INSURER LOSES BID FOR DUAL REPRESENTATION OF ITS INSURED

Legal Directions

Bettergrow Pty Ltd v NSW Electricity Networks Operations Pty Ltd [2017] NSWSC 658

Bettergrow operated a waste facility that was not licensed to receive asbestos. It suffered loss when the facility had to be closed down, when waste contaminated with asbestos was delivered to it. Bettergrow sued a number of parties to recover that loss, including TransGrid and Powercor.

TransGrid was represented in the proceeding by lawyers instructed by its insurer, which had accepted liability to indemnify TransGrid for Bettergrow’s claim.

Powercor made a cross-claim against TransGrid, alleging breach of a contractual obligation to obtain asbestos liability insurance to cover Powercor. Powercor had unsuccessfully sought cover from TransGrid’s insurer, although TransGrid’s position was that Powercor did have the benefit of its insurance.

TransGrid had cross-claimed against Powercor for breach of contract, in failing to prevent the asbestos contamination, and proposed bringing a cross-claim against its insurer on the basis that it was in breach of the insurance policy by not covering Powercor.

Given their conflict of interest, TransGrid’s insurer-appointed lawyers sought an order that TransGrid be able to have separate legal representation for the purpose of defending the uninsured cross-claim brought by Powercor, and to pursue TransGrid’s proposed claim against its insurer. TransGrid, in its uninsured capacity, opposed that application, wanting its own lawyers to act for it for all purposes.

All involved accepted that generally speaking, a party should only have one set of legal representatives, given the cost of having two sets and the practical difficulties that would cause to the conduct of the trial. Those difficulties included which counsel for a party would cross-examine witnesses, and the order and subject matter of final addresses to the court.

The judge was taken to previous cases in which an insured had been allowed, in the interests of justice, to be represented by two sets of lawyers. However, he said they were different to the case before him. Firstly, TransGrid was opposed to the insurer being able to use its own lawyers. Secondly, TransGrid’s own lawyers were prepared to represent it in respect of both the insured and uninsured aspects of the proceeding. The insurer’s lawyers submitted that it was no solution for TransGrid to be represented by lawyers independent of the insurer, because TransGrid itself would have no interest in defending Bettergrow’s insured claim, and pursuing the subrogated cross-claim against Powercor. The judge was not persuaded by this argument, considering that independent lawyers would not do so, because otherwise they would jeopardise TransGrid’s cover under the policy.

In the circumstances, the court refused to permit the dual representation of TransGrid sought by the insurer’s lawyers. Instead it ordered that TransGrid be represented by its own lawyers.

Had both TransGrid and its insurers accepted that a conflict of interest necessitated dual representation, the outcome may well have been different. In another recent decision of the NSW Supreme Court, dual representation was allowed where both insured and insurer agreed it was appropriate due to a conflict, and over the opposition of another party. Another NSW case allowed dual representation of an insured in similar circumstances, where there was only the potential for a conflict between the interests of two insurers standing behind the insured. In both instances, the court contemplated a protocol being established to govern conduct of the trial, and the proceeding generally, to minimise the practical difficulties of the dual representation.

Authored by Scott Krischock, Special Counsel, Melbourne.


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