CGU Insurance Ltd v AMP Financial Planning Pty Ltd

[2007] HCATrans 047

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne Nos M127 of 2006 and M128 of 2006

B e t w e e n -
CGU INSURANCE LIMITED
Appellant
and
AMP FINANCIAL PLANNING PTY LTD
Respondent

GLEESON CJ
KIRBY J
CALLINAN J
HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 8 FEBRUARY 2007, AT 10.02 AM

(Continued from 7/2/07)

GLEESON CJ: Yes, Mr O’Bryan.

MR O’BRYAN: Thank you, your Honour. If your Honours please. We have handed to the Court staff three documents and I apologise that we have felt the need to do that, but a few things were raised yesterday which we thought your Honours should have and there will be a few other things which I will refer to in the course of the day. Could I invite your Honours’ attention, please, just to one of those documents. There are two cases which I will come to presently and one single‑page document looking like that.

GLEESON CJ: Thank you.

KIRBY J: I will need new glasses if I have to ‑ ‑ ‑

MR O’BRYAN: I am sorry, your Honour. We can perhaps blow it up, as the saying goes, your Honour, or try to improve its legibility. What this is, your Honours is a revised version, or not really a revised version but a different version of what appears in the appeal books at pages 29 and 30. At 29 and 30 your Honours have a somewhat illegible – at least on the top line, a somewhat illegible Schedule 1 to the statement of claim which lists all of the claims. There was Schedule 1 and Schedule 2.

Schedule 1 contained a list of all of the settled claims at the time of this statement of claim and at the time the proceeding was conducted before Justice Heerey and Schedule 2 listed claims that were at that time considered to be live claims and in respect of which there was likely to be or quite possibly going to be a liability on AMP to deal with those claims but in respect of which there had not yet been any settlement reached or amount paid. So, Schedule 1 of those in respect of which payments had been made, Schedule 2, those which were anticipated to be possible or likely subjects of payment in the future.

The top line of each those schedules has not reproduced itself terribly well, at least in the copy of the court book that I have and it may also be for your Honours. We can also provide you with a much clearer copy of that schedule if that would assist so you can read the headings of the schedule but you have ‑ ‑ ‑

KIRBY J: Why do we get into this level of detail. There are some very important issues of general principle presented by this appeal.

MR O’BRYAN: Yes. I will wrap this up very quickly, your Honour.

KIRBY J: We just have to be careful that we do not get sucked down into all of this detail that we lose our bearings.

CALLINAN J: I asked for this, this is what I wanted. Thank you.

MR O’BRYAN: I do not want to take any time over it, your Honour, and I will wrap this up very quickly. The document that we have handed up this morning, your Honours, is simply a recast version of Schedule 1 in date order. That is all.

GLEESON CJ: What does “Deferred” mean?

MR O’BRYAN: “Deferred” means that there was inadequate evidence presented to AMP and so in the liability report, the liability report says this investor claims to have made an investment in respect of some investment product or another, in the relevant period, and all the objective factors are present. The client was a client of AMP’s, he dealt with the right dealer, et cetera, but for whatever reason the proof was inadequate.

GLEESON CJ: What has happened in relation to the claims that were deferred?

MR O’BRYAN: I think I am correct in saying, and I will seek confirmation of this, your Honour, that the amount of $3.23 million shown as the bottom line of the claims paid remains the amount today, but nothing more has been paid since.

GLEESON CJ: So the claims deferred have been rejected.

MR O’BRYAN: Effectively, your Honour, yes, one could treat them as now gone but not with absolute certainty but I can clarify that.

GLEESON CJ: Thank you.

KIRBY J: I took Justice Callinan’s question to be directed at the point of whether the actual refusal indemnity which was ultimately extracted, like a tooth, from the appellant was done after all the payments had been made, or most of these payments had been made. Am I misunderstanding the thrust of the point of this schedule?

MR O’BRYAN: I think that was part of the question or part of the thinking behind Justice Callinan’s question but, as we apprehended it, the first question Justice Callinan asked about the timing yesterday was directed to the position in November 2001.

CALLINAN J: I wanted to know what had happened by the time of the actual clear denial of indemnity and this Schedule provides it.

MR O’BRYAN: Yes, it does.

KIRBY J: Where was that clear denial of indemnity? What was the date of the clear denial of indemnity?

MR O’BRYAN: A letter was written by CGU addressed to AMP’s broker – I forget which, but in any event it was in November, 14 November 2002. It was not received by AMP until January 2003, but let us say it was November 2002, by which time certainly 90 per cent of these claims had been paid, as you can see, although there was one more paid in December at a time when AMP had no knowledge of the fact that CGU had written a letter.

KIRBY J: Yes. That was also a bit curious that it was not received until January 2003, was it?

MR O’BRYAN: January 2003, yes.

KIRBY J: But did you run a case that an inference that was derivable from that delay was that the appellant sat on its hands until you had, as it were, got yourself into the worst possible situation by paying all the claims instead of candidly at an earlier stage saying, “Well, look, we have got real problems with this and we are not going to pay and you just prove your case in the proper way?”

MR O’BRYAN: Yes. We did not ever run a “sitting on your hands” case, your Honour. We ran “We agreed a protocol, you told us to behave as a prudent uninsured ‑ ‑ ‑

KIRBY J: No, they agreed in principle to the protocol.

MR O’BRYAN: Yes, fair comment. You agreed in principle to the protocol, we implemented it; all of these things happened pursuant to it and in reliance upon it. You have also told us to act us a prudent uninsured and all of these settlements were conducted pursuant to that instruction and therefore you are fixed with the outcome of that process which was these payments done properly and in accordance with that arrangement ‑ ‑ ‑

KIRBY J: Against that it said that – you will no doubt develop this but it said that they made it clear that they were not accepting indemnity and that there were real questions as to whether there was a liability to indemnify at all.

MR O’BRYAN: There was never articulation, your Honour, of any real question about that until much later. In fact, even after the time of this letter ‑ ‑ ‑

KIRBY J: Just the interposition of the company of MAG, of Mr Pal, would seem to me to raise a real indemnity question.

MR O’BRYAN: No, with respect, it would not, your Honour, unless CGU decided that it was appropriate to defend one of these claims and take it to trial, have a judicial determination of the question whether section 819(4) applied to these claims, and then one would have to postulate that finding in respect of that claim was relevant to any other claim, which is not, with respect, a sensible postulate because the analysis that needs to be undertaken for section 819(4) to operate would need to be separately undertaken in respect of every single claim. So there was no possibility of running a true test case other than it would give you the opportunity to state the law on section 819(4) which, of course ‑ ‑ ‑

KIRBY J: So your complaint that they failed to do this is really to no point because you say there was no real test case that could have been done.

MR O’BRYAN: There was no test case and the protocol, as your Honours will ‑ ‑ ‑

KIRBY J: There was no test case and no test case would have been useful.

MR O’BRYAN: Possibly a test case might have been useful, your Honour. It was up to CGU to decide. The protocol said if we are settling, then we will enter into the normal settlement arrangements. If we are defending the claim, we will prepare the case for trial. You tell us what you would rather do.

KIRBY J: I will just say one further thing at this stage and then I think it is better that you just take your own course. I read again – it is amazing how one forgets these things – Unity Insurance v Pezzano and I see that in that case Justice Gummow and I in dissent took essentially a line rather similar to that which Mr Myers was urging yesterday and that is, he who asserts must prove, and you do not establish your claim as a prudent uninsured just by saying you have settled the matter. In the end a lot depends, it seems to me, on where the onus lay as to proving these things in the course of the trial.

