Sutherland Shire Council v SportsCover Australia Pty Ltd on behalf of Certain Underwriters at Lloyds

HIS HONOUR:

SportsCover Australia Pty Ltd (the defendant) does not consent to those orders.

The substantive proceedings have been fixed for hearing on 2 June 2020 with an estimate of two days.

On 23 June 2013 Christina Safar attended the Sutherland Entertainment Centre to watch a dance eisteddfod conducted by the Sutherland Shire Eisteddfod Incorporated (SSE). The premises were owned by the plaintiff.

It was raining and Ms Safar slipped on water inside the auditorium on the ground floor of the premises. She brought proceedings against the plaintiff asserting that it was negligent. There was no Cross-claim by the plaintiff against SSE.

On 28 September 2016, Ms Safar was awarded substantial damages against the plaintiff.

On 15 December 2017, the Court of Appeal dismissed an appeal by the plaintiff. The Court of Appeal found that there was negligence in the failure of ushers to monitor the auditorium and a failure to provide bins for umbrellas.

On 20 June 2018, the solicitors for the plaintiff, Mills Oakley, issued a letter of demand directly to the defendant as the public liability insurer for SSE. This was done pursuant to s 51 of the Insurance Contracts Act 1984 (NSW). Mills Oakley alleged that the plaintiff was entitled to a complete contractual indemnity pursuant to Cl 5 of a Hire Agreement and/or s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

Enclosed with the letter was a copy of the Hire Agreement between SSE and the plaintiff.

In the letter it was stated:

The letter went on to say:

Because the letter contained an offer of settlement, it was not set out in full, nor has it been annexed to any of the affidavits.

In the course of correspondence, a further letter was received from Mills Oakley, dated 4 July 2018, the relevant portions of which are as follows:

In or around November 2018, the solicitors for the defendant, McCabe Curwood, sought advice from Senior Counsel with respect to the issues raised in the letter of demand dated 20 June 2018. The advice was requested (amongst other issues) so that McCabe Curwood could provide advice to the defendant as to whether or not consent ought to be given to its joinder to the proceedings. The advice of Senior Counsel dealt directly with the effect of the contractual indemnity. A claim for privilege with respect to that advice is maintained by the defendant.

On 24 January 2019, the plaintiff commenced proceedings against SSE. The only cause of action was for statutory contribution, pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act.

After receipt of the Statement of Claim, McCabe Curwood wrote to Mills Oakley on 21 February 2019. Included in that letter was:

The relevant policy of insurance taken out by SSE contained the following exclusion:

On 22 February 2019, Mills Oakley sent a letter to McCabe Curwood seeking the defendant’s consent to it being substituted as the defendant in the proceedings in accordance with s 51 of the Insurance Contracts Act 1984 (NSW) and s 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW).

After receipt of that correspondence, McCabe Curwood sought further advice from Senior Counsel as to whether there was any basis for the defendant to oppose it being joined directly to the proceedings given the claim as now pleaded. McCabe Curwood maintain a claim for privilege with respect to Senior Counsel’s advice.

On 6 March 2019, McCabe Curwood sent a letter to Mills Oakley confirming that the defendant consented to its substitution as the named defendant while maintaining all rights available to it under the relevant policy of insurance and at law.

On 11 April 2019, the plaintiff was granted leave by this Court to join the defendant to the proceedings and an Amended Statement of Claim was filed on 12 April 2019. The nature of the relief sought in that pleading was identical to that claimed in the first Statement of Claim.

By letter dated 9 May 2019, McCabe Curwood wrote to Mills Oakley seeking further and better particulars of the claim. Within the requested information were requests for information relating to the terms of the Hire Agreement.

By letter dated 22 May 2019, Mills Oakley wrote to McCabe Curwood providing a response to the letter requesting particulars.

On 14 June 2019, the defendant filed a Defence to the Amended Statement of Claim. On 5 December 2019, with the consent of the plaintiff, the defendant filed an Amended Defence to the Amended Statement of Claim.

On or about 3 February 2020, the plaintiff briefed Mr Sexton SC to appear on its behalf in the matter.

