Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Limited ACN 000 122 850

[2025] HCATrans 46

[2025] HCATrans 046

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S27 of 2025

B e t w e e n -

UNITING CHURCH IN AUSTRALIA PROPERTY TRUST (NSW)

Applicant

and

ALLIANZ AUSTRALIA INSURANCE LIMITED ACN 000 122 850

Respondent

Application for special leave to appeal

GAGELER CJ
GORDON J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 17 JUNE 2025, AT 10.02 AM

Copyright in the High Court of Australia

MR J.T. GLEESON, SC, may it please the Court, I appear with MS K.I.H LINDEMAN for the applicant.  (instructed by Clayton Utz)

MR J.A.C. POTTS, SC, may it please the Court, I appear with my learned friend MR J.C. CONDE for the respondent.  (instructed by HWL Ebsworth Lawyers)

GAGELER CJ:   Thank you, Mr Potts.  Mr Gleeson.

MR GLEESON:   If your Honours were to grant leave in this matter, you would be hearing one of the most important cases under the Insurance Contracts Act in its 40‑year history. I say that without overstatement. There are three questions of law. Can I identify those and then explain why the facts do not cause a problem in terms of vehicle. The first question of law under section 40(3) of the Insurance Contracts Act is whether that provision is capable of operation over successive years if new and different facts become known in a later year which were not known, or capable of being known, in an earlier year.

On that question, the primary judge has said yes, which we say is correct; the Full Court has said no.  It arises here on the facts because in the earlier year, to take the Full Court’s findings at their highest, there was knowledge in 2004 of inappropriate behaviour by one person, Mr Nisbett, and knowledge of a more generalised problem, and potentially an unsatisfactory response to it by the school, whereas what occurred from 2006 onwards was knowledge of a series of new facts which were incapable of being known in the earlier years, including the arrest of particular teachers, the charging of teachers, the plea of guilty of some teachers, widespread media publicity leading to close to 100 actual complaints coming forward, which had not occurred in 2004.

Our proposition is that, under section 40(3) which your Honours have at paragraph 612 of the Full Court, the relevant inquiry legally is to look at the facts which were notified in these later years: were they facts which might give rise to a claim, yes; were those facts notified as soon as reasonably practicable after the insurer became aware of them, yes, because they were facts which, by definition, could not have been known in the earlier period, therefore the insurer is not relieved of liability under the contract for that year in respect of the claim that ensues by reason only that the actual claim was made after the policy period.

GORDON J:   Are you going to come to the complaints put against you about the assessment of the facts, both in 2004 and then the subsequent facts?

MR GLEESON:   Yes, I will do it now, your Honour.

GORDON J:   You do not have to.

MR GLEESON:   No, no, I will do it now.  The way I wish to do that is to show you, firstly, how the primary judge conducted the inquiry I have just indicated, which is look at what was actually notified in the later years, and conclude correctly that those facts might have given rise to a claim, and that is not challenged by the Full Court.  It is not challenged that each of the 2006 onwards notified facts were facts which objectively might give rise to a claim.

Then I want to show your Honours, in five places, where the primary judge compared those later notified facts to what was known at that time.  That is, in 2004, in respect to the report.  He found they were new facts in 2006 onwards.  The Full Court has not overturned that finding of the primary judge identifying with precision the difference between what was known in each stage of the matter.  So, the five places I wish to take your Honours to are these.  If you start in the primary judge at paragraphs 389 to 391 ‑ ‑ ‑ 

JAGOT J:   I mean, somehow, they found that it is not as soon as reasonably practicable.

MR GLEESON:   And they did that.  There are two errors in that.  The first is a logical error.  If you first learn that a teacher is arrested in 2009, let us say, logically you cannot say that is not as soon as reasonably practicable because you should have notified it in 2004, if you cannot find that fact in the 2004 report.  That is just a logical error, which shows something has gone wrong in the Full Court’s approach.

