limitation period for s 601AG actions began to run on deregistration of the company and that this finding was not challenged on the appeal. Nor did the Court of Appeal take issue with the proposition. Rather, Justice Ipp, with whom Justice Hodgson and Acting Justice Hunt agreed, endorsed it.

1. In dealing with the issues that arose in Almario, Justice Ipp clearly proceeded on the basis that the limitation period, insofar as an insurer was concerned, commenced on deregistration of the company involved.

1. Justice Ipp said at [41] that s 601AG should be construed so that its opening words read:

A person may recover from the insurer of a company that is deregistered (as if the insurer was the deregistered company) an amount that was payable to the company to undertake the insurance contract.

1. The result for the purposes of this case was therefore that:

1. The limitation period within which the plaintiff might pursue the cause of action created by s 601AG of the Corporations Act commenced on 17 October 2010; and

2. On commencement of those proceedings, Wesfarmers will take the position of SMS at the date of deregistration.

Date of discoverability

1. If I am wrong in my conclusion on the second issue, I did not accept Wesfarmers' contention that the limitation period for the institution of proceedings against SMS expired on 12 December 2010 and that, the proceedings against the deregistered company having no legal status, the plaintiff was barred by the provisions of s 50C of the Limitation Act 1969 from proceeding against Wesfarmers.

1. It was argued that the date of discoverability for the purpose of determination of when the limitation period expired was 12 December 2007, the date when the plaintiff suffered injury.

1. The date upon which a cause of action is discoverable is to be determined by reference to s 50D of the Limitation Act 1969 , which provides:

1. For the purposes of this division, a cause of action is discoverable by a person on the first date that the person knows, or ought to know, of each of the following facts:

(a) the fact that the injury or death concerned has occurred;

(b) the fact that the injury or death was caused by the fault of the defendant;

(c) in the case of injury, the fact that the injury was sufficiently serious to justify the bringing of an action on the cause of action.

2. A person ought to know of a fact at a particular time if the fact would have been ascertained by the person had the person taken all reasonable steps before that time to ascertain the fact.

1. There was no doubt in this case that the plaintiff knew that an injury occurred on 12 December 2007. The question was when the plaintiff knew, or ought to have known, that his injury was caused by the fault of SMS.

1. It was clear from his affidavit, as repeated through his cross-examination, that the plaintiff was aware that, whilst he was not employed by SMS, he was, at the time of his injury, working on a building site under the control of that company.

1. This in my view, did not establish that this plaintiff, who unchallenged in cross-examination said he was an unqualified labourer who was not particularly academic , knew, or ought to have known, on 12 December 2007 that SMS was at fault.

1. To the contrary, his evidence, again not challenged in cross-examination, was that he reported his injury to a person he believed to be employed by the second defendant and that he complained to him of the conditions that he considered led to his injury.

1. Wesfarmers referred me to the decision of Justice Fullerton in Foster v QBE Insurance (Australia) Limited [2008] NSWSC 1004 in support of its argument that the plaintiff knew, or ought to have known, that SMS was at fault. However, Justice Fullerton adopted the construction placed upon s 50D by the Victorian Supreme Court in Caven v Women's and Children's Health [2007] VSC 7, that was adopted at first instance in Baker-Morrison v State of New South Wales [2008] NSWDC 129.

1. The New South Wales Court of Appeal expressly rejected this construction of s 50D in Baker-Morrison v State of New South Wales [2009] NSWCA 35.

1. In that case, Justice Basten, with whom Justices Ipp and Macfarlan agreed, dealt with the construction of the separate elements of s 50D(1). He noted that it was unlikely that any issue would arise under ss (1)(a) in the case of physical injury.

1. In respect of ss (1)(b), he said at [28]:

The word 'fault' is no doubt capable of having a broad generic meaning, not necessarily confined to that which engages legal liability. The context, on the other hand, gives it a different connotation. That which is identified as 'discoverable' for the purposes of s 50C is 'the cause of action'. The 'fact' contemplated by paragraph (b) is a relationship between two things, namely the injury or death on the one hand and the fault of the defendant on the other. The relevant connection is one of causation.

1. Justice Basten considered section 50D against the background of section 60I of the Act, and the authorities concerning that provision. He said linguistic differences made s 60I(1) broader in two respects, and noted that it referred to the connection between injury and the act or omission, whereas s 50D dealt with its causation. He noted further that the term act or omission used in s 60I was replaced by the term fault in s 50D. Thus, he concluded that a legal evaluative judgment was required by s 50D(1)(b).

1. Justice Basten said this was even more explicit in s 50D(1)(c), where the injury must be understood to be not only serious but sufficiently serious to justify bringing an action on the cause of action. He said this appeared to require an exercise of both legal and medical expertise.

