Sunset Pty Ltd v New Zealand Insurance Co Ltd

[1999] FCA 702

FEDERAL COURT OF AUSTRALIA

Sunset Pty Ltd v New Zealand Insurance Co Ltd [1999] FCA 702

COSTS – appeal against refusal to make a Bullock order – inducement of a successful party to join other parties not an essential condition to the making of an order.

Workers Compensation Act 1951 (ACT)
Workers Compensation Act 1987 (NSW)

Steppke v National Capital Development Commission (1978) 21 ACTR 23, referred to
Fennel v Supervision & Engineering Services Holdings Pty Ltd  [1988] SASR 6, cited
Reid v Campbell Wallis Moule & Co Pty Ltd [1990] VR 859, considered
Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd (1984) 157 CLR 149, referred to
CE Heath Underwriting & Insurance (Australia) Pty Ltd & Ors v Campbell Wallis Moule & Co Pty Ltd [1992] 1 VR 386, referred to

SUNSET PTY LIMITED V THE NEW ZEALAND INSURANCE CO LIMITED
AG 8 OF 1999

GALLOP, HEEREY AND R D NICHOLSON JJ
28 MAY 1999
CANBERRA

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY

DISTRICT REGISTRY

AG 8 OF 1999

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN:	SUNSET PTY LIMITED Appellant
AND:	THE NEW ZEALAND INSURANCE CO LIMITED Respondent
CORAM:		GALLOP, HEEREY and R D NICHOLSON JJ
DATE OF ORDER:		28 MAY 1999
WHERE MADE:		CANBERRA

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The respondent pay the costs of the appellant’s claim against QBE and AEI and the appellant’s costs of the appeal.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY

DISTRICT REGISTRY

 AG 8 OF 1999

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN:	SUNSET PTY LIMITED Appellant
AND:	THE NEW ZEALAND INSURANCE CO LIMITED Respondent

CORAM:	GALLOP, HEEREY and R D NICHOLSON JJ
DATE:	28 MAY 1999
PLACE:	CANBERRA

REASONS FOR JUDGMENT

THE COURT:

1. The appellant Sunset Pty Limited (“Sunset”) appeals from part of a judgment of a judge of the Supreme Court of the Australian Capital Territory.  Sunset had been sued by an employee for negligence and had joined as third parties its insurer New Zealand Insurance Co Limited (“NZI”), another insurer QBE Workers Compensation (NSW) Limited (“QBE”), and Sunset’s broker, Australian European Insurance (Brokers) Pty Ltd (“AEI”).  Sunset succeeded against NZI but not against QBE or AEI.  His Honour ordered that QBE and AEI have their costs against Sunset and that Sunset recover its costs against NZI.  However, his Honour declined to make a Bullock order requiring NZI to pay the costs of the successful third parties.

The plaintiff’s claim

1. Sunset carried on a business in Queanbeyan in New South Wales.  The business mainly involved the manufacture, sale and installation of concrete street and park furniture.  It also engaged in monumental masonry, that is to say the manufacture, sale and installation of headstones and memorials in cemeteries.  The latter business was about 10 per cent of its activities.  About 15 per cent of Sunset’s total business was carried out in the Australian Capital Territory.

2. On 22 January 1993 Sunset sent its employee the plaintiff to install a headstone in a cemetery at Gungahlin in the Australian Capital Territory.  In attempting to lift the headstone when installing it at the cemetery the plaintiff injured his lower back.  The trial Judge held that Sunset was negligent in failing to provide adequate assistance for the plaintiff by means of extra employees.  His Honour found contributory negligence which he assessed at 10 per cent.  After making that reduction, his Honour entered judgment for the plaintiff against Sunset for $144,803 together with costs. 

The third party proceedings

1. It was common ground that, at the relevant time, both NZI and QBE had in force policies indemnifying Sunset against claims of the kind brought by the plaintiff.  The NZI policy was issued under the Workers Compensation Act 1951 (ACT) and the QBE policy under the Workers Compensation Act 1987 (NSW).

2. The defence of NZI was that its policy did not cover the type and place of business in which Sunset employed the plaintiff.  It was said that Sunset’s proposal did not mention either that it carried on business in New South Wales or that it carried on a business as a monumental mason. 