As a construction error, what is implicit in the Full Court is that if there is a fact – even a highly generalised fact like a problem, a hornets’ nest – and if that fact objectively put you on notice that there could be claims of an exceptionally broad character – e.g., claims by students of any number across any years who went to this school – if that is what the first fact tells you, what the Full Court has said is you could have notified that fact in the 2004 year ‑ ‑ ‑

JAGOT J:   And it would have been of the generality sufficient to cover.

MR GLEESON:   To cover any of the hundreds of claims that emerged, even though the fact that you knew in 2004 did not tell you the names of the ‑ ‑ ‑

JAGOT J:   The fact that you actually ended up notifying.

MR GLEESON:   Yes.  You did not know the names of the group of teachers, you did not know the names of the victims, you did not know any of the facts of what had actually happened in any case to give it life – as in the person has been arrested, charged, pleaded guilty, et cetera – you could not know any of those facts.  Nevertheless, because of the generality of the first fact, the Full Court says any claim that subsequently emerges from any student at the school ‑ ‑ ‑

JAGOT J:   Under this umbrella.

MR GLEESON: Under this umbrella claim is a claim which you can bring under the 2004 policy by way of section 40(3). That is the first side of what they are saying. The second side of what they are saying, which is a real vice, is whether or not that be true – which is where a lot of the battle was here – in the later year, when you learn a more concrete fact, which tells you I now know a particular teacher, a particular incident, a particular complaint, a particular arrest, a particular plea of guilty, and that particular incident now leads a claim within the same generalised class, the Full Court says you cannot use section 40 twice. That is the point of construction – that is the error of construction.

We submit you can use it a second time.  Indeed, you must be able to use it a second time when you think of this Act conceptually, because if the Full Court take their fact‑finding about the generalised problem in 2004, that leaves the Full Court to say:  you lose 40(3), in 2004.  It logically means there was a nondisclosure under section 21 at the next renewal, because a fact that might have given rise to knowledge of a hornets nest would necessarily be a fact you had to disclose, under section 21, at the next renewal.

Therefore, you have strayed into section 28 territory, which was whether the insurer suffered prejudice by reason of entering the 2005 policy based on that nondisclosure.  A critical feature of this case is that Allianz ran but then abandoned all claims of prejudice under sections 28 and 54.  So, Allianz’s position is ‑ ‑ ‑

GORDON J:   For the period where they paid out.

MR GLEESON:   No, no, for the whole case.  The whole 12‑year policies – particularly, the ones that matter are the 2005 policy, 2006 and 2007.  They are the three years where the problem was neither notified under 40(3), nor notified under section 21.  They have abandoned the case that that caused them any prejudice.  So, through those three years, the policy continued each year without any section 28 relief because they suffered no prejudice.

Then from, let us say, 2007 onwards, where each of the new facts emerged – each of the new facts now giving you objectively new and better information more specifically about the claims that are going to emerge – as each of the notifications is given which could never have been given in 2004, because they were unknown, the Full Court has said you cannot use section 40 a second time.

GORDON J:   But that is the factual dispute, is it not?  It is whether or not the 2004 report was sufficiently detailed enough to cover what you describe as the better particular.

MR GLEESON:   The way I am putting it, your Honour, is, yes there was a massive battle in the Full Court as to how you should read the 2004 report.  I am putting it on the basis:  read it at its absolute highest of what the Full Court has said.  What that tells you is:  problems with Nisbett, a more generalised problem, potentially claims coming, we are not sure from whom or when or what person.  That is all you could have notified in 2004.  That is all you could have notified on renewal in 2005.

GORDON J:   Why is that not sufficient for Allianz?

MR GLEESON:   That is sufficient for Allianz for its purpose.  It has two purposes.  The first purpose is that the 2004 policy cannot be extended to cover the hundreds of claims that emerged.  That is because anything covered by that problem could not be put under the 2004, because we did not give the notice.  The second thing is it could have given them a remedy under section 21 and section 28 if they had suffered prejudice, which they did not. 

What it is not sufficient to enable them to do is say if and when each more specific fact emerges, which makes the general problem now a very real and pressing problem, you can never use section 40 a second time.  The way to test it is this:  if they are correct that you fold all the more specific later facts into the generalised problem, what was the Church meant to do when it made its disclosure in each of the later years?  So, let us say, from the beginning of 2007 policy, all the new news comes to light. 

