[2011] HCATrans 144

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
		Melbourne		No M24 of 2011

B e t w e e n -

HIH CLAIMS SUPPORT (ACN 096 857 635)

Appellant

and

INSURANCE AUSTRALIA LIMITED (ACN 000 016 722)

Respondent

GUMMOW ACJ
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 2 JUNE 2011, AT 10.18 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 P. KULEVSKI, for the appellant.  (instructed by TressCox Lawyers)

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friends, MR M.W. THOMPSON, SC and MS C.M. HARRIS, for the respondent.  (instructed by Norris Coates)

GUMMOW ACJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, may I start with the agreed facts, which are found in the appeal book starting at page 245.  Paragraph 1 introduces Mr Steele who may be treated as the insured wrongdoer.  Paragraph 2 refers to the accident by which damage was caused, ultimately, it was held, for which he was responsible.  Paragraph 4 introduces the HIH policy which is at the root of my client’s position.  Paragraph 5 is his claim upon it.  Paragraph 6 is the proceedings in which he was sought with another to be made liable.  

	Paragraphs 7 and 8 are the cross‑claims in relation to other players in the accident.  Those are the New South Wales proceedings to distinguish him from other proceedings in Victoria.  In paragraph 9, which may be linked with paragraph 16, there is the narration of HIH, at that time still solvent and operating, accepting liability to indemnify under that policy and 16 shows there was, in due course, a payment.  There was another policy which also was established after considerable contest on a number of grounds to respond to the accident so as to provide indemnity to Mr Steele.

GUMMOW ACJ:   Just looking at paragraph 14 on 246, it says:

On 15 June, 2000, HIH and Steele brought a proceeding No. 5769 of 2000 in this Honourable Court against SGIC

So, is Mr Steele suing SGIC on the policy?

MR WALKER:   Yes, as a named insured.

GUMMOW ACJ:   Would SGIC have had a defence?  I do not know whether it be an equitable offence, but a defence as to 90 per cent satisfaction already having been received?

MR WALKER:   That is in due course exactly what was established, yes, it did.  That was held so.  

GUMMOW ACJ:   The controversy then is, having the benefit of that defence which arises by reason of the Commonwealth intervention, to use that expression, SGIC does not have any burden or contribution.

MR WALKER:   That is right.

GUMMOW ACJ:   Mr Jackson says, well, that is because of the particular framework of a Commonwealth intervention and it has made its bed in a particular way and it has got to lie in it.

MR WALKER:   Quite so.  That is exactly it.

CRENNAN J:   Is what Justice Gummow is putting to you some answer to the lack off mutuality point that is made by Mr Jackson?

MR WALKER:   Yes.  Ultimately we say that the fact that, as between HIH and SGIC, there was the first kind of mutuality that is talked about in the authorities, that is ‑ ‑ ‑

CRENNAN J:   Well, there is no contest about that, is there?

MR WALKER:   No, quite.  That the fact of the intervening insolvency says nothing about the possibility of contribution, it happens to be why HIH is not here claiming contribution because HIH made no claim.  The novelty – I think I can say, on our research, is it is novel – the novelty of our position is that we claim contribution because, as if we were HIH, that is as to 90 per cent, as if we were HIH we have met obligations of the very kind defined in terms as the very kind of the co‑insurer who, of course, would have had – and it is only hypothetical – would have had ‑ ‑ ‑

CRENNAN J:   Well, I understand all of that, but the point against you essentially is that the Commonwealth, by the structure of the scheme, is never open to contribution claims.

MR WALKER:   Yes.  Now, the answer we give to that is that that is simply a result that is no different from what obtained in the absence of the scheme.  In the absence of the scheme IAL now stands in the shoes of – assumes the obligations of SGIC – IAL would be liable for the whole and they were, after a contest, eventually shown always to have been liable to indemnify.  So in the ordinary case of insolvency where there is not a government rescue package, the party in the position of IAL would have paid the full indemnity and would not have had a claim for contribution against the insolvent co‑insurer.  This is no answer in literal terms to an argument of no mutuality, but it is an answer bottomed on the equity of the situation, that is, we are, by having paid, not putting IAL in any worse position from what would have happened had we not paid.

CRENNAN J:   The mutuality point is taken as the basis for an argument that there is no common burden in truth.

MR WALKER:   I do understand that entirely, your Honour, and that is why say there is that novelty in our position.  Indeed, I want to take you to the facts in just a moment to show about the scheme that probably the parties before you agree in every respect as to the character it bears for the purposes of that mutuality argument against us.  I need to first of all make that clear and see whether I can persuade the Court that that is not enough to defeat the equity that arises from the other way of looking at the matter.  The other way of looking at the matter is there was certainly a burden borne by IAL.  That has certainly be discharged pro tanto by the payment by my client and that is a payment made in the guise of reflecting as to 90 per cent the HIH co‑insurer’s obligation to discharge the same burden.

KIEFEL J:   You do not suggest that the appellant itself came under an obligation pursuant to the trust deed or the scheme it was administering?

MR WALKER:   The very short answer is no, it is considerably more complicated than that.

GUMMOW ACJ:   If it did, your case would be much simpler, would it not?

MR WALKER:   Very much simpler because an obligation assumed, albeit at a different time with clear knowledge of the earlier, none of that would defeat the claim for contribution.  So the very short answer to Justice Kiefel is no, but there are obligations undertaken ‑ ‑ ‑

KIEFEL J:   You mean there might be shades of something akin to an obligation, is that the area we are in, because ‑ ‑ ‑

MR WALKER:   I suspect not.  The truth is that there is an ineradicable element of voluntariness about what the Commonwealth did.

KIEFEL J:   Quite so, which leads me to wonder, could it ever be the case in equitable principles, do you say, that a person who volunteers payments on behalf of a bankrupt who is otherwise liable to contribute could recover contribution?

MR WALKER:   Put so simply, no, we do not contend for a principle that would be either self‑justifying those terms or supported by authority on those terms, no.

GUMMOW ACJ:   They are 19th century cases, are they not, that suggest it would be an intermeddler, as it were, but this is ‑ ‑ ‑

MR WALKER:   Whether you use the word “intermeddler” or officious, there are various unkind ways of describing the charity involved.

GUMMOW ACJ:   Yes, it may not be accurate to describe the Parliament as officious.

MR WALKER:   No, and that is, indeed, going to be one of my arguments in due course, but ‑ ‑ ‑

GUMMOW ACJ:   When it is exercising legislative power with respect to insurance.

MR WALKER:   Yes.

KIEFEL J:   So your approach is to accept that there is nothing in the nature of a true obligation, but to say that the statutory scheme has impressed upon the situation – it gives rise to a payment and the payment itself in this context is sufficient to create the equity?

MR WALKER:   The equity, yes.  There is a deal packed into my acceptance of that proposition.  I will need to, I think, make good a number of different elements in it.

GUMMOW ACJ:   But that is the heart of the case, is it not?

MR WALKER:   Absolutely.  Your Honours, going back to the facts, what Justice Gummow has asked me about is, of course, that which was established – see paragraph 27 – has been, indeed, to this Court on a special leave application before.  Going back to the way in which the matters fell out – see page 246.  By paragraph 13 one sees January 2000 the demand for SGIC to accept liability.  Paragraph 14 is the proceedings in which that was an issue raised and then intervenes the insolvency, paragraph 15.  I will be taking your Honours then to the statute and documents that embody what is referred to in paragraph 17.  I am not able to say by pointing to one discrete document here is the scheme, but it does emerge from the documents to which I will take you in just a moment.

	In paragraphs 18 and 19 there are the steps taken by Mr Steele as envisaged by the scheme.  Perhaps I should flag at this point that perhaps the striking feature, particularly in answer to the questions asked by Justice Kiefel just now, the striking feature of the way the scheme operated was that by applying the claimant, the person who had the benefit now of dubious worth of a policy with HIH or one of the HIH companies, was offering and agreeing to assign the rights with respect to that policy and by a payment, simply by the payment under the scheme, that offer was accepted so as to form an agreement.  So there was obligation.  There is no doubt about the legal form of an obligation.  

	I am bound to point out that the real gravamen of that obligation, of course, is from the insured, the policyholder, with respect to the assignment of the rights under the policy.  If there were a part payment then, on our analysis of the scheme, unless the scheme was dismantled, while ever the scheme was on foot, then there would be an obligation to continue to pay.  That provides a qualification to my answer to Justice Kiefel.  But if there was payment in full all at once, at one stroke the contract would be formed and the payment obligation discharged.  That obviously is an obligation that sits in a rather odd way with the notion of the co‑existing antecedent obligations which ordinarily characterises that two participants in an equity of contribution.  

	Paragraph 21 provided the denouement of the claim arising from the accident and, in short, it could be summarised, Mr Steele was liable for the lot.  Paragraph 22 is the agreement that Mr Steele was an insured.  That had been hotly contested.  It was agreed by the time of these proceedings.  Then 23, 24, 25 and 26 are payments by my client, and then in 27, those payments as satisfaction of the indemnity obligation owed by SGIC assumed by IAL succeeded as a defence on appeal in the Victorian proceedings from which special leave was refused on the express basis that these matters of contribution would not be foreclosed.

	Could I then go to the documents which show or embody the scheme.  The first is the statute to which we have made reference in our list of authorities and that is the Appropriation (HIH Assistance) Act 2001 (Cth).  The HIH companies are there defined, their insurance companies, in section 3, and “HIH eligible person” is defined to include “policyholder, insured or beneficiary” and, in particular, someone who “suffered financial loss as a result of the insolvency”.  Now, both conditions must be present.  The appropriation then follows for the purpose of:

providing financial assistance to HIH eligible persons, either directly or indirectly –

with an informative note that that may be by discharging an obligation.

GUMMOW ACJ:   This is simply an appropriation act?

