Gibbs & Anor v Mercantile Mutual Insurance (Australia) Ltd P63/2002 [2002] HCATrans 508 (22 October 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P63 of 2002

B e t w e e n -

IAN WAYNE GIBBS and PARAGLIDE PTY LTD

Appellants

and

MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD

Respondent

GLEESON CJ

McHUGH J

KIRBY J

HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON TUESDAY, 22 OCTOBER 2002, AT 10.18 AM

(Continued from 21/10/02)

Copyright in the High Court of Australia

GLEESON CJ: Yes, Mr Mullany.

MR MULLANY: Your Honour the Chief Justice asked me yesterday for some particulars about Heirisson Island. We have provided your Honours with a map of the site which indicates the departure and landing site on Heirisson Island. That, I can tell your Honours, was an exhibit below.

KIRBY J: Where are we in relation to this map? We are off to the right, are we?

MR MULLANY: That is so, your Honour, and down and to the left, if I can put it that way.

KIRBY J: Unless we avert our eyes, we might see this outside and get some new evidence.

MR MULLANY: If your Honour sees at the top on the left-hand side where the broad black line is, the reference to Adelaide Terrace, we are towards that end of the map sitting here.

GLEESON CJ: And Heirisson Island is downstream of Guildford?

MR MULLANY: It comes before Guildford, if I can put it that way, if one is coming in from the ocean, so upstream. Your Honour the Chief Justice also has a photograph which the other Justices do not have; we will endeavour to provide additional copies. That was also an exhibit below and provides an overview and even a better indication of the area that we are talking about.

GLEESON CJ: It has an ink mark.

MR MULLANY: Yes, there are two ink marks on that, your Honour; the first relates to the departure site and the landing site. That, unfortunately, was the only copy that we were able to locate, but we will endeavour to provide copies for each member of the Court.

GLEESON CJ: And that is the casino in the foreground of this photograph?

MR MULLANY: That is so, your Honour. Your Honour also asked me how big the island was. It is approximately 1.25 kilometres long and approximately .25 kilometres wide, approximately a third of a kilometre square. Your Honours also have now a full copy of the Marine Insurance Act 1993 and may I return briefly to that. May I take your Honours first to section 7 of the Act. That is where "marine insurance" is defined. It is said to be a contract:

whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure.

That expression incorporates a number of terms which are defined in the following sections. "Marine adventure" is defined in section 9(2) to be where:

(a) any ship, goods, or other movables are exposed to maritime perils . . . referred to as "insurance property";

(b) the earning or acquisition of any freight, passage money, commission, profit, or other pecuniary benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of insurable property to maritime perils;

or thirdly and relevantly to this case:

(c) any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils.

So your Honours see that maritime adventure has a three-part definition. We are concerned with the third of those three parts and why I say that will become clear when I take your Honours to the original policy documentation.

KIRBY J: "Maritime perils" is defined in the next - - -

MR MULLANY: That is so, your Honour; that is defined at the end of that subsection to mean this:

perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seizures, restraints, and detainments of princes and peoples, jettisons, barratry, and any other perils, either of the like kind, or which may be designated by the policy.

GLEESON CJ: Now you could have, could you, a policy of marine insurance which covers a vessel that operates up and down the Hawkesbury River or the Murray River?

MR MULLANY: It all depends, your Honour, on a number of matters. Firstly, it depends on whether or not those stretches of water can be properly characterised as the sea.

GLEESON CJ: What about the effect of section 8?

MR MULLANY: It is clear that section 8(1) does permit either:

by express terms, or by usage of trade, be extended so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage.

Now, your Honours dealt with that provision in the case of Con-Stan Industries of Australia [1986] HCA 14; 160 CLR 226 at 243, which is tab 5 of our materials, which I do not ask your Honours to turn to, but simply record this fact. If the policy does not make it clear that the marine risk is predominant and not merely one of many risks, the contract will not be one of marine insurance. So, the short answer, your Honour, is it all depends on the circumstances of the case. It is true that land risks may be covered, pursuant to section 8(1), but so far as that section is concerned, it must be demonstrated that marine insurance risk is the predominant thrust of the policy.

GLEESON CJ: But what about a paddle-steamer that goes up and down the Murray River?

MR MULLANY: We would say that it would depend firstly on whether or not that particular stretch of water could properly be characterised as the sea. We say that for this reason: in order to come within the marine insurance regime, a vessel must at least be waterborne on the sea, and I took your Honours to the passage of the Australian Law Reform Commission Report where that is dealt with, and a reference is made to Professor Sutton. We say that, not withstanding that the provision does use the word "of" the sea rather than "on" the sea.

KIRBY J: Could I ask you, did Con-Stan clarify in the meaning in section 8(1) whether that phrase "incidental to any sea voyage" governs both the losses on inland waters or on any land risk? The repetition of "on" might suggest that it does.

MR MULLANY: It did not, your Honour, as I understand.

KIRBY J: What is your submission?

MR MULLANY: That it does.

HAYNE J: What consequence, if any, flows from 8(2) and the reference to "adventure analogous to a marine adventure"?

MR MULLANY: There may be situations, your Honour, where that section may bite to ensnare a situation which at first glance one would think would not be covered. We deal with that at 31 of our outline of submissions. In this case we say that no assistance can be drawn by my learned friends from those provisions. We say that those words do not embrace navigation on inland waters connected to the type of water with which we are concerned in this case. There is no authoritative decision that we have been able to unearth or a principle which supports the extension by way of that provision to the kind of circumstances we are talking here.

GLEESON CJ: What about a policy of insurance though for a Sydney Harbour ferry?

MR MULLANY: Your Honour, that is an example that we have given some thought to. I will deal with it now if it is convenient to your Honours, or I can take you to the policy documentation first. Perhaps I will flag what we are going to say about that. We say that there are a number of essential indicia for sea. Primarily it is a question of size; I will develop that in due course if I may. We say also as a consequence of that that a "great ships" indicia is incorporated into the definition. There are other indicia which may operate but do not necessarily have to in order to clarify a particular body as a sea.

In relation to the Sydney Harbour we say this. Where the ships dock, the P & O cruises and the like, at Circular Quay, that would qualify on the definition that we press for. The waters past the head would qualify also; they qualify by reference to size, they qualify by reference to the fact that great vessels travel there and they qualify by reference to common parlance and usage. If your Honours then compare that situation, for example, to the waters near Hunters Hill, we would say that those waters are not of a character justifying the appellation "sea".

GLEESON CJ: Now, what about the hydrofoil that goes from Circular Quay to Parramatta?

MR MULLANY: Beyond the heads, we would accept that those waters do qualify.

GLEESON CJ: No, it does not go out through the heads. On your theory it starts off in the sea and ends up in the Parramatta River.

MR MULLANY: The answer your Honour is this: it depends upon the type of water that the accident occurred in. I am not familiar precisely with the waters your Honour is talking about, but we would provide - - -

KIRBY J: Maybe we should supply you with a map.

GLEESON CJ: It is not dissimilar from the situation you have here.

MR MULLANY: It is not dissimilar, your Honour, but the answer to the question is met by applying the essential characteristics of "sea", which I will come to in due course, but in a nutshell they are: size, they are expansiveness, tested in part by reference to "where great vessels go" - and I will tell your Honours what we mean by that in a moment - and there are certain other criteria. We say that landlocked lakes, for example, completely landlocked lakes, would not qualify.

GLEESON CJ: Yes, but there are rivers that flow into the sea, of which the Swan River is an example, and there is a ferry that goes to Rottnest Island from a location fairly close to the location we are talking about here.

MR MULLANY: That is so, your Honour.

GLEESON CJ: Now, a policy of insurance over that Rottnest Island ferry either is or is not a policy of insurance covered by the Marine Insurance Act.

MR MULLANY: We say not, your Honour.

HAYNE J: How does that give suitable work to 8(2)? The fulcrum of 8(2) is coverage by a policy in the form of a marine policy. The analogy of which 8(2) speaks may therefore be relatively distant, may it not?

MR MULLANY: We say not so distant, your Honour. It does come down at the end of the day to a question of degree; there must be a flavour of marine-ness, if I can put it like that, there must be a flavour of sea. If I can take a more dramatic example in response to your Honour Justice Hayne's question. If 8(2) is given that much work to do, it would ensnare a tributary of a tributary leading up into the hills of this city. Your Honours remember that the Full Court mentioned that the Swan River was tidal as far up as Guildford. Now, we say that 8(2) was not intended to ensnare those types of situations by the use of "adventure analogous to a marine adventure". The word that carries the job to do, your Honour, is really "analogous", "analogous to", and in that circumstance there would be nothing analogous, in our submission, to a true marine adventure.

I suppose, your Honours, that provision is there to ensnare those cases which lie very close to the line. This, we say, is not. We acknowledge immediately that this is not an easy question, but there will be cases where it is clear that one falls outside the regime and there will be cases where it is clear that one does not. Where one comes close to the line, this is the area within which 8(2) may bite. It does not bite here, we say.

HAYNE J: Is the excision of the pleasure craft and their inclusion in the Insurance Contracts Act consistent with opposition that pleasure craft otherwise could have come within the Marine Insurance Act?

MR MULLANY: I think, your Honour, that we would be driven to accept that it could.

HAYNE J: And how could that be save by giving 8(2) an operation of the kind that you have just rejected?

MR MULLANY: It would depend, your Honour, on where those pleasure craft travelled. It comes back to the original proposition I put, namely, that one must have some connection with the sea. Craft is important, but the location of the craft is all-important.

Your Honours, can I take you briefly to the policy documentation. You see from our statement of the relevant facts commencing at paragraph 6 of our submissions that there were two policies issued in this case. The initial policy was dated 5 December 1986. Your Honours find that at AB363 in volume 2. It is of particular significance, we say, that the initial policy, this policy, is in substantially different terms to the renewed policy in force at the time of the accident, which I will take your Honours to in just a moment.

Your Honours can see at about line 20 that the policy is headed "Marine Pleasurecraft Policy Schedule". It is issued to Messrs Soderberg and Gibbs trading as "Paraglide Pty Ltd". Under "Vessel Name" your Honours see the words "Lone Ranger". That is the 17-foot fibreglass hull vessel that we are dealing with in this case. Your Honours see on the right-hand side between 20 and 25 that the period of insurance stretched from 10 October 1986 through to 10 October 1987. Your Honours see under "Sums Insured", about line 42, that the hull was insured, motor was insured, masts, spars, sails, rigging and a trailer was insured. A little further down "Third Party Liability Cover" was also given to the sum of $1 million.

Just underneath that your Honours see the words "Navigation Warranties". To the right of that your Honours see the words "Protected waters of WA as per permit". That is important, and I will come back to it in just a moment. The policy, your Honours see, was expressly extended to include commercial paraflying. It is stated:

It is hereby agreed Warranty 1 of the within Policy is amended to permit Commercial Paraflying in accordance with Survey.

I ask your Honours to underline "Survey"; that is important also. I will come back to it, but it suffices to say for present purposes that the survey recorded the geographical limits of the operation of the vessel as "smooth waters only"; "waters", we submit, stands in contrast with "sea".

Your Honours see also at about line 55 that the policy was extended to cover third party liability in relation to commercial paraflying. That is about line 55. That removed the exclusion in the printed policy of liability for any claims made against the assured in respect of bodily injury arising out of paraflying. Your Honours find the policy wording at appeal book page 376. On the right-hand side under section 1, you will see that part of the document dealing with "Physical Loss or Damage". Section 2 at the bottom of that page deals with "Salvage Charges & Other Expenses".

The important section is over the page, which we have extracted for your Honours' convenience in our written submissions. It provided relevantly that:

If by reason of your interest in the Vessel you became legally liable to pay any sum or sums in respect of any liability, claim, demand, damages and/or expenses for liabilities to third parties, we will pay to you or on your behalf all such sums up to the limit specified in the Schedule in respect of any one accident or series of accidents arising out of the same event.

The section headed "Exclusions" to section 3, a little lower, was, as I have said, removed by the extension of cover to include third party liability arising out of commercial paraflying.

Your Honours find also the proposal leading to the issuing of the first policy at page 359 of the same volume. Can I take your Honours to that. Your Honours see that that is also headed "Proposal for Pleasurecraft Insurance". Under the vessel name "Lone Ranger" is stated. At the bottom of that page under "Sums Insured", the same heads insured as that in the original document are included and then importantly over the page at question 3 it is asked:

In what waters will the vessel operate?

There it is stated:

Protected waters of WA as per permit.

KIRBY J: Now, is this relating to the original policy of insurance or to the renewal?

MR MULLANY: Yes it is, your Honour. That answer was provided by Mr Greg Fullerton. He was the underwriting principal of Anchorage Marine, the respondent's agent. Your Honours note that no specific place of business was identified in the proposal; location was not important. That fact is borne out both by the documentation and was later confirmed by Fullerton in evidence and I ask your Honours to note AB2/ 281, where he said that and AB2/483, where the learned trial judge recorded that fact and made that finding.

GLEESON CJ: I notice that in the courts below Anchorage Marine Underwriting were described as the agent of the respondent. That is right, is it? They are not the agent of the insured?

MR MULLANY: That is my understanding, your Honour.

GLEESON CJ: I see.

MR MULLANY: A cover note was issued at 4.30 on 9 October 1986 to last until midday 10 October 1986. The proposal was sent by Soderberg by a letter of 15 October 1986, which your Honours find at 358. Your Honours see that between 30 to 40 that:

Third party P&I Cover Increased to $1,000,000 and extended to include Commercial Paraflying Operations as per Permit and operated in accordance and under the manufacturers limitations.

So that is the first policy. It was not renewed prior to the expiration date and a new policy was agreed to. That is the critical document with which we are concerned and it is of a fundamentally different character to the first. Can I take you to page 374 of the same volume and tell you this by way of background.

KIRBY J: Now, I am getting a bit lost. This document you just read us on 358, is that relating to the proposal for the second policy?

MR MULLANY: For the first. It was not renewed in time and a subsequent agreement was entered. Your Honours find that renewal at 374. Can I tell you how this came about.

KIRBY J: What is the value of going into the past policies?

MR MULLANY: Well, your Honour, the one that applies at the relevant time was the one I am about to take you to. It is significant, we say, because it stands in stark contrast to the first. That is important for the second of the two arguments we advance concerning liability. Our learned friends take a different view, but we have taken you to it to demonstrate the fundamentally different character of the two policies.

Can I tell you how that came about. In February 1988 Gibbs spoke to Greg Fullerton by telephone. Fullerton was based in Sydney in a two-man operation and he stated that he did not require boat insurance. He sought third party liability insurance only. That was the only occasion that those two men spoke. He confirmed that instruction in a letter to Fullerton's brother Ross, the second man. That letter was received on the 9^th of the month. Your Honours see that on the previous page, 373, "Dear Ross". Relevantly, in the second paragraph:

I spoke with the other chap -

it turns out to be his brother Greg -

in your office and explained that we did not require boat insurance - he said there was no problem.

And that is what happened. Your Honours see in contrast at the first policy under "Sums Insured" nothing under hull, motor, auxiliary motor, masts, spars, sails, rigging, trailer, et cetera, zero is entered throughout. I should just make a note that the reference in his Honour Justice Kennedy's judgment at 27, this document as having been dated 7 March 1998 is incorrect. It is probably explicable by the poor photocopying at the bottom of the right-hand page of that document. I can tell your Honours that the correct date is 9 March rather than 7 March. I do not understand that to be in dispute. In fact, it is recorded in the exhibit reference under document 21 about a quarter of the page up.

Under "Third Party Liability Cover" your Honours see $1 million stated. There is one further little hiccup. Your Honours see under "Hull Premium" to the right-hand side a premium recorded of $99.85, even though no liability cover for that was provided. As the learned trial judge records, that was a mistake; she does so at volume 2, 451 at lines 15 to 20. I told your Honours I would return to the issues of surveys and permits. Can I do that now.

HAYNE J: Just before you do, is the policy wording still the policy wording found at 376 and following?

MR MULLANY: Yes it is, your Honour. We deal with the issue of permits and surveys at paragraph 14 of our written submissions. The Full Court recorded that neither the proposal nor the policy make any reference to the place of business. Justice Kennedy did that at the following pages: AB3/519, 533, 536 to 537. There was no indication of any intention or undertaking as to there being any particular location from where the paraflying was to take place. May I direct your Honours' attention particularly to paragraph 22 of his Honour's judgment at AB3/520.