On 2 March 2020, representatives from Mills Oakley conferred with Mr Sexton SC. During the conference, Mr Sexton SC recommended amending the plaintiff’s claim as set out in pars 38-40 of the proposed Further Amended Statement of Claim.

By letter dated 6 March 2020, Mills Oakley wrote to McCabe Curwood providing a copy of the proposed Further Amended Statement of Claim and sought the defendant’s consent to it being filed. It is common ground that this was the first time Mills Oakley had made any reference to making a claim in contract since the letter of 20 June 2018 addressed to the defendant.

The proposed amendments to the Amended Statement of Claim, which are the subject of this application, are as follows:

The request for the amendment of the Amended Statement of Claim was made by Mills Oakley by letter of 6 March 2020 which relevantly provided:

McCabe Curwood responded to that request by letter dated 18 March 2020 in the following terms:

In his affidavit of 27 April 2020, Mr Hawkes from McCabe Curwood deposed as follows:

The plaintiff submitted that the decision in Aon Risk Services Limited v Australian National University [2009] HCA 27; 239 CLR 175 (Aon) had no application to the amendment in this case because the plaintiff’s solicitors had advised the defendant’s solicitors of the proposed amendment as soon as they had received counsel’s advice, i.e. approximately three months before the hearing date. A further consideration was that the amendment did not involve any factual issues but only gave rise to an issue of law which could be adequately prepared for, given that the hearing date was 2 June. The plaintiff submitted that in any event, the decision in Aon did not establish a rigid rule, rather each case depended upon its own facts.

The applicant noted that s 64 of the Civil Procedure Act provided that an amendment could be made “at any stage in the proceedings” and that s 64(2) provided that all necessary amendments were to be made so as to avoid a multiplicity of proceedings. In that regard, the plaintiff further noted that subject to the application of Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589 it could still bring fresh proceedings on the contractual claim that it sought to raise by this amendment.

The plaintiff submitted that it was necessary for it to amend to bring a contractual claim because the defendant had pleaded s 26 of the Limitation Act 1969 (NSW) which was a tort limitation. The plaintiff’s response was to rely upon the contractual indemnity.

The plaintiff submitted that a contractual indemnity of the kind provided for in the Hire Agreement could apply to the full amount of the loss, even though the indemnifier was only partly liable on a tort apportionment basis. The plaintiff relied upon the decisions in Astley v Austrust Limited [1999] HCA 6; 197 CLR 1 (Astley v Austrust) and Oxley County Council v MacDonald and Ors [1999] NSWCA 126 to support that proposition.

The plaintiff submitted that the proposed amendment would not prevent the defendant relying upon exclusion J in that s 7 of the Civil Liability (Third Party Claims Against Insurers) Act specifically allowed reliance on such exclusions by an insurer sued under that Act.

The plaintiff submitted that when regard was had to the Hire Agreement, SSE agreed to usher the auditorium and to clean and maintain public areas. These were the very matters which the Court of Appeal found gave rise to the successful negligence claim by Ms Safar. The plaintiff submitted that pars 38, 39 and 40 of the Further Proposed Amended Statement of Claim did no more than particularise those matters as part of a contractual rather than a tortious claim.

The plaintiff submitted that there was no difference in substance between the claim which was pleaded in tort contribution and the claim which was pleaded in contract. This is because the facts and circumstances relevant to the determination of the issues were exactly the same, subject to legal argument about the terms of the contract and the terms of the exclusion in the insurance policy. The plaintiff submitted that this was not an amendment which provided new facts and circumstances but was simply an alternative way of putting the same fundamental claim which was that the SSE materially contributed to Ms Safar’s injuries. The plaintiff submitted that the current Statement of Claim, which does refer to the Hire Agreement, did not plead the consequences of the Hire Agreement. The plaintiff submitted that the proposed amendments did no more than fill that gap.