When one gets to the disclosure for the 2008 policy, on 31 March 2008, the Church now knows we have individuals, they are being charged, they are being arrested, we have a media storm occurring about this.  Are they material facts which the insurer would be entitled to know about before it goes on the 2008 policy?  The logic of Allianz is they did not need to be disclosed because they already knew about the general problem in the earlier period.

GAGELER CJ:   So, this is an argument based on principle.

MR GLEESON:   Yes.

GAGELER CJ:   You do not even need to go to the detail of the facts for this.

MR GLEESON:   No.

GAGELER CJ:   But test it this way.  If you have certain knowledge that an event will occur – I understand you accept that to be a fact; the knowledge that the event will occur – then the event occurs, and you say that is a new fact?

MR GLEESON: No. If you have certain knowledge of a fact, you then have a once and only chance under section 40(3) to extend cover by notifying the fact, and you have a duty on your next renewal to notify that fact. But if it is a fact that you could not know of at that date, you cannot be expected to notify more than you have knowledge of. So, what one does is to say let us look at the report in 2004; take it at its absolute highest.

A reasonable insured – an insurer given that information could do what?  Could say we now know there is a prospect, an unhappy prospect that there could be serious claims.  Coming from whom?  We do not know, but it could be anyone going back; it is 20 years historical abuse.  In respect for which, teachers – we know this, but we do not know who else.  In respect to what failure by the school to appropriately respond to those complaints?  We do not know, but we know in a general way that could be a problem.

Now, that notice, if given in 2004, would have been beneficial under the 2004 policy, but by definition, that notice is different to a notice that can be given in 2006 and 2007.  Can I show your Honours on the facts, for example, a notice that was given later, which could never have been given earlier.  If your Honours go to the primary judge at paragraphs 460 to 461, he says – and none of these facts are challenged in any way by the Full Court:

TPC1’s claim had morphed into an allegation of sexual assault –

previously it was an allegation of inappropriate touching:

the NSW Police had formed of Strike Force Arika to investigate sexual abuse of students; NSW Police had arrested and charged Nisbett, Treloar and Stewart –

so, Treloar and Stewart, names that were not found to be offenders in the 2004 report:

a search warrant had been served . . . widespread media reporting –

the allegations had now formed this character.  Now, the Full Court does not say, because it cannot say, that those matters were capable of being known at the earlier period.  Let me take you just one other.  If you go to the first bulk notification ‑ ‑ ‑

GAGELER CJ:   So, is part of this argument to say that a predicted event is not a fact?

MR GLEESON:   I do not think we are putting it that way, your Honour.  What we are saying is that the fact, it is a concrete, practical, commonsense thing:  what is the thing that I know?  Now, a fact could be something I know with certainty, a fact could be an opinion expressed by a reliable source, a fact could be a complaint has been made, a fact could be one or more rumours have been expressed.

They are the facts that you look at and you ask the objective question:  are those facts likely to give rise to a claim?  If not, I do not and cannot notify; if yes, I do and can notify.  So, one looks at that.  One then compares that to the facts which you are actually capable of notifying in the later year.  It simply respects the logical truth that sometimes the claim that might emerge could emerge and be strengthened by multiple facts.

JAGOT J:   Your point, though, in your construction point, is that you must start with the facts as notified.

MR GLEESON:   You must start with the facts as notified and you ‑ ‑ ‑

JAGOT J:   At the degree of specificity at which they were notified, and then you decide whether that notification is as soon as reasonably practicable.

MR GLEESON:   Yes.

JAGOT J:   You do not start with the 1,500‑page report.

MR GLEESON:   No, you start with that which is notified.  It is really as a final check on that exercise, if you have a notification in the relevant year which has ticked each box.  If you are at the stage of, really, by way of defence someone saying:  but you could have notified that fact earlier.  They point to the report, you say in reply:  you show me where in the report my facts ‑ ‑ ‑

JAGOT J:   This fact, as notified.

