Unity Insce Brokers Pty Ltd v Rocco Pezzano Pty Ltd

[1997] HCATrans 295

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P64 of 1996

B e t w e e n -

UNITY INSURANCE BROKERS PTY LTD

Appellant

and

ROCCO PEZZANO PTY LTD

Respondent

BRENNAN CJ
McHUGH J

GUMMOW J
KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON WEDNESDAY, 22 OCTOBER 1997, AT 10.20 AM

(Continued from 21/10/97)

Copyright in the High Court of Australia

BRENNAN CJ:   Yes, Mr Pullin.

MR PULLIN:   Thank you, your Honour.  Could I just deal with a couple of points that were raised yesterday by Judges of the Court.  The first one was to deal with Justice Kirby’s inquiry about what the pleadings were and how the issue was raised.  I have copies available, if necessary, but it was quite a simple plea.  It is simply paragraph 28 of the statement of claim which said:

By reason of the Defendant’s breaches of the Broking Agreement and/or negligence pleaded in paragraph 27 herein the Plaintiff has suffered loss and damage as hereinafter particularised.

Particulars of Loss and Damage

(i)  The Plaintiff repeats the particulars of loss and damage pleaded in paragraph 19(iv) herein.

Paragraph 19(iv) read:

By reason of the Defendant’s breaches of the Broking Agreement the Plaintiff has sustained loss and damage being the difference between what would have otherwise been payable under the policy and the amount of $900,000.00 recovered from NZI as indicated in paragraph 20 below, together with consequential losses, full particulars of which will be provided separately.

That was denied in the defence.  Now, I do not know whether members of the Court require a copy of that, but if so, I have copies.

BRENNAN CJ:   It would be helpful, I think, to have copies of the pleadings.

MR PULLIN:   Yes, very well, your Honour.  I will make those available.  The second point, which I can deal with in just a few seconds, was a point your Honour the Chief Justice raised about why could it not be said, in fact, that there was fraudulent conduct on our part.  There could not have been any fraud on our part because the negligence of my client occurred for this reason, that the person responsible for filling out the form had taken over the file from somebody who did know the previous claims history.  That claims history had been put on the file by the previous officer, who had then departed from Unity Insurance Brokers employment, and there was evidence that that material was not on the file, although it was apparently on the file when Mr Tasker, the officer, actually took it over, but when he came to look at it, it was not there and had been lost for some reason that could not be explained and there were no findings that we had destroyed them or anything of that nature.

So our negligence was really the negligence because there was knowledge in one officer which was really knowledge that should have been possessed by the other officer when he filled out the form.  So, in our submission, there could not be a finding of fraud in those circumstances.  It is true negligence, if I can use that phrase, shorn of any suggestion of fraud.  But, as I say, it was not raised or pleaded against us in those terms. 

I have also been pondering Justice Kirby’s inquiry about what could be done at the time that settlement had taken place apart from the matters we had discussed yesterday.  One would be to say to the insurer at the time of settlement, “Well, you are representing to us that you have evidence to support this allegation of non‑disclosure.  If you will not agree to help us, we are telling you we will rely upon your assertion that there is evidence of that kind.  We will call your client.  If it proves there is no negligence, of course, you would have misrepresented the situation inducing us to settle.”  So there are plenty of ways that it can be attacked.

KIRBY J:   It does not sound like the conversations that used to take place between counsel settling a case that I remember, but perhaps things are becoming more formal and maybe it will be required by the result of this case.

MR PULLIN:   Yes.  Well, I have heard it said, your Honour.  I think there are a couple of cases where there have been allegations of misrepresentation leading to a settlement, but anyway these are all possibilities.  I am not saying that it is the answer in this case.  I am just saying that there are ways to deal with what is thought to be the difficulties confronting a plaintiff in this type of case. 

So our point is simply this, that assuming the broker has breached its duty in completing the proposal form, the issue then is, what evidence must be led to prove that this breach of duty caused any loss, or, in the alternative, if the Court in reasoning through its decision concludes that causation is established in the way that Justice Hayne has mentioned, that is, the way that the Full Court approached it, to say, well, there is a loss of a chance of - I am not quite sure how it is characterised - but the loss of the opportunity of approaching the insurer and having the insurer consider the claim without an allegation of non‑disclosure having occurred, then in quantifying the damage, that is, if one shifts to the next stage, assuming that it is treated as causation having been established and that we move on to quantification, all of the cases dealing with quantification of loss on what I will call the reduced standard of proof that applies in those circumstances, where you are not looking at balance of probabilities, all require evidence to be led to enable the Court to make a proper assessment of how one can place a figure on the quantification of loss.

I would like to take the Court to Johnson v Perez (1988) 166 CLR 351 because that did feature in the Full Court’s reasoning. There was a deal of reference to that case. It is under tab M in the folder. Now, as the catchwords at the top indicate, it was a negligence case against the legal practitioner because proceedings had been dismissed for want of prosecution and there was a loss of the cause of action. The actual issue in the case - I note only your Honour Justice Brennan from members of the Bench that were dealing with the case is here today, but the issue in the case was when did one assess that loss and there was one view, which was Justice Dawson, who said it was at the time that the action was lost, so when it was struck out.

There was a view of the Chief Justice and Justices Wilson, Toohey and Gaudron that the assessment had to be made at the time that judgment would have been obtained and your Honour the Chief Justice, the Full Court below and the trial judge had said that it was the time that judgment was given against the solicitor and that was relevant because various things could have happened that would affect the quantum of the loss.  But what is important is that in this case, if one goes, for example, to page 360, in the second full paragraph, about halfway through, four lines after the reference to Kitchen v Royal Air Force Association, it is said:

there is no question in these appeals whether the respondent would have succeeded in the personal injury actions.  The sole issue is the value of those causes of actions.

So there was no question of uncertainty about whether or not the case would have succeeded had it gone forward, that is, the original case that had been lost had gone forward.  On page 364 at the bottom of the page the majority notes this as well in probably about the last eight lines:

In the two cases now before this Court, it is common ground that the respondent would have succeeded in each of the claims against his employers.

But nevertheless the Court did refer in some detail to Kitchen v Royal Air Force Association, which is referred to back on page 363, and on page 364 there is a passage cited from the judgment of Lord Evershed, who said:

“If, in this kind of action, it is plain that an action could have been brought, and if it had been brought that it must have succeeded, of course the answer is easy.

KIRBY J:   Can I ask you, just pausing there, is it conceded that this is a case which, if brought against the broker, must have succeeded?

MR PULLIN: No, your Honour, that is our whole point, that we say there was a good policy because of section 28. All that we can concede in this case is that there was a duty to exercise reasonable care which had been breached, but there was no loss caused ‑ ‑ ‑

KIRBY J:   So that despite your having failed to bring to notice information which you had which was relevant to the insurer’s risk and despite the fact that the Act permitted the insurer to adjust the liability, that you can walk away without any consequences?

MR PULLIN:   Well, it is the bit where you say that the insurer was entitled to adjust its liability.  It was not, your Honour, unless there was some evidence which could enable a court to reach that conclusion because if one chooses to fight a case with no evidence on that point, one must assume that in those circumstances the policy is good.  One must have some evidence to show that this particular insurer was able to reduce its liability to nil.

KIRBY J:   Can not a court infer from the long knowledge of 300 years of insurance law and the common law that insurers like to have a lot of information and they do not like to have vital information kept from them and that if it is kept from them, that that has a consequence that insurers, at the very least, if they cannot now deny indemnity, it would have an effect on adjusting their obligations?

MR PULLIN:   Your Honour, there has been a real sea change because of this legislation.  Kelaw, that I referred to yesterday, is a very good example of where it may well have been the case that a prudent insurer would have said, “I will not insure this horse because of these material facts and I would not have issued the policy had I known of those facts.”  But in the particular case that particular insurer was keen to get into the industry and was prepared, so the court held, to take risks where a prudent insurer may not have been prepared to do so.  So what is critical now is the position of the particular insurer and if there is no evidence, that premise that everyone keeps putting to me cannot be founded.  It is an assertion with no evidence to support it.

HAYNE J:   Was there not a breach of the contract of retainer with the broker?

MR PULLIN:   There was, your Honour, yes.

HAYNE J:   And there was, therefore, at least liability for nominal damages?

MR PULLIN:   For nominal damages.  I agree with that, your Honour, and because I hear coming from various quarters something that might lead me to believe that I might see reasons for decision that will say that causation was established, at least to say that there was some loss, either nominal damages or in relation to tort, there was at least the loss of an opportunity of presenting a claim with no allegation of non‑disclosure being raised, we also say that when you get to the quantification issue - and our notice of appeal covers this as well - you simply cannot in the issue in relation to quantification, make an assessment without that evidence.  I am not yet finished this - it brings me to this very point.  So Lord Evershed said:

“If, in this kind of action, it is plain -

ie, there is some evidence -

that an action could have been brought, and if it had been brought that it must have succeeded, of course the answer is easy.  The damaged plaintiff then would recover the full amount of the damages lost by the failure to bring the action originally.  On the other hand, if it be made clear that the plaintiff never had a cause of action, that there was no case which the plaintiff could reasonably ever have formulated, then it is equally plain that the answer is that she can get nothing save nominal damages for the solicitors’ negligence.”

Which is, I think, your Honour’s point.  Nominal damages is one thing; it is quite another thing to say, “We will simply require you to pay by way of judgment the difference between the full amount of the claim and the amount that was settled for”, without ever knowing what it was that in reality the insurer was likely to succeed on in relation to the non‑disclosure issue.  So, as I say, our primary contention is based in causation, no causation of any loss, that it is artificial to say, in our submission ‑ that it is forcing the language to say that there is loss because the plaintiff lost the opportunity of presenting a claim which would not have at least an allegation raised against it, that there had been non‑disclosure which might entitle the insurer to deny or reduce its liability for some reason.

BRENNAN CJ:   Mr Pullin, for my part at the moment I do not understand the dichotomy that you are seeking to draw between proof of the loss and quantification of damage and I thought they are precisely the same question, but that does not detract from your basic proposition, I think, which is the need to prove that there was a causal relationship between the negligence on the part of the broker and that which is claimed as a loss.  Now, there are two problems that seem to me to emerge.  One is, if you identify the loss as being the loss of a cover which was undoubted and the acquisition of a cover which is in controversy, so that the one is worth less than the other, you may then say, “There is a loss.”  We will come to the question of what that loss is precisely in a moment.  I understand the argument, I think, in relation to the sea change, as you have spoken of.  What do you say about the other grounds of defence that were raised by the insurer, that is, the cap and the arson?

MR PULLIN:   The cap, I am prepared to say that really does not feature any more because the parties reached ‑ the figure that would have been paid out has been adjusted because of that.  So we can actually put the averaging argument aside.  It is really the fact that the insurer had also raised a plea of arson as well.  Now, what I would say about it is that the trial judge, and the Full Court agreed, said, “Well, I am going to look at what the plaintiff says about whether or not there was arson or not.  The plaintiff has denied it.  Therefore, I will disregard it as being of any relevance at all.”

In fact, what is relevant about the question of arson is, when it comes to the issue of how much was paid out by the insurer, what did the insurer think about it, because the insurer may have been paying because it thought it had a hopeless case on non‑disclosure, given the change in the law and thought it had a wonderful case but, subject to the need to observe the higher standards that apply to an allegation of fraud, might have been prepared to discount it.  But we are all speculating about that because there was simply nothing that enabled the court to make a proper assessment on any probative evidence about that aspect of the case.  So it is not that ‑ ‑ ‑

BRENNAN CJ:   Is there anything which indicated that by an application of the “but for” test the total amount of the cover would have been met?

MR PULLIN:   I am not sure how that would apply in a case with the two reasons being offered by the insurance company.

BRENNAN CJ:   I am really asking whether or not there was any finding below which would assist in that?

MR PULLIN:   I do not believe so, your Honour, no. I might be misunderstanding exactly what finding would have to be made in relation to it, your Honour.  I mean, that issue was not addressed in those terms at all.

BRENNAN CJ:   Yes.  Now, as to quantification, assuming the loss is identified in the terms that I put to you, namely, the acquisition of a contested liability only, why is not the loss then to be understood and quantified as being the value or the difference in value between the totality of the cover and that which, objectively assessed, that is, without reference to the subject of advice received and without reference to the contents of either parties’ brief, but the known facts of the case, why is it not to be assessed by reference to that which would be regarded as a reasonable settlement?

MR PULLIN:   We agree with that, your Honour.  In fact, it is recorded as our argument in the Full Court, but we say the relevant objective facts are what it is that the insurer knew or was doing when it reached a settlement on which we had no evidence at all and the objective ‑ ‑ ‑

BRENNAN CJ:   Well, that is looking at what the situation is from the insurer’s viewpoint.

MR PULLIN:   And that is what is critical, your Honour.

BRENNAN CJ: If the officious bystander was to look at the pleadings and were to say, “Here was an allegation on the one side, on the insurer’s side, that there had been arson and that there had been non‑disclosure; on the other a reliance on section 28 and they come to an agreement of 900,000.” Is that reasonable or not?

MR PULLIN:   I can say that if that test is applied, your Honour, let us say that that was the considerations and there were also two other pieces of information which are found in this case.  One is that you have got an expert evidence who is saying, “I think, in fact, a reasonable insurer would provide cover, notwithstanding this non‑disclosure and I even think that NZI is a reasonable insurer”, and then look at the agreement reached between the parties, that, in fact, no one would have - or any other reasonable insurer would not have reduced liability to nil, but would have charged only an additional $9,000 premium.  Now, what would the officious bystander say?

Would he say, “Your loss is really the difference between $1.7 million and $900,000”?  He could never say it, but the court has just said, “We are going to give the difference between the 1.7 million and 900,000.”  No one could reach that conclusion in the face of those two pieces of information which are in the brief which the officious bystander looks at at the time the settlement takes place.  It would say, “You are never going to get back from the broker the difference between these.  You had better try harder or pursue the insurance company because you are, in fact, just giving up part of your claim.” 

So that is our argument, your Honour. It just seems too plain that the court has said - this Court might even agree that they have said the right words because the Full Court said there was this loss of the chance of presenting a claim without contest, but has then just simply said, “We think that the figure is right.” You cannot say that the figure is right, we say, in the face of the evidence which I read out yesterday and the agreement about the additional premium which would be paid and we say, furthermore, the officious bystander would have said, “Well, really, when you get to trial, you will also, if you want to win the case against the insurer, have to find out what factors are relevant from the insurer’s point of view because of section 28.” So I think that is the answer that I would offer, your Honour, to that question.