MR O’BRYAN: Yes, we accept that, your Honour, and I will come back to Unity Insurance because it is a very important case. Your Honours were not in true dissent because you will recall that the decision of the Court was simply to affirm the decision below and your Honours would simply have remitted it for further determination on the question of damages. On the points of principle, everything said by Justice Gummow and your Honour in Unity is consistent with what was said by the majority and I will seek to demonstrate that.

Your Honour agreed with a very important part of Justice Gummow’s analysis of the so-called indemnity cases. Your Honour may recall in one of your passages you said, “I have read what Justice Gummow says about the indemnity cases and it is quite possible they fall into a special category”. I will develop that also, your Honour.

GLEESON CJ: Before you depart from that line of questions that you have just been asked you answered yes to a question that included the proposition that by the end of 2002 you had got yourself into the worst possible position by paying all these claims. My question to you is what harm did you suffer by paying these claims?

MR O’BRYAN: The underlying liabilities, your Honour, were thereby settled and so when Mr Myers rose to open at the trial and said, “We submit to Justice Heerey that AMP cannot establish any liability unless it calls as witnesses in its own case the persons who previously had claims against it in respect of these investments”, we were very detrimentally affected, your Honour, because the ordinary pressure that exists when the insured is being pursued in a court by an investor, a notional plaintiff investor, where that plaintiff investor has the burden of proof on him or her to prove the case in respect of the investment against the insured and the insured then brings in the insurer, perhaps as a third party, did not exist any longer. We had settled against those persons so to bring them in ‑ ‑ ‑

GLEESON CJ: Because you settled with them it was impossible for you to prove you were liable to them.

MR O’BRYAN: No, it was not impossible, your Honour, and we do not need to show that.

GLEESON CJ: If it is not impossible for you to prove that you were liable to them what was the harm that you suffered by paying them the amount of money that you owed them?

MR O’BRYAN: The harm we suffered, your Honour, was that it enabled CGU to put at the trial, as it is put in every level of the hierarchy, that it was necessary before AMP could make a claim in respect of these settlements, to call those insureds in its case, in other words, as its own witnesses, not with the ability to cross‑examine them, with all of the limitations which would apply to counsel and others in respect of the conduct of the case. These people, your Honour, of course, were not AMP’s friends. They were very upset with what had happened. They had claims against AMP.

CALLINAN J: That is why you do not settle with them. That is why you let them litigate the claims where you can cross‑examine them.

MR O’BRYAN: Your Honour, the protocol explicitly ‑ ‑ ‑

CALLINAN J: No, leave aside the protocol for present purposes. In the ordinary case that is precisely why the cases go to trial so that their claims can be tested and you chose not to do that.

MR O’BRYAN: Your Honour, we agreed with CGU that it would be unnecessary to do that. Both sides of the equation, both CGU and ourselves understood the consequences of that, understood that those claims would be settled. It would have been possible, going back to the Chief Justice’s question a moment ago, quite possible for those investors to have said, “Bringing us into your proceeding against CGU is an abuse of process. We have settled. There is no dispute as between us and you are not entitled to harass us by subpoenaing us to give evidence in this trial” or something else, but most significantly, from the point of view of detriment that is the significant detriment we suffered. They had to be witnesses in our case.

GLEESON CJ: I would like to put that detriment at a slightly higher level of abstraction. You disclaim any suggestion that the detriment is that it was impossible for you to prove that you were liable to them ‑ ‑ ‑

MR O’BRYAN: It was not impossible, your Honour.

GLEESON CJ: So the detriment must be that it was inconvenient to prove that you were liable to them?

MR O’BRYAN: Certainly inconvenient ‑ ‑ ‑

GLEESON CJ: Embarrassing to have to publicly prove that you were liable to them, bad for business to have to publicly prove that you were liable to them? Which?

MR O’BRYAN: Your Honour, there would be measures of all of those things but the key thing is the forensic disadvantage, the sheer forensic disadvantage which one suffers by having settled with a person who previously had a real and legitimate and genuine claim agitated against one and who, in the ordinary course of litigation, as a plaintiff in this notional case that may have happened but never did, would have had to prove their case and be challenged in all aspects of their proof and prepare, therefore, as a litigant does, for the proof at trial. That is the most significant ‑ ‑ ‑

KIRBY J: You say that is the key thing, that Justice Gyles, in his dissenting reasons, appears to have thought that the key thing for you was (a) avoidance of embarrassment and bad reputation and (b) succumbing to the pressure of ASIC, which were not reasons that necessitate the appellant accepting the sums at which you settle, or even that you settle at all. They are your commercial reasons.

MR O’BRYAN: There is no doubt – and we do not shy away from the proposition your Honour puts to me, which is really the same proposition as the Chief Justice just put – there were several relevant factors which undoubtedly played a part in the decision about whether the test case should be run. But the most significant of those factors, we submit, is the forensic disadvantage that would cause, added to which greatly increased cost. There was no true test case possible under 819(4) ‑ ‑ ‑

CALLINAN J: If that is so, why did you not invoke or try to invoke clause 7.8 of the policy? Why did you not rely upon the senior counsel clause? If it had worked out as it could have done – it was worth a try – there would not have had to have been any litigation.

MR O’BRYAN: Your Honour, the senior counsel provision which is at ‑ ‑ ‑

CALLINAN J: It is at 205.

MR O’BRYAN: It could have been invoked by either party. Neither did. We would submit to your Honours that both sides felt that there was no utility in invoking it.

CALLINAN J: That is not an answer, Mr O’Bryan. Why would there not be utility in having a go at it? “Both sides felt”. You cannot speak for Mr Myers’ client.

MR O’BRYAN: There would undoubtedly have been utility in giving it a go, your Honour, and that is, in effect ‑ ‑ ‑

CALLINAN J: That would have been an answer to all of the problems. If it had worked out that would have been an answer to all of the problems and all of the difficulties with which you say you were confronted.

MR O’BRYAN: It would have resulted in – had there been a decision to fight the case, your Honour, that is true. If there had not been a decision to fight the case, you would still not have had a capital “C” claim within the meaning of this policy.

CALLINAN J: You might have got something else out of it. Who knows what binding compromises instead of protocols might have resulted from the implication of that clause.

KIRBY J: One disadvantage that I can see is that, at least it is an arguable one, it transfers into the very risky outcome of a senior counsel decision something which you are entitled to have dealt with in the public courts of law and a lot of money would ride on the outcome.

MR O’BRYAN: Possibly so, your Honour.

CALLINAN J: What it is designed to do, among other things, is to protect corporations and professional people who are insured against precisely the sort of thing that would have been a matter of concern to your client, adverse publicity.

MR O’BRYAN: Yes, that is true.

CALLINAN J: And damage, enormous damage, to reputation and business standards.

MR O’BRYAN: That is all true, your Honour, no doubt but we would submit it is not an answer to the fact that there was clearly, or at least impliedly, a decision taken about this. Your Honours will recall there were senior counsel involved in giving advice and for many months ‑ ‑ ‑

CALLINAN J: No, but not under this clause.

MR O’BRYAN: Not under this clause, no, except as a kind of proxy for the receipt of advice on the value of contesting a claim there was advice sought, as you will recall, from Mr Archibald ‑ ‑ ‑

CALLINAN J: In effect, duelling opinions, but there was nobody who was asked to make, for example, a non-binding sort of assessment or an assessment or to give a binding opinion under 7.8.

