GIO General Ltd v Booksan

[2006] HCATrans 471

[2006] HCATrans 471

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S79 of 2006

B e t w e e n -

GIO GENERAL LIMITED

Applicant

and

BOOKSAN PTY LIMITED

First Respondent

JAYMAY CONSTRUCTIONS PTY LIMITED

Second Respondent

BILAL WEHBE

Third Respondent

GIO WORKERS COMPENSATION (NSW) LIMITED

Fourth Respondent

Office of the Registry
  Sydney  No S80 of 2006

B e t w e e n -

GIO GENERAL LIMITED

Applicant

and

BOOKSAN PTY LIMITED

First Respondent

JAYMAY CONSTRUCTIONS PTY LIMITED

Second Respondent

SALAH ELDIN ELMIR

Third Respondent

GIO WORKERS COMPENSATION (NSW) LIMITED

Fourth Respondent

Office of the Registry
  Sydney  No S81 of 2006

B e t w e e n -

BOOKSAN PTY LIMITED

Applicant

and

JAYMAY CONSTRUCTIONS PTY LIMITED

First Respondent

SALAH ELDIN ELMIR

Second Respondent

GIO GENERAL LIMITED

Third Respondent

GIO WORKERS COMPENSATION (NSW) LIMITED

Fourth Respondent

Office of the Registry
  Sydney  No S82 of 2006

B e t w e e n -

BOOKSAN PTY LIMITED

Applicant

and

JAYMAY CONSTRUCTIONS PTY LIMITED

First Respondent

BILAL WEHBE

Second Respondent

GIO GENERAL LIMITED

Third Respondent

GIO WORKERS COMPENSATION (NSW) LIMITED

Fourth Respondent

Office of the Registry
  Sydney  No S83 of 2006

B e t w e e n -

GIO GENERAL LIMITED

Applicant

and

BOOKSAN PTY LIMITED

First Respondent

JAYMAY CONSTRUCTIONS PTY LIMITED

Second Respondent

GIO WORKERS COMPENSATION (NSW) LIMITED

Third Respondent

SALAH ELDIN ELMIR

Fourth Respondent

Office of the Registry
  Sydney  No S84 of 2006

B e t w e e n -

GIO GENERAL LIMITED

Applicant

and

BOOKSAN PTY LIMITED

First Respondent

JAYMAY CONSTRUCTIONS PTY LIMITED

Second Respondent

GIO WORKERS COMPENSATION (NSW) LIMITED

Third Respondent

BILAL WEHBE

Fourth Respondent

Applications for special leave to appeal

GLEESON CJ
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 1 SEPTEMBER 2006, AT 10.09 AM

Copyright in the High Court of Australia

MR J.B. SIMPKINS, SC:   If your Honours please, I appear with MR R.C. BEASLEY for GIO General Limited and also for Booksan Pty Limited.  (instructed by Phillips Fox)

MR M.L.D. EINFELD, QC:   May it please the Court, I appear with my learned friend, MR D.J. BROGAN, for Jaymay Constructions Pty Limited, which is the second respondent in S79 of 2006, S80 of 2006, S83 of 2006 and S84 of 2006 and the first respondent in S81 of 2006 and S82 of 2006.  (instructed by J.P. Gould)

MR J.P. GORMLY, SC:   May it please the Court, I appear with my learned friend, MR D.P. KELLY, for Bilal Wehbe, the third respondent in S79 of 2006 and the fourth respondent in S84 of 2006.  (instructed by Turner Freeman)

MR J.A. McINTYRE, SC:   May it please the Court, I appear with my learned friend, MR J.L. SHARPE, for GIO Workers Compensation (NSW) Limited, the fourth respondent in S79 of 2006, S80 of 2006, S81 of 2006 and S82 of 2006 and the third respondent in S83 of 2006 and S84 of 2006.  (instructed by Thompson Cooper)

MR L. KING, SC:   May it please the Court, I appear with my learned friend, MR M.A.J. DALEY, for Salah Eldin Elmir, the third respondent in S80 of 2006, the second respondent in S81 of 2006 and the fourth respondent in S83 of 2006.  (instructed by P.D. Banister)

GLEESON CJ:   Mr Simpkins, just before we plunge into it, am I right in thinking that there are substantially two issues in respect of which people seek special leave to appeal?  One is an issue concerning the meaning of a form of insurance contract and the second is an issue that is particular to the particular operations of this case.

MR SIMPKINS:   Yes, your Honour, there are two issues.

GLEESON CJ:   It just occurs to me that we might save some time by dealing with that second issue first.  I am not sure who are the people who are here to agitate that second issue, but who has the running on that?

MR SIMPKINS:   Your Honour, I do, both in my capacity as counsel for GIO General Limited and also in my capacity as counsel for Booksan Pty Limited.

GLEESON CJ:   What about dealing with that second one first?