Now, can I just take the Court to a Victorian case which has just been handed down and that case is Akedian v Royal Insurance Australia.  It was an unreported decision of the Supreme Court of Victoria in the Admiralty list delivered on 1 September - on the index it is shown as 1 December; it should be 1 September - 1997.  It is under the last tab, XYZ, underneath the copy of Wardley’s which you will see there.  This was a case which was almost on all fours with this one:  a claim by an insured against an insurer; the insurer denied liability; the broker was joined; the case was settled against the insurer; the case went on against the broker. 

The only distinguishing factor is that this was a case under the Marine Insurance Act, which does not have the equivalent of section 28. So, therefore, it was looking at what a prudent insurer would or would not have done in the circumstances. If I take the Court to page 9 of the report under the heading Negligence of the Broker, it is exactly the same as this. There was a finding, as you will see under the heading Negligence of the Broker, there was an acceptance:

that the Broker owed to Akedian a duty to exercise reasonable skill and care.....

I am satisfied that the misrepresentation as to the age of the Machinery amounted to a breach of this duty.  A broker must not knowingly make a false answer -

and then down the bottom, the last two lines:

This question of materiality, depending as it does, in part, at least, upon the practice and requirements of the underwriting profession -

so this is why it is not a section 28 case but a prudent insurer -

is often one of great difficulty.

Then under The Insurers’ Entitlement to Avoid, under that heading it says:

Accepting that the Broker was in breach of its duty of care to the Insured, the claim of Akedian for damages depended upon its establishing that the Broker’s non‑disclosure and misrepresentation entitled the Insurers to avoid the policy.  Having itself settled with the Insurers, it assumed the task of presenting against the Broker the case that the Insurers would have presented against it.

We say that is correct given the sentence which precedes.  We say that is the correct approach and that is the approach that should have been followed by the trial judge in this case and we say by the Full Court. 

If that is wrong, of course, it does has practical ramifications generally for this kind of situation because it then becomes very easy for an insured person at the settlement conference to reach really any form of settlement with the insurer knowing that the onus then - or it has been suggested by Justice McHugh, if it be the reasoning of this Court, that the onus would then shift somehow to the broker to then establish the position.  That will have important ramifications in many cases that come before the courts.

Now, I know it is only Justice McHugh that has raised that issue about intervening cause and I wanted to say something about that just now.  Your Honour raised this question about whether or not it could be said that there was some intervening cause which then switched the onus to us so that we should have led the evidence and I just say three short matters about this.  In general I know that the law does accept that intervening causes can, to use the phrase, break the chain of causation.  Your Honour Justice McHugh in the Bennett Case discusses it and analyses the position, Bennett v Minister of Community Welfare (1992) 176 CLR 408.

There is, of course, that general concern in the text about identifying intervening causes and just looking at Professor Fleming who talks about intervening causes in his Eighth Edition of the Law of Torts, he mentions that there is an arbitrary element in the judicial practice of isolating certain co‑operating causes and treating them as independent supervening forces while disregarding others as inoperative to interrupt direct sequence between wrongdoers default and ultimate consequences.

McHUGH J:   It is not really a case of an intervening cause, is it?  It is a case whether the plaintiff’s conduct was so unreasonable that the 800,000 difference is to be attributed to it rather than ‑ ‑ ‑

MR PULLIN:   Yes.  Well, I agree it is not intervening cause because I was going on to make the next point that, surely, what is the intervening cause here.  The only intervening cause the plaintiff could put up is to say, “Well, it was my action in accepting a figure that cannot be supported.”  Surely that cannot be an intervening cause.  So for that reason it cannot possibly be an intervening cause case.  In relation to the difficulty of proof, Professor Fleming, I notice, says this at page 315 of the Eighth Edition:

Proof of causality -

and he is talking causality -

often poses acute difficulty for plaintiffs.  Especially in the case of culpable omission, it becomes harder to show that “but for it” the injury would have been avoided.  As a compromise, the burden might well have been shifted to the defendant, once his negligence had been established, to disprove its causal relevance.  The case for modification becomes even stronger when the defendant’s very negligence created the proof-uncertainty, for example a hospital’s delay in supplying life‑saving aid or a captain’s refusal to turn the ship around and look for a man overboard.  Equally troubling are cases of alternative causation implicating multiple defendants.  But as already noted -

and there is a reference to British courts -

British courts have refused to bend the rules; instead of openly modifying the allocation of proof, they might rather assist plaintiffs by applying in practice a lower standard of proof.

McHUGH J:   That deals with where the onus lies, but I thought I put to you yesterday a question of the evidentiary onus.  I mean, here you have placed the plaintiff in a dilemma and it made a decision to accept 800,000 less than it otherwise would have got.  So in that sense there is a causal connection.  That is prima facie evidence of a causal connection, but ‑ ‑ ‑

MR PULLIN:   We take issue with that, your Honour.  I would just flag that point at which I would take issue.

McHUGH J: What I was going to put to you is that if you want to say that by reason of section 28, among other things, the plaintiff’s conduct was unreasonable, then it is you that bears the evidentiary onus to rebut what is otherwise a prima facie case of causation between your breach and the damage the plaintiff suffered.

MR PULLIN:   We would say that that would then enable the plaintiff in the case to have said, “We will simply abandon the case against the insurer.  We have been placed in this difficult position.  We will abandon the case or we will settle for a dollar or $100,000 or some other figure.”

HAYNE J:   The point, I think, may be perhaps captured, may it not, by the discussion in Biggin v Permanite,  case F in your authorities, where once the party that has settled demonstrates that it settled with advice, then it may be that if it is useful to talk in terms of shifting onuses or evidentiary onuses, the onus may be on you to show in effect why that advice was wrong.

MR PULLIN:   Your Honour, it is probably just at the moment where I was going to refer to Biggin because it is an important case in our argument.  Can I just go first to what the trial judge said, which was adopted by the Full Court, and then go to Biggin because there is a sentence which we say the trial judge states which is completely contrary to Biggin, notwithstanding that his Honour referred to Biggin and the Full Court quoted in extenso and just seemed to ignore what the case was saying.

BRENNAN CJ:   Would you just give me the reference from Fleming again, please?

MR PULLIN:   Yes, your Honour.  That passage that I read was at page 315 in the Eighth Edition of the Law of Torts.  Now, could I take the Court to page 49 of the appeal book and to line 30 and you will see the sentence that starts, in fact, line 31:

The question is not whether NZI considered that it was or was not entitled to reduce its liability to nil but, rather, that of whether the plaintiff acted reasonably in compromising its claim against NZI for $900,000.

Now, that phrase “whether the plaintiff acted reasonably” is completely contrary to Biggin, which is, as I say, quoted by both courts below and let me take you to Biggin.  In fact, let me start with Biggin & Co Ltd v Permanite Ltd (1951) 2 KB 314 and it is at tab F. In fact, I will not go to the phrase where the Court expressly disapproves of that. I will just take you through the case first. Biggin was a case where the plaintiff in this case had bought bitumen from the defendant, the defendant knowing that it was going to be on sold to the Dutch Government and it turned out to be defective. 

The Dutch Government raised a claim.  It was not possible to have the negligence and the allegations of defects joined with an action by the plaintiff against the supplier, the defendant, because the Dutch Government would only agree to arbitration, so there was a separate hearing and once that hearing had taken place - no, sorry, there was not a hearing, there was a settlement by payment of £43,000 by the plaintiff to the Dutch Government and so then the plaintiff turned around and said, “Now sue the defendant for that £43,000.”, which it had settled for.  At page 317 in the judgment of Lord Justice Somervell, about a third of the way down the page, perhaps a little further, you will see the sentence that begins:

Their submission -

that is, the plaintiff’s submission -

was that, if it can be shown that a settlement has been made under competent advice and if the advisers are submitted to cross‑examination, that is enough.  I do not accept that view -

and then if you go to page 321 there is a reference, in fact, on page 320 to a case of Fisher v Val de Travers, which the trial judge gained some comfort from in his reasons for decision, and at the top of page 321 in referring to Fisher v Val de Travers and commenting on it - in fact, you need to go back to the bottom of page 320, the last small paragraph there, the last four lines:

The action was tried by lord Coleridge, C.J., and a special jury, and he left them two questions, which are really only one. The jury found “that the plaintiffs had acted reasonably” in comprising Hick’s claim, and the sum paid as compensation “was reasonable”.  It would seem to be difficult to say that, if the answer to the second question was “Yes”, the answer to the first question could be “No”.

Now, in commenting on that case where there is this reference to a reasonable settlement, Lord Justice Somervell says, and it is the third line down on page 321, and this is the passage I refer to:

So, though, of course, we are not told what happened before the judge and jury, I think that the effective question left was: was the compensation reasonable? I think that that indicates that there must have been at any rate some evidence (as, for instance, the nature of the injuries and so on) on which the jury could come to a conclusion on that point.

I think that the judge here was wrong in regarding the settlement as wholly irrelevant.  I think, though it is not conclusive -

And he said that earlier:

That the fact that it is admittedly an upper limit would lead to the conclusion that, if reasonable, it should be taken as the measure.

We do not dispute that the 900,000 settlement could provide a cap and that is all that is being said here, that if it is reasonable, it should be taken as the measure, but if it is reasonable.  Then a little further down on the page about two‑thirds of the way down, you will see a sentence beginning:

The plaintiff must, I think, lead evidence, which can be cross-examined to, as to facts which the witnesses themselves prove and as to what would probably be proved if, as here, the arbitration had proceeded, so that the court can come to a conclusion whether or not the sum paid was reasonable.

Then on page 324, in Lord Justice Singleton’s judgment, at the bottom of the page, last line, he said:

the plaintiffs must prove their damages. It is not enough for them to say: “We were advised to settle for £43,000, we did so, and we now claim that sum”.  Before the court can award a sum as damages, there must be evidence on which it can act.

And that, one would interpose must be relevant evidence on which it can act.

Therefore, in a case such as this, the plaintiffs must call evidence to establish their case.  If the evidence which they call satisfies the judge or jury that the settlement was a reasonable one, the damages awarded will be the amount of the settlement and the costs reasonably incurred.

And then a little further down, halfway down:

The trial judge must make up his own mind on the facts he finds proved before him.

And then he says, once again:

I am far from saying that the settlement ought to be disregarded.

And he says:

No one can think that a person or a company will agree to pay £43,000 damages lightly.

It is strange in this case that one can say, no one could say that an insurance company would pay $900,000 in money to an insured if it thinks that it is entitled to reduce its liability to nil, that being an argument which it is putting up.  So, that offer itself is actually relevant for the reverse reason in this case.  Then, a little further down:

If, upon the evidence, the judge is satisfied that the damages would be somewhere around the figure at which the plaintiffs had settled, he would be justified in awarding the settlement figure.

And then a little further down:

The plaintiffs must establish a prima facie case that the settlement was a reasonable one.  If the defendants fail to shake that case, the amount of the settlement can properly be awarded as damages.

And then, finally, over the page, the phrase which directly contradicts what, if you still have open page 49, line 31, on page 326, Lord Justice Singleton said this, in the sixth line down, this one sentence, part of a sentence:

The question is not whether the plaintiffs acted reasonably in settling the claim, but whether the settlement was a reasonable one.

So, the question is not whether the plaintiffs acted reasonably in settling the claim, this is what the trial judge said back on page 49:

The question is not whether NZI considered that it was or was not entitled to reduce its liability to nil but, rather, that of whether the plaintiff acted reasonably in compromising its claim against NZI for $900,000.

We say that is wrong.  Biggin is right, that is wrong.

KIRBY J:   Can I just ask you this.  I take the force of what you have just said to us and you appealed against his Honour’s approach which seems, in a somewhat complex area, to have been the approach of the plaintiff, and to have permeated the trial.  It seems a little, what will I say, robust then to say, in a case where the trial has, as it were, miscarried by misdirecting its attention to the correct principle, well, the plaintiff had its chance.  Its obligation is to prove its loss.  It just seems to have assumed that it could claim what the difference was.  The judge seemed to endorse that, that was wrong, but then, that an appellate court does not send the matter back to be dealt with according to the true legal principle.

Now, you say, you have had one chance and that is it?  But is there any principle whereby one can establish the doctrine and have the trial carry according to law with the correct doctrine?  You may still come away with zero but, at least, then a trial would have been had according to law, whereas, on your argument in this case, it was not.

MR PULLIN:   I wonder if we reach that point, and that was a decision of the Court, I must confess I have not come ready with all the material which ‑we were ready to deal with that at the Full Court - because, of course, there is an argument about that and I can understand the Court saying it should go back for reconsideration.  But we would like to be able, if the Court reaches that conclusion, to have that debate based on the material and an analysis of what actually happened at the trial, and to bring forward any relevant material on that issue.

KIRBY J:   It is pretty important to me.  I can tell you that, at the moment, subject to hearing the respondent, that is where I stand. Therefore, it is sort of now or never.

MR PULLIN:   What I would say, your Honour, is - - -

KIRBY J:   I am not saying that the Court would not permit you to put in written submissions but we do not seem to have the transcript of what actually happened at the trial.  But it seems a little hard of heart to say in an area that is quite technical, where a matter may have miscarried on everybody’s - you say in fairness, you flagged the point and you took the point, and this was your point.  But if that is so, I think that ought to be established clearly and then a question is raised as to whether there is not some way whereby the matter cannot be sent back to be dealt with according to the correct principle.

MR PULLIN:   I think your Honour has summarised the point, that it was always an issue and therefore there are a number of cases that say you just cannot, if you have charted your course, you must take the consequences.  I must say that I am not conceding this but I am not particularly worried about it in this case, because if it did go back - and there is a real comfort in my view given the concessions that were made about the fact that the only thing that would have been increased by way of premium would be $9,000, that we would have a fair degree of comfort about our result.  It is perhaps a confidence that is misplaced but, in any event, we take the point, and the authorities suggest that the point is a good one, that if an issue is an issue at the trial, that the matter should not be send back if it is has always been appreciated that that is the issue, and the party chooses to argue it in a particular way, and it is just proved to be wrong, that it has to take the consequences.