MR WALKER:   It is simply an appropriation.

GUMMOW ACJ:   It leaves it to the Executive, does it, as to how it is to implement it?

MR WALKER:   Yes, it does.  The Executive then entered into a number of instruments.  The first of them I wish to take you to starts at page 62 of the appeal book.  I hope, trust, your Honours are being given a supplementary page which ‑ ‑ ‑

GUMMOW ACJ:   Page 62B, we have.

MR WALKER:   It really should be 63A and 63B.  It should follow page 63.  Page 63 is the table of contents, 63A has the last item number 30 of the table of contents, and 63B is the ‑ ‑ ‑

GUMMOW ACJ:   At some stage, we have to be given copies of the pages.  We have a title sheet.

MR WALKER:   You have a title sheet which is 62, “HIH Claims Support Trust”.

GUMMOW ACJ:   Yes, that is right.

MR WALKER:   You then have 63, which is a table of contents, which is page 1 of the document according to its right‑hand corner.

KIEFEL J:   Does what you call 63A deal with 30 counterparts?

MR WALKER:   That is it.

KIEFEL J:   It is numbered 62A in what we have, and it is followed by 62B, which is headed “HIH Claims Support Trust”.

MR WALKER:   I apologise.  So it was.  My copy has been corrected, not by me.  I had assumed that had been carried through.  I do apologise.  The order I have given to you is the correct one.  The page that I am calling 63A that your Honours have emblazoned as 62A, I am sorry ‑ ‑ ‑

GUMMOW ACJ:   Well, can we use the numbers at the bottom?

MR WALKER:   Yes,  The numbers at the bottom, it should run from 67 to 68 and then to 69, and 69 is the first page, the title page really.

GUMMOW ACJ:   Yes.

MR WALKER:   So you have got the parties being the Commonwealth and HIH.  You have got Recital A which matches, I suppose, the appropriation.  In Recital B there is a reference not merely to the present document establishing the trust, but also to the Commonwealth Management Agreement which I will take you to.  The settled sum is a mere $10 million but there was provision for more to be given, as it was.  I am sorry, it was not 10 million, it was $10, yes, but there was provision for more.

GUMMOW ACJ:   The Minister on behalf of the Commonwealth by this deed settled money on trust upon your client?

MR WALKER:   Yes.  Now, I should take you to some of the definitions.  Page 64, if I can now go back to appeal book references, 70 of the earlier exhibit, 64 of the appeal book:

Applicant means an applicant for assistance under the Scheme.

 . . . 

Claim means a claim for a loss under a Policy.

Then on page 66:

Scheme means the scheme as established by the Commonwealth from time to time –

and I need to draw to attention that phrase “from time to time”.  It bespeaks the possibility of change –

to assist certain qualifying individuals . . . affected . . . 

Scheme Payments means payments made or to be made by the Trustee to or on behalf of Applicants of sums funded by the Commonwealth which Applicants are entitled to be paid under the Scheme.

Though I lean on the word “entitled”, perhaps not too much should be made of it, bearing in mind what we will follow.  

GUMMOW ACJ:   Well, just stopping for a minute.  Who are the beneficiaries of this trust?  It is an express trust.

MR WALKER:   It is the Commonwealth, your Honour.

GUMMOW ACJ:   The Commonwealth is a set law.  Who are the beneficiaries?

MR WALKER:   Clause 5, page 69.

GUMMOW ACJ:   That says, “Subject to the terms and conditions of this Deed”.

MR WALKER:   Yes, which includes the objects referred to in clause 2, particularly the last sentence, page 67.  An object of the trust is that:

The assistance [in question] will be paid by the trustee of the Trust and the Commonwealth is to fund the Trust ‑ ‑ ‑

GUMMOW ACJ:   Is it conferring a power on the trustee coupled with a duty of some sort?

MR WALKER:   Trustee, yes.

GUMMOW ACJ:   I mean, there has been no attention paid to this at any stage in this litigation which is mildly irritating because it is the starting point.

MR WALKER:   Your Honour, no one has doubted that the ‑ ‑ ‑

GUMMOW ACJ:   I know they have not doubted, but it would be helpful if they had analysed before they had not doubted.

MR WALKER:   That the trustee with propriety pays applicants.

GUMMOW ACJ:   I am not questioning whether there is any impropriety, I am just trying to work out what the legal structure is because unless we know the legal structure, we do not know whether you can take this case outside Falcke’s Case 34 Ch D  234 of an officious intermeddler.  That is the point, so we have to analyse this deed.

MR WALKER:   Quite.

GUMMOW ACJ:   We will not be rushed through it.  We have to understand it.

MR WALKER:   I do not want to rush through it all.  What I will not get from this trustee, what I cannot get from this trust deed, is a right in an applicant to call for the trust to be administered before, for example, an applicant has had a claim accepted.  They are not a person with a trust right.

GUMMOW ACJ:   Well, if you say so.

MR WALKER:   They would simply be an applicant to the scheme with no rights under the trust.

KIEFEL J:   The trust deed though has to be read with the Commonwealth Management Agreement and the Claims Management Agreement to really understand how the scheme under the trust operates.

MR WALKER:   Exactly.  The objects make that clear with respect to the Commonwealth Management Agreement.  The trust fund is referred to in clause 3, but is no more informative, merely saying it is to be held together with its income on trust pursuant to the terms of the deed.

GUMMOW ACJ:   What is the force of clause 2, the second sentence:

That assistance will be paid by the trustee of the Trust –

Not may be paid; will be paid.

MR WALKER:   That assistance is the assistance to which an applicant becomes entitled upon acceptance of the applicant’s claim.

GUMMOW ACJ:   Whereabouts is the provision for making the claim?

MR WALKER:   It is not in this document.  It is in ‑ ‑ ‑

GUMMOW ACJ:   In the management agreement?

MR WALKER:   Well, it is more than the management agreement.  I am going to come to that in due course.  I have drawn to attention already clause 3.1.  Clauses 3.2, 3.3 provide for the possibility of termination simply by unilateral notice on the part of the Commonwealth – see 3.2(b).  The trustee – see clause 6, particularly 6.1 – has:

duties and responsibilities limited to those –

we would submit that means which extend to those –

expressly provided under this Deed, the Commonwealth Management Agreement and any Claims Management Agreement.

Claims Management Agreement is the means by which, in this case, QBE was appointed, in effect, as a manager.  Clause 7 provides for sums to be paid by way of further settlements:

payments to be made by it in accordance with the Commonwealth Management Agreement.  

Clause 9 requires the establishment of two accounts, 9.1 and under 9.3:

the Scheme Payments Trust Account shall only be used for payments of [so‑called] Scheme Payments.  

Scheme payments, as I told your Honours back on page 66:

payments made or to be made by the Trustee to or on behalf of Applicants of sums funded –

et cetera.

GUMMOW ACJ:   Is there any governing law clause?

MR WALKER:   Clause 29 on page 81, New South Wales.

GUMMOW ACJ:   Thank you.

MR WALKER:   I have to draw to attention clause 11.  I think it is not of particular moment in this context.  Clause 21 at 79 permits these parties to agree to vary the deed.  Can I then move to the next document which commences at page 84 of the appeal book and that is the document referred to in the trust deed, the Commonwealth Management Agreement.  It is, as page 88 shows, between the same parties.  It recites that the Commonwealth has established the scheme, that it wishes to appoint my client to manage on behalf of the Commonwealth.  In the definitions page 89:

Claim means a claim for a loss under a Relevant Policy.

When you go to page 91 ‑ ‑ ‑

GUMMOW ACJ:   Just a second.  The scheme is defined at page 91.

MR WALKER:   In similar terms:

the scheme as established by the Commonwealth from time to time ‑ ‑ ‑

GUMMOW ACJ:   That does not tell one anything.  Established, but how manifested?

MR WALKER:   Your Honour, it is not easy for me to answer that.  I am going to take you to all the documents which were before the courts below by which it is, as we understand it, manifested.  As I said in opening, I do not have a single discrete document to say, here is the scheme.  So page 91, “Relevant Policy”, which is an expression used in the definition of claim, is in somewhat fashion defined to mean:

a policy in relation to which a Claim has been made.

Other details will emerge in relation to what might be admitted.  At the foot of page 91 we have the definition of “Scheme Payments” in similar terms as in the trust deed.  On page 93, clause 3 has the so‑called “Principal Objective”.  There is the provision of:

a framework for the administration and management of the Scheme . . . This Agreement sets out the parties’ ‑ ‑ ‑

GUMMOW ACJ:   How is this management agreement in its terms linked immediately to the trust agreement – the trust deed I should say?

MR WALKER:   The trust agreement refers to it in several places.

GUMMOW ACJ:   The trust deed refers to it.

MR WALKER:   Sorry, the trust deed refers to it in several places, page 67, clause 2, second sentence in particular.

KIEFEL J:   And clause 6.1.

MR WALKER:   Yes, 6.1 very importantly, and 6.6.  See page 64, in its definition it is shown that that form was schedule 1 to the trust deed itself.

GUMMOW ACJ:   Page 64?

MR WALKER:   Page 64, the definition of “Claims Management Agreement”.  It means:

any agreement that has . . . same or substantially similar terms to that set out in Schedule 1 –

I am sorry, that is the Claims Management Agreement, it is the Commonwealth Management Agreement, sorry.  That is defined further down:

the document so entitled . . . executed immediately after the execution of this Deed.

GUMMOW ACJ:   Thank you.

MR WALKER:   That is the one we are in now.  Page 93, as I say, in clause 3 had the principal objective:

to administer and manage the Scheme in the manner provided for in this Agreement.  This Agreement sets out the parties’ respective obligations and rights towards one another in respect of the funding, administration and management of the Scheme.

Clause 4 notes that my client:

enters into this Agreement in its capacity as Trustee of the Trust.

