Star Entertainment Group Limited & Ors v Chubb Insurance Australia Ltd & Ors

[2022] HCATrans 173

[2022] HCATrans 173

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S35 of 2022

B e t w e e n -

THE STAR ENTERTAINMENT GROUP LIMITED (ABN 85 149 629 023)

First Applicant

THE STAR ENTERTAINMENT SYDNEY HOLDINGS LIMITED (ACN 064 054 431)

Second Applicant

THE STAR ENTERTAINMENT QLD LIMITED (ACN 010 741 045)

Third Applicant

THE STAR PTY LIMITED (ACN 060 510 410)

Fourth Applicant

THE STAR ENTERTAINMENT SYDNEY PROPERTIES PTY LTD (ACN 050 045 120)

Fifth Applicant

THE STAR ENTERTAINMENT SYDNEY APARTMENTS PTY LTD (ACN 075 423 666)

Sixth Applicant

THE STAR ENTERTAINMENT QLD CUSTODIAN PTY LTD (ACN 067 888 680)

Seventh Applicant

THE STAR BRISBANE CAR PARK HOLDINGS PTY LTD (ACN 610 776 184)

Eighth Applicant

THE STAR ENTERTAINMENT GC INVESTMENTS PTY LTD (ACN 615 401 164)

Ninth Applicant

and

CHUBB INSURANCE AUSTRALIA LTD (ABN 23 001 642 020)

First Respondent

AIG AUSTRALIA LIMITED (ABN 93 004 727 753)

Second Respondent

XL INSURANCE COMPANY SE (ABN 36 083 570 441)

Third Respondent

ZURICH AUSTRALIAN INSURANCE LIMITED (ABN 13 000 296 640)

Fourth Respondent

ALLIANZ AUSTRALIAN INSURANCE LIMITED (ABN 15 000 122 850)

Fifth Respondent

SWISS RE INTERNATIONAL SE AUSTRALIA BRANCH (ABN 38 138 873 211)

Sixth Respondent

ASSICURAZIONI GENERALI S.P.A. (HONG KONG)

Seventh Respondent

LIBERTY MUTUAL INSURANCE COMPANY (ABN 61 086 083 605)

Eighth Respondent

HDI GLOBAL SE AUSTRALIA (ABN 55 490 279 016)

Ninth Respondent

ALLIED WORLD ASSURANCE COMPANY, LTD (SINGAPORE BRANCH)

Tenth Respondent

PICC PROPERTY AND CASUALTY COMPANY LIMITED

Eleventh Respondent

Application for special leave to appeal

GAGELER J
EDELMAN J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON FRIDAY, 14 OCTOBER 2022, AT 1.24 PM

Copyright in the High Court of Australia

GAGELER J:   In accordance with the protocol for remote hearings, I will announce the appearances of the parties.

MR S.L. DOYLE, KC appears with MR D.H. MITCHELL for the applicants.  (instructed by King & Wood Mallesons)

MR B.W. WALKER, SC appears with MR T.W. MARSKELL and MR H.R FIELDER for the respondents.  (instructed by Wotton + Kearney)

GAGELER J:   Mr Doyle.

MR DOYLE:   Thank you, your Honours.  Your Honours, the policy, by extension, in this case, covered financial:

loss resulting from or caused by any lawfully constituted authority in connection with or for the purpose of retarding any conflagration or other catastrophe.

Now, that language appears in the application book at page 85 in the Full Court’s reasons.  On the evidence in this case, it was held that the COVID pandemic had developed so as to be a “catastrophe” in the normal meaning of that word and that the government measures, which were claimed to have affected Star’s business, were measures in connection with or for the purposes of retarding that pandemic.

We have identified where those findings appear in paragraph 12 of our application; I will not take your Honours to that now.  Neither of those findings was disturbed on appeal.  But beside that, it was held that a reasonable business person would read the policy as not responding to the loss for this catastrophe and the measures taken to retard it.  That was said to be for two related reasons.

The first, and I will summarise, is that it was held, construing the policy as a whole, another memorandum, memorandum 9, covered the field for losses attributable to all the human disease and government measures taken in response to them.  Secondly, it was said, in any event, the expression “conflagration or other catastrophe” was to be construed so as to only cover loss arising from lawful action taken to physically retain or retard by physical means something and that did not extend to the steps taken to retard COVID.