MR O’BRYAN: There were no duelling opinions, your Honour, because we never got Mr Archibald’s opinion until it was too late, we got it in 2003. CGU obtained that opinion in March 2002 and we saw it, I think from memory, in April 2003, concluded it was wrong, CGU never in fact relied upon it and it never went beyond that point.

CRENNAN J: May I ask you this, Mr O’Bryan, and I think it is a related question. At appeal book 22, paragraph 17 of your statement of claim recites that on every occasion when you sent a request for instructions to CGU, you informed them that if they did not communicate their “instructions in accordance with the protocol, the applicant would be obliged to settle” and I am fastening on those words. Are there documents in the appeal book which show a response in which you claim that obligation? My second question is, do you mean morally obliged, legally obliged? What is the content of the idea that is expressed there?

MR O’BRYAN: It is commercial obligation, but also legal obligation in the sense that AMP had formed a genuine view, for its own part, your Honour, that it was liable to these people. These were not invented claims. These people had real and genuine claims under a number of causes of action but most importantly under section 819 of the Corporations Law and AMP, having considered the matter carefully, analysed and studied the materials that these people brought forward, interviewed them and so on, formed a real and genuine view that it was liable.

One cannot say you had an obligation to settle in advance of a judicial determination of that matter, your Honour, but if you as a litigant form a genuine view, an honest view, you are liable and you are likely to lose that litigation, you are in a moral sense, at least, obliged to settle, we would submit, and that was AMP’s position. Of course, your insurer can say, “No, no, I’ve got a brilliant defence which I want to run and I’m either going to obtain senior counsel’s advice or I’m just going to take the matter out of your hands and run that point and establish some authority on the meaning of 819(4)”. Of course, those things were open to it, your Honour, but AMP, having formed the view, was obliged, we submit, in all of the senses that your Honour has identified, in all of them.

GLEESON CJ: That is why the question of detriment is so important. If the hypothesis on which we are approaching this is that AMP, by making these payments was paying its debts, then we have to ask, why was it any worse off as a result of paying its debts?

MR O’BRYAN: Because at the trial, your Honour ‑ ‑ ‑

GLEESON CJ: What else might it have done?

MR O’BRYAN: Your Honour, the debt was an indemnified debt and CGU has been enabled by this device to avoid paying on the indemnity. That is the detriment, ultimately. The detriment arises when at trial CGU opens its case and says, “Unless these investors are called one by one to prove the underlying claims there is no case” and that is what Justice Heerey found.

GLEESON CJ: So the argument has to be that by settling, as you did, you disabled yourself from establishing your liability against CGU, is that right?

MR O’BRYAN: Not absolutely, your Honour. It could still have been done. We could still have issued the subpoenas, dragged the investors into court, put them into the witness box as our witnesses and sought to lead in‑chief the evidence which we would need to lead according to the CGU theory in order to establish the liability.

GLEESON CJ: But it would not be a detriment simply to say that it made it harder for you.

MR O’BRYAN: Yes, it would be a detriment, your Honour. It would within the meaning of our law of estoppel and, we would submit, under section 13 of the Insurance Contracts Act. It is a very significant detriment. It is much more expensive. It would mean this trial would have run for months because you would have had to call every single one of them. There is also a high likelihood forensically that you would lose a good number of them because either they did not turn up at all or they did not come up to proof. You cannot cross‑examine these people, your Honour.

GLEESON CJ: This is all on the assumption that the only way you could prove your liability to these people was by calling these people as witnesses in your case. This is a matter that Justice Heerey dealt with, is it not?

MR O’BRYAN: No, he did not, your Honour. He simply said the point is right. Unless you call these people as CGU demands, you do not have proof of your underlying liability. We submitted to his Honour that is the wrong question. The protocol having been agreed, the question is whether we complied with it and settled as a prudent uninsured which we can prove we did. Here are the documents that prove it, here are all of the matters which we took into account in reaching the settlements, they establish that we did what CGU agreed should be done. Objection was then taken. “These documents are hearsay”, said CGU. We submitted they are not hearsay. They are not tendered to prove the truth of the underlying propositions. They are tendered to prove AMP’s state of mind at the time it settled. So the hearsay rule does not apply to them. They were admitted into evidence and they are in evidence.

KIRBY J: Let us just sharpen this. You accept that at the opening of the respondent’s case it was said that you had to call the claimants one by one?

MR O’BRYAN: Yes.

KIRBY J: So you were on notice that that was so. That was when they opened their case and presumably, if that had been accepted as right, you could have sought leave to reopen your case. I do not know whether leave would be required in the Federal Court. They have some peculiar rules that are different from State courts, but presumably it was not too late at that stage. If that was the right principle, you were on notice, you could have reopened your case and sought to bring those witnesses, or frame some suggestion of a test instance and gone through that to see whether or not that sorted out the legal and practical circumstances sufficiently to have resolved the matter. You could have done all that, could you not?

MR O’BRYAN: Theoretically possible, your Honour. Theoretically possible.

KIRBY J: What is so wrong with it? I mean, those who assert have to prove. You were asserting an entitlement to indemnity and you were on notice in the course of the trial that you had to prove each claim. So it really comes down to, were you relieved from your ordinary obligations of litigation in a disputed claim with an insurer by (a) the protocol and (b) the estoppel that arises from that protocol and (c) the force of section 13 of the Insurance Contracts Act? Is that what it comes down to?

MR O’BRYAN: It does, your Honour, yes. We submitted to Justice Heerey and we submitted to the Full Federal Court we have an answer to this proposition. CGU is estopped by clear principles of the law of estoppel in this country from putting that proposition. They made the representations, we relied upon them and this is a very severe detriment to us, if that proposition is true, and it is absolutely contrary to the assumed basis upon which we have acted, and we submitted reasonably, having regard to what we were told, and having been told that we were uninsured, we act as a prudent uninsured, it is not open to CGU to turn around and say, “You are suing under the policy. You have to comply with all of its terms, and one of them requires you to bring all of these people into court and prove the case in the ordinary way”.

KIRBY J: There is a question and you will have to deal with it in due course as to whether a claim within the policy only arises at the point of dispute and at the denial of indemnity and that therefore what you are seeking to do by estoppel and by section 13 is to expand the contractual obligation of the insurance policy on which you are seeking now to claim.

MR O’BRYAN: Yes. We certainly do that, your Honour. It is noteworthy – it is very noteworthy that all of the other bases under this policy, pursuant to which CGU could have escaped liability, the fact that there was no capital “C” claim because no litigation in fact ensued, the fact that we had settled and therefore notionally breached clause 7.6, the no settlement provision, the fact that we had in all likelihood breached clause 7.2, the so-called claims co‑operation provision, all of those matters which previously and right up until 2003 CGU was relying upon to defeat our claim were abandoned in the defence.

They were not abandoned before the defence, but in the defence CGU recognised if we try to run any of those arguments based on the express terms of this policy we are going to be met with an utmost good faith claim so we will abandon all of those but we will have our cake and eat it too because, although we abandon all of the express terms of the policy which would have enabled us to deny that we have any liability to indemnify, we will demand that AMP run this case in the ordinary way and thereby snooker them, basically, because they take the view that the protocol and the prudent uninsured representations mean that they were entitled to settle reasonably and that all that they have to prove is that they did, in accordance with the protocol and the instruction, and they are not prepared to call all of these individuals to court, for obvious reasons, all of the factors which the Chief Justice identified earlier, and that will enable us to ensure that we never have to pay out under this indemnity. That is, effectively, what has happened. That is what has happened. The trick has worked, to date.

