Sydney Airport Corporation Pty Limited v Baulderstone Hornibrook Engineering Pty Limited; Baulderstone Hornibrook Engineering Pty Limited (BHE) v Connell Wagner (NSW) Pty Limited

[2006] NSWSC 1106

Reported Decision: (2007) 14 ANZ Insurance Cases 61-718

New South Wales

Supreme Court

CITATION:	Sydney Airport Corporation Pty Limited v Baulderstone Hornibrook Engineering Pty Limited; Baulderstone Hornibrook Engineering Pty Limited (BHE) v Connell Wagner (NSW) Pty Limited & Ors [2006] NSWSC 1106
HEARING DATE(S):	20/10/06
JURISDICTION:	Equity Division Technology and Construction List
JUDGMENT OF:	Einstein J
EX TEMPORE JUDGMENT DATE:	10/20/2006
DECISION:	Application for joinder dismissed
CATCHWORDS:	Practice and Procedure - Joinder - Principles - Application by Insurer to be joined to proceedings to apply for proceedings to be dismissed
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) Federal Court Rules High Court Rules Insurance Contracts Act 1984 (Cth) Supreme Court Rules 1970 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
CASES CITED:	Abriel v Levitt [2004] NSWCA 258 Beneficial Finance Corporation v Price Waterhouse (1996) 68 SASR 19 Brown v DML Resources Pty Limited (No 3) (in liq) (2001) 188 ALR 469 Carter v Marine Helicopters Ltd (1995) 9 ANZ Ins Case 61-299 CE Heath Casualty & General Insurance Ltd & Anor v Pyramid Building Society (in liq) [1997] 2 VR 256 Chappuis v Filo (1990) 19 NSWLR 490 Cleary v Jeans [2006] NSWCA 9 Gordian Runoff Limited v Price [2004] NSWSC 535 Great Eastern Cleaning Services Pty Limited, Re [1978] 2 NSWLR 278 Grovenor v Permanent Trustee Co of New South Wales Ltd (1966) 40 ALJR 329 Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 Hunter v Chief Constable of the West Midlands Police [1982] AC 529 IG Farben Industrie AG Agreement, In re [1944] Ch 41 Interchase Corp Ltd (in liq) v FAI General Insurance Co Ltd [2000] 2 Qd R 301 Morrell v Mercantile Mutual Insurance (Australia) Ltd (1999) 21 WAR 451 Moser v Marsden [1892] 1 Ch 487 News Limited v Australian Rugby Football League (1996) 64 FCR 410 ; (1996) 139 ALR 193 Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 Redowood Pty Limited v ASX-Perpetual Registrars Limited (2006) 57 ACSR 256 Reichel v Magrath (1889) 14 App Cas 665 Rippon v Chilcotin Pty Limited (2001) 53 NSWLR 198 Rogers v R (1994) 181 CLR 251 Secretary of State for Trade and Industry v Bairstow [2004] Ch 1 Sky Channel Marketing Pty Limited v Hall [2006] FCA 854 State of Victoria v Sutton (1998) 195 CLR 291 State Bank of New South Wales Limited v Alexander Stenhouse Limited (1997) Aust Torts Reports 81-423 Travel Compensation Fund v Blair & Ors [2003] NSWSC 720 VACC Insurance Co Ltd v BP Australia Ltd (1999) 47 NSWLR 716 Vandervell Trustees Limited v White [1971] AC 912 Walton v Gardiner (1993) 177 CLR 378
PARTIES:	Gordian Runoff Pty Limited [Applicant] Baulderstone Hornibrook Pty Limited [Respondent] Connell Wagner (NSW) Pty Limited [Defendant 6115/01]
FILE NUMBER(S):	SC 55027/02; 6115/01
COUNSEL:	Mr RM Smith SC, Mr MA Jones [Applicant - Gordian Runoff Pty Limited] Mr AJ McInerney, Mr N Kabilafkas, [Respondent - Baulderstone HornibrookEngineering Pty Limited] Mr RI Bellamy [Connell Wagner Pty Limited]
SOLICITORS:	Corrs Chambers Westgarth [Applicant - Gordian Runoff Pty Limited] Clayton Utz [Respondent - Baulderstone Hornibrook Engineering Pty Limited] Deacons [Connell Wagner Pty Limited]

