Alexander Stenhouse Limited v Austcan Investments Pty Limited

[1993] HCATrans 53

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'I

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No Al7 of 1992

B e t w e e n -

ALEXANDER STENHOUSE LIMITED

Appellant

and

AUSTCAN INVESTMENTS PTY LIMITED

and SUN ALLIANCE INSURANCE

LIMITED

Respondents

MASON CJ
DEANE J
DAWSON J
TOOHEY J

McHUGH J

Stenhouse(2) 1 10/3/93

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 10 MARCH 1993, AT 3.05 PM

Copyright in the High Court of Australia

MR J.D. HEYDON, OC: If the Court pleases, I appear for the

appellant with MR J.T. GLEESON. (instructed by

Piper Alderman)

MR T.R. ANDERSON, OC: If the Court pleases, I appear with

my learned friend, MS L.J. KING, for the first

respondent, Austcan. (instructed by Stratford & Co)

MR J.R. SACKAR, QC: If the Court pleases, I appear with my

learned friend, MR A.V.L. POSSINGHAM, for the

second respondent. (instructed by Lawson Downs)

MASON CJ: Yes, Mr Sackar. Mr Heyden.

MR HEYDON:  May it please Your Honours, may I hand up an

outline of argument for the appellant and while it

is corning to the Court, might I indicate that

Mr Anderson will be supporting the argument put, as

well as an argument of his own, and that Mr Sackar

will not be opposing the argument put. I apprehend

the real dispute between the parties will be

another matter which Mr Sackar proposes to

ventilate in due course.

The beginning of that outline sets out a brief

chronology of the relevant events: insurance

commenced in 1984, terminating in November of that

year. In the latter part of 1984 there was a

so-called alteration of use under clause 2 because the insured premises had a change in the character of their use, involving among other things the

installation of a spray booth. In February 1985

the policy was renewed as it were out of time up to

23 November 1985 and fell due for renewal on that

date. On 1 January 1986 the Act commenced; on

16 January the building was damaged by fire and

then the policy was immediately afterwards renewed,

with effect back to 23 November.

decided of which we complain is, and it affects Now, the essential point which the Full Court

both the Act and the contract, they held that the
moment of entry into the relevant contract of
insurance was entry in 1984, not the renewal

effected on 21 January 1986, effective back to

23 November. And the error appears, or the pages

to which we wish to direct submissions, are 495 and

496 of volume IV of the appeal book. On the first

of those pages, at the very top, they set out

condition 2:

The policy shall be avoided with respect of

any item thereof in regard to which there be

any alteration after the commencement of this

insurance -

Stenhouse(2) 2 10/3/93

(b) in the trade or manufacture carried on -

And, to anticipate slightly, it is implicit in the

Full Court's reasoning that the commencement of the insurance was in 1984, the change in the use of the premises was later in 1984, so that condition 2

applied. At the bottom of page 495 they set out

various parts of the Insurance Contracts Act and on

page 496 in the first full paragraph they

summarized the effect of section 28, which

concerns:

the right to avoid the contract for
non-disclosure -

the point of the discussion being that among other ways of characterizing what happened, the insured,

Mr Anderson's client, did not disclose to the

insurer, Mr Sackar's, the change in the use of the

premises. And at line 11 they say this:

The learned trial judge -

who was Mr Justice Cox -

considered that section 28 applied to the

present case -

and Chief Justice King says:

With all respect to His Honour, I do not think

that that view is correct.

And over the next 20 lines or so he develops the reasons for that conclusion. Lines 16 to 18:

The "duty of disclosure" referred to in section 28 is the duty imposed by section 21,

that is to say the duty to disclose relevant

matters -

One can skip the next sentence, and then he says

this: 

A difficulty is created by the provision in

section 11(9) which treats renewal as included

in a reference to entry into the contract

Pausing there, the difficulty that the

Chief Justice is speaking of is this: if

section 11(9) is read as applying to section 28,

the moment of renewal was 23 November 1985 and

section 28 would apply. Do Your Honours have a

booklet of materials, a thin book of materials,

which contains the material parts of the
legislation and one or two other things? If Your

Honours go in that at tab - - -

Stenhouse(2) 3 10/3/93

MASON CJ: Is this the supplementary list?

MR HEYDON:	The so-called supplementary list.
MASON CJ:	The list of authorities and legislation?
MR HEYDON:	Yes, and if Your Honours go to tab 1 or

annexure 1, as we call it in our submissions,

Your Honour finds the material sections of the Act

set out as they applied to the events in question.

If Your Honour goes to section 28, that says:

This section applies where the person who

became the insured under a contract of general

insurance upon the contract being entered

into -

(a) failed to comply with the duty of

disclosure;

So that if the words "the contract being entered into" refer to the November 1985 date, the section applies because there was a non-compliance with the duty to disclose the change in manufacture in 1984.

The consequence is that in subsection (2) it was

not possible for the insurer to avoid the contract

because fraud was never alleged. And it follows

also that subsection (3) is capable of applying,

and in one small respect Mr Justice Cox at trial

did apply it, namely, to indicate that there should

be an adjustment of the premium so that the insurer

should receive a higher premium. He found that

they would have entered the contract, even if there

had been disclosure, but at a higher premium.

The Full Court's view, which is that the words

"contract being entered into" refer to the very
beginning of the contract in 1984, means that there

was no failure to comply with the duty of

disclosure because that duty relates only to pre-

contractual events. If I can go back then to

page 496 in the appeal book at line 21, they refer

to:

A difficulty is created by the provision in

section 11(9) which treats renewal as included

in a reference to entry into the contract -

But he says:

that that provision must give way to the clear

intention and scheme of the Act.

Then he advances a specific reason:

Stenhouse(2) 4 10/3/93

If the duty imposed by section 21 applied to

renewals, then section 22 would also apply.

Section 22, if I can take the Court to that, is a

duty on the insurer:

before a contract of insurance is entered

into, clearly inform the insured in writing of

the general nature and effect of the duty of

disclosure.

The Chief Justice's point is, it would be

ridiculous if every year the insurer had to keep

mouthing over and over again to the insured the

nature of his duty of disclosure, and that is the

point that he makes at the bottom of 496.	Now, can
I just deal with that point.	The point, in our

submission, must fail or be put aside because of

section ll(l0)(a). That says that:

where, after the commencement of this Act and

at or before the original entering into, or the renewal ..... of a contract of insurance, the insurer has given information to the

insured as required by section 22 ..... the

requirement by that section -

namely, section 22 -

to give information to the insured shall be

deemed to be satisfied at or before any

subsequent renewal, extension or

reinstatement -

So that that provision, section ll(l0)(a), avoids

the absurdity which controlled the reasoning of the
court below. Continuing with the reasoning of the

court below, at the top of page 497, His Honour

refers to:

the scheme of the Act, considered in itself

and by reference to the Australian Law Reform

Commission Report upon which it was

based ..... discloses that section 28 is

concerned with non-disclosure and

misrepresentation before entry into the

original contract of insurance.

Can we make these submissions: there is no

scope for examining the scheme of the Act as a
whole or the report in the face of a clear
provision like section 11(9) which is not limited

by reference to any contrary intention or context.

It is, as it were, an absolute definition of what

the expression "entering into a contract of

insurance" means, namely that it includes renewals.

Stenhouse(2) 10/3/93

His Honour, with respect, does not actually

direct any attention to the scheme of the Act in
support of his conclusion, nor to any part of the

Australian Law Reform Commission report. The

Australian Law Reform Commission report, if anything, is against the conclusions of the Full

Court for this reason: it notes in paragraphs that

we have referred to the common law proposition that

a duty of disclosure arises not only on original

entry into the contract but on each renewal.

The Law Reform Commission report gives no sign of any intention to alter the common law, and in

any event the Law Reform Commission report is

essentially of no utility for this reason: these

subsections in section 11, namely (9) and (10),

although subsection (9) is something similar to

that which was recommended by the Law Reform its present form, were introduced on

18 December 1986 retrospectively into the

legislation from 1 January 1986. In other words,

they are legislative provisions that the Law Reform

Commission never had in mind and accordingly, even

if there were anything positive in that report in

support of the Full Court's conclusions, it cannot

be tied to the terms of the current legislation.

We submit also that apart from

section ll(l0)(a), one can get some assistance from

the scheme of the legislation as revealed in the

regulations. The relevant regulation is 3(a). It

was made pursuant to section 22(2) which provides

that the regulations may prescribe a form of

writing to be used for informing the insured of his

duty of disclosure. If Your Honours could go over

to tab 2 in the small bundle, regulation 3(a) says:

For the purposes of section 22 of the Act, the

form of writing prescribed to be used ..... is -

insurance - the form set out in Part I - (a) in relation to a contract of general

If Your Honours could then go to Part I which is on

the next page, in the fifth and sixth lines, the

paragraph beginning with the words:

You have the same duty to disclose those

matters to the insurer before you renew,
extend, vary or reinstate a contract of
general insurance.

That supports the proposition to some extent that the legislature was dividing up renewed contracts

into separate contracts. The next paragraph says:

Stenhouse(2) 6 10/3/93

Your duty however does not require

disclosure of matter -

then the third dash down -

that your insurer knows - - -

MASON CJ:  How can the regulations throw light on the

statute?

