Moltoni Corp v QBE Insurance

[2000] HCATrans 483

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P40 of 2000

B e t w e e n -

MOLTONI CORPORATION PTY LTD

Applicant

and

QBE INSURANCE LTD

Respondent

Application for special leave to appeal

McHUGH J
KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON FRIDAY, 27 OCTOBER 2000, AT 10.22 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR G.R. HANCY, for the applicant.  (instructed by Blake Dawson Waldron)

MR M.W. ODES, QC:   If the Court pleases, I appear with my learned friend, MS F.E. KEAYS, for the respondent.  (instructed by Kott Gunning)

McHUGH J:   Mr Jackson, I know you have come a long way, but I think we might be assisted by hearing Mr Odes first.

KIRBY J:   Such a long way for you to come.

MR ODES:   Your Honours, our submission in this case is that the point that is raised here does not really attack the principle, or does not really raise a principle of law, which has been settled in Sellars.  The test that has been ‑ ‑ ‑

HAYNE J:   But the question is, “Do you ever get to that issue?” and is that not the general question?

MR ODES:   Yes.

HAYNE J:   Do you ever get to questions of chance or the like?

MR ODES:   Well, we say that in terms of Sellars, there is a two‑stage inquiry.  The first is the causation one, and according to Sellars, what has to be proved is that as a result of the breach, whether in contract or in tort, the insurer in this case has lost an opportunity which has some value.

HAYNE J:   On the trial judge’s findings, I understand those findings to be that the insurer would not have investigated.  Is that right, or am I wrong?

MR ODES:   That is the finding, but our submission is that that finding is incorrect.

McHUGH J:   But that depends upon the test.  It seems to me that the issues formulated are at 95 and 114 of the book.  If you go to 95, line 24, Justice Ipp says:

That prejudice was the loss of an opportunity to reduce the extent of the appellant’s liability arising out of its obligation to indemnify the respondent.

Now, that is one view of it.  The other view is the view expressed by Justice Murray at 114, at line 41:

unless it could be found that the appellant would have dealt with the claim in a way which would have reduced the damages awarded to the plaintiff, there would be no relevant prejudice to the insurer’s interests.  If prejudice of that character was found, then it would be necessary to value that prejudice.

So they seem to be the competing arguments and that seems to raise, to my mind at least, an important question of principle concerning this Act, but there is more about this case.  The general administration of justice would seem to require a grant of leave in this case.  What is the unfortunate trial judge to do having regard to the reasons of the Full Court?  Justice Ipp’s judgment is not a binding authority ‑ that is not part of the ratio decidendi ‑ and Justice Wallwork would seem to require a complete new trial of all the issues of fact.

MR ODES:   Well, Justice Ipp, in fact, also sent the matter back for trial.  That was the order of the majority of the Court.

McHUGH J:   Yes, I know that was the order, Mr Odes, but what principle is the trial judge to apply?  Justice Murray’s principle or Justice Ipp’s?  Justice Ipp is in the majority but his reasons on section 54 do not constitute the ratio of the judgment because Justice Wallwork did not deal with the point.

MR ODES:   In terms of Garcia’s Case, the views of Justice Murray are, in fact, not to be regarded at all.

McHUGH J:   Why not?

MR ODES:   Simply because he was not a member of the majority in relation to the order that was actually given.

McHUGH J:   Yes, I know, but what ‑ ‑ ‑

HAYNE J:   That is a view of precedent that has been expressed, I know, several times by Justice Kirby.  That itself may be an issue which would warrant examination.

McHUGH J:   The problem with it, it seems to me, is that Justice Ipp’s reasons are not binding on the trial judge.  The trial judge would be perfectly at liberty to say, “They are persuasive, and I pay attention to them, but I am not bound by them.  I prefer Justice Murray’s” or “I prefer my own view”.

MR ODES:   Well, the unfortunate result of the Appeal Court’s decision was that each of the two judges in the majority order gave different reasons on different points.  It may well be that it is necessary for the trial judge to seek directions as to how he should deal with a matter ‑ ‑ ‑

KIRBY J:   No, that is not how our system operates.  You cannot seek directions.  The court has to lay down a principle and, if it does not do so clearly, then ‑ this is national legislation applied throughout the country ‑ it is really our duty to do so.

MR ODES:   Our submission is that the test that is laid down in Sellars is clear.

McHUGH J:   Yes, I know it is clear, but at the moment, we have not heard your detailed argument, but I would have thought that Justice Murray was the judge who applied it correctly rather than Justice Ipp.

MR ODES:   Our submission is that if one looks at Sellars there is a two‑stage inquiry and all that has to be established ‑ and it is, in fact, the approach that was taken by the Court in Ferrcom’s Case as well.  In Ferrcom’s Case what the Court decided was that the prejudice that was suffered there, and the causation aspect of the inquiry, was that there was a loss of an opportunity to go off risk.

It was no part of the causation leg of the inquiry to decide whether, in fact, the insurer would have gone off risk or not.  That was part of the second leg of the inquiry, which is the evaluation leg.  It is clear from the judgment of the Court in Ferrcom’s Case that they divided it into a two‑stage inquiry, as was done in Sellars.

McHUGH J:   But the problem about Ferrcom was it was not in issue about whether they would have gone off risk.  It was taken as a given in Ferrcom, if I remember rightly, that the insurer would have cancelled the policy.

