Johnston v Endeavour Energy

1. [1]

   On 17 October 2013, significant areas of the Blue Mountains to the west of Sydney, were burnt out by a fire which is alleged to have started in Links View Road, Springwood.

2. [2]

   Fortunately, no lives were lost. However, the bushfire which spread through the Springwood area also impacted on adjoining areas such as the township of Winmalee. Considerable property was lost. Houses were destroyed. The contents of houses, motor vehicles and other personal property were destroyed. Many of the residents suffered personal injury, particularly by way of post-traumatic stress disorder.

3. [3]

   Some, but not all of the houses which were destroyed were covered by insurance. Those that were covered by insurance were not always insured for the full value of the replacement cost. Some, but not all, of the personal property, being the contents of the houses that were destroyed, or motor vehicles or other personal property, were insured. Often, not all of the value of the contents or personal property was insured.

A Representative Action is Commenced

1. [4]

   On 16 May 2014, Mr Sean Johnston as plaintiff commenced representative proceedings pursuant to Part 10 of the Civil Procedure Act 2005 (“the Civil Procedure Act”) in this Court against Endeavour Energy. Mr Johnston described the group which he was representing in the following terms:

2. [5]

   Endeavour Energy defends the Johnston proceedings, denying that it was negligent and denying that it is legally liable for the loss and damage which occurred. In an Amended Defence filed by Endeavour Energy, it relied upon the provisions of Part 4 of the Civil Liability Act 2002 (“the Civil Liability Act”), nominating Osborne Aviation Services Pty Ltd, as a concurrent tortfeasor. In March 2015, Osborne Aviation Services Pty Ltd (“Osborne Aviation”) was joined to the proceedings as a second defendant. Osborne Aviation also denies that it is legally liable to pay damages arising out of the October 2013 bushfire. Cross‑claims between the defendants have been filed.

3. [6]

   Prior to the opt out process being put into place by consent order, Maddens Lawyers (“Maddens”) who are acting for the plaintiff, Mr Johnston, had received a letter from William Roberts Lawyers (“William Roberts”) informing them that they, William Roberts, acted for Insurance Australia Group Ltd. The letter requested a copy of the Statement of Claim in the Johnston proceedings.

4. [7]

   In August 2014, in the course of the usual case management procedure, orders were made with respect to the opt out process in accordance with s 182 of the Civil Procedure Act. The Court required the plaintiff to advertise in identified newspapers, and to place a public notice on the website of Maddens. The Court also ordered that a copy of the relevant documents be sent by pre-paid post to people who had registered their interest in the proceedings with Maddens. As well, the opt out orders, notices and documents were posted on the Court’s website.

5. [8]

   The Court’s orders specified 4pm on 10 October 2014, as the time by which any person who was a group member was required to opt out of the Johnston proceedings. This needed to be done by filing an appropriately completed opt out notice with the Court.

6. [9]

   Prior to the last date and time for opting out, seven opt out notices were filed, by individuals on their own behalf.

7. [10]

   On the afternoon of 10 October 2014, Mr Bill Petrovski, a partner of William Roberts, signed six opt out notices in his capacity as a solicitor (“the insurer opt out notices”) which were filed that afternoon which purported to opt out all of the individuals named in the notices, either directly, or as listed in a schedule. Collectively, the insurer opt out notices identify a total of 565 individuals and entities. That number includes individual members of a family who may have suffered the same loss. For example, a husband and wife are listed as individuals on that list, although they may jointly have lost their home.

A Second Representative Action is Commenced

1. [11]

   Two weeks later, on 24 October 2014, Peter and Yvonne St Barbe More also commenced representative proceedings pursuant to Part 10 of the Civil Procedure Act against Endeavour Energy, claiming damages arising out of the October 2013 bushfire. Mr William Petrovski of William Roberts, is the solicitor acting for Mr and Mrs St Barbe More.

2. [12]

   It will be convenient to refer to these proceedings as “the Insurers proceedings”.

3. [13]

   The Insurers proceedings initially defined the group members being represented by Mr and Mrs St Barbe More in the following way:

4. [14]

   In Schedule 1, referred to in that paragraph, the 565 individuals identified in the insurer opt out notices filed in the Johnston proceedings, were specifically named, as group members of the Insurers proceedings.

5. [15]

   Subsequently, the definition of group members was amended to specifically exclude existing group members in the Johnston proceedings. That amendment meant that the group members in the Insurers proceedings were defined in these terms:

6. [16]

   Significantly, the next paragraph of the Further Amended Statement of Claim set out the nature of the claims made on behalf of the group members, so required by s 160 of the Civil Procedure Act. The nature of the claims related only to loss and damage “to property”, or “to property and person”, caused by the alleged breaches of duty or negligence. No claims were included solely for personal injury or mental harm. Whether the nature of the claims were intended to include any claim for personal injury or mental harm is not entirely clear. The phrase “loss and damage … to property and person” is not apt to include a claim for personal injury or mental harm. This issue need not be resolved here.

7. [17]

   Later in the course of the Insurers proceedings, Mr and Mrs St Barbe More, also joined Osborne Aviation to the insurers action, as a second defendant.

8. [18]

   In the Insurers proceedings, Endeavour Energy and Osborne Aviation both deny that they are legally liable for any loss and damage flowing from the October 2013 bushfire.

9. [19]

   Both the Johnston and the Insurers proceedings have been fixed for final hearing by the Court in February 2016. Both have in place an interlocutory timetable of the necessary steps to achieve a hearing at that time. The Court has indicated that both matters will be heard at the same time, with evidence in one proceeding being evidence in the other.

10. [20]

    The nature of the cases being brought is largely, but not entirely, identical on liability issues. There are many common allegations of fact and law.

Who are the Insurers?

1. [21]

   According to the evidence put before the Court, the insurer of each of the 565 individuals who were opted out of the Johnston proceedings by the insurer opt out notices, and who are included as members of the defined group in the Insurers proceedings, include a number of entities which are part of Insurance Group Australia Ltd. They include:

2. [22]

   Between these insurers, 24 policies are relevantly involved. The details of the policies and the number of insureds under the policies are addressed later.

3. [23]

   One of the policies offered by CGU is entitled “Bendigo Bank Listed Events Home Insurance”. Wesfarmers offered policies in its own name, in the name of Lumley Insurance, and also Coles Insurance.

4. [24]

   It will be convenient to refer to these entities collectively as “the Insurers” unless necessary to specify an individual company.

Some Relevant Facts about the Johnston Group Members

1. [25]

   In the Johnston proceedings, by the end of 2014, Maddens had received registrations from a total of 348 people and entities identifying themselves as group members. The effect of this registration is that these individuals and entities, having identified themselves as group members, have indicated their interest in being included in the Johnston proceedings.

2. [26]

   The way in which the registration system at Maddens works has the effect that, differently from the listing of the individuals in the insurer opt out notices, or in the Schedule to the Statement of Claim in the Insurers proceedings, one registration is to be recorded for multiple members of families who may have suffered losses including different losses.

3. [27]

   Of the 348 registrants, 137 have signed a costs agreement with Maddens. The full and complete terms of the costs agreements are not before the Court, although a redacted version is in evidence. This version has had removed references to the hourly rates by which legal costs are to be charged.

4. [28]

   The 137 who have signed costs agreements have thereby retained Maddens as their lawyers to act for them in the recovery of all their losses arising from the bushfire. That recovery was to be undertaken through a representative action, namely, the Johnston proceedings.

5. [29]

   According to the evidence of Mr Pendergast, who is the solicitor on the record in the Johnston proceedings, and the principal solicitor of Maddens, of the 137 group members who have signed costs agreements with his firm, 90 of them are listed in the insurer opt out notices. Of the remaining 211 group members who have registered with Maddens, 117 individuals are listed in the insurer opt out notices.

6. [30]

   The fact that a number of people have been opted out from the Johnston proceedings by the insurer opt out notices was, I infer, not the subject of direct instructions from the client to William Roberts. It is necessary to exclude the plaintiffs, Mr and Mrs St Barbe More, from this conclusion, and more generally from the following remarks with respect to evidence and authority.

7. [31]

   Although there is no direct evidence relating to Mr and Mrs St Barbe More giving instructions to Williams Roberts to commence proceedings on their behalf, the fact that each of these plaintiffs completed the necessary affidavits in the Statement of Claim is, in the absence of any evidence to the contrary, more than sufficient to enable me to draw the conclusion that they gave specific instructions to commence the Insurers proceedings in their name as plaintiffs.

8. [32]

   It seems that on or around 14 October 2014, NRMA Insurance sent letters to their insureds informing them that it had filed opt out notices in the Court. The other IAG insurers sent out letters which were largely to a similar effect. After these letters were sent, a number of group members contacted Maddens and explained their circumstances and their concern with what had occurred. This evidence was objected to on the basis that it was inadmissible hearsay. I regard it as admissible for the reasons which will be explained in due course.

9. [33]

   The Court also received correspondence from a group member expressing concern as to what had occurred, saying, in general terms, that they had given no authority to be opted out of the Johnston proceedings, seeking to have the position reversed, and asking to be restored to the Johnston proceedings. That group member was informed that they should seek legal advice with respect to their concerns.

