Allianz Australia Insurance Ltd v BlueScope Steel Ltd - [2014] NSWCA 276

Court of Appeal

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Allianz Australia Insurance Ltd v BlueScope Steel Ltd [2014] NSWCA 276
Hearing dates: 16 April 2014
Decision date: 21 August 2014
Before: Basten JA at [1]; Meagher JA at [69]; Ward JA at [94]
Decision:
1. Appeal allowed in part.
2. Set aside the orders of the Dust Diseases Tribunal made on 30 May 2013.
3. Remit the cross-claim to the Tribunal for the purpose of determining:
(a) whether BlueScope was dispensed from compliance with condition 3 of the Policy;
(b) whether, if not, BlueScope should be excused under s 18(1) of the Insurance Act 1902 (NSW) from any breach of condition 3 of the Policy; and
(c) if necessary, BlueScope's claim to damages for breach of Allianz' obligation of utmost good faith in the respects alleged in par 22(b) of BlueScope's cross-claim.
4. No order as to the costs of the appeal.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:
INSURANCE - s18(1) of the Insurance Act 1902 (NSW) - whether primary judge erred in finding no prejudice for the purposes of s18(1) of the Insurance Act 1902 (NSW) - whether loss of chance to cross-examine plaintiff amounted to prejudice from late notification of the claim - whether refusal to take over conduct of proceedings and/or to indemnify dispensed insured from obligation not to make settlement without prior consultation - whether loss of opportunity to seek contribution from co-defendant to moneys paid to plaintiff to settle claim amounted to prejudice for the purposes of s18(1) of the Insurance Act 1902 (NSW) arising from failure to consult before settlement

CONTRACTS - general contractual principles - construction and interpretation of contracts - whether insurer breached contract in declining to take over conduct of proceedings - whether refusal to indemnify by insurer amounted to breach of the policy allowing the insured to claim damages for settlement moneys paid without consent of the insurer

APPEAL - whether trial judge misconstrued test required for s 18(1) of the Insurance Act 1902 (NSW) by taking the term "prejudice" to require "irretrievable prejudice"

APPEAL - whether trial judge erred in failing to find or giving reasons for not finding that failure to seek contribution from co-defendant to settlement sum paid to plaintiff was a breach of the obligation of good faith owed by the insured to the insurer
APPEAL - s 32 Dust Diseases Tribunal Act 1989 (NSW) - appeal limited to points of law - where there are not the requisite factual findings to enable determination of a question of law remittal to enable requisite findings of fact to be made
Legislation Cited: Dust Diseases Tribunal Act 1989
Dust Diseases Tribunal Regulation 2007
Insurance Act 1902
Supreme Court Act 1970
Workers Compensation Act 1926 (NSW)
Cases Cited: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570
Amaca Pty Ltd v Booth [2011] HCA 53; (2011) 246 CLR 36
Amaca Pty Ltd v New South Wales [2003] HCA 44; (2003) 77 ALJR 1509
AMP Financial Planning Pty Ltd v CGU Insurance Ltd [2005] FCAFC 185; (2005) 146 FCR 447
Austral Standard Cables Pty Ltd v Walker Nominees Pty Ltd (1992) 26 NSWLR 524
Australian Stratacore Holdings Ltd (in liq) v Sanwa Australia Securities Ltd [1994] NSWCA 11
Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139
B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2009) 74 NSWLR 481
Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430
Booth v Amaca Pty Ltd [2010] NSWDDT 8
Bowes v Chaleyer [1923] HCA 15; 32 CLR 159
Browne v Dunn (1893) 6 R 67 HL
Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649
Captain Boyton's World's Water Show Syndicate Ltd v Employers' Liability Assurance Corporation Ltd (1895) 11 TLR 384
CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1
CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; 187 CLR 384
Craine v The Colonial Mutual Fire Insurance Company Ltd [1920] HCA 64; 28 CLR 305
CSR Ltd v Amaca Pty Ltd [2009] NSWCA 338
Dasreef v Hawchar [2011] HCA 21; (2011) 243 CLR 588
Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1
Downes v Amaca Pty Ltd [2010] NSWCA 76; (2010) 78 NSWLR 451
DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423
Eaton v Carrier Air Conditioning Pty Ltd (2004) 1 DDCR 716
Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88
Fercometal v Mediterranean Shipping Co [1989] 1 AC 788
Foran v Wight [1989] HCA 51; 168 CLR 385
General Omnibus Co Ltd v London General Insurance Co Ltd [1936] IR 596
Groom v Crocker [1939] 1 KB 194
Hotham v East India Co (1787) 1 TR 638; 99 ER 1295
ICM Agriculture Pty Ltd v Perry [2002] NSWCA 257
James Hardie & Co Pty Ltd v Seltsam Pty Ltd [1998] HCA 78; (1998) 196 CLR 53
King v Caltex Petroleum Pty Ltd [2013] NSWDDT 4
Kodak (Australasia) Pty Ltd v Retail Traders Association [1942] SR (NSW) 231
Kweifio-Okai v RMIT University [1999] FCA 1686, (1999) 47 AILR 4-223
McPherson and Davies Shopfitters Pty Ltd v Mercantile Mutual Insurance Ltd (Supreme Court (NSW), Wood J, 26 June 1986, unrep)
Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; (2010) 240 CLR 611
North Broken Hill Ltd v Tumes [1999] NSWCA 309; 18 NSWCCR 412
Park v Brothers [2005] HCA 73; 80 ALJR 317
Patrick Operations Pty Ltd v Comcare (2006) 68 NSWLR 131
Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564
Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235
Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363
Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33
Sargent v ASL Developments Ltd [1974] HCA 40; 131 CLR 634
Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208; 3 DDCR 1
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603
Toronto Railway Co v National British and Irish Millers Insurance Company Ltd (1914) 111 LT 555
Vetter v Lake Macquarie City Council [2001] HCA 12: (2001) 202 CLR 439
Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277
Texts Cited: Clarke, The Law of Insurance Contracts, (6th ed 2009, Informa)
Category: Principal judgment
Parties: Allianz Australia Insurance Ltd (Appellant)
BlueScope Steel Ltd (Respondent)
Representation: Counsel:
B W Walker SC with D T Miller SC (Appellant)
D F Jackson AM QC with G J McCarthy SC (Respondent)
Solicitors:
Rankin Ellison Lawyers (Appellant)
KJK Legal (Respondent)

File Number(s): CA 2013/00107578
Publication restriction: Nil
Decision under appeal

Citation:

BlueScope Steel Ltd v Allianz Australia Ltd [2013] NSWDDT 3

Date of Decision:

2013-03-15 00:00:00

Before:

Judge MJ Finnane QC

File Number(s):

DDT 6166 of 2006

HEADNOTE

[This Headnote is not to be read as part of the judgment]

This is an appeal from a decision of the Dust Diseases Tribunal in a dispute as to the liability of Allianz Australia Insurance Ltd to indemnify BlueScope Steel Ltd for the costs incurred by the latter in settlement of a claim brought against it by a former employee, the late Mr Jackson. Mr Jackson had developed mesothelioma as a result of exposure to asbestos. He claimed compensation from both BlueScope and from BHP Billiton Ltd. BlueScope was his former employer. The claim against BHP related to a period when he had allegedly been seconded to BHP during his employment with BlueScope.

Following the corporate demerger of BHP Steel Pty Ltd, BHP had indemnified BlueScope for workers' compensation claims at the relevant premises, subject to BlueScope using reasonable endeavours to pursue any applicable insurance. BlueScope and BHP were initially represented by the same solicitors and counsel, who attended a bedside hearing at the Tribunal shortly before Mr Jackson died.

BlueScope subsequently notified Allianz of the insurance claim and requested that Allianz take over conduct of the proceedings and confirm that it would indemnify BlueScope.

The insurance policy contained two relevant conditions: condition 2 - that the insured notify the insurer of any claims as soon as practicable - and condition 3 - that the insured, among other things, not enter into any settlement without written authority of the insurer.

Allianz declined to take over the conduct of the proceedings. After some time had elapsed, it informed BlueScope that it would not indemnify BlueScope under the policy due to the breach of the policy by late notification of the claim.

Shortly before the hearing of Mr Jackson's claim, BlueScope sought instructions as to Allianz' willingness to communicate and discuss with it settlement negotiations that it was anticipated would take place at the hearing. Allianz did not respond to that request.

At the hearing, BlueScope agreed to settle the claim by way of payment to Mr Jackson's widow. It was not disputed by Allianz that the amount of the settlement was reasonable. Allianz' complaint, rather, was that it had lost the opportunity to seek contribution from BHP towards that settlement amount. BHP settled the claim against it for a judgment in its favour with each party to bear its own costs. The effect of this judgment was to preclude any later claim for contribution by Allianz standing in the shoes of BlueScope.

BlueScope then cross-claimed against Allianz under its statutory workers' compensation policy for the amount it had paid in settlement of the claim. Allianz denied liability on the basis that BlueScope had breached conditions 2 and 3 of the policy and its duty of good faith to the insurer. BlueScope maintained that it had not breached the policy but that, if it had, any breach should be excused under s 18(1) of the Insurance Act 1902 (NSW) because Allianz had suffered no prejudice by any breach.

The primary judge held that Allianz was liable to BlueScope. His Honour found that BlueScope had breached the policy by late notification of the claim but that this should be excused under s 18 of the Insurance Act because no prejudice was suffered by Allianz. His Honour considered that the settlement of the proceedings without the consent of Allianz was not in breach of the policy because BlueScope was entitled to act as a prudent uninsured, as Allianz had refused to take over the defence of the claim and had refused to indemnify BlueScope.

In the appeal proceedings, Allianz submitted that his Honour had misconstrued the test in s 18(1) of the Insurance Act as requiring "irretrievable prejudice" rather than "prejudice" and that his Honour had erred in finding that there had been no actual or non-theoretical prejudice suffered by Allianz due to the late notification of the claim. The prejudice identified was the loss by Allianz of the opportunity of cross-examining Mr Jackson. Allianz pointed to the fact that BHP and BlueScope had shared legal representation when their interests were in conflict.

Allianz further submitted that the primary judge erred in determining that it was obliged to assume the conduct of the defence of the claim when notified by BlueScope and to confirm that it would indemnify BlueScope before any liability to indemnify had arisen. Further, Allianz argued that this conduct did not dispense BlueScope from its obligation under condition 3 of the policy not to make any payment in settlement of the proceedings without its consent; and that his Honour failed to deal with, or give adequate reasons for, the issue whether breach of condition 3 should be excused under s 18 of the Insurance Act.

Held:

(1) Basten JA at [56] & [59], Ward JA at [216] & [326] (Meagher JA agreeing at [73]): the primary Judge did not misconstrue the test under s 18 of the Insurance Act to require "irretrievable prejudice" rather than "prejudice".

(2) Basten JA at [67], Meagher JA at [73], Ward JA at [234], [252] & [326]: there was no error in law in his Honour's conclusion that, although BlueScope had breached condition 2, no prejudice was suffered by Allianz by reason of that breach. (Basten at [65]: to the extent that the submission asserted that this had been wrongly decided, this does not demonstrate error of law and must be rejected)

(3) Basten JA at [19] & [30], Meagher at [76], Ward JA at [263]: the primary judge erred in law in finding that Allianz had a legal obligation to take over the conduct of defence of the claim once notified by BlueScope.

(4) Basten JA at [53], Meagher JA at [74] & [92], Ward JA at [299], [314], [326] & [334]: the primary judge had erred in concluding that BlueScope was dispensed from compliance with condition 3, not having made the necessary findings to support such a conclusion. Specifically, his Honour did not address whether, by its conduct, Allianz represented that there was no point in BlueScope seeking its written authority to the settlement of the proceedings (because Allianz would not give that authority in circumstances where it had denied liability) and whether BlueScope relied on that representation. This question should be remitted to the Tribunal for consideration of the appropriate findings on the evidence.

(5) Meagher at [78], Ward JA at [299]: the primary judge had erred in finding that Allianz was in breach of the contract to indemnify, or had repudiated that contract, by declining to indemnify BlueScope. Allianz was not obliged to confirm its agreement to indemnify BlueScope until liability to indemnify was established.

(6) Basten JA at [23], Ward JA at [305], [314] & [334] (Meagher JA agreeing at [93]): the question whether any breach of condition 3 should be excused under s 18 of the Insurance Act was not expressly dealt with by his Honour and must be remitted.

(7) (obiter) Ward JA at [313]: to the extent that his Honour implicitly held that no prejudice was occasioned by breach of condition 3 and that any such breach should be excused, his Honour did not provide reasons for these conclusions.

(8) Ward JA at [315], [326] & [334] (Meagher JA agreeing at [93]): there was no express consideration by his Honour as to the allegation by BlueScope of breach of good faith by Allianz.

(9) Ward JA at [325] (Basten and Meagher JJA agreeing at [68] and [93], respectively): whether Allianz breached its obligation of utmost good faith should be remitted to the Tribunal for decision.