Your Honours, one last comment on the schedule I handed up a minute ago, it demonstrates that less than half of the claims had been paid by the end of November 2001, which was the express question which was asked by Justice Callinan yesterday and the answer was given that all of them had been paid. Less than half of them had been paid, at that that point in time.

CALLINAN J: That was qualified later. Mr Myers said later that it was not the lot and he gave me some details and he said he would provide me with the exact position later. He corrected that.

MR O’BRYAN: Yes. Your Honours, the Chief Justice asked an important question yesterday evening which I would like to endeavour to answer now and that was a question about the nature and basis of AMP’s claim for damages in respect of the utmost good faith principle. Could I ask your Honours, please, to take up volume 3 of the appeal book and turn, please, to page 808.

KIRBY J: I did not hear the page.

MR O’BRYAN: I am sorry, page 808. These are our submissions, AMP’s submissions, in reply in the Full Federal Court. Your Honours will there see a subheading “AMPFP’s damages claim”. In paragraph 10 we set out the basis of all of our damages claims including that for the utmost good faith breaches and pointed out that:

claim for damages must be understood in the context of a liability insurance claim of this nature. The claim for damages in the application is made in the ordinary way in which a claim is made for a payment of indemnity under a policy of liability insurance:

We referred to a number of cases and I would ask your Honours please to be given the first of those cases which is Jabbour v State of Israel [1954] 1 All ER 145 which is one of the cases that we handed up to the Court staff this morning.

This is a decision of Mr Justice Pearson, as his Lordship was. The facts are somewhat complicated as most insurance cases seem to be, but your Honours will see it involved an indemnity claim in respect of damage to a property in what was then the territory of Palestine, I think, or it might have been in Israel itself. No, it was Palestine. You will see in the headnote on 145C and the claim came ultimately before the Queen’s Bench Division in England on various questions.

We do not need to spend any time on the detail of those questions but at the very beginning of his Lordship’s judgment, which your Honours will find on page 150, Mr Justice Pearson set out the principles that apply in relation to claims for damages in respect of indemnity policies. His Lordship said at the beginning of the judgment at A:

As questions will arise under the regulations and the Law whether the plaintiffs’ claim against the insurance company, which, according to the defendant’s contention, became vested in him, was “property” within the meaning of the relevant provisions, and whether it was a “mere right to claim damages”, it is necessary to consider the legal nature of the claim and what, if any, situation it had at the material times.
It is established by many decided cases that such a claim as this is a claim for unliquidated damages –

with numerous authorities cited -

Such a claim is unliquidated because the plaintiff has to prove the amount, and even after an adjustment . . . But the word “damages is puzzling and seems to be used in a rather unusual sense, because the right to indemnity arises, not by reason of any wrongful act or omission on the part of the insurer (who did not promise that the loss would not happen or that he would prevent it) but only under his promise to indemnify the insured in the event of a loss. The usual meaning of the word “damages” is as stated in HALSBURY’S LAWS OF ENGLAND . . .
On the other hand, there is an interesting footnote on p. 1 of MAYNE ON DAMAGES, 11^th ed. –

which I think predates Professor McGregor.

The first sentence of the text is:
“Damages are the pecuniary satisfaction, obtainable by success in an action.”

The footnote is:

“MAYNE’S definition was intentionally wide to bring within the scope of his work actions for the price of goods, amounts payable under policies of insurance, dividends in bankruptcy . . . Lawyers generally distinguish, however, between debt and damages –

and so forth and then discussion about that. Over the page at 151, at the top of the page:

The explanation of the use of the expression “unliquidated damages” to describe a claim for an indemnity under an insurance policy may be wholly or partly afforded by the old form of pleading in assumpsit, alleging a breach by non-payment . . . But, as the only wrong admitted by the insurer is his failure to pay a sum due under a contract –

and in that case the amount had been ascertained. As his Honour says a few lines later:

The claim is for unliquidated damages, but the word “damages” is used in a somewhat unusual sense.

Now, that proposition, your Honours, you will find accepted by this Court in the CIC Insurance Case.

CRENNAN J: The damages are referred to as unliquidated because the amount has to be proven.

MR O’BRYAN: Yes, indeed, your Honour, that is absolutely correct. But the principle is that it is normal in insurance cases to make a claim for damages in respect of an amount which is no more than the claim for the indemnity under the policy. Now, that principle is accepted by this Court in CIC Insurance v Bankstown, which is on our list of authorities.

KIRBY J: Where is this leading? Mr Myers got through all of his submissions, a whole day, without referring to a single case. What is this leading to? He says this is all very trite. We all know that it is damages and it is unliquidated damages for the reason Justice Crennan mentioned, so what is the point of telling us this?

MR O’BRYAN: There were two fundamental points raised by CGU in the opening before Justice Heerey and one of them was repeated here yesterday by Mr Myers and that point was that there could not be a claim for damages because there had not been a breach at the time when the payments were made. The point of this is to demonstrate that the claim for damages in this proceeding has always and only been a claim for an indemnity in respect of the policy.

So that the question, when did the breach occur in relation to the payments which were made pursuant to the settlements is an irrelevant consideration because in insurance cases the denial of indemnity may come months or years after the relevant payment or loss has been suffered. It is nevertheless properly described and understood as a claim for damages in respect of the ‑ ‑ ‑

KIRBY J: Does that depend on whether it is a small “C” claim, or a capital “C” claim?

MR O’BRYAN: No, it does not, your Honour, because the principle identified in Jabbour v State of Israel and accepted by this Court in CIC Insurance means that in all cases of claims for liability they are claims for damages so that the ordinary principle of the law of contract which requires one to look to see whether or not the loss suffered as a result of the breach is inapplicable in insurance cases, indemnity cases, because, of course, the loss will often, if not in most cases, have occurred long before the breach.

CRENNAN J: Mr Myers was simply referring to a body of case law which considers the prudent uninsured, the circumstances in which an insured can act as a prudent uninsured. That is what he was doing.

MR O’BRYAN: I do not think that is entirely correct, with respect, your Honour, because the same point was made at the trial. Mr Myers’ point at the trial was time cannot run backwards and therefore the claim for damages must fail and therefore, it was submitted, there can only be a claim for the indemnity and therefore you have to bring the insureds into court. That was the line of reasoning below and that was the same point made in this Court yesterday. Now, the claim for damages has only ever been a claim for the indemnity and it is the same claim that is made in respect of the breach of utmost good faith for the indemnity, the same claim.

KIRBY J: I interrupted you when you were going to take us to CIC. I do not know whether you need to do that.

MR O’BRYAN: I will just give your Honours the page reference, if I might. It is on the list of authorities and I refer your Honours in particular to the discussion by the Court at page 402. It commences at the bottom of page 401. It is the majority decision of the Chief Justice, Sir Gerald Brennan, and Justices Dawson, Toohey and Gummow and runs over the page to 402. Could I also refer your Honours, without taking you to it, to the helpful discussion of the same point in the Penrith City Council Case, again on our list of authorities, so your Honours will have it. It is No 17 on our list of authorities and there is a useful discussion in that case ‑ ‑ ‑

KIRBY J: We do not have the list of authorities. They go to our associates.

MR O’BRYAN: I am sorry. Shall I give you the citation, your Honour?

KIRBY J: Yes, please.

