Federal Court of Australia

Shorey v One Key Workforce Pty Ltd (in liq) [2020] FCA 1750

ORDERS

THE COURT ORDERS THAT:

1.    One Key Resources Pty Ltd be granted leave to intervene in the proceeding.

2.    The Prospective Applicant’s originating application dated 19 August 2020 be dismissed.

3.    No order as to costs.

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

REASONS FOR JUDGMENT

MURPHY J:

1    By originating application dated 19 August 2020 the prospective applicant, Joseph Shorey, seeks preliminary discovery under r 7.23 of the Federal Court Rules 2011 (Cth) (the Rules) from the prospective respondent, One Key Workforce Pty Ltd (in liquidation) (OK Workforce). The application seeks discovery of:

(a)    management liability insurance policies held by or for the benefit of OK Workforce relating to the period from 8 November 2017 to 8 November 2019, as referred to in the correspondence dated 26 March 2020 from Allens Linklaters to Adero Law (the Relevant Policies); and

(b)    any other insurance policy held by or for the benefit of OK Workforce which may provide coverage in respect of employment liabilities incurred by OK Workforce between 6 November 2015 and 2 October 2018.

2    Mr Shorey seeks discovery of the insurance policies on the basis that:

(a)    he reasonably believes that he has a right to obtain relief in the Court from OK Workforce;

(b)    after making all reasonable inquiries, he does not have sufficient information to decide whether to start a proceeding to obtain that relief; and

(c)    he reasonably believes that OK Workforce has the insurance policies set out above in its possession, power or control, and that inspection of those policies would assist him in deciding whether to bring an application under s 471B of the Corporations Act 2001 (Cth) (Corporations Act) for leave to bring a proceeding against OK Workforce.

3    The liquidator of OK Workforce neither consents to nor opposes the application. A related company of the prospective respondent, One Key Resources Pty Ltd (OK Resources) has filed an interlocutory application seeking: (a) to be joined as a respondent to the application pursuant to r 9.05 of the Rules; or (b) a grant of leave to intervene in the application pursuant to r 9.12. OK Resources opposes the application for preliminary discovery on several grounds.

4    For the reasons I explain it is appropriate to grant leave to OK Resources to intervene, and to dismiss Mr Shorey’s application for preliminary discovery.

The evidence

5    Mr Shorey relies upon the affidavit of his solicitor, Rory Markham, a Principal of Adero Law sworn 14 August 2020.

6    OK Resources relies upon the affidavit of Ian Humphreys, a partner of Ashurst Australia (Ashurst), the solicitors for OK Resources and another company in the One Key Group, One Key Holdings Pty Ltd (OK Holdings) sworn 21 September 2020.

7    The affidavits of both Mr Humphreys and Mr Markham annex extracts of current and historic ASIC searches in relation to OK Workforce and OK Resources (company searches). Amongst other things, the company searches disclose that:

(a)    OK Workforce is a wholly owned subsidiary of OK Holdings. The company issued 12 fully paid ordinary shares which are 100% owned by OK Holdings. OK Holdings has been the only shareholder in OK Workforce from 2 November 2015 to date;

(b)    OK Resources is a wholly owned subsidiary of OK Holdings. The company issued 6,000 shares which are 100% owned by OK Holdings;

(c)    at no time has OK Resources held any shares in OK Workforce;

(d)    at no time has OK Workforce held any shares in OK Resources;

(e)    at all times during which Mr Shorey was an employee of OK Workforce, OK Workforce and OK Resources had substantially the same directors and officers; and

(f)    the ultimate owner of the One Key Group of companies, including OK Workforce, OK Resources, and OK Holdings is Fircroft Engineering Services Holdings Limited (Fircroft). Fircroft has been the ultimate holding company since 23 May 2016.

8    Mr Humphrey’s affidavit also annexes heavily redacted copies of the Relevant Policies based on which OK Resources makes various submissions in opposition to the application for preliminary discovery. The level of redaction created difficulties in deciding the application, and, having regard to the overarching purpose in civil proceedings in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (the FCA), I requested Ashurst, the solicitors for OK Resources, to provide my chambers with un-redacted copies of the Relevant Policies, on a confidential basis.