GLEESON J:   Mr Doyle, why would we grant special leave in this application having regard to the conclusion that we reached in Taphouse and LCA Marrickville?

MR DOYLE:   Your Honours, I hope to persuade you that the conclusions reached on . . . . . points are plainly wrong.  Now, the language has some similarities between the two, but the drafting of the clauses is different and the points we wish to raise are different.  We do not run the contention that this is a particular prism of the offeree through whom the policy is to be viewed but, rather, it is a matter of the proper construction.

Now, I have said that these are all issues with construction of the contract.  But we wish to contend that the court got it wrong and plainly wrong, both as to matters of principle, but also as to matters of construction, which are of general application in the insurance industry.

Can I move to the first of the two questions?  That is, the proposition that the policy did not cover this particular catastrophe because of the construction of memorandum 9 displacing the operation at all of memorandum 7.  Essentially, the reasoning of the Full Court appears at appears at application book page 99, at paragraph 70, which we would ask your Honours to read, please.  It is possibly the only paragraph I will ask you to read for these purposes.

Your Honours will see that it professes to state something of a principle to be applied to the nature of an insurance instrument being something.  And so, it has the appearance of seeking to invoke a principle not merely in its application to the present case.

But even as to the present case, it is, in our submission, an erroneous construction.  The court relied upon a number of features of the memorandum 9 to indicate that it covered the field.  But memorandum 9, your Honours, extracted on page 86 of the application book, it is similar but plainly not the same as the LCA policy to which you were taken earlier.

And the approach of the court was, in effect, to treat the focus of memorandum 9 as being all human disease and then identify features of the policy which restricted by qualification or limitation.  And that is the substance of what is expressed in paragraph 70, identifying the key definition, and then words of modification or limitation.

But the plain . . . . . construction of memorandum 9 is the one adverted to by Justice Edelman, really, in the earlier matter.  It is expressed to be concerned with a variety of things, sort of a mixture of things, which occur at a premises.  It covers:

2.The discovery of vermin or pests at the Premises,

3.Any accident –

affecting drains at the premises, “murder or suicide” – at the premises, I suppose – and a limited class of disease occurring at the premises.

In the case of each of those, all, calling forth some response by the local authority – as it is described – which leads to some restriction imposed upon the use of the premises.  So that relevant to any human disease, for a limited class of notifiable diseases which are not listed human diseases under the Biosecurity Act, the nature of the cover is, if it occurs at the premises, and then it has to be a kind which excites the response of the local authority which causes a restriction of use of those premises, which gives rise to some form of limited cover.

That tells you nothing about the scope of another extension – memorandum 7 – which deals with occurrences not at the premises, but really of a broader nature, something which can be fairly described as a “conflagration” or a “catastrophe”, and the finding in this case was that the COVID‑19 pandemic was a catastrophe within the usual meaning of the word.

So, our submission is that memoranda 7 and 9 really deal with different risks – that 9 deals with particular risks at the premises, and it no doubt is . . . . .  It is not terribly carefully drafted, because it still refers to ‑ ‑ ‑

EDELMAN J:   Mr Doyle, would you accept that a catastrophe at the premises that fell within, for example, a notifiable disease, but which was excluded by the special provisions would fall within the terms of 9 but it would be excluded from the terms of 7?

MR DOYLE:   No, your Honour.  In the unlikely event that there is something which can be said to be a notifiable illness which is not a listed human disease under the Biosecurity Act, in that limited event, and would occur as . . . . . at the premises, but is catastrophic – I am not quite sure how that would occur, but assume that occurs.  There would be two memoranda which might respond, and you would have to make a decision as to which is the specific which applies to that particular event.

It is not a matter that you have to decide for this case, but it is not to be resolved merely on the basis – 9 must apply, and 7 must not.  We would submit that the policy would still cover it as a catastrophe if it is to be fairly described as a catastrophe, even if there was overlap with a differing provision which would cover the circumstances at the premises if they did not give rise to a catastrophe.  I hope I have answered your Honour’s question.

