SR Contracting Pty Ltd v Liberty Mutual Insurance Company - [2017] WASC 359

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: SR CONTRACTING PTY LTD -v- LIBERTY MUTUAL INSURANCE COMPANY [2017] WASC 359

CORAM: ALLANSON J

HEARD: 28 NOVEMBER 2017

DELIVERED : 28 NOVEMBER 2017

PUBLISHED : 8 DECEMBER 2017

FILE NO/S: CIV 1807 of 2015

BETWEEN: SR CONTRACTING PTY LTD
First Plaintiff
CAPE SEAFARMS PTY LTD (IN LIQ) (RECEIVER AND MANAGER APPOINTED)
Second Plaintiff
AND
LIBERTY MUTUAL INSURANCE COMPANY
Defendant

Catchwords:

Practice and procedure - Where application for leave to amend writ - Where proposed amendment adds new cause of action - Where cause of action statute barred - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 21 r 1, O 21 r 5

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Plaintiff                  :     Mr P Lafferty
Second Plaintiff             :     Mr P Lafferty
Defendant:     Mr S M Davies SC & Ms T L Jonker

Solicitors:

First Plaintiff                  :     Armeli & Molony Lawyers
Second Plaintiff             :     Armeli & Molony Lawyers
Defendant:     Tottle Partners

Case(s) referred to in judgment(s):

Belgravia Nominees Pty Ltd v Lowe Pty Ltd [2017] WASCA 127; (2017) 51 WAR 341
Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415; (2000) 23 WAR 159

ALLANSON J: In October 2017, the plaintiffs applied for leave to file an amended writ of summons. The application was opposed.
Five affidavits were read in evidence. The plaintiffs relied on the affidavits of Brian Benjamin Russell, director of the first plaintiff and former director of the second plaintiff, sworn 16 November 2017; and Claude Armeli, solicitor for the plaintiffs, sworn 4 September 2017. The defendants relied on three affidavits of Nana Yeboah, Claims Specialist at Liberty Mutual Insurance Company, sworn 5 October 2017, 24 October 2017, and 27 November 2017.
Each party filed written submissions. At the hearing on 28 November 2017, after hearing counsel, I dismissed the application and said I would publish my reasons later.