9    Having reviewed the un-redacted copies of the Relevant Policies, and without revealing confidential matters, I note that they comprise two “Management Liability” insurance policies in which OK Resources is the policyholder, one covering the period 8 November 2017 to 8 November 2018 and the other covering the period 8 November 2018 to 8 November 2019.

OK Resources’ application to intervene

10    OK Resources seeks to be joined as a respondent to the preliminary discovery application or, alternatively, to be granted leave to intervene on the basis that its rights will be directly affected by an order that OK Workforce discover the Relevant Policies. Having regard to the view I have formed, it is convenient to deal with the application as an application for leave to intervene.

11    Rule 9.12 of the Rules provides that a person may apply to the Court for leave to intervene in a proceeding, with such rights, privileges and liabilities as may be determined by the Court. In deciding the application the Court may have regard to whether the intervener’s contribution will be useful and different from the contribution of the parties to the proceeding, whether allowing intervention will unreasonably interfere with the ability of the parties to conduct the proceeding as the parties wish, and any other matter the Court considers relevant. A non-party whose interests would be affected by a decision in a proceeding is entitled to intervene to protect the interest likely to be affected by the operation of the decision: Roadshow Films pty Ltd v iiNet Ltd [2011] HCA 54; (2011) 248 CLR 37 at [2] (French CJ, Gummow, Hayne, Crennan and Kiefel JJ).

12    Mr Humphreys deposes that OK Resources and OK Holdings are part of the One Key Group of companies, which is part of the Fircroft group of companies. This appears to be uncontentious. He annexes a copy of a letter and attachments Ashurst sent to Adero Law dated 15 September 2020 which advised that:

(a)    OK Resources is the policyholder of the two insurance policies referred to in the letter from Allens Linklaters to Adero Law dated 26 March 2020 (being the Relevant Policies) and the letter attaches heavily redacted copies of the Relevant Policies; and

(b)    the Relevant Policies do not provide coverage in respect of employment liabilities incurred by OK Workforce between 6 November 2015 and 2 October 2018. The Relevant Policies cover only OK Resources and any ‘subsidiary’, as defined, which did not include OK Workforce.

13    Mr Humphreys further deposes that he is informed by Glenn Triggs, the Managing Director Australasia of the Fircroft Group, that Mr Triggs is not aware of any insurance policy, other than the Relevant Policies, held by or for the benefit of OK Workforce which may provide coverage in respect of employment liabilities incurred by OK Workforce between 6 November 2015 and 2 October 2018.

14    In support of its application to be joined as a party or to be granted leave to intervene, OK Resources says that it is the policyholder of the Relevant Policies, not OK Workforce. OK Resources also says that it is under a contractual duty of confidence to keep the Relevant Policies and their terms confidential. Having reviewed the Relevant Policies I accept both of those contentions.

15    OK Resources contends that, even if these matters do not render it a person that ought be joined to the application by order of the Court pursuant to r 9.05(1)(a) of the Rules, they provide a proper foundation for it to be granted leave to intervene pursuant to r 9.12. It says that is particularly so since the liquidator of OK Workforce has determined that it will take no role in the preliminary discovery application and thus there is no contradictor. It argues that if its application for joinder or for leave to intervene is allowed it is in a position to make a contribution which is useful and different from the contribution of the parties: see r 9.12(2)(a).

16    Mr Shorey opposes the application for leave to intervene and argues that OK Resources has not identified any interest that would be directly affected by the proposed order. He submits that the application seeks an order that OK Workforce discover documents that are in OK Workforce’s possession, power or control and that an order to that effect has no direct effect on any interest of OK Resources. He contends that making the preliminary discovery order would not affect the legal rights between OK Resources and any person, including its insurer. On his argument, any such order would not operate to determine the question of whether the insurance policies are responsive to Mr Shorey’s claim against OK Workforce, nor whether a claim against the policy would succeed. He contends that the only ‘interest’ relied on by OK Resources is its contractual obligation to keep the Relevant Policies confidential, and says that an order in the terms sought would not constitute a breach of that contractual obligation of confidence, because such disclosure would be by compulsion of law. He further argues that OK Resources’ submissions do not make a useful and different contribution to the application for preliminary discovery.

