Gibbs & Anor v Mercantile Mutual Insurance (Australia) Ltd P48/2001 [2002] HCATrans 259 (31 May 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P48 of 2001

B e t w e e n -

IAN WAYNE GIBBS and PARAGLIDE PTY LTD

Applicants

and

MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD

Respondent

Application for special leave to appeal

GUMMOW J

KIRBY J

HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON FRIDAY, 31 MAY 2002, AT 10.17 AM

Copyright in the High Court of Australia

MR N.J. MULLANY: May it please your Honours, I appear for the applicants. (instructed by Unmack & Unmack)

MR G.R. HANCY: May it please your Honours, I appear for the respondent. (instructed by Srdarov Richards Burton)

GUMMOW J: Thank you. We would be assisted to hear first from Mr Hancy.

MR HANCY: Your Honours, in this application the applicants are seeking to agitate before this Court two contentions and they are, first, that liability insurance is not marine insurance if it is not insurance against perils of the seas and, secondly, for the purposes of the Marine Insurance Act 1909 , the word "sea" does not mean tidal waters connected to the ocean. The applicants have not pointed to authority - - -

KIRBY J: Both of those are important and interesting questions, are they not?

MR HANCY: They are important and interesting questions, your Honour, that is true.

KIRBY J: The second is extremely arguable, I would have thought. The first is arguable.

GUMMOW J: So the question, in a way, is what is there about this that makes, in your submissio, this an unsuitable case to embark upon these questions, what used to be called an unsuitable vehicle?

MR HANCY: There is a residual issue because in this case what the applicants are contending is that the contract of insurance should ultimately be held to be covered by the provisions of the Insurance Contracts Act.

GUMMOW J: Yes.

MR HANCY: This was a case where there was a provision in the contract, condition 5, that required notification of changes in facts and circumstances compared to the facts and circumstances when the insurance was taken out.

GUMMOW J: Where do we see condition 5? Is it set out in any of the judgments?

MR HANCY: It is. It is set out in the - the policy wording starts at page 119.

GUMMOW J: Do we have the policy itself?

MR HANCY: The policy itself - - -

GUMMOW J: Starting at page 6 or page 5, perhaps. The conditions are at page 7?

MR HANCY: The policy wording is at page 7.

GUMMOW J: Yes. Condition 5?

MR HANCY: Condition 5 is on page 8 on the right-hand side of the page.

KIRBY J: But that is one of those general provisions which the Insurance Contracts Act was designed to require insurers and, ultimately, courts to look to the cause or relevance of any departure from the condition rather than as in the old days simply knock "uninsured" out? Is that not correct? It is section 32 of the Insurance Contracts Act.

MR HANCY: That is true. That kind of provision - not in identical terms, but that type of condition was the type of condition that was considered by this Court in Ferrcom which we have referred to in the - - -

GUMMOW J: Yes, we know about Ferrcom. What was the information supplied that was changed? Where do we find the information supplied in the proposal form? We do not, do we? I am just trying to find out how clause 5 operated in the facts of this case.

MR HANCY: If you start on page 117 there is reference there starting at about line 14, the "Pleasurecraft Insurance" proposal.

GUMMOW J: Yes.

MR HANCY: You will see:

the boat was to operate as being "protected waters of WA as per permit" -

The only permit Mr Justice Kennedy found was the certificate of survey which this vessel did not have at the time of the incident.

KIRBY J: Yes. But, that had absolutely nothing to do with how the plaintiff's accident occurred and the indemnity claim arose. The plaintiff's accident occurred not because of any lack of a survey certificate, because the driver of the boat went too close to the shore and swung the plaintiff around so that she landed in the trees.

MR HANCY: That is correct but the section 54 argument - - -

KIRBY J: I have done this once. I once did this parasailing and I will never do it again, but, you see the way this sort of accident can happen, so it had nothing to do - absolutely nothing to do with the lack of the survey certificate.

MR HANCY: No, but that is not the way the argument was run.

