Hamersley Iron Pty Ltd v Speno Rail Maintenance Australia Pty Ltd & Ors

[2009] HCATrans 167

[2009] HCATrans 167

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P9 of 2009

B e t w e e n -

HAMERSLEY IRON PTY LTD

Applicant

and

SPENO RAIL MAINTENANCE AUSTRALIA PTY LTD

First Respondent

ZURICH AUSTRALIAN INSURANCE LTD

Second Respondent

METALS & MINERALS INSURANCE PTE LTD

Third Respondent

Office of the Registry
  Perth  No P10 of 2009

B e t w e e n -

METALS & MINERALS INSURANCE PTE LTD

Applicant

and

SPENO RAIL MAINTENANCE AUSTRALIA PTY LTD

First Respondent

ZURICH AUSTRALIAN INSURANCE LTD

Second Respondent

HAMERSLEY IRON PTY LTD

Third Respondent

Office of the Registry
  Perth  No P11 of 2009

B e t w e e n -

ZURICH AUSTRALIAN INSURANCE LTD

Applicant

and

METALS & MINERALS INSURANCE PTE LTD

First Respondent

SPENO RAIL MAINTENANCE AUSTRALIA PTY LTD

Second Respondent

HAMERSLEY IRON PTY LTD

Third Respondent

Applications for special leave to appeal

FRENCH CJ
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO PERTH

ON FRIDAY, 31 JULY 2009, AT 10.34 AM

Copyright in the High Court of Australia

__________________

MR B.W. WALKER, QC:   May it please the Court, I appear with my learned friend, MR P. KULEVSKI for the applicant in the first matter, for the applicant and third respondent in the second matter and for the first and third respondents in the third matter.  (instructed by DLA Phillips Fox)

MR E.M. CORBOY, SC:   May it please the Court, I appear with my learned friend, MR S.F. POPPERWELL, for the first respondent in the first and second matter and the second respondent in the third matter.  (instructed by Pynt & Partners).

MR P.R. GARLING, SC:   May it please the Court, I appear with my learned friend, MR J.S. EMMETT, for the applicant in the third matter.  (instructed by SRB Legal)

FRENCH CJ:   It would seem to us convenient to proceed first with P11.

MR WALKER:   Yes, your Honour.

FRENCH CJ:   In that matter I think an extension of time is required.

MR GARLING:   Yes, we seek that extension, your Honour.

FRENCH CJ:   Is that opposed?

MR WALKER:   No, your Honour.

FRENCH CJ:   The extension will be granted.  We think it might be useful perhaps in this matter to hear from the respondent first as to why special leave should not be granted.

MR GARLING:   If your Honours please.

FRENCH CJ:   Mr Walker.

MR WALKER:   Your Honours, in a nutshell, because the matter ought to be decided on appeal in our favour.  Is section 45 important?  Yes, of course it is.  Has it been attended to by this Court?  No.  Is the state of authority below this Court such as to leave the matter where it ought to be?  In our submission, yes.

CRENNAN J:   As I understood it from the application book, the appeal was conducted on the basis that if section 45 did not render the underlying insurance clause wholly void, there was no double insurance and Zurich’s claim for contribution would fail.

MR WALKER:   That is right.

CRENNAN J:   Are matters conducted on the same basis here?

MR WALKER:   Yes.

CRENNAN J:   Yes, thank you.

MR WALKER:   Let me put it this way, as delicately as I may.  We have not yet been told that it is intended by anybody to proceed otherwise.

CRENNAN J:   Yes.

MR WALKER:   Now, that is of some significance because your Honours have seen, in effect, an appeal to Coulton v Holcombe by us in relation to the way in which the distributive effect on the reading, which was undertaken at first instance and in the Court of Appeal, of the clause in question would operate, namely, that there were two categories, as it was called, in some of the discussion of it.  There was the category where the indemnity was purchased by an entry into a policy of insurance and the second category was where an indemnity was available to a person not a party to the insurance policy, but a beneficiary of the profits.

CRENNAN J:   Another party.

MR WALKER:   Now, you have before you litigants who are not unsophisticated, particularly the litigant represented by my learned friends, Mr Garling and Mr Emmett.  There has been, as you will have seen, not a syllable of explanation or expiation for what would appear to be, we think, a threatened departure from that matter of presentation.  Now, we may be wrong there, we may be boxing at shadows, but if we are not, that is, if that matter arose, then, in our submission, it is of the first importance in relation to evaluating this case as an appropriate vehicle for the grant of special leave to see how these parties in litigation that can scarcely be said to have been conducted helter skelter over the years, how they have laid out the arguments ‑ ‑ ‑

FRENCH CJ:   It was not entirely to follow the parties.

MR WALKER:   Your Honour, my observation still is, with respect, accurate.  It is not intended as a criticism.  But there is no possible reason why there should be a departure from the way in which the issues were seen and, with respect, they were common sense and commercial ways for all the parties in relation to this controversy to see the matter, namely, it came down to the question whether or not the effect of section 45 was as was held at first instance or was as has been held in the Court of Appeal.  That, in turn, comes down, we submit, to the meaning of not many words. 

