Permanent Trustee Co Ltd and anor. v Keogh

[1999] NSWSC 967

CITATION:	Permanent Trustee Co Ltd & anor. v Keogh & ors. [1999] NSWSC 967
CURRENT JURISDICTION:	Common Law
FILE NUMBER(S):	15225/92
HEARING DATE(S):	6/9/99 and 10/9/99
JUDGMENT DATE:	23 September 1999
PARTIES :	Permanent Trustee Co Ltd & anor Allan Andrew Keogh & ors
JUDGMENT OF:	Sully J

COUNSEL :	T. Hale - Plaintiff M. McCulloch - X-Deft. L. Ellison - 4,5,6 and 7 defts.
SOLICITORS:	Watson Mangioni - Plaintiff Murray Stewart & Fogarty - Defendants
CATCHWORDS:	Reference to a Referee pursuant to SCR Part 72 - motion for adoption of report by the Court - principles applicable. Held: on the facts Court should decline to adopt report.
ACTS CITED:	Insurance Contracts Act 1984 (C'wealth)
CASES CITED:	Super Pty Ltd (formerly known as Leda Constructions Pty Ltd) v SJP Formwork (Aust) Pty Ltd [1992] 29 NSWLR 549 Jones v Dunkel Alister v The Queen (1984) 154 CLR 404 at 414 Wyong Shire Council v Short (1980) 146 CLR 40 at 47 Astor Properties Pty Ltd v L'Union des Assurances des Paris (1989) 17 NSWLR 483 Gurnett v Macquarie Stevedoring Co Pty Ltd (1955) 55 SR (NSW) 243 at 248 Australian Blue Metal Limited v Hughes & ors (1961) 79 WN (NSW) 498 at 513 Leighton Contractors Pty Ltd v C.E. Heath Underwriting Services Ltd & ors (1995) 8 ANZ Ins. Cas. 61-231 Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd [1988] 17 NSWLR 60
DECISION:	Declined to adopt the report - consequential directions

SUPREME COURT OF
NEW SOUTH WALES
COMMON LAW DIVISION

SULLY J

23 September 1999

15225/92 - PERMANENT TRUSTEE COMPANY LIMITED & ORS. v KEOGH & ORS.

JUDGMENT

1   HIS HONOUR: There are current in the Court proceedings brought at the instance of Permanent Trustee Company Limited and Moreland Finance Corporation (Vic) Pty Limited as plaintiffs. In those proceedings there are seven named defendants. It is sufficient for present purposes to understand that among those defendants is a firm of valuers. The plaintiffs have sued those valuers for damages for negligence in connection with the valuation of certain real estate for the purpose of a mortgage advance. In a judgment delivered on 22 July 1999 Davies AJ of this Court gave judgment for Permanent Trustee Company Limited against the defendants in the sum of $645,320; and for Morelend Finance Corporation (Vic) Pty Limited against the defendants in the sum of $1,263,503. 2 In those principal proceedings the defendants have cross-claimed against H. I. H. Casualty and General Insurance Limited, [“H.I.H”]. The issue raised by the cross-claim, put simply, is whether H.I.H is contractually obliged to indemnify the valuers in respect of the judgments that have been recovered against them by the plaintiffs. 3 H.I.H has disputed that it is so liable upon the relevant contract of insurance. The position taken in that regard by H.I.H is, essentially, that the declaration and proposal respecting the relevant contract of insurance failed to disclose that the valuers, who are now claiming indemnity under the contract of insurance, had become aware of circumstances which could give rise to a claim under the policy. H.I.H contends, in the alternative, that the relevant proposal form as completed by the valuers contained a misrepresentation. H.I.H contends that, had that misrepresentation not occurred, or had the circumstances capable of giving rise to a claim been disclosed to it, H.I.H would have excluded from coverage any claim arising out of the said circumstances; or, in other words, would have excluded precisely such a claim as is now made by the valuers. Such a state of affairs entails, in the contention of H.I.H, that the operation of s.28(3) of the Insurance Contracts Act 1984 (C’wealth) would reduce to nil any liability otherwise accruing to H.I.H under the relevant contract of insurance. 4   In the litigious context thus described, two questions were referred out for consideration by a Referee. The questions were expressed as follows:

“1. Was there a non-disclosure or a misrepresentation which entitled …………(H.I.H) to reduce its liability under the contracts of insurance sued upon to nil?
2. If yes to 1, is ………… (H.I.H) obliged to indemnify ………….(the valuers)………… in respect of the claim made against them by the plaintiffs in these proceedings?”

