Zaki v Better Buildings Constructions Pty Ltd

[2017] NSWSC 1522

Supreme Court

New South Wales

Medium Neutral Citation:

Zaki v Better Buildings Constructions Pty Limited [2017] NSWSC 1522

Hearing dates:

18 October 2017

Date of orders:

10 November 2017

Decision date:

10 November 2017

Jurisdiction:

Common Law

Before:

Campbell J

Decision:

(1)   Order the question appearing in order 2 be determined separately and before other questions arising on the application;

 

(2)   Answer the separate question in the following way:

 

Question: Upon the true construction of s 6(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) does the onus lie upon the claimant to prove that the proposed claim is within time or upon the insurer to prove that it is out of time?

 

Answer: Section 6(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) does not alter the general law and the onus lies upon the insurer to prove that a claimant’s claim against an insured person is out of time under Limitation Act 1969 (NSW).

 

(3) Under s 5 Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), grant leave to the plaintiff to bring proceedings against GIO General Pty Limited by filing and serving a Further Amended Statement of Claim which is Annexure “C” to the affidavit of Suzy David sworn on 18 September 2017;

 (4)   The parties’ costs of the application are costs in the cause.

Catchwords:

CIVIL PROCEDURE – Leave to proceed against insurer – Separate question – Onus of proof on question of limitation – Consideration of s 5 Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW)

Legislation Cited:

Civil Liability Amendment (Personal Responsibility) Act 2002 NSW
Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW)
Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Limitation Act 1969 (NSW)
Motor Accidents Compensation Act 1999 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)
Workers Compensation Act 1987 (NSW)

Cases Cited:

Baker-Morrison v State of New South Wales (2009) 74 NSWLR; [2009] NSWCA 35
Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364; [2006] HCA 32
Blatch v Archer (1774) 98 ER 969
General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69
Hawkins v Clayton t/as Clayton Utz and Co. (1986) 5 NSWLR 109
Kinzett v McCourt (1999) 46 NSWLR 32; [1999] NSWCA 7
Kondis v State Transport Authority (1984) 154 CLR 672; [1984] HCA 61
National Mutual Fire Insurance Co. v Commonwealth of Australia [1981] 1 NSWLR 400
Pullen and Anor v Gutteridge Haskins and Davey Pty Ltd [1993] 1 VR 27
State of New South Wales v Gillett [2012] NSWCA 83
Swain v Waverley Municipal Council (2005) 220 CLR 517; [2005] HCA 4
The Commonwealth v Mewett (1997) 195 CLR 471
Wardley Australia Limited v Western Australia (1992) 175 CLR 514; [1992] HCA 55

Texts Cited:

New South Wales Law Reform Commission, Third party claims on insurance money – Review of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946, Report No 143 (2016)
Second reading speech for the Civil Liability (Third Party Claims Against Insurers) Bill, New South Wales, Legislative Assembly, (Hansard) 3 May 2017 at 2396

Category:

Procedural and other rulings

Parties:

Mr Silwan Georg Zaki (Plaintiff)
Better Buildings Constructions Pty Limited (First Defendant)
GIO General Pty Limited (Second Defendant)

Representation:

Counsel: Mr L King SC with Mr CJM Palmer (Plaintiff)
Ms N Scoble, solicitor (Second Defendant)

  Solicitors: David Legal (Plaintiff)
Mills Oakley (Second Defendant)

File Number(s):

2016/261048

Publication restriction:

Nil

Judgment

1. By Notice of Motion filed on 19 September 2017, the plaintiff seeks leave to bring proceedings against GIO General Pty Limited (‘the insurer’) under the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (‘the Act’).

Nature of the plaintiff’s claim

2. By Statement of Claim filed in the Registry on 30 June 2016, the plaintiff brought proceedings against Better Buildings Construction Pty Ltd, the builder and developer of a building project at Blacktown in New South Wales. The project involved the construction of a high rise building. The plaintiff was employed as a formwork carpenter by a third party not joined to the proceedings. The plaintiff alleges that he was injured on 23 November 2013 when he was struck by a length of chain which fell from a crane operated by an employee of the defendant whereby he suffered serious injury including a right frontal skull fracture and associated traumatic brain injury.