MR SIMPKINS:   Yes, your Honour, I am happy to do that or ‑ ‑ ‑

GLEESON CJ:   Is it the case that if we were to decline special leave in relation to that issue, a number of these applications would fall aside?

MR SIMPKINS:   Yes, your Honour.  That second issue affects proceedings S81, S82, S83 and S84.

GLEESON CJ:   Let us hear what you have to say on that issue first and see if we can clear the decks.

MR SIMPKINS:   Yes, your Honour.  Your Honour, before the Court of Appeal GIO General challenged the trial judge’s finding that Booksan had erected the hoist.

GLEESON CJ:   Now, what kind of an issue is that?

MR SIMPKINS:   At the trial the claim brought by the plaintiffs was a claim where they sued two entities in negligence, both Jaymay and Booksan ‑ ‑ ‑

GLEESON CJ:   But you want us to decide who erected a hoist.

MR SIMPKINS:   No, I do not, your Honour.  Ultimately, if special leave was granted and the appeal was determined, there would be a need for an ultimate finding as to who erected the hoist, that is correct, but the special leave question is really whether we should have been shut out before the Court of Appeal in seeking to agitate this issue.

GLEESON CJ:   So it is a question of practice and procedure?

MR SIMPKINS:   Yes, your Honour.  The Court of Appeal rejected the challenge that we made to the finding that Booksan had erected the hoist because of the way that the trial had, according to the Court of Appeal, been conducted.  This is apparent from the judgment in the joint application book at pages 161 to 162.  This is Justice Ipp speaking in the majority judgment at page 161.  At the start of paragraph 83 of the judgment, asked whether Booksan affixed the hoist to the building.  After a reference to the trial judge’s finding his Honour Justice Ipp then on the following page, page 162, at paragraph 87 refers to the closing address at the trial where Mr Einfeld, who appeared at the trial for both defendants, that is, both Jaymay and Booksan, was said to have “accepted that Booksan erected the hoist”.  Paragraph 89 is the conclusion.  His Honour Justice Ipp says:

Thus, at trial, there came a time –

not identified –

where it was common ground that Booksan had erected the hoist and had affixed it to the adjoining building.  The plaintiffs did not then –

without specifying time –

have to adduce more evidence on the issue.

Then paragraph 90:

In all the circumstances, I do not think that it is now open to the insurers to contend otherwise on appeal.

So the only basis for Justice Ipp to determine that this point could not be raised on appeal was a remark made in closing addressing to the trial by counsel then appearing for Booksan which seemed to accept that Booksan had erected the hoist.  On that basis and without really considering, we contend, in accordance with principle, what the prejudice was to permitting the point to be raised on appeal, his Honour held my client, GIO General Limited, bound by its conduct in not disputing that admission, if it was one, in final address from raising the point the first time on appeal.

GLEESON CJ:   What is the sort of area of dispute that could occupy the attention of this Court about whether Booksan attached the hoist to the adjoining building?

MR SIMPKINS:   Is your Honour really inquiring how extensive the factual inquiry might be?

GLEESON CJ:   How it would go, yes, what we would be hearing argument about.

MR SIMPKINS:   Your Honour, there were admissions made in a statement of facts tendered before the court below, that is, at the trial, that statement of facts being initially tendered in Industrial Commission proceedings relating to a prosecution.  That statement of agreed facts entered into on the part of Jaymay, not Booksan, admitted that Jaymay had erected the hoist, and we would contend that that evidence of the admission before the trial judge that it was Jaymay that had erected the hoist ought to have led her Honour to a finding to that effect.

Beyond the admission in that statement of agreed facts the evidence otherwise established that Booksan had directors but had no employees, that the person or persons who were responsible for erecting the hoist were employees of the company, Jaymay, but beyond that ‑ ‑ ‑

CALLINAN J:   There was terrible ambiguity about the relationship between the two companies and who was employing whom and who was directing the work.  One could hardly be critical of the trial judge for trying to do the best she could on the evidence she had in front of her.

MR SIMPKINS:   Yes, your Honour.  One of the difficulties, of course, is that the trial judge, if one went to her reasons on this particular crucial point, says that it is a finding, that is, that Booksan erected the hoist, based upon “the totality of the evidence” with no identification at all as to what her Honour relied upon.  If one undertakes a task of trying to determine what she might have relied upon, as I say, beyond a clear admission by Jaymay, through one of its directors, that it had erected the hoist and beyond the evidence that Jaymay was the only company of the two that had employees that it employed ‑ ‑ ‑

CALLINAN J:   This was an issue, you say.  Are interrogatories permitted in this jurisdiction in this sort of case?

MR SIMPKINS:   They would have been permitted, yes, your Honour.

CALLINAN J:   There is no answer to any interrogatory tendered in relation to any of these matters?