17    In my view it is appropriate to grant leave to OK Resources to intervene in the application as its interests will be directly affected if the application for preliminary discovery is allowed. It is appropriate to allow it to adduce evidence and advance submissions.

18    First, this is because Mr Shorey is the representative applicant in a class action against OK Resources and OK Holdings which he brings on his own behalf and on behalf of all persons who between 6 November 2015 and 2 October 2018 (the relevant period):

(a)    were employed by OK Workforce;

(b)    were persons to whom the Black Coal Mining Industry Award 2010 (the Award) applied and who were Schedule A employees within the meaning of the Award, who worked at a black coal mine within the meaning of the Award; and

(c)    were not paid the rates applicable or afforded the terms and conditions of employment prescribed by the Award.

The proceeding seeks declarations, compensation and penalties against OK Resources and OK Holdings under s 545 of the Fair Work Act 2009 (Cth) (the FW Act), based in allegations that OK Resources and OK Holdings were “involved” in contraventions of the FW Act by OK Workforce.

19    Mr Shorey seeks preliminary discovery by OK Workforce because he wishes to consider applying for leave under s 471B of the Corporations Act to bring a proceeding against OK Workforce, which, if successful, would mean that it would be added as a respondent to the class action. However, having regard to the Relevant Policies, it is plain that OK Resources is the policyholder, not OK Workforce. Therefore, if the application is allowed, whether, and if so to what extent, OK Resources has insurance cover in relation to the claims made in the class action will be revealed to its opponents in substantial litigation, which will directly affect its interests.

20    The Courts have traditionally been reluctant to allow discovery of insurance policies which show the existence or measure of liability against which an insurance policy indemnifies a respondent. If Mr Shorey seeks discovery of the Relevant Policies in the class action he is likely to face difficulties: Kirby v Centro Properties Ltd [2009] FCA 695 (Ryan J) at [14] and [26]-[27]; Evans v Davantage Group Pty Ltd (No 2) [2020] FCA 473 (Beach J) at [72]. In circumstances where it seems unlikely that Mr Shorey could obtain the Relevant Policies through discovery in the class action, it is appropriate that OK Resources be given leave to intervene to protect its interests in this discovery application.

21    Second, Mr Shorey is presently the only active party in the application as the liquidator of OK Workforce has not taken any active role. The evidence and submissions relied on by OK Resources, including the confidential un-redacted Relevant Policies, are useful and different from the contribution of Mr Shorey. The evidence OK Resources put on is significant in deciding the essential question in the application, being whether the Relevant Policies may respond to a claim against OK Workforce.

22    In Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts [2007] FCA 1331, decided under the previous rules, Graham J held that a third party cannot be joined to or given leave to intervene in an application for preliminary discovery because it is not a “proceeding”. I respectfully disagree. A “proceeding” is defined in s 4 of the FCA to mean “a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connection with, a proceeding…” which in my view includes an application for preliminary discovery under r 7.23. I note also that the decision in Telstra Corporation was given without reference to earlier authority which provides that an application for preliminary discovery is a “proceeding” (Carnegie Corporation Limited v Pursuit Dynamics Plc [2007] FCA 1010; (2007) 162 FCR 375 (French J as his Honour then was) at [48]-[53]) which decision has been subsequently followed: Gearhart United Pty Ltd v Omni Oil Technologies (Asia) SDN BHD [2010] FCA 401; (2010) 267 ALR 630 (Besanko J) at [14]; Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd (No 7) [2010] FCA 902 (Bennett J) at [4].

The Requirements under rule 7.23

23    To establish an entitlement to preliminary discovery, Mr Shorey must satisfy the Court in relation to the three limbs of r 7.23, being that:

(a)    he reasonably believes that he may have the right to obtain relief in the Court from OK Workforce; and

(b)    after making reasonable inquiries, he does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and

(c)    he reasonably believes that:

(i)    OK Workforce has or is likely to have or has had or is likely to have had in its control documents directly relevant to the question whether he has a right to obtain the relief; and

(ii)    inspection of the documents by him would assist in making the decision.