The plaintiff submitted that exclusion J was not a full answer to its claim. It was an exclusion which precluded indemnity only for a contractual obligation over and above a tort obligation. The plaintiff submitted that an important reason why it needed a contractual count was because of s 26 of the Limitation Act. The plaintiff submitted that but for that, the contractual count would not matter except insofar as there was a claim against SSE (and therefore the defendant) on the Astley v Austrust basis, i.e. for a full indemnity. The plaintiff submitted that exclusion J meant no more than that the insurer was liable only for that amount of the contractual obligation which is the equivalent of what the plaintiff could recover on a contribution claim under s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act.

The plaintiff sought to answer the defendant’s submission that had it known that the plaintiff was going to pursue a contractual count, it would not have consented to be substituted as a defendant in the proceedings. The plaintiff submitted that any insurer who consents to be joined under s 5 of the Civil Liability (Third Party Claims Against Insurers) Act must know that there is a possibility that amendments to the pleadings will be granted. The plaintiff submitted that it was misconceived to assert that every consent is limited only to a particular pleading at a particular point in time. It submitted that every litigant knows that amendments may be made at any time. The plaintiff submitted that if the Court did not accept that proposition, what the plaintiff is in effect doing in the application to amend is starting again and saying ‘we need leave and leave will be granted effectively if there is an arguable case’ which, the plaintiff submitted, there plainly is on this contractual count.

The plaintiff submitted that what the defendant was purporting to do in opposing the amendment was to bring itself within s 5(4) of the Civil Liability (Third Party Claims Against Insurers) Act on the basis that leave must be refused if the insurer can establish that it is entitled to disclaim liability under the contract of insurance. The plaintiff submitted that the argument must fail because exclusion J does not have the effect of entirely precluding a contractual claim, i.e. it does not entitle the defendant to disclaim liability under the contract of insurance.

The plaintiff submitted that through no fault of its own there had been some delay in this motion coming before the Court but that otherwise it had acted with appropriate expedition from the time advice was received to bring a contractual count.

In conclusion, the plaintiff submitted that it had an arguable case, where there was no identified prejudice to the defendant other than the point about consent and where there would be no addition to the hearing time and no additional witnesses, then s 64 of the Civil Procedure Act was satisfied. The plaintiff submitted that there was no Aon point and that the consent point went nowhere because the plaintiff could start again with consent and if consent was not given, as is the present situation, make another s 5 application for leave to proceed. The plaintiff submitted that such an application would succeed because there was no basis for refusing to grant such an application, in particular, for the reasons indicated, exclusion J does not entitle the defendant to disclaim liability under the contract of insurance. The plaintiff submitted that all that would achieve would be to delay the hearing of the matter and incur additional costs.

The defendant provided written submissions and responded to the oral submissions of the plaintiff. In written submissions, the defendant submitted that there was no explanation for the plaintiff’s delay in bringing the application to amend the Statement of Claim. That issue was resolved in oral submissions by the plaintiff. The plaintiff’s position is that it was on the advice of Senior Counsel that notice was given to amend the Statement of Claim. That advice was given on 2 March 2020. The defendant submitted that this explanation was far from satisfactory and did not explain the considerable delay from the commencement of the proceedings until Senior Counsel was brought into the matter. The defendant submitted that the explanation proffered was tantamount to there being no explanation at all for the delay in applying to amend the Statement of Claim.

In the written submission, the defendant submitted that if the amendment to the Statement of Claim was granted, it would be significantly prejudiced. This was because had it been made aware that the plaintiff intended to bring a contractual claim, it would not have consented to being substituted as the defendant. The defendant submitted that in that regard it was entitled to rely upon the fact that the Statement of Claim as of 11 April 2019 did not contain any claim in contract. The defendant said that it had now lost the opportunity to oppose its substitution as a defendant.

The defendant submitted that the arguments which it could have mounted to oppose it being joined and sued directly were:

The defendant submitted that these were real issues which would have been relevant to the question of whether leave should be granted to the plaintiff to sue the defendant directly. That there could be a contest between SSE and the defendant was a matter of real significance.

The defendant submitted that there was a real chance that one of these arguments would have succeeded and that leave to proceed against it would have been refused. The defendant submitted that that chance had been lost because of the unexplained conduct of the plaintiff.

