SMILKOVIC v Westcourt General Insurance Brokers Pty Ltd
[2006] WADC 201
•28 November 2006 typed from tape and edited by Trial Judge
SMILKOVIC & ANOR -v- WESTCOURT GENERAL INSURANCE BROKERS PTY LTD & ORS [2006] WADC 201
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WADC 201 | |
| Case No: | CIV:1688/2006 | 28 NOVEMBER 2006 | |
| Coram: | PRINCIPAL REGISTRAR GETHING | 28/11/06 | |
| PERTH | |||
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed | ||
| PDF Version |
| Parties: | STEVE SMILKOVIC JOE SILVESTRI WESTCOURT GENERAL INSURANCE BROKERS PTY LTD (ACN 009 401 772) MMIA PTY LTD (ACN 000 456 799) QBE INSURANCE (AUSTRALIA) LIMITED (ACN 003 191 035) |
Catchwords: | Case management principles Strike out application Exemplary damages |
Legislation: | Insurance Contracts Act 1984 (Cth) Rules of the Supreme Court 1971 Trade Practices Act 1974 (Cth) |
Case References: | Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1999) 169 CLR 279 Eagle Star Insurance Co Ltd v National Westminster Finance Australia Ltd (1985) 58 ALR 165 Lomsargis v National Mutual Life Association of Australasia Ltd [2005] 2 Qd R 295 Youlden Enterprises Pty Ltd v Health Solutions WA Pty Ltd [2006] WASC 161 Kelly v New Zealand Insurance Co Ltd (1993) 7 ANZIC 61-197 Sanders v Snell (1977) 73 FCR 569 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- JOE SILVESTRI
Plaintiffs
AND
WESTCOURT GENERAL INSURANCE BROKERS PTY LTD (ACN 009 401 772)
First Defendant
MMIA PTY LTD (ACN 000 456 799)
QBE INSURANCE (AUSTRALIA) LIMITED (ACN 003 191 035)
Second Defendants
Catchwords:
Case management principles - Strike out application - Exemplary damages
(Page 2)
Legislation:
Insurance Contracts Act 1984 (Cth)
Rules of the Supreme Court 1971
Trade Practices Act 1974 (Cth)
Result:
Application allowed
Representation:
Counsel:
Plaintiffs : Mr T Lampropolous
First Defendant : Ms J Bochenek
Second Defendants : Mr S M Denman
Solicitors:
Plaintiffs : Bradley & Bayly
First Defendant : Downings Legal
Second Defendants : Pynt & Partners
Case(s) referred to in judgment(s):
Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1999) 169 CLR 279
Eagle Star Insurance Co Ltd v National Westminster Finance Australia Ltd (1985) 58 ALR 165
Lomsargis v National Mutual Life Association of Australasia Ltd [2005] 2 Qd R 295
Youlden Enterprises Pty Ltd v Health Solutions WA Pty Ltd [2006] WASC 161
Case(s) also cited:
Kelly v New Zealand Insurance Co Ltd (1993) 7 ANZIC 61-197
Sanders v Snell (1977) 73 FCR 569
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1 PRINCIPAL REGISTRAR GETHING: By application dated 25 September 2006 the second defendants have sought to strike out a number of paragraphs of the plaintiffs' amended statement of claim dated 22 September 2006.
2 The application arises in the context of a claim by the plaintiffs against the first defendant, its insurance broker at the material times, and the second defendants, their insurers. The plaintiffs carried on the business of installing spas and pools. In the course of that business a claim was made against the plaintiffs by the owners of land adjoining land on which the plaintiffs had made an excavation for a pool. The claim ultimately resulted in a District Court action which was finalised on the basis of a consent order dismissing the action against the plaintiffs with no orders as to costs.
3 The plaintiffs incurred legal and other expenses in relation to its claim in the amount of approximately $23,000. They seek those costs from the defendants in the present action along with a claim for exemplary damages.