10. [34]

    The objected to, but admissible, evidence provides four examples of specific individuals affected by their insurer opt out notice. Their names were not provided to the Court but, for reasons which are far from clear, they were referred to by a pseudonym initial. Apparently, their identities were known to the parties and no objection was taken on the basis that the names were not revealed.

11. [35]

    This approach to the evidence about these individuals, adopted unilaterally by Maddens, and apparently concurred in by the other parties to the Motion, is to be deprecated. It pays no attention to the fact that this Court, if asked to consider making a suppression or non-publication order, must take into account that a primary objective of the administration of justice is “… to safeguard the public interest in open justice”: s 6 Court Suppression and Non‑Publication Orders Act 2010 (“the Court Suppression and Non-Publication Orders Act”).

12. [36]

    In order to make a suppression or non-publication order of the names of such individuals on the material put before the Court on this Motion, the Court would have to be persuaded that it was necessary in the public interest to make such an order, and that public interest significantly outweighed the public interest in open justice: s 8 Court Suppression and Non-Publication Orders Act. The Court was not asked to, and did not engage in, such an exercise. The following references to individuals by pseudonym, merely reflects the evidence before the Court.

Evidence of Individuals

1. [37]

   In an affidavit sworn by Mr Pendergast, he set out the specific facts and circumstances as they had been reported to him, or his firm, by individuals identified as “A”, “B”, “C” and “D”. The pseudonyms “C” and “D” seem to in fact be two sets of spouses, or partners, either in life or in property ownership. I would take from Mr Pendergast’s evidence that there are a number of individuals providing instructions to him or his firm, and who are the source of his stated information and belief.

2. [38]

   Speaking generally, Mr Pendergast, or staff in his firm, received phone calls from these individuals, each of whom had registered with Maddens as claimants in the Johnston proceedings. As well as the evidence of Mr Pendergast, one of the employed solicitors at Maddens has annexed ten file notes, each of which refers to and notes (to the extent which the file note remains unredacted) the receipt of a phone call from a person seeking advice about their position in light of the insurer opt out notices.

3. [39]

   Objection was taken to this evidence being admitted on the Motion on the basis that it was hearsay, as it undoubtedly was. However, on any interlocutory application, evidence which is given on information and belief is admissible providing the source of that material is identified: s 75 Evidence Act 1995 (“the Evidence Act”). Accordingly, there is no basis on which to reject this evidence, when considering any of the interlocutory relief which is being sought.

4. [40]

   Further objection was taken when the Amended Notice of Motion was filed on 2 April 2015, in which one group of the orders sought included declarations of invalidity of the insurer opt out notices. It was submitted by the insurer that the declarations sought were in the nature of final relief and that the evidence objected to could not be admitted in proceedings which encompassed a form of final relief. The applicant, Mr Johnston, accepted that this was so, but submitted that the fact of the communications and their content was, insofar as declarations were sought, admissible not for the truth of the content of the communications but for the fact of when the calls were made, by whom and what was said.

5. [41]

   In my view the material is admissible. The material is fully admissible as I have indicated above because the proceedings are interlocutory, and it is based on information and belief. If the Court comes to consider “final relief” by way of declarations, than it may need to set the evidence to one side other than on the basis submitted by the applicant, Mr Johnston, namely as establishing the fact of the communications, but not the truths of the content of them. Ultimately, not much may turn on this distinction.

6. [42]

   In light of these conclusions, I will review the evidence about these individual cases. According to Mr Pendergast’s evidence, the circumstances applying to the individuals were as follows.

7. [43]

   Individual A held an insurance policy with CGU for a camper trailer and its contents. He received a total payment of $12,500 for the trailer and contents which were destroyed in the bushfire. In addition, he owned a home which was completely destroyed, together with its contents. From an insurer, other than one of the Insurers for which William Roberts act, he received a payment of about $1M in respect of his home and contents loss. However, as is not uncommon in cases of this kind, he claims that there were further financial losses, either because items were uninsured or because his house and contents were underinsured. It is anticipated that these further losses would amount to approximately $500,000 over and above the $1M paid to him under his insurance policy.

8. [44]

   As well, it appears that Individual A is likely to have a claim for personal injury. Individual A had signed a conditional costs agreement with Maddens on 6 September 2014. He did not opt out of the proceedings on his own behalf, although he received the relevant notice.

9. [45]

   Individual B had a residential property which was completely destroyed by the fire, including all of its contents. He also had an investment property which suffered loss and damage. Both properties were insured, as was their contents, with the NRMA. However, he suffered additional losses over and above the sums insured.

10. [46]

    This individual has sought advice directly from Mr Pendergast on a number of occasions. He instructed Mr Pendergast that, as a consequence of the initial correspondence received from the NRMA, he was required by a stipulated date (14 November 2014) to provide details of his losses which were not covered by insurance because if he did not do so by that date he would be “shut out” from pursuing those losses in the proceedings brought by the Insurers.

11. [47]

    He had chosen not to opt out of the Johnston proceedings and wished to remain a group member of those proceedings.

12. [48]

    Individual C had signed a costs agreement with Maddens with respect to their claim for the total loss and damage of their property and contents which was significantly undervalued and underinsured. Individual C was insured with NRMA for home building and contents. Individual C had two children living at home at the time of the fire. Mr Pendergast anticipates that the family of Individual C, including the two children, are each likely to have a claim for personal injury arising as a result of the fire. One child is disabled.

13. [49]

    Individual C has sought advice directly from Mr Pendergast. A question arises as to the desirability of the children of Individual C being group members in the Johnston proceedings, and their parents being group members in the Insurers proceedings.

14. [50]

    Individual D actually describes two partners who suffered a total loss to their residential property as a result of the fire, and held insurance policies for home buildings, contents and a motor vehicle through NRMA. They were significantly under-insured.

15. [51]

    The payout between NRMA and Individual D has not yet been finalised. The home was insured for about $420,000 – a figure reached after using NRMA’s online home building value calculator. The cost to rebuild the home of Individual D is anticipated to be in the range of $750,000. The contents were also significantly under-insured.

16. [52]

    Individual D has consulted with NSW Legal Aid, as apparently have a number of other registrants in the Johnston proceedings, for assistance in lodging a dispute with Insurance Council of Australia about the impact that their use of the NRMA’s on-line home building value calculator has had on the sum insured. Individual D contends that the under-insurance of their home building property was a direct consequence of the inadequacies in the NRMA’s calculator. It is Individual D’s contention that the home building value calculator did not take into account additional “flame zone” rebuilding requirements which were applicable to their property and, no doubt, other properties in the Blue Mountains.

17. [53]

    At the date Mr Pendergast made his affidavit in December 2014, Individual D had received a payout pursuant to their contents policy, but had not received any payment in respect of their home buildings policy. There is no evidence of any change in that position at the time judgment was reserved.

Notice of Motion

1. [54]

   Against this background, on 15 January 2015, the solicitors for Mr Johnston, filed a Notice of Motion in the Johnston proceedings. The Notice of Motion named as respondents each of the insurers to which I have referred above and Mr and Mrs St Barbe More, who are the named plaintiffs in the Insurers proceedings, because they are persons affected by the orders sought. Endeavour Energy was also named as a respondent to the Notice of Motion. It took little part in the hearing on the Motion, concentrating its submissions on one issue only.

2. [55]

   At the time the Notice of Motion was filed, Osborne Aviation was not a defendant in the proceedings. After being joined to the proceedings, it was notified of the Notice of Motion and the issues raised. It was given an opportunity to appear and make submissions either orally or in writing. It elected not to participate in the proceedings on the Notice of Motion.

3. [56]

   The Notice of Motion sought orders pursuant to s 183 of the Civil Procedure Act for a process that would result in each of the Insurers compiling and distributing to each of the named individuals in the insurers opt out notice, a further notice about a number of identified matters.

4. [57]

   The purpose of the proposed procedure was to enable any one or more of the group members named in Schedule 1 to the Insurers proceedings, the opportunity to register any claims that they wished to make in the Johnston proceedings with Maddens, and to the extent of those claims, be permitted to become group members in the Johnston proceedings.

5. [58]

   The orders sought also provided for the setting aside of the insurer opt out notices to the extent necessary in respect of those wishing to elect to have any of their claims dealt with in the Johnston proceedings. The orders also sought court approval of the contents of the various Notices.

6. [59]

   On 2 April 2015, an Amended Notice of Motion was filed pursuant to leave being granted. The final version of the Amended Notice of Motion was filed on 5 May 2015.

7. [60]

   The principal relief sought in that Amended Notice of Motion is as follows:

8. [61]

   In order to consider the issues raised by the Motion, the nature of the Johnston proceedings and the relevant provisions of Part 10 of the Civil Procedure Act need consideration.

Nature of Representative Proceedings

1. [62]

   Part 10 of the Civil Procedure Act provides a range of powers with respect to representative proceedings.

2. [63]

   It is important to note that a plaintiff in representative proceedings occupies a position which, in many respects, differs from that of a plaintiff in an individual claim.

