New South Wales Medical Defence Union Limited v Crawford & Ors; New South Wales Medical Defence Union Limited v Oswald

[1988] HCATrans 24

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S102 of 1987

B e t w e e n -

NEW SOUTH WALES NEDICAL DEFENCE

UNION LUiITED

Applicant

and

IYIAXWELL DUNCAN CRAWFORD

First Respondent

MARJORIE JOCELYN BAILEY, EXECUTRIX

OF TRE ESTATE OF THE LATE

HARRY R. BAILEY

Second Respondent

F.H.C.H. PTY LIMITED

Third Respondent

Office of the Registry

Sydney No S103 of 1987

B e t w e e n -

NEW SOUTH WALES NEDICAL DEFENCE

UNION LIMITED

Medical 1 19/2/88

Applicant

and

DOROTHEA OSWALD

First Respondent

MARJORIE JOCELYN BAILEY, EXECUTRIX

OF THE ESTATE OF THE LATE

HARRY R. BAILEY

Second Respondent

F.H.C.H. PTY LIMITED

Third Respondent

Applications for special leave to

appeal

SlTB/1/MB

MASON CJ

DEANE J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 19 FEBRUARY 1988, AT 11.09 AM

Copyright in the High Court of Australia

MR P.G. RELY, QC:	If the Court pleases, in each of those matters I appear with MR S.D. ROBB.	(instructed
by Dawson Waldron)

MR R.W. PARKER, QC: If the Court pleases, in that matter

I appear with my learned friend, MR P. BATES

for the respondent, Crawford. (instructed by

Teakle Ormsby & Associates)

MR P. LANIGAN: If the Court pleases, I appear for the

first respondent, Dorothea Oswald. (instructed by

Anthony Malouf & Company)

'MR. P. LE GAY BRERETON:  May it please the Court, I appear

for the second respondent in both matters.

(instructed by Duncan Barron & Co.)

MASON CJ:  Yes, Mr Rely.

MR RELY: If the Court pleases. Your Honours,

Mr Justice Yeldham refused to grant leave to

proceed against the Medical Defence Union because

His Honour considered that to commence proceedings

against that Union would be to expose it to a

liability greater than that which, by contract,

it had undertaken. In the Court of Appeal

Mr Justice Samuels concurred in that conclusion and said that the statutory charge attached to

such fruits as the contract of insurance might
produce but the section could not operate

to create a subject-matter which the terms of the contract did not aid or did not generate.

His Honour discussed that matter at pages 69 to 71

of the appeal book. Mr Justice Kirby

considered that the matter was not entirely

free from doubt but His Honour came to the

conclusion that unless the insurer was entitled to

avoid the contract of insurance ab initio

in terms of some provision of the contract as

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it stood at the date of the injury, subsequent

events could not operate to enable the insurer

to escape the statutory charge which had already

become operative. His Honour discusses this

point at page 61 of the appeal book. The

conclusion is at line 12. The reasons which are

said to support it are contained in the preceding

paragraph. Now, if Mr Justice Kirby is correct

in his decision it follows that the ~iver h2s

risen higher tli.anits source. It involves the

consequence that a charge on insurance moneys

which may become payable in respect of a liability

enables recovery against the insurer even if no

such moneys are payable in terms of the contract.

We would submit, with respect, that His Honour's

conclusion in that regard is wrong and that the

reasoning of Mr Justice Samuels and Mr Justice Yeldham

is to be preferred to that of the president.

Mr Justice Priestley approached the matter on

a quite different basis. His Honour's conclusions

appear at page 91, about line 3,and His Honour

came to the view that the provisions of the articles

which were the source of the entitlement to

indemnity were, in some sense, a special contract
that could not be altered retrospectively by

special resolution of the members and that

accordingly the relationship between Dr Bailey

and the Defence Union was regulated by the articles

as they stood prior to the amendments. Can I

make two observations with respect to that matter.

First, we submit, it gives rise to a question of

principle as to whether one can have something

which one calls a special right, which is dependent

upon the articles of association but which is not
alterable in the same manner as other provisions

of those articles.

Second, if His Honour was correct in the

conclusion to which he came it logically followed

that the contract included article 60, which appears

at page 18 of the appeal book.

