HIH Claims Support v Insurance Australia Limited

[2011] HCATrans 144

[2011] HCATrans 144

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M24 of 2011

B e t w e e n -

HIH CLAIMS SUPPORT (ACN 096 857 635)

Appellant

and

INSURANCE AUSTRALIA LIMITED (ACN 000 016 722)

Respondent

GUMMOW ACJ
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 2 JUNE 2011, AT 10.18 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 appellant.  (instructed by TressCox Lawyers)

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friends, MR M.W. THOMPSON, SC and MS C.M. HARRIS, for the respondent.  (instructed by Norris Coates)

GUMMOW ACJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, may I start with the agreed facts, which are found in the appeal book starting at page 245.  Paragraph 1 introduces Mr Steele who may be treated as the insured wrongdoer.  Paragraph 2 refers to the accident by which damage was caused, ultimately, it was held, for which he was responsible.  Paragraph 4 introduces the HIH policy which is at the root of my client’s position.  Paragraph 5 is his claim upon it.  Paragraph 6 is the proceedings in which he was sought with another to be made liable. 

Paragraphs 7 and 8 are the cross‑claims in relation to other players in the accident.  Those are the New South Wales proceedings to distinguish him from other proceedings in Victoria.  In paragraph 9, which may be linked with paragraph 16, there is the narration of HIH, at that time still solvent and operating, accepting liability to indemnify under that policy and 16 shows there was, in due course, a payment.  There was another policy which also was established after considerable contest on a number of grounds to respond to the accident so as to provide indemnity to Mr Steele.

GUMMOW ACJ:   Just looking at paragraph 14 on 246, it says:

On 15 June, 2000, HIH and Steele brought a proceeding No. 5769 of 2000 in this Honourable Court against SGIC

So, is Mr Steele suing SGIC on the policy?

MR WALKER:   Yes, as a named insured.

GUMMOW ACJ:   Would SGIC have had a defence?  I do not know whether it be an equitable offence, but a defence as to 90 per cent satisfaction already having been received?

MR WALKER:   That is in due course exactly what was established, yes, it did.  That was held so. 

GUMMOW ACJ:   The controversy then is, having the benefit of that defence which arises by reason of the Commonwealth intervention, to use that expression, SGIC does not have any burden or contribution.

MR WALKER:   That is right.

GUMMOW ACJ:   Mr Jackson says, well, that is because of the particular framework of a Commonwealth intervention and it has made its bed in a particular way and it has got to lie in it.

MR WALKER:   Quite so.  That is exactly it.

CRENNAN J:   Is what Justice Gummow is putting to you some answer to the lack off mutuality point that is made by Mr Jackson?

MR WALKER:   Yes.  Ultimately we say that the fact that, as between HIH and SGIC, there was the first kind of mutuality that is talked about in the authorities, that is ‑ ‑ ‑

CRENNAN J:   Well, there is no contest about that, is there?

MR WALKER:   No, quite.  That the fact of the intervening insolvency says nothing about the possibility of contribution, it happens to be why HIH is not here claiming contribution because HIH made no claim.  The novelty – I think I can say, on our research, is it is novel – the novelty of our position is that we claim contribution because, as if we were HIH, that is as to 90 per cent, as if we were HIH we have met obligations of the very kind defined in terms as the very kind of the co‑insurer who, of course, would have had – and it is only hypothetical – would have had ‑ ‑ ‑

CRENNAN J:   Well, I understand all of that, but the point against you essentially is that the Commonwealth, by the structure of the scheme, is never open to contribution claims.

MR WALKER:   Yes.  Now, the answer we give to that is that that is simply a result that is no different from what obtained in the absence of the scheme.  In the absence of the scheme IAL now stands in the shoes of – assumes the obligations of SGIC – IAL would be liable for the whole and they were, after a contest, eventually shown always to have been liable to indemnify.  So in the ordinary case of insolvency where there is not a government rescue package, the party in the position of IAL would have paid the full indemnity and would not have had a claim for contribution against the insolvent co‑insurer.  This is no answer in literal terms to an argument of no mutuality, but it is an answer bottomed on the equity of the situation, that is, we are, by having paid, not putting IAL in any worse position from what would have happened had we not paid.

CRENNAN J:   The mutuality point is taken as the basis for an argument that there is no common burden in truth.

MR WALKER:   I do understand that entirely, your Honour, and that is why say there is that novelty in our position.  Indeed, I want to take you to the facts in just a moment to show about the scheme that probably the parties before you agree in every respect as to the character it bears for the purposes of that mutuality argument against us.  I need to first of all make that clear and see whether I can persuade the Court that that is not enough to defeat the equity that arises from the other way of looking at the matter.  The other way of looking at the matter is there was certainly a burden borne by IAL.  That has certainly be discharged pro tanto by the payment by my client and that is a payment made in the guise of reflecting as to 90 per cent the HIH co‑insurer’s obligation to discharge the same burden.

KIEFEL J:   You do not suggest that the appellant itself came under an obligation pursuant to the trust deed or the scheme it was administering?

MR WALKER:   The very short answer is no, it is considerably more complicated than that.

GUMMOW ACJ:   If it did, your case would be much simpler, would it not?

MR WALKER:   Very much simpler because an obligation assumed, albeit at a different time with clear knowledge of the earlier, none of that would defeat the claim for contribution.  So the very short answer to Justice Kiefel is no, but there are obligations undertaken ‑ ‑ ‑

KIEFEL J:   You mean there might be shades of something akin to an obligation, is that the area we are in, because ‑ ‑ ‑

MR WALKER:   I suspect not.  The truth is that there is an ineradicable element of voluntariness about what the Commonwealth did.

KIEFEL J:   Quite so, which leads me to wonder, could it ever be the case in equitable principles, do you say, that a person who volunteers payments on behalf of a bankrupt who is otherwise liable to contribute could recover contribution?

MR WALKER:   Put so simply, no, we do not contend for a principle that would be either self‑justifying those terms or supported by authority on those terms, no.

GUMMOW ACJ:   They are 19th century cases, are they not, that suggest it would be an intermeddler, as it were, but this is ‑ ‑ ‑

MR WALKER:   Whether you use the word “intermeddler” or officious, there are various unkind ways of describing the charity involved.

GUMMOW ACJ:   Yes, it may not be accurate to describe the Parliament as officious.

MR WALKER:   No, and that is, indeed, going to be one of my arguments in due course, but ‑ ‑ ‑

GUMMOW ACJ:   When it is exercising legislative power with respect to insurance.

MR WALKER:   Yes.

KIEFEL J:   So your approach is to accept that there is nothing in the nature of a true obligation, but to say that the statutory scheme has impressed upon the situation – it gives rise to a payment and the payment itself in this context is sufficient to create the equity?

