NSW Self Insurance Corporation v Underwriting Members of Lloyd's Syndicate 179

[2010] NSWCA 44

NEW SOUTH WALES COURT OF APPEAL

CITATION:
NSW Self Insurance Corporation v Underwriting Members of Lloyd's Syndicate 179  [2010] NSWCA 44

FILE NUMBER(S):
2009/298521

HEARING DATE(S):
8 March 2010

JUDGMENT DATE:
24 March 2010

PARTIES:
NSW Self Insurance Corporation - Plaintiff
Underwriting Members of Lloyd's Syndicate 179 in Respect of the 1983 Underwriting Year of Account - First Defendant
Underwriting Members of Lloyd's Syndicate 179 in Respect of the 1984 Underwriting Year of Account - Second Defendant
Underwriting Members of Lloyd's Syndicate 179 in Respect of the 1985 Underwriting Year of Account - Third Defendant
Underwriting Members of Lloyd's Syndicate 460 in Respect of the 1983 Underwriting Year of Account - Fourth Defendant
Underwriting Members of Lloyd's Syndicate 460 in Respect of the 1984 Underwriting Year of Account - Fifth Defendant
Underwriting Members of Lloyd's Syndicate 460 in Respect of the 1985 Underwriting Year of Account - Sixth Defendant
Underwriting Members of Lloyd's Syndicate 565 in Respect of the 1984 Underwriting Year of Account - Seventh Defendant

JUDGMENT OF:
Spigelman CJ Allsop P Hammerschlag J   

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
2009/298521

LOWER COURT JUDICIAL OFFICER:
Hammerschlag J

LOWER COURT DATE OF DECISION:
19 July 2009

COUNSEL:
L King SC  with  J Kernick [Plaintiff]
D F Jackson QC with T Mehigan  [Defendants]

SOLICITORS:
Accent Legal [Plaintiff]
Allens Arthur Robinson [Defendants]

CATCHWORDS:
STATUTORY INTERPRETATION – subordinate legislative instruments – where a Ministerial Order made on 30 June 1992 pursuant to section 24 of Government Insurance Office (Privatisation) Act 1991 (NSW) (“the Order”) provided that all contracts of insurance or reinsurance which were entered into for the benefit of the TAC Fund be transferred from GIO Australia Holdings Limited to the plaintiff – where the defendants were the reinsurers under contracts of reinsurance entered into before coming into force of the Transport Accidents Compensation Act 1987 (NSW) which established the TAC Fund – whether in the circumstances the contracts of reinsurance were entered into for the benefit of the TAC Fund and had been transferred to the plaintiffs

LEGISLATION CITED:
Government Insurance (Amendment) Act 1977 (NSW)
Government Insurance (Amendment) Act 1985 (NSW)
Government Insurance Office (Privatisation) Act 1991 (NSW)
Miscellaneous Acts (Transport Accidents Compensation) Amendment Act 1987 (NSW)
Motor Accidents Act 1988 (NSW)
Motor Vehicles (Third Party Insurance) Act 1942 (NSW)
Motor Vehicles (Third Party Insurance) Amendment Act 1984 (NSW)
Motor Vehicles (Third Party Insurance) Amendment Act 1985 (NSW)
NSW Self Insurance Corporation Act 2004 (NSW)
Transport Accidents Compensation Act 1987 (NSW)

CATEGORY:
Principal judgment

CASES CITED:
Saraswati v the Queen [1991] HCA 21; 172 CLR 1
Taylor v Centennial Newstan Pty Ltd [2009] NSWCA 276

TEXTS CITED:

DECISION:
Agreed questions for determination answered as follows:
Question: On the proper construction of the Ministerial Order made on 30 June 1992 (pursuant to s 24 of the Government Insurance Office (Privatisation) Act 1991 (NSW)) was the 1983 Reinsurance Contract transferred to the plaintiff? 
Answer:  Yes.
Question:  On the proper construction of the Ministerial Order made on 30 June 1992 (pursuant to s 24 of the Government Insurance Office (Privatisation) Act 1991 (NSW)) was the 1984/85 Reinsurance Contract transferred to the plaintiff?
Answer:  Yes.
Question:  On the proper construction of the Ministerial Order made on 30 June 1992 (pursuant to s 24 of the Government Insurance Office (Privatisation) Act 1991 (NSW)) was the 1985/86 Reinsurance Contract transferred to the plaintiff? 
Answer:  Yes.
The defendants to pay the plaintiff’s costs of the proceedings in this Court.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

2009/298521

SPIGELMAN CJ
ALLSOP P
HAMMERSCHLAG J  

24 MARCH 2010

NSW SELF INSURANCE CORPORATION  -V-  UNDERWRITING MEMBERS OF LLOYD’S SYNDICATE 179 IN RESPECT OF THE 1983 UNDERWRITING YEAR OF ACCOUNT & ORS

Judgment

INTRODUCTION

1. SPIGELMAN CJ:  I agree with Hammerschlag J.

2. ALLSOP P:  I agree with Hammerschlag J.

3. HAMMERSCHLAG J: The plaintiff is a corporation constituted by s 4(1) of the NSW Self Insurance Corporation Act 2004 (NSW).

