The Owners-Strata Plan 62658 v Mestrez Pty Ltd - [2012] NSWSC 1259

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: THE OWNERS-STRATA PLAN 62658 v MESTREZ PTY LIMITED & ORS [2012] NSWSC 1259
Hearing dates: 10 August, 4 September 2012
Decision date: 18 October 2012
Jurisdiction: Equity Division
Before: Lindsay J
Decision:
Insurer granted leave to file Responses in the names of insured Defendants in addition to Response in its own name.

Catchwords: INSURANCE - general - other matters - subrogation and litigation clause - whether insurer is entitled to claim the benefit of the limitation on liability provided under Civil Liability Act 2002 (NSW) Part 4.
INSURANCE - general - other matters - subrogation and litigation clause - doctrine of election - whether insurer involuntarily joined as co-defendant is barred from denying liability to indemnify the insured.
PROCEDURE - miscellaneous procedural matters - other matters - pleading - leave to amend.
Legislation Cited: Civil Liability Act 2002 (NSW)
Corporations Act 2001 (Cth)
Civil Procedure Act 2005 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)
Civil Liability Regulation 2009 (NSW)
Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Cases Cited: CGU Insurance Limited v Porthouse (2008) 235 CLR 103
AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175
Castellain v Preston (1883) 11 QBD 380
AFG Insurances Limited v City of Brighton (1972) 126 CLR 655
State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Limited (1969) 123 CLR 228
Halliday v High Performance Personnel Pty Limited (In Liq) (1993) 11 ALR 637 at 640
Mitchell Morgan Nominees Pty Limited v Vella [2011] NSWCA 390
Anjin No. 13 Pty Ltd v Allianz Australia Insurance Ltd (2009) 26 VR 148
Texts Cited: Sutton, Insurance Law in Australia 3rd Edition pp. 1218-1219
Category: Interlocutory applications
Parties:
THE OWNERS-STRATA PLAN 62658 Plaintiff

MESTREZ PTY LIMITED
First Defendant

PREMIER FIRE PROTECTION SERVICES (NSW) PTY LIMITED
Second Defendant

BLACK NO SUGAR PTY LTD ACN 061 032 335
Third Defendant

LEND LEASE PROJECTS PTY LIMITED
Fourth Defendant

THE OWNERS - STRATA PLAN 62658
Fifth Defendant
AXIS SPECIALTY EUROPE LIMITED
Sixth Defendant
Representation: D Moujali (Plaintiff)
Richard Oldfield (Plaintiff)

File Number(s): 2008 / 317302

Judgment

INTRODUCTION

The proceedings before the Court raise for consideration two general, interrelated questions relating to the operation of the Civil Liability Act 2002 (NSW). Both arise out of a need to deal with the procedural ramifications of an application, in the context of that Act, of the reasoning of a line of cases that commenced with JN Taylor Holdings Ltd (In Liq) v Bond (1993) 59 SASR 432 and includes Employees Reinsurance Corporation v Ashmere Cove Pty Ltd (2008) 166 FCR 398 and Anjin No. 13 Pty Ltd v Allianz Australia Insurance Ltd (2009) 26 VR 148. Because the parties have treated the last of these cases as a convenient summary of them all, I refer to them here as "the Anjin line of cases".

Both questions arise in the current proceedings because, on the authority of that line of cases, the Plaintiff has joined in the proceedings, as a party-defendant, the professional indemnity insurer of two insolvent, corporate defendants which are two (namely, the Third and Fifth Defendants) of five defendants against which the Plaintiff claims damages, in contract and tort, for negligence.

The insurer (the Sixth Defendant) has moved the Court for leave to amend its "Defence" (more accurately, its "Technology and Construction List Response" governed by the Court's Practice Note SC Eq 3) so as to plead an entitlement to claim the benefit of the limitation on liability for which s. 35(1) of the Civil Liability Act ("CLA") provides in favour of a defendant who is a concurrent wrongdoer in relation to an apportionable claim.

The Plaintiff contends that leave to amend should not be granted but, if granted, it should be on terms that require the Sixth Defendant to plead a case conformable to a standard of precision implicit in CLA ss. 35A(1)(a), (b)(i) and (b)(ii).

The only parties to have taken an active part in the proceedings to date are the Plaintiff and the Second, Fourth and Sixth Defendants. I am told by the Plaintiff that all Defendants have been served with Court process, but only these Defendants have filed pleadings. Each of the Second and Fourth Defendants has pleaded reliance on CLA Part 4, entitled "Proportionate Liability". No parties, other than the Plaintiff and the Sixth Defendant, have availed themselves of the opportunity open to them to be heard on the Sixth Defendant's motion for leave to amend.

The first general question raised for consideration concerns the operation of CLA s. 35 (1), and principles of subrogation, in the context of a claim for relief made by a Plaintiff directly against the insurer of a defendant who is, or may be, a "concurrent wrongdoer" in relation to an "apportionable claim" within the meaning of those expressions as defined by CLA s. 34(1)(a) and CLA s. 34(2) respectively.

The second general question concerns identification and elaboration of any obligation an insurer (joined as a co-defendant with its insured) may have, under or by reference to CLA s. 35A or rules of court governing pleadings, to plead and particularise allegations the insurer makes about the existence, and culpability, of non-parties said by it to be concurrent wrongdoers whose conduct should be weighed in the balance in the Court's determination of proportionate liability under s. 35(1).

For convenience, the first question is here referred to as "the subrogation question", the second as "the pleading question".

FACTUAL CONTEXT OF THE MOTION BEFORE THE COURT

The Plaintiff was at all material times the owner of the common property of a strata title building located at 155 Macquarie Street, Sydney, and known as "Macquarie Apartments".

The building was apparently designed and built between about 1998 and 2000.

The Plaintiff alleges, and the Sixth Defendant accepts, that, on or about 11 June 2002, the lift motors and control systems for lifts within the building flooded as a result of water discharging from the fire control system for the building.

So far as is material to the Sixth Defendant's motion for leave, the defendants to the Plaintiff's claims for damages are:

(a) the Third Defendant, which is said to have been involved in the design, and to have overseen the installation, of the hydraulic services system for the building, including the fire control system and the drainage system.

(b) the Fifth Defendant, which is said to have assumed responsibility from the Third Defendant for the design of the hydraulic and fire services for the building, and for oversight of the installation of those services.

On the hearing of its motion, the Sixth Defendant (with the acquiescence of the Plaintiff) invited the Court to proceed on the basis that, for analytical purposes, the Third and Fifth Defendants might be regarded as a single entity.

The Plaintiff's proceedings were commenced in the District Court of New South Wales by a Statement of Claim filed (against the first four Defendants only) on 10 June 2008.

As it happened, the Third Defendant and the prospective Fifth Defendant had been deregistered under the provisions of Chapter 5A of the Corporations Act 2001 (Cth), with the consequence (for which s. 601AD of that Act provides) that, subject to any order for reinstatement, they had ceased to exist.

On 7 May 2010 Justice Barrett, sitting in the Equity Division of this Court, made orders (on the application of the Plaintiff) to the effect that both companies, first, be reinstated under s. 601AH of the Corporations Act and, then, be immediately wound up: The Owners of Strata Plan 62658 v Black No Sugar Pty Limited [2010] NSWSC 408.

In taking that course, his Honour (relying, at [6]-[8], upon his earlier judgment in Stone v ACN 000 337 940 Pty Limited [2008] NSWSC 1058; 68 ACSR 242) noted that it was plain, on the evidence adduced before him, that the conditions under s. 601AG of the Corporations Act necessary to allow the Plaintiff to proceed against the Sixth Defendant, as insurer of deregistered companies, were not obviously satisfied.

Section 601AG provides that "[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 the deregistration."

On 21 July 2010 the Plaintiff filed in the District Court an Amended Statement of Claim joining the Fifth Defendant.

On 8 April 2011 the Supreme Court made orders, inter alia, to the effect that:

(a) pursuant to the Civil Procedure Act 2005 (NSW), s. 140(1), the District Court proceedings be transferred to the Supreme Court;

(b) pursuant to the Uniform Civil Procedure Rules 2005 (NSW), rules 6.24(1) and 6.19, the Sixth Defendant be joined as a defendant in the proceedings; and

Rule 6.19(1) is to the effect that two or more persons may be joined as Plaintiffs or defendants in any originating process if: (a) separate proceedings by or against each of them would give rise to a common question of law or fact, and (b) all rights of relief claimed in the originating process are in respect of, or arise out of, the same transaction or series of transactions, or if the Court gives leave for them to be joined. This final limb of rule 6.19(1), the subject of emphasis, might be thought to be of particular importance as the earlier limbs of that rule and rule 6.24(1) have, sometimes, been narrowly construed.

Rule 6.24(1) is to the effect that, if the Court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the Court may order that the person be joined as a party.

I have been informed by counsel that the order for joinder of the Sixth Defendant was made, on the application of the Plaintiff, with the Sixth Defendant neither consenting to nor opposing the making of the order. The formal record contains no elaboration of any reasons for joinder beyond reference to UCPR rules 6.24(1) and 6.19.

On 21 April 2011 the Plaintiff filed a Further Amended Statement of Claim.

By that Statement of Claim, the Plaintiff claims a declaration to the effect that the Sixth Defendant is liable to indemnify the Third and Fifth Defendants in respect of any judgment obtained in the proceedings by it against the Third and/or Fifth Defendants, and in respect of any sums (including legal costs) which the Court may order the Third and/or Fifth Defendants to pay to the Plaintiff.

In support of that claim for relief the Plaintiff pleads allegations to the effect that the Sixth Defendant was the insurer of each of the Third and Fifth Defendants under identified policies of insurance, that claims were made against the Third and Fifth Defendants within the terms of those policies and that the Sixth Defendant was duly notified of those claims, with the alleged consequence that the Sixth Defendant is liable to indemnify the Third and Fifth Defendants under their respective policies.

On 3 June 2011 the Sixth Defendant filed its Response to the Further Amended Statement of Claim, placing in issue its liability to indemnify either or both of the Third or Fifth Defendants. It alleges that neither of those defendants held a policy of insurance with it as at 11 June 2002 and contends that, on the proper construction and operation of the policies of insurance subsequently entered into with it by the Third and Fifth Defendants, it is entitled to deny indemnity. It contends, inter alia, that the flooding at the building on 11 June 2002 was a "known circumstance" under the policies it subsequently issued, which required notification by the Third and Fifth Defendants to it, a failure to give which entitles it to decline indemnity: CGU Insurance Limited v Porthouse (2008) 235 CLR 103.

After its joinder in the proceedings, the Sixth Defendant took time to investigate the Plaintiff's claim, inter alia, through inspection of documents discovered by other parties active in the proceedings.