3. QBE also pleaded that its policy did not cover the type of business in which Sunset employed the plaintiff.  As well, by an amended defence notified some 12 days before the trial, QBE contended that its policy did not cover indemnity for injuries sustained outside New South Wales or where the damages were the subject of a judgment of any court outside New South Wales.  This plea depended on provisions in the New South Wales Workers Compensation legislation.

1. Sunset’s claim against AEI was for breach of its duty as broker, primarily in failing to fully inform NZI and QBE on the true nature of its business.

Decision on third party proceedings

1. Sunset succeeded against NZI largely because of his Honour’s acceptance of the evidence of Mr Johnson, a director of AEI called as a witness by that company, to the effect that he had told NZI of the nature of Sunset’s business.  As to QBE, his Honour upheld the defence based on the New South Wales Act.  Had it not been for this point, his Honour would have held against QBE on the issue concerning Sunset’s type of business and also on a waiver and estoppel argument.  As to the claim against AEI, his Honour was not satisfied that it was a term of the agreement between Sunset and AEI that the latter would obtain cover in respect of liability for damages to employees engaged to carry out its business of monumental masonry.  Nor was AEI liable for any negligent advice.

Decision on costs

1. His Honour noted that an order of this nature is not simply made because it was reasonable that Sunset join QBE and AEI.  There had to be some feature of the conduct of NZI to justify making NZI pay or contribute to the costs which Sunset incurred in unsuccessfully seeking indemnity from QBE and AEI: Steppke v National Capital Development Commission (1978) 21 ACTR 23 at 30-31. His Honour then went on to refer to the “submission on behalf of Sunset that there was an inducement on the part of NZI”. His Honour said that “assuming that inducement is one of the tests for awarding costs for a successful defendant against an unsuccessful defendant, I am unable to conclude on the evidence in the present case that NZI `induced’ Sunset to join NZI or AEI.”

2. His Honour agreed that NZI did not simply deny that it insured Sunset but asserted positively that QBE did so.  His Honour continued:

   “The point taken is correct but it is followed immediately by the further submission that Sunset would not have been put to the expense of maintaining its action against QBE but for the erroneous position taken by NZI.  There is, in my view, no connection between the two propositions, essentially for the reason that there is no evidence of ‘inducement’. Obviously, Sunset would not have sued QBE or would have discontinued against QBE if NZI had admitted liability, but as the authorities show, that does not of itself mean that NZI should have to pay Sunset’s costs of suing QBE.  I do not see anything in the conduct of NZI to justify the charge that NZI took ‘an offensive forensically and active position’ which puts it in the character of the conduct envisaged in the High Court cases, or that of Fennell v Supervision & Engineering Services Holdings Pty Ltd (1988) Aust Torts R 80-180 (a decision of the Full Court of the Supreme Court of South Australia.)

Conclusion

1. In our respectful opinion, his Honour erred in effectively treating the element of inducement as though it were an essential precondition for a Bullock order, at least in the sense that there had to be a literal express or implied request by NZI to Sunset to join the other two third parties and that such request had to be made before such joinder.  Modern authority suggests that the discretion is not so limited.  As von Doussa J said in Fennel v Supervision & Engineering Services Holdings Pty Ltd  [1988] SASR 6 at 20:

   “The conduct of an unsuccessful defendant which shows that the joinder of the successful defendant was reasonable and proper to ensure a recovery is not confined to conduct before the date on which the successful defendant was joined.  That conduct may, and often does, occur subsequently in the course of the proceedings.  For example, the conduct may occur by the terms of the defence as in Bullock; during the interlocutory proceedings in aid of proof prior to trial, (Post v Colbert (1978) 20 SASR 62 at 65); or arise at the trial: Altamura v Victorian Railways Commissioners (supra) at 35.  I respectfully agree with Kaye J in the last mentioned case that `circumstances of the case may require that his [the plaintiff’s] decision should be adjudged by the conduct of the defendants after the joinder of the successful defendant and even up until the jury’s verdict.”

2. In Reid v Campbell Wallis Moule & Co Pty Ltd [1990] VR 859 Tadgell J discussed the relevant principles. A firm of accountants sued by a client had brought third party proceedings against their professional indemnity insurer, the Australian Society of Accountants, who had established a group insurance scheme under which the policy was issued, and the broker who had arranged the scheme. His Honour found the insurer liable (a decision subsequently reversed on appeal). His Honour thus did not find it necessary to adjudicate on the firm’s claim against the Society and the broker. His Honour dismissed the third party’s claim against them with costs, but made a Bullock order against the insurer.