MR O’BRYAN: Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564 and the discussion is in the judgment of Justice Giles, now Justice of Appeal. I will give you the page reference. It is at 568E and there your Honours will see that Justice Giles reaches the same conclusion and cites more or less the same authorities as were cited in Jabbour’s Case in support of it. That is the way in which the damages claim was put below and the way in which it is put here.

GLEESON CJ: That is not a claim for damages for breach of the obligation of good faith. It is a claim for damages being the indemnity to which you are entitled.

MR O’BRYAN: But, your Honour, the other leg of our claim for the indemnity depends upon the breach of good faith because we say ‑ ‑ ‑

GLEESON CJ: You mean the breach of good faith entitled you to indemnity.

MR O’BRYAN: The breach of good faith prevented CGU from demanding that the insureds all be brought to court in the same way as the estoppel did, it prevented them from doing that and that meant that we were entitled to our damages, meaning the indemnity, if section 13 prevented, as we submit it did, CGU from running that case at trial.

GLEESON CJ: The breach of good faith cannot have occurred during the trial then.

MR O’BRYAN: Yes, it did.

GLEESON CJ: I thought you said the breach of good faith prevented them from running the trial in a certain way.

MR O’BRYAN: It ought to have prevented them.

GLEESON CJ: If the breach of good faith prevented them from running the trial in a certain way it must have occurred before the trial.

MR O’BRYAN: Yes, I am sorry, your Honour, that is true. The aspects of the breach of good faith of course depend upon what had preceded the events at the trial. We put to Justice Heerey and we put to the Full Federal Court that what had happened leading up to the trial, the protocol, the prudent uninsured instruction, et cetera, rendered it a breach of utmost good faith for CGU to mount that argument at the trial.

GLEESON CJ: That means that by the time they got to trial, by reason of their conduct before the trial, good faith required them to conduct the trial in a certain fashion or, more accurately, not to conduct the trial in a certain fashion.

MR O’BRYAN: Exactly so, your Honour.

GLEESON CJ: But that is by reason of their conduct before the trial.

MR O’BRYAN: Yes.

KIRBY J: And I think Justice Emmett interlinked the estoppel that he discerned and the good faith obligation. I think the two are not disjoined but they are interconnected, are they not?

MR O’BRYAN: They are intimately interconnected, your Honour, because we submitted at all levels, and we submit here, that even if your Honours are against us on the estoppel for whatever reason, if you consider that there was insufficient reliance, if you consider that there was insufficient detriment, both of which propositions we contest for reasons that I will go on to, the breach of good faith was obvious, we submitted, of utmost good faith.

It had to be a breach of utmost good faith to have led us down this garden path for a number of years and then to announce at the trial, or it might have been at a directions hearing – we do not disagree that there was comment about this at a directions hearing, but there is nothing about it in the pleading – so we were unprepared, had not paid enough attention apparently at this directions hearing, which was referred to yesterday, and that was a breach of utmost good faith.

HEYDON J: Did you protest at the trial?

MR O’BRYAN: Protested in the sense that we said at the trial, your Honour, “You are estopped and it is a breach of the utmost good faith and section 13 prevents you from running the case in that way”. We said that.

HEYDON J: What page of the appeal book?

MR O’BRYAN: Your Honour, could I come to a number of pages that deal with that or I can answer your Honour’s question more directly. Could your Honours look at pages 144 to 145 in volume 1. Could your Honours first turn to 141. At 141 is the transcript on page 69 of the first day of the trial, 27 September, during Mr Myers’ opening where at line 30 Mr Myers, having raised the supposed difference between a damages claim and an indemnity claim, then said, “it would be a claim for indemnity” and we would have to “prove all the elements of the liability”. At line 35 he said you “would call the investors” and establish the relations, et cetera. Over the page at 142 in the appeal book, that is page 70 of the transcript, more discussion about the loss and breach question at the top of the page and then, at line 23:

our friends have simply not attempted to establish that these liabilities that have been met, alleged liabilities that have been met by settlement, are within the terms of the policy . . . a claim for indemnity under the policy before breach will fail on the evidence -

because, as Mr Myers put it -

our friends are not even going to attempt to prove that claim -

and then went on about the terms of the contract by admissible evidence at line 35.

Then at 144, just after Mr Myers had concluded his opening, his Honour invited me to respond, at the bottom of the page and I said:

your Honour, insofar as the proposition is put that there cannot be any liability arising out of the reasonableness of the settlement by reason of the fact that CGU simply strung it out until late 2002 or 2003, we – this is subject to some consideration overnight, your Honour – but you’ll see in paragraph 22 and following in our pleading we have put an estoppel plea in relation to that proposition arising out of the exactly the same facts as were said to give rise to the statutory claim.

We plead unconscionability and referred to those various paragraphs in the statement of claim dealing with estoppel.

KIRBY J: Is the statutory claim you are referring to the claim under section 13 of the Insurance Contracts Act?

MR O’BRYAN: Not at that point, your Honour, but it was raised. Your Honours have at page 642 of the appeal book our list of trial issues and this list of issues was handed up to Justice Heerey first on 28 September, the following day. This is the second version of it but it is marked up so your Honours can see what the first version looked like and you can see the date of the first version at the bottom of 643. It was handed up on the 28th. In the fifth point on 643 of the trial issues given to the other side and to his Honour we put:

Is CGU prevented by any principle of law (estoppel, waiver, unconscionable conduct, misleading or deceptive conduct or a breach of its obligation of utmost good faith) from relying upon its argument (first articulated at T 69-71) that AMPFP is not now entitled to claim damages . . . because it settled with some investors after the claims management protocol had been agreed but before CGU had expressly repudiated the contracts of insurance, particularly having regard to the fact that –

it acted :

as a “prudent uninsured” –

in respect of those matters.

KIRBY J: This is dated 30 September. When was Mr Myers’ opening?

MR O’BRYAN: No, it was the 28th, your Honour, originally handed up. This is the amended version. You can see the deletion and the change of the date. There were two versions handed up.

HEYDON J: The openings are on 27 September. This document was finalised on 28 September and amended on 30 September. That is the chronology ‑ ‑ ‑

MR O’BRYAN: Handed up on the 28th, your Honour, and then re‑handed up on the 30th.

HEYDON J: Yes. But if CGU had behaved as badly as you are suggesting, one would have expected a lot of noise to have been made about it on page 144 of volume 1 of the appeal book.

MR O’BRYAN: Your Honour, we did make enough noise, we submit, because both sides at the trial argued that question and that is why, in his Honour’s judgment, as I think Justice Callinan observed yesterday, that question of whether there was an estoppel or a breach of utmost good faith is one of the first issues his Honour dealt with.

KIRBY J: Perhaps it is not in the traditions of the Victorian Bar to make a lot of noise. Perhaps it is more cerebral than other Bars of the nation.

MR O’BRYAN: I will not comment, your Honour. If you look at page 704 of the appeal book in volume 3 you will see that this issue was clearly and plainly in dispute at the trial. Indeed, it is the first set of issues that his Honour deals with in the judgment. If you look at the list on 704, “1” is the “admissible evidence” point; “2” is the so-called damages “before any breach” point and then “3” is, if those questions are answered adversely to AMP can AMP:

avoid that result by reason of its having, with CGU’s knowledge, paid Investors -

by reason of any of the principles identified on the next page which include the “Estoppel” point and the “Breach of the obligation of utmost good faith”.

