Guild Insurance Limited t/as Acerta v DH BI Pty Ltd

[2022] NSWSC 524

Supreme Court

New South Wales

Medium Neutral Citation:

Guild Insurance Limited t/as Acerta v DH BI Pty Ltd [2022] NSWSC 524

Hearing dates:

29 April 2022

Decision date:

29 April 2022

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

1.   Paragraphs C31-C35 of the Defendant’s Commercial List Response filed 9 February 2022 be struck out.

2.   The Defendant pay the Plaintiff’s costs of this motion.

Catchwords:

CIVIL PROCEDURE — Pleadings — Striking out — No reasonable cause of action or defence — Application to strike out pleading asserting novel duty of care between solicitor of the defendant insured and the plaintiff insurer

Cases Cited:

Badenach v Calvert (2016) 257 CLR 440

CaltexRefineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649

McFee v Reilly [2018] NSWCA 322

White v Jones [1995] 2 AC 207

Category:

Procedural rulings

Parties:

Guild Insurance Limited t/as Acerta (Plaintiff)
DH BI Pty Ltd (Defendant | Cross-Claimant)
Dentons Australia Limited (Cross-Defendant)

Representation:

Counsel:
AJ Barnett (Plaintiff)
L Chan (Defendant)

Solicitors:
Meridian Lawyers (Plaintiff)
McInnes Wilson Lawyers (Defendant | Cross-Claimant)
K&L Gates (Cross-Defendant)

File Number(s):

2021/361664

Publication restriction:

None

Judgment

1. By a notice of motion filed on 14 April 2022, the plaintiff, Guild Insurance Limited (Guild), sought to strike out certain paragraphs of the commercial list response filed by the defendant, DH BI Pty Ltd, on 9 February 2022 that raise a concurrent wrongdoer defence. I made that order. These are my reasons for doing so.

Background

2. On 1 September 2018, a property owned by DH BI known as “Briars Inn” at Burradoo, New South Wales, was damaged by a fire which was caused by the tenants at the property. DH BI had insured the property with Guild.

3. Guild indemnified DH BI in relation to the loss and damage it suffered as a consequence of the fire.

4. In or about mid‑2020, DH BI, without the knowledge of Guild, entered into a deed with the tenants by which the tenants surrendered the lease and DH BI released the tenants from any liability arising from the fire. Dentons acted for DH BI in connection with the deed.

5. On 19 November 2020, Guild commenced subrogated proceedings in the name of DH BI against the tenants (the Recovery Proceedings) only to discover the existence of the release contained in the deed. In the light of that release, the proceedings were dismissed by consent and Guild agreed to pay the tenants’ costs.

6. Guild then commenced these proceedings against DH BI seeking to recover damages for loss of the opportunity to recover damages, interest and costs from the tenants and the costs it incurred in connection with the aborted Recovery Proceedings. That claim is put in four ways. First, it is alleged that by settling with the tenants, DH BI breached obligations it owed under the policy of insurance. Second, it is alleged that DH BI breached the terms of a deed by which DH BI’s insurance claim was settled. Third, it is claimed that DH BI owed Guild a duty of care which it breached by releasing the tenants. Lastly, Guild makes a claim for restitution for an amount equal to the amount it paid by way of indemnity.

7. One defence raised by DH BI was the proportionate liability defence. In that defence, DH BI pleaded that Dentons owed both Guild and it a duty of care in connection with the preparation of the deed of surrender and release. DH BI has also filed a cross-claim against Dentons.

Reasons

8. In my opinion, the allegation that Dentons owed Guild a duty of care in connection with the preparation of the deed of surrender and release was bound to fail.

9. The principal facts pleaded in the response that are relevant to the existence of a duty of care are:

(iii)   Dentons was aware that:

(A)   The defendant held a Policy of Insurance with the plaintiff current at the time of the Fire (Policy);

(B)   Pursuant to the Policy, the plaintiff was obliged to indemnify the defendant for the loss and damage caused by the Fire;

(C)   The plaintiff had entered into a settlement with the defendant pursuant to which the plaintiff had made payments under the Policy to the defendant in respect of the damage to the Property caused by the Fire; and

(D)   The plaintiff intended to commence subrogated recovery proceedings against the Tenants in respect of the loss and damage caused by the Fire.

10. It is also pleaded that Guild was vulnerable to any error or omission on the part of Dentons in relation to the deed of surrender and release because it was not a party to the deed and relied on DH BI to preserve its rights of subrogation.

11. The general rule is that a solicitor only owes a duty of care to his or her client: White v Jones [1995] 2 AC 207 at 256 per Lord Goff. The general rule has been affirmed on numerous occasions by Australian courts: see Badenach v Calvert (2016) 257 CLR 440 at [19]ff (Badenach); McFee v Reilly [2018] NSWCA 322 at [131]. As French CJ, Kiefel and Keane JJ explained in Badenach (at [20]):

In Hill v Van Erp, Brennan CJ explained [(1997) 188 CLR 159 at 167] that a solicitor’s duty is generally considered to be owed solely to the client because the duty is to exercise professional knowledge and skill in the protection and advancement of the client’s interests in the transaction in which the solicitor is retained. That duty cannot be compromised by a duty to a person whose interests are not coincident with those of the client ….

12. In the present case, the interests of Dentons’ client and Guild were not coincident. Guild’s interest was in preserving its rights of subrogation. DH BI’s interest, on the other hand, was in negotiating the terms on which the tenants were prepared to surrender the lease. The fact that DH BI may have faced a possible claim by Guild if the terms on which the lease was surrendered included a release, and the fact that was one matter that DH BI needed to take into account in negotiating the terms of the surrender, did not make its interests coincident with that of Guild.

13. DH BI submitted that the duty for which it contended was a novel one and that, in determining whether it existed, it was necessary for the Court to apply the principles stated in CaltexRefineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649 at 676 per Allsop P, which requires the Court “to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by references to the ‘salient features’ or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury”. According to DH BI, that could only be done at a final hearing, when all the facts were known. However, the duty for which DH BI contended was not a novel one in the relevant sense. It was a duty that was inconsistent with established authority. None of the facts pleaded by DH BI could alter the position. Those facts were simply relevant to the duty owed by Dentons to DH BI and the question whether Dentons breached that duty.

14. Accordingly, I made the orders sought in the notice of motion.

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