Moltoni Corporation Pty Ltd v QBE Insurance Ltd P92/2000

[2001] HCATrans 534

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P92 of 2000

B e t w e e n -

MOLTONI CORPORATION PTY LTD

Appellant

and

QBE INSURANCE LTD

Respondent

GLEESON CJ
GAUDRON J
McHUGH J
KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON TUESDAY, 23 OCTOBER 2001, AT 10.15 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 appellant.  (instructed by Blake Dawson Waldron)

MR F.M. DOUGLAS, QC:   If the Court pleases, I appear with my learned friend, MR G.R. DONALDSON, for the respondent and also for the applicant for special leave to cross‑appeal.  (instructed by Kott Gunning)

GLEESON CJ:   Yes, Mr Jackson.

MR JACKSON:   Thank you, your Honours.  As is apparent from the written submissions, the appellant seeks to have restored the judgment in its favour on its third party claim against the insurer respondent.  The respondent’s application for special leave to cross-appeal seeks to obtain judgment for the respondent rather than the new trial which was ordered by the Full Court.  Your Honours, may I deal with the application for special leave to cross-appeal at the time of making our reply on the substantive appeal.

Could I go in relation to our appeal first and briefly to the orders which are in question.  The primary judge’s order your Honours will see in volume 2 of the appeal book at page 434.  There was first of all, and I am referring to orders 1 and 2, judgment against the appellant in favour of the plaintiff in the action with costs and then, as appears from order 3 on page 435, there was judgment in the appellant’s favour for an indemnity in respect of, to put it shortly, the judgment obtained by the plaintiff.

In the Full Court the orders appear at page 475 of the same volume and your Honours will see that the appeal by the present respondent was allowed, order 1. The order for indemnity was set aside, order 2, and there was then a retrial ordered. Your Honours, the decision of the Full Court was by a majority and the majority decided on different grounds: one, Justice Ipp on the basis of the approach to be taken in relation to section 54(1) of the Insurance Contract Act 1984; the other, Justice Wallwork on the basis of sufficiency of the reasons on a factual issue.

Both issues, however, arose in connection with section 54(1) and the issues arose in circumstances where, to put it very shortly, the relevant policy contained a condition, which your Honours will see at page 258 of volume 2 and there is condition 2 in the left column where the condition required notice of an injury to an employee as soon as practicable after the employer knew about it, to put it shortly, and as appears from the preceding page, page 257 “due observance . . . of the Conditions” was stated to be “a condition precedent to” the insurer’s liability in respect of the claim; that is the last paragraph on page 257.

Your Honours, the insuring clause is relevantly at page 273 and your Honours will see in the left column commencing at line 15, there is a paragraph which deals with insurance in respect of liability or, to put it shortly, workers’ compensation under the West Australian Act and then your Honours will see in the next paragraph, the one commencing at line 21, an agreement, and if I could read out the essential parts of it:

It is . . . further agreed . . . that the Insurer will indemnify the Employer against legal liability to pay damages and in addition will pay all reasonable costs and expenses incurred with the written consent of the Insurer . . . and at Common law for personal injury sustained by any person employed by the Employer under a contract of service –

So it was a common law provision in relation to indemnity for common law liability.

HAYNE J:   Does anything turn on the “if clause” that follows that, “if such injury is”, et cetera?

MR JACKSON:   No, your Honour.  Well, perhaps I should say not in our submission, your Honour; we do not understand anything to arise from it.  There was a gap in time in giving notice and the gap in time from giving notice was from 7 November 1992 to 6 April 1994.  These aspects are set out in our written submissions in paragraphs 7 and 11.  I think we say in paragraph 11 that it was approximately 17 months after it occurred and your Honours will see the dates there set out.  The failure to give notice, in those circumstances, and this is where one ‑ ‑ ‑

KIRBY J:   Can I just ask what, in your submission, is the purpose for the requirement of prompt notification?

MR JACKSON:   Your Honour, the first thing is that the notification is to provide to the insurer notice that a claim is being made.  Now, the reasons for that are manifold.  One reason, for example, would be to enable the insurer to make provision for it in its accounts.  Another reason would be to enable the insurer to take whatever action it thought appropriate in relation to determining whether to pay the claim.  I accept that in relation to notice, one of the reasons is to enable the insurer to consider the claim if it chooses to do so.

KIRBY J:   In this area of operations it could include, for example, checking whether the claim was a fraudulent claim; putting investigators on the claim, having video film taken of the claimant as to the quantum of the claim; maybe also notifying reinsurers - that is one of the obligations of a reinsurance policy.  So there are lots of reasons, one would think, for such requirements.

MR JACKSON:   Yes.  There are a number of possibilities.  The extent to which they would be material to a particular insurer will depend on the circumstances and the circumstances of a particular insurer may change from time to time.  It may change by reason, for example, of changes in ultimate ownership of the insurer, on the one hand; changes in the extent to which the insurer’s business focuses on that class of work; also, changes in the extent to which the insurer actually decides to take action when claims are made to it.

KIRBY J:   In the case as between the plaintiff and your client, was there a dispute as to the plaintiff’s having sustained an injury as distinct from the consequences and significance of the injury?

MR JACKSON:   Yes, your Honour.  I am sorry, I think I am answering that incorrectly.  There was a dispute as to liability as distinct from the fact of there having been some injury.  I think that is correct.

KIRBY J:   It was accepted that something had happened and that was adequately chronicled at the time?

MR JACKSON:   Well, your Honour, may I check that.  Certainly liability was in dispute.  Whether the precise point was in dispute, your Honour, is something I will just have to check.  That there was injury was not disputed; the consequences were.

May I go then to the critical provision, which is section 54(1) of the Insurance Contracts Act. Your Honours, one starts in relation to that provision with subsection (6) and that defines, “A reference in this section to an act” including, amongst other things, in paragraph (a), a reference to “an omission”. Your Honours, the section then contains some groups of provisions and they fall, broadly speaking, into relevantly two. The first group concerns subsections (2) and following, and that concerns circumstances starting with subsection (2); that is where the act may have contributed to the loss itself. Then one comes to the other group contained in section 54(1). I do not think I need to take your Honours to it, but your Honours will see the arrangement of the section discussed in this Court’s decision in Ferrcom Pty Ltd v Commercial Union Assurance Company (Australia) Ltd (1993) 176 CLR 332 at pages 339 to 340.

Coming to subsection (1), your Honours will see that the condition of operation of subsection (1) is that, were it not for the existence of section 54, the insurer would be entitled to:

refuse to pay the claim . . . by reason of some act of the insured or of some other person –

And there are two other requirements about the Act, bearing in mind, of course, that it includes by reason of subsection (6) “omission”. First, it must have taken place after the contract of insurance was entered into. Your Honours will see that in the clause commencing, “being an act that occurred after the contract was entered into”. The second requirement, your Honours, is that it is not an Act to which section 54(2) applies and your Honours will see that expression put in parenthetically, “not being an Act in respect to which subsection (2) applies”. Now, could I just say it was conceded at the trial in this matter that subsection (2) was not applicable. Your Honours will see that referred to by the primary judge in volume 2 at page 428 in a passage which commences in the last paragraph on that page and goes over to the top of the next page.