MR GLEESON:   ‑ ‑ ‑ as notified, could have been found.  If you cannot show that in the report, that is the end of it.  So, the logical error and construction error, we say, appears in the majority judgment of the Full Court at paragraph 815.  Let the first sentence be assumed to be correct.  The second sentence, the “therefore” simply does not follow, and it cannot follow if you have started with the actual notification in the relevant year and then looked at the ‑ ‑ ‑

GORDON J:   But it only follows, does it not, if one takes the view that at the level of specificity that is notified in the subsequent years, one can find the substance of it in the LKA2 report?

MR GLEESON:   If you could find in that report, which the Full Court has never done.  You see, the problem is the “therefore” does not follow logically, there is no intermediate reasoning saying:  we have gone back and looked at LKA2 and we have found that the substance of a complaint, that Mr Treloar or Mr Stewart or Mr Barratt or Mr so‑and‑so had, or were likely to have committed sexual assault upon students identified ‑ ‑ ‑

GORDON J:   But they did not need to name them.  They could have identified them by position or ‑ ‑ ‑

MR GLEESON: I agree, your Honour. It is substance, and there is a degree of generality about it, but what has not happened in this analysis – because what underlies it is an idea that section 40(3) can only work once. The same idea is expressed also by Justice Derrington, which you will see in paragraph 74. His Honour has made an additional error. He says you can only use section 40(3) once because once you have used it the first time, exclusion 7 will bite thereafter. That has the problem that on exclusion 7 he is in the minority. Your Honours, that is the primary ground.

In respect to section 54, ground 2, we have given you the summary of what now Justice Ball and the Sutton text have explained is the argument under section 54 as to why section 54 can be used to cure a failure to exercise of right under section 40(3).

GAGELER CJ:   Here, you would have us disturb authority of about twenty years, I think.

MR GLEESON:   In Gosford Council, and it has been looked at and this Court says it is not plainly wrong, but if I can hand your Honours the ‑ ‑ ‑

GORDON J:   And also, the drafting of a number of policies across the insurance industry based upon this Court’s decision.

MR GLEESON:   That may be true, but the question is whether the judgment is wrong, and the reason it is wrong – if I can hand you Ball and Sutton.  It is expressed most pithily this way in Ball on page 5 of this reprint.  So, he refers to the decision in Gosford City Council and he says that the effect of it is that it:

permits an insurer to avoid the application of s 54 by not including a circumstances notified extension in its claims‑made policy. The problem that s 40 was intended to address was precisely the failure by some insurers to include those extensions in claims‑made policy. Given the nature of the problem, the section could equally well have been drafted so as to imply a term in the contract itself, in which case s 54 would clearly apply. It is the substance of s 40(3), not its form, that should count. It would be unfortunate if s 40(3) had the unintended effect of providing liability insurers with the means of avoiding the operation of s 54 in relation to a failure to notify circumstances within the policy period as required by s 40(3). Section 54 should apply on the basis that the insurer’s right to deny liability is, indeed, the “effect of the contract” against the background of the Act, including s 40(3).

So, it comes down to whether the effect of the contract includes both its terms and the legal operation which is given under the Act, and that in fact is the position which this Court has reached in, for example, the cases on section 40(3) itself.

We submit that there is a clear tension between the Gosford approach and the approach which this Court has recognised in FAI and other cases, that the effect of the contract includes its effect under the statute.  So, your Honours, we submit the argument that is put there is not only strongly arguable, it is correct, and the only place it can be looked at is via this Court and the Court should take it on.

May it please the Court.

GAGELER CJ:   Thank you, Mr Gleeson.  Mr Potts

MR POTTS: Thank you, your Honours. In light of the submission that has been put about the order in which the Full Court should have addressed the matters of section 40(3), may I hand up two pages from the current applicant, then respondent, submissions in the Full Court to show the Court how the Full Court was invited to deal with this issue on 40(3).