BRENNAN CJ:   You have sought in your notice of appeal that the action be dismissed.

MR PULLIN:   Yes, and that is our primary contention, your Honour.

BRENNAN CJ:   I understand that that is the mast to which you have tacked your flag.

MR PULLIN:   Perhaps I will reconsider.  Really, it is a - - -

KIRBY J:   There is another mast down the back of the ship.

MR PULLIN:   Perhaps I will take some instructions on it, your Honour.

BRENNAN CJ:   I think, perhaps, you need to do so, because it is not a question of appeals in two bites.

MR PULLIN:   Yes.  Your Honour, our primary argument is, even if we put forward the alternative that, in the alternative, matter be returned for a reconsideration, taking into account the proper law as found by this Court, it would still be our argument that, in fact, that should not happen.  But I agree that - in fact, I can say now that I should add, as an alternative, that that is an alternative order that we would seek.  But that is not making any concession about the strength of the argument that we would put based on what Justice Kirby has identified as the argument we do put, which is that the course had been charted.

So, it is easy enough for me, your Honour, when I think about it, even without instructions, to seek to amend the notice of appeal to say that, in the alternative, there is an order sought - that we seek an order that in lieu thereof, and I will formulate this a little more carefully when I sit down, that in lieu of the orders that we seek that the matter be returned to the court below for a determination in accordance with law.  I will formulate that.

BRENNAN CJ:   The court below or the trial judge?

MR PULLIN:   There is not much point in the court below.  The trial judge, I think, your Honour, yes.

BRENNAN CJ:   That depends on whether or not there is a question of fresh evidence, and then there is the question of the onus of proof.

MR PULLIN:   Yes, I do not know that that is a consideration, your Honour.  Let me think about that.  It may raise that question.  I am not sure whether it is from my point of view or whether the other side would contend that there should be some ability to go into fresh evidence.

KIRBY J:   There may be a need for the Court to have some knowledge of what the powers of the Full Court or the Supreme Court of Western Australia are.  There may be some wide powers to provide for orders that ensure that, effectively, the matter is dealt with according to law.

MR PULLIN:   It certainly has that power to send it back with such a direction, your Honour, there is no difficulty about that.  Now, having pointed out that the Court - - -

GUMMOW J:   Before you leave Biggin, this is a decision of the English Court of Appeal, has the Biggin situation been dealt with elsewhere?  Not in the United States?

MR PULLIN:   Not that I am aware of, your Honour, that it has been considered in the circumstances that we are looking at here.

GUMMOW J:   Not in Canada, not in the United States?

MR PULLIN:   Not this particular issue that we are looking at, your Honour.  Justice Steytler referred to Biggin, in fact Biggin and a series of cases that - - -

GUMMOW J:   Is there any discussion of this in Hardy Ivamy’s book on Insurance, an English text?

MR PULLIN:   I cannot say, your Honour.  We have researched it pretty well but whether or not - Your Honours, Biggin and five other cases were referred to by Justice Steytler in his reasons for decision and they get referred to starting on page 36, where his Honour says that some assistance can be found from the case law on this subject.  He then sets out a reference to Fisher v Val de Travers, Biggin, Nominal Defendant (Queensland) v Langman, State of Western Australia v Bond Corporation Holdings at page 42, and one other case on page 45, the case of Tandoran.

Now, they came up after the case had been argued and all the closing submissions, his Honour identified these cases as cases that he thought as being of relevance and there were written submissions made about them.  The point that we make about these six cases is that, first, none of them are under the Insurance Contracts Act, so not one of them is considering what effect section 28 has. Secondly, some provide no guidance at all and Fisher v Val de Travers is a good example as Biggin indicates, you just cannot tell from the case.  There must have been some evidence in deciding whether or not the decision was reasonable or not.

One we actually say is wrong and that is Tandoran; and  Biggin, we say, having been cited and referred to and quoted extensively, just does not seem to have been recognised as being an authority which suggests the contrary outcome in this case.  So, Biggin is dealt with on page 37, I do not need to deal with that again, and Fisher - - -

GUMMOW J:   Biggin is a demonstration of robust common sense, I suppose. That is about it, is it not?

MR PULLIN:   It is, your Honour, except that it does make the very important point that it is wrong to say, in looking at the value of the settlement, it is not irrelevant and we do not say it is irrelevant, but you cannot just say they settle for that figure and therefore we will give them that figure, or in this case, the difference between the figure they settled at and the amount of the claim.  You have got to have some evidence.  It is common sense, your Honour, I agree.

So, Biggin is dealt with and quoted extensively, including passages that I have read from.  There is then a case, on page 40, of the Nominal Defendant (Queensland) v Langman (1988) 2 Qd R 569. That was a case, if I can just briefly tell you about it, it was some legislation which provided that an amount paid out by the Nominal Defendant, if it was “proper” within the meaning of the legislation in question, so it turns on that meaning of that legislation.  But, even in that case, on the reading of it, one can see that there was a substantial amount of the evidence led which would enable an assessment about whether or not the amount paid out by the Nominal Defendant in relation to an accident was proper.  It enabled the Court to make the assessment on that basis.

The next case, I can quickly deal with these three remaining cases.  The one which is referred to - it is just mentioned in passing at page 42, Suncorp Insurance and Finance v Ploner (1991) 1 Qd R 69, Justice McPherson’s judgment with whom Justice Moynihan agreed. That was a case where a person who was insured attacked somebody, drove his vehicle into that other person’s vehicle, that person who had his vehicle damaged then sued. The insurance company, Suncorp, then settled with that person and then sought to recoup from its insured the amount which had been paid out to the injured party, or the party that had their property damaged.

What can be seen from that judgment, in Justice McPherson’s judgment, is that the facts were fully before the Court.  In fact, it can be seen even from page 76, I do not have a copy just open, but I think on page 76, it can be seen that Suncorp, in fact, called as a witness the plaintiff in the case, in other words, the person who had been injured by its insured.

So, in all of these cases, it is assumed that you have got to give the Court something in deciding whether or not a settlement was reasonable, and I should say, in Suncorp there had, of course, been the settlement with the injured party and Suncorp was seeking to recover the amount it had paid out by way of settlement.  So, the reasonableness of the settlement could be measured against the evidence that would have been led in the other action.

In the State of Western Australia v Bond Corporation Holdings (1991) ATPR 41‑095, which is referred to on page 42 of the appeal book ‑ this is the one that led to the Wardley’s Case or part of the Wardley’s litigation which, ultimately, led to the case in the High Court.  Just to briefly restate, the State of Western Australia had agreed in a deed of indemnity to indemnify the National Bank against losses arising from the bank granting financial assistance to Rothwells.  The National Bank repaid the debt.  The liquidators were appointed to Rothwells and the liquidators claimed that the repayment was a voidable preference.

There was a dispute between the liquidators and the bank which was settled for $22.5 million.  The State then sued to recover this sum.  It was only a pleading point and what Justice French said, and you can find it at page 52,531 of the report, he said:

Whether the circumstances of the decision to settle are such as to enable the judgment to be made that the payment was caused by the conduct of the respondents will depend upon the facts of the case which can only be ascertained when all the evidence is in.

So, he said as a pleading point, it is enough to say the settlement was reasonable, but when it gets to trial, there will be evidence which will tell us whether or not it is reasonable.  So, that decision was not identified by the trial judge as being one which said you have got to look at the relevant - - -

KIRBY J:   Do we have Justice French’s opinion?

MR PULLIN:   Yes, it is under tab T, your Honour, and if you would just like to mark the passage so you do not have to look for it, we have only just photocopied the relevant pages,

HAYNE J:   The passage you cited is at AB 44, I think.

MR PULLIN:   Yes, your Honour.

HAYNE J:   In the present case, other than the fact of settlement and the fact that the settlement accorded with advice given by senior counsel, was there any other evidence about factors that were taken into account in arriving at the settlement, or factors that bore upon the settlement?

MR PULLIN:    No, your Honour.  But there was other evidence which the trial judge took into account in looking at this question of reasonableness which I should now mention, and he listed them.  There is a short passage which summarises them, that is at appeal book 30.  I think there were four points that he listed.  Halfway down the page, line 25, his Honour said:

No evidence was led from any person on behalf of NZI as to what its position would have been had the non-disclosure not occurred.  I am consequently left, in that respect, with the denial of liability by its solicitors to which I have referred -

So, we say that has no value because in Kelaw we saw that the insurer denied liability and failed on it:

The fact of the defence pleaded by it when still a party to these proceedings.

The bundle that was handed up of the pleadings includes the defence which NZI said that if the case did not settle, that represented the case.  What you have, apparently, in the bundle is the pleading that stood as at the time of the settlement negotiations which raised both non‑disclosure and arson.  But what they said at the hearing of the mediation conference was that if the matter did not settle, they would also be raising averaging - and we can disregard that.  So, the one that you have does raise both the arson allegations and the non‑disclosure point.  So, what his Honour is saying:

I am consequently left, in that respect, with the denial of liability.....the fact of the defence pleaded by it when still a party to these proceedings, the fact that it did not, apparently, offer any quote in response to Exhibit 23 and the fact of the settlement reached between the plaintiff and NZI.

Now, I just need to tell you briefly about this reference to “did not apparently offer any quote in response to Exhibit 23”.  What had happened was that 16 months before this transaction, the insurer at the time was I think Sun Alliance - MMI, another insurance company.  An approach was made to insurers, I am not sure whether MMI was approached, I think Sun Alliance was approached, and NZI.  NZI did not respond to the inquiry for cover, did not offer a quote and, at that time, there had been full disclosure of the claims that had existed up until then.  Now, of course, there were not all of the claims because some of them occurred after that time that they were looking at getting insurance.

Now, we, in fact, offered that.  We were relying upon it to say NZI knew about the bulk of these claims, in any event.  The trial judge said, no, I do not think information which was gathered 16 months before could be said to be knowledge of NZI at the relevant time.  But then, having said that, said, but it indicates to me that that is a reason that I can rely upon as indicating that NZI would have denied liability and had grounds for denying liability later on.  We say that it really provides no assistance at all on that  point because, as the judge said, it was 16 months before and, on the other issue, could not be taken into account, given the period of time that it had occurred before.

This point is dealt with on page 49 of the appeal book, down the bottom of the page, last two lines, and over the top of the page, page 50, and opposite line 11, having said that I doubt that the receipt by NZI 16 months earlier could be said to have been the bringing of the plaintiff within section 21 to avoid the non-disclosure defence, then he said this:

Indeed, it seems to me that the fact that NZI did not provide any quote in response to Exhibit 23.....is indicative both of the fact that the plaintiff’s claim history was such as to deter it from quoting in respect of the insurance requested and of the fact that it did not take that history into account in later affording to the plaintiff the insurance provided under the cover note and the policy.

We say that is a matter of entire speculation.  We do not know whether the officer who particularly dealt with the case knew about it.  It really is a matter of speculation given the complete absence of evidence from NZI.

BRENNAN CJ:   But there are two propositions there.  What you just said may apply to the second of them.  What do you say about the first, that is the non-quotations in response to exhibit 23 is material from which an inference can be drawn that NZI, with knowledge of the claims history, would not have issued the policy?

MR PULLIN:   Well, because it does require speculation, your Honour. All we know is that it did not provide a quote. How does one build from somebody not providing a quote that that would provide sufficient evidence to satisfy section 28(3) of the Insurance Contracts Act, and satisfy a court that it could reduce its liability, in this case they are contending, to nil.

BRENNAN CJ: Section 28(3) is satisfied upon proof that the insurer would not have gone on risk.

MR PULLIN:   That is right.

BRENNAN CJ:   So the question is, does that material provid any foundation for the inference that the insurer would not have gone on risk? Answer, here is an insurer in business for whatever policies it can write, it is given an opportunity, it does not offer to write one.

MR PULLIN:   That is right, 16 months before.

BRENNAN CJ:   Sixteen months before, but nothing to show that there is any great change in the insurance market.

MR PULLIN:   But it is not enough, your Honour, to say that it would not have offered the policy.  There may be reasons for that.  I can speculate endlessly.

BRENNAN CJ:   But there may be, but in the circumstances of the case is there any reason why that inference could not be drawn?

MR PULLIN:   Only, your Honour, that we say that it is too remote in time,No 1;  and No 2, it leaves for speculation why it was that it did not offer the quote.  As I say, I can offer a list and probably go on all day with speculation about what might be the reason for the insurance company not having offered the quote on that particular occasion.

BRENNAN CJ:   The claims clerk might have lost the file.

MR PULLIN:   Entirely so, your Honour.

HAYNE J:   But judging the matter of the time at which the party is confronting the question, “Do I settle?”, it may, perhaps, offer an explanation for a settlement that lies part way between maximum success and maximum failure.

MR PULLIN:   But it is not suggested that information was known to the parties at the time of settlement.  This came out during the trial.  So, whether or not it was known, what is not suggested is that this factor was known at the time that the settlement took place.  It may be the case.  I cannot recall any finding in any of the judgments to say that this was one of the factors taken into account at settlement.  There is no evidence to say that that was known and was a relevant factor at settlement.

So, in any event, that is one of the points that was put up.  The final point, your Honour, is the one where you go to page 51 where his Honour said at the top of the page:

It seems to me, in all of the circumstances, that, viewed from the plaintiff’s perspective -

And we say that is, of course, contrary to what Biggin says is what you must be doing:  you must be looking at the facts, not what the plaintiff thinks about it -

there was a reasonable prospect that NZI would succeed in its defence on the non‑disclosure issue -

We say that is contrary to Lord Justice Singleton at page 326; and how can you draw any conclusion other than to speculate entirely that there was a reasonable prospect that NZI would succeed in its defence on the non‑disclosure issue in the face of an expert who is standing next to you saying, “I think you could get insurance elsewhere.  It would only cost you $9,000 and I really even think NZI would have given it to you for $9,000 extra, so that’s really your loss”.

BRENNAN CJ:   Do we have a copy of exhibit 23?  It is not in the appeal book.

MR PULLIN:   No, but what I can tell you, your Honour, is that it listed some of the claims which, if one goes back to page 4A and B in the appeal book, clearly it could not have included the last two because this was occurring in - the request for quotation was, I think, in February 1991, and on the list of claims which in fact occurred, clearly the April 1991 and the September 1991 had not occurred.  In the proposal which is the subject of these proceedings, one of the other nine had been disclosed, and I seem to recall that one other had been missed out at the time of the 16 month earlier occasion.  Page 10, I am told, your Honour.