In oral submissions, the defendant put forward a different argument. The defendant noted that s 61 of the Civil Liability Act 2002 (NSW) provided:

The defendant submitted that it had pleaded this section in its Amended Defence. Its contention at trial would be that each of the persons who were there on behalf of SSE were volunteers. The defendant submitted that the reason for that pleading was that the case law suggested that there can be no vicarious liability for a person who is immune to suit.

The defendant submitted that if the plaintiff was successful in its amendment application, the plaintiff might try to circumvent that defence by relying upon s 3A(2) of the Civil Liability Act which provides as follows:

The defendant submitted that if the amendment were granted, the plaintiff, could circumvent the effect of the “volunteers” defence by relying on the contract. The defendant submitted that if that were on the table at the time the plaintiff was seeking leave, that would have been a ground upon which it could have been open to the defendant to say that that at least raises a basis upon which the defendant could disclaim liability under exclusion J and especially given that that is at least arguable. That was a ground for denying leave or leaving it for an issue to be left in the trial.

It needs to be kept in mind that the claim, the subject of these proceedings, is a commercial dispute between two insurers. There is no disparity in the resources available to the parties.

At the time the defendant agreed to be joined to the proceedings in place of SSE, it must have appreciated the risk that the plaintiff might amend its Statement of Claim to rely upon breach of contract. This is particularly so when advice was sought from Senior Counsel in November 2018 and February/March 2019. Although the content of Senior Counsel’s advice is not known, the issues which were raised with him or her were identified (see [14] and [19]). Senior Counsel was asked to advise on whether the defendant should consent to being joined as a defendant in the proceedings.

The fact that the initial letter of demand identified a claim in contract and specifically sought an indemnity is significant. Mills Oakley were fully aware of the plaintiff’s rights under the Hire Agreement. No undertaking was asked for or inquiry made of Mills Oakley as to whether it was intended to make a claim in contract. It appears to have been assumed, on the basis of the original Statement of Claim, that this set out the full extent of the claim and that this would not change. Against that background, the decision by the defendant to consent to being joined as a defendant in the proceedings was a considered forensic one.

There is another consideration which should have alerted the defendant to not merely the possibility of an amendment to claim breach of contract but to its likelihood. This was the pleading by the defendant of a limitation defence relying upon s 26 of the Limitation Act. Section 26 concerns contribution between tortfeasors and the time limits applying to such claims. The obvious and almost inevitable riposte by the plaintiff to such a defence would be to bring a claim in contract if such were available. In this case it is.

Accordingly, it cannot be said that the plaintiff either deliberately or inadvertently did anything to mislead the defendant into believing that it was going to restrict its claim solely to one based on tort. What appears to have happened is that the defendant assumed that the Statement of Claim would remain as originally served without amendment.

It is not correct to say that the plaintiff gave no explanation for the delay in applying to amend the Statement of Claim to include a claim for breach of contract. It occurred following a conference with Senior Counsel. It is, of course, unfortunate that Senior Counsel was not involved in the proceedings as early as possible. It is a fundamental consideration in case management to involve counsel in the proceedings as early as possible. It is trite to observe that once counsel have become involved in a matter, there are often amendments to the pleadings proposed. That is what occurred here.

In some cases such late involvement of counsel would be reprehensible, particularly where it was proposed to make changes to the factual basis for a claim or in the evidence to be adduced. That is not this case. The amendment proposed has legal consequences but it is common ground that the factual issues remain the same whether or not the proposed amendment is allowed.

It follows that this is not an Aon case and that there was an explanation for the late amendment. All that can be said is that it is unfortunate that Senior Counsel was not involved in the matter at an earlier point in time.

For the reasons already stated, I find it difficult to accept the ex post facto assertion that had the plaintiff foreshadowed a claim in contract it is “very probable” that advice would have been given to the defendant not to consent to being joined as a party. The question was clearly considered by Senior Counsel, retained on behalf of the defendant at that time. Moreover, for the reasons I have already identified it was always likely that such an amendment would be made to the Statement of Claim, particularly when the limitation defence was raised. Far from the defendant losing its opportunity to oppose its joinder as a defendant, it appears to have accepted that fact as inevitable despite the likelihood of there being an amendment to the Statement of Claim to raise contractual counts.