KIRBY J: What is the point you are making now?

MR MULLANY: The point I am making, your Honours, is that there was nothing in the proposal, nothing in the policies, which stipulated that there was any particular part of the Swan River that was to be used and his Honour records there at about line 20 of paragraph 2, that:

Nor has the source of the expression "Protected Waters of WA" been identified.

Your Honours recall that from the policy documents.

There appears, however, to be no doubt that the "permit" was in fact a reference to the certificate of survey for "The Lone Ranger", which recorded the geographical limits of operation of the vessel as "smooth water only", the hours of operation being limited to between sunrise and sunset. This is made clear by the reference in the amendment to Warranty 1 to permit paraflying "in accordance with Survey".

Can I take you to those surveys. Your Honours find them in the supplementary appeal book. It is a five-page document. The first of those surveys is found on page 1. Your Honours see at the bottom of the page that it is dated 3 October 1986 and is valid until the same day the following year. Your Honours see at line 50 under "Geographical Limits of Operation" the words "Smooth water only". The hours of operation are recorded as "between sunrise and sunset".

KIRBY J: Now, this is something between your client and the Department of Marine Harbours?

MR MULLANY: That is right, your Honour. One of the requirements was that a vessel be in survey - we will be saying more about that later - in order to operate and these are the surveys that were provided at the material time. That is the one that operated in relation to the first policy. There were three of them actually. The second is found over the page, the only difference being the date. Your Honours see - - -

CALLINAN J: Well, no, "smooth waters"; the previous one is "smooth water".

MR MULLANY: I stand corrected, your Honour.

CALLINAN J: Something may turn on that. The sea might be smooth from time to time, whereas "smooth waters" might be a generic description of waters that are enclosed or invariably smooth.

MR MULLANY: That is true, your Honour. The reason why nothing will turn on that is that that is defined in a regulation, to which I will come in just a moment, which indicates, in our submission, that that is not so.

Your Honours see the second document dated 19 November 1987, which expires about a month earlier on 21 October 1988. The last document, if your Honours turn to page 5 records under "Area of Operation", underneath the stamp "Cancelled", "Western Australian waters gazetted as smooth only"; hours of operation, "Sunrise to sunset". Your Honours see about lines 20 to 25 that the certificate was valid from 1 February 1989 until 1 February 1990. I can tell your Honours now that that vessel was put in survey a couple of days after the relevant accident. The accident was 30 January 1989. At the time of the actual accident the vessel was not in survey and my learned friends make something of that in their notice of contention and I will deal with that in just a moment.

Can I return to the point your Honour Justice Callinan raised? The relevant regulation is regulation 4 and Schedule 1 to that regulation headed, "W.A. Marine (Certificates of Competency and Safety Manning) Regulations" which confirm the geographical limits of smooth waters. Your Honours find that at volume 2 of our materials at tab 8. I would ask your Honours also to turn, at the same time, to where his Honour Justice Kennedy dealt with this, which is at paragraph 12 of his reasons at 517, volume 3. These are regulations - - -

KIRBY J: Which paragraph of Justice Kennedy's reasons?

MR MULLANY: Paragraph 12 and 13. Regulation 4 provides:

The geographical limits prescribed for the purposes of the definitions of "smooth waters" and "partially smooth waters" in Section 3 (1) of the Act -

That is the Western Australian Marine Act -

are those set out in Schedule 1.

If your Honours turn to Schedule 1 you see that "smooth waters" are prescribed to mean, "All rivers and inland waterways with the exception of Lake Argyle in Western Australian Inland Waters". It is for that reason, to return to your Honour Justice Callinan's observation, that we say that nothing will ultimately turn on that point. That is the way we - - -

KIRBY J: What are we getting out of this Schedule 1?

MR MULLANY: What you are getting out of that, your Honour, is how the phrase "smooth waters only" is gazetted, and you see that this vessel was never intended to travel in any other type of water. It was never intended that this vessel would be an ocean-going vessel. It was always intended that it would travel on the protected smooth waters of WA as defined in that provision.

KIRBY J: But that is something between you and the Western Australian Department. It does not involve the insurer and some people do breach conditions of boating. I just wonder how this links into the Act of the policy?

MR MULLANY: It links in this way. It was never established at trial that the site from which this operation was to be conducted was of significance to this particular insurer. It was never demonstrated at trial that they had a particular concern to insure that this vessel operated from any particular location. What we say is that all of the circumstances of the case make it clear that this vessel was never intended to be anything other than a small runabout vessel operating up and down the Western Australian Swan River and never intended to embark upon anything more adventurous than that.

GLEESON CJ: Was this vessel seaworthy?

MR MULLANY: Yes, it was. I will deal with that now, if I might? This is relevant to the question of survey. Her Honour Judge Kennedy deals with this at the very end of her judgment at 485 of volume 2.

KIRBY J: Which page?

MR MULLANY: Page 485, your Honour. We acknowledge that at the time of the accident, 30 Jan 1989, this particular vessel was out of survey, but it was put, as her Honour records at line 60:

into survey on the following Monday without any further work having to be done on it. It is important to remember that this is a 17ft runabout, not a boat that takes passengers and it is restricted to protected waters.

There is nothing in the renewal schedule that was in operation at the time of this accident or in the standard form policy document that even mentions the word "survey" or requires the boat to be in survey. Undoubtedly the boat had to be seaworthy and it was. If it were not the burden would be on the third party to prove that and given that the boat passed a survey immediately after this accident without anything having to be done to it, the only reasonable inference is that it was seaworthy.

The Full Court did not interfere with that. I will get your Honours the reference in just a second.

KIRBY J: You took us to that Schedule 1 in the schedule relating to the definition of smooth waters. Was there any particular one of the sub-categories there that was relevant?

MR MULLANY: Yes, your Honour.

KIRBY J: Did it have "Perth" or "Swan River"?

MR MULLANY: Yes.

KIRBY J: Did it define where it finished?

MR MULLANY: It is the first part of that which we say encaptures the relevant location, "All rivers and inland waterways", that is the bit which we fall under.

KIRBY J: I am sorry, is that the definition of "Western Australian Inland Waters. All rivers" - - -

MR MULLANY: If your Honour casts your eye slightly to the right, your Honour sees the heading, "Smooth Water Limits", and within that are all those things listed from Western Australian Inland Waters down to Port Headland under which a new heading appears, "Partially Smooth Water Limits". We say we fall - and the Full Court accepted that we did - within the expression, "All rivers and inland waterways". The Full Court deals with the question of seaworthiness at appeal book volume 3 at 556 at the bottom of that page and over to 557. There may be a further reference, your Honours, I will give you in just a minute. May I turn now directly - - -

KIRBY J: I can see how this is relevant to your merits. You say you revealed the sort of boat you were and where you were going to ply and what you were going to do and you were only on the smooth waters and you were only on the river, and then suddenly you are denied indemnity, but I just do not see how it is relevant to the issue of the terms of the policy or the language of the Act?

MR MULLANY: Your Honour, the answer to that is found at 16 of our outline of submissions. We do, of course, stand or fall on the basis of what the policy actually says and what the Act says. We do not shy from that, but as the learned trial judge recorded:

Policies are to be construed "against the background of the transaction of which they formed part and with due regard to the need to arrive at a conclusion which made business common sense".

And she records at the footnote references we have provided:

"It cannot be that [the parties] were planning to enter into a policy that was useless from its inception, but that is the result if [the policy] is a marine insurance policy. This 17ft runabout, restricted to protected waters, was never going to encounter a peril of the sea."

The Full Court picked up on that, and as we read it, accepted what was said there. At paragraph 85 of the judgment which your Honours will find at AB 3, 543, which I will not take your Honours to, but tell you that his Honour Justice Kennedy referred to one of the cases on my learned friends' list, Continental Illinois National Bank and Trading Company of Chicago v Bathurst[1985] 1 Lloyd's Reports 625 at 628 which appears in the reasons for decision of Justice Mustill. Can I turn now directly, your Honours, to what we say are the indicia of the sea.

HAYNE J: Just before you do that, what did her Honour the trial judge mean by the statement you took us to from paragraph 16 of your submissions:

"It cannot be that [the parties] were planning to enter into a policy that was useless from its inception

MR MULLANY: What she meant by that, your Honour, is this: having regard to the evidence, having regard to the fact that the proposal, the surveys all referred to a restriction of operation on protected inland waters of this State as defined in that regulation, that it was never intended that the vessel would travel beyond those limits. It was never intended that the vessel travel into, what we would describe as, "the sea proper".

McHUGH J: Yes, but the statement is a circular argument, is not it, because it depends upon what is a peril of the sea, and if the Full Court is right, then this policy did cover perils of the sea?

MR MULLANY: I do accept that, your Honour. It does, of course, depend on that, and what flows by implication from her Honour's statement - to return to what your Honour Justice Hayne put to me is this -that she considered it clearly to be something which could not be so characterised. It was beyond or beneath the seas, if you like - that is badly put. It was a body of water which did not on any definition, save for ebb and flow - I will come to that in a minute - which justified that appellation. That is what her Honour means, in our submission.

Your Honours, we deal with the "sea" argument proper from about 18 of our written submission. This assumes significance, we say, because in order for the Marine Insurance Act to bite, the vessel must at least be on a sea voyage or at least be waterborne on the sea, and I have taken your Honours to the references in the commission's report, and to the discussion by that of Professor Sutton that they refer to.

There are really two parts: the vessel has to be on the sea or on a waterborne excursion on the sea, and then the accident has to have been caused as a result of something of the sea, and it was not in this case, and I will come to that latter aspect, and return to what your Honour the Chief Justice put to me earlier on yesterday about whether this was negligent navigation or not.

HAYNE J: Now, as an absolute proposition, that just cannot stand in the face of 8(2), can it? Section 8(2) talks about ships in the course of building, being launched. Therefore, the absolute proposition you advance is wrong, is it not?

MR MULLANY: Your Honour is referring to the necessity to be on a seaborne voyage. I suppose that is correct, your Honour. I think that probably is correct.

HAYNE J: Now, if that is so, it is not just a captious point. What does that say about this fundamental premise to this limb of your argument? The fundamental premise seems to be, "Look, this has to happen on the high seas or on the seas"?

MR MULLANY: The entire flavour of this Act, we say, derives from those things connected to things at sea. Now, 8(2) talks of the "building", of the "launch of a ship, or any adventure analogous to a marine adventure". So one looks in the first instance for a marine adventure. Now, let us say, that there was a building of a ship occurring at Fremantle Harbour. One can see how an argument can be constructed that an incident occurring in those circumstances comes within that expression, but there is still a sea character about it. One does not build a ship or launch a ship on a river or in a tributary up at Guildford. What one does - - -

HAYNE J: They build Anzac frigates largely on land until they are launched. I may be wrong, but they are largely built on land.

MR MULLANY: Well, I accept the qualification that your Honour puts to me. I am driven to that by what is said there, but as a general observation, what this Act is talking about is sea voyages, but I do accept that qualification. It is not a happy Act - those are not my words. Many have said that, and there are some difficulties with determining the precise scope and operation of this Act, and the primary problem is the one we face here. Sea verses inland waters, and to a lesser extent, liability contracts verses those which cannot be so described. They are the two areas which the Law Reform Commission directed some attention.

What we say in a nutshell is that "The Lone Ranger" was not involved on a sea voyage in this case. I have already taken your Honours to the foundation for the Full Court's opposite conclusion at 117 and 118 of that judgment, which your Honours find at AB 3, 556. What the Full Court said was this: having found that the river was partially saline - or saline at certain times of the year, I should say - and that it ebbed and flowed as far up as Guildford, on those bases, the river could be construed as part of the sea.

Now, his Honour the Chief Justice refers there to two parts or two places of the river, the Narrows site, behind me, up about a kilometre and - - -

GLEESON CJ: Where the bridge is now?

MR MULLANY: Yes, your Honour, a little further on from the Barrack Street jetty where the Rottnest ferry leaves - and the Heirisson Island site, behind your Honours. In our submission, nothing turns on that, for the reasons we have already advanced, because both of those sites fail the test that we propound but, more importantly, precise location for the operation was, as I have said, not important to this particular insurer.

GLEESON CJ: How far up the Swan River did the "Parmelia" get?

MR MULLANY: I do not know the answer to that, your Honour, and I will find out and tell you. One of the difficulties that the Full Court faced, and that we face here, is that "sea" is not defined in the Act. There are numerous definitions of "sea" in other Acts. They are found in Commonwealth legislation, like the Admiralty Act and the Navigation Act, but they vary substantially, depending upon the purpose of the Act. Some appear, for example, in relation to oil pollution matters and the like, protection of the sea situations.

What those other statutes do highlight, in our respectful submission, is that this situation that we are dealing with, stands in a different category. The sea has been defined on occasion, as any waters within the ebb and flow of the tide. It is so defined in section 6(1) of the Navigation Act, to which his Honour refers, and in 3(1) of the Admiralty Act, to which he also refers. But significantly, they were not incorporated into this particular Act, and the approach adopted by the Full Court was, in effect, to lift them out and treat them as if they did.

There is one other Act that your Honours should contrast the Marine Insurance Act with in particular, and that is the Prevention of Oil Pollution Act 1971 in the UK, section 29. We list those Acts at paragraph 20 of our submissions at footnotes 29 and 30.

KIRBY J: It is a bit risky taking other statutes. I mean, what was the purpose of this Marine Insurance Act? Answer: it was the purpose of reflecting a United Kingdom Act at about the same time, which was designed to cut away marine insurance from lots of different regulations throughout the empire, including different regulations and different Australian colonies and then States, and to put it in a special class because of the imperial interest in that. Is that not correct?

MR MULLANY: That is - - -

KIRBY J: Am I wrong on that?

MR MULLANY: No, you are not, your Honour, that is correct.

KIRBY J: And therefore it was concerned with the imperial interest which one thinks is the high seas and the great vessels coming into the estuaries and bays, but otherwise the imperial interest was not up the river, up the creek, up Parramatta River or up the Swan River, one would not have thought?

MR MULLANY: Your Honour, we agree with all of that, and we do not shy away from - - -

KIRBY J: That is why I am just a bit cautious about plunging into other statutes which have absolutely different histories and different purposes.

MR MULLANY: We respectfully adopt that, and we say therein lies the core of the problem that occurred below, because his Honour, struggling to find any assistance, went to those definitions that could be found and, in effect, we say, and erroneously, with respect, lifted the ebb and flow definition from those Acts and incorporated them into this Act. There is authority for that point as well - it must be acknowledged immediately -but that, we say, was not what was intended in relation to this particular Act.

Can I tell your Honours, to come back to a point that your Honour Justice Kirby raised with me yesterday, that we have examined the New Zealand, the Canadian and the Indian equivalents, and we can tell your Honours that those Acts also do not define the word "sea", nor does the UK parent. I do - - -

KIRBY J: Were they all enacted at about the same time?

MR MULLANY: They vary, your Honours. I can give you the dates.

HAYNE J: That may be because like this Act the word "sea" is used but rarely? Where do we find the word "sea" in the relevant provisions of this Act other than in the composite expression like "sea voyage" in 8(1), "navigation of the sea" in the definition of "maritime perils", and "perils of the seas"?

MR MULLANY: My recollection is, your Honour, there are not very many instances apart from that. I cannot give you an immediate answer to that, but I will review that and tell you precisely where.

HAYNE J: But is not the key expression, "marine adventure", adventure of a kind reflected in the form of policy in the Second Schedule?

MR MULLANY: Yes.

HAYNE J: Adventure which is limited directly largely to cargo but not entirely, and is limited in the case of cargo to a period after mooring and to discharge of the cargo, is it not?

MR MULLANY: Yes, your Honour, I accept that, it is.

HAYNE J: So is not the premise for your argument that "sea" is a critical concept, a premise which itself finds no verbal support in the Marine Insurance Act itself?

MR MULLANY: We say not, your Honour.

HAYNE J: Where do you find the verbal support?

MR MULLANY: Well, we do acknowledge that the essence of the Act, if you like, is the marineness of what one is dealing with and the heart of the operation and scope of the Act is to be found at Part II from 7 through 10, the provisions I have taken you to. We say, on a reading of those combined sections, it is clear that what was intended to be covered was vessels on the sea. Wherever water is talked of, save for the discussion of "inland waters", mixed sea and land risks at 8, which your Honour has taken me to, the references are confined to "sea". There is a sea flavour about the heart of the Marine Insurance Act.