MR WALKER:   The equity, yes.  There is a deal packed into my acceptance of that proposition.  I will need to, I think, make good a number of different elements in it.

GUMMOW ACJ:   But that is the heart of the case, is it not?

MR WALKER:   Absolutely.  Your Honours, going back to the facts, what Justice Gummow has asked me about is, of course, that which was established – see paragraph 27 – has been, indeed, to this Court on a special leave application before.  Going back to the way in which the matters fell out – see page 246.  By paragraph 13 one sees January 2000 the demand for SGIC to accept liability.  Paragraph 14 is the proceedings in which that was an issue raised and then intervenes the insolvency, paragraph 15.  I will be taking your Honours then to the statute and documents that embody what is referred to in paragraph 17.  I am not able to say by pointing to one discrete document here is the scheme, but it does emerge from the documents to which I will take you in just a moment.

In paragraphs 18 and 19 there are the steps taken by Mr Steele as envisaged by the scheme.  Perhaps I should flag at this point that perhaps the striking feature, particularly in answer to the questions asked by Justice Kiefel just now, the striking feature of the way the scheme operated was that by applying the claimant, the person who had the benefit now of dubious worth of a policy with HIH or one of the HIH companies, was offering and agreeing to assign the rights with respect to that policy and by a payment, simply by the payment under the scheme, that offer was accepted so as to form an agreement.  So there was obligation.  There is no doubt about the legal form of an obligation. 

I am bound to point out that the real gravamen of that obligation, of course, is from the insured, the policyholder, with respect to the assignment of the rights under the policy.  If there were a part payment then, on our analysis of the scheme, unless the scheme was dismantled, while ever the scheme was on foot, then there would be an obligation to continue to pay.  That provides a qualification to my answer to Justice Kiefel.  But if there was payment in full all at once, at one stroke the contract would be formed and the payment obligation discharged.  That obviously is an obligation that sits in a rather odd way with the notion of the co‑existing antecedent obligations which ordinarily characterises that two participants in an equity of contribution. 

Paragraph 21 provided the denouement of the claim arising from the accident and, in short, it could be summarised, Mr Steele was liable for the lot.  Paragraph 22 is the agreement that Mr Steele was an insured.  That had been hotly contested.  It was agreed by the time of these proceedings.  Then 23, 24, 25 and 26 are payments by my client, and then in 27, those payments as satisfaction of the indemnity obligation owed by SGIC assumed by IAL succeeded as a defence on appeal in the Victorian proceedings from which special leave was refused on the express basis that these matters of contribution would not be foreclosed.

Could I then go to the documents which show or embody the scheme.  The first is the statute to which we have made reference in our list of authorities and that is the Appropriation (HIH Assistance) Act 2001 (Cth). The HIH companies are there defined, their insurance companies, in section 3, and “HIH eligible person” is defined to include “policyholder, insured or beneficiary” and, in particular, someone who “suffered financial loss as a result of the insolvency”. Now, both conditions must be present. The appropriation then follows for the purpose of:

providing financial assistance to HIH eligible persons, either directly or indirectly –

with an informative note that that may be by discharging an obligation.

GUMMOW ACJ:   This is simply an appropriation act?

MR WALKER:   It is simply an appropriation.

GUMMOW ACJ:   It leaves it to the Executive, does it, as to how it is to implement it?

MR WALKER:   Yes, it does.  The Executive then entered into a number of instruments.  The first of them I wish to take you to starts at page 62 of the appeal book.  I hope, trust, your Honours are being given a supplementary page which ‑ ‑ ‑

GUMMOW ACJ:   Page 62B, we have.

MR WALKER:   It really should be 63A and 63B.  It should follow page 63.  Page 63 is the table of contents, 63A has the last item number 30 of the table of contents, and 63B is the ‑ ‑ ‑

GUMMOW ACJ:   At some stage, we have to be given copies of the pages.  We have a title sheet.

MR WALKER:   You have a title sheet which is 62, “HIH Claims Support Trust”.

GUMMOW ACJ:   Yes, that is right.

MR WALKER:   You then have 63, which is a table of contents, which is page 1 of the document according to its right‑hand corner.

KIEFEL J:   Does what you call 63A deal with 30 counterparts?

MR WALKER:   That is it.

KIEFEL J:   It is numbered 62A in what we have, and it is followed by 62B, which is headed “HIH Claims Support Trust”.

MR WALKER:   I apologise.  So it was.  My copy has been corrected, not by me.  I had assumed that had been carried through.  I do apologise.  The order I have given to you is the correct one.  The page that I am calling 63A that your Honours have emblazoned as 62A, I am sorry ‑ ‑ ‑

GUMMOW ACJ:   Well, can we use the numbers at the bottom?

MR WALKER:   Yes,  The numbers at the bottom, it should run from 67 to 68 and then to 69, and 69 is the first page, the title page really.

GUMMOW ACJ:   Yes.

MR WALKER:   So you have got the parties being the Commonwealth and HIH.  You have got Recital A which matches, I suppose, the appropriation.  In Recital B there is a reference not merely to the present document establishing the trust, but also to the Commonwealth Management Agreement which I will take you to.  The settled sum is a mere $10 million but there was provision for more to be given, as it was.  I am sorry, it was not 10 million, it was $10, yes, but there was provision for more.

GUMMOW ACJ:   The Minister on behalf of the Commonwealth by this deed settled money on trust upon your client?

MR WALKER:   Yes.  Now, I should take you to some of the definitions.  Page 64, if I can now go back to appeal book references, 70 of the earlier exhibit, 64 of the appeal book:

Applicant means an applicant for assistance under the Scheme.

. . . 

Claim means a claim for a loss under a Policy.

Then on page 66:

Scheme means the scheme as established by the Commonwealth from time to time –

and I need to draw to attention that phrase “from time to time”.  It bespeaks the possibility of change –

to assist certain qualifying individuals . . . affected . . . 

Scheme Payments means payments made or to be made by the Trustee to or on behalf of Applicants of sums funded by the Commonwealth which Applicants are entitled to be paid under the Scheme.

Though I lean on the word “entitled”, perhaps not too much should be made of it, bearing in mind what we will follow. 

GUMMOW ACJ:   Well, just stopping for a minute.  Who are the beneficiaries of this trust?  It is an express trust.

MR WALKER:   It is the Commonwealth, your Honour.

GUMMOW ACJ:   The Commonwealth is a set law.  Who are the beneficiaries?

MR WALKER:   Clause 5, page 69.

GUMMOW ACJ:   That says, “Subject to the terms and conditions of this Deed”.

