State Government Insurance Commission v South Australian Housing Trust

[1989] HCATrans 123

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No Al6 of 1989

B e t w e e n -

STATE GOVERNMENT INSURANCE

COMMISSION

Applicant

and

SOUTH AUSTRALIAN HOUSING TRUST

Respondent

Application for special

leave to appeal

MASON CJ
BRENNAN J

DAWSON J

Housing

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 1 JUNE 1989, AT 12.01 PM

Copyright in the High Court of Australia

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MR J.R. MANSFIELD, QC:  May it please the Court, I appear

with my learned friend, MR M.G. STEELE, for the

applicant. (instructed by Ward & Partners)

MR D.M.J. BENNETT, QC:  May it please the Court, I appear

with my learned friend, MR I.L. MAITLAND, for the

respondent. (instructed by F1nlaysons)

MASON CJ:	Yes, Mr Mansfield.
MR MANSFIELD:	If the Court pleases, we have a summary of

submission on the application which we hand up to the

Court. There is reference in it to some cases which

I do not think I will be taking the Court to, but

in case it is necessary ve have a book of those . '

cases available also to the Court.

MASON CJ: 

Thank you.

MR MANSFIELD: 

Would it be convenient to the Court if I

made my submissions through that, or would the
Court prefer to read that document?

MASON CJ: 

I think we might read it first, Mr Mansfield.

MR MANSFIELD: 

If the Court pleases.

MASON CJ: 

Why do you say that Chief Justice King was wrong

in the approach that he adopted to the point that

you describe as point A?

MR MANSFIELD:  If the Court pleases, the reason that we say

that is because, in our respectful submission, the

Chief Justice has misconceived the point which this

Court should consider. May I take the Court to the
Chief Justice's reasons to point that out, and it a2pears in the reasons of the Chief Justice, first

of all, where His Honour starts dealing with the

point, at page 116A of the appeal book, where

His Honour recites the clause and then he cites a

number of the cases following on from that. (Continued on page 3)

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MR MANSFIELD (continuing);

His Honour's comments

having referred to those cases then makes this

comment towards the bottom of page 121.

His Honour says:

I think that the present case is of a very

different kind for reasons which I shall

now state.

The appellant in the present case did

not seek to relitigate an issue which had

been decided against it in the previous

case.	The issues in the two actions are
quite different.	The issue in the first

action was whether the appellant was in

breach of a duty which it owed the injured

child to take reasonable care to prevent foreseeable injury to her. The issue in the present action between.the appellant

and its insurer was quite different.

And His Honour refers to FRASER's case and then,

at page 123, says:

In the present action the appellant did

not seek to relitigate the issue as to whether

he was in breach of his duty of care to

the injured girl; the exitence of such a breach of duty was quite consistent with the appellant having acted reasonably as

between itself and the insurer.

We do not say that any of that is wrong but our
submission, what we would seek to put to the
Court, is that those comments of His Honour the

Chief Justice really miss the point that we seek

to raise by point A. We accept the issues as

between the insurer and the insured are different

from the issues as to fault as between the respondent

to this appeal and the injured child,but in the

course of hearing and determining the injured

child's claim the respondent had against it certain

findings made as towhat communications it had

received from the injured child's mother and

they were quite explicit; that is, on two occasions

before this accident the mother had telephoned

the respondent to this appeal and said something
like, "This gas stove has flames shooting out
of it, it is a dangerous thing.", or generally

conveying that matter.

On the action against our client by this

respondent it is sought to say that it could

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go behind .those findings or could ignore those

findings for the purposes of litigating the issue

of whether it had acted reasonably as between

itself and the insurer.

BRENNAN J:  What is the legal principle which stops it

from doing so?

MR MANSIFLED:  In our respectful submission, the legal

principle which would stop it from doing so is

because - if I can take Your Honour to page 3 of the summary, is that it would be a scandal

to the administration of justice to permit the
insured to seek to make out facts on the question
of reasonableness as between itself and its

insurer, giving rise to its claim to indemnity

which are inconsistent with the facts that it

is seeking the indemnity for.

BRENNAN J:  Here is an insurer who says, "This phone call

was never made to me. We've said it in the first

action, we say it in the second. Now, in the

second action you want to bind us by the finding

in the first action so that we miss out both
on avoiding liability and in giving· indemnity

for it."

MR MANSFIELD:  That is not necessarily so in every case.