Your Honour Justice Kirby asked me what the dates of those Acts are. I can tell you that. New Zealand was enacted in 1908, the Canadian Federal Act, 1993. Before that there were a series of provincial Acts.

KIRBY J: ?

MR MULLANY: 1993, which is why there is nothing to be found in Canada. I will say a little bit more about that in a moment. Singapore applies the English Act by reason of the application of English Law Act 1993. Malaysia does the same by reason of the Civil Law Act of 1956, There is a Hong Kong Ordinance of 1964, and an Indian provision is dated 1963. I pause, your Honours, to mention this: there are important differences in the Australian legislation and the Canadian and Indian legislation which, in our submission, support the constructions for which we contend. It is to that extent also that some reference to "Foreign Act" may prove instructive.

KIRBY J: The more relevant thing to be comparing would be the contemporaneous United Kingdom. I do not call it imperial because Australia and New Zealand were then dominions. United Kingdom, New Zealand and Australian statutes, at about the same time, were they mirror images of each other?

MR MULLANY: Virtually so, your Honour, but the difficulty with that is that you will find nothing of help, because as I have said the Acts passed around that time - indeed, in fact all of them - did not define this, and I can tell your Honours that that undefined term "sea" has not been examined in the context of this Act by any of the following courts. It has not been examined in England, it has not been examined in Scotland, in Ireland, in New Zealand, in Singapore, Hong Kong or Malaysia. The Federal Act of 1993 in Canada has not prompted - perhaps not surprisingly given its date -any judicial discussion of this particular provision, and we have not unearthed any helpful discussion in the provinces.

So far as we have been able to determine, the Indian courts have not addressed this either. There have been some difficulties associated with confirming this, but so far as we were able that is the position as we understand it.

GLEESON CJ: Mr Mullany, what about the undefined term "ship"? Have you found any authority on that?

MR MULLANY: We have not looked at that question, your Honour.

GLEESON CJ: That is an expression that is used, I think even more frequently than the expression "sea" in the Marine Insurance Act 1912 ? I would be interested if, after you have time to look at it, after the conclusion of argument in this case, you could have a look at what authority there is of the meaning in this Act of the word "ship"?

MR MULLANY: Certainly. We say that that adds weight to the submission that we advance in answer to your Honour Justice Hayne's point earlier. It colours, if you like, the seaness, the marineness of the key provisions of the Act that we have taken you to. "Ship" has a particular meaning. We press, in this case, the support for a number of indicia, one of them relating to sizes, where the great ships go, and I will develop that in just a moment if I may. But one, put simply, does not travel in ships, whether they be described as "great" or otherwise, up as high as the Swan River in Guildford. Indeed, you do not do so past the Narrows Bridge or past Heirisson Island.

GLEESON CJ: How would this Act apply to lighters or barges?

MR MULLANY: I am sorry, your Honour?

GLEESON CJ: How would this Act apply to lighters or barges?

MR MULLANY: The answer to that question is the same as the one I gave before, your Honour, it depends. It depends upon all of the circumstances of the case. It depends where the vessel travelled and it depends where or whether the body in question can accommodate that which is properly described as a ship. Can I tell your Honours that "ship" is defined in the Second Schedule to the Act, at page 33 of the version that your Honours have been provided with:

the hull, materials and outfit, stores and provisions for the officers and crew, and, in the case of vessels engaged in a special trade, the ordinary fittings requisite for the trade, and also, in the case of a steam-ship - - -

GLEESON CJ: So, that does not tell you what a "ship" is.

MR MULLANY: No, it does not, your Honour.

GLEESON CJ: That tells you that you have a "ship" but includes certain other things?

MR MULLANY: Quite so.

GLEESON CJ: But what I am interested to know is whether, for example, a lighter is a ship or a barge is a ship or a tug is a ship or a 17ft runabout?

MR MULLANY: We will deal with that, your Honour. Can I answer it - - -

HAYNE J: Could you add to it whether the "Marchioness", which was the vessel that went down on the Thames was covered by marine insurance? I have in mind that there was some litigation arising out of the "Marchioness". It may not have been litigation on the insurance side but if it was that may reveal whether that vessel and that event was covered by marine cover?

MR MULLANY: We will deal with that too, your Honour.

The primary inquiry is this, in what sense is the word "sea" being used in the Act. In our submission, there is nothing is section 9(2) of the Act to indicate that that word was not being used in its ordinary sense, which we say does not encompass bodies of inland water with which we are dealing. We say that that Act contains nothing to indicate that the word "sea" was intended to comprise navigable tidal rivers or those parts of them equivalent to the sections that we are dealing with. We say that to so define it, to so extend it, is artificially to extend the ordinary natural meaning of the words.

We have provided your Honours with the dictionary meanings. You find those at footnote 36 of our submissions on page 11, which I will not take you to, and the relevant extracts at volume 2 at paragraphs 18 through 19. What I will say about those definitions is this. We cavil with them only to this one limited extent. Both refer to landlocked water. If by that reference they mean totally and literally landlocked water, then we take issue with that. One of the indicia of the sea, we contend, is that the water must eventually debouch into the ocean. There must be in order to qualify as the sea, in our submission, a link, albeit tenuous, with the open ocean.

KIRBY J: The Caspian Sea might contest that. There is the Sea of Marmara.

GLEESON CJ: Or the Sea of Galilee.

MR MULLANY: All of those are connected by tributaries which lead to the ocean.

KIRBY J: I do not think the Caspian Sea is. It is a very big mass of water. I drove past it once. There are lots of big seas in Russia, are there not? The Caspian Sea is in the middle of Turkey and Iran.

MR MULLANY: Your Honour, the Caspian Sea is a great salt lake. It is between Europe and Asia, east of the Caucasus Mountains, and it does connect to the ocean. The most important rivers that empty into the Caspian Sea are the following: Volga, the Ural, the Tirek and the Kura. We would accept that that particular body satisfies all of the indicia that we say apply to the sea.

GLEESON CJ: What is the difference between that body and what we have out there?

MR MULLANY: Primarily size. The Caspian Sea is 143,000-odd miles square. I do not know what that converts to in kilometres, but it is huge. On any application of ordinary common language, that would qualify properly as the sea. The title itself is significant. We do not say, of course, that the title is determinative but we say it is not insignificant. That is the primary difference.

KIRBY J: No one calls it the Swan Sea.

MR MULLANY: Quite so, your Honour.

KIRBY J: Not even insurance companies, I think.

MR MULLANY: Not in our submission, your Honour.

The Australian Law Reform Commission supports a construction of that section with which we agree. It is dealt with at paragraph 24 of our submissions on page 11. The Commission recommends a principle change in the coverage of the Act to extend to include adventures on inland waters. It proposes that "sea" be so defined expressly so that the kind of doubts that your Honour Justice Hayne has raised with me may be put to bed and that section 8 be re-headed and amended in the manner found at Appendix B on page 321 of its report.

May I first take your Honours to paragraph 1.16 of that report which is found at volume 2 of your materials at tab 14. "The second principle change in the coverage of the Act is extended to include adventures on inland waters. At present the Act's operation is confined to maritime adventures, that is, sea voyages". That picks up the point your Honour Justice Hayne put to me earlier, the two are linked inextricably, in our respectful submission - "and incidental non-maritime risks. There is some difficulty in determining the point at which a contract covering numerous and varied insurance risks ceases to be covered by the Act and is therefore covered by the ICA. Although the Act cannot be reworded so as to avoid all further uncertainty, the modest expansion recommended in this regard removes some of the uncertainty."

Your Honours find that issue picked up again in the report at paragraphs 8.82, 8.84, 8.86. Can I go to the first of those, 8.82, at the top of the page it is recorded as follows:

It has been suggested that Marine Insurance Act (MIA) should be amended to define the `sea' and `inland waters'. However, the commission considers that a simpler and more satisfactory solution would to amend the MIA so that it clearly covers risks on inland waters.

I will not take your Honours expressly to what is said at 8.84 and 8.86, save to observe that at 8.86 they say that that sort of change "is best placed within MIA s 8", we pause to say, because that is the key part to eliminate any possible uncertainty.

Your Honours find the suggested changes marked up at page 321 of the Act and, critically, I direct your Honours attention to subparagraph (3) of the suggested change:

Unless it expressly provides otherwise, a contract of marine insurance protects the assured against losses on all inland waters.

That, we say, is not only the correct construction but consistent with the one for which we press.

GLEESON CJ: Is there anything in this report about ships?

MR MULLANY: I cannot recall, your Honours, I will deal with it.

HAYNE J: The proposed 8(3) proceeds from the premise that the contract would be a contract of marine insurance?

MR MULLANY: I think it does, your Honour, I think it assumes all other things being equal.

HAYNE J: That is that the current wording of the Act required no change to lead to the conclusion that the insurance contract was a contract of marine insurance.

MR MULLANY: I misunderstood your Honour. I think the other way around.

HAYNE J: Why?

MR MULLANY: For the reasons I have already advanced. The Commission appeared to be of the view - and it seems clear to us from paragraph 1.16 - that as matters now stand the Act does not apply to those kinds of bodies. I said I would take you to two foreign Acts which expressly do - if not expressly then there is a clear implication that they do and the commission attached some significance to that to formulate the conclusion that as matters now stand on the preferred interpretation they are not covered, rather than the flip side, as your Honour puts it to me.

HAYNE J: It seems to me that (3) proceeds from the clear assumption that....contract of marine insurance. Perhaps I am wrong.

MR MULLANY: Your Honour, can I deal with that now then. The commission attached significance to the differences between this Act and the differences between the Canadian Act and the Indian Act. Can I take your Honours firstly to the Canadian Act. At volume 2 of our materials under tab 11. You have only been provided with the relevant extracts. If your Honours want a full copy we can provide to you. What we say about both the Indian and Canadian Act is that on the preferred view they were intended and do apply to inland waters. It appears as the Law Reform Commission indicated at 8.85 of its report that the Canadian Act was intended to cover the insurance of risks on inland waters whether or not they were incidental to sea risks. To achieve that it did two things. First, it contains no reference to inland waters or sea voyage. Secondly, it defines "marine peril" to include:

perils consequent on or incidental to `navigation' rather than to `navigation of the sea'.

As to the first of those, if your Honours turn to - - -

GLEESON CJ: I imagine they were concerned with navigation of the great lakes amongst other things.

MR MULLANY: That is right, your Honour, and there is some helpful authority on that, a case of Rogers by the US Supreme Court which I will refer to in just a moment.

As to the first of those two matters, if your Honours turn to 6(1) of the Act you see that it contains no reference to inland waters or sea voyage. Compare that to section 8(1) of our Act which contains both of those terms. Your Honours find the definition of marine perils or "maritime perils" at section 2(1) of the Act and your Honours see it says:

means the perils consequent on, or incidental to the navigation -

not navigation of the sea. Compare that, your Honours, with 9(2) of our Act. The Indian Act is also instructive. Your Honours find that at tab 12 of our volumes. Again, if you require a full Act we can provide one. That Act appears to apply to inland waters also. The sections that we attach significance to are section 4(2) of the Act, which states:

`An adventure analogous to a marine adventure' includes an adventure where any ship, goods or other moveables are exposed to perils incidental to local or inland transit.

Your Honours find that under the heading "Explanation". Compare that to section 8(2) of our Act which does not contain that. There is one further provision - - -

KIRBY J: Is it not interesting and rather peculiar to see in the definition of "maritime perils" the reference to "detainments of princes and peoples" in a statute of 1993 in the Canadian statute.

MR MULLANY: It is, your Honour. The Law Reform Commission did not see fit to recommend those sorts of excisions but I agree with what you have said.

KIRBY J: This is just confirmation and it mentioned in some paragraphs in the Law Reform Commission report because they went to London and spoke to Lloyds and they went to Singapore and spoke to the Committée Maritime and obviously they took the view that they should not just localise the legislation because of the persisting international market but it is an international market in one would think principally the high seas.

MR MULLANY: That is all true, your Honour.

The one other provision of the Indian Act that we attach significant to is section 8(9). That empowers the Indian central government "to direct that provisions of the Act shall, in their application to contracts of marine insurance, relating to any class of ship exclusively used in inland navigation be subject so such conditions and exceptions and modifications as it may specify." That may well be the explanation for why we cannot find any authority in India on that point. I said there were three things which supported our - - -

KIRBY J: Probably the United Kingdom Act, vis-à-vis India, in the early part of the century was extended to India, was it not?

MR MULLANY: I believe that is so, your Honour.

KIRBY J: That is probably why they did not have Act because they were not a dominion and matters of international concern were probably treated by what to them was still the Imperial Parliament.

MR MULLANY: I believe that is so, but what I can tell you is that we have checked the very early authorities and we cannot find any reference to any authority which is going to assist on this matter.

KIRBY J: They really did not get dominion government until 1935, I think, so that would explain why they would have just not bothered about this until after independence.

MR MULLANY: We cannot be as confident about that jurisdiction as we are of the others, but that is out position.

I said there were three things which supported the construction for which we contend. I know your Honour Justice Kirby will not like me doing this but I do refer to the parliamentary debates on the issue- I will not take you to them.

KIRBY J: I do not see why you would pick me out of that one, I am not Justice Meagher.

MR MULLANY: Some recent comments you have made, Your Honour, about the utility of that exercise, but nonetheless I do it. I say to your Honours that it is clear from the second reading speech of the Honourable Attorney-General Groom, 6 October 1908, pages 764 to 766 which your Honours find at tab 13 of volume 2 of our materials, that the purpose of the Act is to clarify, make "definite", make "certain", to use his expressions, "codify, declare" to use others, the "highly technical" law of marine insurance. There was nothing in those debates which supports the submission that it was intended that bodies of waters like the Swan would be caught by this Act.

McHUGH J: One problem I have with these submissions is that classic forms of marine policies are time and voyage policies. A voyage policy is from one place to another. Why is it not captured, either because of 8(2) or because of the very terms of the Act, if the commencement of a voyage is in a river or if it is just a time policy, for say 12 months? Why is not such a policy caught if some incident happens in the Swan River?

Let me give you a concrete example from my own experience. In Newcastle the Hunter River is navigable by what I will call 60-mile colliers right up to Hexham and those colliers used to carry coal from Hexham down to Sydney. They would go 15 kilometres, 10-12 mile up the Hunter River, and I think in earlier times they used to go as far as Maitland, but why would that not be part of a marine adventure? A collier is loaded in Hexham with coal, traverses the Hunter out into the open sea and down into Sydney Harbour. Why would that not, if you had a voyage policy in respect of that from Hexham to Darling Harbour - - -?

MR MULLANY: There comes a point, your Honour, we say where a line of demarcation must be drawn. To take your Honour's example and put it in a Western Australian context with which I am more familiar: on your Honour's argument and on the Full Court's argument that if any vessel travelled as far up as Guildford where I believe the water can be very shallow at times, it could nonetheless be covered by the Marine Insurance Act simply because it stemmed or began at the mouth of the Swan. What we say your Honours must do is first and foremost construe the Act by reference to its ordinary and natural language, bearing in mind the seaness of the key provisions to which I have referred.

HAYNE J: Or bearing in mind the fact that it was directed to a particular kind of insurance, that is, its focus was commercial, not maritime.

MR MULLANY: That is right, your Honour, commercial to this extent: designed to pick up carriage of goods, the great ship plying their trade.

HAYNE J: No, designed to deal with a particular kind of commercial transaction, namely, insurance - - -

MR MULLANY: Yes, I accept that. That, we say, is not inconsistent with what we are putting to you.

The answer to your Honour Justice McHugh's question in a nutshell really is this. To classify that type of situation and that type of body of water as falling within that Act we say, with all respect, offends natural common sense and language because on ordinary parlance and by reference to common usage, those terms do not ensnare those sorts of tributaries. There must come a point where a river or a sea proper becomes a river and that is a difficult area that courts have been grappling with for decades, indeed centuries. They grappled with it in the context of admiralty jurisdiction and they have grappled with it in other contexts. We rest primarily on the submission that by reference to ordinary common usage, common parlance, the bodies of water that we are concerned with cannot be described as part of the sea.

McHUGH J: But why, in the case - those colliers I think were basically owned by J. and A. Brown and BHP. Supposing they insure with Lloyds from Hexham on the Hunter River to Darling Harbour or Port Kembla and the policy covers that, why is that not an adventure analogous to a marine adventure? It is covered by the policy, why does it not fall within 8(2)?