MR WALKER:   Yes, which includes the objects referred to in clause 2, particularly the last sentence, page 67.  An object of the trust is that:

The assistance [in question] will be paid by the trustee of the Trust and the Commonwealth is to fund the Trust ‑ ‑ ‑

GUMMOW ACJ:   Is it conferring a power on the trustee coupled with a duty of some sort?

MR WALKER:   Trustee, yes.

GUMMOW ACJ:   I mean, there has been no attention paid to this at any stage in this litigation which is mildly irritating because it is the starting point.

MR WALKER:   Your Honour, no one has doubted that the ‑ ‑ ‑

GUMMOW ACJ:   I know they have not doubted, but it would be helpful if they had analysed before they had not doubted.

MR WALKER:   That the trustee with propriety pays applicants.

GUMMOW ACJ:   I am not questioning whether there is any impropriety, I am just trying to work out what the legal structure is because unless we know the legal structure, we do not know whether you can take this case outside Falcke’s Case 34 Ch D 234 of an officious intermeddler. That is the point, so we have to analyse this deed.

MR WALKER:   Quite.

GUMMOW ACJ:   We will not be rushed through it.  We have to understand it.

MR WALKER:   I do not want to rush through it all.  What I will not get from this trustee, what I cannot get from this trust deed, is a right in an applicant to call for the trust to be administered before, for example, an applicant has had a claim accepted.  They are not a person with a trust right.

GUMMOW ACJ:   Well, if you say so.

MR WALKER:   They would simply be an applicant to the scheme with no rights under the trust.

KIEFEL J:   The trust deed though has to be read with the Commonwealth Management Agreement and the Claims Management Agreement to really understand how the scheme under the trust operates.

MR WALKER:   Exactly.  The objects make that clear with respect to the Commonwealth Management Agreement.  The trust fund is referred to in clause 3, but is no more informative, merely saying it is to be held together with its income on trust pursuant to the terms of the deed.

GUMMOW ACJ:   What is the force of clause 2, the second sentence:

That assistance will be paid by the trustee of the Trust –

Not may be paid; will be paid.

MR WALKER:   That assistance is the assistance to which an applicant becomes entitled upon acceptance of the applicant’s claim.

GUMMOW ACJ:   Whereabouts is the provision for making the claim?

MR WALKER:   It is not in this document.  It is in ‑ ‑ ‑

GUMMOW ACJ:   In the management agreement?

MR WALKER:   Well, it is more than the management agreement.  I am going to come to that in due course.  I have drawn to attention already clause 3.1.  Clauses 3.2, 3.3 provide for the possibility of termination simply by unilateral notice on the part of the Commonwealth – see 3.2(b).  The trustee – see clause 6, particularly 6.1 – has:

duties and responsibilities limited to those –

we would submit that means which extend to those –

expressly provided under this Deed, the Commonwealth Management Agreement and any Claims Management Agreement.

Claims Management Agreement is the means by which, in this case, QBE was appointed, in effect, as a manager.  Clause 7 provides for sums to be paid by way of further settlements:

payments to be made by it in accordance with the Commonwealth Management Agreement. 

Clause 9 requires the establishment of two accounts, 9.1 and under 9.3:

the Scheme Payments Trust Account shall only be used for payments of [so‑called] Scheme Payments. 

Scheme payments, as I told your Honours back on page 66:

payments made or to be made by the Trustee to or on behalf of Applicants of sums funded –

et cetera.

GUMMOW ACJ:   Is there any governing law clause?

MR WALKER:   Clause 29 on page 81, New South Wales.

GUMMOW ACJ:   Thank you.

MR WALKER:   I have to draw to attention clause 11.  I think it is not of particular moment in this context.  Clause 21 at 79 permits these parties to agree to vary the deed.  Can I then move to the next document which commences at page 84 of the appeal book and that is the document referred to in the trust deed, the Commonwealth Management Agreement.  It is, as page 88 shows, between the same parties.  It recites that the Commonwealth has established the scheme, that it wishes to appoint my client to manage on behalf of the Commonwealth.  In the definitions page 89:

Claim means a claim for a loss under a Relevant Policy.

When you go to page 91 ‑ ‑ ‑

GUMMOW ACJ:   Just a second.  The scheme is defined at page 91.

MR WALKER:   In similar terms:

the scheme as established by the Commonwealth from time to time ‑ ‑ ‑

GUMMOW ACJ:   That does not tell one anything.  Established, but how manifested?

MR WALKER:   Your Honour, it is not easy for me to answer that.  I am going to take you to all the documents which were before the courts below by which it is, as we understand it, manifested.  As I said in opening, I do not have a single discrete document to say, here is the scheme.  So page 91, “Relevant Policy”, which is an expression used in the definition of claim, is in somewhat fashion defined to mean:

a policy in relation to which a Claim has been made.

Other details will emerge in relation to what might be admitted.  At the foot of page 91 we have the definition of “Scheme Payments” in similar terms as in the trust deed.  On page 93, clause 3 has the so‑called “Principal Objective”.  There is the provision of:

a framework for the administration and management of the Scheme . . . This Agreement sets out the parties’ ‑ ‑ ‑

GUMMOW ACJ:   How is this management agreement in its terms linked immediately to the trust agreement – the trust deed I should say?

MR WALKER:   The trust agreement refers to it in several places.

GUMMOW ACJ:   The trust deed refers to it.

MR WALKER:   Sorry, the trust deed refers to it in several places, page 67, clause 2, second sentence in particular.

KIEFEL J:   And clause 6.1.

MR WALKER:   Yes, 6.1 very importantly, and 6.6.  See page 64, in its definition it is shown that that form was schedule 1 to the trust deed itself.

GUMMOW ACJ:   Page 64?

MR WALKER:   Page 64, the definition of “Claims Management Agreement”.  It means:

any agreement that has . . . same or substantially similar terms to that set out in Schedule 1 –

I am sorry, that is the Claims Management Agreement, it is the Commonwealth Management Agreement, sorry.  That is defined further down:

the document so entitled . . . executed immediately after the execution of this Deed.

GUMMOW ACJ:   Thank you.

MR WALKER:   That is the one we are in now.  Page 93, as I say, in clause 3 had the principal objective:

to administer and manage the Scheme in the manner provided for in this Agreement.  This Agreement sets out the parties’ respective obligations and rights towards one another in respect of the funding, administration and management of the Scheme.

Clause 4 notes that my client:

enters into this Agreement in its capacity as Trustee of the Trust.

GUMMOW ACJ:   Sorry, where are you reading from, Mr Walker?