As a result of those investigations, it says, it prepared the draft Amended Response the subject of its motion for leave.

The substance of the new allegations sought to be relied upon by the Sixth Defendant in this draft pleading (omitting, for the present, "particulars" of wrongdoing attributed by the Sixth Defendant to alleged "concurrent wrongdoers") is as follows:

"40. In answer to the whole of the FASOC, the Sixth Defendant says that the Plaintiff's claim is a building action and an apportionable claim within the meaning of Part 4 of the Civil Liability Act 2002 (NSW).

41. The following are concurrent wrongdoers pursuant to s. 35 of the Civil Liability Act 2002 (NSW): ... [the Sixth Defendant here named each of the First, Second and Fourth Defendants and set out against their respective names a summary of "Particulars" that, inter alia, incorporated by reference those paragraphs of the Further Amended Statement of Claim that plead the Plaintiff's case against them. It proceeded, then, to name eight other entities as alleged "concurrent wrongdoers", accompanying each name with a summary list of "Particulars", not in the form of a conventional pleading but more akin to a conventional form of particulars set out in a statement of claim in support of an allegation of tortious negligence, reciting a litany of alleged failures to exercise care].

42. Further, if the Plaintiff suffered loss and damage as alleged or at all then the Plaintiff contributed to that loss and damage and/or was a concurrent wrongdoer pursuant to s. 35 of the Civil Liability Act 2002 (NSW).

PARTICULARS

[The Sixth Defendant here set out, in summary terms, a form of particulars similar to a conventional form of particularisation of an allegation of tortious negligence].

43. The concurrent wrongdoers as set out in paragraphs 41 and 42 above, are wholly responsible for the Plaintiff's loss pursuant to s. 35 of the Civil Liability Act 2002 (NSW).

44. The Sixth Defendant's liability is limited pursuant to s. 35 of the Civil Liability Act 2002 (NSW).

45. Further or in the alternate, the Sixth Defendant's liability is reduced to nil, or limited, due to the contributory negligence of the Plaintiff as set out in paragraph 42 above."

It is not necessary for present purposes to set out in detail those parts of the Further Amended Statement of Claim recording the Plaintiff's allegations against the First, Second and Fourth Defendants respectively, although the Sixth Defendant has sought to incorporate them in its draft amended pleading by reference.

It is sufficient to note that the Plaintiff can be taken to have pleaded against each of those defendants a claim, in contract and in tort, for damages for negligence. The Defendants are, apparently, content to go to trial on the Plaintiff's case as pleaded.

The Plaintiff, for its part, makes no complaint about the "particulars" set out in paragraph 41 of the Sixth Defendant's draft pleading in relation to the First, Second and Fourth Defendants. The focus of its complaint about the "particulars" set out in that paragraph is upon those presented in connection with alleged "concurrent wrongdoers" not presently joined in the proceedings.

The Plaintiff's claim for declaratory relief is said, by both the Plaintiff and the Sixth Defendant to be predicated upon: (a) s. 562 of the Corporations Act having application to the policies of insurance issued by the Sixth Defendant to the Third and Fifth Defendants; and (b) the reasoning in Anjin No. 13 Pty Ltd v Allianz Australia Insurance Ltd (2009) 26 VR 148 and cases there cited.

Section 562 is in the following terms:

"562 Application of proceeds of contracts of insurance

(1) [Contract of insurance] Where a company is, under a contract of insurance (not being a contract of reinsurance) entered into before the relevant date, insured against liability to Third parties, then, if such a liability is incurred by the company (whether before or after the relevant date) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount must, after deducting any expenses of or incidental to getting in that amount, be paid by the liquidator to the Third party in respect of whom the liability was incurred to the extent necessary to discharge that liability, or any part of that liability remaining undischarged, in priority to all payments in respect of the debts mentioned in section 556.

(2) [Liability of insurer] If the liability of the insurer to the company is less than the liability of the company to the Third party, subsection (1) does not limit the rights of the Third party in respect of the balance.

(3) [Effect] This section has effect notwithstanding any agreement to the contrary. [Emphasis added]".

On the hearing of the Sixth Defendant's motion, the Court was informed that the Plaintiff has not sought to rely upon s. 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) as a foundation for relief claimed against the Sixth Defendant, and no application for leave to proceed under that section has been made.

The Court was informed by counsel for the Plaintiff that an application for leave under s. 6 was perceived to be potentially problematical because the insurance policies issued by the Sixth Defendant were "claims made and notified" policies and the event giving rise to the Plaintiff's claim for damages had occurred well before issue of the policies.

The operation of s 6 is circumscribed by the terms of s 6(1):

"(1) If any person (hereinafter in this Part referred to as the insured) has ...entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of the person's liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability."

MATTERS NOT IN ISSUE ON THE HEARING OF THE MOTION

On the hearing of the Motion the Sixth Defendant expressly noted that there is no dispute that:

(a) the Plaintiff suffered damage as a result of flooding on 11 June 2002.

(b) because the Plaintiff's claim for damages against the First to Fifth Defendants is a "building action", the provisions of CLA Part 4 are, at least, arguably applicable notwithstanding the date (before the commencement of CLA Part 4) upon which the flooding occurred.

(c) subject to proof of negligence on their part, the Third and Fifth Defendants are "concurrent wrongdoers" (within the meaning of CLA s. 34(2)) in relation to the Plaintiff's claim, which is an "apportionable claim" of the type described in CLA s. 34(1)(a).

(d) despite the form of paragraph 44 of its draft pleading, the Sixth Defendant does not assert that it is, or could be, in its own right a "concurrent wrongdoer" within the meaning of CLA s. 34(2).

(e) the Sixth Defendant accepts that (by virtue of s. 562 of the Corporations Act) the Plaintiff has standing to make its application for a declaration as to the Sixth Defendant's liability, or otherwise, to indemnify the Third and Fifth Defendants.

(f) if the Court were to hold that the Sixth Defendant has such a liability, a grant of a declaration in the terms sought by the Plaintiff would have utility as between the Plaintiff and the Sixth Defendant.

The Plaintiff formally recorded that it was content for the Court to proceed on the basis that it is arguable that CLA Part 4 applies to its claims against the Third and Fifth defendants.

Counsel for the Plaintiff and the Sixth Defendant jointly submitted the following notation on the operation of the legislation:

"The CLA came into force on 20 March 2002. Part 4 was introduced into the Act by the Civil Liability (Personal Responsibility) Act 2002 (NSW), which came into force on 1 December 2004. The prima facie effect of clauses 6 and 13 of schedule 1 of the Act is to extend the application of CLA part 4 to civil liability arising before 1 December 2004, except in the case of proceedings commenced before 1 December 2004: Origin Energy LPG Limited v Bestcare Foods Limited [2007] NSWCA 321 at [4] and [13].

Clause 5(1) of the Civil Liability Regulation 2009 displaces the operation of CLA schedule 1 clauses 6 and 13 in respect of any liability arising before 26 July 2004, the apparent intention being to exclude such liability from CLA Part 4. See Origin Energy at [6] in relation to the similarly worded Civil Liability Regulation 2003, clause 3.

Clause 5(2) of the Civil Liability Regulation 2009 qualifies the operation of clause 5(1). It provides that the exclusion from the operation of CLA Part 4 is not to apply to a building action (within the meaning of Part 4C of the Environmental and Planning Assessment Act 1979 (NSW)) commenced on or after 1 December 2004: Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Limited (No 1) [2012] NSWSC 298 at [15].

Section 109 ZI, in Part 4C, defines 'building action' as 'an action (including a counter-claim) for loss or damage arising out or concerning defective building work'.

In Owners Corporation of Strata Plan 56963 v Australand Corporation (NSW) Pty Limited [2011] NSWSC 710 at [17], McDougall J considered that design work fell within the extended definition of building work in s 109ZI, being design in respect of the building work that was subsequently carried out."

There is no dispute, on the facts, that there is a subsisting policy of insurance (ie, a contract) between the Third and Fifth Defendants respectively as insured entities, on the one hand, and the Sixth Defendant as their insurer on the other.

The Sixth Defendant's denial of liability to indemnify the Third and Fifth Defendants in respect of the Plaintiff's claims against them is based, not upon a denial of the existence of a contractual relationship, but upon a contention that, upon the proper construction and application of particular terms of each contract, the Sixth Defendant has no liability to provide an indemnity in respect of the particular claim.

THE ANJIN LINE OF CASES

The glue that holds together in one set of proceedings the three different sets of entitlements at play in these proceedings is the shared commercial imperative for the parties (especially the Plaintiff and the Sixth Defendant) of obtaining an adjudication of all questions in dispute without a multiplicity of proceedings.

Whether, and how, the competing entitlements of the insurer (the Sixth Defendant), the insured (the Third and Fifth Defendants) and the third party claimant (the Plaintiff) can be accommodated in the one set of proceedings depends upon the Court's governing legislation, including rules of court, informed in their operation by a consideration of equity's historical approach to practice and procedure which (by virtue of s. 5 of the Law Reform (Law and Equity) Act 1972 (NSW)) now operates throughout the Court's Judicature Act system of court administration.

On one view, in substance at least, the question whether the three distinct sets of entitlements can be pursued, effectively, in the one set of proceedings has been answered in the affirmative by an application of Anjin: that is, by the joinder of the Sixth Defendant, as a co-defendant with the Third and Fifth Defendants, in the principal proceedings. In my opinion, the final limb of UCPR rule 16.19(1) is, of itself, sufficient to have authorised the order for joinder. It was open to the Court, in the interests of justice, to grant leave for the Sixth Defendant to be joined.

That conclusion is consistent with the reasoning in Anjin (a decision of the Supreme Court of Victoria) and the cases there cited.

The Supreme Court of NSW has no less power than the Supreme Court of Victoria, or other Australian courts, to make an order for joinder of an insurer in the circumstances of the current proceedings. If not by reference to UCPR rules 6.24(1) and 6.19, an order for joinder might arguably be grounded in express provisions such as the Supreme Court Act 1970 (NSW), s. 23 and s. 63; the Civil Procedure Act 2005 (NSW), ss. 56 and 58; and the parallel provisions of s. 61 of the Civil Procedure Act and UCPR rule 2.1. Reference might also be made to s. 20 of the Supreme Court Act as the legislative lens through which the Court's general, equitable jurisdiction - including that sometimes described as the Court's "inherent jurisdiction" - might be viewed.

