Manufacturers' Mutual Insurance Limited v John H. Boardman Insurance Brokers Pty Ltd

[1993] HCATrans 31

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sll4 of 1992

B e t w e e n -

MANUFACTURERS' MUTUAL INSURANCE

LIMITED

Applicant

and

JOHN H. BOARDMAN INSURANCE

BROKERS PTY LTD

First Respondent

METROT PTY LIMITED

Second Respondent

Application for special leave

to appeal

MASON CJ TOOHEY J McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 FEBRUARY 1993, AT 10.07 AM

Copyright in the High Court of Australia

Manufacturers 1 12/2/93

MR H.D. SPERLING, QC:  May it please the Court, I appear for

the applicant. (instructed by Dunhill Madden

Butler)

MR D.F. JACKSON, QC:  I appear with my learned friend,

MR M.T. McCULLOCH, for the first respondent.

(instructed by Minter Ellison Morris Fletcher)

MASON CJ: Is there any appearance for the second

respondent? I ask that question, not expecting a

response because the Registrar has been informed by

the solicitors for the second respondent that they

do not intend to appear at the hearing of the

special leave application and will submit to any

order of the Court save as to costs.

MR SPERLING:  My learned friend has arranged to be prepared

a bundle of documents relating to the submissions

that have been made at various levels and including
the transcript of the proceedings in the Court of

Appeal and I agree with his idea that it would be

useful for the Court to have that material. Could

I therefore hand that up now.

MASON CJ: Certainly. Mr Sperling, there is one question I

wanted to ask you about the current state of the

proceedings. It arises from page 30 of the

application book, the first page of

Mr Justice Mahoney's judgment. Towards the end of

the second paragraph His Honour says:

His Honour -

referring to Justice Rogers -

ordered the determination of a separate
question in the proceeding, decided that
question in a way favourable to the Company,

and gave judgment for the Company against MMI

for $282,641. The proceeding against the

Broker was dismissed.

MMI has appealed to this Court against

that judgment.

Now, does that indicate that the proceedings have

now resulted in final judgment?

MR SPERLING: That is my understanding, Your Honour, that

the decision on that separate question having been

decided in that way by His Honour, the consequence

was final judgment.

MASON CJ:  And there is an appeal pending against that

judgment?

Manufacturers 2 12/2/93

MR SPERLING:  The appeal to the Court of Appeal was against

that judgment.

MASON CJ: It was against that judgment, I see.

MR SPERLING: Final judgment would not be the consequence if

the separate question were answered the other way.

MASON CJ:	Yes, I follow.
MR SPERLING:	Your Honours, the points that arise relevant

to the question of special leave are, first, the

wide effect of the result in the insurance industry
which will be self evident; secondly, a denial of

procedural fairness in the Court of Appeal in that
the point on which the matter was ultimately
decided there was neither raised or argued before

the trial judge, nor, we would say, raised or

argued in the Court of Appeal; and thirdly, that

the result in the Court of Appeal is patently

wrong.

McHUGH J:  On the procedural point, Mr Sperling, is that

common ground, that the matter was not raised or

argued before the Court of Appeal?

MR SPERLING: Could I let my learned friend speak for

himself in that regard. There has been some

discussion, but I am not completely clear about his

position.

McHUGH J: There is an affidavit filed in support of the

application which asserts that the only arguments

advanced before the primary judge and I think

before the Court of Appeal was the operation of the

Act.

MR SPERLING: That is certainly our position,

Your Honour - - -

McHUGH J: Except one thing that concerns me is the form of

the notice of appeal to the Court of Appeal in

terms of the orders sought. Perhaps that is what

got the Court of Appeal into trouble. At page 27:

ORDERS SOUGHT

1. That the questions posed -

et cetera, et cetera. All the introductory words

of the preliminary question were left out. It was

not confined to an argument about section 14 of the

Insurance Act.

MR SPERLING: That was, we would say, an abbreviation which

was treated as such by the parties in the conduct

of the proceedings.