MR HEYDON:  They cannot throw light on the statute directly

but they can show light on the statutory scheme
where the statute itself contemplates the making of

regulations. In the case of Brayson Motors,

Your Honour the Chief Justice made an observation

to that effect and, with respect we would concur
that for guidance to be given by regulations must

be relatively slight and that concentration must be

on the statute as a whole, but that when one has a

legislation on a specific field brought into

existence on a particular date with regulations at or about that date, it is a straw or some guidance

on the question of construction.

Now, Your Honours, those submissions, brief

though they are, are essentially the submissions we

put in support of the appeal being allowed. The

consequences of them are simply this: that going

back to page 496, in the middle of line 11:

The learned trial judge considered that

section 28 applied -

and the Full Court said that was wrong. Well, in

our submission, the Full Court was wrong and

Mr Justice Cox was correct. That means that

section 28 applies, that means that avoidance is

impossible. It also means that section 54 cannot

apply and I should deal with that by going to

page 497 where the section is set out by the

Chief Justice:

where the effect of a contract of insurance

would, but for this section, be that the

insurer may refuse to pay a claim, either in

whole or in part, by reason of some

act ..... being an act that occurred after the

contract was entered into -

now, our proposition is the relevant contract was

that which was entered into with effect from

23 November 1985; the act, that is to say the

omission in not disclosing the change in use

happened in 1984, so that it does not satisfy the

terms of section 54, so that one need not consider

that further.

Stenhouse(2) 10/3/93

If we go back to condition 2, which was the

other basis on which the insurer could have avoided
liability against the insured, the terms of that

are that the terms of:

the policy shall be avoided with respect of

any item thereof in regard to which there be

any alteration after the commencement of this

insurance -

and, in accordance with general principle, we would

submit that the commencement of this insurance was

23 November 1985 and that the events of 1984 do not

answer those terms.

For those reasons then we would submit that

the consequence is that the insurer is liable to

Mr Anderson's client and we have here, if the Court

pleases, a form of orders which would flow from our

submissions. I do not know if the Court is

interested in receiving a copy of it, but

essentially that the appeal should be allowed; that

the orders of Mr Justice Cox in the Full Court be

set aside and that Sun Alliance should pay the

costs of other parties of all courts; and that

there be judgment for Austcan Investments against

Sun Alliance; and that Austcan Investments' claim against us, which was a claim based on negligence

as a broker, should be dismissed on the basis that

they have suffered no loss, save in one respect, an issue unrelated to the present argument, namely the

extra cost of what we have called the extra cost of

reinstatement issue.

I can hand this up now. Mr Sackar will be

proposing a rather different course and it might be
better that this question of the precise form of

any orders that are made, on the optimistic

assumption that the appeal is allowed, be postponed

to that time.

Those are our submissions, if the Court

pleases.

MASON CJ: Thank you, Mr Heydon. Mr Anderson.

MR ANDERSON: If Your Honours please, my learned friend,

Mr Sackar, and I, subject to what Your Honours think, think it would be more expedient if he

explained his position before I am called on.	I am
in Your Honours' hands on that.

MASON CJ:  No. We would be content to hear Mr Sackar at

this stage.

MR SACKAR:  If Your Honours please, may I hand up an outline

of our argument?

Stenhouse(2)	10/3/93
MASON CJ: Yes, Mr Sackar.
MR SACKAR:	Your Honours, the outline in paragraphs (A) and

(B) seti out our position in respect of the

Full Court and I need not say any more than that.

We do not seek, in any way, to support the

Full Court's reasoning as far as section 28 is

concerned and section 54 is concerned. That would

have the inevitable consequence so far as the

notice of appeal goes. The only matter that we

seek to argue is whether or not there is a live

issue still for the court in South Australia to

determine on section 28(3), and I will come to in a

moment how we analyse that.

DEANE J: What has gone wrong here, Mr Sackar? Everybody is

intent on saying the Full Court is wrong. Did

anybody put up this argument to the Full Court?

MR SACKAR: This particular argument here?

DEANE J: Did anybody submit to the Full Court what

everybody now says is wrong?

MASON CJ: ..... presumably.

MR SACKAR:  I am not so certain, Your Honour, that these

arguments were put. I am also not certain, if I

may say quite candidly, that the legislation that

the Chief Justice was looking at was entirely in

accordance with the legislation that may have been

in fact in force at the time.

MASON CJ:  What legislation would he have been

MR SACKAR: Well, perhaps an earlier provision whereby

MASON CJ:  A draft of the - - -

MR SACKAR: Well, no, not even a draft, Your Honour. It may

have been he looked at a provision prior to the

1986 amendment to section 11 that my learned

friend, Mr Heyden, has referred to. But, we can

only speculate. I do not know. There is nothing

that I have read in - - -

MASON CJ:  It seems to be a new art in advocacy to arm the

Court with an incorrect copy of the statute.

MR SACKAR:  I could not detect from the argument that I

read, Your Honour, that anyone was particularly

guilty of handing anything up to the Full Court,

but I can only speculate as to how it went wrong.

MASON CJ: It must have been an interesting argument if

counsel had different copies of the statute.

Stenhouse(2) 9 10/3/93

MR SACKAR:  Yes, well, that may be one explanation,

Your Honour, but it is purely my speculation, if I

may say.

May I take Your Honours to the notice of

contention so that I can get out of the way those matters that need not trouble Your Honours. That

is at 508 of volume IV. Your Honours, may I simply

indicate that I no longer press the matters at

pages 500 to 512. My learned friend, Mr Heydon,

reminds me, I no longer press the matters from 508.

I am sorry, I just cannot read the page on my

appeal· book.

DEANE J: It is 508, I think.

MR SACKAR:	508, yes. the only matter that I now wish to argue about	508 to 512 except item (i).	That is
briefly.

MASON CJ: That is at the bottom of 512?

MR SACKAR:  The bottom of 512, yes. Now, what we say with

respect to this matter is simply this, if I may be

brief about it.

There was an agreement recorded at page 475 of

volume IV that damages would be assessed

separately. Our principal submission is that

section 28(3) is a damages matter. Neither

His Honour Justice Cox nor the Full Court, because

they came to different results, in the first

instance that there was no contract between my

client and Austcan, and in the second, for the

other reasons put forward, namely the

misconstruction of sections 28 and 54. The

question of 28(3) has never arisen, we say, for

decision.

At first instance, His Honour the trial judge

dealt with the questions of contract, and his
reasoning concluded at 466.	I will not take

Your Honours to it, but I simply say that at 466,

line 11, Justice Cox commenced his reasoning on the

issue of negligence, having found no contract, and

Sun Alliance, as it were, went out of the equation.

At 475 he made some findings which will be put

against me as clear, unequivocal findings on

section 28(3), and I must face up to those, and I

wish to do so immediately.	And at line 3,
His Honour said:

Despite Hughes's conservative evidence - Now Hughes, was a witness called by Sun Alliance

principally to describe the file, if I may put it

Stenhouse(2) 10 10/3/93

that way, that is really what he seems to be doing

in the evidence, but he also gave evidence of

certain requirements which Sun Alliance might

impose upon putative insureds in the event that

they had certain types of business that they wished
to insure, principally, the kinds of business that

were being conducted here after the change of use,

and he gave some evidence about those matters.

What His Honour then says is despite the

conservative evidence:

I am not satisfied that in the circumstances

of this case Sun Alliance would have refused

absolutely to insure the Mile End property had

it been informed at the proper time of the

nature and extent of the manufacturing

operations.

I stop for one moment because we will place some

emphasis on the word "absolutely". Now, we say

that what His Honour was here doing, clearly,

deeply embedded in the part of his judgment in

which he was considering negligence, he was looking

at whether one could say absolutely that Sun Alliance, as an example of perhaps a prudent

insurer, would have refused indemnity. Having

decided it would not absolutely, then the question

of negligence against Stenhouse has become a very

real one to be analysed. I should have said at

474, on the prior page, His Honour says at line 15:

The relevant contract with Sun Alliance was thus made after the commencement of the

Insurance Contracts Act.

And he goes on then to consider that sections 21

and 28 would be applicable had there been a

contract between the relevant parties. Now, we no

longer contest the contract, and we no longer
contest that the relevant contract was subject to

or governed by the Insurance Contracts Act.

Now, may I go back to the next page and read

on, he says:

Certainly woodworking and upholstery were

unattractive risks - what Hughes called

"accommodation business", which Sun Alliance

only accepted when it felt it had to - but

Alexander Stenhouse was a national broker and

placed substantial business with Sun Alliance.

It is plain that Sun Alliance would have

charged a higher premium, and probably it

would have investigated the tenant's fire

precautions with care, but I think it more

likely than not that it would have continued

to insure the property. If that is too

Stenhouse(2) 11 10/3/93

sanguine a view to take of Sun Alliance's

attitude, the evidence of Mr Plate -

now he was another witness called by Sun Alliance,

said to be an expert in insurance matters, and he

gave evidence about the kinds of risks which may or

may not be accepted by underwriters, and, again, he

adverted to woodworking and various kinds of

activities which had then become part of the

operations of the change of business. He says:

Plate suggests that the broker would have been

able to find another insurer, if need be, and
for the purpose of the plaintiff's claim

against Alexander Stenhouse that would be

enough. However, for the reasons I have

given, it is not necessary for the plaintiff

to rely upon this particular line of argument.