GUMMOW ACJ:   Sorry, where are you reading from, Mr Walker?

MR WALKER:   Clause 4.1(a) on page 93.  Then a further step in the aggregation of documents is taken in clause 4.2(a).  There is a reference, the Commonwealth acknowledges that my client:

shall only be required to manage and administer the Scheme and carry out its obligations under any Claims Management Agreement –

so that is embedded –

in accordance with the terms of this Agreement –

and then there is the possibility of variation.  Under clause 5.1, my client was appointed to “administer and manage”, and at 5.3, subject to the agreement, that involves –

receive, review and determine Applications in accordance with [the defined term] Eligibility – 

Your Honours, for a reason I simply cannot explain, that page is missing and we will have it supplied, and I apologise.  The applications manual is ‑ ‑ ‑

HEYDON J:   This is very important.  Do you know what the eligibility agreement definition actually is, even though we have not got the page here?

MR WALKER:   No, I do not, your Honour.  The applications manual is one of those ‑ ‑ ‑

GUMMOW ACJ:   Well, we had better be supplied with it quick smart.

MR WALKER:   Yes, quite.

GUMMOW ACJ:   And I mean quick.

MR WALKER:   Yes, your Honour.  The applications manual is one of those terms which by its definition, which includes the phrase “from time to time” – see the top of page 89 – explicitly contemplates changes from time to time:

prepared by and agreed between the parties from time to time.

So its contents are not fixed by this agreement.  Then in 5.3, the process continues through items (b) to (r) on the next page, step by step and in accordance with those provisions to deal with claims, or applications as they are called.  Item (i), for example, includes the authorising of “Claims Managers . . . to effect Scheme Payments”.

KIEFEL J:   Is there a separate criteria document which seems to be in mind in clause 5.3(f) to:

allocate, in accordance with criteria agreed between HCSL, the Commonwealth and Claims Managers . . . all admitted Applications –

MR WALKER:   Not in the record, unless that character is borne by one of the other documents to which I am going to come.  Not so entitled, no.  In fact, item (f) that Justice Kiefel has just drawn to attention in 5.3 is another of those terms which shows by use of the phrase “agreed from time to time”, showing the floating rather than fixed quality of the provisions of the scheme.  There are powers of a very broad kind shown on page 96, clause 5.4 which include – see item (c) – possibility of further indefinite agreements.  Under clause 6.1, as envisaged by the trust deed – see page 97 – there is an obligation on the Commonwealth to pay:

by way of settlement on the Trust, the Funds for the Scheme Payments Component –

which is defined on the top of page 92 to mean:

that component of the Funds to be provided by the Commonwealth to be used –

et cetera.  Under clause 7 further reference is made to the possibility of what I will call a unilateral variation on the part of the Commonwealth – see clause 7.1.  On page 109, clause 21, there is a possibility – see (a)(iv) – for scheme payments to be suspended by unilateral determination of the Commonwealth.  Although in 21(b) that is to operate prospectively so as not to affect:

any past or future Scheme Payments to Applicants under any Application in respect of which –

we have already –

(A)	notified the Applicant that the Applicant is eligible . . . or

(B)	notified the Applicant that the Applicant is not eligible –

if it is still within what is called the internal review or review panel before which that applicant becomes successful.

GUMMOW ACJ:   Now is there provision which indicates what follows from the status of eligibility?

MR WALKER:   In this document, no, your Honour.

GUMMOW ACJ:   In any of them?

MR WALKER:   Yes, there is, in the claims agreement to which I am going to come and, indeed, in the documents that are made available to applicants.  Page 110, clause 23, further unilateral power of the Commonwealth called “Termination and Reduction”, which we do not need to go into in any further detail.  Your Honours, there is a standard form, that is found at page 121, but it does not appear that that plays any particular part and there is a form which Mr Steele filled in to which I will be coming in due course.  Could I then move to the application.

KIEFEL J:   I am sorry, the form on page 121 forms part of the Commonwealth Management Agreement?

MR WALKER:   Yes, but there is a form by – bearing in mind that things can change from time to time, it is appropriate to draw to attention to the one starting at 137 which is the one that Mr Steele actually executed.  I am going to come to that but not right now because I want to go first to the other document.

KIEFEL J:   Just before you do, I might have overlooked this, but the document offer to assign your policyholder rights at page 121, where is it referred to within the body of the management agreement?

MR WALKER:   I cannot find it, your Honour.  Your Honours, can I take you now to the Claims Management Agreement which starts at page 144.  I draw to attention the different nature of the parties.  Perhaps they are more easily set out at 150.  You have got the liquidated HIH entities plus my client called HCSL plus QBE Management Services called the manager.  The HIH parties are called together the insurer.  The background, so‑called, on page 150 includes, just after line 50, that the insurer, that is, the HIH companies, have “rights and owes obligations to HIH Policyholders”, and that is a defined terms, as is HIH scheme claims.  HIH scheme claim – see the top of page 154 – involves a determination by my client, that is, it is:

a claim under an HIH Policy which HCSL has determined as being eligible for assistance under the Scheme.

At page 156 there is the appointment of the manager.  The agency relationship is contained on page 157, clause 2.5(a).  Clause 2.6 notes that this is being entered into in the capacity as trustee.  There are obligations into (c) that are not of great moment – see page 159, clause 5.5.  They are of co‑operation, but under clause 6 on page 160 one sees that the HIH companies in liquidation undertake in various ways, including providing access to claims materials.  I do not need to go in detail to the manager’s duties, but it can be seen that they as well, 7.1(a), refer off to yet other documents, protocols or arrangements, that is, the applicable requirements and the claims management procedures.  The applicable requirements are defined on page 151 to mean:

all legislation, regulation or codes of practice applicable to the handling of the HIH Scheme Claims.

The claims management procedures are defined at the top of page 152 in accordance with schedule 5, but it then goes to say in a familiar way:

as amended from time to time by agreement between the [HIH companies] and the Manager.

KIEFEL J:   Is the status of the HIH companies as parties to this agreement simply to facilitate the consideration of claims and to require them to make documents available?  It does not seem to go any further than that?

MR WALKER:   In essence, that is right.  That is reflected actually in a right given to the HIH companies which you see at 168, 169, which is the reimbursement of expenses.  There are other rights because, after all, this is a scheme under which my client takes the benefit of the insured’s claims under the policy.  On page 170 you see that there are rights of participation and claims review by the insurer, that is the HIH Claims, clause 12A.  Your Honours, this falls in under the management agreement in terms of its currency – see page 176, clause 17.1(a).  That is all I wish to take your Honours to in that one.  Schedule 5 at page 196 contains the claim management procedures which are subject to variation from time to time.

GUMMOW ACJ:   This is schedule 5 to what?

MR WALKER:   This is schedule 5 to the Claims Management Agreement that we have been in.  It is the one referred to in the definition of Claims Management Procedures.  At about line 40 on page 196 there is an obligation on the manager to:

Ensure that no amount is paid on an HIH Scheme Claim unless the relevant HIH Policy was in force –

the premium had been paid, and there is vouching of those matters.  Item (e) on page 197.  The manager’s obligations include assessing:

indemnity and claim quantum in accordance with the terms and conditions of the relevant HIH Policy.  

CRENNAN J:   This is all machinery to ensure that any claim is a valid claim.

MR WALKER:   It is valid and also, for the purposes of my argument, that it is subject to the 90 per cent component.  It is a reflex of the obligation of HIH under the policy.  Otherwise it is, as Justice Crennan has pointed out, machinery – furthermore, it is machinery that is subject to amendment from time to time.

HEYDON J:   I may have missed something, but if you take (e) on page 197, gravid in that is the idea that payment will be made, but is there an express clause compelling the manager to pay whatever the due amount is as distinct from that implication one finds in (e)?

MR WALKER:   One could add as well (f)?

HEYDON J:   Yes.  Is there an express clause?

MR WALKER:   No, your Honour.

HEYDON J:   Your argument is this, presumably, or is it?  The other agreement, clause 5.3, creates a duty to either accept or reject the applications of eligible applicants?

MR WALKER:   Yes.

HEYDON J:   The responsible body, on a whim, could not say, “Well, I do not like you because you are red‑haired, even though you are otherwise qualified”.  Once you become an eligible applicant, somewhere we find in schedule 5, or maybe somewhere else, a duty to pay eligible applicants 90 per cent of their rights.

MR WALKER:   There is in the agreement, which is a very difficult expression for the reasons I have explained in answer to Justice Kiefel earlier, there is in the agreement ‑ ‑ ‑

HEYDON J:   Claims Management Agreement?

MR WALKER:   No, I am sorry, the agreement that is made by payment.

HEYDON J:   Yes.

MR WALKER:   That has the problems I have earlier referred to.  I am bound to say, that appears to be the most close approach to plain words of obligation to pay and it is more than a little difficult that it emerges from the fact of payment.  That has real meaning when it has been a part payment, but it is very odd when it is a whole payment.

GUMMOW ACJ:   It is a trust fund.

MR WALKER:   Yes, your Honour.

GUMMOW ACJ:   To the extent that payments are not made out of it, it results back to the set law of the Commonwealth.

MR WALKER:   Quite so and under the trust ‑ ‑ ‑

GUMMOW ACJ:   So there is a power to pay which is enlivened in certain circumstances.

MR WALKER:   That is right.

GUMMOW ACJ:   The question then is, does that power then become a duty which the Equity Court would enforce under the submission in the earlier provision to the Supreme Court of New South Wales.

MR WALKER:   Yes, and, in our submission, it does become a duty because the object of the trust is that payments are to be made by way of the assistance under the scheme.  The assistance under the scheme is by these steps shown to be those sums ‑ ‑ ‑

GUMMOW ACJ:   You have to be clear as to what the nature of the trust is.