So, there are only two pages of substance.  Your Honours can see the first page is the filing, the second is the outline.  On page 5, dealing with ground 1, your Honours see in paragraph 18:

Where an insurer relies on prior awareness as a means of displacing the effect of s 40(3), the section requires that it establish that the facts of which the insured was aware correspond to the facts the subject of the notification. As the primary judge correctly observed . . . Allianz bore the onus –

Then it was submitted to the Full Court that needed to be approached in three stages.  Your Honours will there see – without reading them to your Honours, for reasons of forensic economy – it is in fact the third stage, which is the correspondence between the facts early and known and the facts subsequently notified.  So, the way in which UCPT invited the Full Court to deal with it was in that fashion.

Now, there can be no doubt, if the matter were to be looked at by this Court, what UCPT knew as and from 7 May 2004 when it received the materials referred to in the litigation as LKA2.  LKA2 was described by Justice Derrington as a “physically and informationally substantial” set of materials.  It comprised an investigator’s report and risk assessment, various underlying work papers, transcripts of interviews, primary documents gathered from the time – so, it was a 1,500‑page investigation file.

My client’s case was always when one looked at what was revealed by the 1500 pages, it revealed problems of a magnitude far beyond a single teacher, far beyond a single incident; it showed an existence of a longstanding, unresolved problem of teachers, both known and unknown, who had engaged with sexual interest in children, who had engaged in instances of suggested sexual abuse, and it was that matter which the primary judge found admitted of no more than a bare possibility of a claim.

That key finding of fact was overturned in the Full Court.  The Full Court took the whole 1,500 pages of LKA2 in the exhibit form in which it had been tendered at first instance and examined that carefully, and it made significant factual findings about what it revealed.  These are to be found principally in the judgment of his Honour Justice Derrington, and they begin at about paragraph – the passage in his Honour’s judgment begins at page 45, paragraph 172 where his Honour records submissions that my client had made about some of the things that this report revealed, including:

the existence of historical problems at Knox going back to the 1980s of allegations of the sexual abuse . . . although there was a known problem in relation to Mr Nisbett, the investigation revealed concerns about a number of other teachers, and it may well have been that there were even more . . . the existence of the sexual abuse indicated that Knox did not have effective procedures to:  (i) identify staff . . . (ii) keep its students safe . . . (iii) facilitate and deal appropriately with allegations of sexual misconduct by staff; or (iv) take proper action –

Then his Honour, beginning at page 46, paragraph 176, goes in some considerable detail through all of these matters and makes specific factual findings about – for example, at page 47 in paragraph 186:

These matters, taken together or in some combination, caused a substantial risk that the victims would seek redress from the school at some time.

Then, at 187:

When the occurrences of actual sexual abuse are added to the evidence of persistent grooming behaviour, the risk of claims against the school increased substantially.  Once reasonable evidence of sexual abuse was uncovered, it must have been difficult to avoid the conclusion that litigation was at least possible.

Then his Honour concludes, at 188:

In summary, with great respect to those of the contrary view, it can be comfortably concluded that LKA2 revealed facts that rendered it likely or at the very least very possible that claims would be made by Mr Nisbett’s victims –

Now, it does not end there, and I will not read all of it to your Honours, obviously, but there is then an analysis beginning at 189 and following of other teachers.  Then there are key conclusions beginning at paragraphs 195 and 196, but critically at page 50, and 197, his Honour concluded that:

It follows that LKA2 –

being the full 1,500 pages:

revealed the existence of this “problem”, “hornets’ nest”, or “can of worms” going back to the 1980s. 

To the extent there is some implicit criticism of the use of those terms, I should note at first instance it was the UCPT who put submissions to the primary judge, Justice Lee, that the can of worms or hornets’ nest‑style analysis, which stems from English cases on contractual deeming provisions, was an appropriate way to analysis questions under section 40(3).

So, we would respectfully submit that it is not now open to them to criticise that form of language.  But what one has, and in summary – both here in Justice Derrington and also the concurring judgment on this point in the joint judgment of Justices Colvin and McEvoy – are detailed findings of fact in terms of what that report revealed, what that material revealed, and they are findings of a very widespread and generalised problem of a history of sexual abuse.