Now, I have got to face up to this because I have

got to say to this Court that is not the trial

judge's reasoning on section 28(3). We say it for

a number of reasons. First of all, I have already

said it is deeply imbedded in that part of

His Honour's judgment dealing with negligence; that

does not get me home. But it could· not be

regarded, we submit with respect, as a conclusive

set of findings because section 28(3) involves

His Honour determining the extent to which

liability would be reduced, notwithstanding the

non-disclosure, and whilst he mentions a higher

premium he also adverts to:

probably it would have investigated the

tenant's fire precautions with care.

Now, what we say shortly is that His Honour was not

purporting to deal conclusively with section 28(3). He did not have to because he had already dismissed

the case against Sun Alliance. He was using this,

we say with respect, first of all to dismiss the

fact that we would have refused it absolutely

thereby leading open, we say, the case against

Stenhouse, and, therefore, His Honour was not

coming to any concluded view about section 28(3).

Now, in a nutshell, that is our case.

Section - - -

TOOHEY J:  Mr Sackar, putting your client's case at its

highest, what is the sort of reduction - I do not

mean in money terms, but - - -

MR SACKAR:  We say, Your Honour, that that is yet to be

determined.

Stenhouse(2) 12 10/3/93

TOOHEY J: Yes, I appreciate that, so that we have got some

understanding of what might be involved in the

remission.

MR SACKAR:  Yes. What might be involved in the remission,

we say with respect, would be either a suggestion

that Sun Alliance would have required certain fire

precautions in the event that they were prepared to write the risk or, I would submit, with respect, we would be entitled to seek either this Court's leave or the South Australian Court's leave to core

evidence, the effect of which would be, if it were

available, to suggest that if certain precautions

had been insisted upon and had been enforced and

the fire had occurred, then the damage that would

have resulted would have been less than the damage

which actually did occur without any or without the

precautions insisted upon by Sun Alliance had it

been informed of the change.

So there is an exercise, we say, ahead, as

part of the damages exercise, which is alive and

available to us to be investigated before the

South Australian court.

McHUGH J:	Was any evidence given as to what the amount of the higher premium would have been?
MR SACKAR:	There was evidence, Your Honour, in Mr Hughes'

evidence; he was cross-examined about higher

premiums and he talked about percentages, yes.	So
that evidence was there.	I should say this:

section 28 was pleaded belatedly in the trial. It

appears in the reply and I cannot at the moment

perhaps give Your Honours the date of that, but may

I just give Your Honours the references to the

pleadings. It was pleaded by the plaintiff in the

reply and I will not take Your Honours to it, but

it is volume 1, page 22, which is the second page

of the reply. It was simply pleaded on the basis

that the plaintiff relied on a number of

provisions, including section 28, and if I may say

again, quite simply and bluntly, that was denied by

the first defendant at page 26 in the rejoinder in

paragraph 4. So there was an issue was say there.

The real question is, did the trial judge deal with

it? We say no, for the reasons we have asserted;

he did not have to. And whilst this reasoning

here, on one view - perhaps putting the case

strongest against me - it gets perilously close to

an assessment of that. We say because His Honour

did not have to find on section 28(3) and because

he had put damages aside, and we say section 28(3),

being a remedy provision, is essentially a damages

issue, it is simply an accounting between the

parties having determined liability and, having put

that to one side, we say that one cannot be

Stenhouse(2) 13 10/3/93

certain, at least, that His Honour was attempting

or purporting to deal finally with section 28(3).

For all the reasons I have put one can infer that

he was not.

So we say that there is a live issue available

under the damages discussion and we say that this

evidence, or rather his analysis, was coincidental,

and, indeed, was relevant to the issue of

negligence.

So for those reasons, Your Honours, what we

say is that there should be remitted to the South

Australian court, as part of its damages hearing

which has been deferred, the inquiry, or rather the

completion perhaps of the inquiry, under

section 28(3).

McHUGH J:  I do not quite understand why you are concerned

to raise these issues in this Court. If you are

right - and this appears to be the situation - that

the damages issue has been left open, then it is a

matter to be debated in the South Australian

Supreme Court, is it not?

MR SACKAR:  Your Honour, it may be what I am now doing in

effect is wasting this Court's time in that sense,

because I could equally perhaps stand up - quite so

if I am right - and say to the South Australian

court, "Now, in the damages hearing here is our
evidence and we now want the position between the

insurers adjusted."

McHUGH J:  The insured has not proved the extent of its loss

yet, has it?

MR SACKAR:	No.
McHUGH J:	So if they prove it is $100,000, you say, relying

on 28(3), it has got to be reduced by whatever the

figure is.

MR SACKAR:	Yes, that is so.
McHUGH J:	Why are we concerned then?
MR SACKAR:	If Your Honours take the view that I have that

open to me - and it is really not a matter for

Your Honour to advise me; it is a matter for me to

advise my client - - -

DAWSON J:  How does what you are suggesting differ from what

Mr Heydon is suggesting?

MR SACKAR: It differs in this sense, that I anticipate that

there will be fire to the left of me and fire to

the right of me shortly, because both sides - that

Stenhouse(2) 14 10/3/93

is, Mr Heyden and/or Mr Anderson - will want to say

that section 28(3) has been conclusively decided

before the South Australian court and all that is

left is a mere mathematical exercise. That is the

issue between us.

They will no doubt suggest that either this

matter should have been dealt with, as it were, in

all of the evidence before His Honour - and,

really, all that His Honour anticipated being left

over was a simple calculation. My response to that

is that was fine in theory, but it does not really

seem to have happened that way. What we say is

that it could not happen that way, because section

28(3) is a damages question; it is not a liability

issue.

Consequently, whilst the parties may not have

focused precisely upon how to delineate the

liability issues and the damages issues, when

looked at properly, we say, 28(3) could only arise

in a damages context. If that is so, we would have

it that we are at large to agitate the issue on

whatever evidence we think may be appropriate to

call.

To take up what His Honour Justice McHugh said

a moment ago, there was no evidence called as to

the extent of the plaintiff's loss, there was no

evidence called as to the measure of damages

against the broker.

When I say there was no evidence called as to the measure of the plaintiff's loss, there were

some figures discussed in the transcript because

there was, and always was it seemed, a large
measure of agreement between Stenhouse and the

plaintiff as to the quantification. We, as it were, have always been at loggerheads on those

issues, but for the reasons we set out, we say in

principle the matter is at large.

Now, if it is to be suggested, of example,

that the way in which the trial was run, one should

draw an inference that the parties really were

addressing that issue, then again we say that really is a matter that this Court should not

entertain; it should be remitted to South Australia

so that it can be debated there. For those

reasons, Your Honour - that is all we would wish to

say now.

DEANE J:  Mr Sackar, assume that Justice Cox had reached

what everybody now seems to agree were the correct primary findings, what do you say, on the basis on which the parties fought the case, he should then

have done?

Stenhouse(2) 15 10/3/93

MR SACKAR: In respect of section 28(3)?

DEANE J: Yes.

MR SACKAR: Well, he should then have permitted the parties

to call such evidence as they may wish to call on

how the amounts were to be adjusted.

DEANE J: Well, there are some things - I mean, obviously he

would have made a finding he did not make, that the

matter did not come within section 28(1), and he

would have made that finding for reasons related to

the view he expressed about premium.

MR SACKAR:  Yes.

DEANE J: Well, should he then have gone on on the basis

that the case was fought to make some express

finding about premium? Did the parties put that

evidence before him?

MR SACKAR:  There was evidence before him which could permit

him to infer, in my submission, what the high

premium might have been.

DEANE J: Well then that would have been findings within the

process of assessing damages in the context of

section 28(3), because that would be the only

reason he would quantify premium.

MR SACKAR:  Yes, but he never did, of course, and I do not

know how the parties addressed him; I have not been

able to see how the matter was finally put.

Mr Anderson may be able to inform the Court of

that.

DEANE J: But is that not the critical matter? I mean, if

the basis before Justice Cox was, if you find a
contract, determine whether section 28(1) does or

does not apply, and stop there. In that case,

obviously, what you are asking would be right.

if the basis was, go beyond that and proceed to But

determine the formula for damages under

section 28(3) by reference to what the increase in

premium would be and what the probabilities were, a

different position would emerge and the matter

should go back to His Honour. Simply do that, I

suppose.

MR SACKAR: Well, there are a number of alternatives, I

agree. One is that His Honour could be invited to

come to a concluded view finally on section 28(3),

on the material that was before him, subject to

what might be said about the way in which the case

was conducted or, indeed, how the matter ought now

to be left. Our submission would be that because

it is a damages matter it should be left at large

Stenhouse(2) 16 10/3/93

in the sense that we should be given liberty to

call further evidence if we wish to do so.