We say that it is so in this case because of
the context of the communications. The reason
that we say that it ought not to be able to do
that is because the fact of it having received
those communications in those terms was, in our
respectful submission, apparent in all the judgments

in the first trial and on appeal in the first

trial, a critical part of its liability.

(Continued on page 5)

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Asioty(2)
MR MANSFIELD (continuing): It was only liable because it had

received those communications in those terms.

We, then, submit that it would be manifestly

unfair for it to come along and seek - say, "We

want indemnity for that liability which exists

because of those communications but, in fact,

they did not exist in those terms. "

BRENNAN J:  Do you say that the doctrine of issue estoppel

has somehow been expanded by the notion of manifestly

unfair?

MR MANSFIELD. No, Your Honour, we do not because we cannot

and did not seek to argue that the doctrine of

issue estoppel arose in a conventional sense.

What we sought to argue and what Acting Justice Lunn upheld at first instance was that it would be an abuse

of the process of the court to permit the insured in

this situation ,to seek to make out facts which are

inconsistent with the facts upon which its liability -

and in respect of which i~ seeks indemnity - were

found to exist against it and that is the point that

we seek to make on this matter A.

The other aspect in which we respectfully submit

the learned Chief Justice erred on this topic is

His Honour's - or perhaps I should take the three

points - His Honour, secondly, says in answer to

this argument that was advanced, and this is at the

middle of page 123:

There is the further consideration that

what is in question is not the ultimate

issue in the previous proceedings, namely
the issue of negligence, but certain findings
of fact made in the course of the judge's

reasoning by which he reached the ultimate

finding of negligence. The finding of negligence

would have been open even if the child's

mother did not complain to the appellant

in terms which made clear the extremely

dangerous character of the defect in the
cooker. There is no case in which a court
has held it to be an abuse of process to

seek to re-open intermediate findings of

fact which do not of themselves determine

the ultimate issue.

Now, as to the sentence that His Honour asserts

there that:

The finding of negligence would have been

open even if the child's mother did not

complain ..... in terms which made clear the

extremely dangerous character of the defect -

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our respectful submission is that, whether or not

that is so or whether or not that might have

been so, the fact is that it was not so in this particular case and on page 2 of the background matters, the Court is given a reference to the

decision, not simply of acting Justice Lunn who

heard the trial at first instance but of

Justice Legoe who heard the girl's claim in the

first instance and of each of the judges, including

the Chief Justice who heard the appeal on liability
on the girl's claim and the references in each
case make it perfectly plain, in our respectful
submission, that the finding of negligence at

the end of the girl's claim was based critically

upon the fact that there had been previously

a communication of a state of danger, not simply
a communication that the stove was not working.

For instance, in the reasons of the chief Justice

at page 44, just over half-way down the page - perhaps
I should tie this comment in with His Honour's

determination of the findings.At page 34, first of

all, the last five or six lines, His Honour records

the finding which was made about the communication
in December 1980 including, the Court will see,

the assertion that it was very dangerous because

of the children. At page 35, the next paragraph,

His Honour records a finding to the same effect

in respect of a communication in April 1981,
just before the accident happened, a few weeks

before it happened. His Honour, in respect of

those findings, says this at page 44:

The duty is as I have indicated, to take reasonalbe measures to remove the danger.

The law of negligence demands only what

is reasonable. A public housing authority

cannot attend to every demand instantly.

Where, however, the authority has express

notive that a defect exists which is a real

and immediate danger to persons on the premises,

reasonableness demands immediate remedial

action.

(Continued on page 7)

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MR MANSFIELD (continuing):  I will not read the balance

of that paragraph, but it is to the same

effect and we submit that the Court will find
that the references otherwise, in the judgment

of Mr Justice Prior at page 70, in the

judgment of Justice Olsson at page 77, make

it clear that in this particular case

communication which did take place was, and

in particular the communication that the

stove was shooting flame and was dangerous,

was a critical part of the decision.

The second reason why His Honour says,

as he does on page 123, why the abuse of process
cases are inapt to apply in these circumstances,

in our respectful submission, is wrong. And

the third reason which His Honour addresses -

BRENNAN J:	Mr Mansfield, could I just ask you what was
the terms of the indemnity?
MR MANSFIELD:	It was the usual clause .. an incl.enpity .for

liability and the liability would of course be

the judgment. We could not go behind - we

were looking at an argument from the point of

view of the insurer and it is obviously

untenable to say, from an insuret's point of

view, although you have been found liable,

we are not going to indemnify you because we

say that judgment was wrong and the facts are

different from what the trial judge found to

be the case.	An insurer could not do that and
we say - - -

BRENNAN J:	The liability on the part of the insurer was
t.o; meet the judgnent debt.
MR MANSFIELD:	The liability was to indemnify in respect

of the judgment debt, but the insurer had

certain conditions in the policy, including

the one which I have mentioned at condition 4

which is set out in full at page 116A.