KIRBY J:   I am sorry, I did not take a note of those pages.

MR JACKSON:   It is page 428, line 51 to page 429, line 9.

KIRBY J:   You also made a concession at the hearing, did you not, that your default would, but for the Act, entitle the insurer to refuse indemnity?

MR JACKSON:   Yes, your Honour.

GLEESON CJ:   How, if at all, does section 54 deal with the first aspect of the purpose of a notification provision that you mentioned - that is to say, enabling the insurer to make adequate provision in its accounts?

MR JACKSON:   Well, your Honour, in circumstances where section 54 might be engaged by reason of late notification, it may be that an insurer would seek to mount a case and one might expect that it would be a case perhaps mounted by the liquidator of an insurer.

GLEESON CJ:   Yes.  I was going to say the person who is likely to be prejudiced is not the insurer; it is the unfortunate individual who bought shares in the insurer at a time when proper provision was not made.  Where does the statute deal with that?

MR JACKSON:   Well, it may not, your Honour, in the end. In response to your Honour Justice Kirby, I was answering the reasons why notification might be required. Whether the circumstances of section 54(1) assist an insurer in all those circumstances is a different question.

HAYNE J:   Is there any amplification anywhere of the expression “the insurer’s interests”?

MR JACKSON:   No, your Honour, but could I just say in relation to that, when one looks at the provision it is speaking fundamentally in terms of money.  Your Honours will see that the obligation of an insurer is an obligation there referred to as an obligation to pay the claim, “may not refuse to pay the claim”.  Then the second thing one sees is this, that it speaks of liability being “reduced by the amount”, again speaking in terms of money, and then, when one goes to the concluding part of the subsection, it speaks of:

the amount that fairly represents the extent to which the insurer’s interests were prejudiced as a result of that act.

And prima facie, your Honours, we would submit it is speaking in terms of financial interests.  In other words, to what extent is the insurer financially more liable than otherwise would have been the case?

KIRBY J:   Mr Douglas is seeking clemency from the Court for a concession made by his predecessor at the trial in respect of the cross‑appeal application.  In his footnote he points out that some developments have happened in the law of equity before and since, I think, the Act was enacted, which suggests that the common law has moved a little in the direction in which the Act has developed.  If the cross‑appeal is allowed and is in favour of Mr Douglas’s client, do you similarly seek to withdraw the concession that you made at the trial in respect of the position of the common law and that you, but for the Act, would not be entitled to indemnity?  It may be that the common law has moved on.  I do not know, I have not looked at those English cases, but Mr Douglas very candidly lists them in his footnote.

MR JACKSON:   Yes, your Honour. The moving on has occurred in circumstances where there is not an equivalent of section 54 and the moving on has been the subject of what one might well think would be a somewhat valid criticism about the inappropriateness of adopting that view in circumstances where there are fairly clearly expressed provisions of the contract. So, tempting as what your Honour has put to me is, I feel some difficulty in accepting it, with respect.

KIRBY J:   Just that I have a sense of perfect equity as between both ends of the Bar table.  You do not want it?

MR JACKSON:   No.

KIRBY J:   Very well, I have tendered it; you reject it.

HAYNE J:   Timeo Danaos.

MR JACKSON:  Well, your Honour, may I move on. What I was dealing with was section 54(1) and essentially what we would seek to say is that the operation of section 54(1) is, to put it shortly, that the ability of the insurer to refuse to pay the claim is taken away, on the one hand, and, on the other hand, the liability in respect of the claim is reduced by the amount that “fairly represents”, and your Honours will see the remaining words of the provision.

Could I go then to the primary judge’s reasons.  As is apparent from his Honour’s reasons, on the evidence before him the trial judge was not satisfied that the respondent would have taken any relevant action if there had been timely notification and that any relevant action would have produced a difference.  May I first indicate to your Honours where that passage is to be found in the primary judge’s reasons and then seek to make some observations about it.  The passage commences at page 431 at about line 39 and goes through to page 433, line 50.  Your Honours, may I commence in relation to it by mentioning one matter.  That is that the task upon which the judge conceived himself there to be engaged and the standard of proof that he applied in so doing is adverted to immediately before that passage, and you will see that referred to at line 19 on page 431.  Your Honours will see:

Mr Odes –

who was leading counsel for the present respondent below –

invited me to determine on the balance of probabilities and by reference to Sellars, whether there had been prejudice and then to value the effect of any prejudice by reference to the likelihood of the possibility of a different outcome –

And he said in the next paragraph:

I accept that is now to be regarded as the correct approach, and that Sellars ought to be regarded as applicable.

Now, your Honours will then see that the judge was being asked in that passage to which he refers to decide on the balance of probabilities whether there had been some prejudice to the interests of the respondent.  If there had been, it would then have been for him to endeavour to value, to put it loosely, the effect of that prejudice.

KIRBY J:   Is not that what you say is the correct interpretation of the section?

MR JACKSON:   Indeed, precisely, your Honour.  The point I am seeking to make about it is this, your Honours, that what the judge did was what he was asked by both sides, in effect, to do.

KIRBY J:   And what you say is the correct thing to do.

MR JACKSON:   Indeed.  And then when one gets to the Full Court, in our submission, one sees the judge in Justice Ipps’ reasons for decision being criticised adversely for having done that and that is the point I am about to seek to make.  Your Honours will see that the judge was applying the test that he had been invited to apply.  Could I just indicate - and I will not give your Honours all the references - how one can identify that that was what he was doing.  Remaining at page 431, your Honours will see in the paragraph commencing at line 40, he says:

To avoid the declaration sought by the defendant, and the obligation to fully indemnify the defendant, the third party must therefore establish on the balance of probabilities that the defendant’s failure to give timely notice prejudiced the third party’s interests, to some extent and that it suffered some detriment as a result.

He then goes on to set out the argument that was advanced and your Honours will see the way in which he refers to the argument being put to him.  For example. at page 431, line 51, the contention was that if Mitchelson’s evidence was adopted, “it was probable” that what is set out there would have happened.  Similarly, your Honours, at the top of page 432, line 10, “A factual assessment would probably also have been undertaken.”  Line 15, “it was probable”.  Line 24, “would also have been likely”, et cetera.  Your Honours, I will not go to the remaining references, but they go through to page 433 line 51 and finally to the conclusion at which the judge arrived, at the end of page 433, where he said he was:

not persuaded that the third party’s interests were prejudiced as a result of that omission.

That was a finding that no prejudice was established.  There was no question of working out what might have happened, what the value of it might have been if it had been.

Could I go then to the course taken by the respondent and by Justice Ipp in the Full Court.  The course taken by the respondent and by Justice Ipp in its favour in the Full Court was, in our submission, a departure from that approach and a departure that was incorrect.  Your Honours, will see, if I could go to page 446, paragraph 14 ‑ ‑ ‑

KIRBY J:   Before you do that, what was the ground of appeal that gave rise to what you say is a retreat from the position that they adopted at trial?

