FEDERAL COURT OF AUSTRALIA

Hopkins v AECOM Australia Pty Ltd (No 4) [2015] FCA 307

THE COURT ORDERS THAT:

1.    The amended interlocutory application dated 18 November 2014 be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BACKGROUND

1    Each of RiverCity Motorway Investment Trust (RCMI Trust) and RiverCity Motorway Holding Trust (RCMH Trust) is and was, at all relevant times, a registered managed investment scheme. The applicants acquired stapled units in RCMI Trust and RCMH Trust under an offer made by a Product Disclosure Statement (the PDS). The second respondent (RCMML) was the issuer of the stapled units and responsible entity for each of RCMI Trust and RCMH Trust. The PDS was prepared by the third respondent on behalf of RCMML. The proceeding was commenced by the applicants as a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth).

2    According to the PDS, the purpose of the offer was to raise funds to partly finance the design, construction and operation of the North-South Bypass Tunnel (the Tunnel) in Brisbane through the issue of the stapled units. Each stapled unit was to consist of one unit in RCMI Trust and one unit in RCMH Trust.

3    The PDS was dated 21 June 2006 and lodged with the Australian Securities and Investments Commission on that date. It appears that the offer closed in July 2006 and that trade in the stapled units on the Australian Securities Exchange (ASX) commenced in August 2006.

4    On 8 July 2014, RCMML went into liquidation following a resolution passed at the second meeting of creditors. Stephen Parbery, Christopher Hill and Michael Owen, who were previously administrators of RCMML, were appointed as the liquidators. At an earlier stage of this proceeding the applicants were given leave to proceed against RCMML.

5    The applicants allege that RCMML is liable under s 1022B of the Corporations Act 2001 (Cth) for (inter alia) what are alleged to be misleading or deceptive statements in the PDS that rendered it defective. Central to the applicants’ case against RCMML is the allegation that traffic forecasts for the Tunnel that were included in the PDS substantially overestimated the average annual daily traffic volumes using the Tunnel.

6    The applicants now seek to join AIG Europe (Netherlands) NV (AIG Europe) as a respondent to this proceeding so that they may obtain relief from AIG Europe based upon s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (LR(MP) Act) as insurer of RCMML. (Subsections 6(1)–(4) of the LR(MP) Act are set out in Schedule A to these reasons.)

7    The applicants also seek orders giving them leave to file a Further Amended Originating Application and a Third Further Amended Statement of Claim giving effect to the proposed joinder and giving them leave to serve such documents in the Netherlands.

8    AIG Europe did not appear at the hearing of the present application. However, it has advanced detailed arguments in correspondence between its lawyers (Houthoff Buruma) and the lawyers for the applicants (Maurice Blackburn) as to why it ought not be joined.

The relief claimED by the applicants against AIG Europe

9    The relief claimed by the applicants against AIG Europe in their proposed amended originating application is as follows:

(fa)    A declaration that AIG Europe (Netherlands) NV (AIG Europe) is liable to indemnify RCM Management in respect of the “Class Action RCM Management Claims” (as defined in the Third Further Amended Statement of Claim);

(fb)    Declarations that:

    (i)    by reason of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), the Policy is charged in favour of the applicants and Group Members in the amount of the “RCM Management Class Action Liability” (as defined in the Third Further Amended Statement of Claim); and

    (ii)    AIG Europe is liable to pay to the applicants and Group Members the “AIG Europe Indemnity Amount” (as defined in the Third Further Amended Statement of Claim);

(fc)    further to subparagraph (fb), judgment against AIG Europe in the amount of the “AIG Europe Indemnity Amount” (as defined in the Third Further Amended Statement of Claim).

Federal Court Rules 10.42 and 10.43

10    Rule 10.43 of the Federal Court Rules 2011 (Cth) (the Rules) relevantly provides:

(2)    A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

…

(4)    For subrule (2), the party must satisfy the Court that:

    (a)    the Court has jurisdiction in the proceeding; and

    (b)    the proceeding is of a kind mentioned in rule 10.42; and

    (c)    the party has a prima facie case for all or any of the relief claimed in the proceeding.

