Hamcor Pty Ltd & Anor v. Marsh Pty Ltd & Anor

[2014] HCATrans 193

[2014] HCATrans 193

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B56 of 2013

B e t w e e n -

HAMCOR PTY LTD (ACN 010 141 429)

First Applicant

TERRENCE ARTHUR ARMSTRONG

Second Applicant

and

MARSH PTY LTD (ABN 86 004 651 512)

First Respondent

OTAGO PTY LTD (ABN 90 010 161 501)

Second Respondent

Application for special leave to appeal

HAYNE J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON THURSDAY, 4 SEPTEMBER 2014, AT 11.13 AM

Copyright in the High Court of Australia

MR P.J. DUNNING, QC:   With my learned friend, MR P.W. TELFORD, for the applicant, may it please the Court.  (instructed by Everingham Lawyers)

MR I.D. FAULKNER, SC:   Yes, my name is Faulkner.  If the please the Court, I appear for the respondents.  (instructed by Thynne & Macartney)

HAYNE J:   Yes, Mr Faulkner.  Yes, Mr Dunning.

MR DUNNING:   Thank you, your Honours.  Your Honours, at least until the Court of Appeal’s decision below, it had been settled law at least at the intermediate appellate level, both in Australia and the United Kingdom, that damages and compensation were conceptually distinct.  In our respectful submission, the Court of Appeal in error conflated those conceptions in a way that is impermissible and ultimately in a way that is prone to disturb the proper application of those concepts within the Commonwealth. 

May I ask your Honours please to go to page 45 of the application book and the critical passage of the reasons of Justice Muir, with whom the other members are agreed, is set out in paragraph 16 of our outline but in particular at around line 18, those emphasised words where Justice Muir reasoned that:

a liability to “pay compensation”.  Those words, necessarily, contemplate the recompensing of a third party in respect of the insured’s liability to that third party‑

In our respectful submission, that was inconsistent with the law in two critical respects.  The first was, it was to set out what is the classical exposition of damages rather than compensation, at least in great part, and secondly, it was inconsistent with the reasoning of the Supreme Court of Victoria Full Court in Monarch.  Can I deal with the first of those matters? 

We set out in paragraph 13 of our outline on page 44, the passage from Lord Esher in Dixon v Calcraft that compensation and damages are different concepts and set out in paragraph 14 references to decisions including at the intermediate appellate level in this country that that distinction is one to be recognised and, as we submit in paragraph 15, the critical distinction is this:  damages conceptually is focused upon the recipient of the money, that is, the amount of money required to compensate that person for the wrong done.  So there is the focus on the recipient and the payment to the recipient of the amount that the recipient is due.

HAYNE J:   Be it so.  Be it accepted that there is a distinction between compensation and damages.  Does the common form insurance provision against their liability to pay compensation connote payment to a third party?

MR DUNNING:   In our respectful submission, it does by the adoption of the language of compensation rather than damages. 

HAYNE J:   In what sense was there liability to pay compensation to a third party in this case?

MR DUNNING:   No, there was a liability to pay compensation.  We do not add those words to a third party, so there is a liability to pay compensation because the Environmental Protection Authority had delivered certain statutory notices which ‑ ‑ ‑

HAYNE J:   Yes.  Who was recompensed or compensated?

MR DUNNING:   Well, the community, ultimately, because there was land that was on a contaminated land register and our clients came under an obligation to put that land right.  We set out in paragraph 18 and onwards what we say are the classical descriptors of compensation and that is exactly the liability we came under.  We came under a liability of, to use one of the expressions, an obligation to restore it to a proper state or repairing or mending.  That was the liability.

KEANE J:   You were required to discharge your liability.  You were required to discharge a legal liability.

MR DUNNING:   Yes, your Honour, we were.

KEANE J:   You spent money to discharge an obligation cast upon you by the EPA.

MR DUNNING:   Correct, your Honour, yes.

KEANE J:   So, you suffered a loss in order to perform your obligation.

MR DUNNING:   Yes, we did.

KEANE J:   You did not have a liability to pay someone else for a loss suffered by them.

MR DUNNING:   No.  We accept that.

KEANE J:   Is not this policy that is excerpted at paragraph 11 of your outline on page 44, classically a policy that covers liability to pay another?