MR MULLANY: We say that the words "analogous to a marine adventure" - which, by the way, the Full Court never dealt with that point - do not ensnare those bodies properly characterised as something less than sea. You do not by that provision, we say, escape the requirement that there be sea involved.

Your Honour uses the example of a large vessel and we would say that part of the test - - -

McHUGH J: When I say it is a large vessel, those colliers, from recollection, may be one and half times as long as this room, or something to that extent.

MR MULLANY: That would fail what we would describe as the "great ship test". We will be saying a little about that in a just a minute. We say in order to qualify, in order to satisfy the primary indicia - size - one can do it by reference to that test.

HAYNE J: That really suggests, does it not, that anchorage marine underwriting, for example, have been conducting their business on a complete misunderstanding. First, the policy which we see at 376 says explicitly "the provisions of the Marine Insurance Act shall be deemed to apply". Second, the policy schedule that they issue, at page 374, deals with such matters as "Trailer Details", so we are dealing with small craft. If we are in the area if discourse with insurance, you invite us, in effect, to say that this participant in the market has completely misunderstood the market in which it is dealing. It is not dealing in marine insurance, it is dealing in something else. It that not the consequence?

MR MULLANY: No, your Honour, it is not. Well, it may be, but let me respond this way. Firstly, the fact that this policy said that it was a marine insurance policy governed by the Act, of course, is not determinative. Indeed, the Full Court dealt with that issue and recorded the fact that it was never suggested by my learned friends on appeal, and nor could it have been, that if the court found that it was not, then it was. That must be so. The fact that an animal is called an elephant does not make it so if it is a mouse. It may well be the case that those participating in this industry have been proceeding on a false premise.

There was evidence at trial from one Mr Waltham, a retired marine underwriter, who gave evidence that he had always assumed - it may have been Fullerton - my learned friends will tell me if I am wrong - that when they were insuring things like the Rottnest Island ferry and so on, they had always assumed that they were doing so under the marine insurance policy. It just does not matter, in our respectful submission, at the end of the day. The difficulty is that there is so little authority and judicial consideration on these issues that these questions remain unanswered. The industry may have been - - -

HAYNE J: Would have been assumed by the industry contrary to the fundamental tenet of your submission?

MR MULLANY: Yes, your Honour, quite so. We do not shy from that.

KIRBY J: The Insurance Contracts Act has a provision that you cannot contract out of it and therefore - and it is a later statute.

MR MULLANY: Yes, it is provision 9(1)(d) from memory.

KIRBY J: That arose in Akai in this Court, did it not?

MR MULLANY: I believe so, your Honour, yes.

McHUGH J: But your submission ultimately lead to the conclusion that in respect of time and voyage policies the insured would never know whether the risk is covered until the court defined whether or not it was the sea in the sense for which you contend?

MR MULLANY: Your Honour, we hope they will know after this case. In this particular set of circumstances there was a clear understanding, in our submission, about where this vessel was going to operate. It was never intended that this vessel was going to go operating on what could, without any controversy, be described as part of the sea. It was not going to head out towards Rottnest, it was always going to be engaged on the Swan River. We may or may not be correct when we talk about whether or not the sea encompasses the Swan River but the fact that this particular insurance assumed, and perhaps has been assuming for some time, that it was accepting risk cover governed by the Marine Insurance Act when in fact it was not, is not something which at the end of the day makes a jot of difference, in our respectful submission.

GLEESON CJ: Can I ask you in connection with this to go again to section 8(1) of the Marine Insurance Act. Let me begin by assuming, contrary to your submission, that the concluding words qualify only the words "any land risk". Let us read the subsection as though it ends with the words "inland waters". Noticing the reference to "usage of trade" in subsection (1), could you have as part of the consequence of that section the possibility that trade usage may produce the consequence that a contract of marine insurance will protect an insured only against losses on inland waters?

MR MULLANY: Your Honour, the answer to that question that I would proffer is really removed by your Honour's excision of the last part of the sentence, the last part of the section.

GLEESON CJ: Your argument depends upon the proposition that the words "which may be incidental to any sea voyage" qualify the words "against losses on inland waters"?

MR MULLANY: Yes, it does, your Honour, and that would be consistent with the rest of that division.

GLEESON CJ: If you are wrong in that, what would follow? I wondered what significance you attach to the word "extended".

MR MULLANY: There has to be a happy link, there has to be something which may properly be described as incidental to the voyage.

GLEESON CJ: Specifically, I had in mind the question whether by "trade usage" you could have contracts of marine insurance which cover paddle steamers that ply up and down the Murray River.

MR MULLANY: Your Honour, we deal with this at 36 of our outline of submissions in the last part of it. In order for something to be extended, you need to have a marine insurance policy in place in the first instance. We say that that must follow. The learned trial judge dealt with that at AB2, 473. We say it also consistent with the other references we make at footnote 70 of our submissions. It must, in other words, cover some marine risk and in the example that your Honour puts to me that test would fail if, and I am not sure about this, the Murray River and/or that vessel do not satisfy the indicia which I have flagged and will develop in a little more detail in just a moment.

To take our example, "The Lone Ranger" here could not have been described as being on that kind of adventure. It was not, for example, journeying down the Swan River, towing Ms Morrell, on its way to Rottnest. If it had been doing that there might have been an argument that could have been advanced, but it was not, so to both of those reasons we would say that it would fall outside the ambit of 8(1). I might add, your Honour, that both those areas, 8(1) and 8(2), did not feature in this case and have not done and there is no authority that we have discovered, save for that which we referred to in 70 which resolves the issue determinatively.

HAYNE J: Well, let us leave 8(1) and 8(2) aside for the moment, though it seems to me they may loom large, and focus only on 9. You said 9 gives you this cascade of definitions. Section 9(2) is introduced by the words "In particular". Maybe some work has to be given to those words and the work that seems to be given to them is that it is not an exclusive list or definition that follows. Let us leave that aside:

ship, goods, or other movables are exposed to maritime perils.

Do you accept that this craft was either a ship or a good or another movable?

MR MULLANY: No, your Honour, we do not. The relevant policy here takes us away, we say, from (a) and (b) and - - -

HAYNE J: Because there was no hull insurance.

MR MULLANY: Yes, and nothing to do at all with marine matters.

HAYNE J: Let me for the moment assume that the absence of hull insurance may have some significance. Can I put that to one side? For the moment sticking with the words, do you accept that the craft was a ship good or other movable?

MR MULLANY: We do not say it is a ship. We say a ship would be a vessel - a vessel is probably the best way to put it - substantially larger than this particular craft, this pleasure craft. It may be that once I have chased that matter that your Honour the Chief Justice raises with me I will have a different answer, but as presently advised we would say not, your Honour.

GLEESON CJ: And you would also say, I presume, looking at the definition of "Movables" and looking at the definition of "Freight" in section 3 that the expression "goods or movables" seems to assume that there is a ship and then it is a reference to personal property other than the ship.

MR MULLANY: We do say that, your Honour.

HAYNE J: How does that then work with the last part of "Maritime perils", in particular:

any other perils, either of the like kind, or which may be designated by the policy.

How does it work with those words?

MR MULLANY: Your Honour we do accept that that definition of "Maritime perils" is not an exclusive definition. We do accept that the policy may stipulate that other definitions may apply, or other perils may be included, but importantly, we say, they are qualified by what appears at the beginning of that definition. They must still be:

consequent on, or incidental to, the navigation of the sea -

and we say that is supported by the expression "that is to say", so everything from that section on must be coloured by what precedes it.

Your Honour Justice Hayne raised earlier this question of the policy itself stating that the Marine Insurance Act did apply and I said the Full Court dealt with that. We found that reference. It is at paragraph 23 appeal book 3 at page 520 and we do not make anything of it.

KIRBY J: By the way, the Indian explanatory statement at the beginning of the Indian Act says that until that Act was enacted the English Act of 1906 applied in India.

MR MULLANY: Yes, your Honour.

KIRBY J: So that was as I assumed.

MR MULLANY: Although there is an absence of authority dealing with sea in this context, there are some cases which your Honours will find instructive. We refer to those at paragraph 55 of our submissions on page 14. What they make clear, we say, is that salinity and tidal flow are not necessarily determinative.

We want to take your Honours to three of those, the first of which is Overseers of Woolwich v Robertson found at tab 1 of volume 1 of our submissions. This was a decision of the Queen's Bench Division two justices. There was a collision between two vessels on the River Thames near Woolwich between a steamship and a vessel known as the "Princess Alice" and 600 people who were passengers and crew lost their lives by drowning. The vessel was sunk in the middle of the river below the low-water mark. The question arose - - -

KIRBY J: Where is Woolwich? Can you explain that?

MR MULLANY: I am not sure, your Honour, where Woolwich is. The sea, I can tell you though, is "thirty miles" from those places mentioned. You find that at 655 at paragraph 6. The question of whether or not that particular location was the sea or not arose because of the need to determine whether the costs of retrievals of bodies could be sheeted home to the overseers of parishes throughout England.

The relevant provision your Honours find recorded in the footnote on 656. About halfway down the first column on the left your Honours find the expression "on shore from the sea". It was the last part of that which the court had to grapple with and what they held in this case was this, that the River Thames at Woolwich, 30 miles from the sea, although a navigable tidal river was not classifiable as part of it.

Can I take your Honours firstly to what was said by his Lordship Justice Lindley on page 658? Just above that counsel's argument is recorded and he identifies that the question in issue was whether the River Thames could be included under the term "sea" in that Act. I should add, for what it is worth, a little lower his Lordship says:

I cannot bring myself to think that the river Thames at Woolwich, from which these bodies came, is within the meaning of the word "sea".

A little lower down, four lines from the bottom:

Then, looking at the Act, we do not find in it a word about tidal rivers, creeks, estuaries, or other streams: we find the word "sea," and sea only.

That is the position with this Act. Over the page at line 6:

What ground is there for extending the meaning of the word "sea"? When we look at other statutes, we find that the sea is always contrasted with river.

That has been the historical position. We make reference to that in our written submissions. His Lordship says:

I am not aware that in any statute the word "sea" is used as synonymous with the word "river." Upon the whole it would appear that the question of what are in any particular case the boundaries of the sea properly so called, is substantially one of fact.

His Lordship Justice Matthew agreed. He says:

I am of the same opinion . . . The question is whether the county is bound to reimburse them the expenses which they have incurred, and for this purpose we have to consider what is the sense in which the word "sea" is used in the Act. I can find nothing in the Act to shew that the word "sea" was intended to comprise navigable tidal rivers.

GLEESON CJ: That is a more elaborate judgment. It had two paragraphs.

MR MULLANY: That is right, your Honour. As I said at the outset there is not much here. The Full Court did not have the advantage of that case, I should add, and nor did it have the advantage of the second case we wish to take you to, The Salt Union, Limited v Wood [1893] 1 QB 370. Your Honours find that at tab 8 of volume 2 of the materials. What happened here was this. A steamer carried salt on:

the rivers Weaver and Mersey from Winsford to Liverpool, where it was transferred to ocean-going vessels. Her voyages, so far as they were upon the river Mersey, were in tidal -

rivers, but she was not a sea-going ship. In contrast to the first case I have taken you to, this case concerned that expression so they are slightly further removed again, we accept. But the key point was this; the fact that it was tidal and largely saline, which your Honours find reflected at pages 373 to 374 did not, it was found, characterise it as the sea and the impression one gleans from this, even shorter, judgment, is that that was considered to be almost self-evident. Can I take your Honours firstly to 373 and the judgment of the Lord Chief Justice? Five lines from the bottom he poses the question:

Is she a sea-going ship?

His Lordship then concludes:

I am of the opinion that the case is not within the Act of Parliament. It is a statute which has to be acted upon every day, and we must give a simple, clear and (if possible) a sensible interpretation to this provision, and a meaning capable of being at once applied by the tribunals which have to act -

A little further along, about eight lines from the bottom of that paragraph, it is recorded -

It is not disputed that this ship does not go to sea. She is one of a line of ships which conduct traffic along a river to a point in the Mersey, where they are met by, and transfer their cargo to, ocean-going ships. She cannot, to my mind, be said to be a sea-going ship.

Lord Justice Cave deals with that point on 375 in the last two lines in what is the shortest of all the judgments:

On the other point -

the sea-going point -

I entirely agree with the judgment of my Lord. I entertain no doubt that this was not a sea-going ship.

KIRBY J: And that was so, although they did, in fact, go to the sea for the purpose of loading and unloading.

MR MULLANY: That is so, your Honour, and the fact that it was tidal - - -

KIRBY J: It was a composite idea. Sea-going ship was thought to be a composite idea.

MR MULLANY: We do accept that it is one step further removed from the position we face, but we attach significance to the fact that at the place in issue it was held that it was not the sea, and the fact that it was tidal there, 30 miles from the mouth, and saline, did not sway the day, as it did below here.

The third of the decisions I wish to take your Honours to is that of the United States Supreme Court, which is tab 2 of our volume of cases. This case came before the court as a consequence of an assault committed on board a steamship, the "Alaska, a vessel belonging to citizens of the United States" and a question of jurisdiction arose, but what is important about this case for this appeal is the fact that the waters of the Great Lakes and the Detroit River, which connects Lake Huron and Lake Erie, were held to be part of the high seas for that particular purpose.

There are some helpful discussions in this judgment as to the indicia of seas. Can I take you to those now? Paragraph [256 page 4 on the first column, the second full paragraph, the second sentence, this is stated:

The Great Lakes possess every essential characteristic of seas. They are of large extent in length and breadth; they are navigable the whole distance in either direction by the largest vessels known to commerce; objects are not distinguishable from the opposite shores; they separate, in many instances, states, and in some instances constitute the boundary between independent nations; and their waters, after passing long distances, debouch into the ocean. The fact that their waters are fresh and not subject to the tides, does not affect their essential character as seas. Many seas are tideless, and the waters of some are saline only in a very slight degree.

A little further on, under 257] it is stated that the Great Lakes:

are of larger dimensions than many inland seas which are at an equal or greater distance from the ocean. The waters of the Black Sea travel a like distance before they come into contact with the ocean. Their first outlet is through the Bosphorus, which is about twenty miles long and for the greater part of its way less than a mile in width, into the sea of Marmora, and through that to the Dardanelles -

Over the page at 259] on the first column towards the end of that section, your Honours find a sentence "The Detroit river". So there was discussion both of the lakes proper and of the connecting river and of the latter it was said:

upon which the steamer Alaska at the time the assault was committed, connects the waters of Lake Huron (with which, as stated above the waters of Lake Superior and Lake Michigan join) with the waters of Lake Erie and separates the Dominion of Canada from the United States, constituting the boundary between them . . . The river is about 22 miles in length and from one to three miles in width, and is navigable at all seasons of the year by vessels of the largest size. The number of vessels passing through it each year is immense. Between the years 1880 and 1892, inclusive, they averaged from thirty-one to forty thousand a year, having a tonnage varying from sixteen to twenty-four millions.

The last passage I wish to take your Honours to appears right at - - -

KIRBY J: What was that last page, I am sorry? Which page was the last quote?

MR MULLANY: That is from paragraph 259] at the bottom part of the left-hand column over to the right-hand part.

KIRBY J: Thank you.

MR MULLANY: The last passage I wish to take your Honours to is in [261 on the right side of that page right at the bottom:

The term, in the eye of reason, is applicable to the open, unenclosed portion of all large bodies of navigable waters, whose extent cannot be measured by one's vision, and the navigation of which is free to all nations and people on their borders, by whatever names those bodies may be locally designated. In some countries small lakes are called seas, as in the case of the sea of Galilee, in Palestine. In other countries large bodies of water, greater than many bodies denominated seas, are called lakes, gulfs, or basins. The nomenclature, however, does not change the real character of either, nor should it affect our construction of terms properly applicable to the waters of either.

We accept that. We draw some comfort from the fact that this body is not labelled, and never has been, "the Swan Sea", and we say that is important when comes to judge how it is to be defined by reference to ordinary and common usage, but we accept that our cases does not fall or stand with that.

There are other cases which support the proposition that a navigable tidal and saline river is not necessarily the sea and those cases are found in the line of authority demarcating the jurisdiction between admiralty and the common law. We deal with those at footnote 55 of our submissions on page 14 and I do not intend to take your Honours to them, but I will tell you about two in particular.

