Wayne Johnston v Centralian Industries Pty Ltd, Kilthistle (No 2) Pty Ltd, Boral Perry Industries Pty Ltd, Transfield Engineering (Silverwater) Pty Ltd and Forwood Down WA Pty Ltd(1995) 13 ACLC 1064, (1995) 8 A [1995] VSC 158; [1995] VICSC 158 (21 June 1995)

SUPREME COURT OF VICTORIA

WAYNE JOHNSTON v. CENTRALIAN INDUSTRIES PTY LTD, KILTHISTLE (No. 2) PTY LTD,
BORAL PERRY INDUSTRIES PTY LTD, TRANSFIELD ENGINEERING (SILVERWATER) PTY LTD
AND FORWOOD DOWN W.A. PTY LTD
No. 4334/95
Number of pages - 8
Practice
(1995) 13 ACLC 1064, (1995) 8 ANZ Insurance Cases 61-284

COURT

IN THE SUPREME COURT OF VICTORIA
PRACTICE COURT
SOUTHWELL J

CATCHWORDS

Practice - Appeal from Master - Claim for damages against defunct but re-registered company - Substituted service - Whether service upon insurer was properly ordered - Rule 6(10)(1) - Appeal dismissed.

HEARING

MELBOURNE, 15-21 June 1995
21:6:1995

Counsel for the Plaintiff Mr Fox QC with

Mr Ingram

Solicitors for the Plaintiff Holding Redlich

Counsel for the Defendants Mr R. Cook

Solicitors for the Defendants Alfred L. Abrahams and Co.

ORDER

Appeal dismissed with costs

DECISION

SOUTHWELL J This is an appeal from a Master.

2. The action is one which in which the plaintiff, who is dying with mesothelioma and whose life expectancy is now measured in weeks, is suing former employers in respect of his terminal disease. It is alleged that during the course of his employment by the defendants the plaintiff was exposed to asbestos dust and fibre which precipitated the disease. There are five defendants who are said to have employed the plaintiff between 1970 and 1982. The fifth defendant (Forwood Down Western Australia Pty Ltd - "Forwood") is said to have been the employer for approximately 18 months in 1977 and 1978 at the Swan Breweries site in Canningvale, Western Australia, although there may well be an issue at trial as to the fact of and nature of that employment.

3. Forwood was deregistered as a company on 20 August 1987. It appears that the company went into liquidation at some time before deregistration. The solicitors now acting for the successor of C. E. Heath Underwriters and Insurance (Australia) Pty Ltd (Heath), have communicated with a Mr Robert Pride, who said he was the liquidator but he did not now have possession of any books or records of Forwood. The material presently before the court does not reveal whether the solicitors made inquiries of Mr Pride as to the identity and whereabouts of any former directors of Forwood or the existence or location of its books or records.

4. A company search by the plaintiff's solicitors on 1 May 1995 reveals no more information than that Forwood's former registered office was at "John Street, corner Charles Street, Burkley, W.A. 6102" and that the company was dissolved on 20 August 1987. There is no reference to the directors or to the liquidator.

5. Inquiries by the plaintiff's solicitors have unearthed somewhat conflicting statements as to the identity of the employer's indemnity insurer at the relevant period. It may have been Heath; it may have been the State Government Insurance Office (SGIO), it may have been each of them for part of the time. Indeed, it may have been neither.

6. On 2 May 1955 Master Kings ordered, pursuant to s.459(6) of the Corporations Law, that the registration of Forwood be reinstated for the purpose of allowing the plaintiff to proceed with the action against that company and at the same time it was ordered that Forwood be added as a fifth defendant. It was said in this court for Heath that the material filed in support of the application was insufficient; that more inquiries should have been made to discover the identity of former directors; that the Master should have been given information which would have enabled her to give some directions as to who should control the affairs of Forwood and that they should then be served. It was said to be inappropriate that Heath, as the insurer, should in effect be representing the company.

7. It may well be that if the plaintiff's solicitors had an abundance of time in which to pursue inquiries, then more could have been achieved. However, just as the courts have in the past looked at the realities of the situation in deciding whether an insurer should be served, so I think I should look at them in deciding whether, within Rule 6.10(1), service is "impracticable", which in turn concerns the question of establishing the identity and whereabouts of the persons best fitted to stand in the shoes of the company. Those realities include the stark reality of the impending death of the plaintiff. In all the circumstances, I am satisfied that all reasonable practical steps have been taken and, in any event, as is later observed, Heath is in a better position than the plaintiff's solicitors to establish the relevant identities. For the purposes of this litigation, Heath is best placed to act on behalf of Forwood, should it wish to do so.