3. The plaintiff seeks leave to file a Further Amended Statement of Claim joining GIO General Pty Ltd as a defendant. It is alleged that the insurer insured a company, now in liquidation, named Ofform Pty Ltd. When he was injured, the plaintiff alleges he was working under the control and direction of an employee of that company. It is alleged that Ofform Pty Ltd was negligent by directing the plaintiff to work below the field of operation of the crane, thus exposing him to an unnecessary risk of injury by objects falling from the crane: see Kondis v State Transport Authority (1984) 154 CLR 672; [1984] HCA 61.

4. The evidence read on the application indicates that the insurer had issued a policy of liability insurance covering Ofform Pty Ltd for liability arising from occurrences during the period from 9 March 2013 to 9 March 2014. The plaintiff’s injury was received during this period. I will refer to Ofform Pty Ltd as the insured company.

The issue in this application

5. The sole issue about whether leave to bring the proceedings against the insurer should be granted under s 5 of the Act turns on the meaning of s 6, which is in the following terms:

(1) Proceedings to recover an amount from the insurer under section 4 must be commenced within the same limitation period that applies under the Limitation Act 1969 or other Act to the claimant’s cause of action against the insured person in respect of the insured liability.

(2)  Subsection (1) does not apply if the claimant has brought proceedings against the insured person in respect of the insured liability before the expiry of the limitation period applying to those proceedings, including any extension of the limitation period granted under the Limitation Act 1969 or other Act by a court.

6. The question that divides the parties to the application is whether the plaintiff must prove that the proceedings against the insurer would be brought within time if leave were granted, or whether the insurer must prove that the proceedings would be out of time.

7. The parties have agreed that this legal question should be decided separately and before any other question in the application. Mr King SC, who appears with Mr C Palmer for the plaintiff, has proposed the following question:

“Upon the true construction of s 6(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) does the onus lie upon the claimant to prove that the proposed claim is within time or upon the insurer to prove that it is out of time?”

Ms Scoble, solicitor, who appears for the insurer, agrees that it would be appropriate in the circumstances to have that question determined separately.

Whether issue to be determined as a separate question

8. I would not ordinarily be disposed to carve out a separate question from the determination of what is essentially an interlocutory application. To do so may unduly fragment the proceedings. However, the proposed separate question of law is not arid. If the insurer carries the onus, it frankly submits it is in no position to call any evidence to discharge it now. If the plaintiff carries the onus, he has not marshalled the necessary evidence to address the central issue of discoverability, the key to determining the date from which the three year primary limitation period fixed for personal injury actions by s 50C(1) Limitation Act 1969 (NSW) runs.

9. Ms Scoble has made it clear that if I decide that the insurer bears the onus, there is no other issue raised in opposition to the grant of leave. Having said that, it does not follow that a grant of leave now forecloses ventilation of a limitation defence at the hearing of the proceedings.

10. Were I to decide the issue against the plaintiff, Mr King seeks an adjournment in order that evidence addressing the issue can be called in the context of the leave application. This does not seem to be an unreasonable approach.

11. In these somewhat unusual circumstances, I think it appropriate to order that the question formulated by Mr King be determined separately from other questions arising in the application.

The plaintiff’s submissions

12. I have had the benefit of written submissions from both parties. Mr King and Mr Palmer submit that the Act reforms and replaces the former s 6 Law Reform (Miscellaneous Provisions) Act 1946 (NSW). The repeal of the former Act is subject to the transitional provisions of s 12 of the Act. Counsel submit it is evident from the Second Reading Speech of the Attorney-General that Parliament intended to accept and implement all of the recommendations contained in the New South Wales Law Reform Commission Report No 143, upon which the legislation is based. While there are substantive changes to the previous law, the Court’s general discretion to grant leave would continue to be exercised in the same way as formerly: Report No 143 at [2.46] – [2.51]. There is nothing to suggest that it was intended to add a requirement that the plaintiff affirmatively prove he or she is within time as an additional condition of the grant of leave.

13. In this regard, s 6 expresses the principle that was implicit in the former legislation as construed by the Court of Appeal in Kinzett v McCourt (1999) 46 NSWLR 32; [1999] NSWCA 7 at [107] – [110].

