Globe Church Incorporated v Allianz Australia Insurance Ltd

1. [1]

   The plaintiff had an Industrial Special Risks Insurance Policy for the period 31 March 2007 to 31 March 2008 (the 2008 Policy). The policy covered a church building and its contents at 78 Felton Street, Gateshead. The insurers were Allianz Australia Insurance Ltd (the First Defendant) with 60% and AIG-Ansvar Insurance Ltd (the Second Defendant) with 40%.

2. [2]

   The policy was thereafter renewed for a number of years but Ansvar Insurance alone was the insurer in those subsequent years.

3. [3]

   In a Further Amended Statement of Claim filed 17 May 2018 the plaintiff alleged that damage occurred to its property first between 8 June 2007 and 31 March 2008. The damage was said to be the undermining of the pier footings to the church hall and the car park as a result of rainwater and flooding in or about 8 - 10 June 2007; the sinking and settling of the strip footings to the church hall as a result of the clay underneath them being wet and cracks appearing in walls; and the sinking and settling of parts of the car park as a result of it being undermined.

4. [4]

   The plaintiff also alleged that further damage of a similar type occurred in the period 31 March 2008 and 31 March 2009, in the period 31 March 2009 and 31 March 2010 and in the period 31 March 2010 and 31 March 2013.

5. [5]

   The plaintiff first made a claim on 29 September 2009. Indemnity was denied by the first defendant on 30 September 2011 and by the second defendant on 5 April 2011. The statement of claim was filed on 4 November 2016.

6. [6]

   The Further Amended Statement of Claim alleges that the denial of indemnity was in breach of the 2008 Policy, and the plaintiff suffered loss and damage by reason of the breaches of that policy.

7. [7]

   In the Defence to the Further Amended Statement of Claim filed by the first defendant on 7 June 2018, the first defendant answered the various paragraphs in the Further Amended Statement of Claim by admissions, non-admissions and denials. Thereafter, three substantive defences were pleaded. First, it was pleaded that the plaintiff had made a claim in 2007 for damage that it had suffered from the thunderstorm on 8 June 2007, that the insurer accepted that claim and indemnified the plaintiff under the policy. The first defendant pleaded that no claim was made for the damage now alleged.

8. [8]

   Secondly, the first defendant pleaded an exclusion under cl 6.2.7 which provided that the policy did not cover damage occasioned through normal settling, seepage, shrinkage or expansion in buildings or foundations, walls, pavements, roads and other structural improvements.

9. [9]

   Thirdly, the first defendant pleaded that the claim was statute-barred because it accrued more than six years prior to the commencement of the proceedings on 4 November 2016: s 14 Limitation Act 1969 (NSW).

10. [10]

    In its Defence filed 24 May 2018 the second defendant pleaded to each of the paragraphs of the Further Amended Statement of Claim by admissions, non-admissions and denials. It addition, it pleaded two substantive defences being reliance on the exclusion clause already referred to, and reliance on the Limitation Act in the same way as the first defendant.

11. [11]

    On 24 May 2018 each of the defendants filed a notice of motion seeking that the Court determine a separate question prior to the final hearing in the matter. The question in each case differed in its terms but related to the defence relying on the limitation period. The first defendant’s question was this:

12. [12]

    The second defendant’s question was this:

13. [13]

    The second defendant’s motion sought also that the proceedings be dismissed pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW), but Senior Counsel for the second defendant said that such an order was not, at present, being pursued. Senior Counsel also handed to the Court an Amended Notice of Motion in which two questions were posed as follows:

14. [14]

    The plaintiff, after initially opposing any separate question going forward in relation to the second defendant, agreed that it was appropriate that two questions subsequently put forward by the defendants jointly should be determined separately. Those questions were:

15. [15]

    The parties agreed on the facts which should form the basis of any separate determination as follows:

16. [16]

    The first defendant’s motion also sought an order pursuant to UCPR r 1.21 that the proceedings be removed into the Court of Appeal for determination of the separate question. In relation to the first defendant’s desire for any separate question to be determined in the Court of Appeal, the basis for that is said to be conflicting decisions about whether the limitation period commences to run from the time the damage is suffered or from the time of the denial of indemnity.

17. [17]

    In The Commonwealth v Vero Insurance Ltd [2012] FCA 826; (2012) 291 ALR 563, Yates J held that the cause of action against a notional reinsurer accrued at the time the claimant on that policy accepted the happening of the damage as an insured event. On the other hand, in Carillion Construction Ltd v AIG Australia Ltd [2016] NSWSC 495; (2016) 19 ANZ Ins Cas 62-115 Stevenson J, following Giles J in Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564, held that the cause of action does not accrue until the claim is denied. I shall return to a discussion of these cases later in the judgment.

