Wallaby Grip Limited v QBE Insurance (Australia) Limited & Anor [2009] HCATrans 249 (2 October 2009)

Last Updated: 15 October 2009

[2009] HCATrans 249

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S95 of 2009

B e t w e e n -

WALLABY GRIP LIMITED

Applicant

and

QBE INSURANCE (AUSTRALIA) LIMITED

First Respondent

IRENE STEWART (AS LEGAL PERSONAL REPRESENTATIVE OF THE ESTATE OF THE LATE ANGUS CLUGSTON STEWART)

Second Respondent

Office of the Registry
Sydney No S96 of 2009

B e t w e e n -

IRENE STEWART (AS LEGAL PERSONAL REPRESENTATIVE OF THE ESTATE OF THE LATE ANGUS STEWART)

Applicant

and

QBE INSURANCE (AUSTRALIA) LIMITED

First Respondent

WALLABY GRIP LIMITED

Second Respondent

Applications for special leave to appeal

GUMMOW J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 2 OCTOBER 2009, AT 9.34 AM

Copyright in the High Court of Australia

__________________

MR B.W. WALKER, SC: May it please the Court, I appear with my learned friend, MR D.J. RUSSELL, SC, for the applicant in the first of those matters. (instructed by Middletons Lawyers)

MR A.J. SULLIVAN, QC: May it please the Court, I appear with my learned friend, MR G.F. LITTLE, SC, for the first respondent in both matters. (instructed by Moray and Agnew Solicitors)

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR D.R.J. TOOMEY, for the second respondent in S95 and for the applicant in S96. (instructed by Turner Freeman)

GUMMOW J: Now, for these present purposes you are an ally of Mr Walker, are you not?

MR JACKSON: Yes, for these present purposes, your Honour.

GUMMOW J: We would like to hear first from you, Mr Sullivan.

MR SULLIVAN: Thank you, your Honour. Your Honours, in our respectful submission, the decision below is clearly correct. In our respectful submission, the mandatory statutory form was one which was required, on payment of penalty, to be the form of policy and was the only evidence of the policy. That prescribed a maximum amount of cover of $40,000. It was up, in our respectful submission – we will take your Honours through to the statutory scheme – for the applicants to show if there was a variation to that statutory amount and they did not do so. In our respectful submission, it is axiomatic that someone seeking to prove a variation of the policy has the onus of so proving.

Alternatively, again for the reasons found by the Court of Appeal, we say that even if one disregarded – which we say you cannot do – the statutory scheme, nevertheless the general law or the outcome would be the same. Now, your Honours, may I just - - -

CRENNAN J: Well, the defence was a positive one, was it not, that the liability was admitted but then it was pleaded that the cover was limited to the sum of $40,000? Is that not the way the claim of the defence worked?

MR SULLIVAN: The pleading was that – there was a non-admission that it exceeded $40,000. The actual pleading - - -

GUMMOW J: We have the pleadings now.

MR SULLIVAN: Thank you, your Honour. It is summarised, in answer to your Honour Justice Crennan, at page 58 of the joint application book and in paragraph 66 of the judgment of Acting Justice Gyles. Your Honour will see that in paragraph 6(d) there was a notation made in the pleading that the cover was $40,000 inclusive of costs, the minimum required level was $40,000 and a non-admission that Pilkington, being the insurer, was entitled to indemnity pursuant to an amount greater than that.

Now, your Honours, I think we have given to the Court a bundle of materials, and may I take your Honours very briefly to that material just to indicate why we submit that the judgment of the Court of Appeal below is clearly correct. The first document I take your Honours to is at tab 2 of the materials handed up, it is the Worker’s Compensation Act in force. Now, the copy we have handed up to your Honours has a reference to $100,000 in it, in section 18(1), but it is common ground at the relevant time – we can hand up the materials – the amount was $40,000. If I may just take your Honours to that first. Your Honours will see in section 18(1) that:

Subject to subsection (1A) –

which is presently irrelevant because that deals with self-insurance – the obligation of the employer was to obtain –

a policy of insurance or indemnity, conforming to this section, for the full amount of his liability under this Act to all workers employed by him and for an amount of at least –

if I may interpolate, $40,000, at the relevant time, around $60,000 –

in respect of his liability independently of this Act for any injury to any such worker, and shall be guilty of an offence against this Act if –

(a) he has not so obtained such a policy –

Section 18(3)(a), which is on the next page of the extract, makes what was called by Chief Justice Spigelman in the case Orica v CGU [2003] NSWCA 331; 59 NSWLR 14 a mandatory statutory form of policy. Subsection (3)(a) said:

Every policy of insurance or indemnity shall, in so far as it relates to any liability referred to in subsection (1),contain only such provisions as are prescribed, but may contain such other provisions relating to any other liability at common law or under any Act or Commonwealth Act as are appropriate to any particular case.