Manufacturers	12/2/93
MASON CJ:	Mr Jackson, at this stage can we find out from

you what your response is on the irregularity

question.

MR JACKSON:  Certainly. Your Honour, I am sorry to say that

it has to be a little bit blurred, I am afraid.

What I mean by that is that we, in a sense, half

agree with what is said by Mr Marks in his

affidavit on page 62, paragraphs 14 and 15. Could

I say that what occurred before the Court of Appeal

appears entirely from the fact that there were

written submissions beforehand and the whole of the

oral argument was recorded, and that appears in the

documents we have handed to Your Honours. Mr Marks

says in paragraph 14:

The only matter the subject of

argument ..... was the construction and effect

of s 14 -

On one view of the matter that is a manner of

describing what occurred, but the question before
the Court of Appeal was the construction and effect

of section 14 in the circumstances and,

Your Honours, we would accept there was simply a

short form of statement of the question and there was also before the Court of Appeal, as there had

been before the primary judge, the relevant
policies and the renewal notice, in effect, the

core documents.

Could I say then that the reasons for judgment

in the Court of Appeal deal only, it is right to
say, with the issue that was - the large issue
before them, if I can put it that way, but the

matter of complaint that one might have, including

our side, about the Court of Appeal's reasons is

that they seemed to deal only in passing with the

argument that we advanced and in a sense attribute

to us an argument which we did not. May I just

indicate in a few words what we mean by that.

MASON CJ: Yes.
MR JACKSON:	Our argument was not, and is not, that

section 14(2), by its operation and of its own

force, creates a contract. It was simply that, if

the case were a particular case where a contract

would be brought into being on payment of the

premium, then the effect of section 14(2) was that

it made, in the particular case of that kind, the

payment to the broker equivalent to payment to the

insurer.	The particular case was one of that kind;
other cases might be different.	And that in those

circumstances, the contract was concluded in the

particular case. Your Honours, we would wish to

say before Your Honours, if we might, again very

Manufacturers 12/2/93

briefly, that the result arrived at by the Court of

Appeal was correct without the reasoning

necessarily being correct on every aspect of it.

MASON CJ: Yes, Mr Sperling.

MR SPERLING:  Your Honours, we would take it from that that

it is indeed common ground that the question before

His Honour under the separate issue and before the

Court of Appeal was whether, in the circumstances

that occurred, which are recorded in paragraphs 1

to 7 of the summons, and having regard to the

documentary material which was tendered, plus the

concession that this was an offer capable of

acceptance by payment of premium, the section had

the effect for which my learned friend contends.

That is common ground that that was the issue.

It is apparent that the Court of Appeal has

decided the case on a different basis. Our

complaint is that the basis on which the Court of

Appeal has decided the matter was not argued below

and was not raised or argued on appeal. So that it

would seem that, by concession, our complaint in

that regard is indeed made out.

In order perhaps to further give content to

what happened in the Court of Appeal, couid I go to

the judgment of His Honour Mr Justice Mahoney,

page - - -

MASON CJ: Before you do that, can I take you to page 10 of

the application book, line 14, where His Honour

says:

Although invited to do so the parties did not

desire to tender any evidence.

What did His Honour have in mind when he said that?

MR SPERLING: That one or other of the parties might think

it appropriate to give evidence other than the

tender of the limited documentary material that was

tendered.

MASON CJ: 

If one was only concerned with the operation of

section 14(2), what other evidence would be
relevant?

MR SPERLING: 

It is the operation of the section in the

circumstances of the case. Now, the parties

proceeded on the basis that the circumstances of

the case were as appear in paragraphs 1 to 7 on

page 3 of the application book. It was open to the

parties to elaborate, give further detail,
complement that material, that bare statement of

facts, by oral evidence if they thought it

Manufacturers 12/2/93

expedient to do so but we would put no wider

meaning on what His Honour said than that. had in mind was that the question was any wider

than we, and we believe our opponents, construed it

to mean.

MASON CJ:  No, I asked you because it seemed to me that that

might be a possible indication that the question

was wider than you have suggested.