EDELMAN J:   So, that would mean that if you had a catastrophe that fell within 9 and involved an exclusion under the special provisions of 9 so that 9 was prima facie activated, but then an exclusion applied, one could avoid that exclusion by then relying on 7.

MR DOYLE:   If the right conclusion is that for an event where there are two memoranda that might apply, one is to be described as the specific which is to apply, we would answer:  yes, your Honour, if you start from the proposition that the event is a catastrophe, it is covered by 7.

It does not resolve that to say, well, if we look at a different provision, if it had applied under a different provision, it would not be covered, because it is in fact covered because it is a catastrophe.  That is a curiosity in this case, the finding is this was a catastrophe, there were actions taken by . . . . . authority in connection with or for the purposes of retarding that catastrophe, the very things which are spoken of in memorandum 7.  We know it to be a disease which is unlisted under the Biosecurity Act, so it does not fall at all within memorandum 9, but it was said that 9 is the specific provision which covers it, and not 7.  I am sorry, your Honour, I interrupted you.

GAGELER J:   No, no, I am sorry.  I thought you had moved on to your other point about the construction of 7, but I will wait until that occurs.

MR DOYLE:   Yes.  So our principal point really is that when one looks as a matter of characterising memorandum 9, it is dealing with a particular category of things occurring at the premises, it is quite a narrow category, and that the right way to categorise it is that it gives rise to a cover of a different kind of risk to that covered by the catastrophe provision in memorandum 7.

The second aspect of that first point is that the Full Federal Court identified an inconsistency between the two memoranda, and that appears in paragraph 36 of their reasons at page 90, relevantly, of the application book.  It is enough if your Honours read from the fourth line on that page to the end of the paragraph.  The consequence, it was said, that:

the scope of memorandum 7 –

the Civil Authority Extension:

is to be read down so as to avoid inconsistency with the language of memorandum 9 –

But there is, of course, no linguistic inconsistency between the two.  There may well be, at least theoretically, a limited number of circumstances in which the cover may overlap, but there is no language conflict between the two.  The overlap of cover is a common feature in insurance policies.  The first sentence of paragraph 70 that I invited you to read earlier contained a recognition by the court that overlap is common.  In any event, this case, as we have submitted, there is no overlap, because COVID is a kind of illness is excluded from the operation of memorandum 9.

But to . . . . . identify overlap which they describe as inconsistency and then seek to read down one to overcome that overlap is a departure from the orthodox approach to the construction of insurance policies.  We have given your Honours in our application reference to the arbitration award by Lord Mance in the China Taiping Insurance (UK) Co Ltd, and the reasons of Mrs Justice Cockerill in Corbin & King and others because they are . . . . . provisions but because they identify that the orthodox construction of insurance policies is to recognise that there is commonly overlap of cover and that it is not to be construed so as to resolve that overlap by removing it, which is what the effect of the approach of the court has been.

The third aspect of this first topic is that the court then argued that because of the inconsistency, one needed to identify which of these provisions was the general which had to give way to the limitations of the specific.  That appears, your Honours, in two paragraphs relevantly:  the first is at paragraph 62 on page 97, and perhaps more importantly, paragraph 83 on page 102.

Their Honours concluded that the specific here was memorandum 9.  Now, with respect, that is plainly wrong.  In a case where what has been identified is a catastrophe, and steps taken by a lawful authority “in connection with or for the purposes of retarding that catastrophe”, that virtually marries the language of memorandum 7.  So, it is plainly this specific provision which is meant to respond to such a risk.  And it is our submission that is what a reasonable business person would construe this policy to mean.

Looking at 7 – that is, memorandum 7 – each of these is an extension to the primary cover.  When we view memorandum 7, a reasonable business person would conclude it covers a “conflagration or other catastrophe” and steps taken in response to that, pursuant to orders by the authorities to resolve it.  Memorandum 9 is concerned with more localised things that might occur – a melange of things that might occur at the premises:  pests, vermin, food poisoning, and so on – and not be concerned with the question of a catastrophe.  But of the two, memorandum 7 is the specific that deals with this claim.

