Chubb Insurance Australia Ltd v Giabal Pty Ltd; Catlin Australia Pty Ltd v Giabal Pty Ltd

THE COURT: All active parties have consented to these two applications for leave to appeal from the interlocutory judgment of the primary judge (Ball J) being heard and determined on the papers.

In representative proceedings pending in the Commercial List, the plaintiffs (Giabal Pty Ltd and Mr Geoffry Underwood) sought leave to proceed against two excess layer insurers, Catlin Australia Pty Ltd and Chubb Insurance Australia Ltd. The application was made pursuant to s 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW). Section 4 permits, in certain circumstances, a claim to be made directly against a defendant’s insurer. Section 5 qualifies that right, by imposing a requirement of leave. Subsection 5(4) provides that leave must be refused if the insurer can establish that it is entitled to disclaim liability.

The primary judge heard argument on the application on 7 August 2020, and granted leave by reserved judgment delivered on 14 August 2020: Giabal Pty Ltd v Gunns Plantations Ltd (in liq) [2020] NSWSC 1070. It is not necessary for present purposes to examine the detail of the submissions or his Honour’s reasons. His Honour identified two difficulties with the insurers’ submissions. The first was based on the definition of a “Claim” under the policies. The second doubted the availability of the exclusions on which the insurers relied. As his Honour observed at [14], both insurers accepted that their opposition to joinder would fail unless they could satisfy the court that their entitlement to disclaim liability was “beyond argument”.

In support of its submissions in favour of the grant of leave to appeal, Catlin complains that:

In opposition to the grant of leave to appeal, the respondents maintain that:

In those circumstances, it is undesirable at this stage in the litigation to express any views concerning the substantive submissions advanced by the applicants and opposed by the respondents as to the construction of the policies.

It is common ground that the discretion was exercised by the primary judge on the basis of asking whether, in relation to the formulation of the plaintiff’s claims at that stage in the litigation, it was “beyond argument” that the insurers were entitled to disclaim. There has been no final determination of the underlying issue, namely, whether in fact the insurers are entitled to disclaim.

If leave were granted and the appeal were ultimately allowed on the basis that (a) the Court of Appeal was satisfied that the primary judge had erred in the exercise of his discretion, and (b) in the re-exercise of that discretion the insurers’ entitlement to disclaim was in fact made out “beyond argument”, then it would remain open, at least in principle, to the plaintiffs to reformulate their pleading. (Indeed, the primary judge recorded at [26] that the insurers had made frequent reference to the pleading being “sanitised” with a view, so it was put, to removing allegations which might engage an exclusion.)

Conversely, the primary judge’s refusal of leave establishes only that the insurers had failed to establish “beyond argument” an entitlement to disclaim. It does not determine – as is common ground on the parties’ written submissions – their entitlement or absence of entitlement to disclaim.

In those circumstances, there is scant utility in any appellate review of the exercise of discretion by the primary judge.

The applicants’ submissions in reply, dated 6 November 2020, correctly apprehended that it was being put that for this reason it was inappropriate to grant leave. It is put that although the respondents’ approach was “superficially attractive”, the questions of construction should not be deferred until a final hearing. That in turn led to submissions as to the “basic nature of the claim” and the breaches alleged, in support of the proposition that the questions of construction were “deserving of appellate consideration now, rather than at the end of a complex representative proceeding”. That submission does not, however, detract from the force of the respondents’ submission that all that has been determined is that the insurers’ entitlement to disclaim is not clear beyond argument.

It may be – we express no view one way or the other – that a final determination of one or more of the questions of construction arising under the policies of insurance might be achieved in advance of any trial. Were that so, the considerations which presently lead to the conclusion that leave should be refused would not apply, at least not with so much force as is presently the case. It is easy to see that there may be reasons tending in favour of such a course, and other reasons tending against such a course. Ultimately, if and when any such application is made, it will be a matter for a judge in the Commercial List to determine whether that course is appropriate. These reasons are not intended to bear in any way upon any such application.

For those reasons, each summons seeking leave to appeal should be dismissed. There is no reason why costs should not follow the event.