Hassoun -V- Wesfarmers General Insurance Ltd T/A Lumley General [2015] Nswca 33

Hassoun operated Signature Auto Body Smash Repairs. Hassoun insured the business premises against certain risks including loss or damage by fire (the policy). The period of risk under the policy extended from 26 February 2008 to 26 March 2009. On 30 July 2008 Hassoun increased the fire cover limit and specified perils by $20,000.

On 8 August 2008 the premises were damaged by fire that was deliberately lit. The premises and its contents were totally destroyed in the fire. On 4 September 2008 Hassoun made a claim under the policy.

The Insurer denied his claim on the basis that it had been fraudulently made, that the fire had been deliberately lit and that Hassoun was either directly responsible or had organised or procured the actions of third parties to light the fire.

On 24 March 2011 Hassoun commenced proceedings in the District Court against the Insurer.

Hassoun in the District Court proceedings failed to comply with a number of procedural directions including failing to serve evidence on a number of occasions, failing to serve a schedule of damages and expert evidence, failing to serve expert evidence on the issue of damages.

The Insurer filed a notice of motion on 17 March 2014 seeking security for costs and rulings on the evidence filed by Hassoun pursuant to s 192A of the Evidence Act 1995 (NSW).

Robinson DCJ’s ordered security to be provided and that the proceedings be stayed.
The decisions based on the following reasoning:

• Hassoun failed to adduce any affidavit evidence in relation to the application.
• Hassoun provided no satisfactory explanation for the delay in the proceedings and his failure to comply with the Court’s directions.
• Hassoun failed to provide any reliable evidence that his impecuniosity had been caused by the Insurers’ refusal to indemnify him under the policy.
• Hassoun had not discharged the evidentiary burden of demonstrating that the proceedings would be stultified if an order for security was made.

It was accepted by the Court of Appeal that to make an order staying proceedings until security for costs is given requires a strong case or an exceptional one, as per the case of Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157.

The Court of Appeal went on to say that Hassoun must demonstrate an error of the kind discussed in House v The King [1936] HCA 40; 55 CLR 499 at 505 – that is, an error of fact, an error of principle, a failure to take some material matter into account, the taking of an immaterial matter into account, or a result that is so unjust as to suggest that one of the foregoing errors must have been committed, even though it is not apparent.

The Court of Appeal rejected each of Hassoun’s arguments and concluded that the unexplained delay and repeated past procedural non-compliance by Hassoun, the large future costs involved to the Insurer and the failure of Hassoun to show that the order for security would stultify the proceedings, were factors additional to Hassoun’s impecuniosity, which entitled the Insurer a stay subject to the giving of security.

The courts are usually most reluctant to order security for costs in favour of an insurer against an insured particularly if the insured can show that they are impecunious and that has been caused or contributed to by the insurer refusing to pay the claim in dispute.

The decision demonstrates that notwithstanding an insured meeting the impecunious test, the court can be persuaded to order security for costs in an insurer’s favour when there are other grounds justifying that position.

The decision also provides a concise well- reasoned summary of the law on security for costs and the circumstances in which an appeal court may overturn a decision.

This CASE LAW UPDATE is intended for general information only and you should not act upon it or omit to act on the basis of anything contained herein without first obtaining legal advice in relation to any particular matter or issue.
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Date: 20 March 2015

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