(10) Basten JA at [40]: Allianz was required to act in good faith and deal with any request it received from BlueScope. As the late notification of the claim did not justify a refusal to indemnify, Allianz would have been in breach of its obligations under the policy if it had failed to consider in a timely manner and bearing in mind the interests of all parties, any request from BlueScope regarding conduct or settlement of the matter.

Judgment

BASTEN JA: On or shortly before 18 July 2006, Youden Richard Jackson died from mesothelioma. On 5 July 2006, less than two weeks before his death, Mr Jackson commenced proceedings in the Dust Diseases Tribunal against BlueScope Steel Ltd (the respondent) and BHP Billiton Ltd. Between 1957 and 1965 he had been employed for a number of periods by John Lysaght (Australia) Ltd, the predecessor to BlueScope. During part of that time he worked at the Newcastle steel works operated by the Broken Hill Proprietary Co Ltd (BHP), the predecessor of BHP Billiton. During the period when Mr Jackson said he was exposed to airborne asbestos, John Lysaght was independent of BHP. In 1979 it was acquired by BHP Steel, but was again separated by a demerger in 2003.

Throughout the period covered by Mr Jackson's claim, John Lysaght held statutory workers compensation insurance policies with MMI Insurance, a predecessor to Allianz Australia Insurance Ltd (the appellant). Although the policies were several and renewed annually, the terms were prescribed under the Workers' Compensation Act 1926 (NSW), and did not vary during the relevant period: accordingly, it is convenient to refer to them as "the policy". At all material times, BHP was a self-insurer.

On 21 August 2007 BlueScope settled Mr Jackson's claim by making a payment, without admission of liability, to his estate. BHP was released from liability by a judgment in its favour.

BlueScope sought to recover the amount of the settlement pursuant to the indemnity under the policy. Allianz declined to accept liability and, on 25 March 2011, BlueScope commenced proceedings against Allianz by cross-claim in Mr Jackson's proceedings in the Dust Diseases Tribunal. (In what sense those proceedings were still on foot is unclear, but nothing turned on this procedural issue.)

There was one further aspect of the corporate history which bore upon these proceedings. That concerned the demerger by which BlueScope achieved independence from BHP Billiton. The demerger was a complex process, the only aspect relevant to the present proceedings being a "Workers Compensation Deed of Indemnity" entered into between BHP Billiton and BHP Steel (now BlueScope) dated 10 May 2002. One effect of the deed was that BHP Billiton indemnified BlueScope against claims such as Mr Jackson's, subject to BlueScope's obligation to use reasonable endeavours to pursue any insurance available to it in respect of the claim against it. To the extent that a claim was made against both BlueScope and BHP Billiton, liability was to be apportioned. In the event of a shared claim (as Mr Jackson's claim was) Allianz had a financial interest in maximising BHP's responsibility, whereas both BHP and BlueScope, pursuant to the deed, had an interest in maximising BlueScope's liability, to the extent that it could recover from its insurer, Allianz.

Issues at trial

In order to understand the issues raised on the appeal, it is necessary to have regard to the issues litigated in the Tribunal, the findings made by the trial judge and the nature of an appeal to this Court.

The primary matters pleaded by BlueScope in its cross-claim were the existence of the relevant insurance policies, and the facts said to give rise to liability for indemnity under the policies. Paragraph 22 of the cross-claim was in the following terms:

"22 Further:

(a) each of the Policies was a contract of the utmost good faith;

(b) Allianz breached its obligation of utmost good faith in failing, upon notification of the Jackson claim to it, to consider in good faith and in with proper expedition and reasonably whether:

(i) to grant Bluescope indemnity against the claim; and/or

(ii) to take over the conduct of the claim; and/or

(iii) to consent (if, contrary to paragraph 21(d) above, consent had not already been given) to Bluescope's incurring reasonable costs in defending the claim;

(c) the expenses incurred by Bluescope in defending and settling the claim resulted from one or more of those breaches and/or from steps reasonably taken by Bluescope to mitigate the losses resulting from one or more of those breaches."

Allianz' defence denied that it owed a duty of the utmost good faith to BlueScope and denied each of the other allegations in subparagraphs 22(b) and (c): Defence, pars 7 and 8. Allianz admitted that it had "declined to exercise its right to take over the conduct of the proceedings for the cross-claimant but [said] that the conduct of the cross-claimant had prejudiced it as to the defence of the claim": par 9.

By way of further defence, Allianz alleged breach of condition 2, in that BlueScope did not give notice to Allianz of Mr Jackson's claim as soon as practicable after it came to its knowledge: par 10(b). It also alleged that, in breach of a contract of the utmost good faith, BlueScope acted contrary to the interests of Allianz because it was represented by solicitors who also acted for another defendant whose interests were inimical to the interests of Allianz: par 10(d). Further Allianz alleged at par 10(c):

"(c) in breach of condition 3 of the policy the cross claimant:

(i) incurred the expense of litigation without the written authority of the insurer; and

(ii) made a payment, settlement or admission of liability in respect of the claim without the written authority of the insurer."

In its reply, BlueScope:

(a) admitted that it had not notified Allianz prior to 10 July 2006, but denied that its failure to do so was a breach of condition 2;

(b) admitted that it had incurred litigation expenses and settled the proceedings without the written authority of Allianz, but said that it acted as a "prudent uninsured" with the authority of Allianz;

(d) said that it had advised Allianz of its retention of solicitors on 14 July 2006;

(e) said that Allianz thereupon was obliged to consider in good faith and as quickly as reasonably practicable, whether to grant indemnity and whether to authorise the incurring of legal expenses or to assume the conduct of the defence itself;

(f) said that Allianz' failure to take those steps was a breach of its obligations under the policy and excused BlueScope from further compliance with the requirements to act only with written authority, and

(g) to the extent that there was a breach of condition 2, condition 3 or the obligation to act in the utmost good faith, BlueScope relied upon s 18 of the Insurance Act 1902 (NSW) and sought an order that any such breach be excused.

In particular, in response to the alleged breach of condition 3, BlueScope stated:

"4.1.4 On 20 July 2006 the Cross-Defendant denied indemnity, and thereafter maintained its denial of indemnity, and thereby breached its obligations under the policy:

4.1.5 The Cross-Defendant's denial of indemnity was also an intimation that the Cross-Claimant need not thereafter comply with the obligations pleaded in sub-paragraphs 10(c) and 10(d); and

4.1.6 By virtue of the Cross-Defendant's conduct, the Cross-Claimant was thereafter discharged from the obligations pleaded in sub-paragraphs 10(c) and 10(d).

Judgment of primary judge

On 15 March 2013, the Tribunal, constituted by Finnane DCJ, gave judgment for BlueScope for the amounts claimed and interest.

After a careful consideration of the evidence, the trial judge set out a number of findings of fact at [88]. Some of those findings will be referred to below; on one view, the findings made were not sufficient to dispose of the issues raised by the parties.

With respect to the first limb of Allianz' defence, the judge accepted that there had been a failure by the solicitors for BlueScope to give notice to Allianz of Mr Jackson's claim as soon as practicable after it came to the knowledge of BlueScope, in breach of condition 2 of the standard form statutory policy: at [98].

Secondly, the judge held that Allianz had failed to establish any actual prejudice from the late failure to notify (at [107]), with the result that the breach was to be excused, pursuant to s 18 of the Insurance Act: at [113], although no order to that effect appeared in the judgment given by the Tribunal. The result of the findings with respect to condition 2 was that "Allianz declined to take over proceedings brought by Mr Jackson against BlueScope Steel, for reasons that lacked substance. ... From that point onwards, BlueScope was entitled to act as a prudent uninsured": at [107].

The trial judge noted that "[o]n 6 July 2007 Allianz declined indemnity": at [108]. That step was relied upon as a basis for excusing BlueScope from its continuing obligation to obtain written authority from Allianz with respect to further steps in the litigation, including acceptance of a proposed settlement. As to the claim that settlement without written authority was a breach of the policy, the judge accepted that Allianz "had no entitlement to be consulted since it declined indemnity without any reason": at [109]. The findings continued:

"[111] In my opinion, that breach [late notification of the claim], in the circumstances, was not sufficient to entitle Allianz to decline to take over the proceedings, much less to decline indemnity.

[112] In my opinion, Allianz was in breach of its contract to indemnify and its breach entitled BlueScope to act as a prudent uninsured and to settle the claim of Mr Jackson."

Issues on appeal

The appeal to this Court, pursuant to s 32 of the Dust Diseases Tribunal Act 1989 (NSW) is limited, relevantly to the present case, to the circumstance where a party is "dissatisfied with a decision of the Tribunal in point of law". (A ground relating to the rejection of evidence was not pressed on the appeal.)

By ground 1, Allianz challenged the finding of lack of prejudice for the purposes of s 18 of the Insurance Act, in relation to the breach of condition 2 (late notification of claim). Three particulars were identified in that regard:

"i. misconstruing in section 18(1) of the Act in taking the term 'prejudice' therein to mean 'irretrievable prejudice' - judgment at [102];

ii. wrongly deciding that the statutory requirement in s 18(1) of the Act, of there being no prejudice occasioned by reason of the breaches, was satisfied on the evidence;

iii. (impliedly) deciding that no evidence of actual (or, non-theoretical - Judgment at [107]) prejudice had been adduced by the Appellant."

Ground 2 covered a number of separate issues. First, it challenged the conclusion that Allianz was obliged under the policy to take over the defence of the proceedings on 20 July 2006, when it was notified of the claim. For reasons which will be noted shortly, Allianz had no legal obligation to take over the conduct of the claim once notified. However, as the pleadings recognised, that did not necessarily constitute a refusal to indemnify and, as BlueScope recognised in its pleading in reply, it could maintain its claim to be indemnified so long as it acted as a prudent uninsured: Reply, par 2.1.

The notice of appeal identified either a finding or an implied finding that the letter of 6 July 2007, by which Allianz declined indemnity, constituted "a repudiation of the Policy by the Appellant with the consequence that the Respondent was thereafter free to enter judgment in favour of the second defendant (BHP Billiton) without giving prior notice to the Appellant and contrary to condition 3 of the Policy": ground 2(b). Significantly, the challenge did not extend to the other terms of the settlement with Mr Jackson.

The third limb of ground 2 needs to be set out verbatim:

"2. The trial judge further erred in point of law in:

...

c. failing to exercise jurisdiction by finding, or impliedly finding, but without providing reasons therefore [sic], that in consenting to the entry of judgment in favour of the second defendant [BHP] without prior notice to the Appellant the Respondent breached its obligation of utmost good faith to the Appellant."

This ground appeared to constitute a complaint that BlueScope had breached its obligation of utmost good faith to Allianz, and the judge had found as much, but without giving reasons for the finding. If, as was the case, the judge made no such finding, the ground went nowhere.

In its written submissions, Allianz raised a completely different line of argument, stating that this ground of appeal "focuses on condition 3 of the policy": submissions, par 56. Self-evidently, the ground set out above made no such complaint. However, following the new line of argument, the written submissions noted that BlueScope had admitted in its pleadings that it did not seek prior written authority. In that circumstance, the appellant's submissions proceeded, the judge should have found that a breach of condition 3 was made out and then dealt with BlueScope's reliance on lack of prejudice for an order that its breach be excused. As Allianz correctly noted, the judge did not address the operation of s 18 with respect to the breach of condition 3.

So far as it went, that submission should be accepted. However, ground 2(c) was probably intended to address the further pleading in BlueScope's reply that, by its letter of 20 July 2006, Allianz had denied indemnity and thereby breached its obligations to act in good faith and as quickly as reasonably practicable, under the policy. The trial judge appears to have upheld that defence on two bases. First, by failing to take over the defence of the proceedings on 18 and 19 July 2006, it had acted without justification. It was that position which Allianz continued to uphold thereafter, but not with any better justification. Secondly, he held that the letter of 6 July 2007 declining indemnity, being based upon the earlier (unjustifiable) claim of prejudice, allowed BlueScope to proceed without written authority. On the other hand, the complaint of lack of reasons (which may really have been a lack of a necessary finding) did not explain the basis upon which BlueScope was excused from compliance with condition 3. On one view, there may have been an implied finding of waiver with respect to condition 3; on another view, there was an implied finding of repudiation of the contract.

BlueScope implicitly accepted the absence of critical findings, because it sought by a notice of contention to support the judgment of the Tribunal on grounds other than those relied on by the Tribunal, which were as follows (omitting grounds which were not pressed):

"2 On the true construction of the Policy, [condition] 2 was not a condition but rather a warranty or an intermediate term any breach of which was not sufficient to justify termination by Allianz.

3 Allianz's conduct in confirming its denial of indemnity on 6 July 2007 was such as to discharge Bluescope from compliance with any obligation to obtain Allianz's consent under [condition] 3 in accordance with the principle in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1953) 90 CLR 235.

...