5   On 5 July 1996 the Referee conducted a hearing during the course of which he received oral and documentary evidence and submissions from the interested parties. On 5 August 1996 the Referee published his report. The Referee answered question 1: no; and question 2: not applicable. 6   By a notice of motion filed on 26 July 1999, the plaintiffs in the principal proceedings apply for orders: that the report of the Referee dated 5 August 1996 be adopted in full by this Court; that the Court makes such further or other orders as it thinks fit; and that the costs of the motion be paid by the valuers. 7   The adjudication of such an application is governed by SCR Pt 72. R 13 of that part provides, so far as is relevant, as follows:

“13(1) Where a report is made, the court may, ……………….on application by any party, on a matter of fact or law or both -
(a) adopt, vary or reject the report in whole or in part;
(b) [not applicable]

(c) [not applicable]

(d) decide any matter on the evidence taken before the referee, with or without additional evidence,
and shall give such judgment or make such order as the Court thinks fit.
(2) Evidence additional to the evidence taken before the referee may not be adduced before the court except with the leave of the court.”

8   At the hearing before this Court, the plaintiffs, H.I.H and (put simply) the valuers were all represented by counsel. 9   At the hearing, a great deal of time was occupied in the resolution of a dispute concerning the proper admissibility in evidence before this Court of the transcript of the proceedings before the Referee, and of certain associated documentary exhibits which had been received in evidence by the Referee. The competing contentions have been recorded; the record has been transcribed; and it is not necessary here to repeat in fine detail these arguments. I received a folder containing such of this material as H.I.H desired to put into evidence before this Court, and marked it Exhibit 1 in the proceedings before this Court. I do not see any need for a present extended discussion of the theoretical principles concerning the admissibility of Exhibit 1. I have taken the view that the nature of the objections made by H.I.H to the Referee’s report is such as to require a proper, which is to say a properly contained, reference by this Court to the course of proceedings before the Referee. 10   Nor do I see any present utility in an extended canvass of the principles which have been established as the criteria by reference to which this Court is to consider an application, such as the present one, for the adoption of a Referee’s report. The relevant principles are the subject of a number of decisions, of which the leading authority in this Court is probably the decision of the Court of Appeal in Super Pty Ltd (formerly known as Leda Constructions Pty Ltd) v SJP Formwork (Aust) Pty Ltd [1992] 29 NSWLR 549. I have read the report of that particular decision; and I proceed for present purposes upon the basis that the principles there established are those by which I am now to be guided. I think that a proper application of those principles in any particular case depends, at least to some extent, upon the way in which a party objecting to the adoption by the Court of the particular report frames the grounds of such objection. 11 In the present particular matter, learned counsel for H.I.H put in substantial written submissions. They summarise in a helpful form the errors allegedly made by the Referee. That written summary was expanded somewhat in the oral submissions put by counsel for H.I.H. Combining the written and oral submissions, a summary statement of the errors asserted by H.I.H to have been made by the Referee is as follows:

1. The primary error of the Referee was in the construction he gave to certain questions and answers in the relevant proposal form. It is contended in this regard that “(such) process involved a question of law or alternatively, a question of mixed fact and law with the result that the Court should review the Referee’s finding and the evidence in order to determine for itself whether the conclusion reached by the Referee was correct or not” .