…

11    Rule 10.42 specifies the kinds of proceedings in respect of which leave may be sought under r 10.43(2). Relevantly, these include (Item 1) a “[p]roceeding based on a cause of action arising in Australia” and (Item 15) a “proceeding seeking any relief or remedy under an Act, including the Judiciary Act 1903 (Cth)”. The applicants submit that their proposed proceeding against AIG Europe falls within Item 1 and Item 15.

12    The nature of the prima facie case that the applicant was required to establish under O 8, r 2(2) of the Federal Court Rules 1979 (Cth) was described in Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 by French J at 110 as follows:

… a prima facie case is made out if, on the material before the court, inferences are open which, if translated into findings of fact, would support the relief claimed.

See also Humane Society International Inc v Kyodo Senpaku Kaisha Ltd (2004) 212 ALR 551 at [23] per Allsop J and Ho v Akai Pty Ltd (in liq) (2006) 24 ACLC 1526 at [10] per Finn, Weinberg and Rares JJ. In the latter case, the Full Court referred with approval to the following statement of Lee J in Century Insurance Ltd (in prov. liq) v New Zealand Guardian Trust Ltd [1996] FCA 376:

What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court’s processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified.

I will adopt the same approach in determining whether or not the applicants have established a prima facie case for the purpose of r 10.43.

The Evidence

13    The evidence relied upon by the applicants consists of six affidavits made by Mr Richard Ryan of Maurice Blackburn, some recent correspondence received from Houthoff Buruma and an email dated 17 December 2014 written by Mr Johnston of Johnson Winter & Slattery, the solicitors acting for RCMML and its liquidators.

14    Mr Ryan’s affidavits also make reference to various other affidavits made by him upon which the applicants rely together with an affidavit of Mr Chapple, the solicitor for the first respondent (AECOM), which (inter alia) exhibits documents produced by RCMML in answer to a notice to produce. These include copies of the relevant policy documents and correspondence.

The Policy

15    The relevant policy is entitled “BusinessGuard Directors & Officers Liability” Policy No 30.92.0592 dated 3 October 2007 and includes an addendum letter from Marsh Ltd to ABN Amro Holding NV (ABN Amro NV) (referred to by Houthoff Buruma as Endorsement 20) dated 25 March 2008 (the Policy).

16    ABN Amro NV (now known as RBS Holdings NV) is the policyholder, and AIG Europe is the insurer. The Policy is governed by Dutch law (cl 5.14) and contains an arbitration clause requiring that all disputes that arise under the Policy be determined by arbitration. Clause 5.8 (the Arbitration Clause) provides:

In the event that a dispute arises between the insurer and the insured regarding the cover afforded by this policy, such dispute shall be referred to a mutually agreed mediator as a condition precedent to any claim being pursued under the policy against the insurer. If any such dispute remains unresolved after the mediation process it shall be referred to and finally resolved by arbitration under the arbitration rules and procedures of the country and city of domicile of the policyholder as indicated in the Schedule. The rules and procedures of the local arbitration association shall be deemed to be incorporated by reference into this clause, save that the said rules and procedures will not apply in relation to the procedure for the appointment of arbitrators and the number thereof. Three arbitrators shall be appointed. The policyholder and the insurer shall appoint one arbitrator each and a third, who shall be Chairman of the arbitration shall be appointed by agreement between the policyholder and the insurer. Failing such agreement after 30 days, the Chairman of the arbitration shall be appointed by the President of the local arbitration association or failing him his duly authorised deputy.

17    The relevant insuring clause, which appears in Endorsement 9, provides:

B:    COMPANY SECURITIES CLAIM COVERAGE AND COMPANY REIMBURSEMENT

The insurer shall pay the loss of the company resulting from:

(i)    a securities claims first made against the company, or

(ii)    a claim first made against the insured person:

during the policy period and notified in writing to the pursuant to the terms [sic] and conditions of the policy for any wrongful act committed by such insured person, but only when and to the extent that the company has indemnified the insured person for the loss.