KIRBY J: Therefore, by section 32 of the Insurance Contracts Act, that would be a non-material breach of condition.

MR HANCY: By section 54?

KIRBY J: Section 54, I am sorry.

MR HANCY: Yes. The way the argument was run was as it was run in Ferrcom and that is that the prejudice to the insurer is the loss of the opportunity to cancel because your Honour will know that section 60 gives limited rights of cancellation and one of them relates to changes in circumstances during the term of insurance. That is the basis upon which it was asserted that section 54 did not preclude the insurer from denying liability in this case.

KIRBY J: I understand that but your client knew that this vessel was being used inter alia, in connection with parasailing, did it not.

MR HANCY: It did but it did not know that - - -

KIRBY J: Therefore, it knew that it was engaged in a high risk activity. I mean, many insurance policies that you get around the world explicitly exclude this activity, waterskiing and parasailing - paragliding - many insurance policies.

MR HANCY: As this one did, but for an endorsement that - following the representations.

KIRBY J: Yes, exactly.

MR HANCY: But your Honours asked me what facts and circumstances were notified. If you continue on page 117 you will see that there is reference in the reasons of Justice Kennedy to a letter - an undated letter - that was sent to the insurer's underwriting agent.

KIRBY J: Yes, we can see that. In the old days that would have been absolutely fatal but nowadays the Insurance Contracts Act requires you to focus your attention on the causative relevance of this. Is it not like that old case in this Court, Leask and something or other where a person was injured by a crane and the crane was not licensed and the Court said, "That is all very well and good but the non-licensing had nothing to do with the plaintiff's injury"? This seems to be quite analogous.

MR HANCY: In that sense it is. The insurer did not raise or did not assert that section 54 did not apply because of that kind of causative reason.

GUMMOW J: You said you would have cancelled the policy, do you not?

MR HANCY: We would have cancelled the policy.

GUMMOW J: Now, is there a finding that you would have?

MR HANCY: If I could take your Honours to Justice Kennedy's reasons. Right at the end of the reasons at page 156.

KIRBY J: This is where his Honour says that it would have been reduced to zero under section 54.

MR HANCY: Your Honours need to read that because he does make the observation - - -

KIRBY J: This was obiter because his reasoning was that it did not arise but this was an obiter comment.

MR HANCY: In that sense, true.

KIRBY J: He did not really have to come to a conclusion on the point.

MR HANCY: No.

KIRBY J: So what we have to evaluate is if we gave special leave and if the applicants won on the two points that you have clearly identified, that it would lead somewhere, that the plaintiff would not be wasting our time because - or, rather, the present applicants would not be wasting our time because at the end of the day Justice Kennedy's closing remark would be the outcome of the case.

GUMMOW J: There was no finding. That is what Justice Kennedy is saying, is he not? That is what he says.

MR HANCY: That is the difficulty with it because he is saying "probable". It was "probable" you will see in paragraph 123 on that page.

GUMMOW J: But there would have to be evidence about this.

HAYNE J: You would have to assess, would you not, the credibility of Mr Fullerton and his Honour explicitly says the trial judge did not make sufficient findings of fact to conclude the issue, did he?

MR HANCY: That is what Justice Kennedy has said at page 157.

GUMMOW J: Can you refer us to any finding by the trial judge that there would have been cancellation.

KIRBY J: Because that seems to be fatal to your "not a suitable vehicle" point.

MR HANCY: No. There was no finding by the trial judge expressly on that point because she stopped short.

GUMMOW J: Well, "implicitly" or "expressly". Do not wriggle around with the word "expressly". Was there or was there not a finding?

MR HANCY: There was not a finding that the policy would have been cancelled by her.

KIRBY J: As that matter therefore has not been determined at a trial, that remains available to the present applicants and there is nothing standing in the way by way of finding or determination. Some obiter remarks from Justice Kennedy and because they are from Justice Kennedy I will give them a lot of respect and attention but in the end there is no barrier to this Courts looking at the first two issues that you have properly identified. You may, ultimately, if you lost on those two issues, on a retrial you might win on those last two issues, although it seems a bit unlikely to me, at the moment.