5 Any breach of [condition] 3 was such that it ought to be excused under the Insurance Act 1902, s 18.

6 Allianz's conduct from 20 July 2006 onwards in declining indemnity without any substantial reason (see at [107]) was such as to amount to a breach of its obligations as insurer under the Policy, and thereby entitle Bluescope to recover its loss on the claim as damages for such breach."

These contentions accept that there was non-compliance with condition 3, that there was no order excusing BlueScope pursuant to s 18 of the Insurance Act, that there was no finding of waiver of compliance with condition 3 and that there was no express finding as to whether Allianz' conduct from 20 July 2006 constituted, in effect, a repudiation of the policy, entitling BlueScope to recover damages for breach of contract. If any of these findings constituted a necessary step to support the judgment below, either the matter required remittal to the Tribunal, or (if it has power) this Court must make the finding.

It is convenient to deal first with the challenge to the finding that Allianz repudiated the contract of insurance. Accepting that there was no repudiation, the next question as to breach is whether BlueScope was in breach of condition 3, or whether Allianz had waived compliance. Thirdly, it will be convenient, after addressing those questions, to consider Allianz' appeal with respect to the finding that it suffered no prejudice from the late notification and that BlueScope's breach of condition 2 should be excused.

Repudiation of contract

The primary relief sought by BlueScope in the cross-claim was a judgment based on the liability of Allianz under the insurance policies. In the alternative, it sought damages for breach of contract. BlueScope neither pleaded, nor expressly sought relief based on, repudiation by Allianz of its obligations under the policy. The reference in paragraph 2 in the notice of contention to "termination" by Allianz, following late notification of the claim, was therefore inapt. The position Allianz took in July 2006 and subsequently was that late notification was a breach by BlueScope which justified Allianz both in declining to exercise its right to take over the defence of the claim and its refusal to indemnify under the policy.

In relation to a policy, the language of which will be considered further below, but is relevantly not distinguishable from the present policy, Stephen J stated in Distillers Co Bio-Chemicals (Australia) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; 130 CLR 1 at 24 stated:

"The present policy, like other policies which have come before English courts, allows the insurer to stand by, neither accepting nor declining liability; it also casts upon him no obligation to defend claims made against the insured."

The application of this conclusion to the present case should be accepted. Because Allianz had no obligation to take over the defence of the claim, it needed no justification (such as reliance upon late notification by BlueScope) to justify its position in that regard.

Waiver of condition 3

As Stephen J noted in Distillers, a refusal by the insurer to take over conduct of the proceedings may leave the insured with a dilemma. In the present case, the dilemma may be summarised in the following terms: if BlueScope were to accept a reasonable offer of settlement, it would do so without the written authority of Allianz, in breach of condition 3. If BlueScope defended the case, it would incur expenses of litigation, again without the written authority of Allianz, in breach of condition 3, and might suffer a greater adverse judgment.

There are, however, circumstances in which a breach of condition 3 will not result. First, even though a refusal to take over the defence of the claim does not constitute a repudiation by the insurer, where there is, on other grounds, a wrongful refusal to indemnify that may constitute a "waiver by conduct" of the requirements of condition 3: General Omnibus Co Ltd v London General Insurance Co Ltd [1936] IR 596. To the extent that that case depended upon such a wrongful repudiation, the correctness of the conclusion was not doubted in Distillers: at 9-10 (Menzies J); 13 (Gibbs J); 27-28 (Stephen J). The question in the present case is whether, absent wrongful repudiation, either by its action in relying on the late notification (later excused under s 18) or by its conduct in July 2007, Allianz waived any obligation of BlueScope to obtain written authority before either incurring expense in defending, or in settling, the proceedings: see Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; 90 CLR 235 at 252-253 (Kitto J) using the language of "dispensing with" fulfilment of a condition.

The appeal in Distillers concerned the correctness of two declarations made by Helsham J in the Equity Division. Declaration 2(a) reflected the terms of condition 3 of the policy in the present case. In considering the language of the declaration, Stephen J remarked that "it is important that the making of this second declaration should not be thought to confer any arbitrary power of refusal of consent upon the insurer": at 29. After referring to passages in the judgments of Scott LJ and MacKinnon LJ in Groom v Crocker [1939] 1 KB 194 at 223 and 226 respectively, referring to the implied boundaries and limitations of the insurer's power with respect to the control of proceedings, Stephen J stated at 31:

"This duty of good faith and fair dealing must, I think, not only control the actions of an insurer who has taken over its insured's defence but will apply equally to the insurer's exercise of its power of granting or withholding consent to the making of admissions etc. even if it elects not to take over the defence."

Noting that no issue had yet arisen as to refusal of consent to a particular settlement, Stephen J continued at 31-32:

"It would I think be improper for the insurer to refuse its consent to an otherwise proper and reasonable settlement if it did so not because there were reasonable prospects of a defence to claims succeeding but rather because, as remote as those prospects might appear, they seemed to it preferable to a settlement involving it in payment up to the full amount of its limit of liability. ... On the other hand the insurer might quite properly refuse consent to a settlement which was attractive to the insured not because of an objective evaluation of the prospects of a successful defence but rather because it would avoid the adverse publicity of a trial or would enable the insured to share in, and require its insurer to share in, a liability which properly should be wholly borne by its parent company, the supplier of the allegedly harmful drug."

This last example has some relevance in the present case, in the sense that Allianz could properly object to a settlement which transferred liability to it, to the benefit of BlueScope's indemnifier, BHP. In other observations having immediate application in the present case, Stephen J noted at 33:

"One claim, relating to the child, Laura Anne Thompson, has been the subject of a specific denial of liability upon the ground of late notification of the claim but the summons in these proceedings does not seek any declaration in respect of that claim. Were it ultimately to be established that the insurer was not entitled to deny liability in respect of that claim and was in breach of contract in doing so I would not necessarily regard the terms of the present declaration as applicable to her case."

The effect of the last observation was that a declaration stating the effect of the condition requiring written authority of the insurer before making any admission or settling proceedings, did not apply in its terms to such a case. The issue foreseen by Stephen J arises for determination in this case.

The relevant principles with respect to wavier of a contractual condition are more than adequately discussed by Meagher JA and Ward JA: I gratefully adopt their explanations. It is sufficient for present purposes to note the statement of Dixon CJ in the case relied upon by the respondent, Peter Turnbull v Mundus Trading, noted at [32] above. Dixon CJ stated at pp 246-247:

"But a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so. If the plaintiff acts upon the intimation it is just as effectual as actual prevention."

In applying that principle, it is necessary to have regard to much of the same material as that relied upon by the trial judge in considering whether Allianz repudiated the contract. The purpose for reviewing the material is, however, a different one and it will be necessary to consider whether the findings made by the trial judge reflected the appropriate analysis or, if they did not, whether only one conclusion was reasonably open on the accepted facts. If neither of those conclusions is available, the matter will need to be remitted to the Tribunal.

The arguments commenced by reference to the initial failure to notify. There was no dispute that the failure to notify as soon as practicable constituted a "failure by the insured to observe or perform a term or condition of the contract of insurance", for the purposes of s 18(1). The Tribunal held that the failure should be excused. That order having been made, BlueScope argued that "the rights and liabilities of all persons in respect of the contract of insurance concerned shall be determined as if the failure the subject of the order had not occurred": s 18(2). Thus, if the order stands, Allianz was retrospectively precluded from relying upon the breach of condition 2 as a breach of contract by BlueScope.

Allianz was entitled to decline to take over the conduct of the proceedings; however, as held in Distillers, the obligation of BlueScope to obtain written authority pursuant to condition 3 applied in those circumstances. Again in accordance with Distillers, Allianz was required to act in good faith and deal fairly with any request it received. Because the late notification did not justify a refusal to indemnify, Allianz would have been in breach of its obligations under the policy if it had failed to consider in a timely manner and bearing in mind the interests of all parties, any request from BlueScope with respect to the manner in which the proceedings were conducted, or settled.

The trial judge did not deal with the legal issues or make findings by reference to "waiver". Rather he dealt with the case as pleaded primarily on the basis of obligations imposed on Allianz "by virtue of the contract being a contract uberrimae fidei": reply, par 3.6. Those obligations were identified in terms of the need to "consider in good faith, and as quickly as reasonably practicable, whether to grant indemnity and whether to authorise the incurring of legal expenses": reply, par 4.1.2. However, BlueScope also pleaded that the denial of indemnity was "an intimation that [BlueScope] need not thereafter comply with the obligations pleaded" by Allianz, including condition 3: reply, par 4.1.5. That pleading involved different language from that adopted by Stephen J in Distillers, but the factual considerations were the same and the legal formulations did not impose any higher duty on Allianz than those identified above.

The material on which the Tribunal relied to find breach by Allianz, excusing BlueScope from compliance with condition 3, must be addressed. It involved a flow of letters between Piper Alderman, and later Sparke Helmore, (solicitors for BlueScope and BHP) and Ellison Tillyard Callanan (solicitors for Allianz). On 19 July 2006 Piper Alderman noted the prior history of the matter and advised that "BlueScope now seeks indemnity pursuant to the policy in relation to" Mr Jackson's claim. They asked for advice as to whether Allianz would indemnify BlueScope; whether they would file a notice of appearance on behalf of BlueScope and whether they would attend a hearing fixed for 20 July 2006 on behalf of BlueScope. Ellison Tillyard replied stating that they did not "yet have instructions in respect to indemnity of [BlueScope] as very late notification of this matter has precluded retrieval of any relevant documentation."

There was no further response from Ellison Tillyard before Piper Alderman were replaced by Sparke Helmore as solicitors for BlueScope. (They continued to act for BHP.) On 23 November 2006 Sparke Helmore wrote to Ellison Tillyard seeking advice as to whether Allianz agreed to indemnify BlueScope and enclosing an amended statement of claim. The letter noted a directions hearing had been listed for 8 November 2006 and a further directions hearing for 30 January 2007 to fix a date for hearing.

On 30 November 2006 Sparke Helmore wrote again, noting that no response had been received since the letter to Piper Alderman of 19 July 2006. On 25 January 2007 BlueScope wrote directly to Allianz seeking confirmation that Allianz would assume conduct of the defence of the claim.

On 27 April 2007 Sparke Helmore wrote again to Ellison Tillyard noting that the matter had been listed for hearing on 20, 21 and 23 August 2007 and referring to unanswered correspondence of 15 August, 23 November and 30 November 2006 and the January 2007 correspondence from BlueScope to Allianz. A reply was sought within 14 days failing which there was a threat that BlueScope would issue proceedings against Allianz.

On 9 May 2007 Ellison Tillyard responded, describing a claim made by counsel for Allianz in court on 20 July 2006 alleging that the conduct of BlueScope and previous solicitors had "irretrievably prejudiced" Allianz' defence of the claim. The letter concluded:

"For the record, our client has instructed us, as advised on 20 July 2006 that they shall not take over the running of the case nor indemnify your client."

On 29 May 2007 Sparke Helmore replied, casting doubt on the purported summary of what senior counsel had said in the Tribunal. (It is not necessary to stay to consider whether the summary accurately reflected what had in fact been said in the Tribunal on 20 July.) The letter also noted the failure to respond to the correspondence referred to above and noted the suggestion that BlueScope "was in breach of various provisions of its statutory policy", seeking advice as to which provisions were said to have been breached and the manner in which the breach was said to have occurred.

On 6 July 2007 Ellison Tillyard responded, repeating the statement that at the hearing on 20 July 2006 senior counsel had indicated that Allianz "was now irretrievably prejudiced in that it could no longer obtain evidence from the plaintiff that would dictate whether it should indemnify or not." The breach of the policy conditions was identified as a failure to notify the insurer of the claim. It referred to BlueScope's "breach of the policy conditions, leading to the prejudice to the insurer by a claim at the late stage at which it was made."

Whether or not the statements in the Ellison Tillyard letter as to what happened at the hearing on 20 July 2006 were correct or not, the effect of the correspondence was unequivocal: Allianz was disclaiming any liability to indemnify under the policy because of an alleged breach of condition 2.

It is no doubt true that a refusal by an insurer to take over the conduct of a claim against an insured places the insured in a dilemma. However, there is also a dilemma for the insurer which receives what it believes to be late notification of a claim as a result of which it may have suffered prejudice. If it does not take the point promptly, it may be thought to have waived reliance on a possible breach by the insured; if it does take the point, but insists on the insured's performance of the contract, again it may be taken to have waived reliance on the earlier breach. In the present case, Allianz adopted the position, at least in 2007, that there had been late notification which justified it in refusing to indemnify BlueScope. It implicitly refused to give written authority with respect to any aspect of the proceedings.

Despite the clear statement in the letter of 9 May 2007 that Allianz would not indemnify BlueScope, Sparke Helmore wrote to Ellison Tillyard again on 17 August 2007 in the following terms:

"This matter is listed for further hearing in Dust Disease Tribunal before his Honour Judge Kearns on 20, 21, 22 and 23 August 2007. We note your client has denied indemnity to our client alleging various breaches of the conditions of the policy of insurance. We are presently seeking instructions in respect of issuing proceedings by way of cross claim against your client.