3. [64]

   The first feature of the Part 10 procedure is that a plaintiff can nominate themselves, by commencing proceedings under Part 10, as a representative of people who have claims which arise out of or in respect of the same, similar or related circumstances, and which otherwise comply with the provisions of s 157. The plaintiff can nominate themselves without the knowledge of, or the consent of, individuals to their inclusion in the proceedings. The issue of consent to participation in the proceedings is dealt with by the opt out procedure set out in s 162 of the Civil Procedure Act and the following sections.

4. [65]

   At the time of the commencement of the proceedings, there needs to be at least seven people who have claims against the same person, but there are no other provisions relating to the size of the group. In many cases the likely, and the maximum, size of the defined group is unknown, although estimates which may or may not be well informed, are often made.

5. [66]

   The second feature is that a plaintiff in representative proceedings retains standing to commence the proceedings against more than one defendant, even though the plaintiff does not have a claim against all of the defendants: s 158(2) Civil Procedure Act.

6. [67]

   The third feature is that a plaintiff, having commenced representative proceedings, retains standing to continue proceedings, including bringing an appeal from a judgment in proceedings, even though the plaintiff personally has ceased to have any claim against any defendant: s 158(3) Civil Procedure Act.

7. [68]

   Put differently, a plaintiff in a representative proceeding retains standing to participate, and to continue to conduct proceedings, in which he has no personal interest or available claim against any defendant. The rationale for this is that the named plaintiff is a person authorised, and permitted, by statute to represent the interests of all individuals who fall within the group membership description.

8. [69]

   Even though the plaintiff may have standing overall to conduct the proceedings, where a question requires determination that relates only to the claims of a particular member, that group member may be entitled to appear with respect to that question: s 169 Civil Procedure Act. Whether the Court permits that to occur is a matter for the Court’s discretion in the circumstances. It is not mandatory.

9. [70]

   Even if such a person is permitted to appear, the plaintiff remains a party to the proceedings although not personally directly affected by the determination of that individual’s claim.

10. [71]

    A court may give directions, including establishing a sub-group, and may appoint a person to be the representative of that sub-group where it is appropriate to deal with questions common to that sub-group: s 168 Civil Procedure Act. The plaintiff remains a party with respect to the proceedings in which the sub-group claims are being determined.

11. [72]

    A particularly important feature is that the Court retains control over the proceedings generally and, in particular, over the plaintiff who is the representative party. Where it appears to the Court on an application made by a group member, that a representative party is not able adequately to represent the interests of group members, the Court may substitute another group member as a representative party: s 171 Civil Procedure Act.

12. [73]

    Ultimately, the Court retains control over representative proceedings because approval of the Court is required for settlement or discontinuance: s 173 Civil Procedure Act. Even if an individual wishes to settle their claim, that settlement must be approved by the Court: s 174 Civil Procedure Act.

13. [74]

    Division 3 of Part 10 of the Civil Procedure Act deals with the giving of Notices. Division 4 of Part 10 deals with powers of the Court with respect to the determination of a matter in the representative proceedings. The Court is given extensive powers to grant relief in a wide variety of ways. Division 5 of Part 10 deals with appeals.

14. [75]

    Division 6 of Part 10 of the Civil Procedure Act contains a series of provisions described with the ubiquitous term “Miscellaneous”. Those provisions nevertheless contain important substantive matters. Two of the sections deal with costs. Section 182 deals with the suspension of limitation periods, and overrides the provisions in the Limitation Act 1969 (“the Limitation Act”).

15. [76]

    The final feature worth noting and examining, is the Court’s general power to make any order thought appropriate or necessary to do justice.

16. [77]

    Section 183 of the Civil Procedure Act, which is central to these proceedings, appears in that Division. It is in the following terms:

17. [78]

    Whilst not all of the provisions in Part 10 precisely mirror the provisions in the Federal Court of Australia Act 1976 (“the Federal Court of Australia Act), many do. Section 183 is the precise equivalent of s 33ZF of the Federal Court of Australia Act.

18. [79]

    As will be seen, there are a number of authorities referrable to s 33ZF of the Federal Court of Australia Act which express principles and views with respect to this general power provision. There is no decision directly on the provisions of s 183 of the Civil Procedure Act.

19. [80]

    It is also important to note that s 183 empowers the Court to make an order “of its own motion”. Whilst it is unnecessary in this judgment to examine whether, or to what extent, the rules of procedural fairness apply to the exercise of such a power, it is important nevertheless to note that it is not necessary for a party to proceedings, or a group member, to seek an order under this provision.

20. [81]

    The general context and purpose of representative proceedings is readily identified. In Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398, Brennan J noted a particular feature of representative proceedings at 408, where he said:

21. [82]

    In Mobil Oil Australia Pty Ltd v State of Victoria [2002] HCA 27; (2002) 211 CLR 1 at [12], Gleeson CJ noted that the primary object of legislation in establishing representative proceedings was clear. His Honour said that the object was:

22. [83]

    In this context, the provisions of s 183 are of importance, and ought be given a generous interpretation. The section is the legislative wellspring of the Court’s discretionary power to make orders where thought appropriate or necessary in, and thereby control, representative proceedings so as to ensure that justice is done, and to also ensure that large numbers of claims are dealt with consistently and fairly.

23. [84]

    This conclusion about the extent of the power in s 183 of the Civil Procedure Act accords with authorities in the Federal sphere, about s 33ZF of the Federal Court of Australia Act.

24. [85]

    In McMullin v ICI Australia Operations Pty Ltd (1998) 84 FCR 1 at 4, Wilcox J said of s 33ZF of the Federal Court of Australia Act:

25. [86]

    Sackville J observed in Courtney v Medtel Pty Ltd [2002] FCA 957; (2002) 122 FCR 168 at [48], that s 33ZF was couched in broad terms, and that there were good reasons for it to be given a generous interpretation. One feature which his Honour identified as important to that approach, was that the Court was given power to act of its own motion. As well, Sackville J at [51], noted the remarks of Brennan J in Carnie, referred to above in [81], about the importance of judicial control of the conduct of representative proceedings, and concluded that s 33ZF “… is directed to just such an issue”.

26. [87]

    The use of s 33ZF of the Federal Court of Australia Act has also been considered in a different variety of circumstances. Tamberlin J, in Johnstone v HIH Ltd [2004] FCA 190, said of s 33ZF, at [104], that:

27. [88]

    In a number of cases including Johnstone and Williams v FAI Home Security Pty Ltd (No.3) [2000] FCA 1438, the provision was used as the basis for an order for the correction of misleading communications to group members or potential group members, both in respect of the nature of the claims being brought, and in respect of the opt out process.

28. [89]

    Finkelstein J in Kirby v Centro Properties Ltd [2008] FCA 1505, considered that role of s 33ZF in dealing with “competing” class actions. At [26] he said:

29. [90]

    It seems that s 33ZF was used by his Honour to resolve opt out questions between competing class actions in Lopez v Star World Enterprises Pty Ltd (In Liq) (VG 133 of 1997, unreported, Finkelstein J 31 October 1997).

30. [91]

    In exercising any power under Part 10 of the Civil Procedure Act, including under s 183, the Court is obliged to give effect to the overriding purpose of the Civil Procedure Act. That purpose is to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56 Civil Procedure Act.

31. [92]

    I am conscious that even though s 183 of the Civil Procedure Act is properly to be regarded as a broad power, it is not an unlimited one. It is not to be used as a vehicle to rewrite the legislative precision of Part 10 of the Civil Procedure Act: Courtney at [52]. Nor is the statutory formulation “… to ensure that justice is done …:” to be ignored: Earglow Pty Ltd v Newcrest Mining Ltd [2015] FCA 328 at [33].

32. [93]

    Having regard to the nature of the relief sought in the Amended Notice of Motion, in my view the power granted to the Court by s 183 of the Civil Procedure Act is broad enough to ground the making of the orders sought in the Amended Notice of Motion provided that the Court is otherwise persuaded that it is a proper matter in which to exercise its discretion.

Standing

1. [94]

   The respondents, being the Insurers, and Mr and Mrs St Barbe More, submit that Mr Johnston has no standing to obtain any of the relief sought. Endeavour Energy did not join in with that submission.

2. [95]

   The respondents’ submission comprises the following elements:

3. [96]

   First, by reason of the definition of the represented groups in each of the two representative proceedings, the groups are discrete. That is, by reason of the definition of the group in the Insurers proceedings, one individual cannot be a group member in both proceedings. One can only be a group member in either the Johnston proceedings or the Insurers proceedings. The orders in the Amended Notice of Motion in the Johnston proceedings are targeted at “affected claimants”, being individuals who have been opted out of the Johnston proceedings and who, by group definition, are now members only of the Insurers proceedings. Accordingly, so it is submitted, the Amended Notice of Motion brought by Mr Johnston ought be characterised, in effect, as a process filed in one proceeding (the Johnston proceeding) seeking relief in another (the Insurers proceedings) a discrete proceeding to which Mr Johnston is a stranger, “… purportedly on behalf of other persons (“affected claimants”) whom he does not represent, and driven by lawyers who do not have an existing retainer with the persons on whose behalf they purport to seek relief”. The result of this, so it is submitted, is that there is no justiciable controversy properly before the Court about the present status of any individual as group members in the Johnston proceedings.

