Cic Insurance Limited v Bankstown Football Club Limited

[1995] HCATrans 209

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S3 of 1995

B e t w e e n -

CIC INSURANCE LIMITED

Applicant

and

BANKSTOWN FOOTBALL CLUB LIMITED

Respondent

Application for special leave to appeal

DAWSON J
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 14 AUGUST 1995, AT 11.47 AM

Copyright in the High Court of Australia

MR B.W. RAYMENT, QC:   May it please your Honours, I appear with my learned friend, MR J.G. DUNCAN, for the applicant.   (instructed by Abbott Tout)

MR J.B. SIMPKINS:   If your Honours please, I appear with my learned friend, MR B. DE BUSE, for the respondent.   (instructed by Thomas Tarmo & Co)

DAWSON J:   We thought we might hear from you first of all, Mr Simpkins.

MR SIMPKINS:   If your Honours please.  The questions in relation to which special leave are sought have been set out in the applicant’s outline in paragraph 1.11.  The first special leave question is said to raise a matter of general significance bearing upon the reinstatement obligations of the applicant under its special risks policy.  The principal judgment delivered in the court below was that of the learned President.  The conclusion that the learned President reached in relation to the policy was that the obligation to reinstate remained unfulfilled as at the date of a fire which occurred outside the period of indemnity and that the damage which then occurred nevertheless was damage which was required to be reinstated.

There seemed to be two bases upon which his Honour reached that view.  In his Honour’s judgment which appears in the leave book at page 97 point 2, his Honour referred to a passage of Mr Justice Barwick in the GIO v Atkinson-Leighton Joint Venture Case and in setting out the passage from the then Chief Justice’s decision, his Honour gave emphasis to a particular view that his Honour expressed as to the obligation to reinstate, namely that if there is an obligation to reinstate which arises and which remains unfulfilled, in the event that there is a supervening event which adds to or increases the cost of the reinstatement, the person as between the insured or the insurer who bears the consequence of that increased risk, is the insurer.

McHUGH J:   Do you support that reasoning?  Do you support the President’s judgment on this point?

MR SIMPKINS:   I do, with respect, your Honour.  Ultimately the question we accept is one of the construction of the policy.

McHUGH J:    That means that if I have a policy similar to this and my door is burnt down and the insurers has an obligation to reinstate it and a month later the house burns down, you have an obligation to reinstate the whole house.  That just strikes me as quite erroneous, with great respect.

MR SIMPKINS:   I was about to fully develop what we understand his Honour said and we would not contend that on a proper construction of his Honour’s judgment, that is the analysis that he finally arrived at.

GUMMOW J:   In any event, it is left in an unsatisfactory state, is it not?  Justice Powell has another view.  The third member of the court may or may not have had a view?  This is an important standard form.  A lot depends on all of this and it is left in flux.

MR SIMPKINS:   There is evidence that it is a standard form and one can accept the view that says his Honour, the learned President may have said something which has a bearing on the standard form.  But, it is also true that although there is evidence that it is a standard form, there is no evidence that there are any events known presently to any of the parties, the outcome of which is likely to be determined by this judgment.

It is, with respect, clear from the nature of the point at issue that it must be one which would rarely arise.  It could only, one would apprehend it, arise in one or two possible circumstances:  either a second event which occurs during the currency of the policy, the point then being of significance if there is a deductible provision such as of magnitude to excite the parties’ enthusiasm to debate the point; secondly, a second event which occurs outside the policy period in circumstances where the insured has become uninsured and in further circumstances where the obligation on the part of the insured under this policy to commence a process of reinstatement with alacrity, is excused because of the impecuniosity of the insured in the face of a wrongful refusal indemnity.

So, it is only in those two hypothetical situations which, no doubt, will occasionally occur that the construction that his Honour endeavoured to put upon the policy and the view that his Honour expressed would provide any guidance.  One can accept that there may be cases where the point of principle arises.  What I am merely seeking to put by way of submission is that notwithstanding the fact as it would appear on the evidence that this is a standard form policy issued by a number of insurers over a regular and protracted period, it is unlikely that either the events which give rise to this application or events which gave rise to the application in the GIO v Atkinson-Leighton Joint Venture Case are likely to arise with any frequency.