2. Central to the relevant process of reasoning which the Referee should have followed was a letter written on behalf of the plaintiffs to the valuers and marked for the attention of Mr. Rowan, one of the employees of the valuers. That letter read, so far as is material to the present submission of H.I.H, as follows:

“With respect to your concerns about a possible claim against your Professional Indemnity Insurance, please be advised that we have instructed solicitors to provide advices in this matter.
Your earliest attention to this matter would be appreciated.”


3. The relevant portion of the proposal form was in two parts. The first part, described as Question 4.1, asked whether a claim had been made. An affirmative answer to that question called for the furnishing of relevant particulars. The answer given in the relevant proposal was: “Yes” ; but no particulars were provided. The letter referred to in 2 above, upon its proper construction, did not constitute, however, a “claim” so that the failure to give particulars of the answer to question 4.1 was irrelevant.

4. An associated question in the proposal form, denominated as question 4.3, was answered in the negative. This was a misrepresentation. Question 4.3 was in the following form:

“4.3 Are you, the proponent, or any of your partners, aware of any circumstances that could give rise to any claim being made against you or your partners or against your predecessors in business or any former partners?”


5. The Referee erred in concluding, as he did, that question 4.1 had been answered correctly. The Referee did not deal with the evidence which had been called before him from Mr. Gregory Brown, General Manager of H.I.H and dealing with the construction of question 4.1. The correct setting for a consideration of question 4.1 was the wording of an earlier policy of which the valuers and their servants and agents must have been aware. That wording contained a definition of “claim” which could not encompass the letter referred to in 2 above. That letter itself could not be found, on any reasonable view, to make a demand. It could not be characterised, on any reasonable view, as a “claim” . The relevant officer of the valuers was not called to give evidence before the Referee. This raised a Jones v Dunkel point, with which the Referee ought to have dealt, but did not in fact deal, in his report.

6. The Referee should have determined that the correct answer to the question 4.1 would have been: no. In that event, the correct answer to the question 4.3 ought to have been: yes.

7. In the alternative, the question 4.3 should have been answered, in any event: yes.

8. In connection with the question 4.3, the Referee had erred in finding that the receipt of the letter referred to in 2 above was not a “circumstance” which could give rise to a claim.

9. The error asserted in 8 above can be demonstrated from the wording of the letter itself. The letter refers to a “possible claim” . This entails: first, that the letter itself cannot be a “claim” ; and secondly , that the notification made by the letter does satisfy the description of “a circumstance likely to give rise to a claim” .

10. The Referee did not deal with submissions made to him by H.I.H to the effect that the relevant representative of the valuers had not regarded the letter referred to in 2 above as evidencing a “claim” .

11. The Referee erred in failing to have any regard in connection with:

(a) The answering of the questions referred to him;


(b) The drawing of inferences from the failure of the relevant representative of the valuers to give evidence before him;

(c) His approach to the construction of the proposal form;

to the contents of a document that was admitted into evidence as Exhibit 2 before the Referee. This document reads as follows:
“Stuart N Rowan Egan Rowan Consultants Valuers P/L
R.V. Dimond Pty. Ltd
R.V. Dimond (Sales) P/L
Prubook Holding P/L
Suhijo P/L & Car Parks P/L
Geoff Gordon R V Dimond (Sales) P/L
ANNEXURE 2
We have received a notice of demand dated 23 November 1990 from Permanent Trustee Company Limited which has been referred to Messrs. Steeves Lumley & Co. and its solicitors Messrs Phillips Fox & Co.
Note: R. V. Dimond (Sales) on demand letter - proposed claim strenuously denied.”

12   I should mention for the sake of completeness a further submission put by H.I.H in the second paragraph of its principal written submissions. That submission is in the following terms:

“H.I.H opposes the adoption of the Report in any event. It is submitted that the Plaintiffs do not have standing to do so. The Report does not deal with any issue between the plaintiff and H.I.H. There are no pleadings between H.I.H and the plaintiffs.”