MR DUNNING:   In our respectful submission, Justice Keane, no, because that is to assume, as our learned friends did and the Court of Appeal did, that because it is a claims made policy and because it is a policy of a type that one routinely might see as a third party liability policy, therefore is a third party liability policy.  In our respectful submission, when one focuses on the language adopted in these policy terms set out in paragraph 11, is not the case because it does not, that is, the compact between insurer and insured in this case did not contain that obligation that it be paid to a third party.  It might have, if we go to paragraph 11, speak of the liability of the owners to pay damages arising out of, and on it would go.  Now, if it did that, then the point that your Honour puts to me would, in our respectful submission, be entirely correct and that is why there is this distinction, in our respectful submission, of a critical character between damages and compensation.

HAYNE J:   You said it was a “claims made” policy, is that right?

MR DUNNING:   Yes, your Honour, that is said against us.  We do not ‑ ‑ ‑

HAYNE J:   Where do I find that aspect of the policy in the application book?

MR DUNNING:   Your Honour, I am not sure – page 62, your Honour.

HAYNE J:   62.

MR DUNNING:   62, yes.

HAYNE J:   Thank you.

MR DUNNING:   At about point 1 on the page, your Honour.  But, in our respectful submission, those matters ultimately serve to distract from rather than illuminate and identify the critical point.  The insuring clause here was that which was critical.  What the insurer had promised was that if a liability of a certain character arose, now if it was a liability to pay damages, and that is the difficulty, in our respectful submission, of talking about the classical application of these policies, because many of them are styled in terms of liability to pay damages rather than liability to pay compensation, and so to speak of liability policies runs the risk of failing, in our respectful submission, to recognise that the parties were free to bargain as they wish.

Some might bargain for a liability to pay damages, in which case there will be this additional requirement that it be a sum payable to another party for the loss suffered by that party, or as here, a wider insurance may be offered and that is a liability to pay compensation, so, a liability to pay, to recompense for something that needs remediating.  Again, it might have been styled as a liability to pay compensation to another which would really then be again a classical formulation of a liability to pay damages, but it did not.

The language that these policy terms adopted was simply a liability to pay compensation and that the court was in error and that it would wrong, in our respectful submissions, to simply view it as, well, classically these policies respond in a certain way, is reflected by the fact that in the reasons of Justice Muir set out in paragraph 16, his Honour has had to add something to recompensing because I do not think there is any controversy that recompensing is a definition of compensating.

So, his Honour says, well, compensation contemplates recompensing of a third party, so it is another way of saying, compensating of a third party in respect of the insured’s liability to that third party.  Now, the insuring clause might have said that, but it did not.  It might have said a liability to pay damages.  It might have said a liability to pay compensation to a third party in respect of the insured’s liability to that third party, but it did not.

There is nothing particularly startling about that, in our respectful submission.  This was a composite policy and one of its components was pollution liability and there would be nothing particularly remarkable, in our respectful submission, in 2005/2006 and beyond, which are the time and events we are concerned with, that ‑ ‑ ‑

HAYNE J:   Who made the claim against the insured – when it was first made during the period of insurance?

MR DUNNING:   Well, your Honour, the proceedings below are in fact negligence proceedings against the broker for failing ‑ ‑ ‑

HAYNE J:   I understand that, but on your understanding of the policy and the way it responds, who was it who first made a claim against the insured, during the period of insurance?

MR DUNNING:   It would be the EPA.

HAYNE J:   Their claim was?

MR DUNNING:   Their claim was that you must remediate this land.

KEANE J:   It was not so much a claim as an instruction, an order.

MR DUNNING:   It was, yes.  Well, your Honour, I think, respectfully, it would serve as both but it is certainly the latter.  I am not meaning to suggest it is not the latter.  Now, for those reasons, your Honour, in our respectful submission, what is set out in paragraph 16 is the definition of damages when a policy is one for compensation, and further, the fact that Justice Muir effectively has to add those words after the word “recompense”, which is synonymous with compensation, reflects the fact that his Honour, to get to an outcome, it was essential in his reasoning, to do so and was thus wrong.  Given that the Dixon v Calcraft has been adopted at least by the Full Court in Western Australia, that would create a controversy between the position adopted by the Court of Appeal in Queensland and in Western Australia.

