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Birbilis Bros Pty Ltd v Chubb Fire and Security Pty Ltd

 

[2018] QSC 3

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Birbilis Bros Pty Ltd v Chubb Fire and Security Pty Ltd & Ors [2018] QSC 3

PARTIES:

BIRBILIS BROS PTY LTD (ACN 115 942 311)

(plaintiff)

v

CHUBB FIRE AND SECURITY PTY LTD
(ACN 000 067 541)

(first defendant)
and
ASSETINSURE PTY LTD (ACN 066 463 803)
(second defendant)
and
AAI LIMITED (ACN 005 297 807)
(third defendant)

FILE NO:

SC 9882 of 2013

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

15 January 2018

DELIVERED AT:

Brisbane

HEARING DATE:

17 July 2017

JUDGE:

Brown J

ORDER:

The order of the Court is that:

  1. The application for leave to file a fifth further statement of claim be adjourned until 23 February 2018.
  2. That the plaintiff is ordered to deliver particulars of the allegation in paragraph 74.1(b) that “the appropriate discount in respect of the orders from all customers other than Super Amart is no discount” by 21 February 2018.
  3. That the plaintiff deliver a further draft statement of claim to the defendants, with liberty to re-plead paragraphs 107 and 109, by 21 February 2018.
  4. That the stay of proceedings pursuant to paragraph 4 of the Orders made on 31 March 2016 be lifted.
  5. That the application for security for costs be dismissed subject to undertakings being given in the form of paragraph 6 of the letter from Piper Alderman of 11 July 2017.
  6. That there be liberty to apply.

CATCHWORDS:

PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – INHERENT AND GENERAL STATUTORY POWERS – TO STAY OR DISMISS ORDERS OR PROCEEDINGS GENERALLY – where the third defendant submits that on the basis that the plaintiff should be refused leave to file the fifth further amended statement of claim, the proceeding against the third defendant should be dismissed or permanently stayed – where the defendants contend that the pleading fails to plead material facts – where the proceedings have suffered delay including by the vacation of trial dates – whether the proceedings or part of the proceedings should be permanently stayed or dismissed – whether a previous order staying the proceedings pending payment of certain costs by the plaintiff to the third defendant should be vacated

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – PARTICULAR PLEADINGS – where the plaintiff seeks leave to file a fifth further amended statement of claim – where the defendants contend that leave should be refused if the amended pleading should be struck out if filed – where the defendants oppose the granting of leave on several grounds, including that: the pleading is incomplete, the pleading lacks particularity, the pleading is confusing, the pleading fails to disclose a reasonable cause of action against the third defendant and the pleading is an abuse of process or likely to delay the proceedings – whether leave should be granted and on what conditions

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – where the first defendant makes an application for security for costs pursuant to r 670 of the Uniform Civil Procedure Rules 1999 (Qld) – where the first defendant asserts that there is reason to believe the plaintiff will not be able to pay the first defendant’s costs if ordered to pay them – where a litigation funding agreement has been entered into by the plaintiff and a third party – whether the third party should provide security for costs by way of a bank guarantee or an undertaking 

Uniform Civil Procedure Rules 1999 (Qld), r 150, r 670

Corporations Act 2001 (Qld), s 1335

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175

Badenach v Calvert (2016) 257 CLR 440

Dominus Pty Ltd v Daydream Island Resort Investments Pty Ltd [2003] QSC 44

Global Finance Group Pty Ltd (in liq) v Marsden Partners (a firm) [2004] WASC 52

Graham and Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221

La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299

Northern Southern Western Supermarkets Pty Ltd (subject to a Deed of Company Arrangement) v HIH Casualty and General Insurance Ltd (in liq) & Anor [2002] NSWSC 541

Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2017] QCA 254

QIC Logan Hyperdome Pty Ltd v Briridge Pty Ltd [2011] QSC 43

Sellars v Adelaide Petroleum NL & Ors (1994) 179 CLR 332

Tabet v Gett (2010) 240 CLR 537

Traderight Pty Ltd v Bank of Queensland Ltd [2010] NSWSC 1502

COUNSEL:

R Bain QC w M Hodge QC for the plaintiff

P Franco QC w C Wilson for the first defendant

S Couper QC w J Sweeney for the third defendant

SOLICITORS:

Piper Alderman for the plaintiff

Wotton + Kearney for the first defendant

Carter Newell for the third defendant

The Applications

  1. Several applications are made in relation to this matter.  The plaintiff (Birbilis) applies for leave to amend its statement of claim in accordance with a draft fifth further statement of claim which is Exhibit 1 (FFASOC), which is an updated version provided to the Court on the day of hearing.
  2. The application was made pursuant to an order made by Justice Flanagan on 23 March 2017 giving leave to Birbilis to deliver to the defendants a draft fifth further amended statement of claim and then to seek leave of the Court to make the amendments.  The FFASOC was delivered on 10 May 2018 (after the time ordered).
  3. Birbilis also applied to lift a stay provided for by an order of Justice Applegarth dated 31 March 2016.
  4. By the order of Justice Applegarth, the trial in the proceedings was vacated and proceedings were stayed pending payment of various costs thrown away to the defendants for, inter alia, the adjournment of the trial.  The vacation of the trial followed a concession by Birbilis that its statement of claim was deficient in certain respects requiring amendments and the matter would not be ready for trial.  Directions were made for Birbilis to deliver a draft fifth further amended statement of claim and for the defendants to indicate any opposition.
  5. The first defendant (Chubb) opposes leave being granted due to deficiencies in the pleading of the FFASOC and makes an application that Birbilis’ claim for lost profits be permanently stayed.  It also opposes the lifting of the stay if leave for the FFASOC is refused.  It also seeks an order that Birbilis provide security for costs and particularly that Birbilis provide cash security.  That application is opposed by Birbilis. 
  6. The third defendant (Vero) opposes leave being granted due to deficiencies in the FFASOC and makes an application that the proceedings against it should be dismissed or permanently stayed.

Matters to be determined by the Court

  1. As a result of the above applications the matters that have to be determined by this Court are:
  1. whether leave should be provided for Birbilis to file and serve the FFASOC in light of the alleged deficiencies identified by Chubb and Vero;
  2. if leave for the FFASOC is not given, whether the proceedings should be:
  1. permanently stayed or dismissed against Vero; and
  1. permanently stayed insofar as the proceedings seek lost profits against Chubb;
  1. whether the order of Justice Applegarth staying the proceedings pending the payment of certain costs of 31 March 2016 should be vacated;
  2. whether an order should be made for Birbilis to pay security in favour of Chubb in the form of a bank guarantee.

Background

  1. Birbilis is a furniture manufacturer producing flat pack furniture.  Chubb services and maintains fire sprinkler systems.  Vero is an insurer of Birbilis under an industrial special risks policy.
  2. In July 2012, two pieces of machinery, said to be essential to Birbilis’ business, namely a Giben saw and a computerised boring and routing machine manufactured in Italy, called a Morbidelli, both of which were insured by Vero under a policy of industrial special risks insurance, are alleged to have been damaged by water.
  3. According to the FFASOC:
  1. Chubb undertook repair works on a fire sprinkler system in the building occupied by Birbilis.  On or about 25 June 2012, the sprinkler system was shut down and drained after a pipe ruptured.
  1. Chubb repaired the sprinkler system on 4 July 2012 and reinstated the system.  After repairing the pipe, Chubb reinstated water to the system in the middle of the night, at which time it had no access to the Birbilis factory.
  1. The Chubb crew recognised that the system could not maintain pressure and eventually realised, after searching in the dark for a window through which to get a glimpse into the Birbilis factory, that a sprinkler head was spraying water onto the Birbilis machinery. 
  1. The water system was subsequently turned off, however, it is alleged that as a result of water damage the Giben saw had been rendered incapable of properly functioning and it was subsequently scrapped.  It is also alleged that as a result of water damage the Morbidelli was rendered inoperable and ceased to have the functionality it previously had and was incapable of repair to the standard it was before or alternatively incapable of economic repair.
  2. Repairs of the Morbidelli were undertaken by Vero but it is alleged by Birbilis that it could not be operated in automatic mode and was functionally impaired in manual mode when returned to Biribilis.  Vero is alleged to have breached and repudiated the policy by its conduct and given the effluxion of time.
  3. A matter of significant controversy in this application is the claim by Birbilis for the loss of the commercial opportunity to utilise the Giben saw and the Morbidelli in its business as a result of the breaches by both Chubb and Vero.  Birbilis alleges it has as a result suffered a significant loss of profits.

The proceedings

  1. Proceedings were issued by Birbilis on 18 October 2013.  They have, to date, a sorry history of parties being put to considerable expense and delay with no prospect of the matter being determined in the near future.  Chubb considers that the matter is still a year away from trial.  Birbilis has changed solicitors several times and retained seven different senior and junior counsel.  Over three and a half years there have been 10 attempts at formulating its claim.  It has taken Birbilis some 15 months to seek leave for the FFASOC since the orders of Applegarth J were made vacating the trial and staying the proceedings. While there has been a significant delay in the delivery of the FFASOC Birbilis has delivered a number of expert reports during that time and has engaged new counsel.  It also changed its solicitors in March 2016.

Approach to leave to amend

  1. The parties’ approach in arguing whether to grant leave for the FFASOC is not in dispute and is generally on the basis that leave should be refused if the FFASOC should be struck out if filed.[1]  Discretionary grounds are however relied upon by the defendants as a basis upon which the proceedings should be stayed or dismissed if leave is not granted.