MR JACKSON:   Your Honour will see the notice of appeal – section 54 is dealt with at page 438 commencing at paragraph 4. Your Honours will see, first of all, paragraph 5 really still works on the basis of balance of probabilities; you will see “would have . . . referred”. Paragraph 6 is a plea in the round, as it were. Paragraph 7 is a factual matter and then paragraph 8 simply again refers to the facts and paragraph 9 seems to involve again a balance of probabilities test.

Then one goes from there to what was said by Justice Ipp.  Could I take your Honours to page 446, paragraph 14, and what was said by his Honour was that Mr Odes:

submitted that the learned Judge erred in applying the ordinary civil standard.

One then sees at page 447, paragraph 19, after having referred in paragraph 18 to the submission made on our side, then said in paragraph 19 that he accepted:

the submission of Mr Odes that the appellant’s loss of opportunity was analogous to the loss of a chance and, just as the loss of a chance is compensable, so is a value to be attributed to the opportunity that was lost.

And then his Honour appeared to take the view on page 448, paragraph 22, and in particular at page 449, about line 10, to say:

In the circumstances of this case, in my view, upon proof that condition 2 was breached, it was established that the appellant had sustained some prejudice.  That prejudice was the loss of the opportunity . . . The very nature of that opportunity was such that its loss resulted in some prejudice being suffered.

That appears to be the central part of the reasoning of his Honour.

I will come back to his Honour’s reasons in just a moment if I may, but may we say two things about it.  The first is that it is a little, perhaps if I could use the expression, hard or tough on the trial judge to be criticised adversely for acting on the basis suggested to him by the appealing party ‑ ‑ ‑

GLEESON CJ:   Was this a submission that Mr Odes volunteered in the Court of Appeal or was he encouraged to make it in the course of exchanges?

MR JACKSON:   Your Honour, I am not able to answer that question.

GAUDRON J:   Perhaps while you are interrupted, what was the point of the reference to Sellars before the trial judge?  Was that to the quantification of it?

MR JACKSON:   The point of it, your Honour, was to endeavour to demonstrate that the approach to be taken was – and if I could just go back to the bottom of page 430, top of 431, to demonstrate really that there were two stages.  Stage one was to endeavour to identify had there been something lost without quantifying it.  So that was the first stage, and the second stage was to quantify it if there had been something found to be lost.

GAUDRON J:   Thank you.

KIRBY J:   Are there really two theories of 54?  One is that any late notification is going to be inconvenient to some degree to an insurer and will mean that whatever investigations an insurer can do, it will be late and may miss a point and therefore you approach it a bit like contributory negligence assessments, in a very general way and you say you have to allow something as a penalty or something as a reduction because of the fact that - you can never been sure, but there will be some disadvantage, whereas your theory is that you have to get over the 50 per cent in order to get any deduction; you have to have probability.  Is that the choice?

MR JACKSON:   With respect, your Honour, not quite.  The argument on the other side is that, as we would apprehend it, except for perhaps the most unusual case, there would always be some value to be ascribed to the loss of opportunity.  I will come back to that theory in a moment if I may.  The other view for which we would contend is that one has to identify whether it is more likely than not that something would be done.  If something would be done, the results that might follow from that are a different…..value.  Could I in relation to the first of those things say this.  The contention that there would have to be some deduction really encounters, in our submission, two difficulties.  One is if one took the simplest case where there was no notification but the evidence was absolutely clear as to the nature of the injury sustained and that there had not been any change in it.

Take someone who lost a leg in an accident.  A “happened all at once” situation does not change and the evidence demonstrates that whether they are notified today or six months later could not make the slightest difference to any aspect of the case.  Now, in those circumstances, the evidence, if it demonstrated that, would not leave, we would submit, any room for a finding that there should be some deduction.

The second aspect, your Honours, is that one really does need to start from the words of the provision and the words of the provision apply a fairly muscular, in a sense, test because what they say – and one is, of course, speaking about a situation as between insurer and insured and, whilst not always, very frequently and perhaps most often, the insured will be someone who is in not a strong a financial position as the insurer, that what they say is that the claim is to be reduced by the amount that fairly represents the extent to which the insurer’s interests were prejudiced.

Now, the way in which the provision is framed is, of course, capable of a number interpretations.  If one is looking at the words of it, what it suggests is that it is saying what is the extent that fairly - and one would think “fairly” comprehends with it a conception of “on the evidence” - what fairly represents the extent to which the interests were prejudiced as distinct from being merely theoretically prejudiced.

HAYNE J:   You have suggested, then, that there may be more than one way in which the expression could be read.  Do you offer any other way in which it might be read?

MR JACKSON:   No, I am sorry, your Honour, what I was seeking to do was to accept the possibility that one way of reading the section might be to say you do not look at reality but in determining the extent to which the insurer’s interests were prejudiced you are able to take into account theoretical matters.  It is not the suggestion that the matter – the contention for which we advance.

HAYNE J:   No.  I understand that but it seemed to me that something really did turn on “were prejudiced”.  It is, at least on its face, seeming to speak about actual prejudice by reference to what would have happened, not what might have happened.

MR JACKSON:   Your Honour, that is our submission.  All I am seeking to say is that if one does see – because in one of the judgments below that another view appears to be taken of the provision.  All I am seeking to say is that assuming that view is one that theoretically is open as a possible meaning of the section, the better view is the one that the provision is speaking about, reality as distinct from theoretical.

GLEESON CJ:   It has also got to be prejudice of a kind that is capable of being represented by an amount.

MR JACKSON:   Yes, your Honour, quite, because as a result of the operation, the provision in term.

KIRBY J:   I suppose the argument to the other side is that because an omission might have led on to something that you will never know in the event that nothing was done, no notice was given, that you can never, as it were, prove with certainty what might have happened if you had been notified earlier.  Take, for example, your case of the lost leg.  There may be no dispute about the injury but as cases that have come into this Court show, the extent of the disability, the incapacity, may very well be a matter of dispute.  If you do not give notice for 18 months, well, people with lost legs can be back at work within four weeks or can be back at work within 18 months.

MR JACKSON:   May I just say in response to that, your Honour, that there are really two aspects to it.  The cases on which our learned friend’s submissions rely of instances in courts below where reference has been made to different provisions and prejudice in relation to them, all the cases seem to be ones where the evidence has demonstrated that it was probable that something would have been, and do not work on the assumption that the evidence was left a blank.

KIRBY J:   I think that is what happened in Ferrcom.  Mr Hoffman, the insurance broker, was called to indicate what happened in the industry and what was done in the case where notice was given.

MR JACKSON:   Yes. Your Honour, the view taken in that case – I will take your Honours to it in just a moment - in the Court of Appeal – and I refer particularly to your Honour’s judgment – was that the particular position of the particular insurer that was relevant under section 54(1) and that one had to look to see what that particular insurer would have done in the case itself. The evidence demonstrated that they would have gone, to put it shortly, off risk, and so the result was that section 54(1) did not help the insured because the prejudice was that they had not gone off risk.

