Chapman v Gibbo’s Transport Pty Ltd & Ors (No 3)

1. [1]

   By way of notice of motion, in part filed in August 2022 and later on 7 March 2023, the second defendant Qube Logistics (SL) Pty Ltd (Qube), seeks the following orders:-

2. [2]

   The relief claimed by Qube in its proposed cross-claim is a declaration that it is entitled to be indemnified by QBE, subject to policy limits, pursuant to the terms of its compulsory third party (CTP) policy, of all loss arising from the claim made against Qube by the plaintiff in his Second (now Third) Amended Statement of Claim, including all costs and expenses Qube has incurred in defending that claim. Qube further claims damages for breach of contract representing all loss arising from the claim made against Qube by the plaintiff in the Second (now Third) Amended Statement of Claim, including costs and expenses, as a consequence of the failure of QBE to indemnify the cross-claimant with respect to the plaintiff’s claim against it.

Background

1. [3]

   I set out the procedural history of the matter, extracted from my judgment in Chapman v Gibbo’s Transport and Ors (No 2) [2023] NSWSC 186:-

2. [4]

   On 7 March 2023, I granted the plaintiff leave to proceed pursuant to s 109 of the Motor Accidents Compensation Act 1999 (MACA). There are now three active defendants in the proceedings. The second defendant mentioned the appearance of the first defendant on this application.

Evidence

1. [5]

   Qube relies on affidavits of Michael Valdes sworn on 11 August 2022 and 7 March 2023. Mr Valdes is a solicitor at HWL Ebsworth Lawyers, who are on the record in these proceedings on behalf of Qube.

2. [6]

   In his first affidavit, Mr Valdes expresses his reasons why there ought to be a separate trial on liability (to which see below). He also attaches correspondence to both the plaintiff and the first defendant and a Schedule of Damages which was provided to him by the plaintiff’s solicitor on 12 February 2021, more than 2 years ago. At that date, the plaintiff estimated his damages to be in the range of $2,220,000 plus costs.

3. [7]

   In his second affidavit, Mr Valdes attaches correspondence which sets out his reasons why a cross-claim ought to be filed. That correspondence discloses that Qube first sought indemnity under the CTP policy on 21 January 2021. QBE has at all times maintained a denial of indemnity. In a letter to QBE’s lawyers dated 10 November 2022, HWL Ebsworth Lawyers said that the purpose of the cross-claim (and in particular the breach of contract claim), is “to give rise to an entitlement to recover Qube’s defence costs from QBE should Qube be successful in its claim for insurance cover pursuant to the CTP policy”. They say that if QBE agrees “that if Qube wins its case against QBE then it will pay all reasonably incurred costs of defending the action by the Plaintiff and also costs in bringing the claim against QBE, then we can proceed as you suggest.”

4. [8]

   A letter dated 29 March 2023 from Mr Ian Jones of Sparke Helmore Lawyers to HWL Ebsworth Lawyers was tendered by the third defendant and marked as exhibit “1”. Mr Jones notes that Qube’s CTP policy is not governed by the Insurance Contracts Act 1984 (Cth) (the Insurance Contracts Act), but is a statutory policy invoked by s 10 of the MACA. Mr Jones says that QBE (as third defendant) acknowledges in paragraph 6(a) of its defence that if the circumstances of the accident are covered under Qube’s third party policy, then QBE is liable to indemnify by s 16 of the MACA. He says:-

5. [9]

   An affidavit of the plaintiff’s solicitor John Hamish Giles Finney, affirmed on 5 June 2023, was read in the proceedings. He notes that previously qualified experts in the areas of neurosurgery, psychiatry and occupational therapy had previously been served but each of those experts is no longer in practice. The plaintiff has therefore qualified and served new reports of experts in each of those fields. He further says that the first and second defendants have not served any reports from medical experts and that the third defendant has not qualified any medical expert. The plaintiff has served an expert report on liability, and the second and third defendant have served the same expert report on liability.

Legislation

1. [10]

   Section 90 of the Civil Procedure Act 2005 (CPA) provides:-

2. [11]

   Rule 9.1 of the Uniform Civil Procedure Rules 2005 (UCPR) provides:-

3. [12]

   Rule 28.2 of the UCPR provides:-

4. [13]

   Section 3A of the MACA provides:-

5. [14]

   Section 10 of the MACA provides:-

6. [15]

   Section 77 of the MACA provides:-

7. [16]

   Section 79 of the MACA provides:-

The parties’ submissions

1. [17]

   Mr Parker SC, on behalf of the second defendant, submits that liability ought to be determined separately from damages, to which the first defendant consents. The plaintiff and the third defendant oppose that application.