Contentions of the defendants as to the FFASOC

  1. On the question of leave, Chubb opposes it being granted on the basis that inter alia:
  1. the FFASOC does not plead material facts which identify the natural person who held the intention on behalf of five nominated customers to whom, it is alleged, Birbilis lost the opportunity to supply its products as a result of the alleged breach; nor does it plead when the relevant person held the intention, give sufficient details of that intention or why it should be imputed to the corporate entity;
  2. the claim for loss of profits from unspecified customers is deficient including the 100 per cent possibility of orders from four of the five customers and should not be allowed leave;
  3. Birbilis has failed to plead material facts to substantiate the allegation at [67] of the FFASOC that it would have or could have supplied products to prospective customers;
  4. neither the amount of profits nor the circumstances in which they were lost in [74.2] of the FFASOC has been particularised;
  5. the claim for loss of profits is not supported by expert opinion or Birbilis’ profitability prior to the incident;
  6. there are various other defects in the failure to plead material facts or where the FFASOC is said to be confusing.
  1. Vero claims that there is no properly constituted claim pleaded against it and makes some overlapping complaints with Chubb as to the claim for damages by Birbilis  and contends, inter alia, that leave should be refused because:
  1. there is no reasonable cause of action pleaded against it because the basis of its claim is untenable and by reason of the absence of material facts;
  2. the pleading of loss and damage alleged to flow as a consequence of Vero’s breach is deficient as:
  1. an inferential assertion of the possibility that the customers would have come to Birbilis after the dates alleged is not sufficient to constitute a pleadable claim;
  2. the lost opportunities were not a consequence of the alleged breaches of Vero;
  3. Birbilis has failed to plead material facts to prove on the balance of probabilities that the five new prospective customers would have entered into contracts with Birbilis and that they would have been profitable;
  4. in relation to the quantification of loss in [109] of the FFASOC, Birbilis’ needs to identify what customers it would have sought to procure orders from, what products the orders would have entailed and the revenue derived from those orders. In [110] of the FFASOC, Birbilis would need to plead the matters set out in [92] of its submissions;
  5. it involves pleading facts which are an abuse of process;
  1. other complaints as to ambiguity, confusion and lack of particularity outlined below.

The claim for lost opportunity from five specified customers

  1. Birbilis summarises its pleaded case with respect to a loss of valuable commercial opportunity in the following way:
  1. had Birbilis had the Morbidelli and Giben saw available to it, Birbilis would have utilised them to perform additional work in its business;[2]
  2. the additional work would have or could have included five specific customers and the quantum of the orders that Birbilis would or could have obtained from each of those customers is pleaded;[3]
  3. the operational capacity of the Morbidelli and Giben saw was sufficient to meet and fulfil those orders from customers with some further limited spare capacity;[4]
  4. no discount should be made in respect of four of the five specified customers to reflect the chance that Birbilis would not have obtained some of the orders from four of those customers (save as determined by the Court);[5]
  5. a discount of 20 per cent should be made in respect of the fifth customer to reflect the chance that Birbilis would not have obtained some of the orders from that customer;[6]
  6. there was a chance that Birbilis would have utilised the limited remaining capacity but this was less than 50 per cent and cannot be particularised until after expert evidence;[7]
  7. pleading a full calculation of the value of the loss of profits from the five specified customers taking into account the 20 per cent discount for one of the customers, breaking down forecast revenue, direct cost of material and variable cost.[8]
  1. Birbilis contends that if the facts pleaded in the FFASOC are accepted at trial, it will have proved it suffered a loss of a valuable opportunity.  The value of that opportunity will be determined by reference to those facts as found.  The material facts, according to Birbilis, are that Bibilis would have won those orders from those customers (and the value of those orders).  It submits that it does not need to plead the evidence by which it will prove that it would have won those orders and that if Vero and Chubb wish to challenge that or allege the orders would not have been profitable and that Birbilis would not have suffered loss, that may be raised by way of defence.
  2. According to Birbilis, the complaints of the defendants misapprehend what is required to be pleaded in order to properly plead a cause of action seeking damages for loss of opportunity.
  3. Birbilis relies in particular on Badenach v Calvert[9] and Sellars v Adelaide Petroleum NL & Ors[10] for the propositions that:
  1. a plaintiff must prove on the balance of probabilities that it has suffered some loss to establish an entitlement to recover for loss of the opportunity to make future profits;
  2. a plaintiff will have suffered loss on the balance of probabilities if there is “a substantial, and not merely speculative, prospect of acquiring a benefit”; or put another way the opportunity has “some value (not being negligible value)”;
  3. the value of the loss is to be determined by reference to the degrees of probabilities or possibilities.[11]
  1. The High Court in Badenach v Calvert emphasised that the onus of proving causation of loss is not discharged by a finding that there was more than a negligible chance that the outcome would be favourable or even by a finding that there was a substantial chance of such an outcome.  The onus is only discharged where a plaintiff can prove that it was more probable than not that they would have received a valuable opportunity.[12]
  2. In Badenach, the High Court emphasised that the respondent in that case could not overcome problems of proof by redefining the loss occasioned by the alleged breach of duty as the loss of the chance that the client may have undertaken inter vivos transactions.[13]  The High Court stated that the reference to “loss of a chance” can distort the question of causation. The case of causation is not improved by seeking to equate the chance spoken of with an opportunity lost.[14]  The opportunity must be shown on the balance of probabilities to have value such that there is a substantial and not a merely speculative prospect that a benefit will be acquired or a detriment avoided.[15] The assessment of a chance is evaluated in assessing damages only after the first threshold of loss has been established on the balance of probabilities.[16]
  3. According to Birbilis, Badenach did not effect any change to the law in respect of a claim for loss of opportunity stemming from Sellars v Adelaide Petroleum NL & Ors[17] which recognised that the loss of a commercial opportunity or interest may have a value itself.  Birbilis contends that this is supported by the fact that the High Court authority of Tabet v Gett[18] is footnoted in the relevant passages of Badenach v Calvert. Sellars was also relevantly footnoted in Badenach v Calvert. According to Birbilis, the complaints of Vero seem to rely on Badenach having changed the law that a commercial opportunity or interest may have a value itself which is incorrect. 
  4. Vero however contends that Birbilis’ approach confuses the first and second step.  In particular Vero contends that by reference to the case pleaded in [109] and [110] of the FFASOC Birbilis must prove on the balance of probabilities that a particular customer would have commenced to order from Birbilis after August 2013 and that the contracts would have been profitable and no fact has been pleaded to make that proposition good.  Vero particularly contends that the pleading of Birbilis is incorrect as a matter of law.  It places reliance on Badenach v Calvert at [41] of that judgment. 
  5. Birbilis relies on the analysis of the Full Federal Court in the decision of La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd[19] as correctly adopting the Sellars approach and what is required to prove causation of loss on the balance of probabilities as opposed to the assessment of that loss, the latter requiring a process of estimation even if guesswork is involved.[20]  Jacobson and Besanko JJ having considered Sellars stated that the applicant must prove on the balance of probabilities that he or she has suffered some loss or damage. That did not however necessarily require proof that a particular transaction had been lost.  At [112]-[113][21] their Honours stated that:

“[112] It seems to us that the question is whether an applicant has established on the balance of probabilities that there was another commercial opportunity of some value or there were other commercial opportunities of some value.  An applicant who is able to establish a particular opportunity which has been lost as a result of contravening conduct will no doubt have an easier path to establishing what is necessary for the purposes of recovery.  At the same time, an applicant in a case such as this who can do no more than point to the fact that he or she is in the business of lending money and was making loans at the time of the improvident loan is likely to fail to establish the loss of a commercial opportunity of some value.

[113] However, in our respectful opinion it is an error to proceed on the basis that unless an applicant can establish a particular alternative transaction he or she cannot establish a lost commercial opportunity of some value.  We think that this is where the primary judge erred.  His Honour said (at [37]):

  [37] The above analysis is persuasive.  In the current case I am not satisfied that La Trobe has proved, on a balance of probabilities, that there was a particular loan or loans that were not entered into by reason of La Trobe entering into a loan agreement with Jet.  Mr Gidman’s evidence is vague and imprecise and an insufficient foundation for this aspect of La Trobe’s case.  As counsel for Hay submits, there is no evidence that there ever existed a particular loan application which was acceptable on all terms to La Trobe, but which La Trobe did not accept due to insufficient funds by reason of the Jet loan.”

  1. A claim for lost opportunity in the context of a breach of contract was recently considered by the Queensland Court of Appeal in Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd.[22]  In that case there was a contractual claim for damages for the loss to acquire and develop certain land at a profit.  The trial judge found that more probably than not the appellant would have lost money from the development and as a matter of law that had the necessary consequence that there was no compensable loss.
  2. McMurdo JA (with whom the rest of the Court agreed) did not accept the trial judge’s position on the legal question.  His Honour found that the opportunity to develop the land at a profit denied by the repudiation of the contract had a value and that the value must be quantified, consistently with the methodology which was discussed in and illustrated by Selllars.  His Honour citing Sellars, summarised the principles for loss of opportunity in the following way:

“[12] A contract to provide a commercial opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that opportunity. There may be a compensable loss of a commercial opportunity, even though there is a less than 50 per cent likelihood that, if pursued, the opportunity would have resulted in a financial return.

[13] In order to recover substantial, as distinct from nominal, damages upon this basis, a plaintiff must establish that the lost commercial opportunity had some value.  If the opportunity had no more than a theoretical or negligible value, then no compensable loss has been caused.  The fact that some loss or damage was caused must be proved on the balance of probabilities.  If that fact is proved, it is then for the court to assess the extent of the plaintiff’s loss. The value of the lost opportunity must then be ‘ascertained by reference to the degree of probabilities or possibilities’ of relevant factual hypotheses, by the approach explained in Malec v JC Hutton Pty Ltd.” (footnotes omitted; emphasis added)

  1. Having considered Brennan J’s statements in Sellars,[23] McMurdo JA stated that the improbability of a profit from the pursuit of a commercial opportunity is not necessarily a bar to the recovery of substantial damages for the loss of that opportunity. McMurdo JA considered that his Honour erred in the description of the opportunity and found that the relevant opportunity which the appellant had to prove was something of value, was the opportunity to make a profit.  McMurdo JA considered that it is only where a commercial opportunity has no chance of being profitable that it is an opportunity of no value and its loss is not compensable.  An opportunity would also be valueless if no rational investor would pursue it.[24]
  2. In Principal Properties, the provision of the opportunity was the subject matter of the contract and according to McMurdo JA it was a case where the “commercial interest lost may be readily seen to be of value itself.”[25] His Honour found that if there was an opportunity to profit from the development which had value, even though a developer’s loss was more likely than a profit, there was a compensable value and the extent of the loss would have to be assessed.[26]
  3. Although the present case is quite different on its facts, the analysis of McMurdo JA is significant insofar as his Honour found that some loss or damage must be proved on the balance of probabilities and the proposition that a commercial interest lost may be readily seen to be of value itself.
  4. On its correct analysis, Badenach has not changed the requirements in respect of claims arising out of loss of opportunity as was established in Sellars or Tabet.  I consider that La Trobe Capital & Mortgage Corporation Ltd v Hay is correct insofar as the loss of a commercial opportunity does not require the identification of a specific transaction to be lost, in order to establish on the balance of probabilities that a lost commercial opportunity had value on the balance of probabilities.
  5. The above authorities deal with what must be proven to establish a claim for damages based on loss of opportunity. They do not directly deal with the question of what must be pleaded to establish such a claim.
  6. In relation to the pleading of a claim for damages based on loss of opportunity, Chubb referred to the decision of Graham and Linda Huddy Nominees Pty Ltd v Byrne,[27] where Jackson J stated:

“First, it is necessary for a plaintiff who alleges loss of a valuable commercial opportunity to plead that the loss it has suffered is a loss of a valuable commercial opportunity, identifying the opportunity with some particularity.  Second, it is also necessary that the plaintiff pleads what it would have done, where what the plaintiff would have done if the defendant had not been in breach of duty is a necessary causal condition to deciding factual causation.  Third, it is necessary for a plaintiff who alleges such a loss to plead the percentage or proportion of the opportunity that was lost, in assessing value on the possibilities, in order to plead the amount of the damages claimed, as is specifically required.  Fourth, where a plaintiff alleges a loss of a 100 per cent possibility or the certainty that they would have obtained the hoped for or expected benefit under a transaction which did not occur, it is to be expected that the plaintiff will allege with some particularity the facts by which that certain outcome would have been achieved.”