The action

The action concerns claims under two contracts of insurance.
The first is a Contractors' Risk Policy, between Liberty Mutual Insurance Company (the insurers) and 'SR Contracting PL, Cape Seafarms PL (as principals), and subsidiary companies' (the insured). Under the Policy:
The Insurers hereby agree with the Insured that if at any time during the period of cover the items or any part thereof entered in the Schedule shall suffer any unforeseen and sudden physical loss or damage from any cause, other than those specifically excluded, in a manner necessitating repair or replacement, the Insurers will indemnify the Insured in respect of such loss or damage …
The second policy is a Single Project Construction Liability Policy, between 'SR Contracting Pty Ltd, Cape Seafarms Pty Ltd plus all contractors and subcontractors' (the insured) (the Construction Liability Policy). The Insuring Clause provides, in its relevant part:
1.1Construction Liability
Subject to the terms of this Policy, Liberty International Underwriters … will pay to or on behalf of the Insured all sums which the insured shall become legally liable to pay by way of compensation in respect of Injury and/or Damage first happening during the Construction Period as a result of an Occurrence at the Site Location in connection with the Insured Project [Construction of Aquaculture Facility].
On 28 May 2015, the plaintiffs filed a writ of summons with an indorsement of claim:
The Plaintiffs' claim is for:
1.A declaration that the plaintiffs are entitled to be indemnified by the defendant under the insurance policy number SYENG07100148 [the Contractors' Risk Policy] entered into between the plaintiffs as the insured and the defendant as the insurer (Policy) in respect of loss arising as a result of Cyclones Melanie, Nicholas, Ophelia and Pancho which occurred in or around February and March 2008 (the Cyclones).
2.An order that the defendant pay the plaintiffs the amount of its loss and damage arising from the Cyclones
3.Interest
4.Costs.
The defendant has given notice that it will raise limitation defences to the claim set out in the writ. That, however, is for another day.
The action has not progressed far. On 28 April 2017, Mr Armeli wrote to the solicitors for the defendant, advising that the plaintiffs were amending the writ of summons, 'which will include but not be limited to your client's declination of the first plaintiff's claim'. On 26 May 2017, Mr Armeli wrote again, providing a minute of amended writ of summons.
On 30 June 2017, the plaintiffs filed an amended writ of summons purportedly pursuant to O 21 r 1 of the Rules of the Supreme Court 1971 (WA). Although only filed on 30 June, the amended writ is dated 28 May 2017. On 10 July 2017, the plaintiffs filed a statement of claim.
On 18 July 2017, Banks‑Smith J relieved the defendants from filing a defence until further order. On 15 August 2017, her Honour made orders that the plaintiffs file an application for leave to file an amended writ of summons, and set aside the writ of summons filed on 30 June 2017. The plaintiffs now apply for leave to file an amended writ of summons in terms of the document dated 28 May 2017.
The amended writ provides:
1.The Plaintiffs' claims arise from ~~is for~~:
1.1The conduct of the defendant in or about and between 2007 and 2013:
1.1.1In entering into two contracts of insurance with the plaintiffs being policy number SYENG07100148 and policy number SYCAS07416569 (Policies) in or about August 2007 wherein the defendant agreed to indemnify the plaintiffs for material loss, loss of profits and project construction in relation to the aquaculture facility located at Heron Point, Exmouth, Western Australia;
1.1.2In or about and between February 2008 and March 2008 and pursuant to the terms of the Policies the plaintiffs notified the defendant of the loss and damage suffered as a result of cyclones Melanie, Nicholas, Ophelia and Pancho submitted a claim pursuant to the Policies;
1.1.3In or about and between 2008 and 2010 the plaintiffs in accordance with requests from the defendant, submitted to the defendant materials relevant to the claims in accordance with the terms of the Policies and in compliance with the defendant's request seeking indemnification of their loss and damage suffered;
1.1.4prior to 7 May 2013 wherein the defendant represented to the plaintiffs that the claims pursuant to the Policies were being assessed by the defendant.
1.1.5In or about and between April 2011 and May 2013 whereby the defendant failed to investigate and assess the plaintiffs' claims in a reasonable time;
1.1.6In or about and between April 2011 and May 2013 whereby the defendant acted unreasonably in failing to indemnify the plaintiffs and pay the plaintiffs' claims in a reasonable time.
1.1.7In or about and between February 2008 and May 2013 whereby the defendant failed to act in the utmost good faith in assessing the plaintiffs claims;
1.1.8In May 2013 whereby the defendant, through its solicitors, Lander and Rogers, issued a declination notice to the plaintiffs whereby the defendant declined to indemnify the plaintiffs pursuant to the Policies for their loss and damage suffered.
1.2The conduct referred to in paragraph 1.1.5 whereby the defendant failed to investigate and assess the plaintiffs' claims within a reasonable time;
1.3The conduct referred to in paragraph 1.1.6 whereby the defendant failed to pay the plaintiffs' claims in a reasonable time;
1.4The conduct referred to in 1.1.7 whereby the defendant in breach of the implied terms implied into the Policies pursuant to the Insurance Contracts Act 1984 (Cth) failed to act in the utmost good faith in assessing the plaintiffs' claims;
1.5The conduct referred to in 1.1.8 hereof whereby the defendant in breach of the terms of the Policies failed and/or refused to indemnify the plaintiffs pursuant to the Policies referred to in paragraph 1.1.1.
1.6Loss and damage suffered by the plaintiffs in respect of:
1.6.1the matters referred to in paragraph 1.2;
1.6.2the matters referred to in paragraph 1.3;
1.6.3the matters referred to in paragraph 1.4; and
1.6.4the matters referred to in paragraph 1.5.
In respect thereof and arising therefrom the plaintiffs claim against the defendant
1.A declaration that the plaintiffs are entitled to be indemnified by the defendant under the insurance Ppoliciesy ~~number SYENG07100148 entered into between the plaintiffs as the insured and the defendant as the insurer (Policy) in respect of loss arising~~ ~~as a result of Cyclones Melanie, Nicholas, Ophelia and Pancho which occurred in or around February and March 2008 (the Cyclones).~~
2.Damages for breach of contract
3.Further and in the alternative aAn order that the defendant pay the plaintiffs the amount of its loss and damage arising from the Cyclones.
4.Further and in the alternative damages for breaches of the implied duty to act in good faith.
5.Interest.
6.Costs.

