HIH Claims Support Limited v Insurance Australia Limited [2011] HCATrans 60

[2011] HCATrans 60

[2011] HCATrans 060

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne       No M147 of 2010

B e t w e e n -

HIH CLAIMS SUPPORT LIMITED (ACN 096 857 635)

Applicant

and

INSURANCE AUSTRALIA LIMITED (ACN 000 016 722)

Respondent

Application for special leave to appeal

HEYDON J
CRENNAN J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 11 MARCH 2011, AT 9.45 AM

Copyright in the High Court of Australia

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR P. KULEVSKI, for the applicant.  (instructed by TressCox Lawyers)

MR J.J. GLEESON, SC:   If the Court pleases, I appear with MS C.M. HARRIS on behalf of the respondent.  (instructed by Norris Coates)

HEYDON J:   I think it might assist us if we heard from you first, Mr Gleeson.

MR GLEESON:   If the Court pleases, the reason that the doctrine of equitable contribution exists is to ensure that when two or more co‑obligers stand waiting to see on which of them the fickle eye of the creditor will fall, each of them can turn to the other and say, regardless of who that creditor chooses, I know that I only have to pay my share.  The simple reason that the doctrine does not arise here is because if HCSL is right, only one of the two co‑obligers can say that to the other.  As HCSL would have it, IAL would pay its share come what may, but HCSL need not, because if IAL paid instead of HCSL when it turned to HCSL for contribution, HCSL, the applicant, would have said, but there is no contract, let alone coordinate liability, because our contract with Mr Steele never sprang into existence because we never paid.

As the Court will remember, the peculiar contractual arrangement, to put it broadly, was that acceptance was constituted and only constituted by the act of payment by the applicant.  It would have said in the hypothetical scenario, we never paid, we never accepted, there is no contract, so when viewed in that sense, it is the antithesis of coordinate liability.

CRENNAN J:   I am not sure I follow you, Mr Gleeson.  Are you saying there is no contract because the liabilities arise at different times or are you making a point about the offer, the offer documents at application book 47?

MR GLEESON:   It is tied with the proposition that the insuring clause event arises at different times, but it is more fundamental than that.  It is the case that when determining whether the liabilities are coordinate, there is only one that is actually properly characterised as a liability at all, because it is the acceptance by payment that creates the applicant’s contract.  It is a strange arrangement; Mr Steele fills out an offer and he does not have a contract until the act of payment.  So it is the reciprocity that is fundamentally lacking in the applicant’s position.  Reciprocity, of course, is the bedrock of the equitable doctrine of contribution.  It is the unfairness of the burden falling on only one ‑ ‑ ‑

CRENNAN J:   Does this not document – look at the top of the page – it relates to valid claims under the HIH Insurance Group’s insurance policies and it says at about point 3:

By completing, signing and returning this form, you will be offering to assign to HCS Limited:

·your rights under your policy of insurance against the HIH Company which issued it –

It just seems to me, I must say, at the moment, that the applicant has assumed liability for the benefit that would have been provided under those HIH policies in respect of valid claims.

MR GLEESON:   Yes, I understand the way your Honour puts it, but at application book 48 at point 20 what the offer document states is that:

The only method which HCS Limited may use to accept your offer is payment of a benefit under the Scheme.

So the offer stands and Mr Steele undertakes to return the form and do certain things along the way.

CRENNAN J:   Do you not then just get into the territory that the liabilities might arise at different times and there is plenty of authority for the proposition that that would not preclude coordinate liability?

MR GLEESON:   As long as they predate what was previously called “event of casualty”.  With respect, that is typically correct.  It is okay for the liabilities to arise at a different time, but if the effect of the timing difference is such that only one of the co‑obligers could ever avail themselves – could ever avail themselves – of the doctrine of contribution, then it does not arise.  My client, as the applicant would have it, must always pay, but HCSL need not always pay.  To say it in those terms, we say, catches the lack of the essential coordinate aspect of the liability.  In essence, what the Court of Appeal said in its second of two points, or second of two reasons, for rejecting the claim that equitable contribution arose, at paragraph 23 at application book 52, is:

if Steele had been paid under the SGIC/IAL policy, there would have been no occasion for him to make a claim on the scheme – and thus no contract would have come into existence –

So without the bilateral aspect of the right to contribution, we say the doctrine does not arise.

BELL J:   What do you say in answer to the applicant at paragraph 20 dealing with this issue where it is suggested that the reasoning is circular?  I am sorry, application book 67.

MR GLEESON:   Thank you, your Honour.  We understand the way that is put, that is to say, well, if that reasoning dictates, then the classic double insurance case would similarly fail.  With respect, that is not the case.  The nub of the hypothetical analysis that the Court of Appeal engaged in and that we urge this Court to engage in is not to say, would it fail because one of us has paid, but rather, would it fail because one of us in those circumstances never had a liability at all?