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY AND CONSTRUCTION LIST

Einstein J

Friday 20 October 2006 ex tempore
Revised 20 October 2006

55027/2002 Sydney Airport Corporation Limited (formerly known as Sydney Airports Corporation Limited v Baulderstone Hornibrook Engineering Pty Limited & Ors

6115/2001 Baulderstone Hornibrook Engineering Pty Limited v Connell Wagner (NSW) Pty Limited & Ors

JUDGMENT

1 Baulderstone Hornibrook Engineering Pty Limited currently maintains two further sets of proceedings against Connell Wagner and Reinforced Earth arising from the construction of the third runway at Sydney Airport. These are:

(1) Supreme Court proceedings 55027 of 2002 [being the original proceedings commenced by Sydney Airports Corporation Limited against BHE in relation to which BHE maintains cross-claims against Connell Wagner and Reinforced Earth];

(2) Supreme Court proceedings 6115 of 2001 [these are separate proceedings commenced by BHE against Connell Wagner and Reinforced Earth].

2 BHE has filed motions seeking to amend its claim in the above proceedings.

3 Gordian Runoff Pty Limited has, by notice of motion and amended notice of motion, applied pursuant to Pt 6 rule 6.24 of the Uniform Civil Procedure Rules to be joined to each of these proceedings to argue, inter alia, that the maintenance of the proceedings constitutes an abuse of process.

4 It seeks to be joined to each of these sets of proceedings for the purposes of determination of:

(a) the plaintiff's application to amend and

(b) Gordian's application that the proceedings be dismissed or permanently stayed as constituting an abuse of process.

The Principles

5 In its submissions Gordian has sought, without being exhaustive, to set out in general terms the principles which require to be applied on an application for joinder. It seems to me that Gordian's short summary may (subject to some expansion of certain references) be accepted for present purposes. The propositions put are as follows:

(a) to satisfy the test of necessity, something more is required than merely that the joinder is just or convenient [ Vandervell Trustees Limited v White [1971] AC 912];

(b) “In our opinion, the question should be decided according to the test proposed by Lord Diplock. The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party’s rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent … The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases where the effect of the order on non-parties can be characterised as only indirect or consequential”.
News Limited v Australian Rugby Football League (1996) 64 FCR 410 at 524-525];

(c) seeking to distinguish between interests based upon a legal and commercial dichotomy is not helpful. In Pegang Mining Co Ltd v Choong Sam [[1969] 2 MLJ 52 at 55-56; cited with approval in News v ARL supra, and a number of judgments in this State, including Gordian Runoff Limited v Price [2004] NSWSC 535, Travel Compensation Fund v Blair & Ors [2003] NSWSC 720 at [117]-[121] and Brown v DML Resources Pty Limited (in liq) (2001) 188 ALR 469 at [49]ff], Lord Diplock (delivering the opinion of the Privy Council) said in respect of the rule equivalent to Part 6 rule 6.24:

“The cases illustrate the great variety of circumstances in which it may be sought to join an additional party to an existing action. In their Lordships' view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard. To achieve this object calls for a flexibility of approach which makes it undesirable in the present case, in which the facts are unique, to attempt to lay down any general proposition which could be applicable to all cases.
It has been sometimes said as in Moser v Marsden [1892] 1 Ch 487 and in In re IG Farben Industrie AG [1944] Ch 41 that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between `legal' and `commercial' interests helpful. A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?”