BRENNAN J:  I can understand that if it were a question

of a liability which rested upon a fact which

attracted a defence, your point would have some substance, but that is not the claim at

all that is being made under the policy. It

is to be indemnified with respect to a

judgment debt.

MR MANSFIELD:  We have not sought to contest at any stage

that our client, but for breaches of the

condition, is obliged to indemnify. That has
not been the issue. The issue, as between

the respondent and the applicant here, has

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been whether or not there were breaches of

the condition. Our submission was, and remains,

that on the topic of whether or not there is

a breach of condition, the insured ought not

to be able to set out to prove a set of facts - two

specific facts, which are specifically inconsistent

with the findings on those specific facts which

were critical to the existence of the liability

in the first place.

BRENNAN J:  Wlio bears the onus of proof?

MR MANSFIELD: Well, in our respectful submission, the

onus of proof does not detract from the

proposition.

BRENNAN J:	Does not the insurer have to prove that - - -
MR MANSFIELD:	The insurer has the onus of proof of proving

the facts upon which it seeks to make out the

breach of the condition - we accept that.

BRENNAN J: Well how can it discharge that onus?

MR MANSFIELD:  Well certain evidence was led in the course

of the trial._ It was not simply the pleadings

and judgment on the first trial which was

tended, but the reasons for judgment were

also tended and it was sought - - -

BRENNAN J:  How were they · admissible?

MR MANSFIELD: Well, they were received,Your Honour - there

is one of the cases mentioned in the affidavit

and it is not in the book.- there is a decision of our

supreme court, that is the South Australian
Supreme Court, in a matter of SKAVENTZOS V ME.AIX:WS DISTRICT

COUNCIL, in which it was said by Justice Walters, that those reasons in the previous trial

in somewhat similar circumstances were admissible

of the facts, or admissible evidence of the fact

contained in the reasons so far as they were critical

to the ori~inal decision.	And they were received on
that basis.

(Continued on page 9)

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BRENNAN J: That must be a novelty, must it not?

MR MANSFIELD:  Your Honour, we have not put that in as a matter

that this Court should be considering, but we do say
that it is not proper, and the Court should not

permit to happen, that the insured should be able,

in response to an insurer's assertion that it was in

breach of a policy, when the insured is seeking

indernnity, to come to the Court and say, "We are

entitled to indenmity, we are not in breach of our

policy because although we are liable because of this

fact, along with other facts, this fac~, in fa~t,

is not the case." In other words, in our respectful

submission, the net result would be if the insured is

allowed to take that position, and this is something

which was mentioned in ANSHUN in the process of
reasoning, that the Court on this action was being

asked by the respondent to make findings of fact

about the terms of those cormnunications which were

different from the findings of fact about the terms of

those cormnunications which it had litigated and lost

when the question of its liability was first determined.

It is not, simply, a case where these two issues

are entirely separate. One might say, well, if there

was another claim for damages by somebody else who

was hurt, there would be a different set of

considerations, but they are not separate, because

in this case. it is only by virtue of that liability

andstepping back from the liability by virtue of '

the findings upon which that conclusion of liability was

made, that the insured is entitled to the indemnity

under the policy. So it is, in a sense, a derivative

or consequential claim, rather than an independent

claim.

BRENNAN J:  I understand the way you put it, Mr Mansfield.

The difficulty I have is that it seems to me that

the plaintiff in the action with which you are

concerned simply comes along with the judgment, you

then raise the defence, you must then discharge the

onus of showing that the fact, as you would have it,	exists. They do not say anything about the question
of the facts underlying the judgment. That is a
matter simply for you. You cannot prove it, as it
seems to me, by looking at the judgment. You have
to prove it - aliunde, and if you fail to prove
it then you lose.

MR MANSFIELD:  In our respectful submission, Your Honour - I

take the point Your Honour is making - the course
of the trial of this action, apart from very formal
evidence on the part of the respondent to this

apppeal, then lead to the applicant adducing its

evidence. Included in that evidence was a successful

tendering of the reasons of the court on the first

trial. Also included in the evidence was the mother

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of the child whose communications they were.