14. Moreover, it is settled law that the onus of establishing a limitation defence rests on the defendant: Pullen and Anor v Gutteridge Haskins and Davey Pty Ltd [1993] 1 VR 27 at 72 – 74; Hawkins v Clayton t/as Clayton Utz and Co. (1986) 5 NSWLR 109 at 142; Baker-Morrison v State of New South Wales (2009) 74 NSWLR; [2009] NSWCA 35 at [14]; State of New South Wales v Gillett [2012] NSWCA 83 at [26]. This is important because s 4(3) provides, in part, “…(…subject to this Act), the parties have the same rights and liabilities … as if the proceedings were proceedings brought against the insured person”; s 5(4) provides, “Leave must be refused if the insurer can establish that it is entitled to disclaim liability under the contract of insurance or under any Act or law” (my emphasis); and s 7 provides that in proceedings brought under the Act, the insurer is entitled to rely upon any defence “that the insured person would have been entitled to rely on in proceedings” brought against it by the plaintiff.

The insurer’s submissions

15. Ms Scoble relied upon the emphatic language of s 6(1) that proceedings under s 4 must be commenced within the same limitation period applicable to the plaintiff’s cause of action against the insured. The emphatic language, it was submitted, suggests as a matter of grammatical construction that demonstration of compliance with s 6 is a condition of the grant of leave. As the plaintiff’s injuries were received on 23 November 2013 and the application for leave was not filed until 19 September 2017, some three years and ten months after the date of the accident, it is quite possible that proceedings would be out of time.

16. The insurer did not know and could not say when the cause of action was discoverable by the plaintiff. Only the plaintiff could give this evidence and no evidence has been lead. The disadvantage at which the insurer found itself indicated that as a matter of construction, whatever the content of the general law, the plaintiff carried the onus under s 6. Indeed Ms Scoble submitted that I should find that the plaintiff knew or ought to have known all that he was required to know for the purpose of s 50D(1) Limitation Act on the date of his accident.

Decision

17. The enactment of s 6 does not alter the settled law that a defendant raising a statutory bar imposed by the Limitation Act carries the legal onus of proof.

18. It may be accepted that s 4 of the Act creates a new statutory right of action for recovery of the amount of an insured liability direct from the insurer by the claimant who is a third party to the contract of insurance. Notwithstanding the use of the emphatic must in s 6, I am not of the view that it creates a limitation period which is annexed by the statute to the right which s 4 has created “so as to be of the essence of that right”: The Commonwealth v Mewett (1997) 195 CLR 471 at 534 – 535 (per Gummow and Kirby JJ). I think this arises from a number of considerations.

19. First, s 6 does not purport to create a single fixed limitation period for all proceedings brought under s 4 of the Act. Rather, it picks up the operation of the Limitation Act 1969 or any other Act which applies a limitation period to a claimant’s cause of action against the insured. Section 151D Workers Compensation Act 1987 (NSW) and s 109 Motor Accidents Compensation Act 1999 (NSW) provide examples of the latter.

20. Secondly, the Limitation Act creates more than one limitation period. It also, in some cases, makes provision for a flexible extension of the limitation period, as do s 151D Workers Compensation Act and s 109 Motor Accidents Compensation Act. Section 6 (2) makes express reference to such provisions (see [5] and [22]).

21. Thirdly, as the High Court of Australia said in Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364; [2006] HCA 32 at [20] – [21]:

For many centuries the courts have developed a well-known interpretative approach to construing certain statutory bars. In Commonwealth v Mewett, Gummow and Kirby JJ said of a limitations statute:

“[A] statutory bar, at least in the case of a statute of limitations in the traditional form, does not go to the jurisdiction of the court to entertain the claim but to the remedy available and hence to the defences which may be pleaded. The cause of action has not been extinguished. Absent an appropriate plea, the matter of the statutory bar does not arise for the consideration of the court. This is so at least where the limitation period is not annexed by statute to a right which it creates so as to be of the essence of that right.”

What was there being referred to was a law which barred the remedy for the plaintiff’s cause of action without extinguishing the right. There are numerous examples of such statutory bars. The two with the longest pedigree are s 3 of the Statute of Limitations 1623 (UK) applicable to personal actions (“all Actions … shall be commenced … within the Time …”) and s 4 of the Statute of Frauds 1677 (UK) (“no Action shall be brought … unless …”). Other examples were given in the decisions mentioned by Mason CJ in Verwayen.