HAYNE J:   Then, does not your reading of the provision equate with a reading, represents the extent to which the insurer was prejudiced?  The insurer’s interests might be understood as looking to something more than their financial loss?

MR JACKSON:   Your Honour, whether there is any difference between the two expressions, in our submission, is a difficult question because – the provision has a slight history.  The term “the insurers” was originally “his interests” and I just mention that in passing.  Having said that, the situation which obtains, in our submission, is that one is looking to see a provision which is covering a large number of possible situations.  Probably the result is, your Honour, that whether one used the expression “the insurer was prejudiced” or, “the insurer’s interests were prejudiced” is a selection of terms, the operation of each of which does not arrive at a different conclusion.

HAYNE J:   Because a view against you would be that the insurer should have had the choice, did not have the choice.  True it is, that is a difficult valuation task but you are required to do it, put a value on the fact that the insurer was denied the choice about whether to send for rehabilitation, whether to call in the investigators, et cetera.  All of that is somehow encompassed by this expression, “the insurer’s interests”.

MR JACKSON:   Your Honour, even if one were to accept all of that, the situation which would yet obtain would be that section 54(1) uses the expression:

the amount that fairly represents the extent to which the insurer’s interests were prejudiced –

Now, if the evidence in a particular case demonstrated that the insurer would not have taken any relevant action, on the balance of probabilities, then the valuation of what might have happened had the action been taken does not arise for consideration.

HAYNE J:   But it would arise, for example, if that insurer set a target of investigating 10 per cent of employment-related claims and thus one could not really predict whether this one would or would not have hit the 10 per cent that were investigated.  How do you cope with that kind of circumstance which is at least possible?

MR JACKSON:   Your Honour, in a case of that kind, if the evidence established – first of all, if I could just take an example that is slightly different from the one your Honour put to me – if one took a case where it was established that in every case that course was followed and that the result of following that course was to reduce the amount that might otherwise be payable across the board, as it were – and, your Honour, I am putting it in very short fashion – then one might well form the view, on the balance of probabilities, that there was an opportunity which had been lost and depending on how the evidence fell, that one would then go on to value that opportunity in the particular case.

It would not follow, your Honour, from having found that there was an opportunity, that the valuation was necessarily a pure percentage because it may well be that when one looked at the facts of the particular case they would demonstrate that although the opportunity had not been provided, that the opportunity would not have been of any value in the particular case.  That is the first thing. 

If one had a situation where the proposition was that 10 per cent of cases were routinely investigated and had a particular result, then it may well be a borderline case but the probability would be – I am sorry, I am putting it badly – the result one might arrive at or the conclusion that might be formed would be that an opportunity had been lost but the valuation of the opportunity would be a much more difficult question.  Difficult because, apart from depending on the facts of the particular case, one would then have to factor into it the proportional aspect brought about by only 10 per cent.

GLEESON CJ:   Is a possible point of view that the insurer’s interests in the present case included the insurer’s contractual right and that the insurer had a contractual right to have some information which it was denied and that denial of information constituted a prejudice of the insurer’s interests, necessarily?

MR JACKSON:   Your Honour, the first parts of that are ones that one would have to agree with, that there was a contractual right and that the contractual right was a right to have information provided to the insurer but it does not follow from that that the failure to provide that is more than, or is necessarily more than the occasion for bringing into operation section 54(1) as distinct from being the result of its application.

GLEESON CJ:   Whether he was right or wrong, Justice Ipps’ approach seems to have been to say, having regard to the terms of the contract the insurer’s interests were self‑evidently prejudiced because what the insurer did not get was information to which it was contractually entitled and then would go directly to the question of working out the amount that fairly represents the prejudice which obviously occurred.

MR JACKSON:   Your Honour, on that assumption his Honour categorises the failure to notify as necessarily prejudice but, in our submission, it may be in one sense prejudice, purely in ‑ ‑ ‑

GLEESON CJ:   I think, to express it more amply, prejudice to an interest of the insurer, the interest being the contractual right to the notice.

MR JACKSON:   Could I say in relation to that, in one sense, of course, one can say that for a person to not have the advantage, such as it may be, given by performance of a contractual obligation by another is a prejudice or may be a prejudice. What we would seek to say, however, in relation to that is that the issue arises in circumstances where the – I am sorry, may I start that again? If one is talking about section 54(1), the circumstances that bring section 54(1) into play are ones where almost inevitably there is likely to have been a breach of a term of the contract of insurance that was the opening words of it.

One looks then to see whether the right that is given by the contract in respect of that prejudice, that is, the right to refuse to pay the – I am sorry, in respect of that breach of contract, that is the right to refuse to pay the claim, that is taken away.  Then what is provided for by subsection (1) is that there is to be an inquiry and one looks to see, the right to bring the contract to an end having gone away, whether there has been, in fact, in our submission, prejudice to the insurer.  What I mean by that is by saying, in fact, is that a concept of that kind is brought about, we would submit, by the existence of the expression, for example, “that fairly represents the extent to which” there was a prejudice “as a result of that act.”

HAYNE J:   It means that the prejudice must be a financial prejudice.
\
MR JACKSON:   Yes, your Honour.

HAYNE J:   No other form of prejudice, as, for example, prejudice constituted by the fact standing alone of failure to abide the contractual stipulation takes you only part of the way.  You have to attribute a financial consequence or effect to that failure to abide the stipulation.

MR JACKSON:   Yes, and it has to come to money, in the end.

GLEESON CJ:   Not only that, it has to be of financial consequence to the insurer, not, for example, a financial consequence to the insurer’s shareholders.

MR JACKSON:   That is so, yes. Your Honours, if one looks at the context in terms of the words of section 54(1), the reduction in amount is a reduction in amount of the amount that otherwise the insurer would be liable to pay under the contract.

KIRBY J:   The presupposition of the section is that there has been a breach of a condition which in the old law would have entitled the insurer to deny indemnity.  I think that would confirmed, if one looks at the Law Reform Commission Report.  That was the mischief that it was trying to cure and which the Act has been held to have sought to cure.

MR JACKSON:   Yes.  Your Honours, could I say ‑ ‑ ‑

KIRBY J:   Have there been many cases concerning - apart from Ferrcom,have there been many cases where courts have approached the calculation of the prejudice because it is quite a difficult thing to do, really.

MR JACKSON:   It is, your Honour.  The answer is “relatively few”.  There is a decision in – I think is Hanover Insurance, a decision of a judge of the Federal Court, relatively recently, dealing with a superannuation claim.  Hanover Insurance is one of the parties to it.  There are few cases - and it one, I think, which result in anything other than 100 per cent one way or the other.  The only other cases of which I am familiar are ones where there has been some reduction by reference to the amount by which a premium might have been increased, or something of that kind.