I understand that might make it attractive for a grant of special leave, but that is a fact unavoidable, and what I want to do is to push on, as it were, past that attractiveness for special leave to a reason why you really should not grant leave, the reasons below being, in our submission, such as to leave this Court comfortably assured that the law has been properly administered, has produced a satisfyingly correct result and the intervention of this Court is simply not needed, given the unlikely possibility of any error being show.

CRENNAN J:   Is there a significance for us in the difference between what was called the “potential liability construction” and the “actual liability construction”?

MR WALKER:   That is, with great respect, a theoretical construct only.  It plays no real part in the way in which the ‑ ‑ ‑

CRENNAN J:   In the disposition?

MR WALKER:   Yes.  At the end of the day, it is not labels of approach that matters, it is the way in which section 45 operates.  The operation in question, as I say, starts – given the way the parties have laid out their differences to date and argued them – with the proposition that if section 45 avoids only the provision which has the quality described in section 45, then there was left another provision, the other category of operation not caught by concession, not caught by section 45.  That remains a concession we think that is rock solid.  So the only question is whether what is typed out as one clause, if I can put it that way, is to be treated as one discrete, inseverable provision, the word “provision” being one of the very few words at the heart of the case.

In our submission, that is not how it would be appropriate for any court to approach the meaning of the word “provision” in a provision of an act which is directed at the effect of a vast variety of words and wording that parties may select, typed out either in jammed together provisions of an old‑fashioned kind, all one long sentence with lots of subordinate clauses, or divided out and numbered separately. 

In this case, conveniently, if you went to the application book page 167 in paragraph 110 Justice Beech has most conveniently for present purposes set out with, as it were, the blue pencil indicated as well, the clause in question.  We put this submission, that the word “or” that you see at the end of the first line of the text of that clause indicates grammatically and conceptually the existence of two provisions.  There is a provision in what came to be known as the first category and there is the provision in what came to be known as the second category.  The parties have hitherto fought on the basis that one would be within the description of section 45 and the other not. 

Similarly, it has been dispositive of a commercial dispute between the parties because if the other survives the avoiding provision in section 45, then there will be no double insurance to give rise to the other issues which follow and which are the subject of our special leave applications.  So that considerable commercial conduct in and out of court has been based upon the way in which that issue has been presented.  So it comes down simply to the question, can it be thought that section 45 could be read as intending to sweep away provisions – I use that word advisedly, I hope not tendentiously – of a policy which happen to be contained within the same clause or even sentence of a form which do not have anything to do with, that is, fall clearly outside the description of that which section 45 seeks to avoid?

There is another way of putting it.  Where in section 45 is it said that provisions other than those with that description are avoided by reason of the avoidance to which section 45 is directed?  It comes down to what might be called accidents of drafting, almost accidents of how one numbers a clause.  If this had been divided into (a) and (b) in that first sentence of the printed text you seen in paragraph 110, would it have been different, we inquire rhetorically, hoping your Honours do not have an adverse answer?  We submit, of course it should not be different.  Section 45, precisely because it talks of effect, as our learned friends have correctly pointed up, is concerned with that as a substance. 

If one looks at what might be a bewildering array or variety of printed forms and asks whether one or more aspects of the particular form in question has the effect described in section 45(1), if it does, then that provisions is avoided.  The truth, in our submission, this case raises no difficult or subtle questions of severance, it is simply a matter of obeying the statutory command; “the provision is void” is the way in which the provision ends.  The matter of substance, the character which attracts that avoiding, is a provision which is defined so as to be discrete, that is, separate from anything which does not have:

the effect of limiting or excluding the liability of the insurer under the contract by reason that the insured has entered into some other contract of insurance.

That phrase “by reason that the insured has entered into” is the very ground upon which it was common ground that the clause in question here contained a provision to that effect but other provisions as well.

CRENNAN J:   What do you say about his Honour’s reliance on the various authorities at the top off page 167 in this context?

MR WALKER:   They are tangential.  There is discussion in the passage cited from SST in particular – and I say this with great respect to the Judges in those reasons – which itself ranges more widely than the particular issue before the Court in SST required and none the worse for that because it was setting the basis for the principal decision in that case.  Equally, it is not inappropriate for Justice Beech to have set the general scene in relation to severance in the manner that a citation of those three extremely well known cases would do. 

It is not suggested by our side or by the other side, by anyone in this case, by any judge in this case that there is any difficulty or crux in any of the reasoning in the famous passages one finds, either in Sir Frederick Jordan or Fazal Deen or in SST, requiring this Court to engage in anything that might be called jurisprudential exegesis.  It is not necessary.  Nothing will be added in relation to either so‑called general tests or common law tests of severance.  All will be added to the insight, not new, that the first, middle and last stage of the exercise is to construe and apply section 45. 