I was about to come to your Honour’s Mr Justice McHugh’s point which is, prima facie, there is something perhaps surprising about a result which says the door burns down and you recover for a structure of a house outside the policy period because the door has not been replaced.  His Honour’s views as to precisely how his construction principle operated perhaps may not have been expressed with the transparency with which one might have wished but there seemed to be two possible bases upon which his Honour reached the result that he did.  He either consistently put the views expressed by the Chief Justice in the Atkinson-Leighton Joint Venture Case, decided that if it be the fact that in order to reinstate the first fire damage, one had to reinstate the third fire damage, that recovery could be had for the third fire damage. 

For reasons I can develop at a little length if required, we would say that that is one possible view of what his Honour the learned President did, namely, accept the passage which he has underlined in the decision of the Chief Justice, taken the view without, perhaps, expressing it at length that on the facts that were before the Court of Appeal, in order to reinstate the third fire damage, it was necessary to reinstate the third fire damage.

McHUGH J:   The other point, of course, is that under this policy, the basis of settlement was the cost of reinstatement.  Not reinstatement itself but the cost of reinstatement.

MR SIMPKINS:   Certainly and one can accept that Mr Justice Cole attached some significance to that and also so did Mr Justice Powell in the Court of Appeal.  It is a matter that appears to be recognised by the learned President in his judgment but not given any particular emphasis.  In our submission, whether the obligation be one to reinstate or whether the obligation be one to pay the costs of reinstatement, if the obligation remains unfulfilled for reasons that cannot be sheeted appropriately home to the insured, and if a second event occurs which requires further expenditure in order for the fulfilment, either of the obligation to reinstate or to pay the costs of reinstatement, then that is the measure of the indemnity which the policy provides.  No point of principle or no matter of significance emerges, based upon whether the obligation is one to reinstate or to pay the costs of reinstatement.

I have put, I think, one basis upon which it might be said that his Honour the learned President consistently with principle ‑ certainly consistently with the approach of his Honour the Chief Justice ‑ ‑ ‑

McHUGH J:   How does it work out?  Take the example of a door:  Supposing it is a glass door and the bottom is kicked in, so part of it has to be repaired and then outside the policy period, the top part, another hole is broken in the door.  Does the insurer have to reinstate the whole door, or only the part that was damaged within the policy period?

MR SIMPKINS: The answer to that question will be a question of fact and there may be differing views according to what the nature of the evidence is.  But, if one took, for example, a wall which had the top half of it destroyed in one incident and then the bottom half destroyed in another incident, there might not be much force in the view factually that, in order to reinstate the top half, it will be necessary for someone to reinstate the bottom half.  That is just to recognise that these are factual questions, the answers to which will vary according to the state of the evidence.  They may be, in some cases, very difficult factual questions but the question is, I suppose in this application, whether there is sufficient point of principle to justify the grant for special leave.

If what his Honour the learned President has done is merely to recognise that principle that says there may be some factual circumstances in which, in order to reinstate one event of loss which has become increased to another event of loss, that other event must also be attended to.  In my respectful submission, that is certainly consistent with the dissenting judgment of his Honour the Chief Justice.  His Honour the Chief Justice dissented in the ultimate result, largely because of the differing view he took as to the way in which the various provisions of the policy before the High Court in that case interconnected, his Honour taking the view, I think, in relation to the reinstatement memorandum that it was an essential and critical part of the indemnity, a view which was not ‑ ‑ ‑

McHUGH J:   You are taking up a lot of your time on this point that I raised with you, but what about the point Justice Gummow raised with you about the state of the cases in general, and the various reasons.  Different reasons from three Justices, then Justice Priestley withdrawing his reasons to agree with the President.

MR SIMPKINS:   The mere fact that there is a differing view taken by the Court of Appeal from the judge below is not a special leave point, nor is the fact that there is one dissent in the Court of Appeal a special leave point.  What his Honour Mr Justice Priestley seems to have done is to have embraced the decisions of the learned President to the extent that that was necessary to reach a majority view.  That is what he has done;  that is what he says he has done and there is no suggestion in any expression of that by Mr Justice Priestley that he is doing it notwithstanding any intellectual or other reservation about that course.

McHUGH J:   What does it do in terms of precedent now?  It makes the President’s judgment the precedent.  If Justice Priestley had stuck to his guns, so to speak, maybe this case would do nothing but turn on its special facts.