13   Upon reviewing, as I have done, the transcript of the hearing before this Court, I am not clear whether H.I.H presses this particular submission. I indicate, therefore, and for more abundant caution, that I reject the submission. The plaintiffs have in their favour a judgment of this Court against the valuers. The plaintiffs have an obvious interest in the effective enforcement of their judgment. That effective enforcement depends, in significant degree, upon the liability of H.I.H to indemnify the valuers. The adoption, or the rejection, by this Court of the Referee’s report has obvious importance in the resolution of the question whether that liability falls, in the events which have happened, upon H.I.H. Those considerations are sufficient, in my opinion, to dispose of this particular contention of H.I.H. 14   It is convenient to turn, next, to the way in which the Referee dealt with the question 4.1, and the answer given to it, in the relevant insurance proposal form. The Referee’s exposed process of reasoning in that connection is both succinct and clear, and is better quoted than glossed. The Referee says:

“In dealing with these issues it seems to me that the correct approach is to ascertain, upon a fair reading of the terms of the questions, what was required of the proponent at the time he made the declaration, in this case on 23 December 1991.
Question 4.1 requires information as to claims made up to the date of the declaration. The term “claim” has no definition and so one looks to its natural and ordinary meaning which includes “an assertion of a right or alleged right; an assertion of something as a fact” (Macquarie Dictionary 2nd Edition). Thus Question 4.1 may be read widely as a request for information as to claims whether spurious, sound, established, alleged or threatened.
Mr. Rowan answered Question 4.1 “Yes”. It is reasonable to assume that at the time he answered the question he had in mind at least the letter and the matters alluded to in it. A fair reading of the letter clearly suggests the existence of a possible claim, or the threat of one, of a kind which generated sufficient concern in Mr. Rowan to result in the retention of solicitors to advise on the matter. The very terms of the question left it to him to make a judgment as to whether the information he had before him amounted to a claim in its ordinary meaning.
The evidence does not enable one to know the extent of the information before Mr. Rowan at the relevant time which caused him to give the answer he made, although obviously it consisted of more than the bare statement in the letter quoted above. In any event, the statement in the letter, although it may be argued that it should not be construed as a claim, cannot be read as negating a claim.
In my view, the evidence relied upon by H.I.H, such as it was, establishes that Mr. Rowan was entirely justified in answering Question 4.1 “Yes”. It certainly does not provide a basis for a finding that such an answer was untrue.”

15   As to this process of reasoning, I express the following opinions:

1. I agree that the term “claim” is not defined in the relevant insurance proposal form. I do not agree with the submission of H.I.H that question 4.1 needed to be considered by the Referee “against the background of the wording of an earlier policy of which Mr. Rowan must have been aware which contained a definition of claim, which definition could not encompass the subject letter” . The insurance proposal form seems to me, on the evidence available to this Court, to be a stand-alone document in the sense that it does not incorporate in any general way the contents of the current policy of insurance; and, in particular, the terms of any definitions contained in the current policy of insurance. There are in the insurance proposal form some particular references to aspects of the current policy of insurance; but, as I say, there is no general incorporation into the insurance proposal form of definitions appearing in the current policy of insurance. Nor was there before the Referee, as it seems to me, any evidence to support the proposition, now advanced by H.I.H, that Mr. Rowan must have been aware of the definition of “claim” contained in the relevant current policy of insurance; still less that Mr. Rowan, when he completed the insurance proposal form, did in fact have a conscious awareness of any such definition.

2. That being so, I agree with the Referee that it was necessary to look to the natural and ordinary meaning of the words, in question 4.1: “Have any claims been made against you ………..” .

3. I do not agree, however, that such inquiry led as its first step to relevant dictionary definitions, or to any other extraneous material. What the Referee was required to do, as it seems to me, was not only to give the words of question 4.1 their natural and ordinary grammatical meaning; but also to give the words that meaning in a way that was consonant with the context in which the words appear.

4. That context is not, in my opinion, limited rigidly to question 4.1 itself. It is true that questions 4.1, 4.2 and 4.3 are distinct questions distinctly posed in the insurance proposal form. It is, however, equally clear, in my opinion, that questions 4.1, 4.2 and 4.3 are, notwithstanding that distinctness of their expression, related questions having to do with the general topic, nominated in the very heading of the relevant portion of the insurance proposal form as: “4. CLAIMS HISTORY” .