MR SPERLING: His Honour's judgment does not indicate that

His Honour took a different view. Having drawn the

Court's attention to those facts in the summons, in

paragraphs 1 to 7, if one then goes to

Mr Justice Mahoney's judgment at page 31 one sees

the question recorded. We would indeed say that

the appropriate way in which to read that question, and the way in which it was read by the parties in these proceedings, having regard to the way they

conducted the proceedings, was whether in the

circumstances that had occurred the payment had the

effect referred to by virtue of the operation of

section 14, with the whole of the emphasis being on

whether the consequence in the circumstances

mentioned arose by reason of the operation of

section 14.

That question was decided favourably to the applicant but His Honour Mr Justice Mahoney, at

page 37 of the application book - I should refer to

page 37. Your Honours will see there the section

is set out conveniently for the purposes of

reference and I then go to the page 44 of the

application book and line 7 where His Honour

Mr Justice Mahoney takes up the second basis and it is, broadly speaking, to the effect that in

His Honour's opinion the insurer had in some way

created a situation in which a reasonable person in
the position of the intended insured would have
taken the position to be that the offer of renewal

was capable of acceptance by the payment of a

premium to his own broker.

It is that approach to the case which we say

was wholly outside the question, outside the way

the case had proceeded at first instance, outside

the way it had proceeded on the hearing of the

appeal and, in our respectful submission, patently

wrong as conflicting with the general law of agency

in relation to brokers and, indeed, in conflict

with the decision of this Court in Con-Stan

Industries v Norwich Winterthur Insurance,

160 CLR 226, which was a case on identical facts to

the present and where it was held that payment to

the intended insured's broker does not have such

contractual effect. Our submission would be that

Manufacturers 6 12/2/93

the subsequent enactment of section 14 puts no

different colour on the situation in view of the

correct interpretation that had been given to it by

the Court itself.

Those are our submissions, if the Court

pleases.

MASON CJ:  Thank you, Mr Sperling. Mr Jackson.

MR JACKSON:  Your Honours, as I submitted earlier, we would

urge that whatever be the correctness of the

reasoning adopted by the Court of Appeal, the

result in the particular case is correct.	I say
"in the particular case", because may I say
immediately we do not seek to contend that

section 14(2) has the effect that whenever a
premium for renewal is paid to an insurance

intermediary, the contract of insurance is thereby

concluded. It may be or it may not be; it depends

on the facts.

In the present case, it was accepted that the

renewal advice was an offer which was capable of

acceptance by payment of the premium.

Your Honours, may I indicate where that is to be

seen. That appears in the application book first

at page 72, line 24. Your Honours will see the

renewal advice, line 24 to the end. Line 24:

Before renewing please read the duty of

disclosure notice, the policy wording and any

notices attached.

There is a reference to the premium. That really

is relatively neutral on the point. At page 17,

commencing at line 10, the primary judge expressed

the view that the renewal notice was not an offer
capable of acceptance by the mere payment of the

premium but then, after he discussed the matter

with counsel he then received further submissions

on behalf of the present applicant which

Your Honours will see said they did:

not wish to contend that the Renewal Notice

was anything other than an offer to renew .....

1 ...... capable of being accepted ... by

payment ..... or by notification -

of acceptance. Your Honours, the applicant's

outline of submissions, when appellant in the Court

of Appeal, appears in the folder we handed to

Your Honours behind tab 5. In paragraph 2,
Your Honours will see what was put to the Court of

Appeal:

Manufacturers 12/2/93

The renewal advice ..... was an offer to

renew ..... capable of acceptance by Metrot
paying the renewal premium to MMI.

Could I say if Your Honours happen to be looking at that document again, paragraphs 3 and 4 of it were

not relied on before the Court of Appeal. That is

why you will see them crossed out in the copy that

you have. Then, Your Honours, in the transcript of

the argument in the Court of Appeal, the question

was asked of counsel for the applicant. That

appears in a couple of references. It is the last

document in that book, page 2, about point 8,

Mr Justice Mahoney says:

Do I read the papers correctly that the

parties are agreed that nothing turns upon

negotiating.

