Zeini v Intersen Pty Limited

[2006] NSWSC 107

CITATION:	Zeini v Intersen Pty Limited & Anor [2006] NSWSC 107
HEARING DATE(S):	28/02/2006
JUDGMENT DATE :	3 March 2006
JUDGMENT OF:	Hoeben J at 1
DECISION:	Leave to cross-claim against GIO is refused in rspect of the claim in contract.
CATCHWORDS:	Adding insurer pursuant to s6 Law Reform (Miscellaneous Provisions) Act 1946 - whether common law extension to workers compensation policy responds to claim in contract against insured - question not arguable because of recent Court of Appeal decisions.
LEGISLATION CITED:	Law Reform (Miscellaneous Provisions) Act 1946 Motor Vehicles (Third Party Insurance) Act 1942 Workers Compensation Act 1987
CASES CITED:	Bailey v NSW Medical Defence Union Limited (1995) 184 CLR 399 at 446 Gordian Runoff Limited v Heyday Group Pty Limited [2005] NSWCA 29 Multiplex Constructions Pty Limited v Irving & Ors/Fugen Holdings Pty Limited v Irving & Ors [2004] NSWCA 346 Tzardas v Child & Ors (2004) 208 ALR 651 at [21]
PARTIES:	Salim Zeini - Plaintiff Intersen Pty Limited - First Defendant Fifth Avenue Projects Pty Limited - Second Defendant Intersen Pty Limited - First Cross-Claimant/Applicant Uneed Formwork & Construction Pty Limited - Frist Cross-Defendant GIO -Proposed Second Cross-Defendant/Respondent
FILE NUMBER(S):	SC 20098/2005
COUNSEL:	K Andrews - Respondent D Priestley - Applicant
SOLICITORS:	McGrath Dicembre & Company - First defendant/cross claimant David Phillip Cooper - Solicitor for the Respondent

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HOEBEN J

Friday, 3 March 2006

20098/2005 - Salim Zeini v Intersen Pty Limited & Anor

JUDGMENT

1 HIS HONOUR:

Nature of application
The application before me is made by the first defendant/cross claimant, Intersen Pty Limited (hereinafter called Intersen). Intersen seeks the leave of the Court pursuant to s6 of the Law Reform (Miscellaneous Provisions) Act 1946 to commence proceedings by way of cross-claim against GIO General (hereinafter called GIO), the workers compensation insurer of Uneed Formwork and Construction Pty Limited (Uneed).

2 GIO does not oppose the application insofar as it relates to a claim for contribution in respect of the tortious liability of Uneed (s5, Law Reform (Miscellaneous Provisions) Act 1946). GIO does, however, oppose its joinder as a cross-defendant to that part of the cross-claim which seeks an indemnity from it in respect of any contractual liability of Uneed to Intersen.

Factual background

3 The plaintiff was employed by Uneed as a formwork carpenter. Building work was being carried out at 16-18 Fifth Avenue, Blacktown in New South Wales. Intersen was the head contractor on the site. Fifth Avenue Projects was the owner. Intersen had contracted with Uneed for the construction by Uneed of formwork on the site.

4 On 12 April 2002 the plaintiff was carrying out measurements close to a stairwell opening on the ground floor. He fell through the opening to the basement below, a distance of approximately 3 metres. He suffered serious injuries as a result of that fall.

5 Uneed has been deregistered. As of 12 April 2002 GIO had issued to Uneed a workers compensation policy with a common law extension in the form required by the Workers Compensation Act 1987.

6 In April 2005 the plaintiff commenced proceedings against Intersen and Fifth Avenue Projects alleging negligence on their part and breaches of regulation. Intersen filed a defence and issued a cross-claim against Uneed claiming contribution from it pursuant to s5 of the Law Reform (Miscellaneous Provisions) Act 1946 and also claiming to be fully indemnified pursuant to a contract which it had with Uneed.

7 Since Uneed has been deregistered and has no assets, Intersen seeks the leave of the Court pursuant to s6 of the Law Reform (Miscellaneous Provisions) Act 1946 to issue a second cross-claim against GIO as the workers compensation insurer of Intersen. That proposed cross-claim (exhibit J to the affidavit of Anthony Dicembre, sworn 13 February 2006) seeks contribution from GIO pursuant to s5 of the Act and a full indemnity, pursuant to the contractual obligations owed by Uneed to Intersen.

Consideration

8 Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 provides:

“6(1) If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, 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.

(2) If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured (being a corporation) is being wound up, or if any subsequent winding-up of the insured (being a corporation) is deemed to have commenced not later than the happening of that event, the provisions of subsection (1) shall apply notwithstanding the winding-up.
(3) Every charge created by this section shall have priority over all other charges affecting the said insurance moneys, and where the same insurance moneys are subject to two or more charges by virtue of this Part those charges shall have priority between themselves in the order of the dates of the events out of which the liability arose, or, if such charges arise out of events happening on the same date, they shall rank equally between themselves.
(4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured: Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken.
(5) Such an action may be brought although judgment has been already recovered against the insured for damages or compensation in respect of the same matter.
(6) Any payment made by the insurer under the contract of insurance without actual notice of the existence of any such charge shall to the extent of that payment be a valid discharge to the insurer, notwithstanding anything in this Part contained.
(7) No insurer shall be liable under this Part for any greater sum than that fixed by the contract of insurance between the insurer and the insured.
(8) Nothing in this section shall affect the operation of any of the provisions of the Workers Compensation Act 1987 or the Motor Vehicles (Third Party Insurance) Act 1942.
(9) Despite subsection (8), this section applies in relation to a policy of workers compensation insurance entered into by an employer (whether entered into before or after the commencement of this subsection), where the employer:
(a) being a natural person, has died, or is permanently resident outside the Commonwealth and its Territories, or cannot after due inquiry and search be found, or

