Wade v Muir

[2009] NSWSC 723

CITATION:	Wade v Muir [2009] NSWSC 723
HEARING DATE(S):	5 June and 10 July 2009
JUDGMENT DATE :	29 July 2009
JUDGMENT OF:	Harrison J
DECISION:	The plaintiff's notice of motion is dismissed. The parties to bring in short minutes of order giving effect to my conclusions.
CATCHWORDS:	INSURANCE – claim by plaintiff against her former solicitor alleging negligent conduct of a conveyancing transaction - application to join insurer pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) - circumstances in which plaintiff can proceed directly against insurer of solicitor alleged to be liable to pay her damages - claims-made policy - whether event giving rise to the liability to the plaintiff occurred before entry into the contract of insurance
LEGISLATION CITED:	Insurance Contracts Act 1984 Law Reform (Miscellaneous Provisions) Act 1946
CATEGORY:	Procedural and other rulings
CASES CITED:	Bailey v New South Wales Medical Defence Union Limited [1995] HCA 28; (1995) 184 CLR 399 The Owners - Strata Plan No 50530 v Walter Construction Group Limited (In Liquidation) & Ors [2007] NSWCA 124; (2007) 14 ANZ Insurance Cases 61-734
PARTIES:	Dawn Florence Wade (Plaintiff) Brian Muir (First Defendant) Donald Wakeling (Second Defendant)
FILE NUMBER(S):	SC 20026/2008
COUNSEL:	G C Jones (Plaintiff) G Curtin (LawCover)
SOLICITORS:	Oliveri Lawyers (Plaintiff) HWL Ebsworth Lawyers (LawCover)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
PROFESSIONAL NEGLIGENCE LIST

HARRISON J

29 July 2009

20026/2009 Dawn Florence Wade v Brian Muir and Donald Wakeling

JUDGMENT

1 HIS HONOUR: By her notice of motion filed 16 March 2009 the plaintiff seeks a grant of leave pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 ("the Act") to join LawCover Insurance Pty Ltd ("LawCover") as a defendant in the proceedings.

Nature of the proceedings

2 The first defendant was a solicitor. He acted for a company, of which the plaintiff was a director, with respect to a conveyancing transaction in 2001 and 2002. This concerned the purchase by the company of a property in Buckett's Way, Gloucester. Completion of the company's purchase of the property occurred on 8 February 2002. The plaintiff alleges that the first defendant was negligent in a number of respects in the way that he handled the transaction for the company, as a result of which it suffered loss. On 8 February 2003 the company assigned its cause of action against the first defendant to the plaintiff. Her statement of claim commencing these proceedings was filed on 6 February 2008.

The notice of motion

3 The proceedings came before me in the professional negligence list. LawCover opposed the relief sought upon the grounds that the facts of this case provided no basis for the grant of leave to join it as a defendant. It relied upon an affidavit of Kaveetha Kumar sworn 28 April 2009, part of which was read without objection as follows:

"12. Brian Muir's practising certificate was suspended on 18 January 2007. Annexed and marked "H" is a copy of the Legal Services Commissioner's online Disciplinary Register's printout.

13. I am instructed by LawCover Pty Limited that Brian Muir did not take out a policy of insurance for the period 1 July 2007 to 30 June 2008.

14. Annexed and marked "I" is a copy of the 2007/2008 LawCover Run-Off Cover Professional Indemnity Insurance Policy."

4 The evidence appears to establish that a claim was made by service of the statement of claim upon the first defendant on 1 March 2008. For example, the affidavit of Emanueli Oliveri sworn 13 March 2009 on behalf of the plaintiff annexes his letter to Colin Biggers and Paisley dated 17 September 2008 in which he advised that firm of service of the statement of claim on the first defendant on that day. Subsequent affidavits filed by the plaintiff sworn by Janine Miltenyi on 18 May 2009 and Claudio Grizonic on 28 May 2009 appear to cast doubt upon whether or not the first defendant was served on that day or at all. This is referred to in a different context later in these reasons. However, for the purposes of the contentions of LawCover, and having regard to the question that I have been asked to decide, whether or not the first defendant was served on 1 March 2008 or has been served at all is of no particular significance.