8. There is now no registered office of Forwood at which service may be affected. Heath has declined to accept service. Accordingly, the plaintiff applied for an order for substituted service and on 4 May 1995 Master Wheeler ordered that service be affected by serving both Heath and SGIO. That was done.

9. On 25 May Forwood entered a conditional appearance and by summons of the same date applied for an order setting aside the order for substituted service. On 8 June 1995 Master Wheeler dismissed the application. It is from that dismissal that Forwood (the application is of course made by Heath) now appeals.

10. Counsel for Heath first submitted that leave ought not to be given to the plaintiff to rely upon affidavits which were not before the Master. It may be correct to say that the new material, which is not, in my view, of any great importance, could well have been included in earlier affidavits. However, the plaintiff's solicitors have encountered considerable difficulties in their attempts to identify all relevant employers and the quickly deteriorating health of the plaintiff brought an element of urgency to the matter. In those circumstances and in the absence of any real prejudice to Heath, the court should not shut the plaintiff out upon what seems to me to be technical matters. Accordingly, to the extent necessary, I will grant special leave to the plaintiff to rely upon the further material.

11. The order for substituted service was made pursuant to Rule 6.10(1) which provides -

"Where for any reason it is impractical to serve a document in
the manner required by these Rules, the Court may order that,
instead of service, such steps be taken as the Court specifies
for the purpose of bringing the document to the notice of the
person to be served."

12. It was submitted for Heath that such an order ought not to be made where the defendant cannot be located and the plaintiff wishes to serve a writ upon an insurer, and where the notice of the writ is unlikely to reach the defendant. In a case such as the present, where a defunct company is re-registered merely for the purpose of being sued, the acceptance of the submission might produce the result that service could never be affected upon anyone -for example, where the former directors cannot be found. So it might follow that a former employee of a company having a good cause of action against it, and the company at the relevant time being indemnified by an insurer, would succeed if the company prospered and continued in existence, but would fail if it had been dissolved.

13. However, it is said for Heath that there is powerful authority for its principle proposition.

14. In Porter v. Frendenberg (1915) 1 KB 857 a strong Court of Appeal considered the question of substituted service in England of a writ upon the English agent of the defendant, who was an alien enemy resident abroad. The court said at page 888 -

"In order that substituted service may be permitted, it must be
clearly shown that the plaintiff is in fact unable to effect
personal service and that the writ is likely to reach the
defendant or come to his knowledge if the method of substituted
service which is asked for by the plaintiff is adopted."
(Emphasis added.)

15. Counsel for Heath relied upon the emphasized passage, submitting that here it has not been shown that service upon Heath will ensure that the defendant has knowledge of the writ. In the same judgment at page 889 it is said that before granting an order for substituted service the judge should

"satisfy himself ... that (the substituted service) will in all
reasonable probability, if not certainty, be effective to bring
knowledge of the writ to the defendant."

16. In Chappell v. Coyle (1985) 22 NSWLR 73, a running-down action, the car driver's identity was known but his whereabouts were unknown both to the plaintiff's solicitors and to the insurer, the Government Insurance Office. A Master ordered substituted service upon the insurer pursuant to the Supreme Court Rules 1970, Pt 9, r.10(1), which, so far as is here relevant, is in terms similar to our R. 6.10(1). Each rule permits such service "for the purpose of bringing the document to the notice of the person to be served".

17. Yeldham J, after an exhaustive examination of authority, held that the Master had erred in ordering such service. The Master did so upon the basis that this was one of an exceptional class of case distinguishable from Porter v. Frendenberg, since the defendant was statutorily insured, the insurer had the right to conduct the action and judgment could be pursued against the insurer. His Honour so decided upon his interpretation of the relevant rule, stating at page 86 that the order was not made for the purpose of bringing the documents to the notice of the defendant, "but for the purpose of bringing the statement of claim to the notice of his insurer".

18. His Honour went on to say:

"I have come to the conclusion that, although an order that a
statement of claim may be served upon the authorised insurer in
the type of case with which we are dealing could be said, in
most circumstances, to accord with the justice of the situation,
that fact cannot serve to bring within the relevant rule that
which is outside it. The court is only empowered to order steps
to be taken by way of substituted service for the purpose of
bringing the statement of claim to the notice of the named
defendant. In the present case that, admittedly, was not the
object of the application, nor will it be the result of the
order, which, for that reason, must be set aside."

