Newcastle Resources Pty Ltd (formerly known as SCE Resources Pty Ltd) v Certain Underwriters at Lloyd’s Syndicate CVS 1919 subscribing to policies numbered LS00100XL, LS00100BU and STA0222BU (No 2)

1. [1]

   I published my principal judgment in this matter on 1 November 2022. [1] I shall use the same defined terms here.

2. [2]

   In relation to the claim made by the Council against Newcastle in respect of Future Road Replacements I said:

3. [3]

   I held that, to this extent, the Policies did not respond to the claim made by the Council against Newcastle.

4. [4]

   Newcastle now seeks leave to reopen its case to tender a letter written by the Council’s solicitors to Newcastle’s solicitors.

5. [5]

   In that letter, the Council’s solicitors set out passages of my judgment, including those that I have repeated above, and continued:

6. [6]

   The letter refers to pars [24] and [25] of the Council’s Second Amended Technology and Construction List Statement in the Underlying Proceedings.

7. [7]

   In its List Statement, the Council alleges:

8. [8]

   In support of the application for leave to reopen Mr Lloyd SC and Mr Newton submitted that the significance of the Council’s solicitor’s letter was:

9. [9]

   These submissions focused on the second paragraph in the passage from the Council’s solicitor’s letter which I have set out above.

10. [10]

    However, in the penultimate paragraph of that letter, the Council’s solicitors refer to the allegations made by the Council at par 25(ii) of its List Statement (that it will incur costs to “rectify the Council Roads Damage and prevent further damage”) and state that that is “a reference to an objective of preventing further consequential damage that might be incurred by an expanding road base remaining in situ”. (Emphasis added.)

11. [11]

    The passages I have emphasised seem to me to confirm, rather than contradict, the correctness of the Underwriters’ contentions and my findings that an element of the Council’s claim in the Underlying Proceedings is the costs it will incur to “prevent further damage” to its roads and “consequential damage” that “might” be sustained if Mix 3 causes further expansion of the road base. This is, or may well include, damage not yet sustained. Whether or not Council’s current case theory is currently narrower, it is open to the Council, based on the claim it makes in its List Statement, to pursue this claim. If it succeeds, the Policies will not respond to this aspect of its claim.

12. [12]

    In any event, I do not see how the matters stated in the Council’s solicitor’s letter affect my conclusions concerning Exclusion 13.3. Even if, contrary to my opinion, the Council’s claim should be seen as confined to existing damage in its roads, it is still a claim arising out of or connected with the removal of Mix 3 from the road base.

13. [13]

    In those circumstances, the additional evidence comprised by the Council’s solicitor’s letter cannot affect the outcome of the proceedings and, for that reason alone, I am not satisfied that it is in the interests of justice to grant Newcastle’s application for leave to reopen its case. [5]

Relief

1. [14]

   At [144] of my principal judgment I held that Newcastle was not entitled to the declaratory relief it sought. At [146] I said I would invite submissions as to whether any alternative declaratory relief should be made.

2. [15]

   Newcastle submitted that I should make the following declarations:

   1. (1)

      Declare that the defendants are obliged to pay, in their respective proportions, the expenses incurred by the plaintiff in the defence of the cross-claim brought against the plaintiff by Lake Macquarie City Council (“Council”) in proceedings in the Supreme Court of New South Wales with case number 2017/295403.

   2. (2)

      Declare that the defendants are obliged to pay, in their respective proportions, the expenses incurred by the plaintiff in the defence of the claim by the Council, brought in proceedings in the Supreme Court of New South Wales with case number 2018/77899 (“2018 proceedings”), for compensation for the Council’s liability to property owners for damage to their property adjacent to the Council’s roads.

   3. (3)

      Declare that the defendants are obliged to pay, in their respective proportions, the expenses incurred by the plaintiff in the defence of the claim by the Council, brought in the 2018 proceedings, for compensation for damage to roads and related infrastructure owned by the Council, such as kerbing, drains and the like, which the Council has repaired from time to time at its own cost.

3. [16]

   The Underwriters submitted that the making of such declarations would be hypothetical because there are “contingencies to be satisfied as a condition of indemnity”, being:

4. [17]

   I do not agree that the proposed declarations would be hypothetical. They reflect my findings and to that extent, quell a dispute between the parties. Their utility may be limited, but not to the point of being hypothetical.

5. [18]

   Alternatively, the Underwriters submitted that the declarations sought by Newcastle should be qualified by inserting the words “with the prior written consent of the defendants” before the words “in the defence of the cross-claim” reflecting the definition of “Defence Costs” that I set out at [66] of the principal judgment.

6. [19]

   At [74] of the principal judgment I recorded that the Underwriters had not suggested that the requirement of the Underwriters’ “prior written consent” to the incurring of costs by Newcastle was relevant to the question of whether I should make the declarations sought by Newcastle.

7. [20]

   However, on reflection, and as it is undoubtedly a condition of indemnity that such consent be obtained, I think it appropriate to add the words proposed by the Underwriters to the declarations sought.

8. [21]

   The Underwriters also submitted that declaratory relief should be confined to defence costs associated with claims for damages to the property of third parties; that is, to the claim for Council Liabilities. The first two declarations sought by Newcastle are so confined. The third relates to the claim for Council Repair Costs that, as I found at [27] of the principal judgment, the Underwriters accepted were within cover.

9. [22]

   In those circumstances I make the following declarations, incorporating the words proposed by the Underwriters into the form of declarations proposed by Newcastle:

   1. (1)

      Declare that the defendants are obliged to pay, in their respective proportions, the expenses incurred by the plaintiff with the prior consent of the defendants in the defence of the cross-claim brought against the plaintiff by Lake Macquarie City Council (“Council”) in proceedings in the Supreme Court of New South Wales with case number 2017/295403.

   2. (2)

      Declare that the defendants are obliged to pay, in their respective proportions, the expenses incurred by the plaintiff with the prior consent of the defendants in the defence of the claim by the Council, brought in proceedings in the Supreme Court of New South Wales with case number 2018/77899 (“2018 proceedings”), for compensation for the Council’s liability to property owners for damage to their property adjacent to the Council’s roads.

   3. (3)

      Declare that the defendants are obliged to pay, in their respective proportions, the expenses incurred by the plaintiff with the prior consent of the defendants in the defence of the claim by the Council, brought in the 2018 proceedings, for compensation for damage to roads and related infrastructure owned by the Council, such as kerbing, drains and the like, which the Council has repaired from time to time at its own cost.

Costs

1. [23]

   As the Underwriters pointed out, this litigation was pursued with a view to establishing that Newcastle was entitled to be fully funded for its defence costs in the Underlying Proceedings by the Underwriters.

2. [24]

   Newcastle has not established that position and the declarations I have made fall short of the relief sought.

3. [25]

   However, Newcastle was successful in relation to a number of the issues put forward, as discussed in my principal judgment.

4. [26]

   In those circumstances, in my opinion the appropriate costs order is that the defendants should pay half of the costs incurred by the plaintiff in these proceedings.