I cannot tell Your Honour exactly whether her

evidence in-chief conveyed the same precise

communications, or whether in general terms it was

to the same effect and it was watered down by a

cross-examination. But, our submission is that the

process by which the respondent to this appeal was

seeking to get findings upon her evidence different

from the findings upon which its liability

ultimately was found in the first trial was something

which the Court ought not to have allowed.

Can I turn briefly to the third point which

His Honour the Chief Justice raised as to why the -

if I can euphimistically and very loosely describe

it as the abuse of process point was not correct in

the particular circumstances.	At page 123 at the
bottom His honour said:

Finally, I think that there are strong

considerations of reason and justice in the
present case in favour of permitting the

appellant to rely upon findings of fact which

differ from those made by Legoe J. The fact

of the child's mother having made complaints in

tenns to which she-deposed, is not conclusive of the

issue of breach of condition. The failure

to act reasonably, to amount to a breach of
the condition, must be the failure of the
insured itself, that is to say the failure of

some person or persons of sufficient authoricy

in the organisation to be regarded in law as

identified with the appellant itself.

His Honour then sent on to say that once

Acting Justice Lunn had found that he was obliged

to make the same findings on these communications

as in the first trial	His Honour Acting Justice Lunn
had then	to embark upon a rather artificial and

tortured process of attributing because of the

particular witnesses who were called at both trials

being apparently acceptable, of saying, well I

accept those people were not scandalously

irresponsible, but having accepted that these

communications were made, people who receive them

were responsible, therefore they would have been

passed on, therefore somebody up the line who

was, in the relevant sense the actor of the company,

must have been scandalously irresponsible.

(Continued on page 11)

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MR MANSFIELD (continuing):  His Honour says at the top of

page 125 that that result and that process of

reasoning involved:

a hybrid of presumed fact which was

contrary to his Honour's own opinion

and his Honour's ~vn· finding as to the

character of the receptionists and

maintenance officer. The result was

quite artificial and did not accord with

the reality as his Honour saw it. An

application of the doctrine of abuse of

process which produces such an artificial

and capricious result, cannot be correct.

Our response to that is twofold:  the first is to

point to the way in which Acting Justice Lunn did

deal with the matter, and His Honour started dealing

with the matter at page 109 at the very bottom. Sorry,

His Honour started dealing with it at an earlier

stage than that, but his conclusion is towards the

bottom of page 109:

On the balance of probabilities, and

on the evidence on the topic as sparse
as it is, I find that the person taking

the complaints from Mrs Parker referred

them to some person in higher authority

in the plaintiff's organisation and that

person took the decision not to act upon

them. I find that unknown person to have

been in a sufficiently responsible position

in the managerial structure of the plaintiff

to be identified with the plaintiff, and for

his (or her) decision to be that of the

plaintiff.

Now, it is that passage in that process of reasoning

which His Honour the Chief Justice is critical of.

We would submit in response that having made the primary

findings about the terms of the communication, having

had, as His Honour did, the evidence of a

Mr Wallington who was the insurance officer of the
respondent about the systems and the evidence of
a number of other people about the systems of

dealing with complaints and reports, His Honour could

quite properly make those findings but, more

importantly, and a quite independent point in

response to His Honour the Chief Justice, is in the

next paragraph.	His Honour Acting Judge Lunn, at
page 110 said this:

I find that the plaintiff was also in

breach of Condition No. 4 in not having

established any proper system to deal

with and remedy complaints of defects in
premises which were a source of potential

danger to occupants of its houses.

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He goes on to criticize the direct evidence of

Mrs Collins and Mr Robertson about the form in which

complaints were received, the form in which they

were dealt with, the form in which they were

recorded, the form in which they were followed up,

and His Honour's conclusion - and that was not

evidence which involved any hybrid; it was accepting

primary evidence from those witnesses and assessing

its significance - His Honour then - - -

MASON CJ:  This is really a minor reason advanced by the

Chief Justice for not applying the doctrine of abuse

of process. You really have to overcome the more

general reasons.

MR MANSFIELD:  Yes. Well, I think to the extent to which

His Honour identified three reasons we have made

our submissions as to the first two as to why

His Honour was wrong and we say that in response to

the third reason it is not a valid reason but in any
event there was an entirely independent basis, once

the primary findings were made, to reach the conclusion

that there was a breach of the condition, irrespective

of structuring, who passed on the information and

at what level it was reached. If the Court pleases,

that is all we would put on matter A.