Now that sounds, in one sense, like having

another bite at the cherry, but what we say is that

it is a separate issue and, in principle we should

be permitted to do so. Now, if that is not right,

by reason of the way in which the case was

conducted, then it is Justice Cox, we say with
respect, who ought to determine what procedure, or

what material, is ultimately going to be relevant to the section 28(3) inquiry. His Honour may say

it is that, or His Honour may say it is something

else.

MASON CJ: Well, presumably he knows what he was about.

MR SACKAR: Well, this is the point, and it is only he who

can now, we say, tell the parties what the parties

are entitled to put with respect to the material,

because it is otherwise intriguing, to say the

least, because it is not a place where one would

expect to find such a comment, and because he was

not obliged to make a final ruling on the issue,
then it is at least an open question whether he

has, and all we say is, if we are restricted to the

evidence that is before him, either by reason of

his exercising that discretion, or because he finds
that is the way in which the parties conducted the

case and understood the issues developing - and one

can see an argument clearly that would be forceful

on that basis, bearing in mind the issue was

pleaded, however inelegantly; or alternatively, he

likewise could exercise a discretion one way or the

other as to whether the parties should expand on

the material that is there.

TOOHEY J:  Mr Sackar, you describe section 28(3) as

involving a damages issue; do you accept that a
possible outcome of the remission might be no more

than that your client would be entitled to some

higher premium?

MR SACKAR:	Yes, that is one of the - - -
TOOHEY J:	I merely put it as a possible - you do not exclude that as a possible outcome?
MR SACKAR:	I would submit, with respect, that that is one

possibility. It is certainly one we would be

vigorously opposing, but it has got to be - - -

TOOHEY J: Yes, I appreciate that, but in your concept of

damages you accept that that might be a possible

outcome, do you?

Stenhouse(2) 17 10/3/93

MR SACKAR: That is a possible outcome, subject to us having

had the opportunity to address His Honour on the

precise question.

McHUGH J:  I must say, having regard to the way the case is

conducted, from what I can see about it it seems to

me that that was the only outcome of it.

MR SACKAR:  Yes, well, it may be, Your Honour, that that is

the outcome. Whether it is or whether it is not,

we say that Justice Cox is the only person, with

respect, who can practically sort out the problem
or problems, if any, which exist. If I am

ultimately restricted to that amount, we say it is

Justice Cox who should so rule. If whoever it is

who does the case is permitted to go further, then

likewise it is Justice Cox who was in control of

this trial and who should deal with the matter.

They are our submissions, if Your Honours please.

DEANE J:	Can I just try and tie you down a little bit more?
MR SACKAR:	I hope not, Your Honour.
DEANE J:	You are not suggesting, are you, that if it goes

back to Justice Cox you are to be free to say that

if you had known, you would not have entered into

the contract?

MR SACKAR:  No. I want to go back to him, however, with

liberty to call such evidence that may reduce our

liability very considerably.

DEANE J: Well, now, that is the next question. You are not

suggesting you can go back to Justice Cox and say,

"You have found we would have probably

investigated. I now want to lead evidence before

you to show that if we had investigated we would have found out facts which would have stopped us

entering into the contract".

MR SACKAR:  Your Honour, what I want to do, obviously, is to

run the case as fully as one can on the issue of

28(3). I would be initially resisting being

restricted to the evidence that was before him.

DEANE J:  I follow that. My question is directed to what

you want to lead evidence about because on one

approach to what you have said, you are not saying

that you want to challenge his finding that you

would have entered into the contract, but by a

roundabout way you want to render that finding

really devoid of content.

MR SACKAR: No, with respect, I do not. There are a number

of levels we say can arise, or a number of

questions that can arise under section 28(3). One

Stenhouse(2) 18 10/3/93

certainly is the absolute one, and we say in

principle an insurer might be able to show in

certain circumstances that they would not have

entered into the contract, in which case,

theoretically, they could reduce their liability to

nil.

DEANE J:	Now, you have lost that point.
MR SACKAR:	Yes.
DEANE J:	You have lost on "wouldn't have entered into it at

all".

MR SACKAR:  Yes, he has found that we would not have

absolutely refused.

DEANE J: But do you want to be free to say you would have

entered into it but the precautions you would have

insisted were such that the accident would never

have happened and therefore there would be no

damages?

MR SACKAR: If I am permitted to do that, yes, and if I am

permitted to go the second step and_ say it would

have been considerably reduced, then logically that

would follow.

DEANE J: Because, reading the little I have read, that does

not seem to be envisaged in the agreement. The

issue of damages would be postponed, because if you

were to succeed on that there would be nothing to

go to the Master for damages.

MR SACKAR: That is so but I think that is really the issue.

The parties have not directed their minds, we say,

precisely to the nature of the section 28(3)

inquiry, and I am only at this moment able to ask

for liberty to investigate or agitate these

matters. I cannot say to Your Honours that I have

evidence or my client has evidence which it would

call on these issues. All we are really wishing to

do is say we want liberty to have a proper hearing

on section 28(3), accepting that His Honour would

have discretion to say, "No, you can't call that

evidence. Here are my findings. You can address

me on the evidence that is before me".

DEANE J:  So what you would really be asking for is that we

make the basic orders which Mr Heydon asks for, but

then remit the matter to the trial judge to

determine the course of further proceedings.

MR SACKAR:  The course of further proceedings and, more

precisely, the ambit, the precise ambit, of the

section 28(3) inquiry, yes. And he would have a

discretion to do that. That would have this

Stenhouse(2) 19 10/3/93

consequence, if Your Honours favoured that

approach. I think my learned friend Mr Heyden has

also considered what effect that would have on the
costs and what effect that would have on one of the
orders that he seeks, namely to substitute, as it
were, the judgment, which currently is against his

client, completely with a judgment against us. That would not lead to that result because one

would not know what the judgment would ultimately

be and, indeed, in what proportions if any

Stenhouse are found liable as opposed to us.

It would require, if Your Honours favoured the

view that we put, to adjust the orders that he

seeks so as to leave the section 28(3) inquiry open
so that His Honour Justice Cox would then enter

judgment accordingly, depending upon how he found

the amount or liability should be reduced. It may

lead to us being completely substituted, as my

learned friend foreshadows; it may not.

So, I will not, unless Your Honours wish me to

do so, hand up the alternative orders that I think

my learned friend has a draft of, for the moment.

We might, if it is convenient, wait for Mr Anderson

to finish and then, at that stage, it may be

appropriate to discuss the form of orders. If

Your Honour please.

MASON CJ: Yes, Mr Anderson?

MR ANDERSON:  If the Court pleases, we oppose the remission

suggestion by my learned friend, and I think it

is - I am sorry, my friend is reminding me about an

outline. I have one, if Your Honours please. With

respect, in view of the developments that have

taken place in the -

MASON CJ: It is misleading.

MR ANDERSON:  It is not misleading, Your Honour, but it is

not going to be helpful to you.	I will put it in,
however, at a convenient time but I think it would
be wasting time to read it now, with respect.	But

it will show you our stand in the matter, but these

developments have been quite recent. My client, of
course, finds itself in the dilemma of not knowing
what the finality of this matter is, and that is

the basis on which I want to make some submissions.

But they are twofold and they are, firstly,

that we contend, as my learned friend, Mr Sackar,

intimated we probably would, that the matter has

been finally determined by Justice Cox and I want

to put a brief argument to you on that. But more

importantly, with respect, I submit that there is a threshold matter which is related to the conduct of

Stenhouse(2) 20 10/3/93

the trial as he again envisaged, and that is that
the very point which he now seeks to raise in this

Court, and with the greatest of respect to

Your Honours, I share the view that it is

inappropriate that it should be raised with this

Court, was raised by counsel for Sun Alliance with

the Full Court. And, therefore, what my learned

friend seeks to do now is, in effect, appeal an

interlocutory decision made by the Full Court when

this was attempted there, as distinct from corning

before Your Honours on a notice of contention, and

we submit that is quite important.

With your leave, Your Honours, I would hand up

to you, because I want to take you to a transcript

which has become relevant because of this

contention and it is the transcript, or the

relevant part of it, from the Full Court, and in my

submission that will show the Court that this

matter is not a live issue. And, as I say, my fall

back position if the Court does not accept that, is

to argue that, in any event, for the reasons I wish

to put to you, section 28(3) was finally dealt with

and, of course, as I think Your Honour

Justice Toohey may have envisaged, the question of

what is meant by an assessment of damages becomes

relevant, and from our point of view, and I am told

by Mr Heydon from his point of view, there has

never been any misunderstanding. The

misunderstanding is all one way it appears and that

is that really Justice Cox was to finalize the

matter; the matter was then not to go before him
for anything further, it was to go before a master
for assessment of damages, that meaning and what

the parties intended, it is my contention, that the

nuts and bolts, if I can put it that way, of how

many sheets of iron were required to replace the
roof, et cetera, were the matters to be aired,
including what my client was entitled to for loss

of rent.

So that is what was meant to go to the Master.

With the greatest of respect, this is a last ditch

attempt by my learned friend, with the greatest of respect to him, to get back before the trial judge

and attempt to patch up the evidence which they did

call on the point of section 28(3) in any event.