It was suggested yesterday that our raising these points came at the very heel of this trial and that is incorrect, your Honours. It is incorrect. I can hand your Honours the relevant pages of the transcripts of the trial and the version of the disputed questions of fact and law which were handed up to his Honour by Mr Myers on 29 September – so the day after our first version was handed up – in which the same points were agitated. If those are of assistance to the Court I have the necessary copies here, if there is any suggestion that this was not a matter that was agitated between the parties at the trial.

KIRBY J: Yes.

MR O’BRYAN: We would submit it is absolutely clear from Justice Heerey’s judgment that it was a matter agitated at the trial.

GLEESON CJ: Mr O’Bryan, was there any evidence at the trial about the terms of settlement that were entered into between AMP and these individual claimants?

MR O’BRYAN: Yes, your Honour. Every single set of documents that supported every claim along with every settlement deed that was entered into along with every draft prior to the conclusion of every deed was in evidence.

GLEESON CJ: Did the settlement deed contain a confidentiality clause?

MR O’BRYAN: From memory I am not certain, your Honour. There are a couple of these in the court book so I can give your Honours the references to them. They are in volume 2. Mr Myers took you to one yesterday. It is at 555. A draft is at 555 in volume 2.

GLEESON CJ: These settlement deeds were presumably entered into with ASIC looking over people’s shoulders.

MR O’BRYAN: Certainly looking over AMP’s shoulder, your Honour. Yes, but everyone was aware that ASIC ‑ ‑ ‑

GLEESON CJ: Was there a confidentiality clause in the settlement?

MR O’BRYAN: There is in the draft, your Honour, at 557.

GLEESON CJ: That is what I wanted to know.

MR O’BRYAN: Yes.

GLEESON CJ: If you took from these investors a clause requiring them to keep the terms of the settlement confidential, was there any evidence as to why you could not also have obtained in the settlement deed an agreement from the investors that if you were forced to pursue your insurers in litigation, they would give evidence in support of their claims?

MR O’BRYAN: It may have been possible to do that, your Honour ‑ ‑ ‑

GLEESON CJ: Well, what I wanted to suggest to you for your comment is that that is not uncommon practice.

MR O’BRYAN: Not a common practice?

GLEESON CJ: Not uncommon practice.

MR O’BRYAN: Not uncommon practice. I cannot answer that question from my own ‑ ‑ ‑

GLEESON CJ: Why could it not have been done?

MR O’BRYAN: It could have been done, your Honour. We do not dispute it could have been done but, if looked at from AMP’s point of view, the fact that it was not done, we would submit, is further evidence in favour of AMP that it did not assume that CGU would later turn around, having accepted the protocol and so forth, and demand that we call these people at the trial. Had we known that there was any possibility of doing that, you would expect such a provision to have been inserted because it would have been prudent to do it. The fact that it is not there, we submit, is consistent with both our detrimental reliance, for the estoppel case, but also the fact that it was not within our contemplation at all that that is what would be necessary.

GLEESON CJ: I understand the way you put it. Thank you.

CALLINAN J: Mr O’Bryan, could I draw your attention – it is a matter I asked Mr Myers about yesterday – to page 859 and 860, the reasons for judgment of Justice Emmet, paragraph 64? You see, his Honour points out that there was a case that you might have made or you might have pleaded but you did not and then his Honour said in 65:

In its written submissions to the primary judge, AMP outlined such a case.

Now, Mr Myers disputed that and I thought he took us to passages which tended to show that he was correct about that and therefore what was said in the last sentence of paragraph 65 was correct. Indeed, it was not – it was incomplete. Not only did the statement of claim seek to make out such a case, but also your written submissions did not do so.

MR O’BRYAN: No. With respect ‑ ‑ ‑

CALLINAN J: Can you demonstrate to us that the written submissions did what Justice Emmett says they did?

MR O’BRYAN: Yes. Your Honours, the written submissions at trial are at 672. Your Honours will see we dealt with estoppel on 679, commencing at paragraph 35.

CALLINAN J: It might be more convenient for you to deal with this later, Mr O’Bryan.

MR O’BRYAN: I am sure I can come to it reasonably quickly, your Honour.

CALLINAN J: I do not want you to have to do this on the run. If you want your junior to look it up, do so.

MR O’BRYAN: Yes, I am sorry. My learned junior has assisted. Page 677, your Honour, at 25 and 681. Now, 677 at paragraph 25 is the utmost good faith principle used as a shield, that is to say, as a way of arguing CGU is not entitled to run the case in which it sought to run the case before Justice Heerey. Paragraph 40 is a use of section 13 as a sword, in other words, a submission that if AMP was wrong in the submission that it put to Justice Heerey that it was unnecessary to demonstrate that there had been a breach of the insurance policy on CGU’s part before it settled – and that was AMP’s primary submission - then there had been a breach and the breach was a breach of the sort identified in Moss v Sun Alliance, the case that is cited in paragraph 40 which was a breach of section 13 by reason of a long delay, that case standing for that proposition.

So that section 13 came into the case in two respects. One is a respect that is analogous to the law of estoppel, what I describe as the shield use of it. The other was a sword effect, namely, if we have to prove there was a breach before we settled, there was such a breach because of the excessive delay, Moss stands for the proposition that that is a breach of contract and it happened in this case.

CALLINAN J: Assuming that to be correct, even on Justice Emmett’s analysis, if you go back to paragraph 64, you would have had to have proved, would you not, that you settled each demand on reasonable terms?

MR O’BRYAN: Yes.

CALLINAN J: You say you did not have to do that because of a protocol. That is the real issue between you and Mr Myers.

MR O’BRYAN: No, no, not at all, your Honour. We accept and have always accepted we had to demonstrate reasonable settlement and we said we did that by proving everything we did pursuant to the protocol and by tendering ‑ ‑ ‑

CALLINAN J: Again you get back to the protocol.

MR O’BRYAN: Yes, we do.

CRENNAN J: Mr Myers put it that you were suggesting that you could rely merely on the process rather than proving the settlements were reasonable objectively in the sense that that is normally understood in the case law.

MR O’BRYAN: No, your Honour, with respect, that is not what we put to Justice Heerey. What we put to Justice Heerey was, all we need to prove is that these settlements were reasonable settlements and we prove that by showing your Honour all of the reasoning that underlay the settlements. That is what Unity Insurance stands for. To prove a reasonable settlement you must prove the facts and matters which you took into account before settling, including the advice you received and so forth.

All of that was contained in the numerous volumes of material which were tendered and accepted in evidence by Justice Heerey. The question of the reasonableness of the settlements was directly in issue at the trial. Indeed, if your Honours have the volume of the trial submissions there that we were looking at a moment ago, if your Honours will turn to page 696 - I am sorry, it was not in the trial submissions. It is in the appeal submissions. I have given you the wrong reference for which I apologise.

It is in volume 3. If your Honours look, commencing at 790 – if your Honours turn to 799, these are CGU’s submissions to the Full Federal Court about the question of the reasonableness of the settlements. Paragraph 27 on 799 correctly states:

On the claim pursued by AMPFP at trial, however, the reasonableness of the settlements reached by it with the investors was the central issue.

We agree with that.

That issue accounted for the considerable volume of evidence led by AMPFP.

That is correct.

As the judgment makes plain, the contention by AMPFP that the settlements were reasonable . . . required consideration of the possible bases of legal liability -

We agree with that.