MR ODES:   With respect, that part of the inquiry related to the valuation of the loss of the opportunity.  The loss of chance doctrine focuses on the loss of the chance to obtain benefits, not the benefits themselves.  Basically, that is what the essence of the loss of chance doctrine is.

McHUGH J:   But you have to show prejudice.  It does not seem to me at the moment that just merely showing that you lost an opportunity means that you have been prejudiced within the meaning of section 54.  You have to show, or argue, as Justice Murray held, not only that you had an opportunity but that you would have availed yourself of it.  Then you show prejudice and then the question is, “What have you lost by it?”.  Then that is taken into account in calculating the reduction under 54.

MR ODES:   With respect, the prejudice that was held in Ferrcom’s Case was not the fact that the insurer would have acted in a particular way, the prejudice was that there was an opportunity of value that was lost, and that was the chance to go off risk.  Once that is established – you have to establish in the causation leg of the inquiry that there is a loss of an opportunity of some value.

McHUGH J:   Well, you keep saying that, but that is not the words of the section.  You have to show prejudice.  The question is, “What is prejudice?”.  Justice Ipp’s judgment stands for the proposition, it seems to me, that any loss of opportunity is prejudice, whether or not you would have availed yourself of it or not.  Now, that is, at the very least, a debatable proposition in respect of a section which is of very great importance to this community, not only the commercial community, but generally.

MR ODES:   May I say, with respect, that Justice Ipp’s comments in relation to the loss of opportunity to investigate, he was dealing with the context of an insurance policy where there is a requirement to give notice.  The importance of notice to an insurer is a clear commercial advantage.  That condition has been inserted in insurance policies since time immemorial  It is almost an invariable clause that is found in every insurance policy.  That opportunity itself has value.  The question is ‑ assessing the value of that opportunity is a different exercise.  It is at that stage ‑ ‑ ‑

McHUGH J:   It may have value, but the question is, “Is it prejudice?”.

MR ODES:   Well, in Ferrcom’s Case the prejudice that was found ‑ and I refer to the case.  If the Court looks at our bundle of documents at page 21, the Court will see that there is the judgment of the Full Court at page 342 of the report.  It is my bundle, page 21, which is 342 of the report.  In the middle of the page, the Court found that:

The loss of the opportunity to cancel the policy was the material prejudice suffered by Commercial Union.

Now, that was the prejudice that was suffered.  The Court was dealing there with the causation part of the inquiry.  It was no part of the Court’s consideration that there had to be established in addition to that, in addition to the loss of opportunity, the fact that that opportunity would have been availed itself of.

McHUGH J:   Yes, but that remark was made in the context where it was common ground that the loss of opportunity would have resulted in the cancellation of the policy.  To seize on that one sentence, without regard to the context, is not of great assistance.

MR ODES:   May I just perhaps take the Court a bit further on the same page.  Just reading beyond that particular statement:

Indeed, the additional premium which Mr. Hughes mentioned in his evidence would not have been payable unless the existing policy in respect of the crane had been cancelled and another policy had been issued without the ME35A endorsement.  An assessment of the amount fairly representing the prejudice to Commercial Union must include the value of the lost opportunity of cancellation determined by reference to the facts as revealed by the evidence.

Then it says in the paragraph beginning “First”, the third sentence:

Here, s. 54(1) imposed on Commercial Union a prima facie liability to pay under the policy by sterilizing the operation of cl. 1(a), but the opportunity which Commercial Union lost was the opportunity to go off risk offered by the right of cancellation conferred –

and that was the prejudice.

McHUGH J:   Well, that statement is like all statements in judgments:  it has to be read in the light of the facts of the case, and in that particular facts, it was common ground that they would have gone off risk.  I mean, the majority of the Court of Appeal, if I remember rightly, held that Commercial Union would have gone off risk.

MR ODES:   Well, may I say that that was the exercise that was applied to the second leg of the inquiry, because they then had to value the loss of the opportunity, and the fact that they would have gone off risk led the Court to conclude that the extent of the prejudice was equivalent to the full amount of the liability, but that was applied to the second leg of the inquiry, of valuing the loss of the risk.  What was the value of the chance?  If, in fact, a finding had to be made whether or not the policy would have been cancelled was part of the causation inquiry, there was nothing left to determine the value, because once it was found that that was part and parcel of the causation inquiry, what was left to value?

McHUGH J:   Let us test your proposition this way.  Supposing QBE had a policy of never making any investigation whatever when they were given notice.  Would you say then that QBE was prejudiced merely because it had lost an opportunity?

MR ODES:   No.  Our submission is the way in which that could have been dealt with is that, objectively speaking, the opportunity given to an insurer to investigate a claim – that is why notices of claim are required – is of some commercial value ‑ ‑ ‑

McHUGH J:   It may be of some commercial value.  That is not the question.  The question is, “Has it been prejudiced?” and the trial judge in this case found it had not been prejudiced because it would not have investigated the claim.  Now, Mr Odes, I think we have said enough to indicate that there is a serious question concerning the construction of a very important section in this particular case.

You may succeed in persuading the Court that the judgment of Justice Ipp is correct, but at this stage, I think you have a hard case to persuade the Court that this application has no prospect of success if leave were granted.  The very fact that Justice Murray dissented, alone, on this issue, shows the arguability of the applicant’s case.  Add to that all the other problems, it seems to me that this is a case for the grant of special leave.

MR ODES:   I have no further submissions to make.

McHUGH J:   Thank you, Mr Odes.  Yes, there will be a grant of leave in this particular case.

AT 10.37 AM THE MATTER WAS CONCLUDED