Section 23 provides that "[The] court shall have all jurisdiction which may be necessary for the administration of justice in New South Wales". Section 63 provides that "[The] court shall grant, either absolutely or on terms, all such remedies as any party may appear to be entitled to in respect of any legal or equitable claim brought forward in the proceedings so that, as far as possible, all matters in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of those matters avoided". Sections 56-58 appear in the Civil Procedure Act Part 6 Division 1, relating to case management of proceedings before the Court. Section 61(1) provides that "[The] court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real questions between the parties to the proceedings." UCPR Rule 2.1 provides that "[The] court may, at any time and from time to time, give such directions and make such orders for the conduct of any proceedings as appear convenient (whether or not inconsistent with these rules or any other rules of court) for the just, quick and cheap disposal of the proceedings. It is probably unnecessary, save for completeness, to notice the remedial powers of the Court (found in s. 63 of the Civil Procedure Act) to make orders dealing with procedural irregularities. Section 20 provides that "[the] Supreme Court of New South Wales as formerly established as the superior court of record in New South Wales is hereby continued".

If (contrary to my opinion) the final limb of rule 6.19 is not, of itself, sufficient to authorise an order for joinder, or if any rules of court are to be regarded as an impediment to such an order, reference should also be made to ss. 14 and 16 of the Civil Procedure Act. Section 14 authorises the Court to dispense with requirements of the rules. Section 16 authorises the Court to give procedural directions for which rules of court or practice notes do not provide. (By virtue of s. 15 of the Act, practice notes have legislative force, subject to rules of court.)

These provisions confirm that the Court is duly authorised to regulate its own practice and procedure in the conduct of business for which it has jurisdiction. Sections 20 and 23 of the Supreme Court Act, as the most general sources of the Court's jurisdiction, undoubtedly extend to determination of disputes that arise, directly or indirectly, between an insurer, its insured and a Third party Plaintiff with a cause of action against the insured alone.

Of the cases cited in Anjin, two are of particular significance for a single judge of this Court. They are judgments of Australian intermediate appellate courts outside New South Wales, and they are foundational to the reasoning in Anjin. The first is the decision of the Full Court of the Supreme Court of South Australia in JN Taylor Holdings Limited (In Liq) v Bond (1993) 59 SASR 432 at 436-437, 438, 439-440, 440-441, 442 and 443. The second is a decision of the Full Court of the Federal Court of Australia in Employers Reinsurance Corporation v Ashmere Cove Pty Limited (2008) 166 FCR 398 at 409-410[49]-[54], 411[58], 412-413[66]-[68], 413[71] and 414[73]-[74], upholding a judgment of French J (as his Honour then was) published as Ashmere Cove Pty Limited v Beekink (No. 2) [2007] FCA 1421; 244 ALR 534.

Notwithstanding variations in legislative regimes, the reasoning these judgments embody can reasonably be applied by reference to the governing legislation, and rules, of this Court. In those circumstances, although I may not be technically bound to give effect to that reasoning (on a literal application of Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 151-152 [135]), prudence dictates that I should do so. The orderly conduct of business in a national legal system favours that approach.

The reasoning underlying Anjin, and its antecedents, can be summarised as follows in an NSW context:

(a) When an insurer has denied indemnity, the insured can, uncontroversially, file a cross claim against it for the purpose of enforcing their contract.

(b) It would be an abuse of the processes of the court if a third-party Plaintiff, without a cause of action against the insurer, simply sought to join the insurer as a co-defendant with an insured defendant against which the Plaintiff had a cause of action.

(c) However, the interests of justice, and the convenient administration of justice, may authorise an order that an insurer be joined as a co-defendant with its insured, whether on the application of the third-party Plaintiff or otherwise, if:

(i) the insurer has denied liability to indemnify the insured against the Plaintiff's claim.

(ii) there is a bona fide dispute as to the entitlement of the insurer to deny liability.

(iii) there is a substantial impediment (including insolvency on the part of the insured) standing in the way of the proceedings being conducted simply by the Plaintiff against the insured defendant, with a cross claim filed by the defendant against the insurer.

(vi) the dispute as to the liability or otherwise of the insurer to indemnify the insured defendant can properly be made the subject of a grant of declaratory relief pursuant to the Supreme Court Act 1970 (NSW), s 75.

(v) there is, in particular, a true legal controversy between the Plaintiff and the insurer such as would ensure that each of those parties might reasonably be relied upon by the court to serve as a contradictor for the other.

(vi) joinder of the insurer as a co-defendant with its insured might reasonably be relied upon to avoid a multiplicity of proceedings, and to enable all matters in controversy between the parties (namely, the Plaintiff, the insured and the insurer) to be completely and finally determined.

(d) A true legal controversy between the Plaintiff and the insurer may be taken to exist where, on the facts of the particular case, there is a realistic prospect of s. 562 of the Corporations Act having scope for operation.

(e) A decision to allow joinder of the insurer as a co-defendant is one which is discretionary and fact-based, not available as of right.

Section 75 provides that "[no] proceedings shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby and the Court may make binding declarations of right whether any consequential relief is or could be claimed or not". The history, and nature, of the Court's declaratory jurisdiction is addressed in JN Taylor Holdings Ltd v Bond (1993) 59 SASR 432 at 435-437; PW Young, Declaratory Orders (Butterworths, 2nd ed, 1984); K Dharmananda and A Papamatheos (ed), Perspectives on Declaratory Relief (Federation Press, 2009).

This approach was articulated in the cases culminating in Anjin by reference to current court legislation, without express reference to any historical roots it may have had in equitable jurisdiction. Particular emphasis was laid on the courts' statutory jurisdiction to grant declaratory relief despite the absence of any cause of action in the Plaintiff against a defendant affected by a declaration.

Invocation of a more general equitable jurisdiction, either directly or as informing an exercise of the Court's legislative powers, may provide the Court with greater flexibility than is evident in the Anjin line of cases. That is because of equity's inherently flexible approach to the joinder of "proper" as well as "necessary" parties. Equity found its touchstone in considerations of practical convenience, in the constitution of proceedings, best calculated to settle all matters in controversy without a multiplicity of proceedings. See Edge; Re Eco Panels Australasia Pty Limited (In Liq) [2007] FCA 30; 61 ACSR 139 at [6]-[13]; Young, Croft and Smith, On Equity, paras. [15.50]-[15.60].

A modern analogous illustration of equity's flexibility in the joinder of parties might be found in acceptance that a member of a corporation can bring a derivative action "in the name of the corporation" by joinder of the corporation as a defendant: Keynote Pty Ltd v Hamarc Pty Ltd [2001] NSWSC 491; 38 ACSR 396 at [16]-[19] per Santow J; Metyor Inc v Queensland Electronic Switching Pty Ltd [2002] QCA 269; 42 ACSR 398 at [14]-[15] per McPherson JA; Charlton v Baber [2003] NSWSC 745; 47 ASCR 31 at [5]. The Court's focus is on the substance, rather than merely the form, of the constitution of proceedings provided all necessary parties are joined in the proceedings.

An advantage of analysis of the problem at hand by reference to equitable principles may be that that approach more readily engages the Sixth Defendant's assertion of an entitlement to rely upon CLA s. 35(1) by reference to a claimed "right of subrogation".

THE TERMS OF THE CIVIL LIABILITY ACT, PART 4

For present purposes, the material provisions of the CLA are s. 34(1)(a), (2) and (4); s. 35(1) and (3)-(5); and ss. 35A, 36, 37 and 38.

The central focus of the Sixth Defendant's claim to the benefit of the CLA is s. 35(1)(a). However, that provision must be read in context.

The parties' submissions on the hearing of the Sixth Defendant's motion suggest that the identified provisions are sufficient to provide that context:

"Part 4 Proportionate liability

34 Application of Part

(1) This Part applies to the following claims (apportionable claims):

(a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury,

...

(2) In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim.

...

(4) For the purposes of this Part id does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died.

35 Proportionate liability for apportionable claims

(1) In any proceedings involving an apportionable claim:

(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss, and

(b) the court may give judgment against the defendant for not more than that amount.

(3) In apportioning responsibility between defendants in the proceedings:

(a) the court is to exclude that proportion of the damage or loss in relation to which the Plaintiff is contributorily negligent under any relevant law, and

(b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings.

(4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings.

(5) A reference in this Part to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a Plaintiff) whether joined under this Part, under rules of court or otherwise.

35A Duty of defendant to inform Plaintiff about concurrent wrongdoers

(1) If:

(a) a defendant in proceedings involving an apportionable claim has reasonable grounds to believe that a particular person (the other person) may be a concurrent wrongdoer in relation to the claim, and

(b) the defendant fails to give the Plaintiff, as soon as practicable, written notice of the information that the defendant has about:

(i) the identity of the other person, and

(ii) the circumstances that may make the other person a concurrent wrongdoer in relation to the claim, and

(c) the Plaintiff unnecessarily incurs costs in the proceedings because the Plaintiff was not aware that the other person may be a concurrent wrongdoer in relation to the claim,

the court hearing the proceedings may order that the defendant pay all or any of those costs of the Plaintiff.

(2) The court may order that the costs to be paid by the defendant be assessed on an indemnity basis or otherwise.

36 Contribution not recoverable from defendant

A defendant against whom judgment is given under this Part as a concurrent wrongdoer in relation to an apportionable claim:

(a) cannot be required to contribute to any damages or contribution recovered from another concurrent wrongdoer in respect of the apportionable claim (whether or not the damages or contribution are recovered in the same proceedings in which judgment is given against the defendant), and

(b) cannot be required to indemnify any such wrongdoer.

37 Subsequent actions

(1) In relation to an apportionable claim, nothing in this Part or any other law prevents a Plaintiff who has previously recovered judgment against a concurrent wrongdoer for an apportionable part of any damage or loss from bringing another action against any other concurrent wrongdoer for that damage or loss.

(2) However, in any proceedings in respect of any such action the Plaintiff cannot recover an amount of damages that, having regard to any damages previously recovered by the Plaintiff in respect of the damage or loss, would result in the Plaintiff receiving compensation for damage or loss that is greater than the damage or loss actually sustained by the Plaintiff.

38 Joining non-party concurrent wrongdoer in the action

(1) The court may give leave for any one or more persons to be joined as defendants in proceedings involving an apportionable claim.

(2) The court is not to give leave for the joinder of any person who w as a party to any previously concluded proceedings in respect of the apportionable claim."

The NSW Court of Appeal in Mitchell Morgan Nominees Pty Limited v Vella [2011] NSWCA 390; 16 BPR [98513] made the following observations, at [46]-[48], about the purpose, and effect, of CLA Part 4:

"[46] Part 4 of the Civil Liability Act is matched in legislation of the Commonwealth and other states and territories. Its purpose is to alleviate what was seen as harsh operation of the principles by which one of several tortfeasors who caused the same loss was liable to the Plaintiff for the whole of that loss, and was left to recovery from a co-tortfeasor under contribution legislation: s 5(1) of the 1946 Act and its analogues in other jurisdictions.