In our submission, that is why, properly understood, this is not a case where this Court’s intervention is necessary in order either to prevent error or to state the law in a way which would be either more authoritative or clearer or bring understanding where there is confusion at the moment.  The outcome in the Court of Appeal is crystal clear.  It is for reasons which are

based upon fidelity to the statutory text and it is presented in a case where the wording, usefully, in one sentence relevantly of the clause, raises the question as to whether there could be what is called severance, what we would prefer to say doing no more than what the statute seeks. 

For those reasons the Court of Appeal’s decision can safely be left and ought appropriately be left as the state of law in this country on that matter.  There can be no doubt that upon a refusal of special leave the law would be, with respect, as clear as it would be upon this Court pronouncing on the same issue.  That leaves only the question, would it be to the effect of how this Court would pronounce on the same issue?  We have tried to persuade your Honours that it is very, very likely that that will be so.  May it please the Court.

FRENCH CJ:   Thank you, Mr Walker.  Yes, Mr Corboy.

MR CORBOY:   If your Honours please, we have nothing further to add but to adopt the submissions of my learned friend, Mr Walker.

FRENCH CJ:   Thank you.  Yes, we will not need to hear from you, Mr Garling.  There will be a grant of special leave in this matter. 

That then brings us, I think, to P9 and P10 and I think again we would be assisted by submissions as to why there should not be a grant of special leave in those matters.  Mr Corboy.

MR CORBOY:   If your Honours please.  We have addressed that matter briefly in our written submissions.  We rely primarily upon those.  The primary basis upon which we contend that, even if special leave, as it has been, is granted in P11, special leave ought not to be granted in P9 and 10, is the result that is sought by the applicant in each of those applications is, as Justice McLure observed, a result which is substantially of its own making and it arises, the contention that is being sought that there should be a right of subrogation as between or where a contributing insurer is obliged to contribute, arises out of the peculiar circumstances of this matter.

In particular, it is the combination of the waiver of subrogation clause which was insisted upon by Hamersley to be inserted in the Speno policy, the policy that was to be taken out by Speno pursuant to the rail grinding contract, a clause or a stipulation which was to protect the commercial interests of Hamersley.  So it is a combination of that waiver of subrogation clause together with the fact that MMI has refused and continues to deny liability to indemnify Hamersley that then throws up this particular issue. 

It is only because of that combination of particular circumstances that the question of whether or not there ought to be a right of subrogation arises would not arise but for those peculiar circumstances.  As Justice McLure observed, it really is the result of decisions made by MMI that the issue is thrown up.  So there is not an issue of general importance, not an issue of general principle but rather a ‑ ‑ ‑

FRENCH CJ:   Does it not raise an issue of general principle, though, notwithstanding that it may emerge out of particular circumstances in relation to the way in which the doctrine of subrogation works?

MR CORBOY:   There is a general issue obviously in terms of the breadth of the doctrine and whether or not the doctrine ought to be extended to these circumstances, but, in our respectful submission, for the reasons that have been identified in the judgments below, then this is not an appropriate vehicle for exploring that issue because essentially MMI has brought this upon itself in circumstances where it could have, knowing the terms of the Speno policy, if it regarded the right of subrogation as being a valuable right, it could have indemnified Hamersley, paid out the claims of Nolan and Oatway and acquired a right of subrogation in those circumstances.

It, of course, is associated with Hamersley.  It is a captive insurer to the group of which Hamersley is a member.  The stipulation by Hamersley was to protect its commercial interests.  MMI knew of that and so it is very much the author of the position in which it arrives.  So although there might be some underlying issue of some importance concerning the ambit of the doctrine, ultimately this is not an appropriate vehicle for exploring the doctrine and any extension.

FRENCH CJ:   Thank you, Mr Corboy.

MR CORBOY:   Sorry, your Honours.  I should just indicate.  The other point is that, in our respectful submission, the merger argument which found favour below with all three judges would be, in any event, a complete answer to any claim by way of subrogation against Speno.  So one has to deal not just with the subrogation issue, but in order for MMI to ultimately have a right of subrogation which is a real right, then one has to also overcome the merger point.

FRENCH CJ:   Thank you, Mr Corboy.  I do not think we need to hear from you, Mr Walker.  There will be a grant of special leave in matters P9 and P10.  Can we get an indication of roughly how long the parties think all these three matters will take?  Mr Garling.

MR GARLING:   Your Honour, at the Bar table here we think the matter might spill into a second day.

FRENCH CJ:   They can all be heard together, I would think.

MR GARLING:   Absolutely, but given the totality of the issues, we think it would be safer to note that it is likely to go to a second day.

FRENCH CJ:   Thank you.  Mr Corboy, do you agree with that estimate?

MR CORBOY:   If your Honours please.

FRENCH CJ:   Yes, all right.  These matters will be set down for the Perth sittings of the Court and we will allocate two days for that purpose.  Thank you.

AT 10.56 AM THE MATTER WAS CONCLUDED