5. Approached in that way, it can be seen, in my opinion, that questions 4.1 and 4.3 aim at distinct, but complementary, matters. Question 4.1 aims at a claim that has actually been made against the proponent or the proponent’s present partners. Question 4.3 is aimed clearly, in my opinion, at the complementary situation where no such claim has actually been made; but where the proponent or any of the proponent’s partners is aware of circumstances of which a reasonably prudent businessman would understand that, although a claim had not actually been made, it was “on the cards”, (to borrow from Gibbs J in Alister v The Queen (1984) 154 CLR 404 at 414); or not “far fetched or fanciful”, ( to borrow from Mason J in Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47), that such a claim might actually eventuate in the future.

6. It seems to me to follow, therefore, that the answer: “Yes” given to question 4.1 should be understood as a disclosure by the proponent that a claim had actually been made against the proponent; and that the proposed insurer was entitled to have that fact disclosed as being something within the contemplation of s.21(1) of the Insurance Contracts Act .

7. I agree with the Referee that the evidence before him, exiguous in the extreme as it was, did not provide a basis for any finding by the Referee that the answer, as thus given to question 4.1, was untrue. But neither was there any evidence before the Referee, so far at least as I can see, capable of establishing that the answer was, in a literal and particular sense, true. It seems to me that the evidence before the Referee, such as it was, was wholly neutral on the point.

8. What can be said about the answer to question 4.1, and notwithstanding the paucity of the available evidence about the process of reasoning that led to the making of the answer, is that it was, on the face of the insurance proposal form, an incomplete answer in as much as “full particulars” , which the proposal form plainly called for in the case of an affirmative answer to question 4.1, were not ever provided. H.I.H accepted, nevertheless, the proposal for insurance. It seems to me to follow that, by reason of the operation of s. 21(3) of the Insurance Contracts Act , H.I.H was deemed to have waived compliance with what would otherwise have been the statutory duty of disclosure in connection with the matter of claims actually made. The Referee came to that conclusion. In my opinion he was correct to do so.

9. It is apparent from a reading of the Referee’s expressed process of reasoning in connection with question 4.1 that the Referee took the view that he was entitled to draw from the evidence before him an inference that the person who answered question 4.1 had in mind, at the time of the giving of the answer, at least the contents of the letter of 23 October 1991. The Referee thought, also, that it was obvious that some information which “consisted of more than the bare statement in the letter” had been present to the mind of the person who completed the answer to question 4.1. For the sake of completeness, I express my respectful disagreement with the drawing by the Referee of these inferences. In the absence of evidence from Mr. Rowan, the officer of the valuers who completed the insurance proposal form, I cannot see that there was any hard evidence from which either of the suggested inferences could be logically drawn.

10. To say that I am in respectful disagreement with various aspects of the Referee’s approach to question 4.1 and its answer, does not entail, as of course, that I must refuse to adopt the Referee’s report in so far as it deals with that question and answer; Astor Properties Pty Ltd v L’Union des Assurances de Paris (1989) 17 NSWLR 483. I shall return to this point presently; but before doing so I turn to the way in which the Referee approached the question and answer 4.3

16   As to the question numbered 4.3, also, the Referee’s exposed process of reasoning is succinct and clear. It is in the following terms:

“With regard to the terms of Question 4.3 it should be observed that as a matter of ordinary English usage a “circumstance” is “a state of affairs, an incident, occurrence or event” (Macquarie Dictionary supra). By itself, the letter is not a “circumstance” within the meaning of Question 4.3. Even if it allows the inference that the proponent was aware of circumstances that could give rise to a claim as at 23 October 1991, in my view it does not prove that those circumstances necessarily remained of that kind as at 23 December 1991.
Indeed, on one view of things it may be said that the contention that Question 4.3 should have been answered “Yes” depends upon acceptance of the proposition that as at 23 December 1991 the letter was the entirety of the information before the proponent. To do so involves an exercise in speculation which should not be undertaken.
It follows, in my view, that it is not open to H.I.H to say that because the letter in its terms should not be understood as conveying a claim it was necessary to answer Question 4.3 “Yes” irrespective of the answer given to Question 4.1.”