[47] The effect of Pt 4 is far-reading. It shifts the burden of irrecoverability because a co-wrongdoer cannot be found or is insolvent from the defendant wrongdoer(s) to the Plaintiff, and extends to liability beyond liability in tort. As part of the scheme, a defendant must inform the Plaintiff of a potential concurrent wrongdoer so that the Plaintiff can consider claiming against that person also: ss 35A, 38. The Plaintiff can later proceed against another concurrent wrongdoer, but cannot be over-compensated: s 37. But s 35 applies whether or not all concurrent wrongdoers are parties to the proceedings: s 35(4).

[48] For consistency with contribution under s 5(1)(c), a defendant who is a concurrent wrongdoer cannot be required to contribute to damages recoverable from another concurrent wrongdoer: s 36. There is a necessary relationship between contribution recoverable by a tortfeasor from any other tortfeasor who is, or would if sued have been, liable "in respect of the same damage" under s 5(1)(c), and limitation of liability under s 35 of the Civil Liability Act where the acts or omissions of more than one person "caused ... t he damage or loss the subject of the claim". The words are different, but conceptually they must correspond to the change worked to joint and several liability would not mesh with the contribution legislation. [Emphasis added]"

Section 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) provides (with a marginal note that reads "Proceedings against and contribution between joint and several tort-feasors") that "[where] damage is suffered by any person as a result of a tort (whether a crime or not)... any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought".

An incidental purpose of CLA Part 4 might also be thought to have been to discourage a multiplicity of proceedings by making provision for factors affecting the entitlements of parties, external to a Plaintiff's cause of action against a "concurrent wrongdoer", to be taken into account.

MATERIAL TERMS OF POLICIES OF INSURANCE

The Sixth Defendant denies that it has, or has ever had, a liability to indemnify either the Third Defendant or the Fifth Defendant in relation to the flood damage suffered by the Plaintiff.

Consistently with that denial, it has made no payment to any person referable to the Plaintiff's claim for damages.

Nevertheless, in the context of its joinder in the current proceedings along with the Third and Fifth Defendants, it claims an entitlement to rely upon "rights of subrogation".

Those rights of subrogation are said to arise from the terms of the policies of insurance issued to the Third and Fifth Defendants.

The material clauses of those policies are said to comprise clauses 1.1, 3.9.2(c), 5.2.1 and 5.2.2. Reference also needs to be made to the definition of "claim" in clause 6.1.

Those provisions are here reproduced:

"PROFESSIONAL INDEMNITY INSURANCE POLICY

In consideration of the payment of the Premium and in reliance on the contents of the Proposal the insured has provided, We agree to provide indemnity subject to the terms of this Policy.

SECTION 1 - INSURING CLAUSES

1.1 Breach of Professional Duty

We agree to indemnify the Insured against civil liability for any Claim first made against the Insured during the Period of Insurance and notified to Us during the Period of Insurance for breach of professional duty arising from any act, error or omission wherever or whenever committed or allegedly committed by the Insured in the conduct of the Professional Business.

SECTION 3 - EXCLUSIONS

We shall not be liable under this Policy to provide indemnity in respect of any Claim against the Insured directly or Indirectly arising from:

...

3.9 Prior Claims or Circumstances

3.9.2 attributable to or in consequence of any fact or circumstance:

...

(c) of which the Insured first became aware prior to the Period of Insurance and which the Insured knew or ought reasonably to have known may give rise to a Claim;

SECTION 5 - CLAIMS CONDITIONS

5.1 Reporting Claims

The Insured must give Us written notice as soon as practicable, and during the Period of Insurance, of any Claim made against the Insured.

5.2 Defence and Settlement

5.2.1 We shall be entitled at any time to take over and conduct, in the Insured's name, the defence or settlement of any Claim. Lawyers retained by Us to act on the Insured's behalf shall at all times be at liberty to disclose to Us any information or document obtained (whether by the Insured or otherwise) in the course of so acting, and the Insured agrees to waive any claim for client legal privilege to the extent that such privilege may otherwise prevent that disclosure to Us.

5.2.2 The Insured must not settle any Claim, incur any Defence Costs, make any admission, offer or payment, or assume any contractual obligation in relation to any Claim without Our prior written consent (which consent shall not be unreasonably withheld). We shall not be liable for any settlement, Defence Costs, admission, offer or payment, or assumed obligation to which We have not consented in writing....

6.1 Claim

"Claim" shall mean:

(a) the receipt by the insured of a demand for compensation made by a Third party against the insured. It must take the form of:

(i) a writ, statement of claim, summons, application or other originating legal or arbitral process, cross claim, counterclaim or Third party or similar party notice; or

(ii) any other form of written or verbal notice; and where applicable

(b) the making by the insured of a claim against Us under insuring clauses 1.5 (loss of documents), 1.6 (costs of official enquiries) and 1.8 (fidelity).

[Emphasis Added]"

THE CENTRAL QUESTIONS FOR DETERMINATION

The subrogation question

Limited by reference to the factual setting in which it arises for determination in these proceedings, "the subrogation question" is WHETHER, upon the proper construction and operation of CLA s. 35(1), an insurer of a defendant who is, or may be, a "concurrent wrongdoer" in relation to an "apportionable claim" by a Third party Plaintiff (within the meaning of those expressions as defined by CLA ss. 34(1)(a) and 34(2) respectively) is entitled, by assertion of a "right of subrogation", to claim the benefit of the limitation of the liability of the defendant for which s. 35(1) provides in circumstances in which:

(a) the insured defendant is an inactive party to the action in which the Third party Plaintiff claims damages against the insured defendant;

(b) the insurer denies that it has any liability to the insured defendant under the contract of insurance which governs their relationship and, consistently with that denial, has made no material payment to any person referable to the contract;

(c) on the application of the Plaintiff, the insurer has been joined as a party-defendant to the action in its own right;

(d) the relief claimed by the Plaintiff, against the insurer in its own right, is a declaration that the insurer is liable to indemnify the insured defendant in respect of any judgment obtained by the Plaintiff against the insured defendant in the action; and

(e) the Plaintiff's standing to apply for that declaration is said to be grounded upon s. 562 of the Corporations Act.

In formulating this question by reference to a "right" of subrogation, I expressly refrain from entry into debate about whether "subrogation" is, correctly, to be characterised as a "right" or merely as a "remedy": PW Young, see Croft and ML Smith, On Equity (LBC, Sydney, 2009), para. [12.720] citing Boscawen v Bajwa [1996] 1 WLR 328 at 335B-E.

The term "subrogation", itself, generally needs to be understood in the particular context in which it is used. As recognised in Halliday v High Performance Personnel Pty Ltd (In Liq) (1993) 67 ALJR 678 at 680; 11 ALR 637 at 640, the principles governing a "right of subrogation" may differ depending on whether the "right" arises from an application of equitable principles alone (on discharge of the liability of another) or from equity's enforcement of a contractual right (to conduct proceedings in the name of another).

One should also be mindful that, upon analysis of "subrogation", different considerations might apply depending on whether an insurer is seeking to defend a claim against an insured or to take action against a third party in the name of an insured. These proceedings concern only the former. Some commentators would confine the term "subrogation" to the latter: eg, C Mitchell, P Mitchell and S Watterson (ed), Goff & Jones' The Law of Unjust Enrichment (Sweet & Maxwell, London, 8th ed, 2011), para [21.11]. That is consistent with a right of subrogation only arising, strictly, upon indemnification of an insured.

The statement of the question here, for the purpose of crystallising the question for determination, is not intended to address on a final basis any issue between the parties. It is directed to the interlocutory question whether it is open to the Sixth Defendant to plead a claim to the benefit of CLA s. 35(1) that might, in a properly formulated pleading, be determined at a trial of the merits.

The pleading question

Upon an assumption that the Sixth Defendant has a "reasonable cause of action or defence" (to adapt the language of rule 14.28(1)(a) of the Uniform Civil Procedure Rules applicable to applications for the striking out of defective pleadings) referable to CLA s. 35(1), "the pleading question" is whether, conformably with the provisions of CLA Part 4 and (so far as they may be applicable) the provisions of the UCPR relating to the pleading and particularisation of defences, the form of draft Amended Response propounded by the Sixth Defendant on its Motion, or some modification thereof, ought to be the subject of a grant of leave to amend.

Subsidiary Questions of the Sixth Defendant's Motion

Subsidiary questions about the proper exercise of the Court's discretion to allow an amendment (under s. 64 of the Civil Procedure Act 2005 (NSW)) also need to be formally addressed in the context of the case management principles for which ss. 56-59 of that Act provide and which have been the subject of submissions made by the parties by reference to AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175.

However, as the hearing on the Sixth Defendant's Motion unfolded, there is little to be said against a grant of leave to amend (in circumstances in which the principal proceedings have not been allocated a date for trial) if I accept, as I do, that it is open to the Sixth Defendant to plead reliance upon CLA s. 35(1) by one means or another.

An Underlying, and Consequential, Question

Each of the questions thus far identified for determination is based on an assumption that both the order for joinder of the Sixth Defendant, and the Plaintiff's pleading of a case against the Sixth Defendant in the Further Amended Statement of Claim, can and should stand without modification as the point of commencement of debate about the Sixth Defendant's entitlement (if any) to obtain the benefit of CLA s 35(1).

The course of debate has exposed a need to review that assumption. The Plaintiff has appropriated to itself the benefit of joinder of the Sixth Defendant, in aid of its claims against the Third and Fifth Defendants, because of the inconvenience to it of the insolvency of the Third and Fourth Defendants.

Can it, in fairness, deny to the Sixth Defendant the benefit that the Sixth Defendant would obtain under CLA s 35(1) if the Third and Fourth Defendants were actively involved in the proceedings and diligent in the conduct of their defence? Can the Plaintiff have the benefit of the joinder of the Sixth Defendant without bearing the burden of allowing the Sixth Defendant to rely, directly or indirectly, on s 35(1)?

Can the Plaintiff, fairly, assert a claim to declaratory relief against the Sixth Defendant without any cause of action against the Sixth Defendant and, at the same time, deny to the Sixth Defendant the benefit of legislation which would enure to it if the Plaintiff had been confined to its causes of action against the Third and Fifth Defendants and those Defendants were left to cross claim against the Sixth Defendant? Does the Plaintiff's claim for a declaration, effective against all defendants, implicitly, and of itself, require consideration of all defences that the Third and Fifth Defendants could have raised against the Plaintiff had they actively defended the proceedings?

The Plaintiff and the Sixth Defendant are both agreed on three points.

First, should it decide to do so, the Sixth Defendant could exercise a contractual right (vis á vis its insured, the Third and Fifth Defendants) to defend the Plaintiff's claims against the Third and Fifth Defendants (and, consequentially, against it) in the names of the Third and Fifth Defendants.

