Zurich Australian Insurance Limited v XL Insurance Company SE - [2023] NSWSC 29

Supreme Court

New South Wales

Medium Neutral Citation: Zurich Australian Insurance Limited v XL Insurance Company SE [2023] NSWSC 29
Hearing dates: 31 January 2023
Date of orders: 31 January 2023
Decision date: 31 January 2023
Jurisdiction: Equity
Before: Hammerschlag CJ in Eq
Decision:
Notice of Motion dismissed with costs

Catchwords:
PRIVATE INTERNATIONAL LAW — forum non conveniens — application for a stay — insurance — claim by plaintiff insurer against defendant insurer for equitable contribution on the basis of coordinate liability for the same risk — where the defendant insurer’s liability said to arise for one or both of two policies, one in English and governed by the laws of this State and another in French, arguably governed by the law of France — defendant contends that whilst this Court is an appropriate forum to determine issues pertinent to the English policy, it is clearly an inappropriate forum to determine issues pertinent to the French policy and that the Court should stay the proceedings so far as the issues relating to the French policy are concerned — defendant contends that it is oppressive to require it to deal with issues concerning the French policy in this Court — whether this court is a clearly inappropriate jurisdiction to determine the issues arising under the French policy — HELD — it is undesirable for components of the same overall dispute to be separated out and decided by separate courts — that it is not oppressive to require the defendant to deal with the French component in this Court, but if it were, it would be equally oppressive to require the plaintiff to deal with the French component separately from the local component in a foreign court — this Court is the more appropriate forum for the determination of the whole of the dispute — the Court does not anticipate any significant difficulty in dealing with any factual or legal issues to be determined in accordance with the law of France to the extent that it applies — seen as a whole, this jurisdiction is the one to which the dispute has the closest connection — application dismissed with costs

Cases Cited:
Voth v Manildra Flower Mills Pty Ltd (1990) 171 CLR 538; [1990] HCA 55

Category: Principal judgment
Parties: Zurich Australian Insurance Limited (ABN 13 000 296 640) (Plaintiff / Respondent on the Motion)
XL Insurance Company SE (ABN 36 083 570 441) (Defendant / Applicant on the Motion)
Representation:
Counsel:
D L Williams SC with N D Riordan (Plaintiff / Respondent on the Motion)
S Donaldson SC with C Coventry (Defendant / Applicant on the Motion)
Solicitors:
Colin Biggers & Paisley (Plaintiff / Respondent on the Motion)
McCabes Lawyers (Defendant / Applicant on the Motion)