So that in the principal legislation is the prescription. One then needs to go to the regulation to see how that prescription was carried to effect. Your Honours will see that behind tab 3 and, in particular, at regulation 1(a) it says there that:

Every policy of insurance or indemnity shall contain only such provisions relating thereto as are contained in the form of policy in Appendix 1 hereto.

Regulation 1(b) creates a penalty for failure to have a policy containing only such provisions. The appendix referred to is behind tab 4. It recounts the recital and states:

WHEREAS by virtue of the Workers’ Compensation Act 1926, as amended (hereinafter called the Act), it is provided that every employer shall obtain from an Insurer licensed under the Act to carry on business in the State a policy of insurance or indemnity for the full amount of his liability under the Act to all workers employed by him and for an amount of at least –

if I may again interpolate, $40,000, because this is a later copy –

in respect of his liability –

That is the recital so-called, if one views this, as appears to be the proper way to view it, as a contract – construed as a contract. Then the operative clause states as follows:

NOW THIS POLICY WITNESSETH that in consideration of the payment by the Employer to the Insurer of the above-mentioned Premium –

then it mentions time limits –

the Employer shall be liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of such Employer or to pay any other amount not exceeding –

again those words now become $40,000 –

in respect of his liability independently of the Act for any injury to any such person.

So it is a $40,000 not exceeding, and it is in the operative clause of the policy, nowhere else. The statutory form of policy provides for a way to vary the policy but it is expressed to be a particular way of variation. That is in special condition 14 of the policy, which is contained at page 635 of the extract we have handed your Honours, and that says:

No condition or provision of this Policy shall be waived or altered unless the consent of the Insurer be previously obtained and signified by endorsement hereon –

et cetera. Now, in our respectful submission, in that statutory context and where the actual terms of the actual policy are not present and, given the requirement by law to have a policy in place in that form, the situation is that the policy is or would be presumed to be in accordance with the statutory policy which contains an operative provision that would be not to exceed $40,000.

It is open, and indeed obviously in some cases it did happen, for employers to seek to increase the amount of insurance, but where they do so, of course, that constitutes a variation, in our respectful submission, of the terms of the policy, one which is required to be evidenced by endorsement, but conformably with the ordinary principles of litigation, of he who asserts must prove and the onus of proof. The onus of proving a variation to the statutory form, in our respectful submission, is upon that person who asserts it. In this case, in our respectful submission, that was the applicants. That is the approach which was adopted and, in our respectful submission, correctly adopted by the Court of Appeal.

GUMMOW J: By the majority of the Court of Appeal.

MR SULLIVAN: Yes, by the majority of the Court of Appeal, your Honour. Indeed, it is succinctly summarised in the judgment of Justice Ipp in the joint application book at pages 34 to 35 in paragraphs 2 to 7.

GUMMOW J: Well, of course, you rely on that, but what do you say about Justice Brereton’s decision?

MR SULLIVAN: Well, we say two things, with great respect, about Justice Brereton’s decision. First, with great respect, his Honour seems to ignore or overlook the statutory framework. One has to construe this policy in respect of the statutory framework. His Honour appears to assume – and this comes particularly, your Honours, in our respectful submission, from paragraph 68 on page 59 of the application book. His Honour says:

As Ipp JA observes, the only evidence that bore upon the amount of cover under the policy was that which gave rise to an inference that the cover was at least $40,000.

In our respectful submission, that is an error. The inference is that the policy amount was for an amount not exceeding, because that is the wording of clause 1, the operative clause, of the statutory policy. Indeed, to the extent to which the recital says it can be an amount of at least that amount, of course, a recital as a matter of pure construction of contract cannot cut down or vary or alter the clear words of an operative provision. The operative provision in this contract said, as we have said, that it was to be an amount not exceeding $40,000.