In Dawkins v Lord Penrhyn, Earl Cairns LC drew a distinction between those cases and the limitations statute applicable to real actions which resulted in the extinguishment of the title of the plaintiff to the property in question after the stipulated period of time. This distinction reflects the settled approach of courts to interpreting statutes of that kind in the adversarial system of litigation which obtains in common law jurisdictions. The New South Wales legislature must be taken to have been aware of this when enacting s 151C. (Footnotes omitted)

Mewett may be added to the cases cited by the plaintiff (at [14]) establishing the general rule that the defendant must plead and prove a statute which bars the legal remedy.

22. Section 6(2) demonstrates that time ceases to run if proceedings have been brought against the insured within time and specifically refers to “any extension of the limitation period granted under the Limitation Act 1969 or other Act by a court”. This is a strong indication that the “well known interpretative approach” to construing limitation provisions applies here: Berowra Holdings at [20].

23. As argued on behalf of the plaintiff, s 6 expressly enacts what was implicit in the former legislation as settled by Kinzett v McCourt. It states a rule of substantive law. Just as there is nothing in its express language or statutory context to suggest it establishes an element of the statutory cause of action, nor is there anything in those considerations suggesting that it imposes a condition precedent to the grant of leave under s 5 which must be established by the claimant for leave before leave is granted. Indeed the express language of s 6 is against this construction. It refers to the time within which the proceedings must be brought. It says nothing about the time within which the leave application must be brought. Section 6 does not refer or apply to a s 5 leave application at all. Unlike under the former legislation, under s 5 leave to proceed may be granted nunc pro tunc: cf National Mutual Fire Insurance Co. v Commonwealth of Australia [1981] 1 NSWLR 400 at 403. It must follow that provided s 4 proceedings are brought within time, the question of leave can be dealt with after time has (notionally) expired.

24. In my view a consideration of the language of s 6 in the context of the whole Act does not suggest that any limitation issue must be determined one way or the other before leave may be granted. On the contrary, there are strong contextual indications in the legislation that any limitation issue need not be decided as a preliminary issue, but can be determined upon the evidence lead at the final hearing of the proceedings under s 4. This is consistent with the adjectival law generally applying to civil proceedings in the prevailing, as it was put by the Court in Berowra Holdings, “adversarial system of litigation”: see Wardley Australia Limited v Western Australia (1992) 175 CLR 514; [1992] HCA 55.

25. The matters of context to which I refer in [23] include the provision in s 4(3) that in proceedings brought against the insurer, the insurer stands in the place of the insured person as if the proceedings were proceedings to recover damages, and the reference in the same subsection to the parties having the same rights and liabilities as if the proceedings were brought against the insured person.

26. Importantly, s 7 is in the following terms:

“In proceedings brought under section 4, the insurer is entitled to rely on any defence or any other matter in answer to the claim or in reduction of its liability to the claimant:

(a)  that the insurer would have been entitled to rely on in a claim made by the insured person under the contract of insurance; or

(b)  that the insured person would have been entitled to rely on in proceedings brought by the claimant against the insured person in respect of the insured liability.”

This express language, as can readily be seen, entitles the insurer to rely upon any defence, inter alia, “that the insured person would have been entitled to rely upon in proceedings brought by the claimant against the insured person in respect of the insured liability”. This obviously includes a defence under the Limitation Act 1969. The reference to proceedings brought under s 4 of the Act in s 7 is a reference to the proceedings which have been brought by leave granted, whether before or after their commencement, under s 5. It is most clearly not a reference to the application for leave, the subject of s 5.

27. As paragraph [2.46] of Report 143 indicates, a grant of leave will be determined by reference to what the authors of the report refer to as “well settled criteria”: that there is an arguable case of liability against the defendant; that there is an arguable case that the insurer’s policy responds to that liability; and there is a real possibility that, if the plaintiff obtains judgment against the defendant, the defendant will not be able to meet it (my emphasis). Given the interlocutory nature of the leave application, it is appropriate that contestable issues as to the liability of the insured person, and the availability of cover under an insurer’s policy, should be determined at the ultimate hearing.