The first limb

24    In relation to the first limb of the test, the evidence shows that from 30 June 2016 to 30 June 2019, Mr Shorey was employed by OK Workforce working in the black coal mining industry in the position of Underground Operator. OK Workforce was in the business of providing labour hire services in that industry. Its only material trading activity was entering into contracts with persons such as Mr Shorey to work in the black coal mining industry and then supplying its contracted workforce to a related entity, OK Resources, which in turn contracted with unrelated third parties to supply labour to them in the black coal mining industry.

25    During his employment with OK Workforce Mr Shorey was paid the rates of pay and afforded the terms of conditions of a casual employee pursuant to the terms of the applicable enterprise agreement – the RECS (QLD) Pty Ltd Enterprise Agreement 2015 (the RECS Agreement) – which was approved by the Fair Work Commission (FWC) on 6 November 2015.

26    Subsequently, a question arose as to whether the employees of OK Workforce at the time the agreement was made had “genuinely agreed” to the terms and conditions of the RECS Agreement as required by the FW Act. The question as to the status of the RECS Agreement was of importance to the relevant union and its members who were ostensibly covered by it because the terms of the RECS Agreement were said to be less beneficial than the terms of Award which did not permit casual employment in classifications under Schedule A of the Award, which includes the position of Underground Operator.

27    In November 2016, the Construction, Forestry, Mining and Energy Union – now the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) – filed an originating application in this Court seeking a declaration that the RECS Agreement was void and of no effect. On 23 November 2017, the Court made orders including that the RECS Agreement was void and of no effect: Construction, Forestry, Mining and Energy Union v One Key Workforce Pty Ltd [2017] FCA 1266; (2017) 270 IR 418 (Flick J).

28    On 27 November 2017, OK Workforce appealed the decision and orders. On 21 December 2017, Flick J stayed the operation of the order regarding validity of the RECS Agreement until the determination of the appeal. His Honour however ordered that by 31 December 2017 OK Workforce pay the sum of $1 million into an interest-bearing account administered by its solicitors, Ashurst, to be held on trust pending the result in the appeal.

29    On 25 May 2018, the Full Court, although upholding the appeal in part, found that the FWC had fallen into jurisdictional error in finding that the relevant employees had “genuinely agreed” to the RECS Agreement. The Full Court granted different relief: One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union & Anor [2018] FCAFC 77; (2018) 262 FCR 527; (2018) 277 IR 23 (Bromberg Katzmann and O’Callaghan JJ). On 28 August 2018, the Full Court issued a writ of certiorari to quash the decision of the FWC approving the RECS Agreement.

30    On 31 August 2018, OK Workforce was placed into voluntary administration by its Directors. Justin Walsh of Ernst and Young was appointed as the administrator (the Administrator). On 6 September 2018, OK Workforce terminated the employment of most of its workforce, including that of Mr Shorey. On 2 October 2018, OK Workforce was placed into liquidation by special resolution of the directors and Mr Walsh was appointed as liquidator (the Liquidator). In the Second Report to Creditors dated 20 September 2018, the Administrator stated that the directors considered that the company became insolvent as a result of the orders of the Full Court quashing the RECS Agreement and requiring that most former and current staff be employed under the Award, as a result of which employees were entitled to accrued leave and other entitlements. On 28 February 2019, Flick J made orders requiring that the $1 million held on trust by Ashurst be disbursed to OK Workforce to a dealt with by the Liquidator in accordance with his statutory responsibilities.

31    Mr Shorey argues that the effect of the Full Court’s orders is that the RECS Agreement did not ever apply to him in his employment with OK Workforce, and that instead the Award applied. He contends that:

(a)    OK Workforce could not have lawfully engaged him as a casual employee because the Award did not provide for casual employment for employees employed in classifications falling within Schedule A of the Award, which include the classification of Underground Operator:

(b)    he was therefore a full-time employee for the purposes of the Award;

(c)    he was entitled to but did not receive the terms and conditions of employment applicable to a full-time employee under the National Employment Standards and the Award. Amongst other things, Mr Shorey claims that he is entitled to, but was not paid, annual leave in accordance with Division 6 of Part 2-2 of the FW Act nor notice of termination in accordance with s 117 of the FW Act;

(d)    by reason of the matters in (a), (b) and (c), OK Workforce failed to comply with the terms of the Award and therefore contravened ss 44 and 45 of the FW Act; and

(e)    by reason of those contraventions he is entitled to declarations, compensation and penalties under s 545 of the FW Act.