We anticipate on the hearing date there may be settlement discussions between the Plaintiff and the Defendants. Whilst we appreciate your client's stated position on the indemnity question we feel it would be of mutual benefit to both our clients to keep open the option of settlement.

Accordingly, we would like to be in a position whereby we can communicate and discuss with you any settlement negotiations. We would appreciate it if you could take your client's instructions in relation to this and indicate its position."

There being no response to that letter, an inference available to be drawn by BlueScope was that Allianz wished to have no part in any settlement negotiations and that it would be useless for BlueScope to continue to seek prior approval. If that were the proper inference, the settlement agreed by BlueScope without admission of liability, including a judgment in favour of BHP, would not constitute a breach by BlueScope of condition 3.

That the findings of fact made by the Tribunal did not extend to the issue of waiver was reflected in ground 3 of BlueScope's notice of contention. Given that the appeal to this court is limited to questions of law, the absence of essential findings of fact prevent this court disposing of the matter. Accordingly the matter should be remitted to the Tribunal to determine whether:

(a) the conduct of Allianz unmistakeably intimated to BlueScope that it would be pointless for it to seek approval prior to negotiating a settlement with the claimant;

(b) BlueScope relied upon that intimation in proceeding to settle the claim, and

(c) if both of (a) and (b) are not satisfied, breach of condition 3 should nevertheless be excused pursuant to s 18 of the Insurance Act.

Breach of condition 2 - whether prejudice from late notification

The remaining question is whether the Tribunal erred in law in finding that there was no prejudice to Allianz resulting from the late notification of the claim. If it did not, ground 1, challenging the order under s 18 with respect to the breach of condition 2, must fail.

In its original notice of contention, BlueScope had challenged the finding that it was in breach of condition 2 by failing to notify Allianz of Mr Jackson's claim prior to 12 July 2006. That contention was not pressed on the appeal. The only question, therefore, with respect to the late notification, was whether there was error of law on the part of the Tribunal in ordering that it be excused, pursuant to s 18 of the Insurance Act. The relevant ground of appeal involved two limbs. First, it was said that the Tribunal misconstrued s 18(1) by referring to "irretrievable prejudice", rather than prejudice, thereby setting a higher hurdle than did the statute. Leaving aside the question of which party bore the burden of proof in a legal sense, there is little doubt that Allianz at least bore an evidential burden. It would have been sufficient, it submitted, that it provide evidence of any level of prejudice; it did not have to demonstrate irretrievable prejudice.

That submission must fail for two reasons. The first is that, as demonstrated by the analysis of the letters set out above, the phrase "irretrievable prejudice" was language derived from Allianz' correspondence. Thus, in several passages the trial judge referred to "irretrievably prejudiced", the quotation marks being his. When making findings of fact, at [63] and [88](10), the judge used the phrase "irretrievably prejudiced", referring to the claims made by counsel for Allianz at the hearing on 20 July 2006. That was not what counsel had said (set out by the trial judge at [57]) but it was the language used by Allianz' solicitors in identifying what had been said. The phrase was used again at [101], again in quotation marks, and again by reference to the statements by Allianz' solicitors. When, at [102], the trial judge held that Allianz did not suffer any "irretrievable prejudice", he again used the phrase in quotation marks, thus indicating that he was referring to the claim set out in the previous paragraph. Similarly, at [110], he noted that Allianz had declined to take over the proceedings and then, in 2007, "declined indemnity substantially relying on the claim that it was 'irretrievably prejudiced'". None of this demonstrated that the trial judge had misapprehended the statutory test.

In identifying the legal issues, at [88]-[94], the trial judge merely referred, as the final issue, to s 18 of the Insurance Act. After considering the claims and counter-claims, the judge concluded at [107]:

"The position then, in my opinion, is that Allianz declined to take over proceedings brought by Mr Jackson against BlueScope Steel, for reasons that lacked substance. Certainly, it could justifiably claim that BlueScope was in breach of condition 2 for not informing it of the claim at the earliest opportunity. But it could not point to any prejudice, apart from a theoretical one, that it had suffered as a result of the late failure to notify."

The judge then turned to consider the circumstances of Allianz declining indemnity in July 2007, concluding that they did not justify Allianz taking that step. The judge expressed a final conclusion at [113] in the following terms:

"If I am wrong in this opinion, I am of the opinion that the failure of BlueScope to give notice as soon as possible caused no prejudice to Allianz and it may reasonably be excused on the ground that Allianz was not prejudiced by the failure and I order, pursuant to s 18 of the Insurance Act 1902 as amended, that the failure be excused."

There is no basis for concluding that the trial judge misunderstood the terms of s 18. The use of quotation marks when referring to the concept of irretrievable prejudice indicated that he was, on each occasion, identifying a claim made by Allianz in its correspondence. The expression of his conclusions with respect to the issue did not use that language, but merely referred to "prejudice", being the concept identified in s 18. The submission that he misunderstood that concept must be rejected.

Whether or not there was prejudice to Allianz by the late notification was a question of fact. To the extent that appeal ground 1(ii) asserted that the judge wrongly decided that there had been "no prejudice occasioned by reason of the breaches" did not identify an error of law and must be rejected.

The alternative expression at (iii) purported to identify an implied decision that "no evidence of actual (or, non-theoretical) prejudice had been adduced" by Allianz. As the use of the epithet "impliedly" deciding indicated, there was no express finding in those terms. Implicit in the statement of the ground is an assumption as to the burden of proof, namely that Allianz was subject to an evidential burden to adduce evidence of prejudice once BlueScope had raised the application of s 18.

There is no reason, however, to accept the basis on which the ground rests, namely that the judge impliedly decided that Allianz had adduced no evidence of relevant prejudice. That was not the way the trial judge dealt with the issue. Rather, he sought to identify the claim of prejudice and then consider whether the claim should be accepted, on the evidence before him.

The claim had two elements, each grounded in the conflict of interest between BHP and Allianz. Mr Jackson had joined both BlueScope and BHP, on the basis that he may have been exposed to airborne asbestos whilst working for or at the premises of either company. The evidence with respect to exposure at the BHP plant was, on any view, not strong. The evidence was not limited to that of Mr Jackson, but it certainly included his evidence. Given Mr Jackson's terminal illness, his evidence was taken very shortly after the claim was lodged. At that stage, BHP and BlueScope were represented by the same lawyers. Mr Jackson was cross-examined by their counsel. As Allianz correctly noted, there was a conflict of interest between BlueScope and BHP: BHP had an interest in minimising its liability, a position which BlueScope had little interest in resisting, as it was indemnified by BHP with respect to its liability, subject to any recovery from Allianz. Thus, Allianz saw the joint representation as prejudicial to its interests. In principle that was correct and was accepted. The second element of prejudice arose from the fact that the late notification had prevented it obtaining separate representation at the bedside hearing convened to take Mr Jackson's evidence. Again, as a factual matter, that element of potential prejudice was accepted. The prejudice crystallised, from Allianz' point of view, in the settlement which included a judgment in favour of BHP, on the basis that it was not liable to any extent.

All of these steps were understood by the trial judge, but proved inconsequential because of two factual findings. These may be broadly identified as, first, that, given that Mr Jackson was near death at the time of the hearing, and given his inability to deal with questions put to him at the hearing, the trial judge was not satisfied that any questioning designed to elicit more detail of his possible exposure to airborne asbestos at the BHP plant would have been productive. Secondly, other evidence as to his exposure whilst working at BHP provided no basis for maintaining the claim against BHP.

In short, the trial judge did not base his conclusion as to absence of prejudice upon a failure of Allianz to adduce evidence. Allianz had articulated an arguable basis for asserting prejudice which was then assessed on the evidence before the Tribunal.

The traditional way of challenging a finding of fact as constituting an error of law is to assert that there was no probative evidence to support the finding. The "no evidence" ground can give rise to difficulties in formulation, depending upon whether the appellant bore the onus of proof at trial, or the respondent did. Where the appellant bears the onus of proof, a finding that the relevant fact was not established cannot give rise to an error of law on the basis of an absence of evidence for the contrary conclusion: Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156 (Glass JA). In other words, the party bearing the onus cannot turn the necessary element of a cause of action into an unsupportable negative finding. That is, if the plaintiff has to prove injury, a complaint that the trial judge found, without supporting evidence, that there was no injury will not demonstrate any error of law.

The present case is somewhat different from the standard case where a party must establish positive elements of a cause of action. BlueScope could only succeed under s 18 if the Tribunal were satisfied that the insurer "was not prejudiced by" the breach of contract. Allianz did not bear the burden of proof; rather, the judge had to be satisfied as to a negative factor. That satisfaction involved a matter of evaluation, based on the evidence. It was open to the trial judge to be satisfied that no prejudice had been caused; accordingly there was no error of law in that finding.

Conclusion

Allianz has made good its challenge to the judgment of the Tribunal in part; accordingly, the decision of the Tribunal must be set aside and the matter remitted to it for determination of the outstanding issues. I agree with the orders proposed by Ward JA.

MEAGHER JA: This appeal is concerned with whether the appellant (Allianz) is liable to indemnify the respondent (BlueScope) under a workers compensation insurance policy in respect of its liability resulting from the settlement of a claim made by Youden Richard Jackson. That claim was made in proceedings that were commenced in the Dust Diseases Tribunal in July 2006 and settled in August 2007. The proceedings were brought against the respondent and BHP Billiton Ltd. The circumstances in which those claims arose and were made and resolved are set out in the judgment of Ward JA at [106] to [143].

Allianz denied liability to indemnify BlueScope. It did so on three grounds. The first two were that its obligation to indemnify was subject to the due and proper observance by BlueScope of policy conditions which required the prompt notification of claims (condition 2) and that the insured not incur any expense of litigation or make any payment, settlement or admission of liability without Allianz's written authority (condition 3). Allianz alleged that BlueScope had breached or not complied with those conditions.

The third basis on which Allianz denied liability was that in breach of its duty of utmost good faith BlueScope had acted contrary to Allianz's interests. The breach alleged was BlueScope's retainer of Piper Alderman to act for it when that firm also acted for BHP, in circumstances where BHP's interests were said to be contrary to those of Allianz because of an indemnity given by BHP to BlueScope. The terms of that indemnity and the nature of the conflict are dealt with by Ward JA at [144] to [147]. The basis on which a breach of this duty could provide a substantive defence to BlueScope's claim was not explained by Allianz's pleading or addressed by the Tribunal. Compliance with any duty of utmost good faith was not a condition precedent to BlueScope's entitlement to an indemnity. Accordingly it would seem that this defence could only be relied upon to set-off any damages to which Allianz might be entitled against any amount to which BlueScope is entitled. However, no such set-off was claimed in Allianz's defence to BlueScope's cross claim.

The Tribunal did not make any express finding as to Allianz's defence based upon a breach by BlueScope of its obligation of utmost good faith. The fact that the Tribunal did not do so is not relied upon by Allianz as a ground of appeal. Accordingly it is not necessary to consider this argument any further.

I agree, for the reasons given by Ward JA, that the Tribunal did not err in law in concluding that although BlueScope had breached condition 2, there was no prejudice to Allianz resulting from that breach. Accordingly it did not err in excusing that breach under s 18(1) of the Insurance Act 1902 (NSW).

I also agree with Ward JA that the Tribunal did err in concluding for the reasons that it gave that BlueScope was not required to comply with condition 3. The Tribunal did not address that question by reference to the correct legal principles or make the findings necessary to answer it. That being the position, the question whether BlueScope was dispensed from performing condition 3 should be remitted to the Tribunal to be determined together with the other matters referred to by Ward JA at [334]. This is not a case in which it is suggested that there could be only one answer to that question so that it might be dealt with by this Court.

The Tribunal's reason for concluding that BlueScope was not required to comply with condition 3 was that by August 2007 Allianz was "in breach of its contract to indemnify" entitling BlueScope "to act as a prudent uninsured and to settle the claim of Mr Jackson": BlueScope Steel Ltd v Allianz Australia Ltd [2013] NSWDDT 3 at [112]. The "breach" referred to would appear to be Allianz's declining to take over the defence of Mr Jackson's claim and continuing to refuse indemnity: [2013] NSWDDT 3 at [109]-[112]. Significantly, the Tribunal did not in terms or otherwise address whether Allianz, by its conduct, represented that there was no point in BlueScope seeking its consent in accordance with condition 3 because it would not respond to any such request, other than by maintaining that it was not liable. Nor did the Tribunal address whether for that reason BlueScope abstained from seeking Allianz's consent to the settlement.