  1. His Honour went on further to say at [51]:

“… In a similar vein, in my view, where a plaintiff alleges loss of a valuable commercial opportunity, the plaintiff should in most cases also allege the extent of the loss it says it suffered on the possibilities.  It is not sufficient for a plaintiff simply to allege a 100 per cent possibility of obtaining the hoped for or expected benefit, leaving it open to contend that the issue to be decided by the court is the actual degree of likelihood anywhere between 100 per cent and 1 per cent. …”

  1. Chubb contends that Birbilis’ assertion in its submissions that it would have won the orders from the five customers is no different from asserting that two parties would have entered into a contract and as such requires similar factual basis to be pleaded as well as details of the proposed orders.  It asserts that they need to be pleaded in order for Chubb to be able to properly respond.  I have set out Vero’s contention that Birbilis would need to prove that a particular customer would have commenced to order from Birbilis after August 2013.
  2. The authorities referred to above do not require Birbilis to plead a particular transaction was lost with a particular customer but that it suffered loss by losing a commercial opportunity which is valuable[28] and identifying that opportunity. Birbilis has done that by identifying in [67] with sufficient particularity the commercial opportunity lost by identifying orders of one or more of five customers to be placed in the relevant period for products it was able to produce using the Giben saw and Morbidelli who were dealing with Birbilis in relation to the placement of those orders (and the facts showing that they are valuable).
  3. It may be for reasons identified by the defendants that Birbilis will be unable to prove on the balance of probabilities that it has lost a valuable opportunity as discussed by French CJ, Kiefel J and Keane J at [39] – [41] of Badenach, however that is a different question from whether the cause of action and claim for damages arising from loss of commercial opportunity has been sufficiently pleaded. Birbilis does not need to plead the further details identified by Chubb or Vero in relation to the transactions in [67] in order to properly plead that the alleged opportunity due to the breach was valuable.[29]
  4. Similarly the proposition of Chubb that a condition of mind has to be pleaded in relation to a potential customer as a material fact to establish the cause of action in relation to the loss of opportunity is for the same reason misconceived. Birbilis has identified with sufficient particularity the orders that it alleges were intended to be placed with it by the five customers.
  5. The particular individuals who were to place such orders on behalf of the individuals is an evidential fact not a material fact which is required to be pleaded.
  6. As to the allegation that the FFASOC is deficient in not pleading facts to support the state of mind of each of the potential corporate customers named, Chubb relies on the fact that [67] of the FFASOC pleads that the five corporate customers had certain intentions and that pursuant to r 150(1)(k) and 150(2) of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”), Birbilis is required to plead every fact from which that intention is to be inferred.
  7. Chubb sought to demonstrate the significance of its complaint by pointing to disparities between the pleading and emails relied upon in relation to particular customers. For example, the email of 10 August 2012 from Laminex to Mr Birbilis[30] raises a question of the veracity of the figure of $200,000 referred to in the particulars rather than a figure of $50,000. A signed letter referring to $200,000 was also provided to Birbilis.  No doubt this will be a matter raised by Chubb in its defence.  It is not, however, a matter which requires further matters to be pleaded by Birbilis.  I consider that the same can be said in relation to the complaint in respect of Mitre 10 and the other customers.  There has been a sufficient pleading to raise a reasonably arguable case of the loss of a commercial opportunity.  Sufficient particulars have been provided supporting the contention that such orders could or would have been made.
  8. Chubb referred to, inter alia, the decision of Dominus Pty Ltd v Daydream Island Resort Investments Pty Ltd[31] and the decision of QIC Logan Hyperdome Pty Ltd v Briridge Pty Ltd.[32]  The cases were, however, quite different from the present. As was pointed out by Birbilis, no authority was cited for the proposition that it was necessary to allege the state of mind of potential customers identified for the purpose of a loss of commercial opportunity claim.  I accept that the relevant material fact is that those customers were placing orders for products which Birbilis alleges it would have or could have obtained.  In those circumstances nothing further was required to be pleaded nor particularised.
  9. Chubb’s contention that particulars have not been provided as to why four out of five customers would have had 100 per cent possibility of placing orders with Birbilis is valid.  As Jackson J in Graham and Linda Huddy Nominees Pty Ltd identified such particulars are required in order for a party to avoid being taken by surprise.  I will order such particulars be provided but the absence of such particulars is not a sufficient basis upon which the pleading would be liable to be struck out and leave not granted.
  10. Chubb also contends that the pleaded case, that Birbilis would have taken steps to take advantage of the commercial opportunity, fails to substantiate that Birbilis would have been in a financial position to obtain finance to purchase a Giben saw and ignores that Birbilis had not generated a profit but rather had operating losses in 2011 and 2012 identified by Birbilis’ expert.  It contends that the pleading does not explain the marked difference between the sales from major customers between 2010 and 2012 and the anticipated sales and profits between 2013 and 2019 pleaded in the FFASOC.  Vero makes a similar complaint.  Chubb also complains of the absence of any facts to plead why the five customers would have placed orders with Birbilis when four of the five customers had had no sales made to them in 2012 and in three cases between 2010 and 2012.
  11. The question is not what a party has not pleaded but what a party needs to plead to disclose a reasonable cause of action.  The matters which Chubb and Vero identify may well be relevant for it to raise by way of defence and matters which need to be addressed by way of evidence but they are not material facts which are required to be pleaded in order for Birbilis to properly plead its cause of action.  Birbilis is not obliged to plead in anticipation of matters that will be raised by way of defence.  That is the purpose of a Reply.  Sufficient facts have been pleaded to support the cause of action.
  12. Vero makes additional complaints about the pleading of quantum.  It contends that Birbilis’ case is not that it lost revenue from existing customers, but from prospective new customers who would have entered into contracts with Birbilis post-August 2013 or post-April 2014.  Vero contends that Birbilis would have to plead facts capable of proving that those contracts would have been profitable.  Chubb makes a similar complaint.  They claim the process of discounting then arises at the second limb when assessing the value of those contracts. 
  13. Birbilis states that the material facts are that Birbilis would have won those orders from the customers referred to and the value of those orders, but that it does not need to plead the evidence by which it will prove that it would have won those orders.  It contends that if Vero or Chubb wishes to allege that Birbilis would not have won any of the orders or that such orders would not have been profitable and therefore Birbilis would have suffered no loss on the balance of probabilities, that is a matter for their defences.  Birbilis further asserts that it only has to show that there were some customers likely to place an order and that they were customers who were already, as at 2013, not long out of communication with Birbilis.[33] I accept the contention of Birbilis.
  14. While Chubb and Vero refer to a number of matters which they say provide good reason to be sceptical about the loss of profits claim which may well be right, that is not a basis upon which this Court should refuse leave to amend.  They are matters which Chubb and Vero may raise by way of defence. Birbilis has pleaded material facts to support its allegations.  Birbilis is not required to plead further matters to address or explain away the fact that it had been making a loss and unable to obtain finance for both the Giben saw and the Morbidelli.  No doubt those are matters which may be raised in the defence and which Birbilis will have to overcome at trial.
  15. I reject the contention that Birbilis has pleaded insufficient facts to constitute a cause of action for loss of opportunity in terms of the first limb, which requires it to establish on the balance of probabilities that it has suffered loss by the loss of a substantial prospect of acquiring a benefit, or lost an opportunity that has some value which is not a negligible value.  If Birbilis succeeds in establishing its pleaded case, namely that if it had working machinery it would have won orders from certain customers and the facts as to the value of those orders to establish that the use of the machinery would have been profit-making, it will have established that it has suffered loss of a valuable opportunity. What the value of those orders would have been falls to be determined in the assessment of damages by reference to probabilities and possibilities under the second limb.  The complaints of Chubb and Vero conflates the two limbs in terms of what Birbilis is required to plead.
  16. In order to show that there has been a loss of valuable opportunity due to the fact that the five customers outlined would have placed orders with it, Birbilis has pleaded facts by which it asserts that each customer would have placed orders with it such that a valuable opportunity has been lost, albeit that the quantum of that lost opportunity is to be ascertained on the basis of probabilities and possibilities.  I reject the contention of Vero that Birbilis would need to identify the matters outlined in [92] of its submissions in order to properly plead its claim.  They are matters of evidence, not matters required to be pleaded in order to plead an arguable case. 
  17. As to the remaining complaints of Chubb in relation to the loss of profits in [50] of Chubb’s submissions, the complaint that loss of profits are claimed without any attempt to discount losses for future contingencies is a matter which does not give rise to a deficiency of the pleading, and may be raised by way of defence. 
  18. In terms of the pleading of causation of loss, Vero complains of the lack of a temporal link between its breaches and the loss of opportunity being pleaded in [109] of the FFASOC.  In particular there is no pleading of material facts capable of establishing that on the balance of probabilities Birbilis lost a commercial opportunity from 16 August 2013 to 1 April 2014.  It asserts that Birbilis must plead facts which would lead to proof on the balance of probabilities that the prospective new customers would have entered into contracts with Birbilis post-August 2013 or post-April 2014.  In particular, Vero complains that there is an absence of a causal link to any breach by it from the loss claimed.  The orders in [67] of the FFASOC refer to proposed orders that would have been placed before August 2013 although it is contemplated that they would continue.  However it is alleged that the loss of opportunities as a consequence of Vero’s breach arose from 16 August 2013 or 1 April 2014.  Vero relies on the fact that the FFASOC in [73] concedes that, if the proceeding is resolved in its favour and capacity restored, all customers that Birbilis would have won if the Giben saw and Morbidelli had been operational in July 2012 would not return to Birbilis immediately or at all.  Vero claims that there is no reason that the position would have been any different in August 2013.
  19. Birbilis claims that the matters in [67] show that there were prospective customers in 2013 and while it accepts that there is some temporal disconnect in terms of customers willing to place orders in 2012, it argues that it is not such that the Court could not find that there was likely to be an ongoing commercial opportunity from the nominated customers in 2013 and 2014. 
  20. The claim for loss of opportunity is premised on one or more of the five customers providing the nominated orders, with appropriate discounts for the prospect that Birbilis may not have procured some of the orders or customers between July 2012 and 2019.[34]  The damages claimed from Vero have been adjusted on the basis of orders from customers alleged in 2013. 
  21. Given the difference in time when the alleged breach of Chubb occurred and it is alleged to have caused loss to Birbilis by way of loss of opportunity, as opposed to Vero the FFASOC fails to plead the temporal causal link to Vero’s breach.  I consider that Birbilis has failed to plead additional material facts by which the valuable opportunity identified in [67] has been lost as a result of the breach by Vero in August 2013 and April 2014. This is not a matter which goes to a level of discount that may be relevant to any damages assessment under the second limb as contended by Birbilis.  A temporal causal link is a relevant material fact which must be pleaded.  For the reasons set out above, that does not extend to Birbilis having to plead material facts by which customers would have entered into particular contracts or the matters contended by Vero in [92] of its submissions.
  22. I do not regard the temporal disconnect in terms of the proposed orders in [67] and the alleged breach by Vero as indicating that Birbilis is unable to plead such a causal link to the breach by Vero.   Counsel for Birbilis referred in submissions to the customers in [67] being in the market serviced by Birbilis and the expectation of an ongoing commercial relationship. If they are the material facts relied upon they should be pleaded.  For the reasons which I outline below I consider that Birbilis should be given the opportunity to replead in this regard.

