Statement of Claim Dismissed for Inchoate Cause of Action

The Court dismissed the claimant's statement of claim on the grounds that the cause of action was inchoate, as the damages remained hypothetical and had not crystallised. The ruling was based on the Supreme Court Rules - Part 13 r 5.

New South Wales Supreme Court

CITATION : [NAME] v [NAME] & 2 Ors [2002] NSWSC 465 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 20151/2001 HEARING DATE(S) : 15 May 2002 JUDGMENT DATE : 29 May 2002

[NAME] (Plaintiff)

[NAME] (First Defendant) PARTIES : [COMPANY] (Second Defendant)

[COMPANY] (Third Defendant) JUDGMENT OF : [NAME] (Plaintiff)

[NAME] (First Defendant) COUNSEL : [redacted] (Second Defendant)

[NAME] (Third Defendant)

[NAME] (First Defendant)

SOLICITORS : [redacted] (Second Defendant)

[NAME] (Third Defendant) CATCHWORDS : Summary judgmenyt - cause of action inchoate LEGISLATION CITED : Supreme Court Rules - Part 13 r 5 Agar v Hyde (2000) 201 CLR 552; [2002] HCA 41 Air Services Australia v [NAME] (NSWSC unreported 26 August 1998) CASES CITED : Dey v Victorian Railway Commissioners (1948-49) 78 CLR 62 [COMPANY] v Commissioner for Railways (1964) 112 CLR 125 Webster & Anor v Lampard (1993) 177 CLR 598

DECISION : (1) The statement of claim is dismissed; (2) The plaintiff is to pay the [NAME]' costs.

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IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

MASTER HARRISON

WEDNESDAY, 29 MAY 2002

20151/2001 - [NAME] v [NAME] & 2 ORS

JUDGMENT (Summary judgment; cause of action inchoate) 1 MASTER: By notice of motion filed 4 October 2001, 30 October 2001 and 16 November 2001 each defendant seeks an order that the statement of claim as against him be dismissed pursuant to Part 13 r 5 of the Supreme Court Rules (SCR). The first defendant is [NAME]. The second defendant is [COMPANY]. The third defendant is [COMPANY]. The plaintiff relied on the affidavit of [NAME] sworn 23 November 2001.

The law on summary judgment 2 Part 13 r 5 says: "(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings- (a) no reasonable cause of action is disclosed; (b) the proceedings are frivolous or vexatious; or (c) the proceedings are an abuse of the process of the Court, the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings." 3 In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 the High Court held at 57 that:

"Ordinarily a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way." 4 According to their Honours, this is because:

"It would be wrong to deny a plaintiff resort to the ordinary processes of a court on the basis of a prediction made at the outset of a proceeding if that prediction is to be made simply on a preponderance of probabilities" (at 58). 5 Similarly, in Air Services Australia v [NAME] (NSWSC unreported, 26 August 1998) Rolfe AJA found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railway Commissioners (1949) 78 CLR 62; [COMPANY] v Commissioner for Railways (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. I have reproduced some of the passages quoted in [NAME]. 6 In General Steel Barwick CJ, who heard the application alone stated at 130: "Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed." 7 Barwick CJ also said at 129: "It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; be manifest that to allow them' (the pleadings) 'to stand would involve useless expense." 8 In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous testing stating, at 602: "The power to order summary judgment must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried."' 9 According to Rolfe AJA in [NAME] at 15-16: "The demanding nature of the test is in no way lessened in circumstances where there are the potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened: see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241."

The earlier proceedings for personal injury 10 The plaintiff has brought two proceedings, this one and 20201/2000 (the earlier proceedings). For the purposes of this application I have accepted the allegations in the statement of claim in the earlier proceedings as being true. The statement of claim in the earlier proceedings pleads that on 6 April 1994 the plaintiff was employed by the first and/or the second defendant to work for it at the Wagga Wagga viaduct in the capacity of a welder/bridge carpenter and was working on the Wagga Wagga railway viaduct (the project). The third and fourth [NAME] in the earlier proceedings were also variously supervising the plaintiff or the project. At about 10.00 am on 24 October 1994 the plaintiff in the course of his employment was engaged in installing a walkway when he was injured as a result of a fall and suffered serious personal injuries. 11 In the earlier proceedings the first defendant is [COMPANY] and the second defendant is [COMPANY] (both collectively known as [NAME]). [NAME] are the plaintiff's employers. [COMPANY] (the third defendant) is the head contractor and [COMPANY] (the fourth defendant) is the owner/occupier of the premises. 12 On 2 July 1999 [COMPANY] went into liquidation. On 24 June 1999 [COMPANY] went into liquidation. In June/July 2002 the proceedings against [COMPANY] and [COMPANY] were struck out. 13 In these earlier proceedings the first and second [NAME] brought cross claims against [COMPANY] as first cross defendant claiming that it had an insurance policy to cover an event such that has happened to the plaintiff. [COMPANY] as second cross defendant, its [NAME], claiming that it ought to have procured insurance for the benefit of the first and second [NAME] to cover an event such as occurred to the plaintiff. [COMPANY] as third cross defendant alleging that it as head contractor owed a duty of care to the plaintiff to prevent an event such that occurred to the plaintiff. This cross claim has been dismissed. 14 That leaves only [COMPANY] and [COMPANY] as [NAME] in the earlier proceedings. The plaintiff's claim against the head contractor and the owner occupier in which he is seeking damages for personal injuries has not yet been heard by this court.