4. Each of the defendants is an underwriting member of a Lloyd’s syndicate in respect of one or more of the underwriting years of account into which the three reinsurance contracts referred to below fall.

1. Where it is not necessary to distinguish between the three reinsurance contracts I shall refer to them as “the Reinsurance Contracts”.

1. These proceedings were, pursuant to Uniform Civil Procedure Rules Pt 1 r 1.21, removed into this Court by a judge of the Equity Division for the decision of questions of law which have arisen in proceedings in the Division.

2. The questions are whether on the proper construction of a Ministerial Order made on 30 June 1992 (“the Order”), pursuant to s 24 of the Government Insurance Office (Privatisation) Act 1991 (NSW), each of three Reinsurance Contracts under which the defendants variously agreed to provide excess of loss insurance to the Government Insurance Office of New South Wales was transferred to the plaintiff.

LEGISLATIVE HISTORY LEADING UP TO THE ORDER

Establishment of the GIO and the 1942 Act

1. Section 3(1) of the Government Insurance Act 1927 (NSW) (“the 1927 Act”) established the Government Insurance Office of New South Wales (or “the Office” or “GIO” as the case may be) to carry on insurance business. 

2. At all material times s 8 of the 1927 Act provided that every policy or contract of insurance or indemnity issued or entered into within the authority of the Act is guaranteed by the Government of New South Wales and that any liability arising under such guarantee shall be payable out of the Consolidated Revenue Fund.

3. The Motor Vehicles (Third Party Insurance)Act 1942 (NSW) (“the 1942 Act”) required owners and drivers of motor vehicles to be insured against liability in respect of the death of or bodily injury to persons, caused by or arising out of the use of motor vehicles. Section 14(1) of the 1942 Act provided that the Office was to be an authorised insurer.

4. The Government Insurance (Amendment) Act 1977 (NSW) was an Act to amend the 1927 Act so as to separate the motor vehicles (third party) insurance business of the Office from other business conducted by it. To that end, it inserted into the 1927 Act the following s 5B(1) and s 5B(2):

   Divisions of insurance business

5B.         (1)          For the purposes of this Act, the insurance business of the Office is divided into the following divisions :-

(a)          life insurance business;

(b)motor vehicles (third party) insurance business, being business conducted under the Motor Vehicles (Third Party Insurance) Act, 1942;

(c)general insurance business, being all other insurance business.

(2)          The funds for the time being of the Office in respect of the division of the insurance business of the Office shall be available only for the purposes of the business comprised in that division and shall not be liable for any contracts, liabilities or obligations of the Office for which they would not be liable if the only insurance business of the Office were business comprised in that division.

1. During the period 1942 to 28 June 1984, the Office was one of, but not the only, authorised (third party) insurer of motor vehicles. 

1984

1. The Motor Vehicles (Third Party Insurance)Amendment Act 1984 (NSW) (“the 1984 Act”) was an Act to amend the 1942 Act. It provided that its provisions relating to third party policies would constitute a scheme to be known as the “Department of Motor Transport Third Party Insurance Scheme” and that the Office would be the manager of the Scheme. One of the principal features of the Scheme was that (subject to the Savings and Transitional provisions referred to below) the Office became the sole insurer under the 1942 Act.

2. The 1984 Act inserted the following definition into s 5(1) of the 1942 Act (which it referred to as the Principal Act):

   “Third-party Fund” means the fund for the time being of the Government Insurance Office in respect of that division of               the business of that Office being the motor vehicles (third party) insurance business conducted under this Act.

3. The 1984 Act inserted into the 1942 Act the following s 14(1):

Making of claims – identified motor vehicles.

14.          (1)          Every claim for damages in respect of the death of or bodily injury to any person caused by or arising out of the use of a motor vehicle, the identity of which is established and which, at the time the circumstances resulting in the death or bodily injury occurred, was -

(a)in the case of an insured motor vehicle, being used in any place, whether within New South Wales or otherwise; or

(b)in the case of an uninsured motor vehicle, being used on any public street in New South Wales,

being a claim which, but for this section, could be made against the owner or driver of the motor vehicle, shall be made against the Government Insurance Office and any proceedings to enforce any such claim for damages shall be taken against the Government Insurance Office and not against the owner or driver of the motor vehicle.

