AssetInsure Pty Ltd v New Cap Reinsurance Corp Ltd (In Liquidation) & Ors

[2005] HCATrans 419

[2005] HCATrans 419

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S434 of 2004

B e t w e e n -

ASSETINSURE PTY LIMITED (FORMERLY GERLING GLOBAL REINSURANCE COMPANY OF AUSTRALIA PTY LIMITED)

Applicant

and

NEW CAP REINSURANCE CORPORATION LIMITED (IN LIQUIDATION)

First Respondent

JOHN RAYMOND GIBBONS AS LIQUIDATOR TO THE FIRST RESPONDENT

Second Respondent

FARADAY UNDERWRITING LIMITED

Third Respondent

NC RE CAPITAL LIMITED (IN LIQUIDATION)

Fourth Respondent

Application for special leave to appeal

GLEESON CJ
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 17 JUNE 2005, AT 10.37 AM

Copyright in the High Court of Australia

__________________

MR R.B.S. MACFARLAN, QC:   If the Court pleases, I appear for the applicant with my learned friend, MR S.A. GOODMAN.  (instructed by Clayton Utz)

MR B.A.J. COLES, QC:   May it please the Court, I appear with my learned friend, MR D.A.C. ROBERTSON, for the company in liquidation and its liquidator, the first and second respondents.  (instructed by Henry Davis York)

MR F.M. DOUGLAS, QC:   May it please the Court, I appear with my learned friend, MR J.A. HOGAN-DORAN, for Faraday Underwriting, the third respondent.  (instructed by PricewaterhouseCoopers Legal)

MR S.D. EPSTEIN, SC:   If it please the Court, I appear for the fourth respondent with MR H. ALTAN.  (instructed by Deacons)

GLEESON CJ:   We thought it would be convenient to hear you first, Mr Coles.

MR COLES:   If your Honour pleases.

GLEESON CJ:   One thing I am interested in is the current state of the legislation.  To what extent is the legislation, that was the subject of this decision, materially altered?

MR COLES:   So far as the subject matter of the special leave application is concerned, not, your Honour, in our understanding.  At page 172 of the applicant’s summary of argument there are outlined, or stated, the two questions for special leave.  The first relates to section 116 of the Insurance Act, the second relates to section 562A of the Corporations Act.  It may be accepted at the outset, if your Honours please, that each of those statutes, being a statute of the Commonwealth of general importance, contains provisions, including the particular provisions, the proper construction of which generally speaking is of some significance.  However, in our respectful submission, that does not conclude in the applicant’s favour an entitlement to a grant of special leave.

McHUGH J:   Well, except – there are important questions of statutory construction in which you have a division of judicial opinion, and in addition, on one view of the first question, there may be an important question concerning the common law rule as to the situs of a debt – a matter that this Court has not considered since Haque v Haque.  So there are some fairly important questions involved in it, are there not, Mr Cole?

MR COLES:   I accept that, your Honour, but can I say our response is, or I apprehend will be, that the approach to the statutory construction of each of the provisions, and I will illustrate this in a moment by one of them, really was the conventional application of settled principles of statutory construction, and there is no important or significant or individual issue of statutory construction per se which informed the outcome of either of the issues; that is to say, the resolution in each case was the product or the consequence of a conventional application of settled principles, well‑known, well-recognised and well-understood of statutory construction.

So far as your Honour’s second point, we agree that the question of the common law situs, or the general law situs of assets is itself of importance but we point out there, there is no ground of appeal asserted in relation to, for example, what was criticised as being the pragmatic approach commended by the majority.

McHUGH J:   Yes.

MR COLES:   That is not the subject of a ground of appeal, nor is the issue of the general law situs of assets made a special leave point in the applicant’s application.

McHUGH J:   You say it is a conventional approach, but in Justice Hodgson’s judgment he found that the determinative factor was not found in 31(4) as such, but in the practice applicable to this policy that claims would only be paid by New Cap.

MR COLES:   Again, your Honour, we would urge there ‑ ‑ ‑

McHUGH J:    ‑ ‑ ‑ to a local broker in Australia.

MR COLES:   Sure.

McHUGH J:   And it would then be accounted to as a reinsured broker.

MR COLES:   Our only response for present purposes, if we may respectfully say so, your Honour, is that if the ground for special leave devolves itself upon a question of the actual construction, not so much of the statute but of the individual contract of insurance or reinsurance in question, then that raises no ground of special leave in itself.