Can I from that, your Honours, to the second aspect of this error below, and that was to confine the meaning of the expression:

‘in connection with or for the purpose of’ . . . ‘retarding any conflagration or other catastrophe’ –

in the way that I have outlined the Full Court did.  There were three errors in their approach, which – if correct – will have effect for general operation for any kind of similarly‑expressed provisions.  The first is in paragraph 119 at page 111.  The Court construed the composite expression which is used in memorandum 7 as being limited to steps taken to retard the conflagration or the catastrophe, whereas, the natural reading of the clause is to construe it as referring to actions by lawfully constituted authorities.  Either in connection with any conflagration or other catastrophe or for the purpose of retarding any conflagration or catastrophe.

EDELMAN J:   In other words, Mr Doyle, you read the clause as though there is a comma after “with” and a comma after “retarding”.

MR DOYLE:   Correct.  You give effect to both aspects of it.  The Full Federal Court’s construction gives no scope to the expression “in connection with”.

GAGELER J:   What role does section 2 of the policy play in the construction of memorandum 7; that is, the scope of the damage that memorandum 7 is meant to extend?

MR DOYLE:   It has been determined to extend to financial loss.  In this case, it is the loss of trading business attributable to something.  But ultimately what the Full Federal Court has said is that it has to be attributable to steps taken to retard and they have to be physical steps which physically retard something, and the first step in that reasoning is to give no scope to the operation of the words “in connection with”, in this case, the catastrophe.

GLEESON J:   What scope is there for the words “for the purpose of retarding”?

MR DOYLE:   I will give your Honour an example.  If there were . . . . . at the moment whether this is or is not a physical manifestation of some kind.  One could take a step in connection with a conflagration or catastrophe, like taking over premises to house people who have been displaced by a conflagration or catastrophe somewhere else, which would obvious have an effect on the business conducted at those premises.  One could take steps towards retarding the conflagration or catastrophe itself, knocking down buildings to cut a fire break, and so on.

So, if it is right nonetheless to say that retarding has to be, with respect, something that is a physical manifestation, steps taken in connection with it can be broader.  There is no warrant, really, to read the clause as excluding the kinds of steps which an authority may take to prevent the operation of a business directed to something which is connected to the conflagration or catastrophe, but not itself designed towards retarding it.

Your Honours, none of these things are to be dealt with in isolation, so I will move on if I may.  The concept of whether there is connection with the retarding, the Full Federal Court determined at paragraph 127 that it is limited to:

events that can be retarded by physical actions directed towards restraining or interrupting the progress –

and it was said, COVID is not such a thing.  Now, that of course falls away if the focus of the court is not simply retarding, but extends to matters in connection with.  But in any case, the error which the court fell into in coming to that conclusion was essentially to apply the ejusdem generis rule.  It said conflagrations are physical, therefore other catastrophes much be physical, and they made the error of using one to define a class, and they have defined it by reference to its physical characteristics as distinct from its propensity to cause widespread harm.

GAGELER J:   Mr Doyle, your time has expired.  If you have a submission that you wish to complete, please do so.

MR DOYLE:   Very well.  Sorry, I had only heard the one bell, your Honour.  I am sorry.  In terms of the second question, we rely upon what we have said in writing.  The reason why special leave ought to be granted is because this is a matter of general importance.  It is not limited to my client’s claim, which, in itself, is very substantial, but to similar such claims about which there is evidence.

It is also – there was evidence in the material at application book 284 of the general insurance interests, that is, insurance business interests in the determination of this question, whether the descriptor “conflagration or other catastrophe” extends to the kinds of things which cannot be met by physical restraint.  And so, it is not simply a matter which is concerned with this case; it is concerned with the industry as a whole, as the industry itself recognises in that article to which we have referred, and, really, for the public importance of it and the importance of the interests of justice for my client, we would urge that special leave be granted.

GAGELER J:   Yes.  Thank you, Mr Doyle.  We will retire at this point to consider the course we will take.

AT 1.47 PM SHORT ADJOURNMENT

UPON RESUMING AT 1.52 PM:

GAGELER J:   Mr Walker, we do not need to hear from you.  In our opinion, the foreshadowed appeal would not involve resolution of any principle of general importance.  On that basis, special leave to appeal is refused with costs.

The Court will now adjourn until 2.00 pm.

AT 1.52 PM THE MATTER WAS CONCLUDED