KIEFEL J:   The closest one comes to an express obligation provided in the opening paragraph of schedule 11 on page 205 which refers to the settlement after the determination of coverage entitlement.

MR WALKER:   That is another reference of a kind similar to those to which Justice Heydon drew attention which contains an obvious implication that there will be payment from which it follows at least power to pay, entitlement to pay, and, in our submission, so far as the trustee is concerned for whom the manager is the agent, there is the obligation to pay in accordance with the object of the trust.

KIEFEL J:   With the policy, for instance, by reference to matters such as clause 8 in schedule 11 which requires a taking account of deductibles and losses and excesses and the like.

MR WALKER:   Yes, again, a working through of the amounts payable under this scheme as being a reflex of policy rights, including countervailing obligations, yes.

KIEFEL J:   I am sorry.  Would you mind stating once again how you say this converts into an obligation under the trust deed?

MR WALKER:   I am so sorry, your Honour, into a ‑ ‑ ‑

KIEFEL J:   Into an obligation on the part of the trustee to ‑ ‑ ‑

MR WALKER:   So far as the obligation ‑ ‑ ‑

KIEFEL J:   Perhaps I am wrong.  You do not say that.  You say that the payment subsequently made stands somehow in lieu of an express obligation?

MR WALKER:   Well, the obligation under the trust deed is from the second sentence of clause 2 to which attention has already been drawn, page 67.

GUMMOW ACJ:   Justice Heydon draws attention to page 205, clause 9.  There seems to be an assumption there that the HIH policyholder can complain if there has been a refusal of entitlement.

MR WALKER:   Yes, that assumption is plain from clause 9.  Whether the assumption is a good one is another point altogether.

HEYDON J:   It gives a power to negotiate a settlement of the same.

MR WALKER:   It does.

HEYDON J:   That is to say, it gives a power thought to be given to the question whether the claim is a just one at the end of the day.

MR WALKER:   You could pay on it, yes.  Of course you can compromise a claim, though, disputing all entitlement. 

HEYDON J:   I am just trying to build your case up so that Mr Jackson can knock it down if he feels like it.

MR WALKER:   I am not trying to resist your Honours.  I am trying, however, not to make the error of discerning the plain language of obligation to pay where I do not have ‑ ‑ ‑

GUMMOW ACJ:   Yes, that is because you are construing it as if it is a contract.  What I am trying to get out of you ‑ ‑ ‑

MR WALKER:   No, your Honour, a scheme.

GUMMOW ACJ:    ‑ ‑ ‑is that this is a deed of trust to which all this is appendant.  True enough, contractual arrangements between the manager and so on.

MR WALKER:   Yes.

GUMMOW ACJ:   It is governed by the laws of New South Wales.  People keep talking about an object.  It would not satisfy the traditional statements for a purpose trust, so it cannot be simply a purpose trust.  It has to be an express trust with a power to make certain payments and in default of the exercise of that power, there is a reversion of the beneficial ownership to the Commonwealth.  The question then is, in what circumstances that power can or must be exercised and at whose request and what consequences if there is a failure then to exercise it?  That brings us, for example, to clause 9 on page 205.

MR WALKER:   Yes.

GUMMOW ACJ:   There may not be any contractual right in any of these parties, but they may have a right to approach the Equity Court in some circumstances because there is an abuse of power by denying their entitlement or by accepting their entitlement, but not acting upon it, by paying them.

MR WALKER:   Yes.  If so, then the second sentence of clause 2 of the trust deed, found on page 67, would be at the heart of an argument by a disgruntled policyholder who says, if he, she or it can say so, that they have or should be treated as – that they had satisfied the requirements.  Would your Honours just excuse me one moment?  Your Honours, and with apologies, may I hand up the missing page?

GUMMOW ACJ:   Thank you.  This has the missing definition of “eligibility criteria”?

MR WALKER:   Yes.  As we try to reconstruct the documentation from the record below, it looks like this was missing from the Court of Appeal, but we are not sure – or originally missing and then put in.  In any event, there it is.  The eligibility criteria, however ‑ ‑ ‑

GUMMOW ACJ:   We had better see the media release, had we not?

MR WALKER:   No, your Honour, that is ‑ ‑ ‑

KIEFEL J:   And regulation number FSR/041.

MR WALKER:   Exactly, but I am told that was never in any record below.

GUMMOW ACJ:   It is a public document, though, is it not?

MR WALKER:   Yes, that will be obtained – there are two, sorry.

GUMMOW ACJ:   We hear about government by media release, this is the backwash of it.

MR WALKER:   Well, this is overtly it.  I am bound to draw to ‑ ‑ ‑

GUMMOW ACJ:   A great decline in the standards of public administration that produces this result, but nothing you or I can do about it.

MR WALKER:   No, your Honour.  I am bound to draw to attention that at the end of that definition, yet again, although I will supply those documents to your Honours, they do not, in fact, definitively supply the content of eligibility criteria.  They may be unilaterally altered by the Commonwealth from time to time by notifying my client in writing.  So that may not exhaust all the terms that render the content of the scheme fluid, shall I say, but, with respect, any point against us that depends upon demonstrating that it does have fluidity is plainly on a sure basis.  The argument may be wrong, but I have to accept that the content of the scheme, which becomes more and more an all encompassing but not precise expression, the content of the scheme may alter from time to time.

HEYDON J:   Trusts can be amended from time to time.  Trust deeds can be amended from time to time, nothing startling about it.

MR WALKER:   Quite so, and it does not mean that there are not obligations.  There are real obligations that are created and the real obligation on the trustee to make payments by way of the assistance means the assistance as from time to time.  That is a real obligation of real governmental, social, and to the individuals in question, financial worth.  There is nothing nebulous about being admitted to assistance and then having the trust obligation imposed upon my client to make the payment.  

	That person does not be a beneficiary of the trust in the sense of a proprietary interest in the corpus, but it most certainly becomes a person who, probably not only by way of a clause 9 action against a manager, but someone who can out of court raise with the Commonwealth and my client, and in court, if necessary, draw to the equity jurisdiction’s attention that a trust appears to be being departed from.  It may be a fragile situation if something in the nature of policy or supposed principle had produced a resistance on the part of my client because the Commonwealth has the capacity to terminate matters and to alter matters, but in theory at least this is an enforceable trust.  Your Honours, I need then to take ‑ ‑ ‑

HAYNE J:   Just before you depart from that, Mr Walker, was the class of persons entitled to seek assistance through this scheme a class that was closed at the time of the making of these agreements?

MR WALKER:   Factually, yes, it is policies that existed – I will have that turned up.  To have a relevant policy has a terminal date.  I will get that for you.

HAYNE J:   But do the events giving rise to the obligation under that policy extend beyond the date on which these agreements were made or are the agreements dealing only with events and circumstances that have occurred before the date?

MR WALKER:   No, it is by reference to policies existing before, your Honour, and I will just have those turned up.

GUMMOW ACJ:   We better be clear about this.

MR WALKER:   Yes, quite.

HAYNE J:   It may be important, it may not be important to know whether or how the class of persons entitled to seek assistance under this scheme can be identified or defined.

MR WALKER:   Yes, your Honour.  Could I, apropos that and other questions your Honours have asked, take you to the document at page 226, notes for applicants.  It is one of these from time to time stipulations of the scheme.  Who qualifies, it would appear, to be, as a matter of English, eligibility criteria:

if you are a policy holder or insured who has a claim under an insurance policy issued by a company –

this is 226, line 25 – and you are an Australian citizen, et cetera, and then there is a definition of the HIH Group.  Then, in answer to Justice Hayne, it is:

The event which entitles you to make a claim must have occurred before 11 June 2001.

In the case of ‘claims made’ insurance . . . claim must have been made against you or a circumstance notified to the insurer, before 11 June 2001.

GUMMOW ACJ:   So long tail claims might miss out?

MR WALKER:   Yes, except insofar as a circumstance notified, of course, still has an element of tail in it.

GUMMOW ACJ:   Yes.

HAYNE J:   What is the significance of the date 11 June 2001?  No doubt I have been told it three times already but forgotten.

MR WALKER:   No, your Honour has not.

GUMMOW ACJ:   Is that a date of liquidation?

MR WALKER:   It is two months before the order for winding‑up.  I imagine it was the inception of ‑ ‑ ‑

HAYNE J:   Of the commencement of liquidation.

MR WALKER:   ‑ ‑ ‑ insolvency or suspension of payments.  15 March was provisional liquidators, 27 August was the winding‑up.  I am sorry, I do not have that off the top of my head, and I will obtain it during ‑ ‑ ‑

GUMMOW ACJ:   Was there a press release on 11 June?

MR WALKER:   Almost certainly there was, your Honour.  Whether it concerned this, I do not know.  I am sorry, I cannot find that in the ‑ ‑ ‑

HAYNE J:   The media release is 21 May 2001 apparently.  Perhaps it looked forward for once in a media release rather than looking backwards.

MR WALKER:   Could I then turn finally to Mr Steele’s documentation, page 137.  This sets out something under the heading of “Conditions and Obligations”.  The wording is not entirely consistent, but nonetheless this is what he signed:

you have a valid claim under an insurance policy issued by a company in the HIH Group ‑

Then at the foot of that:

has agreed that, in certain cases, and subject to the limitations of the HIH Claims Support Scheme, it will provide the benefit that would have been provided –

There is the beginning and top and bottom of that column.

GUMMOW ACJ:   We have not so far found in the documentation any specific conferrals of power to require an assignment?  There is a condition of accepting an eligibility claim.  We have not, have we?

MR WALKER:   No, you have not.

GUMMOW ACJ:   Are there any general words that would accommodate that?  Anyhow, maybe a search could be made.

MR WALKER:   The answer to that is, yes, it is to be found ‑ ‑ ‑

GUMMOW ACJ:   General power of fixing terms and conditions.