[the italics identify terms that are defined in the Policy]

18    The Policy period commenced on 1 October 2007 and, after extension in accordance with Endorsement 20, ended on 17 October 2013.

19    The term “company” is defined in cl 2.4 of the Policy to mean “the policyholder and its subsidiaries and any other entity notified to the insurer which the insurer has confirmed in writing is to be considered a company”. In correspondence, Houthoff Buruma has indicated that AIG Europe is proceeding on the basis that RCMML was a subsidiary of ABN AMRO NV throughout the period from 28 April 2006 to 26 September 2008.

20    The terms “security” and “securities claim” are defined in cl 2.36 and cl 2.37 of the Policy as follows:

2.36    Security means any note, stock, bond, debenture, share or other equity issued by the company, and shall include any certificate of interest or participation in, receipt for, warrant or other right to subscribe to or purchase, voting trust certificate relating to, certificate of deposit for, or other interest in any of the foregoing.

2.37    Securities claim means a claim made against an insured:

    (i)    alleging fraud or a violation of any regulation, rule or statute that can be applied to the regulation of securities (including, but not limited to the purchase or sale or offer or solicitation of an offer to purchase or sell securities) which is:

        (a)    brought by any person or entity alleging, arising. based upon or attributable to the purchase or sale or offer or solicitation of an offer to purchase or sell any securities issued by the company; or

        (b)    brought by a security holder of a company with respect to such security holder’s interest in securities issued by such company; or

    (ii)    brought derivatively on behalf of a company by a security holder of such company.

    The foregoing Definition of security claims shall not include any: (i) administrative or regulatory proceeding against or investigation of a company; or (ii) employment practice claim alleging, arising out of, the loss of, or failure to receive or obtain, the benefit of stock or stock options.

21    The Policy includes an exclusion in Endorsement 1 (the Professional Services Exclusion) which states:

The insurer shall not be liable to make any payment for loss in connection with any claim made against the insured, alleging, arising out of, based upon or attributable to the performance or failure to perform professional services by or on behalf of any insured.

22    In correspondence with RCMML’s Dutch lawyers, Houthoff Buruma stated that coverage for the claims notified by RCMML under the Policy with respect to the proceeding brought by (inter alios) the applicants against RCMML does not exist. That statement is subject to the qualification that “… this coverage position is based on the information provided so far … [and that AIG Europe] reserves all of its rights to revise its coverage position in accordance with further information that may be received by it”.

23    In support of AIG Europe’s contention that no coverage for the claims is available under the Policy, Houthoff Buruma have asserted that the claims made against RCMML by the applicants in this proceeding do not qualify as “securities claims” within the meaning of the Policy and that coverage for the claims is also excluded by the Professional Services Exclusion.

24    As to whether the applicants’ claims are “securities claims”, Houthoff Buruma contend that the applicants’ claims do not relate to securities issued for the purpose of capitalising RCMML. Houthoff Buruma further contend that the applicants were stakeholders in the project but not in RCMML. The project, as I understand it, is said to be the project for the design, construction and operation of the Tunnel.

25    So far as the Professional Services Exclusion is concerned, Houthoff Buruma assert that the sole purpose for ABN AMRO NV’s subsidiaries being involved in the Project was to generate professional fees in return for the provision of professional services.

The Arbitration

26    RCMML referred its dispute with AIG Europe to arbitration in November 2014 in accordance with cl 5.8 of the Policy. The parties ultimately agreed to waive the requirement for mediation under cl 5.8 of the Policy. Subsequently, RCMML nominated Mrs W Tonkens-Gerkema and AIG Europe nominated Mrs WH van Baren as arbitrators. As at the date of the hearing of the present application, no third arbitrator had been nominated. In the absence of agreement between the parties the third arbitrator (who is to act as the chairman) is to be nominated by the President of the Nederlands Arbitrage Instituut or his deputy. The evidence suggests that all three appointments were to have been made by early January 2015. According to Mr Johnston’s email of 17 December 2014, a hearing of the arbitration will take place towards the middle of 2015.