This is a species of entitlement similar to, but generally regarded as distinct from, a right of subrogation. It is sometimes spoken of as arising under a "litigation clause" in a policy of insurance: K Sutton, Insurance Law in Australia (LBC, Sydney, 3rd ed, 1999), paragraph [16.10]. Use of the expression "contractual subrogation" appears apt, but has been criticised as a contradiction in terms because an insurer's contractual right to conduct proceedings in the name of an insured, before any payment by the insurer under a policy of insurance, needs to be distinguished from an equitable right of subrogation arising upon payment: A Brown, "An Insurer's rights in Litigation, or Contractual Subrogation : an Oxymoron?" (1996) 8 Ins LJ 60.

Secondly, it is not open to the Sixth Defendant both to deny a contractual obligation to indemnify the Third and Fifth Defendants and to exercise a contractual right, embodied in a litigation clause, to defend the Plaintiff's claim in the names of the Third and Fifth Defendants. The reason for that is said to lay in the "doctrine of election" or, possibly, an application of principles of estoppel.

Thirdly, should the Sixth Defendant file in the proceedings a Response (Defence) in the names of the Third and Fifth Defendants, it would be likely to be held to have bound itself, by an election between inconsistent rights or by an estoppel, to indemnify the Third and Fifth Defendants against any liability they might be found to have to the Plaintiff.

Although the Plaintiff has directed my attention to the potential field of operation of estoppel, its submissions have been confined to election. That may be explained by the fact that, to date, the Sixth Defendant has consistently denied any liability to indemnify the Third and Fifth Defendants. It has neither made a representation, nor encouraged a belief, to justify an assumption that it has accepted, or that it will in the future accept, a liability to indemnify the Third or Fifth Defendants. If the Sixth Defendant maintains that position, the elements of an estoppel will not materialise against it: Delaforce v Simpson Cook (2010) 78 NSWLR 483.

Both parties point to CE Heath Underwriting and Insurance (Australia) Pty Limited v Campbell Wallis Moule & Co Pty Limited [1992] 1 VR 386 at 393-395 as a foundation for the supposed operation of the doctrine of election against the Sixth Defendant. Additionally, the Plaintiff refers to Nigel Watts Fashion Agencies Pty Limited v GIO General Limited (1995) 8 ANZ Ins Cas 61-235 at 75,653; ACN 007838584 Pty Limited v Zurich Australian Insurance Limited (1997) 69 SASR 374 at 395-396; and Transfield Pty Limited v National Vulcan Engineering Insurance Group Limited (2003) 12 ANZ Ins Cas 61-543 at [88], affirmed on appeal at (2003) 59 NSWLR 119 at 137. The last of these cases endorsed the reasoning in Freshmark Ltd v Mercantile Mutual Insurance (Australia) Ltd [1994] 2 Qd R 390, and distinguished Nigel Watts.

The Plaintiff submits that, in circumstances in which the Sixth Defendant has investigated the facts and formed the view that a claim does not fall within the policies of insurance issued to the Third and Fifth Defendants, it would be inconsistent with that position for it to exercise rights under those policies. It submits that, in those circumstances, if the Sixth Defendant asserts rights which could only exist if the policy covered the Plaintiff's claims against the Third and Fifth Defendants, the Sixth Defendant must be taken to have elected to treat the policies as applicable to those claims.

It says that the present proceedings can be distinguished from a case in which an insurer conducts the defence to a claim subject to a reservation of rights designed to afford it an opportunity to investigate the facts of a claim; cf, Reid v Campbell Wallis Moule & Co Pty Limited [1990] VR 859 at 873, the judgment of Tadgell J considered on appeal in CE Heath [1992] 1 VR 386. It says, further, that the present proceedings are distinguishable from a case in which an insurer grants indemnity on the basis of an erroneous decision that a claim falls within the terms of the policy and seeks, subsequently, to decline indemnity; cf, Transfield Pty Limited v National Vulcan Engineering Insurance Group Limited (2003) 12 ANZ Ins Cas 61-547 at [88] and Freshmark Limited v Mercantile Mutual Insurance (Australia) Limited [1994] 2 Qd R 390.

A question for consideration in these proceedings is whether the doctrine of election has, or might have, the field of operation ascribed to it by the parties notwithstanding that: (a) the Sixth Defendant has been joined in these proceedings without its consent and primarily, if not wholly, for the benefit of the Plaintiff alone based upon an assumption that the Third and Fifth Defendants cannot themselves effectively participate in the proceedings in the ordinary course; (b) by that joinder, the Sixth Defendant is compelled, under threat of a claim for declaratory relief against it, to defend the claims for relief nominally made by the Plaintiff against the Third and Fifth Defendants; (c) the Plaintiff has no cause of action against the Sixth Defendant and is not privy to any contract (between the Third and Fifth Defendants respectively, as insured, and the Sixth Defendant as insurer) in respect of which the Sixth Defendant's allegedly inconsistent rights arise; (d) no objection has been taken by the Third and Fifth Defendants to the Sixth Defendant defending, in their names, the Plaintiff's claims to damages against them; and (e) if the Third and Fifth Defendants were to take such an objection, or otherwise participate actively in the proceedings, the Sixth Defendant would have grounds to move the Court for a revocation of the joinder order, leaving the Third and Fifth Defendants to conduct their own defence and, if so advised, to sue the Sixth Defendant on a cross claim in accordance with ordinary procedural norms of the Court where an insured party contests an insurer's denial of liability to provide an indemnity.

If the doctrine of election, or principles of estoppel, could possibly operate in these proceedings as the Plaintiff and the Sixth Defendant both apprehend, consideration must, in my judgement, be given by the Court to the possibility that, in the interests of justice, either: (a) the order for joinder of the Sixth Defendant should be revoked in the absence of an undertaking by the Plaintiff that it will not plead the doctrine of election, or an estoppel, against the Sixth Defendant by reason only of its conduct of a defence to the Plaintiff's claims against the Third and Fifth Defendants in their names; or (b) the Sixth Defendant should be permitted, in its own Response, to plead reliance upon CLA s 35(1).

THE SUBROGATION QUESTION

The nature of "subrogation" in relation to Contracts of Insurance. The Sixth Defendant's claim to an entitlement to rely upon CLA s. 35(1) in answer to the Plaintiff's claim to damages is said to be grounded upon a "right of subrogation" to the rights of the Third and Fifth defendants (as, it may be assumed, concurrent tortfeasors) viś a viś the Plaintiff.

That "right of subrogation" is said to arise from policies of insurance made between the Sixth Defendant (as insurer) and the Third and Fifth Defendants (as insured parties) respectively.

The Plaintiff objects to the assertion of any right of subrogation by the Sixth Defendant in circumstances in which the Sixth Defendant has not only, not discharged any liability the Third and Fifth Defendants might have to the Plaintiff, but also not admitted any liability to indemnify its insured.

The Plaintiff founds its objection to the Sixth Defendant's claimed right of subrogation, largely, on the basis of the following observation of Mason J in AFG Insurances Limited v City of Brighton (1972) 126 CLR 655 at 663:

"The doctrine [of subrogation] comes into operation when the insurer meets his liability under the policy [of insurance] by making payment to the insured in respect of his loss. The insurer is then subrogated to the relevant rights of the insured. Unless and until the insurer makes good the loss the doctrine has no application."

I accept that any "right of subrogation" (strictly so called) that the Sixth Defendant has in equity is prospective and contingent upon it making a payment to, or on the account of, the Third or Fifth Defendants in fulfilment of a contractual promise, or otherwise on acceptance of a liability, to indemnify those Defendants against the third-party claim of the Plaintiff.

Nevertheless, the Sixth Defendant attempts to meet the Plaintiff's objection by relying upon two passages from the judgment of Barwick CJ in State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Limited (1969) 123 CLR 228.

The first passage is at 123 CLR 240-241:

"It is settled law that an insurer who has paid the amount of a loss under a policy of indemnity is entitled to the benefit of all the rights of the insured in the subject matter of the loss and by subrogation may enforce them. This right of subrogation is inherent in the contract of indemnity. It has been put that it exists as a contingent right from the inception of the insurance. For my part, with respect, I do not find the description 'contingent right' appropriate and satisfying. The right of subrogation as it seems to me does not depend for its existence as a right upon the occurrence of a loss under the policy. Its exercise is of course dependent upon the payment of the loss but as a right it exists from the moment of the making of the contract of indemnity. There is therefore no reason why a breach or threatened breach of the right could not be restrained by the insurer before the loss has occurred, though an occasion for such a course will probably be rare.

It is also settled law that an insured may not release, diminish, compromise or divert the benefit of any right to which the insurer is or will be entitled to succeed and enjoy under his right of subrogation."

The second passage is at 123 CLR 242-243:

"... the right of subrogation is no more than a right to enforce and have the benefit of the insured's rights in relation to the subject matter of the loss which the insurer has paid: it includes, of course, a right to have such rights maintained pending the occurrence of a loss within the policy."

The Sixth Defendant contends that the inchoate, equitable right of subrogation inherent in the policies of insurance it issued to the Third and Fifth Defendants - that is, the contracts that bind those parties as insurer and insured - is sufficient, of itself, to enable it to rely upon CLA s 35(1) without it having first indemnified the Third and Fifth Defendants or even conceded a liability to do so. See also John Edwards & Co v Motor Union Insurance Co Ltd [1922] 2 KB 249 at 254-255; Boag v Standard Marine Insurance Co Ltd [1937] 2 KB 113 at 122; SR Derham, Subrogation in Insurance Law (Law Book Co, Sydney, 1985), pages 49-50 and 126-132.

That contention stops short of unravelling the elements of contract law and equitable principle that are implicitly interwoven in Barwick CJ's observations.

There is no conflict between his Honour's judgment and that of Mason J. That is because to speak of "the doctrine of subrogation" coming into "operation" or having no "application" to particular facts is not inconsistent with recognition that a "right of subrogation is inherent in [a] contract of indemnity," and that it "does not depend for its existence as a right upon the occurrence of a loss under [a policy of insurance]", but that "[its] exercise is ... dependent upon payment of the loss ...".

As is recognised in Meagher, Gummow and Lehane's Equity : Doctrines and Remedies (4th ed, Lexis Nexis, 2002), at para. [9-195], Barwick CJ's observations focussed upon principles, and remedies, protective of an insurer's prospective right of subrogation.