Discussion

5 Section 6 of the Act does not apply to claims made policies of insurance where the cause of action accrued prior to the period of insurance in which the claim is made. A charge under s 6(1) of the Act arises and only arises on the happening of the event that gives rise to a claim against the insured. This charge is not an equitable or legal right but a statutory one. Where the insurance contract does not yet exist at the time of the happening of the event, a charge is not created by s 6(1) even if the insurance policy is of a claims made or claims made and notified type. The words "may become payable" refer to cases where the amount payable under an existing insurance policy has not been determined and/or depends on future circumstances: see The Owners - Strata Plan No 50530 v Walter Construction Group Limited (In Liquidation) & Ors [2007] NSWCA 124; (2007) 14 ANZ Insurance Cases 61-734. If the statement of claim was served on 1 March 2008, the relevant policy is the one annexed to the affidavit of Kaveetha Kumar effective for the period 1 July 2007 to 30 July 2008. If it is yet to be served then the policy in existence when that occurs will be the relevant policy.

6 It seems to be uncontroversial that the plaintiff's cause of action accrued at some time during 2002. That is when the conveyance was completed. A subsequent sale of the property occurred in November of the same year. The damages claim against the first defendant had been consummated by no later than that event. The plaintiff did not argue to the contrary and expressly accepted that all causes of action against the first defendant accrued prior to 1 July 2007: see the plaintiff's written submissions at par 18.

7 In Walter Construction Group (supra) Hodgson JA said this:

"[30] It is common ground, as well as being asserted by the High Court in Bailey , that under s 6(1) the "charge" must arise, if at all, on the happening of the "event" giving rise to the claim against the insured, and not at some later time. That being so, if there is to be any charge in any cases where that event (whatever completes the cause of action against the insured) occurs before any contract of insurance is made, it would have to be a "charge" arising where there is no property or even potential property to which it could apply, and not even any identifiable insurer with whom such property, if and when it came into existence, might be associated. It would thus be a "charge" without having even as much substance as a contract to give a charge on after-acquired property, where there is at least a person against whom a contractual right exists pursuant to which (assuming the contract is specifically enforceable) an equitable charge can arise if and when the property is acquired.

[31] It is true that the charge under s 6(1) is something created by statute, which does not have to conform to pre-existing general law categories; but it is difficult in the extreme to read s 6(1) as disclosing a legislative intention that there be something called a charge in existence at a time when there is no property to which it could attach, and no person against whom any rights could be asserted to have a charge attached to property if and when the property comes into existence. (It would be otherwise if there were, at the time of the event, a contract between the insured and the insurer for claims-made insurance to be given for some future period: in those circumstances, I think a charge would arise.)

[32] It is also true that the charge extends to "moneys that … may become payable"; but in the situation under discussion, there would not be in existence any circumstance giving rise to a possibility that moneys may become payable, apart from the possibility that the person against whom the cause of action has arisen might, in the future, make a contract with some as-yet unidentified insurer, which covers liability under that cause of action. The words "may become payable" are apt to refer to cases where the amount payable under an existing insurance policy has not been determined and/or depends on future circumstances, and also cases where there are conditions of the insurance policy which may or may not be satisfied.

[33] The other main difficulty I see with the view adopted by Lindgren J is the indication of temporal order strongly given by the language of s 6(1). It is true, as asserted by Lindgren J, that the question of whether a person "has … entered into a contract of insurance" is to be considered at the date of adjudication; but the link between that expression and the words "shall upon the happening of the event" cannot be disregarded, and this, as a matter of language, is a strong indication that s 6(1) is directed to those cases where the "event" happens after the entry into the contract."

8 The plaintiff appeared to assert, contrary to her own evidence, that no "claim" had in fact been made upon the first defendant. This appears to follow from the plaintiff's evidence and submissions about service of the statement of claim upon the first defendant. LawCover submitted that if it were the case that no claim had been made then s 6 has no application because there is no policy that responds. It submitted that if and when a "claim" is made it will suffer from the obvious difficulty that the plaintiff's cause of action will have accrued before any policy came into existence that could be said to respond to it.