The current proceedings 15 In these proceedings the [NAME] are [NAME] as first defendant, [COMPANY] as second defendant and [COMPANY] as third defendant. [NAME] was a director and officer of [COMPANY] and [COMPANY]. Briefly this claim is brought in negligence on the basis that the director of [NAME] ([NAME]) the broker and insurer did not arrange for a common law extension cover to be provided with the workers compensation insurance to the [NAME] companies. 16 It is pleaded that the plaintiff is entitled to be indemnified pursuant to the policy of insurance in the event that the plaintiff succeeds in establishing negligence by [NAME] as employer and in circumstances where the common law insurance extension cover would indemnify [NAME]. 17 The [NAME] raised essentially two main issues, firstly that the cause of action is inchoate; and secondly, that they owe no duty of care to the plaintiff.

Claim against [NAME] – Director of the [NAME] companies 18 The statement of claim alleges that on 24 October 1993 to 24 October 1994 [NAME] retained and/or otherwise engaged the [NAME] for the purpose of purchasing and/or otherwise acquiring for the benefit of [NAME] and those persons employed by it including the plaintiff insurance cover to include the common law extension insurance cover in relation to works to be performed by its employees including the plaintiff in New South Wales. 19 In about June 1994 to late 1994 the [NAME] advised, informed and/or otherwise conveyed to [NAME] that common law extension insurance cover had been obtained from the insurance company and that common law extension insurance cover would operate to indemnify [NAME] in the event that the plaintiff sustained injuries in the course of his employment whilst working in New South Wales whilst employed by [NAME]. It is then alleged that [NAME] breached his duty of care and acted negligently in that he failed to ensure that insurance cover was in place. On this pleading, it seems that [NAME] did all that was required by him. He arranged for the company to be covered by the common law extension policy and was told by the broker that such cover was in place. In these circumstances, it is difficult to envisage that [NAME] was negligent.

Claim against the [NAME] – [COMPANY] 20 It is pleaded that the [NAME] owed the plaintiff a duty of care to exercise all reasonable care in obtaining insurance cover on behalf of [NAME] and/or [NAME] including common law insurance cover. It is not disputed that the broker owed a duty of care to the insured, [NAME], but it is disputed that the duty of care was owed to the plaintiff. It is alleged that the duty of care was breached when the [NAME] failed to obtain from the insurance company the common law extension cover for [NAME]. 21 At paragraph 20(c) it is pleaded that the broker ought to have known that if the insurance cover was not in place then persons such as the plaintiff employed by [NAME] and performing work in NSW would not have in place any insurance cover which would indemnify [NAME] in respect of injuries sustained by persons such as the plaintiff as a result of [NAME]'s negligence as an employee and those circumstances could or may give rise to difficulties in the plaintiff claiming/receiving the fruits of the judgment award or settlement pursuant to any judgment, award, settlement or any claim arising from those circumstances including circumstances where [NAME] had insufficient assets available to meet any potential claim by persons such as the plaintiff.

The insurer – [COMPANY] 22 It is alleged that the insurance company owed a duty of care to the plaintiff to exercise all reasonable care in issuing policies of insurance including the common law extension insurance cover to entities such as [NAME]. It is alleged that the insurance company failed to properly advise the [NAME] and/or [NAME] and/or [NAME] that the insurance cover purportedly offered by the insurance company did not in fact include the common law extension cover.

The claim for damages 23 The damages claimed are predicated on the plaintiff obtaining a verdict against [NAME]. He will not be able to enforce the entirety of any judgment obtained by the plaintiff against [NAME] by reason of the absence of a policy of insurance which included the common law extension insurance cover. 24 Hence the plaintiff's damages crystallise once the personal injury proceedings are heard. If the plaintiff obtains judgments against the remaining [NAME], and payment is made, he will not suffer any financial loss. He would not have a claim for damages. It is only if judgments are entered against [NAME] companies and those companies are unable to satisfy judgments that the plaintiff will suffer a financial loss. Without damages being crystallised, the cause of action is inchoate. 25 In Baldry v Jackson [1976] 2 NSWLR 415 at 416 the Court of Appeal held that it is impossible to permit an amendment to a statement of claim which would have the effect of introducing a cause of action based on facts which have not arisen when the statement of claim was filed. In my view, the facts pleaded in paragraph 20 of the statement of claim have not yet arisen. The damages have not occurred. They are hypothetical. The cause of action is inchoate and the claim against the [NAME] is hopeless. The statement of claim is dismissed. 26 The [NAME] submitted that they did not owe a duty of care to the plaintiff where it caused economic loss. It is not necessary for me to decide this issue. 27 The statement of claim is dismissed on the basis that the cause of action is inchoate. 28 Costs are discretionary. Normally costs follow the event. The plaintiff is to pay the [NAME]' costs. 29 The orders I make are:

(1) The statement of claim is dismissed.

(2) The plaintiff is to pay the [NAME]' costs. **********

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