MR HANCY: Yes. We would have to consider whether we would seek to cross-appeal, if special leave were granted.

KIRBY J: You may need a notice of contention.

MR HANCY: Yes.

GUMMOW J: What would the cross-appeal be?

MR HANCY: That the findings ought to have been made.

GUMMOW J: By whom?

MR HANCY: By the trial judge.

GUMMOW J: But you did not complain about that in the Court of Appeal.

MR HANCY: Yes, we did.

GUMMOW J: In the Full Court, I should say.

MR HANCY: In the Full Court we did.

KIRBY J: But you were content with the outcome, were you not, at trial? You were content with the judgment, the order?

GUMMOW J: It does not sound like a cross-appeal point.

MR HANCY: Your Honours, I cannot take the matter any further for the respondent on that question of unsuitable vehicle except perhaps to take your Honours to the written submissions or to remind your Honours of the written submissions that refer to the breach of condition 5, and I have mentioned in taking your Honours to extracts of the reasons of Justice Kennedy the fact that a certificate of survey was to be in place for the vessel and, secondly, that the operators were to be licensed. There was also a representation that they had Shire approval.

In the written submissions starting at page 179 of the application book, paragraph 19, we refer to condition 5 and then what the failures were, adopting at the top of page 180 the failure that Justice Kennedy mentioned at page 156, failure to give notice of the suspension in 1988 of Mr Soderberg's certificate of competency, caution given to Mr Gibbs and the reasons given for the Department of Marine & Harbours taking that action, but we go on and talk about a number of other important failures which his Honour Justice Kennedy did not identify because he had already found, as your Honours know, that this was a contract of marine insurance and we would seek to agitate then whether a cross-appeal is appropriate or whether the matter goes back to the Full Court or goes back to trial. We would see to agitate - - -

KIRBY J: I think, just looking at the orders of the Full Court, they, on page 159, set aside:

Paragraphs 6 and 7 of the judgment of the District Court -

They are the paragraphs of the judgment of the primary judge that ordered you to indemnify the second defendants and to pay their costs so that you were content with that order because that let you completely off the hook. So it would seem to me that it is more a notice of contention point, that you have to say that even if the Full Court was wrong on the other matters, that the primary judge got it wrong by failing to determine the issue that you want to agitate, and that would be a ground for this Court, not, as it were, providing judgment to Mr Mullany's client but ordering the matter to go back to trial, because the finding just has not been made.

MR HANCY: Yes. If we cannot persuade your Honours that the issues that we have raised in the written submissions create an obstacle for the applicants - - -

KIRBY J: Then you have to face up to arguing the two points that you raised at the outset. You may still win those two points but they are - - -

MR HANCY: Correct, and we accept that.

KIRBY J: Just tell me this, the Australian Law Reform Commission conducted an investigation of the Marine Insurance Act and I think they have produced a report on the matter.

MR HANCY: They have.

KIRBY J: Does that in any way, or has any Bill been introduced to implement that report or does that make this issue a non-viable or non-relevant question of law on those two points you identified or not?

MR HANCY: I cannot say that it does at the moment, your Honours, but we did include extracts from the discussion paper in the book of materials.

KIRBY J: Have they gone beyond - I have an impression - I may be wrong - that they have actually produced their report on the Marine Insurance Act.

MR HANCY: I was just going to say that. We have also included extracts from Report No 90 in the book of materials.

KIRBY J: No Bill has been introduced into the federal Parliament based on that report?

MR HANCY: I cannot say that a Bill has been introduced.

KIRBY J: No.

MR HANCY: But, importantly, what I wanted to put - - -

GUMMOW J: I am sorry, Mr Hancy, have you the notice of appeal to the Full Court? Is that in the book here? Yes, at page 101. Did you seek - among the orders you sought there was there sought, in the alternative, an order for a retrial so that you could have tried this question of right of cancellation?

MR HANCY: The orders sought are at page 102 of the application book, paragraph 2.