MR SIMPKINS:   Not that I am aware.

CALLINAN J:   That was a way for somebody to prove it, was it not?

MR SIMPKINS:   Yes, your Honour, but of course it was not the task for Booksan or for my client to establish the contrary fact.  The plaintiff had to establish ‑ ‑ ‑

CALLINAN J:   There may be an evidentiary onus upon you once doubt arose.  Why would there not have been an evidentiary onus if this were an issue and there was doubt it?  You were in the best position to prove it and there is a rule, a very old rule, that you assess evidence according to the capacity of a party to adduce it.  It does not alter the onus but it certainly affects the way in which a trial judge or a jury may resolve a question.

MR SIMPKINS:   Your Honour, there may not have been evidence additional to the evidence that the trial judge received which would bear upon the point, but so far as the trial disclosed the material facts upon which the plaintiff relied to demonstrate that it was Booksan that affixed the hoist was that a person who was a director but also a director and employee of Jaymay had had a responsibility for the erection of the hoist.

CALLINAN J:   It seems to me to be a case par excellence for the defendant to assume an evidentiary onus and to clarify the matter.

MR SIMPKINS:   Your Honour, if that was all that was demonstrated by the evidence, there might be much to be said for that proposition, but what happened before the trial judge was that in addition to that evidence there was tendered before her Honour an admission on the part of Jaymay that it was the company that had erected the hoist and at the conclusion of proceedings the plaintiffs were seeking to address that evidence to persuade her Honour that one or other or both of the two entities, Jaymay and Booksan, had erected the hoist.

GLEESON CJ:   Leaving to one side the question of legal costs, what is the amount of money involved in this issue?

MR SIMPKINS:   Your Honour, that is hard to say because her Honour dealt only with liability.  Damages and quantum is yet to be determined.

CALLINAN J:   Has the form of insurance policy been changed since this case?

MR SIMPKINS:   Your Honour, that does obviously does relate to the other point.

CALLINAN J:   I know that, but I ask it.

MR SIMPKINS:   The answer to your Honour’s question is that there is an affidavit that we have in the application book that demonstrates some alterations to the policy over the years, as your Honour might expect – we say not in any material way – and the number of policies that would be affected by the construction point, if we were permitted to argue it, is over 680,000 policies.

GLEESON CJ:   Now, who supports you on this point about who attached the hoist?

MR SIMPKINS:   I am not too sure that anyone supports me.  I argue the point for GIO General Limited, as the insurer, and because we have been obliged to indemnify Booksan, I am also here in my capacity for that entity.

GLEESON CJ:   I think you indicated a little earlier that if you were unsuccessful in getting special leave on that point some of these special leave applications would fall away.

MR SIMPKINS:   Yes, I did, your Honour.

GLEESON CJ:   Is there anything else you want to say on that point or that anybody else wants to say in support of you on that point?

MR SIMPKINS:   Yes, your Honour.  I do understand that if leave was granted an issue would arise as to what the facts did demonstrate.  My point in relation to that is if we got to it, there is evidence constituting an admission by Jaymay that it erected, that evidence being in the agreed statement of facts that was tendered.  I am reminded by my learned junior that there is also oral evidence by one of the directors consistent with that admission in his cross‑examination before the trial judge.  But before we get there – and I appreciate that of itself is not a special leave point – the special leave point, if there is one, in the four applications I have identified is whether we ought to have been shut out by the Court of Appeal in arguing this point and having someone at least look at the evidence.

Notably in the reasons of Justice Ipp that I have taken the Court to, his Honour does not identify the time at which it became common ground.  He refers to a matter which, if it was relevant, occurred at the concluding stages of the trial and which of itself would be incapable of leading to any degree of prejudice sufficient to shut out a party from arguing the point.  There is no attempt by his Honour Justice Ipp or by the other judges in the court to consider this issue in the light of authorities such as FCT v Linter Textiles, that is, no examination of the prejudice in the interests of justice and what was expedient.

If it was relevant to consider what was the common ground before that point in time – and I do not know whether your Honours wish me to address that now or later – there is transcript during the trial where counsel then appearing for my client, GIO General Limited, did indicate that the position that it advocated was that Jaymay had constructed the hoist.  When submissions were put to her Honour the trial judge none of the plaintiffs pressed her Honour with the fact that the issue had been resolved by admission and, indeed, in her Honour’s ultimate decision she did not find that Booksan had erected the hoist based upon an admission.  So her Honour has acted upon unidentified evidence.  We have been shut out from challenging the finding based upon inadequate reasons and shut out from seeking to demonstrate from the evidence I have identified earlier that it was Jaymay that had erected the hoist.