Allianz submits that the Tribunal erred in law in concluding that it was obliged to take over the defence of the proceedings and that it was "in breach of its contract to indemnify" by asserting that it was not liable on the basis that there had been a breach of condition 2 which could not be excused under s 18(1) of the Insurance Act 1902. In relation to that submission, two matters are not controversial. The first is that condition 4 (which related to the defence of proceedings) did not impose any obligation upon Allianz to conduct or take over the defence of Mr Jackson's claim. Like the clause considered in Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; 130 CLR 1, but in quite different terms, condition 4 cast no obligation on Allianz to defend Mr Jackson's claim. It follows that there was no breach of condition 4 involved in Allianz's communicated decision not to do so.

Secondly, BlueScope did not plead or argue that Allianz's conduct, in denying liability on that basis and maintaining that denial, was a repudiation of the contract of insurance. Unlike the insured in Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88, BlueScope did not purport to terminate the contract by acceptance of an alleged repudiation of liability and claim damages flowing from that repudiation. Instead, like the insured in CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; 187 CLR 384, BlueScope claimed the moneys to which it was entitled upon the proper construction of the policy. It remained bound by the conditions in the contract unless something happened which operated to excuse or discharge it from performance of any particular condition or conditions; just as would have been the position had there been an anticipatory breach of an essential term of the contract and it elected not to treat that breach as a repudiation and terminate the contract: see Bowes v Chaleyer [1923] HCA 15; 82 CLR 159; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; 90 CLR 235; Foran v Wight [1989] HCA 51; 168 CLR 385; and Fercometal v Mediterranean Shipping Co [1989] 1 AC 788.

I agree with Ward JA's analysis at [267]ff that Allianz's reliance upon the breach of condition 2 as entitling it to deny liability did not constitute a breach of its promise to indemnify and was not repudiatory conduct. The relevant insured event was that BlueScope "shall be liable to pay" common law damages. That event did not happen, in the case of Mr Jackson, until August 2007. (A number of the authorities which support that analysis are referred to by Giles J (as his Honour then was) in Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564 at 571-572). It follows that the Tribunal erred in law in concluding that by declining to indemnify BlueScope, Allianz was "in breach of its contract to indemnify".

It remains necessary to consider whether the Tribunal's conclusion that BlueScope was entitled to disregard condition 3 was justified in law upon the basis that, as it found, Allianz had declined to take over the defence of the proceedings and maintained that it was not liable to indemnify BlueScope.

That conclusion was not justified by reference to the proper construction of condition 3. It was not argued before the Tribunal or on appeal that this condition did not apply in circumstances where the insurer had not exercised its right to take over the defence of the claim and had indicated that it denied liability in respect of it. In Distillers Co, Gibbs J (as his Honour then was and dissenting) held that the clause there under consideration did not apply where the insurer had declined to take over and conduct the defence or settlement of the claim against the insured: at 14. The majority reached the opposite conclusion (Menzies J at 9-10, Stephen J at 27-28). A similar issue of construction arose in the Irish case of General Omnibus Co Ltd v London General Insurance Co Ltd [1936] IR 596. The trial judge (Hanna J) construed the relevant condition as not applying to an admission, promise or payment made in circumstances where the insurer had refused to take advantage of the right to take over the action and repudiated liability (at 601). On appeal to the Supreme Court, Murnaghan J (Kennedy CJ agreeing) reached the same conclusion (at 608, 619).

Stated generally, the Tribunal's conclusion was that Allianz's conduct precluded it from insisting on performance of the condition as to the making of admissions. In Sargent v ASL Developments Ltd [1974] HCA 40; 131 CLR 634 at 655, Mason J (as his Honour then was) said the principles governing such circumstances "have their origin in the differences to be found in the various doctrines (election, waiver and estoppel) which may come into operation and in the differing concepts which each doctrine has at times been thought to embrace". Also, as the plurality (Gummow, Hayne and Kiefel JJ) said in Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570 at [90], the proposition that a contractual condition has been "waived" is a statement of conclusion which does not reveal the process of reasoning leading to the assignment of that description. Their Honours also observed at [84]:

"... in many cases in which it is said that a party to a contract has 'waived' a condition for that party's benefit, the party said to have waived the condition will have made an election between inconsistent rights (to insist on further performance or treat the contract as discharged for failure of the condition). In other cases, of which [Panoutsos v Raymond Hadley Corporation of New York [1917] 2 KB 473] is an example, the case may be better identified as one of estoppel."

In General Omnibus Co the insurer, at a very early stage following the motor accident in respect of which the appellant sought an indemnity, said that it repudiated all liability under the policy and that it was "not prepared to deal with the matter in any way whatever". In the face of that conduct, the third member of the Supreme Court, FitzGibbon J held (at 615) that there was "an express waiver by the defendants of all right to be consulted about the conduct of the defence" of the proceedings instituted by the second of the two passengers injured in the accident. Adopting the later language of Dixon CJ in Peter Turnbull & Co at 248, the insurer could have been described as having "unmistakably intimated" to the insured that it would be pointless to seek its consent to the making of any admission, promise or payment.

In Distillers Co the majority rejected an argument that the insurer could not rely upon a condition precedent requiring its written consent to any settlement of the claim against the insured. The insurer was not in breach of contract. There was no obligation to conduct the insured's defence and no repudiatory conduct in denying liability under the policy. Citing the decision in General Omnibus Co, Menzies J said (at 9-10) the "insured may make a reasonable settlement where the insurer breaches the contract by denying liability and refusing to defend or settle". In support of that proposition he also cited the dictum of Lord Esher MR in Captain Boyton's World's Water Show Syndicate Ltd v Employers' Liability Assurance Corporation Ltd (1895) 11 TLR 384. None of the judgments in General Omnibus Co in terms supports such an unqualified proposition or reveals the underlying principles which would support it. Nor does the report of the judgment of Lord Esher MR which makes no reference to there being any issue as to whether a condition precedent could be relied upon. Furthermore, the present case is not within that general proposition for the same reasons that Menzies J considered that the proposition did not apply in Distillers Co - the insurer had not repudiated its obligations and was not in breach of contract by having denied liability and refused to defend or settle.

This analysis leads to a consideration of the principles underlying the judgment in Peter Turnbull & Co, which is relied upon by BlueScope. The plaintiff agreed to purchase oats under a contract for sale which required delivery by the defendant FOB Sydney on a vessel nominated by the plaintiff. In the face of the seller's stated inability to supply the oats from the port of Sydney, the parties initially sought to make alternative arrangements for that supply from Melbourne. When it became clear that those arrangements could not be made, the defendant seller confirmed that it could not load from Sydney and the plaintiff terminated the contract for breach. In the period during which the negotiations for alternative arrangements were occurring, the plaintiff had not nominated a ship and shipping dates as required by the contract. In answer to the plaintiff's claim for damages for repudiation the defendant relied upon its failure to comply with that nomination condition. The majority (Dixon CJ, Webb and Kitto JJ) rejected that argument on the basis that the defendant had "dispensed" the plaintiff from fulfilling the condition. The presently relevant passages in the judgments of Dixon CJ and Kitto J are extracted in the reasons of Ward JA at [294] to [297].

In Foran v Wight Mason CJ formulated (at 395-396) the principle in Peter Turnbull & Co as follows:

"A failure by the innocent party to treat an anticipatory breach of an essential term as a repudiation and to terminate the contract has the effect of leaving the contract on foot, in which event it remains in force for the benefit of both parties, just as it would if the anticipatory breach had never occurred, subject to a qualification to which I shall refer in a moment. The parties then remain bound by the contract and the repudiating party may rely on any supervening circumstance which justifies his non-performance of the contract when the time for performance arrives ... The qualification is that, if the repudiating party by his refusal to perform or other conduct intimates to the innocent party that he need not perform an obligation which is a condition precedent to the performance by the repudiating party of his obligation, and does not retract that intimation in time to give the innocent party an opportunity to perform his obligation, that party may be excused from actual performance of the condition precedent. The repudiating party then waives complete performance of the condition precedent and his conditional promise becomes unconditional. The term 'waiver' is generally used where one party by words or conduct relieves the other party from timely fulfilment of a condition or performance of a promise, time being of the essence of the contract: Peter Turnbull." [Emphasis added]

That principle was considered and applied in Park v Brothers [2005] HCA 73; 80 ALJR 317. The Court (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ), after referring to the statement set out above, continued:

"[42] In the earlier case, Dixon CJ referred to repudiatory conduct which expressly or implicitly intimates to the innocent party that it is useless to perform a condition, in consequence of which that party is dispensed from performing the condition. This, he said, was 'just as effectual as actual prevention'."

There was then set out the paragraph from the judgment of Kitto J which is the first extracted by Ward JA at [296]. The Court continued:

"[43] The application of that principle to a given case may be affected by the nature of the promise, and the nature of the condition. If the conduct of the party in breach of contract prevents the performance by the other party of the condition, then it has been said to be 'evident from common sense' that it is equal to performance' of the condition. The result has been explained sometimes in terms of waiver, and sometimes in terms of estoppel. Lord Mansfield said that 'reason' dictated that if one party stops the other offering performance by showing an intention not to perform 'it is not necessary for the first to go farther, and do a nugatory act'." [Footnotes omitted]

In Foran v Wight, Mason CJ (at 410-411), Brennan J (at 420-422), Deane J (at 434), Dawson J (at 445-449) and Gaudron J (at 456) considered the outcome in Peter Turnbull & Co to be best explained as achieved by operation of an estoppel. In Austral Standard Cables Pty Ltd v Walker Nominees Pty Ltd (1992) 26 NSWLR 524 this Court (Clarke JA, Kirby P and Handley JA relevantly agreeing) proceeded on the basis that since Foran v Wight the legal basis for dispensation from performance of a condition in such cases should be regarded "as firmly grounded in estoppel" the elements "being an intimation by one party that it would not perform its obligations thereby rendering nugatory any attempt by the innocent party to do so and an acting on that intimation by the innocent party to its detriment" (at 533-534).

Whilst the three High Court cases to which reference has been made (Peter Turnbull & Co, Foran v Wight and Park) involved the operation of an estoppel in circumstances where there had been repudiatory conduct, the relevant principle obviously applies in any circumstances where there has been a representation giving rise to a estoppel with respect to the enforcement of or reliance on a defence or right.

In relation to an insurance contract, the non-application of the waiver clause considered in Craine v The Colonial Mutual Fire Insurance Company Ltd [1920] HCA 64; 28 CLR 305 turned on the distinction between waiver involving an election between inconsistent rights or positions and estoppel by conduct, and there being an estoppel available in the circumstances of that case (at 326-327). In The Law of Insurance Contracts, (6th ed 2009, Informa) at par 26-4A2 Professor Clarke formulates that distinction in the following terms:

"When the insurer knows something which entitles him to rescind the contract (misrepresentation, non-disclosure) or to repudiate a claim (breach of procedural condition), he 'has to choose whether to exercise that right or not' and his choice of one course is waiver of the other. When, however, at a time before disclosure is due or a condition has to be performed, the insurer indicates that he will not insist on disclosure or performance of the condition, that is a case of estoppel."

An example of a case described as involving the waiver of a condition precedent in a policy of insurance but better identified as one of estoppel is the decision of the English Court of Appeal in Toronto Railway Co v National British and Irish Millers Insurance Co Ltd (1914) 111 LT 555. The question was referred to as being whether the insurer under a fire policy had by its conduct waived the right to insist upon a condition precedent which required the completion of an adjustment report and certificate of a magistrate. In the judgments of Kennedy LJ at 561 (col 2) and Scrutton LJ at 563 (col 2), the insurer's waiver was analysed in terms of estoppel. Kennedy LJ concluded that the insurers "had so indicated to the plaintiffs their intention not to insist upon the stipulations of the policy as to the ascertainment of the amount of loss, and so led them to act and to abstain from acting during nearly eight months out of the twelve within which an action must be brought, so as to debar them from afterwards insisting upon adherence to those stipulations, and to entitle the plaintiffs to enforce their claim by action as they have done."

By ground 3 of its notice of contention, BlueScope sought to support the primary judge's conclusion in accordance with the principle in Peter Turnbull & Co on the basis that Allianz's conduct in and from July 2006 (when it first declined to take over the defence of the claim) had discharged BlueScope from compliance with any obligation under condition 3 in relation to the incurring of expenses and the settlement of Mr Jackson's claim. The earlier discussion shows that the Tribunal erred in concluding that any breach of contract on the part of Allianz freed BlueScope of any obligation to obtain its written consent. The position remains that the Tribunal did not address and make findings as to whether, consistently with the principles to which reference has been made, Allianz was estopped from relying on any non-compliance with that condition. Specifically, it did not address whether by its conduct Allianz represented that there was no point in BlueScope seeking its written authority to the settlement of the proceedings because Allianz would not give that authority in circumstances where it had denied liability. Because the Tribunal did not make the findings necessary to address it, that question should be remitted to the Tribunal for determination.