2. [18]

   Mr Parker submits that the predominant issues in a liability trial (assuming that it includes the proposed cross-claim) are likely to be the explanation for the rollover of the truck which was driven by the plaintiff, whether the circumstances of the accident bring the matter within s 3A of the MACA (and whether the injury caused to the plaintiff was caused by the fault of the owner in the use or operation of the vehicle during the driving), and whether in the event the CTP policy is engaged, QBE is liable to Qube for breach of contract. He submits that the factual argument relevant to the proposed cross-claim will be resolved at the determination of any liability hearing.

3. [19]

   Mr Parker submits that the expert evidence will take a considerable amount of time as it will involve automotive engineering evidence, although I observe that an order that there be concurrent evidence (which is probably inevitable) would likely shorten this evidence. Mr Parker also says that the second defendant proposes to adduce evidence from at least 3 lay witnesses.

4. [20]

   As to the issue with the third defendant set out in its proposed cross-claim, Mr Parker submits that whether or not the CTP policy covers the circumstances of the accident is contested, and until that issue is resolved, Qube has to defend the action as a prudent insured, which causes complexity and ambiguity as to appropriate source of instruction to advance the matter. The resolution of this issue, he submits, will depend on a discrete finding as to whether or not the accident was caused by the fault of Qube in the use and operation of the vehicle. If QBE succeeds in denying coverage, then Qube will be left to conclude the proposed damages trial without QBE present. A separate trial on liability, he submits, would determine the plaintiff’s entitlement to recover damages and resolve the proposed cross-claim.

5. [21]

   Mr Parker acknowledges that the court is generally reluctant to grant separate trials on specific issues for reasons advanced by Kirby and Callinan JJ in Tepko Pty Limited v Water Board (2001) 206 CLR 1; [2001] HCA 19 at [168] – [171]:-

6. [22]

   In Mr Parker’s submission, those concerns fall away where what is to be determined is an entire case on liability rather than a separate issue. He submits that a separate trial will facilitate the just quick and cheap resolution of the real issues in these proceedings.

7. [23]

   Mr Catsanos SC, on behalf of the third defendant, submits that the question of a separate trial is a matter for the court, but observes that the severity of the plaintiff’s injuries is a matter of common ground, and that the limited heads of damage are such that the undesirable consequences of severing issues are not displaced. Thus in his submission it would be a more efficient use of resources and more cost effective for all issues to be determined at the same time.

8. [24]

   Mr de Meyrick, on behalf of the plaintiff, opposes the application and submits that the separate determination of issues is an exceptional measure distinct from the ordinary course taken of determining the issues in their totality. He says that the question of liability in fact involves several separate determinations, including the liability of each of the three defendants and the issue between the second and third defendant, if the proposed cross claim proceeds. He notes that if there is a separate trial on liability, the plaintiff is likely to give evidence at both the liability and damages trial, which I accept. It is the case that the plaintiff, who suffered a traumatic brain injury, would have to participate in two separate trials which, he submits, is inefficient. He says that it is possible that there may be issues as to the plaintiff’s credibility, which would be undesirable. He further submits that a separate trial on liability is inappropriate as it will not resolve the proceedings entirely.

9. [25]

   Mr de Meyrick relies upon a recent judgment of Bellew J in Wipro Ltd v State of New South Wales & Anor [2022] NSWSC 907, where his Honour, quoted from a judgment of Hallen AsJ, as his Honour then was, in Southwell v Bennett [2010] NSWSC 1372 at [15]:

10. [26]

    In Mr de Meyrick’s submission, the second defendant has not demonstrated that the court should depart from the usual position that all questions should be determined at the same time.

11. [27]

    As to the proposed cross-claim, Mr Parker accepts that the cross-claim is out of time, but he submits that in all of the circumstances, the second defendant should be granted leave. There is no suggestion that the third defendant has suffered prejudice caused by the effluxion of time.

12. [28]

    The plaintiff and the first defendant neither consent to nor oppose a grant of leave to the second defendant to file the proposed cross-claim.

13. [29]

    Mr Parker gleans from exhibit 1 that QBE’s objection to the filing of the cross-claim is based on an assertion that the statutory policy issued under the MACA is not a contract of insurance governed by the Insurance Contracts Act, that the CTP policy does not respond to all aspects of the pleading advanced by the plaintiff, that the proposed cross-claim is in breach of s 77 of the MACA, that the cross-claim is an abuse of process because QBE is joined pursuant to s 79 of the MACA, that the cross-claim is to be issued for a collateral purpose being for a recovery of costs and is to be issued contrary to s 77, that Qube has acted contrary to s 77, that there is no breach of the statutory policy and that the claim based on breach of contract is ill-founded.