Your Honours, there was also an issue taken about the standing of GIO General Limited to raise this point, because to some extent, if it is permitted to be raised, it will involve a setting aside not only of the judgment against GIO General Limited but also the judgment in favour of the plaintiffs against Booksan Pty Limited.  I do not know whether your Honours wish to hear me on that now or perhaps in response, I think, to what might be said in support of that argument by ‑ ‑ ‑

GLEESON CJ:   You say whatever you want to say now.

MR SIMPKINS:   Your Honour, the point as I understand it is that at the trial my client permitted Booksan effectively to run its own defence to the claim and at the trial was content largely to involve itself only in addressing the insurance issues.  It is said that as a result of that conduct we are bound by the decision in favour of the plaintiffs against Booksan and we ought not to be heard in any appeal from it, this contention apparently being said to be founded in the decision in the Court of Appeal in Insurance Exchange of Australasia v Dooley.

The point we make about that is that if we are bound by the judgment in favour of the plaintiffs against Booksan, as insurer, being bound by that judgment and being a party, we ought in principle to be entitled to be heard on an appeal in relation to that judgment.  If Dooley is authority for the proposition that we are bound by the judgment as an insurer but cannot challenge it, then we say that decision is wrong and inconsistent with the High Court authority, in particular Helicopter Sales (Australia) Pty Limited v Rotor‑Work Pty Limited where the issue was whether the third party was bound by the judgment in the principal action, and of course the party can become bound by an order that it be bound as a third party or cross‑defendant or it can become bound by conduct, but, in any event, the material consideration is whether the third party – in this case, the insurer – has become bound.  If we are bound, as we must be as a party, we ought to be permitted to challenge the decision.  Your Honour, that is probably all I want to say on that particular point.

GLEESON CJ:   Which are the applications that would fall away if we were against you on that issue?

MR SIMPKINS:   Your Honour, S81 to S84.

GLEESON CJ:   Thank you.  In applications S81, S82, S83 and S84 of 2006 the applicants seek to obtain special leave to enable them to argue in this Court that Booksan Pty Limited did not attach the hoist to the adjoining building and that the trial judge, Judge Truss, should have found that two individuals as employees of Jaymay Pty Limited erected the hoist.  The Court of Appeal dealt with that matter by reference to the way in which the trial had been conducted before Judge Truss. 

These applications do not raise an issue suitable to a grant of special leave to appeal to this Court.  The applications are dismissed with costs.

Now, Mr Simpkins, your 20 minutes can start again in relation to the question of the insurance policy.

MR SIMPKINS:   I am grateful to your Honour.  I do not think the next issue will require the 20 minutes, but we will see how we go.

GLEESON CJ:   Just come back then to this factual matter.  We understand the point of construction of the policy, but it is said against you that while this was a common form of policy, it has been altered and, as I understand it, it is said it has been altered to, in effect, overcome the decision of the Court of Appeal in this matter.  I see an affidavit put on by your side which says that there were thousands of policies issued in this form.  I do not see anywhere in that affidavit any assertion that there is any live dispute about this particular question between any of the parties to those policies and, as I say, an argument against you is that no future dispute is going to arise because your client has just altered the form of the policy.

MR SIMPKINS:   Your Honour, the alterations are dealt with in the affidavit that your Honour the Chief Justice has referred to.  This is to be found in the joint application book at page 235, the affidavit of Reginald Millar.  Mr Millar sets out the history of the changes to the policy.  I am happy to attend to the detail of those changes but can I ‑ ‑ ‑

CALLINAN J:   They would be annual policies, would they not?  The policies would be renewable every year – annual policies.

MR SIMPKINS:   Yes, your Honour, that is true, but there are a lot of these policies that have been issued and ‑ ‑ ‑

CALLINAN J:   And you do not know whether there are claims or not, I suppose.

MR SIMPKINS:   As your Honour might imagine, the task of undertaking investigation of the 680,000 policies to see whether there were disputes and, if there were, to what extent they raise these particular provisions would be an enormous undertaking and we have not sought to do that I readily accept.  What we have sought to show is that the policy wording the subject of these proceedings is in a form which has continued – we say substantially – as it was before the trial judge in this case and it has the potential to impact upon a great many other insureds in respect of claims which might be brought under those policies.

Your Honour, as the Court would be aware from reading the decision in the Court of Appeal, at issue was essentially a construction of a couple of provisions.  There was the definition of “You/your” which was…..for the purposes of the public liability section.

GLEESON CJ:   Where can we most conveniently see the clauses that are in dispute?

MR SIMPKINS:   If I can take your Honour to the particular policy, perhaps I should do that.  The policy before the trial judge commences at page 1 and the provision that was operative for the purposes of the public and products liability section is at page 37.  Clause 4 on that page in the definitions provided that, “You/your” meant “the Insured shown on the Schedule”, or under subparagraph (b) relevantly “any ... employee ... of the Insured shown on the Schedule”.