In R v Forty-Nine Casks of Brandy [1836] EngR 331; (1836) 166 ER 401 at 407 to 408, case 10 on our list, it was held that Poole Harbour was within the body of the County of Dorset and not on the high seas although the great bay was "sixty miles in compass . . . twelve miles long; seven miles wide", and, importantly for this case, was permanently salty and ebbed and flowed four times in every hour.

The second case I want to highlight is the "Public Opinion" [1832] EngR 515; (1832) 166 ER 289 at 291, case 11 on our list. There was a collision between vessels on the Humber River, which was about "twenty miles from the main sea, but within the flux and reflux of the tide", as it was described, "and at about three-fourths flood". It was held that the collision had occurred not on the high seas but that the Humber estuary was within the County of Lancashire and it was held relevantly for this case that that particular location was not a branch or arm of the high sea. We rely on the other authorities that we have listed there.

Your Honours, in our respectful submission, there is no reason, no justification, to construe "seas" so broadly as to construe those which do not happily sit within that description. We respectfully submit that a pragmatic approach ought be brought to this exercise and we contend that there are a number of features which must be exhibited before that appellation can be provided.

First and foremost, we say, the body of water must be large. Its dimensions must be incapable of measurement by one's unaided vision. We draw that from the United States Supreme Court decision I have just taken your Honours to. In order to be classifiable as part of the sea, we say, the water must be so great, so expansive, as to be capable of that description by reference to ordinary parlance.

We say that that is reflected in fact in section 8(1), to come back to what your Honour Justice Hayne put to me a little earlier, which on one reading draws a distinction between those waters comprising the sea and those waters of a less expansive nature. We say that because of the use of the language extended so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage. That supports on one interpretation, we say, the contention that in order to qualify under the latter category one must be dealing with a large body. The test, we say, is primarily one of size. That is reflected in what we say is an essential qualification to ensure that the definition accords with that ordinary and common parlance.

GLEESON CJ: A possible point of view as to section 8(1) is that the words "which may be incidental to any sea voyage" do not qualify either the words "land risk" or the words "inland waters", but qualify the word "losses". That, I would have thought, would be a construction that would support your argument.

MR MULLANY: It does, and we are grateful for that, but we - - -

GLEESON CJ: No one could seriously say, could they, that inland waters are incidental to a sea voyage?

MR MULLANY: No, your Honour. We say that the water in question must be capable of accommodating the great ships and it must be capable of accommodating them for the whole of the distance. Now, we do not dispute, as my learned friends point out, that that phrase first emerged in the context of admiralty jurisdiction. That is so; it did. But that fact does not render that concept an unhelpful yardstick when one is seeking to define an undefined term. If that were true, your Honours, a definition based on the ebb and flow of the tide would also be equally lacking because that is where that phrase emerged also in the search over many years for the demarcation line when one is dealing with admiralty jurisdiction in rivers.

On the question of great ships, your Honours will find some assistance from what is said by Lord Justice Scott in "The Tolten" [1946] P 135 at 156, tab 7 in our bundle, where he noted that:

the phrase "high seas" are "in places where great ships go -

and that it was -

a geographical term which would reach a long way up most navigable rivers in those days when probably a ship of 300 tons was accounted "great".

Sometimes, your Honours, that expression was combined with the expression "where the great ships go", the ebbing and flowing I am talking about. Now, obviously in bygone eras even great ships smaller than those today could travel probably further upstream than those sorts of vessels can do nowadays.

What we submit is rather than define that vessel by reference to tonnage, we consider it to be of more assistance nowadays to say that a great ship is to be regarded as something of the size of a liner or there up. It does, we say, encompass cargo vessels, container vessels. Smaller, even substantial vessels, we say, do not qualify. So, to come back to what your Honour the Chief Justice put to me earlier, tugs do not qualify, the Rottnest Island ferry does not qualify, large pleasure craft do not qualify. Greg Norman's yacht, a great ship in one sense but not in this sense, does not qualify. We say that tidal waters, those which cannot accommodate great ships, do not qualify as part of the sea for that reason.

We say there are other essential indicia. We say that to be part of the seas the body must be connected to the ocean. Completely landlocked bodies do not qualify, we say. That is the reason we took issue with that one expression, or queried that expression of the dictionary meanings. Secondly, we say that the body of water must eventually debouch into the sea. That is really the flip side of the first proposition. We say the distance between the body of water with which we are concerned and the ocean is not determinative, but there must eventually be some link.

Thirdly, we submit that the seas are created by nature, not by man. So artificial bodies do not qualify, irrespective of size and irrespective of whether they are connected to the open ocean. On that point, your Honours find assistance from "The Mecca" [1895] P 95 at 108, tab 4 on our list. An artificial basin or dock excavated out of land, but into which water from the high seas could be made to flow would not be, in any sense, part of the high seas. It is for that reason we say, your Honours, that the Suez Canal, the Panama Canal, Lakes Argyle, Burley Griffin or the Volta in Ghana do not qualify, irrespective of size.

We say that there are a number of features which a body of water may or may not exhibit which may or may not be indicative of a sea character. They are noted in our submissions from 28 to 30. Two were afforded an undeserved status: salinity and tidal flow. They were the only two features upon which the Full Court placed reliance. The fact that bodies of water have exhibited those things in other cases has, as I have shown, been held to be non-determinative. The fact that the Great Lakes were freshwater bodies did not, for example, prevent the United States Supreme Court from classifying them as part of the seas.

In the Hansen Case [1999] NSWCA 186 to which reference was made yesterday, case number 17 on our list, the fact that Cugden Lake was tidal did not prevent that classification. We say that they may be relevant to the question of characterisation, but that they are not determinative.

At paragraph 106 of the Full Court's judgment, which your Honours find at AB 3/552 to 553, his Honour records that the Swan is tidal as far upstream as Woodbridge near Guildford and that it is saline for part of the year. If that were correct, the test applied below, there would be, we say, no logical stopping point on the application. To come back to the example your Honour Justice McHugh put to me earlier, that would mean that wherever the water rises by the smallest of margins or wherever there is an ounce of salt - it is primarily the first rather than the second that the emphasis was placed on below - that would qualify. In our respectful submission, that would run contrary to common usage and language.

To come back to what your Honour the Chief Justice put to me earlier about Sydney, we would respectfully suggest that most people in Sydney would reject the contention that the water in Sydney Harbour near Hunters Hill would qualify as the sea. We would respectfully suggest also that most people in Melbourne would reject the submission that the Yarra near Scotch College could be so described.

GLEESON CJ: Well, you are probably on fairly safe ground with Lake Burley Griffin and your argument amounts to this, does it not, that although the vessel - and there is such a vessel - that navigates Lake Burley Griffin, might be subject to a contract of insurance not materially different from the kind of contract of insurance that a collier that plied between Hexham and Darling Harbour might take out, the vessel that navigates Lake Burley Griffin would not be subject to a contract of insurance to which the Marine Insurance Act applies.

MR MULLANY: Yes, that is so, your Honour. It may fail for a number of reasons but it also fails because it is an artificial body. You can have dual classification - we agree with that. Certain parts of a river can be a sea. It all depends upon the circumstances of the particular case and whether the particular body in issue demonstrates those essential indicia. My learned friends appear to say this, that the ebb and flow test is really the only sensible definition that one can adopt in modern times. But there are, of course, other tests, apart from the one adopted below and apart from the one that we pressed for.

There are three of those. The first is this: it might be said that the sea is comprised only of the open ocean. We do not, as has been suggested, advance this. We say that the open ocean is the sea but that other bodies of water can qualify as well. Secondly, it might be said that the great ships test stands alone. We prefer to see that as a reference to the primary requirement - or yardstick, better put - that there be a large body in issue. Thirdly, some practical limitation might be imposed. There are cases which refer to the first or last bridge, depending upon whether one is travelling up or downstream, by reference to the open ocean.

Now, we do not advance that test. His Honour Justice Kennedy referred to that as a practical limitation - he does it at 109 of his judgment, at appeal book page 3/553 - but his Honour rejected it as an appropriate test in modern times. What I might say though about that is this. If that were the test, we would satisfy it. The first bridge that you meet from the Swan River is the old Fremantle traffic bridge, the second, the new, the third, the Narrows, the fourth, the Causeway. On any application of that test, we would arrive at the conclusion for which we contend. It is significant, we say, that it is only on the ebb and flow test and on the open ocean test - which we do not advance - that we would fail to arrive at the conclusion for which we press.

Finally, a pertinent question at the end of the day is this: Whether by reference to ordinary language, parlance and commonsense that part of the Swan River with which we are concerned can properly be classified as the sea? In our respectful submission, the answer to that is no. If we are correct about that, for the reasons I have developed earlier, we say that the Marine Insurance Act can have no application to this particular matter.

Can I move to a second point. Even if your Honours are unpersuaded that the relevant parts of the Swan River are not the sea - - -

KIRBY J: Just let me ask, if you win that point, is that a winning point in the appeal?

MR MULLANY: In our submission, it is. If you are not persuaded by that, your Honours, we say that the accident here was not of the sea. We deal with this in our submissions at paragraph 6(g)(i) and 17 to 18. We are happy to rest on what we say there, and ask your Honours to record the following references where there was discussion of the accident below: appeal book pages 2/404, 407, 416 to 417, 462, 426 to 427. It was the negligence of Mr Gibbs which resulted in the accident and injury to Mrs Morrell in this case. He failed to power on when required, with the result that a collision with the trees on Heirisson Island was unavoidable. It had nothing whatever to do with the sea, even if the Swan River can be so defined.

Your Honours, can I turn to the argument concerning the significance of the third party liability status of the renewed policy. We deal with that in our submissions at paragraphs 33 through 36. It is our respectful submission that the correct classification of the renewed contract did, contrary to what his Honour Justice Kennedy said at paragraph 118 at AB 3/566, prevent its characterisation in the circumstances of this case as a contract of marine insurance. It can be very difficult to discern whether a particular policy is covered or not. As I said earlier, this is one of the areas to which the Law Reform Commission attached some significance.

The renewed policy which I took your Honours to at AB 2/374 was a pure liability policy and critically, we say, such loss was never going to arise by reason of exposure to maritime perils. It stands in stark contrast with the first policy which dealt with all of the common, classical indicia of marine insurance: hull, freight, et cetera. It was structured, your Honours recall, on the express request by the first-named appellant to excise from the first policy those indicia.

There is very little authority on this point. There is, however, authority contrary to the conclusion expressed below. Can I take you to the primary decision upon which we rely, that is the case of Hansen, which your Honours find at tab 17. This was a decision of the New South Wales Court of Appeal. The court comprised Justices Priestley, Meagher and Stein. Justice Meagher gave the leading judgment, with whom Justices Priestley and Stein agreed. Your Honour Justice Callinan may remember from the special leave application - unsuccessful - that it arose out of an accident on a wave sled ride on Cugden Lake, a one-kilometre square landlocked lake in New South Wales.

Your Honours may care to have handy also that part of the judgment below where Justice Kennedy deals with this case: paragraphs 98 to 100 of his judgment, AB 3/550. As he noted, there were marked similarities between the facts of these two cases. Coincidentally, the same agent and the same insurer were involved. Importantly, the relevant part of section 3 of the policy before the courts was identical. In both cases, renewed third party liability policies rather than original policies of marine insurance were analysed. As Gibbs had instructed the excision of that, so too had that situation arisen in this case. The question before the court was whether or not this third party liability policy was also a marine insurance policy. Can I take your Honours first to paragraph 5:

The first matter to discuss is the nature of the insurance policy between the parties -

At the bottom of that paragraph, their Honours say:

There is a typed warranty which is as follows:

"Warranted That Sections 1 + 2 of the Policy are deleted, the Policy being restricted to Third Party only. Further Warranty 1 is amended to permit Commercial Water Skiing and hire of the vessels as per approvals notwithstanding all other terms and conditions."

Your Honours will be immediately struck by the similarity between that and what we are dealing with here. In paragraph 7, their Honours say:

In order to decide whether the policy is a policy of Marine Insurance or not, some attention will have to be paid to the content of section 1 and 2.

Over the page they are set out, and then at 3 - this is at paragraph 8 - your Honours find the same provision that we are dealing with in this case. We set that out at pages 2 to 3 of our written submissions. Over the page, the exclusion clause to section 3 is also set out. In paragraph 9 Justice Meagher says this:

The contract of insurance, therefore, indemnifies Hansen Development Pty Limited against liability for injuries suffered as a result of its "boats"; little, if anything, else; and that, only if incurred as a result of "water ski-ing" -

in our case, paraflying -

It is as Mr King SC, learned senior counsel for the appellant, asserted, a public liability policy. A question which arises, however, is whether it is also a contract of marine insurance; or, more appropriately, a contract to which the Marine Insurance Act 1909 applies.

The critical part of the decision is found at paragraph 11. His Honour says this:

It will be observed that, despite the heading of s.7, that section hardly qualifies as a description. The whole Act appears to assume that the established English law of marine insurance still exists, and supplies the answer to the question. If so, the answer to the question whether the Maritime Insurance Act applies must be in the negative. English law seems to have proceeded on the basis that any policy in or to the effect of an "SG" policy (or its later replacements) was a "marine" policy -

Arnould is cited -

A marine policy, so understood, covered all sorts of misadventures which might be sustained by a vessel: storm, tempest, fire, collision, average, damage to cargo etc., in fact almost everything except death or injury to third parties.

So his Honour says there is a historical basis for excluding this sort of contract.

In the whole of Arnould's work, I have not located a single example of a public liability risk being treated as a marine insurance risk, let alone a policy dealing with nothing but public liability being treated as a marine policy. Particularly must this be so when no "sea" is involved: Cugden Lake can hardly be said to be a "sea".

There is one other authority that we place reliance upon, and the decision is Norsworthy - - -

KIRBY J: Just a moment. In that case, at paragraph 11 his Honour refers to Maritime Insurance Act.

MR MULLANY: Yes, your Honour.

KIRBY J: What is that Act? As distinct from the Marine Insurance Act.

MR MULLANY: A typo, I think, your Honour. It should be "Marine".

KIRBY J: I see.

MR MULLANY: The other decision is a decision of Justice Olsson, which your Honours find at tab 19 of volume 1 of the materials: Norsworthy & Encel v SGIC [1999] SASC 496. The background facts are set out in paragraphs 3 to 5. The accident arose as a consequence of a mishap during a scuba-diving excursion organised by a diving club, and the plaintiffs were on a vessel called the "Blue Devil". Can I take your Honours to 40 of that judgment, where his Honour records the fact that in this case the policy bore the expression, "MARINE POLICY".

There is a reference to section 51 of the Insurance Contracts Act and conferral of a right to sue insurers directly in certain circumstances. That is why the question of whether or not this was a marine insurance policy loomed in this case, because the Marine Insurance Act does not contain any equivalent provision. At 45 his Honour says:

For a contract, properly, to be characterised as a contract of marine insurance it must relate to losses incident to "marine adventure".

He goes through and lists the definitions. The paragraphs which we draw something from are 47 and 48. His Honour says this:

When one peruses the relevant policy it is immediately apparent that the primary object of it is the hull, engines, trailer and special equipment of the Blue Devil. Classically, the bulk of the policy is directed towards subject matters of the nature contemplated by s 9 of the MIA -

what we say is that nothing in the renewed policy is directed towards the subject matters of section 9 or those contemplated by it.

The third party clause is, within that context, merely an incidental, optional cover.

HAYNE J: You said nothing was directed to section 9?

MR MULLANY: What we say, your Honour, is that the renewed policy is not directed to the subject matters of the nature contemplated by section 9. So the very things that his Honour - - -

HAYNE J: Why is it not a 9(2)(c) matter? That is the case against you. You say it is not. Why is it not?

MR MULLANY: What we mean by that, your Honour, is this. It does not have the kinds of things that his Honour refers to in the second sentence. That is all I mean by that. It does not have hull, it does not have engine, it does not have trailer and it does not have freight. What it has is third party and third party only. They say we have to come within 9(2)(c) but we say, effectively, that nothing of that contract has the hallmarks of the classic marine insurance policy. We say that it must - - -

GLEESON CJ: There was no question about (c) in this case. The vessel was in fact swamped while it was manoeuvring in the surf.

MR MULLANY: That is true, your Honour; we accept that. We draw nothing from that case other than what I have just put. There is very little on this question. But what we say is that, in order to qualify as a contract of marine insurance, the policy must be possessed of at least some of the accepted subjects of marine insurance. It is not a question, as my learned friends put it, of whether or not this contract was in a traditional format or not. It becomes at the end of the day a question of whether or not those accepted subject matters are present.

