The recent decision of Justice Campbell in Zaki v Better Buildings Constructions Pty Limited1 has become the first Supreme Court of New South Wales authority applying the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (the Act).

This decision concerned the joinder of an insurer to proceedings and the appropriate onus with respect to time limitations.

Background

Zaki commenced proceedings against Better Buildings Construction Pty Ltd (“Better Buildings”), the builder and developer of a high rise building project at Blacktown, New South Wales, as a result of serious injuries that he suffered after being struck by a length of chain that fell from a crane operated by a Better Buildings employee.

At the time of the injury, Zaki alleged that he was working under the control and direction of Ofform Pty Ltd, a company now in liquidation. Zaki alleged that Ofform Pty Ltd was negligent by directing him to work below the field of operation of the crane, thus exposing him to an unnecessary risk of injury by objects falling from the crane.2

As Ofform Pty Ltd had entered liquidation, Zaki sought leave of the Supreme Court to file a Further Amended Statement of Claim joining the insurer of Ofform Pty Ltd, GIO General Pty Ltd (Insurer), as a defendant to the proceedings pursuant to section 5 of the Act.

Question in Issue

Justice Campbell observed that the sole issue in relation to whether leave to bring the proceedings against the Insurer should be granted under section 5 of the Act, turns on the meaning of section 6 of the same Act, which is in the following terms:

(1) Proceedings to recover an amount from the insurer under section 4 must be commenced within the same limitation period that applies under the Limitation Act 1969 (NSW) or other Act to the claimant’s cause of action against the insured person in respect of the insured liability.

(2) Subsection (1) does not apply if the claimant has brought proceedings against the insured person in respect of the insured liability before the expiry of the limitation period applying to those proceedings, including any extension of the limitation period granted under the Limitation Act 1969 (NSW) or other Act by a court.3

As such, Justice Campbell noted that the question dividing the parties on the application was that upon the true construction of s 6(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), does the onus lie upon the claimant to prove that the proposed claim is within time, or upon the Insurer to prove that the claim is out of time?”

Reasoning

Upon consideration of the express language and statutory context of the Act, Justice Campbell found that the enactment of section 6 of the Act does not alter the settled law that a defendant raising a statutory bar imposed by the Limitation Act 1969 (NSW) (Limitation Act) carries the legal onus of proof.

Whilst it may be accepted that section 4 of the Act creates a new statutory right of action for recovery of the amount of an insured liability direct from the Insurer by the claimant who is a third party to the contract of insurance, the Court was not of the view that it creates a limitation period which is annexed by the statute to the right which s 4 has created “so as to be of the essence of that right”.4

Justice Campbell observed that, inter alia, section 6 of the Act does not purport to create a single fixed limitation period for all proceedings brought under section 4 of the Act, rather, it picks up the operation of the Limitation Act 1969 or any other Act which applies a limitation period to a claimant’s cause of action against the insured, similar to section 151D of the Workers Compensation Act 1987 (NSW) and section 109 of the Motor Accidents Compensation Act 1999 (NSW).

The Limitation Act also creates more than one limitation period and, in some cases, makes provision for a flexible extension of the limitation period, again, similar to the aforementioned provisions of the Workers Compensation Act 1987 (NSW) and Motor Accidents Compensation Act 1999 (NSW).

Justice Campbell found that section 6(2) of the Act demonstrates that time ceases to run if proceedings have been brought against the insured within time and specifically refers to “any extension of the limitation period granted under the Limitation Act 1969 or other Act by a court”. This is a strong indication that the “well known interpretative approach” to construing limitation provisions applies in these circumstances.5 Section 6 of the Act expressly enacts what was implicit in the legislation that preceded the Act and states a rule of substantive law.

Just as there is nothing in the express language or statutory context of the Act to suggest it establishes an element of the statutory cause of action, there is nothing in the Act to suggest that it imposes a condition precedent to the granting of leave under section 5 of the Act, which must be established by the claimant prior to such leave being granted.

In light of these findings, Justice Campbell confirmed that the express language of section 6 is against this construction, as it refers to the time within which the proceedings must be brought, whilst saying nothing about the time within which the leave application must be brought. Accordingly, section 6 of the Act does not refer or apply to any leave application brought pursuant to section 5 of the Act at all.

Furthermore, Justice Campbell found that section 7 of the Act contemplates that contested issues about the insured person’s right to recover under the contract of insurance, and an insured person’s defences to the claim brought by the claimant are to be determined at the hearing of the recovery proceedings under section 4 of the Act, rather than on the application for leave under section 5 of the Act.

Decision

In answering the question in issue, Justice Campbell determined that section 6(1) of the Act does not alter the general law, and the onus lies upon the Insurer to prove that a claimant’s claim against an insured person is out of time pursuant to the Limitation Act

Justice Campbell was satisfied that:

a) there is an arguable case of liability against the insured company in accordance with the High Court’s decision in Kondis;

b) there is an arguable case that the Insurer’s policy would respond to that liability;

c) given the liquidation of Ofform Pty Ltd, the court was satisfied that there is a real possibility that if the plaintiff obtains judgment against the insured company, it will not be able to meet it; and

d) accordingly, there is no countervailing reason to refuse leave.

Notwithstanding, the grant of leave does not disentitle the Insurer to raise any available defence under the Limitation Act 1969 NSW at the trial of the action, or any defence that would have been available to it in an action for indemnity brought by its insured.

In light of the above, and becoming the first authority to apply the Act, the Supreme Court of New South Wales found that:

1) section 6(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) does not alter the general law and the onus lies upon the Insurer to prove that a claimant’s claim against an insured person is out of time under Limitation Act 1969 (NSW); and

2) under section 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), the plaintiff was granted leave to commence proceedings against the Insurer by filing and serving a Further Amended Statement of Claim, with the costs of the application being costs in the cause.