Hacai Pty Ltd v Rigil Kent Pty Ltd and ORS P47/1996 [1997] HCATrans 161 (30 May 1997)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P47 of 1996

B e t w e e n -

HACAI PTY LTD

Applicant

and

RIGIL KENT PTY LTD, MAX BEVILAQUA and THELMA MAY BEVILAQUA

Respondents

Application for special leave to appeal

DAWSON J

TOOHEY J

KIRBY J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON FRIDAY, 30 MAY 1997, AT 11.30 AM

Copyright in the High Court of Australia

MR G.R. HANCY: I appear for the applicant. (instructed by Greenland Brooksby)

MR C.J.L. PULLIN, QC: If the Court pleases, I appear with my learned friend, MR M.D. SONTER, for the respondent. (instructed by Barker Gosling)

MR HANCY: The important point of principle that is raised by this proposed appeal concerns the role of the plaintiff's insurance in assessment of damages. There is a subsidiary question, and that is whether there are cases, if insurance is generally not to be taken into account, where the insurance should be taken into account, and we say that this is such a case. The courts below, including the trial judge, did not, we suggest, provide a clear test for determining this question. The trial judge proceeded without enunciating a test on the basis that the proceeds of the insurance under the respondent's policy was different in kind from the loss that it had suffered by reason of the applicant's breach of its covenant under the lease. The court below proceeded on the basis that a set off was available, but without clearly enunciating a principle that it relied on.

DAWSON J: It could only be an equitable set off, could it not?

MR HANCY: If it were any set off, it could only be an equitable set off, yes.

DAWSON J: Did the court allow an equitable set off, in the circumstances?

MR HANCY: It appears that, in effect, it must have done so.

DAWSON J: Yes.

MR HANCY: The test that we rely on is that that was enunciated by this Court in the recent decision of Manser v Spry and that, to the extent that it is relevant, is that when consideration is given to what benefits a plaintiff receives should be taken into account in reduction of damages, benefits are to be ignored if they are conferred with the intention that they are to be enjoyed independently of, and cumulatively upon, the plaintiff's right to claim damages.

DAWSON J: But that is not this case, is it? This case is a case in which the landlord says, "Look, you, the lessee, agreed by contract to take out a policy of insurance which would cover me. In breach of contract, you did not do that, and I am entitled to damages for that breach of contract." Entirely different situation. It is not a question of two sets of benefits and you ignore one; it is a question of whether he suffered damage by reason of breach of contract.

MR HANCY: That is right. And then the consideration has to be given as to whether any loss arose from it, and here the claimed loss was the absence of an insurance - - -

DAWSON J: Well, a loss did arise from it. He would have been covered by insurance for the claim that is being made - and he is not - if the contract had been carried out.

MR HANCY: We say he is. It was not in issue. He would have been covered by our policy, but he was covered by his own policy, and that was not in issue below.

DAWSON J: Well, you disregard that, because that is double benefits. That is a different situation. But why is he not entitled to damages for breach of contract?

MR HANCY: Well, he is, but then the question is: what are those damages; what is the assessed loss? His loss that he is claiming is the loss of the insurance policy that should have been provided for his benefit, but he did indeed obtain his own insurance policy. So the benefit that we say should be taken into account is identical for practical purposes with the benefit that the plaintiff says it has lost and therefore that there is no loss.

DAWSON J: He may not have wanted to claim on his own policy; he may have wanted to rely on the other one. There are all sorts of reasons why you should not take that into account. The question, before you even get to the question of the loss, is: was there a cause of action for breach of contract on the part of the landlord against the lessee for failing to take out an insurance policy?

MR HANCY: Yes, that was never in dispute. The issue below was whether there was any loss arising out of the breach because the applicant said, and it still says, that the claimed loss was the loss of a right under an insurance policy to be indemnified for the loss that the respondents had incurred through their own conduct - that is, a liability either to pay damages to the injured plaintiff or to pay contribution to the applicant.

DAWSON J: In that situation Manser v Spry is against you, is it not, because you say you disregard any private arrangements he might have had and just look to the cause of action and see whether any loss followed, and it did.

MR HANCY: Manser v Spry, we say, is not authority for the proposition that you simply ignore private benefits. You ignore private benefits if they have been incurred with the intention that they be enjoyed independently of and cumulatively upon the right to claim damages.

DAWSON J: Why is that not so in this case? Why is he deprived of his right to sue for damages for breach of contract just because of a private arrangement he has made covering a situation which may have been covered had the contract been observed?