In its defence . . . CGU alleged expressly that the settlements were not reasonable having regard to the defence available under section 819(4) . . .
28. The failure by AMPFP to lead any direct evidence as to the facts underlying the claims made by the investors meant that the learned trial judge was required to reach a view as to the application of section 819 on the basis of the hearsay evidence available and without hearing from any investors -

That is incorrect, your Honours. It was not hearsay evidence for the reasons that I explained to Justice Heerey. It was accepted in evidence by his Honour. It definitely evidenced the reasonableness of the settlements because it showed the facts and matters that were taken into consideration by AMP before settling. It was not hearsay and it was admitted.

GLEESON CJ: Could I just ask how this works in relation to a policy like this, getting away from the facts of the present case, so that the response to the question is not complicated by any of the factual details in this case.

Suppose a medical practitioner is covered by a professional indemnity policy in substantially the same terms as this and a patient, claiming to be a victim of medical negligence, makes a claim against the practitioner and the practitioner gives a notice of the claim to the insurer. The medical practitioner, of course, for a variety of reasons may not want to go to court and may wish to settle with the claimant to avoid damage to his or her reputation, but assume the Queen’s Counsel clause, which is there to deal with that sort of problem, is not invoked.

The lawyers for the medical practitioner, in a situation where the insurer has acted in the way this insurer has acted and says, “We don’t admit or deny liability, act as a prudent uninsured”, the lawyers for the medical practitioner say, “We reckon $950,000 is a good settlement and one of the reasons we think that is that the patient claims to have suffered continuing back pain and we see no reasonable prospects of demonstrating in court that the plaintiff does not suffer back pain” so the matter is settled for $950,000. Then the medical practitioner looks to the insurer and the insurer says to the medical practitioner, “We don’t believe that that person suffers back pain, you’d better sue us and prove that the settlement is reasonable”.

In order to prove that the settlement was reasonable does the medical practitioner, in the claim against the insurer, need to prove that the patient in fact had a sore back?

MR O’BRYAN: No, your Honour.

GLEESON CJ: What does the medical practitioner need to prove?

MR O’BRYAN: That in the circumstances that prevailed at the time of the settlement, the settlement was reasonable. So he would have to demonstrate that all of the materials that had been gathered, both factual and legal, were adequate for a sensible, reasonable settlement of $950,000 to have been arrived at. He does not need to bring the victim into court to prove that there was, in fact, the underlying condition. That is spelt out very clearly in the judgment of Justice Hayne in Unity Insurance in very compelling terms, your Honours, that I ‑ ‑ ‑

KIRBY J: Just pause there. Add to the Chief Justice’s set of facts that the insurer’s solicitor gets the evidence of Professor McTavish of the Edinburgh School of Royal College of Surgeons and gets various other experts who say, “This surgeon did absolutely everything and it was perfect and I have examined the operation record and there is no liability. It is absolutely clear that this is a perfect operation and there is no negligence whatever”. Now, what then is the way in which the reasonableness of the settlement is decided if there is a true and strong argument about liability at all?

MR O’BRYAN: Your Honour, it is always open to the insurer to test the quality of the work done on behalf of the doctor at the trial. So the insurer might demand to cross‑examine the medicos who presumably form the opinion that informed the settlement. There is no doubt about that. But that is a decision for the insurer to take. Noticeably, in this case, CGU did nothing other than to cross‑examine Mr Tudjman, the main decision‑maker on CGU’s part, and did not in any other respect, other than saying in a general sense, “We disagree with the interpretation of section ‑ ‑ ‑

KIRBY J: Yes, but be fair. You did not call the witnesses who would proffer the question as to whether there was liability at all.

MR O’BRYAN: No, your Honour, because all of the material upon which the liability might be founded – that is to say, all of the material relating to the relationships between the investors and Pal and AMP and so forth, every document that had passed between Pal, AMP, the investors and so forth, all of the receipts, the investment certificates, et cetera, was in evidence. Your Honours have it in one part of this appeal book. If you look in volume 2 which is a volume that we do not expect your Honours will need to look at very much, but volume 2 of this appeal book ‑ ‑ ‑

KIRBY J: That is where you say you do not expect us to look at it. I think you said a very similar thing to Justice Heerey at trial. “I do not expect your Honour is going to have to look at any of this”.

MR O’BRYAN: No, no, I am sorry. I do not want to be misunderstood about this, your Honours. You do not have to look at it for very long and you do not have to read every word of it. Can I say that? If you look at this vast run of documents which commences in the case of Dalton at – sorry, take the first one. Page 392 is the case of Bajada. That is a set of liability documents in respect of that claim.

The Dalton file – we were only permitted to have a couple of these in the appeal book and for the very reason that your Honour Justice Kirby identified yesterday, lest everyone felt they were back in an intermediate Court of Appeal or, worse still, at a trial – the Dalton set of papers, the whole of them, I think this is, commences at 399 and runs through to 517 and I think it is true to say that is everything which was in the Dalton claim file, so that is every document that was produced by AMP or by the Daltons themselves or by Minter Ellison, including all of the certificates for their insurance, every account, statement, receipt, cheque, butt, et cetera, and, of course, the liability report.

KIRBY J: Why did you not object to it going in?

MR MYERS: We did object to it going in, your Honour.

KIRBY J: You should have said that it is irrelevant.

MR MYERS: Then we were told it did not go in for the proof of anything, one could assume it was lies and we did not need to look at it.

KIRBY J: Where was it said that it was lies?

MR MYERS: It is a reference that I gave your Honours yesterday. I will ask my learned junior to find it again, “one could assume it was all lies”. It is on page 146 at about lines 35 to 38.

My learned friend said this morning that the claim is and always has been a claim for indemnity. With respect to my learned friend, that was not so. I trust I demonstrated it yesterday. There is a difference between a claim for indemnity and a claim for damages after acceptance of the repudiation of the contract. That was the distinction that we drew before the learned trial judge and it was the difference between those two cases that gave, in the end, my learned friend some of his difficulties of proof.

My learned friend also said that the claim for breach of the obligation of utmost good faith is a claim for indemnity. It is simply not so. It is quite a different claim and, moreover, as I have said before, no loss was alleged and no causal connection was attempted to be established and no repudiation was alleged.

KIRBY J: It is alleged that a term of “utmost good faith” is imported by force of the statute in the indemnity contract and that therefore you have to examine the contract with a light to see whether or not there was a breach of that particular term.

MR MYERS: All that was pleaded in relation to it was that there was a breach. It was not alleged that any loss or damage flowed from it. Somehow or another it was ultimately wrapped up in the estoppel contention and that is how the remitter is framed, but it was never put forward at any level as a claim for indemnity.

KIRBY J: It is a matter of studying the statement of claim but, as I saw it earlier, it seems to make the allegations and then makes the claim for the consequences of the…..but we have both submissions now. We just have to consider that.

MR MYERS: Before the luncheon adjournment, your Honour Justice Callinan referred to some of the portions of the report on liability in relation to the Bajada Retirement Fund. That is in volume 2 at page 392 of the court book and your Honour referred particularly to clause 7.2(b)(ii) on page 394. Without reading it I would ask your Honours to contrast the same paragraph in the next indemnity claim, which was for the Daltons at page 410. A completely different conclusion is reached upon the matter of the application of section 817 on the same facts.

In one case it said that the facts may be sufficient for a finding of liability under section 817 of the Corporations Law and on the next occasion the same facts are marshalled, they say this may mean there is no liability under section 817 of the Corporations Law. I am wrong in saying it is completely different. Probably they are the same. It may be yes, it may be no.