MR WALKER:   No, it is not that.  It is more general than that your Honours.  It is even more general than that, your Honours.  On page 137, under the heading “What happens if I fill in this form?”:

By completing, signing and returning this form, you will be offering to assign to HCS Limited:

•	your rights under your policy . . . 

•	any rights you may have . . . in connection with your claim under that policy.

You will also be undertaking to provide all reasonable assistance . . . This includes:

•	filling out the HIH Company’s claim form and lodging the claim under the original policy –

and then 138 second dot item:

•	fully complying with the terms of the policy ‑ ‑ ‑

GUMMOW ACJ:   So it is an assignment for value, I suppose?

MR WALKER:   Yes, it is.

GUMMOW ACJ:   It is effective in equity, anyway.  

MR WALKER:   Yes.  The reflection intended by a kind of adoption on the part of my client of obligations in return for the insured performing obligations under the policy can be seen in these terms, including, for example, the fourth dot item on the left‑hand column on page 138 which ends up:

as though HCS Limited were the insurer which issued.

Now, the requirements of the scheme which are referred to in the next one were set out in the notes to applicants which I took you to earlier.  Then comes the quid pro quo.  If we accept your offer, this will mean that we:

will pay you at least 90% per cent –

in this case, it was 90 per cent.  Again it is the notion of a reflex –

the amount that would have been provided by the original HIH insurer under your insurance policy.  

You give up claims in the liquidation.  You give up any other claims with some exceptions.  In the middle of the right hand column on 138:

How will I know if HCS Limited has accepted my offer?

The only method which HCS Limited may use to accept your offer is payment of a benefit under the Scheme.  Where the benefit consists of a series of payments relating to one claim, the first payment of the series constitutes acceptance by HCS Limited of this offer.

Then there is stipulations for what to do with certain receipts intended to be devoted to others.  Then page 139 line 30:

What happens if HCS Limited has accepted my offer but I do not comply with the requirements of the Scheme?

If you do not, then in absolute discretion may:

•	withdraw the provision of further assistance . . . 

•	set a limit on the total amount –

It should be drawn to attention at the foot of that long set of stipulations about what might happen, right‑hand column, 139 at about line 55, it is said that my client:

may exercise its discretion even if you have fully complied with the terms and conditions of the policy.

That is the HIH policy.  That is if you breach the requirements of the scheme.  The terms of the offer, page 140 about line 5, “you offer to assign”, and one sees that plus a promise “not to revoke” for 12 months, and then provision for execution.

HEYDON J:   Mr Walker, the name of the insurer which issued the policy was C.E. Heath via Concord Underwriting Agencies Pty Ltd.  Is that in the HIH Group?  Is it a misunderstanding by Mr Steele?  Is that a broker?

MR WALKER:   In fact, the insurer was World Marine.

HEYDON J:   World Marine is not an HIH company, according to page 65.  I withdraw that.  I see that, yes.  Where do we get World Marine in and about page 140?

MR WALKER:   It is an agreed fact, your Honour.

HEYDON J:   Paragraph 4?

MR WALKER:   In fact, no.  It is HIH Casualty & General which, by agreed fact 4, is said to be the relevant policy.  Your Honour, that is what the agreed fact says.  World Marine comes from the finding at page 298, paragraph 3, line 35.  So either the agreed fact is wrong or the matter in the Court of Appeal is wrong, but the parties are agreed that it is an HIH Group policy, and so there is a misunderstanding by Mr Steele probably of a broker’s position.  I am sorry to be eking these materials out, your Honours.  Mr Hockey’s ministerial press release, FSR/041, “Criteria for HIH Hardship Relief”.

GUMMOW ACJ:   “Relevant dates” at the bottom, that is where 11 June seems to come from.

MR WALKER:   Yes.  This media release is 21 May and that obviously was intended to give some period of grace for people to organise their affairs – see the top of page 2.  Justice Gummow’s question, there is a specific power in relation to having these assignments, offers to assign collected, page 94 of the Commonwealth Management Agreement.  My client’s obligations include in that long list (d), what is called collecting:

Offers to Assign from Applicants and check they are appropriately signed and fully completed –

Then in terms of payment, there is the item to which I drew attention earlier, (i), authorising claims managers to effect scheme payments.

GUMMOW ACJ:   So which was the last one of those, Mr Walker?

MR WALKER:   I am so sorry, your Honour.

GUMMOW ACJ:   Which was the last paragraph you referred?

MR WALKER:   At 5.3(i) on page 95.  That then links back to the definition ‑ ‑ ‑

GUMMOW ACJ:   The definition of “scheme payments” speaks of entitlement.

MR WALKER:   Yes, exactly.

HAYNE J:   The provision of funds by the Commonwealth at page 97, item 6.1(g) talks about payments required –

to ensure HCSL is able to meet its obligations to make Scheme Payments.

MR WALKER:   Yes.  It raises the question, obligation owed to whom and enforceable by whom, but at least answers the question, is there an obligation?  Yes, there is ‑ ‑ ‑

GUMMOW ACJ:   Although the definition of “scheme payment” postulates an entitlement to the applicant.

MR WALKER:   Yes, it does.

GUMMOW ACJ:   Which presumably the Equity Court would enforce.

MR WALKER:   Yes, that is, the trustee is bound to hold the money to be dispensed in a particular way.  That way would be demonstrated by somebody who has an entitlement which will come upon acceptance of a claim.  Otherwise the press release does not, it would appear, take the matter any further.

GUMMOW ACJ:   It does indicate the source of the relevant date.

MR WALKER:   Yes, there is a period of grace, it would appear.  It also explains the difference between 100 cents and 90 cents as a policy matter.  There is a preference for personal injury claims, and that does not explain why it is only 90 for property damage, but it does show that there was a discrimination being practised.  Your Honours, perhaps I should take you back in relation to what has been asked about entitlement.  In the notes for applicants documents to which I have taken you, at pages 228 to 229 you will find the explanation of those references to review.  There is an internal review possible – see item 10 at line 40 on page 228, right‑hand column.  Then there is external review, page 229, left‑hand column.  Your Honours, all of that, in our submission ‑ ‑ ‑

GUMMOW ACJ:   We come back to the question Justice Crennan asked, I suppose, is there sufficient connection or relation to generate an equity of contribution?

MR WALKER:   Yes, that is right.  The situation as between SGIC and HIH was, of course, straightforward, co-insurers.  The position obtaining by reason of HIH’s insolvency was also straightforward.  IAL would, ultimately, upon the liability it resisted but was held to have, pay the whole without contribution.  Upon the Commonwealth devising the scheme and undertaking to provide the funds for it while the scheme was in existence, those who were insured both by HIH and SGIC had a choice, as the creditor, as to whom to sue, whom to claim against.  The choice of the policyholder, the insured as creditor, would determine who first bore a burden which was equally and co-ordinately borne by the two insurers.

	The difficulty in our position, or the novelty of the position for which we contend, is that although all payments by the scheme pro tanto discharge the co-insurers of HIH, it is not said and it does not appear to the slightest degree possible to argue, we would submit, that these are funds appropriated for and available under the trust fund to meet claims for contribution in the converse case, that is, if it had been to IAL, having assumed SGIC’s liabilities, to whom Mr Steele had first looked.  If mutuality in that sense is critical to the equity of contribution arising from the fact of HIH and SGIC being co-insurers and a payment reflecting HIH liabilities freeing SGIC from its burden, if it be necessary that mutuality in that sense exists, then we must fail.

GUMMOW ACJ:   Say that again.  Mutuality in what sense?

MR WALKER:   There is a second sense of mutuality involved, namely, that a party from whom contribution is claimed must always be a party who could have claimed contribution had the facts been opposite, namely, that the defendant had first payed, not the plaintiff.  If there is something at that high level of abstraction which is to be required for the equity to exist, then we must fail because there is nothing about this scheme that makes my client liable to contribute to a payment made by IAL on account of the SGIC policy ‑ ‑ ‑

GUMMOW ACJ:   That if Mr Jackson’s had paid first?

MR WALKER:   If they paid first, no payment by HIH, we are certainly not here – the scheme does not exist.

HEYDON J:   You would not have accepted Mr Steele’s offer?

MR WALKER:   I think we have put that and they have put that and we are at common ground on that.

HEYDON J:   But that is where the lack of mutuality comes from?

MR WALKER:   Yes, it does.

CRENNAN J:   He would not seek to avail himself of the Commonwealth scheme if ‑ ‑ ‑

MR WALKER:   If he had been paid.

CRENNAN J:   If he had been paid?

MR WALKER:   That is right.

CRENNAN J:   That is the way that the Court of Appeal analysed it, is it not, as against you?

MR WALKER:   Yes.

HEYDON J:   If he had a claim against Mr Jackson’s client but the Commonwealth scheme came along and he made an application under the Commonwealth scheme and Mr Jackson’s client then paid him, you would not have accepted his offer?

MR WALKER:   No, because that would have doubly compensated him.  He would not be a person who had suffered loss by reason of HIH insolvency.  He would have been made good by the IAL payment.

GUMMOW ACJ:   So it is not so much a question of mutuality, it is a question of the alleviating against the accident of choice and the sequence of choice by Mr Steele?

MR WALKER:   Yes, that is right, and it is our submission that ‑ ‑ ‑

GUMMOW ACJ:   The equity is concerned that that should not dictate events.

MR WALKER:   Exactly.

GUMMOW ACJ:   We are then back where we were.

MR WALKER:   Yes.  It is our submission that the cases are not capable, bearing in mind what they stand for, none of the cases that parties have drawn to attention, they are not capable of supporting at that level of abstraction a general requirement of mutuality in that second sense that I have accepted does not exist in this case.  Mutuality in the first sense, that is, HIH and SGIC were co‑insurers, that is obvious and trite in this case.  It is the second case of the defendant in the contribution claim saying, “I should not pay you any contribution because what if I had paid, you would not have paid me contribution.”  That is the sense in which, in our submission, the cases do not actually support that that is a barring rule.  