4 The plaintiffs in their submission place great weight on the recent comments by his Honour the Chief Justice, Martin CJ, in Youlden Enterprises Pty Ltd v Health Solutions WA Pty Ltd [2006] WASC 161. The key paragraph referred to is par 2 and in view of its significance in this case I will quote it in full:
"Before dealing with this specific application I would observe that both I and the other members of this Court are firmly of the view that interlocutory disputes of this kind must be actively discouraged. In many cases interlocutory disputes, particularly disputes relating to pleading issues, consume very substantial amounts of time and expense on the part of both the parties and the Court. In many cases the time and expense involved in the consideration and resolution of the interlocutory dispute is entirely disproportionate to its significance to the just and effective resolution of the case as a whole by mediation or trial. For this reason this Court will use the existing powers available under the Rules of the Supreme Court ("the Rules") and if necessary amend the rules to actively discourage disputes of this kind. In very general terms interlocutory disputes of this kind will only be entertained by the Court if the time and expense involved in the resolution is proportionate to the significance of the dispute to the just and effective resolution of the case."
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5 The plaintiffs submit that the present interlocutory dispute ought not to be entertained at all as the time and expense involved is disproportionate to the significance of the dispute to the just and effective resolution of the case. It seems to me, however, that for three reasons the present dispute ought to be determined in order to assist with the just and effective resolution of the case.
6 The first reason is that there is a claim for exemplary damages. The gravity of this allegation is such that the second defendants ought to have a very clear understanding of the case they have to meet.
7 The second is that, in applying the Chief Justice's comments in the context of a pleadings dispute, the Court must balance what I will conveniently refer to as the case management considerations with the fundamental function of the pleadings. In the words of Mason CJ and Gaudron J in Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1999) 169 CLR 279 at 286:
"The function of pleadings is to state with sufficient clarity the case that must be met ... . In this way pleadings serve to ensure the basic requirements of procedural fairness that a party should have the opportunity of meeting the case against him or her, and incidentally, to define the issues for decision."
8 Weaving this principle together with the comments of the Chief Justice, one way to look at a case like the present is to look at the cumulative impact of the deficiencies identified. If, notwithstanding the number of individual deficiencies identified, the opposing party still has a good understanding of the case it has to meet, it will not undermine the just and effective resolution of the case to allow the pleadings to stand.
9 On the other hand, where the cumulative impact of the deficiencies are such that the opposing party is deprived of the opportunity to understand the case it has to meet, to allow the pleading to stand will not promote the just and effective resolution of the case.
10 The third factor is in relation to the timing of the dispute. The initial statement of claim was annexed to the writ and dated 31 August 2006. There was then an amended writ and statement of claim dated 22 September 2006. The present application was filed on 25 September 2006.
11 As I read order 20 of the Rules of the Supreme Court 1971, r 19 subrule (3), the 21-day period referred to in that rule relates to the
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- pleading, or those parts of the pleading, under challenge. In the present case, the parts of the pleading under challenge are substantially, or in their entirety, issues relating to the original pleading and not the amended pleading. So, on that basis, the application is technically out of time. However, it is only out of time by a matter of days in contrast to the decision in Youlden where the application to challenge the pleading was out of time by an order of magnitude of approximately 70 days.
12 The other relevant point of distinction between this case and Youlden is that in Youlden the underlying action was commenced in 2002, the application being heard in August 2006. In the present case, as I have mentioned, the action was commenced a month before the application was made.
13 Tying that all together, in the circumstances of the present case, the cumulative impact of the deficiencies I will identify in the course of these reasons, in their context of a claim for exemplary damages, mean that the defendants ought to be given a clearer outline of the case they have to meet. Having said that, the comments of the Chief Justice contain an invitation to look at the dispute as a whole in the context of determining this particular interlocutory application. Accepting that invitation it seems to me that the just and effective resolution of the case will be promoted by considering whether it ought to be listed for a mediation conference prior to any further work being undertaken in the action. I will leave this course open until I have heard from counsel.
14 I will now turn to the specific paragraphs of the pleadings that have been challenged. The first paragraph under challenge is par 7(a) in which the plaintiffs plead that the first defendant, being their insurance broker, acted as agent for the second defendants, being their insurers. The second defendants say that the general proposition is that an insurance broker is the agent of the intending insured, in this case the plaintiffs. They cite as authority for this proposition the decision in Eagle Star Insurance Co Ltd v National Westminster Finance Australia Ltd (1985) 58 ALR 165.