Contrary, therefore, to what his Honour said, in our respectful submission, the statutory policy does prove, even if we or the insurer bore the onus of proving what the amount of cover was, and we would respectfully disagree with that assumption, but even if we did bear that onus, that was discharged by the reference to the statutory policy which

contained a provision that the amount was not exceeding $40,000. It is not by way of a limitation or an exclusion clause; rather, it is by way of an express statement of the extent of cover in the operative clause where one traditionally finds that cover.

So, in our respectful submission, his Honour proceeded upon a false premise there. That really is the attack we have on his Honour’s judgment, with great respect. He appears, with great respect, also in paragraph 58 at page 55 of the application book to make the point that it is not invariably the case that policies of indemnity have a limit of cover, and we agree. But what we do say here is when you look at this policy in its context, and that is what is important, the statutory context, and where it has to be unless otherwise varied in a prescribed form, then the starting point, indeed the primary point to start at, is to look at the terms of the statutory policy and to see whether there is any evidence at all where that has been varied or altered. Absent such evidence, in our respectful submission, the proper inference to draw is that the policy is in accordance with the prescribed policy, as is the requirement of law.

So, your Honours, for those reasons, in our respectful submission, their Honours in the majority were correct in the conclusion they reached and for the reasons they reached it. If it please the Court, we do not have anything further to add to our written submissions on that matter. We see this as a very short and simple point.

GUMMOW J: Thank you. Yes, Mr Walker.

MR WALKER: Your Honours, an artfully drawn pleading which asserts in explicit terms a non-admission of liability exceeding a statutory minimum does not disguise the fact, as my learned friend has made clear in any event, that the issues between these parties was joined on the basis that there was in force a policy, that it was a policy to indemnify for non-workers compensation liability such as those that had been held against the deceased man’s employer, which, by dint of the statutory provisions your Honours have been referred to in writing, were available to the widow and indirectly can redound to the benefit of my client.

CRENNAN J: A non-admission can in some circumstances amount to a positive case, I would have thought.

MR WALKER: Without question in the context of this pleading – as I say, artfully drawn, not a criticism on our part – unquestionably sought to assert that the policy was in terms - - -

CRENNAN J: Limited in its cover.

MR WALKER: Quite so. Now, that, in our submission, plainly assumed an onus. The reason why the approach taken by the members of the majority should be regarded as at least prima facie wrong so as to require attention from this Court is that they drew in particular upon the reasoning which is in question and as a matter of elementary pleading and proof when the making of a contract is in question, but there was no dispute about the fact that a contract was made, none at all.

For those reasons, one was forced back to the terms of the statute, and the terms of the statute made it clear – I stress, the statute, not the regulation – made it clear that the policy which would be made case by case, employer by employer, insurer by insurer, was one that must insure for at least $40,000 in relation to non-workers compensation liability. At least, it need hardly be said, says nothing about the probabilities of the minimum being what was in fact selected. Furthermore, when specific reference was made in paragraph 18(3)(a) to the form of the policy by reference to prescription it was explicitly made clear consistently with the use of the phrase “at least in subsection (1)” that the policy:

may contain such other provisions relating to any other liability at common law –

of the kind in question in this case –

as are appropriate to any particular case.

That meant that it was at large as a matter of fact what happened in the particular dealing between Pilkington and the defunct insurer to which QBE is successor. That was the factual question at large. There was an assertion by the plaintiff of a promise to indemnify. So much is admitted, not least because of the statutory obligation to have granted a policy to indemnify. The question was then, what was the cap financially to that indemnity? Unless and until this Court were to pronounce, on our researches for the first time, the notion of the expression “at least” carries a presumption that people will be as skinnily insured as they can be, which is by no means factually cogent as an approach to fact-finding, then, in our submission, that was a matter which was simply at large.

GUMMOW J: Does anything come out of the regulations that causes trouble for you?

MR WALKER: The regulations to which my learned friend referred might be thought at first sight to cause trouble, which is why we started with the statute because the statutory provision is for at least 40,000 and that the policy must be as prescribed and, rather curiously, says may “contain only such provisions as are prescribed, but may contain”, et cetera. In the regulations, which are relevantly quoted as at the relevant time in application book 45, paragraph 31, there is, as my learned friend drew to attention, the repetition of those statutory words, every policy shall “contain only such provisions”, et cetera, and then the addition in the pre-form of prescription of “the form of policy in Appendix hereto” and there is an offence created for departing from that form.