	It may be that that is a situation that for reasons particular to the facts of a relationship will show, for example, that the plaintiff and defendant of the contribution claim are not at what is called the same level of liability.  Treating that as one of the various phrases that have been used to stipulate for the requirement beyond merely freeing the defendant from the burden that equity has for contribution obligation seems to be the same as the co‑ordinate liability requirement that this Court, with respect, most often uses as the words to describe the concept in question.  

GUMMOW ACJ:   But it can involve the nature of the liability as well, can it not?

MR WALKER:   Nature and extent ‑ ‑ ‑

GUMMOW ACJ:   Is that not important in Burke v LFOT?

MR WALKER:   Yes.  Can I deal directly with that matter.  In Burke v LFOT there were, of course, qualitative differences introduced by what was variously described but can be summarised as being the differences of culpability, which has, of course, causal elements as well.  For example, in the reasons of Acting Chief Justice Gaudron and Justice Hayne at 209 CLR 282 at 293 paragraph 16.  That matter does not intrude into this case.  This is not a case where there is any nature or character question to which matters of culpability might arise.

GUMMOW ACJ:   One has to look at Justice McHugh too, I think, at paragraph 49 when he refers to that Scottish case.  There is a notion of substantiality involved.

MR WALKER:   Yes.  The whole discussion in Justice McHugh’s reasons, starting at the foot of page 298, paragraph 38 and going over to page 303, paragraph 50, with respect, is to that effect.  One of my last submissions was obviously based upon what one finds at page 301 in paragraph 44:

Nor will it apply merely because the claimant’s payment has benefited or relieved the other party financially.

We have that, obviously, resoundingly.  I accept that that is not enough.  However, the principle includes, with respect, the way in which his Honour puts it in paragraph 41 following the citation of Ellesmere Brewery Co v Cooper and by reference obviously to Albion where his Honour says:

The nature of the relevant interest and burden is such that the discharge of the burden by one party constitutes a benefit to the other or others which, in fairness, the law cannot countenance them keeping.

Cleaving to that statement of the principle and, in our submission, as one should, interposing no further paraphrase of the matter, we are enabled to say that because in the special circumstances of this case, by dint of the government beneficence which set up a scheme which has embedded it in obligations to benefit people whose rights against HIH have become worthless, but because in those special circumstances the reflex of what they obtain from us is the HIH obligation which is the paradigm case of being co‑insurers of the equity of contribution arising, but one can see, so far as fairness is concerned, the notion that IAL for SGIC keeping all its money is something which the law could not countenance.  

	Nothing they have done of merit and nothing we have done of demerit provides any persuasive reason, any reason at all, why they should take advantage of the timing of events in which the most important contributor to their present financial advantage was what has turned out to have been their wrongful refusal to accept liability.  It is that and the process of litigation to overcome their repudiation of their obligation which, by the interposition of the insolvency, leads them to be able to say, as they successfully contended in the Court of Appeal in the Victorian proceedings, “We are discharged because you have been paid”. It is our submission, the very basis of their success in those proceedings whereby they correctly observe the discharge of their obligation because of the co‑insurer’s payment, demonstrates the inequity of their maintaining that position as between the source of that payment, that is, my client, and themselves.

CRENNAN J:   It shows, I suppose, that they are not independent obligations.

MR WALKER:   No.

CRENNAN J:   That they were able to satisfactorily mount the defence of satisfaction.

MR WALKER:   That is right.  Quite so.  They were not able and, indeed, they embraced, for the purpose of that discharge answer in which they succeeded, they embraced the fact that this was not a merely coincidental payment by my client to Mr Steele.  They had to do that in order to show discharge, and it is for those reasons, in our submission, that they cannot have it both ways.  If they have succeeded in the defence of discharge, which they have, that is water under the bridge, then, in our submission, that demonstrates a sufficient mutuality.  They benefited by the discharge from which it follows that as between them and the party who provided that benefit, there should be equality pro rata of contribution.

GUMMOW ACJ:   You have to deal with paragraph 48 of Friend v Brooker, have you not?

MR WALKER:   Yes, indeed.

GUMMOW ACJ:   I do not think you are re‑running your argument in Friend v Brooker, which was encapsulated at paragraph 64.

MR WALKER:   I hope not, your Honour.

GUMMOW ACJ:   Nevertheless, you have to cope with the second sentence in paragraph 48 which refers back to what Justice McHugh was saying.

MR WALKER:   I think that is what I have been trying to deal with.  In our submission, the terms of the trust, the management agreements and the scheme and the offer accepted upon an application being made combine, as I say, to show that the HIH policy provides the entire reason for and measure of the payment made by us.  It is for that reason, namely, payment on account of an insurance obligation against his liabilities arising from the accident, that enabled IAL for SGIC to call in aid that payment for the discharge from which it benefited.  That, in our submission, overcomes the warning that one sees repeated in paragraph 48 of Friend v Brooker 239 CLR 129 at 151.

	It is our submission that this case requires no further analysis than the satisfaction of a court of equity that the payment made has already been treated in the most solid way possible, namely, to achieve their discharge, has already been treated as having been made on account of a liability of the same kind and to the same extent, to use the old language, so as to add the component necessary in order to enliven the equity that is necessary over and above the mere discharge of a burden.

GUMMOW ACJ:   I think you have got to cope with paragraphs 38 and 39 of Friend v Brooker too, and perhaps 40.  It comes back to the problem you have as to what would have happened if the insured, Mr Steele, had moved in one direction rather than in the other.

MR WALKER:   It does, yes.  In essence, what would have happened, they would have been no worse off than if there had been no payment at all, that is, we are not by our actions placing them in a worse position, but, in our submission, it lies ill in the mouth of a defendant to a contribution action to say, “If I had not refused to pay, if I had not then forced the claimant to sue me, then, as it turns out, you would not have been obliged to contribute”, and that would have been simply because of the intervening insolvency and there is nothing objectionable about the last solvent co‑insurer having to bear the whole of the obligation.  That does not offend equity at all.

GUMMOW ACJ:   There would have been no equity to direct Mr Steele in one direction rather than the other, would there?

MR WALKER:   Well, no, and if there is an insolvency, it would be an absurd proposition.  So that, in our submission, what if we had done the right thing rather than, as they actually did, they did the wrong thing?  That “what if” is not an appropriate way to analyse the position so far as concerns the most important matter which is in, for my argument, the natural justice referred to in the second sentence of paragraph 38 of Friend v Brooker 239 CLR 148.  That natural justice is, in our submission, enlivened ‑ ‑ ‑

GUMMOW ACJ:   Natural justice is reference back to Lord Winchelsea, is it not?

MR WALKER:   Yes:

the equality of burden should not be disturbed or be defeated by the accident or chance that the creditor has selected or may select one or some rather than all for recovery.

The added feature of this case not needing to be considered in Friend v Brooker paragraph 38 is the intervening insolvency of one of the co‑insurers.  That intervening insolvency obviously does not deprive us of whatever merit we have ‑ ‑ ‑

GUMMOW ACJ:   I think, Mr Walker, the obligor was here, your client, in the sense that it was obliged in due administration of its trust to pay the insured.

MR WALKER:   Yes, it became obliged ‑ ‑ ‑

GUMMOW ACJ:   You do not solve the problem by keep going back to the initial situation which triggered all this, which was double insurance.  We are not in a double insurance situation.  We are in a situation of comparing on one side of an insurance and on the other side a regime involving a trust with public funding.

MR WALKER:   Yes, your Honour.

GUMMOW ACJ:   And the due administration of that trust, are we not?

MR WALKER:   Yes, your Honour.  

HEYDON J:   Mr Walker, I am wondering whether you have not conceded too much against yourself in relation to mutuality.  If Mr Jackson’s client had paid first, could not the client have said to whichever company was the relevant person to speak to under the government scheme, “We had a duty to pay under a contract of insurance and we have paid.  You had a duty in equity under a trust to pay.  Mr Steele was a person who you had to bail out to the extent of 90 per cent.  Kindly come to the party since we have saved you from that”?  What is wrong with that request on the part of the respondent if the events had fallen out in that way?

GUMMOW ACJ:   Against the Commonwealth, or against the trustee, I should say, in the course of administration of that trust.

HEYDON J:   Mr Steele had not been paid anything, so his offer had not been accepted, but there was a duty to pay him if he did not get paid by the respondent.

MR WALKER:   Your Honour, I do not wish to appear to spurn assistance, but I am bound to point out, I think, in the interests of the funder that if Mr Steele – I suppose it depends on the hypothesis – if Mr Steele had not applied because he had been paid, it does not appear that he would have any chance of persuading, say, an equity judge that he ought to be considered a person entitled under the scheme.

GUMMOW ACJ:   The trust fund has been relieved to that extent.

MR WALKER:   There is no doubt about that, your Honour.  To the extent that people decide to bear their own losses, that is not make a claim, or that they are fully satisfied with indemnity from a co‑insurer or that they are able otherwise to obtain indemnity, say, from another tortfeasor, then of course the trust fund is spared, but ‑ ‑ ‑

KIEFEL J:   It sounds a little like an unjust enrichment claim, however.

MR WALKER:   Your Honour anticipates what I wanted to say, but that is the very simplicity of the proposition that this Court has repeatedly said does not suffice to give a right to contribution.  The mere circumstance that some event has spared a fund does not provide in itself without considerably more the equity of contribution by that fund.  But to return to Justice Heydon’s question, if there had been no application and the circumstance was that was because or it was at a time when he had been fully paid by SGIC, then of course he would not have been eligible because he is not a person who would have lost on its account.