14. [30]

    Mr Parker submits that the proposition that the CTP policy is not a contract of insurance (if that is what is being asserted) raises an important legal issue with potentially wide-ranging consequences. He concedes that whilst theoretically the court can give judgment without a formal cross-claim in accordance with section 90 of the CPA, in his submission the better course is for a pleading of the cross-claim to be in place so that the parties can plead their relevant positions and the court can then adjudicate on the issues as defined. In his submission, the matters raised in exhibit 1 are matters that ought not to be disposed of as a preliminary matter on the basis that the court declines to extend time for the issuing of a cross-claim. Rather, he submitted that it is desirable that all issues arising from the plaintiff’s accident – including any relevant insurance issues – be determined in the same proceedings.

15. [31]

    Mr Catsanos relies upon exhibit 1. He says that QBE’s position, and that of the plaintiff, is that the subject accident does not fall within the ambit of s 3A of the MACA and thus is not covered by the CTP policy prescribed pursuant to s 10 of the MACA. I observe that the primary position of the plaintiff is that the accident does not fall within the ambit of s 3A, but his fallback position is that it does. The essential point of QBE’s opposition to Qube’s application to file a cross-claim, in Mr Catsanos’s submission, is that it is of no utility, that it reflects a breach of s 77 of the MACA and that it will only generate delay and unnecessary costs.

16. [32]

    Mr Catsanos submits that the issue said by Qube to generate the cross-claim involves ground anticipated by the legislature, and that s 79 of the MACA deals with the not uncommon situation when injuries arising out of an accident involving a motor vehicle can give rise to controversy as to whether or not particular fact situations satisfy the requirements to engage a CTP policy. He says that if the plaintiff’s allegations in the Third Amended Statement of Claim are made out, they fall outside the scope of s 3A of the MACA, which he concedes is a triable issue requiring determination by a court. He observes that the third defendant has been joined to the proceedings as a result of it intervening pursuant to s 79 of the MACA, the purpose of which is to permit CTP insurers to intervene in proceedings with respect to their liability to indemnify the person allegedly at fault, particularly where there may be a dispute about whether or not the liability of a defendant is under a CTP policy, employer’s liability, public liability or some other cause of action. Mr Catsanos re-iterates what is contained in Mr Jones’s letter – that there is no dispute that Qube held a valid CTP policy and that there would be no impediment to QBE indemnifying Qube under that policy were this purely a claim under the MACA. Rather, in his submission, it is a confluence of circumstances which puts QBE in the position where it cannot act for Qube in relation to the dispute because of the plaintiff’s categorisation of the accident.

17. [33]

    Mr Catsanos says that the proposed cross-claim does nothing more than engage the indemnity issue specifically addressed by s 79 of the MACA. He submits that this is so is reflected in the symmetry between ss 79 and 77 of the MACA. Section 77 prohibits an insured from incurring expense in any litigation without the consent of the third party insurer. Thus it follows, in his submission, that the proposed cross-claim necessarily puts Qube in breach of s 77 as QBE has not consented to the costs generated by the proposed cross-claim. He further submits that the proposed cross-claim is unprecedented in practice.

18. [34]

    Mr Catsanos points out that the CTP insurer manages the liability for the claim, as the claim is made on the insurer rather than the insured. So much can be accepted: see QBE Insurance (Australia) Ltd v Mordue [2015] NSWCA 380 at [86] per Simpson JA. He submits that there is no occasion for an insured to cross-claim in circumstances like the present, where there is a dispute as to whether or not the policy responds. He says that there is no point in granting leave to file the proposed cross-claim as the objects of the MACA have been satisfied and the court will ultimately determine the controversy as to the categorisation of the accident.

19. [35]

    Finally, Mr Catsanos says that the real motivation for the cross-claim is the recovery of costs. He submitted that if the court ultimately finds that the CTP policy is invoked, all parties will be able to address on the question of costs. He says that Qube seeks to forestall the issue by suggesting that the opposition to the filing of the cross-claim is a matter requiring the court’s adjudication at some later time and should not be dealt with on a preliminary basis. In his submission, that adjudication should take place now, on this application.

Consideration

1. [36]

   The principles which apply to the ordering of a separate question are well-settled. In Idoport Pty Ltd & Anor v National Australia Bank Ltd & Ors; Idoport Pty Ltd & Market Holdings Pty Ltd v Donald Robert Argus; Idoport Pty Ltd “JMG” v National Australia Bank [2000] NSWSC 1215 (Idoport), Einstein J said (dealing with Part 31 r 2 of the then Supreme Court Rules 1970) at [6] – [8]:-

2. [37]

   See also Hoban v New South Wales Land & Housing Corporation [2008] NSWSC 1121 (Hoban) per McCallum J, as her Honour then was. That case, which concerned a child who had suffered brain damage, was about re-joining liability and quantum when an order severing them had previously been made.