Now, in order for this Court to deal with any question of law about whether one can use section 40(3) twice, it inevitably is going to involve this Court having to become mixed up in the factual findings about what was revealed and known by LKA2, all 1,500 pages of it, and what was disclosed subsequently in the notifications that our learned friends rely upon.

GORDON J:   At a level of principle, just so I understand your distinction from Mr Gleeson’s approach, is it that one does not start with what is disclosed subsequently in 2007 and try to find where that is sourced, if at all, in the LKA2 report, because one is asking the question:  what was the knowledge back in 2004, in order to determine whether there had been disclosure properly or improperly?

MR POTTS:   Yes. For UCPT to invoke and rely upon section 40(3), it had to show that it had given written notice of the facts as soon as reasonably practicable after it had become aware of them. Our defence, to the reliance on the later notifications, was to say, in substance, you had known of facts which effectively subsumed the later facts notified all the way in 7 May 2004.

GORDON J:   And is that why you handed up this submission, to show that was the approach adopted by the applicant in the court below?

MR POTTS:   Yes, your Honour.  Yes, with respect.  That is the approach that the applicant, UCPT, urged the Full Court to take and, in substance, that is the approach the Full Court took in disposing of this issue and making factual findings.  In summary, we would say this Court – even if that were a question worthy of this Court’s attention, this is not going to be an appropriate or convenient vehicle for this Court to deal with that, because in order to deal with it, it is going to have to confront and deal with what was revealed by LKA2; the factual findings of the Full Court of that LKA2, compared to the factual findings of the primary judge.

There is a further problem which we have adverted to in writing, which is we ran an alternative case in the Full Court.  We said – your Honours will appreciate many of the issues have dropped away – one of the red‑hot issues in the Full Court was whether the knowledge of the Knox Grammar School headmaster was taken to be knowledge of the UCPT.  That has been resolved in our favour and there is no attempt to resurrect that issue.

But one of the fallback cases we ran in the Full Court was to say, even if we are wrong about that and even if the primary judge was correct, all of these claims, or at least the vast bulk of them, should go back into one policy year, 2008‑2009.  That was what Justices Colvin and McEvoy called “issue (11)”.  Their Honours held, in relation to issue (11), that if issue (11) is identified at page 166 to 167 in paragraph 680 ‑ ‑ ‑

GAGELER CJ:   What is the paragraph number again?

MR POTTS:   Paragraph 680, your Honour, is where they identify the issue, but they resolve that issue at paragraph 867, on page 209, where they effectively say, in 867 – and this is on an assumption that his Honour’s findings about LKA2 were correct – your Honours will see on line 2:

on the assumptions made for the purposes of Issue (11), the notifications in the 2008‑2009 policy year covered all such claims.

So, there is not going to be a simple scenario in which your Honours would simply resurrect findings of the primary judge, resurrect the relief given by the primary judge.  It is far more complicated and fact‑specific than that.

With respect, we say this is not a convenient or suitable vehicle, given the factual context in which it arises, for your Honours to test a proposition of law which says: can one use section 40(3) twice? It is going to involve, inevitably, this Court in an extensive factual analysis involving a 1,500‑page investigation file. It is going to involve factual analysis of the Federal Court’s decision and its findings, both at first instance and on appeal.

GORDON J:   The appeal went for four days.

MR POTTS:   It did.

GORDON J:   What percentage of the time was taken up with this analysis of LKA2?

MR POTTS:   I would estimate – and it is only an estimate – a couple of days.  Two of the four days, I would think.  Can I just deal briefly with the second ground, your Honours – the section 54 ground.  As your Honours know, on 1 January next year, the Insurance Contracts Act will have been in force for 40 years.

In that 40 years, the only case – the only decided judgment that might be taken to have even come close to holding that section 54 can operate to cure a failure to validly invoke section 40(3), is the decision referred to by Justice Derrington at paragraph 495, on page 127. That is the decision of Justice Rolfe for first instance decision in Einfeld v HIH Casualty and General. 