HEYDON J:   He had made an application?

MR WALKER:   So if I could move to a different hypothesis. He had made an application and it had been accepted, upon which there was an obligation to pay.

HAYNE J:   Could not SGIC, under its policy covering Mr Steele, have taken steps to ensure, probably in the name of Steele, that Steele pursued his other rights?  I am not sure that that is so, but why would not be so, insurers are willing to step into the shoes of the insured very often?

MR WALKER:   In effect, that is what did happen here, but in the opposite direction; HIH and Steele did sue IAL standing in for SGIC.  Won, what I will call, all the cover contentions and lost on the discharge point, but did happen.  So the answer, Justice Hayne, is yes.  I have not finished dealing with Justice Heydon’s question.  On the hypothesis that we take what had actually happened this far, namely, making the claim and acceptance of the claim so that there is a full set of obligations imposed on my client, but departing from actuality to this extent that there had not been full payment, and at that point, on a road to an insurer’s Damascus, SGIC or IAL repents and pays in full and claims that payment as the ground for an equity of contribution against the scheme, then your Honour’s suggestion to me may be right in that case, but of course that did not happen.

HEYDON J:   What we actually have is an intermediate position between the first one you put and the last one you put.  Even though there had been no acceptance, the fact is Mr Steele was in a position to compel acceptance if his risk was not to be covered in any other way.  

MR WALKER:   Yes, and your Honour is there talking about in the absence of payment by Mr Jackson’s client.

HEYDON J:   Yes.  We are sort of putting ourselves in the respondent’s shoes, the argument that the respondent would advance against the trustee and the trustee’s administrators, but the mere fact that there had been no acceptance by payment does not alter the fact the trustee had a duty to pay.

MR WALKER:   Yes.  Your Honour, I accept it.  The whole matter depends upon the difficulty of inserting Mr Jackson’s client’s payment at a point where my client was obliged but had not yet paid.  If that situation were brought about, then, in our submission, it may well be that the burden, later assumed but of the same kind and extent, the burden imposed on my client as trustee, being relieved by that last moment payment by SGIC, would give rise to inequity, yes.  It may be that that theoretical possibility is another answer, not hitherto advanced by me but now adopted by me, to Justice Crennan’s question about mutuality.  It may be that that is so, yes.  

	Your Honours, could I turn finally to the notion of primary or secondary or different level of liability which is relied upon by my learned friends as an answer to the claim.  If we are right in our argument so far, then we have already met this point by referring to the way in which our obligation as a reflex of the HIH obligation, and as sparing IAL from the burden it undoubtedly had, suffices for the equity.  However, the subrogation cases which have been referred to in this regard, particularly the Caledonia North Sea [2002] UKHL 4, [2002] Lloyd’s Rep 261 decision relied upon by our learned friends, in our submission, do not carry the matter as far as has been argued by our learned friends.  Could I pick up the matter in relation to this idea of levels or primary and secondary first in the speech of Lord Bingham, page 268 of the Lloyd’s Reports, right‑hand column, section 12:

	The right of an insurer who has paid a claim to seek contribution from other insurers of the same risk on the same interest in the same property is clearly established . . . equally clearly established that a surety who is obliged to pay the debt owed by the debtor to the creditor is entitled to contribution . . . The question at the heart of this issue in the appeal is, as it seems to me, this:  is the present claim, as the operator contends, a subrogated claim properly made in its name by its insurer (who had indemnified it under a policy of insurance) to enforce a contractual right of the operator against the contractor?

The contractor having been held in part liable, that is, having been one of those whose wrongs had caused the disaster, and the contractor owing a contractual indemnity against the consequences –

or is it, as the contractor contends, a claim for contribution by one party liable to indemnify the operator against another?

So in that case the contest was between whether the insurer of the operator was entitled by subrogation to enforce to the hilt the contractual indemnity owed by the contractor to the operator, so that is the subrogation aspect of the case which is what it was about, or was it rather not a case of full subrogation but a case where the defendant, the contractor, could say, “My contractual indemnity stands at the same level” – or to use other language – “to the same kind and same extent as the insurer’s insurance obligation owed to the operator?”  For the reasons which their Lordships find, the primary liability was that of the contractor and in the course of that analysis considerable use is made of Australian authority.  You will see in Lord Mackay’s ‑ ‑ ‑

GUMMOW ACJ:   There is reference to Speno, is there not?

MR WALKER:   Yes.  At the end of Lord Bingham’s reason, page 270, left‑hand column, paragraph 16, Albion is distinguished, that is, so as to defeat the contractor’s argument, about the middle of that column referring to Mr Justice Kitto:

his ruling was not directed to the case where the liabilities of the two indemnifiers are not co‑ordinate, where (to use different language) one liability is primary.

Then a reference to Speno where:

the competing liabilities –

one insurer and one a contractual –

were intrinsically different and not co‑ordinate.

GUMMOW ACJ:   Did we give special leave in that or refuse special leave?

MR WALKER:   There is another aspect of that dispute was the subject of special leave and of appeal.

GUMMOW ACJ:   I thought, yes.  Did it come here on another point?

MR WALKER:   It did.  I should remember, your Honours, but I cannot.  I am sorry, your Honours.  It has nothing to do with this case.  

GUMMOW ACJ:   Yes.

MR WALKER:   This aspect of the case did not, of the rather wide‑ranging dispute, did not come to this Court ultimately.  Justice Wheeler was quoted by his Lordship with this expression, in particular, to which I will draw attention.  

Where, as here, there is a contract for services which contains within itself an indemnity provision, together with insurance which may also cover the events the subject of the indemnity – 

and I would interpolate so, on one view, it might have been thought same kind, same extent.  Her Honour continued –

it is generally appropriate to regard the insurance as a secondary rather than a co‑ordinate obligation.

Now, the word “generally”, of course, covers the situation to deal with novelties of circumstances such as, for example, this case may arise.  My present point is to observe that in terms of this defeat of this character of being co‑ordinate, the direct contractual obligation of indemnity for an event or consequence, be it by wrongdoing or not, is regarded as primary by contrast with the insurance obligation where obviously the insurer will not have been  responsible in any way for bringing about the event and so it is ‑ ‑ ‑

CRENNAN J:   You want to go back to your standing in the shoes of HIH?

MR WALKER:   I have tried to avoid that metaphor, your Honour, because we are advancing a subrogation claim obviously, but, yes, subject to that last quibble, yes.  I do go back to the proposition that in the eyes of equity as a matter of substance, everything about our position derives from the existence and nature of the obligations owed by HIH to policyholders.  

	One thing, of course, is clear to demonstration as between us and the insured, it cannot be said by contrast that the pre‑existing insurer, SGIC, is somehow secondary with us being primary.  If there is any remoteness of level of liability to be differentiated between these parties, it is that they would be primary and we would be secondary, but that, in our submission, would be to elevate these epithets which are overly abstract beyond what is necessary in order to serve the equity which, as a matter of substance, observes that we subjecting ourselves to obligations wholly explained as to existence and extent by the co‑insurer’s obligations ought, in these special circumstances, have the equity.  

	I should draw to your Honours’ attention the condition that is necessary in order to do equity that your Honours will have seen in the written submissions.  We reserve a right with all our policyholders we sign up to prove in the liquidation.  To the extent that we get a dividend, we must share that with Mr Jackson’s client.

GUMMOW ACJ:   We need to be clear, I think, about one matter.  Referring back to Friend v Brooker at paragraphs 38 and following, cannot this case be fitted within that framework on the footing that if Mr Jackson’s client had been demanded and paid first, Mr Steele would have been obliged ‑ ‑ ‑

MR WALKER:   To make a claim on us?

GUMMOW ACJ:   Yes, which would produce, in effect, a contribution by your client in the course of the due administration of that trust?

MR WALKER:   Under the policy, yes.  As between Mr Jackson’s client and Mr Steele, yes, is the answer.

GUMMOW ACJ:   Then as between  your client and the due administration of the trust, would he not have been obliged to act accordingly?

MR WALKER:   Your Honour, it is obviously tempting to simply to say yes.  I do need, however, to draw to attention the criterion of suffering loss by insolvency. 

GUMMOW ACJ:   Meaning?

MR WALKER:   Meaning that the scheme seems to be set up on the basis that it will only make payments to those who have suffered loss as a result of the insolvency and that somebody who has been fully indemnified by a co‑insurer may not fall into that category.

HAYNE J:   Is there a particular provision or set of provisions which you point to in that respect?  The reason I ask it is that I have in mind page 228, which is the notes for the applicant’s document, under the heading “What will the scheme pay?” casts the obligation in terms of:

90% of the amount which the insurer would have been obliged to pay –

and there is no explicit reference there to, if you have lost that amount or the like.  I do not doubt that the political statements that were made placed some emphasis upon making good the losses suffered by particularly described classes of person.

MR WALKER:   Yes.  Would your Honours just excuse me one moment?

KIEFEL J:   I think the media release refers to:

policyholders suffering financial hardship as a result of the HIH collapse.

MR WALKER:   That is one of the references, yes.  I am so sorry, your Honours, I had this and it was one that I referred your Honours to this morning.  It is not the one I had in mind, but I am indebted to Mr Kulevski for drawing to attention the rather important expression in clause 2 of the trust deed, “Objects of the Trust,” page 67:

The Commonwealth wishes to assist certain qualifying individuals and small businesses affected as a direct result of the appointment on 15 March 2001 of the Provisional Liquidators –

That is not actually the reference I had in mind, which I cannot put my hands on at the moment, but that is to the same effect.  Your Honours, the questions that both Justice Heydon and Justice Gummow have in various ways repeatedly asked me with unsatisfactory answers from me really can be seen, with respect, as amounting to this.  Does this scheme, as it stands in this Court, require its administration according to its terms derived from the trust deed and down, so that applicants who had relevant policies with HIH must be admitted to an entitlement to be paid notwithstanding a co‑insurer had already fully indemnified them?  