For this Court to leave intact the Court of Appeal’s reasoning does not invite the danger that is suggested in paragraph 21.  The classic double insurance case is not affected by this type of logic because if you advance the hypothetical in the classic double insurance case, you will come up with the answer that there was liability.  Of course it is horribly circular to say, yes, but there would have never been an obligation to pay because I paid; that is not the proposition we put.  This is perhaps a better way to put it.  It is not to say the other’s obligation is discharged by my payment, the Albion test as they would have it, not that it is discharged, it never existed at all.  So even though we say the so‑called Albion test is not a test, or the test, even if we are wrong about that, the facts of this case do not satisfy the so‑called Albion test.

We say that, in any event, the trial judge and the Court of Appeal correctly identified the principles, referred to the correct authorities and then, in the trial judge’s case, turned to apply the very specific facts of this case to those principles.  We say that her Honour did so correctly, but if we are wrong about that, it is no more or less than a misapplication of facts to settled principles, and settled recently by this Court in Friend v Booker.  In May 2009 this Court analysed in considerable detail the fundamental characteristics of equitable contribution and nothing that has occurred in this case disturbs those principles or invites a reconsideration of them.

The other reason we say that this is not a good vehicle for considering those issues is that this issue of the date of the insuring clause event, the position that is now put by the applicant is at odds with what was stated by the learned trial judge at paragraph 127 of her Honour’s judgment.  The applicant now urges the Court to accept that the insuring clause event is the date of payment.  What her Honour said at application book 32, paragraph 127, is:

The parties agree that the relevant date (being the date of “the insuring clause event”) for determining whether there is an entitlement to contribution is 3 March 1998, being the date of the incident.

That is the date the screen fell down.  So it would create difficulties, we say, given that unchallenged recitation of agreement by the learned trial judge, picked up by the Court of Appeal, we say, in effect, at paragraph 12(d) of what the Court of Appeal said.  In paragraph 12 at application book 49 the Court of Appeal identifies four underlying propositions to the appellant’s submissions, the fourth of which is that:

(d)Fourthly, as at March 1998 (the date of damage), both the HIH and SGIC (IAL) policies responded.

So there would be considerable difficulty for this Court to analyse the issue when date of insuring clause event is so central to the relevant considerations and to depart from what has been found by the learned trial judge.

CRENNAN J:   Except, I suppose, that the unusual facts here might give rise to consideration of whether there should be, for reasons of fairness, some exception to the general rule.

MR GLEESON:   We accept that.  It is a difficulty.  It is perhaps not insurmountable.

CRENNAN J:   I mean, what you have said about what happened at trial is a telling point, of course.

MR GLEESON:   Yes, we do not put it as high as to say it is an insurmountable problem.  It just renders it a less than suitable vehicle and it is going to be central to any analysis of the matter.

CRENNAN J:   It is a very unusual set of facts in terms of applying the general principles in relation to the insuring clause event.

MR GLEESON:   Yes, and that was principally the reason stated by the learned Chief Justice for refusing special leave in the related proceedings that made its way to this point, where his Honour – and this is at footnote 2 of our summary – the previous special leave application was refused and his Honour stated that:

The proceedings that were the subject of the decision by the Court of Appeal in this case arose out of the very particular circumstances of a scheme set up following the collapse of an insurance company.
We think the case does not raise an issue of general principle suitable to a grant of special leave to appeal.

Now, that is the same very particular set of facts that pertain here.  We say nothing has happened since to render them less specific.  The applicant says, well, there are two cases that are sitting waiting for the determination of this matter, and I think they say some others – a number of further proceedings, they say in paragraph 28 of their summary.  This is, with great respect, unhelpfully vague.  It is within their knowledge precisely how many matters within the scheme await the determination of this matter and how much money turns on it.  They advance the proposition that the public purse is directly affected.  The amount of money in this matter is less than a million dollars and it is within the applicant’s knowledge just the totality of the sum in question turning on this matter.

We say if the application for special leave is refused, those matters will fall to be determined according to the well stated principles.  We will say that they will be correctly decided on the principles as long as the facts are applied in an appropriate manner.  In any event, we say it does not convert the matter that the learned Chief Justice said was an unsuitable vehicle arising out of special facts into the very opposite of that.

HEYDON J:   I do not think you should place too much weight on what Chief Justice Gleeson said three years ago.

MR GLEESON:   If your Honour pleases, we say, no more or less than with great respect, his Honour got it right.  It is so specific, this set of circumstances, that it will not advance the understanding of the principle of equitable contribution.

CRENNAN J:   Well, as I said before, you could also come at this from the vantage point that the unusual facts do raise an issue about whether there should be exceptions to the general principles.

MR GLEESON:   We accept that, your Honour.

CRENNAN J:   Especially since fairness is such a driving factor in relation to equitable contribution.

MR GLEESON:   Which brings us back to where I started, which is to say, it is unfair for it to be a one‑way street.  If the Court pleases.

HEYDON J:   We need not trouble you, Mr Walker.  There will be a grant of special leave.  Mr Walker, how long will it take, do you think, the appeal?

MR WALKER:   Half a day, your Honour.

HEYDON J:   Half a day.  Very well.  Do you agree, Mr Gleeson?

MR GLEESON:   It may go beyond that because of the special facts, your Honour.

HEYDON J:   Yes, very well.  As I say, there will be a grant of special leave.  The Court will now adjourn briefly to reconstitute.

AT 10.01 AM THE MATTER WAS CONCLUDED