MR WALKER:   Clause 4.1(a) on page 93.  Then a further step in the aggregation of documents is taken in clause 4.2(a).  There is a reference, the Commonwealth acknowledges that my client:

shall only be required to manage and administer the Scheme and carry out its obligations under any Claims Management Agreement –

so that is embedded –

in accordance with the terms of this Agreement –

and then there is the possibility of variation.  Under clause 5.1, my client was appointed to “administer and manage”, and at 5.3, subject to the agreement, that involves –

receive, review and determine Applications in accordance with [the defined term] Eligibility –

Your Honours, for a reason I simply cannot explain, that page is missing and we will have it supplied, and I apologise.  The applications manual is ‑ ‑ ‑

HEYDON J:   This is very important.  Do you know what the eligibility agreement definition actually is, even though we have not got the page here?

MR WALKER:   No, I do not, your Honour.  The applications manual is one of those ‑ ‑ ‑

GUMMOW ACJ:   Well, we had better be supplied with it quick smart.

MR WALKER:   Yes, quite.

GUMMOW ACJ:   And I mean quick.

MR WALKER:   Yes, your Honour.  The applications manual is one of those terms which by its definition, which includes the phrase “from time to time” – see the top of page 89 – explicitly contemplates changes from time to time:

prepared by and agreed between the parties from time to time.

So its contents are not fixed by this agreement.  Then in 5.3, the process continues through items (b) to (r) on the next page, step by step and in accordance with those provisions to deal with claims, or applications as they are called.  Item (i), for example, includes the authorising of “Claims Managers . . . to effect Scheme Payments”.

KIEFEL J:   Is there a separate criteria document which seems to be in mind in clause 5.3(f) to:

allocate, in accordance with criteria agreed between HCSL, the Commonwealth and Claims Managers . . . all admitted Applications –

MR WALKER:   Not in the record, unless that character is borne by one of the other documents to which I am going to come.  Not so entitled, no.  In fact, item (f) that Justice Kiefel has just drawn to attention in 5.3 is another of those terms which shows by use of the phrase “agreed from time to time”, showing the floating rather than fixed quality of the provisions of the scheme.  There are powers of a very broad kind shown on page 96, clause 5.4 which include – see item (c) – possibility of further indefinite agreements.  Under clause 6.1, as envisaged by the trust deed – see page 97 – there is an obligation on the Commonwealth to pay:

by way of settlement on the Trust, the Funds for the Scheme Payments Component –

which is defined on the top of page 92 to mean:

that component of the Funds to be provided by the Commonwealth to be used –

et cetera.  Under clause 7 further reference is made to the possibility of what I will call a unilateral variation on the part of the Commonwealth – see clause 7.1.  On page 109, clause 21, there is a possibility – see (a)(iv) – for scheme payments to be suspended by unilateral determination of the Commonwealth.  Although in 21(b) that is to operate prospectively so as not to affect:

any past or future Scheme Payments to Applicants under any Application in respect of which –

we have already –

(A)     notified the Applicant that the Applicant is eligible . . . or

(B)     notified the Applicant that the Applicant is not eligible –

if it is still within what is called the internal review or review panel before which that applicant becomes successful.

GUMMOW ACJ:   Now is there provision which indicates what follows from the status of eligibility?

MR WALKER:   In this document, no, your Honour.

GUMMOW ACJ:   In any of them?

MR WALKER:   Yes, there is, in the claims agreement to which I am going to come and, indeed, in the documents that are made available to applicants.  Page 110, clause 23, further unilateral power of the Commonwealth called “Termination and Reduction”, which we do not need to go into in any further detail.  Your Honours, there is a standard form, that is found at page 121, but it does not appear that that plays any particular part and there is a form which Mr Steele filled in to which I will be coming in due course.  Could I then move to the application.

KIEFEL J:   I am sorry, the form on page 121 forms part of the Commonwealth Management Agreement?

MR WALKER:   Yes, but there is a form by – bearing in mind that things can change from time to time, it is appropriate to draw to attention to the one starting at 137 which is the one that Mr Steele actually executed.  I am going to come to that but not right now because I want to go first to the other document.

KIEFEL J:   Just before you do, I might have overlooked this, but the document offer to assign your policyholder rights at page 121, where is it referred to within the body of the management agreement?

MR WALKER:   I cannot find it, your Honour.  Your Honours, can I take you now to the Claims Management Agreement which starts at page 144.  I draw to attention the different nature of the parties.  Perhaps they are more easily set out at 150.  You have got the liquidated HIH entities plus my client called HCSL plus QBE Management Services called the manager.  The HIH parties are called together the insurer.  The background, so‑called, on page 150 includes, just after line 50, that the insurer, that is, the HIH companies, have “rights and owes obligations to HIH Policyholders”, and that is a defined terms, as is HIH scheme claims.  HIH scheme claim – see the top of page 154 – involves a determination by my client, that is, it is:

a claim under an HIH Policy which HCSL has determined as being eligible for assistance under the Scheme.

At page 156 there is the appointment of the manager.  The agency relationship is contained on page 157, clause 2.5(a).  Clause 2.6 notes that this is being entered into in the capacity as trustee.  There are obligations into (c) that are not of great moment – see page 159, clause 5.5.  They are of co‑operation, but under clause 6 on page 160 one sees that the HIH companies in liquidation undertake in various ways, including providing access to claims materials.  I do not need to go in detail to the manager’s duties, but it can be seen that they as well, 7.1(a), refer off to yet other documents, protocols or arrangements, that is, the applicable requirements and the claims management procedures.  The applicable requirements are defined on page 151 to mean:

all legislation, regulation or codes of practice applicable to the handling of the HIH Scheme Claims.

The claims management procedures are defined at the top of page 152 in accordance with schedule 5, but it then goes to say in a familiar way:

as amended from time to time by agreement between the [HIH companies] and the Manager.

KIEFEL J:   Is the status of the HIH companies as parties to this agreement simply to facilitate the consideration of claims and to require them to make documents available?  It does not seem to go any further than that?

MR WALKER:   In essence, that is right.  That is reflected actually in a right given to the HIH companies which you see at 168, 169, which is the reimbursement of expenses.  There are other rights because, after all, this is a scheme under which my client takes the benefit of the insured’s claims under the policy.  On page 170 you see that there are rights of participation and claims review by the insurer, that is the HIH Claims, clause 12A.  Your Honours, this falls in under the management agreement in terms of its currency – see page 176, clause 17.1(a).  That is all I wish to take your Honours to in that one.  Schedule 5 at page 196 contains the claim management procedures which are subject to variation from time to time.

GUMMOW ACJ:   This is schedule 5 to what?

