Australia: Previous credit car hire proceedings – no estoppel?

Last Updated: 3 August 2015
Article by John Van De Poll

Previous proceedings brought by a credit hire car provider in the name of an insured do not necessarily preclude a later subrogated action.

On 29 July 2015 Wilson SCJ refused leave to AAMI to appeal against a determination by Magistrate Milledge of the NSW Local Court in Peters v D'Armas. 

Peters had an insured loss for damage to his vehicle and had also hired a replacement vehicle on credit.  The credit hire provider had commenced and lost proceedings in Peters' name against AAMI's insured D'Armas.  NRMA had also commenced subrogated proceedings in Peters' name without knowing about those earlier hire car proceedings.

AAMI sought to strike out the NRMA proceedings on the basis of estoppel and the operation of S.24 of the Civil Procedure Act 2005 (NSW).  Whilst arguably much of the determination turned on what was described as "the inexplicable failure of AAMI to refer to the first proceedings during its dealings with the NRMA", the comments of the Supreme Court nevertheless will have a significant effect on the conduct of matters before lower courts where much of this litigation is conducted.

Notable in Wilson SCJ's judgment is the following

Ordinarily, it is the privity of interest which determines whether the parties are considered to be the same. "Privity of interest" was defined ... as"a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party."

Implicit in her Honour's determination of the matter is a conclusion that there was not a sufficient degree of identification between Mr. Peters acting in his personal capacity and the NRMA acting through Mr. Peters, to regard a decision relevant to one entity as binding on the other. Whilst the cause of action may have been the same, the redress sought was very different and, accordingly, it was open to her Honour to consider that the matters litigated and the interests determined were also different.

Although reasonable minds might differ as to the conclusion reached, it is not without precedent.

In Linsley v Petrie [1998] 1 VR 427, the Victorian Court of Appeal considered that an insurer with a conflicting interest would not be bound by issue estoppel from earlier proceedings brought in the insured's name, in which the real party was his insurer.

Smith AJA made some further obiter remarks.. to the effect that it was difficult to accept that issue estoppel should bind a litigant as to issues raised and determined in earlier proceedings that were not initiated by that person and over which he or she exercised no control.

Arguably, the same should apply to the question of the applicability of the doctrine of res judicata. The NRMA, a party with a legitimate interest in the determination of the issue of negligence relevant to the 2012 collision, did not initiate the (very limited) claim filed by Mr. Peters, and had no say in the pleadings or in the manner in which the litigation was conducted and the issues raised by it for determination. Its complete ignorance of the suit arose, certainly by the default of Mr. Peters but also, in her Honour's view, by the almost studied failure of the plaintiff's representatives to refer to it in dealings with the NRMA. Her Honour was clearly of the view that, should the de Armas motion succeed, an injustice would be occasioned to the NRMA, and the real issues between the parties would not have been litigated.

Her Honour's ruling leaves it open to the parties to have heard and determined the real issues in the proceedings, and prevents one litigant from taking advantage of the actions of another to shut out from the proceedings an entity with a legitimate interest in the proceedings.

Although the decision relates to circumstances in which the insurer was unaware of the credit hire proceedings, we expect that insurers in the Local Court will be better able to argue that they should no longer be denied the ability to seek recovery of subrogated losses, despite previous credit hire proceedings. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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