The application for leave

27    The first question that arises is whether an order should be made joining AIG Europe as the fourth respondent to the proceeding. Importantly, in the circumstances of this case (where s 6(2) of the LR(MP) Act does not apply) the proceeding which the applicant seeks to bring against AIG Europe may not be commenced by it without leave being obtained pursuant to s 6(4) of the LR(MP) Act.

28    The second question is whether leave should be given authorising service outside the jurisdiction in accordance with r 10.43 of the Rules. In deciding whether it is appropriate to grant leave to serve outside the jurisdiction it is necessary to consider whether the applicants have established a prima facie case for any of the relief they seek against AIG Europe and, if so, whether, in the exercise of the discretion, it is appropriate to make such orders. Matters of particular relevance to the exercise of discretion arising under r 10.43 of the Rules in the present case include the governing law of the Policy, the Arbitration Clause and s 7 of the International Arbitration Act 1974 (Cth). (Subsections 7(1), (2) and (4) are set out in Schedule A to these reasons.)

Prima FacIe Case

29    Houthoff Buruma has raised two distinct arguments in support of its contention that s 6 of the LR(MP) Act cannot apply in the circumstances of this case. Both these arguments draw upon the reasoning of the New South Wales Court of Appeal in Chubb Insurance Company of Australia Ltd v Moore (2013) 302 ALR 101; [2013] NSWCA 212 (Chubb).

30    The first argument focuses upon the language of s 6(1) and, in particular, the words “on the happening of the event giving rise to the claim for damages or compensation.” In Chubb Emmett JA and Ball J (Bathurst CJ, Beazley P and Macfarlan JA agreeing) held at [57]:

The reference in s 6(1) to “the happening of the event giving rise to the claim for damages or compensation” should be construed as a reference to the moment when the liability arises, rather than to a later time when the claim based on that liability is made. That is to say, it should be construed as referring to “the happening of the event giving rise to the liability to pay damages or compensation”. The charge comes into existence on the happening of the event that gives rise to the liability to pay damages or compensation, not when the claim for damages or compensation that that liability may prompt is made. The claim for damages or compensation will ordinarily be made some time after the liability arises.

(original italics)

31    After considering the conflicting approaches to s 6 indicated in FAI General Insurance Ltd v McSweeney (1997) 73 FCR 379 at 415 (Lindgren J) and the New South Wales Court of Appeal in Owners - Strata Plan No 50530 v Walter Construction Group Ltd (in liq) (2007) 14 ANZ Ins Cas 61-734; [2007] NSWCA 124 (Walter Construction), Emmett JA and Ball J concluded at numbered paragraph (3) of para [207] of their reasons in Chubb:

The decision of the court in the Walter Construction case should be followed to the extent that it concludes that s 6 does not create a charge based upon a claim arising from an event that has, or events that have, occurred prior to the inception of the policies. Accordingly, s 6 of the Reform Act is not capable of applying to insurance moneys that are or may become payable under the policies in respect of a liability to pay damages or compensation to any of the PDS claimants, where the alleged conduct of the insured giving rise to the claim for damages or compensation happened before the inception of the policies.

32    In the present case Houthoff Buruma contend that the alleged conduct of RCMML giving rise to the applicants’ damages claim took place prior to 1 October 2007 (the inception date of the Policy) such that s 6 cannot operate so as to impose a charge upon any insurance monies payable in respect of any liability RCMML may have to the applicants.

33    It is not disputed by the applicants that the conduct of RCMML which they say caused them to suffer damage occurred prior to the inception of the Policy. Nevertheless, they submit that it is reasonably arguable that the statutory charge could not have come into existence until such time as the applicants first suffered damage which is when the relevant causes of action accrued. They further submit that damage was first suffered no earlier than the date upon which the Tunnel was opened, that being the earliest possible time from which it could have been apparent that the relevant traffic projections were likely to be excessively optimistic.