1. A new s 14A was inserted, concerning claims in respect of unidentified motor vehicles.  It provided that any person who could have enforced a claim for damages against the owner or driver of an unidentified motor vehicle could enforce the claim against the Office.

2. A new s 14D in the following terms was inserted into the 1942 Act:

   Payment of claims.

   14D The Government Insurance Office shall not be personally liable to pay any amount payable in satisfaction of any claim made under section 14 or 14A, any judgment recovered against it or the amount of any costs or expenses incurred by it in relation to any such claim or to the proceedings in which the judgment was obtained, but every such amount shall be paid by the Government Insurance Office out of the Third-party Fund.

3. Section 6 read with par 1 and par 2 of Sch 6 of the 1984 Act provided relevantly as follows:

   Policies issued before 1.7.1984.

   1.            The Principal Act, as in force immediately before 1st July, 1984, continues to apply to and in respect of a policy issued in accordance with that Act by an authorised insurer within the meaning of that Act, other than the Government Insurance Office, as if this Act, Schedules 3 and 4, and section 5 in its application to those Schedules, excepted, had not been enacted.

   Causes of action existing before 1.7.1984.

   2.            The Principal Act, as in force immediately before 1st July, 1984, continues to apply to and in respect of any cause of action relating to the death of or bodily injury to a person, being a cause of action which arose at any time before that date, whether or not any proceedings have been commenced before that date in respect of any such cause of action, as if this Act had not been enacted.

1985

1. The Government Insurance (Amendment)Act 1985 (NSW) omitted par (b) from s 5B(1) of the 1927 Act and inserted instead the following:

   (b) insurance funds administration business, being business comprising the administration of any insurance funds which may from time to time be managed or administered by the Office on behalf of the Government of New South Wales, a public authority or any other person or body;

2. The Motor Vehicles (Third Party Insurance) AmendmentAct 1985 (NSW) omitted the definition of “Third-party Fund” from s 5(1) of the 1942 Act and inserted instead the following:

   “Third-party Fund” means the fund administered by the Government Insurance Office within the insurance funds administration business division of that Office which comprises amounts (other than commission) held by that Office as manager of the Department of Motor Transport Third Party Insurance Scheme.

1987

1. On 1 July 1987, there came into force the Transport Accidents Compensation Act 1987 (NSW) (“the 1987 Act”). Part 4 of the 1987 Act provided for the payment of benefits to persons who suffered bodily injury which was caused by, or arose out of a transport accident and for the payment of benefits to dependants of persons whose death was caused by, or arose out of a transport accident.

2. Section 3(1) of the 1987 Act provided that “GIO” means “the Government Insurance Office of New South Wales established under the Government Insurance Act 1927”.

3. Section 15(1) of the 1987 Act provided as follows:

   Transport Accidents Compensation Fund

   15           (1)The GIO shall establish and administer a fund, to be called the “Transport Accidents Compensation Fund”.

4. Section 11 of the 1987 Act provided as follows:

Administration of scheme for transport accidents compensation

11.          The GIO, through the insurance funds administration business division, shall have the responsibility for implementing and administering the scheme for transport accidents compensation embodied in this Act.

1. Section 16 of the 1987 Act was in the following terms:

   Payments into the Fund

   16.          (1)          There shall be paid into the Fund -

   (a)amounts paid to the GIO under section 25, 26 or 28 or under any regulations made for the purposes of section 30;

   (b)any money appropriated by Parliament for the purposes of the Fund;

   (c)penalties recovered for offences against this Act;

   (d)the interest from time to time accruing from the investment of the Fund; and

   (e)such other amounts, if any, as may be prescribed.

   (2)There may be paid into the Fund money, other than money referred to in subsection (1), which may lawfully be paid into the Fund.

1. Section 17(1)(a) of the 1987 Act was in the following terms:

   Payments out of the Fund

   (1)          There shall be paid out of the Fund -

   (a)          benefits payable under this Act;

1. Section 31(1) of the 1987 Act was in the following terms:

Injured person’s benefits – generally

31.          (1)          If an injured person is able to prove, in accordance with the civil law, that another person is (in the capacity of the owner or driver of a motor vehicle or other form of transportation or conveyance to which this Act applies) liable, in whole or in part, for the bodily injury suffered by the injured person, the injured person is entitled to benefits under this Act.