MR WALKER:   This is schedule 5 to the Claims Management Agreement that we have been in.  It is the one referred to in the definition of Claims Management Procedures.  At about line 40 on page 196 there is an obligation on the manager to:

Ensure that no amount is paid on an HIH Scheme Claim unless the relevant HIH Policy was in force –

the premium had been paid, and there is vouching of those matters.  Item (e) on page 197.  The manager’s obligations include assessing:

indemnity and claim quantum in accordance with the terms and conditions of the relevant HIH Policy. 

CRENNAN J:   This is all machinery to ensure that any claim is a valid claim.

MR WALKER:   It is valid and also, for the purposes of my argument, that it is subject to the 90 per cent component.  It is a reflex of the obligation of HIH under the policy.  Otherwise it is, as Justice Crennan has pointed out, machinery – furthermore, it is machinery that is subject to amendment from time to time.

HEYDON J:   I may have missed something, but if you take (e) on page 197, gravid in that is the idea that payment will be made, but is there an express clause compelling the manager to pay whatever the due amount is as distinct from that implication one finds in (e)?

MR WALKER:   One could add as well (f)?

HEYDON J:   Yes.  Is there an express clause?

MR WALKER:   No, your Honour.

HEYDON J:   Your argument is this, presumably, or is it?  The other agreement, clause 5.3, creates a duty to either accept or reject the applications of eligible applicants?

MR WALKER:   Yes.

HEYDON J:   The responsible body, on a whim, could not say, “Well, I do not like you because you are red‑haired, even though you are otherwise qualified”.  Once you become an eligible applicant, somewhere we find in schedule 5, or maybe somewhere else, a duty to pay eligible applicants 90 per cent of their rights.

MR WALKER:   There is in the agreement, which is a very difficult expression for the reasons I have explained in answer to Justice Kiefel earlier, there is in the agreement ‑ ‑ ‑

HEYDON J:   Claims Management Agreement?

MR WALKER:   No, I am sorry, the agreement that is made by payment.

HEYDON J:   Yes.

MR WALKER:   That has the problems I have earlier referred to.  I am bound to say, that appears to be the most close approach to plain words of obligation to pay and it is more than a little difficult that it emerges from the fact of payment.  That has real meaning when it has been a part payment, but it is very odd when it is a whole payment.

GUMMOW ACJ:   It is a trust fund.

MR WALKER:   Yes, your Honour.

GUMMOW ACJ:   To the extent that payments are not made out of it, it results back to the set law of the Commonwealth.

MR WALKER:   Quite so and under the trust ‑ ‑ ‑

GUMMOW ACJ:   So there is a power to pay which is enlivened in certain circumstances.

MR WALKER:   That is right.

GUMMOW ACJ:   The question then is, does that power then become a duty which the Equity Court would enforce under the submission in the earlier provision to the Supreme Court of New South Wales.

MR WALKER:   Yes, and, in our submission, it does become a duty because the object of the trust is that payments are to be made by way of the assistance under the scheme.  The assistance under the scheme is by these steps shown to be those sums ‑ ‑ ‑

GUMMOW ACJ:   You have to be clear as to what the nature of the trust is.

KIEFEL J:   The closest one comes to an express obligation provided in the opening paragraph of schedule 11 on page 205 which refers to the settlement after the determination of coverage entitlement.

MR WALKER:   That is another reference of a kind similar to those to which Justice Heydon drew attention which contains an obvious implication that there will be payment from which it follows at least power to pay, entitlement to pay, and, in our submission, so far as the trustee is concerned for whom the manager is the agent, there is the obligation to pay in accordance with the object of the trust.

KIEFEL J:   With the policy, for instance, by reference to matters such as clause 8 in schedule 11 which requires a taking account of deductibles and losses and excesses and the like.

MR WALKER:   Yes, again, a working through of the amounts payable under this scheme as being a reflex of policy rights, including countervailing obligations, yes.

KIEFEL J:   I am sorry.  Would you mind stating once again how you say this converts into an obligation under the trust deed?

MR WALKER:   I am so sorry, your Honour, into a ‑ ‑ ‑

KIEFEL J:   Into an obligation on the part of the trustee to ‑ ‑ ‑

MR WALKER:   So far as the obligation ‑ ‑ ‑

KIEFEL J:   Perhaps I am wrong.  You do not say that.  You say that the payment subsequently made stands somehow in lieu of an express obligation?

MR WALKER:   Well, the obligation under the trust deed is from the second sentence of clause 2 to which attention has already been drawn, page 67.

GUMMOW ACJ:   Justice Heydon draws attention to page 205, clause 9.  There seems to be an assumption there that the HIH policyholder can complain if there has been a refusal of entitlement.

MR WALKER:   Yes, that assumption is plain from clause 9.  Whether the assumption is a good one is another point altogether.

HEYDON J:   It gives a power to negotiate a settlement of the same.

MR WALKER:   It does.

HEYDON J:   That is to say, it gives a power thought to be given to the question whether the claim is a just one at the end of the day.

MR WALKER:   You could pay on it, yes.  Of course you can compromise a claim, though, disputing all entitlement.

HEYDON J:   I am just trying to build your case up so that Mr Jackson can knock it down if he feels like it.

MR WALKER:   I am not trying to resist your Honours.  I am trying, however, not to make the error of discerning the plain language of obligation to pay where I do not have ‑ ‑ ‑

GUMMOW ACJ:   Yes, that is because you are construing it as if it is a contract.  What I am trying to get out of you ‑ ‑ ‑

MR WALKER:   No, your Honour, a scheme.

GUMMOW ACJ:    ‑ ‑ ‑is that this is a deed of trust to which all this is appendant.  True enough, contractual arrangements between the manager and so on.

MR WALKER:   Yes.

GUMMOW ACJ:   It is governed by the laws of New South Wales.  People keep talking about an object.  It would not satisfy the traditional statements for a purpose trust, so it cannot be simply a purpose trust.  It has to be an express trust with a power to make certain payments and in default of the exercise of that power, there is a reversion of the beneficial ownership to the Commonwealth.  The question then is, in what circumstances that power can or must be exercised and at whose request and what consequences if there is a failure then to exercise it?  That brings us, for example, to clause 9 on page 205.

MR WALKER:   Yes.

GUMMOW ACJ:   There may not be any contractual right in any of these parties, but they may have a right to approach the Equity Court in some circumstances because there is an abuse of power by denying their entitlement or by accepting their entitlement, but not acting upon it, by paying them.

MR WALKER:   Yes.  If so, then the second sentence of clause 2 of the trust deed, found on page 67, would be at the heart of an argument by a disgruntled policyholder who says, if he, she or it can say so, that they have or should be treated as – that they had satisfied the requirements.  Would your Honours just excuse me one moment?  Your Honours, and with apologies, may I hand up the missing page?

GUMMOW ACJ:   Thank you.  This has the missing definition of “eligibility criteria”?