34    There was no evidence before me to indicate the price at which the stapled units traded either before or after the date they were first listed on the ASX. The ASX listing occurred almost four years prior to the opening of the Tunnel.

35    In support of their position, the applicants referred to the reasons of Hodgson JA (with whom Giles and Tobias JJA agreed) in Walter Construction where his Honour referred to the event giving rise to the charge as the event that completes the cause of action against the insured. Hodgson JA said at [30]:

It is common ground, as well as being asserted by the High Court in Bailey, that under s.6(1) the “charge” must arise, if at all, on the happening of the “event” giving rise to the claim against the insured, and not at some later time. That being so, if there is to be any charge in any cases where that event (whatever completes the cause of action against the insured) occurs before any contract of insurance is made, it would have to be a “charge” arising where there is no property or even potential property to which it could apply, and not even any identifiable insurer with whom such property, if and when it came into existence, might be associated. It would thus be a “charge” without having even as much substance as a contract to give a charge on after-acquired property, where there is at least a person against whom a contractual right exists pursuant to which (assuming the contract is specifically enforceable) an equitable charge can arise if and when the property is acquired.

His Honour seems clearly to have regarded the event that completes the cause of action as the event giving rise to the charge.

36    Some of the language used by Emmett JA, Ball J and Hodgson J when referring to “the event giving rise to the claim” is drawn from the judgment of McHugh and Gummow JJ (with whom Brennan CJ, Deane and Dawson JJ agreed) in Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 (Bailey). Their Honours said at 447:

Although the claimant is a stranger to the contract between the insurer and the insured, the charge created by the section is enforceable, by reason of s 6(4), by way of an action by the claimant against the insurer. This action is to be maintained in the same way and in the same court as if it were an action by the claimant to recover damages or compensation from the insured. Moreover, in respect of that action and of the judgment given therein, the parties to it, the claimant and the insurer, have, to the extent of the charge, the same rights and liabilities and the court has the same powers as if the action were brought by the claimant against the insured. In most circumstances, the action cannot be commenced save with leave of the court.

(footnote omitted)

37    In the present case the applicants’ claims against RCMML are founded upon s 1022B of the Corporations Act which confers a statutory right upon a person who suffers loss or damage because of certain conduct to recover damages. Thus, the cause of action under s 1022B arises when the person suffers such loss or damage.

38    In Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, Mason CJ and Dawson, Gaudron and McHugh JJ observed at 527:

The kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. With economic loss, as with other forms of damage, there has to be some actual damage. Prospective loss is not enough.

When a plaintiff is induced by a misrepresentation to enter into an agreement which is, or proves to be, to his or her disadvantage, the plaintiff sustains a detriment in a general sense on entry into the agreement. That is because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff. But, as will appear shortly, detriment in this general sense has not universally been equated with the legal concept of “loss or damage”. And that is just as well. In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events. In such a situation, there would be an ever-present risk of undercompensation or overcompensation, the risk of the former being the greater.

(footnotes omitted)

39    In the present case it is reasonably arguable that the applicants did not suffer any damage because of the (allegedly) defective PDS until after the Tunnel opened. In particular, it is reasonably arguable that any detriment to which the applicants were exposed as a consequence of acquiring the stapled units was in the nature of prospective loss, that is to say, a loss that they might or might not suffer depending upon the number of vehicles that actually used the Tunnel.

40    It follows that it is reasonably arguable that s 6 was engaged after the inception of the Policy when the applicants first suffered loss or damage, and when their causes of action against RCMML accrued.

41    The second point raised by Houthoff Buruma with respect to s 6 is that it cannot apply to a proceeding brought by the applicants against RCMML in the Federal Court of Australia.