9 In an apparent attempt to counter this submission the plaintiff embraced the language of the cases, including Bailey v New South Wales Medical Defence Union Limited [1995] HCA 28; (1995) 184 CLR 399 in which reference is made to the statutory charge "descending" upon the relevant policy of insurance. Referring to this case, Hodgson JA in Walter Construction Group (supra) at par [24] said this:

"[24] This discussion supports the following propositions, relevant to the present case:


(1) Although s 6 uses the term "charge", what it creates is a statutory right which does not fall neatly into existing legal or equitable categories.

(2) The charge arises (or descends) on the happening of the "event" referred to in s 6(1) (and it is clear, and common ground, that this event is whatever completes the relevant cause of action).

(3) The relevant contract of insurance is that as it stood when the charge descended, unaffected by subsequent mutual or unilateral action otherwise than pursuant to that contract or the general law as it operates on that contract.

(4) The phrase in s 6(1) "insurance moneys that … may become payable" is apt to deal with the situation where, whilst the charge has descended, there is as yet no sum which could be identified as payable by the insurer to the insured.”

10 The plaintiff argued that the policies of insurance that presumably indemnified the first defendant in February 2002 or November 2002 for the periods from 1 July 2001 to 30 June 2002 and from 1 July 2002 to 30 June 2003 were "[t]he policies of insurance of LawCover that are applicable … covering the above periods and not for the period from 1 July, 2007 to 30 June, 2008". The plaintiff's written submissions continued, arguing that "[h]er application should be granted as prior to [1 July 2007] the statutory charges descended on the events which happened during the periods when this Court can infer that there is evidence to indicate that there were contracts of insurance between [the first defendant] and LawCover."

11 However, this submission diverts attention from the way in which the application was argued before me, which proceeded upon the basis that the relevant claim, which isolated and identified the policy of insurance that was said to respond to it, had been made either on 1 March 2008 or remained yet to be made. By arguing in the manner described above, the plaintiff appears to be suggesting, without saying so, that a claim was made on one or other of the assumed policies covering the earlier years in question. This is not so much an issue about whether the statutory charge descends upon the policy on the happening of the "event" giving rise to the claim against the insured, as an issue about whether one or other of the earlier policies responds to that "claim". There is no evidence before me that any such claim had been made and there is some evidence to suggest otherwise. If the plaintiff wished now to argue that a relevant claim had been made so as to trigger the operation of the claims made policies in effect between 1 July 2001 and 30 June 2003, or one of them, then some evidence of such an assertion will have to be produced. Presumably in those circumstances LawCover would not argue that s 6 did not apply to its claims made policies of insurance because the plaintiff's cause of action had accrued prior to the period of insurance in which the claim was made, but would require evidence from the plaintiff that established that a relevant claim had been made to which one or other of the policies actually responded.

Conclusions and Orders

12 In my opinion the principles discussed in Walter Construction Group (supra) apply so that the plaintiff's notice of motion as it was presented and argued before me must fail. If the causes of action accrued prior to 1 July 2007 then no policy that came into existence after that date will be affected by the descent of the relevant statutory charge. If some earlier policy is said to apply, the plaintiff has not submitted, and certainly has not yet established, that any relevant claim as defined in such a policy has been made.

13 In the circumstances, and having regard to what follows, I will direct the parties to bring in short minutes of order to give effect to my conclusions. Before any final orders were made, however, I should also want to be informed whether or not the plaintiff wishes to contend that some earlier policy apparently indemnifying the first defendant, and which was in existence at the time that the plaintiff's cause of action accrued, is said to be amenable to an application under s 6 of the Act upon the basis of some facts that have not so far been revealed in the proceedings before me. As I have indicated, even though the plaintiff's submissions appear to raise such a suggestion, the issue was not argued in any detail at all and was not the subject of any evidence. It is presently unnecessary to elaborate upon the obvious significance of this question in advance of hearing further from the parties.

Miscellaneous

14 Perhaps in anticipation of the difficulties confronting her attempt to rely upon s 6 of the Act, the bulk of the plaintiff's submissions before me were based upon the additional and quite different proposition that the first defendant had not been served and could not be found after reasonable enquiry so that the operation of s 51(1) of the Insurance Contracts Act 1984 was attracted. This raised a completely new issue that was not within the scope of the plaintiff's original notice of motion and LawCover objected to its inclusion amongst the matters for decision by me.

