HIH Claims Support Limited v Insurance Australia Limited [2011] HCA 31 22 August 2011 M24/2011
ORDER
Appeal dismissed with costs.
On appeal from the Supreme Court of Victoria
Representation
B W Walker SC with P Kulevski for the appellant (instructed by TressCox Lawyers)
D F Jackson QC with M W Thompson SC and C M Harris for the respondent (instructed by Norris Coates)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
HIH Claims Support Limited v Insurance Australia Limited
Equity – Doctrine of contribution – Requirement of co-ordinate liabilities – Sub-contractor insured under insurance policy ("HIH policy") issued by member of HIH corporate group ("HIH") and under insurance policy issued by respondent's predecessor in title – Sub-contractor held liable for damage caused to third party by collapse of scaffold – HIH accepted sub-contractor's claim for indemnity under HIH policy and paid portion of sub-contractor's legal costs – After collapse of HIH corporate group, sub-contractor assigned rights against HIH to appellant as trustee under government assistance scheme and appellant paid 90 per cent of amount HIH would have paid under HIH policy in satisfaction of sub-contractor's liability and defence costs, excluding amounts already paid by HIH – Whether appellant could claim equitable contribution from respondent – Whether liabilities of appellant and respondent co-ordinate.
Words and phrases – "co-ordinate liabilities", "common burden", "common interest", "of the same nature and to the same extent".
GUMMOW ACJ, HAYNE, CRENNAN AND KIEFEL JJ. This appeal from a unanimous decision of the Court of Appeal of the Supreme Court of Victoria (Warren CJ, Mandie JA and Beach AJA) concerns a claim for equitable contribution. The appellant's obligation to indemnify the insured arose under the HIH Claims Support Scheme ("the Scheme") which was created by the Commonwealth Government to assist insureds affected by the collapse of the HIH group of insurance companies ("the HIH Group"). The appellant is the trustee of the HIH Claims Support Trust ("the Trust") and administrator and manager of the Scheme. The issue is whether, in the circumstances described below, the appellant is entitled to claim contribution from the respondent in respect of amounts which the appellant paid in satisfaction of liabilities incurred by the insured.
The facts
Ronald Steele, who conducted a scaffolding business, was sub-contracted to erect a scaffold at Albert Park, Melbourne for the purposes of the 1998 Australian Grand Prix. At all material times, Steele was insured under a general liability insurance policy ("the HIH policy") issued by a company in the HIH Group ("HIH"). At the same time, the Australian Grand Prix Corporation and its contractors and sub‑contractors, one of which was Steele, were insured under an insurance policy ("the SGIC policy") issued by SGIC General Insurance Limited ("SGIC"), whose rights and…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
HIH Claims Support Ltd v Insurance Australia Ltd [2011] HCA 31
Case
[2011] HCA 31
Decision Date
CaseChat Overview and Summary
The appellant, HIH Claims Support Ltd, sought to claim equitable contribution from the respondent, Insurance Australia Ltd, in relation to amounts paid to indemnify a sub-contractor, Ronald Steele, for liabilities arising from the collapse of a scaffold. Steele was insured under a policy issued by a member of the HIH corporate group and also under a policy issued by the respondent's predecessor in title. The dispute arose after the collapse of the HIH group, with the appellant administering a government assistance scheme designed to support affected policyholders.
The central legal issue before the High Court of Australia was whether the appellant, having paid a significant portion of Steele's liabilities and defence costs, could claim equitable contribution from the respondent. This required the court to determine if the liabilities of the appellant and the respondent were "co-ordinate," meaning they were of the same nature and to the same extent, thereby giving rise to a common burden that could be shared.
The High Court reasoned that the doctrine of contribution requires co-ordinate liabilities, and in this case, the obligations of the appellant and the respondent were not of the same nature or to the same extent. The appellant's obligation arose under a statutory scheme established to alleviate hardship caused by the collapse of the HIH group, whereas the respondent's obligation stemmed from its contractual insurance policy. The court found that a mere "community of interest" between the obligors was insufficient to establish co-ordinate liabilities when the nature of their respective obligations differed qualitatively.
Consequently, the High Court dismissed the appeal, upholding the decision of the Court of Appeal of the Supreme Court of Victoria. The appeal was dismissed with costs, meaning the appellant was unsuccessful in its claim for equitable contribution from the respondent.
Orders
Orders of the court
Appeal dismissed with costs.