KIRBY J: You are saying these things to this Court now years after these events. The question is whether or not, having regard including to section 13 which imports this term into the contract of insurance, it was not your obligation to say these things at a much earlier stage.

MR MYERS: These questions arose in relation to ‑ ‑ ‑

KIRBY J: To reach a conclusion on indemnity at a much earlier stage. You just led them along.

MR MYERS: These questions arose in connection with the question whether we were just sitting on our hands and whether we should be seeking further information. I am just pointing out that the very documents that Justice Callinan referred to contain this contradiction.

KIRBY J: Where is the request for further information about that particular case? Where is it? It did not come. You were just doing nothing.

MR MYERS: There were requests for further information at the meeting of 5 October and also at 26 July.

CALLINAN J: Mr Myers, can I just ask you one question. You pressed Mr Tudjman about the influence of ASIC’s attitude upon the settlement.

MR MYERS: Yes, I did.

CALLINAN J: Did you ever put to him his email at 365?

MR MYERS: I cannot recall. My learned junior is telling me yes, but my ‑ ‑ ‑

CALLINAN J: It is a fairly direct contradiction. I would just be interested in his response to it.

MR MYERS: The whole of Mr Tudjman’s cross‑examination is not reproduced which may be ‑ ‑ ‑

CALLINAN J: I understand that. It is apparent.

KIRBY J: I think you were in full flight at one stage, and we are deprived of the impact.

MR MYERS: Probably, your Honour.

KIRBY J: Are we going to be given those pages, the missing pages of Mr Tudjman’s cross‑examination?

MR MYERS: We do have the whole of the transcript of the cross‑examination if that is what your Honours want.

KIRBY J: I think it would have to be the examination in‑chief.

MR MYERS: I cross‑examined him for about a day, as I recall.

CALLINAN J: All I want at the moment is a very small portion of it, if any – it may already be there ‑ ‑ ‑

MR MYERS: If we cannot find that passage at the moment, would I have leave to send your Honours a note about it.

GLEESON CJ: Yes, certainly.

MR MYERS: It may not be possible to find it just at this present minute. My next note asks me to refer to page 703 which would be in Justice Heerey’s reasons for decision – paragraph 3:

The Australian Securities and Investment Commission (ASIC) urged AMPFP to meet the losses of the Investors. ASIC made it clear that an inadequate response to the Investors’ claims would put AMPFP’s securities dealer licence at risk.

That finding was not challenged.

KIRBY J: But what does it matter? You give an insurance in a commercial setting of a particular kind of a finance house, you know they are subject to the control or the supervision of ASIC. That is the commercial environment in which you provide this form of indemnity. So what does it matter that they were under a bit of pressure. That would just follow from the nature of that industry and the nature of ASIC’s statutory responsibilities under the Parliament of this country.

MR MYERS: But when there is a question of causation or reliance these sort of issues may be important. They were important and they were the subject of cross‑examination of Mr Tudjman and Mr Heyworth, in particular, in this case, because they also reflected on the issue of reasonableness as it had been put forward in opening by my learned friend.

KIRBY J: But under Justice Emmett’s remission order or what he contemplates, that would be the matter of consideration in each individual case. On your theory of the case it is a technical knockout. They fail to prove their case in a particular way though you never took over a case and fought it and litigated it as you could and now you want to have complete victory, removing them from any entitlement to indemnity, though you took an awful long time to reach your conclusion, whereas at least on Justice Emmett’s order the matter would go back and would be considered individual case by individual case, that being the way you want it.

MR MYERS: If your Honour pleases, we do say that AMP failed completely to prove its case before the trial judge. That is their responsibility, not ours. Indemnity was reserved, indemnity was denied. They have to establish that they are entitled to indemnity under the policy. They did not attempt to do so. There is no point in complaining that they did not understand what is perfectly elementary, that if you bring a case to court to establish that you are entitled to rights under a contract, you have to prove it by admissible evidence. That was always inherent in the state of affairs where, as they knew, CGU had reserved liability and may deny liability.

KIRBY J: But, as you knew, they were acting on the protocol. You had accepted the protocol in principle; everything was proceeding swimmingly, whilst one firm of solicitors had it. There was then a change of solicitors and new life was breathed into it and even then you took an awful long time to deny indemnity. If you had done that earlier, the whole thing would have taken on a different complexion. It is not a good principle for this Court to endorse that you can take a year and a half, or more, to make up your mind on indemnity, not a good principle at all.

MR MYERS: We knew and they knew that indemnity was reserved. They did not complain about it. To the contrary, as his Honour found, and it has not been challenged, they were happy with that because they did not want us to be in a position where we might say, “We’re taking over the conduct of any of the claims”. The evidence is perfectly clear.

KIRBY J: They did not want that but that was your right and at least it would have brought the matter to a head and you would have been able to litigate these matters that you complain so vociferously now you did not have a chance to test and litigate.

MR MYERS: We did not, with respect, your Honour. There is no question about that.

KIRBY J: But you would under Justice Emmett’s order.

MR MYERS: Under Justice Emmett’s order, as I understood my learned friend, though perhaps he was not absolutely unequivocal, the matter would be decided on the evidence that is already in and one of my primary submissions yesterday is that the remitter is hopeless because on that evidence he is bound to fail.

KIRBY J: Then the question will be who bore the onus of proving it? At least one view would be open to the judge that because you are the one who raised the defence of 18A of your defence, it was up to you if you wanted to raise an issue under section 819 to prove the evidence relevant to that matter and you did not.

MR MYERS: No, with respect, your Honour, it is for the insured to establish the elements that entitled the insured to indemnity.

KIRBY J: He might say I prove it enough by the material I put in. That is a matter for the future.

MR MYERS: But, your Honour, he did not attempt to prove it by that matter and when this vast body of material was put before the court we were concerned to ensure that the basis on which it was put was clear and our learned friend made it very clear and that statement about the basis on which it was put in evidence regulated the conduct of the case. There are many other things that he might have done, but he did not. That is what he did. Your Honour Justice Callinan, the answer to your question is, yes, I did put it to Mr Tudjman and it is at page 168, line 5.

A matter was raised this afternoon about whether independently of the big body of evidence that was tendered on the limited basis, there was evidence sufficient to enable the judge to decide upon the section 819 question and questions of construction. In my respectful submission, the judge did so decide. To the best of my recollection this is a point that has never been taken before, but in any event, Mr Heyworth and Mr Tudjman – particularly Mr Heyworth – were cross‑examined to make admissions of fact which were sufficient to found the section 819 case, and that evidence is found particularly at appeal book 149, 150 and maybe it goes on to 151,

and there is some cross‑examination that is directed to that, and Mr Heyworth speaks of MAG carrying on the securities business and Mr Pal and Mr Howarth being its human agents and so on.

My learned friend this afternoon referred to the question of section 13, and I just want to draw attention to the fact that Justice Heerey gave, as we see it, three reasons for rejecting the section 13 claim, and if one turns to paragraphs 78 and 79 on page 725 of the court book of his Honour’s reasons, in paragraph 78 there is a separate reason for injecting the breach of the obligation of utmost good faith claim, and in paragraph 79 there is a further reason. If your Honours please, they are the submissions I wish to make in reply.

GLEESON CJ: Thank you, Mr Myers. We will reserve our decision in this matter and we will adjourn until 9.30 tomorrow in Canberra and 9.30 tomorrow in Sydney.

AT 3.51 PM THE MATTERS WERE ADJOURNED

[2007] HCATrans 47

8 February 2007