Should a separate question be ordered?

1. [18]

   The principles governing the ordering of separate questions are set out by Hallen ASJ (as his Honour then was) in Southwell v Bennett [2010] NSWSC 1372 at [15]; by Beech-Jones in J Crawley v Vero Insurance Ltd & Ors [2012] NSWSC 593 at [16]-[20]; and by Ward J (as her Honour then was) in Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103 at [87]-[92]. Since, in the present matter, the orders are not opposed I will not set out those passages. They may be found set out together in Commissioner of the Australian Federal Police v Pharmacy Depot Hurstville Pty Ltd [2018] NSWSC 1284 at [11]-[13].

2. [19]

   Whilst I note that all parties agree to the determination of the separate question, it is still ultimately a matter for the Court to determine if it is appropriate in the light of the principles in those cases.

3. [20]

   The following matters persuade me that it is appropriate to order a determination of the separate questions:

4. [21]

   Wherever a separate question is sought to be determined based on the Limitation Act it is always necessary to consider what was said by the High Court in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 at 533.

5. [22]

   In my opinion, the issue in the present case falls into the exception referred to by the High Court. It is clear that when damage was suffered is not the issue in the present case. The claim is one in contract, unlike the position in Wardley where the issue concerned whether damage was contingent or actual at a particular point in time. In the circumstances of the present case, and subject to the provisions of ss 64 and 65 of Civil Procedure Act 2005 (NSW) for the amendments against the second defendant, the only possible dates on which the limitation period could have accrued would be the date on which damage was suffered in June 2007, the date on which the claim was made in September 2009 or the dates on which indemnity was denied in April and September 2011. I note that no party is arguing for the date on which the claim was made.

6. [23]

   In my opinion, the agreed questions should be determined separately from and prior to the final hearing of the proceedings.

Referral to the Court of Appeal

1. [24]

   Rule 1.21 of the UCPR provides:

2. [25]

   Mr Herzfeld of counsel for the first defendant submitted that the following principles applied when considering whether it was appropriate to make an order for removal under r 1.21:

3. [26]

   I accept that those principles, which are derived from Stewart v Ronalds [2009] NSWSC 455, AVS Group of Companies v Commissioner of Police [2010] NSWSC 659, and Kang v Bishop [2018] NSWSC 46, are the relevant principles to consider.

4. [27]

   In my opinion, the existence of a conflict in legal authority in relation to the determination of the separate questions in this case is a sufficient basis to justify removal of the proceedings into the Court of Appeal. The circumstances in the present matter arise in this way.

5. [28]

   In The Commonwealth v Vero Insurance Ltd the Commonwealth sought indemnity under the terms of a policy with Vero for remediation and related costs of damage to land caused by an oil spill on or about 20 July 1999. The facts are complicated from an insurance point of view but the Commonwealth’s claim was notionally one against a reinsurer in respect of an indemnity it had provided to a particular Commonwealth instrumentality. The proceedings brought by the Commonwealth were commenced on 14 June 2011. The insurer argued that the cause of action accrued on the date of the oil spill, which resulted in the claim being statute barred.

6. [29]

   The Commonwealth relied on two later dates, both of which were within the limitation period, being the date on which the Commonwealth notified its instrumentality that indemnity would be provided, or a later date on which the Commonwealth had made a payment to its instrumentality. Although the Commonwealth relied at [87] on what Giles J had said in Penrith City Council, that there is no breach of the contract of insurance until there is a refusal to pay, the date of that refusal was not relied upon: see at [91].

7. [30]

   Justice Yates held at [93] that time did not commence to run from 20 July 1999 (the date of suffering the damage), but rather from the date on which the Commonwealth accepted the suffering of the damage as an insured event (at [98]), with the result that the Commonwealth’s claim under the policy was not statute barred.

8. [31]

   In the course of the judgment, his Honour noted that the Commonwealth’s reliance on the decision of Giles J in Penrith City Council, and its submission that what Giles J had said at pp 568-569 had been quoted with approval by the NSW Court of Appeal in CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301 at [59] and [61]. His Honour noted that the same passage had been cited with approval by the Victorian Court of Appeal in Kone Elevators Pty Ltd v Popa [2006] VSCA 26 at [21].