(d) in State of Victoria v Sutton [(1998) 195 CLR 291 at 316-317 [77]-[78] ], McHugh J said (footnotes included):


[77] The rules of natural justice require that, before a court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. Because that is so, it is the invariable practice of the courts to require such a person to be joined as a party if there is an arguable possibility that he or she may be affected by the making of the order [ News Ltd v ARLLtd (1996) 139 ALR 193; Grovenor v Permanent Trustee Co of New South Wales Ltd (1966) 40 ALJR 329. This rule is derived both from the common law and by implication through the power of courts to join parties who are necessary and proper for hearing, for example, New South Wales Supreme Court Rules Pt8 r8, High Court Rules O16 r4]. That practice also assists in avoiding duplication of hearings on the same issues and in avoiding the spectre of inconsistent decisions by courts or the judges of the same court. In Pegang Mining Co Ltd v Choong Sam [[1969] 2 MLJ 52 at 55-56] Lord Diplock, delivering the opinion of the Judicial Committee of the Privy Council, said: "In their Lordships' view one of the principal objects of the rule [The precursor to O6 r8 in the Federal Court] is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard ... a better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?"

[78] The test for determining whether a person is a necessary party has usually arisen in the context of a person seeking to join proceedings rather than a failure to join a relevant person. But the same principle must apply in both situations. Thus, in News Ltd v ARL [(1996) 139 ALR 193], the Full Federal Court held that an order "which directly affects a third person's rights against or liabilities to a party should not be made unless the person is also joined as a party. If made, the order will be set aside." [(1996) 139 ALR 193 at 298. Note that the New South Wales Court of Appeal in Chappuis v Filo (1990) 19 NSWLR 490 at 511-512 held that where a necessary party is not joined in the proceedings, the Court could determine the issues in the absence of the party although that party would, if prejudiced by the orders, have a right to apply to have the orders set aside] The Full Court pointed out that O6 r7 of the Federal Court Rules [A similar rule is present in many jurisdictions including the High Court Rules, O16 r4(1)] which states that proceedings will not be defeated by a misjoinder or non joinder was "intended to give effect to the abolition of the plea of abatement" [(1996) 139 ALR 193 at 297]. The Court said that the rule was directed "to cases where there is a curable defect, for example the misnaming of a party".


(e) a matter of significance in the determination of an application is whether there will be an effective contradictor without the joinder [ Gordian Runoff Limited v Price [2004] NSWSC 535 at [21]; Re Great Eastern Cleaning Services Pty Limited [1978] 2 NSWLR 278 at 280];

(f) attention is to be directed at the orders that are sought in the proceedings [ Sky Channel Marketing Pty Limited v Hall [2006] FCA 854 at [11] ].

(g) The cases from which the above-mentioned principles are derived were decided before the commencement of the Civil Procedure Act . It is submitted that the proper construction of Part 6 rule 6.24 ought now also be considered in light of the overriding purpose prescribed in s 56 of the Civil Procedure Act . That is, the test of “necessity” is to be considered in light of the requirements placed upon the Court to control its procedure by the operation of s 56.

The suggested substance of the applications proposed to be made by Gordian

6 In its written submissions Gordian has put the following propositions:

i. Gordian claims that these proceedings ought to be dismissed or permanently stayed on the grounds that the continuation of these proceedings brings the administration of justice into disrepute among right thinking people [ Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at 536; Walton v Gardiner (1993) 177 CLR 378 at 393; See also Rogers v The Queen (1994) 181 CLR 251 at 256, 286; Rippon v Chilcotin Pty Limited (2001) 53 NSWLR 198; Abriel v Levitt [2004] NSWCA 258 at [27 ]; Secretary of State for Trade and Industry v Bairstow [2004] Ch 1 at 16-17 [38]; Cleary v Jeans [2006] NSWCA 9; Reichel v Magrath (1889) 14 App Cas 665; Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404; State Bank of New South Wales Limited v Alexander Stenhouse Limited (1997) Aust Torts Reports 81-423], or, alternatively, on an extended res judicata basis [Handley, “ Res Judicata: General Principles and Recent Developments ” (1999) 18 Aust Bar Rev 214; Redowood Pty Limited (ACN 003 365 820) v ASX-Perpetual Registrars Limited (ACN 083 214 537) (2006) 57 ACSR 256]. Each ground relies on the fact that Baulderstone Hornibrook Engineering Pty Limited’s (“BHE”) claims in these proceedings were either raised in the proceedings between it and, inter alia, Gordian (“Gordian proceedings”), which were lost by BHE. Or alternatively BHE could have raised those matters in the Gordian proceedings.