Other defects complained of by Chubb

The cost of replacing machines

  1. Paragraph 52 of the FFASOC pleads the cost of replacing each of the Morbidelli and Giben saw, which is said to be part of the loss and damage suffered by Birbilis as a consequence of the inundation of water onto and around the Morbidelli and Giben saw.[35]  The complaint of Chubb is that the quotations which have been referred to in the particulars on their face appear to refer to new machines, rather than machines of the equivalent age as those that were damaged.[36]  Chubb alleges that if Birbilis wishes to recover the cost of the new machines on some different basis from what is pleaded, that should be specifically pleaded, and Birbilis should credit the defendants with the difference between the value of the replacement machines and the original machines.   Birbilis contends that the complaint by Chubb is not a pleading issue, even if it is right that the quote is a brand new machine.  Birbilis has alleged that, as a consequence of Chubb’s negligence, it no longer has working machines and part of its loss is the cost of replacing those machines and it has alleged a value for replacing those machines.  The criticisms made by Chubb, according to Birbilis, are matters that can be raised by way of defence.
  2. The FFASOC has set out the damages suffered as a consequence of the negligence of Chubb and what is alleged to be the cost of replacing the Morbidelli and Giben saw.  The criticisms by Chubb may be well-founded, but they do not constitute a defect in the pleading of the FFASOC and they are matters for defence rather than being a matters of criticism as to the pleading of the FFASOC.

Pleading of particulars instead of material facts

  1. Chubb complains that matters of Chubb’s knowledge are to be inferred from various matters set out in particulars to [17], [23.2] and [38] of the FFASOC.  The pleading sufficiently identifies the matters relied upon by Birbilis in relation to Chubb’s knowledge and it is not necessary for Birbilis to replead those matters as material facts to properly plead a reasonable cause of action or in order for Chubb to understand the case it has to meet.

Paragraph 48 of the FFASOC

  1. There is an allegation that paragraph numbers relied upon were omitted.  That has now been rectified in the latest version of the FFASOC which is Exhibit 1.

Water inundation pleaded in a confusing manner

  1. Chubb complains that the pleadings in [31], [32] and [49] of the FFASOC is confusing in its references to “a significant amount of water”, “inundation of water” and references to water covering the Morbidelli and to it being on the Giben saw.
  2. The FFASOC in [31.2], [32] and [49] refers to water onto and around the Morbidelli and the Giben saw, and provides particulars as to the basis of that allegation, namely that “water was covering the Morbidelli”, or “water was on the Giben saw”.  While different terminology is used, it is not such that the pleading is not comprehensible and would be liable to be struck out.

Lack of clarity as to the alleged damage to the equipment

  1. Chubb complains that there is some confusion about the extent of damage caused by the inundation in [49.1].
  2. The complaint as to [49.1] regards a reference to “at least” in [49.1(a)], which suggests that there may be other items which were affected, other than those listed in the schedule.  Birbilis should be able to identify the items which the water discharged onto and inside the Morbidelli by this stage.  In providing leave, I will direct that Birbilis provide particulars of any further items by 19 February 2018, failing which the words “at least” should be struck out.
  3. Chubb complains that [49.2] does not identify the respects in which the machinery was damaged, save to say that it was not able to be repaired or was beyond economic repair in terms of the cost to return it to the same condition and functionality.  Paragraph 49.1(b) pleads the result of the damage due to the water.  Birbilis’ case relies on the difference between the machines’ functionality pre-damage and the functionality post-damage rather than identify particular defects in the Morbidelli. The case is sufficiently pleaded.

Production capacity pleaded in a confusing manner

  1. These complaints relate to [54], [58], [65] and [70] of the FFASOC. 
  2. The first complaint as to [54] has now been sufficiently addressed by the amendments made by Birbilis in Exhibit 1. 
  3. Chubb contends that the pleading causes confusion as to pre-incident capacity and post-incident capacity of the machinery and that it is impossible to reconcile the figures and terminology used. Birbilis has indicated that the approach by Chubb is to carry out a mathematical calculation which will be the subject of detailed expert evidence.  Birbilis also contends that in any event it is a matter of little consequence, given the material facts pleaded by Birbilis as set out in [50] of their submissions, namely that, had the machines been working in an undamaged state, they would have had sufficient production capacity to fulfil the orders of the specified customers, in addition to the work actually completed by Birbilis since 4 July 2012, and that there would have still been some extra capacity as pleaded in [70].
  4. If there is, as alleged by Chubb, an inconsistency in the production capacity pleaded it is a matter for defence.  The substantiation of the alleged capacity is a matter for evidence.  The complaints are not vague and embarrassing such that the FFASOC is liable to be struck out. 

Should leave be delayed

  1. Chubb contends that leave should not be given to file the FFASOC until the pleading is complete.
  2. In particular it refers to the fact that the pleading is still incomplete insofar as Birbilis has pleaded in [74.2] that it cannot particularise the second limb of its loss of profits claim as to customers who would take up the additional capacity without an expert report.  Birbilis also intends to update its claim based on a further Benjamin report, to expand its period of loss to 2020 and the alleged lost profits from $35 million to $42 million without pleading any additional facts, which Chubb contends shows the pleading is at too high a level of generality.
  3. It is unsatisfactory that Birbilis requires expert evidence to complete the allegation for lost profits in [74.2], it has pleaded the nature of the damage and the level of discount and identified that the calculation of lost profits is to be the subject of expert evidence.  I do not consider however that leave should be refused pending the provision of such a report. The material facts are pleaded, albeit that the allegations require particularisation.  The matter is on the Supervised Case List and strict timeframes should be set for Birbilis to provide such particulars.  The question of whether it is appropriate for a defence to be pleaded prior to that time should also then be addressed.
  4. Chubb further contends that leave for the consequential loss claim should be refused as it is hopeless.  It contends that Birbilis has had four years to plead the allegations and has caused a trial to be vacated due to the inadequacy of its pleading.  While Chubb has cause to complain about the conduct of these proceedings, I do not consider that the claim for consequential loss is hopeless.  While Birbilis has a number of evidential hurdles to overcome to succeed in its claim, I consider that Birbilis has pleaded sufficient facts to constitute a reasonably arguable cause of action.

Further complaints by Vero

  1. Vero contends that leave should not be given to amend the pleading in its present form, on the basis that the pleading would immediately be liable to be struck out for failing to disclose a reasonable cause of action, being an abuse of process or  otherwise tending to prejudice or delay the fair trial in this proceeding.

Failure to plead a reasonable cause of action against Vero

  1. Vero contends that the present FFASOC fails to plead a cause of action against it. 
  2. The Giben saw and the Morbidelli were both insured by Vero under a policy of industrial special risks insurance.  The relevant insuring clauses and conditions provide that:
  1. the insurer agrees, inter alia, to indemnify the insured as specified herein against loss arising from any insured events which occur during the period of the insurance;[37]
  1. in the event of any physical loss, destruction or damage will, subject to the provisions of the policy including the limitation on the insurer’s liability, indemnify the insured in accordance with the applicable basis of settlement;[38]
  1. pursuant to subparagraph (a) on buildings, machinery, plant and all other property and contents the Basis of Settlement is the cost of reinstatement, replacement or repair in accordance with the provisions of the reinstatement and replacement;[39]
  1. if the insured elects to claim the indemnity value of any damaged property the insurer will pay the insured the value of such property at the time of the happening of the damage or at its/their option reinstate, replace or repair such property.[40]
  1. The basis upon which the amount payable is to be calculated shall be the cost of reinstatement of the damaged property insured at the time of its reinstatement, subject to the following provisions and subject also to the terms, conditions and limit or sub-limit of liability of this property. 
  1. For the  purpose of the insurance under this memorandum ‘reinstatement’ shall mean:
    1. where property is lost or destroyed; in the case of a building, the rebuilding thereof or in the case of property other than a building, the replacement thereof by similar property: in either case in a condition equal to, but not better or more extensive than, its condition when new.
    2. where property is damaged: the repair of the damage and the restoration of the damaged portion of the property to a condition substantially the same as, but not better or more extensive than, its condition when new.”[41]
  2. Subparagraph (i) of the provisions of the policy provides that:

“The work of rebuilding, replacing, repairing or restoring as the case may be … must be commenced and carried out with reasonable despatch, failing which the Insurer(s) shall not be liable to make any payment greater than the indemnity value of the damaged property at the time of the happening of the damage …”

  1. Subparagraph (iv) of the policy provides that:

“No payment beyond the amount which would have been payable under this policy if this memorandum had not been incorporated herein shall be made until a sum equal to the cost of reinstatement shall have been actually incurred; provided that where the insured reinstates or replaces any lost or destroyed property at a cost which is less than the cost of reinstatement (as defined) but greater than the value of such property at the time of the happening of its loss or destruction, then the cost so incurred shall be deemed to be the cost of reinstatement.”