The schedule, your Honours will find a little later in the policy, relevant to your Honour at page 68, and the policy schedule continues over the following pages.  To go back to the form of the policy itself in the public liability section, there is that definition I have taken your Honours to at page 37.  The reasonable care condition, as your Honours know, is to be found at page 5 – that is part of the general conditions – so at page 5 at the foot under “General Conditions”.  At the top of page 6 the reasonable care condition is set out.  It is expressed in terms of an obligation or condition precedent stipulated by reference to the conduct of the person described as “You”.

CALLINAN J:   I am sorry, whereabouts is that?

MR SIMPKINS:   Sorry, at the top of page 6, your Honour, clause 2 “Reasonable Care”.

GLEESON CJ:   Did the question whether the word “You” at line 10 on page 6 embraces everybody who is referred to in the definition of “You/your” on page 37, line 25?

MR SIMPKINS:   Yes, your Honour.

GLEESON CJ:   That is the question?

MR SIMPKINS:   That is the question.

CALLINAN J:   The policy would not be worth much to an insured, would it, on that construction?

MR SIMPKINS:   To an insured did your Honour mean?

CALLINAN J:   Yes.  You would be able to escape liability always, would you not?

MR SIMPKINS:   No.

CALLINAN J:   In what situations would you liable whenever you had a company?

MR SIMPKINS:   Your Honour, the obligation to take reasonable care is an obligation which for the purposes of this particular condition has been construed in the authorities fairly strictly, so it would ordinarily require something like a deliberate courting of the risk, hence, even though there is ‑ ‑ ‑

CALLINAN J:   I am sorry, courting of the risk?

MR SIMPKINS:   Yes, it requires much more than merely neglectful ‑ ‑ ‑

CALLINAN J:   That seems to be a very expansive reading.  I mean, one could understand why a court might read it that way and obviously reading it that way to give the policy some value to the insured.

MR SIMPKINS:   Yes, your Honour.  It requires more than merely careless conduct.  It requires something in the nature of a reckless disregard or a ‑ ‑ ‑

CALLINAN J:   What I am really saying is that it is far more than a literal reading of the clause.  The reason for that is that otherwise the clause would render practically valueless any insurance policy.

MR SIMPKINS:   Yes, your Honour.  We are content to have clause 2 read consistently with the authorities and her Honour the trial judge found, based upon the conduct of the person who operated the hoist, that there was reckless conduct enlivening this particular provision.  So what is at issue is not really what clause 2, the reasonable care provision, means but whether its operative effect is only in relation to the insured entity and its directing mind and will – the Court of Appeal’s view – or whether it is also operative in relation to the conduct of employees. 

The argument that we advanced before the trial judge, the argument which was rejected by the Court of Appeal, was this particular provision, general condition 2, is said to “apply to and should be read in conjunction with all Policy Sections”, including the public and products liability section I went to, and that being incorporated in that section it takes the “You/your” definition in that section.  So “You” or “your” when it appears in clause 2, for the purposes of that section, means relevantly the conduct not just of the insured but of any employee.

Now, the reason that was given effectively for our loss before the Court of Appeal was that there was a relevant joint insureds provision – this appears at page 40.  These are extra conditions.  Clause 2, “Joint Insureds”, is the condition relied upon.  It commences by saying:

When the Insured shown on the Schedule comprises more than one party, Definition 4 of this Policy Section applies to each party as if a separate Public and Products Liability Policy had been issued to each party –

but the relevant employees who engaged in this act are not named insureds.  So this particular provision that I have taken your Honours to, although relied upon by the Court of Appeal, was in fact not triggered by anything because the schedule did not identify the relevant employees.

GLEESON CJ:   Mr Simpkins, can you just take us back for a moment to that affidavit that we were looking at earlier? 

MR SIMPKINS:   Yes, your Honour.

GLEESON CJ:   Does that show the new clause in the policy?

MR SIMPKINS:   Yes, it does, your Honour.

GLEESON CJ:   Which, I suppose, expresses what you say was the true construction of the original policy.  Where do we see how you put it now?

MR SIMPKINS:   Your Honour, the wording has been revised but not in the way that does address the particular difficulty exposed by the Court of Appeal’s decision.

GLEESON CJ:   What page?

MR SIMPKINS:   I am sorry, your Honour, the affidavit is at page 235.  The changes in wording commence at page 237.

GLEESON CJ:   Are those changes aimed at achieving the result that you say you intended to achieve by the original wording?

MR SIMPKINS:   No, your Honour.  We have just sought to be candid about the way in which the policy has altered by setting out the way in which it has altered, but we do not suggest that these amendments address the Court of Appeal difficulty.

GLEESON CJ:   So the alterations to the policy do not overcome the question that you want us to take on.