ii. Independently of proposition i, if Gordian was joined it would argue that leave to amend should be refused, on a further ground. The amended claim abandons a number of the claims originally pleaded. It substitutes new causes of action which are all based upon the proposition that there were design defects which (whilst variously expressed) all centre upon the proposition that RE and CW had an obligation to warn and/or advise BHE as to how to compact sand to avoid the introduction of folds or wrinkles in the geotextile. This concept first appears at paragraph 160 by the reference to the Design Defects and the particulars of the Design Defects. The same concept forms the basis for the misleading and deceptive conduct claims (paras 160, 166, 172) the claims for breach of contract, (paras 178, 187) and the claims in negligence (para 193). This is a new case, which is fundamentally different from the present pleading. Gordian will submit that the new claims are statute barred.

iii. If the Court is satisfied that the continuation of these proceedings constitutes an abuse of process, then the Court ought to dismiss or permanently stay the proceedings forthwith. This would necessarily deny BHE the relief of leave to amend. If it held that all, or any, of the causes of action in the amended pleading were statute barred and that s 65 of the Civil Procedure Act 2005 did not apply, the Court would refuse leave. It is only in that way that Gordian seeks to participate in BHE’s leave application.

iv. Gordian seeks to rely upon the second limb of Part 6 rule 6.24, that it is a person “whose joinder as a party is necessary to the determination of all matters in dispute” in the proceedings.

The essential gravamen of the submission.

7 Gordian submits that its joinder is relevantly necessary because if not joined its liabilities to CW and RE under the project specific insurance will be directly affected by any order which may be made in these proceedings in favour of BHE against Connell Wagner and/or Reinforced Earth.

8 In support of that submission Gordian has sought to prove four facts. For present purposes the Court may proceed upon the assumption that those facts are made out, noting that BHE had sought to call upon subpoenas to test some parameters of the factual questions. Those facts are:

(a) each of Connell Wagner and Reinforced Earth are parties entitled to claim on Gordian for indemnity under the project specific policy;

(b) each has made claims for indemnity on Gordian;

(c) Gordian has not yet granted or declined indemnity;

(d) each of Connell Wagner and Reinforced Earth have informed Gordian that if indemnity is declined they will join Gordian in these proceedings and claim indemnity for any liability they are held to have to BHE.

9 Even positing those facts as made out, my own view is that presently Gordian has not been able to show that it has locus standi [that is to say a material interest in the two continuing sets of proceedings] such as to justify an order that it be joined to the proceedings:

i. for the purpose of determination of the plaintiff's application to amend; or

ii. for the purposes of determination of Gordian's application that the proceedings be dismissed or permanently stayed; or

iii. for any other purpose.

10 Essentially, its proposition that its joinder is relevantly necessary because if not joined it's liability to Connell Wagner and to Reinforced Earth under the project specific insurance will be directly affected by any order which may be made in the two sets of proceedings in favour of BHE against Connell Wagner and Reinforced Earth is misconceived, and this because at this point in time Gordian has not been joined into the proceedings as a cross-defendant, nor if this were practicable as a defendant. In short, and as BHE has submitted, any interest possessed by Gordian is both contingent and consequential. That being show, its interests are presently insufficiently affected by any order the court may make on BHE's application to amend or in the proceedings generally.