We have given your Honours in paragraph 25 the reference to Jabbour v Custodian of Israeli Absentee Property.  It is a first instance decision of Justice Pearson but His Lordship’s reasoning has been widely adopted since it was decided in the mid‑1950s.  It has become a feature of the description of damages in Halsbury’s and as your Honours will see in our footnote at 19, routinely adopted generally as to its analysis on the topic and in terms adopted by Justice Warren, as her Honour then was, in the Supreme Court of Victoria and where his Honour describes it as:

a monetary remedy whose object is to compensate the plaintiff for loss suffered by the defendant’s wrong –

So that damages is something that requires something in addition to compensation.  Put another way, a policy that offers indemnity for compensation is one that is more widely expressed than one that offers insurance against a liability for damages because if shorn of that requirement, in our respectful submission, that it must concern itself with the loss suffered by another party.  There is a second respect in which the decision of the Court of Appeal ‑ ‑ ‑

HAYNE J:   Just on that, this is, I would have thought, one of the most common forms of insurance wording that we can find.  Do you point to any case, particularly in England, which has adopted a construction of the kind you would urge us to adopt?

MR DUNNING:   Your Honour, no, but we have identified cases that set out in our outline, Bartoline in particular, where what the court was concerned with was an insuring clause that was against a liability to pay damages and there is a description in both of those cases of that distinction and that is why, in our respectful submission, one should caution against referring to these policies as “in wide use” and ultimately it comes back to the language the parties chose to use.

It is rather like saying, well, there is a QC clause but, as we all know, QC clauses are unhelpfully described by that descriptor because the insurer and the insured may well have chosen any number of mechanisms by which controversy between them would be resolved by an independent party.  Same here.  There was, relevantly, to be cover for pollution liability.  That is the relevant focus of inquiry.  Pollution liability and what the parties would have chosen, had the policy been accepted in their favour, is that it would be liability for compensation for that pollution liability, not liability for damages for that pollution liability.  But that is the approach the Court of Appeal took.

The second matter we would wish raise is that which is set out in paragraph 28 of our outline concerning the decision of the Full Court of the Supreme Court of Victoria in Monarch.  Your Honours, shortly stated, Monarch was this situation:  you have a host employer and a labour hire company.  A gentleman is injured on the premises of the host employer, though he himself, he is an employee of the labour hire company.  He makes a claim on the workers compensation scheme and, for the day at least, substantial sums are paid under the compensation statutory scheme.

By the time the trial comes, there is a controversy as to the liability of both the labour hire company and the host employer to the plaintiff for his injuries and then a claim by the host employer on its liability insurance policy.  The plaintiff’s claim which was resolved 100 per cent against the host employer and the hire company is excused of any responsibility to him, but by that stage the labour hire company via the statutory workers compensation scheme has paid substantial sums to the injured employee.  At first instance, the judge said, in a policy that was materially identical to the one with which we are concerned here, and your Honours will see that on page 47 at about line 21, it was:

“for all amounts which [the insured] shall become legally liable to pay as compensation in respect of personal injury –

At first instance, the judge said, well, no difficulty with the judgment the plaintiff obtained against the host employer for, in effect, the balance of his injuries other than those that have already been paid under the workers compensation scheme.  But as to the former, that is not a liability to pay compensation and his Honour did what the Court of Appeal had done here and that was really view it as damages. 

But in the Full Court in the ways we have set out on paragraph 8, the Full Court held that, no, that was wrong.  It was a liability to pay compensation which was conceptually wide enough, not only to pick up the obligation that the host employer was held to have to this individual on his site, but also to recoup the amount that had been paid out under the workers compensation scheme which there was a statutory entitlement to recoup.  So under the workers compensation scheme, or under the Act, there was a capacity to recoup from the host employer an amount that had been paid on

behalf of the labour hire company and that was held to be a payment of compensation because of a liability so arising.

Now, we say that is not exactly the factual scenario that arose in the Court of Appeal, properly analogous, and again the position adopted by the Court of Appeal is inconsistent with that.  If those submissions we make are correct, then one has a situation where the conceptions of damages and compensation are treated differently by the Court of Appeal in Queensland and at least the intermediate appellate courts in Victoria and Western Australia. 

That would present difficulties for trial judges in other jurisdictions as to how they should proceed.  It would also present real difficulties in commerce because it would mean that people who had hitherto worked on the basis that they had a compact with somebody else for compensation as opposed to damages would, if the Court of Appeal in Queensland are right, be left simply with some covenants in relation to damages, notwithstanding compensation is what they had bargained for.  Unless we can assist your Honours any further, that is the basis upon which we seek the grant of leave.

HAYNE J:   Thank you, Mr Dunning.  We will not call on you, Mr Faulkner.

There is no reason to doubt the correctness of the decision of the Court of Appeal in this matter.  Special leave is refused.  It must be refused with costs.

AT 11.33 AM THE MATTER WAS CONCLUDED