McHUGH J:   Well, it raises this, as to whether or not that is a proper approach, does it not?

MR COLES:   Inasmuch as it hauls into play the statutory context, yes.

McHUGH J:   Yes.

MR COLES:   But we have made our observation about that – or our response.

McHUGH J:   Does not Justice Hodgson’s judgment in effect say, “Well, you can look at the practice applicable to the policy.  You don’t have to find the determinative factor in 31(4)’s language itself”.  Is that not what he is saying?

MR COLES:   Well, we think that is not an unfair characterisation, your Honour.

McHUGH J:   Yes.

MR COLES:   Otherwise - your Honours understand our point, that when one looks with the attention of course that their complexity requires, the individual statutory provisions, one really finds a fairly straightforward process involved in unravelling their content, and we have pointed that out in our written submissions, it need not be repeated.  We would urge a special caution in the present case because the companies of course are in liquidation, and the costs burden of further proceedings, which of course will be a priority cost in the winding up, will impose a special burden ‑ ‑ ‑

McHUGH J:   I understand that, but the second question is an important question in terms of priorities.

MR COLES:   And again we say, your Honour, important though the question is, the idea of, for example, comparing the text on the one hand and the idea of construing that text when so compared in the context of both its history and origin and in particular its purpose, is no matter of novelty so far as this Court is concerned.  They are our submissions.

GLEESON CJ:   Thank you.  Yes, Mr Douglas.

MR DOUGLAS:   Your Honour, we have nothing to add.  I think the only difference between our position and that of Mr Cole’s was that we did in fact support the grant of special leave in respect of the second question, but not the first.

McHUGH J:   Yes, you have a vested interest in it.

MR DOUGLAS:   The first question could involve some factual analysis of one of the policies and some evidentiary consideration of the bringing into existence of that policy, the arrangements for payment under it, but we see that as being very largely a question of construction as well.

GLEESON CJ:   Yes, Mr Epstein.

MR EPSTEIN:   We oppose the grant of special leave in relation to the question arising as to the interpretation of section 562A of the Corporations Act.  There was no division of opinion before the Court of Appeal ‑ ‑ ‑

McHUGH J:   Perhaps you should go to the microphone, Mr Epstein.

MR EPSTEIN:   As to the operation of section 562A of the Corporations Act, there was no division of opinion in the Court of Appeal on that topic.  We submit that the decision of the Court of Appeal in that respect is compelling.  The contrary interpretation of the section advanced by the applicant for special leave seeks to attach a uniform and invariable meaning to the word “insurance” when the authorities demonstrate that is not the position.

McHUGH J:   Well, that is so, but Justice Windeyer at first instance upheld the submission, did he not?  Am I right in thinking that?

MR EPSTEIN:   Your Honour is right in that respect.

McHUGH J:   Yes.

MR EPSTEIN:   The unanimous view of the Court of Appeal, having regard to the decision of the House of Lords in particular in Agnew, was to

interpret the word “insurance” as having a variable content depending upon the statutory context ‑ ‑ ‑

McHUGH J:   But it does seem strange at first instance to see 562 and then dealing with – assuming that a contract of insurance would embrace a contract of reinsurance, and then the very next section there is no reference to contract of reinsurance.  I know that an explanation is given by the Court of Appeal, but it cannot be said to be unarguable.

MR EPSTEIN:   The Court of Appeal’s explanation is, in our respectful submission, compelling, having regard to the statutory history and the reforms introduced in consequence of the Harmer Report, which we contend were directed to two discrete classes of case:  section 562, as it now stands, dealing with the insolvency of parties who are insured; section 562A dealing with the insolvencies of companies which carry on insurance business, namely in this context direct insurance business, as in the class of a case which had come before the courts previously where, for example, parties who had the benefit of professional negligence insurance were sued.  In that class of case section 562A is directed to providing a statutory priority in those circumstances.  There is no apparent ‑ ‑ ‑

McHUGH J:   Yes, well the theory is the big boys can take care of themselves.

MR EPSTEIN:   Your Honour has the point, yes.  That is all I wish to say.

GLEESON CJ:   Thank you, Mr Epstein.  In this matter there will be a grant of special leave to appeal.  We will allow one day for the hearing of the appeal, and we will expect counsel to agree between themselves on a division of time for oral argument.

We will adjourn for a short time to reconstitute.

AT 10.47 AM THE MATTER WAS CONCLUDED