11 The mere fact that each of Connell Wagner and Reinforced Earth have informed Gordian that if indemnity is declined they will join Gordian into the proceedings and claim indemnity for any liability they are held to have to BHE is insufficient to establish an entitlement to join. Dealing with the wording of Pt 6 rule 6.24 of the Uniform Civil Procedure Rules, the evidence does not establish that Gordian is a person "whose joinder as a party is necessary to the determination of all matters in dispute in the proceedings".

12 None of the three integers by Gordian has sustaining its suggested relevant interest in the outcome of the litigation is sufficient at the present time to justify the present joinder. Those three integers were:

i. as being a party potentially liable to Reinforced Earth and/or Connell Wagner;

ii. as being a party either (as an insurer funding defence costs if indemnity is granted) or a cross-defendant if indemnity is not granted, facing protected litigation on that topic at great expense to it;

iii. as having an interest where it in earlier litigation defeated a case (defective design of the geotextile on Dr Ingold's theory and/or reliance by BHE on Reinforced Earth's failure to warn that compaction could induce folds and/or wrinkles in the geotextile case and the like) and where the same case is sought to be raised in later litigation where, if the case succeeds, Gordian's liability to Reinforced Earth and/or Connell Wagner may be adversely affected.

13 As BHE has contended it is immediately apparent that the third alleged "relevant interest" adds nothing to the first two. If the fact that Gordian's "liability to Reinforced Earth and/or Connell Wagner may be adversely affected" in these proceedings is not sufficient to found a sufficient interest for joinder, then the fact that Gordian was a party to other broadly related proceedings cannot make it so.

14 The simple circumstance is that as at the present date it cannot be said that the rights or liabilities of Gordian to any party to the action in respect of the subject matter of the action will necessarily be directly affected by any order which may be made in the action, but as soon as either or both of Reinforced Earth or Connell Wagner join Gordian into the proceedings the position will be otherwise.

15 Nor do any of the following suggested circumstances, put forward by Gordian, justify the present joinder.

(a) First, Gordian does not seek to be joined for all purposes, but is prepared to accept being joined for the sole purpose of the matters identified by it; being a joinder subject to conditions. If it is correct in establishing that these proceedings are an abuse of the Court’s processes, that will either lead to the end of this litigation, or alternatively, its scope will be significantly reduced. Gordian has a clear interest in seeing the end of this litigation.

(b) Second, the point Gordian seeks to take is a matter that not only it has an interest in, but the Court and the public have the same interest. Judicial resources should not be spent in litigation covering the same ground as the Gordian proceedings.

(c) Third, in a practical sense, Gordian, having been the contradictor in the Gordian proceedings is likely to become the effective contradictor in these proceedings or alternatively will be placed in a difficult forensic position in the future if it does not take that role. If Gordian confirms indemnity it will be a privy of RE and CW. It will therefore either be obliged to participate, or be bound by, the findings of the Court. If it denies indemnity, it will be joined to these proceedings. If that is the case, given its prior involvement in the protracted litigation before Einstein J, it will become the effective contradictor here. If it denies indemnity and is not joined to these proceedings and in the second proceedings BHE persuades the Court to make findings contrary to those made in the Gordian proceedings, Gordian’s liability to RE or CW in any proceedings claiming indemnity against Gordian will be adversely affected. It would be a most unjust position for the Court to put Gordian in, where Gordian has already spent vast sums defeating the same case when brought against it directly.

(d) Fourth, having regard to the enormous time, expense and complexity of the proceedings previously maintained by BHE against Gordian (see [2006] NSWSC 223), and the fact that neither RE nor CW were parties to those proceedings, it is evident that Gordian is in a much better position to properly prosecute an application for dismissal/stay (on the basis identified) than those parties are; having the detailed knowledge of what occurred in that litigation. Gordian is the most effective contradictor of these matters. To deny it the ability to act as contradictor, will simply mean that RE and/or CW will need to spend a large amount of time and resources to put themselves in a position to argue the substance of the points. That approach would be inconsistent with the facilitation of the just, quick and cheap resolution of the proceedings (s 56(1) Civil Procedure Act ), the overriding purpose which the Court is obliged to give effect to (s 56(2) Civil Procedure Act ).