MASON CJ:  Mr Hely, I do not think we will trouble you

further at this stage. We will hear what the

respondents have to say in opposition to the grant

of special leave. Yes, Mr Parker.

MR PARKER:  Your Honours, we would wish to say three

preliminary matters. The first is that the factual

circumstances stated at page 5 of the application

are inapt to raise and explain the issues adjudicated

below. Secondly, we would say - and I will come

to these in more detail - certain grounds of appeal

by reasons of the concessions made at hearing and by reasons of the facts adduced will not, on any

substantive hearing, if granted, be entertained by

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the Court. Thirdly, with respect to the grounds

of appeal that remain, we say that they are matters

of discretion, matters very special of fact expressly

mentioned by Mr Justice Yeldham in the book.

Therefore,	the remaining matter of discretion·
is not a matter for special leave.	Now, dealing

with the first matter of the factual circumstances,

this has been provided to my learned friends this

morning, I understand. I hand up to Your Honours,

please, three sets of the emendations and explain

how the emendations are worked.

MASON CJ:  Are these emendations, as you call them, of some

significance, that they are likely to deter us

from granting special leave if otherwise minded

so to do?

MR PARKER:	Yes, they are, and I can explain shortly.
MASON CJ:	Yes.
MR PARKER:	The way they are done, Your Honours, is this.

If Your Honour goes to page 5 of the applicant's
book, Your Honour will see a phrase, the heading,

"Factual Circumstances on which Application is Based."

Your Honour will then notice the document of

emendation. What we have done is to add certain

facts that we believe are relevant after each one.

Such added facts are underlined so that Your Honours

would pick up, for instance, to give an example,

3.2. What the applicant says is that:

At all material times until his death, the

late Dr Bailey was a member of the Applicant.

What was conceded, if Your Honour will look at

the emendation, by the applicant, was that Dr Bailey

had a right of indemnity until change of the

articles in November 82.	I will develop these,
if I may, shortly.

Now, we would, in these circumstances, ask

Your Honours please - I will not got through the

facts at the moment because I can pick them up

in my submissions. If I can ask Your Honours please

now to look at grounds 4.l(a) and (d) in the book

which I will be speaking to now. The outline

of submissions that I would seek to make about

these particular matters I have reduced to writing,

Your Honours, and I hand them up to the Court.

MASON CJ:	Yes. Thank you.
MR PARKER:	They will contain in a more, I think, clear way what I would seek to say orally from the bar table. I seek to give my friends a copy.

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The first are - all three paragraphs of that

outline go to the fact that grounds 4.l(a) and 4.l(b) cannot be pressed. Briefly, in summary,

why we say grounds 4.l(a) and 4.l(b) cannot be
pressed - I ask Your Honours just to look at the
note as I read down it. We have a situation in

this case, Your Honours, looking at my note - - -

TOOHEY J:	Mr Parker, excuse me, where do you take your grounds of appeal from?
MR PARKER:	I am looking at the grounds of appeal contained

in the book at page 7.

TOOHEY J:	Not the draft notice of appeal.
MR PARKER: Well, I do not know.	I am actually working from

the grounds of appeal at page 7, Your Honour, rather

than its formulation.

TOOHEY J:	Yes, thank you.
MR PARKER:	Your Honour, briefly, summarizing those first

three paragraphs on my outline, we have a situation

here where Dr Bailey was a member of the applicant,

that is, the MDU. He became entitled to an

indemnity as of right and it came from the fact
of membership and the provisions of the articles

of association. It was conceded by the applicant

that there was a contract of insurance in force wh~n

the r::le-vant eva:i.ts happened in December 83. The best

outline of that concession, stated by

Mr Justice Priestley, is in the book at 78 point 1.

What the learned judge said was:

Before Yeldham J and also before this

court counsel for the MDU conceded, in my opinion soundly, that until the amendment

by MDU ..... contracts of indemnity were on

foot between Dr Bailey and MDU.	On this
basis Yeldham J was of the opinion that the

amount of Dr Bailey's liability to the
applicants became a charge on the insurance
moneys. In this court Kirby J is of like

opinion.