McEWAN: Correct your Honour.

MAHONEY JA:  And it is accepted that if the

payment to the broker would otherwise

constitute a renewal of the policy then the

wording of this notice does not prevent it

happening.

McEWAN: Correct.

CRIPPS JA:  We approach this on the basis that

the insurance company had simply invited a

renewal on the same terms and it was open for

acceptance had it -

that seems to mean the premium -

gone to the insurance company.

MCEWAN:  Yes.

And, Your Honours, at the bottom of the next page, page 4 point 9, Mr Justice Clarke said:

Mr McEwan it is correct that all the plaintiff

had to do was to pay the premium.

McEWAN:  We accept that your Honour.

Your Honours will see Mr Justice Clarke at the top

of the next page makes an observation about that.

At page 16, at the bottom of the page,

Mr Justice Clarke in effect encapsulates the

submission that our side was making to the Court of

Appeal and we accept that at the top of the next

page. Then, at about point 3 to point 6 on the

page, our position was stated.

Manufacturers 12/2/93

So, Your Honours, the case was simply one

where the contract would come into being on payment

of the premium and, in those circumstances, the

question was the effect of the application of

section 14(2). May I take Your Honours to its

terms. Section 14(1), if I could pause there for a

moment, deals with contracts of insurance which

have been arranged or effected by an insurance

intermediary and says that payment to the insurance
intermediary of moneys operate as a discharge of

the liability to pay the money. Subsection (2)

makes it clear that it is speaking of insurance

contracts which have not yet come into being.	May
I refer Your Honours to the words "an intending
insured" and also to the words, "a contract of
insurance to be arranged or effected".	The

contrast with the terms of the preceding subsection

in that regard is stark.

Your Honours will see that the opening word of

section 14(2) is the word "payment", which is the

word which the legislature has selected as the

relevant event. If one applies the words of section 14(2) to the present case there is a

situation where a payment, to pick up the first

word, was made; the payment was made to an

insurance intermediary, the broker; the p~yment was

made by an intending insured; the payment was made

in respect of a contract of insurance to be

arranged or effected by the intermediary and the

payment was in respect of a premium and the

premium, Your Honours, and I should say

section 14(2), pausing at that point, provides in

terms that the making of the payment discharged as

between an insurer and insured any liability to pay

the premium. The particular circumstances were

such that a contract of insurance would come into

being on payment of the premium. If there had been

other terms which required agreement before a

contract could come into effect, for example levels

of cover, the payment of the premium to the broker

would not effect a renewal.	And it is not
section 14(2) which effects renewal; it does no

more than say that a liability to pay a premium is

discharged. It is just that in the particular case payment of the premium was the only event necessary

to effect renewal.

Your Honours, our submission is that the

result arrived at by the Court of Appeal was

correct.

MASON CJ:  Thank you, Mr Jackson. Mr Sperling.

MR SPERLING:  Of course the decision was to be made having

regard to the facts, but the facts are, if not the

ordinary case, then certainly circumstances which

Manufacturers 9 12/2/93

would very commonly arise. So that what my learned

friend says in that regard should not be received

as supporting any implicit suggestion that the

matter in question in these proceedings is not one

of general importance.

So far as his main point is concerned, the

implication of what he says is, of course, that the
Court of Appeal on the main point, and everybody

agrees the only point, was wrong and, he says, so

plainly wrong that the Court would not entertain

this present application. Now, we would say that

the situation is certainly, for the purpose of an

application for special leave, nothing like so

plain.

MASON CJ:  Mr Sperling, at this stage we will not trouble

you further. We will take a short adjournment and

consider what course we will take.

AT 10.36 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.45 AM:

MASON CJ:  Mr Sperling, the Court is minded to grant special leave to appeal on ground 1 in your draft notice of appeal, that is on the irregularity point.

MR SPERLING: If I could just turn that up, Your Honour.