That is the point I want to take you to in the Full

Court transcript. Can I ask you to read at page 85

what Mr McCarthy, who then stood in the position of

Mr Sackar, was putting at line 22.	He said, quite
wrongly, with respect:

What he didn't go into, of course -

meaning the trial judge

Stenhouse(2) 21 10/3/93

was the evidence that was before him, from

both Hughes, who was the main underwriter of

the insurance company, and Plate, the expert

witness -

Your Honours do not need to go to that evidence, I

hope. Plate was called wholly and solely for the

purpose by Sun Alliance of showing what would have

been required by a prudent insurer by way of extra

fire precautions, sprinkler systems, fire

extinguishers, et cetera; in other words, the very

matters that could be relevant in reducing Sun's

potential liability under section 28(3).

Hughes was called for a variety of reasons by Sun, and one of those was to go into the very same

matters.	One of them, I accept, was in relation to
premiums.	When they are all boiled down, the end

result is that His Honour had before him the

evidence that the premium in all probability would

have been approximately two and a half times what

it was. That is the evidence before His Honour

Justice Cox.

TOOHEY J:  Mr Anderson, did you say a moment ago that what

Justice Cox envisaged would go before the Master

was the extent of the loss sustained by the

insured, not a section 28(3) question at all?

MR ANDERSON:  No, and I say - - -

TOOHEY J: Is that reflected in the formal order that was

made?

MR ANDERSON: 

Yes and no, of course, or we would not be here

probably. If the Court would go to page 477, the
order No 2 is:

That the plaintiff recover against the second defendant damages to be assessed.

No 3 over the page is: 

That the assessment of the plaintiff's damages

against the second defendant be heard before a

Master of the Court.

So it does come, I accept, down to what was meant

by an assessment of damages.

DAWSON J: But that is an exercise which has got to be

conducted, anyway.

MR ANDERSON:  Yes, it does, Your Honour. In other words,

unless there is agreement - and, as I think you

were told from the bar table, there has never been

any disagreement between my friend Mr Heydon's

Stenhouse(2) 22 10/3/93

client and ourselves on the quantum as to its
reasonableness and its amount, but yes, it does

have to be assessed.

McHUGH J: But, Mr Anderson, you cannot work out

section 28(3) until you first find out what the

insurer's liability is and then under 28(3) that is

to be reduced to the amount that would place him in

the position which he would have been if the

failure had not occurred.

MR ANDERSON:  Yes, I accept that, Your Honour. But what I

am putting is that Sun, aware of that, called

evidence in its attempt to satisfy its onus under

section 28(3). The evidence was in such a state

that His Honour - and I have not come to this yet -
that His Honour made findings on the balance of

probabilities which are to the effect that although

the premium would have been higher, none the less
they would have insured and he made a finding about

the probability of extra precautions.

In other words, the state of the evidence, the

way it was left by Sun at the trial was such that

His Honour had no option but to be only able to do

one thing, to say that it is the premium that is

the matter that has got to be adjusted. So I want

to come to that Your Honour Justice McHugh, and I

can do that if it is convenient.

McHUGH J: But even taking your case at its highest, if the

result that has now been reached in the case had been reached before Justice Cox, he would surely

have made some findings about the amount of the

premium, would he not?

MR ANDERSON: Well yes, I have to accept that, but that is

something that he has not spelt out; it was argued;

evidence was led, and the effect of it is

arithmetical, it is not difficult to do, but

His Honour did not say in his reasons what the

figure was, I accept that.

DEANE J: But is that so, because on His Honour's findings

and orders, the Master had to work out what the

premium would be, because any increase in the

premium would have decreased the damages against

the broker.

MR ANDERSON: Yes, I accept that. That depends, of course,

entirely on what was meant and is now the case on

the assessment of damages. If the Master's job was

to assess damages in toto and that included

section 28(3), then, yes, Your Honour, that is so.

Stenhouse(2) 23 10/3/93

DEANE J: Well would the Master also have had to work out

the cost of any extra precautions which the insurer

would have insisted on?

MR ANDERSON:  No, with respect, because you see that was the

evidence that was called, the evidence that the

trial judge dealt with, and that was a final issue

that he determined and - - -

DEANE J: His Honour has found that they probably would have

investigated the fire precautions and has made no

finding about what the consequence of that

invest_igation -

MR ANDERSON: Well, with respect, I say that if you look at

that page of page 475, His Honour has done several
things: he has firstly weighed up the whole of the

evidence, and there was other evidence, and when he

says at the top of the page:

Despite Hughes's conservative evidence -

what he is really saying is, taking all the

evidence into account and accepting that Hughes is

the high point from Sun's case - that is really

what I am suggesting His Honour is saying - despite

that, in other words, that is the evidence on that

side of the scales:

I am not satisfied -

et cetera.

Now then His Honour moves on to take into

account certain other matters; one of them was the

accommodation business, and that has some relevance

to the relationship between the two companies, and

His Honour takes that into account. His Honour

then moves into what I say are the findings, at

line 13, and he says:

It is plain that Sun Alliance would have

charged a higher premium -

finding one: finding two - I paraphrase - on the

balance of probabilities:

it would have investigated the tenant's fire

precautions with care -

finding three, on the balance of probabilities, I

find:

that it would have continued to insure the

property.

Stenhouse(2) 24 10/3/93

In other words, I am putting it to Your Honours

that His Honour was left with the evidence in such

a state that he was forced to finally merely

comment on the premium aspect because the other

aspects were not available to Sun; the paucity of

evidence and, indeed, what evidence there was was

all to the opposite effect.

McHUGH J:  I am sorry, I am not following this at all. What

has the evidence about Mr Plate got to do with the

case? The only question is - - -

MR ANDERSON:  Very little, with respect, Your Honour, and it

really was not necessary, with the greatest of

respect, for His Honour to say anything along the

lines he did. And you will see that he does, after

the passage I have just dealt with - - -

McHUGH J: See, if Sun Alliance had required the insured to

make alterations or install various precautions,

that is an irrelevant issue at this stage, is it

not?

MR ANDERSON:  At this stage - - -

McHUGH J: Yes, at this stage. This is an indemnity policy,

so the only question is, what loss did they suffer? What was the value of their premises at that stage? And then you determine to what extent the liability for that loss is reduced by reason of

misrepresentation.	Can it bring in anything else
except premium?

MR ANDERSON:  No, 28(3) it is now contended brings into

account premium and/or the possibility of, using the words of 28(3), "the liability of some being

reduced on account of" - it is suggested, and it is

the only thing that is suggested - "the fact that

maybe" - it is all in this form - "maybe if there

had been evidence and it had been sufficient, that

there were sprinklers in some parts of the

building, and if they had been in those parts of

the building, then maybe they would have prevented

the fire". In other words, Your Honour, putting it bluntly, it required expert evidence which they did not call.

DAWSON J: But on any view of it, although he made some

findings, Justice Cox did not make enough findings

to apply section 28(3).

MR ANDERSON: Well, I am putting it to Your Honour that he

did because - - -

DAWSON J: For instance, if there was to be a higher

premium, he did not say what it was.

Stenhouse(2) 25 10/3/93

MR ANDERSON:	No, he did not.
DAWSON J:	So he did not make enough findings.

MR ANDERSON:  No, he did not. I am stuck with that.

DAWSON J:  And surely he is the person to determine, if now

he has to make findings with respect to 28(3), how
he goes about it and whether there is sufficient

evidence to do so or whether it is proper to call

other evidence.

MR ANDERSON:	Your Honour, on premiums I could not disagree, with respect, because His Honour has not been
complete in his reasons, but it is not the case
that there should be an attempt at a retrial, and
that is really what it amounts to on my learned
friend's submissions, since he has not walked away
from the position that was put to him - - -

DAWSON J: But, you see, he has not determined

section 28(3). He did not have to. Now, he has

to: well it is for him to say - - -

MR ANDERSON:  With respect, he did deal with section 28(3).

My learned friend's counterpart in the Full Court

suggested exactly what is being suggested now, to

the Chief Justice. The Chief Justice said - and I

have given you the pages and have not taken them to

you yet, I apologize.

MASON CJ: That is at the top of page 87, he said:

We feel that we could proceed to make

any findings that is necessary to be

made - - -

MR ANDERSON:  He said it several times. At the top of 86,

at line 27 on 86.

MASON CJ:  But what does it matter, ..... in the event did not

make the findings?	Why can it not go back to
Mr Justice Cox.

MR ANDERSON:  The Full Court did not make the findings

because they did not accept the submissions -

MASON CJ:  No, of course, but, in those circumstances, why

does it not go back to Mr Justice Cox who can

complete what he was about?

MR ANDERSON:  He can complete what he was about, with the

greatest of respect, on that issue which, I have

conceded, he did not finally deal with. In

relation to the other issue, in our submission, it

is a blatant attempt - and I do not think there is

any secret about it - to have a chance to call the

Stenhouse(2) 26 10/3/93

type of evidence that they thought they had called,

but when it fell short of that, they now wish to

bolster.

MASON CJ: Well, if that is so, he can repudiate it.