I can tell your Honours that it was a case that involved questions about whether or not this Court’s decision in Antico had overruled the New South Wales Court of Appeal decision in FAI v Perry.  It dealt with this question in literally one sentence, and the totality of the reasoning was:

to the that that section –

that is section 40(3):

provides a statutory extension to the policy there is no reason why the ameliorating provisions of s 54 cannot apply to it.

That is the totality of the reasoning.  It only arose indirectly because that was a case about a contractual deeming provision, and a submission was put that to accept what this Court ultimately held in Australian Hospital Care would lead to some form of inconsistency between section 54 and section 40(3). His Honour dealt with that in one line, in one sentence.

Allied against that is a settled and consistent body of case law in the Court of Appeal of New South Wales and the Court of Appeal of Queensland.  These are the decisions referred to by his Honour Justice Derrington:  there are decisions referred to in Gosford at 465 of Justice Derrington; Guild Insurance v Hepburn, which is referred to by his Honour at 487; Avant Insurance v Burnie, referred to at paragraphs 482 and 486 by Justice Derrington; and Clark v Avant, referred to at paragraph 487 of Justice Derrington.

There is then the Court of Appeal of Queensland in CA v MEC McInally, which is referred to at paragraph 491; a single judge decision of the Federal Court in Darshn, referred to by his Honour at 488; and I can add to that a subsequent decision in the Supreme Court of Victoria, Fairbank Haven Pty Ltd v Merkon Constructions Pty Ltd [2024] VSC 32; and there is now the Full Court judgment in this case. They all hold, in terms, section 54 is incapable of acting upon a failure to comply with the statutory preconditions in 40(3).

GORDON J:   Unless there is a deeming provision.

MR POTTS:   Yes, and that is quite a distinct position, your Honour, because then one has a contractual position and one accepts, following this Court’s decision in Australian Hospital Care, that that is a position where section 54 can operate.  But what one has – and Justice Derrington observed at paragraph 497, on page 127, that the arguments – this is at the end of the third line, end of the fourth line – in favour or in support of this:

are neither textual nor contextual, but rather policy‑based.

That is true. The academic articles to which our learned friends refer are appeals to policy. They say it would be a bad thing if section 54 did not do this, but they do not start, or even traverse with any form of textual, contextual or purposive analysis of either section 40(3), or section 54.

Now, this is not a point we say that your Honours should entertain and disturb a settled body of law where it has stood now – Gosford was decided in 2003, over 22 years ago, and a considerable body of law has built around that. All of that, we say, is entirely consistent with how this Court analysed section 40(3) in the Newcastle City v GIO Case (1997) 191 CLR 85. We have referred to in our special leave response. Chief Justice Brennan, at page 93, talked about section 40(3) in these terms. He said:

Sub‑section (3) imposes a liability where no contractual liability exists.  The conditions on which statutory liability is imposed on an insurer under sub‑s (3) are satisfied by proof of two facts and one contractual consequence.  The facts are the giving of a notice within the policy period of facts that might give rise to a claim and the making of the claim outside the policy period.  The contractual consequence is that the making of the claim outside the policy period necessarily results in the relief of the insurer from liability.

Then his Honour went on to refer at the top of page 94 to:

the interests of the insurer are protected by a notice as prescribed by sub‑s (3) –

There are similar remarks in the joint judgment of Justices Toohey, Gaudron and Gummow at page 103 at about halfway down the page, which I will not go to. So, there is now a settled and orthodox view of the law on this question, and we have pointed to the fact there are powerful policy reasons, in addition to the textual ones, as to why this question would not be resolved as the applicants would submit, because section 40(3) was the

implementation of the Australian Law Reform Commission recommendation that cover of a particular type be made mandatory.

We have pointed out, in paragraph 26 of our special leave response, the Court of Appeal’s observations in the P & S Kauter decision that there is a critical purpose from the insurer’s perspective to the conditional requirements in section 40(3). They are there in the language of the statutory preamble to the Insurance Contracts Act to effect a fair balancing of the interests between an insurer and an insured. 

