Federal Court of Australia

XL Insurance Company SE, trading as Brooklyn Underwriting v Kerembla Pty Ltd [2023] FCA 1038

ORDERS

THE COURT ORDERS THAT:

1.    The amended interlocutory application be dismissed.

2.    The costs of the amended interlocutory application be costs in the appeal.

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

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from the transcript)

LEE J:

A    INTRODUCTION

1    This is an interlocutory application filed by XL Insurance Company SE, trading as Brooklyn Underwriting (XL Insurance) by which it seeks a stay of orders made by Jackman J pending an appeal, which is anticipated to be heard in November of this year. By its amended interlocutory application, XL Insurance relevantly seeks:

2.     That Orders 1–3 inclusive made by the Honourable Justice Jackman on 7 July 2023 be stayed pursuant to section 29 of the Federal Court of Australia Act, pending final determination of this appeal.

3.     That the Order made by the Honourable Justice Jackman on 16 August 2023 be stayed pursuant to section 29 of the Federal Court of Australia Act, pending final determination of this appeal.

2    It is unnecessary in dealing with this application to set out the background to this proceeding, which was canvassed by Jackman J in Kerembla Pty Ltd v XL Insurance Company SE, trading as Brooklyn Underwriting [2023] FCA 769 (at [1]–[4]), save to note that the fundamental issue concerns the liability of XL Insurance to indemnify the first respondent, Kerembla Pty Ltd (Kerembla), for losses arising out of an incident in 2021 involving damage to a bridge.

B    THE ORDERS

3    The orders sought to be stayed fall into two categories. The first is a declaration made in July 2023 that, in essence, XL Insurance is liable to indemnify Kerembla for the incident; and the second are costs and related orders.

4    In relation to the first category, an immediate problem arises, which is not addressed in submissions made on the application. If a judgment is, in substance, declaratory rather than executory, it does not order a party to act in a particular way, such as to pay damages or refrain from interfering with a claimant’s rights, either of which would be enforceable by execution if disobeyed.

C    THE RELEVANT LAW

5    The distinction between declaratory and executory judgments is explained by Lord Woolf and Woolf J in Zamir & Woolf: The Declaratory Judgment (Sweet & Maxwell, 4th ed, 2001) (at [1.02]) where it is said (see also Macks v Viscariello [2017] SASCFC 172; (2017) 328 FLR 115 (at 187–188 [659]–[660] per Lovell J, Corboy and Slattery AJJ)):

A declaratory judgment is a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs. It is to be contrasted with an executory, in other words coercive, judgment which can be enforced by the court. In the case of an executory judgment, the courts determine the respective rights of the parties and then order the defendant to act in a certain way, for example, by an order to pay damages or to refrain from interfering with the plaintiff’s rights; if the order is disregarded, it can be enforced by official action … A declaratory judgment, on the other hand, pronounces upon a legal relationship but does not contain any order which can be enforced against the defendant … In other words, the declaration simply pronounces on what is the legal position.

6    The position of this Court concerning a stay of declaratory orders is made clear in Arnhem Land Aboriginal Land Trust v Northern Territory [2007] FCAFC 31; (2007) 157 FCR 255, where the Full Court (at 256–258 [5]–[7] per French, Finn and Sundberg JJ) set out a wealth of authority in support of the proposition that ordinarily, a declaratory order will not be stayed.

7    There is no doubt, however, that in an appropriate case, the Court has power to make orders in respect of rights which have been declared to exist and which are challenged or sought to be impugned in the context of an appeal (including enjoining the exercise of rights), and also to grant a stay in respect of consequential orders to give effect to a declaratory order. This is a critical distinction: see Bunnings Forest Products Pty Ltd v Bullen (1994) 54 FCR 342 (at 347 per Carr J); Smolarek v McMaster [2006] WASCA 216 (at [30] per Buss JA); Stellar Call Centres Pty Ltd v Community & Public Sector Union [1999] FCA 1236 (at [12] per Katz J).

D    CONSIDERATION

8    Here, as noted earlier, the Court has declared that XL Insurance is liable to indemnify Kerembla. There is various correspondence between the parties recording contentions by Kerembla that XL Insurance should pay amounts to Kerembla.

9    Although ordering a stay of the declaratory order is inappropriate, a question may arise as to whether or not XL Insurance should be required to pay amounts to Kerembla prior to the resolution of the appeal in the absence of adequate protection. That issue is not before me today, and given the pendency of the appeal, one hopes that some sort of sensible interim regime can be agreed as between the parties.

10    In relation to the second category above, the order made by the Court was that XL Insurance pay the costs of Kerembla relating to the claim against it as agreed or assessed. There is no reason why the ordinary taxation regime should be stayed pending the outcome of the appeal. Needless to say, if the appeal is successful, that process will cease.

E    CONCLUSION

11    In all the circumstances, the appropriate course is for the amended interlocutory application to be dismissed and for the costs of the application to be costs in the appeal.

Associate:

Dated:    30 August 2023