32    The authorities show that r 7.23 is to be beneficially construed, and given the fullest scope that its language will reasonably allow, with the proper break on any excesses in its use lying in the discretion of the Court, exercised in the particular circumstances of the case: Paxus Services Ltd v People Bank Pty Ltd [1990] FCA 723; (1990) 99 ALR 728 (Burchett J) at 733-734. The test for whether a prospective applicant reasonably believes that he or she may have a right to obtain relief is an objective one: Hooper v Kirella Pty Ltd [1999] FCA 1584; (1999) 96 FCR 1 (Wilcox, Sackville & Katz JJ) at [39]. Objective circumstances must exist sufficient to demonstrate that the party has reasonable cause to believe that he or she may have a right to relief, but this can be established, depending on the circumstances, even if something is left to surmise or conjecture: John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 (Emmett J) at [13]-[14]. The words “may have” cannot be ignored, and it indicates that the belief need not amount to a firm view that there is a right to relief and it is not necessary for the prospective applicant to make out a prima facie case: John Holland at [13]; Telstra Corporation Limited v Minister for Broadband Communications and the Digital Economy [2008] FCAFC 7; (2008) 166 FCR 64 (French J as his Honour then was, Weinberg and Greenwood JJ) at [58].

33    Having regard to the circumstances outlined above, I am satisfied that Mr Shorey has reasonable cause to believe that he may have a right to obtain relief from OK Workforce.

The second limb

34    I am also satisfied that Mr Shorey satisfies the second limb of the test, at least in the way Mr Shorey puts that limb. That is, after making reasonable inquiries, he does not have sufficient information to decide whether to bring an application for leave to bring a proceeding against OK Workforce pursuant to s 471B of the Corporations Act.

35    A grant of leave under s 471B of the Corporations Act is discretionary. The factors to be taken into account in deciding whether to grant leave to commence a proceeding against a company in liquidation include whether the company has funds available to defend against such litigation and whether the company is insured against the liability that is the subject of the proceeding: Hopkins v AECOM Australia Pty Ltd & Others [2012] FCA 1204; 91 ACSR 391 at [20] (Nicholas J). Usually, there is no utility in allowing a proceeding to be brought against a company in liquidation if it has no funds and no insurance.

36    In relation to OK Workforce’s financial position, the evidence is that on 13 November 2018 the Liquidator wrote to the CFMMEU and said the following:

(a)    “ordinary claims” against OK Workforce totalled $1.08 million;

(b)    OK Workforce formerly employed approximately 2,893 individuals, of whom approximately 2,229 were engaged as casual employees;

(c)    it was possible that all 2,893 former employees had a priority claim against OK Workforce; and

(d)    though the Liquidator was not then in a position to confirm the accuracy of the amounts, OK Workforce estimated that the total amount due to all former employees as at November 2017 was in the range of $40.3 million to $75.5 million.

37    The Annual Administration Return for OK Workforce for the period ended 27 September 2019 shows that:

(a)    OK Workforce has cash at bank of $652,255.34; and

(b)    no amounts have been paid to the former employees of OK Workforce under the Fair Entitlements Guarantee Scheme.

At that point the Liquidator estimated that OK Workforce’s creditors total $4,995,209. The difference in the Administrator/Liquidator’s assessment of potential claims by former employees is not explained in the materials.

38    Mr Markham deposes that OK Workforce was not named as a respondent to the class action because:

(a)    it was not necessary as a matter of law to name it as a respondent in order to establish liability against OK Resources and OK Holdings as persons “involved” in the alleged contraventions of the FW Act by OK Workforce;

(b)    OK Workforce is in liquidation and leave of the Court was required under s 471B of the Corporations Act to commence a proceeding against it; and

(c)    Mr Shorey did not believe that he would obtain leave to proceed against OK Workforce because of its financial position.