I agree that the primary judge erred in law in concluding that there was no breach of condition 3 and that that finding must be set aside. The orders proposed by Ward JA should be made and the proceedings remitted to the Tribunal for the purpose of determining the matters referred to by Ward JA at [334] and whether Allianz dispensed BlueScope from performing condition 3 of the policy.

WARD JA: This is an appeal by Allianz Australia Insurance Ltd (Allianz) from a decision in the Dust Diseases Tribunal of New South Wales. Allianz, as insurer, was found to be liable to its insured, BlueScope Steel Ltd (BlueScope), for moneys paid by BlueScope in settlement of a compensation claim made against it in the Tribunal by the late Mr Youden Jackson.

There was no dispute that Allianz was on risk for the claim by Mr Jackson against BlueScope, in its capacity as BlueScope's statutory workers' compensation insurer, BlueScope having assumed the obligations of the statutory insurer at the relevant time (Manufacturers Mutual Insurance Ltd (MMI)).

Allianz declined to take over the conduct of the Tribunal proceedings, which were defended by BlueScope and in due course settled by agreement between BlueScope and the plaintiff on terms which included the entry of judgment against BlueScope and in favour of the plaintiff in the sum of $225,000 plus costs. It also declined to indemnify the claim, relying on an alleged breach of the policy conditions (late notification to it of the claim). BlueScope then brought a cross-claim in the Tribunal proceedings against Allianz seeking recovery of the settlement sum and its defence costs.

As to the allegation that Allianz was in breach of an obligation to consider in good faith whether to indemnify, it must be noted that as at both May and July 2007 no contractual obligation to indemnify had arisen. It is not clear the basis on which a lack of good faith was asserted but it was not the subject of any finding by his Honour nor was any reason (other than, perhaps, the lack of a substantial reason to decline indemnity - which cannot be maintained in the face of the finding as to breach of condition 2) given for the implicit finding that there was a breach of the obligation of good faith in denying liability to indemnify and maintaining that denial up to the hearing.

BlueScope submitted at the Tribunal hearing, in effect, that a wrongful denial of indemnity to pay a claim denied an insurer any legal entitlement thereafter to insist on compliance with condition 3 of the policy (BlueScope there citing Edwards v Insurance Office of Australia Ltd (1933) 34 SR(NSW) 88, Distillers Co Bio-Chemicals v Ajax Insurance and, in the alternative, referring to Peter Turnbull and Co Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1953) 90 CLR 235 at 246-247 and 251). Allianz disputed this contention.

Allianz contends that where a contract of insurance is not repudiated by the insurer but, rather, the insurer (relying on the contract terms and perceiving that the insured's conduct, in breach of clause 2 of the policy, has prejudiced its position) puts the insured to proof, the insured remains under a duty of good faith to the insurer when effecting any settlement with the claimant (referring to Kirby J, in CGU v AMP). It is submitted that discharge of that obligation required BlueScope to have the interests of the insurer in mind (which I note Ms Brewster agreed she had not done) and to comply with condition 3.

BlueScope did not plead (nor did his Honour find) that any conduct by Allianz in denying liability to indemnify amounted to anticipatory breach or repudiation of the contract of insurance. Insofar as there might have been contended to have been repudiatory conduct on its part, Allianz notes that BlueScope's cross-claim proceeded on the premise that that it had affirmed the policy, by seeking relief referable to its claimed entitlement to indemnity under the policy (there referring to [21(e)] of the cross-claim and order 1).

In Distillers, Menzies J said (at 9-10):

The insured may make a reasonable settlement where the insurer breaches the contract by denying liability and refusing to defend or settle ... But such is not the case here for the insurer has not repudiated its obligations and is not, so far as I can see, in breach of its obligations. By acting as it has it may be that the insurer is forcing the insured to defend claims that it would prefer to settle at the partial expense of the insurer. However it seems to me that the condition is directed to giving the insurer such an advantage for its own protection.

Stephen J (at 24) identified the dilemma for an insured when faced with a refusal by the insured to acknowledge in advance liability to indemnify, as follows:

This construction of condition 2(a) [that there is conferred upon an insurer who has declined either to defend a claim or to acknowledge any liability to indemnify in respect of that claim, a power arbitrarily to withhold consent to a settlement] is prone to leave the insured in a dilemma; if he defends the action brought against him a verdict much in excess of the insurer's limit of liability may result and the insurer may ultimately turn out not to be liable to indemnify; if he settles the action, albeit for a reasonable sum, the insurer may then rely, as the present insurer has said it will, upon the fact of that unauthorized settlement as a breach of condition excusing it from all liability to indemnify.

It was equally BlueScope's dilemma in the present case.

As noted, BlueScope relied on what was said in Edwards v Insurance Office Australia, where Halse Rogers J found at 98 that the insured plaintiff was in the position that it had proved at trial "what is practically an anticipatory breach of contract on the part of the defendant". There, the defendant had wrongly disclaimed liability under an insurance policy on the basis of a perceived failure of the insured to notify it of certain court proceedings at the time of the motor vehicle accident the subject of the claim. His Honour concluded that the plaintiff was then clearly entitled to recover the damages resulting from the defendant's breach. In that case however, the pleading had alleged repudiation of liability and had claimed loss of the benefit of the insurance policy. His Honour said at 98:

It is clear, on my reading of the evidence, that the plaintiff's evidence, as it stood at the close of his case, established the contract, the breach, and the consequent loss of the benefit of the policy, and there was a complete case to go to the jury, so long as that evidence was not cut down, for the assessment of such damages as was shown to flow from the breach.

In my opinion, the plaintiff, having been put in the position of having to take all steps in connection with the litigation of the claims against him at his own risk, is entitled to recover, as damages, such sums as he paid to settle those actions, provided that he shows that he acted reasonably in making the settlement.

In the present case, however, there was no finding by his Honour of anticipatory breach or repudiatory conduct by Allianz, nor was there any such plea.

Allianz submits that its conduct in invoking condition 2 to decline indemnify is inconsistent with any repudiation by it of the contract because the insurer is (correctly, as it transpired, subject only to the insured being excused pursuant to s 18) invoking its contractual rights. Allianz maintains that it is not repudiatory conduct to stand on one's legal rights. Thus Allianz submits that its reliance on breach by BlueScope of condition 2 in the May/July 2007 correspondence shows that the insurer was not saying it would not indemnify whatever might be the outcome of the proceedings; it was, in effect, simply saying that there was no present obligation to do so.

The terms of the notification of Allianz' refusal to indemnify did not add the rider that, if the breach of policy conditions were later to be excused or if it were found that it was incorrect as to its construction of the contract, it would then acknowledge liability to indemnify. However, it must be implicit in the reliance by Allianz on breach of the policy conditions for its refusal to indemnify that Allianz was objectively acting in accordance with what it understood to be its legal rights under the contract, not repudiating the contract.

The question is as to the objective intention to be discerned from the relevant conduct when determining whether there has been an intention to renounce or repudiate a contract. By way of analogy, it is clear that if a party, objectively viewed, is willing to perform the contract on its proper construction, then the fact that it proceeded on a mistaken interpretation of the contract will not evince an intention to repudiate the contract (see DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, where the respondent's case was pleaded as one of rescission for repudiation and renunciation for "anticipatory breach"; Kweifio-Okai v RMIT University [1999] FCA 1686, (1999) 47 AILR 4-223 at [61] per Dowsett J; Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277; Australian Stratacore Holdings Ltd (in liq) v Sanwa Australia Securities Ltd [1994] NSWCA 11).

In Woodar, Lord Wilberforce observed (at 283) that:

it would be a regrettable development of the law of contract to hold a party who bona fide relies upon an express stipulation in a contract in order to rescind or terminate a contract should, by that fact alone, be treated as having repudiated his obligations if he turns out to be mistaken as to his rights. Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations.

BlueScope made it clear in the course of submissions, on the appeal that it does not contend that Allianz' conduct was repudiatory of the policy as a whole (Appeal Transcript 30/37). However, it argues that there was an anticipatory breach and that the communication by Allianz of its decision not to indemnify meant that BlueScope was not thereafter bound to obtain its consent to a settlement of the proceedings. There was no pleading of anticipatory breach. It is difficult to discern from the communications in May/July 2007 an intention on the part of Allianz not to be bound by and perform the contract of insurance according to its terms. Without an intention of that kind being evinced by the correspondence, there could be no finding of anticipatory breach. The position seems, instead, to be that Allianz did not repudiate its obligations under the insurance policy; rather, it acted on what was ultimately proven to be a correct view as to the consequence of BlueScope's breach of condition 2 of the policy (albeit that the Tribunal considered this was a breach that should be excused).

The only question then is whether in some other fashion Allianz' conduct could be said to have dispensed BlueScope from its obligations under condition 3.

BlueScope relies on the Peter Turnbull case at (246-247 and 251) for the proposition that, where a party to a contract repudiates its obligations, further performance of some or all of the other party's obligations may not be required and in that event the other party would be discharged from compliance. It is on this basis that it is asserted that Allianz' denial of indemnity discharged BlueScope's obligation to seek consent to the settlement. Allianz says that Turnbull case can be explained as one that shows that an antecedent breach may dispense a party from compliance with a subsequent obligation conditional for its performance on the earlier breached obligation but maintains that, here, there was no antecedent breach.

In Turnbull, the plaintiff had claimed damages for non-performance by the defendant of an agreement under which the plaintiff was to purchase oats at a particular price FOB Sydney. To the knowledge of the defendant, the purchase by the plaintiff was for the purpose of re-sale. The trial judge found that the contract was subject to a condition as to delivery, namely that the oats were to be loaded, on a ship (or ships) nominated by the plaintiff, during a particular period. The plaintiff gave a tentative indication of a shipping date within the relevant period, which the trial judge inferred had become absolute. The defendant then informed the plaintiff that it could not supply the oats from Sydney but could probably supply them from Melbourne. There was some correspondence between the parties as to the possibility that the oats could be loaded from Melbourne. Ultimately, however, the defendant advised that it would not be able to load the oats from Melbourne; the plaintiff insisted on the oats being loaded from Sydney (but did not nominate another ship or shipping date); and the defendant responded to the effect, "we have not got the oats here. You cannot get blood out of a stone". The plaintiff then purchased the oats at a greater cost, losing the benefit of the agreement and the profits expected to be made under the agreement and sued the defendant.

The trial judge found that the plaintiff was not in default at the time when the defendant stated that it would not load the oats in Sydney and that the plaintiff was entitled to accept that repudiation of the contract by the defendant and to maintain the action for a breach. An initial appeal from that decision was successful but the High Court ultimately reinstated the verdict for the plaintiff.

In the High Court, Dixon CJ (at 240) framed the question for decision as being whether, under the terms of the contract for the sale and purchase of oats FOB Sydney, the buyer was disentitled to recover from the seller for non-delivery of the oats because the buyer had failed in the fulfilment of the condition precedent to nominate a ship. His Honour said at 243:

It appears to me that by buying the oats ... against the defendant's contract and by informing the defendant of the fact, ... the plaintiff fixed or crystallized the rights under the contract, whatever they may be, of the respective parties. The plaintiff treated the refusal or failure of the defendant to deliver the oats as a breach going to the root of the contract and intimated an intention on the part of the plaintiff to regard the contract as at an end.

As to the failure of the plaintiff to name a ship available for loading in the relevant period and to give 14 days' notice of the ship and the shipping date, at 245-247, Dixon CJ said

But however this may be, I think that the plaintiff is entitled to succeed on the ground that, in so far as there was a non-fulfilment of the condition requiring the nomination of a February ship and the giving of fourteen days' notice of the ship and shipping date, the defendant dispensed the plaintiff from such fulfilment.

In the Supreme Court the plaintiff failed because the case was treated as one in which the contract had been kept open by the plaintiff notwithstanding the defendant's intimation of its inability to perform it, with the consequence that the plaintiff was bound to fulfil the conditions on its part to be fulfilled. But this is not a case confined to a simple anticipatory refusal to perform or declaration of inability to perform on the part of one party followed by an election by the other not to treat the contract as discharged by breach. The course taken by the defendant involved something more than that and the additional element brings into application other principles of law. The defendant persisted up to 2nd March that it could perform the contract only in one way, namely by substituting a shipment by the same vessel in Melbourne for that in Sydney contracted for. By seeking the plaintiff's help in an attempt to effect this substitution and at the same time persisting that it could not perform the contract according to its terms the defendant clearly intimated to the plaintiff that it was useless to pursue the conditions of the contract applicable to shipment in Sydney and that the plaintiff need not do so. The fact that under the rules of law governing anticipatory breach of contract, the plaintiff might have elected to treat the defendant's intimation as a discharge by breach may be disregarded. The plaintiff did not do so and that left the contract on foot. But it left it on foot subject to a continued intimation that only by a substituted performance could the defendant carry it out, an intimation involving an attempt by all parties to effect the substitution...