So we would submit, in light of those concessions,

that the ground of appeal pressed relating to

preconditions to the attachment of the charge just

cannot be now raised. Look at (b) particularly,

4.l(b) I urge Your Honours to look at.

At the time the late Dr Bailey's liability

to his patients arose, his liability was

indemnified by the Applicant.

But that, as those particular points will make clear, has been

conceded. I ask Your Honours then, please, to go

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to the second ground, which is 4.2(a). This is

really a matter of expression, but we would submit

that this is not a case about disclaimer in the

terms of section 6(4) of the Act. Mr Justice Yeldham

made this clear in this judgment and so did

Mr Justice Kirby. It is true that in his second

judgment Mr Justice Yeldham does refer to this

phrase about "disclaimer" but he is really referring

to discretion. So, we would submit 4.2(a)

and 4.7 cannot be sustained.

Now, coming to 4.2(b), if I may, that is the

ground about whether, in fact, Dr Bailey was a "good
common law defendant". This was an issue before

Mr Justice Yeldham and before the Court of Appeal

but it is a ..... question, if I may use the

phrase, the fact that he has got a pound in his

pocket but he owes 22 shillings. So the Court of

Appeal, on the materials they held, took the view

that Dr Bailey was not a "good common law defendant".

So, we would submit that must be peculiarly a question

of fact and not properly the subject of special

leave. Therefore, we would submit, 4.2(b) must come

down.

Now, the only other remai.ining grounds that

we seek to challenge are - and we do it, Your Honours,

in paragraph 6 of my outline, and it is really quite

important because these particular grounds, 4. 4 and

4.6, go to the question of when the Medical Defence Union changed its articles and later said they were

not going to indemnify Dr Bailey, on what articles

did they do it, the old articles or the new? It is

quite plain from the way the things happen and

the judgments that it was under the new articles
that they did it not the old. In those circumstances
the applicant cannot raise a case in this Court

that it could have disclaimed under the old articles.

We seek to do that, Your Honours, this way.	I just
read it briefly from 6.	The right to Dr Bailey
to be indemnified arose under the old articles.

The articles were changed on 4 November 1982. The

council of the application is required by the new

article, resolved in general terms on 2 December

pursuant to new article 57, to help those members

including Dr Bailey who previously requested

assistance.

Now, page 3 of my outline. After his death

by suicide the council of the applicant resolved

on 3 October under the new article 60, to terminate

assistance to the late Dr Bailey in relation inter

alia to the claim against the respondent. These

steps were taken under the new articles in November

1982 not the old articles, who had turned itself into

a non-insurance company. So we say, in respect to

the grounds that say they came disclaim under the

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old articles, 4. 4 and 4. 6 are the grounds, grounds
of appeal cannot be raised, the purported grounds

postulate hypothetical situation. Similarly,

question of law 5. 5 is hypothetical and does not arise.
Your Honours, if those submissions are correct -

and I believe them to be - we have pared away the husks

of the appellant's application and what is left is

the kernel of the argument, and the kernel of the

argument that the Court should be interested in

on 8 October 1985 seeking the leave of the Court

looking at today is that dealt with at 7 and 8.

to invoke the provisions of section 6, to cormnence

an action against the applicant. I have got the

document if Your Honours wish to see it. This

explains the two judgments of Mr Justice Yeldham

which is not otherwise explained. That was the

proceeding that the applicant first took. It is

not in the book, Your Honours.

Now, the MDU, the applicant here, then took out this motion. This motion, Your Honours, was

to ask that it was not an insurer for the purpose

of section 6 of the LAW REFORM (MISCELLANEOUS

PROVISIONS) ACT. Now, that explains the first

two judgments. The first judgment of Mr Justice Yeldham,

by consent, was dealing with the MDU's motion itself.

He held that he would not make that declaration that

they wanted. In his second judgment he refused to

grant leave to us to cormnence an action against

the applicant under section 6.

So, a·s a result of that, Your Honours, we say

that the real and only disputed issue before this

honourable Court is the effect of the resolution on

4 November 1982. It is clear that this question

is not appropriate for the gran~ ofspecial leave as

Mr Justice Yeldham observed in his first judgment.

If I may take Your Honours to it. It is set out

in my notes. It is at page 25.

(Continued on page 8)

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MR PARKER (continuing): At the very bottom, Mr Justice Yeldham says,

and he would be right in this, surely, that:

Cases would be few in which, at the time

of the happening of the events giving rise

to a liability to pay damages, there was

a binding contract of insurance which, as

in the present case, is later and

retrospectively -

that is a question of dispute -

converted into something which does not

answer that description, with the
consequence that as between previous

insurer and insured no moneys become

payable by the former to the latter

in respect of his liability to pay

damages.

Then he went on to say, which will explain, perhaps,

why he decided the first judgment the way he did:

Any events concerning members of the Medical

Defence Union, which are said to give rise

to damages and which occur after -

the date of the motion -

must, on the view which I have taken, be outside

the ambit of s. 6 because there would not be, at the date of the relevant events, any contract of insurance.

So, we would submit, in conformity with the rulings

this Court has given, that this question, by being

a matter of discretion, is not an appropriate matter for leave but, recognizing that the Court might feel

by reason of the matters that Mr Rely has said, that

it should be granted, we would submit that the kind

of question that the Court ought to think about is

this: was the Court of Appeal right in sayin:7 :=hat

Mr Justice Yeldham was wrong in refusing the plaintiff

leave to commence proceedings against the MDU because

of the resolution of November 1982 and that would,

if this Court was disposed to grant it, limit the

very issue which was agitated and properly agitated

in the Court of .Appeal.

I only would wish to add this, Your Honours. I

do not want to develop it unless I am asked to. There

are stray references in the application book to the

matter being a matter of public importance. Now,

it is conceded that there are other claims besides

that of Crawford, for whom I act, and Miss Oswald

for whom Mr Lanigan n0W acts - I think there are two or three,

there may be more - but we would respectfully submit

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that the Court, in its discretion, should not belief

that that fact itself was a matter of sufficient

public importance to grant leave. I would finally,

Your Honours, wish only to say this: that an

examination of the majority judgments and the

judgment of Mr Justice Yeldham would not persuade

this Court that leave should be granted.

MASON CJ: Thank you, Mr Parker. Yes, Mr Lanigan.

MR LANIGAN:  Your Honour, I do not wish to address the Court

separately on the matters that my learned friend

has raised.	I adopt what my learned friend,
Mr Parker, has said.	I would simply make this

general proposition that, in this case, the

provisions of the LAW REFORM(MISCELLANOUS

PROVISIONS)ACT are relatively straightforward.

There is no real difference between the judges

· as to what the provisions mean.	It is essentially
a case of a very, very complex fact situation.	I
would simply put that this is a matter that is
appropriately determined at the level of the for grant of special leave.

MASON CJ: Thank you, Mr Lanigan. Yes, Mr Brereton.

MR LE GAY BRERETON:  May it please the Court, I adopt, with

respect, what my learned friend, Mr Parker and my

learned friend, Mr Lanigan, have said. There are

in addition, in my submission, three reasons why

leave should be refused in this case. In short

they are, first, that when it is seen that the

correct test in these proceedings was whether there

is an arguable case against the insurer, then

insufficient doubt attaches to the judgment of

the Court of Appeal to warrant a grant of special
leave. Secondly, that what is sought to be done

by the applicant in these proceedings is to have

determined on a final basis their liability under

section 6 and that it is inappropriate in an

interlocutory appeal of this nature to make such

a final determination and, thirdly, that the

controversy in the courts below was not over the

substantive question, the construction of section 6(1)

upon which all four judges below were agreed, but

over the exercise of a discretion as to whether leave

should be granted,accepting that the preconditions
for leave had been satisfied.

If I could turn, first, to the application of the test below and the question as to whether

insufficient doubt attaches. The real question to

be determined in these proceedings was whether leave

should be granted to commence proceedings against

the MDU upon the basis that, first, was there an

arguable case against the MDU and, secondly, was

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there a good common law defendant available if

there was an arguable case against the MDU.

There is ample authority, in my submission,

for the proposition that the only matter of which

the courts below had to be satisfied was that there

was an arguable case. That was initially established
by Mr Justice Blackburn in ANDJELKOVIC V AFG INSURANCES

LTD, (1980) 3l'ALR 17 where, at page 24, His Honour

surmnarized his reasoning, as follows:

Leave may be refused where the applicant's

claim is unarguable, that is, where his contention that the statutory conditons for the vesting in him of a right of action

have been fulfilled could not possibly succeed but, if on such an issue there is an argument in the applicant's favour

which could be seriously put then, in
my opinion, leave should be granted and

the -issue should be determined in the

action in any available way.

Although that decision was overruled on the facts in the Full Court of the Federal Court reported in

AFG INSURANCES LTD V ANDJELKOVIC, (1981) 5~ FLR 398,

the Court accepted the test proposed by the respondent

which was, was there an arguable case and held, in a

joint judgment:

We accept the relevant test proposed by

the respondent which is really the test

formulated by the primary judge, namely,

has the respondent presented a case which

is at least arguable?

From that decision there was an appeal to this Court which is reported in 58 ALJ'R 52. This Court did not

deal specifically with the test to be applied but did

hold, at page 53:

We therefore agree with the Federal Court

when it said that the appellant's case, that

the insured was indemnified against the

liability, was not arguable.

MASON CJ: Yes, well there is no doubt that an applicant has to

show he has an arguable case.

MR LE GAY BRERETON: But, in my submission, Your Honour, the

next question is that the applicant does not need to

show any more than that he has an arguable case. It

is not in the interlocutory proceedings that the

ultimate question of liability of the insurer is to

be determined.

MASON CJ:  No.

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MR LE GAY BRERETON:  If the applicant has an arguable case

good connnon law defendant, leave ought to be granted.	against the insurer, then, in the absence of a then, in my submission, there is clearly at least an arguable case against the applicant for special leave, the insurer. In the judgment of His Honour
Mr Justice Priestley who dealt with the matters on
that basis, he expressly so found. The other judges
below did not refer to the test of arguability but, in my submission, once the decisions below are set against the test of arguability, it follows, in my
submission, that there is an arguable case against
the insurer and, for that reason, it was proper to grant leave.

The next submission was that it is not appropriate

finally to determine in these proceedings the liability

of the insurer to the plaintiffs. That follows, in my

submission, from the decision in ANDJELKOVIC v AFG for

this reason that, there being an arguable case, leave

is then to 1:egranted and the ultimate question as to
whether the insurer is or is not liable under
section 6 can be determined on the trial of the

final proceedings. That is what was suggested by

Mr Justice Blackburn in ANDJELKOVIC's case and

does not appear to have been departed from in the

appeals from that decision.

The third reason why leave should not be granted

is that the controversy is only over the exercise of

discretion. As has been said, the issues below were

dealt with in two limbs. His Honour Mr Justice Yeldham

was first asked to determine whether the preconditions

which had to be satisfied for the attachment of the

statutory charge had been established. His Honour

found they had been. All the members of the Court

of Appeal agreed with His Honour. The next question

was, if that question was answered in the affirmative,

as it was, whether, as a matter of discretion, leave

ought to be granted and it was on that question that	the controversy below arose~ Mr Justice Yeldham finding
that leave should not be granted, first, because there
was a good connnon law defendant and, secondly, because
the insurer was entitled to disclaim; His Honour Mr Justice Samuels agreeing in the Court of Appeal
and the other two members of the Court of Appeal
taking a different view.But the import of that is
that what was disagreed below was that question of discretion wnether,the preconditions having been
satisfied, leave should, as a matter of discretion,
be granted. Bearing in mind that these are
interlocutory proceedings, it is appropriate that
those proceedings be resolved where matters of
discretion are concerned, at first instance, or
in an intermediate court of appeal and it would be
my submission that, for those reasons, it is an
inappropriate matter to come to this Court at the

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interlocutory stage. It remains open upon the

final hearing of these proceedings for an appeal

to be brought in which the questions which are

sought to be argued in the draft notice of appeal

can still be propounded in an appeal from the

final proceedings.

DEANE J:	May it not be helpful in terms of the future hearing
from your point of view as well as from the applicant's
to know the answer to the question whether, if liability
in the insurer does arise, the insurer can subsequently
escape it by disclaimer for a valid reason?
MR LE GAY BRERETON:	I would have to concede, Your Honour, that

it might be helpful to know the answer to that.

DEANE J: Because, if the answer to that question is as you

would put it, as I follow it,a .lot of the other matters

do not require to be investigated. One does not get

involved in the question was there a valid denial of

liability or whichever way you put it.

MR LE GAY BRERETON:  I concede, Your Honour, that there would

be some benefit.

DEANE J:  Well, perhaps you should look in Mr Parker's direction

before you do concede,that there may be some simple

answer to that.

MR LE GAY BRERETON:  Well, there might be quite a different

answer, Your Honour, from the first respondent's point

of view as opposed to my client who has a different

interest in the proceedings to the first respondent

and who, for that matter, in other places, is on the

other side of the record but, albeit that there might

be some assistance in knowing that, in my submission

the assistance which that would afford would be

insufficient to tip the balance in favour of a grant

of special leave as opposed to the disadvantages at

this stage of a grant of special leave when there

might well be a further appeal at the end of the

final hearing anyway.

DEANE J:	So, what you say is, you would prefer to have all the
matters investigated at a hearing rather than to be
landed with an appeal on an isolated matter at this
stage.

MR LE GAY BRERETON: Precisely, Your Honour.

DEANE J: Yes, I follow that.

MR LE GAY BRERETON:  So the position, in my submisssion, is

that below, bn the construction point, there was

unanimity and discretion is not on an

interlocutory appeal a matter appropriate to be

explored in this Court and, unless there are any

other matters, those would be my submissions.

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MASON CJ: Thank you, Mr Brereton. Yes, Mr Hely.

MR HELY:  Your Honours, the question of principle, we

submit, is whether a statute which creates a charge

upon moneys which may become payable pursuant to a contract imposes an obligation upon an insurer in

circumstances where no such moneys become payable

pursuant to that contract.

MASON CJ:  Why should we determine the question at this stage

of the proceedings?

MR HELY: Firstly, because it is convenient, I submit, to do

so because the question will ultimately have to be

determined in any event and upon the same facts.

MASON CJ: Normally, we take the view that the question should

stand until the final hearing of an action - - -

MR HELY:  Yes. One of the reasons - - -

MASON CJ: - - - rather than, as it were, fragment proceedings

and isolate questions of law in midstream, so to

speak.

MR HELY:	Yes, I take Your Honour's point. One of the reasons
for adopting that course is, of course, that the
facts might change. A second reason is factors of cost, expense and efficiency but, in this particular case, there are two facts of which account
should be taken, I submit. The first is that the
facts will not change, the facts upon which this
question is to be determined are quite simple and
discrete. Second, there is an obvious convenience
both to the applicant and to the plaintiffs in
knowing in advance of the proceedings whether there is an insurance fund or whether there is not. Those
are the factors upon which we would place reliance for
departure from the ordinary course, coupled with the fact
that the Court of Appeal, with the exception of
Mr Justice Priestley, did determine the question
in the abstract and not simply on the question of
an arguable case. If the Court pleases.

MASON CJ· Yes, thank you, Mr Hely. Notwithstanding the arguments

that were put to us persuasively by :tvi:r Hely, we have come

to the conclusion that this application for special

to appeal should be refused. The applicant seeks

special leave to appeal against a judgment which is, in the circumstances, interlocutory in character and

involved the exercise of a discretion. The resolution

of certain questions of law was relevant to the

exercise of that discretion but the questions will be

finally determined in the action itself when it comes

on for hearing. We do not consider that we should

isolate the questions of law for resolution at this

stage. It is preferable that the matter should go

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for trial. The application is, therefore,

refused. I take it that one or more of the
respondents is going to ask for costs and I

take it, Mr Hely, you cannot oppose that

application?

MR HELY:	tf it is made - quite right.
MR PARKER:	We would, of course, ask for costs,

Your Honour,

MASON CJ:  The application is refused with costs.

AT 11.50 AM THE MATTER WAS ADJOURNED SINE DIE

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