3. [38]

   I start from the position that in the usual case, all issues will be heard and determined at once. In this particular case, the resolution of the proposed separate issue will not entirely dispose of the proceedings. Assuming his success on liability, the plaintiff, who has suffered a traumatic brain injury, will have to give evidence twice, both in the proposed liability and damages hearings. Further, there will likely be a delay between the hearing of liability and damages, in circumstances when the plaintiff was injured in August 2016, some 7 years ago. That in itself, in my opinion, militates against the order sought. I observe that there is no consensus as to the likely length of any hearing. The plaintiff estimates that the trial will take 8 days – 5 days for liability and 3 days for damages. The second defendant estimates that the trial will require 15 days – 5 days for liability and 10 days for damages. Moreover, such is the dispute between the defendants, that there is every possibility that there will be an appeal from the decision on liability with the result that the plaintiff’s case will be even further delayed. I note that delay has already created circumstances where three of the plaintiff’s medical experts have retired, so that he has suffered the additional expense of briefing three new experts.

4. [39]

   In Idoport, Einstein J observed that it was the experience of the courts which suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings, but has the reverse effect, adding delay and expense to the resolution of the litigation. I would add that, if I were to separate liability and damages, there would likely be little prospect of the matter settling until after the determination of the separate question (and after an appeal if that eventuates). If I refuse the application, a court ordered mediation is likely to occur in the foreseeable future, and the matter has a much better chance of resolving within a reasonable time period.

5. [40]

   Whilst I accept that a separate trial on liability will likely result in a quicker and cheaper hearing for one or some defendants, as McCallum J observed in Hoban at [12], if that were the guiding principle, all cases would have liability and quantum separated.

6. [41]

   I have taken into account the matters set out in paras [38] and [39] above, the well-known overriding purpose of the UCPR and the dictates of justice. The overall consideration in this case is that there should not be any undue delay for the plaintiff, who it is agreed, has suffered a debilitating brain injury. In my opinion, the just and timely determination of the proceedings as a whole at a cost affordable to all parties, the efficient disposal of the business of the court and the efficient use of available judicial and administrative resources all favour both liability and damages being heard at once. I have come to the view that there ought not be a separate determination of liability and I dismiss that part of the second defendant’s application.

7. [42]

   It should be noted that the second defendant attempted to have the cross-claim issue determined early in 2022. For various reasons, beyond the parties’ and the court’s control, that did not occur. I accept for present purposes, that the genesis of Qube’s dispute with QBE occurred in January 2021 when its solicitors first wrote to QBE seeking indemnity pursuant to its CTP policy.

8. [43]

   QBE is on record saying that it will indemnify Qube if the accident falls within the ambit of s 3A of the MACA. There remains a dispute between the second and third defendant about the extent of that indemnity, and in particular taking into account QBE’s statements found in exhibit 1 that “if a finding that QBE is obligated to indemnify Qube is made by the court, then QBE will have a liability for the plaintiff’s claim (subject to its merits) from the date that claim was made against QBE, namely 31 March 2022 to the date of judgment”, and “QBE opposes any order of costs being made against it for proceedings between the plaintiff and Qube before the plaintiff had made his motor accident claim against QBE on 31 March 2022”.

9. [44]

   This is not a summary dismissal or a strike out application, but in my opinion the question is whether Qube has an arguable claim such that it should be granted leave to file a cross-claim to ensure that all matters in dispute are determined at once. It seems to me (notwithstanding Mr Catsanos’s submission that such a cross-claim is unprecedented), that the extent of QBE’s indemnity to Qube (if any), including any liability for its costs, and its claim in contract are triable issues. I make no comment about the strength or weakness of the proposed cross-claim. I find only, on the very limited evidence before me, that it is arguable. QBE is not without remedy. No doubt if QBE is successful, there will be an application by it for indemnity costs as against Qube.

10. [45]

    I propose to grant leave to the second defendant to file its proposed cross-claim, which will be known as the third cross claim in these proceedings.

Costs

1. [46]

   The parties agree that costs of each party are to be costs in the cause.

Orders

1. [47]

   I make the following orders:-

   1. (1)

      I dismiss that part of the second defendant’s motion seeking an order pursuant to r 28.2 of the UCPR.

   2. (2)

      I grant leave to the second defendant to file and serve the third cross-claim found at annexure “A” to its motion within 7 days, i.e. by 6 July 2023.

   3. (3)

      The third defendant is to file and serve a defence to the third cross-claim by 3 August 2023.

   4. (4)

      Costs of each party are costs in the cause.