19. For Heath it was said that this court ought to follow Chappell v. Coyle. As it seems to me, the underlying reason for the caution with which the courts have approached the problem is the seeming injustice of a judgment being obtained against a person who may be disadvantaged by that judgment and who may wish to defend the proceedings, but who is left in ignorance of them. The rule makers did not, as I think, have in mind circumstances such as are here present. So far as an insurer is concerned, it may need the instructions of the defendant (and, perhaps, his presence) to be enabled to defend the case. Where the defendant is a company, it is to the management, staff or directors that the insurer will first look and from whom instructions will be sought. In the present case, although difficulties have been encountered in tracing records and identities, I am not persuaded that there is no reasonable possibility that Heath will discover the identity and whereabouts of the management, staff or directors. Heath does know the identity of the liquidator, but it is not said that inquiries have been made of him as to the existence of staff or directors who might have knowledge of the facts relevant to this action.

20. It follows that the seeming injustice to which I have referred has not here been shown to exist.

21. In any event, it seems to me to be entirely artificial to speak of injustice to a defunct company which is re-registered solely for the purpose of this litigation and which can in no way be disadvantaged by the entry of a judgment against it.

22. In Chappell v. Coyle, Yeldham J's attention was not, so far as it appears from the report of the case, drawn to the case of Foxe v. Brown (1984) 58 AIR 542, judgment in which was handed down on 8 November 1984, some 6 months before the hearing of Chappell v. Coyle. In saying that, I do not suggest that Yeldham J's decision would have been different if His Honour had considered Foxe v. Brown, for His Honour in the end decided Chappell v. Coyle upon the interpretation of the rule which was different from the High Court rule in Foxe v. Brown, to which I shall refer in a moment.

23. In the latter case, Mason J dealt inter alia with a question of substituted service under High Court Rule 9.2(2), which enabled substituted service where "the plaintiff is, from any cause, unable to effect prompt personal service". This rule does not include the words present in the New South Wales and Victorian rules, "for the purpose of bringing the document to the notice of the person to be served".

24. In Foxe v. Brown, Mason J at page 544 referred to regulation 12 of the Motor Vehicle Insurance Regulations 1986, which gives a right to a judgment creditor to proceed against the insurer if the judgment is left unsatisfied. After referring at page 546 to the principles restated in Porter v. Frendenberg, and which are set out above, Mason J said:

25. "However, in a number of cases substituted service of a writ has

been ordered on a third party motor vehicle insurer against whom
a judgment obtained may ultimately be enforced even though there
was apparently little likelihood of the writ thereby coming to
the knowledge of the defendant (eg Kevin v. Schmeisze (1964) QWN
51 and Lawford v. Hosth (1974) 5 AIR 57). In Lawford v. Hosth
Forster J (at pp 58-9) identified the principles underlying
these cases as being: ' ... first, that the real defendant in
motor accident cases is the third party insurer of the defendant
(McCann v. Parsons [1954] HCA 70; (1954) 93 CLR 418; (1955) AIR 14) and,
second, that if a judgment obtained against the defendant may
ultimately be enforced against the defendant's insurer then,
provided all proper inquiries to find the defendant have been
unsuccessful, an order for substituted service upon the insurer
may be made whether or not the policy was entered into
interstate.'"

26. Here, surely "the real defendants" are any employers who are found liable to compensate the plaintiff, or in the case of Forwood, if it is found liable, its insurer, whoever that might ultimately be proven to be. A judgment obtained against Forwood, if ever it is to be satisfied, will be satisfied only by that insurer. That insurer will be the only person to be disadvantaged by the judgment.

27. In those circumstances, it may fairly be described as "the real defendant". If Heath is not proved to be the insurer, it will not be liable; if it has a defence under its contract with Forwood, it will again not be liable. If it believes its best interests are served by taking no part in the proceedings, so be it.

28. It is clear that Mason J accepted the correctness of the principle stated in Porter and Frendenberg, but considered it appropriate to permit exceptions where the insurer is "the real defendant", and it was then immaterial whether notice of the claim would be passed on to the named defendant.

29. The problem was again considered by the Full Court of the Supreme Court of the Northern Territory in O'Neil v. Acott, [1988] NTSC 68; (1988) 59 NTR 1, a decision relied upon by counsel for the plaintiff. In that running down case, extensive inquiries had failed to reveal the whereabouts of the identified driver. A Master ordered that service be affected by service upon the insurer of the motor vehicle, the Territory Insurance Office, which under the relevant legislation had the right to conduct such proceedings and was described by the trial judge upon an application to set aside service as "the real applicant".

30. The applicable rule there was in terms similar to the Victorian rule.

31. Asche CJ (with whom Nader and Rice JJ concurred) referred to Yeldham J's statement at page 85 of Chappell v. Coyle where His Honour said;

"But I do not think that such 'realities' would justify the
court in making an order for substituted service in circumstances
not permitted by the relevant rule of court or else contrary to
its obvious spirit and intendment."