HAYNE J: What does that proposition amount to? How do you relate it to the Act, Mr Mullany? Are you saying that (c) is to be read conjunctively with what precedes it? How is your submission related to the words of the Act?

MR MULLANY: This is a separate point, your Honour. This is a point which stands outside or separate to the first submission we advance. What it really reduces to is this. In order to come within that Act, in order to come within something classically marine, which includes classically (c), you have to have some, at least, of the hallmarks of that type of insurance. And when you excise - here, on express request - all of those traditional indicia - freight, et cetera - what are you left with? You are left with in this case a pure third party liability cover, in relation to which the parties involved could never have been exposed to a maritime risk.

HAYNE J: Are you saying therefore that "marine adventure" as explained in 9(2) cannot be constituted by that which appears in paragraph (c) standing alone?

MR MULLANY: No, your Honour - could you put that to me again?

HAYNE J: Are you saying that "marine adventure" as explained in section 9(2) cannot be constituted by what appears in paragraph (c) standing alone?

MR MULLANY: I need to think about that, your Honour, if I may. Can I do that over lunch if that would be a - - -

GLEESON CJ: I had understood the argument that you have just finished putting to us to be that here, there was no question of "maritime perils" as a possibility.

MR MULLANY: That is right, your Honour. There is a link to that extent, yes. That is the answer. I am obliged to your Honour. That is the point.

HAYNE J: In that event, if you read "maritime perils" as broken at the comma in the second line, "the navigation of the sea" - if you read that as the first part and what follows afterwards, that is to say, as the explanation of "consequent on, or incidental to, the navigation of the sea", what work do you give to the words "either of the like kind, or which may be designated by the policy"?

MR MULLANY: There still has to be, in our submission, your Honour, some connection with the first part of that provision. You cannot have, we say, despite the last part of that provision, those things covered which do not arise as "consequent on, or incidental to, the navigation of the sea". It comes back to the maritime-ness of the situation. Can I answer your Honour Justice Hayne this way, by way of an example. If a club offered third party liability cover in respect of, let us say, the medical treatment by a doctor on board a vessel, that, we say, would not be covered by the Marine Insurance Act. The same would be true if they offered cover in relation to negligent legal advice provided on board the QE II. That is because the third party liability cover is divorced from the sea and all things maritime. It is divorced from the maritime elements. It would not be sufficiently classically marine in order to qualify.

HAYNE J: What I am trying to do is to root it in the words of the Act. I am not trying to destroy your argument, I am trying to relate your argument to the words of the Act. Is the argument that the words "any other perils, either of the like kind, or which may be designated by the policy" are words that are limited by "perils consequent on, or incidental to, the navigation of the sea"?

MR MULLANY: Yes. That forms a logical break, if it please your Honours.

GLEESON CJ: We will adjourn now and we will resume at 10 past 2.

MR MULLANY: I should say, your Honours, that, in order to ensure Mr Jackson is not disadvantaged, I will be very quick after lunch.

GLEESON CJ: Thank you.

AT 12.39 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.19 PM:

GLEESON CJ: Yes, Mr Mullany.

MR MULLANY: Your Honours, can I refer quickly to the issue we were discussing beforehand, the indicators of the seaness of the Act. At sections 45(2) and 53(2) by way of example there is reference to the word "port". In our respectful submission, you speak of ports in the context of seas rather than rivers. You speak of jetties and the like in the sphere of rivers. At sections 45(1), (3), 46, 48, 50, 51, there are references to "voyage" and "destinations"; terms which, when used together, we also say are indicative of a seaness or a sea quality attached to this Act. You do not speak of a voyage or a destination in a 17 foot runabout on a Cooks tour on the Swan River.

Can I return also to what your Honour Justice Hayne put to me earlier and proffer this example in relation to an incident which may be incidental to a sea voyage. Let it be supposed there was an ocean liner cruising around the Caribbean. Let us say it anchors some kilometres off St Kitts. Let us say the passengers on board were going to stay at a group of chalets some 10 miles inland up a river on that island. Let us say that the ship's captain arranged for transport from the anchored liner up the river. Five kilometres up that river there was an accident, or a fire. That would be a circumstance, we submit, where the provisions of section 8(1) would apply because that would be an example of an incident incidental to the sea voyage. It is for that reason also that the example that your Honour Justice McHugh put to me earlier, the Hawkesbury River example, would perhaps be caught there. There is a world of difference we say between a Swan River cruise up to the wine country of WA which leaves from the Barrack jetty, and the kind of venture that your Honour Justice McHugh put to me the former never goes towards or comes from the open ocean.

Your Honours, there is one additional authority we wish to refer to in relation to the liability issue, and that is the case of Bolivia. It is at tab 15 of our volume. The full title is Republic of Bolivia v Indemnity Mutual Marine Insurance Company Limited [1909] 1 KB 785. This case is of assistance because the geographical circumstances with which the court was concerned in that case, and the ones with which you are concerned in this case, were very similar. There were some obiter comments in this decision which may prove to be instructive.

The case turned on whether or not piracy, as defined in the particular policy, had been experienced. It did not turn strictly on the question of whether or not the policy in issue was marine or something else. But, interestingly, at page 802 the court characterised the policy in that case as "riverine". That is what we say we are dealing with here. This was a case involving the Amazon River and your Honours see at the top - - -

McHUGH J: But they even have ports in the Amazon River, at Manaus and at Belize. They call them ports. The big rubber plantations were there. The boats went up there, a thousand miles up.

MR MULLANY: That is all true, your Honour. But in this case you will see from the top of 802 where the particular accident occurred. This occurred on a tributary of a tributary of the Amazon.

KIRBY J: Which tab is this?

MR MULLANY: This is tab 15, your Honour. The relevant page is 802. The fourth line down on that top paragraph it is stated:

It is on the face of it, having regard to the place of departure and the place of destination, what I may call a "riverine" policy, upon goods which were to be carried, not upon the sea, but upon a river. Para, the port of departure, is at the mouth of the Amazon, and, though the estuary, where the river joins the sea some way further up, and the river itself for a long distance inland are of great width, the river being one of the largest in the world, those who accepted the insurance in this case must be taken to have known that this was a riverine policy, and that none of the transit was to be upon the high seas, the destination of the vessel being a place situated far inland upon a tributary of a tributary of the river.

We would classify the renewed policy with which we are dealing, in the same way. Your Honours, that is all I wish to say about the two primary matters.

Can I say this about the notice of contention, which is wrapped up with ground of appeal 3. My learned friends propose to deal with that primarily by way of a written note and, with your Honours' leave, we would propose to do likewise, and we can deal with those other matters that your Honour the Chief Justice raised earlier. If it please, your Honours.

GLEESON CJ: Thank you, Mr Mullany. Yes, Mr Jackson.

MR JACKSON: Thank you, your Honours. May I deal first with the issues arising under the Marine Insurance Act other than the question of "sea", and then come to the question of "sea".

Your Honours, one starts with section 7 of the Act, and may I take your Honours to that. Could I say, your Honours, that the particular aspects with which I am seeking to deal are two aspects that our learned friend's submission seem to make. I say that, with respect, with some hesitation, because it is not entirely clear the extent to which the arguments are in the end taken. One appears to be that one cannot have a policy, which is a marine policy, which indemnifies purely in respect of liability to a third party without covering hull or some other aspects of it. Another seems to be that a marine policy cannot cover things that occur by reason of the negligence of the crew. So may I deal with those aspects first in a sense.

Your Honours will see that section 7 of the Act says that:

A contract of marine insurance is a contract whereby -

et cetera. But your Honours will see in particular that it refers to an indemnity against "losses incident to marine adventure". That is the way it is put. One goes then to section 9(1) which says that:

every lawful marine adventure may be the subject of a contract of marine insurance.

Now, your Honours, if I could pause at that point. There are ships, vessels, boats of numerous kinds used to carry passengers or cargo or both, or to be working boats, fishing boats for example, or those which provide amusement to holiday makers - maybe by providing trips, parties, dive pontoons, swimming platforms, waterskiing or indeed parasailing. Your Honours, if one took for example the Barrier Reef. The waters inside the Barrier Reef are undoubtedly the sea; relatively calm, full of boats providing services to tourists. Again, one sees areas between, say, Fraser Island and the coastline of the mainland, Hervey Bay where whale watching goes on. Your Honours, each of those activities is something which, in our submission, could properly be regarded as being a marine adventure in ordinary language and, as your Honour Justice McHugh observed, policies can be time policies as well as voyage policies, and that is referred to in two provisions of the Act: One being section 29(c), the other being section 31. May I take your Honours to those for just a moment. Your Honours will see in section 29(c) that it says that:

What policy must specify . . .

(c) the voyage, or period of time, or both, as the case may be, covered by the insurance -

and then section 31(1) speaks of the two types of policy a little more fully.

Your Honours, could I also say your Honour the Chief Justice asked what is a ship. The broad proposition, with some qualifications no doubt, seems to be that it is something which is itself capable of free and ordered movement from one place to another on the waters. Your Honours, I say that with some hesitation. Could I give your Honours one reference initially, and that is to Polpen Shipping Company v Commercial Union Assurance Co Ltd [1943] 1 All ER 162. That was a case where a ship collided with a flying boat, and the question was whether the flying boat was a ship or a vessel within the meaning of the policy. Your Honours will see that after some discussion, Justice Atkinson said at page 163, about letter D, he referred to one naturally "turning to the Merchant Shipping Act to see what definitions are there given", and the ship included:

every description of vessel used in navigation not propelled by oars.

And the same idea comes through the whole of his judgment, particularly page 165 between letters F and H at the conclusion. Your Honours will have seen also in - my learned friend this morning referred to Norsworthy & Encel v State Government Insurance Commission which is behind tab 19 in the appellant's volume at paragraph 46. Justice Olsson said:

The word "ship" is not defined and is obviously to be construed according to its widest normal usage. According to its usual connotation the word "ship" is taken to be any vessel intended or used for navigating the water . . . It is clearly apt to encompass a 6.5 metre commercial charter vessel of the type here in contemplation.

Your Honour, a vessel about the same size I think as the one in question here. Could I just say one thing about the observation made by his Honour there, that the term "ship" is to be given a wide meaning. Your Honours will appreciate this case arises a little unusually in a sense in that the insurer is saying marine insurance is a wide concept. In the more ordinary course of events one would see the insured saying the terms of the Act, the policy, should be interpreted to give the insured the benefit of the policy so far as consistent with its terms. So one needs to bear that in mind on one hand.

The other feature, your Honours, is this: your Honour Justice Kirby referred to the perhaps imperial nature as it were of the Merchant Shipping Act. No doubt it had an imperial aspect in a sense, in the sense that many of the countries of the then British empire were utilising laws to much the same effect. But it was in a sense more international than imperial because what was sought to be attained was to improve and maintain the very substantial English market in marine insurance; something that has persisted for many years, particularly at about this time.

KIRBY J: Some support for that lies in the fact that they have persistent with some of these old formula from no doubt insurance policies about princes. On the other hand - - -

MR JACKSON: Still a few princes around, your Honour. The Sultan of - - -

KIRBY J: I cannot even think of one.

MR JACKSON: Your Honour, there are so many, that is why. The Persian Gulf area your Honours will find one or two around there.

CALLINAN J: An area, Mr Jackson, rife with piracy too.

MR JACKSON: Yes.

KIRBY J: They are sheiks, they are not real princes.

McHUGH J: Prince Sihanouk.

KIRBY J: The point I was making was that it gave a clue as to whether or not the objective was to not just look after British marine insurance, which is a legitimate focus of concern, but also British imperial marine interest, of which insurance was one aspect. That is the high seas. That is real seas, not pseudo seas, like a river.

MR JACKSON: Your Honour, could I say this: it is not just dealing, of course, with shipping going from Britain to other countries but also, of course, with shipping in Australia, around Australia.

KIRBY J: But the sort of ships that would be up and down creeks and rivers would not have been of great interest to the imperial authorities whereas those that ply on the high seas and come from time to time into ports, that is a different matter.

MR JACKSON: Your Honour, the imperial interests owned many of them. They plied up and down the - where they were, but many of them were owned by imperial interests. So, your Honour, it is very difficult to give a precise economic rationale to every aspect of it but the short fact, in our submission, was first of all that there was in the United Kingdom - I will not say a national monopoly, but a very significant portion of the business in marine insurance.

McHUGH J: But a lot of this has to do with history, has it not?

MR JACKSON: Yes.

McHUGH J: It has a lot to do with history in the sense that the common law courts had no jurisdiction outside the counties, and the Court of Admiralty did not have jurisdiction if something could be - in the counties, and part of the jurisdiction of the admiralty was on the rivers up to the bridges and where the great ships go. Those policies were enforceable, were they not, in the admiralty - - -

MR JACKSON: In admiralty, yes. Your Honour, in relation to the admiralty jurisdiction, leaving aside the question of the great ships and the bridges, which puts possible limitations on it, the basic thing to which there might have been limitations was that the admiralty jurisdiction went to where the tide, in effect, came to an end. My learned friends say, and I do not particularly want to make a pun about it, but my learned friends say, "What is the flavour of the sea?" I suppose you could smell it or taste it when you get to the end of it. But it is where, in effect, in the area in the adjacent - - -

KIRBY J: That will not work, because you remember the story of Magellan, dipping down into the - on the high sea - into the effluent of the Amazon, and he struck good water, clear water. That would still be the seas.

McHUGH J: He must have been luckier than I was. The last time I was on the Amazon it was not too clear I can tell you.

MR JACKSON: Your Honour, I was not suggesting it as a test. I was just saying if one is going to adopt phrases like, "What's the flavour?", well that is not a bad indication.

Your Honours, I was dealing with the question of "What is a ship?". Your Honours, it is discussed - and your Honour the Chief Justice referred particularly to things like drilling platforms and things of that kind, I have forgotten the exact reference. Your Honours will see it discussed in Hill -- being the editor - of O'May's "Marine Insurance" 1993 I think, your Honours, pages 228 to 231. It discusses there a number of cases dealing with when unusual things like that are or are not ships in effect. It depends principally I think on their ability to propel themselves.

Finally, if I could just give one reference. I am afraid I have not been able to have it copied for your Honours. In Davies and Dickey's "Shipping Law" in the second edition it is the first four or five pages. Your Honour will see it commences by saying at page 1:

In a maritime context, and thus for the ordinary purposes of maritime law, the word "ship" is a general term used to describe any seagoing vessel.

KIRBY J: Well, this was a vessel which could go onto the seas but, as you well know, it was not intended to. It was intended to be plying in a river.

MR JACKSON: Of course, your Honour. I accept that. We do not suggest that it was a vessel that was insured to go out past the mouth of the river. But, your Honour, having said that, we do not suggest there is anything particularly - - -

KIRBY J: It just sounds a little as though you were taking the premium for no risk.

MR JACKSON: Your Honour, with respect, we were covering - - -

KIRBY J: You were not covering the risk that they disclosed, which was parasailing on the Swan River.

MR JACKSON: But we were, your Honour. We cover the risk. Whether the case is one that falls within or without the Marine Insurance Act, the question is simply if it falls within the Marine Insurance Act then the breaches of the policy, conditions that applied, had the result they are not entitled to indemnity. If it is not, then we have the question arising out of the notice of contention.

GLEESON CJ: You do not deny that they were on cover, do you

MR JACKSON: No, your Honour, not at all. What we say is that if there had not been the breaches we would have brought the contract to an end.

KIRBY J: There was not much cover left, in your concept of the policy.

MR JACKSON: Your Honour, our cover was simply that of what we would say was a normal policy we had issued to them for a premium, not an exorbitant amount. We have the premium. We would have covered them, if the situation had been that they had not been in breach of the policy. If they had told us what it was, they would be covered.

KIRBY J: You are not running the argument because the policy contained the statement that this is governed by the Marine Insurance Act that that is determinative of the matter.

MR JACKSON: No. Your Honour, as I said before, it is a question which Act applied to it. So, your Honours, it is not a question about taking the money for nothing. We took the money, gave them the cover for the first year, gave them the cover for the second year but we had, as part of our - - -

KIRBY J: No claim in the first year, was there?

MR JACKSON: No.

KIRBY J: Only when the claim came that you raised this point.

MR JACKSON: That is how it normally happens, your Honour, with respect.