MR SIMPKINS:   That might be right, but the fact is Mr Justice Priestley did embrace the learned President’s reasons to the extent necessary so there is a majority judgment constituted now by the learned President’s judgment and the now assenting supplementary judgment of Mr Justice Priestley.  So, what might have been the position had his Honour not done that is not a matter which relevantly arises.  In addition to endeavouring to support the learned President’s judgment on the construction point upon the basis that what his Honour really did was adopt a more limited principle than the one articulated by your Honour Mr Justice McHugh and then apply that factually to the evidence that was before him.

The other view which would also support what his Honour the learned President did is that his Honour, construing the policy, had regard to the requirement for damage within the policy period but he formed the view, factually, that the third event which had occurred outside the policy period was relevantly inseverable from the first fire and that, therefore, the obligation to reinstate damage extended not to the immediate damage caused by the first fire, but also to the damage caused by the third fire.  That, again, is a matter factually about which minds may well differ but it is a factual conclusion that his Honour reached and now a factual conclusion appears to be embraced by his Honour Mr Justice Priestley.

So, there are those two alternative ways his Honour’s judgment might be approached, neither which gives rise, on its face, to any principle of importance, both of which reflect an assessment by his Honour the learned President of how a principle should be applied to facts.  The second thing we would say about the construction point, with respect, is that whether his Honour’s construction be right, in fact, he did determine it also on the alternative ground - and this is really the second question in relation to which leave is sought ‑ that the third fire damage was caused, relevantly, by the first fire and was relevantly inseverable from it because the first fire, given the impecunious position of the insured, rendered the premises in a state where they were more susceptible to vandals or attack by other persons, certainly more susceptible to a third fire.

That is a matter where his Honour the learned President endeavoured to apply accepted principle of causation lying upon current authority in this Court where, again, his Honour’s conclusion is a conclusion of fact upon which minds may differ.  But, unless the Court was going to grant special leave in relation to the first and the second question, there would be still an alternative holding by his Honour the learned President supported by Mr Justice Priestley which would support the view that the third fire damage is recoverable.  I think I have already addressed on why we would say the matter, whether it be the first question or the second question, does not give rise to a question of general principle.

In relation to the third question propounded is a question for general leave.  The claim which was put forward by the insured at the trial and which was found in favour of the insured by Mr Justice Cole was that, upon the wrongful denial of liability under the policy and the delayed receipt of indemnity under the policy in respect of business interruption loss, there were further general damages sustained.  Appeals exclusion No 9 is an exclusion which is referable to claims under the policy.  What was advanced before his Honour was a claim under the policy but for the period permitted by the policy and a claim for general damages in consequence of the wrongful denial.  Appeals exclusion No 9 was not pleaded as an answer to the claim for general damage nor, in our respectful submission, does it have any reasonable prospects of success in that regard.  It was not advanced before the Court of Appeal and nothing was said by the Court of Appeal accordingly in the judgments.  In our submission, it is not an appropriate question for special leave. 

The fourth question propounded as one appropriate for special leave is whether or not it was open to Mr Justice Priestley to achieve a majority view in the way that he did.  What the Court of Appeal did, as I think I have previously submitted, was to ‑ ‑ ‑

GUMMOW J: Do you support the construction of section 58 of the Insurance Contracts Act?

MR SIMPKINS: With respect, we do, but there was not any difference of opinion amongst any of the judges as to what the Act required. The question was whether, upon any view of section 58, there was an effective policy of insurance as at its termination date and that was a view about which there was a difference of opinion. Mr Justice Priestley decided that nothing had happened to render the contract ineffective and, therefore ‑ ‑ ‑

GUMMOW J:   That is what I was asking.  Do you support that?

MR SIMPKINS:   We do support that.  I was addressing the question propounded as a fourth question for special leave, whether or not Mr Justice Priestley could have acted in other ways.  The fact is that what he did do was to achieve a majority view by adopting the President’s reasons to

the extent that that was necessary.  That was done by seeking to achieve a common denominator between the various judgments so no question relevantly of general principle arises. 

In relation to the fifth question propounded for special leave, namely whether is a deemed renewal, Mr Justice Priestley was in the minority view.  The reason for the difference between his Honour and the learned President, on the one hand, and Mr Justice Powell on the other hand, was the view they took as to the effect of a letter written by the solicitor.  Unless there are any further matters that the Court would wish to hear me on, they are our submissions.

DAWSON J:   Thank you, Mr Simpkins.  We need not trouble you, Mr Rayment.  There will be a grant of special leave in this case.

AT 12.05 PM THE MATTER WAS CONCLUDED