42    In Chubb, Emmett JA and Ball J observed at [202]-[204]:

[202]    The fundamental legislative purpose behind s 6 is to protect claimants who have obtained a judgment or settlement, or who are entitled to obtain a judgment, and to secure the payment of that judgment or settlement when the defendant is insured from moneys that would otherwise be payable to the insured in respect of that judgment or settlement. It is difficult to see why the New South Wales legislature would not have intended to protect any person who properly brings a claim in New South Wales, even where that claim is governed by some other law, given the focus in s 6(4) upon the powers of the court in the s 6 enforcement process. Section 6(4) provides the essential enforcement mechanism, by the claimant against the insurer, without which the claimant will not be protected by s 6. Put another way, s 6 may be described as a procedural mechanism by which that fundamental purpose is achieved. At the heart of that mechanism is s 6(4). The s 6(4) enforcement mechanism is the hinge or central concern of s 6, and the references to courts in s 6(4) referred to above indicate that s 6 is focused on New South Wales courts.

[203]    On the other hand, it is not obvious that the New South Wales Parliament would have intended that s 6 should protect any claimant who chose to bring a claim against an insurer elsewhere, even if that claim is in relation to a contract of insurance the proper law of which is New South Wales.

[204]    In all of the circumstances, the preferable approach is to treat s 6 as applying to all claims brought in a court of New South Wales, and as not applying to a claim brought in a court that is not a court of New South Wales. None of the Great Southern proceedings has been brought in a New South Wales court. It follows that s 6 has no application to any of the claims being prosecuted in the Great Southern proceedings.

Their Honours held that s 6 of the LR(MP) Act had no application in proceedings commenced in the Supreme Court of Victoria or the Supreme Court of Western Australia.

43    Houthoff Buruma’s argument overlooks s 79 of the Judiciary Act 1903 (Cth). Section 79 relevantly provides:

79    State or Territory laws to govern where applicable

    (1)    The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.

Section 79 is intended to facilitate the exercise of federal jurisdiction by the application of a “coherent body of law” consisting of Commonwealth law and, where applicable, the laws of the States or Territories in which such jurisdiction is being exercised: Northern Territory of Australia v GPAO (1999) 196 CLR 553 at [80] per Gleeson CJ and Gummow J. In its adjudications in this proceeding this Court is exercising, and will continue to exercise, federal jurisdiction in New South Wales. Accordingly, s 79(1) of the Judiciary Act will “pick up” s 6 of the LR(MP) Act, which will apply even though it is a State law the terms of which were interpreted by the Court of Appeal in Chubb as limiting its application to proceedings in a court of New South Wales: Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at [55]-[59].

44    Leaving aside the need for the applicants to obtain leave to proceed pursuant to s 6(4) of the LR(MP) Act, I am satisfied that the applicants have established a prima facie case for the relief they seek against AIG Europe.

Discretionary Considerations

45    Section 6(4) of the LR(MP) Act provides that, except where the provisions of s 6(2) apply, no action to enforce a charge arising under s 6(1) shall be commenced without the leave of the court. It also specifies certain circumstances in which leave must not be granted: see Bailey at 448.

46    In circumstances where neither of the exceptions to the leave requirement applies, the considerations relevant to the question whether leave should or should not be granted are confined only by the subject matter, scope and purpose of the enactment. The purpose of s 6 was said by Emmett JA and Ball J in Chubb to be as follows (at [63]):

Section 6 seeks to secure the performance of not only the insurer’s obligation to pay to the insured insurance moneys that are or may become payable, but also the insured’s performance of its obligation to pay damages or compensation to the claimant in satisfaction of the insured’s liability to the claimant. That is achieved by creating the charge in favour of the claimant overall insurance moneys that are or may become payable in respect of the insured’s liability to pay damages or compensation to the claimant. The obligations, the performance of which are to be secured by the charge, may be greater or less than the value of the security created by s 6, being the insurance moneys payable under the relevant contract of insurance: Bailey at CLR 447; ALR 35; ACSR 555.

47    Considerations that are in my view of particular relevance are as follows:

    RCMML is insolvent and lacks the capacity to meet any substantial judgment that may be entered against it in this proceeding.

    RCMML’s claim for indemnity under the Policy in respect of the applicants’ claims is strongly arguable.

    The liquidators of RCMML are seeking to enforce RCMML’s rights under the Policy in respect of the applicants’ claims in accordance with the requirements of the Policy including, in particular, the Arbitration Clause. Both RCMML and AIG Europe are now actively engaged in arbitration.