MR ANDERSON:  Yes, he can. Can I tell Your Honour - you may

be wondering what my concern is, and I think you

should know, with respect. My concern is this,

that suddenly at the court doorstep there is a

capitulation in relation to the main parts of the

appeal. They are the matters, basically, I should

tell you Your Honours, that we contended for at the trial. So, that is why we are more than happy with what has happened there.

But, the substitution of a judgment, that is,

the one we have got now, against Alexander, to be
substituted for one against Sun, still leaves open

the one issue and the concern is this: that we

have a judgment against my learned friend,

Mr Heydon's client, on one matter which is not

appealed by him, and that is that it was his

client's negligence which led to the

non-disclosure. That is trying to encapsulate it

in a nutshell.

If my learned friend Mr Sackar's client gets

back before a trial judge, calls further evidence,
and say, was successful in convincing the trial

judge that under section 28(3) the liability - say

they called all the expert evidence and the trial

judge said, "Yes, I find that the fire would not

have happened if there had been sprinklers here and

here, or if it happened it would have been put out

and there wouldn't have been any loss", and their

liability is reduced to nil, then it is not much

value for my client to have a judgment against Sun.

That is why we have to force, with respect, the issue of a final determination by this Court in

relation to what matters are to be finally

determined in the Court below, because - - -

McHUGH J: But does it make any difference? If it was held you would have got a judgment against Sun Alliance

for nil, then notwithstanding Stenhouse's

negligence your quantum would be nil against them,

would it not?

MR ANDERSON:  No, I do not think so, with respect.

McHUGH J: Well, because their negligence consists in

failing to insure you and if you would not have

recovered anything under the insurance - - -

Stenhouse(2) 27 10/3/93

MR ANDERSON:  No, Your Honour, not in failing to insure us,

that is - - -

McHUGH J:	I am sorry, in failing to notify you.
MR ANDERSON:	In failing to tell us about our duty.

McHUGH J: That is a condition.

TOOHEY J: But it is their negligence, it is the very aspect

of their negligence, on the approach just put to

you, that would lead to a reduction in the

liability of the insurer, so that the liability of

the broker would stand independent of that, it

would not be reduced by reason of the insurer's

reduced liability.

MR ANDERSON:  Yes, that is right.

TOOHEY J: It is inflated by reason of the insurer -

MR ANDERSON:  Yes, with respect I agree, but that is why I

cannot - - -

McHUGH J: It is all right, Mr Anderson.

MR ANDERSON:  - - - allow this Court, the last Court, to put

all our eggs into the Sun Alliance basket, and then

with the risk, albeit I suppose minimal but it may

be there, of that being just dissipated by some

subsequent evidence, and that is why I want to tell

the Court that this matter again has been thrashed

out in the Full Court and they there suggested to

the Full Court that they wanted to go back to the

trial judge - the Chief Justice said, at the

various passages that I want to take Your Honours

through, but I do not need to if you have accepted

that His Honour said it several times -

MASON CJ: Well, it is clear enough that that is what

His Honour was saying.

MR ANDERSON:	Yes, and moreover, if Your Honour pleases
DEANE J: But what do you ask us?	I mean, the Chief Justice

said, "If we reach the stage that we have now

reached, the Full Court has to make a number of findings which will be very difficult for it to make, but it will do its best, because the trial

judge has not made them." Well now, I presume you

are not suggesting that this Court goes through all

this evidence to make - - -

MR ANDERSON:  No, no.

Stenhouse(2) 28 10/3/93

DEANE J: Well, do you want us to send it back to the

Full Court?

MR ANDERSON:  No.

DEANE J: But the Full Court said it would have to make the

findings though.

MR ANDERSON:	The Full Court said effectively
DEANE J:	I mean, we cannot dispense with the findings.

MR ANDERSON:  No·. With respect, Your Honour, the Full Court

said, "You get on with your argument. You tell us

why your liability under section 28(3) should be

reduced, not just in relation to premiums, but in

relation to", we will call it, "the sprinkler

system", et cetera. That is what they said. And

then Mr McCarthy went into it and dealt with the

evidence; it has all been dealt with. And that

goes from page 87 - his submissions, he refers the

Full Court to the page references where the

witnesses gave the evidence: 87, 88 and through to 89. So, Mr McCarthy, in Mr Sackar's position, has

made those submissions. The Full Court has

obviously not accepted them and the trial judge, we
say, did not accept them; we say the issue is

closed.

We say that this Court should either, with

respect, say that the issue is closed, or

alternatively, if you are against me on that, then

this Court should say there is no way that our

rights, as the meat in the sandwich, as it were,

should be prejudiced by this attempt at this stage

to rerun a trial and that we should therefore be

protected in whatever orders the Court makes.

DAWSON J: Really what you are asking us is to send it back

to someone, presumably Mr Justice Cox, to determine

the section 28(3) issue - - -

MR ANDERSON:  No, I am not asking that. I am saying 28(3)

has been determined both by - - -

DAWSON J: But you conceded it has not. At least he has got

to decide what the premium - - -

MR ANDERSON:  He does. With respect, Your Honour, we are

only dealing with infinitesimal amounts there.

DAWSON J:  To determine the section 28(3) issue, but on the

evidence that is currently before the Court; that

is what you are asking?

MR ANDERSON:  Yes - - -

Stenhouse(2) 29 10/3/93

DAWSON J:  And the other side seeks to be able to apply to

call further evidence.

MR ANDERSON:  Thank you, Your Honour. My further fall-back

to this, if I may put it this way, and I do not do

it disrespectfully, is that - yes, if it did go

back at least it should go back on this basis: one,

for Justice Cox to report what he understood the

arrangement was and what he was doing, and indeed,

that is what should have happened and what counsel

for Sun should have done in the Full court if they

were pursuing this line. They should have said to

the Full court, "Require a report from the trial

judge". So that is my first request.	Just merely
on that.

Secondly, that if it is to go back it should

not be effectively a retrial, which is what it is
going to amount to and therefore that it should be

for Justice Cox to determine solely and wholly on the basis of the evidence now before him and then the other contention, of course, is my learned

friend's: that is to go back and effectively

re-open the matter.

I do not want to trouble this Court with

taking you to all the voluminous evidence

references. That, with respect, would not be

appropriate, but the Court can accept my assurance

that all of the evidence which Mr McCarthy put to the Full Court in his attempt to convince them of

what they should do was an effective summary of the

evidence. In other words, Mr McCarthy in that

position - and I think he says it at one point -

accepts that he is effectively bound by what has

happened.

In other words, he then gets on and makes the

address to the Full Court on the basis of what has

already happened. We say that it is most

unfortunate, and it should not be the case, that at

which Sun Alliance wishes to hang onto and they do	this stage of the piece there is this small thread	it solely by virtue of a slip, I suggest, in that
His Honour did not go on to say, "I find the difference in premium is $500'', or whatever it was.
That would be unfortunate, with respect, and that
is their opening gambit. They say that is how they
get into the area where they can make that
submission.

MASON CJ:  Can I just ascertain this from you. You do

oppose, do you, a remitter of the matter to

Mr Justice Cox to determine such issues as may be

outstanding, in particular the scope of the

section 28(3) inquiry?	You would oppose the
remitter in those terms?

Stenhouse(2) 30 10/3/93

MR ANDERSON:	Yes, I do, Your Honour, except that I have conceded that unless it is agreed he has to fix
that premium, I concede that.  I oppose it but at
the same time I have to - - -
MASON CJ:	In other words, you want this Court by its order

to confine the consideration given to outstanding

issues by Mr Justice Cox?

MR ANDERSON: Precisely, with respect, Your Honour. That is

our concern, that if it is important enough to have

got here - and the basis on which leave was

granted, of course, has now all fallen by the

wayside. This really, at this point of time, is a

request, almost a request for leave now, for this

Court to do what my friend asks.

MASON CJ:  I do not think you need to go through all that.

DAWSON J: Really, it boils down to this: the only issue

outstanding, you say, is the amount of the premium.

MR ANDERSON:	Yes.
DAWSON J:	Once that is determined, that will automatically

determine the amount under section 28(3).

MR ANDERSON:  Yes, because the rest of the matter has all

been dealt with, both in the trial and in the Full

Court and then it becomes, once His Honour deals with that, a question of straight to the Master

for, as I put it to Your Honours, the nuts and

bolts operation of how much the loss is.

DAWSON J:  Mr Anderson, reading the pages you have handed

up, page 90, the middle of the page, Mr McCarthy

seems to have raised the very type of thing that Mr

Sackar has raised before us and I cannot see in

what you have handed up any place where the Full

Court says you are not allowed to go into that.

MR ANDERSON:  Your Honour, with respect, on page 90

Mr McCarthy is addressing the Full Court on

section 54 of the Act, and that is at line 3.	He
is finished.	The discussion finishes.

DEANE J:	I am sorry, it was page 89 I should have said?
MR ANDERSON:	In the middle of page 89?
DEANE J: Yes.
MR ANDERSON:	Yes, Your Honour.
DEANE J:	Now, where does the Full Court shut that out?