The following extract from R.P. Meagher JA's judgment in Sola Basic Australia Limited v Morganite Ceramic Fibres Pty Limited (Court of Appeal, 11 May 1989, unrep, BC 8902186), comprising part of a larger extract published in Meagher, Gummow and Lehane, provides an elaboration of that point:

"It is undoubtedly true, as Sir Garfield Barwick pointed out, that in every contract of insurance there is an obligation, implied if not expressed, as between the insurer and his insured that the latter will not do anything to diminish the former's right to subrogation. It does not emerge clearly from the cases what is the source or the nature of that obligation. It may be, and I think it is, a term of the contract of insurance which is implied by law. It could also conceivably be, although I doubt if this be the case, an equitable obligation arising independently of contract. If it be the former, it is a negative stipulation, which has the same consequence as any other negative stipulation; that is to say, the insurer may enjoin any apprehended breach of the stipulation, may subsequently sue for any actual breach in damages, may plead the breach as a defence if the insured claims under the relevant policy of insurance, and may sue for an injunction or damages any Third person who induces a breach of the stipulation.... Likewise, if the obligation in question is not a consequence of an implied term but is the consequence of some independent equity, the doctrine of De Mattos v Gibson (1858) 4 De G and J 276; 45 ER 108, produces the same result."

The relationship between an insurer and an insured that gives rise to a right of subrogation is generally grounded upon a contract of insurance, even if accompanied by statutory rights and obligations in particular cases. That is not inconsistent with an acceptance of the proposition that subrogation is a creature of equity and that it does not depend upon principles of contract: Insurance Commission of WA v Kightly (2005) 30 WAR 380 at 387 [26]; Meagher, Gummow and Lehane, para. [9.015]. Cf Sutton, paras [16.14]-[16.18]; Derham, chapter 1; K Mason, JW Carter and GJ Tolhurst, Restitution Law in Australia (Lexis Nexis Butterworths, Australia, 2nd ed, 2008), para [639]; GE Dal Pont, Equity and Trusts in Australia (Law Book Co, Sydney, 5th ed, 2011), paras [14.05]-[14.60]; M Evans, Equity and Trusts (Lexis Nexis Butterworths, Australia, 3rd ed, 2012), paras [20.1], [20.6]-[20.7] and [20.10]-[20.12].

The nature and scope for operation of any right of subrogation depends, ultimately, upon context.

Equitable principles do not operate in a vacuum. In an insurance context they generally rest upon a contract, and the terms of the particular contract must be consulted in order to determine whether, and how, they operate.

In the present proceedings, the particular policies of insurance under consideration have several features in common with professional indemnity policies generally.

First, they are contracts of indemnity. Secondly, they are predicated upon the existence of an equitable "right of subrogation" which Barwick CJ described as "inherent" in a contract of indemnity. Thirdly, they contain a term (one type of "litigation clause") that requires the insured to lend their names to the insurer in defence of Third party claims against the insured: clause 5.2.1. Fourthly, they also contain a term (another type of "litigation clause") that limits any entitlement of the insured to defend or settle Third party claims without the consent of the insurer: clause 5.2.2. Fifthly, they are contracts in respect of which the parties owe obligations of good faith to one another, in performance of the contract as well in formation of the contract: K Sutton, paras. [3.7]-[3.10] and [16.69].

Each policy is expressed in terms consistent with the implication of two terms not uncommonly found in commercial contracts. Both might be thought to be reflections of an obligation of good faith. Both find expression, in one form or another, in expositions of insurance law (whether attributed to law or equity): eg, Derham, pages 126-128, 130-132. The first is a term that each contracting party will cooperate with each other party in the doing of acts which are necessary for the performance of the contract: Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596 at 610 and 615. The second (reminiscent of the obligation of an insured not to diminish an insurer's right of subrogation, identified by Barwick CJ and elaborated by R.P. Meagher JA) is a term that an insured will not hinder or prevent the fulfilment of its promise to allow the insurer to take over and conduct the defence or settlement of a claim and to refrain from settling or defending a claim without the insurer's consent: Service Station Association v Berg Bennett (1993) 45 FCR 84 at 92-94, citing Dixon J in Shepherd v Felt and Textiles of Australia Limited (1931) 45 CLR 359 at 378. The latter term is, in substance, a covenant not to derogate from the right of subrogation conferred upon an insurer in return for the insurer's promise of an indemnity.

For an elaboration of the prospective right of subrogation it seeks to protect by participation in the principal proceedings, and by reliance on CLA s. 35(1), the Sixth Defendant points to the classic formulation of Brett LJ in Castellain v Preston (1883) 11 QBD 380 at 388-389:

"In order to apply the doctrine of subrogation, it seems to me that the full and absolute meaning of the word must be used, that is to say, the insurer must be placed in the position of the assured. Now it seems to me that in order to carry out the fundamental rule of insurance law, this doctrine of subrogation must be carried to the extent which I am now about to endeavour to express, namely, that as between the underwriter and the assured the underwriter is entitled to the advantage of every right of the assured, whether such right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already insisted on, or in any other rights, whether by way of condition or otherwise, legal or equitable, which can be, or has been exercised or has accrued, and whether such right could or could not be enforced by the insurer in the name of the assured by the exercise or acquiring of which right or condition the loss against which the assured is insured, can be, or has been diminished. That seems to me to put this doctrine of subrogation in the largest possible form, and if in that form, large as it is, it is short of fulfilling that which is the fundamental condition, I must have omitted to state something which ought to have been stated. But it will be observed that I used the words 'of every right of the assured'. I think that the rule does require that limit."

It may be accepted that Castellain v Preston is good law in Australia. It was approved by Mason J in AFG Insurances Limited v City of Brighton, at 126 CLR 663-664, for example.

In my opinion, however, it is not necessary, or even productive, to dwell on whether, as a mere question of textual comparison, a claimed entitlement to rely upon CLA s. 35(1) can be characterised as falling within Brett LJ's formulation of an insurer's right of subrogation. That approach (advocated by the Sixth Defendant) is an invitation to pass over distinctions that can have operative significance. It is, in my opinion, an invitation to error.

In the realm of insurance, law and equity have a symbiotic relationship mediated by the agreement between insured and insurer in the particular case. Equity may provide a jurisprudential foundation for a subrogation of rights upon indemnification of another; and contracts of insurance may be predicated upon the prospect of a right of a subrogation crystallising at the time of provision of an indemnify; but what equity can, and may in its discretion, do depends on the terms of the particular contract, express or implied.

An Examination of the Rights of the Parties. It is necessary, therefore, to focus attention on the contractual rights and obligations of the parties to the policies of insurance issued by the Sixth Defendant and, in these proceedings, on the nature of such, if any, rights there may be in a stranger to those contracts (the Plaintiff) who seeks, in reliance upon them, to stake a claim to a declaration that the insurer is liable to indemnify the insured.

The problem at hand can best be dealt with, in my opinion, by breaking it down into its constituent parts, then reassembling it in the form of the single set of proceedings in which it presently presents itself for analysis.

This involves a consideration of three different perspectives of interlocking sets of entitlements. It requires consideration of the rights and remedies available to the Plaintiff, the Third and Fifth Defendants, and the Sixth Defendant respectively. It also requires, ultimately, a consideration of the independent perspective of the Court in the administration of justice.

This must occur in circumstances in which the Plaintiff and the Sixth Defendant are the active contradictors in the proceedings, notwithstanding the absence of any privity of contract between them. The question upon which they are at issue is whether the Sixth Defendant (as insurer) is liable to indemnify the Third and Fifth Defendants (as insured parties) in respect of the claims to damages made by the Plaintiff (as a Third party claimant) against the Third and Fifth Defendants (as, it must be assumed, "concurrent wrongdoers" within the meaning of CLA Part 4).

First, the Plaintiff's perspective. It pleads a cause of action, at law, in contract and tort, against each of the Third and Fifth Defendants. It has no cause of action, no equity and no statutory right against the Sixth Defendant directly.

There is no contention in these proceedings that the policies of insurance issued by the Sixth Defendant to the Third and Fifth Defendants respectively were, at law or in equity, made for the benefit of the Plaintiff. None of the issues that occupied attention in Trident General Insurance Co Limited v McNiece Bros Pty Limited (1988) 165 CLR 107 has scope for operation here. This case calls for no deliberation or debate about the role or utility of concepts of privity of contract, consideration or contracts for the benefit of third parties.

On the reasoning in the Anjin line of cases, such rights as the Plaintiff may have "against" the Sixth Defendant derive from the width of the Court's jurisdiction to grant declaratory relief, and its preparedness to adapt its procedural norms.

The reasoning in the Anjin cases is, however, founded upon the Court being satisfied that, in the event that either the Third Defendant or the Fifth Defendant has a contractual right against the Sixth Defendant to be indemnified against the Plaintiff's claims to damages against it, and the Sixth Defendant satisfies its obligation of indemnity by a payment to the liquidator of the Third or Fifth Defendants (as the case may be), the Plaintiff, by virtue of s. 562 of the Corporations Act, has a statutory right to receive the benefit of that payment as a priority payment in the winding up of the recipient company. It was to secure that right of priority that the Plaintiff applied to the Court for, and obtained, orders, pursuant to s. 601AH(2) of the Corporations Act, that the Third and Fifth Defendants respectively be restored to the register and immediately wound up.

Secondly, the perspective of the Third and Fifth Defendants. There is a serious question to be tried as to whether, upon the proper construction and operation of the policies of insurance between the Sixth Defendant (as insurer) and the Third and Fifth Defendants (as insured parties) respectively, each of the Third and Fifth Defendants has a contractual right, against the Sixth Defendant, to be indemnified by the Sixth Defendant against the Plaintiff's claims. The Sixth Defendant does not deny the existence of a contract in either case. In each case, it relies upon an express term of the policy (clause 3.9.2(c)) to assert that the insurance cover for which the policy provided operates to exclude (in the sense of not answering for) any liability for the Plaintiff's claims.

If (contrary to the Sixth Defendant's contentions), it is contractually liable to indemnify the Third and Fifth Defendants against the Plaintiff's claims, and the Plaintiff establishes one or other of the causes of action it has pleaded against the Third and Fifth Defendants, the Sixth Defendant will have an established liability (under clause 1.1 of the subject policies), viś a viś the Third and Fifth Defendants, to indemnify them against the Plaintiff's claims by payment of any judgment obtained by the Plaintiff against them, without requiring them, first, to pay the judgment debt and claim reimbursement.

The right of indemnity for which the policies of insurance respectively provide is one which could be enforced, by the insured against the insurer, in a suit for specific performance: Meagher, Gummow and Lehane, at para. [20-050], citing Re Richardson; ex-parte The Governors of St Thomas Hospital [1911] 2 KB 705 at 709-710; McIntosh v Dalwood (No. 3) (1930) 30 SR (NSW) 332; McIntosh v Dalwood (No. 4) (1930) 30 SR (NSW) 415; and Commissioner of Taxation v Unilever Australia Securities Limited (1995) 56 FCR 152 at 170C.