1. Section 32(1) of the 1987 Act was in the following terms:

   Dependant’s benefits – generally

   32.          (1)          If the dependant of a person, being a person whose death is caused by or arises out of a transport accident within 3 years after the date of the accident, is able to prove, in accordance with the civil law, that another person is (in the capacity of the owner or driver of a motor vehicle or other form of transportation or conveyance to which this Act applies) liable, in whole or in part, for the death of the deceased person, the dependant is entitled to benefits under this Act.

2. The Miscellaneous Acts (Transport Accidents Compensation) Amendment Act 1987 (NSW) amended the 1942 Act in a number of respects.

3. First, it inserted the following s 3:

   Application of Act

   3.            This Act applies to and in respect of -

   (a)the registration or renewal of registration of a motor vehicle effected or required to be effected before 1 July 1987;

   (b)          the issue of a trader’s plate before 1 July 1987;

   (c)          the use of a motor vehicle before 1 July 1987; and

   (d)the death of or bodily injury to a person arising out of the use, before 1 July 1987, of a motor vehicle.

4. Secondly, it omitted the definition of “Third-party Fund” in s 5(1) and inserted instead:

   “Transport Accidents Compensation Fund” means the Fund established under section 15 of the Transport Accidents Compensation Act 1987.

5. Thirdly, it omitted the words “Third-party Fund” in s 14D and inserted instead “Transport Accidents Compensation Fund”.

6. In addition, par 2 of Sch 3 provided as follows:

   Transfer of money in Third-party Fund

   2.            (1)          In this clause -

   “Compensation Fund” means the Transport Accidents Compensation Fund;

   “Third-party Fund” means the fund administered by the GIO within the insurance funds administration business division of the GIO which comprises amounts (other than commission held by the GIO as manager of the Department of Motor Transport Third Party Insurance Scheme).

   (2)          On 1 July 1987, the GIO shall pay into the Compensation Fund all money then standing to the credit of the Third-party Fund.

   (3)          On and from 1 July 1987 -

   (a)money which would, but for the enactment of the Transport Accidents Compensation Act 1987 and this Act, have been paid or payable out of the Third-party Fund shall be paid or payable out of the Compensation Fund; and

   (b)money which would, but for the enactment of the Transport Accidents Compensation Act 1987 and this Act, have been paid or payable into the Third-party Fund shall be paid or payable into the Compensation Fund.

1988

1. The Motor Accidents Act 1988 (NSW) (“the 1988 Act”) came into force on 1 July 1989. It repealed the 1987 Act. Section 6 is in the following terms:

   Restoration of common law rights

   6. The law relating to a right to or a claim for damages or compensation or any other benefit (pecuniary or non-pecuniary) against any person for or in respect of the death of or bodily injury to a person caused by or arising out of a transport accident (within the meaning of the Transport Accidents Compensation Act 1987) occurring on or after 1 July 1987, shall be as if the Transport Accidents Compensation Act 1987 had not been passed and the common law and the enacted law (except that Act) shall have effect accordingly.

1. Part 10 of the 1988 Act (which includes s 138, s 139, s 140 and s 143) is entitled “Funding and Administration of Previous Schemes”.

2. Section 138 of the 1988 Act is in the following terms:

   Definitions

   138.        In this Part -

   “intermediate transport accident” means -

   (a)a transport accident (within the meaning of the 1987 Act) occurring on or after 1 July 1987 and before the date of commencement of Part 2 -

   (i)in relation to which a person is entitled to benefits under the 1987 Act, or

   (ii)in relation to which a person would be entitled to damages assessed in accordance with this Act if the person at fault had, on the occurrence of the accident, been an insured person; or

   (b)          an accident -

   (i)which would, but for the repeal of the 1987 Act, be a transport accident to which that Act applies; and

   (ii)which is caused by or arises out of the use of a form of transportation or conveyance included within section 4 of that Act; and

   (iii)which occurs on or after the date of commencement of Part 2 of this Act and during a period for which a contribution under Division 3 of Part 3 of the 1987 Act had, before that date, been paid in relation to the form of transportation or conveyance concerned;

   “the 1987 Act” means the Transport Accidents Compensation Act 1987;

   “The TAC Fund” means the Transport Accidents Compensation Fund established under section 15 of the 1987 Act.

3. All references below to the TAC Fund are references to the Transport Accidents Compensation Fund established under s 15(1) of the 1987 Act.

4. Section 139 of the 1988 Act is in the following terms:

   Continuation of the TAC Fund

   139.(1)          Despite the repeal of the 1987 Act, the TAC Fund shall continue in accordance with this Part.