  1. An exclusion is also provided in the policy for “physical loss, destruction or damage occasioned by or happening through wear and tear, … gradual deterioration or developing flaws, normal upkeep or making good…”.
  2. In summary the case pleaded by Birbilis against Vero for breach and repudiation of the insurance policy is as follows; that from early August 2012, Vero took complete control of the attempt to repair the Morbidelli, and directed Birbilis’ insurance agent to terminate the services of the repairer that had been engaged on behalf of Birbilis and directed Birbilis not to touch the Morbidelli.[42]  It is alleged by Birbilis that by any or all of that conduct, Vero waived the conditions precedent[43] to Vero’s obligation to pay an amount in excess of the indemnity value of the property to Birbilis, in accordance with the Reinstatement Standard for its benefit (or alternatively is estopped from relying on the condition precedent).[44]  On 1 March 2013, Vero purported to hand over the machine to Birbilis.  Birbilis alleges that the Morbidelli still did not work.  It is alleged that it could not operate in automatic mode and was functionally impaired in manual mode.[45]  Birbilis alleges that prior to Chubb’s conduct, the Morbidelli had the functionality in automatic mode which Birbilis required and used in its manufacturing.[46] 
  3. Birbilis alleges that from July 2012 or on alternative dates between August 2012 and November 2012 Vero was obliged to deliver to Birbilis the Morbidelli repaired to the standard required under the policy within a reasonable time or pay Birbilis such amount as was required to achieve the Reinstatement Standard.[47]
  4. While there is no provision to this effect in the policy, Birbilis does not contend that the insurer was obliged to carry out repairs at a greater cost than a replacement Morbidelli.  An alternative case is, however, pleaded that Vero would have been obliged to carry out repairs in a reasonable time after March 2013.
  5. Birbilis contends that it was either impossible to repair the Morbidelli or not economical to repair the Morbidelli in that it would cost more to repair it than to buy a replacement.[48]  Birbilis alleges that either by 16 August 2012 (by which time Vero was directing repairs to the Morbidelli) or alternatively by 1 March 2013 (when Vero purported to deliver control of the Morbidelli to Birbilis) it ought to have been reasonably apparent to Vero that it was not possible to repair the Morbidelli to the standard it was before it was damaged or alternatively it was not practical or economical to repair the Morbidelli to the condition required by the policy and that a replacement would be required.[49]  It is alleged that by 16 August 2012 or alternatively 1 March 2013 Vero was obliged to place an order or take steps to acquire a Morbidelli or pay Birbilis the amount required for an equivalent machine. In not doing so or alternatively in not paying for any further restoration or reinstatement of the Morbidelli so as to achieve the Reinstatement Standard from 1 March 2013 Vero is said to have breached the policy.[50]
  6. It is alleged that Vero breached and repudiated the policy by not reinstating or paying for the reinstatement of the Morbidelli given the effluxion of time.[51]
  7. Birbilis has purportedly accepted the repudiation and terminated the policy.[52]  It is alleged that, but for the breach or repudiation by Vero:
  1. a new Morbidelli would have been ordered or steps taken to acquire it by August 2012 or 1 March 2013;
  1. if a Morbidelli had been ordered, Birbilis would have been in a position to obtain finance to order and commission a new Giben saw;
  1. Birbilis could and would have had the use of a new Morbidelli and Giben saw or equivalent machinery by 16 August 2013 or alternatively by March 2014.
  1. It is alleged that due to the breach of contract by Vero, Birbilis suffered loss comprised of the cost of replacing the Morbidelli and the loss of a commercial opportunity to make profits.[53]  In that regard Birbilis relies on, inter alia, [54] to [73] of the FFASOC, save that the quantum of loss has been adjusted, in terms of when it was incurred.
  2. According to Vero, it is plain and in fact “beyond argument” that in order to determine the obligation of Vero under the policy regarding “reinstatement”, it is necessary to know whether it is said that the Morbidelli was damaged or destroyed.  That is evident, it contends, from the clause in the policy with respect to reinstatement which is referred to above.  In failing to plead whether the Morbidelli was damaged or destroyed, Vero contends no cause of action is disclosed against it.  In particular it states that there is no cause of action supporting the claim that Vero was liable for the cost of the replacement of the Morbidelli.  If the Morbidelli was damaged and liable to repair, it was only liable to the extent that it had to repair the damaged portion.  It points out that there is nothing in the policy that limits the cost to economic repairs.  In any event, Vero complains that the nature and cost of the repairs is not pleaded.  Further, Vero claims that the obligation to do so is not overcome by the pleading of waiver or estoppel.
  3. Birbilis contends that there are two separate issues.  The first issue relates to the conditions precedent to Vero’s liability to pay the cost of reinstatement.  The second issue is the extent of Vero’s liability which Vero contends is determined by whether the property is damaged or destroyed.
  4. Birbilis contends that it does not matter in the present case whether the Morbidelli was taken to be damaged or destroyed for the purposes of the reinstatement memorandum to the policy.  Birbilis focuses on the obligation of the insurer to pay the cost of reinstatement of damaged property in the basis of the settlement clause.  It asserts that there are not two obligations depending on whether the Morbidelli is destroyed or damaged.  The obligation is to reinstate the damaged property, regardless of the distinction in subparagraphs (a) and (b) of the definition of reinstatement.  Thus it rejects the proposition of Vero on the basis that whether the property is destroyed or damaged is of no moment insofar as the insurer’s obligation is the reinstatement of the machine to the standard it was prior to being damaged whether by repairs or by provision of a machine of an equivalent standard.  Of importance to Birbilis’ pleaded case is, it contends, its obligation to perform within a reasonable time.
  5. According to Birbilis, if the Morbidelli was incapable of repair and therefore destroyed on Vero’s construction of the policy, Vero was required to replace it within a reasonable time; alternatively if the Morbidelli was incapable of being repaired at a cost less than the cost of replacing the Morbidelli, Vero was not obliged to undertake repairs that would exceed the cost of a replacement; if the obligation of Vero was to perform repairs even if the cost exceeded the cost of replacement, then Vero was still required to perform its obligations within a reasonable time. Birbilis’ pleaded case is that Vero was either obliged to repair the Morbidelli within a reasonable time or, in the event that the Morbidelli was incapable of being repaired at a cost less than the cost of replacing it, to replace it or pay the cost of replacing it.  According to Birbilis, Vero did none of them including performing its obligations with a reasonable time. 
  6. The policy provides that the obligation of the insurer is the cost of reinstatement of the damaged property. That will be done by either carrying out repairs to reinstate the machinery to its pre-damaged state[54] or replacing or paying for a replacement machine.  Birbilis’ case is that Vero has not discharged its obligation to reinstate the Morbidelli by way of repair or by replacement (or payment of a replacement) within a reasonable time whether it was characterised as being repairable or destroyed and it does not need to plead anything further.
  7. Given the provision as to the Basis of Settlement in the policy, I consider that Birbilis’ pleaded case that it contains the primary obligation of Vero is reasonably arguable under the terms of the policy and that it is implied that Vero must perform its obligations within a reasonable time.  The FFASOC discloses a reasonable cause of action.  
  8. Even if Vero’s contention is correct and Birbilis is limited to contending that the obligation of Vero is one of repair, there is also an alternative case raised by Birbilis that Vero breached the policy in not undertaking the repairs to restore the property to the condition required by the policy after March 2013, within a reasonable time as required by the policy.  While Vero complains the pleading is defective because it does not specify what repairs it was obliged to carry out, Birbilis’ case is it did not carry out any further repairs after March 2013 at all and it is irrelevant.  That accords with the case pleaded.  Nothing further needs to be pleaded in this regard.
  9. A further complaint made by Vero is of the ambiguity that is said to arise in [100] of the FFASOC, which it says reflects the alternative propositions to [49.3], namely that the Morbidelli was incapable of being repaired to the standard it was in before the inundation with water or, in the alternative, was incapable of economic repair in that the cost of any repairs would exceed the cost of replacing the Morbidelli with another Morbidelli.  Vero complains that there is no pleading as to what further repairs would be required or what their cost would be.
  10. It is evident from the particulars that Birbilis’ case is that the damage to the Morbidelli was such that it was rendered incapable of repair to the standard it was before the damage occurred or that the entire cost of dismantling, replacing, rewiring, reconstructing and testing the Morbidelli to repair the damage would exceed the cost of acquiring a replacement.  The material matters have been pleaded. I address below whether the particulars should be pleaded as material facts. 