16 It cannot be the case that an insure, without electing:

(1) to accept that a policy responds or

(2) to decline indemnity on the basis that the policy does not respond or

(3) to reach an accommodation with an insured to take over the conduct of the proceedings [albeit keeping its options open as to whether or not its position will ultimately be that the policy does or does not respond]

has a right to be joined into proceedings brought against the insured simply for the purpose of endeavouring to have those proceedings dismissed.

17 As BHE has submitted, if the alleged "relevant interest" (that Gordian may have a potential liability to Reinforced Earth and Connell Wagner) is sufficient, then a fortiori any party which could be potentially liable to indemnify a defendant in respect of all or part of a claim by a plaintiff would automatically be entitled to be joined as a defendant to proceedings per se.

18 And if this was correct, then flowing from McHugh J observed in State of Victoria v Sutton at 78, the test for failure to join is the same as for an application to join a potential indemnifier is in fact required to be joined. This has simply never been the position.

19 Further, and also as BHE has submitted:

i. Although there is no doubt that an indemnifier has a contingent and consequential interest which could be affected, the law already provides a mechanism for the protection of that interest through the law of subrogation, as modified in the circumstances by any contractual right to take over the conduct of proceedings.

ii. Potential indemnifiers in the position of Gordian have two options: to take over the conduct of the litigation for the insured, whether pursuant to an equitable or contractual right (which does not necessarily require a decision to grant indemnity), or to refuse to do so (which does not, as in this case, require that the indemnifier to actually have “declined” indemnity).

iii. In the first case, the general rule is that the insured and insurer cannot have separate representation, even if (for example) there are “insured” and “uninsured” elements to the claim: Carter v Marine Helicopters Ltd (1995) 9 ANZ Ins Case 61-299 at 76-347. This flows from the fact that the insurer does not have title to sue or sue in its own name in the proceedings, but must act through the insured. That rule recognises that an insurer might in exceptional circumstances be joined as a defendant in its own right, for instance where there is a dispute between insured and insurer such that it is clear that separate representation is required to protect an interest of the insurer the insured is unable or unwilling to protect: Carter v Marine Helicopters Ltd (1995) 9 ANZ Ins Case 61-299 at 76-347. Absent such special circumstances, however, where the insurer has carriage of the proceedings through the grant of indemnity and/or the exercise of a contractual right, the law permits only single representation of the one party properly before the court – the insured – that party’s several interest (to the extent that it exists) is normally sufficiently protected by the insurer’s obligation to conduct the proceedings with utmost good faith.

iv. In the second case, the insurer has made a deliberate decision to take its chances. The mechanism by which the insurer is then joined to the proceedings, is for the insured defendant to join the insurer by way of cross-claim. Otherwise, the insurer is not bound by findings in the proceedings between the claimant and the insured: VACC Insurance Co Ltd v BP Australia (1999) 47 NSWLR 716 at [28] per Fitzgerald JA (Meagher JA agreeing).

v. Whether or not the insurer is joined, is generally a matter for the insured. The decided cases on the rule in the form of UCPR 6.24 illustrate that there is generally not a sufficient interest for the plaintiff (rather than the defendant insured) to join the defendant’s insurer to the main proceedings: CE Heath Casualty & General Insurance Ltd & Anor v Pyramid Building Society (in liq) [1997] 2 VR 256; Beneficial Finance Corporation v Price Waterhouse (1996) 68 SASR 19; Interchase Corp Ltd v FAI General Insurance Co Ltd [2000] 2 Qd R 301; Morrell v Mercantile Mutual Insurance (Australia) Ltd (1999) 21 WAR 451.