   (2)          The TAC Fund shall continue to be administered by the GIO.

   (3)          The TAC Fund shall continue to be a fund administered within the insurance funds administration business division of the GIO.

5. Section 140 of the 1988 Act is in the following terms:

   Payments into the TAC Fund

   140.        (1)          There shall be paid into the TAC Fund -

   (a)          amounts paid to the GIO under section 149;

   (b)          any money appropriated by Parliament for the purposes of the Fund;

   (c)          the interest from time to time accruing from the investment of the Fund; and

   (d)          such amounts, if any, as may be prescribed.

   (2)          There may be paid into the TAC Fund money, other than money referred to in subsection (1), which may be lawfully paid into the Fund.

1. Section 143 of the 1988 Act is in the following terms:

   Payment of damages out of TAC Fund

   143.        Damages payable -

   (a) (without limiting section 14D of the Motor Vehicles (Third Party Insurance) Act 1942) in respect of claims made under section 14 or 14A of that Act; or

   (b)          in respect of intermediate transport accidents,

   shall be paid out of the TAC Fund.

1991 Privatisation

1. By the Government Insurance Office (Privatisation) Act 1991 (NSW) (“the 1991 Act”) provision was made for the privatisation of the Government Insurance Office of New South Wales (which was referred to in that Act as the GIO).

2. In his Second Reading Speech on the Government Insurance Office (Privatisation) Bill of 17 October 1991, the Minister assisting the Premier indicated that privatisation by way of a public float was the Government’s preferred option.  He also said the following:

   The bill allows also for certain parts of the business undertaking to be excluded from the sale of the GIO.  Though it is not the Government’s intention to exclude any part of the business from the sale, it may be necessary to leave some assets or liabilities behind so that the business being promoted in the float is well balanced and saleable.  It may be appropriate to sell these residual assets outside the float process.

3. Section 10 of the 1991 Act provided that the GIO would be taken to be registered under the Corporations Law as a public company limited by shares and to be known as GIO Australia Holdings Limited.

4. Section 24(1) of the 1991 Act (which was in Pt 5) provided as follows:

Excluded undertakings

24. (1) The Minister may direct, by order in writing, that any assets, rights or liabilities that are part of the business undertaking of GIO or a GIO subsidiary be excluded from that business undertaking and transferred to the Ministerial Corporation or another person on behalf of the State of New South Wales.

1. Section 28(1) constituted a corporation with the corporate name of NSW Insurance Ministerial Corporation. 

1. Section 38(1)(b) and s 38(1)(c) of the 1991 Act were in the following terms:

Application and interpretation

38.          (1)          This Part applies to the following orders under this Act:

(b)          an order under Part 5 excluding a part of the business undertaking of GIO or a GIO subsidiary and transferring it to the Ministerial Corporation or other person on behalf of the State;

(c)          an order under Part 5 transferring any part of the excluded undertaking to a person acquiring it from the Ministerial Corporation or other person on behalf of the State.

1. Section 39(1)(a) and s 39(1)(b) of the 1991 Act were in the following terms:

Vesting of undertaking etc. in transferee

39.          (1)When any part of a business undertaking is transferred by an order to which this Part applies, the following provisions have effect (subject to the order directing the transfer):

(a)the assets of the transferor comprised in that part of the undertaking vest in the transferee by force of this section and without the need for any conveyance, transfer, assignment or assurance;

(b)the rights and liabilities of the transferor comprised in that part of the undertaking become by force of this section the rights and liabilities of the transferee;

The plaintiff

1. Section 4 of the NSW Self Insurance CorporationAct 2004 (NSW) constituted a corporation with the corporate name NSW Self Insurance Corporation.

2. Under s 16 read with Pt 2 of Sch 1 to that Act, the NSW Self Insurance Corporation (the plaintiff in these proceedings) is a continuation of, and the same legal entity as, the NSW Insurance Ministerial Corporation that was constituted by the 1991 Act.

The Order

1. On 30 June 1992 the Minister made the Order under s 24 of the 1991 Act:

   I, JOHN JOSEPH FAHEY, Premier and Treasurer, pursuant to Section 24 of the Government Insurance Office (Privatisation) Act 1991, order that the assets, rights and liabilities that are part of the business undertaking of GIO Australia Holdings Limited specified in Parts 1, 2, and 3 of the Schedule be excluded from that business undertaking and transferred to the New South Wales Insurance Ministerial Corporation at 8.00 pm Australian Eastern Standard Time on the 30th of June 1992.