Waiver or estoppel

  1. Vero contends that the analysis of the waiver, estoppel and variation[55] shows that the proposition which fundamentally underpins Birbilis’ case is unsustainable because Vero contends that the pleading of waiver or estoppel cannot overcome the failure to plead whether the machine has been destroyed or damaged and does not create an obligation that Vero pay for the replacement of the Morbidelli if its obligation was to carry out repairs. 
  2. According to Vero, waiver of provision (i) can only be a waiver of the requirement that the insured act with reasonable dispatch and prevents the insurer refusing to pay the cost of the repairs or replacement.  According to Vero, waiver of provision (i) however has no effect on the anterior question as to whether, under the policy, the property was destroyed or damaged; nor does a waiver of provision (i) create a liability for the insurer to pay for replacement of property which is damaged. 
  3. Vero further contends that the effect of provision (iv) is that the insurer is not obliged to pay anything beyond the indemnity value of the property until the cost of reinstatement has actually been incurred by the insured.  Any waiver of provision (iv) only has the effect that the insurer’s obligation to pay the “costs of reinstatement” in accordance with the memorandum may arise before the insured has incurred that sum.  Vero contends that waiver of provision (iv) has nothing to do with the identification of the relevant costs of reinstatement which in turn depend on whether the property was destroyed or damaged. 
  4. Birbilis claims that the complaint of Vero misconceives its case.  It does not contend that waiver or estoppel creates an obligation that Vero replace or pay to replace the Morbidelli. The extent of its liability under the policy arises from the obligation to reinstate the policy and act within a reasonable time. The waiver or estoppel has the effect that Birbilis did not have to take any steps required by the condition precedent provisions in (i) and (iv) of the reinstatement memorandum prior to Vero being obliged to meet the cost of reinstatement. 
  5. The assertion that, in reliance upon the representation by Vero, Birbilis did not carry out repairs to the Morbidelli, does not, as contended by Vero, implicitly assert that the Morbidelli must have been capable of repair.  While there may have been an expectation that the Morbidelli would be capable of being repaired by Birbilis, it does not mean as a matter of fact that that must have been so.  The undertaking of repairs in light of that expectation, in order to satisfy the obligation under provision (i), would constitute a detriment sufficient to disclose a reasonable cause of action in terms of estoppel.
  6. The argument of Vero confuses the contentions as to waiver and estoppel with what Birbilis contends is its obligation to reinstate the Morbidelli under the policy. The pleading of waiver and estoppel is directed to the obligations of Birbilis prior to Vero being obliged to pay the cost of replacement of the Morbidelli, not to the extent of Vero’s liability to reinstate the Morbidelli. I do not consider the pleading is defective as contended by Vero.

Pre-existing damage to the Morbidelli

  1. Vero submits that [49.1] of the FFASOC pleads that damage was done to those parts of the machine set out in the schedule accompanying the FFASOC, which is said in [49.1] to relate to electrical components.  Vero submits, however, that [93] of the FFASOC which pleads that the machine, after it was returned by Vero, could not operate in automatic mode and was functionally impaired in manual mode, relies on particulars in paragraph 93(i)(b), (c), (d), (i), (k) and (l) and in paragraph 93.2(2)(b) which bear no relationship to any alleged water damage of electrical components.
  2. According to Vero, the deficiencies in [49.1(a)] and [93] mean that the FFASOC has a tendency to prejudice or delay the fair trial of the proceeding because they are internally inconsistent on their face and at least in part unsustainable and do not properly inform Vero of the case it has to meet.
  3. Vero further asserts that the allegation is an abuse of process because of facts from which it contends give rise to a compelling inference that the particulars in question in [93] are pre-existing defects.
  4. In judging whether the claim is an abuse of process, the Court may take into account the state of the pleading and ask whether there is a factual basis for the view that Birbilis has any legitimate claim against Vero.  In that regard, Vero submits that the Court can take into account evidentiary material that there were defects in the machine plainly unrelated to water damage which, as a matter of compelling inference, were pre-existing.  It further relies on the fact that Birbilis has not attempted to put any evidence forward to suggest that it has a factual basis for a claim which can be properly articulated. 
  5. Birbilis in response contends that Vero is asking the Court to make findings of fact which are set out in [32] of its submissions.  It contends that:
  1. if Vero wishes to defend the claim by alleging that there were pre-existing faults with the Morbidelli and that some of the identified deficiencies present after Vero had attempted to repair the Morbidelli are due to pre-existing faults, then it can do so in a defence and the matter can be resolved at trial;
  2. even if everything Vero alleged was factually correct that the particulars in [93] do not relate to water damage, Vero accepts that eight of the 14 identified defects in the Morbidelli in [93] after it had attempted repairs were unarguably the consequence of water damage;
  3. the limited factual material to which Vero refers is not capable of establishing the factual findings that Vero asserts ought to be made.
  1. The schedule referred to in [49.1] does not only refer to matters which are said to be electrical components but also refers to matters subject to corrosion.  Paragraph 93, which refers to the matters by which the operation of the Morbidelli was defective when handed over by Vero, does arguably extend to matters which are not electrical components.  It may be, as contended by Vero, that those matters refer to defects which were pre-existing defaults and which Vero was not obliged to repair pursuant to the exclusions under the policy. 
  2. The evidence relied upon by Vero however does not unequivocally support the proposition that Birbilis’ case is without a proper factual basis such that the pleading is an abuse of process.  It relies on opinions expressed by the parties who author the material referred to but such opinions do not constitute an objective fact to found a finding of abuse of process.  It is not the role of this Court in considering whether to give leave for the proposed amendments to engage in some factual inquiry on the basis of material which raises an arguable position, but does not demonstrate that as a matter of fact, the pleading of Birbilis is without factual basis and an abuse of process.  This is particularly so, given that Vero concedes that eight of the 14 identified defects in [93] could be attributed to water damage. It is also relevant that the FFASOC has been settled by Counsel and that a matter should not be pleaded unless the lawyers have a factual basis for pleading such an allegation.  The matters raised by Vero are properly matters that can be raised by way of defence, or if Vero wishes to pursue it further, by way of a summary judgment application. I am not satisfied that the matters raised by Vero are such that the allegations have a tendency to prejudice or delay the trial.
  3. Vero further complains that [103.3] fails to plead any material fact to identify what further repair, restoration or reinstatement was required or what it might cost.  It also contends that there is no material fact pleaded which could support the implicit allegation underlying [108.1], that purchasing a replacement machine for more than $3 million, as opposed to the cost of completing the repairs, is a proper measure of damage.
  4. The complaint as to [103.3] and [108] is not well based in the context of the case pleaded.  The allegation is that Vero did not carry out any repairs at all after March 2013 and contended it was not obliged to do so (see [94] of the FFASOC).  There is no implicit allegation as alleged in [108].  The basis upon which it is contended that repairs would exceed the cost of replacement is dealt with elsewhere.

Paragraphs 100 and 101 of the consequential loss claim

  1. The particular complaint in this respect relates to the allegations that it ought reasonably to have been apparent to Vero that it would not be possible to repair the Morbidelli by 16 August 2012 or alternatively by 1 March 2013.  According to Vero, it pressed for particulars of how it is alleged that it knowingly or negligently embarked upon a futile attempt to repair an unrepairable piece of machinery.  It has never been provided with those particulars.  It asserts that it can be inferred by the Court that there are no facts which could support the allegation.  In [52] – [57] of its submissions, Vero sets out the advice from repairers at all times leading up to 16 August 2012, which it says shows that it was possible to economically restore the Morbidelli and that restoration of the Morbidelli was progressing as expected and was anticipated to be completed in the near future.  It contends that an attempt to assert the reverse of the above, namely that it ought to have been reasonably apparent to Vero that the repair was futile, is an abuse of process.  For the same reasons, Vero submits that it is an abuse of process for Birbilis to make the assertion in [101] that by 1 March 2013 “it ought to have been reasonably apparent to” Vero that the repair of the Morbidelli was not possible. 
  2. Birbilis contends that Vero is seeking to have the Court accept its set of facts.  Birbilis’ case relies on the fact that Vero was undertaking the repair works and the state of the Morbidelli when it was returned.  Thus the case of Birbilis is that it is a matter that ought reasonably to have been known to Vero on the basis of the state of the machinery and that Vero had control of it.  That will no doubt be challenged by Vero on the basis of the repair reports that it was receiving and the disputed source of the defects in the machine. 
  3. The fact that Vero presents competing facts does not demonstrate that it is an abuse of process for Birbilis to plead the case based on the state of the Morbidelli and the fact it was within the control of Vero given they had taken over the repairs. Birbilis’ case is not that Vero was told the Morbidelli was incapable of repair but rather that it was in a position where it ought to have known it.  While the case of Birbilis is narrow, the pleading is sufficient and the matters raised by Vero are properly raised as a matter of defence. 
  4. Vero also asserts the matters pleaded as particulars to [100] should have been pleaded as material facts.  The line between material facts and particulars is not always a clear one. The matters that have been particularised in [100] support the allegation in [100].                   I consider the pleading of the matters as particulars is sufficient.

Consequential loss claim – causal link

  1. Separate to the complaints considered above Vero raises additional complaints as to the consequential loss claim which specifically apply to it.
  2. Vero complains that [107] of the FFASOC contains a number of defects.  In particular Birbilis’ capacity to fulfil the orders which it claims in [67] it would have received, is dependent upon it having both a working Morbidelli and a working Giben saw (or their equivalent).  Vero contends that [64] makes it clear that Birbilis could not afford to replace the Giben saw from its own funds nor obtain finance to do so.  There is no allegation of breach of the policy by Vero with respect to the Giben saw.  Vero contends that even if it had committed the alleged breach by failing to purchase a replacement Morbidelli, Birbilis would not have been able to fulfil the orders because of the absence of a Giben saw which was completely unrelated to the breach by Vero.  It therefore contends that the claim for lost profits cannot be maintained against Vero.
  3. Vero contends that Birbilis cannot overcome the flaw by the pleading in [107.2] by alleging that, had Vero ordered a new Morbidelli, or had steps been taken by Birbilis to do so, Birbilis would have been in a position to obtain finance to also order a replacement Giben saw.
  4. Vero asserts that such a case has an implicit allegation that Vero had a contractual obligation to inform Birbilis when it ordered or took steps to acquire a new Morbidelli and that no such term has been pleaded nor could it be.  It is true that is implicit in the FFASOC that Birbilis would have been made aware of the fact.  Given Vero is an insurer it would seem uncontentious that they would have done so or responded to an inquiry by Birbilis.  Strictly speaking however Birbilis should plead a material fact supporting the proposition that it would have become aware of the matters in [107.1] so as to take the steps in [107.2].
  5. Further, Vero contends that the allegation in [107.2] is irreconcilable with the previously pleaded assertion in the third version of the FFASOC, that Birbilis never had the financial capacity to replace the Giben saw or the Morbidelli.  In that respect, 23 particulars have been provided of the failed attempts to obtain finance.[56]  It is submitted that the current version has been injected into the pleading for the purpose of attempting to overcome a fatal legal flaw and as such is an abuse of process in the claim.  It is also asserted that the allegation in [107.2] is a statement of conclusion without supporting material facts.
  6. Birbilis responds that on the facts alleged in [107] of the FFASOC, it is alleged that Birbilis would have been able to obtain finance to purchase another Giben saw, if Vero had delivered to it a functioning Morbidelli.  This is in contrast to an earlier allegation which is [64] that Birbilis sought to refinance its secured debt to BankWest and obtain finance to fund the acquisition of both a replacement Giben saw and Morbidelli.  The allegation now in terms of the purchase of the Giben saw is dependent on the provision of a functioning Morbidelli which would have provided Birbilis with leverage to obtain finance.  Particulars are provided of the allegation.  Birbilis submits that Vero’s breach of contract is still a concurrent cause of loss because the loss flows from not having the Giben saw and the Morbidelli. 
  7. The emails that were referred to by way of particulars do not contradict the case now put by Birbilis.  Finance was being requested for both the Giben saw and the Morbidelli at the one time and as such it does not undermine the factual basis of what is now pleaded.  The case pleaded is not inarguable nor is it an abuse of process.  Paragraph [107.2] pleads a material fact but also relies on the fact in [107.1] and is not simply a conclusion.  Birbilis has also outlined in this application its case so Vero is aware of the case being made against it.
  8. On the basis of the above analysis, I accept Vero’s contention that material facts should have been pleaded setting out the basis upon which Birbilis would have become aware that a new Morbidelli had been ordered or steps taken to acquire one.  I otherwise do not accept the contention of Vero. 