MR WALKER:   Yes.  As we try to reconstruct the documentation from the record below, it looks like this was missing from the Court of Appeal, but we are not sure – or originally missing and then put in.  In any event, there it is.  The eligibility criteria, however ‑ ‑ ‑

GUMMOW ACJ:   We had better see the media release, had we not?

MR WALKER:   No, your Honour, that is ‑ ‑ ‑

KIEFEL J:   And regulation number FSR/041.

MR WALKER:   Exactly, but I am told that was never in any record below.

GUMMOW ACJ:   It is a public document, though, is it not?

MR WALKER:   Yes, that will be obtained – there are two, sorry.

GUMMOW ACJ:   We hear about government by media release, this is the backwash of it.

MR WALKER:   Well, this is overtly it.  I am bound to draw to ‑ ‑ ‑

GUMMOW ACJ:   A great decline in the standards of public administration that produces this result, but nothing you or I can do about it.

MR WALKER:   No, your Honour.  I am bound to draw to attention that at the end of that definition, yet again, although I will supply those documents to your Honours, they do not, in fact, definitively supply the content of eligibility criteria.  They may be unilaterally altered by the Commonwealth from time to time by notifying my client in writing.  So that may not exhaust all the terms that render the content of the scheme fluid, shall I say, but, with respect, any point against us that depends upon demonstrating that it does have fluidity is plainly on a sure basis.  The argument may be wrong, but I have to accept that the content of the scheme, which becomes more and more an all encompassing but not precise expression, the content of the scheme may alter from time to time.

HEYDON J:   Trusts can be amended from time to time.  Trust deeds can be amended from time to time, nothing startling about it.

MR WALKER:   Quite so, and it does not mean that there are not obligations.  There are real obligations that are created and the real obligation on the trustee to make payments by way of the assistance means the assistance as from time to time.  That is a real obligation of real governmental, social, and to the individuals in question, financial worth.  There is nothing nebulous about being admitted to assistance and then having the trust obligation imposed upon my client to make the payment. 

That person does not be a beneficiary of the trust in the sense of a proprietary interest in the corpus, but it most certainly becomes a person who, probably not only by way of a clause 9 action against a manager, but someone who can out of court raise with the Commonwealth and my client, and in court, if necessary, draw to the equity jurisdiction’s attention that a trust appears to be being departed from.  It may be a fragile situation if something in the nature of policy or supposed principle had produced a resistance on the part of my client because the Commonwealth has the capacity to terminate matters and to alter matters, but in theory at least this is an enforceable trust.  Your Honours, I need then to take ‑ ‑ ‑

HAYNE J:   Just before you depart from that, Mr Walker, was the class of persons entitled to seek assistance through this scheme a class that was closed at the time of the making of these agreements?

MR WALKER:   Factually, yes, it is policies that existed – I will have that turned up.  To have a relevant policy has a terminal date.  I will get that for you.

HAYNE J:   But do the events giving rise to the obligation under that policy extend beyond the date on which these agreements were made or are the agreements dealing only with events and circumstances that have occurred before the date?

MR WALKER:   No, it is by reference to policies existing before, your Honour, and I will just have those turned up.

GUMMOW ACJ:   We better be clear about this.

MR WALKER:   Yes, quite.

HAYNE J:   It may be important, it may not be important to know whether or how the class of persons entitled to seek assistance under this scheme can be identified or defined.

MR WALKER:   Yes, your Honour.  Could I, apropos that and other questions your Honours have asked, take you to the document at page 226, notes for applicants.  It is one of these from time to time stipulations of the scheme.  Who qualifies, it would appear, to be, as a matter of English, eligibility criteria:

if you are a policy holder or insured who has a claim under an insurance policy issued by a company –

this is 226, line 25 – and you are an Australian citizen, et cetera, and then there is a definition of the HIH Group.  Then, in answer to Justice Hayne, it is:

The event which entitles you to make a claim must have occurred before 11 June 2001.

In the case of ‘claims made’ insurance . . . claim must have been made against you or a circumstance notified to the insurer, before 11 June 2001.

GUMMOW ACJ:   So long tail claims might miss out?

MR WALKER:   Yes, except insofar as a circumstance notified, of course, still has an element of tail in it.

GUMMOW ACJ:   Yes.

HAYNE J:   What is the significance of the date 11 June 2001?  No doubt I have been told it three times already but forgotten.

MR WALKER:   No, your Honour has not.

GUMMOW ACJ:   Is that a date of liquidation?

MR WALKER:   It is two months before the order for winding‑up.  I imagine it was the inception of ‑ ‑ ‑

HAYNE J:   Of the commencement of liquidation.

MR WALKER:   ‑ ‑ ‑ insolvency or suspension of payments.  15 March was provisional liquidators, 27 August was the winding‑up.  I am sorry, I do not have that off the top of my head, and I will obtain it during ‑ ‑ ‑

GUMMOW ACJ:   Was there a press release on 11 June?

MR WALKER:   Almost certainly there was, your Honour.  Whether it concerned this, I do not know.  I am sorry, I cannot find that in the ‑ ‑ ‑

HAYNE J:   The media release is 21 May 2001 apparently.  Perhaps it looked forward for once in a media release rather than looking backwards.

MR WALKER:   Could I then turn finally to Mr Steele’s documentation, page 137.  This sets out something under the heading of “Conditions and Obligations”.  The wording is not entirely consistent, but nonetheless this is what he signed:

you have a valid claim under an insurance policy issued by a company in the HIH Group ‑

Then at the foot of that:

has agreed that, in certain cases, and subject to the limitations of the HIH Claims Support Scheme, it will provide the benefit that would have been provided –

There is the beginning and top and bottom of that column.

GUMMOW ACJ:   We have not so far found in the documentation any specific conferrals of power to require an assignment?  There is a condition of accepting an eligibility claim.  We have not, have we?

MR WALKER:   No, you have not.

GUMMOW ACJ:   Are there any general words that would accommodate that?  Anyhow, maybe a search could be made.

MR WALKER:   The answer to that is, yes, it is to be found ‑ ‑ ‑

GUMMOW ACJ:   General power of fixing terms and conditions.

MR WALKER:   No, it is not that.  It is more general than that your Honours.  It is even more general than that, your Honours.  On page 137, under the heading “What happens if I fill in this form?”:

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

·your rights under your policy . . . 

·any rights you may have . . . in connection with your claim under that policy.

You will also be undertaking to provide all reasonable assistance . . . This includes:

·filling out the HIH Company’s claim form and lodging the claim under the original policy –

and then 138 second dot item:

·fully complying with the terms of the policy ‑ ‑ ‑

GUMMOW ACJ:   So it is an assignment for value, I suppose?