Background
Background to the litigation
GUMMOW This appeal from a unanimous decision of the Court of Appeal of the Supreme Court of Victoria (Warren CJ, Mandie JA and Beach AJA) concerns a claim for equitable contribution. The appellant's obligation to indemnify the insured arose under the HIH Claims Support Scheme ("the Scheme") which was created by the Commonwealth Government to assist insureds affected by the collapse of the HIH group of insurance companies ("the HIH Group"). The appellant is the trustee of the HIH Claims Support Trust ("the Trust") and administrator and manager of the Scheme. The issue is whether, in the circumstances described below, the appellant is entitled to claim contribution from the respondent in respect of amounts which the appellant paid in satisfaction of liabilities incurred by the insured.The facts Ronald Steele, who conducted a scaffolding business, was sub-contracted to erect a scaffold at Albert Park, Melbourne for the purposes of the 1998 Australian Grand Prix. At all material times, Steele was insured under a general liability insurance policy ("the HIH policy") issued by a company in the HIH Group ("HIH"). At the same time, the Australian Grand Prix Corporation and its contractors and sub‑contractors, one of which was Steele, were insured under an insurance policy ("the SGIC policy") issued by SGIC General Insurance Limited ("SGIC"), whose rights and liabilities had vested in the respondent by the time of the commencement of the proceedings below. At the Australian Grand Prix held at Albert Park in Victoria, on 3 March 1998, a supporting scaffold erected by Steele collapsed, causing damage to a large and valuable video screen known as a "jumbotron" screen, which was operated by Screenco Pty Limited ("Screenco"). That incident has given rise to three separate legal proceedings.The New South Wales proceeding In a proceeding commenced by Screenco in the Supreme Court of New South Wales ("the New South Wales proceeding"), the Supreme Court found Steele liable for the damage to the screen and entered judgment against him. The position of the parties before this Court was that both the HIH policy and the SGIC policy responded to the claim made against Steele. Before the collapse of the HIH Group in 2001, Steele made a claim under the HIH policy for indemnity in respect of the damage to the screen and any liability established in Steele in the New South Wales proceeding. HIH accepted this claim and, prior to the winding up of the company, had paid approximately $80,000 in legal costs incurred in defence of the New South Wales proceeding on Steele's behalf. Prior to the trial of the New South Wales proceeding, the HIH Group collapsed. HIH was placed in provisional liquidation on 15 March 2001, and winding up orders were made by the Supreme Court of New South Wales in August 2001. Before completing an account of the New South Wales proceeding, it is necessary to consider the Commonwealth Government's response to the collapse of the HIH Group. On 21 May 2001, the Minister for Financial Services and Regulation issued a media release entitled "Criteria for HIH Hardship Relief", announcing a relief package for "policyholders suffering financial hardship as a result of the HIH [Group] collapse." What followed was the institution of the Scheme, in which public funds were made available for the purpose of alleviating financial hardship of certain policyholders affected by the HIH Group's collapse.The Scheme
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
GUMMOW ACJ, HAYNE, CRENNAN AND KIEFEL JJ
HEYDON J
The respondent's ability to claim the benefit of satisfaction based on the appellant's payments in respect of Steele, when sued by Steele in the first Victorian proceeding, is not sufficient to substantiate a common burden on the appellant and the respondent. A "community of interest" between obligors is not a sufficient condition for the operation of an equity to contribute in circumstances where the obligations in question are qualitatively different, as they are here.Conclusions That the obligations of the appellant and the respondent are not "of the same nature and to the same extent" is reason enough to find that those obligations are not co‑ordinate liabilities. The circumstances in which 90% of the liabilities incurred by Steele were paid by the appellant do not call for the intervention of equity. These conclusions make it unnecessary to deal with the respondent's amended notice of contention. Orders The appeal should be dismissed with costs. The respondent's predecessor, SGIC General Insurance Limited ("SGIC"), insured Mr Steele against his liability to pay for the damage caused by his negligent construction of scaffolding. So did a company in the HIH group of insurance companies[83]. After HIH collapsed, the Federal Government, in order to indemnify people in the position of Mr Steele, set up the HIH Claims Support Scheme ("the Scheme"). The Scheme is administered by the appellant. In large measure, though not completely, Mr Steele was indemnified under the Scheme. [83]It is convenient to refer to the company as "HIH" and to both the respondent and its predecessor as "the respondent". One striking feature of the litigation is the determination with which the respondent has resisted indemnifying Mr Steele on its policy. The litigation exemplifies the teachings of ordinary litigious experience that insurers who are able to meet the liabilities which they have agreed to meet are often unwilling to do so, while those who are willing to meet them are often not able to do so. Here HIH found itself, after a time, unable to pay, though willing to do so. On the other hand, the respondent, though able to meet its liability to indemnify Mr Steele's obligation to pay for the damage caused by his negligence, has at all stages been unwilling to do so. In 2000 the respondent was asked to admit that Mr Steele was insured under the SGIC policy but evidently did not do so. It then denied the proposition that the policy responded by contending that three exclusions applied. It did this in different related proceedings ("the first Victorian proceedings"). On appeal in those proceedings it unsuccessfully attacked that Court's decision that those exclusions did not apply[84]. [84]Insurance Australia Ltd v HIH Casualty & General Insurance Ltd (In liq) (2007) 18 VR 528. A second striking feature of the litigation is that normally where a person is insured by two insurers, the liquidation of the first operates adversely to the interests of the second by rendering it liable to indemnify the insured person completely, without having any effective recourse to contribution against the first insurer. Here a first insurer (HIH) went into liquidation, but on the reasoning of the Victorian Court of Appeal in the first Victorian proceedings, this did not result in a second insurer (the respondent) being liable to indemnify Mr Steele, because Mr Steele was substantially indemnified by the appellant. The respondent does not now dispute the proposition that if HIH had not gone into liquidation but had indemnified Mr Steele, it would have been liable to make contribution to HIH. The decision of the Federal Government to save insured persons in the position of Mr Steele from the risk of completely losing indemnity has absolved the respondent from fulfilling what would otherwise have been a just obligation to share the burden with HIH. The liquidation of HIH, instead of leaving the respondent to bear the whole burden, has relieved it of the whole burden.
Ratio Decidendi
Legal Principle Established
Established by:
GUMMOW ACJ, HAYNE, CRENNAN AND KIEFEL JJ,
HEYDON J