39    On the basis of OK Workforce’s last disclosed asset position, it has insufficient assets to defend the class action and meet any potential award of compensation. Mr Shorey argues, and I accept, that the absence of sufficient funds to enable OK Workforce to participate as a respondent in the class action and to meet any significant part of the value of the claim would weigh heavily, perhaps determinatively, against a grant of leave under s 471B of the Corporations Act. As such, it is only through a responsive policy of insurance that OK Workforce will have, or may have, sufficient funds to defend the litigation under consideration and to meet some or all of the claimed compensation and penalties.

40    As I said above, on 26 March 2020, Allens Linklaters, the solicitors for the Liquidator wrote to Adero Law and advised of the existence of the Relevant Policies, being two management liability insurance policies, one for the period from 8 November 2017 to 8 November 2018, and one for the period from 8 November 2018 to 8 November 2019. The letter said that the policies may be relevant to the claims made by Mr Shorey but noted that the policyholder in respect of both policies was not OK Workforce, and that the Liquidator made no representation as to whether or not the policies would respond to any claim Mr Shorey made against OK Workforce.

41    Mr Shorey argues that:

(a)    he has made reasonable inquiries of the Liquidator;

(b)    he has been informed of the existence of two management liability insurance policies (being the Relevant Policies) that may be responsive to his claims against OK Workforce;

(c)    he is not, despite his reasonable inquiries and efforts, in possession of the Relevant Policies, and absent an order of the Court has no means of obtaining them;

(d)    he is unable to assess whether the Reasonable Policies are likely to be responsive to his proposed claim, and if so, the amount of any insurance that might be recoverable; and

(e)    whether the Reasonable Policies or any other policy insured OK Workforce against the subject matter of Mr Shorey’s proposed claim against the company is a relevant matter in assessing whether leave should be granted under s 471B of the Corporations Act to commence a proceeding against OK Workforce.

He submits that he cannot decide whether to make an application for leave to bring a proceeding against OK Workforce pursuant s 471B of the Corporations Act without first reviewing the terms of any potentially responsive policy of insurance, because the question of whether there is responsive insurance and the value of such insurance will, on the authorities, be critical to the likelihood of any such application succeeding.

42    I accept those submissions and except for the contention set out below I would be satisfied that he meets the second limb of the test.

43    The exception is that OK Resources disputes that it is sufficient for Mr Shorey to show that he does not have sufficient information to decide whether to bring an application for leave to bring a proceeding against OK Workforce. It argues that the Relevant Policies (or any other insurance policies for the benefit of OK Workforce) could only go to show the capacity of OK Workforce to meet a judgment, not to any right to relief from the Court. It notes that r 7.23(1)(a) refers to a “right to obtain relief in the Court from a prospective respondent…”, and that r 7.23(1)(b) refers to the prospective applicant having insufficient information to decide “whether to start a proceeding in the Court to obtain that relief”. It contends that those words are directed to substantive relief which might be obtained from a respondent in a proceeding before the Court, and are not apt to apply to a leave application necessary to bring the proceeding, such as a grant of leave to bring a proceeding pursuant to s 471B of the Corporations Act. OK Resources contends that the grant of leave required to commence a proceeding against a company in liquidation is not “relief” in the Court from a prospective respondent, and until the grant of leave, there is no proceeding inter partes by which the applicant may seek relief from a respondent. In my view this contention has some force but it is unnecessary to decide given my view in relation to the third limb of the test under r 7.23.

The third limb

44    To satisfy the third limb of the test, Mr Shorey must show that he has a reasonable belief that OK Workforce has or is likely to have or has had or is likely to have had within its control:

(a)    two specific insurance policies for the period 8 November 2017 to 8 November 2018, and 8 November 2018 to 8 November 2019 (being the Relevant Policies); and

(b)    any other insurance policy held by or for the benefit of OK Workforce which may provide coverage in respect of employment liabilities incurred by OK Workforce between 8 November 2015 and 2 October 2018; and

that those policies are directly relevant to whether he has a right to leave to bring a proceeding against OK Workforce under s 471B of the Corporations Act.