15 Section 51 of the Insurance Contracts Act 1984 is as follows:

" 51 (1) Where:


(a) the insured under a contract of liability insurance is liable in damages to a person (in this section called the third party ) ;

(b) the insured has died or cannot, after reasonable enquiry, be found; and

(c) the contract provides insurance cover in respect of the liability;


the third party may recover from the insurer an amount equal to the insurer's liability under the contract in respect of the insured's liability in damages.

(2) A payment under subsection (1) is a discharge, to the extent of the payment, in respect of:


(a) the insurer's liability under the contract; and

(b) the liability of the insured or of the insured's legal personal representative to the third party.

(3) This section does not affect any right that the third party has in respect of the insured's liability, being a right under some other law of the Commonwealth or under a law of a State or Territory."

16 The only evidence that has been filed on this issue came from the plaintiff's side and included the following material. Charles Firns swore an affidavit on 12 March 2009 that was relevantly as follows:

"2 On the 28th December 2008 I attended at the property 1 Old Kangaloon Road, Robertson, NSW with the intention of serving an amended statement of claim on Brian Muir. A woman opened the front gate. I said to her … 'Is Brian Muir here?' [She said] 'Brian has not lived here for several months.' [I said] 'Do you know where he is?' [She said] 'I have no idea'."

17 The affidavit of Janine Miltenyi suggested that she had attempted to serve the first defendant with a copy of the statement of claim and the notice of motion on 15 May 2009 but was unable to do so. Paragraphs 6 and 7 of the affidavit are as follows:

"6 I attended the given address of Daventry Old Kangaloon Road Robertson and found a rural property attended at the house on the property where I had previously served the defendant and found it to be empty except for a table and chair.

7 I attended and spoke to an elderly female person who lives across the road and who I have spoken to before and who has stated that she was Brian Muir's friend. I said 'How are you? Would Brian Muir still live across the road at Daventry?' She said 'No the property was sold been gone about 9 months a uni student [named] camped there'."

18 The affidavit of Claudio Grizonic is in the following complete terms:

"1 I am [ sic ] swore an affidavit on 14th May 2008 in these proceedings stating that I had served Brain [ sic ] Muir on 1st March 2008.

2 On 1st March I travelled to Robertson in an attempt to serve Brian Muir in what I believed to be his residence. As the gates were locked I then accompanied Dawn Wade to the township of Robertson. Dawn Wade then said to me…'Go and ask a business owner if they know if Brian Muir is still in the area'. I walked down the street towards to [ sic ] Robertson general store. Opposite the store I asked a man …'Do you know if a Brian Muir lives in the area?' [He said] 'That is Brian Muir over there.' I then served the man that had been pointed out to me with the statement of claim. I did not ask him if he was the Brian Muir named on the statement of claim or if he was the Brian Muir formally [ sic ] of Bridge Street, Sydney or if he was the Brian Muir of 1 Kangaloon Road, Robertson.

3 I cannot say and do not know if the person I served was the correct Brian Muir."

19 On 28 May 2009 the plaintiff swore an affidavit, which annexed Mr Grizonic's affidavit of 14 May 2008 in which he deposed to service of the statement of claim upon the first defendant in the circumstances referred to in par 2 of his later affidavit. The plaintiff also deposed to an undated conversation with a Mrs Smooton who is identified as an acquaintance of the first defendant in which she was informed that the first defendant was said to be living in the south of France and that there was a warrant out for his arrest.

20 LawCover's objection to this issue being argued in the circumstances was well founded and I declined to deal with it. It was not foreshadowed in the plaintiff's notice of motion and was not referred to until it emerged in the plaintiff's written submissions. Moreover, because the plaintiff's evidence about it is arguably internally inconsistent and contradictory, if not also incomplete, I declined to deal with it until after the determination of the s 6 application. It seemed to me to be likely, if not inevitable, that some cross-examination would be required on this material. Furthermore, without intending to express a view about it one way or the other, it may also be the case that the plaintiff has not filed all of the evidence touching this issue that she may require concerning reasonable enquiry. It is additionally not known whether LawCover proposes to file evidence on this topic at some stage.

21 Accordingly, I will hear further submissions as to what is contemplated by the parties to the motion with respect to the disposal of this remaining issue. Some consideration should be given to it at the time of preparation of the short minutes of order to which I have earlier referred.

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