17   As to this process of reasoning, I express the following opinions:

1. I agree with the Referee that the letter of 23 October 1991 was not itself a “circumstance” of the kind contemplated by question 4.3. I think, however, that it is clear from the terms of the letter that it communicated “circumstances” in the sense contemplated by that question.

2. I agree with the Referee that it was a question for consideration whether the “circumstances” as communicated by the letter of 23 October 1991 remained current 2 months later when the relevant insurance proposal form was completed by Mr. Rowan on behalf of the valuers.

3. I do not agree, however, with the conclusion of the Referee that the evidence before him, such as it was, did not permit of the drawing of a reasonable inference that the circumstances communicated in October 1991 did indeed remain current in December 1991. The relevant principles in that regard are well established. It is convenient to refer briefly to two particular expositions of them.
In Gurnett and Macquarie Stevedoring Co Pty Ltd (1955) 55 SR (NSW) 243 at 248, Street CJ, speaking for a majority of the Full Court, said:

“A guess is a mere opinion or judgment formed at random and based on slight or uncertain grounds. In contradistinction to such a conjectural opinion, an inference is a reasonable conclusion drawn as a matter of strict logical deduction from known or assumed facts. It must be something which follows from given premises as certainly or probably true, and the mere possibility of truth is not sufficient to justify an inference to that effect.”

In Australian Blue Metal Limited v Hughes & ors. (1961) 79 WN (NSW) 498 at 513, Jacobs J, speaking of what is conventionally referred to as the Jones v Dunkel principle, says of that principle that it:

“……………….is not limited to inferences in respect of a defendant’s conduct arising from his own failure to give evidence, but extends to inferences arising from a defendant’s failure to call any witness who might be expected to be called by him to give direct evidence on facts which the other party seeks to establish by inference.”

18   The application of those principles to the evidence, such as it was, before the Referee in the present case, seems to me to justify the following reasoning:

(a) The letter of 23 October 1991 is addressed to the personal attention of Mr. Rowan.

(b) The letter is marked, prominently, with a stamp reading “URGENT” . There is no reason to think that the letter was not despatched urgently to the valuers; and there is no evidence either that it was not received by the valuers, or that it was received by them but for some reason or other did not find its way to the attention of Mr. Rowan.

(c) The valuers, and Mr. Rowan in particular, were uniquely well placed, as between themselves and their insurer H.I.H, to furnish evidence as to the currency or otherwise at the date of completion of the insurance proposal form of the “circumstances” communicated by the letter of 23 October 1991.

(d) That evidence could have been provided easily by calling Mr. Rowan to give evidence of anything that had come to his attention between 23 October and 23 December, being anything indicative of the “circumstances” having changed in any relevant way between the two dates.

(e) In the alternative, it would have been a simple matter for the valuers to have produced to the Referee any relevant documentary material showing such a change in the “circumstances” between the two relevant dates.

(f) Mr. Rowan was not called to give evidence, and his failure to give evidence was, so far as I can see from the available material, wholly unexplained.

(g) Nor, so far as I can see, was anything else put before the Referee so as to establish that the “circumstances” communicated in October 1991 were not current on the relevant date in December 1991.

(h) In that evidentiary setting, it was more than a mere possibility, and was, as a matter of reasonable inference, more probable than not, that nothing relevant changed in the “circumstances” between October and December 1991.