Stenhouse(2) 31 10/3/93

MASON CJ:  The Chief Justice on 90 refers to 28(3)

specifically, four-fifths of the way or

three-quarters of the way down the page -

MR ANDERSON:	Yes, it does, Your Honour.
MASON CJ:	"What are we to make of sun-s.3 of s.28 and that

is the key to this I suppose".

MR ANDERSON:  Yes, and he asked that of other counsel when

it was their turn to address and section 28(3) was

not argued, in this respect.

DEANE J: But where do you say the Full Court rejected 28(3)

as being a live issue in the way Mr McCarthy said

it - - -?

MR ANDERSON:  In the earlier parts, Your Honour. Sorry, I

not rejecting it was a live issue but saying to

Mr McCarthy, "You have made your bed and you must

lie on it.	You deal with the evidence that has
already been called".	Your Honour, very briefly,

the references are at the top of page 86 where

His Honour the Chief Justice says:

The evidence is all there and the judge's findings were there as to credibility and so

on.

That is the evidence of Hughes, et cetera.	And
then Mr McCarthy goes into - - -

DEANE J: But if that is so the Full Court is saying that

the matters you want to raise in relation to 28(3)

have not been the subject of findings.

MR ANDERSON:  No, with respect, what the Full Court is

saying, as I read it, Your Honour, is that they

have been but you tell us what your submissions are

and why Justice Cox is wrong.

DEANE J: Well, you show me where they say that as distinct

from "will make any necessary finding".

DAWSON J: But you really mean not that they have not been

the subject of findings but they have been the

subject of evidence.

MR ANDERSON:  I adopt that, Your Honour, thank you. That is

what I mean.

DEANE J: Well, then, who is to make the findings, on your

submission?

MR ANDERSON:  The findings have been made at trial by the

judge, I put it to the Court. I have not developed

that aspect of it, I apologize, but that is what I

Stenhouse(2) 32 10/3/93

started on when I was on page 475. The issue has

been pleaded, he has heard evidence, Sun have chosen to call such evidence as they saw fit,

His Honour has ruled upon that evidence finally,

the Full Court is asked, effectively, "Can we go back and call some more evidence?" and the Chief

Justice says, "No, make your submissions to us" and

the submissions are made and there is no finding

and therefore - - -

DEANE J: Well, let us be specific. Where is the finding

about what would have happened pursuant to what the

trial judge found, and that is the insurer would

probably have investigated the tenant's fire

precautions. Who is to make the finding about what

would have happened as a consequence of that

investigation?

MR ANDERSON:  That is the finding of Justice Cox in the

middle of 475 where he says:

probably it would have investigated the

tenant's fire precautions with care.

DEANE J: Yes.

MR ANDERSON:  Yes, I say that what he has done there, as I

put it to Your Honour before, is that he has said,

"I make that finding on the balance of

probabilities, but I then go on to make the further

finding that it is more likely that they would have

continued to insure the property" and by exclusion,

and that is the only way I can put it to Your

Honours, His Honour has effectively said that

having dealt with the evidence it is not good

enough, and therefore the only issue is the

premium. Now, he does not say that, and perhaps he

should have, with respect, but it is there in his -

it is not as if it is just a throwaway line, he

deals specifically with 28(3) and in relation to

the evidence called on it.

DEANE J: But would not, in those circumstances, the

appropriate course be that it go back to

Justice Cox who knows what he dealt with, what the

evidence was, what the basis on which the parties

conducted the case was?

MR ANDERSON:  Your Honour, it is very difficult to argue

against that as a practical proposition given that

His Honour has to cross his Ts and dot his Is on

the premium.

McHUGH J: But there is more to it than that, is there not?

These actions were never consolidated, were they?

They were just heard together.

Stenhouse(2)	33	10/3/93
MR ANDERSON:	No, it is one case, Your Honour.	We sued both

defendants. So yes, Your Honour, it is difficult

to argue against the practicality of that.

Perhaps, with respect, Your Honours might see that

my client is particularly concerned with some

finality, and it is for those reasons that I

advanced that this Court should assist in that if

it would in making orders which at least limit the

extent to which we may have further hearings,

because one can envisage that if it goes back on

section 28(3) and they are not satisfied, then the

whole gamut could be run again, further evidence

could-be called -

MASON CJ:	I think you are wandering into areas that you have already traversed.
MR ANDERSON:	I have already indicated to Your Honours my

preferences, and I accept that my first one you

might not be impressed with, but certainly we say
there should be some finality put on by this Court,

with respect.

MASON CJ: Yes. Mr Heydon.

MR HEYDON:  Your Honours, could I just say four brief

things. In relation to the appeal Mr Justice Deane

asked, in effect, what was said in the Full Court
about the sort of arguments I have been putting to

this Court. The points on which we have been

complaining were not raised in argument before the

Full Court by any party nor by the court

themselves, and so those parts of the judgment -
those two pages or so - came as a surprise to us

and I think to the other parties.

DEANE J: Well, as the Chief Justice pointed out to me at

page 92 Chief Justice King said the judgment:

doesn't deal with s.28.

Mr McCarthy: No.

MR HEYDON:  Yes, but Mr Justice Cox did not have to deal

with 28 because of his finding that there was no

contract. His path of reasoning simply - - -

DEANE J: But there is a problem here in terms of fairness

to Mr Anderson's client, is there not, and that is

this: if it goes back and Mr Sackar's client can

run some new case about how if there had been an

inspection they would have required steel doors,

and if they had put in steel doors the fire would

not have happened, and you then come to your

position; the case against you will be: if you had

done your job and the insurer had an inspection,

the insurer would have required steel doors, and if

Stenhouse(2) 34 10/3/93

there had been steel doors the fire would not have

happened therefore you are liable. I would have

thought there could be a real problem of causation

in that. Well now, where that leads I do not know,

but it seems to be very unfair to Mr Anderson's

client at this stage.

MR HEYDON:  What Your Honour has just said leads into an

earlier question Your Honour asked and which I was

proposing to deal with.	Yes, there may well be
unfairness.	Your Honour at one earlier point said

to Mr Sackar, I think it was, "What is wrong with

making Heydon's orders and adding in a remitter as

well?" What is wrong with it is that to have a

remitter, particularly of the very general type

that Mr Sackar wants, would annihilate the other

orders. You cannot have judgments made in favour

of some parties and dismissals of proceedings

brought by other parties - - -

DEANE J:  I follow that, but what that leads to is this, is

it not, that if the parties cannot sit down and

work sense out of this in terms of something that looks like developing into a second marathon, why should we not simply, if we uphold your primary

submission, correct the decision of the Full Court

and send it back to the Full Court for it· to work out what the consequences of that are in the hope the parties will exercise a little common sense in

the meantime and engage in some negotiation.

MR HEYDON:  Yes, one understands why Your Honour says that;

I can assure Your Honour that there have been plenty of negotiations in the last few days.

DEANE J:  I was not criticizing anybody, but when at this

stage one sees costs are covered up to here, really

one shudders.

MASON CJ:  I think His Honour's emphasis was on common sense as an additional element in the negotiations.

MR HEYDON:  Can I indicate our general position in this way.

We are in the same position as Mr Anderson as to

what should happen and we adopt his arguments and
we would wish to add nothing further to his

arguments save to put this, and this is a little

like a rock in a river where the water has run

past. One element in Mr Sackar's submission was

that section 28(3) has related to remedy to

damages. We submit that is not so. It says it is

related to liability and the fact that an order

under section 28 might lead to a reduction of 100 per cent reveals that it might affect the

judgments made against parties, but we just put

that point shortly.

Stenhouse(2) 35 10/3/93

If the problem is a problem that

Mr Justice Cox failed to make enough findings, or

at least left it in doubt as to whether he had

completed his process of fact finding, if that is

the problem, then in our submission the only
appropriate remitter is for a remitter to him on a

limited question on the evidence before him, or it

may be a remitter to the Full Court to determine
what should be done in the light of this Court,

having disturbed that part of the Full Court's

reasons. It may in the long run be more efficient

to go to Mr Justice Cox, but it may be better for
the Supreme Court of South Australia to work out

its own internal arrangements.

DEANE J: If the parties cannot agree as to how it should go

to Justice Cox to be finally disposed of, what can

really be said against the proposition that short of reading all the evidence and whatever there is of the submissions before Justice Cox, we should

remit it to the Full Court?

MR HEYDON:  I do not think anyone is suggesting Your Honours

should read any evidence or reach any conclusion of

your own on that question. The only choice is

whether there should be no remitter, in which case

we would invite some orders on a sheet of paper,
which we will hand up shortly, to be made or that

there should be a remittal, and then we would at

least propose orders on another pair of sheets of

paper. I appreciate the time. Would it assist in

concentrating debate if I handed up those two

documents?

MASON CJ: Yes.

MR HEYDON:  I first hand up a sheet of paper with no

heading, and this is on the assumption that the appeal is allowed without remitter. Then can I

hand uP sheets of paper headed ''Remittal".	Can I
indicate a preference in answer to Justice Deane's
question?	On reflection it seems more appropriate,

if there be a remittal, that it should be to the

Full Court. Yes, there are two pages and a number of sets.