KIRBY J:   The concept of “fairly represents” seems to import notions akin to contributory negligence assessments of what is equitable and just and that seems to contemplate something other than an “all or nothing” position which was the old common law.  If you had failed to give notice, well, you got nothing, and that was what offended the Law Reform Commission and, apparently, the Parliament.  It is difficult to know how one would approach the case unless you embrace a theory that “fairly represents” means that you have to do some sort of broad justice of saying, “Well, of course there is some disadvantage to an insurer”.  You have just got to make some calculation of what fairly represents that disadvantage, but that may have to rest upon evidence that in 10 per cent of cases we find, by getting in there quickly, we can find fraud.

MR JACKSON:   And evidence that is accepted.  Once one gets to that point then it is possible to value what value to value it.  Unless one gets there, there is a silence, your Honours.  I think your Honour referred to this in Ferrcom in the Court of Appeal in New South Wales, unless there is evidence that something would have happened you do not get anywhere, you do not get off the ground, for the insurer.

Could I take your Honours back to say a couple of more things about what appears at page 431 in the primary judge’s reasons?  Your Honours will see at page 431 in the passage which commences at line 49 through to page 432, about line 33, that the judge is reciting the argument that was put forward on behalf of the other side.  We would simply invite your Honours to note that our learned friend’s written submissions in pages 7 and 8, paragraph 27, footnote 17, treat what is there said by the judge as findings but it is plain enough, in our submission, that the argument is simply being recited.  The dealing with the merits of it commences at page 432 about line 26.

The second thing about it, your Honours, is that it is clear that the judge was not satisfied that the respondent would have been referred to rehabilitation or to a medical specialist prior to November 1993 and that was relevant because of the contention which appears at the bottom of page 431 commencing about line 49.  Thirdly, your Honours, for similar reasons, the reliance on the inability to examine and assess shortly after 7 November 1992 should not succeed because the judge found that the opportunity would not have been taken.

GLEESON CJ:   Perhaps, more accurately, found that he was not satisfied that the opportunity would have been taken.

MR JACKSON:   Yes, your Honour. I accept that. Now, in short, if one goes back to the words of section 54(1), the judge found that the act was the failure to comply with condition 2, but that in the particular case the insurer’s interests were not prejudiced by that act. Could we invite the Court, also, to note in relation to this aspect of it, the analysis of the evidence by Justice Murray in the Full Court at page 469.

KIRBY J:   It is a fair criticism of the primary judge’s reasons that it has been really left to the Full Court to do the analysis of the reasons of the witnesses called by the insurer.   With respect to his Honour, it is not a very satisfactory analysis of the evidence which a party tendered to resist a very substantial burden of insurance.

MR JACKSON:   Is your Honour speaking about the medical evidence or the ‑ ‑ ‑

KIRBY J:   No, the evidence of Mr Mitchelson.

MR JACKSON:   Your Honour, can I just say that that is not the – the part that is at page 431 is not, I think, the whole of the recitation of the evidence by the primary judge in relation to Mr Mitchelson.  Your Honour will see a little earlier ‑ ‑ ‑

KIRBY J:   It is at 407 and 408.

MR JACKSON:   Yes, your Honour, it is at page 407 and 408 where he discusses the evidence that he gave.  It is apparent that he considered the evidence.  He then saw him giving oral evidence, he heard him ‑ ‑ ‑

KIRBY J:   It is more in his analysis of why he reached his conclusions.  It may be that it is enough ‑ ‑ ‑

GAUDRON J:   As I read it, though, it did seem to turn on the fact that the doctors had certified the injured worker fit to return to work, is that correct?

MR JACKSON:   Yes.  To light work, your Honour.  Yes, that was what was said.

GAUDRON J:   Yes, and he formed a view that once that certificate had been given there was no reason to think that they would have done anything else.

MR JACKSON:   And also had gone back to work.

GAUDRON J:   Yes.

MR JACKSON:   Yes.  So, your Honour, what he is saying is that he says at page 432, having recited the evidence - he did not have to say that he had heard the evidence and seen Mr Mitchelson in the witness box.  He said on that page that he believe he gave it honestly and he specifically accepted part of it and then he went on to give the reasons at line 35 why he did not accept it.  Now, as Justice Murray said in his reasons, a judge only thinks his own reasons are perfect but we would submit there was no particular reason why the judge had to say more than he said that he was, namely, not persuaded that any broad policy was applied consistently, or that if they had received a claim, it would have been referred, et cetera.

Many of these things, of course, are matters ultimately of impression in relation to which it is sometimes impossible to say more than that that is the view and judgments would be very long, indeed, as some tend to be becoming, if one had comments about every aspect of every witness who gave evidence and every aspect of the pleadings and their life. 

I was going to take your Honours to Justice Murray at page 469.  The passage to which I wish to refer consists of paragraphs 100 through to 109 on page 472.  I do not intend to go through them paragraph by paragraph but what your Honours will see, if I could just indicate the most significant parts of them, in paragraph 100 his Honour says that he did not want to:

leave the matter without referring to the second principle plank –

and your Honours will see what is there set out.   He describes that a little more fully in paragraph 101.  Your Honours will see in paragraph 102 that he refers to the review of the evidence by the trial judge.  Your Honours will appreciate that the trial judge had discussed the evidence about the injuries fairly fully in dealing with the question of damages, as apart from the third party question, but your Honours will see, particularly, in paragraph 102, about line 17, where he refers to the fact that there had been an MRI scan in December 1993 which:

did not show that the disc bulge apparent in the CT scan of November 1993 –

which was the thing that gave rise to the possibility that there had been a further injury in November 1993 and he said it:

was a more sensitive test.

Now, your Honours will then, if one goes through then to paragraph 108 – he refers to the fact that:

it was necessary to make findings of fact based on whichever medical opinion –

and then your Honours see on page 472, about line 9, having quoted from the primary judge, his Honour said – correctly, in our submission – that:

By that remark his Honour clearly meant that having accepted the opinion of Mr Woodland and Mr Bell in preference to that expressed particularly by Mr Batalin, but to some extent also by Professor Hollingworth, he considered that the cause of the plaintiff’s final injuries was established to be continuing degenerative change in his back made symptomatic by the accident of 7 November 1992 and to which any incident associated with the worsening symptoms in November 1993 made no effective contribution.

Your Honours will see in the next paragraph, paragraph 109, his Honour says that:

it followed that the lost opportunity . . . was of no value –

to put it shortly, your Honours, “in any event”. 

I had referred your Honours earlier to some of the passages in Justice Ipps’ reasons in the Full Court.  I think I have taken your Honours to the essence of his Honour’s reasons but may I go back to page 448 and, in particular, to paragraph 22 and the part of paragraph 22 on that page – at the top of that page.  Your Honours will see at about line 11 the proposition that his Honour puts that:

In the circumstances of this case, in my view, upon proof that condition 2 was breached, it was established that the appellant had sustained some prejudice.

That would seem to mean that there has to be a notional value given to the loss of opportunity in every case and such a value has to be given in spite of a finding that the opportunity would not have been taken.  Could I refer also to paragraph 24 on page 450 where he appears to say something to the same effect.

GLEESON CJ:   Justice Wallwork left that question open.

MR JACKSON:   Yes, your Honour, and, of course, Justice Murray decided the other way.