27. Obviously in clear cases, as s 5(4) indicates, where the entitlement to deny or to disclaim liability under the contract of insurance is beyond argument, leave must be refused. Likewise, where it is clear beyond argument that a claim against an insured person is out of time, leave would be refused, but that it is because there would be no arguable case of liability against the insured person. In these cases, the General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125, [1964] HCA 69 standard would apply. Often, especially in cases where there is no flexible discretion to extend time, it may be that time can be clearly shown to have expired. As I have said, in those cases leave should not be granted because there will be no arguable case against the insured person. However, as the touchstone of discoverability for limitation purposes in personal injury cases brought after the commencement of Civil Liability Amendment (Personal Responsibility) Act 2002 NSW on 6 December 2002 (see s4, sch 4.6) will usually involve contestable issues of fact, such clear cases are likely to be rare.

28. Section 7, as I have said, contemplates that contested issues about the insured person’s right to recover under the contract of insurance, and an insured person’s defences to the claim brought by the claimant, will be determined at the hearing of the recovery proceedings under s 4, rather than on the application for leave under s 5. Express reference is made to s 4 proceedings, not s 5.

29. The interpretation I have arrived at accords in my view with the grammatical meaning of the text of s 6 in its statutory and historical context. By the latter I am referring to the former legislation and the interpretation given to it by the courts. The practical difficulties that an insurer and, indeed, its insured, might face in discharging the legal onus of making good a limitation defence, having regard to the nuances and subtleties that may be necessarily attendant upon engaging with s 50D of the Limitation Act and the concept of discoverability that it gives content to, does not in my judgment render this interpretation so unreasonable that it must be taken to be not what Parliament intended by the language it employed so as to require a different construction.

30. The kind of difficulty the insurer’s argument highlights is not at all unfamiliar in adversarial civil litigation. Generally it is overcome by application of what might be called the rule in Blatch v Archer (1774) 98 ER 969 at 970. There Lord Mansfield said: “All evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted”. In Swain v Waverley Municipal Council (2005) 220 CLR 517; [2005] HCA 4 at [17], Gleeson CJ said of this rule: “this basic principle of adversarial litigation is not a matter of esoteric legal knowledge, but accords with common sense in ordinary human experience”.

31. At a factual level, there is simply no evidence before me one way or another enabling me to make a decision about discoverability of the plaintiff’s cause of action for the purpose of s 50C and certainly not according to the General Steel Industries standard. This is to be expected. A decision about that issue will have to abide the hearing of the proceedings.

Answer to separate question

33. I would answer the separate question in the following terms:

Section 6(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) does not alter the general law and the onus lies upon the insurer to prove that a claimant’s claim against an insured person is out of time under Limitation Act 1969 (NSW).

34. As the limitation issue is the only issue raised in answer to the application for leave, I think it appropriate under UCPR 28.3 to dispose of the application for leave. I am satisfied that: there is an arguable case of liability against the insured company in accordance with the High Court’s decision in Kondis; there is an arguable case that the insurer’s policy would respond to that liability; and, given its liquidation, I am satisfied that there is a real possibility that if the plaintiff obtains judgment against the insured company, it will not be able to meet it. There is no countervailing reason to refuse leave. Accordingly, I will grant leave to the plaintiff to bring proceedings against GIO General Pty Limited in accordance with the form of Further Amended Statement of Claim which is Annexure C to the affidavit of Suzy David sworn on 18 September 2017.

35. The grant of leave, however, does not disentitle the insurer, if so advised, to raise and propound any available defence under the Limitation Act 1969 NSW at the trial of the action. For completeness, it does not disentitle it from raising any defence that would have been available to it in an action for indemnity brought by its insured.

36. My orders are:

1. Order the question appearing in order 2 be determined separately and before other questions arising on the application;

2. Answer the separate question in the following way:

3. Question: Upon the true construction of s 6(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) does the onus lie upon the claimant to prove that the proposed claim is within time or upon the insurer to prove that it is out of time?

4. Answer: Section 6(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) does not alter the general law and the onus lies upon the insurer to prove that a claimant’s claim against an insured person is out of time under Limitation Act 1969 (NSW).

5. Under s 5 Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), grant leave to the plaintiff to bring proceedings against GIO General Pty Limited by filing and serving a Further Amended Statement of Claim which is Annexure “C” to the affidavit of Suzy David sworn on 18 September 2017;

6. The parties’ costs of the application are costs in the cause.

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Decision last updated: 17 April 2018