4. [97]

   Secondly, Mr Johnston, who has not opted out of his own proceedings is, as is the group which he represented, and now represents, not an interested party, in the sense of being a person affected by the insurer opt out notices. The only appropriate person to bring a motion such as the one brought by Mr Johnston, would be a person who was actually affected by the opt out procedure. That would mean that a person who was initially a group member in the Johnston proceedings could argue that the opt out procedure, so far as they were concerned, was invalid and therefore they remained a group member in the Johnston proceedings and ought not be a group member in the Insurers proceedings. The plaintiff, it is submitted, is not such a person.

5. [98]

   Thirdly, the relief sought by Mr Johnston requires a determination as to the authority of William Roberts to sign and file the opt out notices on behalf of the 565 individuals named. That authority derives from the relationship between the Insurers and their insured, which is dependent either in whole or in part on the principles of subrogation, or else the contract of insurance which each insured entered into with their insurer, or both. Whilst the respondents accept that notionally there may be a “matter in the constitutional sense” between one of the insureds and their insurer, in respect of whether the insurer had authority, or was otherwise entitled, to instruct solicitors to opt out of the Johnston proceedings, that matter is not justiciable as between Mr Johnston and the insurer respondents, in this Amended Notice of Motion, because Mr Johnston is not a party to the relevant contract of insurance.

6. [99]

   As it developed, this submission first identified the fact that any such controversy about the insurance policy was, with respect to the respective rights of the insured and insurer under a contract of insurance, which was regulated by Federal legislation: the Insurance Contracts Act 1984 (Cth) (“the Insurance Contracts Act”).

7. [100]

   It was submitted that, as a consequence, because there would be an adjudication of rights and liabilities under a contract which owes its existence to a Federal law, this Court in determining that issue was engaged in an exercise of judicial power arising under Chapter III of the Constitution.

8. [101]

   It was submitted that viewed in that way, there was no justiciable controversy because the parties to the contract were not active parties in the controversy before the Court.

9. [102]

   This submission concluded in this way:

10. [103]

    I am unpersuaded by the submissions that Mr Johnston has no standing. To the contrary, I am satisfied that Mr Johnston has the requisite standing to bring this Amended Notice of Motion, and thus obtain any of the relief sought in its amended form.

11. [104]

    I do not accept the submission that, properly characterised, what is being sought is for a stranger to the Insurers proceedings to interfere in those proceedings. It is clear that what is being attacked is the validity of the insurer opt out notices filed by William Roberts in the Johnston proceedings. The basal question which needs to be determined, and upon the determination of which the relief to be granted falls for consideration, is the validity of the insurer opt out notices. If those notices are invalid, then the integrity of the Court’s orders for the opt out process, and the integrity of the opt out process itself, which is in the Johnston proceedings, has been adversely affected. Mr Johnston, as the plaintiff, has standing and an interest to, by a notice of motion, explore that question. The fact that he may not be personally interested, in the sense of personally adversely affected, does not reduce his standing in a representative proceeding. As the plaintiff he represents the interests of all who fall within the group description. One cannot approach this question as the insurer respondents do, by first assuming the validity of the opt out process and then urging that Mr Johnston no longer represent those who have opted out.

12. [105]

    What is at issue with respect to the insurer opt out notices is a part of the membership of the group represented by Mr Johnston, namely the part which consists of the 565 individuals. Mr Johnston is entitled to know whether some or all of those members are part of the group which he represents in the litigation. He is entitled to know whether, in the conduct of this litigation, he is obliged to have regard to their interests or not.

13. [106]

    After all, the essence of proceeding under Part 10 of the Civil Procedure Act is that the plaintiff may not in fact have a claim against all parties that is viable, yet he can maintain his position as the plaintiff. Whilst he may not be a person named in the insurer opt out notices, that does not prevent him from having the standing to invite the Court to examine the validity of those notices.

14. [107]

    First, it is a matter relevant to the group which he represents, and on whose behalf he has commenced proceedings, for the Court to determine the membership of that group. The validity of the insurer opt out notice relates to the membership of the group.

15. [108]

    Secondly, assuming that the Insurers are correct about the determination of the present issues involving the Court in the exercise of Federal jurisdiction, which is a proposition which is by no means uncontroversial: see Buckee v The Commonwealth of Australia [2014] FCA 242, I am satisfied that the issues raise a “matter” as that term is used in a constitutional sense, such that this Court can determine in the legitimate exercise of Federal jurisdiction, and Mr Johnston’s claim for the relief set out in the Notice of Motion, as finally amended.

16. [109]

    The issue which falls for determination here is whether the insurer opt out notices are valid. That question involves the Court determining whether Mr Petrovski had authority, as a solicitor, to sign those notices on behalf of each of the individuals listed in the Schedules to the notices. As I have earlier held, Mr Johnston has sufficient standing to raise such an issue and to contend that the notices are invalid. The Insurers who instructed Mr Petrovski to file the insurer opt out notices are respondents to the Motion. They contend that the notices are valid and that Mr Petrovski was authorised by them to sign and file them. The dispute about the validity of the notices is not a hypothetical one. It concerns the membership of the group in the Johnston proceedings.

17. [110]

    In Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570, the majority (Mason, Murphy, Brennan and Deane JJ) said at 608:

18. [111]

    In the judgment of the High Court in In re Judiciary and Navigation Acts [1921] HCA 20; (1921) 29 CLR 257, at 265, the majority (Knox CJ, Gavan Duffy, Powers, Rich and Starke JJ) said:

19. [112]

    Hayne J expressed it in this way in Re McBain; Ex Parte Australian Catholic Bishops Conference [2002] HCA 16; (2002) 209 CLR 372 at 458 [242]:

20. [113]

    Here, the Insurers argued that the substantive dispute was in fact about the meaning and effect of the terms of the insurance policies entered into between the individuals named in the insurer opt out notices and the insurance companies which issued and underwrote the policies. The Insurers submitted that as the plaintiff, Mr Johnston, was not an insured under any of the policies, and that there was no application being made by any party to any of the policies, then the determination of the rights, or the extent of the rights granted under the policies was an entirely hypothetical question which could not constitute a “matter” sufficient to allow the Court to exercise any Chapter III powers, or any Federal jurisdiction.

21. [114]

    There are a number of reasons for rejecting these submissions. First, and perhaps most fundamentally, the dispute which falls for determination is not properly described as being limited to the questions of the proper construction of the insurance policies, or the rights arising under the policies. None of the relief sought is directed solely to any such question or questions. Rather, in seeking the relief set out in the Amended Notice of Motion, by reference to the evidence adduced, Mr Johnston seeks to persuade the Court that the solicitor who executed and filed the insurer opt out notices, was not authorised so to do.

22. [115]

    The insurer respondents contend that he was, and they adduced evidence of the terms and conditions of the insurance policies to establish Mr Petrovski’s authority. The question of Mr Petrovski’s authority to execute and file the insurer opt out notices is one of fact which the Court will need to determine. It is not the only question of fact to be decided before the Court considers whether the relief sought ought to be granted. The authority of Mr Petrovski, whilst it can be proved from the terms of the insurance policies, can also be proved in other ways and by other evidence, for example, by production of evidence of instructions being given to him directly by individuals, either orally or in writing.

23. [116]

    The reliance by the Insurers upon the terms of the policies as sufficiently authorising Mr Petrovski to execute and file the insurer opt out notices in order to resist the relief sought, raises the necessity for the Court to determine the questions of fact, relevant to his authority, including but not limited to the effect of the insurance policies.

24. [117]

    In no sense is this a hypothetical question. On the contrary, it is a real issue about the authority of the Insurers to instruct Mr Petrovski to do what he did.

25. [118]

    The second and additional reason to reject the respondents’ arguments relates to my earlier conclusion that Mr Johnston has sufficient standing to seek the relief set out in the Amended Notice of Motion. Questions of standing are intimately related to the nature of the relief claimed. As Gaudron J said in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [2000] HCA 11; (2000) 200 CLR 591 at [48]-[50]:

26. [119]

    In the same case, Gummow J said at [122]:

27. [120]

    It seems to me that if Mr Johnston has standing to seek the relief in the Amended Notice of Motion, and the determination of his entitlement to that relief requires a decision from the Court on the question of whether the insurance policies gave Mr Petrovski the authority to execute and file the insurer opt out notices, then there is a sufficient controversy to be “quelled”, and there is a matter in the constitutional sense.

28. [121]

    There is a third reason for declining to accept the submissions of the Insurers. The Insurers did not argue, nor could they have done so, that the principal proceedings in which Mr Johnston claims damages from Endeavour Energy and Osborne Aviation, was not a matter of legitimate and real controversy. If that is a necessary criterion to be adjudged, then clearly it is accepted by the Insurers that it is so. Mr Johnston seeks relief by way of damages for the tortious breach of a duty which he claims is owed to him.

29. [122]

    The determination of an interlocutory motion seeking to deal with one of the many steps taken in the preparation of the substantive proceedings for a final hearing will, provided it is a relevant step to ensuring the integrity of the proceeding so that the matter is made ready for a final hearing on all issues, be a matter in the relevant sense. Each question of fact to be determined will be part of the “matter”.