Conclusion

  1. I consider that Birbilis should be given leave to file the proposed FFASOC against Chubb.  An order should however be made for Birbilis to provide particulars of the allegation in [74.1] that no discount is appropriate in relation to four customers other than Super Amart.
  2. In relation to Vero I propose that leave to file the FFASOC be given save for paragraphs [107] and [109] as identified in the reasons above.  I am satisfied that liberty should be given to Birbilis to re-plead those allegations.

Application for permanent stay

  1. Vero submits that on the basis that leave should be refused because the pleading is fundamentally defective, the proceeding should be dismissed or permanently stayed against Vero. 
  2. The matters identified by Vero which I have found require amendment are not matters which are of such significance that the pleading could be regarded as substantively deficient.  I am also satisfied that they can be addressed by minor amendments being made by Birbilis. 
  3. I am not satisfied that the proceedings against Vero should be dismissed or permanently stayed.  While Vero has, understandably, focused on the fact that the events in relation to this matter occurred in 2012 and 2013 and the proceedings were commenced in 2013 and a final pleading was still not provided by this application, the respects in which I have found that it is defective are relatively minor.  It is true that the litigation has been characterised by long periods of delay, particularly due to Birbilis’ failure to plead a case.  There has also been a lengthy delay since Applegarth J’s order in March 2016 and the seeking of leave for the FFASOC. 
  4. The applicant has been taking active steps to progress the matter by the delivery of six further expert reports and obtaining non-disclosure, notwithstanding that the matter has been stayed.  Further, in March 2016 Birbilis changed solicitors and its counsel have also subsequently changed.  While that is not a matter which can weigh heavily in Birbilis’ favour, the fact remains that the claim has changed significantly in the way it was pleaded and particularly in terms of consequential loss can be attributed to the fact that there is a new legal team.  Draft FFASOC’s have also been provided to Chubb and Vero since December 2016 and been the subject of some negotiation.  The limitation period in relation to this matter has not expired and even if the proceedings were dismissed or stayed it would be open to Birbilis to launch fresh proceedings. 
  5. While the pleading of the loss of opportunity has changed considerably, lost profits have been the subject of the claim prior to the trial being vacated, albeit a different legal team has pleaded it differently. 
  6. I have weighed the various factors above and had regard to the matters identified by the High Court in Aon Risk Services Australia Ltd v Australian National University.[57]  As was identified by the Full Federal Court in Cement Australia Pty Ltd v Australian Competition and Consumer Commission (ACCC),[58] the Court must exercise its discretion based on the particular circumstances before it to determine what is just in all the circumstances.  The explanation for the delay in the provision of the FFASOC has been largely attributed to the change in legal team and gathering of further evidence.[59] The case has some complexity and I accept that explanation.
  7. While costs orders cannot always adequately compensate a party as was recognised in Aon Risk and there are also costs to the administration of justice, Birbilis had significant cost orders made against it as a result of the vacation of the trial by Justice Applegarth.  The proceedings have also been stayed up until the present, thus minimising the prejudice that was suffered by the defendants by the delay.[60]  Vero also referred to the fact it has been required to carry a contingent liability on its books of accounts and that resources have been diverted to deal with this litigation.  It also refers to its employees and consultants having to bear the strain of impending litigation.  While that may be so, Vero is an insurer who undertakes risk management, a part of which requires it being engaged in litigation and managing risk and contingent liability.  As such those factors are of limited weight. 
  8. I am satisfied that in this case, while Birbilis must now prosecute this case quickly, it is not in the interests of justice that the proceeding be permanently stayed or dismissed.  The matters in respect of which I have found the pleading is defective are not significant such that I have formed the view that Birbilis cannot rectify them and plead a viable case against Vero. 

Application to lift the stay

  1. The proceeding was stayed by Applegarth J by an order made on 31 March 2016, until payment of certain cost orders were made in favour of the defendant.
  2. The stay has remained in place because Chubb has not been paid all of the costs it has claimed.  Vero was paid on 30 May 2016.  There is a dispute between Chubb and Birbilis in relation to the amount sought to be claimed by Chubb.  Birbilis contends that the Court should exercise its discretion to lift the stay and that Chubb can submit its costs for cost assessment.
  3. The dispute relates to costs sought by Chubb said to have been thrown away by the adjournment of the trial.  Birbilis submits that supporting materials have never been provided by Chubb in support of the claim.  Despite orders to do so, Chubb has failed to deliver a final cost summary until 22 June 2017.  Birbilis contends that Chubb should not have the benefit of the stay as it has failed to act in a timely manner, breaching every court order made requiring it to deliver its cost summaries by a certain time and has failed to deliver supporting documentation. 
  4. Chubb does not oppose the lifting of the stay in the event that the Court gives leave to file the proposed proceeding.[61]  As I am granting leave I will not consider the matter further. 