9. [32]

   Justice Yates said at [87] that he did not read the passage from the judgment of Giles J as supporting the submission the Commonwealth made. His Honour then went on to say at [88]:

10. [33]

    His Honour then went on to discuss the decision of the Full Court of the Supreme Court of Western Australia in Cigna Insurance Asia Pacific Ltd v Packer (2000) 23 WAR 159. In that case Pidgeon J considered that Penrith City Council should not be followed because it was contrary to earlier Western Australian authority.

11. [34]

    On the appeal by the Commonwealth, the Full Court of the Federal Court in Commonwealth of Australia v Vero Insurance Ltd [2013] FCAFC 152 held, when considering Vero’s Notice of Contention relating to limitation issues, per Jagot J (Dowsett and Logan JJ agreeing) at [115]-[116], that Yates J’s analysis concerning whether the action accrued in 1999 was correct. However, the Full Court said nothing about that part of the judgment of Yates J that discussed the correctness of Penrith City Council. Special leave to appeal was refused by the High Court, but the application did not concern the limitation determination: Commonwealth of Australia v Vero Insurance Limited [2014] HCATrans 136.

12. [35]

    A different view of the correctness of Penrith City Council was reached by Stevenson J in Carillion Construction Ltd. The policy under consideration in that case was one for indemnity for property damage. Justice Stevenson held at [126] that the insured’s cause of action arose when the insurer refused indemnity under the policy. His Honour noted that there was much English authority for the proposition that under an indemnity policy the insured’s cause of action accrued, and time began to run, on the occurrence of the peril the subject of the indemnity. His Honour made reference to a number of texts that relied on the judgment of Sir Peter Webster in Callaghan v Dominion Insurance Co Ltd [1997] 2 Lloyd’s Rep 541 at 544.

13. [36]

    The different view adopted by Stevenson J from that of Yates J is best demonstrated by setting out the following portion of Stevenson J’s judgment:

14. [37]

    In 2015 the Full Court of the Supreme Court of Tasmania in Associated Forest Holdings Pty Ltd v Gordian Runoff Ltd [2015] TASFC 6 at [94]-[96] followed Cigna and distinguished Penrith City Council.

15. [38]

    The position is, therefore, that two intermediate appellate courts (the Full Court of the Supreme Court of Western Australia and the Full Court of the Supreme Court of Tasmania) lend support to the view of Yates J in the Federal Court, whereas Stevenson J calls in aid of his decision the approval of the New South Wales Court of Appeal. In addition, although it was not referred to by Stevenson J, the decision of the Victorian Court of Appeal in Kone Elevators at [21] accepts the correctness of the judgment of Giles J in Penrith City Council in saying that the right of action for breach of contract accrued at the time of the breach and not at the time of suffering the damage. It should be noted also that the New South Wales Court of Appeal in CGU v Watson made express reference at [60] to the judgment in Kone Elevators.

16. [39]

    This is not simply a dispute between the NSW and Victorian Courts of Appeal on the one hand and the Tasmanian and Western Australian Full Courts on the other. If that were so, no occasion would arise to refer the present matter to the Court of Appeal because any single judge of this Court would be bound by what was decided in CGU. The focus of the submission of the first defendant in the present case is the extent to which the Court of Appeal in CGU endorsed the conclusion of Giles J in Penrith where his Honour said (at 571E-G):

17. [40]

    The first defendant submitted that this passage was not referred to by the Court of Appeal in CGU and that it, therefore, does not follow that Stevenson J was correct in following it on the supposed basis that it had been endorsed by the Court of Appeal. The first defendant submitted that the passage at 571E-G was obiter dicta, and that only the ratio only of Giles J’s decision (at 568-569) was endorsed by CGU at [59] and [61].

18. [41]

    The first defendant submitted that a judge of this Court at first instance would be in an invidious position if called upon to determine the separate questions. That judge would feel bound to follow Stevenson J unless clearly persuaded that his Honour was in error, but would also be expected to follow interstate intermediate appellate courts. The first defendant submitted that, if the matter was referred to the Court of Appeal, that Court could authoritatively rule on the correctness of Penrith City Council and clarify what had been endorsed in CGU. The first defendant submitted that it would seek leave to argue that, to the extent that CGU had endorsed Penrith City Council at 571, the Court of Appeal should review its decision in CGU.

19. [42]

    The first defendant submitted that, if the question was decided by a single judge adversely to the defendants, an appeal was very likely with the added costs and time involved in that process.

20. [43]

    The second defendant submitted that the cases, when examined, did not disclose any inconsistency. The second defendant submitted that although it was “not wedded either way”, it considered that a single judge would be able to reach a correct decision notwithstanding what appears to be a façade of inconsistency in the cases. The second defendant submitted that the Court of Appeal may consider it would be assisted by having a judgment from a judge at first instance if it came to consider the matter on an appeal. The second defendant submitted that the inevitability of an appeal from one or other party was not a sufficient justification for sending the proceedings directly to the Court of Appeal.