MR WALKER:   Yes, it is.

GUMMOW ACJ:   It is effective in equity, anyway. 

MR WALKER:   Yes.  The reflection intended by a kind of adoption on the part of my client of obligations in return for the insured performing obligations under the policy can be seen in these terms, including, for example, the fourth dot item on the left‑hand column on page 138 which ends up:

as though HCS Limited were the insurer which issued.

Now, the requirements of the scheme which are referred to in the next one were set out in the notes to applicants which I took you to earlier.  Then comes the quid pro quo.  If we accept your offer, this will mean that we:

will pay you at least 90% per cent –

in this case, it was 90 per cent.  Again it is the notion of a reflex –

the amount that would have been provided by the original HIH insurer under your insurance policy. 

You give up claims in the liquidation.  You give up any other claims with some exceptions.  In the middle of the right hand column on 138:

How will I know if HCS Limited has accepted my offer?

The only method which HCS Limited may use to accept your offer is payment of a benefit under the Scheme.  Where the benefit consists of a series of payments relating to one claim, the first payment of the series constitutes acceptance by HCS Limited of this offer.

Then there is stipulations for what to do with certain receipts intended to be devoted to others.  Then page 139 line 30:

What happens if HCS Limited has accepted my offer but I do not comply with the requirements of the Scheme?

If you do not, then in absolute discretion may:

·withdraw the provision of further assistance . . . 

·set a limit on the total amount –

It should be drawn to attention at the foot of that long set of stipulations about what might happen, right‑hand column, 139 at about line 55, it is said that my client:

may exercise its discretion even if you have fully complied with the terms and conditions of the policy.

That is the HIH policy.  That is if you breach the requirements of the scheme.  The terms of the offer, page 140 about line 5, “you offer to assign”, and one sees that plus a promise “not to revoke” for 12 months, and then provision for execution.

HEYDON J:   Mr Walker, the name of the insurer which issued the policy was C.E. Heath via Concord Underwriting Agencies Pty Ltd.  Is that in the HIH Group?  Is it a misunderstanding by Mr Steele?  Is that a broker?

MR WALKER:   In fact, the insurer was World Marine.

HEYDON J:   World Marine is not an HIH company, according to page 65.  I withdraw that.  I see that, yes.  Where do we get World Marine in and about page 140?

MR WALKER:   It is an agreed fact, your Honour.

HEYDON J:   Paragraph 4?

MR WALKER:   In fact, no.  It is HIH Casualty & General which, by agreed fact 4, is said to be the relevant policy.  Your Honour, that is what the agreed fact says.  World Marine comes from the finding at page 298, paragraph 3, line 35.  So either the agreed fact is wrong or the matter in the Court of Appeal is wrong, but the parties are agreed that it is an HIH Group policy, and so there is a misunderstanding by Mr Steele probably of a broker’s position.  I am sorry to be eking these materials out, your Honours.  Mr Hockey’s ministerial press release, FSR/041, “Criteria for HIH Hardship Relief”.

GUMMOW ACJ:   “Relevant dates” at the bottom, that is where 11 June seems to come from.

MR WALKER:   Yes.  This media release is 21 May and that obviously was intended to give some period of grace for people to organise their affairs – see the top of page 2.  Justice Gummow’s question, there is a specific power in relation to having these assignments, offers to assign collected, page 94 of the Commonwealth Management Agreement.  My client’s obligations include in that long list (d), what is called collecting:

Offers to Assign from Applicants and check they are appropriately signed and fully completed –

Then in terms of payment, there is the item to which I drew attention earlier, (i), authorising claims managers to effect scheme payments.

GUMMOW ACJ:   So which was the last one of those, Mr Walker?

MR WALKER:   I am so sorry, your Honour.

GUMMOW ACJ:   Which was the last paragraph you referred?

MR WALKER:   At 5.3(i) on page 95.  That then links back to the definition ‑ ‑ ‑

GUMMOW ACJ:   The definition of “scheme payments” speaks of entitlement.

MR WALKER:   Yes, exactly.

HAYNE J:   The provision of funds by the Commonwealth at page 97, item 6.1(g) talks about payments required –

to ensure HCSL is able to meet its obligations to make Scheme Payments.

MR WALKER:   Yes.  It raises the question, obligation owed to whom and enforceable by whom, but at least answers the question, is there an obligation?  Yes, there is ‑ ‑ ‑

GUMMOW ACJ:   Although the definition of “scheme payment” postulates an entitlement to the applicant.

MR WALKER:   Yes, it does.

GUMMOW ACJ:   Which presumably the Equity Court would enforce.

MR WALKER:   Yes, that is, the trustee is bound to hold the money to be dispensed in a particular way.  That way would be demonstrated by somebody who has an entitlement which will come upon acceptance of a claim.  Otherwise the press release does not, it would appear, take the matter any further.

GUMMOW ACJ:   It does indicate the source of the relevant date.

MR WALKER:   Yes, there is a period of grace, it would appear.  It also explains the difference between 100 cents and 90 cents as a policy matter.  There is a preference for personal injury claims, and that does not explain why it is only 90 for property damage, but it does show that there was a discrimination being practised.  Your Honours, perhaps I should take you back in relation to what has been asked about entitlement.  In the notes for applicants documents to which I have taken you, at pages 228 to 229 you will find the explanation of those references to review.  There is an internal review possible – see item 10 at line 40 on page 228, right‑hand column.  Then there is external review, page 229, left‑hand column.  Your Honours, all of that, in our submission ‑ ‑ ‑

GUMMOW ACJ:   We come back to the question Justice Crennan asked, I suppose, is there sufficient connection or relation to generate an equity of contribution?

MR WALKER:   Yes, that is right.  The situation as between SGIC and HIH was, of course, straightforward, co-insurers.  The position obtaining by reason of HIH’s insolvency was also straightforward.  IAL would, ultimately, upon the liability it resisted but was held to have, pay the whole without contribution.  Upon the Commonwealth devising the scheme and undertaking to provide the funds for it while the scheme was in existence, those who were insured both by HIH and SGIC had a choice, as the creditor, as to whom to sue, whom to claim against.  The choice of the policyholder, the insured as creditor, would determine who first bore a burden which was equally and co-ordinately borne by the two insurers.

The difficulty in our position, or the novelty of the position for which we contend, is that although all payments by the scheme pro tanto discharge the co-insurers of HIH, it is not said and it does not appear to the slightest degree possible to argue, we would submit, that these are funds appropriated for and available under the trust fund to meet claims for contribution in the converse case, that is, if it had been to IAL, having assumed SGIC’s liabilities, to whom Mr Steele had first looked.  If mutuality in that sense is critical to the equity of contribution arising from the fact of HIH and SGIC being co-insurers and a payment reflecting HIH liabilities freeing SGIC from its burden, if it be necessary that mutuality in that sense exists, then we must fail.