BRENNAN CJ:   It is noted in the index simply as a facsimile.  Is it possible to have it turned up while we are here to discover what the terms of the facsimile were?

MR PULLIN:   It is, in fact, set out on page 10, your Honour, the earlier claims history which was disclosed 16 months earlier.  There were seven, so there must have been some missing from the twelve which, if your Honours look on the previous page, page 9:

It was agreed between the parties of the claims history of Mr Pezzano and of the plaintiff in respect of the premises.....was -

and then the court lists all of them, and we are both agreed that that was the claims history. There are 12 claims. In the proposal form that was lodged, which is the subject of this claim, theft of crates was disclosed - just one of them - and I think that was the last one, or it might have been the - but, anyway, one theft of crates was referred to, and what had been disclosed to various insurers. Of course, what is relevant, your Honours, is that he did get insurance. He submitted this exhibit 23 showing the claims history set out on page 10 and he did get cover without any difficulty from Sun Alliance. They offered the quote; gave the quote. So that verifies, I suppose, to a large measure, what the expert was saying: even with this kind of claims history you will get insurance cover. There are seven of the twelve there. What the court said is, “That’s taken as evidence that NZI would have been entitled to reduce its liability to nil under section 28”, and we say it has not any probative value in that respect without hearing from NZI as to the reasons why because that is just putting NZI in the position where it can just say, “We deny liability. We would have denied liability had we known of these claims”.

That is the piece of information that was offered, and there were four of them:  the denial of liability; the fact that a defence had been filed - and we say Kelaw indicates why that is of no use at all, because courts can say you might deny liability but that is no good without a good explanation - the fact of that quote 16 months earlier, and that it was said to be “reasonable from the plaintiff’s perspective”, which we say is wrong in principle.

KIRBY J:   It is inherent in your submission that the plaintiff got a very poor settlement, is it not.

MR PULLIN:   Yes, absolutely, your Honour.

KIRBY J:   And that you should not be fixed with their poor settlement.

MR PULLIN:   That is right.  In fact, we have actually got some figures where I can say that they should have settled for the full amount less $9,000.

KIRBY J:   For?

MR PULLIN:   Nine thousand dollars.  The full amount, $1.7 million minus $9,000 because of what we have set out in our outline of submissions in paragraph ‑ ‑ ‑

KIRBY J:   That is the additional premium.

MR PULLIN:   Yes, the additional premium.  There was plenty of evidence to suggest - if NZI had been called as a witness - say the plaintiff had called NZI, their witnesses would have been hard pressed to explain how they could justify giving evidence on oath that they should have reduced liability to nil because they would not have been provided cover, in the face of a witness who had just been called to say, “Look, you can get cover.  A previous insurer had provided cover.  What is it about you that makes this a case where you could satisfy the court that liability would be reduced to nil because you would not have provided cover in this case?”  Really, it would be contrary to the case that the plaintiff was advancing bar other evidence.

Then, finally, the case of Tadoran v Delaney, which we say is wrong because it reasoned in the same way as the judge in this case, but without analysing it at all.  I can give the reference to it:  it is the case that is referred to on page 45 of the appeal book, Tadoran v N.G. Delaney (1989) 5 ANZ Insurance Cases 60‑900. In that case there had been - it is quite a difficult judgment to read because of the complex facts, but the plaintiff had asked the defendant, who was an insurance broker in that case, to arrange insurance. A loss had occurred. The insurer denied liability, so it was this situation. It is at page 75,736, and this case is found under tab U. At page 75,736 Mr Justice Brownie seemed to decide the case saying it was complex, that there was a “likelihood that the compromise achieved” - I had better go to it because my quote seems to be wrong ‑ ‑ ‑

GUMMOW J:   What principle does this stand for?

KIRBY J:   I was going to ask are we going to be taken through every case in which there is a claim of this kind?

MR PULLIN:   No, that is the last one, your Honour.  All I am saying about the case was that the judge said that he thought:

that the compromise represented a round number of dollars which seemed attractive to the then litigants and their respective lawyers, and I see no basis for concluding other than that it was reasonable on the part of the plaintiff to compromise its claim for the sum obtained, bearing in mind the various difficulties then placing the plaintiff -

That is what the reasoning is in reality in this case.  We say that is wrong; we say this case is wrong for the same reasons that I have offered to date.  That is all that I wish to refer to by way of cases.  They are all the cases referred to by Justice Steytler to justify his decision.

The last thing I think I want to do is to just point out where the errors actually occurred in the judgment if I can quickly go through and mark the passages where we say the errors occurred.  Starting with the Full Court, starting at page 72 in Mr Justice Ipp’s judgment, at line 35 his Honour said:

It seems to me that where the breach of duty by an insurance broker causes the insured to lose a cause of action based on an insurance policy issued by an insurer.....the injury suffered by the insured is, similarly, the loss of a chance, or opportunity, or benefit.

There are two propositions there.  The first part is that what is caused to be lost is a cause of action, and his Honour just seems to assume that has occurred, and that is the crux of the case.  He then goes to the second aspect, that is, that then the injury suffered is “the loss of a chance, or opportunity, or benefit”.  We say the issue is all about whether or not any loss had been caused at all, but we are quite prepared to tackle it on the basis that if the court was in the process of assessment of damages, it still had to have some probative evidence before it before it could reach a conclusion about the assessment of the loss that had taken place.  On page 74 his Honour goes straight to looking at the issue of damages.  That is the third line down:

The trial Judge dealt with the issue of damages -

He talks about the issue of damages; and down at line 50:

The subsequent compromise affects the measurement of that loss, but not its character.

It is still failing to look at, we say, the causation issue.  Then, on page 75, a passage which we say is wrong, but some of your Honours have found some attraction in this phrase, I think.  Line 9:

I reiterate that the respondent thereby lost the chance to make a claim without having to meet the defence of non‑disclosure.

That is what members of the Court have been putting to me.  It is the loss in this case, and if that is agreed, we then need to look at, as I say, Kitchen’s Case and Johnson v Perez which indicate you simply have to have some evidence - Bigginv Permanite is the same - in order to work out what the value of that lost chance is. Finally, at page 84 his Honour ‑ ‑ ‑

McHUGH J:   His Honour seems to be using “chance” in the sense of right.

MR PULLIN:   Yes; he is saying the loss of a chance to approach the insurer without the insurer saying “You did not disclose material facts”.  That is what he is, I think, saying - without having to meet the defence of non‑disclosure.  What he is saying is that if there had not been non‑disclosure the insurer would not have been raising it at all.  Even if the Court agreed with that statement, if we then go to page 84, at the top of the page his Honour said:

In my view, the principles according to which his Honour determined the reasonableness of the settlement were entirely correct.

The last thing I need to do is just to flag the passages where we say the trial judge is wrong because they have really been adopted.  At page 48 of the appeal book, line 31:

The plaintiff was, in these circumstances, entitled to assume, in my opinion, that NZI would, at the trial, lead evidence in support of its contention that, had full disclosure of the claims history been made, it would not have entered into the contract of insurance.  I do not consider that the plaintiff was obliged, in this action, to lead evidence from NZI to the effect that its assumption was correct.

That is the issue in this whole case.  That is the point.  We say that is wrong for all the reasons that have been advanced.  Then, on page 49 the passage that I have already referred to, where his Honour goes directly contrary to Biggin v Permanite.  That is lines 31 to 35.  Then, I think, two other references.  Page 51, I have referred to that already, he said, “viewed from the plaintiff’s perspective”.  Then a little further down - I did not refer to this passage - at lines 15 to 26 he said he thought that it seemed to him that the settlement was reasonable having regard to the plaintiff having been advised by senior counsel to settle for $900,000:

it seems to me that the settlement was reasonable.

So, that is wrong to look at it from the plaintiff’s perspective.  And, page 52 lines 25 to 30:

I am satisfied, in the light of the evidence before me, that the defendant’s breach of duty (whether contractual or tortious) was such as to leave the plaintiff exposed to a real risk of complete failure in relation to its claim against NZI -

We say the only way it can determine whether there was a real risk was to hear what NZI would have been saying.  Without that evidence it is a matter of complete speculation.  Those are my submissions, may it please the Court.

BRENNAN CJ:   Yes, thank you, Mr Pullin.

MR PULLIN:   Can I formulate that proposed amendment to the orders that we seek, your Honour, and mention that afterwards.

BRENNAN CJ:   Of course.

KIRBY J:   Were you going to elaborate that with reference to the transcript and what was said at the trial, or is that a closed book now?  Perhaps you might consider that.

MR PULLIN:   Yes.

BRENNAN CJ:   Yes, Mr Pringle.

MR PRINGLE:   May it please your Honours.  I propose to respond to some of the factual points which my learned friends have raised and also to bring to your Honours’ attention some of the findings of the two courts below.

The first point I would make, your Honours, is that the trial court did hold that the settlement was a reasonable settlement.  We need only go to the last passage that my learned friend cited to your Honours to see that that was so.  My learned friend Mr Pullin read to your Honours page 52 from line 25, and I would bring to your Honours’ attention that not only did his Honour find in that passage that it was reasonable for the respondent to seek to compromise the claim, his Honour also found that the compromise which it did, in fact, achieve was reasonable in all the circumstances.  That indicates where his Honour makes the two findings.  He directed himself correctly in that it was not enough merely to find that the respondent had acted reasonably in settling, but he had also considered the question whether, quite apart from whether the respondent acted reasonably, whether the settlement itself was reasonable.

KIRBY J:   Is there any passage where he takes his mind off - apart from that statement, that he takes his focus off it being reasonable from the plaintiff’s point of view, because that is what he seems to be repeatedly saying.  If Biggin is right, that is wrong.

MR PRINGLE:   I have not looked for any other specific passage because this seems to be the summing up of his findings on this part of the case, and, as I say, it does indicate, in our respectful submission, quite clearly that his Honour did have both legs of the argument, as it were, in mind.

BRENNAN CJ:   Mr Pringle, can we understand that you accept the proposition that the appropriate test is whether the settlement was, in fact, in some objective sense reasonable?

MR PRINGLE:   Of course, that is a very broad question, and it could be looked at from several perspectives.  I would not like to be thought to concede that the settlement had to be entirely reasonable from the defendant’s point of view.  I can understand an approach that a plaintiff must think not only of himself but also of the defendant when settling with one of two or more defendants with the view to pursuing the one remaining or the others remaining for the balance.  One can understand that.  We have, in our submission, here a judge who made a specific finding in that regard and it ‑ ‑ ‑

BRENNAN CJ:   You are not quite answering my question, are you?  We are not talking about whether you would accept a situation looking at it specifically from the defendant’s viewpoint.  The question is whether you accept the test that is expressed in Biggin as the appropriate test.

MR PRINGLE:   I find that a very difficult question to answer, having regard to the relative paucity of authority in the area.

BRENNAN CJ:   We have to answer it.

MR PRINGLE:   Yes, your Honours.

BRENNAN CJ:   So what submission do you make as to the way in which we should answer it?

MR PRINGLE:   I must submit, your Honours, that it is not necessarily a requirement in looking at the question from the point of view of whether there is causation and properly quantified damages that the settlement must necessarily be objectively reasonable.

McHUGH J:   Does that mean the plaintiff can still succeed if the settlement is unreasonable?

MR PRINGLE:   Take the case of the second leg in Hadley v Baxendale.  An insurance broker might know that a particular insurance company might take a particularly hard‑nosed attitude.  Take the case of the broker who slips up seriously.  Could he not foresee that the insured, being an ordinary person who might not wish to get involved in a situation where it is all or nothing against the insurer, might take the best offer he can obtain?

McHUGH J:   That seems to be confusing remoteness of damage with causation.

MR PRINGLE:   No, I am assuming ‑ ‑ ‑

McHUGH J:   Well, you used the term “foreseeability”.

MR PRINGLE:   I am assuming ‑ ‑ ‑

McHUGH J:   Which is a test of remoteness, not causation.

MR PRINGLE:   Assume for the moment that we get over the hurdle of causation; but in a particular situation like that, in our respectful submission, it may be that the broker should be responsible for the difference between the best settlement that was obtainable, and the amount which would have been payable by the insurer if there had been no failure in performing his or her task on the part of the broker.

KIRBY J:   I suppose you have to say something like in the circumstances, at least at this trial, where the evidence was that both parties were well represented, they were at arm’s length, it was in everybody’s interest to get the best possible settlement for the plaintiff, that not only was it reasonable from the view of the plaintiff but that the inference should be drawn that, notwithstanding the absence of the insurer from the equation, that it was objectively the most reasonable settlement that could be procured.

MR PRINGLE:   Following on that thought ‑ ‑ ‑

BRENNAN CJ:   Before you follow too quickly on the thought, are you accepting the proposition that was at the end of his Honour’s question to you, and was therefore objectively reasonable?  That takes you back to Biggin’s Case - yes or no?

MR PRINGLE:   I would say that in most cases that would be so.

BRENNAN CJ:   In this case?

MR PRINGLE:   I would not like to make a concession.

BRENNAN CJ:   I can understand you would not like to make it; can you advance the reason for not making it?

MR PRINGLE:   Your Honour, it is basically the point which I put, and that is that - can I perhaps give your Honours an example where in one sense I would say yes, and in another sense I would say no.  Take the case of a hard‑nosed insurer who only offers a quarter when a reasonable settlement would be half, but the broker knows that he is putting the insured into a policy with a hard‑nosed insurer and he breaches his duty by failing to disclose something to the insurer.  One might think that what is achieved in one sense is an unreasonable settlement when only a quarter is paid.  But, when you also take into account the position of the three parties, you could say from another point of view it was a reasonable settlement because it was the sort of thing which the broker should have foreseen might happen.  That is why I have difficulty with giving your Honours a straight answer.

McHUGH J:   This means the broker ought to foresee that the plaintiff would make what was objectively an unreasonable settlement.

MR PRINGLE:    Particularly when - and this is the other part of it, of course.  It is not a case like Biggin, where the plaintiff dealt directly with the first party, and so as against us the party sued.  The plaintiff had knowledge of the transaction.  Here we are talking about a hypothetical situation in which the other party, whose policies and state of mind on a hypothetical basis has to be considered, is the opposing litigant, where it is impossible to know at the time of settlement what the facts are.  That is not like Biggin.  Biggin was a party who dealt with the buyer, and then there was the question with a sub‑buyer.