MR HANCY: We say the test in Manser v Spry is not the being deprived of the right to claim the damages.

DAWSON J: To recover, if you like.

MR HANCY: The comparison must be made between the benefit that has been lost that gives rise to the right to claim damages and the benefit that has been received or obtained by other means. Then the question to be asked is: when you compare the thing that has been lost with the benefit that has been received, is the one that has been received intended to be enjoyed independently of and cumulatively upon the right to claim damages? Just to change slightly to perhaps better explain what that all means, if this had been a tortfeasor and the respondents were not tortfeasors, they were claiming effectively for breach of contract, if this was a case of the applicant being a tortfeasor and the respondents being an injured plaintiff, then if the plaintiff had sued for loss of wages but had received sick pay or holiday pay, then that is the type of benefit that would be taken into account in reduction of damages.

It does not have anything to do with the plaintiff's right to claim the damages but rather it involves a comparison of the nature of the benefit lost with the benefit received. If one was intended to be enjoyed independently of and cumulatively upon the other, then it is not taken into account but, if one effectively replaces the other, then it is taken into account. Here the applicant was not being held responsible for damages in tort - that is, it was not the respondents who were seeking to recover damages in tort from the applicant and then attempting to say by way of defence, "Well, you would have been covered for that loss which is different by your insurance policy".

The very loss that the respondents said they suffered was the absence of an insurance policy, not a liability in tort, not the liability to contribute. That very loss - that is, the loss of an insurance policy - was the equivalent of the benefit that they had through obtaining their own policy to cover the same event.

DAWSON J: But that is the very situation - that is the Manser v Spry situation. You may be insured against loss which you incur but, if that loss gives rise to a cause of action, you may nevertheless sue the person who is responsible for it and recover damages.

MR HANCY: The question then becomes, "What are the damages?" We accept your Honour's - - -

DAWSON J: No, it does not, because you ignore the private arrangement which has been made by way of another contract which provides the insurance moneys in that situation and it is no different here.

MR HANCY: That is the important issue that we say this case raises, is the proposition - - -

DAWSON J: Then you do not contest, Mr Hancy, do you, that there was an equitable set-off available absent the question of the landlord's, if I may term it that way, additional insurance?

MR HANCY: If the insurance policy had not been present - - -

DAWSON J: Can I put it quite clearly to you? If the landlord did not have an insurance policy, do you contest that he would have been entitled to a set-off by way of damages for breach of contract against the lessee?

MR HANCY: If he had been left with uninsured loss, then that may be the correct result.

DAWSON J: Do you say it is or it is not?

MR HANCY: It probably is, but this was not that case. This was a case where the landlord was not left with an uninsured loss because he had secured his own insurance cover and we said that the loss - - -

TOOHEY J: No, but, Mr Hancy, what your answer does point up, I think, is that the case does not really turn upon questions of equitable set-off or otherwise, that is in the end it does not turn on that, but upon the basic question of whether the existence of the other policy precluded the present respondents from raising by way of set-off or otherwise an answer to the claim for contribution. So in the end the question really turns upon the existence of the respondents' own policy.

MR HANCY: It does, that is right, and we say that it is only after that issue is dealt with that the question of loss and beyond loss, equitable set-off, becomes relevant. Just two further points if I can because otherwise we rely on the written submissions. We say that the policy that the respondents had was not one that could be enjoyed independently of, and cumulatively upon, the benefit that we should have provided and that is because if both had been in existence there would have been a situation of double insurance and the respondents would have had a right to claim on one policy but not both.

The final point we wish to make in case there is any doubt about the practical general significance of this issue, your Honours I hope have been provided with an extract from Dorter & Sharkey on building and construction contracts just to show that even in the general area of construction alone it is very common in standard building contracts for there to be provisions that require one party to insure for the benefit of the other. So that the problem that is raised by the proposed appeal is one that is likely to be of significant practical and general significance. Thank you.

DAWSON J: Thank you, Mr Hancy. The Court need not trouble you, Mr Pullin.

The Court is not persuaded that the question which the applicant seeks to raise was decided incorrectly by the court below and accordingly the case is not an appropriate one in which to grant special leave to appeal. Special leave to appeal is accordingly refused.

MR PULLIN: I seek an order for costs, may it please the Court.

DAWSON J: You cannot say anything about that, can you, Mr Hancy?

MR HANCY: No, I cannot, your Honours.

DAWSON J: It is refused with costs.

AT 11.44 AM THE MATTER WAS CONCLUDED