2. Part 1 of the Order was in the following terms:

Assets Rights and Liabilities to be Transferred

Part 1

1.Any right, entitlement, liability or obligation of GIO Australia Holdings Limited granted or imposed by or arising under Part 10 of the Motor Accidents Act 1988 or the Motor Vehicles (Third Party Insurance) Act 1942.

2.Any policy of insurance issued or deemed to be issued by GIO Australia Holdings Limited under Part 10 of the Motor Accidents Act 1988 or the Motor Vehicles (Third Party Insurance) Act 1942.

3.The beneficial interest in any investment (including cash) of the TAC Fund (as that term is defined in Part 10 of the Motor Accidents Act 1988) to the extent that the beneficial title of the investment is held by GIO Australia Holdings Ltd at the date of this order including such beneficial interest in the investments specified in Attachment 1.

4.All contracts of insurance or reinsurance which have been entered into for the benefit of the TAC Fund to the extent that they are for the benefit of the TAC Fund including the contracts of reinsurance set forth in Attachment 2 (but only to the extent that they are for the benefit of the TAC Fund) and any claims or the proceeds of claims made or notified under any such insurance or reinsurance policies.

5.Any right, entitlement, liability or obligation held by or arising under any policy of insurance or contract entered into or assumed by GIO Australia Holdings Limited for or on behalf of the TAC Fund or in respect of which the TAC Fund is liable including the contracts set forth in Attachment 3.

6.Any record, document or account relating to the TAC Fund or relating to any claim in respect of which damages may be or have been paid out of the TAC Fund, held by or on behalf of GIO Australia Holdings Limited.

1. Attachment 2 was a list of motor vehicle excess of loss treaties.  It included references to a treaty for the period 1 January 1983 to 30 June 1984 (“the 1983 Reinsurance Contract”), a treaty for the period 1 July 1984 to 30 June 1985 (“the 1984/85 Reinsurance Contract”) and a treaty for the period 30 June 1985 to 30 June 1986 (“the 1985/86 Reinsurance Contract”). 

THE AGREED FACTS

1. The parties are agreed that:

   aon 1 January 1983 pursuant to the 1983 Reinsurance Contract the first and fourth defendants agreed to provide unlimited excess of loss reinsurance (in excess of $5 million) to GIO for the period 1 January 1983 to 31 December 1983. The reinsurance contract was extended to cover the period to 30 June 1984;

   bon 1 July 1984 pursuant to the 1984/85 Reinsurance Contract the second, fifth and seventh defendants agreed to provide unlimited excess of loss reinsurance to GIO (in excess of $5 million) for the period 1 July 1984 to 30 June 1985; and

   con 1 July 1985 pursuant to the 1985/86 Reinsurance Contract the third and sixth defendants agreed to provide excess of loss reinsurance to GIO ($1 million in excess of $5 million) for the period 1 July 1985 to 30 June 1986.

2. The parties are further agreed that:

   aon 11 January 1983 injury was caused to Mark Harford arising out of the use of a motor vehicle, the driver of which was insured by the GIO;

   bon 16 April 1984 injury was caused to Amanda Kaest arising out of the use of a motor vehicle, the driver of which was insured by the GIO;

   con 17 August 1984 a settlement agreement was entered into between GIO and Mark Harford in relation to the claim brought by Mr Harford;

   don 13 December 1984 a settlement agreement was entered into between GIO and Amanda Kaest in relation to the claim brought by Ms Kaest;

   eon 2 January 1985 injury was caused to Nava George arising out of the use of a motor vehicle. A claim was brought directly against the GIO under s 14 of the Motor Vehicles (Third Party Insurance) Act 1942 (NSW);

   fon 13 September 1985 injury was caused to Kelly McCann arising out of the use of a motor vehicle. A claim was brought directly against the GIO under s 14 of the Motor Vehicles (Third Party Insurance) Act 1942 (NSW);

   gon 28 November 1986 a settlement agreement was entered into between GIO and Kelly McCann in relation to the claim brought by Ms McCann; and

   hon 19 December 1986 a settlement agreement was entered into between GIO and Nava George in relation to the claim brought by Ms George.

THE PROCEEDINGS

1. By Amended Summons and Commercial List Statement dated 18 March 2009 in the Commercial List of the Equity Division, the plaintiff claims that:

   athe first and fourth defendants are liable to reimburse it in accordance with the terms of the 1983 Reinsurance Contract in respect of payments made or to be made under the settlements with Mark Harford and Amanda Kaest;

   bthe second, fifth and seventh defendants are liable to reimburse it in accordance with the terms of the 1984/85 Reinsurance Contract in respect of payments made or to be made under the settlement with Nava George; and

   cthe third and sixth defendants are liable to reimburse it in accordance with the terms of the 1985/86 Reinsurance Contract in respect of payments made or to be made under the settlement with Kelly McCann.

