FEDERAL COURT OF AUSTRALIA

Australian Prudential Regulation Authority v Rural & General

Insurance Limited [2003] FCA 1567

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY v RURAL & GENERAL INSURANCE LIMITED (ACN 000 007 492)

N 3050 OF 2003

GYLES J

12 DECEMBER 2003

SYDNEY

THE COURT ORDERS THAT:

1.      The hearing of the separate question be adjourned to a date to be fixed.

2.      The plaintiff pay the defendant’s costs of the day, to be taxed and paid immediately.

3.      The plaintiff pay to the defendant an amount of $5,000 on account of those costs, to be paid immediately.

4.      Costs otherwise reserved.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The proceeding will be adjourned.  I will give short reasons.  The transcript of today's argument will be available.  Counsel have put before me comprehensive submissions as to the situation.  The alternative to this order would be to, as it were, force the plaintiff on in the present state of evidence which might lead to either a dismissal of the case because evidence is not admissible or it may indeed lead to the plaintiff accepting that the proceeding ought to come to an end with uncertain consequences.  I note that counsel for the defendant has said that his client would not take an Anshun estoppel point if subsequent proceedings were commenced. Although counsel for the plaintiff says that that statement is not in a form on which it is necessarily safe to rely, if that was all that was involved no doubt undertakings to the Court could be given which would be secure. 

2                     It seems to me, however, that it would not be right to risk bringing this proceeding to an abrupt halt.  There has been much preparation done, including the obtaining of documents, the inspection of documents and so on, which would be effectively wasted if this proceeding did not go on.  I take account of the fact that, admissible or not, the opinion of the expert retained by the plaintiff, according to his most recent affidavit, is that the defendant is insolvent in the special insurance sense that is relevant.  That being the case, it seems to me that the plaintiff would be advised to pursue the matter with another proceeding which would appear to me to involve a considerable waste of expense for everybody.

3                     The matters of prejudice which have been put forward by counsel for the defendant are not without substance.  The pendency of a winding up proceeding is an adverse circumstance even though the company is not writing new business.  It may affect the attitude of other creditors, it may affect the attitude of re-insurers and their bargaining positions and so on.  There is interlocutory relief on foot which limits the ability of the company to dispose of assets.

4                     Although there is no evidence as to the amount of the costs of preparation, or of the ongoing costs of this case, the figures that I have been given from the bar table are substantial.  I would assume that the figures would be substantial.  It would be ironic indeed if the company were made insolvent by the incurring of costs to defend itself, some of which can properly be seen as wasted through what has occurred.  It is also relevant to note that s 462(3) of the Corporations Act 2001 (Cth) does indicate that the legislature was conscious of the necessity for there to be, what might be called, a cautious approach to winding up in these circumstances.  It is also legitimate to take account of the strain upon the managing director of a company who is very heavily involved in both the affairs of the company and the allegations which are involved in the case itself.

5                     This is not, however, a case where the plaintiff has simply failed to get its evidence into order.  It is legitimate for the expert retained by the plaintiff to re-consider his estimates on the very important question of the application of the insurance standards as information becomes available, particularly where the information is essentially in the hands of the other party.  It is true that that expert has been an inspector of the company and did have the ability to obtain information but that does not detract from the fact that the company is the source of the information, directly and indirectly.  On the other hand, there is substance in Mr White's criticism that the revision for more current information does not wholly explain, and he would say does not explain, the necessity, which counsel for the plaintiff now accepts, to put the evidence into proper form. 

6                     As I indicated tentatively to counsel for the plaintiff, it seems to me that none of the reports and none of the affidavits are drawn in the way one would expect to see an expert's report drawn having in mind the Direction in relation to expert witnesses, the requirements of the Evidence Act 1995 (Cth), the general law as to the reception of opinion evidence, and the necessity to prove the underlying facts. 

7                     So that there are things to be said for both points of view.  In my opinion, as the company is in run-off and is not writing current business, the inevitable adjournment of the matter to the new year, whilst it is to be deplored, is not of such moment as to cause me to refuse the adjournment.

8                     The question of costs is a difficult one.  I am conscious of the financial strain that this company has in defending these proceedings.  It is inevitable that some of the costs which have been expended or committed will be wasted by reason of the adjournment.  On the other hand, whilst I do not have a final view about it, it seems to me that the provision of information on affidavit by the defendant company has increased the information which the plaintiff’s expert must necessarily take into account.  Because of the time when that evidence was put on, I think that there is some excuse for the somewhat unsatisfactory way in which it has been dealt with by the plaintiff.

9                     My disposition is to order that costs of the day be taxed immediately and paid by the plaintiff to the defendant.  I order a payment of $5,000 on account of those costs to be paid immediately. 

10                  That is not the limit of the costs order which might eventually follow.  It should be clear therefore that the overall costs implications of what has occurred will be a matter to be taken into account and dealt with by whoever deals with the substantive separate question.  I should also say I am not persuaded that the separate question should be abandoned.  That course was arrived at by a consensual process.  It does seem to have practical merit and I, at least, would not take that step myself. 

Associate:

Dated:              22 December 2003