30. [123]

    Here there can be little doubt that the disposition of this interlocutory motion, will provide for the end of an interlocutory dispute which is a real and not hypothetical dispute, namely the validity of the insurer opt out notices. And, as well, the determination of an interlocutory application to the Court to exercise its powers under s 183 of the Civil Procedure Act, as a part of ensuring that the proceedings are ready for a final hearing.

31. [124]

    For each of these reasons, I am not persuaded that the Insurers submission that this Court is precluded from determining the relief sought in the Motion ought be upheld.

32. [125]

    It is convenient now to proceed to determine the question of the integrity of the insurer opt out notices.

Facts Relating to Insurer Opt Out Notices

1. [126]

   Mr Petrovski, although he swore an affidavit which was read in the proceedings, did not give any evidence in that affidavit as to the basis of his authority to execute and file the insurer opt out notices. Importantly, he did not suggest that he had instructions from any of the individuals named to opt out of the Johnston proceedings.

2. [127]

   The basis of his authority is to be gleaned from correspondence sent at the time. It will be necessary to refer to the significant features of the correspondence which is in evidence.

3. [128]

   On 27 May 2014, William Roberts wrote to Maddens informing them that they acted for Insurance Australia Ltd t/as NRMA Insurance. The letter informed Maddens that it was likely that the Johnston proceedings incorporated claims of:

4. [129]

   On 30 May 2014, Maddens sent to William Roberts a copy of the Statement of Claim which had been filed.

5. [130]

   On 22 August 2014, Maddens provided to Mr Petrovski a copy of the “Important Notice” which the Court ordered to be distributed to relevant people and publicly advertised. This “Important Notice” set out the procedure for opting out.

6. [131]

   On 10 October 2014, William Roberts wrote a letter to Maddens in the following form:

7. [132]

   The number of individuals or companies, the subject of those six opt out notices, is 565. There was no suggestion from Mr Petrovski that he had spoken to, or taken instructions directly from, the 565 individuals or companies, prior to executing and filing the insurer opt out notices.

8. [133]

   On 13 October 2014, NRMA Insurance sent a letter, which I infer is in standard form, to those who held insurance policies with it. I infer that the other Insurers in the IAG Group, sent a letter to a similar effect.

9. [134]

   The letter was signed by an officer of NRMA Insurance, who is described as a “Litigation Specialist – Bushfire Class Action Unit”. It included the following:

10. [135]

    Attached to that letter were five pages seeking details of uninsured losses. The recipient of the letter was given a month to complete that detail and return it to IAG. The recipient was informed that if that did not occur within one month, IAG would assume that they did not have any uninsured loss or, alternatively, did not wish to claim for it.

11. [136]

    The questionnaire with respect to uninsured losses asked the recipient to identify the types of uninsured losses which they had suffered, including personal injury, disease or illness (physical or psychological), property damage, and “other economic or financial loss”. The recipients of the letter and questionnaire were asked to set out supporting information for their claim for uninsured losses including photographs, documents providing proof of ownership or in support of the value of items, invoices and quotes of the cost of repair or replacement.

12. [137]

    On 12 November 2014, William Roberts served the Insurers proceedings. On that day a letter, which I infer was in standard form, was sent to all policy holders. It said:

13. [138]

    In addition to these standard letters sent to each of the insured, the insurer opt out notices gave rise to correspondence between Maddens and William Roberts. It is unnecessary to set out the entirety of the exchange of views between those solicitors.

14. [139]

    However, there are some statements, particularly by William Roberts, to which reference is relevant. In their letter of 30 October 2014 to Maddens, William Roberts included the following statements:

15. [140]

    In a letter of 3 December 2014 from William Roberts to Maddens, William Roberts confirmed that they acted for Insurance Australia Ltd and for the following insurers, to whom I have already made reference, namely, NRMA Insurance, CGU Insurance, Coles, WFI and Lumley. The last three names are business names of Wesfarmers General Insurance Ltd.

16. [141]

    The letter of 3 December 2014 includes this statement:

17. [142]

    In a letter of 12 December 2014 from Maddens to William Roberts, Mr Pendergast joined issue with the assertion in the earlier correspondence made by William Roberts on behalf of NRMA Insurance, that it was contractually entitled to conduct recovery actions and for that purpose to opt out its customers from the Johnston action. The letter drew attention to particular wording of the policy, and advanced a position that there was no contractual power to do what NRMA Insurance had done.

18. [143]

    Mr Pendergast’s letter asserted that by reason of the Johnston proceedings, which had been commenced first, the group members in those proceedings, who were insured with the Insurers were “dominus litis” and accordingly, had the right to take first priority to the recovered sum

19. [144]

    The balance after such recovery costs were deducted was, so it was contended, then due to be paid to the insurer. Mr Pendergast contended that the effect of removing the group members from the Johnston proceeding, and including them as group members in the insurer proceeding, was to reverse the priority of payment:

20. [145]

    Assuming Mr Pendergast’s position is correct, one might be forgiven for thinking that the real issue is whether it is the insurer or the insured who will carry the shortfall on any sums recovered, and the shortfall created by the unrecovered solicitor/client component of the legal costs.

21. [146]

    The facts to be derived from the correspondence suggest the following:

22. [147]

    The evidence before the Court includes each of the insurance policies pursuant to which instructions were given to William Roberts to act. It will be necessary in due course to analyse the relevant terms of those policies which are relied upon as giving the insurers their contractual rights. But, first, it is appropriate to identify the principles of subrogation as they exist in law. These principles are the context within which the insurance policies are written, and the context and background against which it is necessary to give content to the clauses in the insurance policy when interpreting them.

Subrogation

1. [148]

   It can be accepted for the purposes of this judgment that subrogation is a creature of equity, and does not depend upon principles of contract. However, a search for a single unitary theory which explains when subrogation will be permitted is unlikely to be fruitful.

2. [149]

   The right to subrogation arises from the conduct of particular parties in particular circumstances. In Australia, the defined circumstances, which according to principle give rise to subrogation, are those which would make it unconscionable for a defendant to deny a plaintiff’s right to subrogation: Re Dalma (No.1) Pty Ltd (In liq) [2013] NSWSC 1335 at [24].

3. [150]

   With respect to insurance policies, Brett LJ (as Lord Esher then was) said in Castellain v Preston (1883) 11 QBD 380 at 388 this:

4. [151]

   Mason J said in AFG Insurances Ltd v City of Brighton [1972] HCA 70; (1972) 126 CLR 655 this at p 663:

5. [152]

   Mason J went on to consider what Bret LJ said in Castellain which I have set out above. Of that passage, Mason J said at p 664:

6. [153]

   The authors of Meagher Gummow and Lehane’s Equity Doctrines and Remedies, (5th ed), suggest at [9-255] that a different situation may arise where insurance is for part only of the loss. They say:

7. [154]

   The authors draw attention to the position in Canada. The authors refer to a judgment of Ferguson JA in the Appeal Division of the Ontario Supreme Court in Globe & Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659, where his Honour identified a number of propositions at 668-670 including the following:

8. [155]

   This principle, although of some age, appears to have continued to be adopted in Canada in a series of cases up to, at least, 1975.

9. [156]

   My researches have not identified an Australian case which specifically adopts, or approves of, the proposition to which attention has been drawn.

10. [157]

    However, in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, Allsop P (with whom Beazley and Campbell JJA agreed), referred at [306]-[308] to the Canadian line of authority, and suggested that it was consistent with the preferred view in England. Allsop P also identified the view expressed in a number of textbooks that

11. [158]

    His Honour, having found that it was unnecessary to resolve the issue, went on to say at [308]:

12. [159]

    The decision of the House of Lords in Lord Napier and Ettrick v Hunter [1993] AC 713, is an important judgment, which considered the principles and application of the doctrine of subrogation. The case involved the recovery by certain insureds of a sum which was greater than the sum which had been paid to them by their insurers. In this case, the insureds had claimed first on the policies of insurance. Their claims had been met. The insureds then pursued an action in negligence against a third party.

13. [160]

    The House of Lords held that on payment by the insurers under the policies of insurance, the doctrine of subrogation had conferred on those insurers an equitable proprietary right in the form of a lien over the settlement monies obtained from the third party. The House of Lords held that the insurers were entitled to an injunction to restrain distribution of that fund until the amount paid by the insurers had been repaid to them.

14. [161]

    Lord Templeman, at 736, said this:

15. [162]

    In another speech, Lord Browne-Wilkinson, at 752, said this:

16. [163]

    His Lordship went on to pose the question as to whether insurers had a proprietary interest in the assured’s cause of action against the third party as contrasted with the damages actually recovered. He preferred to express no concluded view on that question.

17. [164]

    Most recently the High Court of Australia considered the right of an indemnifier in proceedings which did not involve a policy of insurance, but which involved an issue of subrogation in Stewart v Atco Controls Pty Ltd [2014] HCA 15. At [50] the Court said:

18. [165]

    From this review, it is necessary to draw together the strands to which authorities have referred and to identify the principles which are relevant here. But before doing so, it is necessary to consider whether, as a matter of principle, the Canadian jurisprudence is applicable in Australia.