MR HEYDON:  I need not trouble the Court with the page

without a heading. The page with a heading

"Remittal" has the consequence that all this Court

would do would be to allow the appeal and set aside

at least the orders of the Full Court, possibly

also the orders of Mr Justice Cox. There is then a

costs order concerning the costs in this Court and

the Full Court but not before Mr Justice Cox

because that would be in a different category.

4(a) remits to the Supreme Court of South

Australia, leaving open whether it be the

Stenhouse(2) 36 10/3/93

Full Court or Mr Justice Cox, the question of the entitlement of Sun Alliance to have its liability

reduced by reason of conditions which it might have
imposed on Austcan Investments a proper disclosure

being made.

The closest Mr Sackar ever came to identifying

the point he wants remittal on was under pressure

from the Bench and that seems to be the idea, and

Justice Deane gave an example of it a few minutes

ago and we submit that, to that extent at least,

our learned friends should be tied down. The

remittal should be on the basis that the parties

are to be at liberty to argue that there are no

further findings to be made. I mean, it is

conceivable that in the Supreme Court of South

Australia, page 475 of Mr Justice Cox's reasons for

judgment, will be treated as exclusive findings,

but in any event that no further evidence be called

on that matter.

The essential difficulty has arisen because

Mr Justice Cox appears, from a perhaps

understandable desire for economy, to have taken

his path of reasoning as it led him and decided those things he had to decide. When it led him away from 28(3) he did not bother to make findings

on conclusions that were not necessary. If that is

the problem, then there is no occasion for

permitting any further evidence to be called and,

in our submission, this Court ought not to either

give any imprimatur to a wide reopening before

Mr Justice Cox or to the general retendering of

evidence before Mr Justice Cox.

TOOHEY J:  Mr Heydon, there seems to be something missing

from this second one, namely a substantive order in

lieu of the setting aside of the orders below. Are

we to read, as it were, paragraph 4 of the short

document as incorporated in the longer document?

MR HEYDON:  I think I understand Your Honour's problem. No,

for this reason. It is theoretically possible that

on remittal to South Australia, Mr Sackar gets

nowhere; in other words, all he gets is a slight

increased premium and that is something that

Mr Anderson's client will have to pay, and not us.

At the other extreme, the possibility is that he will succeed in an argument but had there been

disclosure, conditions would have been imposed

which would have prevented the fire having ever

broken out, so there would have been no loss, and

on that basis, there will be no judgment against

the insurer, no judgment against Sun Alliance.

They would have been wholly successful in the

proceedings, but there would be a judgment to a

Stenhouse(2) 37 10/3/93

corresponding extent, subject to questions of

causation against my client.

That is why we have not incorporated order 4, judgment, or the dismissal of the proceedings in

order 5 in the unheaded document in the other

document. It illustrates the radical nature of a

section 28(3) argument and how utterly unremedial

it is, and how it cannot possibly be permitted to

be raised again in South Australia under the

heading of a remitter to the Master to assess

damage.

TOOHEY J: There would have to be some sort of reasons for

judgment to accompany this document, to explain why

the matter is going back, would there not? Going

back without any - on no basis other than that the

appeal has been allowed without any indication of

this Court's view as to the position of the parties

to the appeal.

MR HEYDON:  I suppose there would have to be very brief

reasons for judgment.

TOOHEY J:	I am not for a moment encouraging the writing of reasons. It just seemed to me that it is a rather
curious document divorced from the circumstances in which the appeal comes before this Court.

MASON CJ: But we may have to deliver reasons in any event

to explain why it is we are allowing the appeal.

MR HEYDON: There would have to be some reasons, if it is

not presumptuous to say so, roughly following the

lines of our written outline.

TOOHEY J: That is really all I mean. There has to be

something.

MR HEYDON:  Then there would not need to be very much in the

way of reasons for the orders. All we have done in

this remittal is to try to be fair, among other

things, to Mr Anderson's client by not having

judgments made which are sort of contingent and

conditional upon future events and reductions that

may or may not be made.

McHUGH J: But is not the remitted document somewhat

misleading, because although you agree to setting

aside the orders made both by Justice Cox and by

with the question of your liability to Austcan on the extreme view of the case.

the Full Court, the fact that you are only

remitting a particular question might lead the

Stenhouse(2) 38 10/3/93

MR HEYDON: If a misleading impression is being experienced

by Your Honour then it probably does need to be

remedied.

McHUGH J:  No, it is not by me, but the only question if it

is being remitted is this question 28(3) question.

MR HEYDON:  Every other finding of fact that has survived

appeal, which is all of them of Mr Justice Cox,

would stand.

McHUGH J: But supposing the liability of Sun Alliance is

reduced-by, say, 60 per cent, for example, Austcan

would want to recover that 60 per cent against you.

MR HEYDON:	Yes.
McHUGH J:	Now, that issue is not dealt with unless by

implication one can deal with it under paragraph 2

of your orders.

MR HEYDON:  I think, as we see it, it would follow, as it

were, consequentially upon 4(a) of the remittal

document because you remit the question, and having

answered the question you just see where the

procedural consequences lead you, where the
remedial consequences lead you. It would leave the
courts below untied by their present remedial
orders and at liberty to substitute remedial orders

which properly reflected the rights of the parties

having had the 28(3) inquiry.

TOOHEY J: But if someone picked up that document,

Mr Heyden, divorced from any reasons - and the

judgment ought to speak for itself - that person

would find in 4(a) an assumption that there had

been some decision holding Sun Alliance liable,

that that liability subject to reduction under

section 28(3), and then the reader would say - - -

MR HEYDON:  I see Your Honour's point.

TOOHEY J:  Where has the Court said that Sun Alliance is

liable?

DAWSON J:	Why could you not just remit it for the further disposition of the matter in accordance with
section 28(3) and then with the conditions you impose - - -?
MR HEYDON:	For example, that would appear to give Mr Sackar

liberty to call evidence to challenge the findings

of - - -

DAWSON J:  No, that is (a) and then (b) is as you have it

there.

Stenhouse(2) 39 10/3/93

MR HEYDON:  What I was going to say, and I am sorry if I am

slightly behind Your Honour, but Mr Justice Cox did

make some findings. Mr Sackar has refused to

disallow an intention to attack those findings if
the evidence turns out right for him. Surely what

findings have been made must be sacrosanct.

DEANE J:  Does not the absence of the agreement between the

parties on this really make it clear that there are

two possibilities. One is since there is no

agreement to vary the orders of the Full Court, if

you do not persuade us on your section 28 argument,

we simply dismiss the appeal. If you do persuade

us on your section 28 argument we give reasons why

you persuade us, we uphold the appeal, we set aside
the judgment of the Full Court and we simply remit
the matter to the Full Court to be dealt with in a
context where their approach to section 28 has been

held to be mistaken.

If the parties cannot agree on a course from

now, really why should we get involved in all these

messy things. Though, no doubt the Full Court will

greatly resent my comment as to why should we get

involved when we are sending it back to them.

MR HEYDON:  We will not remind them of it. I think the

logic of Your Honour's two possibilities is

difficult to resist. All we were seeking to do in
the remittal document was to try and clarify
things, but implicit in what Your Honour has put,

there is at least no encouragement to Mr Sackar to

go beyond what - I mean, it is open to -

DEANE J: Well not really, because it will be going back to

the Full Court, which seems to have indicated it
thinks the evidence has been closed. Well now, if,
on examining the thing in the sort of detail that

Their Honours may be prepared to undertake, it

appears that the view they expressed is justified,

one would think it unlikely that at the next stage

of the hunt they would permit Mr Sackar's client to

go back to what it should have done in the trial

before Justice Cox.

MR HEYDON:  Yes. If Your Honour pleases, we have no further

submissions.

MASON CJ: Yes, thank you, Mr Heydon. Mr Sackar, do you

want to respond to what has been put?

MR HEYDON: Just before he does it, if Your Honour pleases,

I forgot to give you those outlines.	I will hand
them up now.

MR SACKAR:  All we would say is this, Your Honour: we would

adopt what Justice Deane has said, except that we

Stenhouse(2) 10/3/93

would say that the appropriate person is

Justice Cox and we put the reasons for that, but

what we - - -

MASON CJ:  When you say you would adopt what Justice Deane

has said, what are you referring to?

MR SACKAR:  I am referring only to the suggestion that,

implicit in what he said as I understood it, it

should be remitted and that the nature and the

scope of the inquiry should be left to the court to

which it is remitted. His Honour suggested the

Full Court. I agree with His Honour to the extent

that it should be remitted and the nature and the

scope should be left to the Court, but we say it

should be Justice Cox. That is all I want to say

on the issue.

TOOHEY J: But would you agree that it would go back with a

judgment against your client?

MR SACKAR: It logically must, if the appeal is allowed,

yes. The extent to which ultimately we are liable is to be determined.

TOOHEY J: That is another matter. There has to be some

foundation for it to go back.

MR SACKAR: But it is logical - yes. There must be a

judgment against Sun Alliance, the extent of that
judgment is to be determined, either by the

Full Court or by Justice Cox.

MASON CJ: Yes, thank you, Mr Sackar. The Court will

consider its decision in this matter.

AT 4.48 PM THE MATTER WAS ADJOURNED SINE DIE

Stenhouse(2) 41 10/3/93