GLEESON CJ:   Yes.  Justice Wallwork, as I understand it, between pages 459 and 461, did not disagree with the finding of fact of the trial judge, he just said the trial judge had given insufficient reasons for it and the matter should go back for a retrial.

MR JACKSON:   That is so, your Honour.

MR JACKSON:   Whereas Justice Murray said you can criticise the structure of the reasons but the essential lines of reasoning are there.

MR JACKSON:   Yes, your Honour.  I was going to say, your Honours will see that Justice Wallwork did adopt a different approach and his basis for dealing with it appears to be, your Honours, in the end at page 461 in paragraphs 72 and 73 and, as your Honour the Chief Justice said, that was to say, essentially, that the primary judge’s reasons did not deal sufficiently with Mitchelson’s evidence.

Now, your Honours, could we note in passing that our learned friend’s written submissions do not deal with this issue at all.  There is nothing in the written submissions to attempt to support the approach that was taken by Justice Wallwork, and I will come to that in a moment, your Honours.

KIRBY J:   Was there a ground of appeal complaining of the lack of reasons?

MR JACKSON:   Yes, your Honour, there was. The notice of appeal commences at 436. Ground 4, your Honour, deals with the doctors. Your Honour, there does not appear to have been a specific ground of appeal in relation to Mr Mitchelson and I think it is right to say that Justice Murray adverted to the fact that the argument on the appeal appeared to have gone a little beyond the notice of appeal. May I give your Honour a reference to that in just a moment? I seem to have lost that page. Your Honours, if I could come back to section 54(1). May I take your Honours to our written submissions ‑ ‑ ‑

HAYNE J:   Just before you go back may I, while still with Justice Ipp’s reasons, go to paragraph 7 at page 444?  I just wanted to be sure that I understand what his Honour is there saying.  As I read it, his Honour appears to say that Ferrcom stands for the proposition that prejudice is:

the existence of a liability which, in whole or in part, would not have been borne . . . The appellant contended that the respondent’s conduct caused it prejudice in this sense.  The “liability” –

was the liability of Mr Symons –

The prejudice sustained . . . was the opportunity it lost to so reduce that liability –

which appears, on its face, to be moving from existence of liability that would not have been borne to opportunity to reduce.

MR JACKSON:   Yes, your Honour.  There is a difference and that is why, your Honour, we would seek to say if one looks at the way in which the primary judge dealt with it, he was dealing with it on a basis that was really quite different from the way in which Justice Ipp dealt with it.  What has taken place, in our submission, is this, that one does need to bear in mind that in Ferrcom the Court was dealing with a case where it was already established that the opportunity would have been taken and that was the starting point.  So, the case in the end was one involving the valuation of the opportunity and that was the position.

Your Honours, I was going to come to the fact that one must, in our submission, first decide, before coming to value the opportunity, whether something has actually been lost.  Your Honours, one can see that, in our submission, from Sellars v Adelaide Petroleum N L (1994) 179 CLR 332. Your Honours, in that case there is a discussion which goes on for some distance of earlier decisions dealing with the assessment of future possibilities and also past hypothetical situations. The discussion commences at page 351 and it concludes at page 355.

The relevant part, your Honours, is in the first two new paragraphs on page 355 and we refer particularly to the paragraph commencing about halfway down page 355:

On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage.  Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage.  However, in a case such as the present –

and that was a contract that might have been entered into –

the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities.

Now, your Honours, if I could just pause at that point, what your Honours will see is that that is what was being sought to be applied by the primary judge in this case in the passages to which I have taken your Honours at pages 431 and 432 where his Honour uses those words or words which are a paraphrase of them.  Your Honours will see, for example, page 431, the paragraph commencing line 40:

establish on the balance of probabilities that the defendant’s failure to give timely notice prejudiced the third party’s interests, to some extent, and that it suffered some detriment as a result.

Your Honours, that is, in our submission, the appropriate test.  Could I refer your Honours also to Justice Brennan at pages 367 and 368 to the same effect.

Now, your Honours, if I could take your Honours then to our written submissions for just a moment at paragraphs 31 to 40.  We seek to set out fundamentally what I have been endeavouring to put to your Honours.  Your Honours, I do not propose to go to that in more detail but your Honours will see the essence of what we seek to say there.

Your Honours, could I say that the approach, in our submission, is supported by the approach taken by the Court in Ferrcom 176 CLR 332 and may I refer particularly to page 339. Your Honours will see that the members of the Court, about halfway down page 339, said that:

Their Honours –

speaking about the Court of Appeal –

assessed the prejudice to Commercial Union resulting from Ferrcom’s failure to notify the registration of the mobile crane by adopting the hypothesis that Commercial Union would have cancelled the policy and would not have accepted any further risk of damage to the crane by overturning.  The evidence of Mr Hughes . . . demonstrated that no other hypothesis was reasonable.  It is by reference to that hypothesis that the court has to determine the amount “that fairly represents –

So, your Honours will see that there had been a finding that if the condition had not been breached the insurer would have gone off risk.  That was a fact which had been established on the balance of probabilities.  We give your Honours the references to where that had been established in our written submissions in paragraph 29 and your Honours will see the reference to the decision in the Court of Appeal.

Your Honours will also see then, in returning to the judgment in this Court in Ferrcom, that at page 342, halfway down the page, in dealing with the question of the amount fairly representing the prejudice, what their Honours say is:

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.  The value of that lost opportunity is, in the events that have happened, equivalent to the liability –

Then, your Honours will see at the last paragraph on the page:

the value of that lost opportunity depends on the hypothesis that Commercial Union would have exercised the right to cancel the policy –

et cetera, and your Honours will see, at the top of the next page –

In the present case, the Court of Appeal by majority found that Commercial Union would have gone off the risk of the crane’s overturning had Ferrcom notified it of the registration of the mobile crane and the evidence to support that hypothesis was extremely cogent.

The point we would seek to make, your Honours, is that the observations in Ferrcom arise in a context where the initial question had already been decided.  Your Honours, this is a case which simply went the other way.  The evidence was to the effect that nothing would have happened.  Your Honours, could we go for a moment to what was said in Ferrcom (1991) 22 NSWLR 389 in the Court of Appeal?

GLEESON CJ:   Just before you leave Ferrcom in this Court, on the top of page 342, in the first complete sentence on that page, do you accept that as a complete statement of the kind of prejudice to interests to which section 54 is referring?

MR JACKSON:   Your Honour, may I say I think so.  It is possible that there are other cases but broadly speaking, yes, your Honour.  Yes.  Your Honours, I suspect your Honours do not have Ferrcom in the Court of Appeal.

GLEESON CJ:   Yes, we do.  It is attached to the respondent’s submissions.

MR JACKSON:   I am sorry, your Honour. I was going to refer your Honours to what was said by your Honour Justice Kirby at page 394 about letter F on the page where your Honour was speaking about section 54(1). The point I want to make is that your Honour’s observations reflect the need to look at the position of the particular insurer. Your Honours will see letter F, your Honour said:

For a number of reasons I believe that the former is the correct approach. First, as a simple matter of statutory construction, the focus of the closing part of s 54(1) is upon the conduct of the particular insurer. It is that insurer which is prevented by law from refusing to pay the claim. It is that insurer whose liability in respect of the claim is reduced. The extent of that reduction is determined by reference to the extent to which that insurer’s interests were prejudiced. To measure that extent, it is necessary to weigh the prejudice not to a hypothetical insurer, or insurers generally, but to the very insurer which is deprived of the pre‑existing legal right to refuse to pay the claim.

