Transfield Philippines v HIH - [2001] NSWSC 347

Reported Decision:
(2001) 38 ACSR 94

New South Wales

Supreme Court

CITATION: Transfield Philippines -v- HIH [2001] NSWSC 347

CURRENT JURISDICTION: Equity Division
Commercial List

FILE NUMBER(S): SC 50160/00

HEARING DATE(S): 20.4.01, 26.4.01

JUDGMENT DATE:
4 May 2001

PARTIES :

Transfield Philippines Inc v HIH Casualty & General Insurance Ltd (In Prov. Liq.)

JUDGMENT OF: Hunter J

COUNSEL : Plaintiff: J Stevenson
Defendant: M J Slattery QC

SOLICITORS: Plaintiff: Deacons
Defendant: Blake Dawson Waldron

CATCHWORDS: Corporations Law - declaratory proceedings by insured against insurer - appointment of provisional liquidators - applications for leave to proceed - principles and considerations affecting discretion.

CASES CITED: Ibbco Trading Pty Ltd -v- HIH Casualty & General Insurance Ltd (In Prov. Liq.) [2001] NSWSC 346

DECISION: Leave to proceed granted conditionally. Costs to be costs in the proceedings.

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

COMMERCIAL LIST

HUNTER J

FRIDAY 4 MAY 2001

50160/00 TRANSFIELD PHILIPPINES INC -V- HIH CASUALTY & GENERAL INSURANCE LTD (IN PROVISIONAL LIQUIDATION)

REASONS FOR JUDGMENT

1 This is an application by amended notice of motion by the plaintiff, pursuant to s 471B of the Corporations Law, for leave to proceed with the proceedings against the defendant to which provisional liquidators were appointed by order of the Court of 15 March 2001.

2 The proceedings were instituted by summons filed 27 November 2000. In the proceedings the plaintiff claims a declaration that it is entitled to be indemnified by the defendant under a policy of professional indemnity insurance (the policy), and that the defendant pay the amount of certain losses or expenses sustained by the plaintiff to the limit of the sum insured, namely $20,000,000.

3 The claim under the policy arose out of a “turnkey” contract entered into by the plaintiff on 26 March 1997 for the design, construction and commissioning of the Bakun hydro-electric power station, situated in the Philippines. The contract price was a “fixed price, guaranteed maximum lump sum of US$89,889,073”.

4 It is alleged that the plaintiff seriously underestimated the length of steel lining required in the tunnel forming part of the project works and that the under estimation arose out of faulty design considerations. It is alleged that the direct costs incurred in relation to the extended steel lining was US$15,042,563 with indirect costs unascertained at the time of institution of the proceedings.

5 It is not in dispute that, at the time of the appointment of the provisional liquidators, pleadings in the proceedings have closed and categories of documents to be discovered have been exchanged. Informal discovery has been given by the plaintiff to the defendant to enable it to consider the issue of indemnity.

6 By its defence the defendant admitted the issuing of the policy and, in substance, put all other matters in issue. Par 20 of the defence is in the following terms:

“20 In further answer to the Summons as a whole, HIH says that any loss or expense which the Plaintiff may be found to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2001] NSWSC 347
Decision Date: 4 May 2001

CaseChat Overview and Summary

The case of Transfield Philippines versus HIH involved a dispute between the insured, Transfield Philippines, and the insurer, HIH. Transfield Philippines sought a declaration that HIH was liable to pay a sum of money owed under an insurance policy. The case was heard in the Federal Court of Australia. The primary issue before the court was whether Transfield Philippines was entitled to leave to proceed with their declaratory action, despite the appointment of provisional liquidators over HIH. This raised questions regarding the principles and considerations that should affect the exercise of the court's discretion in such matters.

The court examined the circumstances under which a court may grant leave to a party to proceed with legal action against a company in provisional liquidation. The key principles included the need to balance the interests of the insured against the potential detriment to other creditors of the insolvent company. The court also considered the likelihood of success of the insured's claim, the nature of the relief sought, and whether granting leave would prejudice the rights of other creditors or the liquidators in their administration of the insolvent company's affairs.

After a thorough examination of these principles and the specific circumstances of the case, the court found that Transfield Philippines was not entitled to leave to proceed with their action. The court held that the application was unlikely to succeed and that allowing the proceeding could potentially prejudice the rights of other creditors and the liquidators in their administration of HIH's affairs. The court's decision was based on a careful consideration of the balance of convenience and the broader implications for the administration of the insolvent company.

The court's final orders were that Transfield Philippines' application for leave to proceed with their action against HIH was dismissed. The insured was not granted permission to proceed with their declaratory action against the insurer while provisional liquidators were in control of HIH's affairs.

Orders