The application for leave

The proposed amended writ requires leave of the court if it adds a new cause of action: see O 21 r 1(3). The first question is whether it does add a new cause of action. That question is approached as a matter of impression and degree. The court will not undertake an overly technical and rigid investigation, and will construe an indorsement generously, rather than narrowly: see Belgravia Nominees Pty Ltd v Lowe Pty Ltd [2017] WASCA 127; (2017) 51 WAR 341 [46].
The defendant, correctly, submitted that the proposed amended writ conflates the plaintiffs, the policies and the claims under them. The proposed amended writ:
(1)claims that the plaintiffs submitted a claim 'pursuant to the Policies': par 1.1.2;
(2)refers throughout to the 'claims';
(3)seeks a declaration that the plaintiffs are entitled to be indemnified under the insurance policies; and
(4)claims damages for breach of contract and for breach of the implied duty to act in good faith, apparently for breach of both policies.
That conflation cannot mask the fact that the amendment adds a claim for indemnity and damages under a different policy of insurance. The insured parties under the two policies are not identical (the Construction Liability Policy includes contractors and subcontractors of the plaintiffs); and the insured risk in each is different.
The plaintiffs, in their submissions, simply did not address the extent to which the cause of action under the Construction Liability Policy was a new cause of action.
I am satisfied that the proposed amendments add a new cause or causes of action. The plaintiffs require leave.
The court may allow the plaintiffs to amend their writ, on such terms as to costs or otherwise as may be just and in such manner (if any) as the court may direct: O 21 r 5(1). Where an application for leave is made after any relevant period of limitation current at the date of issue of the writ has expired, the court may nevertheless grant such leave in the circumstances mentioned in sub rules (3), (4) and (5): O 21 r 5(2). Relevantly, the court may allow an amendment under sub rule (2) notwithstanding that the effect of the amendment will be to add a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment: O 21 r 5(5). Allowing the amendment does not, however, prevent a defendant from invoking and relying upon a limitation defence for the new cause of action.
In Belgravia Nominees Pty Ltd v Lowe Pty Ltd [46] ‑ [47], the court stated principles relevant to the exercise of the discretion under O 21 r 5. Relevantly, in a case in which the defendant indicates an intention to plead a limitation defence to a cause of action barred by statute at the time it is proposed to be added by amendment, the court will disallow the amendment if there is no doubt that such a defence would defeat the claim:
Generally speaking, however, limitation issues are best decided at trial, with the consequence that an amendment will only be disallowed on the basis of such a defence in the clearest case. … However, in all but cases of that character, the appropriate course is to allow the amendment (assuming there is no other valid objection to it), enabling the defendant to plead any limitation defence which can then be determined at trial [47].
The defendant has foreshadowed an answer to the plaintiff's case, not reliant upon a limitation defence, but also that it will plead a limitation defence. The defendant submits that this is a case where the claim is clearly statute barred.
It is necessary to identify the date on which the cause of action under the Construction Liability Policy accrued. In Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415; (2000) 23 WAR 159, Malcolm CJ, (Kennedy J agreeing), said:
This requires a determination at what point the appellant's liability as an insurer accrued. A cause of action accrues when all the facts have occurred which the plaintiff must prove in order to succeed [31].
Those questions require the court to consider the terms of the policy to ascertain what events were required to happen for the insurer's liability under the policy to arise.
Under the insuring clause of the Construction Liability Policy, the obligation of the insurer is to pay 'all sums which the insured shall become legally liable to pay by way of compensation in respect of Injury and/or Damage first happening during the Construction Period': cl 1.1. Damage and injury are both defined. Damage, relevantly, means physical damage to or destruction of tangible property, or loss of use of tangible property that is not physically damaged provided 'such loss of use is caused by physical damage of other tangible property which first happened during the Period of Insurance'. In each case, loss of use is deemed to happen at the time of the physical damage that caused it: cl 2.3.
Accordingly, the liability of the defendant to indemnify the first plaintiff arose when damage had occurred, and the first plaintiff became legally liable to pay compensation in respect of that damage.
Both parties took the court to the statement of claim filed on 10 July 2017, as the statement of the plaintiffs' case under the proposed amended writ. In my opinion, it is relevant to the exercise of the court's discretion that, if the plaintiffs were to establish the case they have pleaded, their claim would be statute barred.
The plaintiffs plead in pars 18 and 19:
18By reason of the matters pleaded in paragraph 16 above [that is, damage caused by cyclones Nicolas and Pancho in or about February and March 2008] the First Plaintiff failed to deliver to the Second Plaintiff the aquaculture facility pursuant to the Construction Contract and the Second Plaintiff made a claim against the First Plaintiff in respect of its failure to deliver the aquaculture facility and the First Plaintiff suffered loss and damage.
Particulars
The Second Plaintiff made a claim against the First Plaintiff in or about December 2010.
19By reason of the matters pleaded in paragraph 18 above the First Plaintiff became entitled to be indemnified by the Defendant in respect of the loss by virtue of the express terms of the [Construction Liability Policy] pleaded in paragraph 12 above.
The plaintiffs' pleaded case is that damage occurred in or about February and March 2008; by in or about December 2010, the second plaintiff made a claim for compensation and the first plaintiff became legally liable to pay compensation; and the first plaintiff was then, by reason of those matters, entitled to be indemnified against the claim. On that proposed case, the first plaintiff's cause of action for indemnity under the Policy arose in about December 2010. The limitation period for that claim expired in about December 2016.
There is another reason why I would refuse leave. I do not believe it would be appropriate to exercise the court's discretion in favour of the plaintiffs where the proposed amended writ and the evidence the plaintiffs adduced in support of this application are patently inconsistent with the case they propose to plead. The proposed indorsement sets out that the plaintiffs submitted a claim pursuant to the two policies 'in or about and between February 2008 and March 2008'; and submitted materials relevant to the claim 'in or about and between 2008 and 2010': pars 1.1.2, 1.1.3. In his affidavit in support of the application, Mr Russell states that he engaged Austcover to assist in progressing a claim under the two policies in about 2009: par 5. On the plaintiffs' pleaded case, however, its claim under the Construction Liability Policy did not arise before December 2010.
For those reasons, I dismissed the application.