KIRBY J: That is true.

MR JACKSON: And if it were otherwise then one would see even more insurance companies having difficulties because there have to be some years you make money. Your Honours, I referred to a number of activities in which various boats can get into, various boats are engaged in. What we would submit is that each of those is a marine adventure in ordinary language but also, your Honours, each is an activity whereby losses may be incurred by such things as groundings or collisions with reefs or rocks, and in many, probably most cases, the grounding or collision is likely to have been caused by some negligence on the part of the crew. Caused, of course, in one sense by the presence of the reef or the rocks or the shoal, whatever one might call it but, your Honours, it would seem odd if cases of negligence were excluded from the cover of marine insurance. Indeed, your Honours, section 61(2) appears to make it clear that it is not. If your Honours see section 61(1) says:

unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against -

and then subsection (2)(a):

the insurer is not liable for any loss attributable to the wilful misconduct of the assured, but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew.

Now, your Honours, that seems to contemplate that negligence may perfectly well be covered by such a policy.

McHUGH J: What is the position under this Act of an "Inchmaree" clause that seeks to overcome that decision of the House of Lords in the "Inchmaree" that damage to the ship's machinery was not covered by the ordinary marine policy. Is that covered by this Act or is it outside it?

MR JACKSON: Your Honour, the "Inchmaree" clause, the exact terms of it elude me at the moment. Are they the ones that deal with the question whether damage to the machinery is caused by the ordinary operation of the ship?

McHUGH J: Yes, it does, or the sea itself I think.

MR JACKSON: Your Honour, that of course is in part dealt with I think by section 61(2)(c).

McHUGH J: Yes.

MR JACKSON: You see the opening words of section 61(2)(c). Also by that which - - -

McHUGH J: It says:

or for any injury to machinery not proximately caused by maritime perils.

MR JACKSON: I think that is the provision which would cover what your Honour was thinking about.

McHUGH J: Yes.

MR JACKSON: Also, your Honour, that really reflects, in a sense, rule 7 in the Second Schedule because rule 7 is speaking of:

The term "perils of the sea" refers only to fortuitous accidents or casualties of the seas. It dos not include the ordinary action of the winds and waves.

And of course, your Honours, rule 7, one would think, is saying you exclude things like losses caused by corrosion, rust, by the fact that the movement of the sea makes rivets and welds comes apart in due course if something is not done. But, your Honours, one of the things that can happen in a marine adventure is that liability to other persons can be incurred, and not just with respect for cargo. Crew, holiday makers, passengers can be drowned or otherwise killed or injured in things that take place and, of course, liabilities for pollution could also be incurred.

Could I note in passing that this case is one where a part of the vessel, that is the parachute and the harness with the injured person in it, while the vessel was being used for what we would submit was the marine adventure came into contact with the land, came into contact with the trees. Unusual, of course, but it involved part of the vessel, in our submission, coming in contact with the land. Your Honours, if one were dealing with a case where, say, waterskiing was being conducted on the Barrier Reef and the negligent control of the boat that was pulling the skier or skiers had the result that they ended up on a reef and were injured, it would be exactly the same thing, in our submission.

Now, your Honours will see also in - I think we have given your Honours a copy of Hill's edition of O'Mays "Marine Insurance Law and Policy" to which I adverted earlier. Your Honours, at pages 225 to 228 is a discussion of cases dealing with when something attached to the vessel, when it collides with something else or when something collides with it, when that is treated as part of the vessel and this would be, in our submission, such a case. But, your Honours, if I could go back to the terms of the Act. Our submission is that its terms are very much against the notion that either of two things occurs. One is it is against the notion that negligence on the part of the crew in navigation of the vessel is not capable of being the subject of marine insurance on the one hand, and the second feature: it is against the notion that liability for damage to third parties only cannot be insured against. I mean by that where that is the only indemnity provided for by the policy.

Your Honours, if one goes to section 9(1), your Honours will see that it says, as I submitted earlier, that:

every lawful marine adventure may be the subject of a contract of marine insurance.

Subsection (2) commences with the words, "In particular" and then gives three sets of circumstances in which there is a marine adventure. Now, your Honours, dealing with those three, your Honours will see that subsection 9(2)(a) performs two functions. One is that it specifies one of the circumstances in which there is a marine adventure. The second is that it defines what is insurable property. Insurable property, your Honours will see, "ship, goods or other movables".

The second thing, your Honours, is if one goes then to section 9(2)(b), it extends the range of persons having an insurable interest. Then, your Honours section 9(2)(c) says that there is a marine adventure where:

any liability to a third party may be incurred by the owner of or other person interested in or responsible for, insurable property, by reason of maritime perils.

"Insured property" is defined of course by section 9(2)(a). Now, your Honours, there is nothing, in our submission, in section 9 or section 9(2)(c) which requires that a maritime adventure, as defined in section 9(2)(c), cannot be insured unless some other maritime adventure, as defined in section 9 or elsewhere, is insured as well.

Indeed, your Honours, the words of section 9(1), in our submission, are against that because it says that "every lawful maritime adventure" - and 9(2)(c) defines one type - "may be the subject of marine insurance."

Now, your Honours will see that each of the paragraphs of section 9(2) uses the expression "maritime perils". That term, of course, is defined at the end of section 9(2) and, your Honours, what it means, in our submission, is the perils consequent on or incidental to the navigation of the sea. Now, your Honours, if one pauses at that point, without going on to the remainder of it, if one reads that part of the definition of "maritime perils" with the words of 9(2)(c), one of the circumstances in which a "liability", which is what 9(2)(c) speaks of, "to a third party may be incurred by the owner of, or other person interested in or responsible for" a ship or vessel, or boat, is where that ship et cetera or part of it runs into something through the negligence of the crew.

Your Honours, we would then say that the ambit of the opening words of the definition of "marine perils" is not restricted by the words following, commencing with "that is to say", and in that regard there are really two, I think, things that make that apparent. One is to be found in the concluding words of the provision, that is:

and any other perils, either of the like kind, or which may be designated by the policy.

No doubt, your Honours, and we would accept this, they do not allow one to go beyond the concept in the opening words of the definition, but they do indicate that one is not limited to the "pirates, rovers . . . princes" and so on which are enumerated in that provision. The second thing, your Honours, is that a sample form of policy which is in the Second Schedule to the Act, described as the "Lloyds S.G. Policy" which is referred to in section 36(1):

A policy may be in the form in the Second Schedule.

Your Honours, as is pointed out in a case to which I will take your Honours in just a moment, the collection of perils in that draft, both by addition and subtraction, differs from those that in the definition of "maritime perils." If I could take your Honours to that, that is The "Captain Panagos DP" [1985] 1 Lloyd's Rep. 625 and it is case No 1 in our volume of materials, and at page 631 Justice Mustill, in the left column about a quarter of the way down the page, he says:

Four points must be made on these sections. First, the list of risks set out in the definition of "maritime perils" resembles at first sight the substantive part of the old Lloyd's S.G. form, as set out in the First Schedule to the Act.

He goes on to say, about halfway through that paragraph:

The collection of perils in the concluding part of s. 3(2) -

which is the English provision -

is curious. It omits a number of risks which are set out in the S.G. form, but includes two which are not - namely "captures, seizures". I venture to doubt whether, even at the date when the Act was brought into force, any insurance was written in respect of this unusual collection of risks, and I am confident the draftsman cannot have intended by sub-s. 2 to create an exclusive definition of maritime perils. The words "that is to say" must, to my mind, be given the rather special meaning of - "which may include, by way of example".

Your Honours, at the remainder of that page and to the end of the paragraph at the top of the right column, he refers in effect to the fact that ultimately the opening words of the definition of "maritime perils", are the ultimately defining provision.

Your Honours, a further thing we would seek to say about this aspect of it is that if one does go simply to the events which are listed in the definition of "maritime perils" and takes the first of them, that is, "perils of the sea", we would submit, why is not navigating too close to the shore so that something attached to the vessel hits part of the shore not something which can be regarded as a peril of the sea?

Your Honours, our learned friends placed some reliance upon rule 7 - I mentioned it in passing earlier - your Honours will see it in the Second Schedule at the top of page 33 of the pamphlet copy:

7. The term "perils of the sea" refers only to fortuitous accidents or casualties of the seas. It does not include the ordinary action of the winds and waves.

Now, your Honours, what we would submit about is that excludes the consequences of things like corrosion and so on and the effect of movements and natural things brought about by the ordinary action of the wind and waves, ordinarily of course to some lack of maintenance.

In our submission, a liability incurred by reason of, say, negligent navigation is a liability which is incurred consequent on or incidental to the navigation of the seas. Now, your Honours, we would submit, as I did a moment ago, that section 9 contemplates there may be policies of marine insurance directed to liability only. That is supported, in our submission, by section 80 which refers to circumstances:

Where the assured has effected an insurance in express terms against any liability to a third party -

and then it goes on to deal with the measure of indemnity. There is also, your Honours, in section 91, the reference to cases of "mutual insurance" and your Honours will see in section 91(4):

the provisions of this Act apply to a mutual insurance.

Mutual insurance is brought about where various, for example, shipowners each insure each other. One puts into a fund and the fund reimburses for loss. Your Honours, the concept is dealt with by Lord Brandon in Firma C-Trade SA v Newcastle Protection and Indemnity Association [1991] 2 AC 1 at page 23, and that is behind tab 3 in our book of cases. The passage is, I think, actually extracted by the Full Court in this case. It is the passage referred to commencing in the paragraph between B and C on page 23.

CALLINAN J: Mr Jackson, could I ask you a question about section 33. Could you explain to me how this policy could satisfy what appear to be the requirements of that section. Perhaps I am wrong about that. It rather suggests insurance of a hull or of an object, does it not? It does not really lend itself readily, I would have thought, to third party liability.

MR JACKSON: It says "valued or unvalued", your Honour.

CALLINAN J: Yes, but then it says in - what is an unvalued policy, then? The policy in question here is not within 33(2), is it?

MR JACKSON: Your Honour, if one looks at page 375, it speaks of a third party liability cover to $1 million and if one bears in mind that the Act contemplates, leaving aside whether it may have some other aspects, it contemplates a third party liability may be subject of it indemnity under the policy, then that would, in our submission, be either a valued policy, valuing it at $1 million - I am sorry, I should interpolate because in any event, a valued policy, your Honour would see under 33(2), would be conclusive of the insurable value, whether the loss be total or partial. I am sorry, your Honour, I am putting it badly. The value fixed by the policy under 33(3) does not seem to be the amount one would necessarily get. It seems to be it would be the maximum one would get.

CALLINAN J: The language does not lend itself readily to the sort of policy that.....does it? If you look at subsection (4), for example, the words "constructive total loss".

MR JACKSON: Your Honour, one would not have to determine whether there was constructive total loss in a case like this.

CALLINAN J: No, I understand that, but the language - the policy to be policy under the Act must satisfy section 33, must it not, among other things?

MR JACKSON: Yes, your Honour. Your Honour, it either would by saying a million or if a million is not saying the value of it, then it is unvalued.

McHUGH J: But does not section 34 tend to tell against your argument, Mr Jackson, because it defines what is an unvalued policy?

MR JACKSON: Yes, your Honour, it:

does not specify the value of the subject-matter insured, but . . . leaves the insurable value to be subsequently ascertained - - -

HAYNE J: The subject matter of the insurance being what, indemnity?

MR JACKSON: Being indemnity, your Honour, yes, being the amount of the indemnity required.

CALLINAN J: Again, it does not strike me immediately as being totally appropriate language, I must say.

MR JACKSON: Your Honour, could I just say that if one goes to section 80, one sees that it is speaking of effecting "an insurance in express terms against any liability to a third party" and it defines then the measure of indemnity in respect of the liability to the third party and then provides for the way in which that is to be worked out if it cannot be worked - this is in section 81 - if it cannot otherwise be worked out.

Now, your Honours, of course, much of the Act is dealing with the older forms, as it were, or the earlier forms of insurance such as insurance for the hull and other parts of the vessel and cargo.

CALLINAN J: Would your opponent not say, however, that section 80 operates in relation to insurance additional to insurance which must first exist in relation to, say, a hull, and that sections 33 and 34 provide an indication - I do not put it any higher than that - that perhaps there needs to be something of that kind first before - - -

MR JACKSON: I am sure they will now, your Honour, and, in our - - -

CALLINAN J: It just emphasises, I think, the importance of looking at all of the Act, Mr Jackson, which we really have not done so - - -

MR JACKSON: Well, your Honour, could I say in relation to that then, if one looks at really, in a sense, the core provisions of the Act, those start with those in Part II Division 1 which are sections 7 to 9, and all I want to say about those is really a couple of things. One is that your Honours have seen in the opening words of 9(1) that "every lawful marine adventure may be the subject of" it and then in section 9(2) there is not really anything in the language of the provisions which requires that, for example, (c) is necessarily dependent upon (a). So that it is apparently free-standing and the terms of the definition of "maritime perils" is apt to include, in our submission, liabilities of the kind referred to in (2)(c). There is not anything in that provision - there is nothing in the provisions really to say that you have to have these things tied together.

Now, your Honours, if one goes then to Division 2 which sets out the insurable interest and your Honours will see in section 11(2), for example:

In particular, a person is interested in a marine adventure where he stands in any legal or equitable relation to the adventure, or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof.

Now, your Honours, that is dealing principally with cargo, perhaps the last concluding words but - dealing with insurable property, I am sorry, but what it does indicate, in our submission, is that one could have insurance in respect of, for example, that liability separately from anything else. It emphasises what is in (2)(c).

CALLINAN J: The Act seems to be structured in such a way that there a number of cumulative provisions and requirements which have to be satisfied before you have a policy of marine insurance.

MR JACKSON: Well, your Honour, with respect, yes and no. There are a number of requirements, yes. Whether they are cumulative is another question, really, because what one has are the general propositions set down, for example, in section 9 and then other provisions which apply to various aspects of it and deal with the fact that much of marine insurance was traditionally related to ships and goods. You see, for example - - -

CALLINAN J: Section 22 is talking about "boilers and coals" and "seamen's wages", and other - - -

MR JACKSON: That is so and also the preceding provisions around section 14 to 21.

Your Honours, if one goes then to the terms of the policies, one sees in sections 28 and following that it really deals with a number of aspects but there is nothing particular in section 33 and section 34, if one selects them, that are especially antithetical to the notion that there can be a separate insurance in respect of liability. Your Honours, they are consistent, of course, with insurance for the other things but they are not antithetical to the other notions.

Your Honours, we would accept entirely one must look at the whole of the Act, but it is a question of what is there when one goes.

McHUGH J: But section 73 and 74(b) also tend to indicate that one is dealing with insurance in respect of things, at least primarily:

73(1) The sum which the assured can recover in respect of a loss . . . in the case of an unvalued policy to the full extent of the insurable value - - -

MR JACKSON: Then, your Honour, one might say, with respect, now read on, as it were, because then one gets, of course, once you get past the partial loss of the ship and partial loss of freight, goods and so on, and in 78, Apportionment of valuation",79, "contribution" and then 80 "Liabilities to third parties". What it is dealing with is each of the possible areas of cover is dealt with separately. So that, your Honours, there is no particular reason why one would treat section 80 as being in some way a subsidiary provision, it just reflects one of the things in section 9(2), namely 9(2)(c).

GLEESON CJ: Now, is it common ground, Mr Jackson, that this was not a policy to which the Marine Insurance Act applied unless the locality in which it was contemplated by the parties to the contract that the vessel would operate was part of the sea?

MR JACKSON: Your Honour, we accept that. Your Honour, I was going to come on to say that - I appreciate there was some discussion this morning of section 8. Your Honour, we have not relied on section 8 in the past and I do not seek to do so now, with respect.

Your Honours, that I think really takes me to what we would seek to say about the Act itself, subject to the question of the sea and we would say in relation to that the place where the accident happened was part of the estuary of the river, it was affected by tidal movements. Your Honours will see that referred to by Justice Kennedy in volume 3, paragraph 106 of his reasons at page 552. There was evidence in the case, your Honours, and in fact a short video which showed the tidal movements at various times of the year going up the river quite some distance past the place where this occurred. Your Honours, as his Honour said:

The waters of the Swan River around South Perth, Heirisson Island and Burswood, being affected by tidal movements of the ocean, are properly described as estuarine. The river has a permanent opening to the ocean and is tidal as far upstream as Woodbridge, near Guildford.