Now long before the doctrine of anticipatory breach of contract was developed it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied, it was equal to performance thereof: Hotham v. East India Co [(1787) 1 TR 638; 99 ER 1295]. But a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so. If the plaintiff acts upon the intimation it is just as effectual as actual prevention... The party must shew he was ready; but, if the other stops him on the ground of an intention not to perform his part, it is not necessary for the first to go farther, and do a nugatory act. (my emphasis, footnotes omitted)

His Honour considered that the defendant had unmistakeably intimated to the plaintiff that it was useless to take the steps required for the defendant to deliver the oats FOB Sydney and that the plaintiff (at 248):

was excused from literal compliance with the clause requiring a February ship and fourteen days' notice thereof and was so excused at and from a time when the plaintiff could still have fulfilled it. What excused the plaintiff was the defendant's persistently maintaining that it could not ship the goods from Sydney as distinguished from Melbourne.

Kitto J said at 250-251:

The principle, which applies whenever the promise of one party, A, is subject to a condition to be fulfilled by the other party, B, may, I think, be stated as follows. If, although B is ready and willing to perform the contract in all respects on his part, A absolutely refuses to carry out the contract, and persists in the refusal until a time arrives at which performance of his promise would have been due if the condition had been fulfilled by B, A is liable to B in damages for breach of his promise although the condition remains unfulfilled.

The doctrine of anticipatory breach is, of course, applicable as soon as A has communicated to B his refusal to carry out the contract. Under that doctrine B is put to his election. He may, if he chooses, treat the contract as brought to an end in consequence of A's default, and recover damages from A for loss of the benefit of the contract. Alternatively, he may treat the contract as continuing on foot, in which case it will remain in force for the benefit of both parties, just as it would if the refusal had never been declared. If A persists in his refusal, B may at any time while the refusal continues elect to treat the contract as at an end and sue for damages; but unless and until he does so the contract remains on foot, and A may withdraw his refusal and require B to perform the contract on his part, subject only to giving B reasonable notice of his change of intention ... or he may take advantage of any supervening circumstances of such a character as to discharge the contract ... But suppose that A's refusal is never retracted; that B does not elect while the period specified by the contract for performance is unexpired to treat the contract as determined by reason of the refusal; and that no event occurs during that period to discharge the contract. I am supposing, of course, a case like the present where in all the circumstances the refusal necessarily conveys to B that he need not trouble to fulfil a condition to which A's obligations under the contract are subject, because even if he does A will still not perform his obligations. ... the inescapable fact is that A's refusal was a continuing intimation that the condition need not be observed, and it did not become any the less an intimation to that effect because B chose not to determine the contract before its time. The intimation having continued until the time came when A would certainly have been in default if the condition had been fulfilled, the law, as I understand it, treats A's obligation as absolute, and holds B entitled to damages for not having got what A promised he should have in the event of the condition being fulfilled. (my emphasis)

At 252, his Honour continued:

What is meant, however, by saying that fulfilment of the condition has been dispensed with is that A's conditional obligation is to be treated, for the purposes of an action for non-performance, as if it had been made absolute by a fulfilment of the condition ... the defendants having discharged the plaintiff from doing what he had to do, he was substantially in the same position as if he had done it, not indeed for the purpose of recovering the whole purchase money, but for the purpose of recovering damages for the non-payment thereof.

Conclusion

As pointed out by Meagher JA (at [92]), the primary judge did not make findings necessary to answer the question whether Allianz had dispensed with the requirement for BlueScope to comply with condition 3. There was not a finding that Allianz had intimated that it was useless for BlueScope to comply with condition 3 because, come what may, Allianz would not indemnify it.

Allianz was not obliged to confirm its agreement to indemnify this particular claim until a liability to indemnify was established. The fact that Allianz did not advise BlueScope, on notification of the claim or by 20 July 2006 (or indeed thereafter) that it accepted liability to indemnify under the policy, would not of itself dispense BlueScope from its obligation to comply with condition 3. For such a conclusion to follow there would need to be further factual findings, of the kind to which Meagher JA refers, that this Court is not in a position to address. Absent such findings the position appears to be akin to that considered in Distillers.

Allianz contends that his Honour failed to address the above issues. I agree. Allianz further contends that, if his Honour did so implicitly, then his Honour failed to comply with his duty to give reasons in relation to the competing arguments that were presented on this issue (Soulemezis v Dudley Holdings Pty Ltd (1987) 10 NSWLR 247; Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430 at 431, 436 to 437 and 439 to 441). Again, I agree.

Ground 2(b) in my opinion is made out and ground 3 of the notice of contention is not made out. I consider ground 6 of the notice of contention later in these reasons.

Ground 2(c) - failing to exercise jurisdiction in failing to determine allegation of breach by BlueScope of obligation of utmost good faith in relation to consent to entry of judgment in favour of BHP

What Allianz contends in this ground of appeal (as I read it) is, in effect, that his Honour should have found that, in consenting to the entry of judgment in favour of BHP without providing prior notice to Allianz, BlueScope breached its obligation of utmost good faith to it. However, no such breach was in terms pleaded at [10(d)] of the defence to cross claim. Rather, what was pleaded (at [10(d)(viii)]) was that Piper Alderman continued to act for BHP "securing an advantageous outcome for it to the detriment of [Allianz]".

In oral submissions, Allianz maintained that ground 2(c) focuses, not on the obligation of utmost good faith, but on condition 3 of the policy. It complains that his Honour failed to consider the defence pleaded at [10(c)(ii)] of the defence to cross-claim and hence failed to engage in the jurisdictional task of fact finding or a constructive failure to exercise jurisdiction (referring to Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; (2010) 240 CLR 611 as explained in Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 at [9]).

Allianz' written submissions ([57]) focus in this regard on consent to entry of a judgment that exonerated BHP but Allianz does not seek to maintain such an argument on appeal. Instead, it contends that the breach of condition 3 was entry into the settlement with the plaintiff without notice. There is, therefore, some disjunction between the way in which Allianz pleaded its defence, the grounds of appeal, the written submissions and the oral submissions. As this particular breach was not pleaded and seems not to be pressed on appeal, it is not necessary here to deal with it.

Notice of contention

Ground 5 - order under s 18(1) to excuse breach of condition 3 of the policy

His Honour did not deal expressly with the claim, in reply, by BlueScope that any breach of condition 3 should reasonably be excused under s 18(1) of the Insurance Act.

His Honour did express the view that there was no basis for Mr Prentice's opinion that he could have expected to obtain a 25% contribution from BHP to the settlement, even on the assumption that he could have successfully objected to the plaintiff consenting to judgment in favour of BHP. His Honour also inferred that the plaintiff's counsel would not have advised that there be agreement to a judgment in favour of BHP, and an order that the plaintiff pay a defined sum of the costs of BHP, unless counsel had considered that there was no chance of success of the case against BHP ([85]).

It is accepted by Allianz that there was no basis given by Mr Prentice for his estimate of 25% contribution but notes that this evidence was not challenged. BlueScope submits in this regard that his Honour's finding that rejection of Mr Prentice's evidence asserting a 25% contribution is a factual one and was clearly open, given his finding that Mr Jackson's claim against BHP lacked proper evidentiary basis. For the reasons explained above, that finding was itself not maintainable having regard to the verified pleading and particulars.

Allianz contends that prejudice was occasioned by the breach of condition 3 and therefore that s 18 is not available to BlueScope. The prejudice identified in Allianz' written submissions ([59]) was the loss of the ability for Allianz to bring a claim in BlueScope's name against BHP for indemnity or contribution by way of subrogation, on the basis that the entry of the consent judgment against the plaintiff in favour of BHP had the effect of transferring the whole of BHP's liability to BlueScope (with the aim, it is contended, of sheeting that liability home to Allianz). BlueScope's response was to question whether an insured's obligation not to impair rights to which the insurer is subrogated extends to circumstances where the insurer has denied liability but that, if it does so extend, it must be limited to conduct which is unreasonable in the circumstances of the case.

On the appeal, the prejudice was identified as the loss of an opportunity, in the context of the settlement negotiations, to seek a contribution by BHP to the settlement sum that the plaintiff accepted. Allianz maintains that it is immaterial whether or not it could have brought a cross-claim; rather its prejudice was that it was deprived of the opportunity to seek contribution as part of a commercial settlement (Appeal Transcript 3.45); to encourage BHP to contribute something towards the settlement sum that the plaintiff had agreed to accept (Appeal Transcript 4.5).

Allianz accepts that, from 20 July 2006, BlueScope was required to act as a prudent uninsured, since it was seeking indemnity under the policy. It accepts that a prudent uninsured may arrive at an objectively reasonable settlement in light of its potential liability and pay accordingly (AMP Financial Planning Pty Ltd v CGU InsuranceLtd [2005] FCAFC 185; (2005) 146 FCR 447 at [161] per Gyles J) but it contends that reasonableness of a settlement is not dictated solely by the sum. Allianz submits that Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603 does not stand as support for the proposition that BlueScope was entitled to settle, and accede to the entry of judgment on terms that assumed full liability to the plaintiff and exculpated BHP, without regard to condition 3 of the policy and without regard to Allianz' interests.

BlueScope argues that the exercise of power under s 18 would take into account the conduct of Allianz in response to the request for participation in relation to settlement discussions (see the correspondence referred to earlier above). That may well be a relevant factor.

However, the claim to be excused under s 18(1) required his Honour to address the question whether no prejudice was caused by any breach of condition 3 and, if there were found to be no prejudice, to consider whether the breach should reasonably be excused.

Insofar as his Honour implicitly held that no prejudice was occasioned by such a breach, with the result that the breach could reasonably be excused under s 18(1) of the Insurance Act, and went on implicitly to decide that such a breach should be excused, his Honour did so without providing reasons for those conclusions.

The application for relief the subject of ground 5 of the notice of contention should be remitted to the Tribunal to consider.

Ground 6 - alleged breach by Allianz by declining indemnity without any substantial reason

This ground relates to BlueScope's claim for damages for breach of an alleged condition of the policy (namely, whether to consider in good faith and with reasonable expedition, whether to grant indemnity, and whether to take over the conduct of the claim and whether to consent to the insured incurring defence costs). It was not expressly dealt with by his Honour.

BlueScope places emphasis on what was said in Distillers by Menzies J and by Stephen J, respectively, as to the obligation of an insurer when considering whether to withhold consent to a settlement by its insured. Menzies J said at 10, after the passage extracted earlier above:

In these proceedings, there has been no argument upon the question whether in the circumstances the refusal of the insurer to give its consent in writing to the insured making any admission, offer, promise or payment in connexion without any claim lacks bona fides or is unreasonable and, if so, whether the insurer is under an obligation to consent. These are important questions of law depending on findings of fact which have not been made and which require full consideration after argument. [His Honour expressed no opinion on those issues].

In that case, Stephen J said at 26-27:

However in my view the declaration tells but half the story; the consent to which condition 2(a) refers is not one which the insurer may arbitrarily withhold. Its power of restraining settlement by the insured must be exercised in good faith having regard to the interests of the insured as well as to its own interests and in the exercise of its power to withhold consent the insurer must not have regard to considerations extraneous to the policy of indemnity.

His Honour noted that it was important that the making of that declaration should not be thought to confer any arbitrary power of refusal of consent upon the insurer, saying at 29:

On the contrary I regard the power of the insurer as so hedged around with safeguards for the legitimate interests of the insured as to result in a situation in which the insured may be little worse off as a result of the declaration than it would have been had it been held that it might settle claims without the insurer's consent.

At 31, his Honour said that the duty of good faith and fair dealing controlled the actions of the insurer who has taken over the insured's defence but would apply equally to the insurer's exercise of its power of granting or withholding consent to the making of admissions even if it elects not to take over the defence. (Reliance is also sought to be placed on this by BlueScope, as I apprehend it, for an argument that Allianz could not have reasonably refused consent to the settlement had that consent been sought.)

Reference is made by BlueScope to Mr Prentice's evidence that, ordinarily, his firm would advise Allianz not to decline indemnity unless breach had given rise to irremediable prejudice (Black 150-151V, 152R). It is noted that the approach was that claims would not be refused even if there was a failure to notify promptly unless the matter had first been investigated and it had been established that the failure to notify had actually caused prejudice. It is submitted that Allianz made no attempts to demonstrate it followed those procedures before the final refusal of indemnity in May 2007.

BlueScope submits that Mr Prentice's evidence shows that the insurer did not in good faith put the insured to proof, rather the evidence showed that Allianz considered itself to be under an obligation to give proper and reasonable consideration to taking over the conduct of the defence but did not do so. This is said to be a breach by Allianz of its obligation of good faith.

BlueScope further submits that, in retaining Sparke Helmore to act for it after settling the proceedings, BlueScope acted reasonably so as to mitigate the loss flowing from that breach by Allianz. It is said that this allows BlueScope to recover the amounts paid to Sparke Helmore and the amount of the settlement as damages for breach of the contract. It points to his Honour's findings that the refusal of liability was wrongful and that BlueScope's actions in settling fell within the scope of acting as a prudent uninsured (at [107], [111] and [112]).