MR SIMPKINS:   That is correct, your Honour.  So in this affidavit at page 237, paragraphs 13 and 14 set out the original and then the changed definition of “You/your” for the purposes of the public and products liability section.  Relevantly, in the new provision referred to in paragraph 14(c) also includes “employee”.  So it is effectively, we would say, substantially the same definition that the Court of Appeal dealt with.

CALLINAN J:   Mr Simpkins, I am sorry to interrupt you.  I have just noticed that GIO is a Suncorp Company.  I should mention I have some shares in Suncorp, not a very significant number, I do not think, but I do have some shares in Suncorp.

MR SIMPKINS:   Certainly we make no objection or observation about that fact.  Your Honours, beyond the changed definition to “You/your”, which we say is not material for the purposes of the present debate, described in paragraph 14, there have been other changes.  So on the following page, page 238, there is a reference in paragraphs 15 and 16 to the old and then the new joint insureds provision.

GLEESON CJ:   We might be assisted by hearing – first of all, is there anybody supporting you on this?

MR SIMPKINS:   Not as I understand it, your Honour.

GLEESON CJ:   All right.  Who has the labouring oar for your opponents?  Yes, Mr Einfeld, let us hear what you say.  We just want to be sure we understand what the point is.

MR EINFELD:   Your Honours, the first reason why leave ought be declined is that the construction of the contract which was the subject of the matter of debate before the Court of Appeal does not have the broad application suggested for two reasons.  Firstly, the question of construction that was debated before the court has been overcome by the terms of the new policy we will submit and explain why ‑ ‑ ‑

GLEESON CJ:   That is what we were just talking to Mr Simpkins about.

MR EINFELD:   Mr Simpkins says no, we say yes, and we will explain to your Honours ‑ ‑ ‑

GLEESON CJ:   Can you explain to us why that is?

MR EINFELD:   Certainly.  The issue before the Court of Appeal and the trial judge was which definition of “You/your” should be applied to the take reasonable precautions clause.  Your Honours have thus far only been invited to look at one, but the debate was which of two.

If your Honours go to the policy which starts at page 1 and to what is called the general section, which starts at page 4, the subject reasonable care clause is at the top of page 6 in the general conditions, the structure of the policy being a general section followed by a number of specific sections for fire, risk, theft, public liability and the like.  So the general conditions, the one that was sought to be enforced by the insurer, is clause 2 – it is important to look at it:

You must take all reasonable care to maintain the premises …

You must take all reasonable care for the safety of the Property … You must also ensure that only competent employees are employed –

The question is whether the definition clause in the policy upon which the insurer sought to rely is apt to include within the term “You” in clause 2 employees as well as the insured entity.  We will come back to why, as a matter of construction, that is an impossible argument shortly, but may we go back to page 5 which contains the definitions which govern the general conditions.  There are two definitions of “you/your”.  At page 5:

Unless otherwise defined in individual Policy Sections, these Definitions apply to and should be read in conjunction with all Policy Sections.

Then definition 5 is:

Insured/you/your means –

so that includes the words “you/your” –

Any person, company or legal entity shown on the Schedule as the Insured.

So the point is general definition, applicable, so we said below and say now, to the general condition.  The general definition, remembering, does not include any reference to employees as part of the definition “you”.  So that if you apply the general definition to the general condition, then the one‑off isolated or the reckless, as her Honour found, act of the employee would not be a non‑compliance of general condition 2 because the employee is not defined within the definition of “you” if that is the applicable definition.

GLEESON CJ:   Because Mr Sahyoun is not on the schedule?

MR EINFELD:   Correct, Mr Sahyoun is not on the schedule.  So that is that possibility.  The other possibility was the one to which Mr Simpkins has thus referred.  Within the public liability section alone is a separate definition applying to that section.  That is at page 37.  Can we draw your Honours’ attention to what page 36 says?  This is the insurance provision, insurance clause, for public and products liability.  In the part that is a bit difficult to read under the heading “The Insurance” at line 20, “GIO will insure you as set out in this Policy Section”.  So who is “you”?  We look to the definition across the page.  Under the heading, “Definitions”, “For the purposes of this Policy Section”, down to No 4, “You” includes both the insured and also any director, employee, et cetera.

GLEESON CJ:   Do the words “shown on the Schedule” qualify the word “employee”?

MR EINFELD:   No, “the Insured shown on the Schedule”, and that is Jaymay Constructions.

GLEESON CJ:   I am looking at paragraph (b), “any director, employee, executive officer or partner of the Insured shown on the Schedule”.  My question to you is do the words “shown on the Schedule” in paragraph (b) qualify the word “employee”?

MR EINFELD:   Probably not.  They probably qualify the word “Insured”, and there is a reference to what appears back in (a).  If they do qualify “employee”, then of course the insurer must fail because the employee was not shown on the schedule.  But that point, I have to say, was not, as I recollect it, argued either in the Court of Appeal or at trial.