If I can turn to matter B, it is our submission

that the Court should give special leave to appeal in

respect of matter B also because it is a matter which

is very common - in fact, one should not assert always

but it is at least a very common feature of insurance

policies that insureds receiving knowledge of an

occurrence are required to report that knowledge of

the occurrence.

MASON CJ:  But Mr Mansfield, questions of these kind

frequently arise and their resolution always depends

on the particular facts of the case, and this case is

no different.

MR MANSFIELD:  In our respectful submission, Your Honour, it is

important that this Court consider this matter because,

in our submission, there is apparent in the way in
which both Acting Justice Lunn approached the matter

and the way in which the Chief Justice approached the

matter of saying, "We put aside the concept of agency." -

and we do not quibble about that because the agency

concept is concerned with the person dealing with the
agent - "We therefore seek to determine whether for
the purpose of this", and we say like, "policies,

the knowledge of someone in Mr Robertson's position

is the knowledge of the corporation".

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MR MANSFIELD (continuing):  His Honour then went to what is

called the "organic theory of corporations" and

said, given the organic theory of corporations

obviously the man who receives the maintenance
complaints and goes and inspects and hears about

things at the shop-front, as it were, who decides

what to do about them is not, in the relevant sense,

the directing mind of the company. So we have

really two extreme positions. In our respectful

submission, this Court should entertain this argument:

namely, that the concept of knowledge in clauses

like this in insurance companies should rather be

a question of the construction of the clause

because it must be, in our submission, within the

contemplation of the parties - or, first of all,

within the recognition of the parties and, in

particular, the insurer - that when it talks about

knowledge of the company, the insured, the insurer

will not be providing the knowledge.

. .

The insurer will be expecting that the knowledge

comes from the victim or someone on behalf of the

victim, as was the case here. Our submission then is

tha4 given that connnon understanding, the way in

which these clauses should be approached is to say

that these clauses should be construed reflecting
that situatio~- reflecting the fact that the insurer

and the insured are aware that the insured has the
control of the information process within its body,

that the purpose of the clause is to make sure

that the insurer gets early notice of possible claims

and that the insured ought not to be better off by

having badly organized systems of information.

So that we would contend that as a matter of

construction of this and similar clauses, the proper

approach is not to look at the organic theory of

corporations at all, but to say, as a matter of construction, what was contemplated between the

parties, and we would seek to argue that what was

contemplated between the parties by their contract

was that, once the information was received by a

person within the corporation whose job it was to
receive that information from the victim, or on
behalf of the victim of the accident - the occurrence -
the responsibility for getting that information -
or dealing with that information - should be at the

risk of the insured and not at the risk of the insurer.

This case provides a very good illustration of

why that should be so, because between the time the

knowledge of the occurrence was brought to

Mr Robertson's attention on 2 July 1981 and when
the solicitor's letter was brought to the attention
of Mr Wallington, the insurance officer, in November 1981,
the stove had been destroye4 or put away, or disposed

of in a way which it could not be redeemed.

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MR MANSFIELD (continuing):  The Court will have seen from

the judgments that there was a considerable degree

of technical evidence about asserting that that

which was alleged to have happened was technically

impossible to have happened and it is obviously

a case where the presence of the stove would

have been a terribly useful piece of evidence

to assist in the proof or disproof of the

allegations. By virtue of the getting of the notice

in November instead of what we contend should

have been the case in July, that opportunity

to acquire that evidence was lost so it was a

good illustration of why, in our respectful

submission, as a matter of construction, the

concept of knowledge of an insured in insurance

clauses like this should be approached differently

from the way in which both Acting Justice Lunn

and the Full Court approached it. If the Court

pleases, that is our submission.

MASON CJ:  Thank you, Mr Mansfield. The Court need not

trouble you, Mr Bennett. The applicant raises

two questions as warranting the grant of special

leave to appeal. The decision of the Full Court
on the first, relating to the application of
the doctrine of abuse of process, is not attended

with sufficient doubt to justify the grant of

special leave to appeal. The second question,

relating to the knowledge of the respondent

corporation, depends on the particular facts of this case. Its resolution is unlikely to result in any elaboration of general principle.

For these reasons the application for special

leave to appeal is refused.

MR BENNETT:	I ask for costs,-
MASON CJ:	You cannot oppose that, Mr Mansfield?
MR MANSFIELD:	No, Your Honour.
MASON CJ:	The application is refused with costs.

AT 12.36 PM THE MATTER WAS ADJOURNED SINE DIE

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