Your Honour dealt in the next paragraph, and perhaps in the passage, your Honours, that goes through to page 395C.  I will not read it out but what is apparent if one looks at that passage is that there is reference to the position of the particular insurer and the circumstances of each case.  Could we refer also, your Honours, to Justice Handley at page 421 about letter D in a passage which goes through to page 422 about letter D.

GLEESON CJ:   If that statement on the top of 342 in 176 CLR is a complete statement of the kind of prejudice to which section 54 is referring - and I am not suggesting it is not - that demonstrates, does it not, that the interests about which section 54(1) is talking are the interests of the insurer, vis-a-vis, the insured?

MR JACKSON:   Yes.

GLEESON CJ:   Not, for example, general commercial interests in relation to making proper provisions.

MR JACKSON:   Yes, your Honour, yes, and, your Honour, that really is supported, of course, by the fact that the starting point of section 54(1) is the contract of insurance which, of its nature, involves contracting parties. Your Honours, our learned friend’s argument appears, in essence, to be, as Justice Ipp said, that there must be prejudice because of loss of opportunity and, in a sense, irrespective of what the evidence in a particular case might be.

Could we say several things about that?  The first is that the evidence simply did not establish such a situation.  The second thing is that our learned friend’s submissions place some reliance on the decision of Justice Murray in the Supreme Court of Victoria in Jimaco Clothing Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985) 3 ANZ Insurance Cases 60-640.

Now, your Honours, that is a case that arose under section 27 of the Instruments Act 1958 Victoria, which is paraphrased at the bottom of the left column of page 78,941. Your Honours will see the last six or eight lines. Your Honours, that was a case where there was evidence before the tribunal at first instance, the magistrate, of the insurer’s practice and that that is so appears at page 78,940 in the right column about point 6, going on through that paragraph.

Your Honours, it is plain that that evidence was treated as evidence which should have been accepted and your Honours will see, however, that the practice, in a sense, was proved but what one sees is that page 78,943, in the left column, the last paragraph in the left column, five lines into it, it is recognised that there may be cases that any such general prejudice was not proved.  Your Honours will see the observation:

While it may be true that in some cases all that could be said is that a party might have suffered prejudice but that the matter was purely one of conjecture, in the present case in my opinion there was abundant evidence to demonstrate that the respondent had in fact suffered prejudice.

Then his Honour refers to the evidence in that case.

Now, if the statute in that case - and it was an all or nothing statute - was one that had required valuation, that would have been the next step to work out what was the particular sum of money that was the amount by which there would be some deduction from the amount otherwise recoverable.             Your Honours, we would also submit that if one looks at the other decision relied upon by our learned friend’s submissions in relation to prejudice in somewhat similar situations, what is contemplated is that there will be evidence of prejudice.

Your Honours, could I say, if I could go back for a moment to our learned friend’s submissions or, with respect, absence of submissions, in relation to the view taken by Justice Wallwork.  I submitted earlier that it was not adverted to in any substantive way in their written submissions.  I should say there are two references in passing to it.  One is at page 1 of their submissions, paragraph 3, where it is simply accepted that our statement that it was “a relevant issue” is correct.  The other reference is at page 15 in paragraphs 47 and 49 where it appears to be touched on, somewhat lightly.

Your Honours, if the point is sought to be supported, in our submission, we would seek some liberality in the ambit of our reply upon it, but otherwise we seek to rely upon our written submissions.

KIRBY J:   There was no evidence of a general kind brought, the kind I was mentioning earlier, namely that in 10 per cent of cases we have found that if we can get quickly and put the investigators on the matter, we discover fraud.

MR JACKSON:   Your Honour, evidence of that broad kind, without perhaps the precision in the way your Honour has put it to me, was sought to be adduced from Mr Mitchelson, but the evidence that he gave was evidence of a somewhat broader character of some endeavours and evidence that really, in our submission, just did not go far enough.

KIRBY J:   In your submission, could evidence of that general kind help a court to determine the loss that fairly – the word “fairly” introduces a certain generality and not precision in the determination of the damage, the reduction in the claim.

MR JACKSON:   Your Honour, the term “fairly” does two things in a sense.  One is that it enables a range of considerations to be taken into account which can, if I can use the expression, fairly bear upon what is a fair result.  But the other is, of course, that the use of the term “fairly” is not, in a sense, a licence to go everywhere.  What it does require is a determination of what, in truth, by an application of a fair judgment, was the prejudice suffered.  Your Honour, what I am seeking to say is that it does not really provide the opportunity to go all over the field.  It looks to the precise issue and requires a determination of what is fair in the circumstances.

Your Honour, may I say one more thing in response to what your Honour put to me?  When one is talking about evidence of the insurer’s practice, what the evidence of the insurer’s practice would demonstrate is that there is a possibility which had been lost.  Now, how good the possibility is, once that first stage has been passed on the balance of probabilities, is a matter for valuation and that may depend on many things.

KIRBY J:   The Parliament did not say, “Reduced by the amount representing the extent to which the insurer was prejudiced”.  It is the insurer’s interests.  Then, it did not have to put the word “fairly” in.  It could have just left it as “Reduced by the amount that represents the extent”, but it put this word “fairly” in, which is a sort of invitation to do a general fairness as between the parties.

We would also submit that the natural meaning of the provision is, as we have submitted in our written submissions, that the exception being carved out is - that it does not apply to such contracts to the extent to which they are contracts entered into for the relevant purpose.  Your Honours, when one goes to the terms of the relevant Act in Western Australia, what one sees is that whilst there are some provisions dealing with common law actions for damages in respect of persons who are employees, there is no provision requiring that there be any insurance in respect of common law damages or in respect of any liability at common law.  The only requirement for insurance is that provided for by section 160 and, in our submission, the insurance in respect of that is the only part that is caught by section 9(e)(i).  We have put that in our written submissions and we would seek to rely upon that.

Your Honours, could I go back then to the appeal, and there are a few matters with which I wish to deal.  The first concerns the observations by our learned friends about the findings in relation to the practices that have been adopted, or were said to have been adopted, by the respondent.  If one sees the actual finding as to the practice at page 432 in volume 2, your Honours will see, dealing with Mr Mitchelson’s opinion in lines 35 and following, it is plain that the judge, and your Honours will see about line 44, was saying that he did:

not feel persuaded to the requisite standard that any broad policy or aim . . . was applied consistently -

Our learned friends referred to the statements by the judge in relation to Mr Mitchelson’s evidence, which appear at pages 407 and 408, as if they were findings, but what is apparent, in our submission, is that if one looks at the statements by the judge, he is simply recounting the evidence that Mr Mitchelson gave without there expressing any view about whether he accepted it or not.