In separate proceedings between an insured and insurer the Court might also grant an insured a declaration that it is entitled to an indemnity (and, in some circumstances, it might order that a fund be set aside) so that the insured can be indemnified without the necessity of its having to pay the Third party claimant and then sue for that money paid: In Re Richardson at 712-713.

Although these authorities relate to contracts of indemnity other than insurance contracts, there is no reason why the principles they identify can not be applied in an insurance context in general or to the facts of this case in particular.

On the authority of the Anjin line of cases (based, in part, on Guaranty Trust Company of New York v Hannay & Company [1915] 2 KB 536, Johnco Nominees Pty Ltd v Albury-Wodonga (NSW) Corporation [1977] 1 NSWLR 43 and Ainsworth v Criminal Justice Commission (1992) 125 CLR 564 at 581-582, as appears in JN Taylor (1993) 59 SASR 432 at 435-437),the breadth of the Court's jurisdiction to grant declaratory relief (at the suit of the Plaintiff and despite the absence of any course of action vested in the Plaintiff against the Sixth Defendant) is sufficient to sustain the Plaintiff's claim for relief against the Sixth Defendant in circumstances in which the Third and Fifth Defendants are inactive parties to the proceedings.

In an ordinary case, where an insured defendant is solvent, willing and able to sue its insurer to resolve a contest between them as to the availability of indemnity cover, proceedings between the insured and the insurer might be conducted by way of a cross claim (filed by the insured against the insurer) ancillary to principal proceedings in which a Third party Plaintiff makes its claim against the insured.

The practical problem in the current proceedings is that neither of the Third and Fifth defendants is solvent, willing or able from its own resources to sue the Sixth Defendant so as to establish such right of indemnity as it might have.

Thirdly, the Sixth Defendant's perspective. As their insurer, it has contractual rights against each of the Third and Fifth Defendants as insured parties. There is no need for it to have indemnified the insured before taking over conduct of the proceedings, in exercise of those rights: Halliday v High Performance Personnel Pty Ltd (In Liq) (1993) 67 ALJR 678 at 680; 11 ALR 637 at 640.

As Barwick CJ recognised in State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Ltd, it has contractual rights protective of a prospective entitlement to subrogation, and those rights can be enforced by resort to equity. Consistently with that prospective entitlement, the Sixth Defendant has (by virtue of clause 5.2.1) a contractual right to take over and conduct, in the name of the Third and Fifth Defendants respectively, the defence or settlement of the Plaintiff's claim. Likewise, it has the benefit of a negative covenant on the part of the Third and Fifth Defendants that they will not settle any claim, incur any defence costs, make any admission, offer or payment, or assume any contractual obligation in relation to the Plaintiff's claim without the Sixth Defendant's prior written consent. In the circumstances of this case, the implied terms identified in paragraph 113 add nothing significant to the parties' express terms.

It may be that the Plaintiff's claim for declaratory relief implicitly imposes on the interested parties, and the Court, an obligation to consider all the defences (including defences arising out of CLA s 35(1)) that the Third and Fifth Defendants could reasonably be expected to have raised had they been active in the proceedings.

Having ordered that the Sixth Defendant be joined in the proceedings, the Court is required to give such judgment, or make such order, as the nature of the case may require. Both s 90(1) of the Civil Procedure Act and UCPR rule 36.1 provide legislative backing. Section 90(1) is expressed in terms more emphatic, and less discretionary, than rule 36.1; but they stand together. Rule 36.1 is in the following terms: "At any stage of proceedings, the court may give such judgment, or make such order, as the nature of the case requires, whether or not a claim for relief extending to that judgment or order is included in any originating process or notice of motion." The words here given emphasis confirm that the Court is not necessarily constrained, in all respects, by the parties' pleadings (or lack thereof) and, independently of the parties' pleadings but with due regard for procedural fairness, it may be obliged to give effect to CLA s 35(1) so far as it is able to do so.

It is not necessary in this judgment to form a conclusion about whether, and (if so) to what extent, s 35(1) imposes constraints on judicial decision-making independently of the pleadings, and contentions, of litigants. Accordingly, I do no more than notice such questions as a qualification upon the plaintiff's assumption that, if no party expressly pleads s 35(1) in the interests of the Third, Fifth or Sixth Defendants, it can proceed against those parties without reference to the provisions of the section.

Having secured the joinder of the Sixth Defendant on a claim for declaratory relief, without a cause of action against the Sixth Defendant, because the Third and Fifth Defendants were insolvent, the Plaintiff may, independently of any pleading of other parties, bear at least a forensic burden of addressing the operation of CLA s 35(1) vis á vis the Third and Fifth Defendants and, incidentally, the Sixth Defendant), and the Court may be compelled to address that same topic, whether or not the Sixth Defendant, in one form or another, expressly pleads s 35(1).

However, the Court, and all parties in the proceedings, have an entitlement to have all questions in dispute in the proceedings expressly articulated so far as may be reasonably practicable. Proceedings should normally be determined "on the pleadings". If, as in the case of a defence based on CLA s 35(1), a particular defence is only available to the Third and Fifth Defendants, but may be relied upon one way or another by the Sixth Defendant as their insurer, the pleadings should reflect that truth.

I have given consideration to whether the case management powers of the Court extend to the giving of a direction that the Sixth Defendant file a Response on behalf of the Third and Fifth Defendants independently of any contractual entitlement that the Sixth Defendant may have. Such a direction might be justified on the basis that considerations of fairness, and the efficient administration of justice, require the Plaintiff to have a contradictor representing the Third and Fifth Defendants on the proportionate liability issue.

The Court's powers are extensive. They may extend as far as the giving of such a direction. However, it is not necessary for me to enter that territory in this case, at this stage of the proceedings.

That is because I have concluded that: the Sixth Defendant has contractual rights to defend the proceedings in the names of the Third and Fifth Defendants; in the context of the proceedings as presently constituted, neither the doctrine of election nor principles governing estoppels constrain on the Sixth Defendant in the exercise of those rights; at this stage of the proceedings, the Sixth Defendant should be left to its contractual rights; and, having regard to the case management criteria set out in CPA ss 56-58, the orderly conduct of the proceedings would best be promoted by a grant of leave to the Sixth Defendant to file Responses in the names of the Third and Fifth Defendants as well as itself.

The principle of indemnity which governs the policies, the doctrine of subrogation which is associated with that principle, the policy imperatives of the Civil Liability Act, and considerations of practical convenience that justified the joinder of the Sixth Defendant as a co-defendant in the principal proceedings all point in the same direction. That is, that the Sixth Defendant is entitled to rely upon CLA s. 35(1) via Responses it is entitled, contractually, to file in the names of the Third and Fifth Defendants respectively.

For these reasons, in my opinion, the Sixth Defendant is in principle entitled (albeit through the Third and Fifth Defendants) to rely upon CLA s. 35(1) against the Plaintiff. In substance, the "subrogation question" should be answered in the affirmative, though through closer consideration of the policies of insurance issued by the Sixth Defendant, and principles governing the conduct of proceedings in the Court, than upon an abstract review of the concept of subrogation or the particular terms of CLA s. 35(1).

The Sixth Defendant's entitlement to rely on CLA s. 35(1) is subject to a qualification. There is need of pleadings in proper form, Responses that comply with UCPR Parts 14 and 15 (which, respectively, govern "pleadings" and "particulars").

THE PLEADING QUESTION

In the proceedings as presently constituted, consideration of the Sixth Defendant's motion for leave to file an Amended Response requires that a broader consideration be given to the respective pleadings, or lack thereof, filed by or on behalf of each of the Plaintiff, the Third and Fifth defendants and the Sixth Defendant. That is because pleadings that ordinarily might be expected to be filed by the Third and Fifth defendants (a Response in defence to the Plaintiff's Statement of Claim and a Cross Claim against the Sixth Defendant) have not been filed, and are unlikely to be so. The position ordinarily taken by the Third and Fifth Defendants has been distributed between the Plaintiff and the Sixth Defendant.

A consideration of the future course of the pleadings cannot be limited to a bare consideration of the draft Amended Response the subject of the Sixth Defendant's motion for leave.

The Plaintiff's Statement of Claim

If the Plaintiff wishes to maintain an Anjin case against the Sixth Defendant it should, in my opinion, be permitted to do so only on terms that it give to the Court an undertaking designed to secure the Sixth Defendant against prejudice arising from its joinder in the proceedings as a defendant rather than as a cross defendant.

Such an undertaking should protect the Sixth Defendant against any contention that, by exercising a contractual right to defend the Plaintiff's claims for relief in the names of the Third and Fifth Defendants, jointly or severally, it has elected to accept a liability to indemnify those defendants against the Plaintiff's claims to damages or bound itself, by operation of principles of estoppel, to accept such a liability.

In any event, the Plaintiff should address the fact that the jurisprudential foundation of its claim for relief against the Sixth Defendant is not fully articulated in the Further Amended Statement of Claim.

Nothing is pleaded by the Plaintiff in support of its claim to advance a case against the Sixth Defendant which, in ordinary circumstances, might be advanced by the Third and Fifth Defendants against the Sixth Defendant in a cross claim. There is no recitation of the fact that the insured defendants are insolvent, in the course of being wound up, and unable from their own resources to contest the Sixth Defendant's denial of liability to indemnify them. There is no articulation of any of the elements identified in paragraph 54(c)(i)-(vi) and (d) above as indicative of the reasoning in Anjin.

Not unreasonably perhaps, the Plaintiff and the Sixth Defendant have been prepared to proceed upon a common assumption that, because they each have an understanding of the other's case referable to Anjin and they accept the procedural framework for which that case provides, it is not necessary that these elements be expressly articulated.

In my opinion, the better view is that they should be addressed expressly in the Statement of Claim so that the Court, and other parties, can be fully appraised of the true nature of the claim for relief being made by the Plaintiff against the Sixth Defendant.

That said, I am loathe to compel the parties to incur costs attendant upon an amendment of the Statement of Claim at this stage of the proceedings for the purpose, only, of articulating the Plaintiff's Anjin case. The nature of that case, and the Sixth Defendant's engagement with it, is apparent in this judgment. However, should the Plaintiff hereafter seek to amend its Statement of Claim, my view is that it should, at that time, tidy up the pleading.

Defence of the Third and Fifth Defendants viś a viś the Plaintiffs

If the Sixth Defendant seeks, through the Third or Fifth Defendants, to rely CLA s 35(1) in these proceedings it can, and in my opinion it should, exercise its contractual rights to file a Response in the respective names of those Defendants, fortified by orders of the Court designed to protect it against prejudice arising from its joinder in the proceedings as a co-defendant with its insured.

Any such Response can, in the circumstances of the current proceedings, include an express reservation of the Sixth Defendant's primary contention that it is under no liability to indemnify either the Third Defendant or the Fifth Defendant against any liability that they might have to the Plaintiff. That might provide further protection against any allegation of estoppel advanced against the Sixth Defendant.