19. [166]

    The starting point for the engagement of the doctrine of subrogation is that one party (the insurer) meets their obligations under a policy by paying another party (the insured) in respect of that party’s loss: AFG Insurances at p 663.

20. [167]

    If the insured recovers damages including for the loss covered by the policy from a third party, the insured is obliged to reimburse the insurer for the monies it has paid to the insured. The insurer is not entitled to any monies over and above the sum necessary to be reimbursed: Lord Napier at 752.

21. [168]

    In the absence of any particular express or implied contractual term permitting the insurer to take recovery proceedings using the name of the insured, it is not open to an insurer to commence such action: Globe & Rutgers at 668. The insurer’s right to monies received from the third party is adequately protected by either an equitable interest in the fund of recovered monies by way of an equitable lien over the fund if the money still exists: Lord Napier at 752.

22. [169]

    If the fund itself no longer exists, the insurer will have a common law right of action against the insured to recover the monies as monies had and received to the user of the insurer: Lord Napier at 752.

23. [170]

    Unless there has been an assignment of an insured’s right to an insurer, or an appropriate term exists, an insurer does not have a right conferred by the doctrine of subrogation to commence proceedings in the name of the insured. However, the insurer may seek to compel the insured to take such action by proceedings relying upon the insurer’s equitable interest in the proceeds of any recovery action: Morley v Moore [1936] 2 KB 359 at 369 per Scott LJ.

24. [171]

    Where an insured commences recovery proceedings against a third party seeking damages for their loss, which damages include an amount necessary to reimburse the insurer for monies paid under the policy, then the insured is entitled to conduct that action free from interference from the insurer: Commercial Union Assurance Co Ltd v Lister (1874) Vol IX LR Chancery Appeals 483.

25. [172]

    In the absence of a specific contractual term, an insurer does not have the right to prevent, whether by direction, request or otherwise, an insured taking proceedings against a third party to recover damages from that third party. In Morley v Moore at 369 Scott LJ said:

26. [173]

    In the event of an insured taking proceedings against a third party, as discussed in the previous two paragraphs, if the insured recovers a sum to the extent of the indemnified monies, the insured owes obligations to the insurer.

27. [174]

    In circumstances where the insurer’s payment to an insured does not cover the whole of the insured’s loss, an insured has and retains the right to recover his entire loss as the litigating plaintiff i.e. as dominus litis, without interference from the insurer: Arthur Barnett Ltd v National Insurance Co of New Zealand Ltd [1965] NZLR 874. In that case, if the insured does not conduct the case with proper regard for the insurer’s interests, he may be liable in damages to the insurer: Arthur Barnett at p.883 per North P; MacGillivray on Insurance Law, (5th ed) at 921 par [1898].

Number and Range of Insurance Policies

1. [175]

   According to the evidence, there are 24 separate policies of insurance which are relied upon as providing a contractual basis for the authority of Mr Petrovski to execute and file the insurer opt out notices. The Court has been provided with a schedule setting out the details of the insurer, the policy name, the number of groups members insured under the policy and an extract of the policy wording. As well, the Court has been provided with copies of the full policy wording.

2. [176]

   Mr Johnston accepts in respect to seven of the policies, covering 12 claimants, that Mr Petrovski was properly authorised to file the insurer opt out notices. Nothing further needs to be said with respect to those policies, and those individual group members. Policies 8, 9, 11, 14, 17, 22 and 24 in the table set out below are those which Mr Johnston concedes provided Mr Petrovski with the authority to execute and file the opt out notices for the insureds under those policies.

3. [177]

   The remaining policies fall, broadly, into two groups. The first group comprises eight policies being those numbered 1 to 7 (inclusive) and 10 in the table above, which cover 553 group members. In respect of these policies, Mr Johnston submits that no authority is given which would be sufficient to authorise Mr Petrovski to execute and file the insurer opt out notices.

4. [178]

   The second group comprises nine policies of insurance numbered 12, 13, 15, 16, 18 to 21 (inclusive) and 23 in the table above, covering 19 group members. Mr Johnston submits that while these may provide some limited authority, that authority was insufficient as a matter of proper interpretation to authorise what was done, because the authority did not extend to losses falling outside the monies paid by the insurer: i.e. underinsured or uninsured losses.

5. [179]

   Prior to commencing an analysis of the various contractual provisions of the insurance policies, it is appropriate to set out the legal principles which are applicable to the interpretation of insurance contracts.

Interpretation of Insurance Contracts

1. [180]

   In McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at 589 [22], Gleeson CJ said:

2. [181]

   Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; (1998) 1 WLR 896 described at 912 the interpretation of a written contract as involving:

3. [182]

   Gleeson CJ, Gummow and Hayne JJ cited this approach with approval in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at [11].

4. [183]

   The High Court of Australia recently considered the approach to the interpretation of commercial contracts. In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7, the majority (French CJ, Hayne, Crennan and Kiefel JJ) said at [35]:

Contents and Wording of the Insurance Policies

1. [184]

   This policy covered 57 individual group members. It provides cover for “… loss or damage to a motor vehicle caused inter alia by fire”.

2. [185]

   The conditions of the policy are expressed in plain and uncomplicated language, which from a legal perspective presents a challenge.

3. [186]

   On page 27 of the policy, the responsibilities of an insured when making a claim are described. The insured is put on notice that if their responsibilities are not met, the insurer may not pay a claim in full or at all. The responsibilities of the insured include the following:

4. [187]

   The policy also includes various clauses dealing with recovery. At page 22, under the heading “Your insured loss”, the following appears:

5. [188]

   It is convenient to note here that in the case of the 57 group members covered under this policy, there is no evidence that any of them asked the NRMA to recover their uninsured losses. There was no evidence that any of them had entered into an agreement about the terms upon which, relevantly here, the lawyers, Williams Roberts, would act to recover the uninsured losses. I conclude in the absence of such evidence, and from the terms of the standard correspondence in [134] and [137] above, that none of the insureds under this policy either asked the NRMA to recover their uninsured losses, nor entered into any agreement about the recovery, at any time prior to the filing of the insurer opt out notices.

6. [189]

   On page 32, under the heading “Recovery against another party”, the following appears:

7. [190]

   This policy is relevant to the claims of three group members. It contains similar wording with respect to the responsibilities of the insured to co-operate fully with the insurer, to which I have referred at [186] above.

8. [191]

   On page 33, this policy includes the following:

9. [192]

   The coverage of this policy is a limited one with respect to veteran vehicles (vehicles made before 1919), vintage vehicles (vehicles made between 1919 and 1930) and classic vehicles (vehicles more than 20 years old), provided that the vehicles are used for hobby or recreational purposes. The policy specifies that if the vehicle suffers loss or damage caused by fire, the insurer will repair the vehicle, pay the insured the cost of repairing the vehicle or pay the agreed value as shown on the current certificate of insurance. The policy includes coverage for loss and damage caused by the vehicle to another person’s property.

10. [193]

    The clauses which are set out below are to be found in that part of the policy commencing at page 31, entitled “Claims”:

11. [194]

    This policy does not include any specific mention of recovery action other than as noted immediately above. There is no mention of the recovery of any uninsured cases.

12. [195]

    This policy covers five individual group members.

13. [196]

    As the name implies, the policy covers a motor vehicle owned by an insured which is listed on the current certificate of insurance. The policy provides cover for incidents that occur in the period of insurance, and offers an agreed value cover. The loss and damage to the vehicle which is covered, includes loss and damage caused by a fire. The policy also covers loss and damage caused by the insured to someone else’s property.

14. [197]

    On page 13 of the policy, the following is to be found:

15. [198]

    This clause is essentially the same as the clause in the first policy above. However, the last part of the clause contains, in the circumstances of these proceedings, a significant restriction on the extent of a recovery action.

16. [199]

    On page 23 of the policy, under the heading “Recovery Against Another Party”, the following is recorded:

17. [200]

    This policy covers the largest number of group members. There are 459 group members covered by this policy.

18. [201]

    It will be convenient to set out this policy in more detail than the previous ones.

19. [202]

    The policy provides for three alternative forms of insurance. The first is buildings and contents insurance, which covers the insured’s home and its contents, secondly, home building insurance, or thirdly, merely the contents of a home. The policy covers loss occasioned by listed events including fire.

20. [203]

    The policy wording includes the following:

21. [204]

    I have already described the types of insurance. There are two levels of cover provided under the policy. The first is called “Home” which provides what is described as “Our standard level of cover”. The second level of cover is “Home Plus”, which “provides a higher level of cover – so you get our standard cover plus more”.

22. [205]

    The policy makes it plain that the sum for which the building is insured or the contents are insured, are sums chosen by the insured to cover their home or contents.

23. [206]

    In describing the listed events for which coverage is provided, the policy at page 22 says:

24. [207]

    As I have earlier pointed out, both fire and bushfire are listed events pursuant to the policy.

25. [208]

    On page 12 of the policy, the terms and conditions of the agreement are referred to. The policy records this:

26. [209]

    Section 5 of the policy deals with general exclusions which apply to the policy. Section 6 of the policy is entitled “Claims and What We Pay”. It is necessary to set out some of this section in detail.