Your Honours, we would say, if one looks at some of the evidence - and I will only take your Honours to one passage at page 233 in volume 1 - what one sees is, in the passage that goes from about line 12 through to line 28, that it was apparent that what might have happened to the plaintiff in this case was purely a matter of speculation.

KIRBY J:   Who was Mr Hancy?

MR JACKSON:   Mr Hancy was ‑ ‑ ‑

HAYNE J:   The incorporated nominal junior, is he, Mr Jackson?

MR JACKSON:   Yes, your Honour.  He is here in spirit, your Honour, and - well, he was the counsel at the trial for our side.  Your Honour Justice Gaudron referred to the question whether in some cases there was really a two‑stage inquiry or whether the two overlapped, and there was really one thing.  Your Honours will see at page 472 in volume 2, in Justice Murray, it is paragraph 109, where he, in our submission correctly, was expressing the view that, and he is referring of course to the primary judge’s reasons, “that the lost opportunity” was in fact “of no value”, which is in a sense the other way of putting the matter.

Our learned friends referred to Antico 188 CLR 652. Your Honours, to put the observations made in that case in their context, one does need to see the issue that was being decided, and what that issue was appears at page 665 in the paragraph commencing at about point 4 on the page. Your Honours will see that their Honours said:

The question for this Court does not concern the identification of any relevant “prejudice”.  It is the threshold issue of whether the Court of Appeal was correct in holding that the appellant’s failure to obtain the consent . . . was not an act or omission -

That was the issue with which the Court was dealing and your Honours will see the conclusion of the reasons of the Court at page 675 makes that apparent again.  Your Honours will see about point 5 on that page:

Since the Insurer is not a party to the appeal to this Court, it may not be appropriate to disturb the relevant order made by the Court of Appeal.  But, as between the parties to the appeal, we would answer those questions as follows -

Your Honours will see the two questions and two answers relating to the issue earlier adverted to.

HAYNE J:   To that may be added 674 point 5 in that short paragraph in the middle of the page, “The failure may or may not have prejudiced the interests”.

MR JACKSON:   Yes, your Honour.  So the point I am seeking to make about it is that the issue of whether there was prejudice, what constituted prejudice and what was the consequence of it, was not one that fell for determination by the Court.  Could I just move then to Sellars 179 CLR 332 for one moment at page 368. Your Honours will see the passage commencing in Justice Brennan, about the first new paragraph on page 368. Our learned friend referred, I think, to the first few lines and what your Honours will see is that his Honour distinguishes between, on the one hand:

Although the issue of a loss . . . must be established on the balance of probabilities, hypotheses and possibilities the fulfilment of which cannot be proved must be evaluated to determine the amount or value of the loss suffered.  Proof on the balance of probabilities has no part to play in the evaluation of -

But as to the existence, your Honours, in our submission, it does.

Your Honours, could I deal then with a matter raised by our learned friends in relation to the evidence of Mr Batalin that our learned friend raised this afternoon.  If I could take your Honours to volume 1, page 237.  What your Honours will see in the passage to which our learned friends referred in the last question and answer on page 237, he gave evidence in the last four lines about the two x-rays and said that:

subsequent x-ray shows disc protrusion to the left, then one has to draw logical medical conclusion -

Your Honours, that was in a context where he was referring to evidence about the two CT scans that had been done but the evidence that had been given already was the evidence of Dr Woodland at page 147, where your Honours will see at the bottom of that page that he referred to the fact that there was more than those two scans.  What there was also was an MRI scan which he said was much more sensitive than the CT scan and then, your Honours, that was discussed at page 148, particularly the second paragraph question and answer and he went on to discuss that at quite some length.

Your Honours will see that in those circumstances, although no doubt perhaps it could have been dealt with differently, one had a situation where the evidence that was being given by Mr Batalin was evidence based on material in relation to which there was already evidence that there was a better and more sensitive way of dealing with it.  So that, your Honours, one might understand why there was not a lengthy cross‑examination of him about that.  I should also have taken your Honours, while dealing with that, to page 165 in Dr Woodland’s evidence at the bottom of the page, the last five lines going over to the top of the next page where he said the later scan may have been a “red herring”, and he gave the reasons for that.

Your Honours will then see, if one goes to the way in which the judge dealt with the evidence in volume 2 at page 394, the last paragraph on that page, he was conscious of the evidence in relation to these issues and then at the top of the next page in the first new paragraph, referred to the fact that:

no bulge was shown in the MRI scan taken in the subsequent month, although the latter was a more sensitive test.

When one goes to page 406, your Honours will see in the paragraph commencing about line 32, he refers to the evidence of Mr Batalin.  We would submit that if one goes to the analysis of the evidence that I took your Honours to this morning - that analysis of the evidence and the judge’s findings that was engaged in by Justice Murray, commencing at page 469, paragraphs 100 to 109 I took your Honours to this morning, he refers to the matters which demonstrate that the view adopted by the primary judge on this issue was perfectly open.  Could I refer particularly in that regard to paragraph 102 at page 470.  Your Honours, those are our submissions.

KIRBY J:   Mr Jackson, there were two questions, though they might actually be properly directed to Mr Douglas.  The first was that there was a mention in the written submissions - I am not sure whether it was on your side or the other - that the absence of the plaintiff had some significance.  Now, it has not been voiced by either of you to the end of the case.  It does not seem to be relevant to me but in your submissions is there any ‑ ‑ ‑

MR JACKSON:   I do not pursue the point.

KIRBY J:   I am sorry?

MR JACKSON:   The point was ours, I do not pursue it.

KIRBY J:   The second is that if Mr Douglas were to succeed on the cross‑appeal, it would seem just that his client should have to pay all the costs in the Court of Appeal where the matter was conceded and in this Court because those points were not litigated in those courts and you come here to contest the point in the Full Court.  I suppose that would be your submission.

MR JACKSON:   It would, your Honour, and could I say that some of the points really appear for the first time in a sense in my learned friend’s written submissions as is obvious, so there is a further freshness about some of them than there was even in the Court of Appeal, and the freshness ‑ ‑ ‑

KIRBY J:   It seemed to be a little bit fresher down your end of the table.

MR JACKSON:   Your Honour, with respect, if I may say so, there is nothing new in anything we have put to the Court from what went below.  Could I just say, however - I will not labour the point about the freshness - but it does leave your Honours in a situation where one has the perhaps unusual situation where a point conceded at first instance, never the subject of discussions in any relevant sense in either of the two courts below, thus providing no assistance to the court, is raised for the first time here.

KIRBY J:   You are not raising a constitutional question that it cannot be a subject of appeal?

MR JACKSON:   No, your Honour, what I am submitting is that it would be unusual for there to be a grant of special leave in such circumstances and that that is an appropriate course for the Court to follow now.

GLEESON CJ:   Mr Douglas, is there any thing you want to talk about.

MR DOUGLAS:   No, your Honour.

GLEESON CJ:   Thank you.  We will reserve our decision in this matter.

AT 3.29 PM THE MATTER WAS ADJOURNED