GLEESON CJ:   So your submission is that the expression “the Insured shown on the Schedule” both in paragraph (a) and in paragraph (b) is different from Mr Sahyoun, who is the relevant employee?

MR EINFELD:   Yes.  The point I am taking your Honours to just now – I was going to do it second – is to understand what the nature of the issue was and to see whether it has been addressed by the new policy.  So the question is, the way the insurer has argued it is that this definition, which is included in the specific public liability section, in fact applies not, as we say, merely to identify who is meant by “you” in the insuring clause on the left‑hand page ‑ ‑ ‑

GLEESON CJ:   That is, who is covered?

MR EINFELD:   Who is covered.  The object of this clause being simply to give cover not just to the insured entity, but if a third party who is injured sues an employee as well that employee will have separate cover, as we say is this definition, but the insurer says, no, that same definition applies not just within this public liability section but also to qualify the general condition and not the general definition which excludes employees.

Now, what is relevant?  The change made as Mr Millar identifies in his affidavit at pages 238 to 239.  Mr Millar says in paragraph 18 on 238 that the clause in the policy under examination is in the general section, general condition 2, “You must take all reasonable care”, et cetera, over the page, “take all reasonable care for the safety”, et cetera, of individuals.  Then he says at paragraph 20, the current policy, relevant policies:

also have an additional reasonable care condition in the Public and Products Liability Section –

which was never there before.  It says:

You must:

(a)      exercise reasonable care to avoid and minimise personal injury –

et cetera.  So the conundrum for the trial judge and for the Court of Appeal has disappeared, because under the new policy there is no question now that this “take reasonable care” clause has been shifted into the public liability section.  The definition in that section which includes “employee” has now been made to cover without hesitation, without equivocation, the obligation to take reasonable care.

GLEESON CJ:   Under the current policy if Mr Sahyoun fails to take care ‑ ‑ ‑

MR EINFELD:   If that is the finding of fact that is applicable, which it is, yes, under the new policy he would be caught by the “fail to take reasonable care” clause if he was reckless.

GLEESON CJ:   Not he would be caught; his employer would be caught?

MR EINFELD:   His employer would be caught by reason of him having failed to take reasonable care.  That was the point of debate and it has now been resolved.  Now, why it is not a matter of general public importance any longer is because the old policies have gone and there is no evidence that there is one extant claim which would be governed by the decision determined by the Court of Appeal.  We find that by going back two pages in Mr Millar’s affidavit, at 236, because Mr Millar says in paragraph 9 that:

In August 2003, the GIO Business Insurance policy, GIO Trade Insurance policy wording and the AMP branded versions of these policy wordings were revised to include a new Public & Product Liability section wording –

to which we have adverted –

The policy wording was standardised across all policies.  The revised policy wording was progressively applied as policies fell due for renewal from October 2003 to October 2004.

So the old policy with the old subject wording has been renewed, it has been replaced with the new wording.  So since 2004, according to Mr Millar, on his own evidence, the old policy, 600,000 that were issued over that time, have been revised and been renewed and replaced in 2004, 2005, 2006, so they have all gone.  So for that reason the purported argument that says that this is of wide application is not correct.

Your Honours, may we just take the opportunity, having been heard at this time, to say why as a matter of language the construction for which the insurer contends is not one which has any reasonable prospects of successfully being applied by this Court if leave were granted.  If one goes back to the subject clause at the top of page 6, one looks again at the plain language of the clause, the starting point being the plain language within the context of the policy, bearing in mind there are separate policy conditions governing separate risks. 

It is interesting to note that that extended definition of “you/your” applicable so as to include employees appears only in the public liability section, not in the fire section, not in the property damage section or any of the other sections, and its purpose manifestly is that to which we referred earlier, namely, qualify the insuring clause to give cover to employees if they are sued by somebody else, a third party.  There is no obligation upon an individual employee to take reasonable care to prevent fire, to prevent theft, to prevent property damage, but if our friend’s application is right that the public liability definition applies across the board, that would happen, and it is manifestly not an available construction.  The point being that if one looks at the words of clause 2 on page 6:

You must take all reasonable care to maintain the premises …

You must take all reasonable care for the safety of the Property Insured and to avoid and minimise loss of or damage to property or injury –

we know, as indeed the trial judge held, that because Mr John Sahyoun, who was the principal of Booksan, for example, employing the hoist and Jaymay – the hoist operator, Mr Sahyoun, the young Mr Sahyoun – her Honour found as a fact that the employer had taken reasonable steps to ensure that he was a competent operator and that there was no reason to suspect that this one‑off event with the overloaded hoist, with men riding on it, would ever happen, that it was not guilty of a breach, if I may use that term, it had not failed to comply with the clause.  It had taken all reasonable steps.  He was a licensed lift operator, et cetera.