3. His Honour referred to Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd (1984) 157 CLR 149. His Honour said (at 879)

   “The Norwest Case involved a claim by an insured for indemnity under a policy and, in the event that that claim failed, claims in negligence against a fisherman’s co-operative that had held itself out as being prepared to arrange the insurance, and also against the broker through which arrangements for the insurance were made.  All claims failed at first instance, the insurer successfully relying on an exclusion clause.  The Full Court of the Supreme Court of Western Australian dismissed an appeal against the broker but allowed an appeal against the co-operative, finding that the co-operative was negligent in failing to warn the plaintiff of the limitations of the insurance cover.  A Bullock order was sought by the plaintiff requiring the co-operative to indemnity it against the costs it had been required to pay to the insurer.  The Full Court refused a Bullock order and the High Court declined to disturb that decision.  Gibbs C.J. and Mason, Wilson and Dawson JJ. Said, at p.163, that the plaintiff’s action on the policy was “a straightforward action which was not independent with or in any real sense alternative to the claim against the Co-operative.”  I was invited to take a like view having regard to the obvious similarities between that case and this.  The similarities, however, are apt to be deceptive, for there are also important differences.

   It does not appear that in the Norwest Case there was any conduct of the co-operative that would have justified it being made liable for the costs incurred by the plaintiff in unsuccessfully suing the insurer.  So far as appears the plaintiff was not induced to sue the insurer by any conduct or attitude of the co-operative.  The plaintiff simply chose to sue the insurer and failed, choosing also to sue the co-operative and the broker in case it failed against the insurer.  In the present case, on the contrary, it is evident that the defendants sued the society and Minet because the underwriters had denied liability, and after they had served a defence.  To adapt the language of Dixon J. in Johnsons Tyne Foundry Pty Ltd v President, Ratepayers and Councillors of the Shire of Maffra (1948) 77 C.L.R. 544, at p. 566, it may justly be said that the defendants were induced to join the society and Minet by the erroneous attitude adopted by the underwriters. I consider that the defendants took a reasonable and proper course in doing so. Their alternative would have been to await the outcome of their trial as against the underwriters and, if they failed against them, then to sue the society and Minet. The convenience, if not the practical necessity, of taking the course they did is plain. It avoided circuity, the potential duplication of evidence and the risk of obtaining two inconsistent interpretations of the exclusion clause in the policy. In the circumstances I consider further that it is just that the underwriters should bear the costs of the defendants’ joinder of the other third parties and that there would be a Bullock order as sought.”

This statement remains unaffected by the reversal of the primary decision in Reid on appeal:  see CE Heath Underwriting & Insurance (Australia) Pty Ltd & Ors v Campbell Wallis Moule & Co Pty Ltd [1992] 1 VR 386.

1. In the present case, it is true the third party proceedings were issued against QBE and AEI on the same date as those against NZI.  Nevertheless the claims were “in a real sense alternative”.  An employer carrying on business in New South Wales and the ACT has a policy for each jurisdiction, but both insurers deny liability.  It would be surprising indeed if an employer did not join both insurers, and its broker, given the grounds of denial of liability.  And, as Tadgell J points out, not to do so would create a real risk of circuity, delay and expense.

2. Moreover NZI at trial actively supported AEI’s contention that QBE was liable.  Thus NZI explicitly blamed another party and in effect told Sunset that it should look to the successful party for its remedy.  In our respectful opinion, his Honour acted on a wrong principle in holding in effect that the absence of inducement prior to joinder disentitled Sunset to a Bullock order. 

3. The appeal should be allowed.  There should be an order that NZI pay the costs of Sunset’s claim against QBE and AEI and Sunset’s costs of the appeal.  We order accordingly.

I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Associate:

Dated:            28 May 1999

Counsel for the Appellant:	Mr G Richardson, SC
Solicitor for the Appellant:	Vandenberg Reid
Counsel for the Respondent:	Mr L King, SC
Solicitor for the Respondent:	Mallesons Stephen Jaques
Date of Hearing:	14 May 1999
Date of Judgment:	28 May 1999