McHUGH J:   Yes, but it does raise this question:  you are seeking to foist on, in this case, the broker the consequences of your voluntary act in settling.

MR PRINGLE:   Yes.

McHUGH J:   If you do not know the strength of the other side, or you are unable to lead any evidence of it, then if you prefer to settle rather than to litigate, why should you not wear the difference between what you got and what was a reasonable sum?

MR PRINGLE:   Again it is a question of how you look at that.  If you bring into account the position of the broker ‑ ‑ ‑

McHUGH J:   You do not have to settle but you decide to settle for your own good reasons.

MR PRINGLE:   Yes, but, your Honour, I am not suggesting that the mere fact of a settlement is enough, not for a moment.  What the plaintiff can do, of course, is to prove what was known, and on the basis of those facts ask the court to accept that not only was the plaintiff reasonable in settling, but also that the settlement was a reasonable one.  Just take, for example, a case like this where there is the imponderable; the claim is for $1.7 million.  You take $900,00.  One of the things taking $900,000 does is to reduce the broker’s exposure from $1.7 million to $800,000.

KIRBY J:   Yes but the broker does not concede the $1.7.  The broker says it is much less.

MR PRINGLE:   No, maybe not.  I said the exposure.

McHUGH J:   The broker says he did not have any liability at all.

MR PRINGLE:   In a situation where the three parties are in litigation, and one does not know exactly what NZI’s evidence is going to be, the fact that you take $900,000 reduces the broker’s exposure from $1.7 million, if NZI got off the hook, to $800,000.

KIRBY J:   If exposure merely means potential liability in theory ‑ ‑ ‑

MR PRINGLE:   That is what I mean.

KIRBY J:   ‑ ‑ ‑ that is true.

MR PRINGLE:   I am sorry, perhaps I should have put it that way.  The potential liability of the broker is reduced by more than half, and that is a factor.

McHUGH J:   Why is it a factor?

MR PRINGLE:   Because who knows what the answer will be to the hypothetical question of what NZI would have done had there been no non‑disclosure.

McHUGH J:   You would be able to evaluate it if you had all the facts, and that is one thing that is missing in this case.

KIRBY J:   It can be tested this way:  assume your side had sent along an incompetent lawyer, or somebody who had a case elsewhere; they were busy, they wanted to settle - and that has been known to happen - why should the broker be fixed with the result of the best thing that can be done on your day in court.  That is absolutely unacceptable, and that is the principle you are seeking to defend.

MR PRINGLE:   That is why I said that in some cases the settlement would be exposed to criticism and would not be held against the broker.  I accept that there will be such cases.  But that is not this case.

KIRBY J:   That is why it is important to search out a correct principle.

MR PRINGLE:   Yes.

KIRBY J:   The principle is if you claim loss, you have to prove it, and the loss is not just what you happen to agree with the other party, but what was, objectively, the correct loss that you suffered.  That involves calling a bit more evidence than you did.

MR PRINGLE:   I will go into that, your Honours.

McHUGH J:   You see, in this case Mr Pezzano said that he settled because senior counsel told him he risked getting nothing.  The broker says, “That was just bad advice.  Why should I have to pay for Mr Pezzano acting on the bad advice of his senior counsel?”.

MR PRINGLE:   Let us take the facts on page 9.  You will see there, starting in 1989 through to 1991, 12 recent claims.  That is from 1989 to 1991.  Without disclosure of the last - sorry, the one in 1989, or the last two, we know that NZI refused to quote.  It was not simply a neglect to quote because, as Justice Ipp pointed out on page 86, in an answer to interrogatories, your Honours will see at the top of the page that the appellant gave an answer to interrogatories where it was said:

it is believed by the [appellant] that NZI orally informed the [appellant] that no such quote was to be provided.

So it is not simply a case of no quote being forthcoming with the possibility, of course, of something having gone wrong.  Somebody had obviously turned his or her mind to the question whether to quote.  That is with reference to the information on page 10 which is only part of the information on page 9, of course.  Page 10 is what both NZI and Sun Alliance saw in February 1991.

BRENNAN CJ:   Do you have a full copy of this exhibit 23?

MR PRINGLE:   Yes, your Honours.

BRENNAN CJ:   Can you get photocopies made of it and distribute it to the Court?

MR PRINGLE:   If your Honours please.  If I may just locate it.  It is not terribly legible, your Honours.  What would your Honours like us to do, get it photocopied and handed up with seven copies after lunch?

BRENNAN CJ:   Yes, please.

MR PRINGLE:   If you please.  As you will see, they are not told about the $12,000 claim for fire damage to a vehicle in 1989.  Of course, by the time NZI was approached on this occasion there had been two more claims against Sun Alliance, on 10 April 1991 and 6 September 1991, which NZI was not told about, and also, they were not told about the fact that Sun Alliance had refused to renew the insurance.  They were not reminded about the fact that they themselves had refused to quote. 

We really are talking, your Honours, not only about nondisclosure here but misrepresentation, because if your Honours look at page 3 of the appeal book your Honours will see question 2 - this is the question now which was completed by the appellant:

2. PREVIOUS INSURANCE
Has any Insurance Company denied, cancelled or refused to renew any insurance policy -
NO

“Previous Losses”, there is a partial disclosure of one incident in 1991, and in regard to the 10 cases between - or 12 cases between 1989 and 1991 inclusive, nine are not mentioned at all - I am sorry, nine out of the 10 were not mentioned at all and the one about the theft of the crates is an incomplete answer.  It was said in a note that the claim was for $4,000; it was something over $6,000, and there had been also property damage caused on the occasion.  Then they are asked in ‑ ‑ ‑

KIRBY J:   This all seems to me to be completely irrelevant.  The broker accepts duty and that there was a breach, but what is put in issue is whether you have established that the damage that you claim is the amount of the difference between the recovery from the insurer and what you assert is the total claim.

MR PRINGLE:   Yes, I am on the question now, your Honours, whether it was not only reasonable to settle but also whether the settlement was in fact reasonable, perhaps not needing to confront too directly the point that was put to me by his Honour the Chief Justice and Justice McHugh.

KIRBY J:   Given that the trial did not focus on that issue it is not surprising that you are not being very direct.  The trial focused on whether, looked at from the point of view of your client, it acted reasonably instead of looking at whether it objectively was a reasonable settlement.

MR PRINGLE:   Finally, there are two more points about this proposal.  The first is that there is a question whether there is anything else you ought to tell us, and the answer is “No”.  Your Honours will see that the date of the proposal is 29 June 1992.  If your Honours turn the page on to page 4, which is the first page of the trial judge’s reasons, your Honours will see down at lines 49 to 50 that the policy was expressed to be current from the date of the proposal.  So on the face of it, the proposal was treated as a matter of some consequence by NZI. 

There is also the further point that in regard - if I may just turn it up, your Honours - in regard to the question of fraud we would respectfully submit that there was a risk that NZI would raise a defence of fraud when it found out the facts.  Your Honours were taken to page 18, line 49 of the appeal book, and it was said that there had been a change of personnel; but his Honour’s finding goes beyond what my learned friend submitted to your Honours.  Your Honours will see that he said that:

In the light of Mr Newbound’s evidence, which I have no hesitation in accepting, I am able to conclude only that the documents to which I have referred were placed by him on the defendant’s file and that this information was available to Mr Tasker and he looked for it.

That raises the suggestion of some recklessness, at least:

While it may be so that those documents were not on the file at the time at which the defendant gave discovery (and there was no satisfactory explanation for this) I am satisfied, on the evidence, that they were on the file when Mr Tasker took over responsibility for that file.

Then one has the further finding, your Honours, at page 51, at line 44, this is what his Honour was talking about in saying that there was no evidence that the appellant had an opportunity to comment on the reasonableness of the proposed settlement.  What his Honour did say after that is:

However I am, in the end, satisfied that this did not render the settlement unreasonable in circumstances in which the defendant was maintaining a complete denial of liability to the plaintiff, in which it had denied knowledge of the plaintiff’s prior claims history and in which it was ascribing to the plaintiff the very act, which had given rise to the non-disclosure, of which it had itself been guilty.

That goes back to ‑ ‑ ‑

BRENNAN CJ:   What is the meaning of that last phrase, “ascribing to the plaintiff the very act”?  What is that act?

MR PRINGLE:   That is the non-disclosure.  The appellant sought to place the responsibility for the non-disclosure on the respondent.  The trial judge dealt with this aspect at some length in his reasons, starting, I think, it is at page 13, your Honours, line 9, I think, starts the discussion.  That is there is the conflict of fact between Mrs Hall, the respondent’s bookkeeper and Mr Tasker.  It goes on and on, until page 18, your Honours.  What I have just read to your Honours about the documents being on the file with the information in it finally rounds off his Honour’s findings in favour of Mrs Hall’s version and against Mr Tasker’s. 

Of course, among the information that the appellants had was the information which was passed on to both NZI and to Sun Alliance in February 1991, which is at page 10; all the 1990 cases, as far as I could see, the seven claims in 1990.  Yet they tried to put the blame on us.  What one has to think about is that when NZI became alive to those matters it might have, for example, ascertained that the broker and the insured were putting the blame on each other and it might have alleged one or other of both of you recklessly placed this wholly insufficient information before us in the questionnaire and the proposal at page 3, and that we were entitled to avoid the policy.

BRENNAN CJ:   That was never pleaded.

MR PRINGLE:   No, your Honour, it did not reach - - -

McHUGH J:   You are not saying you took that into account in settling the case, are you?

MR PRINGLE:   No, no, but, your Honour, if we are looking at whether the settlement was in fact reasonable, are we not entitled to look at what might have happened at the end of the day?  I mean, that is a different inquiry as to whether Mr Pezzano acted reasonably, or was reasonable in wanting to settle and in settling.  If we are looking at it from the point of view of an objective thing, what would NZI’s position have been if it was at the trial and the information which your Honours see in the appeal book was available to it and where it was in a position to take advantage of what was alleged by the appellant and the respondent against each other and the evidence called on both sides, each saying the other was responsible, in a quite serious way, for what had gone wrong?

McHUGH J:   I am not following this argument at all.  Would you tell me how it bears on the question of the reasonableness of the compromise?

MR PRINGLE:   Your Honours, if your Honours put yourselves in the place of the parties at this stage of trial there would have been before the court the three litigants, including the insurance company.

McHUGH J:   This argument seems to me to be against you, because it indicates a case was settled partly because of factors other than non-disclosure. 

MR PRINGLE:   Why does your Honour suggest that?

McHUGH J:   That is what you are putting.  It is either irrelevant - I mean, one of the things that were put in this case was the question of fraud.  The trial judge found the issue of fraud had nothing whatever to do with the settlement.  If, for example, he had found it had, there would have had to have been, on any view, a substantial discount.

MR PRINGLE:   Your Honours, if there was a risk that our agent had been found to have been fraudulent, it would have meant the policy would have been avoided.

McHUGH J:   That may be the case, but if you settled on the basis of that risk then you cannot rely on non-disclosure, can you?

MR PRINGLE:   No, your Honours, I am looking at it from the point of view now simply of, objectively, whether the settlement was - - -

McHUGH J:   At some stage before your argument finishes I would like you to isolate, in as simple language as you can, a series of facts which you say made this settlement reasonable, either in an objective sense or, if you like, from your point of view.

MR PRINGLE:   Yes, your Honour.  The best place to go is to Justice Ipp’s reasons, because he collected the various factors, starting at page 84.  Your Honours, just before going to that, may I just mention the points that not only did the trial judge twice refer to the reasonableness of the settlement itself but the Full Court also looked at that question and, in particular, your Honours, at page 83, line 20, you will see there there is quoted from what Lord Justice Singleton said in Biggin, and at line 20 his Honour quoted:

The question is not whether the plaintiffs acted reasonably in settling the claim, but whether the settlement was a reasonable one; and in considering it, the court is entitled to bear in mind the fact that costs would grow every day the litigation was continued.”

His Honour then continued:

The following comments can be made in the context of this case concerning the above mentioned remarks.  Their Lordships did not hold that the plaintiff was required to prove strictly that it was liable to the third party.  As I understand their Lordships’ reasons, they were dealing with what kind of evidence the plaintiff would be required to call, in addition to the fact of the settlement.  The effect of the remarks made by their Lordships is that other evidence, in addition to the fact of the settlement, should be adduced to establish the reasonableness of the settlement.

McHUGH J: Let me tell you directly what my problem in this case is; it is this: having regard to section 28, the only ground for you compromising was fear that the liability of the insurer would be reduced in some way. There is not a shred of evidence, that I can see, which would give this Court any assistance - or the trial judge, for that matter - any assistance in determining that there was that risk. It is as if it never occurred to the plaintiffs to consider the situation in respect of section 28. One would have expected in this trial against the broker that, even if you did not call NZI, you would have called your own evidence, which suggested the risks that you had in respect of that issue; that you would have called consultants or experts in the industry who would have given expert evidence about the likelihood of what NZI would have done, or what insurers generally would have done.

MR PRINGLE:   What Mr Fuller said was that some insurers would have insured if there had been full disclosure and some would not.  That is the effect of his evidence, which was accepted by both the trial court and the Full Court.

McHUGH J:   And that NZI was a reasonable insurer?

MR PRINGLE:   Mr Fuller was hardly purporting to speak for NZI, your Honour, in our submission.

McHUGH J:   But the evidence was in.

MR PRINGLE:   It is in, but you have got to evaluate it.  If you look at what Mr Fuller actually said you can reach a semantic conclusion that that is where the evidence leads, but nowhere did he say that one would have expected all insurers to issue a policy on being fully apprised of the facts.

McHUGH J:   But it is not a question of issuing of policies; it is a question that NZI could not have avoided this policy.  The best they could do was to reduce the amount they were liable to pay.

MR PRINGLE:   By saying they would not have issued any policy?

McHUGH J:   Maybe, but that is something personal to them.  In the absence of that sort of evidence, one would have had a look at what went on in the industry generally.

MR PRINGLE:   There was a witness who was called on that point, and that was Mr Fuller.  He did give evidence that some insurers - he would be able to place the insurance, but not that all or most insurers would have accepted the risk.  That is not what he said. 