Now, the point is is this clause to be read, as the insurer contends, as if “you” means “you and your employees”.  If your Honours go on to the next sentence, the third part of the obligation in the reasonable care clause at page 6, your Honours will see it says:

You must also ensure that only competent employees are employed and that you and they comply with all statutory obligations –

et cetera.  If you read the clause in the way for which the insurer contends, it must now be read:

You [and your employees] must also ensure that only competent employees are employed and that you [and your employees] and they –

being your employees –

comply with all statutory obligations, by‑laws, regulations –

which would impose, for example, upon the site labourer an obligation to ensure that the company only employed competent site supervisors or the like.  It is an impossible construction.  To read “you and your employees” into the language of clause 2 would produce an absurd and nonsensical reading of the clause and is not one which is capable of support.

One might say perhaps the obvious, that in attempting to expand the operation of the clause in the manner it does the insurer so as to render the employer liable wherever even an employee engages even in a one‑off casual act of negligence ‑ or in this case recklessness, pushes the button once – in order to expand the clause to go from its implemented regime of supervision, the reach of which might render it a failure to comply with this clause, to do that, in our submission, it would have to have been done by clear language, and the tenuous and rather tortuous means by which they seek to import into a general provision, even one where a definition has said, subject to any contrary wording in another section, but to intend to import into this provision a clause in a specific section which has a rational

explanation in terms of expanding cover, not expanding a definition only in relation to that type of section of a general definition, would have required clear words and the tortuous path which the insurer seeks to follow to permit it to happen, in our respectful submission, is not realistic.

It is submitted in the written outline of the insurer, your Honours, that the effect of reading the clause in the way we seek to do would be to render clause 2 meaningless.  Manifestly that cannot be so because it still operates construed consistently with cases like Fraser v Furman, Lord Devlin’s well‑known expression that mere negligence cannot be enough because otherwise it would deprive the contract of its commercial efficacy, something like recklessness having regard to the fact that the insurer at the end of the day would be likely to have to pick up the tab, as it were, all of those considerations still operate. 

The clause has ample work to do in accordance with the ordinary common law provisions which governed these types of clauses for a long time and it is the construction of the clause propounded by the insurer which proposes the problem, and that the correct construction is as we have said, that the exclusive definition, exclusive to one part, applies within that part, the general definition governing general conditions applies to govern that general condition so as to exclude the one‑off conduct of the employee as being escalated into a non‑compliance with the clause.  May it please the Court.

GLEESON CJ:   Thank you, Mr Einfeld.  Yes, Mr Simpkins.

MR SIMPKINS:   Thank you, your Honour.  Can I turn in the joint application book to page 193 which is the part of the Court of Appeal’s judgment where this point was dealt with.  At paragraph 195 his Honour Justice Ipp accepts the submission that was put to him that for the purposes of construing general condition 2, even though it was outside of the public and products liability section, one used the definition of “you/your” in that section.

Mr Einfeld made much of the fact that the equivalent general condition 2 is now actually physically in the public and products liability section, but it is not a material distinction, since the Court of Appeal dealt with the matter as if the then general condition 2 was to be read with the definition in that section in any event.

When one turns to look at the way in which the Court of Appeal resolved this question, even though it took that approach to the definition, your Honours will see that paragraph 197 of his Honour Justice Ipps’ judgment turns to look at the joint insureds provision that I took the Court

to and then at paragraph 198 the reason that we lost on this point before the Court of Appeal is exposed:

Thus, while Patrick Sahyoun is an insured for the purposes of the Public and Products Liability Section, he is an insured on the basis that a separate Public and Products Liability Policy is deemed to have been issued to him.

So his Honour took the view that even though Patrick Sahyoun was not a named insured and did not appear in the schedule, that the joint insured provision nevertheless caught him and it made this in relation to him a separate policy.  For the reasons that I gave in my opening submission, we say that that is in error, because the plain wording of the joint insureds provision requires the insured being considered to actually be shown on the schedule and it is insufficient that he was merely an employee.

In relation to the affidavit of Mr Millar, if your Honours turn to that affidavit at page 238.  The wording of the current policy is wording which includes two reasonable care provisions.  One is still in the general conditions as opposed to the public liability conditions.  Paragraph 19 of Mr Millar’s affidavit refers to that continuing provision expressed, we would say, not as a matter of substance differently which remains in the general conditions.  Clause 20, as I have noted earlier, although it has been elevated and moved to the public and products liability section, is construed in accordance with the definition in that section and therefore that makes no material difference, in our respectful submission.  If your Honours please.

GLEESON CJ:   Thank you, Mr Simpkins.  Now, is there anybody who wanted to support Mr Simpkins?

In matters No S79 of 2006 and S80 of 2006 we are of the view that there are insufficient prospects of success of an appeal to warrant a grant of special leave and the applications are dismissed with costs.

AT 10.58 AM THE MATTERS WERE CONCLUDED