32. Asche CJ then observed:

"I acknowledge the strict logic of his Honour's reasoning. But I
would not, with respect, think it necessarily within the spirit
and intendment of the rules to deprive a plaintiff of relief
in the exceptional case, where all that stands between him and
a legislative scheme expressly devised to give him a remedy if
the opposite party cannot be found, is the very fact that the
opposite party cannot be found. In those circumstances and on
the basis of the reasoning in such cases as Lawford v. Hosth
it should be open to the court to specify service on the
insurer 'for the purpose of bringing the document to the notice
of the person to be served' because that is all that is left
that can reasonably be done, and although the purpose may not
be achieved."

33. It is true that in the present case the legislative scheme is not "expressly devised to give (the plaintiff) a remedy if the opposite party cannot be found". The relevant Western Australian legislation would not enable the plaintiff to proceed directly against Heath, but it may well be that the plaintiff could proceed against Heath upon the principle enunciated in Trident General Insurance Company Ltd v. McNiece [1988] HCA 44; (1988) 165 CLR 107.

34. However Asche CJ said at page 10, when referring to the judgment of Martin J from whom the appeal was taken:

"Martin J cited with approval the remarks of Nader J in Nicholls
v Thiel (1983) 25 NTR 11 at 16-17 which, with respect, I would
also adopt:

'It is true that both Lawford v Hosth and Hunt v Molk involved
legislation providing for enforcement of judgments against
insurers. Indeed, the Chief Justice used language that might
be taken to mean that such enforceability is one of the criteria
justifying substituted service upon an insurer. Because such
enforceability was part of the legislation with which the Chief
Justice was concerned, there was no call for his Honour to
consider whether the duty to indemnify was alone sufficient.
Briggs v Sands, supra, was a case concerned with s 6 of the
Act: enforceability was not expressed to be a basis of the
decision of O'Leary J His Honour noted merely the duty to
indemnify. It is the duty to indemnify that gives the office
(or an insurer in an appropriate case) sufficient interest
in the outcome of proceedings to provide an incentive to locate
and involve the defendant. I can see nothing in the English
cases referred to in Lawford v Hosth to lead to a different
conclusion.'"

35. For the plaintiff, it was submitted that Chappell v. Coyle and many of the cases discussed in it are distinguishable in that they deal with defendants who are natural persons and whose whereabouts cannot be ascertained, whereas in this case, it is said, not only is the identity of defendant known, but it cannot be said that its whereabouts are unknown. There is here again, I think, some artificiality in speaking of the whereabouts of a defunct but re-registered company which has no registered office. It is in one sense nowhere, and since no new liquidator has been appointed, no one exists who can represent it.

36. A somewhat similar problem was before O'Bryan J in Re Otway Coal Co. Ltd. [1953] VicLawRp 74; (1953) VLR 557. There the company had been dissolved in 1937 and reregistered in 1950, pursuant to the precursor of s.459(6).

37. O'Bryan J said at page 563:

"But is it impracticable in this case to effect service under
rule 6. The case, therefore, is one in which an order for
substituted service should be made. The difficulty is that
there is no way in which service can be effected which would
bring to the company notice of these proceedings. The company,
though technically in existence, has no office or officers,
no directors and no business life."

38. His Honour then went on to discuss the shareholders and directors. He went on to observe at page 564:

"I am of the opinion that no useful purpose can be served by
any order for substituted service upon the company, e.g.,
example, by way of advertisement or by ordering that all
these shareholders should be served with the originating
summons."

39. Then a little later His Honour said on the same page:

"I have decided to make an order for substituted service by
ordering service of a copy of the originating summons upon
its largest shareholder."

40. Those observations tend to show, in my opinion, that good grounds exist for distinguishing the cases where a natural person is sued and for ordering that service be effected upon the insurer. The largest shareholder was selected by O'Bryan J, since it had the greatest interest in the proceedings. Here, Heath or the SGIO have the greatest interest. However, even were Chappell v. Coyle to be regarded as indistinguishable, I would nevertheless hold that since the justice of the case so clearly lies in favour of enabling the plaintiff to pursue his claim against Forwood, I should adopt the reasoning of the Full Court in O'Neil v. Acott.

41. I do so without disregarding what seems to me, if I may say so, with respect, the highly persuasive reasoning of Yeldham J in Chappell v. Coyle. However, His Honour at page 85 had referred to "the obvious spirit and intendment" of the relevant rule. I do not regard the interpretation adopted in O'Neil v. Acott as offending that spirit and intendment.

42. For those reasons I am of the view that the order for substituted service was properly made. Accordingly, the appeal must be dismissed with costs.