File Number(s): 2019/00308171

EX TEMPORE JUDGMENT

These are my abbreviated reasons for declining an application by the defendant (XL) to stay part of these proceedings on forum non-conveniens grounds. In considering the application, I have adopted the summary approach described by the High Court and applied the test mandated by that Court, in Voth v Manildra Flower Mills Pty Ltd (1990) 171 CLR 538; [1990] HCA 55.
XL has failed to persuade the Court that it is a clearly inappropriate forum for determination of the part of the proceedings to which the application relates. To the contrary, I consider it to be the more appropriate forum for the determination of all issues in the proceedings.
I have had the benefit of clear, concise and well-articulated written and oral submissions from counsel.
Menard Oceania Pty Ltd (Menard) was retained by Port Waratah Coal Services Ltd (Port Waratah) to design and construct an underground base block, the purpose of which was to allow excavation of a tunnel and dump pit without having to resort to external dewatering as part of the construction of a dump and reclaim station at the Kooragang Coal Terminal Project near Newcastle, NSW. Various components of the construction were divided into cells. The base block comprised various separate cells intended to be impervious to water ingress. Menard’s work, however, did not achieve this, and certain cells flooded.
Zurich and XL are insurers.
Zurich insured Menard under a Design and Construction Professional Indemnity Policy (the Zurich Policy) which was operative from 31 March 2011 to 31 March 2012 covering Menard’s liability for defective design and construction, as well as Menard’s defence costs in defending covered claims, to a limit of $10 million.
Port Waratah sued Menard for damages in this Court. Menard claimed, and was given indemnity by Zurich. The proceedings were settled by settlement agreement dated 19 February 2017, under which Menard agreed to pay Port Waratah a total of $9.65 million. Menard incurred costs and expenses of $6,216,098 in defending the proceedings. It is not in dispute that the settlement constituted a reasonable compromise of Menard’s liability to Port Waratah. Zurich paid a total of $9,717,654. Taking into account an earlier payment made by Zurich in relation to an unrelated claim, the amount paid reached the policy limit.
Zurich contends that XL also insured Menard for the same risk under two policies, a General and Products Liability Policy (the Local Policy) and Indemnity Liability Policy (the Master Policy).
The Local Policy is in English and governed by the law of this State.
The Master Policy is in French and it is likely (although it is in contest) that its construction and operation, at least in part, will be governed by French law. It has been translated into English and the controversy between the parties extends even to disagreement as to its proper translation.
XL denies that the Local Policy responded. It says that it covered damage to property whereas Menard’s liability arose out of the provision of professional services, which liability is excluded from cover. Hence, XL puts in issue that the Local Policy can be the basis of any coordinate liability with Zurich.
Article 7.1.1 of the Master Policy provides that where an entity outside of France is covered by the Master Policy and, at the insured’s request, a policy is issued locally by the insurer, the policies are deemed to be integrated and that the coverage shall apply on a Difference in Conditions and Difference in Limits basis of local integrated policies. Article 7.1.2 provides that when an entity outside of France is covered by the Master Policy but is not covered by (what is connoted in French as) an “integrated local policy”, the Master Policy applies. It does not appear to be in dispute that the Zurich Policy was not an integrated local policy. But there will apparently be debate about the construction of the Master Policy so far as it refers to the insured not being covered by (or having the benefit of) an integrated local policy. There is, it seems, a question as to whether art 7.1.2 is engaged when there is no integrated policy at all, or whether it is only engaged where there is an integrated policy but cover under it does not extend to the claim in question.
XL also denies that the Master Policy can be the basis for coordinate liability, as cover was only available to the extent that it was not available under the Zurich Policy, either due to differences in conditions or limits and it argues that even if the policy otherwise responded, any claim for contribution is governed by French law which will not recognise it.
XL accepted indemnity (although there appears to be an issue whether this was under the Master Policy – which XL now says it was – or under the Local Policy) and paid $6,148,445 under that indemnity.
By its Amended Statement of Claim filed on 7 December 2021, Zurich seeks contribution from XL on the footing that it and XL have a coordinate liability to Menard. Originally, Zurich relied only on XL’s liability under the Local Policy but, by the amendment, now also relies on XL’s liability under the Master Policy.
XL accepts that so far as Zurich’s claim for contribution rests on the operation of the Local Policy, the proceedings are properly and appropriately brought in this Court. However, so far as the Master Policy is concerned, it argues that this Court is a clearly inappropriate forum for the determination of issues concerning the Master Policy, and that to require XL to meet a case which involves the construction and operation of a French instrument governed by the law of that country would be oppressive. XL contends that critical aspects of the analysis will be “lost in translation,” that expert opinions in French will need to be translated into English and cross-examination will involve translators. It argues that construction of the Master Policy cannot be divorced from the legal context in which it was made and an extensive body of French law may need to be considered.
The fundamental hurdle in XL’s path to success on the present application is that to uphold it would entail a bifurcation of the proceedings into two segments, each of which concerns the same central subject matter, namely, whether there is coordinate liability and a consequential claim for equitable (or its equivalent) contribution, but one of which will be determined in this State where coordinate liability will be examined on the basis only of the Local Policy and the other will be determined in France where coordinate liability will be examined on the basis only of the Master Policy. This Court would determine separate issues, leaving other issues in the same overall contest to be determined by another court in another country. This has pitfalls which the High Court has repeatedly identified and counselled first instance courts to avoid.
This is an undesirable manner in which to proceed. It is preferable for all issues to be determined at one and the same time by the same tribunal.
If (and I do not think it is) it would be oppressive to require XL to meet Zurich’s case in this State, including the component which relies on the Master Policy, it would be equally oppressive to require Zurich to motivate a separate case for the same relief based only on the Master Policy, in a foreign jurisdiction.
It is to be remembered that Zurich claims only one form of relief, namely contribution, although it asserts coordinate liability on alternative grounds.
Added to this, seen as a whole, this jurisdiction is the one to which the dispute has the closest connection. Australia is the place of the event for which Zurich and XL provided cover. Menard was sued by Port Waratah in Australia and both Zurich and XL paid monies in Australia to resolve the claim. Two of the three policies are indisputably governed by the law of this State. Both Zurich and XL do business in Australia.
I do not anticipate that the Court will encounter any significant difficulty in dealing with any factual or legal issues to be determined, in the traditional way, in accordance with the law of France where it applies. This is almost an everyday occurrence in this Court in transnational disputes, in particular in large infrastructure projects with international participants, including insurers.
The defendant’s motion filed on 1 March 2023 is dismissed with costs.