2. By their respective Commercial List Responses:

   athe first and fourth defendants deny that the 1983 Reinsurance Contract was transferred to the plaintiff by the Order;

   bthe second, fifth and seventh defendants deny that the 1984/85 Reinsurance Contract was transferred to the plaintiff by the Order; and

   cthe third and sixth defendants deny that the 1985/86 Reinsurance Contract was transferred to the plaintiff by the Order.

1. Without prejudice to the generality of its denial, each of the defendants pleads that:

   aonly contracts of reinsurance “entered into for the benefit of the TAC Fund” and/or “for the benefit of the TAC Fund” were transferred to the plaintiff;

   bthe TAC Fund was only established with effect from 1 July 1987 pursuant to s 15 of the Transport Accidents Compensation Act 1987 (NSW); and

   cthe reinsurance contract to which it is a party was not entered into for the benefit of the TAC Fund and was not for the benefit of the TAC Fund within the meaning of clause 5 of Pt 1 of the Order.

THE AGREED QUESTIONS FOR DETERMINATION

1. The agreed questions for determination by this Court are whether on the proper construction of the Order:

   athe 1983 Reinsurance Contract was transferred to the plaintiff;

   bthe 1984/85 Reinsurance Contract was transferred to the plaintiff; and

   cthe 1985/86 Reinsurance Contract was transferred to the plaintiff.

CONSIDERATION

1. With respect to all of the Reinsurance Contracts, the defendants submit that the Order was not effective to transfer them to the plaintiff because they are neither contracts of insurance or reinsurance “which have been entered into for the benefit of the TAC Fund nor are they for the benefit of the TAC Fund” within the meaning of par 4 of Pt 1 of the Schedule to the Order. It is put that the Reinsurance Contracts do not satisfy the description of having been entered into for the benefit of the TAC Fund and that they cannot be for the benefit of the TAC Fund because at the time they were entered into the TAC Fund did not exist, it having been established by s 15(1) of the 1987 Act which only came into force on 1 July of that year.

2. Additionally, in relation to the claims of Mark Harford and Amanda Kaest which arose during the underwriting period of the 1983 Reinsurance Contract, the defendants put that those claims fell to be dealt with under the 1942 Act as it stood before the amendments effected by the 1984 Act.  They put that under s 5B of the 1927 Act (as inserted by the Government Insurance (Amendment) Act 1977 (NSW)) the source of funds to meet those liabilities was restricted to the account held in the third party motor insurance division of the GIO and that there was no statutory fund of any kind in existence when those claims arose and were settled. The defendants point to the fact that the liabilities of the GIO are supported by the Government guarantee and that any liability under that guarantee is payable out of the Consolidated Revenue Fund.

3. For the reasons which follow, both of the defendants’ submissions are unsustainable.

4. Section 5B(1) of the 1927 Act divided the insurance business of the GIO into three divisions, one of which was the motor vehicles (third party) insurance business being conducted under the 1942 Act.  Section 5B(2) of the 1927 Act provided that the funds for the time being of the Office “in respect of the division of the insurance business of the Office shall be available only for the purposes of the business comprised in that division”.  This, in my opinion, brought about the establishment of a fund, which subsequently became known as the Third-party Fund and later the TAC Fund. 

5. The 1984 Act inserted the definition of “Third-party Fund” into the 1927 Act.  That definition was: “the fund for the time being of the Government Insurance Office in respect of that division of the business of that Office being the motor vehicles (third party) insurance business conducted under this Act”.

6. Plainly, that fund was then, and since the divisionalisation in the business of the GIO brought about by the insertion in 1977 of s 5B into the 1927 Act had been, in existence.

7. The fact that the transitional provisions in the 1984 Act provided that the 1942 Act as in force immediately before 1 July 1984 continued to apply to and in respect of any cause of action which arose before that date as if the 1984 Act had not been enacted, and the fact that the Harford and Kaest claims fell to be dealt with under the 1942 Act before its amendment say nothing with respect to the existence or otherwise of the Third-party Fund (as it was then called).

8. The existence of the Government guarantee provided for in s 8 of the 1927 Act also says nothing with respect to the existence or otherwise of the Third-party Fund. Section 14D of the 1984 Act provided that the GIO was not personally liable to pay any claims but that claims were to be paid by it out of the Third-party Fund. The Government guarantee would cover claims which the GIO was unable to pay out of that Fund. The existence of the Government guarantee is in no way inconsistent with the existence of a statutory fund out of which claims are (if there are sufficient moneys in it) to be met.