    The evidence indicates that the dispute between RCMML and AIG Europe will be heard by the arbitrators in the Netherlands in the middle of 2015. The hearing of the proceeding in this Court will not commence until September 2015 or sometime thereafter.

    The dispute between RCMML and AIG Europe appears to be comparatively narrow in scope (in contrast to the breadth and complexity of the proceeding to which it is sought to join AIG Europe) and is to be determined in accordance with Dutch law.

    The liquidators appear to have the funds necessary to enforce RCMML’s rights under the Policy and have previously obtained orders and directions from the Court pursuant to s 511 of the Corporations Act authorising them to take steps to preserve and enforce such rights which is precisely what they are doing.

    Section 562(1) of the Corporations Act will apply to any amount that is or may be received by RCMML from AIG Europe in respect of the applicants’ claims. It relevantly provides:

    Where a company is, under a contract of insurance (not being a contract of reinsurance) entered into before the relevant date, insured against liability to third parties, then, if such a liability is incurred by the company (whether before or after the relevant date) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount must, after deducting any expenses of or incidental to getting in that amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability, or any part of that liability remaining undischarged, in priority to all payments in respect of the debts mentioned in section 556.

48    Mr Sheahan QC submitted that a critical matter, from the applicants’ point of view, is to ensure that the applicants do not have to litigate the question of liability as between the applicants and RCMML twice. That possibility seems to me to be more theoretical than real. Nevertheless, if the arbitrators decide that RCMML is entitled to indemnity under the Policy in respect of the applicants’ claims then it will be open to the applicants to make a fresh application to join AIG Europe.

49    In the result, I am not persuaded that it is appropriate to grant leave pursuant to s 6(4) of the LR(MP) Act. In the circumstances, I do not propose to make any of the orders sought by the applicants in their amended interlocutory application.

International Arbitration Act

50    It is not necessary for me to consider whether AIG Europe would be entitled to a stay of the proceeding which the applicants seek to commence against it on the basis of s 7(2) of the International Arbitration Act. It is not disputed by the applicants that s 7 of the International Arbitration Act would apply to any proceeding commenced by RCMML in breach of the Arbitration Clause. Whether s 7 of the International Arbitration Act would apply to the proceeding which the applicants seek to bring against AIG Europe would depend upon whether each of the applicants is a “person claiming through or under a party” to the relevant arbitration agreement: see s 7(4); Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332, 341-342 (Brennan and Dawson JJ), 353 (Deane and Gaudron JJ); Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd (2014) 289 FLR 30 especially at [57]-[82] (Nettle JA).

Disposition

51    The applicants’ amended interlocutory application will be dismissed.

Associate:    

Dated:    2 April 2015

SCHEDULE A

Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) relevantly provides:

(1)    If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of the person’s liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability.

(2)    If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured (being a corporation) is being wound up, or if any subsequent winding-up of the insured (being a corporation) is deemed to have commenced not later than the happening of that event, the provisions of subsection (1) shall apply notwithstanding the winding-up.

(3)    Every charge created by this section shall have priority over all other charges affecting the said insurance moneys, and where the same insurance moneys are subject to two or more charges by virtue of this Part those charges shall have priority between themselves in the order of the dates of the events out of which the liability arose, or, if such charges arise out of events happening on the same date, they shall rank equally between themselves.

(4)    Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured:

    Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken.

…

Section 7 of the International Arbitration Act 1974 (Cth) relevantly provides:

(1)    Where:

    (a)    the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a Convention country;

    …

    (d)    a party to an arbitration agreement is a person who was, at the time when the agreement was made, domiciled or ordinarily resident in a country that is a Convention country;

    this section applies to the agreement.

(2)    Subject to this Part, where:

    (a)    proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and

    (b)    the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration;

    on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter.

…

(4)    For the purposes of subsections (2) and (3), a reference to a party includes a reference to a person claiming through or under a party.

…

SCHEDULE B