Allianz in response submits that there was no obligation on it to investigate the consequence of the prejudice flowing from the insured's breach and that Mr Prentice's evidence in this regard was on a wrong premise.

His Honour seems to have considered that Allianz had an obligation not to decline indemnity without giving reasons or without a substantial reason so to do. Under the policy there was no express obligation to provide reasons; nor was a failure to do so pleaded as giving rise to a breach of the obligation of good faith. However, in any event, there was a sufficient reason to decline indemnity if Allianz bona fide considered that it had been prejudiced by late notification of the claim. There is no suggestion that its statements to this effect were untrue or that its belief as to prejudice was not genuinely held. While I have difficulty seeing any breach of the obligation of good faith in this regard, it is a matter that should be determined having regard to factual findings that this Court does not have jurisdiction to make.

The issues raised by ground 6 of the notice of contention illustrate the need for the matter to be remitted to the Tribunal.

Conclusion

His Honour did not err in his construction of the test to be applied under s 18(1) of the Insurance Act nor in its application to the breach of condition 2 of the policy. However, his Honour did not make the necessary factual findings that would have permitted a conclusion that BlueScope was dispensed from its obligation to comply with condition 3 of the policy and failed to consider, or give adequate reasons for any implicit consideration of, the consequences of such a breach, including BlueScope's claim to be excused therefrom. His Honour also failed to deal with the respective allegations of breach of the parties' corresponding obligations of utmost good faith.

Allianz submits that the question whether prejudice was suffered by the breach of condition 3 takes the matter beyond this Court's jurisdiction under s 32. BlueScope contends that it is open to the Court to grant relief based on the findings that were made by his Honour without the need for the matter to be remitted.

In my opinion the matter must be remitted for determination of those issues that were not determined by his Honour. If a question of law can be determined on facts found by the Dust Diseases Tribunal, then this Court can adjudicate the question. However, if there is an operative error of law, but the factual findings necessary for this Court to determine that question of law have not been made by the Tribunal, then the question should be remitted to the Tribunal, where the requisite factual findings can be made.

Insofar as BlueScope submits that this Court can determine the issue in relation to condition 3, this is based on the fact that, the appellate jurisdiction having been invoked by the appellant in respect of alleged errors in point of law, it is open to this Court to make "such other order in relation to the appeal" as the Court thinks fit. BlueScope contends that this extends to the relief sought under the notice of contention. It was submitted that such a broad power should not be read down.

The High Court has on a number of occasions declined to enter into the debate as to whether this Court's jurisdiction on an appeal such as this is limited to the adjudication of questions of law or, once an error in point of law has been identified, has power to decide any other matter in issue (see Amaca Pty Ltd v New South Wales [2003] HCA 44; (2003) 77 ALJR 1509 at [22], [26]; Vetter v Lake Macquarie City Council [2001] HCA 12 at [14]; (2001) 202 CLR 439 at 447; Dasreef v Hawchar [2011] HCA 21; (2011) 243 CLR 588 at [48]-[49]).

The issue has also been considered in this Court (Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649; CSR Ltd v Amaca Pty Ltd [2009] NSWCA 338; Downes v Amaca Pty Ltd [2010] NSWCA 76; (2010) 78 NSWLR 451).

In Caltex Refineries, Allsop P, as his Honour then was, said at [11] that the consequence of the limitation under s 32(1) of the Act was that:

... the task of this Court (prior to consideration of relief) is limited to the assessment of a question of law dealt with by the Tribunal, and, in practical terms, whether there is an error of law: North Broken Hill Ltd v Tumes [1999] NSWCA 309; 18 NSWCCR 412 at 421 [24]-[25]; ICM Agriculture Pty Ltd v Perry [2002] NSWCA 257 at [19]; Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208; 3 DDCR 1 at 49 [148]-[166]; Patrick Operations Pty Ltd v Comcare (2006) 68 NSWLR 131 at 142 [39]-[59]; and B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2009) 74 NSWLR 481.

though his Honour continued at [16] to note that if, on the facts displayed by the Tribunal's reasoning unaffected by legal error, this Court was not persuaded that any other error of the Tribunal was operative in relation to the particular question of law, this Court could reach a conclusion as to the relevant question of law (there, the existence of a duty of care). However, if the facts necessary for the correct undertaking of the analysis had not been found, the matter would need to be remitted to the Tribunal for rehearing. See also the analysis of Basten JA at [239]-[240].

In CSR, Allsop P noted at [32] that it was not this Court's place to make factual findings (on which the final legal conclusion there depended), a conclusion echoed by Hodgson JA at [53]. Basten JA addressed the issue at [86]-[91], noting the lack of clarity as to the scope of phrases such as "question of law", "point of law" and "error of law".

In the present case, there have not been factual findings on a number of matters relevant to whether BlueScope was dispensed from the requirement to comply with condition 3 and to the application by BlueScope to be excused from any breach of condition 3 (the threshold test as to whether there was no prejudice, as well as matters going to the exercise of the discretion to excuse any breach if there were no prejudice); nor have there been factual findings as to the alleged breach by Allianz of its duty of good faith, for which BlueScope claims damages.

It is not a case where, on the facts as found (assuming them to be unaffected by any operative legal error), relief can be granted based on a conclusion as to the legal effect of those findings. The matter must be remitted, though in my opinion the remitter should not include the issues relating to the breach of condition 2 (as to which there was no error of law established by Allianz).

As to the costs of the appeal, Allianz has had mixed success. It has obtained an order for the matter to be remitted on some, but not all, of the issues on which it contended the Tribunal had erred. The ultimate outcome of the dispute remains to be seen. In the circumstances there should be no order as to the costs of the appeal.

I would therefore propose the following orders:

(1) Appeal allowed in part.

(2) Set aside the orders of the Dust Diseases Tribunal made on 30 May 2013.

(3) Remit the cross-claim to the Tribunal for the purpose of determining:

(a) whether BlueScope was dispensed from compliance with condition 3 of the Policy;

(b) whether, if not, BlueScope should be excused under s 18(1) of the Insurance Act 1902 (NSW) from any breach of condition 3 of the Policy; and

(c) if necessary, BlueScope's claim to damages for breach of Allianz' obligation of utmost good faith in the respects alleged in par 22(b) of BlueScope's cross-claim.

(4) No order as to the costs of the appeal.

**********

Amendments

22 August 2014 - Representation - Solicitor for the Respondent

Amended paragraphs: Coversheet

Decision last updated: 22 August 2014

Medium Neutral Citation:	Allianz Australia Insurance Ltd v BlueScope Steel Ltd [2014] NSWCA 276
Hearing dates:	16 April 2014
Decision date:	21 August 2014
Before:	Basten JA at [1]; Meagher JA at [69]; Ward JA at [94]
Decision:	1. Appeal allowed in part. 2. Set aside the orders of the Dust Diseases Tribunal made on 30 May 2013. 3. Remit the cross-claim to the Tribunal for the purpose of determining: (a) whether BlueScope was dispensed from compliance with condition 3 of the Policy; (b) whether, if not, BlueScope should be excused under s 18(1) of the Insurance Act 1902 (NSW) from any breach of condition 3 of the Policy; and (c) if necessary, BlueScope's claim to damages for breach of Allianz' obligation of utmost good faith in the respects alleged in par 22(b) of BlueScope's cross-claim. 4. No order as to the costs of the appeal. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords:	INSURANCE - s18(1) of the Insurance Act 1902 (NSW) - whether primary judge erred in finding no prejudice for the purposes of s18(1) of the Insurance Act 1902 (NSW) - whether loss of chance to cross-examine plaintiff amounted to prejudice from late notification of the claim - whether refusal to take over conduct of proceedings and/or to indemnify dispensed insured from obligation not to make settlement without prior consultation - whether loss of opportunity to seek contribution from co-defendant to moneys paid to plaintiff to settle claim amounted to prejudice for the purposes of s18(1) of the Insurance Act 1902 (NSW) arising from failure to consult before settlement CONTRACTS - general contractual principles - construction and interpretation of contracts - whether insurer breached contract in declining to take over conduct of proceedings - whether refusal to indemnify by insurer amounted to breach of the policy allowing the insured to claim damages for settlement moneys paid without consent of the insurer APPEAL - whether trial judge misconstrued test required for s 18(1) of the Insurance Act 1902 (NSW) by taking the term "prejudice" to require "irretrievable prejudice" APPEAL - whether trial judge erred in failing to find or giving reasons for not finding that failure to seek contribution from co-defendant to settlement sum paid to plaintiff was a breach of the obligation of good faith owed by the insured to the insurer APPEAL - s 32 Dust Diseases Tribunal Act 1989 (NSW) - appeal limited to points of law - where there are not the requisite factual findings to enable determination of a question of law remittal to enable requisite findings of fact to be made
Legislation Cited:	Dust Diseases Tribunal Act 1989 Dust Diseases Tribunal Regulation 2007 Insurance Act 1902 Supreme Court Act 1970 Workers Compensation Act 1926 (NSW)
Cases Cited:	Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570 Amaca Pty Ltd v Booth [2011] HCA 53; (2011) 246 CLR 36 Amaca Pty Ltd v New South Wales [2003] HCA 44; (2003) 77 ALJR 1509 AMP Financial Planning Pty Ltd v CGU Insurance Ltd [2005] FCAFC 185; (2005) 146 FCR 447 Austral Standard Cables Pty Ltd v Walker Nominees Pty Ltd (1992) 26 NSWLR 524 Australian Stratacore Holdings Ltd (in liq) v Sanwa Australia Securities Ltd [1994] NSWCA 11 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2009) 74 NSWLR 481 Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430 Booth v Amaca Pty Ltd [2010] NSWDDT 8 Bowes v Chaleyer [1923] HCA 15; 32 CLR 159 Browne v Dunn (1893) 6 R 67 HL Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649 Captain Boyton's World's Water Show Syndicate Ltd v Employers' Liability Assurance Corporation Ltd (1895) 11 TLR 384 CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1 CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; 187 CLR 384 Craine v The Colonial Mutual Fire Insurance Company Ltd [1920] HCA 64; 28 CLR 305 CSR Ltd v Amaca Pty Ltd [2009] NSWCA 338 Dasreef v Hawchar [2011] HCA 21; (2011) 243 CLR 588 Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1 Downes v Amaca Pty Ltd [2010] NSWCA 76; (2010) 78 NSWLR 451 DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 Eaton v Carrier Air Conditioning Pty Ltd (2004) 1 DDCR 716 Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88 Fercometal v Mediterranean Shipping Co [1989] 1 AC 788 Foran v Wight [1989] HCA 51; 168 CLR 385 General Omnibus Co Ltd v London General Insurance Co Ltd [1936] IR 596 Groom v Crocker [1939] 1 KB 194 Hotham v East India Co (1787) 1 TR 638; 99 ER 1295 ICM Agriculture Pty Ltd v Perry [2002] NSWCA 257 James Hardie & Co Pty Ltd v Seltsam Pty Ltd [1998] HCA 78; (1998) 196 CLR 53 King v Caltex Petroleum Pty Ltd [2013] NSWDDT 4 Kodak (Australasia) Pty Ltd v Retail Traders Association [1942] SR (NSW) 231 Kweifio-Okai v RMIT University [1999] FCA 1686, (1999) 47 AILR 4-223 McPherson and Davies Shopfitters Pty Ltd v Mercantile Mutual Insurance Ltd (Supreme Court (NSW), Wood J, 26 June 1986, unrep) Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; (2010) 240 CLR 611 North Broken Hill Ltd v Tumes [1999] NSWCA 309; 18 NSWCCR 412 Park v Brothers [2005] HCA 73; 80 ALJR 317 Patrick Operations Pty Ltd v Comcare (2006) 68 NSWLR 131 Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564 Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235 Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 Sargent v ASL Developments Ltd [1974] HCA 40; 131 CLR 634 Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208; 3 DDCR 1 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603 Toronto Railway Co v National British and Irish Millers Insurance Company Ltd (1914) 111 LT 555 Vetter v Lake Macquarie City Council [2001] HCA 12: (2001) 202 CLR 439 Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277
Texts Cited:	Clarke, The Law of Insurance Contracts, (6th ed 2009, Informa)
Category:	Principal judgment
Parties:	Allianz Australia Insurance Ltd (Appellant) BlueScope Steel Ltd (Respondent)
Representation:	Counsel: B W Walker SC with D T Miller SC (Appellant) D F Jackson AM QC with G J McCarthy SC (Respondent) Solicitors: Rankin Ellison Lawyers (Appellant) KJK Legal (Respondent)
File Number(s):	CA 2013/00107578
Publication restriction:	Nil
Decision under appeal	Citation: BlueScope Steel Ltd v Allianz Australia Ltd [2013] NSWDDT 3 Date of Decision: 2013-03-15 00:00:00 Before: Judge MJ Finnane QC File Number(s): DDT 6166 of 2006