21. [44]

    The plaintiff indicated that its position was simply that it would rather have one hearing. In that way if the matter was referred to the Court of Appeal, that would eliminate the risk of two hearings, with a single judge reaching a decision on the basis of the authorities followed by an appeal to the Court of Appeal. The plaintiff’s concern was principally, however, about the risk that it might bear the costs of two other parties if it was unsuccessful on the hearing of the separate question. For that reason, the plaintiff sought an order that if the matter was referred directly to the Court of Appeal any costs that the plaintiff would have to pay should be limited to one set of defendant’s costs.

22. [45]

    In reply, the first defendant said that any argument before a single judge of the separate questions would mean that the first defendant would be hamstrung in that it could not suggest that the Court of Appeal was wrong in the view it took in CGU. It might be able to argue that Stevenson J’s decision was wrong in the way he saw the endorsement of CGU for Penrith City Council, but a direct hearing in the Court of Appeal would remove that as an issue. The Court of Appeal could simply be asked to determine the correctness or otherwise of the other intermediate appellate courts.

23. [46]

    Following the expression of concern by the plaintiff about being liable for two sets of defendant’s costs, I enquired of counsel for both defendants what their positions were as far as agreeing that the plaintiff would only be liable for one set of defendant’s costs at the hearing of any separate question. The solicitors for the defendants subsequently forwarded emails to my Associate saying that, if I was minded to make an order for the determination of the separate questions, their clients would not oppose such a limitation on any costs order.

24. [47]

    On an application to remove the proceedings into the Court of Appeal following a decision for the separate determination of questions, it is not part of the function of the Court to do other than consider whether or not there is a sound basis for the Court of Appeal to determine the questions in the first instance. Where the basis for doing so is a conflict between decisions of intermediate appellate courts and a conflict between single judges in this Court and the Federal Court, it is sufficient to see that there is at least a serious argument that such a conflict exists. It is not for me to determine, for example, if Stevenson J was correct in the view he reached that the Court of Appeal in CGU had endorsed the totality of what was said in Penrith City Council.

25. [48]

    I am satisfied that on the face of the decisions in Carillion Construction on the one hand and Commonwealth v Vero Insurance on the other there is a conflict inasmuch as the single judges deciding those cases have relied on authority from intermediate appellate courts that have taken a different view of the particular issue. The parties before me made no reference to the decision of the Victorian Court of Appeal in Kone Elevators, and that decision serves only to highlight the difference amongst the intermediate appellate courts of the country.

26. [49]

    I accept the submissions of Mr Herzfeld that clarification is needed at an appellate level of the principle or principles referred to by Giles J in Penrith City Council. I accept his submission that an argument before a single judge of the Court would be hamstrung by various principles of stare decisis concerning judgments of other single judges of this Court and obligations with regard to appellate courts of other States. I accept also that if the first defendant intends to argue that CGU was wrongly decided, that argument can only be put to the Court of Appeal. This is also not a case where the Court of Appeal is likely to be further assisted by having a judgment of a single judge. It will have available not only the judgments of Stevenson J and Yates J but also the other judgments of intermediate appellate courts.

27. [50]

    I accept also that the insurance point is a significant one for insurers and that there is a very strong likelihood of an appeal from a single judge if the questions were determined adversely to the defendants. I consider also that, bearing in mind the value of the claim (well in excess of $500,000), there is a reasonable likelihood that the plaintiff would appeal if the questions were decided adversely to it. Ordinarily, the likelihood of an appeal is not a strong reason to refer a matter to the Court of Appeal. In the present circumstances, however, where the principal reason for referral is an apparent conflict in decisions of various courts, the issue of a likely appeal from a single judge assumes greater significance.

28. [51]

    I consider, however, that the plaintiff should be protected from having to pay two sets of defendants’ costs in the event that the plaintiff is unsuccessful. The plaintiff was forced to join both defendants because of the arrangement of the policy, with each defendant bearing a proportion of any indemnity that has to be paid. It would be inappropriate for the plaintiff to pay two sets of costs where the same arguments were put by the defendants. Further, if different arguments are put to maximise the chances of success of the defendants, the plaintiff should not be required to pay for that. It will be for the Court of Appeal to determine how the defendants will be required to pay any costs ordered in the plaintiff’s favour.

Conclusion

1. [52]

   Accordingly, I make the following orders: