NSW Med. Def. Union v Crawford- Bailey v NSW Med. Def

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S205 of 1994

B e t w e e n -
NEW SOUTH WALES MEDICAL
DEFENCE UNION LIMITED
Appellant
and
MAXWELL DUNCAN CRAWFORD

Respondent

Office of the Registry
Sydney No S200 of 1994

B e t w e e n -
MARJORIE JOCELYN BAILEY (as Executrix of the Estate of the late
Dr Harry R. Bailey
Appellant
and
NEW SOUTH WALES MEDICAL DEFENCE UNION LIMITED
Respondent

BRENNAN CJ
DEANE J
DAWSON J
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 1 JUNE 1995, AT 12.31 PM

(Continued from 4/5/95)

______________________________

MR R.W.R. PARKER, QC: Your Honour, in this matter I now appear with my learned friends, MR P.W. BATES and MR G.R. WAUGH for the respondent Crawford. (instructed by Teakle Ormsby & Associates). (Mr Bates did not appear in Court)

Your Honour, Mr Brereton has advised me that he wishes to complete certain written material and asked me in those circumstances whether he may do so. With your Honour’s permission, Mr Brereton would like to.

BRENNAN CJ: Yes.

MR BRERETON:May it please the Court, your Honours will be aware that there has been an exchange of written submissions between myself and my learned friend, Mr Sullivan. We have prepared a document of three pages which responds to some of the matters raised in Mr Sullivan’s submissions. May I hand up nine copies of that - my learned friends have copies - together with copies of one of the authorities referred to in it.

BRENNAN CJ: Thank you.

MR BRERETON: May it please the Court.

BRENNAN CJ: Yes, Mr Parker.

MR PARKER: Your Honours, on the last occasion, with five minutes or so to go, I handed up my outline of argument, the chronology, the transcript of the Court of Appeal that had occurred in November 1992 wherein Mr Sullivan had explained the proper state of the articles, specifically Article 60, between 1973 and 1977 and I summarised at the last pages of the transcript by sketch of the argument that we would make.

What I would like to do, your Honour, is, it is a month ago since I began, with your Honour’s permission ask you to take out the chronology which we prepared which I call the “speaking chronology”, so that your Honours will see the factual setting under which we would make our submissions. If I may go to that, I will just show your Honours what we think are the critical features and add to them a little bit because I have now have the advantage, of course, of the intermission and can give some references as well.

The Article 57, as it stood, at the time of the accident in 1972 is on the first page. Mid-way down your Honours will see, “The Union shall indemnify each member of a deceased member in respect of any liability” et cetera. So, the empowering provision which gave the right in 1972 is contained on that first page. Then we have taken the liberty in page 2 to set out how Article 60 would have stood before 1977, that is to say, because it was a condition only if the member was expelled.

If your Honours look with me please, your Honours will see in the centre of that page that the discretion, if I may use the phrase, in Article 60 was not unlimited but was conditioned upon the member being expelled and as I have said, Bailey was never expelled. It is Mr Justice Sheller who deals with might I might call the proper change. Could I ask your Honours please at the bottom of that page to add Mr Justice Sheller’s reference at volume 2, page 372, line 30.

Your Honours, what happened was this, that that change having been made in the way that we have described, and I will bring it to your notice now, is at page 4. There it is changed and it is that article that Mr Justice Mahoney relied upon and where we can demonstrate we think accurately where the error in his judgment took place. If your Honours please then go over, again we have done it fully hoping to help the Court, the statement of claim issued in 1980. You see that at page 5. The process began and in answer to the process - I am sorry, it was amended, extended - the power to issue it was extended on 17 December by Mr Justice Allen as he now is at the bottom.

There was a small unimportant resolution with some amendments in 1981 but the critical one which I have to place emphasis on and which my friend Mr Sullivan not really developed very fully is what occurred on 4 November 1982 and your Honours will see it at page 6 and there they changed Article 57 to give the council a complete discretion. They had to investigate, as your Honours see, then in 58:

The Council may in its sole and absolute discretion and either in whole or in part and upon such terms -

and so forth. Let me please add to that because it would help I think - just give your Honours the reference as to where that was dealt with. Mr Justice Enderby dealt with it at trial, volume 1/200 line 25 and line 201. Mr Justice Kirby dealt with it at volume 2/299 line 17. Mr Justice Mahoney does not really deal with it at all and I will deal with that when I have to cover that particular matter, but Mr Justice Sheller deals with it at 2/375. Now, the next aspect that occurred after that amendment most interestingly enough was the fact that they resolved in general terms to grant acceptance. Your Honours see that at the bottom of 7. 2 December 1982 the council - of course it was not an insurer then, but we call it an insurer in view of what we call the vestive rights that occurred at the very bottom - these are dealt with, your Honours, at these pages: Mr Justice Enderby deals with it at 1/202, Mr Justice Kirby at 2/299 and Mr Justice Sheller at 2/375.

So in May 1973 - this is page 8 - Dr Bailey filed his defence and then he put on an amended defence in 1983 and on 8 September 1985 - your Honours will see the entry at the bottom - he died by suicide. It was in those circumstances that the council of the insurer resolved that the assistance granted to Dr Bailey in respect of the claim be terminated and that the Defence Union’s instructor file a notice of ceasing to act. References for that please: Mr Justice Enderby, the trial judge, it is volume 1/202; Mr Justice Kirby at 2 page 300 line 15; Mr Justice Sheller volume 2 at 375. We have then taken the liberty of taking it right through as far as we can, the history of the matter after that, including the leave which we of course had to obtain. If I may just explain again to remind you how that arose.

In 1985 two motions came before Mr Justice Yeldham, page 9, one for us to get leave to sue the New South Wales Medical Defence Union and also then, the insurer filed a notice of motion for “a declaration that it was no longer an ‘insurer’”. Mr Justice Yeldham would not give the declaration is no longer an insurer, he refused the application for leave, and because he did that we took the appeal to the Court of Appeal, and in 11 NSWR 715, that court granted the leave, and it was in those circumstances - and I come over the page now - there was an application for special leave to this Court - I am looking at page 11 now, from that judgment, on 19 February 1988, which was refused. The Chief Justice Sir Anthony Mason said, primarily because it was “interlocutory”. So it was in those circumstances, having had the leave, that on 28 July, Mr Crawford filed the statement of claim against the New South Wales Medical Defence Union, and I will not read this further. I thought it would be helpful.

Having made those general survey of the facts that I hope are helpful, we would wish to say this now to the Court. We wish to deal with three propositions: the first is, dealing with the special contract point; the second point, to deal with the question involving section 6 and the third point is to deal with the matter we have put in writing, dealing with the resolution of the council on 16 August 1990 to terminate under old Article 60. So that is the frame, if you like, of the argument that we would seek to mount.

I come immediately if I may to show the Court how it was that Mr Justice Mahoney dealt with Article 60. He did so under the misapprehension that Article 60 invested a revocable discretion, a complete free and revocable discretion at the time of the event which gave rise to the charge. Those particular passages are these. Would your Honours go with me please to the appeal book, which is volume 2 at page 363. There are not too many references to follow here, I do assure you. At page 363 of the second volume, there is Article 60 as it stood after 1977, giving the complete discretion. Then at the next page, page 364, what Mr Justice Mahoney says is this:

If and insofar as a right of indemnity arises under or by reference to the articles of association that right is, of its nature, subject to the right of the Medical Defence Union to alter the article under which indemnity was granted and/or to refuse the indemnity under Article 60. The right which Dr Bailey, as the insured, had was subject to such powers of the Medical Defence Union and, for the reasons I have given, that on which the charge was given by section 6(1) was subject to the exercise of such rights.

Arguments have been submitted, and pejoratives have been employed, to suggest that Article 60 does not mean what it says. I do not think that such arguments should be accepted. It is, in my opinion, apparent that the draftsman of Article 60 intended that the Medical Defence Union should have in this regard a very wide power and that that power should exist notwithstanding that prima facie a right to indemnity existed under Article 57 ‑

Now, that is in error for five reasons: the first is that the right had arisen before 1977 and not in terms of that article but only conditioned upon expulsion. Secondly, Article 60 was not invoked either before 1977 or after. In 1982 the Medical Defence Union termed itself what has been called loosely, a non-insurance company and it then confirmed the grant in December of that year. Three years later, on 3 October 1985, it resolved that assistance be terminated.

So, we would respectfully submit that it never acted under the proper old article and the events had not arisen to give rise to it to permit it to do so. What it sought to do one month before the trial was to hold a meeting and resolve that the rights under old Article 60 be invoked. Even then it used the wrong article, we would submit. If I come a little bit further, if I may, to 366, his Honour actually says:

A more difficult question arises in relation to the amendment of the articles of association ‑

this is at line 22 ‑

However, because of the conclusion I have formed in relation to Article 60, it is not necessary to pursue that matter.

So, he really does not actually deal with the effect of the amendment in 1982, and we would submit that that is in error. Now, if I may finally, under this heading just deal with the passage at 367. He says at line 16:

insofar as there is a contractual relationship based upon the articles, it is said that it is based on an implied contract of the kind to which I have referred.

Then he says:

But this, I think, does not assist Mr Crawford’s case. If there is such a contract to be implied, the implication would include a provision based on Article 60 ‑

meaning the Article 60 that prevailed after 1977. Your Honours, I notice the time.

BRENNAN CJ: Yes, thank you, Mr Parker. The Court will adjourn until 2.15 pm.

AT 12.47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.18 PM:

BRENNAN CJ: Yes, Mr Parker.

MR PARKER: Your Honours, before lunch I was dealing with Mr Justice Mahoney’s approach to Article 60 and I confine myself to what we might call the first judgment. It had been agreed in the Court of Appeal that the law would be looked at first and then the facts and it is the law that is dealt with in that first judgment of 3 September and the facts afterwards. What is interesting to us is that in that first judgment Mr Justice Sheller, at page 372 and page 391, recognises the change of articles that we are pressing for.

What is also interesting, and I have to deal with to be fair, is in the second judgment Mr Justice Mahoney in deference to the submissions I made between the first judgment and the second came back to deal with this issue and for the reasons which I will show you, he would not change his mind primarily because he said that the form of the article had not been in the courts below, which is true, and was not formerly before the Court of Appeal.

Let me take you to those passages which your Honours will find in the third volume, I think, between pages 455 and 464. I will not read it fully but I do want to make the point about how really Mr Justice Mahoney - it has been mentioned lightly by Mr Brereton, though. It is headed, “Reconsideration of the Court’s Previous Conclusions” and then he says, at the very bottom:

I adhere to my previous opinion that s 6 does not prevent MDU doing what it did.

Then in the next, he sets out a table as to chronology which he thought was important at page 456. Notice that he does not put in the 1977 change betweens lines 15 and 20 and does not, for reasons that are a bit hard to understand, even actually record the amendment in 1982 where in the body turned itself from an insurance company into a non-insurance company. Then he says at page 457 at line 8:

As far as can be ascertained from the material before this Court on appeal, the Articles before that date do not appear to have been tendered or dealt with below -

correct ‑

It is, in my opinion, proper that the rights of MDU in this regard be decided on that basis ‑

incorrect, incorrect in view of what Mr Sutherland did in September 1992. He then sets out the Article 60, that was the old article; explains what he says. Then he says, at 458, line 19:

In deference to the submissions made following the delivery of the judgment of 3 September 1993, I shall expand what I said ‑

If your Honours wish to have that, we have multiple copies for you but, effectively, they said - our argument was that it had to be considered at the relevant date and in those circumstances ‑ then he gives his construction of Article 60, and of course he is talking about the Article 60 with the unlimited discretion, not the one that is clear, and sets that out. Then 459 - he then deals with estoppel and waiver that my friend, Mr Brereton, dealt with at 460. I shall not trouble the Court with that.

Then he talks about the subsequent amendments to Article 60; meaning the amendments - that the action that occurred, I think, in 1990, and at 462 he refers to my submissions. I will not read that. But then he develops it slightly in the middle of 463:

Mr Parker QC has, in written submissions, submitted that the Court should determine the present matter upon the basis that the Articles of Association relevant for present purposes were not those in force in 1985 but those in force in December 1973‑January 1974. For the reasons I have given as to the construction of Article 60 ‑

and so forth ‑ I will not do so ‑

If the right was based in the Articles, such rights as previously existed were of their nature subject to proper amendment of the Articles.

And this is really as far as he gets to deal with special contract. And then he says:

I make these observations in deference to Mr Parker’s present submissions. I am not satisfied that the material in relation to earlier Articles was formally before the Court although copies of the documents were provided to the Court at later stages. Those documents were of assistance in considering the construction of the relevant Articles, Articles 57 and 60. I do not think the Articles were intended to supplement the evidence before this Court or to raise issues not litigated below.

Let me just say in a word that that transcript that I gave the Court on 4 May in the dying minutes of that actually show that Mr Justice Mahoney asked for the recorded article as it stood before 1977 and what we have done in our chronology in the light of the concession at page whatever it is of our chronology is to set it out how it stood, but there can be no doubt that before 1977 the member had to be expelled for that discretion to operate. So having said that, your Honours, may I pass, please, to my first formal submission. This is the submission of the special contract and what I wish to say is this. We say the question should be put this way: whether the obligations of the particular contract left it still open to the NSWMDU upon altering its articles to give it an unlimited discretion to refuse to Dr Bailey without thereby committing a breach of contract.

I draw that formulation from a judgment of Sir Frederick Jordan in a case called Hunt v Carrier (1939) SR(NSW) that came up to this Court in 61 CLR and the Court was equally divided, therefore, under the Judiciary Act Sir Frederick’s view held and that is the case that I would like to take the Court through. No one below taxed the court in relation to this judgment because until we dug deep into it we did not see the significance of the judgment of Sir Frederick Jordan, but what I wish to do is -we have summarised in shorthand form 30‑odd cases that have been decided in the 100 years since this matter became a live issue.

I am going to come to the cases in a moment, your Honours. Just before I get to it may I first of all speak to this generally. I hand up to your Honours a summation of all the cases and I will not, of course, heaven forbid that I should, refer to them at all and I am only going to refer to one, but it might be a handy compendium for you. Now, in deference, your Honour, secondly, so your Honours have got all the materials before you, to a question Mr Justice Gummow threw out on the last occasion: he said bring the Court up to date after the article I think it was by Dr Sealy.

Now, your Honours, we have done that. The most important and impressive document is a book, the new edition of Ford which reviews all the cases and there is to be, on 9 June, in addition to the book, a loose-leaf service and I went and spoke to Professor Ford who himself contributed to this aspect of the case. He was not able to build it out in any way, other than the book so I hand up to the Court nine copies. It was only published, I am told, last week. Your Honours, I will not read these, but again, in deference to the request made of me, we have summarised articles that might be relevant and only copied one of them for the Court. I hand up to the Court what appear to be subjects dealing with this matter more recently.

Finally, your Honours, so that your Honours will have them, this is an extract from the University of Western Australia’s Law Review quite a few years ago now, but it heads out a summation of the history of the Companies Act from about 1844. It starts with Hickman which, of course, is a leading case, thinking that it is very valuable but I think its value lies in what I have said.

Your Honours, what we would wish to say is this now. First of all, going to the cases - these are what I might call general submissions now. The cases seem to demonstrate through the years three different propositions, and they are these: first of all, the contract must be with a person other than in his capacity as a member of the company. That is to say, as an employer, for instance, as in Heron, or an employee as in Hunt v Carrier, as an insured in Baily. I am bound to say however, that the case of Baily that Mr Justice Sheller put such store on was reversed on appeal in 1906 AC, on the view that when the contract was construed there was a revocable article, and Mr Justice Sheller does refer to that.

The ones that are so important to the appellants are cases involving shares and the share right and the right to forfeiture. Examples of that, of course, are the classic case of Allen v Gold Reef and Pepe’s Case, but the fact we are seeking to make out is that, on that heading, that it must be with a person other than in a capacity as a member. We say it cannot be argued; that we got the right as an insured. When I say “we”, I mean Dr Bailey. And what is interesting, in Lord Lindley’s famous judgment, he actually says that the articles can contain the contract and they can also be a special contract. He actually says that you do not have to have the contract otherwise contained in the articles; there can be a special contract, he says. So we would submit that is the first proposition.

The second proposition is this, that the contract must be solely in the articles and not from anything outside the articles. In fact, Sir Frederick Jordan puts it in a particularly interesting way that I will come to. An example of that would be Shuttleworth v Cox, where in fact all the shareholders were directors, and they were made directors perforce of the articles. And that, of course, is the strongest case for the other side, because Allen v Gold Reef and Pepe’s Case deal with shares, and remember, the passage of Sir Owen Dixon in the Peters’ Case, where he said mostly you are dealing with the shares of a company and the rights of the shareholders to the profits. This this is the interesting thing that Mr Justice Else-Mitchell got onto in one of the home unit company cases - I forget which it is, but it is right at the end of that list I gave your Honours - and he questions whether the statements of Sir Owen apply to a case where you do not have shares and shareholders , and of course there are no shares here. So that is the second heading and I am coming back to Carrier directly.

The third proposition is this: at the date that the contract becomes operative, the contract must contain a revocable term in the articles which permits a company to determine retrospectively and take away rights of the insured at the date the contract became operative and we say here that it did not give the insurer any right to take the right away. The key for that, we would submit, is this case that I will refer your Honours to and take it both from - the Court of Appeal, Sir Frederick Jordan’s decision in 39 SR(NSW), if the Court would be kind enough to come with me to that.

BRENNAN CJ: I do not know that it is on our list, Mr Parker.

MR PARKER: It was in the new list I put before the Court in the last two days. Is it not before the Court?

BRENNAN CJ: I think not at the moment.

MR PARKER: I am sorry. It is important that I take your Honours to this decision. Would your Honours pardon me while I ask my instructing solicitor to get the relevant authority. We did put it on the new list two days ago and I thought my friends had been given copies of it. Let me explain briefly, if I may. In this case Carrier:

entered into an agreement with the plaintiff to employ him -

that is Hunt -

as managing director for five years, subject to the company’s articles of association. Article 82 provided that the office of direction should be ipso facto vacated, if the director were removed under article 91. Article 91 provided that subject to the provisions of any agreement for the time being subsisting the company might remove any director before the expiration of his period of office. Other articles provided that the directors might appoint a director to be managing director and, subject to the provisions of any contract between him and the company, remove or dismiss him from office. It was also provided that, should a managing director cease to hold the office of director, he should ipso facto and immediately cease to be a managing director. The contract provided that the company should be at liberty to terminate the term, if the managing director ceased to be a director of the company.

So there were entrenched rights, Sir Frederick held, both in the contract and the articles. But then:

The company subsequently amended article 91 by deleting the provision as to subsisting agreements. It then resolved that the plaintiff be removed from the board of directors and, thereupon, gave notice to the plaintiff of the termination of the agreement. The plaintiff sued for damages for wrongful dismissal.

It was held in demurrer - and it was a demurrer of the Full Court, the three judges: Sir Frederick Jordan, Mr Justice Halse-Rogers and Mr Justice Street - that:

although the company had power to alter article 91, as it did, the contract, upon its proper construction, did not give the company the right, by virtue of that alteration, to dismiss the plaintiff during his term of office.

If I may just pick out a few passages, Sir Dudley Williams acted for the defendant in the case and during the argument Baily v British Equitable Assurance was quoted at page 15. The answer came back from Mr Williams, as he then was: the contract was made subject to a revocable article. That is why the High Court divided because the High Court took different views as to whether the contract contained a revocable article or not.

Sir Frederick Jordan says this, and it is worth quoting because it seems to me it goes to the heart of the case.

BRENNAN CJ: What page is this, Mr Parker?

MR PARKER: I am sorry, your Honour; page 16, and again I apologise for not having the books before you.

DEANE J: It would seem not to be your fault, Mr Parker, so I do not see that you should be concerned about it.

MR PARKER: Thank you, your Honour, for that. At 16, Sir Frederick said this:

The question is as to the meaning and effect of the agreement of 15th May, 1937, and the operation of that agreement having regard to the events which happened before action brought. The present is not a case of an agreement constituted solely by the articles of association themselves, unsupplemented by any external facts -

That is what we put heavy weight on. Mr Brereton expresses it in a slightly different way but his thrust is the same as ours:

The present case is not a case of an agreement constituted solely by the articles of association themselves, unsupplemented by any external facts, and therefore inherently and necessarily alterable in the manner provided by the Statute:

Shuttleworth v Cox, of course, is quoted because they are the partners, who were partners, became directors, were all appointed; that was clear. He says this:

Nor is it the case of an agreement which has no other connection with the articles of association than the fact that the articles constitute the source or part of the source of the authority to bind the company by the contract. It is in some respects intermediate between the two. It is a contract entered into between the company and an individual under an authority conferred by article 109 to employ a person to manage the company’s business. But the authority conferred by this article is an authority to employ only a director for the purpose - it is a managing director who may be appointed -

and so forth. He then frames the question the way I have put the question to the Court here, at the bottom of that page. Then he says at the top of page 17:

At the date when the contract was made, the only power which the company had to remove a director by extraordinary resolution was that conferred by article 91, and this was expressed to be subject to the provisions of any agreement for the time being subsisting. The contract provides that the company agrees to employ the plaintiff for the term of five years, to employ him subject to the provisions in the contract contained. The term is to continue for five years subject to the provisions thereinafter contained.

Then further down he says this:

The contract to employ for five years is inconsistent with a right in the company to remove the plaintiff as director, and thereby automatically, by virtue both of article 110 and of the agreement itself, which is to employ as managing director, removing him from the office of managing director. It is true that the contract is to employ “subject to the articles,” but I am of opinion that this does not mean “subject to a right in the company so as to alter the articles as to enable the company to free itself from the obligations of the contract.”

May I then say it is worth reading, I suppose, the last few words. Of course they are the important ones:

If it did, then if the articles had contained no provision for removal at all, the phrase would have justified the introduction into the articles of the provision for removal applicable to directors who are managing directors, and the subsequent removal of such a director pursuant to the new article. By virtue of the deletion of the portion of article 91 now in question, it has been in effect sought to produce this result. I am of opinion, however, that the presence in article 91 of the words which have been deleted did not make any difference to the effect of that article. They served as a reminder that the power conferred by the articles is one the exercise of which may involve the risk of committing a breach of contract.

Then he says:

Similarly, the agreement of the plaintiff to serve the company for the term of five years made it impossible for him during the term, without committing a breach of his contract, to exercise the right -

Now he comes then to deal with the Allen v Gold Reefs, but not in the way that we are arguing. It is the Gambotto point, that is to say what Mr Sullivan would call the equitable right; the question of whether it was bona fides. He then says, coming back to the issue that we have here:

A company has power to alter its articles by special resolution. But if a company makes a contract dehors the articles by which it agrees expressly or impliedly not to do a particular thing, it cannot, by alterings its articles and conferring on its board of directors or a general meeting power to do the thing on its behalf, acquire a right to do the thing with impunity. No doubt the thing may be effectual if done, but it is none the less a breach of contract.

Baily, which is the insurance case, is relevant and so is James Nelson:

Again, if the thing agreed upon is, or involves, that the company will not alter its articles in a particular way, then to make the alteration is a breach of contract.

So, in that short judgment he came to the view and carried his colleagues with him. Then, your Honours, it went up to the High Court in the same volume as Peters. I think Peters is volume 61 and that has been quoted by my friends. I ask your Honours now to look briefly at the Peters decision.

GUMMOW J: Am I right, Mr Parker, that Carrier was not referred to in the New South Wales Court of Appeal either in this case or in the Oswald v Bailey case.

MR PARKER: No, it was not, your Honour, and I have explained the reason. Thank you, your Honour, for that. In the High Court, your Honours, it is correctly recorded at (1939) 61 CLR 534. Sir George Rich and Sir Heydon? Starke held on a construction that there was a revocable power and that was enough and in that way they were contrary to Sir Frederick Jordan. The judgments, it seems to me, that carry more weight are the judgments of Mr Justice Evatt and Mr Justice McTiernan, particularly as Mr Justice McTiernan recognises that the contract was not only made in the articles. He is the only judge to really pick up that point. You have to, I suppose, have read all the cases to see the force of that, but may I just ask you to mark the relevant passages. At page 548, Mr Justice Evatt does deal with the statement of Lord Lindley at Allen v Gold Reefs and he says really that the term is in the particular form which is set out at page 548. He quotes the decision of Nelson and he says at page 550 that:

the attempted removal of the plaintiff from the office of director might possibly have been regarded as a nullity equivalent in result to a removal by the office boy; for the words “subject to the provisions of any agreement -
Then, after he had written it, the Shirlaw decision had been written by the House of Lords. Now, that was a decision where the House of Lords was divided but I think Lord Atkin sat in that judgment. I have it here if your Honours wish me to take you to it, but I am conscious of the time. At any rate, he said it was a question much like Sir Frederick Jordan’s. What is interesting in the court below in Shirlaw, Lord Justice MacKinnon referred to the “officious bystander” and it is that case, interestingly enough, if you remember as we all talked about it and learned about what the “officious bystander” says. It is at (1932) 2 KB 227 and the passage of the “officious bystander” about that contract is there and that is where it began its life:

For my part ‑

says the Lord Justice ‑

I think that there is a test that may be at least as useful as such generalities. If I may quote from an essay which I wrote some years ago, I then said: “Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so, that if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course!’”.

He came to the view that the right existed in Shirlaw in that company and therefore the company was in breach. Your Honours, what I wish to say is this: Mr Justice Kirby must be wrong because he says in his judgment that all the members got this right and, of course, they did not. He says that at page 316, line 11 and 12. This was not a general right in all the members. That would have applied in the case of Southern Foundries v Shirlaw. Mr Justice Kirby did not really give an extensive inquiry as to the matter that I am seeking to put before your Honours, but we would simply submit that on that finding alone, Mr Justice Kirby must be wrong.

The final thing I wish to say on this aspect of the case is this ‑ well, not the final aspect of construction. Mr Justice Mahoney himself does not deal with the facts about how membership is created and I would tread on your indulgences if I repeat what Mr Brereton said. But the significant articles, 5, 8, 10, 11 and 15 all deal with how a person becomes a member and an indemnified member. He has to pay an entrance fee and a subscription and when he does, the payment is backdated which is interesting to when he did it. So, it seems that it was almost done to protect him against that insurance, a kind of a retrospective right, but it did depend upon not only paying but keeping up the payment.

Your Honours may recall in Article 58 that provision arises where he becomes unfinancial and the right the company has there, but the application and the grant of membership and the payment of the money and the continuation of money are terms outside the terms of the articles which we would say govern this particular matter. We would submit very briefly that there cannot be any doubt in those circumstances that the member is being treated as an insured, not just a member of a company in the Allen way.

May I conclude this part of my argument very quickly, and it is this, and it is dealt, of course, within our outline. We would ask the Court to construe the articles prospectively. We would do that for the reason given by Mr Justice Gummow in Service Station Association where, as a judge of the Federal Court, Mr Justice Gummow pointed out that it would make the agreement illusory if one did not imply this term because it would virtually mean that no consideration was given by the insurance company. And they purport to do so after all the events have occurred. So, we would respectfully submit ‑ I will just have to give your Honours the passage to Mr Justice Gummow.

BRENNAN CJ: I think it is 45 FCR 84 at 94, is it?

MR PARKER: We would submit that that is sound. Mr Justice Atkin in Shirlaw I think said the same thing. So, we would submit that ‑ ‑ ‑

GUMMOW J: Well, that would make it a bit more cogent, I think.

MR PARKER: Thank you, your Honour. He was a great judge; I can see that, your Honour. May I then deal with a question that attracted Mr Justice Deane right at the very beginning of this case, and that is this question about all the events having happened.

It is true that below Mr Justice Sheller referred to McDonald v Dennys Lascelles, but there is even more powerful decision that we must quote to your Honour and actually ask your Honour to read of Westralian Farmers v Commonwealth Agricultural Service (1935) 54 CLR 361. The passage, your Honours, is this. I note the facts are as peculiar as our own facts, so I will not seek to read it, but the relevant question is dealt with - Dennys Lascelles is quoted at 379 and I will not go to that, but what is relevant is 380. If I may read it please and then that will I think complete my reading on this section. It says this:

If the title to rights consist of vestitive facts which would result from the further execution of the contract but which have not been brought about before the agreement terminates, the rights cannot arise. But if all the facts have occurred which entitle one party to such a right as a debt, a distinct chose in action which for many purposes is conceived as possessing proprietary characteristics, the fact that the right to payment is future or is contingent upon some event, not involving further performance of the contract, does not prevent it maturing into an immediately enforceable obligation.

And whilst Mr Justice Sheller and Mr Justice Priestley in the leave case quoted, McDonald v Dennys Lascelles, it seems to us that that is a neater way of really putting the problem than McDonald v Dennys Lascelles and we thought we should present it to you and we would simply submit here really I suppose that the contract had become executed and vested rights had arisen in it and I am attracted to the proposition that says:

If the title to rights consists of vestitive facts -

and it seems to me that that is a use of the word “vested” in a very peculiarly explanatory way.

So on three bases, your Honours, we would submit that the Court is entitled to take the view that this was a special contract as understood by the law and there might have been some thought indeed before I put this matter to you of Sir Frederick Jordan, that is the Court of Appeal decision, confirmed by the High Court, that what Mr Justice Priestley said seemed to be argumentative because he went into deemed contracts and he dealt with various categories. We would submit that put in this way, a more complete way, the contract can be seen as a contract not depending upon the articles and therefore not generally revocable.

Your Honours, may I turn now, please, to my submission on section 6. Your Honour, Mr Justice Kirby deals with it favourably to the respondent, Mr Justice Mahoney deals with it against the respondent and Mr Justice Sheller does not deal with it at all, so I must make my thrust and attack on Mr Justice Mahoney on this point and I wish to say before I begin that Mr Justice Mahoney takes an interesting view, and we say a limited view, on Heydon’s Case. He quotes himself in the particular case and that is quite right, but we would submit the error that he makes is twofold, and I am speaking if you like generally. I just want you to see the thrust of the case I seek to make.

First of all he says that the statute deals with two things: diversion of funds and collusive action. His judgment says no collusive action. He says diversion of funds only occurs when in fact the insured gets away with the money, so that the poor victim gets nothing. What he does not look at, and I have explained why he does not look at it, because he places no weight on the change of articles, is in fact the diversion of the funds by the company, diversions in effect in that they were devoted to the insurance and the company says, “No, I’m going to turn myself into a non‑insurance company,” and thereby diverts it. So that is really what we wish to say. That is our first proposition.

Secondly, Justice Dawson’s approach to the matter was much like my own, when I first looked at this matter about charge, and obviously you think of receivers and floating charges, but the words cannot really bear that meaning here, as I think Justice Gummow said. They have got to be sui generis. They have got to be thought of as giving a right other than a company meaning, and we are content to say that they are intended to preserve the rights which the victim had until, in fact, the leave is granted or refused. That is why, in our submissions, we have relied, only by analogue, to the Judgment Creditors’ Remedies Act, which comes from an old English statute of 1837, which provides that, “A person in the position of owed money”, Crawford, “can apply for an order nisi under the Judgment Creditor’s Act, which, if granted by the order nisi, preserves the property until the full hearing.” We say that what section 1, in fact does as a mechanism, is to preserve that, and it does that, in effect, by granting an order nisi in its first section.

Now, that may be thought of as an unusually broad submission, your Honours, but let me begin by saying this: this is what the old books call an action on the statute. It was a statutory remedy not known at the common law. The most famous example of that is Wolverhampton Waterworks v Hawkesford, decided by Mr Justice Willes, (1859) 6 CB Reports 335, 141 ER 486, with a finding by the judge at 495, and what he says is, the words of the statute must be obeyed precisely. That is what Mr Justice Isaacs said in Bull v Attorney‑General (1913) 17 CLR at 391. And what we are saying here, your Honours, is this, that, if your Honour looks at some judgments that I will take your Honour to, the right is to preserve the right until the hearing. I do not know, may I ask ‑ we have copies for you and perhaps that is the better way for me cautiously to proceed.

BRENNAN CJ: The Judgment Creditors’ Remedies Act; is that so?

MR PARKER: Do your Honours have that? We have got copies?

BRENNAN CJ: You can hand them up, if you like, Mr Parker. Well, if they become available you can hand them up.

MR PARKER: Can I hand up eight, your Honour, for the moment. I do this no more than just as a guide to your Honour.

DEANE J: You could open a shop, Mr Parker.

MR PARKER: Your Honour, the only thing I have in mind is to assist the Court. If your Honour looks at charging orders in part V at page 941 of the papers that I have put before you, it says: if any person against whom any judgment has been entered up in the Supreme Court, the District Court has certain rights, a judge of the Court or “the District Court, as the case may be” on application, and so forth, “shall stand charged”. So, it uses the word “charged”, in 27(a) and (b), and then it says, providing, and so forth:

Every such order charging ‑

it then says ‑

(a)may be made in the first instance ex parte and without any notice to the judgment debtor and
(b)shall be an order to show cause only ‑

a bit like our leave. But what it says in 30 is:

No disposition by the judgment debtor in the meantime shall be valid or effectual as against the judgment creditor.

And there are three cases, your Honour. I do not need, I suppose, to read them although they are valuable, but I would like your Honours to note on that. The first is a case called Haly v Barry (1868) 3 Ch Appeals 452 at 457.

BRENNAN CJ: Does this depend upon equating the phrase “all insurance moneys that are or may become payable”, in section 6(1) of the Law Reform Act, with the phrase ”stock shares or deposit, or such equity of redemption or equitable interest” in section 27?

MR PARKER: Yes it does, your Honour; it is only an analogue, your Honour, yes. What I am seeking to say is, how that the charging order worked there. That is really what I am seeking to put before you. We have some some passages in these cases that I would like you to know.

BRENNAN CJ: But those cases all turn on section 30 of the Debtors’ and Creditors’ Remedies Act.

MR PARKER: That they do, your Honour. It is a different Act, but what is said is here, most interestingly in Cragg v Taylor, for instance, is that:

The mortgagee of the shares and the trustees under the deed may no doubt be delayed in their remedy for their own claims by the sale or other disposition of the shares, until they can obtain the authority of a court of equity. But this is an inconvenience, in many cases inevitable, in giving effect to these acts, which are imperative in their terms, and compel a court of law to order that the property shall be charged.

That is at page 134 of Cragg v Taylor, in the Court of Exchequer, in 1867. I think I put these in my book list, but I do not want you to read them at the moment. It is just a question of time.

In Haly v Barry, another one under that Act, (1868) 3 Ch Appeal 452 and at page 457 it says:

The statute directs the Judge to make an order nisi. If sufficient cause is shewn against it, it falls, but if not, it remains in force, and in the meantime it is operative, taking the fund out of the control of the debtor, and the only question remaining is, whether any sufficient cause can be shewn against making it absolute.

Now I realise that we do not use that language in 6(1) or 6(4). What I am seeking to say is, the suggestion that some how or rather this section does not work and Mr Justice Mahoney seems to have some difficulty as to understanding why and how it does. Now let me explain finally this question of his approach to Heydon’s Case. The best example I can give the Court is Levesley (1891) 2 Ch 1, where the question of the use of Heydon’s Case applied to that particular statute. This is what Mr Justice Kay said at page 8:

In construing Acts of Parliament it is always well to bear in mind the rules of interpretation adopted in Heydon’s Case, where it is said in effect that four things are to be considered viz., what was the law before the Act - what was the mischief and defect for which such law did not provide; next, the remedy and the true reason of the remedy; and then “the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act pro bono publico.”

For the public good.

If your Honours look at how Mr Justice Mahoney approaches this matter, and I will take your Honour to it, your Honours will see that he does not in fact give an enlarged meaning to the remedy. I need to take your Honours to the various passages please, just to show that: volume 2, between I think page 344 and page 350. If I may take your Honours please to the book. He begins his argument about Heydon’s Case there at page 344, quotes Heydon’s Case:

I shall consider: the mischief with which section 6 was intended to deal; the remedy chosen by it to deal with that mischief; and the way in which that remedy has been or must be applied to give effect to the section.

And so forth. He quotes a case of his own where he sets out his views, and then he says:

The section, on any view of its construction, is intended to effect a change in what, under the general law, are the rights of (as I shall describe them) the injured, the insured, and the insurer.

Correct. Then he says:

The general thrust of the mischief with which section 6 was intended to deal is reasonably clear. The difficult problem is to determine precisely the extent of the mischief with which the legislature intended the section to deal. It is, in my opinion, to be accepted that the section was intended to prevent (as I shall describe it) the diversion of the proceeds of insurance policies. The nature of this mischief is well understood.

Then he gives the example that I quoted in short form in my discussion, and he calls that “the ordinary cases”. He then turns to “collusive action”:

The arguments suggested that the legislature saw the insured as, prima facie at least, entitled to the whole of the insurance moneys which, absent action by the insured and/or the insurer, would ordinarily be available to him. It therefore saw as a mischief anything which would reduce the amount of the insurance proceeds otherwise available to him in this way. And, accordingly, the suggestion has been that section 6 was intended to proscribe as collusive action anything which would reduce the amount of the insurance proceeds otherwise available to the insured.
that “collusive action” was within the mischief -

he says. Then he says:

It is not obvious from the terms of section 6 that collusive action was a mischief -

and then he reads the second reading speech of the Attorney-General and comes to the view it was. And then he says, at the bottom of page 348:

The argument was that the mischief at which section 6 was directed goes beyond the ordinary cases and includes (as they were described) collusive cases of this kind. It was submitted for Mr Crawford that the lastmentioned are within section 6 and accordingly that the section prevents the exercise by Medical Defence Union of rights given to it under the insurance arrangements which would avoid its liability to indemnify the estate in respect of Mr Crawford’s claim.

But not enough, because he does not deal anywhere with this change of articles at all.

To determine the extent of the mischief to be remedied and what is proscribed, it is of assistance to understand the remedy -

and he deals with the charge. He says:

the imposition of a charge “on all insurance moneys that are or may become payable in respect of that liability”: s 6(1); and the grant to the injured person of the right to enforce the charge.....It is, I think, to be inferred that the legislature intended to treat as a mischief and to proscribe that which, by the imposition and enforcement of such a charge, would be prevented. This may be tested by, as I have described them, the ordinary cases.

If your Honours look at the top of 350, he deals with what I might call the ordinary case. The ordinary case, of course, is the situation where the insurer can for some reason avoid the policy. McMillan v Mannix is the best example of that where we submit, of course, Mr Justice Kirby went wrong. In that case, Mr Justice Meagher was right, because that was a term of the policy. He says:

But the imposition of a charge over the proceeds of an insurance policy would prima facie not prevent the insurer exercising its right under the policy to avoid for non‑disclosure or the like.

Quite correct. Then he says:

For these reasons, I do not think that the grant of the charge would prevent the exercise by the insurer of such rights. Accordingly, the exercise of such rights was not something which the section sought to prevent.

Then he goes on a little bit further to finish, and I am sorry to weary the Court by reading it, but it has not been read to you before. At 351 he says:

In considering the way in which the statutory remedy, the imposition of the charge, was intended to operate, it is relevant to note two things. First, the imposition of a charge does not mean that the person on whose property or rights the charge is imposed has or is deemed to have promised to pay to the injured person the amount secured.

Quite correct. The statute has ordered it. It is not a question - in Leavesley is the best example of that. There, the poor person went insane, and they said it did not matter that the person had gone insane, the statute gave the remedy. So, the concept of a charge without personal.....Secondly, he said - and I am reading at 16:

Second, the creation of the charge, as such, does not give rise to a cause of action in respect of which there is a right to sue at the time when the charge is imposed.

That is correct because it depends upon the leave. He then deals with this:

But in relation to the charge created by s 6, the statutory intention is, in my opinion, that the method of enforcement of the charge is by the action referred to in s 6(4). The charge, if otherwise enforceable, is not enforceable until the time when proceedings under s 6(4) may be brought.

But that is to leave the stable doors open, and the horse may have fled. We would respectfully submit that the horse would have bolted. We submit here the very purpose of the statute is to preserve the right, and the one person that got this right in all the cases is Mr Justice Badgery‑Parker in a case called Anastassiou, Gale, and Lawlor, and I regret, your Honour Mr Justice Deane, I have to proffer this judgment to you, but I will not charge. This was another one of the Bailey cases. It involved, if I may use the phrase, “a variation on the theme of Crawford, and we do not have to look at that variation on the theme. What Mr Justice Badgery‑Parker says - I hand them up - and there is only one passage I seek to quote; is that he said that it was intended to preserve the right.

GUMMOW J: This is at pages 23 and 24, is it?

MR PARKER: That is right, your Honour. It is actually, your Honour, if I may assist, the second paragraph of page 23. If I may read it to the Court, it says:

The legislature has not adopted the course which was available, of giving to the tortfeasor’s victim a direct right of action against the tortfeasor’s insurer to recover from the latter (up to any relevant limit of indemnity) damages to which the former was entitled against the tortfeasor, upon ‑

and so forth. This is a critical passage:

The legislature has instead used the language of charge, and the adoption of this language must be taken to have significance. The concept of a charge is directed to the preservation of a fund for the benefit of one who has a right against that fund or against the proprietor of that fund. The creation of the charge is designed to preserve the fund until the time when the postponed or inchoate right becomes enforceable, whether or not there must first be some process of assessment. The fund or asset to which the charge attaches is reserved for the purpose of meeting that particular obligation of the fund owner in priority over other uses to which it might have been put.
The adoption of the language of charge rather than the alternative which I have mentioned above seems to me clearly to indicate that, whether or not the charge is in every respect the same as those types of charges with which the law is more familiar, it was the intention of the legislature that from the moment of the tort, insurance funds should be preserved for the benefit of the tortfeasor’s victim, subject to the preservation of the insurer’s right upon valid grounds to disclaim liability (subsection 4) and subject to any monetary limit specified in the relevant policy (subsection 7). That being so, I would, if unrestricted by authority, conclude that no unilateral act on the part of the insurer could be effective to defeat the charge which the section creates.

Then he quotes the decision of Oswald v Bailey which, in fact, as Mr Brereton declared is, in fact, Oswald & Crawford v Bailey. Both were separately dealt with before Mr Justice Yeldham and it is in that first judgment that your Honours do not have before you, that I need again to burden the Bench with. I should tell the Court this, that the facts as they fell out finally were not different to the facts that were heard in the leave application. Perhaps I could also ‑ ‑ ‑

BRENNAN CJ: What is the fund to which Justice Badgery‑Parker is referring there?

MR PARKER: I think, your Honour, he is actually using that word, perhaps, inaptly. He is referring to the rights which are given as a result of the contract between the parties. Your Honours, I think earlier in answer to Mr Sullivan and Mr Brereton had to try and deal with the question of what it is. We would simply say it is the moneys paid or payable. The fund he is talking about is presumably a belief that such a fund existed. We do not wish to put it any higher than that, but we agree with what your Honour the Chief Justice has said that the word “fund” is slightly inapt. We would prefer to adopt the language that your Honour has done in the earlier discussion with my friends.

May I, your Honour, remind you now, please ‑ I have done this before, but it is curious so you have to, if I may say so, just let me remind you of it. Mr Justice Yeldham’s judgment of 17 December dealt with the specific question of whether, in fact, the New South Wales Medical Defence Union was, at the relevant times, an insurer. Because Mr Gleeson, who acted for the New South Wales Medical Defence Union said that the results that had happened in 1982, that it was to be treated for all purposes, as a non-insurer. And it was that judgment that Mr Justice Yeldham refused to make the declaration Mr Gleeson, as he then was, had put before him.

We agree that the general question of leave would go down to trial before Mr Justice Yeldham and it did in May 1986 the next year. Mr Justice Yeldham’s decision refusing leave in 11 NSWR 715 miscarried for the reason clear in that judgment, namely that in his second judgment, which I will not burden you with because it is not relevant to my submissions, held that Bailey was a good common law defendant. In fact, his estate was submerged in debt. He had debts everywhere and there was no doubt that he was not a good common law defendant. That is what the second judgment deals with because he takes the approach of Mr Justice Badgery‑Parker, not in terms but in substance to preserve the right.

He sets out the facts for them both there. He sets out the preliminary issue that was agreed to be tried at the top of 4; he sets out the sections and the articles. Then he says at the top of 9, which is correct:

This it will be seen that under these Articles of Association members of the union were entitled to indemnity as a right.

And then he deals with the alteration which your Honours see, so it became a free discretion. He says why it did in the next page 10: it was to follow the Medical Defence Union of the United Kingdom. The case on that, if your Honours wish to see it, is Mr Justice Megarry’s judgment at 10.

Then he says, your Honour, he sets out the Companies Code, and then he sets out the cases that have been discussed before your Honours there. Then the relevant arguments that we both put before the Court are set out at page 11. The insurer’s argument is put out at page 13 and then, your Honours - before page 13, pages 10, 11 and 12 and the argument that we have been addressing, your Honour, is put out then; my own argument is put out.

This is how he seeks to deal with it, your Honours. I am reading from page 15:

The above case would appear to support the submissions of Mr Parker that the right to the charge given by s.6(1) arises at the time of the happening of the event giving rise to the claim for damages or compensation. But the difficulty in the present case stems from the fact that any such charge must be “on all insurance moneys that are or may become payable in respect of that liability”. Subsection (4) envisages, in the proviso, that leave to enforce the charge (except in the case of winding up of the insured), must first be obtained and that no such leave shall be granted where the court is satisfied that the insurer is entitled, under the terms of the insurance contract, to disclaim liability and that proceedings to establish that entitlement had been taken.

Perhaps I should just now interpose and make this particular point to the Court. Mr Sullivan has said that what the company did by changing its articles was to disclaim. We would submit that that cannot be so. There is no disclaimer here in any proper way and it was not treated, certainly on the leave application, as being a disclaimer. So, he says:

Subsection (4) envisages, in the proviso, that leave to enforce the charge (except in the case of winding up of the insured) must first be obtained and that no such leave shall be granted where the court is satisfied that the insurer is entitled, under the terms of the insurance contract, to disclaim liability and that proceedings to establish that entitlement had been taken. It is perhaps possible to envisage other situations where, although a policy is in force at the date of the happening of the relevant event, things that occur subsequently preclude the charge from ever becoming enforceable. One such occurrence may be where, between the date of the relevant event giving rise to the claim and the date of any judgment obtained against the negligent insured, the insurer avoids the policy on the ground of the failure by the insured to disclose material facts. Probably it could be argued in that case that the policy was avoided ab initio.....The critical problem is whether, in such a case -

I read from the top of page 16 -

such as the present where, as I have held, and as indeed was conceded by Mr Gleeson, there was a contract of insurance in force at the time when the relevant events happened and until November, 1982 but not thereafter an order can (not should) be made. The charge contemplated by s.6(1) is “on all insurance moneys that are or may become payable in respect of” the liability to pay damages or compensation.....As between the estate of Dr Bailey and the Medical Defence Union there was not, after November 1982, any contract of insurance, having regard to the effect of the change in the Articles of Association which were binding on Dr Bailey and bind his estate. I do not regard the resolution in general terms to continue to indemnity him, passed in December 1982, and upon which much reliance was placed on behalf of the plaintiffs, as being of any relevance in the solution of the present problem. The new Articles clearly provide that the Medical Defence Union could at any time terminate any grant of indemnity and this it did.....No doubt the problem which has arisen in the present case is to be regarded as an isolated one. 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 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. Any events concerning members of the Medical Defence Union, which are said to give rise to damages and which occur after November 1982 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.

He does not quite deal with it the way we have sought to deal with it but that is the thrust.

In the present case I have come to the conclusion, although not without some hesitation, that a charge did attach in favour of the respective plaintiffs at the time when the conduct on the part of the late Dr Bailey said to give rise to an entitlement to damages in the plaintiffs occurred and that, subject to the leave of the Court being obtained, that charge is, as a matter of law, enforceable against the Medical Defence Union notwithstanding the legal effect of the amendment to the Articles in November 1982, and notwithstanding the resolutions of the Council of the Defence Union on 3rd October and 7th November 1985. I do not consider that the rights of the plaintiffs which vested, by reason of the operation of the statute, upon the happening of the relevant events said to give rise to a liability to pay damages, and because there had previously come into existence a contract of insurance by which, as at the relevant date, Dr Bailey was indemnified against any liability, can be divested.

He does not develop there the argument of McDonald v Dennys Lascelles or the Westralian Case, but quite plainly that is meant and he is actually dealing with this question of vested and accrued rights which is the subject of discussion by the court here, but not the subject of discussion by Mr Justice Mahoney. I have tried by the way in which I put the argument before you to explain how Mr Justice Mahoney actually came to the decision he did.

We would respectfully submit on this particular point, for the reasons we have given, that Mr Justice Sheller’s argument is impeccable. We would also support his view, if we are wrong on the way we are putting it, as to Article 60, the old Article 60 that is to say. He gave it a rendering which suggested that if you died a member then the right could not be, if you like, divested. So, your Honours, for those reasons we would submit that section 6 operates and operated to preserve the right.

I now come to the way in which I would seek to put it finally and deal with Bogie’s Case 3 CLR. Your Honour, this in a kind of a way is an argument about policy, public policy, but it is important if you like in construing our statute section 6(1). It is The Equitable Life Assurance of the United States v Maria Bogie 3 CLR 879 and I cite it for only one reason and that is the passage at 892 of Sir Samuel Griffith because it seems to us, underlying all the argument here, there is an argument of public policy that has to be thoughtfully considered.

Here there was a statute which said if certain events occurred the surrender value of a policy could not be reduced. The policy here did reduce it. So you had what might be called a dichotomy or challenge between a statute on the one hand and a contract on the other. What Sir Samuel Griffith said, at that passage I quoted, is this. I ask you to go, please, to 892 at the very bottom, your Honours:

I think a law of that sort lays down a rule of public policy, and that it would be making the law nugatory if a stipulation in a policy inconsistent with it were allowed to prevail over it, so that the parties could contract themselves out of the section. I suppose a company might frame its policies in such a way as to escape the operation of the section altogether. For instance, suppose there were a simple provision that upon the non‑payment of a premium the policy shall lapse, and there were no provision for any surrender value, the section would not apply. But a stipulation that, notwithstanding sec. 22 of the Life Insurance Companies Act, the policy shall lapse for non‑payment of premiums, notwithstanding the existence of a surrender value, would, it seems to me, be in direct conflict with the intention of the legislature as declared by the Act. I have, therefore, come to the conclusion that this is a provision that cannot be waived. It is a provision not solely for the benefit of the assured; it was considered by the legislature to be an important condition, which ought to attach -

and we would submit with appropriate changes in language section 6 was intended to preserve the rights of Mr Crawford and in those circumstances what the NSWMDU did in fact, if it did have the power, which we submit it did not, was to divest of that and we would submit that would be contrary to the provisions of the policy of section 6, if one reads the terms of section 6 in a wide way to avoid the subtle inventions.

Your Honours, I have concluded my argument now on section 6. May I be very short on the question of the argument on what I might call the fraud on the power. I have reduced this to writing in pursuance of leave given by the Chief Justice to me to make some submissions on the cross‑claim on the last occasion. I am told it has been filed before your Honours.

BRENNAN CJ: Yes, I think it has.

MR PARKER: It is a very short document of two and a bit pages. Briefly, we of course are not concerned in the cross‑claim; that is to say, whether Dr Bailey can succeed against the New South Wales Medical Defence Union. Why I am really putting this before the Court is to assist Mr Brereton, as I have said, in his submissions, but it is to help the Court deal with this question of what really is the fraud on the power. We said that the fraud in the power was the event that occurred on 16 August 1990 before the hearing began on 24 September 1990. What the Medical Defence Union did on that day was to assemble and pass a resolution in virtue of the comments made by Mr Justice Priestley. I went to the trouble at the hearing of cross‑examining the relevant officers of the Medical Defence Union. Mr Brereton has covered all that; I will not go back over it.

But we would respectfully submit that the quite plain purpose of that action was to subvert the decision of the Court. The Court had granted leave in a particular way, granted us leave. We would submit in accordance with - I think it is a case called Life Insurance Co of Australia Ltd v Phillips. I think it is in 36 CLR. Really, what the Medical Defence Union was doing was, if you like, outflanking the Court of Appeal. It of course used the wrong article. It used the wrong article because it did not know until Mr Sullivan told us two years later what the right article was. But putting that aside, what it sought to do was to subvert the decision of the Court of Appeal and render all our efforts in that respect nugatory if it were right.

That is why I have given the passages to your Honours about Mr Justice Enderby’s view at the very top of page 3. It does not seem to have been made clear to Mr Justice Kirby that it was that that he was referring to. He was talking about Wayde’s Case and the powers of majorities. Our challenge to the fraud on the power, using those famous words of Sir Owen Dixon in Mills, was to suggest that in fact the power was used for which it had not been entrusted. That is why we would respectfully submit Mr Justice Enderby was right when he was highly critical of the moral flexibility of the council members of the New South Wales Medical Defence Union.

If I may just pass to that, because I have not gone to the trouble of setting it all out, but I feel that it ought to be before the Court. It is in volume 1, your Honours, 222. He sets it out. It is quite plain that his criticism was not grounded on the resolution of 1982, and that was why I rose in the special leave application to correct what appeared to be a misconception. We challenge that for different reasons which the Court has now heard. But we cross‑examined the officers of the Medical Defence Union to actually bring out the fact of what they were doing. The finding of the judge - he sets the material out and he quotes a decision of Mr Brereton at 223 and he says at 225 - he makes a finding:

In my opinion the purpose of the 1990 resolution was alien to the purpose for which the power and the discretion existed.

GUMMOW J: We have already been taken to this passage before, Mr Parker.

MR PARKER: Sorry, I did not know that. I thank your Honour. I will not read it. The piece about he is marvelling at the moral flexibility of the counsel is set out in the final paragraph. Your Honour, those are the submissions for the respondent Crawford.

BRENNAN CJ: Thank you, Mr Parker. Mr Sullivan.

MR SULLIVAN: Your Honours, might I first deal with the matters my learned friend has raised orally today and then deal in a more structured way hopefully with matters in reply. My learned friend today placed heavy emphasis when he was talking about the so‑called special contract point on a decision of Hunt v Carrier, a decision of Sir Frederick Jordan and the Full Court in New South Wales and then discussed on appeal in the High Court. With great respect, that case does not assist him. Rather, it demonstrates the proper distinction between a separate contract and the statutory contract.

Indeed, we would say as a general matter in response to my learned friend’s submissions today they, with respect, confuse the question of whether a contract is a special contract or a statutory contract on the other hand with the circumstances in which a special contract, if it exists, may be altered or revoked. Hunt v Carrier fits within the second category. There was no question there of an argument that it was a statutory contract. Plainly on its face, like Shuttleworth and Nelson, it was a separate contract. Why? The answer is quite apparent from the judgement of Sir Frederick Jordan. At 39 SR (NSW) 12 at page 14 in the facts I should say on the demurrer at about point 1 or point 2.

Whilst the articles were in these terms, the company on 15th May, 1937, entered into an agreement with the plaintiff, who was one of its directors and had for some time past been employed by it as managing director, and was therein called the managing director -

and it sets out the contract. So you have here, as in Shuttleworth, not a question of dilemma before the court as to whether something was a separate contract or part of a statutory contract, but an express and specific separate contract into which were sought to be imported the provisions of the articles, exactly the same situation as in Shuttleworth and a similar situation to Nelson. It was in those circumstances that the question for determination of the Full Court and in the High Court was when in that clearly separate contract there were provisions which were revocable or not. So it is not in any shape nor form a case for which guidance can be had as to the criteria or the distinctions between a separate contract on the one hand and a statutory one on the other.

Moreover, my learned friend then relies upon the judgment of Sir Edward McTiernan in the same case in the High Court and Sir Edward, with great respect, makes that distinction perfectly plain. That passage appears at page 553 of Sir Edward’s judgment reported in 61 CLR.

GUMMOW J: It is the paragraph at the bottom of page 553, is it?

MR SULLIVAN: The sentence starting “On the other hand”, your Honour, in the penultimate paragraph the last sentence and then the next passage. So that with great respect to my learned friend, Hunt v Carrier is purely an illustration of what is a separate contract and a discussion and analysis of the circumstances in which such articles or terms of the articles imported into it may be regarded as revocable or not.

If I might then deal, before I come to other submissions in reply mainly to my learned friend Mr Brereton, on statutory contract with my learned friend’s oral submissions today on section 6 of the Law Reform (Miscellaneous Provisions) Act. In the first respect, the first matter we wish to submit about is that the Judgment Creditors’ Remedies Act clearly on any view of the language employed therein, compared with the language employed herein, provides absolutely no analogy or reliable guide to the interpretation of section 6. We do not wish to say anything more about that.

Secondly, my learned friend appears to be critical of his Honour Justice Mahoney’s approach to statutory interpretation reference to Heydon’s Case in the decision which is under appeal in the present case. We might say two things about that. Justice Mahoney’s approach, with great respect, conforms with the approach to statutory construction this Court has endorsed, so much is apparent from page 357, point 25 of his Honour’s judgment where he cites and refers with approval and, indeed, if one reads the passage, thinks that he has applied the approach of your Honour Justice McHugh when your Honour was a judge in the Court of Appeal in the case of Kingston v Keprose.

That passage of your Honour Justice McHugh in Kingston v Keprose has, to my recollection, been cited with approval by, I think, a unanimous judgment of this Court in the case called Bropho v The State of Western Australia. I know there is a series of Bropho cases. All I can recall of the citation, your Honour, is that it starts at page 1 of the Commonwealth Law Reports, the particular one, and I think the passage is at page 12 or 13. My learned friend then, in respect of section 6 made a submission that McMillan v Mannix is correct and that his Honour Justice Kirby was wrong in that case. With great respect, we entirely agree with that submission but in having said so, we would point out that that submission would have a contrary result to the tentative suggestion in argument of your Honour Justice Dawson to the construction of section 6 of the Act. I shall deal with that if I may in just a moment when I deal with what I term my “structured submissions” in respect of section 6 in reply.

My learned friend then turned today to what Justice Yeldham did in Oswald v Bailey. He took your Honours to the first judgment but indicated that he would not take your Honour to his second judgment because it simply dealt with whether there was a good common law defendant or not and that was overturned. With great respect, the second judgment went much beyond that. His Honour, in the second judgment which is in the appeal books - I am sorry, it is not in your appeal books but we will provide your Honours with a copy of it. It was in the appeal book for the application for special leave to appeal and I presume that might have found its way elsewhere now, but in that case, his Honour has two bases for ultimately rejecting leave for appeal.

One, he was not satisfied there was a good common law defendant and secondly, because of the alterations to the articles he was of the view that no moneys would become payable within the meaning of section 6(1) of the Act. Indeed, your Honours only have to read the judgments of Justice Samuels in the reported decision of the Court of Appeal of Oswald v Bailey where there is reference to that finding of Justice Yeldham’s.

My learned friend then dealt with two final matters orally today which I would seek to make submissions about. First, he made a reference to Bogie’s Case (1905-06) 3 CLR. In our respectful submission, that case has absolutely nothing to do with the issues before your Honours. The ratio of Bogie’s Case is that one cannot contract out of a statute, no more nor no less, and that is what the passage which was quoted to your Honours stands for. That is not, in any shape nor form the question that we are to determine here.

We are concerned here with a construction of section 6 and the question of whether or not, by reason of what the Medical Defence Union did, it fell within the ambit of section 6(1) in that no charge became payable. Finally, my learned friend says ‑ and we have dealt with this in detail in our oral submissions, so I will not repeat myself ‑ but there was a fraud on the power in the 1990 resolution that somehow or other, because of the moral deviousness of the counsel as legal advisers, an attempt was made to outflank the Court of Appeal.

Leaving aside the colourful language employed, on true analysis if my learned friends are correct, a fraud on a power, as it is put ‑ my learned friend relies upon it as put in the company law cases simply does not arise. Here, if my learned friends are correct, there is a common law or special contract. In other words, a contract between, on the one hand, the company as a private contracting party and on the other hand, Dr Bailey as another private contracting party. No fiduciary obligations are owed in respect of the exercise of powers conferred pursuant to that private contract by the New South Wales Medical Defence Union.

The concept of fraud on a power arises only in the exercise by directors or a company of powers conferred on behalf of a company in respect of the discharge of duties to and on behalf of the company. My learned friend is seeking to convert that into a situation where a private contracting party owes a fiduciary obligation. Your Honours are well aware of the extreme limits upon such an analysis or categorisation of contractual powers. I would simply refer your Honours in passing to Hospital Products as to the circumstances in which that is so limited.

If I may then turn to matters which were not raised orally today, may I seek to hand up to your Honours, at the risk of having murdered more trees, nine copies of an outline of submissions in reply together with a document headed “The construction of section 6(1) of the Law Reform (Miscellaneous Provisions) Act”.

If I might take you to the shorter document first. What we have sought to do is, in order to hopefully render more sensible the language of section 6; break it up into its constituent parts inserting what we regard as, or we submit are, the words which have to be inserted by necessary implication in respect of each of those constituent parts. What we would respectfully submit is when it is looked at this way it just makes clearer that, in our respectful submission, the language of the section conforms to the evident statutory purpose - namely to avoid moneys which should be payable to an insured not finding their way to a third party. The opening words of section 6 say that:

If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance -

We have interpolated the words which we say must arise by necessary implication, at any time, whether before or after the event giving rise to a claim for damages. The importance of that for practical commercial purposes is in respect of claims made policies. In our written submissions and reply we refer your Honours to a decision of this Court called Yorkville Nominee Pty Limited v Lusenden arising out of the collapse, I think, of the Nugan Hand Bank, where your Honours determined and construed, or applied section 6 in respect of a claims made policy and, of course, a claims made policy can come into existence after the event giving rise to the claim, because liability attaches upon the claim being made and notified. It is relevant, in our respectful submission, by necessary implication, those words need to be imported.

When that condition is satisfied one goes to the next constituent element. Then, and we have inserted that word, the amount of “his” - that is the insured’s liability - the relevant words to be implied then, by necessary implication, to the third party suffering damage shall on the happening of the event giving rise to the claim for damages or compensation, (c) nothwithstanding that the amount of such liability may not then; that is, at the time of the happening of the event giving rise to the claim for damage or compensation have been determined, be a charge on all moneys that are - then we have inserted the words “payable to the insured at the time of the happening of the event giving rise to the claim for damages or compensation” - the original words say “are or may become payable”. Then, payable to whom? Payable to the insured in the future in respect of the liability of the insured to the third party.

When one interpolates those words in which are there inherently, in our respectful submission, what it makes plain is that the section is looking at imposing a charge on moneys payable, either at the time of the event in question - and here of course there is none because no moneys are payable at the time of the event in question - or which may become payable in the future in respect of that liability. It is the second category which is relevant.

That accords with the legislative purpose of the section, the remedial purpose. In our written submissions in reply, we have set out in paragraphs 1.1 to 1.7 the relevant parts and passages which we say state the purpose. It is the purpose as stated by Justice Mahoney and, in our respectful submission, the correct purpose. What it means, as we have set out in paragraph 2, is that the equities between the insured and the insurer are part of the factor to be taken into account and that part of the determination to be made as to whether insurance moneys become payable.

The next thing we would wish to deal with in reply is the suggestion that those equities are somehow or other frozen so that one looks notionally at the matter as at the date of the happening of the event and determines when, if you assume everything happened on that date, there would be insurance moneys payable. Your Honour Justice Dawson made such a suggestion as a possible interpretation of the section at page 81 of the transcript and my learned friend, Mr Brereton, embraced that in his suggested interpretation of the section.

Your Honours, we have set out in paragraph 3 of our submissions in reply why, with great respect, that approach should not be adopted. Essentially we can summarise them in this way. In the first place, it is not necessary to adopt that approach to do the work which the section was intended to do. That is our first submission. We set that out in paragraph 3.1 with detailed reasoning. In 3.2 and 3.3 we point out that the consequence of doing that would be that, in a situation such as McMillan v Mannix, which this Court, admittedly only on a special leave application, approved, must be wrongly decided. In McMillan v Mannix the event giving rise to the right to disclaim the policy was said to be a failure to co‑operate with the insured after the events occurring in the incident.

So that you have a situation if you had a frozen notional assessment as at the date of the incident, say it occurred in 1973, a claim is bought in 1975, the insurer says to the insured, “Please help me to defend this claim.” The insured says, “I am not going to help you.” The insurer says, “Well, that is a breach of your duty of co‑operation and assistance in 1977. Because that is a condition of precedent, I rescind the contract ab initio.” That situation could not apply if the rights were frozen notionally as at the date of the event giving rise to the occurrence because at that time simply, the relevant default had not and could not have occurred.

BRENNAN CJ: How does the rescission take effect ab initio?

MR SULLIVAN: It is nominally expressed in a policy as it was in McMillan v Mannix, your Honour, that it is a condition precedent to liability that subsequently you co‑operate with the insurer so that there is a condition precedent, really it should be regarded as a condition subsequent I would have thought, but in McMillan v Mannix it was expressed to be a condition precedent that you cooperate. It really is, in our respectful submission, on proper analysis a condition subsequent.

BRENNAN CJ: Precedent to what or subsequent to what?

MR SULLIVAN: It was expressed to be a condition precedent to liability under the policy.

BRENNAN CJ: I mean, that might be the very problem that is involved in this section.

MR SULLIVAN: Your Honour, there are problems involved in the section, which we have all been trying to grapple with and that may be one. Certainly, what we have tried to seek to set out in our submissions in reply are some of the problems, some of what we would respectfully call the anomalies, which will occur if an approach of frozen rights occurs.

GUMMOW J: It depends what you mean by “frozen” and what you mean by “rights”.

MR SULLIVAN: Yes, your Honour. We were using that expression in the sense of, if equities are frozen, in the sense of that you have to determine whether, at the time of the happening giving rise to the claim, one could either say, “Insurance moneys are payable or not”, so that, in other words, the facts giving rise to a right to avoid the policy must exist then. We clearly submit that that cannot be the case, for the reasons we have given you about McMillan v Mannix, and a whole series of other cases, which would produce, with respect, absurd results. It would enable a collusion between an insured and a third party.

Take the example of a husband and wife who have a car accident. The claim is made by the injured passenger, be it the wife or the husband; the husband is not a good common law defendant ‑ he has no money ‑ he subsequent to the events, (a) admits liability and (b) refuses to co‑operate. If the rights are frozen in the sense suggested, then, under section 6, the insurance moneys would be payable to the injured wife, notwithstanding the fact that the insurance company would have had every entitlement in those circumstances to refuse indemnity.

BRENNAN CJ: What are the equities that are frozen?

MR SULLIVAN: In the present case, your Honour?

BRENNAN CJ: Yes. I just do not understand the terminology.

MR SULLIVAN: The equities which are frozen, your Honour, are the rights under the contract of each party.

BRENNAN CJ: Why are they equities?

MR SULLIVAN: Well, I was using the word “equities” in a perhaps non‑specific legal sense, because it has been used in some of the judgments which have been referred to. Basically the rights on either side to avoid the policy, or to enforce the policy, and I apologise if that terminology is confusing. That is all I simply use it to mean.

BRENNAN CJ: Frozen contractual rights; is that what it is?

MR SULLIVAN: Yes, your Honour. So that, in our respectful submission, one of those contractual rights here was the right to revoke or alter the basis of the indemnity which is granted, and that can be done subsequently, and it does not offend ‑ ‑ ‑

DEANE J: What if the contract expressly said, “The parties may, at any time, vary the terms of this contract”, on your argument, after ‑ ‑ ‑

MR SULLIVAN: Unilaterally or by consent, your Honour?

DEANE J: By consent. The parties may, together, at any time, vary the terms of this contract.

MR SULLIVAN: It would not make any difference to our arguments, your Honour, because, as I understand contract law, that is an incident of contract law anyway. It would not need to be stated for a start.

DEANE J: I was just putting to you that it is stated.

MR SULLIVAN: Well, your Honour, if it is stated, the parties may at any time vary the contract, and they did vary the contract, in our respectful submission, then that variation would be valid and applicable.

DEANE J: They varied the contract to say that the insurer will not be under any liability?

MR SULLIVAN: If they did that, subject to some argument that there was a fraud which could not be overcome ‑ ‑ ‑

DEANE J: I am not saying it is wrong; I am just trying to see whether there is any difference.

MR SULLIVAN: The consequence would be as your Honour puts it, in our respectful submission.

DEANE J: In theory the case is the same, is it not?

MR SULLIVAN: Yes, your Honour. But that works, with respect, in two ways. If you had a situation where there was a fixed cover of, say, $100,000 at a relevant time and because, as we all know, damages verdicts have tended to increase over the years, the parties consensually agreed that in return for an extra premium the amount of cover for events in 1973 was increased to ten times that, then under section 6 what the moneys payable would be the subsequently increased amount, not the original amount. In our respectful submission, that makes perfect sense of the words “may become payable”.

DEANE J: But that really has little to do with it because if you increase the amount there would be no inconsistency with the charge on the earlier smaller amount. The only query with section 6 is whether it prevents the terms of the contract being varied so as to defeat a charge which has arisen under the statute by reference to the terms which existed at the time in question.

MR SULLIVAN: That is the question in issue in the present case, but in order to answer that question, in our respectful submission, one has to look at the proper overall interpretation of the section.

DEANE J: I was not expressing any view at all. It does seem that your argument must go so far as to say insurer and insured can vary the contract at any time and thereby defeat section 6.

MR SULLIVAN: Yes, your Honour.

DEANE J: I should not have said defeat section 6 - and thereby prevent the third party having rights arising by reference to section 6.

MR SULLIVAN: Yes, your Honour. We have really set out those submissions in more detail in section 3 of our submissions in reply. May I then turn in the time left to me to the statutory contract, or special contract matters, in addition to matters I have responded to orally today to my learned friend Mr Parker. In section 4 we seek to summarise our response to the two limbs of the question which your Honour Justice Deane put on the construction of the articles and the effect of revocability, and I will not trouble to deal with those at the present time.

May I then take your Honours in specific response to what my learned friend Mr Brereton said to what we submit on the vested contractual right theory. First of all, what we respectfully submit there are two things. Although it was not, with great respect, clear in some parts of my learned friend’s submissions, Mr Brereton correctly recognised that if there is no special contract ‑ in other words the contract is the statutory one ‑ then the articles are alterable so as to divest accrued rights. In other words, he agreed with our main submission ‑ I have given your Honours at 5.2 the transcript reference for that.

So my learned friend’s reliance upon the American authorities was on the express basis that there was a special contract and then that in those circumstances, if there was a special contract, one could not revoke or alter those terms of it imported into it from the articles of association. We have had the opportunity in the intervening time between the last hearing date and today to take up a suggestion of your Honour Justice Gummow about what has happened since the cases to which my learned friend has referred your Honours. We set out in paragraph 5.4 what we have been able to find. We have copies of the relevant material.

May I hand up nine copies of an extract of a text called Fletcher Cyclopedia of the Law of Private Corporations 1992 revised volume. Your Honours, might I say two things. I will not ask your Honours to read them. I say simply two things. First of all something which fell from your Honour Justice McHugh appears to be undoubtedly correct, namely, that the principle at least appears to be based in part on the US Constitution and the constitutional prohibition on the impairment of contractual rights. That is set out in Fletcher at page 712. That edition of Fletcher, the 1992 edition, according to our inquiries is not available in Australia anywhere that we have been able to find. We found a 1990 version but not a 1992 one. Mr Brereton tells me in the Macquarie University Law Library if one needs the full document.

The second thing, as Fletcher again points out, is that there has been no consistency about the decisions and, indeed, we found several decisions we could refer your Honours to if necessary which go to the opposite effect, but the third thing, in modern times it has come under extensive attack and what is called the Model Business Corporations Acts, that is an Act formulated by the American Bar Association as guidance for legislators to incorporate into legislation on Corporations Law and we have handed up to your Honour there the Corporations Act and an explanation of its role. I am sorry, we have not done that. I now seek leave to hand those up as well.

The final thing, your Honour, we would wish to say orally in reply is to look at the Co‑operative Cases. In our respectful submission, for the reasons we point out in section 6, the Elthan Co‑operative Case is a case which is clearly and manifestly different to this. There again there was a separate contract for supply entered into importing into it the terms of the articles. It was not a contract which was made pursuant to the articles and, indeed, the judgments make that plain and we have given your Honour references to judgments in paragraph 6.4 at pages 216 to 217. May I also add a reference there, your Honours, to pages 246 to 247 and to 258. Your Honours, in view of the time and because we have tried to set out everything else extensively we wish to deal with in reply, they are our submissions in reply.

BRENNAN CJ: Yes, thank you, Mr Sullivan.

MR SULLIVAN: I am sorry, your Honour. I am reminded of one thing, which we refer to in our written submissions. British Equitable v Baily which my learned friends rely on clearly does not assist them as is apparent from the House of Lords judgment. That was not a contract which could possibly be between members, qua members because the plaintiff was not a member of the corporation. He was a policyholder. That is expressly referred to at two parts of the judgment which is set out in our written submissions. We have got copies of British Equitable v Baily (1906) AC if your Honours wish the looseleaf copy rather than the text.

BRENNAN CJ: We may as well take them.

MR SULLIVAN: Thank you, your Honour.

BRENNAN CJ: Mr Brereton, do you see anything novel in the reply which give you any entitlement to further submission?

MR BRERETON: Perhaps there are two matters on which I would seek to say something. First of all‑ ‑ ‑

BRENNAN CJ: Well, no doubt you do but do you say that it is novel, arising out of the reply?

MR BRERETON: I probably cannot fairly put that it is really novel, your Honour.

BRENNAN CJ: No, thank you. Nor you, Mr Parker?

MR PARKER: I think, your Honour, I should deal with one matter and that is that you may recall that Mr Sullivan was given leave by your Honour to reopen ground 2.6 which he had withdrawn, that is to say whether, in fact, the level of the indemnity could rise and it seems to me - I have not read it properly - that he deals with this in paragraph 9.2 of his written submissions and our answer simply in short form is to say Mr Justice Sheller was right in volume 2. The judgment actually does not have a page for some reason. We have called it page 403A but he says this, and I burden the record so it is before you if you wish to look at it, “But the appellant then argues if the policy is not a claims made policy” - they accepted it, of course, as an occurrence policy:

The monetary amount of the limitation must be taken as that applicable at the date of the occurrence on the case of Mr Crawford 1973 or 1974. I do not think this argument has any substance. Quite clearly the limit in Article 57(3) is expressed in respect to that claim.

When a claim is made it is necessary to look at what the limit applies to the claim:

As a matter of language, in my opinion, the limit is that applicable at the time the claim is made.

It would seem to us in those circumstances that that is the answer to the suggestion that somehow or other the limit, if I can use the phrase, was fixed. That is all we wish to say, your Honour. I am not, of course, in a position to otherwise answer but it seems to me that was the thing that Mr Sullivan left out when the Court gave him leave.

BRENNAN CJ: Thank you, Mr Parker. The Court will consider its decision in these matters.

AT 4.10 PM THE MATTER WAS ADJOURNED

[1995] HCATrans 147

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