27. [210]

    The section commences with identifying responsibilities which fall upon an insured when a claim is made. The first set of provisions involve prohibitions on the conduct of the insured. They are as follows:

28. [211]

    The section also provides for an obligation of co-operation. The clause is similar to those seen in previous policies. In full it is as follows:

29. [212]

    On page 62 of the policy is a section about recovery. It is in the following form:

30. [213]

    There are two matters arising from this clause which ought to be noted here. The first is the meaning of the word “may” as it appears in the first part of the clause: “We may need to recover the amount we pay …”. Mr Johnston submitted that the word meant that the NRMA had to establish the existence of some necessity before exercising their recovery rights. In other words, the NRMA was under, or else had, a necessity to take the recovery action. The Insurers submitted that it meant “wish” or “want”, and that the NRMA did not need to establish any pre-condition of the kind to which Mr Johnston submitted.

31. [214]

    The second matter to note is that, at the time the Insurer opt out notices were filed, there had been no notification by any insured under this policy of a wish for the NRMA to recover any loss for them which was not covered under the policy. The same position existed at the time when the Insurers proceedings were commenced.

32. [215]

    It appears that in June 2013, a supplementary PDS for this home insurance policy was issued. It is of six pages. None of that supplementary PDS is of any relevance to the clauses to which reference has been made.

33. [216]

    This policy provides cover for 11 group members, including Individual A.

34. [217]

    It provides cover for a touring caravan, an on-site caravan or trailer. Fire is one of the included events against which the insurance is provided. If the insured requires coverage for an annexe attached to a caravan then that has to be sought as an optional inclusion within the policy and for which an additional premium is payable.

35. [218]

    In the event that a claim is made for loss or damage, the insurer notes that it is entitled to decide whether to repair the onsite caravan, touring caravan, annexe or trailer or to pay the cost of repairing those items, or, alternatively, to pay to the insured the applicable agreed value for the caravan, trailer or annexe. Contents which are located inside the caravan or trailer are also covered to a limited extent.

36. [219]

    One of the exclusions from liability under this policy is “Death or bodily injury to you or any person who has your permission to use your [caravan]”.

37. [220]

    On page 21 of the policy, the clause with respect to the insured having responsibility to co-operate fully with the insurer is repeated, but otherwise this policy contains no clauses relating to recovery actions, it contains no clauses or conditions relating to use of the name of the insured in any recovery action or clauses of the kind to which reference has been made in earlier policies.

38. [221]

    This policy covers 12 group members. The cover provided by this policy is described in this way:

39. [222]

    The types of policies which are available relate to buildings and contents or a combination of both. The listed events for which cover is provided includes fire.

40. [223]

    Other cover is available dealing with building materials, furniture and furnishings, loss of rent and other minor items.

41. [224]

    On page 36 of the policy, when dealing with the responsibilities of the insured in making a claim, the policy provides that the insured must co-operate fully with the insurer, including the various matters to which earlier reference has been made in other policies such as [211]. As well, the clauses similar to those in the Home Building and Contents policy with respect to not settling claims or making admissions are also applicable: see [210].

42. [225]

    On page 44 of the policy, it includes reference to recovery against another party. It reads:

43. [226]

    There are four group members who are insured under this policy.

44. [227]

    The policy provides cover for loss or damage to a boat owned by the insured. The coverage extends to include the hull of the boat, any motors, sails and trailer if applicable. The policy specifies that coverage is available if the boat or any part of it suffers loss or damage caused by fire. If that occurs, the insurer at its election may repair or replace the damaged item, pay the insured the reasonable cost of repairing or replacing the damaged item, or pay the insured the agreed value for the damaged item.

45. [228]

    In the section of the policy dealing with claims, on page 39 of the policy is a clause describing the responsibilities upon the insured. The terms reflect, relevantly for these proceedings, the same terms as have earlier been described with respect to co-operating fully and providing information, documents etc: see [211]

46. [229]

    On page 47 the policy, under the heading “Things that may put your claim or insurance cover at risk” the policy reads:

47. [230]

    The policy makes no reference to the bringing of a recovery proceedings or the use of the insured’s name in any proceedings. It contains no reference to uninsured losses.

48. [231]

    This policy is relevant for two group members. The policy provides cover being comprehensive cover, third party property fire and theft cover, or third party property damage cover, with respect to motor vehicles. Fire and explosion are insured events of the purpose of the policy.

49. [232]

    At page 53, when dealing with the claims process, the policy has a heading “What you must do to help us manage your claim”. Underneath that heading is the following:

50. [233]

    Further on in the policy, the following appears:

51. [234]

    The policy does not include any reference to any under-insured or uninsured losses. It includes no other specific provision of the kind referring to these losses seen in some of the earlier policies.

Second Group of Policies

1. [235]

   Each of the policies numbered 12, 13, 15, 16, 18-21 (inclusive), and 23 in the table at [176] have a clause which is in the same words, or with words to the same effect, with respect to possible recovery.

2. [236]

   In the clause dealing with the responsibilities of the insureds when making a claim, there is in each of these policies (except the policy numbered 21) the following clause, or else a clause to this effect:

3. [237]

   The policy numbered 21, namely the Commercial Plan offered by Wesfarmers General Insurance, contains the following at page 8:

4. [238]

   I note that the policy affects only 1 group member.

Conclusion with Respect to the Insureds Under the Group 1 Policies

1. [239]

   It is convenient to draw some conclusions about the insureds who were covered under the Group Policies.

2. [240]

   There is no clause in any of the policies by which the insured, explicitly, assigns to the insurer all or any part of the insured’s legal rights to take proceedings against an identified third party claiming damages arising out of the event which has given rise to the claim under the policy of insurance. No such assignment has occurred by virtue of the policy.

3. [241]

   An insurer who has paid a claim under a policy, and who thereby has acquired an entitlement by law to be subrogated, is not in an equivalent position to that which would ensure if a complete assignment of rights had been taken.

4. [242]

   There is in each of the policies a clause requiring co-operation on the part of the insured. Generally, this obligation is expressed in a part of the policy dealing with making claims on the insurer, either for monetary reimbursement or else with respect to proceedings being taken against the insured, who is indemnified for such claims. Whilst not providing an exclusive list for requirements upon the insured for co-operation, none of the specifically listed matters are apt to require an insured to cease pursuing legal proceedings which an insured may lawfully be doing.

5. [243]

   Particularly in the light of the established legal principles at the time the insurance policy was entered into, I would not be prepared to find that an obligation not to commence or prosecute legal proceedings for which the insured had a legal entitlement, can be implied into the policy of insurance, nor can the co-operation clause be read as including such an obligation on the part of the insured.

6. [244]

   Each of these policies (except Policy 5) includes a clause dealing with recovery from a third party. The clauses are not identical, but seem to have a similar substantial effect. The clause enables the insurer to commence proceedings in the name of the insured for the purpose of recovery from a third party of some, or all, of the amounts paid by the insurer to the insured. In my view, this clause would extend to include both the insurer taking action either by way of an individual action which names the insured as a plaintiff, or a representative action under Part 10 of the Civil Procedure Act, in which the insured was named as a plaintiff or else was a member of the group defined in the pleadings of the representative action.

7. [245]

   In Policy 5, the NRMA Caravan and Trailer Insurance Policy, where there is no clause at all dealing with recovery actions which may be taken by the insurer, I can see no basis to imply into the policy a recovery right. In particular, I can see no basis to imply into the policy the right for the insurer to commence and pursue proceedings in the name of the insured. It may be entitled to take proceedings in its name, but without specific authority, not in the name of the insured.

8. [246]

   In only two of the policies (those numbered 1 and 3), is there any specific clause dealing with an uninsured loss of the insured. Those two clauses are in identical terms. The clause gives to the insurer the right, at its unfettered election, to decide if it will or will not recover any uninsured loss for the insured. But there are preconditions fixed by the clause to the exercise of that unfettered election. Relevantly, those preconditions include that the insured must have notified the insurer of the uninsured losses, requested the insurer to recover those losses, and finally, have entered into an agreement about the terms, including as to costs, upon which the insurer or its agents, such as lawyers, will recover the uninsured losses on behalf of the insured.

9. [247]

   The evidence in these proceedings does not suggest that any of these preconditions have been met with respect to any of the 62 insureds under either of these policies. In particular, there is no evidence that any agreement was entered into about the terms upon which uninsured losses would be recovered by lawyers appointed by the Insurers.

10. [248]

    It follows that the Insurers had no contractual right which it was entitled to exercise, either at the time the insurer opt out notices were filed, or else at the time the Insurers proceedings were commenced, to claim any uninsured losses, that is, any sum over and above the moneys paid by the Insurers to the insured on their claims.

11. [249]

    The rights of an insurer pursuant to the general law of subrogation do not include the right to claim any sum of money in excess of the amounts paid by the insurer in response to the claim of an insured under the policy in any proceedings commenced in the name of the insured.