(b) being a corporation (other than a company that has commenced to be wound up), has ceased to exist, or

(c) being a company, corporation, society, association or other body (other than a company that has commenced to be wound up), was at the time when it commenced to employ workers to which the policy relates incorporated outside the Commonwealth and its Territories and registered as a foreign company under the laws of any State or Territory and is not so registered under any such law, or

(d) being a company, is in the course of being wound up. “

9 Section 6 creates “a new right with an associated remedy to enforce it” (Bailey v NSW Medical Defence Union Limited (1995) 184 CLR 399 at 446). The right is the charge as created by s6(1). Unless at the time of the event giving rise to the claim against the insured, the insured was a corporation under winding up within s6(2), the remedy is subject to the requirement of leave.

10 The purpose of the leave requirement has been described in various ways. For present purposes it is sufficient that it was intended to protect insurers from unwarranted direct actions by claimants upon their insured. It was agreed between the parties that the express prohibition in s6(4) did not apply. It was also accepted that the application may be refused in the exercise of the general discretion to grant leave, even if the prohibition did not apply. For Intersen to be successful in this application, it was necessary for the general discretion to be exercised in its favour.

11 For the purposes of the exercise of the general discretion, it is necessary for Intersen to establish that it is arguable that GIO is obliged to provide indemnity to Uneed in respect of Intersen’s cross-claim against it. (Tzardas v Child & Ors (2004) 208 ALR 651 at [21]. At Santow JA said in that case ([140]) to establish an arguable case “is a relatively modest hurdle”. Put another way, if it is unarguable that the policy could respond to the claim, leave should not be granted.

12 As indicated, the only question in dispute is whether it was arguable that Uneed was entitled to indemnity from GIO under the common law extension to the workers compensation policy, in respect of the contractual claim brought against it by Intersen.

13 In relation to that part of Intersen’s cross-claim which sought contribution against Uneed as a joint tortfeasor pursuant to s5 of the Act, GIO accepted that the common law extension to the workers’ compensation policy would respond. On that issue, I am satisfied that the plaintiff has an arguable case that his injuries were caused by the negligence of Uneed so that Uneed would be regarded as an entity which if sued by the plaintiff, would be found liable.

14 GIO submits that as a result of the Court of Appeal decisions in Multiplex Constructions Pty Limited v Irving & Ors/Fugen Holdings Pty Limited v Irving & Ors [2004] NSWCA 346 and Gordian Runoff Limited v Heyday Group Pty Limited [2005] NSWCA 29, it is unarguable that the common law extension to the statutory form of workers compensation policy issued under the Workers Compensation Act 1987 responds to a claim in contract.

15 In the Multiplex case, the Court held that the workers compensation policy of the employer Fugen Holdings did not respond to the contractual claim by Multiplex. In the Gordian Runoff case the Court held that the employer’s common law liability arising out of the employee’s employment with it (ie “qua worker”) was limited to its contribution as a joint tortfeasor, notwithstanding that under the contract it was liable for the whole of the damages. It should be noted that leave to appeal was refused by the High Court in the Multiplex case.

Decision

16 On that state of the authorities, it cannot be said that Intersen has an arguable case against GIO for that part of its cross-claim which relies upon the claim in contract. Accordingly I propose to refuse leave for Intersen to proceed against GIO as a cross-defendant in respect of that part of the proposed cross-claim which alleges a contractual liability owed by Uneed to it, for which GIO is liable under the common law extension to the statutory workers compensation policy.

17 A problem arises as to how to implement that decision. The proposed cross-claim raises in the one document two separate claims against GIO. The first is a liability to indemnify Uneed in respect of its tortious liability to the plaintiff and therefore its liability to contribute to any verdict obtained by the plaintiff against Intersen. The second is the issue, which I have found to be unarguable, ie the liability of GIO to indemnify Uneed in respect of any contractual liability, which it might have to Intersen.

18 It seems to me that the best way to implement my decision is to grant conditional leave to Intersen to rely upon the second cross-claim against GIO. The condition, which I propose to impose, is that paragraphs 10, 11, 12, 13 and 14 of the proposed second cross-claim be deleted.

Costs

19 It seems to me that GIO should have its costs of the application. In submissions before me it was made clear on behalf of GIO that it did not oppose being a cross-defendant provided its liability was restricted to the tortious liability of Uneed. It opposed being joined to the proceedings if what was being alleged against it was liability for the contractual obligations of Uneed. Intersen sought to have GIO joined to the proceedings as an insurer responsible for both tortious and contractual liability. On that issue GIO has succeeded.

20 On behalf of Intersen it was submitted that there should be no separate costs order in favour of GIO but that the costs of this application should await the ultimate outcome of the proceedings. I do not agree. The argument before me was on a discrete issue, which is separate from other matters in the trial, and only concerns Intersen and GIO. Accordingly, I propose to order that Intersen pay GIO the costs of and associated with this application.

Orders

21 The orders which I make are as follows:

(1) Leave is granted to Intersen, pursuant to s6 of the Law Reform (Miscellaneous Provisions) Act 1946 to commence proceedings by way of cross-claim against GIO.

(2) Order 1 is subject to the condition that in any such cross-claim, or other proceeding brought by Intersen against GIO pursuant to this leave, Intersen is not to rely upon nor plead the matters set out in paragraphs 10, 11, 12, 13 and 14 of the draft cross-claim, exhibit J to the affidavit of Anthony Dicembre, sworn 13 February 2006.

(3) Intersen is to pay the GIO’s costs of and associated with this application.

**********