Case: Re Multi-tech Services Pty Ltd (In liq); Heard v Commonwealth Trading Bank of Australasia (1982) 30 SASR 218
Outcome: cited
Referring to discretionary considerations, King CJ noted that the trial of the action against the directors seemed likely to be very lengthy, very complex and very costly. The joinder of the insurer would make it a co-defendant with the defendant directors. The question which he then posed was whether res judicata would operate as between the co-defendants. He concluded that an actual lis in the sense of proceedings between the defendants concerned was not a requisite of res judicata and cited the judgment of Jacobs J in Re Multi-tech Services Pty Ltd (In liq); Heard v Commonwealth Trading Bank of Australasia (1982) 30 SASR 218. He said (at 441): In my opinion, the insurer, if joined as a defendant, would be bound, in subsequent proceedings by the defendant directors or their trustee in bankruptcy, by a declaration of liability and also by any findings of fact made in the present proceedings. King CJ accepted that joinder would involve "embroiling the insurer in these proceedings although, if it is not joined, the occasion for proceedings against it may never arise" (at 441). He recognised that that was an important factor in the exercise of the discretion. However, it could not prevail against other compelling considerations. If the insurer were to plead defences based on want of notification of claims or avoidance of the policy under s 237 of the Companies (South Australia) Code by reason of payment of the premiums by the plaintiffs or a related corporation, such defences could be determined, if appropriate, as preliminary issues. If determined in favour of the insurer, the insurer's involvement in a long and expensive trial would be avoided. 43 His Honour said that, in the exercise of its discretion, the Court must be guided by the overriding principle that a multiplicity of proceedings was to be avoided. He referred in that respect to s 27 of the Supreme Court Act which is in substance reflected in s 22 of the Federal Court Act. He was particularly concerned about the need to avoid the prospect of a second long and complex trial. 58 I respectfully agree with the view expressed by Byrne J that the decision of Jacobs J in Multi-tech Services 30 SASR 218 does not seem to be authority for the proposition that an insurer joined as a co-defendant at the suit of a claimant against the insured, would be bound as between itself and the insured, by a declaration that it was liable to provide indemnity to the insured. There was no exposition by Jacobs J of any principle that would support that proposition. It is not necessary for me to decide the general question here. In my opinion the approach taken in JN Taylor 59 SASR 432 is supportable on a wider basis without reliance on a res judicata or issue estoppel. That wider basis was enunciated by Davies JA. In this respect I refer also to my review of the authorities relating to the general concept of abuse of process by relitigation in Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 at [59] [69]. I consider, as did Davies JA, that there is utility in a declaration against an insurer in circumstances such as the present. That factor however, while important, does not exhaust the discretionary considerations, particular to this case, to which I should have regard.