HAYNE J:   Beyond the bare fact that there had been a non-disclosure, was there ever at trial any articulation of why the insured was at risk?  Would it come down to the bare assertion, there had been a non-disclosure, therefore, the insured was at risk?

MR PRINGLE:   One has to look at Fuller’s evidence, at pages 30 to 31, your Honours.  Line 45, he said he would think that he would be able to place the risk.  He said:

I would place the cover.

Then, at the top of the next page, he says:

Maybe not all insurers, but I mean, an insurer would, yes.

Then there was the cross-examination about reasonable insurers.  In our respectful submission, the questions and answers about reasonable insurers do not really take the case any further, in the light of the earlier evidence.

McHUGH J: Except you get in this dilemma, do you not? You start with the hypothesis that section 28 binds NZI. So the next question is, were you at risk of having the damage reduced? If the evidence had been NZI said, “We would not have accepted the policy”, then you were in that sense at risk. But the plaintiff - or the broker would have countered that by saying, “But in any event, if we’d disclosed, the fact is other insurers would have taken it on board for no more than an additional $9,000. So your maximum loss was $9,000 from our negligence.”

MR PRINGLE:   No, with respect, your Honour, that is a wrong way of reasoning.

McHUGH J:   Why?

MR PRINGLE:   Because if there had been full disclosure to NZI on that scenario they would not have accepted the risk and we would have gone to someone who would.

McHUGH J:   Exactly.

MR PRINGLE:   On a full disclosure. 

McHUGH J:   Exactly, and it would have cost you an extra $9,000. 

MR PRINGLE:   No, it would only have cost us another $9,000 but we would have got 1.7 million. 

McHUGH J:   Yes.

MR PRINGLE:   I have, with respect, difficulty in following where your Honour’s questions are leading. 

McHUGH J:   What I am wanting to know from you at the moment is, where is the evidence that NZI would not have accepted this particular policy?

MR PRINGLE:   They certainly contended that when the claim was made and they pleaded it.  There is one other piece of evidence that your Honours have not seen, which relates to the question of the non-disclosure.  Could your Honours look at page 34.  I would like to bring to your attention two passages on the page.  Could Your Honours first go down to page 34, and you will see there that:

Also, the plaintiff led evidence from Mr Pezzano to the effect that, at the mediation conference which had apparently preceded the settlement reached with NZI, NZI had raised only the non-disclosure issue and not that of arson.

So that it was still, at the time of mediation, insisting that it had a good defence of non-disclosure.  In regard to arson, your Honours, while I am on the page, can I bring to your Honours’ attention the first six lines, and that is that his Honour said:

So far as the defence of arson is concerned I am, on the evidence, satisfied that this played no part in persuading the plaintiff to settle and that it did not influence the amount for which the plaintiff was prepared to settle.

Mr Pezzano denied in evidence that he, or anyone associated with him, had been responsible for the fire.  No evidence at all was led to contradict him.  Indeed, there was no other evidence in respect of the alleged arson.

So that his Honour made positive findings that arson was out of the question.  As I say, your Honours, there was the response - the immediate response was that there was non-disclosure; that is when the claim was made.  It was pleaded that there was non-disclosure and that the mediation conference immediately preceding settlement, NZI was still insisting that that was its defence.

McHUGH J:   Yes, I know.  The fact that NZI was maintaining that defence and asserting it at the mediation conference shows why you settled, but it does not show that it was reasonable.

MR PRINGLE:   Your Honours, if one takes what was not disclosed - and that was common cause - that is on page 9 - these are very serious non‑disclosures.  Recent claims, from 1989 to 1991, in the previous three years, there had been some 12 claims - no, 10 claims in the previous three years.

KIRBY J: But the broker says you are locked into the old law. You are thinking in terms of the old law when that would have been fatal, but now you have got section 28 and you have just got to take that into account.

MR PRINGLE:   Yes, of course.  That is why I am saying any one of those would be good enough, under the old law.  But we have here, as I said, the history of NZI refusing to insure in the information that goes up to 9 December 1990, and then, with two further claims, Sun Alliance, which had insured knowing the history in 1990 only - as you will see from the next page - do insure and then refuse to renew their two more claims. 

So NZI had itself refused to insure in 1991 and Sun Alliance, which went off risk in 1991, each of those instances being clearly sufficient under the old law to avoid the policy, as was pointed out by the Privy Council in that case in the outline, Eagle Star Insurance Company Limited v National Westminster Finance Limited, 58 ALR 165. In paragraph 3(e) the relevant passages are given. I do not propose to read to your Honours now, but the Privy Council said failure to disclose - a refusal to increase cover from $650,000 to 1 million was in itself fatal, under the old law. And, moreover, there was misrepresentation, as Justice Ipp pointed out, about improved security.

Perhaps one should go, your Honours, to what Justice Ipp did.  I have taken your Honours to page 83, where his Honour adopted the test of Lord Justice Singleton in Biggin.  Over the page, his Honour held, at the top of the page:

In my view, the principles according to which his Honour determined the reasonableness of the settlement were entirely correct.

Then, your Honours, if you can go to page 91 where, at line 35, his Honour quoted the passage which I read to your Honours right at the beginning of our argument, that is where the trial court held it was satisfied both that the respondent had been reasonable in endeavouring to settle, and that the compromise which it did in fact achieve was reasonable in all the circumstances.  Justice Ipp said:

I am unable to conclude that his Honour erred in this finding.

Then your Honours will see, at page 84, the heading sets out the test.  In the fourth line on page 84:

Was the compromise in fact reasonable?

There can be no doubt, in our respectful submission, that his Honour had the right test in mind when formulating the question.  Then his Honour went through the various items.  If I may take your Honours, as quickly as I reasonably can, to those matters.  There was the risk of failure, your Honours, at page 84 itself, and your Honours will find there a reference to advice by senior counsel to settle for $900,000, and that his Honour concluded that “the compromise was reasonable.”

Then, at pages 84 to 86, his Honour went through the fact of NZI having previously declined to insure when given the history for 1990.  I do not propose to take your Honours through that, because I have already taken you to the other passages about it.

GUMMOW J:   All this factual minutiae is very interesting, but what I want to know is, what is the principle that lies behind Biggin’s Case?  Is it said to be, by Lord Justice Somervell that:

The law, in my opinion, encourages reasonable settlements, particularly where, as here, strict proof would be a very expensive matter -

et cetera. 

MR PRINGLE:   Yes, your Honour.

GUMMOW J:   Encourages settlement between A and B, then that encouragement may prejudice C, which is Mr Pullin’s client.  How are those competing matters are to be balanced?

MR PRINGLE:   Your Honours, could we put it this way - - -

GUMMOW J:   I will not get the answer just by being told to read Biggin v Hill, because it does not really attempt it.

MR PRINGLE:   No, your Honours.  I had intended to take your Honours to four cases ‑ ‑ ‑

GUMMOW J:   That is the principle we have got to sort out first.

MR PRINGLE:   Take the four cases, your Honour.  The first one is Biggin  itself.  The passage your Honour has in mind is a passage which, properly interpreted, we would submit, means that you do not have to prove everything needed ‑ ‑ ‑

GUMMOW J:   We are not bound by Biggin v Hills.  That is what I am trying to say to you.  The question is, what cogency does it carry - Biggin v Permanite, I am trying to say.

MR PRINGLE:   Yes, we take the point, your Honours.  In a situation such as this it would be a bit hard on us if we had to not only settle for an amount of approximately half and then have to prove against the broker that he was really liable for the lot.  That would be unreasonable.

GUMMOW J:   That is what Lord Devlin said you had to do, and he was the primary judge in Biggin, not a notably underestimated judge, I would have thought.

MR PRINGLE:   No.  But ‑ ‑ ‑

KIRBY J:   You say it is hard on you, but every plaintiff who brings a claim for damages must prove their loss.

MR PRINGLE:   Yes.  The point about - if your Honours are with us on that step that, because the breach of duty caused us to look for a settlement rather than go for broke, as it were, because we were apprehensive about the risk of losing the case against NZI, and that advice was taken and we pressed them to give us as much as we could get out of them ‑ for example, there is the evidence referred to by Justice Ipp of the first offer being $740,000 and eventually going to $900,000 and Mr Pezzano being advised - and this is in the trial judge’s reasons - “You will not get any more out of NZI; they’re not going to pay any more than that.”

McHUGH J:   How did counsel know that?

MR PRINGLE:   I am not sure it was counsel who told him that, maybe it was a solicitor.

McHUGH J:   How did the solicitor know that?

MR PRINGLE:   Presumably because he had tried to talk them up, without success.

KIRBY J:   He might just not be as good a poker player as counsel for the insurer.

MR PRINGLE:   Yes, your Honour, that is a possibility.  But there must be some - - -

McHUGH J:   This theory seems to lead nowhere, because they started off with $50,000 and the solicitor said, “Well, we’re not going to get more than 50,000 out of them; you’d better take that.”  On your theory, the broker has got to wear the rest of it.

MR PRINGLE:   No, but, your Honour, one would surely have thought that 50,000 would have been a little ‑ ‑ ‑

McHUGH J:   Let us say 200,000 or 300,000 or 400,000.

MR PRINGLE:   But that is not the case you are having to face, your Honours.

KIRBY J:   But where is the principle?  That is what Justice Gummow keeps asking you, and I too.

MR PRINGLE:   The principle, in our respectful submission, your Honour, is where we are put into an awkward position, we do our best to get out of it, reasonably.

HAYNE J:   And thus that the wrongdoer wears the risk; is that your underlying proposition?

MR PRINGLE:   Yes, I think so.  I think one must say that, within limits, of course.  One cannot have an obviously stupid settlement, if I could put it that way. 

McHUGH J:   As I said yesterday afternoon, this is a dilemma case, that you are put in a dilemma as a result of the broker’s negligence.  But that said, it seems to me, at the moment, that the only piece of evidence that supports the view that you were at risk of having this claim reduced to nil is the fact that an earlier “proposal” was sought from NZI and no response was received from them.

MR PRINGLE:   Yes, there was a response.  They said, “No, we won’t insure.”  I have read to - - -

McHUGH J:   Can you point to that, because I thought that the trial judge found expressly.  He said that it seems that no response was received from NZI.

MR PRINGLE:   Maybe his Honour overlooked the answer to the interrogatories which his Honour Justice Ipp identified.

McHUGH J:   At page 11 the trial judge said:

It seems that no response was received from NZI -

Where is the passage in Justice Ipp’s judgment?

HAYNE J:   Page 86 ‑ ‑ ‑

MR PRINGLE:   Yes, page 86, towards the top:

“it is believed by the [appellant] that NZI orally informed the [appellant] that no such quote was to be provided.”

McHUGH J:   That is the high water mark of your case, it seems to me, at the moment; indeed, it may be, as far as I can see, the only piece of evidence that you have got going for you.

MR PRINGLE:   Your Honours, there is a bit more than that.  We have got an expert who said some insurers would accept the risk and others would not.

McHUGH J:   That evidence is against you, because that expert said that a reasonable insurer would have accepted it, and NZI was a reasonable insurer.  That is dead against you.

BRENNAN CJ:   But you have got paragraph 25 of NZI’s defence, which says that if they had known the facts they would not have entered into the contract.

MR PRINGLE:   That would be evidence of a state of mind.

McHUGH J:   I do not think - - -

BRENNAN CJ:   I do not know about that.

McHUGH J:   I think that is going a bit far.

BRENNAN CJ:   The problem really arises in this way for us, does it not, and that is that if it is a question of applying the Biggin principle, either in the form expressed in the Court of Appeal or the form expressed at first instance by Lord Devlin, or in some modified form, how are we to determine whether the conclusion is right, assuming we read the judgment that way, that the settlement was, in fact, reasonable, without having the full transcript and material before us, and having examined it?

MR PRINGLE:   Your Honours, what we would say is that the way in which the matter comes before your Honours is that you have concurrent findings by the trial court and the Full Court that not only did the respondent act reasonably in settling, but that the settlement itself was reasonable.  The attack on that is that that cannot be right without evidence from NZI and, if that is rejected, then, in our respectful submission, the appeal should be dismissed.  That is, in our submission, how this matter stands.

McHUGH J:   They put it another way, do they not?  They say there is no evidence in any of these findings of fact, apart from the conclusory ultimate finding, which would support your case.  It is not a case, so the appellant says, of concurrent findings of fact, because there is just no evidence to support those - - -

MR PRINGLE: But that is the point. I mean, their point is that you have got to have evidence from NZI, otherwise you do not get off the ground. We say you could look at the claims history and, if it is a bad case and they take the point against you that there has been such a non‑disclosure that they get out under section 28, despite the change of the onus and the general shift in favour of the insurer, which I accept, and what has happened in the course of the litigation - that is, taking advice - that mediation being told and, after being told by letter, by a pleading - letter at the beginning, pleading in 1993 and, at the mediation conference somewhere between June 1993 and January 1994, that that is the point being taken against you, the litigant must do the best it can; get senior counsel’s advice, consider all information that can be known at that stage, and make a decision.

McHUGH J: But what is the information that was known at that stage? That is what we are not told. We do not know whether senior counsel even thought of section 28.

MR PRINGLE:   Well, it is most unlikely that he did not.

McHUGH J:   Well, we do not.  We do not know anything at all about it.

MR PRINGLE:   Yes, but, your Honours, you do have a serious case of non‑disclosure for a start.

McHUGH J:   So?

MR PRINGLE:   There are 10 claims in the last three years, and a refusal to renew, and a refusal to insure, and, as I said, a false story being put up by the broker, with possible ramifications at the end of the day.  And at least, there was a reasonable apprehension that we might lose.  Unless that finding is to be overturned on the basis of no evidence, in our respectful submission, at least that must stand.  And then that forms a foundation for saying, if we settle for $900,000 - more than half - we are reducing the potential liability of the broker by more than half, if NZI turns out to have been entitled to - - -

McHUGH J:   The term “potential liability” is of little assistance, Mr Pringle, because it assumes that there is a liability.  There is a breach, undoubtedly; the question is, were you ever at risk?  And, apart from the fact that there is an answer to an interrogatory that says it is believed that NZI orally informed the appellant that no such quote was to be provided, there is nothing further in the case.