12. [250]

    It follows that at the time the insurer opt out notices were executed and filed, the Insurers had no entitlement to recover any uninsured losses. Expressed differently, the Insurers had no entitlement to commence proceedings against a third party seeking recovery, in the name, or on behalf, of the insured, where such proceedings claimed damages which exceeded the sums paid by the Insurers to the insured under the claim which had been made.

13. [251]

    As has earlier been noted, the authority of Williams Roberts to execute and file the insurer opt out notices is entirely dependent upon the authority which the Insurers themselves had to take any step in the Johnston proceedings. On that basis it is appropriate to consider and determine whether the Insurers had an entitlement:

14. [252]

    However, before proceeding to determine that question, which is the essential one upon which relief in the Motion depends, it is convenient to deal with the insureds who fell within the Group 2 policies.

Conclusions with Respect to Insureds Covered under Group 2 Policies

1. [253]

   As noted above, except for the sole insured under Policy 21, each of the insureds under the Group 2 policies have given their insurer their “… rights to claim from anyone else …” for an incident (or event) covered under the policy.

2. [254]

   I would interpret this clause although expressed in plain language, to be, in substance and effect, an assignment by the insureds to the insurer of their rights of recovery against third parties in respect of the sums paid by the insurer. So much seems to be accepted by counsel for Mr Johnston.

3. [255]

   However, counsel submits that the uninsured losses of the insureds have not been effectively assigned by these contractual provisions and, accordingly, the authority or entitlement of the insurer to opt these insureds out of the Johnston proceedings was only a partial one. Counsel contended that the action of removing these insureds from the Johnston proceedings entirely exceeded the authority and entitlement of the Insurers.

4. [256]

   Counsel for the Insurers contended that to place such a construction on the effect of the clause would be to permit a wholly non-commercial interpretation contrary to the principles of proper contractual interpretation.

5. [257]

   In my opinion, the construction of the clause contended for by the counsel for Mr Johnston is incorrect. It does not adequately pay attention to all of the words in the clause, and the way in which the whole clause is expressed. The following parts of the whole clause support this conclusion:

6. [258]

   In combination, these terms do not support any limitation on the rights given by an insured to an insurer with respect to an incident covered under the policy. It seems to me that the express words are to the contrary of such limitation. And that interpretation of the clause accords with a commercially workable interpretation. Such an interpretation will undoubtedly have the effect of placing onto the insurer some significant obligations owed to the insured with respect to litigation in which claims are made for losses over and above that which the insurer has paid. Such obligations would include but not be limited to obtaining the agreement of the insured to any settlement proposal. That is the insurer’s burden which arises by reason of its own choice, it having included the clause in the terms in which it was in the policy which the insurer offered.

7. [259]

   This conclusion with respect to the insureds under the Group 2 Policies means that the Insurers were entitled to authorise the execution and filing of the insurer opt out notices, and the commencement of the Insurers proceedings. This conclusion will not apply to the sole insured under Policy 21.

The Central Question

1. [260]

   It is convenient to return to the central questions that were earlier set out in [251] above.

2. [261]

   For the insureds under the Group 1 policies, I am of the view that the Insurers did not have any entitlement to remove those insureds as group members of the Johnston proceedings. It follows from that conclusion that Williams Roberts did not have any authority to execute and file the insurer opt out notices. Accordingly, I conclude that those notices were invalid and of no effect to opt out those insureds from the Johnston proceedings.

3. [262]

   Those insureds were group members of the Johnston proceedings upon the commencement of the proceedings, and they remain group members because they have not been validly opted out. They are not now group members of the Insurers proceedings because of paragraph 1(c)(ii) of the definition of the group members in those proceedings, which specifically excludes a group member in the Johnston proceedings from being a group member in the Insurers proceedings. See [15] above.

4. [263]

   My reasons for reaching this conclusion can be relatively concisely stated. In order for the Insurers to have the authority and entitlement to act in a way which has the substantive effect of discontinuing an insured’s participation in existing litigation claiming damages from a third party, which damages include, but are not limited to, sums paid by the Insurers in respect of a claim, then there must be an explicit contractual basis for the Insurers so to do.

5. [264]

   The rights of an insurer under the general law of subrogation do not extend to either:

6. [265]

   As well, any rights which an insurer acquires under the general law of subrogation are limited to the sums which they have paid to an insured. They have no rights of subrogation with respect to the total of damages (where those damages exceed the monies paid under the claim) which may be claimed from a third party with respect to an incident covered by a policy. The Insurers only rights under the general law of subrogation are for the reimbursement of the sums which they have paid out under the claim.

7. [266]

   Since the insurer opt out notices had the substantive effect of both terminating the involvement of the insureds in litigation in which they were lawfully entitled to participate as group members and, as well, had the effect of dealing with the whole of the claims for damages, because limited opting out is not permitted under Part 10 of the Civil Procedure Act, there was no valid basis for the Insurers to act as they did, or for their solicitors to file properly authorised and valid opt out notices.

8. [267]

   As the analysis above shows, the Insurers did not have a contractual entitlement to, in substance and effect, disenfranchise the insureds who were group members in the Johnston proceedings from pursuing their claim for damages, and they had no entitlement under the general law of subrogation so to do.

9. [268]

   Even if it could be said that they had such an entitlement under the general law of subrogation, that entitlement could only extend to the sums paid by the Insurers to the insureds by reason of claims made under the policies. The insurer opt out notices and the Insurers’ conduct in removing the insureds from the Johnston proceedings and making them group members in the Insurers proceedings, contained no limitation on the claims which were being made. The Insurers simply had no authority to deal with claims for losses which exceeded the sums claimed, yet that is the effect of what they did in filing the insurer opt out notices.

10. [269]

    The insurer opt out notices were not limited, nor could they have been. Rather, they opted the insureds completely out of the Johnston proceedings. There was no lawful entitlement for the Insurers to act in that way, and so it follows that the opt out notices are not valid.

11. [270]

    Because the individuals who had coverage under Group 1 policies named on the insurer opt out notices, were not validly opted out of the Johnston proceedings, they remain group members in that proceedings. Since the definition of the class in the Insurers proceedings excludes individuals who are group members of the Johnston proceedings, the insureds cannot be part of the Insurers proceedings although named in the schedule attached to the Further Amended Statement of Claim in the Insurers proceedings.

12. [271]

    Whilst it was open to the Insurers to commence proceedings for the insureds covered under the Group 1 policies, without express consent, the Insurers could not instruct their solicitors, Williams Roberts, to include in the claim being made by any such proceedings, any claim for loss and damage over and above the monies which the Insurers had paid out on the claims. It follows that the claims in the Insurers proceedings, which are or include claims for loss and damage over and above the Insurers expenditure, are made without valid instructions to Williams Roberts. A ready example of such a claim, but not the only example, is a claim for damages for personal injury. Williams Roberts has no sufficient authority, and no sufficient instructions, unless provided by an individual insured, to advance any claim over and above the monies to which the Insurers are lawfully entitled.

13. [272]

    I conclude that the Insurers did not have any entitlement to include in the Insurers proceedings any claim over and above the monies paid to the insureds under the Group 1 policies. As the claims are expressed without limitation, they are made without full and complete instructions.

Relief

1. [273]

   Because the definition of group members in each of the proceedings has the effect that an individual cannot be a group member of both proceedings, the Court is not confronted with the difficulties inherent in competing class actions. See, for example, Johnson Tiles Pty Ltd v Esso Australia Ltd [1999] FCA 56.

2. [274]

   The Court, however, needs to consider the appropriate relief in the Johnston proceedings.

3. [275]

   I am not prepared to make a declaration with respect to the insurer opt out notices. A declaration is not required, relevantly, what is required here is a substantive order setting aside the insurer opt out notices. However, it will be necessary for the parties to consider with some care, the way in which that is attended to, because the effect of this judgment is that the insurer opt out notices were invalid for all of the insureds under the Group 1 policies, and policy 21, but not for other policies.

4. [276]

   As well, the Insurers will need to consider, as a consequence of any such order seeking leave to amend Schedule 1 of the Insurers proceedings, so as to delete the names of the insureds who have not opted out of the Johnston proceedings, validly.

5. [277]

   Having regard to the time at which the insurer opt out notices were filed, namely, on the last day of the opt out period - in the afternoon – and having regard to the fact that none of the named insureds opted out individually either before or since the insurer opt out notices, there does not appear to me, at least without the benefit of further submission from the parties, to be a need to extend the original opt out period for the Johnston proceedings, except insofar as it may be necessary to give effect to the finding that the opt out notices are invalid. However, if the parties take a different view about this, I will receive submissions.

Costs

1. [278]

   The parties have not addressed the issue of costs.

2. [279]

   Ordinarily, costs should follow the event. Mr Johnston has, so it seems to me, had substantial success. Unless there is good reason otherwise, I would order the respondents, Mr More and the Insurer respondents, to pay Mr Johnston’s costs of this part of the proceedings.

3. [280]

   If there is to be any contention contrary to this preliminary view, then the parties will need to address the Court on that question.

4. [281]

   The only order which is necessary at the moment is to stand the proceedings over until 21 August 2015 for the making of final orders.

Orders

1. [282]

   I make the following orders:

   1. (1)

      Proceedings stood over to 21 August 2015 at 9.30am for final orders.