1. He referred to the need to secure legal and medical advice in connection with thresholds and caps established by various legislative schemes, and to the obligation imposed under s 347 of the Legal Profession Act 2004 , that a certificate be provided to the effect that a personal injury claim had reasonable prospects of success.

1. He also said that the onus was on the moving party to prove what the potential plaintiff knew at a particular date. In this case, Wesfarmers bore that onus.

1. As to what a person ought to know if that person took reasonable steps to ascertain relevant facts, Justice Basten said it was necessary to assess what would have been ascertained if reasonable steps were taken. He concluded that this meant that the knowledge would, not should, have been obtained through active steps taken by the person. At [58] he said that in most circumstances the step of instructing a solicitor would suffice.

1. Applying these principles to the current case, it was clear that the plaintiff knew of his injury.

1. I did not accept that Wesfarmers established that on 12 December 2007, the plaintiff knew as a fact that SMS was at fault to the point where he had a cause of action against that entity.

1. I have already referred to the plaintiff's evidence of his limited academic abilities, his reporting of the accident to an employee of Broad Group Holdings and his reporting of his complaint to that person about the condition at the site.

1. Further, his initial claim was made against his employer under workers compensation legislation.

1. As to when he became aware, or ought to have become aware of the necessary facts, it was not suggested that he ought to have consulted a solicitor earlier than 3 November 2008 when he was experiencing increasing pain and discomfort in his injured right knee, accompanied by the increasing incidence of back pain, to the point where he was facing unemployment.

1. It was clear from the evidence that on that occasion he was advised of the potential fault of SMS leading to his injury.

1. Thus, the earliest at which the date of discoverability might be set was 3 November 2008, with the limitation period against SMS expiring on 3 November 2011.

1. This would not be my final conclusion, however, since the situation concerning the plaintiff's injuries was unclear at that point.

1. Questions arose about the connection between the knee injury and the development of back pain, having regard to medical records showing that the plaintiff suffered an injury to his back in another incident that occurred prior to 12 December 2007.

1. Causation in this respect was determined in the plaintiff's favour for the purposes of the workers compensation regime by Dr Hicks on 7 April 2011.

1. It was unnecessary for me to decide whether this was the determining factor in establishing whether the injury was sufficiently serious to justify the bringing of an action on the cause of action against SMS.

1. The fact is that the date of discoverability, at its earliest was 3 November 2008, and at its latest was 7 April 2011, leaving the plaintiff within time to commence proceedings against Wesfarmers in respect of the cause of action against SMS.

1. In the circumstances, the relief sought by the plaintiff will be granted.

1. Wesfarmers argued that the plaintiff should pay its costs of the proceedings before Registrar Carter of this Court on 8 July 2011. The basis of that argument was that, on that date, the plaintiff sought leave to proceed against Wesfarmers on a different basis to that proposed in the amended notice of motion.

1. On 8 July 2011, the Registrar adjourned the motion for hearing by the presiding Judge. There was no indication in the court records that this was done because the plaintiff indicated an intention to amend the application, rather than that the Registrar, in her discretion, decided that the issues raised warranted consideration by a judge of this Court.

1. In the circumstances, costs will follow the event.

1. The orders that I make are as follows:

1. I grant leave to the plaintiff to join Wesfarmers General Insurance Limited to the proceedings.

2. I grant leave to the plaintiff to file an amended statement of claim in the form annexed to the amended notice of motion filed on 22 July 2011 marked A. The amended statement of claim is to be filed and served by 1 September 2011.

3. Wesfarmers is to pay the costs of the motion of the plaintiff and of the second defendant.

4. The affidavits in support of the motion are returned.

1. There is one final matter that I wish to raise in respect of issues 2 and 3. There was clear appellate authority by which I was bound that established that the propositions argued for by Wesfarmers could not succeed.

1. A party always has the right to argue that any such authority was wrong and to signal to a first instance Judge an intention to pursue what that party regards as correct legal principles.

1. In neither case did Wesfarmers do that. Rather, it said nothing of the decisions of the New South Wales Court of Appeal in Almario , or the Queensland Court of Appeal in Pagnon that expressly dealt with the issue of the date of the commencement of the limitation period in respect of the right of action created by s 601AG of the Corporations Act.

1. In respect of issue 3, Wesfarmers relied on Foster , a decision that applied a line of reasoning that was overturned by the Court of Appeal in March 2009, based on principles that it has consistently applied since that date.

1. I raise these matters to mark my disappointment that the Court was not better served by counsel, and that, but for my own research, I might well have been led into error when dealing with these issues.

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Decision last updated: 25 November 2011