Judgment date: 14 July 2010. Gorczynski v W & FT Osmo
Pty Ltd  NSWCA 163, NSW Court of Appeal1
This case involved an application for leave to proceed directly
against an insurer under section 6 of the Law Reform
(Miscellaneous Provisions) Act 1946 (s6). The Insurer argued
that leave should not be granted as no claim had been notified to
it during the relevant policy period as required by the policy
The Plaintiff sought to rely on Section 54 of the Insurance
Contracts Act (s 54) which provides that an insurer may not
refuse to pay a claim by reason only of an act or omission by the
insured or any other person after the policy was entered into and
which could not reasonably be regarded as capable of causing or
contributing to the loss.
The Insurer said only the insured could rely on the provisions
of s 54. The Court of Appeal disagreed.
In 1999 W & FT Osmo Pty Ltd (Osmo), a firm
of consulting structural and civil engineers, was retained by the
Plaintiff's neighbour to prepare certificates in relation to an
existing building. In reliance on those certificates, the local
Council issued building certificates retrospectively authorising
the construction of the building.
The Plaintiff successfully brought proceedings in the Land &
Environment Court for orders that the building be demolished.
In May 2006, the Plaintiff commenced proceedings in the District
Court against Osmo to recover the cost of legal fees he had
incurred from the Land & Environment Court proceedings.
Osmo did not defend the District Court proceedings and in July
2007 the plaintiff obtained default judgment against it. Osmo was
unable to meet any award against it.
In December 2008, the Plaintiff filed a Notice of Motion seeking
leave to join Osmo's insurer, QBE (Insurer),
to the proceedings against Osmo pursuant to s 6. Section 6 creates
a statutory charge over insurance monies that would otherwise be
payable to an insured in favour of injured third parties.
At first instance in the Supreme Court, Simpson J dismissed the
Plaintiff's motion for leave. The plaintiff appealed.
Court of Appeal
It was accepted in the Court of Appeal that Simpson J's
decision was factually flawed. The Insurer did not argue otherwise
but raised a number of other arguments in its notice of
Of those, the Court was primarily concerned with an argument
that s 54 had no application as Osmo never made a claim against it.
The Insurer said that there was no 'claim' within
the meaning of s 54 and, even if there was, that claim was not made
by the Insured but by a third party.
The Court of Appeal considered that the filing of the
application for leave was itself a claim against the Insurer. The
question was then whether only Osmo could make the claim.
The Court noted that the policy behind s 54 is to limit an
insurer's remedies so that they reflect the actual loss the
insurer has suffered as a consequence of the relevant act or
omission. On that basis, the Court said it was difficult to see why
that policy does not apply to a claim made by a third party as much
as to a claim made by the insured where the contract of insurance
is otherwise engaged.
The Court also considered that the Insurer's submission
overlooked the essential nature of the s 6 charge on the insurance
moneys. The opening words of s 6(4) provide that every such charge
shall be enforceable by way of an action against the insurer in the
same way and in the same court as if the action were an action to
recover damages or compensation from the insured. Further, in
respect of any such action the parties have the same rights and
liabilities as if the action were against the insured.
The Court concluded that a claim to enforce such a charge
against the insurer was essentially the same as a claim upon the
insurer by the insured itself.
Despite successfully navigating his way through the insurance
issues, the Plaintiff's application for leave was ultimately
rejected on the basis his claim was out of time.
This case makes it clear that reliance on s 54 is not restricted
to the insured under a policy of insurance. It is also open to a
third party making application directly against an insurer pursuant
to s 6. By implication, it should also extend to similar
applications under other legislation such as s 562 of the
The decision reinforces the willingness of the Court to look at
the policy reasons behind provisions such as s 6 and s 54 in
determining the scope of the remedies they provide.
1. Giles JA, Tobias JA and McColl JA
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