GUMMOW ACJ:   Say that again.  Mutuality in what sense?

MR WALKER:   There is a second sense of mutuality involved, namely, that a party from whom contribution is claimed must always be a party who could have claimed contribution had the facts been opposite, namely, that the defendant had first payed, not the plaintiff.  If there is something at that high level of abstraction which is to be required for the equity to exist, then we must fail because there is nothing about this scheme that makes my client liable to contribute to a payment made by IAL on account of the SGIC policy ‑ ‑ ‑

GUMMOW ACJ:   That if Mr Jackson’s had paid first?

MR WALKER:   If they paid first, no payment by HIH, we are certainly not here – the scheme does not exist.

HEYDON J:   You would not have accepted Mr Steele’s offer?

MR WALKER:   I think we have put that and they have put that and we are at common ground on that.

HEYDON J:   But that is where the lack of mutuality comes from?

MR WALKER:   Yes, it does.

CRENNAN J:   He would not seek to avail himself of the Commonwealth scheme if ‑ ‑ ‑

MR WALKER:   If he had been paid.

CRENNAN J:   If he had been paid?

MR WALKER:   That is right.

CRENNAN J:   That is the way that the Court of Appeal analysed it, is it not, as against you?

MR WALKER:   Yes.

HEYDON J:   If he had a claim against Mr Jackson’s client but the Commonwealth scheme came along and he made an application under the Commonwealth scheme and Mr Jackson’s client then paid him, you would not have accepted his offer?

MR WALKER:   No, because that would have doubly compensated him.  He would not be a person who had suffered loss by reason of HIH insolvency.  He would have been made good by the IAL payment.

GUMMOW ACJ:   So it is not so much a question of mutuality, it is a question of the alleviating against the accident of choice and the sequence of choice by Mr Steele?

MR WALKER:   Yes, that is right, and it is our submission that ‑ ‑ ‑

GUMMOW ACJ:   The equity is concerned that that should not dictate events.

MR WALKER:   Exactly.

GUMMOW ACJ:   We are then back where we were.

MR WALKER:   Yes.  It is our submission that the cases are not capable, bearing in mind what they stand for, none of the cases that parties have drawn to attention, they are not capable of supporting at that level of abstraction a general requirement of mutuality in that second sense that I have accepted does not exist in this case.  Mutuality in the first sense, that is, HIH and SGIC were co‑insurers, that is obvious and trite in this case.  It is the second case of the defendant in the contribution claim saying, “I should not pay you any contribution because what if I had paid, you would not have paid me contribution.”  That is the sense in which, in our submission, the cases do not actually support that that is a barring rule. 

It may be that that is a situation that for reasons particular to the facts of a relationship will show, for example, that the plaintiff and defendant of the contribution claim are not at what is called the same level of liability.  Treating that as one of the various phrases that have been used to stipulate for the requirement beyond merely freeing the defendant from the burden that equity has for contribution obligation seems to be the same as the co‑ordinate liability requirement that this Court, with respect, most often uses as the words to describe the concept in question. 

GUMMOW ACJ:   But it can involve the nature of the liability as well, can it not?

MR WALKER:   Nature and extent ‑ ‑ ‑

GUMMOW ACJ:   Is that not important in Burke v LFOT?

MR WALKER:   Yes.  Can I deal directly with that matter.  In Burke v LFOT there were, of course, qualitative differences introduced by what was variously described but can be summarised as being the differences of culpability, which has, of course, causal elements as well. For example, in the reasons of Acting Chief Justice Gaudron and Justice Hayne at 209 CLR 282 at 293 paragraph 16. That matter does not intrude into this case. This is not a case where there is any nature or character question to which matters of culpability might arise.

GUMMOW ACJ:   One has to look at Justice McHugh too, I think, at paragraph 49 when he refers to that Scottish case.  There is a notion of substantiality involved.

MR WALKER:   Yes.  The whole discussion in Justice McHugh’s reasons, starting at the foot of page 298, paragraph 38 and going over to page 303, paragraph 50, with respect, is to that effect.  One of my last submissions was obviously based upon what one finds at page 301 in paragraph 44:

Nor will it apply merely because the claimant’s payment has benefited or relieved the other party financially.

We have that, obviously, resoundingly.  I accept that that is not enough.  However, the principle includes, with respect, the way in which his Honour puts it in paragraph 41 following the citation of Ellesmere Brewery Co v Cooper and by reference obviously to Albion where his Honour says:

The nature of the relevant interest and burden is such that the discharge of the burden by one party constitutes a benefit to the other or others which, in fairness, the law cannot countenance them keeping.

Cleaving to that statement of the principle and, in our submission, as one should, interposing no further paraphrase of the matter, we are enabled to say that because in the special circumstances of this case, by dint of the government beneficence which set up a scheme which has embedded it in obligations to benefit people whose rights against HIH have become worthless, but because in those special circumstances the reflex of what they obtain from us is the HIH obligation which is the paradigm case of being co‑insurers of the equity of contribution arising, but one can see, so far as fairness is concerned, the notion that IAL for SGIC keeping all its money is something which the law could not countenance. 

Nothing they have done of merit and nothing we have done of demerit provides any persuasive reason, any reason at all, why they should take advantage of the timing of events in which the most important contributor to their present financial advantage was what has turned out to have been their wrongful refusal to accept liability.  It is that and the process of litigation to overcome their repudiation of their obligation which, by the interposition of the insolvency, leads them to be able to say, as they successfully contended in the Court of Appeal in the Victorian proceedings, “We are discharged because you have been paid”. It is our submission, the very basis of their success in those proceedings whereby they correctly observe the discharge of their obligation because of the co‑insurer’s payment, demonstrates the inequity of their maintaining that position as between the source of that payment, that is, my client, and themselves.

CRENNAN J:   It shows, I suppose, that they are not independent obligations.

MR WALKER:   No.

CRENNAN J:   That they were able to satisfactorily mount the defence of satisfaction.

MR WALKER:   That is right.  Quite so.  They were not able and, indeed, they embraced, for the purpose of that discharge answer in which they succeeded, they embraced the fact that this was not a merely coincidental payment by my client to Mr Steele.  They had to do that in order to show discharge, and it is for those reasons, in our submission, that they cannot have it both ways.  If they have succeeded in the defence of discharge, which they have, that is water under the bridge, then, in our submission, that demonstrates a sufficient mutuality.  They benefited by the discharge from which it follows that as between them and the party who provided that benefit, there should be equality pro rata of contribution.

AT 3.16 PM THE MATTER WAS ADJOURNED