vi. In such a case, an insurer, having made the decision not to indemnify or take over the conduct of the proceedings, has no interest in the principal claim unless and until judgment is given against the insured. The insurer may be entitled to decline all or part of the claim for any number of reasons arising from the terms of the policy or the Insurance Contracts Act 1984 (Cth). In that respect, an insurer who has refrained from conducting the proceedings, has the contingent and consequential interest it possessed protected without being joined by the fact that it is free to dispute any findings in the proceedings on the claim, while the insured is bound by any such findings upon which its claim against the insurer depends: VACC Insurance Co Ltd v BP Australia (1999) 47 NSWLR 716 at [28] – [34] per Fitzgerald JA (Meagher JA agreeing).

vii. In both cases, whether the insurer takes over the conduct of the principal litigation on the part of the insured or not, and whether it expressly accepts or declines indemnity or not, the general rule is that only the insured has a sufficiently direct interest to be joined to the claim.

20 The fact that Gordian was a defendant to a claim by BHE in earlier related proceedings does not amplify its interest at this time in these proceedings.

21 The only factor that Gordian has put forward to distinguish it from the usual case where an insurer is potentially liable to indemnify an insured defendant is that Reinforced Earth would not be as effective as contradictors. That is not a sufficient distinction.

22 During the course of oral address Mr Smith sought to distinguish the instant circumstances from what he put as the ordinary case by reference to the proposition that the essential difference involved the rights of Gordian established in the earlier proceedings which it was submitted, would be affected for the purpose of the joinder test.

23 The proposition was that:

i. The rights which supported the joinder include the right arising out of the fact that in the litigation between Gordian and BHE it was found that Gordian was not liable to be BHE, because on the special condition 2 argument that Reinforced Earth and Connell Wagner were not liable to BHE in respect of BHE's liability to SACL.

ii. In this case, BHE seeks to ignore that finding and to persuade the court to reach the contrary finding, that is that Reinforced Earth and Connell Wagner were liable to BHE for its liability to SACL.

iii. For the purpose of the joinder test Gordian's rights include that finding coupled with the anterior body of legal doctrine.

iv. The combination of those two features mean that Gordian has an existing legal argument available to it to prevent BHE from obtaining that inconsistent finding, which inconsistent finding, if found in these proceedings, would directly affect Gordian's rights.

v. The reason it would directly affect Gordian's rights is that it would establish that the insureds making a claim upon Gordian had a liability to BHE.

24 For reasons given these propositions are misconceived in terms of the principled approach to the application to be joined.

25 At the end of the day, Gordian's application to be joined suffers from the vice that any interest is purely contingent in circumstances where that contingency is independent of any orders that might be made in the proceedings but is solely dependent on whether it decides to grant or refuse indemnity, a matter solely within its control, and whether Reinforced Earth and/or Connell Wagner choose to join it as a third party.

26 If Gordian chooses to grant indemnity, then as a matter of contract it must abide by the conduct of the defence by the insureds' representatives, presumably instructed by the primary layer insurer. If Gordian does not and is joined to the proceedings by Reinforced Earth and/or Connell Wagner, then it is joined by that order and for that purpose. The proposition that the possibility of joinder at a later time on some other basis can create the entitlement to be joined at an earlier time is misconceived.

Generally

27 Plainly enough, this judgment deals and deals only with the application by Gordian for joinder into the two sets of proceedings already referred to. Complex questions such as may or may not arise in relation to those proceedings concerning the possibility of abuse of process and/or the type of matters which Gordian had sought to raise had it been joined in endeavouring to have the proceedings stayed are not dealt with by this judgment.

Appropriate orders

28 The appropriate order is to dismiss the notices of motion pursued by Gordian. The parties will be given an opportunity to address on costs.

Subpoena issue

29 Effectively these findings mean that it becomes unnecessary for the Court to deal with the issue of whether or not the subpoenas issued by BHE and sought to be set aside by Gordian should be set aside.