15 The second defendants did not submit to me that it was not possible as a matter of law for a broker to also be the agent of the insurer. Accordingly the nub of this challenge is that a plea that runs contrary to the general proposition, or perhaps seeks to characterise the relationship in a different manner than the general proposition, ought to set out very clearly how the agency arises, in relation to what duties and tasks the agency exists and the extent of the powers of the agent in relation to each task or duty.
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16 The plaintiffs, on the other hand, rely on the general usage of the word "agent" and say it is clear the case that the second defendants have to meet, namely, that the first defendant acted as its agent. The plaintiffs also rely on the fact that the first defendant forwarded correspondence from the second defendants to the plaintiffs as an indicia of agency.
17 However, the mere fact that a person forwards correspondence from another does not make them their agent. At one level, all that is presently pleaded is that the first defendant, as the broker of the plaintiffs, obtained information from an insurer, passed it on to the plaintiffs and the plaintiffs then entered into a contract with the insurer. It seems to me that, given the general proposition that in the ordinary course a broker such as the first defendant acts as agent for the intending insured and not the insurer, such as the second defendants, the second defendants' concerns are well made.
18 Paragraph 7(a) ought to be struck out. The plaintiffs need, in order to support a claim along the lines currently pleaded in par 7(a), to plead the necessary facts and particulars to make it clear how the agency arose, what its scope is and what is the extent of the authority in the agency.
19 The next paragraph complained of is par 9(b) in which the plaintiffs plead the second defendants were vicariously liable for the actions of the first defendant. The second defendants again did not submit that as a matter of law the second defendants cannot be vicariously liable for the actions of the first defendant. Rather, the second defendants are saying that in the absence of the material facts pleaded as to the agency relationship, the plea of vicarious liability in par 9(b) is without foundation and ought to be struck out. In my view this concern is also made out. However, it may well be that when further material facts and particulars are pleaded to support the agency plea, a claim for vicarious liability may be established.
20 The next paragraph under challenge is par 18. In par 18(a) there is a plea that the plaintiffs are entitled to be indemnified by the second defendants pursuant to cl 2.1 and 2.2(c) of the policy. The second defendants have challenged this paragraph on the basis that it is not clear what cl 2.1 and 2.1(c) state. In their submissions, the plaintiffs effectively said that in the context of the pleadings in par 5 and par 8 it is clear that the references to cl 2.1 and 2.2(c) refer to clauses in the letter dated 15 September 2003 that the first defendant wrote to the plaintiffs.
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21 The key issue in this case is what are the terms of the contract between the plaintiffs and the second defendants. In this context, it is incumbent on the plaintiffs to clearly plead the terms that they rely on, and in particular where those terms emanate from. Paragraph 8(a) should be struck out as being embarrassing as it would place the second defendants in a position of considerable uncertainty in attempting to respond to it.
22 Paragraph 18(b) provides that liability to indemnify is not excluded by the exclusion clause as defined in par 13. Paragraph 18(c) provides that the exclusion clause is not applicable because it was contrary to the insurance cover required by the plaintiffs and/or was not adequately communicated to the plaintiffs at all.
23 The way in which the plaintiffs' claim is pleaded in par 18(b) and par 18(c) is not as clear as they are subsequently in the particulars to par 19, specifically pars (b), (c) and (d). In relation to par (c) the second defendants submitted that the factual foundation to support a plea that the nature of the plaintiffs' insurance cover required was communicated to the plaintiffs has not been established.
24 Once again, it is not the second defendants' submission, as I understand it, that as a matter of law the exclusion clause could not be found not to apply because it was not adequately communicated to the plaintiffs.
25 In my view, par 18(b) and par (c) also should be struck out on the basis that they are embarrassing. One of the issues that arises when par 18 is read with par 19, specifically the particulars to par 19, is that it is not clear whether the plaintiffs' case is that the exclusion cause forms part of the contract and does not apply, or whether it does not form part of the contract or whether, if it does form part of the contract, it does not apply in its terms. As I have indicated, the format of the plea in the particulars in pars (a), (b), (c) and (d) makes the plaintiffs' case much clearer.
26 Turning then to that paragraph, par 19, par 19 contains an allegation that the refusal to indemnify constitutes both the breach of the policy and a breach of the duty of utmost good faith. Both compensatory and exemplary damages are sought. The second defendants submit that the material facts supporting claims for the breach of duty of utmost good faith, contumelious disregard and entitlement to exemplary damages have not been made out. Therefore, the allegations ought to be struck out.