MR PRINGLE:   But, your Honour, the fact that things had got worse since there was a refusal to quote - that is, there were two more claims - and, of course, a refusal to renew, it was a bad case of non‑disclosure, in our submission, which - - -

McHUGH J:   There could have been numerous reasons.  But the thing that keeps coming to the forefront of my mind is, if this was NZI’s policy, it is difficult to believe that the plaintiff would not have called somebody from NZI.  It would have just put the matter beyond doubt.  And when you do not do it, and if you lose the case, it is not because of any technicality, it is because one assumes you made a tactical decision, or you did the best with what material you had.

KIRBY J:   I think, in fairness, there may be some risk in the plaintiff calling on the blind somebody from NZI, because NZI might say, “Well, actually, we really did not have very much in our brief, but we had Mr X as a wonderful poker player and he got a wonderful settlement for us.  He always does.”

MR PRINGLE:   That would be one risk inherent in the situation.  The other one, of course, is that they might not give us a statement.

KIRBY J:   But they can be brought to Court under subpoena.

MR PRINGLE:   Yes, but then you just put them in the witness box, and one normally does not ask questions unless one knows what the answer is going to be.

McHUGH J:   But one would have expected interrogatories would have been administered to NZI in the first action, and you would have got answers as to what their policy was.

MR PRINGLE:   I think they probably settled before that stage was reached.  There was a chance, of course, to get a substantial sum at the stage at which it was settled.

McHUGH J:   Well, that tends to be against you.  It seems that before you explored the strength of your opponent’s case by interrogatories, discovery and otherwise, you have settled the case.

MR PRINGLE:   The fact of the matter was that there was a mediation and, following upon the mediation, there was a very substantial offer, and that had to be addressed.

McHUGH J:   Before you knew how strong the case against you was?

MR PRINGLE:   There was, at lowest, your Honours, reasonable apprehension that this case might be lost.

McHUGH J:   I can understand that.  But are you going to settle for such a small part of what you are entitled to, without obtaining discovery, without administering interrogatories, without finding out what the strength of NZI’s case really is, what its policies are, without interviewing people who have dealt with them, without interviewing their officers, if you could?

MR PRINGLE:   Unfortunately, your Honour, I cannot tell you the answer to any of that.

McHUGH J:   No.

BRENNAN CJ:   If it were practicable to finish this case before 1 o’clock, we would be anxious to do so, I think, Mr Pringle.

MR PRINGLE:   Your Honours, I would like to take you through the authorities, at a reasonably rapid rate.  But I was not involved in the trial, and I am told that that is - I may be told information that might be helpful over the lunch hour.  Should I keep going until 1 o’clock?

BRENNAN CJ:   Yes, very well, we will adjourn until 2 o’clock.

MR PRINGLE:   If your Honours please.

MR PULLIN:   Your Honours, just before we adjourn, your Honour, could I hand up a minute of the proposed amendments for the orders sought, so that they can be considered by the Court over the break, and just hand up the transcript - just a few pages of transcript relating to what course was charted by the parties at the trial.  It can be shown very quickly in a couple of pages of transcript.  Could I hand those up at this stage, your Honour?

BRENNAN CJ:   You have no objection to that, Mr Pringle?

MR PRINGLE:   I have not seen the material, your Honour.

BRENNAN CJ:   No.

MR PRINGLE:   I wonder if I could, at least in regard to the transcript, see it before it goes up?

BRENNAN CJ:   Yes, very well.  Then, let the proposed amendments be handed up, and the other matters can be produced after Mr Pringle has had an opportunity to consider them.

MR PULLIN:   There are seven copies, your Honour, and they are proposed amendments to what we see on page - it would be an addition to page 97, a new paragraph (h) at the end of the orders which we seek.  And if I just briefly explain them, your Honour, we say that in the alternative to the action being dismissed, the possible courses that could be taken is that the judgment be entered be set aside and, in lieu thereof, there be judgment for nominal damages of $1 - that is to cover the breach of contract possibilities, so that there is an entitlement to nominal damages - or, alternatively, the $9,106, which it has been agreed that either NZI or another reasonable insurer would have charged by way of extra premium, or, alternatively, that the action be remitted to the trial judge for further hearing according law.

If I could just mention that Order 63, rule 10(3) of the Supreme Court Rules gives the Full Court of the Supreme Court power to:

make any order, on such terms as the Court thinks just, to ensure the determination on the merits of the real question in controversy between the parties.

This is a very broad power, and Order 63, rule 12(1) the Full Court can order a new trial if it wishes.  So, a new trial, or, alternatively, the general power often results in a court saying that it is to be remitted to be dealt with in accordance with law.  So, there is power to deal with all of those.

McHUGH J:   But if you are going to enter a judgment for the plaintiff for $1, or, alternatively, 9,000, why is it being remitted to the trial judge?

MR PULLIN:   No, no, not - your Honour, that is an alternative.  I am saying there are three possible alternatives.  Our first proposal is that we stay with the orders that we have, and that the transcript that I will produce reveals that, in our outline of submissions before the case started, we said you have to - - -

GUMMOW J:   Well, (i) and (ii) are alternatives in (c) in your proposed amendment, is that right?

MR PULLIN:   Yes, your Honour, they are.

McHUGH J:   So, there should be an “or” in front of (ii).

MR PULLIN:   Yes.  I am sorry, your Honour, yes, “or”.

BRENNAN CJ:   Now, one other thing you said was that the 9,106 was agreed.  Is that so?

MR PULLIN:   Yes, it is referred to in our outline of submissions in paragraph 10.  It was an agreed fact, when we dealt with the issue of quantification, that that was the figure that a like policy of insurance would have issued by NZI, or, alternatively, another insurer, and that the increased premium would have been $9,106.  So, I will let my learned friend consider that and we move for those orders, your Honour.

BRENNAN CJ:   The Court will adjourn until 2 o’clock.

AT 12.51 LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.10 PM:

BRENNAN CJ:   Yes, Mr Pringle.

MR PRINGLE:   It would probably be convenient, your Honours, for Mr Pullin to tender the transcript which he wanted to tender just before lunch and to make a couple of observations in answer to, I think, a question by his Honour Justice Kirby.

BRENNAN CJ:   Yes, very well.

MR PULLIN:   Your Honours, I hand up seven copies of the transcript of the trial.  The reason that I hand it up and what it reveals is some part of the transcript after both cases had closed and we see at page 195 the start of the closing submissions made on behalf of the broker.  Relevantly, over the page on 196, where we were talking about what it was that the plaintiff had to prove, I record the fact towards the bottom of the page that in our outline of submissions before the case started that we had made it clear in paragraph 3 of that outline of submissions that the defendant:

Will not have caused any loss and indeed will not have been negligent if the defendant arranged a policy which the plaintiff was entitled to enforce against the insurer.  To prove causation or a breach of duty by the defendant the plaintiff must prove the defendant arranged a policy in circumstances which entitled NZI to reduce the amount payable under the policy -

Then if we can turn over to page 244 - that is the second‑last page - your Honours will see the interchange that took place between the trial judge and counsel for the plaintiff where Mr Justice Steytler said at the end of that passage towards the end of the page, the second‑last passage:

you can’t expect to lumber a co-defendant with a liability which has not reasonably been incurred.

Then Mr Dawes talked about:

The plaintiff can’t recall any evidence to show what the insurance company would or wouldn’t have done.  It is very much a subjective matter.

That is the way that they argued it.  Over the page the judge was really putting the argument that was being put to him and in the second passage:

And that in proving your case against this defendant you need only establish that you acted reasonably at that time, whether right or wrong, and that for that reason you did not need to call evidence from the insurer.

So the parties had charted the course before the trial started about the way it had to be argued.  The plaintiff decided that it would advance the case that it did without calling NZI.  There are two reasons for that.  One, counsel either thought that the law was as Mr Justice Steytler thought it was - well, he did, he said it - but it may also be the case - we would be speculating on the real reasons for this - that inquiry had been made of NZI and there was a decision not to call them and this was the best that they could do without any explanation.  We do not know what.

I only mention that because, in the recently decided case of De L v Director‑General, NSW Department of Community Services 71 ALJR 588, there is a discussion about the power of the Court to reopen its judgments. We say that the principles are the same. At page 592 there is talk about the conduct of a case “on a misapprehension as to the facts or the law”. I also refer to Smith v New South Wales Bar Association (1992) 176 CLR 256 at 266 which refers with approval to the decision of Barker v Furlong which I hand up to the Court.  I will just be one more minute, your Honours, on this.

The reason I mention all this is because, if the Court decides that it should be remitted, we should have it out now as to whether or not it should be remitted for reconsideration in accordance with law on the evidence that was led or whether it is intended that the trial judge should be allowed to consider an application to reopen so that the plaintiff could then call the evidence if it chose to do so from the insurer which, in our submission, it should have done.  In Barker v Furlong which, as I say, was referred to with approval in Smith v New South Wales Bar Association, on page 184, which should be copied there in the last page, there is discussion about what happens if “plaintiffs’ counsel had in the exercise of his judgment, preferred to close his case without calling” a witness, then in a case like that where the cases have been closed, his Honour Justice Romer said:

I should be making a precedent which would, if established, lead to an improper amount of laxity in the conduct of a plaintiff’s case -

to allow reopening in those circumstances.

KIRBY J:   I notice that that is a decision in March 1891.  Have we made no progress in flexibility of procedures since then?

MR PULLIN:   Well, it has been approved, your Honour.  That is why I quote Smith v New South Wales Bar Association where the Court approved that decision only recently.  The proposition is supported about the rules taken by the Court in approaches to cases like this by reference to that decision in Smith v New South Wales Bar Association.

Finally in relation to the points that were raised, Justice Gummow asked about Hardy Ivamy and I can say that in the Sixth Edition there is no reference to Biggin in the table of cases, the contents or the subject index at all.  Biggin seems to have been referred to, in the information that I have been given, only in Suncorp v Ploner which is in our bundle of documents, item S, where Justice McPherson referred to it with approval really to say that there is a relaxed approach when you are ‑ ‑ ‑

GUMMOW J:   But what is the juristic principle involved in all of this?

MR PULLIN:   We say the principle, your Honour, that it is unjust to allow a party to settle and then to seek to recover in accordance with that settlement without any evidence which enables the court to determine whether or not it was reasonable.

GUMMOW J:   But is this operating as a qualification or addition or was it some new ‑ ‑ ‑

MR PULLIN:   As a matter of proof of the case, we say, from the plaintiff’s point of view, that if it says, “I put forward the settlement as being a reasonable settlement and therefore in effect a cap on the amount that I can recover in most cases”, then it must be established that up to that point there is some evidence which enables the Court to determine as a matter of justice that it was a reasonable settlement.  I hand up a copy finally of the typed version of the minute of proposed amendments.

BRENNAN CJ:   Thank you , Mr Pullin.  Yes, Mr Pringle.

MR PRINGLE:   May it please your Honours.  First of all, may I hand up seven copies of exhibit 23 as requested.  They are not terribly legible but your Honours do have the help of page 10, I think it is. 

In regard to the evidence relied upon to show that the settlement was reasonable, could I simply say that I ask your Honours to look at pages 84 to 91 in the Full Court’s reasons together with pages 15 to 29.  That will cover matters which I have not yet developed, but there are only a couple of small points left and I do not want to take your Honours over the same ground.

In regard to the legal questions and issues in the case, may I take your Honours through a few propositions, directing your Honours’ attention to authorities and where they are but not reading from them at this stage.  I would like to come to the point which Justice Gummow raised in regard to the authorities dealing with the reasonable settlement.  I would like to finish off by looking at a few of those.  But can I make the submission that the appellant’s breaches caused the respondent to settle its claim against NZI in a reduced amount and that is the appropriate conclusion as a matter of common sense and experience.  We here refer to Medlin v The State Government Insurance Commission 182 CLR 1 at pages 6 to 7, 10 and 21.

I would also ask your Honours to consider in this context State of Western Australia v Bond Corporation Holdings (1991) ATPR 41‑094, also in 28 FCR 68, the relevant pages being 80 to 83, and directing your Honours’ attention in regard to this case to what was said by Justice French in the appeal book halfway down page 43 and three‑quarters of the way down page 44 are the two passages we particularly wish to place before your Honours. The approach of the trial judge may be seen at page 33, lines 21 to 22, and page 36, lines 9 to 15.

The next submission, your Honours, is that the infirmity of the respondent’s claim against NZI constituted economic loss and damage.  In other words, the value of the claim against NZI was reduced.  The authorities we rely on there are partly in the bundle of authorities:  Hawkins v Clayton 164 CLR 539 at pages 601 and 602 and Wardley v State of Western Australia 175 CLR 514 at pages 527 and 532. These are the last two cases in the volume of reports under dividers VW and XYZ respectively. Only those pages are there with the headnote. Your Honours will see in our outline that we have referred to greater passages in the Wardley Case.

We submit then that, some damage having been suffered, this is a quantum of damage case and not a causation case.  From there we go to the proposition that the authorities favour the view adopted by the trial court and Full Court that the respondent was not obliged to prove upon a preponderance of probabilities that NZI was not liable to pay indemnity.  We would add that we take up the stance that there may be a prima facie case that if it was reasonable for the respondent to enter into a settlement, that he did so on advice.  With regard to the matters which were debated this morning, there is a prima facie case that the settlement was a reasonable one and that unless shaken by the appellant, the settlement should be taken to fix the measure of damages in the case.

We would seek to qualify the proposition that one should simply just look at the settlement and what the evidence was in determining whether it was a reasonable one.  Here we have in mind the predicament in which we were placed and that both the trial judge and the Full Court made reference to the case of Banco de Portugal v Waterlow which is quoted at page 52 of the appeal book in the reasons of the trial court and the same passage being quoted on the last page of the Full Court’s reasons at page 91 of the appeal book.

In regard to the particular cases, my learned friend has brought to your Honours’ attention most of the relevant passages in Biggin v Permanite Ltd (1951) 2 KB 314. They are to be found in the appeal book at pages 38 to 39 and at the top of page 40, the latter passage being in the reasons of Lord Justice Singleton. In looking at the reasoning of the Court of Appeal in that case, one must, in our submission, take the reasons in their context. What had happened was that Mr Justice Devlin had said that damages had to be strictly proved. Their Lordships came to the conclusion that less evidence than proof upon a preponderance of probabilities was needed. What they held was good enough to dispose of that case because the plaintiff in that case had called a considerable body of evidence. They did not have to deal with this sort of situation and it was a case in effect setting a course, and one can imagine that the first time round the court would take a somewhat conservative approach to the matter.