45    At the point Mr Shorey made the application for preliminary discovery I consider he had a basis to reasonably believe that OK Workforce had the Relevant Policies in its control, and that those policies may respond to a claim against OK Workforce, and that those policies are directly relevant to whether he has a right to leave to bring a proceeding against OK Workforce. However, having regard to the evidence now before the Court, there is no objective basis for such a belief.

46    The evidence includes the company searches, the redacted copies of the Relevant Policies, the confidential un-redacted copies of the Relevant Policies, and the evidence of Mr Humphreys. The Relevant Policies show that OK Resources, not OK Workforce, is the policyholder. The policies provide insurance cover to the “Company” in relation to various different types of events. “Company” is defined to mean “the Policyholder or any Subsidiary”. Thus, the policies cover only OK Resources and any “Subsidiary”, as defined.

47    The policies define “Subsidiary” as follows:

Subsidiary

any entity which the Policyholder Controls either directly or indirectly through one or more other entities on or before the inception date of this policy.

Cover for any Subsidiary or any Insured Persons of such Subsidiary shall only apply for Fraudulent Acts, or acts, errors or omissions committed or occurring whilst such entity is or was a Subsidiary.

(Emphasis in original.)

48    The policies define “Control” as follows:

Control

the securing of the affairs of an entity by means of:

  (i)    controlling the composition of the board of directors of such entity;

(ii)    controlling more than half of the shareholder or equity voting power of such entity; or

 (iii)    holding more than half of the issued share or equity capital of such entity.

49    The company searches show that OK Workforce is not a subsidiary of the policyholder, OK Resources. OK Resources does not and has never owned any shares in OK Workforce, and thus does not control the composition of the board of directors of OK Workforce, nor control more than half of its shareholder or equity voting power, nor hold more than half of its issued share or equity capital. That conclusion is supported by the evidence of Mr Humphreys who deposes that he is informed by Mr Triggs, the Managing Director Australasia of Fircroft Group, that at no time has OK Resources had any ability to control the composition of the board of directors of OK Workforce, nor to control any of the shareholder or equity voting power of OK Workforce. That evidence is hearsay but it is admissible in an interlocutory application: s 75 Evidence Act 1995 (Cth), and there is nothing in the materials that provides any reason to doubt its correctness.

50    The Relevant Policies do not cover claims against OK Workforce. They are not held by or for the benefit of OK Workforce and they do not provide coverage in respect of employment liabilities incurred by OK Workforce between 6 November 2015 and 2 October 2018.

51    In relation to any other insurance policy or policies, the evidence does not reveal any objective basis for Mr Shorey to believe that OK Workforce has or is likely to have or has had or is likely to have had in its control any other insurance policy held by or for the benefit of OK Workforce which may provide coverage in respect of employment liabilities incurred by OK Workforce between 8 November 2015 and 2 October 2018. Mr Shorey does not point to anything to indicate a basis for such a belief and Mr Humphreys deposes that he has been informed by Mr Triggs that he is not aware of any insurance policy (other than the Relevant Policies) which may provide coverage in respect of employment liabilities incurred by OK Workforce between 6 November 2015 and 2 October 2018.

52    The application for preliminary discovery does not satisfy the third limb of the test in r 7.23 and it is therefore appropriate to refuse it.

Costs

53    OK Resources seeks its costs of the interlocutory application on the basis that costs should follow the event. I take a different view. As I have said, there was a basis for Mr Shorey to have the requisite reasonable belief when he made the application for preliminary discovery, although that basis fell away upon OK Resources filing its evidence and submissions, including by providing un-redacted copies of the Relevant Policies. Mr Shorey’s legal representatives were not given access to the un-redacted policies and could only seek to discern the content and meaning of the Relevant Policies by perusing heavily redacted copies, which was difficult given the extent of redaction. Following provision of the un-redacted policies, the parties incurred no significant further costs because the application was decided on the papers. In those circumstances I do not consider it appropriate to order costs against Mr Shorey.

Associate:

Dated:    3 December 2020