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27 At the very least in my view, the plea in its current form is embarrassing. The material facts, such as they are, supporting the claim for exemplary damages are in the particulars; they ought to be pleaded.
28 Moreover, there may well be a more fundamental defect in par 19. In the decision of the Supreme Court of Queensland in Lomsargis v National Mutual Life Association of Australasia Ltd [2005] 2 Qd R 295, his Honour McMurdo J found that an insurer under a contract governed by the Insurance Contracts Act 1984 is not liable to the insured in tort for failure to act towards the insured in good faith.
29 There are a number of sub-propositions that are relevant to the present case. The first is that it was accepted in that decision that the remedy of exemplary damages is only available in relation to a tortious claim. It is not available for a claim for breach of damages or for breach of contract. The second proposition is that the duty of utmost good faith is a contractual principle rather than a tortious principle, the duty being implied into the contract under the Insurance Contracts Act.
30 There was some suggestion in the Lomsargiscase that the Court ought not to strike out a pleading which looked in similar terms to this case on the basis that the law was still developing. I am conscious of the fact that counsel have not had the opportunity to address me in relation to this issue. Rather, the argument before me centred on the question of whether or not the sufficient material facts were pleaded to support the various claims in par 19. On that basis, I am satisfied that at the very least that that contention is made out and at the moment there is not sufficient facts pleaded to support the breach of duty of utmost good faith, nor an entitlement to exemplary damages.
31 At this stage, the appropriate course is to strike out par 19, still allow the plaintiff's liberty to re-plead, but leave to another day the question of whether or not as a matter of law exemplary damages are available for the breach of the duty of utmost good faith. It seems to me that that proposition ought to be argued in the context of the claim as pleaded in its strongest form.
32 Paragraph 23 is the next paragraph complained of. Paragraph 23 contains an allegation that, by reason of the matters pleaded in certain named paragraphs, the first and second defendants engaged in conduct that was misleading or deceptive or likely to mislead or deceive contrary to s 52 of the Trade Practices Act. From the paragraphs referred to, it is clear that the misleading conduct complained of is that of the second
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- defendants. The only direct conduct of the second defendants prior to the insurance contract being taken out is that pleaded in par 20, where there is a plea that the second defendants notified the first defendant of the exclusion clause prior to the insurance contract being effected. If the allegedly misleading or deceptive conduct by the second defendants was that of the first defendant, then this paragraph also falls away by the deficiencies in the agency and vicarious liability pleadings referred to earlier. In my view, par 23 ought to be struck out insofar as it raises a claim for breach of s 52 of the Trade Practice Act against the second defendants on the basis that the material facts to support that plea have not been pleaded.
33 The final paragraph complained of is par 24. In that paragraph, the plaintiffs have pleaded that they are entitled from the second defendants to a refund of the policy premium paid by the plaintiffs in the sum of just under $5,500. This claim is said to arise by reason of what is pleaded in par 18 to 23. However, those paragraphs do not found a plea of this kind.
34 Significantly in par 21, the plaintiffs assert had they been aware that the insurance policy did not cover excavation work, they would have sought alternate insurance which would have covered such work. This would have entailed a premium to have been paid by the plaintiffs. That being so, to put the plaintiffs in the position they would have been and had there been no misleading and deceptive conduct, it would have inevitably involved the payment of a premium.
35 Significantly then, on the material facts pleaded, there is no basis established that, to compensate the second defendants under the Trade Practices Act nor at common law, there ought to be a refund of the policy premium paid. I also note that there is no alternate plea in the nature of a total failure of consideration. In relation to par 24, it ought to be struck out as there are no material facts or insufficient material facts to support it.
36 That then leaves the position whereby pars 7(a), 9(b), 18, 23 and 24 are struck out and par 23 is to be struck out insofar as it relates to the second defendants. It will be apparent from the comments that I have made in the course of these reasons that the plaintiffs ought to be given the opportunity to re-plead at least at some stage.
37 At the conclusion of giving these reasons ex tempore, I was advised that the writ endorsed with the original statement of claim filed on 31 August 2006 was not in fact served until 4 September 2006. This
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- means that the second defendant's strikeout application dated 25 September 2006 was brought within time and my comments about the application being made out of time above should fall away.
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