In relation to the other specific matters raised in the defendant’s written submissions (see [44]-[48]) these were matters which must have been considered by Senior Counsel retained by the defendant. Moreover, I am not satisfied that exclusion J operates to entitle the defendant to disclaim liability under the contract of insurance and so provide a complete answer to an application for leave to proceed under s 5 of the Civil Liability (Third Party Claims Against Insurers) Act.

In any event, the defendant is not prevented from relying upon exclusion J because of its joinder to the proceedings. Section 7 of the Civil Liability (Third Party Claims Against Insurers) Act makes that clear.

I am not persuaded that the three matters referred to by Mr Hawkes in his letter of 18 March 2020 to Mills Oakley raise matters of prejudice brought about by the defendant’s joinder to the proceedings. In relation to the consent given by the defendant to being joined to the proceedings, this was done after receiving advice on two occasions from Senior Counsel. It must have been understood, or should have been understood, that there was no implied condition in giving that consent, that the plaintiff’s pleadings would not thereafter change. For the reasons already given, it should have been appreciated that an amendment to the pleadings to raise a claim in contract was likely.

The second matter raised in that letter does not apply and there is nothing to prevent reliance by the defendant on exclusion J.

In relation to the third matter, since the proposed amendment gives rise to issue of law only, the lateness of the application to amend is of much less importance than it otherwise would be. In that regard, the defendant has not demonstrated any prejudice brought about by the lateness of the request for amendment.

In relation to the defendant’s oral submission concerning the interaction of sections of the Civil Liability Act, i.e. ss 3A(2) and 61, these are matters which can be dealt with at the trial. They are not matters which raise such prejudice for the defendant that it would be unfair to allow the plaintiff to rely upon them.

Under s 64 of the Civil Procedure Act leave to amend may be sought for a variety of reasons ranging from a mere correction of pleading errors to the alteration of the parties and the addition of substantive causes of action and defences. In all these situations, the Court must have regard to both the overriding purpose of the Civil Procedure Act and the dictates of justice (Civil Procedure Act ss 56 and 58). Discharge of the obligation requires consideration of the nature of the proposed amendment, its consequences for the other parties and the expeditious conduct of the proceedings.

From the point of view of the dictates of justice, the amendments proposed by the plaintiff do no more than state legal consequences arising from facts which are not in dispute. As well as a tortious liability, there was also the Hire Agreement between the plaintiff and SSE which set out additional obligations. There would be a substantial distortion of the true factual background if the matter went to trial artificially based on only part of the actual facts. Even though the application has been brought at a late point in time, the nature of the amendment sought will not significantly increase the costs of the proceedings, nor will it delay the hearing.

Finally, there is no suggestion that the application for leave to appeal does not have a proper purpose. For the reasons set out above, the proposed amendment does not cause undue prejudice to the other party.

It follows, therefore, that the plaintiff is entitled to amend the Statement of Claim as requested in its Notice of Motion. That, however, does not end the matter. There remains the question of costs.

The plaintiff accepted in argument that it was seeking an indulgence and submitted that if it were successful, it should not have its costs.

As earlier indicated, it is most unfortunate that Senior Counsel was not involved at an earlier point in time in these proceedings. There are very considerable advantages from a case management point of view in that occurring. Where counsel becomes involved at a late point in time, it often occurs as here, that amendments to the pleadings are required, some of them being quite substantial.

It also occurs that applications for late amendments to pleadings are mostly hotly contested and require adjudication by the courts. This involves a considerable expenditure of resources which could easily be avoided and better directed by a more timely involvement of counsel.

The delay here has not caused actual prejudice in the sense that the factual substratum remains the same and it is only legal argument which will change. Nevertheless, the events the subject of the plaintiff’s claim occurred many years ago and the parties are commercial entities. It is also significant, as was conceded by Senior Counsel for the plaintiff, that it is the plaintiff which is seeking an indulgence from the Court.

In all the circumstances, I am of the opinion that the plaintiff, although successful in this application, should pay the costs of the motion and any other costs incurred as a result of the amendments to the Statement of Claim being allowed.

The orders which I make are: