Australia: Joining Insurers to Proceedings – Section 6 LRMPA

Insurance Update (Australia)
Last Updated: 14 April 2013
Article by Sarah Fountain

Australian courts have not yet had the opportunity to consider the "Bridgecorp" issue which has confronted the New Zealand courts in recent times (see our article on page 50). Given the high stakes involved, it is unlikely to go away, even after the New Zealand Court of Appeal sensibly preserved the interests of insureds.

In the meantime, we summarise the recent key decisions handed down in relation to section 6 (s 6) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (LRMPA). These decisions reinforce the difficulties that plaintiffs may encounter in seeking to join insurers to proceedings pursuant to s 6.


This was an appeal from a decision of RS Hulme J dismissing an application to join Vero Insurance Ltd (Vero) as a defendant to a proceeding pursuant to s 6(4) of the LRMPA. Vero was the liability insurer of Cal-Gym Manufacturing Pty Ltd (CG Manufacturing), the named insured of the policy in question and its subsidiaries.

The proceeding was issued by the plaintiff, who had been seriously injured in November 2006 at a gym owned and operated by the defendant, Energize Fitness Pty Ltd (Energize), while using a weightlifting aid known as the Smith Machine, which was alleged to be defective. Energize brought CG Manufacturing and Cal-Gym Equipment Pty Ltd (CG Equipment) into the proceeding on the basis that one of them had manufactured the machine. Energize subsequently applied to join Vero to the proceeding on the basis that it was the liability insurer of both CG Manufacturing and CG Equipment. By the time of the hearing of that application, both CG Manufacturing and CG Equipment were deregistered.

The primary judge held that leave will only be given to join an insurer under s 6 of the LRMPA where there is an arguable case against the insured, an arguable case that the policy responds and a real possibility that if judgment is obtained the insured would not be able to meet it. In relation to the first of those requirements, the primary judge held that there was insufficient evidence for there to be an arguable case that CG Manufacturing was the manufacturer of the machine, because the evidence was that the machine was manufactured in or around 1996, which was two years before CG Manufacturing was incorporated. It was held that there was no arguable case that CG Manufacturing was the manufacturer of the machine and therefore Vero, as insurer of that company, should not be joined to the proceeding. In relation to CG Equipment, the primary judge held that there was no evidence that Vero insured CG Equipment or that CG Equipment was a subsidiary of CG Manufacturing and therefore Vero should not be joined.

On appeal, the Court of Appeal said that the decision to grant or refuse leave to proceed against an insurer under s 6(4) is discretionary. The Court of Appeal rejected the argument that the primary judge made an error of principle in not applying the test for summary dismissal of an action, because the questions involved in an application for summary dismissal and an application for leave under s 6 of the LRMPA are different. In an application for leave under s 6 of the LRMPA, the question is whether the court should permit a litigant to commence an action against a party who, in the absence of such leave, the litigant has no right to sue, whereas in an application for summary judgment the question is whether an action that a litigant has been able to commence without any need for leave of the court should be brought to an end. The Court of Appeal said that the essential question for the grant of leave in this case was whether there was an arguable case that the machine was manufactured on or after the date that GC Manufacturing was incorporated. It held that the primary judge's view that there was no such arguable case was the correct view.


This decision concerned an application by the second defendant, Albert Malouf, to join his solicitor's insurer, LawCover Insurance Pty Ltd (LawCover), to a cross-claim he was making against his solicitor, Mr Goldberg. The question for the court was whether the event giving rise to the claim occurred before inception of the applicable insurance policy.

The underlying proceeding arose out of a transaction in which Mr and Mrs Malouf signed several documents in the belief that they were providing short-term financial assistance to their son, Albert (the second defendant). However, the effect of the documents was that Mrs Malouf's interest in the property was transferred to Albert (and therefore Mr Malouf and Albert became tenants in common) and a mortgage was granted over the property to the plaintiff. That mortgage secured a AU$700,000 loan to Albert, which Albert on-lent to a third party. The third party, and then Mr Malouf and Albert, fell into default and the plaintiff sought to exercise its rights under the mortgage. As Mr Goldberg had ceased practising as a solicitor, Albert sought to join LawCover to the proceeding pursuant to s 6(4) of the LRMPA.

The case against Mr Goldberg was that he was negligent in failing to investigate the security properties adequately or at all and failing to obtain the consent of caveators with priority to the registration of a second mortgage over the security properties.

The relevant policy was a claims made policy providing run-off cover to Mr Goldberg for the period 1 July 2006 to 30 June 2007. There was no dispute that the claim was first made against Mr Goldberg in March 2007. As the court was bound by authority that s 6(1) does not give rise to a charge where the event that gives rise to a cause of action against the insured occurred before the inception of the relevant contract of insurance, the issue to be determined was when the event giving rise to the liability arose. Was it at the time of the sale of the final security property in October 2006 (as argued by Albert)? Or at the time Mr Goldberg breached his contract of retainer when the first loan was made, in 2004 (as submitted by the LawCover)?

The court said that what is described as "the event" in s 6 is what causes the charge on the insurance moneys to arise and that "the event" is whatever completes the cause of action against the insured. In this case, the policy indemnified Mr Goldberg against civil liability for claims arising from the legal practice of the firm first made against him during the period of insurance.

The case against Mr Goldberg was that he breached the term of the retainer to provide appropriate advice. The court held that the breach (if established) occurred in 2004 when the loans were made and that the cause of action to which the policy responds (ie civil liability for a claim) was complete on the breach. Therefore the "event" occurred in 2004, which was prior to the inception of the policy. Therefore no charge was created under s 6(1), which precluded Mr Malouf from being granted leave to claim directly against LawCover.


The plaintiff, Mr Al Khaled suffered injuries from electrocution while working as a cement renderer on scaffolding at a building site when the aluminium straight edge he was using came into contact with an energised power line. He issued proceedings against the developer of the building site and the companies that erected the scaffolding. The defendants each issued a cross-claim against Neatrule Cement Rendering Pty Ltd (Neatrule), a labour hire company that provided the plaintiff's labour. Neatrule became the subject of a creditor's voluntary winding up order and liquidators were appointed. At the time of the event in question, Neatrule held public liability insurance with Calliden and workers compensation insurance with Allianz.

Calliden initially conducted the defence on behalf of Neatrule under a reservation of rights and, while doing that, joined Allianz to the proceeding as a cross-defendant on the basis that it was obliged to indemnify Neatrule because the plaintiff was a worker or deemed worker of Neatrule.

After liquidators were appointed to Neatrule, the defendants sought leave to continue the cross-claims against that company. Calliden argued that the appropriate course was for leave to be granted to the defendants to institute fresh proceedings seeking relief under s 6 of the LRMPA. The defendants opposed such an order. The issue for the court was whether to grant leave to the defendants to continue the cross-claims.

Although the court was "very attracted to the idea that an order under s 6(4) should be made", ultimately it held that the orders sought by the defendants should be made (ie to grant leave to the defendants under s 500(2) of the Corporations Act 2001 (Cth) (Corporations Act) to continue with the cross-claims). If the defendants were to bring claims directly against the insurers pursuant to s 6 of the LRMPA, that would involve instituting fresh proceedings and redrafting pleadings, which the defendants did not wish to do. The court did not wish to impose that burden upon the defendants.

The court acknowledged that there was some commercial risk that continuing the proceedings under s 500(2) may later lead to it being necessary for the defendants to bring further proceedings, but said that it was not for the court to protect the defendants from that risk. The preferable course was to maintain the status quo and allow the proceedings to continue as they had been. Therefore, orders were made that the defendants be granted leave under s 500(2) of the Corporations Act to continue each of the cross-claims against Neatrule.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.