That, of course, cannot rise higher than its source. Its source is the statute. The statute says you may contain provisions for a greater indemnity than the statutory minimum – that must be the meaning of the words in paragraph 18(3)(a) – and that, of course, is picked up and recognised by the recitals of the statutory policy to which my learned friend referred. The passage is emphasised at the foot of page 45 in paragraph 32 of Justice Gyles’ reasons.

Now, the operative clause, it is true, no doubt because you must provide for at least $40,000, contains, as one would expect with any indemnity limit, the phrase “not exceeding”, but the number or word denoting number that follows the expression “not exceeding” was precisely that term which without committing any offence at all may be departed from so long as a higher number than 40 goes in and, that is, of course, the meaning of the statutes.

For those reasons, in answer to Justice Gummow, no, there was no difficulty created whatever by the form of the regulation and it would be bordering on the perverse to construe the combination of statute and prescription under the statute as somehow discouraging the provision of a greater insured obligation of indemnity than the statutory minimum. It is for those reasons, in our submission, that there are very considerable doubts as to the correctness of the ruling on a matter which goes to the fundamentals and involves consideration of fundamentals of pleading and proof where the facts are, in a manner not unknown in litigation concerning insurance and other fields of statutory regulation, likely to be obscure.

GUMMOW J: Yes, on this question of not unknown in insurance litigation, I see from the materials we have been supplied with there is various authorities referred to. If special leave were to be granted, I think attention would be required to what has happened in the United States where this has been something of a problem for some time. The multi-volume Couch on Insurance 2d in volume 19, sections 79 – they are big subsections – section 79:317 to 319 and 417 contain detailed discussion of these questions. We do not need to hear you any further, Mr Walker. We will see if Mr Jackson wants to add anything.

MR WALKER: If it please the Court.

MR JACKSON: Your Honours, all I wish to say was two things. The first is that if one looks at the state of the pleadings, there was an admission that there was a policy complying with the statute. Compliance with the statute involved there being a policy for not less than the relevant sum. The question which then arose was, who bore the burden of demonstrating that it was or was not above that sum? Your Honours, in our submission, in those circumstances, it was appropriate for the insurer to bear that burden.

The second feature I wanted to mention, your Honours, is that one speaks of 40,000, but some of the material suggests that the amount had become 50,000 at the end of the period; it does not seem to matter for present purposes. May I say perhaps a third thing, and that is that there was, of course, in the statutory form of policy the provision of clause 14, which is referred to in our learned friend’s written submissions at page 75 in paragraph 10. It contemplated that the actual statutory form might itself be varied.

GUMMOW J: Yes, Mr Sullivan.

MR SULLIVAN: Your Honours, this is not, as perhaps was suggested by Mr Walker in his submissions, a case about the validity of the regulation or of the appendix thereto being the prescribed form of policy. What has to be construed is, what are the terms of the policy? The regulation sets out what the form of the policy is. It may be that there is some variance with the words of the statute. In our respectful submission, there is not because the form of the policy in the appendix clearly provides for a minimum cover of $40,000 and provides for a mechanism to increase that to give effect to the words my learned friend has emphasised, “at least”.

Now, it is a bit like the analogy when one has in cases like Biotechnology v Pace and Lewandowski when someone says, “I am going to employ you and pay you $40,000 plus a bonus to be assessed or agreed”. The courts would say there there is a certain contract but it is only a certain contract enforceable to the amount of $40,000 and the rest is too uncertain to be enforced. This is the situation here. One says, what is the evidence of the contract? The evidence of the contract, and the only evidence of it, in our respectful submission, is in the prescribed form which was required, unless someone wanted to take the point that the regulation was invalid, to be conformed with by the insured and the insurer. That provided for in the operative clause, which cannot be cut down by the recital, in our respectful submission, an amount of up to $40,000. In our respectful submission, for that reason, notwithstanding what my learned friends have said, their Honours in the majority Court of Appeal were clearly correct in the approach that they adopted.

GUMMOW J: There will be a grant of special leave in each of these matters, that is to say, S95 and S96 of 2009. The appeals will be heard together. It will be a one-day matter, I should have thought.

MR SULLIVAN: If it please your Honour.

GUMMOW J: Yes, thank you.

AT 9.58 AM THE MATTER WAS CONCLUDED