KIRBY J: Is it 3.3 at 107?

MR HANCY: The ground of appeal?

KIRBY J: Yes.

HAYNE J: As I understand your fall-back position, Mr Hancy, is - your primary position is you never get into these issues because the Full Court is right. Your secondary position is if the Full Court is wrong about the distinction between marine and non-marine insurance, there was a question about entitlement to cancel. If it is correct to say that there were no findings of fact below at trial founding the right to have section 54 applied in a way reducing your liability to nil, your fall-back position seems to be, does it not, that there should be an order for retrial of that issue by a single judge of the District Court?

MR HANCY: That might ultimately be the result or it might be a reconsideration by the court below.

HAYNE J: But if it is right to say that the question of credibility of Mr Fullerton bears upon the operation of section 54, then that would seem, at least at first blush, to be a matter for retrial rather than for an appellate court to form its view about credibility without the benefit of seeing the witness.

MR HANCY: Yes, we would accept that.

GUMMOW J: It may be a cross-appeal point. Anyhow, you can think about that.

KIRBY J: It is either a cross-appeal or a contention.

MR HANCY: Yes. But, your Honours will see that there are grounds of appeal that raise this issue before the court below and I think you will find them perhaps from 104.

GUMMOW J: Yes, but the orders you sought, though, did not include an order in the alternative for a retrial, did they?

MR HANCY: They did not, no.

GUMMOW J: I think we have pursued that one down every burrow. Yes.

MR HANCY: Your Honour Justice Kennedy did ask me about the Australian Law Reform Commission and I wanted to take your Honours to what they had to say about liability insurance. That may or may not influence your Honours in light of what you have said already.

KIRBY J: I am Kirby. For once I do not mind being confused with Justice Kennedy because I have the highest of respect for his Honour.

MR HANCY: Justice Kirby, I beg your pardon.

KIRBY J: That is all right. I am such an inconspicuous person.

MR HANCY: I wanted to refer your Honours to some of the comments that were made in the discussion paper in the report about liability insurance. Now, these comments, though, they only go to the question of whether there is serious doubt or sufficient doubt about the decision of the court below. Now, if your Honours wish me to take you to them I will but if your Honours are satisfied on that question already I will not take you to them but there are extracts - - -

KIRBY J: I think these are things you can save up, if we are satisfied, to the appeal because that touches on the reason why those two points are interesting because they raise questions of marine insurance and that has not been looked at by this Court for quite a long while.

MR HANCY: No. There is one point that perhaps your Honours should note. If you have the book of materials - if I could take you to page 143. This is - you will see there that - - -

KIRBY J: They say the Act does not define "sea" and the Commission's research has not identified a case dealing with the issue. We might be able to help.

MR HANCY: Correct. That certainly helps the applicants here but if you look at paragraph 8.75 on the question of just how important is this issue you will see that they have, in effect, concluded that:

In practice, the need to make this distinction -

which they therefore there draw between inland waters and the sea -

is limited.

Then they go on and talk about it because it was put to them that there should be a definition put in the Act of what the sea is, as there is in the Navigation Act and the Admiralty Act but they declined to follow that suggestion and recommended that the Marine Insurance Act simply cover commercial vessels on inland waters.

KIRBY J: A case came down yesterday called Risk v The Northern Territory which deals with bays. I do not think it touched on this issue but you had both better have a look at that, if the matter is granted special leave.

MR HANCY: Yes.

GUMMOW J: Yes, thank you, Mr Hancy.

MR HANCY: Thank you, your Honour.

GUMMOW J: We do not need to call on you, Mr Mullany. There will be a grant of special leave in this matter. An estimate, I would think, of one day for the appeal. Do counsel agree with that?

MR HANCY: Yes, I would agree.

MR MULLANY: As do I, your Honour.

GUMMOW J: Do you agree with that, Mr Hancy?

MR HANCY: I do, your Honours.

GUMMOW J: Yes, thank you.

AT 10.39 AM THE MATTER WAS CONCLUDED