9. It follows that the defendants’ submission that there was no statutory fund of any kind in existence when the Harford and Kaest claims arose and were settled must be rejected.

10. Section 15(1) of the 1987 Act provided for the establishment of the TAC Fund. Section 16(2) provided that there may be paid into the TAC Fund money which lawfully may be paid into it and s 17(1) provided that there shall be paid out of it benefits payable under that Act.

11. At the same time the Miscellaneous Act (Transport Accidents Compensation) Amendment Act 1987 (NSW) changed the definition of Third-party Fund in s 5(1) of the 1942 Act to mean the TAC Fund.  The Savings and Transitional provisions provided that on 1 July 1987 the GIO would pay into the TAC Fund all money then standing to the credit of the Third-party Fund and that on and from that date money which would have been paid or payable out of the Third-party Fund was to be paid or payable out of the TAC Fund and that money which would have been paid or payable into the Third-party Fund was to be paid or payable into the TAC Fund. 

12. Hence what had from 1987 been called the “Third-party Fund” in the 1942 Act became known as the TAC Fund. 

13. Section 139(1) of the 1988 Act provided that despite the repeal of the 1987 Act the TAC Fund was to continue, and was to continue to be administered by the GIO within the insurance funds administration business division of the GIO.

14. Accordingly, when the Minister referred to the TAC Fund in Pt 1 of the Schedule to the Order, this was a reference to what had previously been known as the Third-party Fund which had been in existence since the 1977 Act and later defined in 1984.

15. It follows that the defendants’ submission that the Reinsurance Contracts were entered into prior to the existence of the TAC Fund and were therefore not entered into for its benefit must be rejected.

16. Even if it were the case that the TAC Fund had not been in existence at the time the Reinsurance Contracts were entered into, in my view, par 4 of Pt 1 of the Schedule to the Order was nevertheless effective to transfer them to the plaintiff.

17. The Reinsurance Policies are described in Attachment 2 to the Schedule to the Order.  Paragraph 4 expressly transfers those contracts but only to the extent that they are for the benefit of the TAC Fund, that is, to the extent that they were to the benefit of the TAC Fund as at the date of the Order. 

1. By the time of the Miscellaneous Act (Transport Accidents Compensation) Amendment Act 1987 (NSW) the defendants’ liability to the plaintiff, (if any) had arisen, and the proceeds of the Reinsurance Policies became payable into the TAC Fund. 

1. Accordingly, as at the date of the Order, the Reinsurance Policies were for the benefit of the TAC Fund whether or not they had been entered into at a time before the TAC Fund had been established.  Even if their proceeds had earlier been payable into the Third-party Fund, on and from 1 July 1987 they were payable into the TAC Fund because of par 2(3)(b) of Schedule 3 of the Miscellaneous Act (Transport Accidents Compensation) Amendment Act 1987 (NSW).  The Order was thus, effective to transfer them to the plaintiff.

2. The plaintiff put that the legislative purpose of the Order was, relevantly, to exclude the motor vehicle (third party) insurance part of the GIO’s business undertaking including pertinent reinsurance policies.  It put that if the literal or grammatical meaning of the Order did not conform to the legislative purpose, the Court is entitled to give effect to that purpose by addition to, omission from, or clarification of, the Order: Saraswati v the Queen [1991] HCA 21; 172 CLR 1 at 22; Taylor v Centennial Newstan Pty Ltd [2009] NSWCA 276. That course is neither necessary nor appropriate in the present case, because the words of the Order conform to and achieve the legislative purpose.

CONCLUSION

1. I would answer the agreed questions for determination as follows:

Question: On the proper construction of the Ministerial Order made on 30 June 1992 (pursuant to s 24 of the Government Insurance Office (Privatisation) Act 1991 (NSW)) was the 1983 Reinsurance Contract transferred to the plaintiff?

Answer:  Yes.

Question: On the proper construction of the Ministerial Order made on 30 June 1992 (pursuant to s 24 of the Government Insurance Office (Privatisation) Act 1991 (NSW)) was the 1984/85 Reinsurance Contract transferred to the plaintiff?

Answer:  Yes.

Question: On the proper construction of the Ministerial Order made on 30 June 1992 (pursuant to s 24 of the Government Insurance Office (Privatisation) Act 1991 (NSW)) was the 1985/86 Reinsurance Contract transferred to the plaintiff?

Answer:  Yes.

1. The defendants should pay the plaintiff’s costs of the proceedings in this Court.

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LAST UPDATED:
24 March 2010