Abstract

Joinder of Party - Exclusion, Vehicles

Article

Joinder of Party

On a claimant’s application to join as a party to an action the insurer of a deregistered company against which leave to proceed for damages had been obtained, in order that the claimant could seek a declaration that the insurer was liable to indemnify its insured in respect of the claim so that such indemnity could be appropriated to the claim under s 562 of the Corporations Act 2001, the power to join is to be exercised on the basis that the Court has jurisdiction with respect to the proceedings so far as they relate to the party to be joined: CGU Insurance Limited v Blakeley (2016) 259 CLR 339. It is only if the plaintiff were to succeed in obtaining judgment in the action against the defendant, whose liquidator or trustee in bankruptcy were then to demand and to receive from the insurer an amount in respect of its liability as such, that the section would operate to require that the net amount be paid to the plaintiff: Interchase Corporation Limited (in liq) v FAI General Insurance Company Limited [2000] 2 Qd R 301. It is not itself a source of jurisdiction. It may be exercised only in order to exercise its jurisdiction and the power given to the Court  may inform the characterisation of its jurisdiction but does not necessarily define its content: Lacey v Attorney General (Qld) (2011) 242 CLR 573 at [48].

The criteria for an application of this type are:

 (a) If an insurer has denied indemnity, the insured can, file a cross claim against it for the purpose of enforcing their contract.

(b) It would be an abuse of processes if a third-party plaintiff, without a cause of action against the insurer, simply sought to join it as a co-defendant with an insured defendant.

(c) However, the interests of justice, and the convenient administration of justice, may authorise its joinder as a co-defendant with its insured, whether on the application of the third-party plaintiff or otherwise, if: (i) the insurer has denied liability to indemnify the insured against the claim; (ii) there is a bona fide dispute as to its entitlement to do so; (iii) there is a substantial impediment (e.g., the insured’s insolvency) to a simple claim by the plaintiff against the defendant, with a cross claim by the defendant against the insurer; (iv) the dispute as to the liability or otherwise of the insurer to indemnify the insured defendant can properly be made the subject of a grant of declaratory relief; (v) there is a true legal controversy between the plaintiff and the insurer which would ensure that each might reasonably be relied upon to serve as a contradictor for the other, which would be the case if the defendant’s insurer were joined; (vi) joinder might reasonably avoid a multiplicity of proceedings and enable all matters in controversy between the parties to be completely and finally determined. If an insured defendant either accepts that its insurer is correct in declining to indemnify or effectively withdraws and seeks not to be further involved, there is a substantial impediment obstructing the conduct of proceedings by the plaintiff against the insured defendant, with a cross claim by the defendant against its insurer.

(d) A true legal controversy between the Plaintiff and the insurer may exist if on the facts of the particular case there is a realistic prospect of the operation of s. 562 of the Corporations Act.

(e) Joinder is discretionary and fact-based, and is not as of right. The Owners-Strata Plan 62658 v Mestrez Pty Ltd (supra).

If the company is not in liquidation at the time of the joinder application, the point at which the section can have application is when it incurs liability in judgment and indemnity is received by it or its liquidator, for the benefit under the section does not crystallise until the insurer pays out under the policy. Until then, it does not confer on a liquidator a right of action against an insurer to enforce an insurance policy since its interest would be hypothetical and contingent upon an insured’s successfully enforcing a right: Blakeley (supra) at [51]. But if there is at least a prospect that the insured company wound up, joinder may be granted: Anjin No 13 Pty Ltd v Allianz Australia Pty Ltd (2009) 26 VR 148 for a declaration that the insurer is liable to indemnify it against its liability under the claim: Employers Reinsurance Corporation v Ashmere Cove Pty Ltd (2008) 166 FCR 398; CGU Insurance Limited v Blakeley (supra); Anjin No 13 Pty Ltd v Allianz Australia Pty Ltd (2009) 26 VR 148; JN Taylor Holdings Ltd (in liq) v Bond(1993) 59 SASR 432; The Owners-Strata Plan 62658 v Mestrez Pty Ltd[2012] NSWSC 1259; Interchase Corporation Limited v FAI General Insurance Company Limited (supra) not followed. The plaintiff has standing to make this claim: Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406.

If a declaration is made, it would compel the insurer to respond favourably to a claim by the insured because it would be an abuse of process for it to seek to argue elsewhere that it was not liable to indemnify. If the applicant obtains a judgment against the insured, and if the most likely consequence will be that it will be placed in liquidation by the applicant, in that case there would be a realistic prospect of the operation of s 562 of the Corporations Act. If neither a natural defendant nor a corporate defendant was likely to have the capacity to meet a judgment, the plaintiff has a contingent right to proceed directly against the trustee in bankruptcy of the individual or against the liquidator company under the section to recover the amount of the liability: Morrell v Mercantile Mutual Insurance (Australia) Ltd (1999) 21 WAR 451.

As to the court’s discretion on joinder, its practical utility is relevant in that, if the plaintiff succeeds in obtaining a declaration the fact that it would bind the insurer as between it and the plaintiff would be likely to lead to the plaintiff’s entitlement to take advantage of the indemnity available to the insured. It would enable issues of liability and assessment of damages, both as between claimant and insured and as between insured and insurer, to be heard and determined in the one proceeding, with benefits in efficiency and economy. Any attempt by the insurer to relitigate its liability in subsequent proceedings would give rise to the Anshun principle. Though the outcome could not be predicted with certainty, having had a full opportunity to agitate its defences in the claim for declaratory relief it would probably have difficulty if it were not to put them all forward in those proceedings, or were to seek to relitigate issues within adverse findings: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.

Exclusion, Vehicles

In Godden v State of Queensland [2018] QSC 18 an exclusion provided - 2. Vehicles - Personal Injury, loss or damage caused by or arising out of the use of or operation of any vehicle that is legally required to be registered or legally required to have third party bodily injury insurance;

If indemnity is not provided by any other insurance or fund, this exclusion 2 will not apply to the insured’s liability for personal injury or property damage:

(a) arising from the actual loading, unloading; delivery or collection of goods to or from any vehicle; and

(b) arising during the Trade Use of any Vehicle at any site where the Insured is or at the Insured premises:

provided that insurance is not available while a vehicle is:

(i) travelling between locations where it is to be used for Trade Use; or

(ii) used only for the transportation or haulage of goods.

If one of the causes of the accident was the dropping dirt and debris on the road by vehicles, which might suggest that the accident was caused by or arose out of the use of a motor vehicle and if there is at least one ground for excluding cover, then the whole claim is excluded. However, there was an issue as to whether the Motor Accident Insurance Act policy’s cover would be available to the insured despite its non-conformitywith the requirements of the Act, and it was found that there was still an aguable issue which justified joinder.

The applicant should provide the court with a draft of the pleading which it would propose to file in order to define the nature of the claim and show whether it attracts federal jurisdiction or not. Regrettably, no draft pleading was provided: Godden v State of Queensland [2018] QSC 18.