AFTER DISCUSSION WITH COUNSEL, HIS HONOUR TRANSFERRED THE MATTER TO THE COMMERCIAL LIST.

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Decision last updated: 02 February 2023

Medium Neutral Citation:	Zurich Australian Insurance Limited v XL Insurance Company SE [2023] NSWSC 29
Hearing dates:	31 January 2023
Date of orders:	31 January 2023
Decision date:	31 January 2023
Jurisdiction:	Equity
Before:	Hammerschlag CJ in Eq
Decision:	Notice of Motion dismissed with costs
Catchwords:	PRIVATE INTERNATIONAL LAW — forum non conveniens — application for a stay — insurance — claim by plaintiff insurer against defendant insurer for equitable contribution on the basis of coordinate liability for the same risk — where the defendant insurer’s liability said to arise for one or both of two policies, one in English and governed by the laws of this State and another in French, arguably governed by the law of France — defendant contends that whilst this Court is an appropriate forum to determine issues pertinent to the English policy, it is clearly an inappropriate forum to determine issues pertinent to the French policy and that the Court should stay the proceedings so far as the issues relating to the French policy are concerned — defendant contends that it is oppressive to require it to deal with issues concerning the French policy in this Court — whether this court is a clearly inappropriate jurisdiction to determine the issues arising under the French policy — HELD — it is undesirable for components of the same overall dispute to be separated out and decided by separate courts — that it is not oppressive to require the defendant to deal with the French component in this Court, but if it were, it would be equally oppressive to require the plaintiff to deal with the French component separately from the local component in a foreign court — this Court is the more appropriate forum for the determination of the whole of the dispute — the Court does not anticipate any significant difficulty in dealing with any factual or legal issues to be determined in accordance with the law of France to the extent that it applies — seen as a whole, this jurisdiction is the one to which the dispute has the closest connection — application dismissed with costs
Cases Cited:	Voth v Manildra Flower Mills Pty Ltd (1990) 171 CLR 538; [1990] HCA 55
Category:	Principal judgment
Parties:	Zurich Australian Insurance Limited (ABN 13 000 296 640) (Plaintiff / Respondent on the Motion) XL Insurance Company SE (ABN 36 083 570 441) (Defendant / Applicant on the Motion)
Representation:	Counsel: D L Williams SC with N D Riordan (Plaintiff / Respondent on the Motion) S Donaldson SC with C Coventry (Defendant / Applicant on the Motion) Solicitors: Colin Biggers & Paisley (Plaintiff / Respondent on the Motion) McCabes Lawyers (Defendant / Applicant on the Motion)
File Number(s):	2019/00308171