Security for costs

  1. Chubb makes an application for security for costs pursuant to r 670 of the UCPR or alternatively s 1335 of the Corporations Act 2001 (Qld).  The application is made on the grounds that there is reason to believe that Birbilis will not be able to pay Chubb’s costs if ordered to pay them or alternatively that the justice of the case requires the making of the order.  The application pursuant to s 1335 of the Corporations Act is made on the ground that it appears by credible testimony, namely evidence from Birbilis’ own solicitors and expert accountant together with the evidence of the litigation funding agreement, that there is reason to believe that Birbilis will be unable to pay Chubb’s costs if Chubb is successful in its defence.
  2. The real issue is whether a deed poll which has been entered into between Birbilis and IMF is sufficient to negate the evidence supporting the fact that Birbilis will not be able to pay Chubb’s costs if ordered to pay them.  The Deed Poll provides that IMF agrees to pay any costs order in favour of Chubb or Vero made against Birbilis or IMF in respect of costs incurred by Chubb or Vero during the term of the litigation funding agreement and to submit to the jurisdiction of the Court in relation to any order in respect of those costs
  3. Birbilis submits that given the Deed Poll there is no basis for ordering security.  It refers to the fact that IMF is a publicly listed company and the suggestion that it would not be able to pay a costs order for approximately $490,000, which are the estimated costs of Chubb is unsupported by the evidence[62].  Various company reports were tendered by Birbilis to show IMF’s strong financial position.  It also relies on the delay in bringing the application for security more than two years after IMF began funding the proceeding and that the application was filed after the date ordered, namely 9 June 2017.  Given that the application was filed on 21 June 2017, the latter is not a matter to which I attribute any significance.  The former matter is of some weight but the full Deed Poll was not originally disclosed to Chubb and given that the action has been stayed due to Birbilis’ delay in the provision of a proper pleading, the delay is of less significance than it otherwise would have been.
  4. Chubb submits that an order for security will address the potential difficulties for Chubb:
  1. if IMF terminates the litigation funding agreement shortly before any trial, leaving Chubb to seek security for its costs from Birbilis, which the Court may or may not grant depending on the circumstances;
  2. if there is a delay between termination of the funding agreement and notice to Chubb, particularly at a time when significant costs are being incurred, i.e. close to or during the trial; and
  3. given the inherent commercial risk in the business undertaken by IMF.
  1. The litigation funding agreement provides for it to be terminated at will by IMF.  Chubb submits that while IMF asserts that it does not presently intend to withdraw funding from Birbilis, that does not mean it will not do so in the future.  In that event, Chubb will be left in the position of having to seek security for its costs from Birbilis.
  2. Where a non-party stands behind an impecunious plaintiff and seeks to take the benefit of the litigation, the Court has considered that that is a matter in favour of an order for security for costs.[63]  The existence of a litigation funding agreement is a discretionary matter to be taken into account.  A promise to indemnify against costs that a plaintiff may be ordered to pay a defendant may be negated to the extent that the promise of indemnity may be terminated in the future at any time.
  3. By letter of 27 June 2017, the solicitors for Birbilis inquired of the solicitors for Chubb whether Chubb would be prepared to accept an undertaking in similar terms to that ordered by Ward J in Traderight Pty Ltd v Bank of Queensland Ltd.[64]  Such an undertaking would provide that it will be liable to Chubb for any adverse costs order that may be made in its favour in the proceedings in which Chubb is the defendant in respect of costs incurred during the term of the litigation funding agreement.  That has not been taken up by Chubb.
  4. In relation to the question of termination, on 11 July 2017 the solicitors for Birbilis, in a further exchange with the solicitors for Chubb, stated that IMF was prepared to offer an undertaking to the Court and the defendants, the terms of which are reflected in an updated deed poll, namely that it notify the defendants in writing within two business days of the litigation funding agreement being terminated and that it will undertake to meet any adverse costs orders made during the term of the litigation funding agreement.  It was suggested by Birbilis that Chubb could monitor IMF’s financial position from publicly available documents to the extent it was concerned about commercial risk and that IMF would not offer a bank guarantee.
  5. Chubb raised two concerns as to the wording of the amended Deed Poll.  As to the provision of two, not seven, days’ notice of termination, Chubb conceded that that was an improvement, although it submitted that there was no reason in principle why the liability of the funder could not cease when Chubb was given notice, even if it was two days later.  I consider the notice provision adequate to protect Chubb’s position.  The second point was that the liability of the funder under the wording of the Deed Poll turns upon the phrase “costs incurred”.  IMF’s exposure under the Deed Poll is limited to any “costs order made in favour of the respondent against the Claimant and/or IMF in the proceedings in respect of costs incurred by any respondent during the term of the [funding agreement]”.  The submission of Chubb is that the Deed Poll does not specify whether costs are incurred, namely, when the work is done or when the obligation to make payment arises.  That matter was clarified by counsel for Birbilis during the hearing on instructions from the representative from IMF, namely that costs are incurred when work is done and not when an invoice is issued.[65]  I agree that is the proper construction of the phrase “costs incurred”.
  6. Chubb’s more significant point was who should bear the risk if IMF’s financial position worsened.  It contended the nature of its business was such that IMF has significant capital risk.  While it conceded that IMF was raising a large amount of money, in the sums of millions by debt capital raising, it noted that it also has the debt and submitted that it had the potential to suffer a downturn very quickly.  Monitoring IMF accounts was not unreasonable. 
  7. In Global Finance Group Pty Ltd (in liq) v Marsden Partners (a firm),[66] Roberts-Smith J stated that it was unreasonable to expect a defendant to monitor the published financial accounts and business performance of a litigation funder with a view to applying to the Court for security for costs to be provided in a different and more secure form.
  8. Chubb also referred to the decision of Einstein J in Northern Southern Western Supermarkets Pty Ltd (subject to a Deed of Company Arrangement) v HIH Casualty and General Insurance Ltd (in liq) & Anor,[67] where his Honour ordered that Insolvency Litigation Fund Pty Ltd, a wholly owned subsidiary of Insolvency Management Fund Ltd, to provide a bank guarantee as security for costs, noting that the defendants were entitled to certainty in terms of security for costs and should not be obliged to have any possible question marks over the value of their security for costs protection in the form of a mere undertaking to the Court, albeit by a public company.  The relevance of that case was questioned by Robert-Smith J in Global Finance Group given that the business of IMF had changed considerably since that decision.  Notwithstanding that, His Honour did, in Global Finance Group order that security be provided by way of a bank guarantee on the basis that IMF should be required, as part of its commercial interest in litigation, to bear the burden of the cost of providing a bank guarantee.
  9. In Traderight, the BOQ parties sought orders that the OMB parties provide, within 14 days, security in the form of an undertaking from IMF to the Court to meet any costs orders made in favour of the Bank of Queensland or any of the bank’s co-defendants or co-plaintiffs as the case may be or alternatively provide security in such amount at such time and in such manner as the Court deems fit.  In Traderight, her Honour did not find that the delay in making the application for security was such that she would not exercise her discretion in favour of the grant of security.  Ward J noted that IMF could choose to withdraw from the funding agreement and thus avoid liability for costs thereafter, but noted that if that occurred, there was no reason why the BOQ parties could not then seek security for costs going forward.  Ward J considered out of an abundance of caution and given the litigious history between the parties involved, to the extent that there was an issue over the construction of the relevant paragraphs of the Deed Polls, it was appropriate to provide for an undertaking as sought by the BOQ parties in respect of security for their costs.  That would remove the doubt for the BOQ parties as to how the Deed Polls may be construed in due course and preserve the ability for a contempt of costs order if IMF failed to comply with the order.  She was not satisfied that the latter was necessary but she did think that there was some merit in the context of the litigation input in the issue as to the construction of the Deed Polls to rest.
  10. While I accept that some commercial risk surrounds the business of IMF, the evidence satisfies me that it is not a significant risk as it demonstrates that IMF is a substantial public company which is in a position to meet any adverse costs order against Birbilis in Chubb’s favour. Further, IMF has successfully continued to operate and grow its business for a significant period of time since the decisions of Global Finance Group and Northern Southern Western Supermarkets Pty Ltd (in liq). I am further satisfied that the terms of the revised Deed Poll proposed by IMF on behalf of Birbilis provide protection to Chubb to ensure they are given notice of any termination of the Deed Poll such that it will not be exposed to having incurred significant costs without knowing that it has been terminated. Further, an undertaking to the Court and the defendants in terms is offered by IMF as set out in the letter from Piper Alderman to Wotton Kearney of 11 July 2017.[68]  Upon the provision of that undertaking to the Court as set out in paragraph 6 of that letter by IMF, I consider that Chubb will have been provided with adequate security and that the application for security for costs should be dismissed.
  11. The Orders I make which take effect on the date of publication of these reasons are that:
  1. The application for leave to file a fifth further statement of claim be adjourned until 23 February 2018.
  1. That the plaintiff is ordered to deliver particulars of the allegation in paragraph 74.1(b) that “the appropriate discount in respect of the orders from all customers other than Super Amart is no discount” by 21 February 2018.
  1. That the plaintiff deliver a further draft statement of claim to the defendants, with liberty to replead paragraphs 107 and 109, by 21 February 2018.
  1. That the stay of proceedings pursuant to paragraph 4 of the Orders made on 31 March 2016 be lifted.
  1. That the application for security for costs be dismissed subject to undertakings being given in the form of paragraph 6 of the letter from Piper Alderman of 11 July 2017.
  1. That there be liberty to apply.
  1. I will hear the parties as to the question of costs and have provided liberty to apply should any matter arise out of the reasons in relation to the order made. 

Footnotes

[1]  Birbilis Outline of Submissions at [5]. Cf Monto Coal 2 Pty Ltd v Sanrus Pty Ltd (as Trustee of the QC Trust) [2014] QCA 267 at [73] – [77].

[2]  [66] FFASOC.

[3]  [67] FFASOC.

[4]  [70] FFASOC.

[5]  [74] FFASOC.

[6]  [74] FFASOC.

[7]  [74] FFASOC.

[8]  [75] FFASOC.

[9]  (2016) 257 CLR 440.

[10]  (1994) 179 CLR 332 at 364.

[11] Sellars v Adelaide Petroleum NL & Ors (1994) 179 CLR 332 at 355.

[12]  At [41] per French CJ, Kiefel J (as Her Honour then was) and Keane J.

[13]   At [37] per French CJ, Kiefel and Keane JJ.

[14]   At [39] per French CJ, Kiefel and Keane JJ.  Vero in particular claims that this is what Birbilis seeks to do by its claim for loss of profits in the FFASOC.

[15]  Ibid.

[16]  At [38] per French CJ, Kiefel and Keane JJ.

[17]  (1994) 179 CLR 332.

[18]  (2010) 240 CLR 537 particularly [69] per Hayne and Bell JJ, [101]-[102] per Crennan J and [123]-[124] per   Kiefel J (as Her Honour then was).

[19]  (2011) 190 FCR 299 at 321; see also Angas Securities Ltd v Valcorp Australia Pty Ltd (2011) 277 ALR 538 at [194]-[198].

[20]  See in particular [89] and [90] per Finkelstein J and [110], [112] & [113] per Jacobson and Besanko JJ.

[21]  See also [96] per Finkelstein J.

[22]  [2017] QCA 254.

[23]  At [15].

[24]  At [23].

[25]   At [27].

[26]  At [28].

[27]  [2016] QSC 221 at [50].

[28]  Such value being substantial as discussed by the High Court in Badenach at [39].

[29]   See [11] of Chubb’s submissions in reply and [18] of Vero’s submissions and submissions in reply.

[30]  Affidavit of Fisher, Exhibit DEF1, p 117.

[31]  [2003] QSC 44 at [75]-[76].

[32]  [2011] QSC 43 at [9].

[33]  T1-83/36-39.

[34]  Although that is to be expanded to 2020 according to Birbilis on the basis of its latest report from Benjamin.

[35]  [50] FFASOC.

[36]  Chubb Outline of Submissions at [37] – [41].

[37]  Affidavit of Fisher, DEF1, Policy p 1.

[38]  Affidavit of Fisher, DEF1, Indemnity, s 1.

[39]  Affidavit of Fisher, DEF1, Basis of Settlement, (a), p 8.

[40]  Affidavit of Fisher, DEF1, Basis of Settlement, (a), p 8.

[41]  Affidavit of Fisher, DEF1, Memoranda to s 1, p 9.

[42]  [84], [86], [87], [88], [89], [90] and [91] FFASOC.

[43]  Conditions (i) and (iv) of the Reinstatement or Replacement Memorandum of the policy.

[44]  [97], [98] and [99] FFASOC.

[45]  [93] FFASOC.

[46]  [48] FFASOC.

[47]  [98] FFASOC.

[48]  [49] and [100] FFASOC.

[49]  [100] and 101] FFASOC.

[50]  [103] FFASOC.

[51]  [102] – [106] FFASOC.

[52]  [106] FFASOC.

[53]  [108] – [110] FFASOC.

[54]   For damage which the insurer is obliged under the terms of the policy to rectify.

[55]  [95] – [99] FFASOC.

[56]  Affidavit of Fisher, Exhibit DEF1 at pp 228 – 234.

[57]  (2009) 239 CLR 175 at [102].

[58]  (2010) 187 FCR 261.

[59]   Although not deposed to by a representative of Birbilis.

[60]  Although disputes between the parties continue.

[61]  T1-35/11-15.

[62]  The estimate of Mr Hartwell, which has not been challenged, is that Chubb’s costs from 31 March 2016 to the end of the first day of trial are $491,376.50.

[63]  See, for example, Suncare Constructions Australia Pty Ltd & Anor v Gainspace (MacKay) Pty Ltd [2016] QSC 67 at [36], [48] – [50] and [52].

[64]  [2010] NSWSC 1502.

[65]  T1-54/27-28.

[66]  [2004] WASC 52 at [89].

[67]  [2002] NSWSC 541.

[68]  Affidavit of Elizabeth Conlan sworn 14 July 2017.

Close

Editorial Notes

  • Published Case Name:

    Birbilis Bros Pty Ltd v Chubb Fire and Security Pty Ltd & Ors

  • Shortened Case Name:

    Birbilis Bros Pty Ltd v Chubb Fire and Security Pty Ltd

  • MNC:

    [2018] QSC 3

  • Court:

    QSC

  • Judge(s):

    Brown J

  • Date:

    14 Jan 2018

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2018] QSC 3 14 Jan 2018 Application for leave to file fifth further amended statement of claim adjourned; plaintiff ordered to deliver particulars; plaintiff draft further draft statement of claim; stay of proceedings lifted; application for security for costs dismissed subject to undertakings: Brown J.
Primary Judgment [2018] QSC 129 31 May 2018 Costs Judgment: Brown J.

Appeal Status

No Status