What we rely on are some Australian cases which go further, in particular The Nominal Defendant (Queensland) v Langman (1988) 2 Qd R 569. The particular passage which we rely on is in the appeal book at page 42, a quarter of the way down the page. Your Honours will there see something of a watering down of what was required according to the reasons in Biggin.  There your Honours will see there is the observation that settling in fact could help the defendant in the second round, as it were.  Also there is the reference to responsible counsel recommending a 50:50 offer and that settlement was achieved on a somewhat more favourable basis.

My learned friend has taken your Honours to State of Western Australia v Bond Corporation Holdings Ltd (1991) ATPR 41‑094 and we would ask your Honours to look at the middle of page 43 of the appeal book and three‑quarters of the way down page 44 because your Honours will see there that it was held to be sufficient not to have to prove that the State was liable for the full amount in order to obtain judgment on the basis that it had entered into a reasonable settlement. That case, on the other hand, your Honours, does not quite get to grips with this point but it comes reasonably close.

More important is the case of Suncorp Insurance and Finance v Ploner (1991) 1 Qd R 69 which is only referred to by his Honour without setting out any part of the report at page 42 just below the middle of the page. We would ask your Honours to look at divider S. I only wish to quote from one page and that is page 76. The relevant passages, your Honours, are the first paragraph on the page on the left which is page 76 where your Honours will see that the evidence was called to show that the settlement arrived at was reasonable, the evidence being original evidence as to those matters but not original evidence as to establish upon a preponderance of probabilities the facts of the case including the damages. Then there is another passage in the middle of the same page which should be read with what went in the first paragraph, your Honours, and that is it was said:

In the end he -

the trial judge -

found that Suncorp had properly exercised its power of compromise under reg. 11, and that the settlement of the action in the sum of $3,000 plus costs was a reasonable settlement.

In view of the status of such a finding in an appeal like this, I do not think that his Honour’s conclusion on this matter of fact either can or should be displaced.

That is a case, in our respectful submission, that ‑ ‑ ‑

KIRBY J: The only difficulty is that none of these are cases which address the particular problem which is in hand in this case which is section 28 of the Insurance Contracts Act which requires a particular formula to get into the mind, as it were, of the insurer and to see what it would have done in such a circumstance.

MR PRINGLE:   Your Honour, it cannot be said that we have not put any evidence before the Court.  As I said before, we have shown what was not disclosed.  We have shown the response.  It then becomes a matter of reasonable inference whether or not we were at risk.

HAYNE J:   Apropos of that, you have produced exhibit 23 this afternoon.  That, it appears from appeal book page 11, was produced from the custody of the insurer, NZI.  Would you go, please, to the second page of the bundle you produced to us this afternoon.  In the top right‑hand corner it appears to me to read “Survey” and an abbreviation which may be “B4”:  “Survey before quoting”.  There is a transverse line which may, perhaps may not, read, “No quote”.  What are we to make, if anything, of those annotations on the document apparently produced from NZI’s custody?

MR PRINGLE:   Well, they do show, your Honour, what, in our respectful submission, the answer to interrogatories revealed.  That is that NZI gave consideration to whether it would quote or not, and decided not to.  It is consistent with that answer to interrogatories.  I am indebted to your Honour for noticing that.  I am afraid my sight is not terribly good and I did not pick it up.

McHUGH J:   What do you say about the fact that, that document having been produced by NZI on discovery ‑ ‑ ‑

HAYNE J:   Subpoena.

McHUGH J:   Subpoena, was it?

HAYNE J:   Yes.

McHUGH J:   It may indicate that they were in possession of it at the time that they issued the present policy.

MR PRINGLE:   Well, they would have been in possession of it, your Honours, but whether there was a file which was located at the time the second request to quote for a policy was made is another matter.  The trial court said that it was not to be inferred that they would tie up a simple refusal to quote with what happened in the following year.  But we would respectfully submit, your Honours, that the decision of the Full Court in Queensland clearly watered down the principle in Biggin and is moving towards the idea of a rational decision by the insured.  Tadoran (1989) 5 ANZ Insurance Cases 60-900 is the last of the group of cases and it is to be found discussed at pages 45 to 46 of the appeal book and we would ask your Honours to pay particular attention to the passage at page 46 of the appeal book from the middle of the page down to the end of the page where ‑ ‑ ‑

BRENNAN CJ:   We have had our attention drawn to this and it is said to be in your favour and on that account to have been wrongly decided.

MR PRINGLE:   Yes.

BRENNAN CJ:   Do you have anything to add to that?

MR PRINGLE:   No, your Honours, all I am saying is that there has been a movement away from the Court of Appeal’s stand in 1951 in circumstances which I have put to the Court.  I have put to your Honours two reasons why the somewhat more stringent test should be looked at somewhat askance in 1997, being the first case of the kind and dealing with a situation ‑ ‑ ‑

BRENNAN CJ:   You say the Biggin test is inappropriate?

MR PRINGLE:   Yes.

BRENNAN CJ:   Yes, all right.

MR PRINGLE:   What we would submit, your Honours, is that if one sees a clear breach of duty - I mean, you have to prove breach of duty to get off the ground in these cases.  Without a breach of duty, you have not made out any sort of case, but when you have proved a breach of duty and you then have a repudiation of liability by the insurer and such information as is available at the time of settlement and that is put before the court, the court is in a position to decide whether there is a rational settlement.  If that is so, we would respectfully submit that the proper approach should be that prima facie that is a reasonable settlement and should stand as the test of quantum unless displaced by the defendant.  That really sums up our submission to your Honours on this part of the case.

There remains the question if we are wrong about the settlement being a reasonable settlement.  May I take your Honours back a short step to the submission that this is a case where the breach of duty put us in the predicament where it can be said that we have suffered loss and damage.  I mean substantial loss and damage which, on the view put by my learned friends, is that the Supreme Court erred in adopting the measure it did.  But that does not mean that that is the end of the case, in our respectful submission.

If we have proved substantial damage - and remembering that it is the duty of the court to assess damages as best it can on the materials before it if that can be done - then at the very lowest we should get some damages because it cannot be said, in our submission, that all we should really get out of this case is $900,000.  That would be a totally unreasonable result.  Whether we should get the full 800 or some smaller sum is a matter that should be judged on the right test, if I can put it that way.  This is of course assuming that we are wrong so far.

McHUGH J:   It may be judged on the right test and you have taken a decision not to call NZI.  If the Court is against you, why should there be a new trial?  Why should you get another opportunity?

MR PRINGLE:   Because, your Honour, we submit that where we have cases in Australia which show that we do not have to go further than we did and perhaps call someone from NZI blind, it would be an unusual thing to do unless one were forced to do it.

McHUGH J:   No, not call them blind.  There are a lot of things that you could have done.  You could have called the counsel, you could have called solicitors to give evidence as to what they thought of your case and what they thought of the defendant’s case, what they thought the weaknesses were.  That is on one view of it, even if you reject Biggin.

MR PRINGLE:   That may be, your Honour, but one thing that will be noticed from the papers which were handed up in regard to the pleadings is that the lawyers have changed since the settlement.  So that the lawyers who were engaged after that were not fully au fait with what had happened in the past.  But at all events, can I bring to your Honours’ attention two cases in the bundle of authorities which dealt with the exercise of the power by the court to remit.  First of all there is Johnson v Perez which is under divider M.  There it was held that the trial court and the Full Court have made an assessment of damages on the wrong basis and, as your Honours will see from page 392 which is the last page of a rather thick report, what happened was that the appeal was allowed with costs, the trial judge’s judgment was set aside and there was ordered a new trial limited as to damages.  The other case where an order was made remitting ‑ ‑ ‑

KIRBY J:   Was the case of Perez a case where a party signalled its submission and the plaintiff went ahead regardless and sought to prove its case in another different way?

MR PRINGLE:   Talking about signalling, your Honour, if we are right about this being a quantum case and not a causation case, the signal was not precise.  What my learned friend has read to your Honours about what he said in the outline of submissions was that this was a causation case and if we get up on causation then we did not fall on that hurdle but on the quantum part of the case.

BRENNAN CJ:   That is assuming that there is some difference between the two.

MR PRINGLE:   Yes.  Anyway, the case to which I am referring so that it may appear from the transcript is 166 CLR at page 351.  The other case, your Honours, is the case of Alexander Stenhouse Ltd v Austcan Investments 67 ALJR 421 and the order is at page 425. This case did involve section 28(3). I am afraid the whole report is not here and I am not able to help your Honours at this stage about the background, but can I bring to your attention on page 425, you will see that there was a remittal of the matter to the Full Court of the Supreme Court of South Australia to question the entitlement of any of the respondent Sun Alliance Insurance to have its liability reduced pursuant to section 28(3) of the Insurance Contracts Act by reason of various matters.

Your Honours, then there is the case to which my learned friend referred your Honours in the recent edition of 71 ALJR 588. At page 592 there is this passage in column 2 letters B to C:

On the other hand, courts recognise that accidents and oversights can sometimes occur which, unrepaired, will occasion an injustice.  In the case of a final court of appeal, such as this Court, that injustice may be irremediable, unless the Court itself, acting promptly, is persuaded to reopen its orders so as to afford relief in the exceptional circumstances of the case.

That is to reopen your Honours’ own order.  We would respectfully submit that the same must apply more strongly in the case of orders of lower courts when the court is exercising its powers on appeal and when the matter is still open.  Unless there is anything further you wish me to deal with?

BRENNAN CJ:   Thank you very much, Mr Pringle.

MR PRINGLE:   If you please, your Honours.

BRENNAN CJ:   Anything further in reply, Mr Pullin?

MR PULLIN:   Just a few minor points that will only take a couple of minutes, your Honour.

At page 11 of the appeal book there is a reference to the subpoenaing of exhibit 23, which your Honour Justice Hayne referred to what is on the exhibit.  It is true, the subpoena was issued by the plaintiff.  They brought the witness from NZI to the court, or solicitor to the court, to produce the documents, and then, of course, from the file which was produced into the custody of the court, obtained this document.  It almost then approaches a Jones v Dunkel situation, we say, where in those circumstances one can say that the decision being made not to call the witness from NZI, that one can assume that there is nothing that could have assisted the party who declined to proceed further with the subpoena, and simply to rely upon documents which had been produced into the custody of the court.  Secondly, the Suncorp Case has been referred to ‑ ‑ ‑

McHUGH J:   But as against that, what is the practice in Western Australia?  Is it the practice in other States that the documents are produced to the court and the judge then gives both parties leave to have access to the file.  Is that the fact ‑ ‑ ‑

MR PULLIN:   Yes, both had access to the documents, your Honour, yes.

KIRBY J:   What happened here, if that is the practice, would seem to be just conforming to that practice rather than a positive decision not to call.

MR PULLIN:   I agree.  I have said almost this is a Jones v Dunkel case because I think Jones v Dunkel ‑ ‑ ‑

KIRBY J:   Emphasis on the “almost”.

MR PULLIN:   Because Jones v Dunkel has, while one reaches a conclusion that a particular witness would not have assisted the party, when one looks at the application of that rule it is conceded by the authorities that if the party who would call the witness does not know what the witness is going to say, that perhaps in those circumstances the rule does not apply.  What I am saying is that the documents - that there was an appreciation of the need to get information from NZI before the court, and we see that the plaintiff actually went to that step.  It might lead to the conclusion - and this is speculation, I agree - that they considered what NZI could do for them and chose not to advance that evidence; that they would run the case that they did and hope that that was sufficient.  Indeed, they convinced the trial judge that it was sufficient to look at it from the plaintiff’s point of view, and not look to see what it was that NZI would have said if called.  One can speculate about what NZI might have revealed.  It might have revealed a new manual which, from a new manager, after the 16 month period had expired since that exhibit 23 had issued, which contained rules which did not assist the plaintiff.  We say that there was an appreciation from the plaintiff’s point of view, at least, of the need to produce some evidence from NZI, and they just did not call the relevant evidence which is what NZI would have done in the year in question if they had received an application which had disclosed all the material facts.

KIRBY J:   Under the practice in this State, would it have been possible to have had the proceedings against the broker heard in the same suit as the proceedings against the underwriter?

MR PULLIN:   They were, your Honour.  They were both defendants in the one action.  The settlement then dropped the insurance company out of the action as a result of the settlement, and the action then proceeded against the broker.

KIRBY J:   I see.  The danger in the proposition that you are advancing is still worrying me; that it would mean, or it would tend to discourage settlement, and tend to force cases to go to trial, which is running totally contrary to the whole trend of modern administration of justice.

MR PULLIN:   As I say, there are various ways we have talked about how that could be easily avoided by the proper approach to the settlement.  One is, as Justice McHugh said, you find out what it is that the insurance company is going to say if you call them; secondly, you can get an agreement.  If you cannot get the agreement you can rely on the representations which have been made that there is evidence.  Finally, you can do what was done in Suncorp v Ploner on that page that my learned friend referred to under tab S on page 76, where Justice MacPherson said this about Biggin v Permanite.  He said:

it is not necessary that the reasonableness of the settlement should be proved by adducing all or precisely the same evidence as would have been required if the action had been tried rather than settled.

But, in that case, you will see that what happened was Suncorp, who was seeking to recover against its insured for the money it had paid out to an injured party, actually called the person who had been injured to lead the evidence which would then enable the court to assess whether or not the settlement was reasonable.  One just has to do it.  We all face difficulties in proving our cases in courts when we are plaintiffs.  They just have to call the evidence, your Honour.  The reasonableness of the settlement cannot be judged by guesswork.  It has to be judged by probative evidence in relation to the particular issue which concerns the court.  They are my submissions in reply, may it please the Court.

BRENNAN CJ:   Thank you, Mr Pullin.

KIRBY J:   You did mention some orders of the Supreme Court of Western Australia.  They may be a little difficult to find in Canberra, or easily to find if we have them.  Have you got those handy?

MR PULLIN:   I can photocopy them and have them made available to the Court, your Honour.

BRENNAN CJ:   Thank you, Mr Pullin.  The Court will consider its decision in this matter.

AT 2.53 PM THE MATTER WAS ADJOURNED