MASON CJ: It is page 67 of the application book.

MR SPERLING:  Yes, Your Honour.

MASON CJ: That covers all matters that you would want to

put in support of the irregularity point.

MR SPERLING: It does, Your Honour.

MASON CJ:  I was going to say to you, the parties were

notified that in the event of special leave being

granted today, certainly in relation to the

irregularity point, the parties should be prepared

to present argument on the substance of the appeal.

Now, it does seem from Mr Jackson's opposition to

the application for special leave to appeal that in

the event of an appeal coming on for hearing,

subject to what I will say in a minute, that he

would be relying on an argument which would be the

subject of a notice of contention. Is that right,

Mr Jackson?

Manufacturers	10	12/2/93
MR JACKSON:	Yes, Your Honour.	In any event, we would put

it as a notice of contention. Whether it is

exactly a matter of contention, we would do so.

MASON CJ:	You would want to be presenting that argument?
MR JACKSON:	Indeed, Your Honour, yes.

MASON CJ: That almost certainly indicates that it is not a

matter that this Court could deal with today,

constituted as it is, and within the time frame

available. But there is another question and that

is, having regard to the materials that are before
the Court and having regard to the nature of the
case that you are presenting, whether or not the

parties might be minded to consider some other

approach to the case which would involve perhaps a

re-hearing or at least supplementary material being

adduced. Do you follow what I mean, in terms of -

before the Court of Appeal, because after all,

having regard to the materials that were before

Justice Rogers, the claim that you make about the

drawing of inferences on those materials alone,

that might indicate unless something were done

about the materials, assuming the parties wanted to

supplement them, that the.matter would come to this

Court really on the bare materials that are in the application book.

Now, I am not asking the parties to indicate

what their attitude is today with respect to that;

I am only identifying it as a matter which might repay careful attention in the future.

MR SPERLING:	Thank you, Your Honour.
MASON CJ:	So that all we can do today is to grant special

leave to appeal on ground 1 in the draft notice of

appeal.

MR SPERLING:  As the Court pleases.

MR JACKSON:  Your Honours, might I ask the Court perhaps to

reserve the further consideration of the question

whether it should in the end be a term of the grant

of special leave that the applicant should pay the

costs in any event. What I mean by that is that

the resolution of the issue, although it comes

before the Court by reason of the particular matter

on which the Court has granted special leave,

acquires importance from the applicant's side

because of the importance, or so it is said, of the

operation of section 14(2) to insurers generally

and to the insurance industry, whereas from our

point of view we are simply persons who have lost a

great deal of money by reason of an earthquake and

by reason of the broker not having paid over the

Manufacturers 11 12/2/93

premium. So, Your Honours, we would ask the Court

to reserve that question and perhaps a matter to be

dealt with when one sees how the case proceeds.

MASON CJ:  Do you want to say anything about that,

Mr Sperling?

MR SPERLING: Only this, if I may, Your Honour, that the

only question that arises today is the question of

the costs of the application, we would suggest, and

we would ask for an order - - -

MASON CJ:  Oh no, they are costs in the appeal anyhow.

There is no need to deal with them. But I do

think, in so far as Mr Jackson raises the question

whether it should be a term of the grant of special

leave that you pay the costs in any event, that is

something that we should appropriately reserve for

further consideration. Otherwise events may

overtake it.

MR SPERLING:	Your Honour, we have no objection to the question being reserved since something has
been -

MASON CJ: That is all Mr Jackson is asking~

MR SPERLING: Since something has been said about it, could

I just say one sentence and that is that if we

succeed in the appeal, we will have been no more at

fault for what has occurred than Mr Jackson's

client and the burden should fall, if it fall

anywhere, on the broker.	But having said
that - - -

MASON CJ:  You have no objection to that question being

reserved?

MR SPERLING: That is so, Your Honour.

MASON CJ: Very well, it will be reserved.

AT 10.50 AM THE MATTER WAS ADJOURNED SINE DIE

Manufacturers 12 12/2/93