Any direction by the Court permitting the Sixth Defendant to file such a Response can cater for the possibility of an objection on the part of either of the respective liquidators of the Third and Fifth Defendants, or the Plaintiff, by expressly reserving to those parties liberty to apply to strike out any Responses the Sixth Defendant may file pursuant to that direction.

To adopt this course is to facilitate an orderly conduct of the proceedings in at least three respects. First, it recognises that the jurisprudential foundation of the Sixth Defendant's present claim to "subrogation" can be found in the contracts between it and the Third and Fifth Defendants. Secondly, it closes out the theoretical possibility, however remote in practice, that it would be open to the Plaintiff to apply for a default judgment against the Third and Fifth Defendants absent the filing of Responses on their behalf. Thirdly, it enables the Court and the parties, to embrace a settled line of authorities about the standard of precision required of a defendant in asserting, for the purpose of CLA s 35(1), that there is a person who is a concurrent wrongdoer.

A convenient summation of that settled authority is found in HSD Co Pty Limited v Masu Financial Management Pty Limited [2008] NSWSC 1278 at [14]-[18] per Rothman J:

"14. The fundamental principle underpinning the promulgation of legislation permitting proportionate liability is that persons, who are one only of a number who have occasioned the same damage, should bear the damage proportionately to the number of persons who are responsible.

15. The obvious precondition to limiting liability, on the basis that others are also responsible for the damage, is to prove that those others have caused the damage and are legally responsible for it.

16. There is a complementary duty (s 35A of the Civil Liability Act, above) on the defendant, who invokes the provisions, to inform the Plaintiff of relevant information on any person, who may be a concurrent wrongdoer, in default of which there are consequences in costs.

17. As seems obvious from the foregoing, the scheme extends protections that would otherwise be available by issuing a cross-claim. In order to utilise a cross-claim, a defendant must allege a cause 9of action by it against the cross-defendant. The proportionate liability provisions allow the defendant to allege a cause of action by the Plaintiff against the concurrent wrongdoer. Such a right brings with it the correlative duty to specify, in the same way as if there were a cross-claim, the basis for proportionate liability and the basis for identifying a person as a concurrent wrongdoer.

18. It is essential, if these provisions are to operate appropriately, that any defendant be required to plead t he proportionate liability defence in a manner that discloses the cause of action and damage in at least as detailed a manner as would be required of any initiating process for such a cause of action. The information should include:

(a) the identity of the concurrent wrongdoer;

(b) the basis for the cause of action - if it be contract, identify the contract; if it be tort, identifying the duty, its scope and the breach; and

(c) the damage - the aspects of causation; the alleged extent and proportion of the damages, and the causal connection with the damage said to be suffered by the Plaintiff in the substantive proceedings.

In this regard, I agree, with great respect, with the view expressed by McDougall J in his paper 'Proportionate Liability in Construction Litigation' (2006) 22 BCL 394 at 400; see also UCAK v Avante Developments [2007] NSWSC 367 (per Hammerschlag J) and Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450 (per Middleton J)."

The Sixth Defendant's Response

I am disinclined to grant to the Sixth Defendant any leave to amend its Response so as to incorporate allegations relating to its reliance upon CLA s 35(1). Those allegations can, and should, be advanced via Responses filed in the names of the insured Defendants.

I am fortified in this view by the following circumstances: (a) it is open to the Sixth Defendant to file Responses in the names of the Third and Fifth Defendants respectively, relying upon a contractual right to do so; (b) the Sixth Defendant can, in my view, be protected by orders of the Court against exposure to any risk of the Plaintiff, the Third Defendant or the Fifth Defendant contending that (by reason of its filing a Response in the names of the Third and Fifth Defendants jointly or severally or conducting a defence against the Plaintiff in their names) it has lost, or prejudiced any entitlement it might otherwise have had to deny liability for indemnification of those Defendants; (c) there appears to be no impediment, or downside, to the Sixth Defendant filing such Responses in these circumstances; and (d) the orderly conduct of the proceedings would be assisted by keeping distinct, first, contentions relied upon by the Sixth Defendant in the respective names of the Third and Fifth Defendants against the Plaintiff and, secondly, contentions relied upon by it in its own name against the Plaintiff and the Third and Fifth Defendants in common,

Where an insurer takes over proceedings in defence of a Third party claim against an insured party, questions may arise as to the exposure of the insured for costs incurred by the insurer in the name of the insured: eg, Halliday v High Performance Personnel Pty Ltd (In Liq) (1993) 67 ALJR 678 at 680; ALR 637 at 640.

Against the possibility that such questions might arise in this case, I note that, on the perspective of the proceedings presently available to the Court, there would appear to be no warrant for any costs incurred in the names of the Third or Fifth Defendants to be laid at their door. The parties in whose interests any such costs are likely to be incurred are the Plaintiff and the Sixth Defendant. As between themselves and the Third and Fifth Defendants they are, prima facie, the parties at risk as to costs.

There could be no objection, in the circumstances of the current proceedings, to the Sixth Defendant's Response containing a formal notation that the Sixth Defendant relies upon contentions set out in the Third and Fifth defendants' Responses in opposition to the Plaintiff.

The Sixth Defendant's Response should, however, confine itself to contentions to be advanced in opposition to a finding that, under the policies of insurance issued to the Third and Fifth defendants, the Sixth Defendant has no liability to indemnify them against the Plaintiff's claims.

ORDERS

For these reasons, and subject to hearing from the parties as to the form of the relief to be granted, I propose to make the following orders and notations:

(a) ORDER that, unless the Plaintiff gives to the Court no later than the expiry of seven days after the making of these orders an undertaking that it will not, without the leave of the Court, contend in these proceedings, or in any other proceedings, that (by reason only of filing a Response in the names of the Third and Fifth Defendants, jointly or severally, or conducting a defence to the Plaintiff's claims in the names of the Third and Fifth Defendants, jointly or severally) the Sixth Defendant has lost, or prejudiced, any entitlement it might otherwise have had to deny liability to indemnify those Defendants against the Plaintiff's claims for relief, the order made by the Court for joinder of the Sixth Defendant in the proceedings be revoked.

(b) UPON the assumption that the Plaintiff gives the undertaking referred to in paragraph (a), and subject to the reservations noted in paragraph (c) and further orders of the Court, ORDER that the Sixth Defendant be granted leave to file:

(i) such Response as it proposes to file in the name of the Third Defendant

(ii) such Response as it proposes to file in the name of the Fifth Defendant

(iii) such Amended Response as it proposes to file in its own name, and right, in opposition to the Plaintiff's claim for relief against it and in opposition to any contention that it is liable to indemnify the Third and Fifth Defendants against such, if any, liability they might have to the Plaintiff.

(i) to each of the liquidator of the Third Defendant, and to the Plaintiff as the party having carriage of these proceedings against the Sixth Defendant, liberty to apply for directions referable to any Response that may be filed by the Sixth Defendant in the name of the Third Defendant.

(ii) to each of the liquidator of the Fifth Defendant, and to the Plaintiff as the party having carriage of these proceedings against the Sixth Defendant, liberty to apply for directions referable to any Response filed by the Sixth Defendant in the name of the Fifth Defendant.

(iii) to the Sixth Defendant, liberty to apply for an order that the order for its joinder as a defendant in the proceedings be revoked if the Third Defendant or the Fifth Defendant apply for directions to permit them to defend the proceedings in their own names or if any party contends that the Sixth Defendant, by conducting a defence of the proceedings in the names of the Third and Fifth Defendants jointly or severally, has lost or prejudiced any entitlement it might otherwise have had to deny liability for indemnification of the Third and Fifth Defendants.

(d) ORDER that any Response to be filed by the Sixth Defendant pursuant to these Orders be filed and served within 14 days or such other time as may be fixed by the Court.

(e) ORDER that the Plaintiff be granted such leave as may be necessary for it to proceed against the Third and Fifth Defendants, on condition that no steps are taken by the Plaintiff to enforce any judgment against those defendants without the leave of the Court.

I invite submissions as to the form of the orders to be made and the costs of the Sixth Defendant's Motion.

**********

Amendments

19 October 2012 - paragraph reference changed from 96 to 54

Amended paragraphs: 196

Decision last updated: 19 October 2012

Medium Neutral Citation:	THE OWNERS-STRATA PLAN 62658 v MESTREZ PTY LIMITED & ORS [2012] NSWSC 1259
Hearing dates:	10 August, 4 September 2012
Decision date:	18 October 2012
Jurisdiction:	Equity Division
Before:	Lindsay J
Decision:	Insurer granted leave to file Responses in the names of insured Defendants in addition to Response in its own name.
Catchwords:	INSURANCE - general - other matters - subrogation and litigation clause - whether insurer is entitled to claim the benefit of the limitation on liability provided under Civil Liability Act 2002 (NSW) Part 4. INSURANCE - general - other matters - subrogation and litigation clause - doctrine of election - whether insurer involuntarily joined as co-defendant is barred from denying liability to indemnify the insured. PROCEDURE - miscellaneous procedural matters - other matters - pleading - leave to amend.
Legislation Cited:	Civil Liability Act 2002 (NSW) Corporations Act 2001 (Cth) Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Civil Liability Regulation 2009 (NSW) Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Cases Cited:	CGU Insurance Limited v Porthouse (2008) 235 CLR 103 AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 Castellain v Preston (1883) 11 QBD 380 AFG Insurances Limited v City of Brighton (1972) 126 CLR 655 State Government Insurance Office (Queensland) v Brisbane Stevedoring Pty Limited (1969) 123 CLR 228 Halliday v High Performance Personnel Pty Limited (In Liq) (1993) 11 ALR 637 at 640 Mitchell Morgan Nominees Pty Limited v Vella [2011] NSWCA 390 Anjin No. 13 Pty Ltd v Allianz Australia Insurance Ltd (2009) 26 VR 148
Texts Cited:	Sutton, Insurance Law in Australia 3rd Edition pp. 1218-1219
Category:	Interlocutory applications
Parties:	THE OWNERS-STRATA PLAN 62658 Plaintiff MESTREZ PTY LIMITED First Defendant PREMIER FIRE PROTECTION SERVICES (NSW) PTY LIMITED Second Defendant BLACK NO SUGAR PTY LTD ACN 061 032 335 Third Defendant LEND LEASE PROJECTS PTY LIMITED Fourth Defendant THE OWNERS - STRATA PLAN 62658 Fifth Defendant AXIS SPECIALTY EUROPE LIMITED Sixth Defendant
Representation:	D Moujali (Plaintiff) Richard Oldfield (Plaintiff)
File Number(s):	2008 / 317302