19   It follows, therefore, that it ought, in my opinion, to have been found on the probabilities that question 4.3 ought to have been answered: “Yes”; and that the answer in fact given was, therefore, wrong in fact and did not disclose something that ought to have been disclosed by the proponent. 20 As earlier herein noted, the Referee came to the conclusion that compliance with the statutory duty of disclosure had been waived in connection with question 4.1. The Referee concluded, also, that there had been such a waiver in connection with question 4.3. In my opinion, that conclusion was not supported by the evidence before the Referee. It seems to me that the answer in fact provided to question 4.3 did not constitute a failure to answer as contemplated by s.21(3)(a) of the Insurance Contracts Act; and that it was not “an obviously incomplete or irrelevant answer” to question 4.3, as contemplated by s.21(3)(b) of that Act. I cannot see, therefore, where there is a basis for a holding that H.I.H waived compliance, by reason of the deeming provisions of s.21(3) with the relevant duty of disclosure in relation to question 4.3. Nor do I see in the evidence before the Referee, or in anything else now before this Court, evidence of a waiver aliunde by H.I.H. 21   There are two further matters to be considered in the light of the submissions that were made to this Court at the recent hearing; and, presently, I shall have something to say about both of them. What I shall thus say does not affect, however, what I am about to say by way of conclusions reached in the light of the whole of the foregoing discussion. 22   I am very conscious of the fact that what I am now called upon to do is to exercise a judicial discretion. In that connection, I have had, as earlier herein indicated, regard to the clear statements of policy and of principle that are contained in the Super Pty Ltd decision. I have had regard, as well, to the discussion of relevant principle that forms part of the judgment of Giles J in Leighton Contractors Pty Ltd v C.E. Heath Underwriting Services Ltd & ors. (1995) 8 ANZ Ins. Cas. 61-231: see in particular the material that follows the heading “The approach to the report” at 75, 533-75,534. I have considered, as well, a similar discussion by Cole J in Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd [1988] 17 NSWLR 60: see in particular at 66G-69D. 23 In the present particular case, the Referee was one of Her Majesty’s counsel of acknowledged learning and experience. I hesitate to refuse to adopt a report from a Referee of such standing; and I would not so refuse in fact for the reason, only, that I, had I been in the Referee’s position, would have decided particular questions, resolved particular issues, or assessed particular evidence, in a way different from that taken by the Referee. I have come, however, to the clear conclusion that the aggregate effect of the matters to which I have drawn attention in the preceding discussion is such that it would not be a proper exercise of the relevant discretion to adopt the particular report. 24 Of the two outstanding issues to which I have earlier referred, the first is the submission numbered 11 in the summary of H.I.H’s submissions as set out at the beginning of this judgment. This submission turns upon the contents and effect of the document that became Exhibit 2 in the proceedings before the Referee. The contents of that document have been set out earlier in this judgment. 25 Exhibit 2 was introduced into evidence during the course of a very brief re-examination of Mr. Brown. In cross-examination, Mr. Brown had explained that at the times relevant to the matters in issue before the Referee, an affirmative answer to question 4.1 in the insurance proposal form would have triggered a procedure to investigate whether there was any record of such a claim in any claim history of the proponent with the proposed insurer. Mr. Brown explained that such procedure involved looking up some record or other on a computer screen. His relevant answers continued as follows:

“………….. If you look up the computer screen and there is no claim history, right, the next step is, you would say to the broker, ‘what is the problem here, there is no claims history’. Now the broker then presumably, if he is smart, would go back to the insured and say, ‘you have answered ‘yes’
Q. ‘What is the meaning of it?’
A. Yes. Alternatively, in this situation, the broker, seeing the answer ‘yes’ would look up his computer screen, again assuming there is nothing on there, would go to the insured and if the answer from the insured was, ‘no there had been no claims made against me’, he would not refer the file to us. There would be no need. He would merely note on his file that the answer was incorrect.
Q. We are surmising about what the broker would do?
A. That is right.”

26   The re-examination of Mr. Brown consisted of a bare handful of questions as follows:

“Q. You were asked some questions ………..(by counsel) …………..about previous claims. Do you, seeing you are unaided by any documents, have any recollection of any other claims involving …………. (the valuers) ………….. under your scheme?
A. The name comes to mind. Whether it is a pre or post this event I’m not sure. We have sort of, since we started, something like 23,000 claims. I do not run an index in my mind.
Q. I show you this document. Have you seen that document before or something like it? That is just a yes or no answer to that, please.
A. Well, I don’t know about that document per se, but it certainly ….
[THE REFEREE]: Q. I think it is a yes or no?
A. Yes.
[COUNSEL] Q. Yes, you have?
A. Yes.”