Now, your Honours, one of the features which his Honour noted in paragraph 109 at page 553 at the start of his Honour's reasons was that:

the High Court of Admiralty had jurisdiction with respect to marine insurance.

He refers to that also at paragraph 72 of his reasons at page 537 where your Honours will see that he said in paragraph 72 that:

Marine underwriting has a long history in the United Kingdom, going back to the Middle Ages. For centuries it was the only form of insurance available.

He refers to and sets out the quotation from Holdsworth:

Insurance, as was pointed out in a sixteenth-century petition to the Council, `is not rounded upon the lawes of the realme, but [is] rater a civill and maritime cause, to be determined and discided by civilians, or els in the highe courte of the Amiraltye'.

Your Honours, the Admiralty Court had jurisdiction in rivers within the ebb and the flow of the tide. We have set out the history of it in our written submissions and your Honours will see that dealt with in paragraphs 53 going on to, I think, 56.

Your Honours will see that there is some discussion of the issue by Justice Kennedy in the paragraphs of his reasons which go on for some distance but, in particular, your Honours, going back to page 553, paragraph 109, where his Honour refers to R v Carr and also the reference to the The "Tolten". We would submit that those decisions are decisions which support the notion that the jurisdiction of the Admiralty was jurisdiction which went with the ebb and flow of the tide, even if it were in a river.

So too, Your Honours, do the United States decisions. Could I take your Honours very briefly to three of them, including one dealing directly with the case of marine insurance. The first is Baker v Hoag [1853] 7 NY Cas, 555, New York Court of Appeals, it is behind tab 14 in our volume of materials and at page 561 their Honours said in the last paragraph on the page:

It has repeatedly been held that admiralty jurisdiction embraces rivers navigable from the sea within the ebb and flow of the tide, although the locality may be within the body of a county -

a bit like the case of R v Cunningham to which my learned friend referred, the Bristol Channel -

and when the locality is within the ebb and flow of the tide and within the body of a county, a court of common law has a concurrent jurisdiction -

various references given.

Your Honours, if I could move from that to the decision of the, I think, Texas Court of Appeals in Mannheim Insurance Co v Charles Clarke & Co which is behind tab 16, (1913) 157 SW 291 and at page 295 in the left column their Honours say about a quarter of the way down the page, speaking of the Gulf of Mexico:

We are clearly of the opinion that he terms are sufficiently broad to embrace at least all bays, inlets, and streams upon the gulf coast to the extent to which they are subject to the ebb and flow of the tide.

Your Honours will see at the start of the next paragraph:

The decision from which we have just quoted is not without authority to support it. We refer to Waring v Clark, 46 U.S. (5 How.) 441, 12 L. Ed. 326, where it is said that the "sea" as defined by the admiralty courts means, not only the "high seas," but the arms of the sea, waters flowing from it into ports and havens, and as high up rivers as the tide ebbs and flows. If such be the sea certainly gulf waters may be construed -

et cetera. Your Honours, that is, as I said, a case dealing with marine insurance and a similar issue directly. Waring v Clark the decision of the United States Supreme Court that is referred to there your Honours will see behind tab 13 of the same volume[1847] USSC 24; , 46 US 441. Your Honours, I think the copy your Honours will have is one having two columns and I wanted to refer your Honours to the bottom of page 460, the right-hand column. Your Honours will see about 20 lines from the bottom of the page a reference to Lord Hale:

Lord Hale differed from Lord Coke. the former, in defining what the sea is, says, "that it is either that which lies within the body of the county or without; that arm or branch of the sea which lies within the fauces terrae is, or at least may be, within the body of a county; that part which lies not within the body of a county is called the main sea."

At the bottom of the page, the last few lines:

But there is no difficulty in making such a rule, if the construction of it, by the admiralty courts, is adopted. In that construction, it meant that not only high sea -

which, in a sense, is our learned friends' argument, although I think I am overstating it a little -

but arms of the sea, waters flowing from it into ports and havens, and as high upon rivers as the tide ebbs and flows. We think in the controversy between the courts of admiralty and common law -

because your Honours will appreciate where one put the boundary, in a sense, meant the boundary of jurisdiction and some centuries ago, seeing things were not really very different from the way they are sometimes perceived to be now, namely that courts do not often decide they do not have jurisdiction. But if I could go back to this, your Honours:

We think in the controversy between the courts of admiralty and common law, upon the subject of jurisdiction, that the former have the best of the argument -

and then your Honours will see, if I could go a little further down the page, about two-thirds of the way down, their Honours say:

In the case of The Streamboat Orleans v Phabus -

I think -

[1837] USSC 11; (11 Peters, 175), the jurisdiction of the court was denied, on the ground that the boat was not employed or intended to be employed in navigation and trade on the sea, or on tide waters.

Your Honours, that is the basis of the decision of the Court.

Your Honours, could we say also that the observations made in Hale were made in the sense of looking at the question of what today we would call, perhaps instructed by the Seas and Submerged Lands Act Case, sovereignty in relation to the seabed. Your Honours will see that for the purpose of sovereignty, if I could call it that, the view taken was that the sea included areas such as that presently in question. Could I invite your Honours to look at a reference which we have given of Hall, "On the Seashore", 2^nd edition 1875. I wanted to start at page 2. Your Honours will see in the second new paragraph on page 2 a reference to "dominion and ownership over the British seas" defined on the preceding page and saying that:

is not confined to the mere usufruct of the water, and the maritime jurisdiction, but it includes the very fundum or soil at the bottom of the sea.

Then on the next page it says:

This dominion not only extends over the open seas, but also over all creeks, arms of the sea, havens, ports, and tide-rivers, as far as the reach of the tide, around the coasts of the kingdom. All waters, in short, which communicate with the sea, and are within the flux and reflux of its tides, are part and parcel of the sea itself, and subject, in all respects, to the like ownership.

McHUGH J: This view was rejected out of hand in Sea and Submerged Land - - -

MR JACKSON: The ownership part was, your Honour, but what was rejected was the ownership in the contest between the States and the Commonwealth. There was no doubt though that rights did exist in relation to it, the rights being those of, on the one hand, sovereignty conveying not only a right to make laws about it but also a right to decide what should happen to it and grant rights in relation to it, not a right of ownership held. That is really the only thing that was held not to exist. In Australia of course, the effect of that case was that it finished at the low-water mark but it does not mean that the proposition, generally speaking, about what is the sea is erroneous.

Could we refer also to Hale, "De Jure Maris", which is our volume of materials behind the last tab. At page 376 in chapter IV, your Honours will see the second paragraph:

We come now to consider the sea and its arms: and first, concerning the sea itself.

The sea is either is either that which lies within the body of a county or without . . .

The part of the sea which lies not within the body of a county, is called the main sea or ocean.

The simple point I seek to make about it is that whilst of course the main sea is outside the body of a county, it does not follow that what is inside is not part of the sea.

Could we refer also and finally in this regard to the decision of Gann v Free Fishers of Whitstable (1865) XI HLC 191. Your Honours will not, I think, have copies of this but may I give them to your Honours now. I am sorry, I do not immediately have the English Reports reference to it. The page to which I wish to refer is numbered 1312 at the bottom. Your Honours will see at that page in the first new paragraph on the page, Lord Westbury, whose judgment commences on the preceding page, says in the fourth line:

The bed of all navigable rivers where the tide flows and reflows, and of all estuaries or arms of the sea, is by law vested in the Crown.

He then discusses through the remainder of, in a sense, that page the fact that these were areas in relation to which the subject did not have rights unless they were granted by the Crown if they could be so granted. Perhaps that case does not take the matter very far but indicates the underlying assumption.

In Australia the Navigation Act and the Admiralty Act, both Acts having a relationship with the general subject matter, to put it like that, defines "seas" as including tidal waters. There is the Navigation Act, section 6, which says that:

sea includes any waters within the ebb and flow of the tide.

Your Honours will see that behind our tab 23 and to the same effect is the provision of the Admiralty Act 1888 , section 3.

GLEESON CJ: What is the difference between an estuary and an arm of the sea?

MR JACKSON: It can be a question of degree, but an arm of the sea, one would expect it to be, in effect, an inlet without there necessarily being any river flowing into it. An estuary is part of the river which is then flowing into something like a harbour or basin. Commonly sometimes these estuaries, for example, such as that of the Nile, spread into a number of rivers.

GLEESON CJ: Is an estuary a point of conjunction between a river and the sea? Maybe, I mean.

MR JACKSON: Maybe, your Honour. It would no doubt include the point of conjunction but often the point at which the river meets the sea is sometimes moving.

GLEESON CJ: I should have said "place" rather than "point".

MR JACKSON: It is a place but it often goes back some distance. The estuary can be used in the narrower sense or in the rather larger sense that I think was probably used by the Full Court in this case to mean the area between where the river meets the ocean, as it were, or the harbour on the one hand, and going back to the point where it ceases to be tidal. I was simply going to say this, that sometimes of course, depending on the particular river - and I think the Murray is one example - the actual mouth from time to time can move, silt up, change and so on. If one took, for example, the Noosa holiday resort, until it was stabilised, for many years moved in various places but was still part of the same estuary.

Your Honours, the point we simply wanted to make about those definitions is that of course one does not apply definitions from one Act to another, but what they do do is reflect in relation to a general subject matter an adoption of a notion which we would submit is the notion which does reflect the concept of the sea.

Could I come to the tests which were suggested by our learned friends as indicating what might or might not be the sea. I appreciate of course that the notion of bridges is not relied on. Where the bridge is, it would have some fairly odd elements to it. One would think that when the Sydney Harbour Bridge was built, the Westgate Bridge in Melbourne and the Gateway Bridge in Brisbane, that maritime insurance could not operate beyond those bridges, even if the bridges had been built at a sufficient height to allow the biggest ships to go through them. That would seem a rather curious result in respect of three cities, each of which had a significant maritime aspect and, in the case of the Gateway Bridge in Brisbane, would have been built over what one might regard as the estuary of the river.

CALLINAN J: Quite big ships come up beyond - - -

MR JACKSON: Indeed, your Honour, yes. It would be a very curious thing if one had a situation where, as soon as a bridge was built downstream to accommodate traffic and shipping, it had a significant effect upon whether there could or could not be marine insurance inland of it.

Your Honours, the second thing is the suggestion that the issue is one of the great ships. Ships get bigger and ships get smaller. What type of ship is it to be - the giant tankers, many of which are probably in mothballs at the moment. Is it to be the new "Queen Mary" under construction? Is it to be some very large tourist ship or some very large cargo ship? Does it depend on how deep the waters are, how big the particular harbour is? It is a very difficult criterion.

The third thing is the size of the water. Presumably some harbours in Australia qualify, some would not. Some that would be so obviously, one would think, part of the sea are ones that would fail because, like joining the police, they are not tall enough, not big enough. None of those criterions, in our submission, is a very satisfactory one. Our submission is that the provisions of the Admiralty Act and Navigation Act reflect the general understanding and this Act should be construed harmoniously, in a sense, with those. Your Honours, that is what we seek to say in relation to the question of the sea.

May I come then to the question of the notice of contention. Your Honours will have seen from our written submissions - and I am referring to paragraph 2 - that if the appellant were to succeed, a question arises as to what should happen to the case. That would have the consequence that the case would be one to which the Insurance Contracts Act would apply and we would then seek to have the issue not decided by the Full Court but decided by the Court. Could I say in relation to it that your Honours will see the issue referred to in volume 3 at page 557, paragraph 123, where the Full Court expressed a tentative view in our favour and said that there had not been enough findings of fact.

We have set out in our written submissions in paragraphs 7 through to 23 the additional basic facts and then in our written submissions in paragraphs 66 through to the end of them the submissions we make in relation to that. Your Honours will see in particular, if I could go to paragraph 80, that our contention is that the issue should be resolved in our favour but if the Court is of the view that further findings are required, then we would submit that the course we refer to in paragraph 4 should be followed.

Recognising two things, (a) a question of time; and (b) a question that the written submissions in a sense contain our submissions in two parts, we have sought to put them a little more in focus, if I can put it that way, in a document which your Honours should have. It is headed "Submissions - Notice of Contention".

GLEESON CJ: Yes, we have that.

MR JACKSON: That sets out the submissions we would seek to make in relation to it and I had not proposed to add to that.

GLEESON CJ: I think Mr Mullany told us that you were going to deal with this in writing and he was going to deal with it in writing.

MR JACKSON: We are content with that. Those are our submissions.

GLEESON CJ: Thank you, Mr Jackson. Yes, Mr Mullany.

MR MULLANY: Your Honours, five brief points in reply. Firstly on the estuary point, the Full Court dealt with that issue at paragraph 106 at 552 of volume 3 and endorsed the definition that your Honour the Chief Justice put to my learned friend. In relation to the question of great ships, can I do two things. Can I give your Honours another reference, the first to the decision Union Steamship Company of New Zealand Limited v Ferguson [1969] HCA 73; (1967) 119 CLR 191. The relevant passage is at page 206, particularly in the judgment of the Chief Justice endorsing that test.

Secondly, can we say that all of the vessels referred to by my learned friend we would respectfully submit would come within that definition. Thirdly, my learned friend said that the vessel came into contact with Heirisson Island. Your Honours, we would submit otherwise. What came in contact with Heirisson Island was Mrs Morrell and the towrope, if anything at all.

In relation to the liability point, can I say this. Our position is really encapsulated by what his Honour Justice Meagher said in Hansen's Case. We do say what my learned friend suspected we said. We say also that the construction of the Act and the sections referred to by your Honours Justice Callinan and Justice McHugh lend support to what his Honour said at paragraph 11 which I will not repeat. Those classical elements of the policy being absent, the third party liability risk cover falls outside the regime.

It is really at the end of the day a question of degree. Can I make this observation about section 91. It refers to "marine losses". That, in our respectful submission, has to be read pursuant to sections 7 to 10 of the Act. The same is true, we say, of section 80 of the Act which is to be read by reference to what occurred in the principal part, Division 1, marine insurance, starting from section 7. We say that the confinement of the cover took the characterisation of the policy so far away from the traditional marine policy that it is incapable of falling within that particular provision, section 7.

The last thing I want to say relates to the issue of the negligence and the question of whether or not that can be a peril of the sea. I make two observations about that. The question that my learned friends postulate at 29 of their outline of submissions really begs the question, with respect. My learned friends say that:

Negligent navigation is a peril "consequent on, or incidental to, the navigation of the sea".

It is the last part of that of course which ultimately bites. What is the sea? Can one say that in these particular circumstances one is caught by that.

There is one authority on that point that I should refer your Honours to and it is the Great China Case which is referred to at footnote 10 of our written submissions: Great China Metal Industries Co Limited v Malaysian International Shipping Corporation, Berhad [1998] HCA 65; (1998) 196 CLR 161. It is the judgment of your Honour Justice McHugh at 191 that we point to. Your Honour said this at about three or four lines down. Your Honours do not have a copy of that case. We will endeavour to provide it if you have not. Your Honour says about five lines down:

However, loss or damage caused by a collision which is the result of negligence of the master was not caused by a peril of the sea.

There is a contrary authority footnoted. We do say that. Those are our submissions.

KIRBY J: I know you are going to deal with it in writing, but in one sentence what is your response to the notice of contention?

MR MULLANY: We say a couple of things about it. If I can give it in a two-part response, your Honour. We resist it on two bases, one on a procedural basis and, secondly, one on a substantive basis. We say that her Honour did deal with it at the end of the day and that, contrary to the findings of the Full Court in the last paragraph of the judgment, there were sufficient findings of fact. My learned friends, in a nutshell, rely on four principal material changes within which 11 subdivisions can be found. Each one of those subdivisions was dealt with in evidence by Mr Fullerton and, for reasons we will develop, he was found to be unworthy of credit on those issues. My learned friends take a different view. We say her Honour dealt with it and dealt with it sufficiently.

KIRBY J: It is very hard for us to sort that out if the Full Court has impressed itself on the matter.

MR MULLANY: If we are wrong about that, then the matter would have to go back for the reasons that the Full Court said. My learned friends and we disagree only to this extent on that issue. We would send it all the way back. There is no point, we would say respectfully, in ordering a pit stop at the Full Court level when their Honours have already made the comments they have made in the last paragraph. May it please your Honours.

GLEESON CJ: We will reserve our decision in this matter and we will adjourn for a few minutes to reconstitute.

AT 3.40 PM THE MATTER WAS ADJOURNED