Effectively, those conditions are the integral part of the explicit statutory extension of cover made mandatory, and they are there to balance and give some protection to the insurer.  It would effect a seismic change in that balance if one were now to read those conditions built into the subsection as being subject to section 54.

One would go from a position where an insured had to satisfy and prove and they had satisfied those conditions to get the extension of cover, to one where an insurer would have to identify and prove some form of prejudice.  In summary, there is no sufficient prospect of the appeal argument succeeding to justify the grant of special leave in the face of the settled body of law.

May it please the Court, those are my submissions.

GAGELER CJ:   Thank you.  Mr Gleeson.

MR GLEESON:   Your Honours, if you go to paragraphs 613 to 614 on the last point ‑ ‑ ‑

JAGOT J:   Of the appeal judgment?

MR GLEESON:   Of the appeal judgement. The majority explained, in relation to the section 40, that this Court has not adopted a literal interpretation of its terms. Rather, the Court has treated section 40 as extending cover. In consequence, the coverage of the policy consists of that which is in its text plus that which is provided by section 40(3). That is the effect of the contract of insurance for the purpose of section 54, which provides a textual as well as a purposive basis for the argument.

Now, on the main points, your Honour, firstly what you were told about the way the case was run was wrong.  Can I hand up some transcript references that have been given to Mr Potts.  It is most unfair to Mr Williams and those who ran the case for the Church, below, to suggest he did not run the present argument.  If you look only at page 2 – but there are many other examples here – at point 3, Mr Williams says:

I hope I am not repeating myself by saying one must examine the problem which is notified.  Examine when the problem which is notified has come to the attention of the of the insured, and it is that inquiry, rather than some different problem, that needs to be analysed for the purposes of policy engagement.

So, that is the argument which you start with the notice given.  The alternative argument, as your Honour Gordon put to Mr Potts, is start three years earlier to knowledge you had at an earlier point in time.  That is the question we ask you to resolve.

Now, what is interesting in the speech Mr Potts gave you about the report, was he never addressed the submission we made in chief that the Full Court has not shown where any of the later notified facts emerged in the earlier report.  That is why you will not have an appeal that will take several days.  Can I give you just one example where the findings of the primary judge have been left wholly untouched by the Full Court, and that is if you go to paragraph 446 of the primary judge.

This is the first and second bulk notification that I was trying to find in chief.  So, this is an actual notification in the relevant years, and you will see at 446, paragraph 2.1, that it listed potential claimants.  Paragraph 2.2, it listed:

persons who have expressed an intention to seek redress –

and:

persons whose school records –

are such that they might ultimately seek redress.  That is the type of fact which had come to the knowledge of the Church in 2009, which was not earlier known, and that is the type of fact which his Honour analysed at 461 and 466 as facts which were incapable of being known or notified in an earlier year.

For example, if you look at 466, in the 2009‑2010 year, the problem has extended beyond Nisbett, Treloar and Stewart to now include Vance, James and Barratt.  There is no answer by Mr Potts to our point that for the purpose of a section 21 disclosure, if we had not disclosed in the next year that we now know Vance, James and Barratt are alleged perpetrators, as well as the others, we would have been guilty of a non‑disclosure under section 21.

Yet, it is said that is not a new fact that can justify a notice under section 40(3). That shows a disconformity in the construction of the Act,

which has been adopted by the Court.  As to the question of relief, if we were to be successful, either we will reinstate the primary judge’s orders, or if there is any question of adjusting the claims between the policy years, that can be remitted to the primary judge.

May it please the Court.

GAGELER CJ:   Thank you, Mr Gleeson.  We will retire for a moment to consider the course we will take.

AT 10.48 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.51 AM:

GAGELER CJ: We are not satisfied that the case presents as a suitable vehicle for considering the question concerning the operation of section 40(3) of the Insurance Contracts Act sought to be raised by the applicant, and we consider there to be insufficient prospects of success on the question concerning the operation of section 54(1) of the Insurance Contracts Act to warrant the grant of special leave to appeal.  Special leave to appeal is refused with costs.  The Court will now adjourn until 11.00 am.

AT 10.52 AM THE MATTER WAS CONCLUDED