27   The document was then tendered. There was no objection to the tender, and the document was thereupon admitted and marked as Exhibit 2. The upshot of this evidence seems to me to be as follows:

1. It is not at all clear whether Mr. Brown was saying that he had seen the particular document before; or that he had seen “something like it” on a previous occasion.

2. The evidence before the Referee, and, so far as I can see, the evidence before this Court, does not give any explanation at all of the contents of Exhibit 2. There is no evidence as to what the document actually is. There is no evidence of any system according to which it was either produced, or kept on record. The document on its face contains materials which are described as “Annexure 1” and “Annexure 2” ; but there is no evidence to indicate what it is to which the document is supposed to be an annexure.

3. I think that it is a reasonable inference from the fact that counsel for the valuers and for the individual employees or officers of the valuers took no objection to the tender, that counsel saw the document as having some relevance to the matters in issue before the Referee. The Referee himself did not query the relevance of the document; and nobody on either side of the record gave the Referee any explanation, however brief, of the supposed relevance of the document.

4. It is submitted that the Referee fell into error by reason of a failure on his part to have regard, in the way more particularly set out in the submission as previously summarised, to the contents of Exhibit 2. I do not agree that the Referee fell into such an error. Everything about Exhibit 2 was, in the final state of the evidence before the Referee, so imprecise as to have afforded, in my opinion, no assistance at all to the Referee in connection with the particular questions that he was called upon to decide.

28   The only remaining submission about which I think something particular should be said is a submission that was made by learned counsel appearing for the valuers and for certain individual defendants in the principal proceedings. Counsel submitted that the discretion conferred upon this Court by SCR Pt 72 is so unfettered as to permit of this Court’s adopting a report, notwithstanding a clear conviction on the part of the Court that the report is, for whatever reason, unsustainable whether in law or in fact or both in law and in fact. It is, I think, sufficient in the circumstances of the present case if I say simply that I reject that submission. The relevant authorities to which I have earlier referred uniformly stress the breadth of the relevant discretion and that it is a discretion to be exercised judicially. Those authorities are uniform, also, in enjoining a proper judicial restraint in connection with the adoption or rejection of a particular report from a Referee. There is, however, one further point on which the authorities are of one accord, and that is the need to ensure that in any particular case the Court does not exercise the relevant judicial discretion in such a way as promotes administrative efficiency or bare utilitarianism at the cost of justice. That proposition entails necessarily, as it seems to me, that it cannot be correct to suppose that the Court would be justified in adopting a report of which it was clearly and properly convinced that the report misconceived the relevant law; misapprehended the relevant facts; or reached conclusions that were manifestly unsustainable on a proper view of the available evidence concerning them. 29   Having decided, for the whole of the foregoing reasons, that I decline to adopt the Referee’s report in the present case, it remains to consider what ancillary orders should thereupon be made. In that regard, I give direction as follows:

1. The plaintiffs in the principal proceedings are to file and serve not later than 7 days from today Short Minutes of Orders giving effect to the present judgment, and to its practical consequences in the principal proceedings.

2. Not later than 7 days thereafter the 4th, 5th, 6th and 7th defendants in the principal proceedings and H.I.H are to file and serve upon the plaintiffs in the principal proceedings written submissions, both as to the orders proposed by the plaintiffs, and as to any proposed alternative orders.

3. Upon compliance with the directions given in 1 and 2 above, the proceedings in this Court may be re-listed for any necessary argument in connection with, and for the making of, appropriate orders necessary to give practical effect to the present judgment. Any party to the present proceedings in this Court may have those proceedings so re-listed upon 3 days’ notice by letter or by facsimile transmission to all other interested parties, and for a day convenient to the Court and the parties.

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Last Modified: 09/23/1999