	If the answer to that is yes because of the references, including that to which Justice Hayne drew my attention, that is, the criteria I took the Court to at 228 and 229, starting in the notes for applicants at 226, if the answer to that on the basis of those documents is yes, then there is an answer to the so‑called mutuality objection raised against us.  If, on the other hand, a proper understanding of the scheme – see the first sentence of clause 2 – is that one must be a sufferer, in fact, by reason of insolvency, then it would not appear to be true of people who have been fully indemnified that they could make out that they have suffered as a result of the insolvency.  There is no gentle way of putting this.  Clearly enough, applicants do not include co‑insurers.  This was not a scheme for the benefit of insurance companies.  That, of course, does return me to where we started, in terms of the mutuality question.

HEYDON J:   But principles of equity do.

MR WALKER:   I am sorry, your Honour?

HEYDON J:   Principles of equity do.  In this notional world, we are talking about where the respondent paid first.  The respondent is not claiming under the scheme.  The respondent is appealing to the equitable principles of contribution.

MR WALKER:   No, quite so.  I accept that entirely.  My comment was simply to this effect, that the scheme does not, in fact, have any element which shows an express contemplation of contributing to claims made by co‑insurers.  Now, that does not mean that the trustee is not entitled to make such payments but rather, that you cannot see it from the way in which this motley collection of documents shows the nature of the scheme.

KIEFEL J:   In the notes for applicants at page 227 under the heading “Who does not qualify?”, at paragraph 6(c) there are identified claims under certain categories of policies which this is not one.

MR WALKER:   No.

KIEFEL J:   It would seem perhaps that the trustee’s potential for rejecting a claim might be under clause 4, where there is no case of genuine hardship, which might align with the media release, but that is about all.

MR WALKER:   Yes, that is a means test.

KIEFEL J:   I realise that, but that is the only reference to how you might not qualify otherwise.

MR WALKER:   No, I accept that.  The notes for applicants wholly support the possibility of their being an entitlement though a co‑insurer has paid.

KIEFEL J:   Yes.

GUMMOW ACJ:   Where does the scheme contemplate any power in your client to seek contribution from Mr Jackson’s client?  It does not, does it?  Having sought the benefit, I cannot quite see at the moment why you escape the burden if the facts were the other way around, which is what you seem to be doing.  You want to have a Chinese wall that works one way.  Now equity enables you to hop over the Chinese wall in one direction but does not enable Mr Jackson to hop over it on the hypothesis we have been considering.  How is this right?

HAYNE J:   The relationship is give and take, is it?

GUMMOW ACJ:   Take but not give, not an attractive position for an equitable claim.

MR WALKER:   No, we gave.  I think the short answer is we gave and want only a fair take, a fair take, that is, to share the burden which we presently wholly bear.  

HEYDON J:   Mr Walker, you seek an order that judgment be entered in the amount of $907,000‑odd with interest.  Pages 10 to 13 indicate that interest is a very complex subject.  Would it be better, assuming everything else works in your favour, that the court orders a particular amount which then carries interest from the day of judgment, from the day of order?

MR WALKER:   Yes.

HEYDON J:   An order of the type you seek would have about three or four pages of annexures to it, pages 12 and 13.

MR WALKER:   Yes, is the answer, your Honour.  

HEYDON J:   Would it not be desirable, subject to what others think, that you put in some document indicating what the correct figure is and the amount of interest that as of, say, next Wednesday and the amount of interest that will go on thereafter from day to day?

MR WALKER:   If I have the Court’s leave to do so, yes.

GUMMOW ACJ:   Yes, I think that would be – page 313 at the moment is not very satisfactory.

MR WALKER:   I entirely accept that, your Honour.

GUMMOW ACJ:   I have to say to you, Mr Walker, I still do not understand what it is that is the mainspring of your equity claim contribution, one‑sided contribution, and unless your client faces up to that, it seems to me it is seeking to make equity approbate and reprobate and you may talk yourself out of your claim against Mr Jackson.

MR WALKER:   No, I understand entirely, your Honour.

GUMMOW ACJ:   It is a very serious situation that has been breached, it seems to me.  I do not know why it was not breached a long while ago, but anyhow it has been breached after two hours in the final Court of Appeal in the country.

MR WALKER:   Yes, your Honour.  As I say, if it be held, if it be regarded that the entitlement of a person to be admitted to payment, to be given payment, and does not require that they are out of pocket at that time, then, in our submission, for all the reasons that have been raised, Mr Steele can by an application have – I should say, impose on my client a burden which would give rise to contribution had we not been the first to pay.  I think it must follow from the nature of the equity in question that there has to be that burden and for that burden to exist there has to be an obligation to admit to payment a person who has already been paid by a co‑insurer.

	That does not mean that there has to be a merry‑go‑round of money.  We entirely accept there is a possibility of that occurring which gives rise to the equity of contribution.  Our position is if there be that entitlement in somebody like Mr Steele, then it would follow that the problem of mutuality raised against us, that is, the lack of an equity contribution, would not be so and that it would apply.  May it please the Court.

GUMMOW ACJ:   Yes, Mr Jackson.

MR JACKSON:   Thank you, your Honours.  As your Honours will have seen from the outline of submissions we handed up this morning, the underlying propositions we advance are that the appellant’s position does not entitle it under the law as we would submit it stands to claim contribution against the respondent and there is not any very good reason for expanding the right to contribution to allow it to do so.  Could I mention, your Honours, without going to it in detail the matter to which we have referred in that outline on paragraph 2.  It is something arising from our learned friend’s reply and, your Honours, I would simply refer to it without going to the detail of it.

	May I come to the terms of the scheme, a matter about which there has been considerable reference this morning.  Your Honours, the point we would seek to make about it initially is that the scheme documents to which the Commonwealth is a party and those are the first two that were referred to this morning, that is the trust deed and the management agreement, make it, in our submission, quite clear that the entitlements of the appellant are not to be those which involve it having the rights of the HIH insurers, and by that I mean not having, for example, the right to contribution that there would be, if there had been a payment made by an HIH insurer, a claim against us, but rather what the scheme documents do is, in our submission, to make it apparent that the rights which are to be transferred are the rights of the insured, not the insurer.  

	Your Honours, I will come back to this a little later, but it is clear also from the actual document that Mr Steele signed and the payments that were made that it was in return for him transferring to the appellant his rights as an insured under the policy.  Your Honours, at the time in the theoretical construct that has been referred to by your Honour Justice Heydon, for example, to which my learned friend was responding, at the time that had occurred if we had first paid, the assignment of his rights to the appellant would be an assignment of rights against the HIH company but in respect of obligations which had already been satisfied by us, there would be no continuing loss, which does create, in our submission, a difficulty for that construct, but may I come back to that, your Honours.  

	Could I go, your Honours, to the scheme documents, and I use that a term a little incorrectly perhaps because one should start with the Appropriation (HIH Assistance) Act 2001 which provides a statutory backing for the expenditures to be made.  Your Honours, I do not think I need to take your Honours to its very brief terms, but what one does see from it is that it authorises an appropriation of funds for the purposes set out in section 4.  It does not effect a transfer to the appellant of the rights or the rights and obligations of the HIH companies.  Your Honours, if I could move from it to the first of the documents implementing the scheme ‑ ‑ ‑

GUMMOW ACJ:   Just looking at section 4, Mr Jackson, which seems to have a lot wrapped up in it, for purposes (a):

providing financial assistance to HIH eligible persons, either directly or indirectly –

It does not say providing by whom.

MR JACKSON:   No, and I perhaps invite your Honours to note that it speaks of providing financial assistance to HIH eligible persons, a defined term meaning:

a person who:

(a)	is a policyholder, insured or beneficiary under a policy of insurance issued by an HIH company; and

(b)	has suffered financial loss –

et cetera.  So your Honours will see the focus there upon an HIH eligible person being a policyholder and a reference in ‑ ‑ ‑

GUMMOW ACJ:   Or a beneficiary under a group policy of some sort.

MR JACKSON:   Yes, your Honour.  I am sorry, policy – I put it too shortly.  If the contract of insurance then, in fact, was had with us, had been in similar terms with HIH, then Mr Steele, although he had not effected the insurance personally, would have fallen within the terms of the term “beneficiary”.

GUMMOW ACJ:   Then it says providing, the legislature does not say how, “either directly or indirectly”.  Indirectly would presumably contemplate the interposition of the trust structure, would it, with the management agreement under that and so on and so forth?  Because it is not the Executive that is handing out this money.

MR JACKSON:   Your Honour, that is so.  

GUMMOW ACJ:   It seems to permit the Executive to make some arrangements which had this procedure.

MR JACKSON:   Yes, the appropriation is for that purpose, so there has to be provision of financial assistance to people who are described as HIH eligible persons in terms of the definition and the provision has to be by doing it directly by payment of money presumably by instrumentalities of the Commonwealth or employees of the Commonwealth to those persons or indirectly by doing it through some other agency.

GUMMOW ACJ:   Then the note picks that up.

HAYNE J:   Indirectly by paying the person to whom the insured person is liable.

MR JACKSON:   Yes.  So that, your Honours, so far as the construct of the scheme is concerned, is not a question of being ultra vires of course.

GUMMOW ACJ:   No.

MR JACKSON:   It is just a question of, as we would say, if one looks at that Act, one sees that it has authorised an appropriation of funds for the appropriate purposes but it does not itself effect any change in the legal relationships of any persons who are involved.  Your Honours, if I could go then to the trust document at page 67.

GUMMOW ACJ:   What I am trying to get to is perhaps, Mr Walker says, well, there is this structure been created with the trust and the agreements and so on.  He then says equitable principles attached to that and there does not seem to be anything in the appropriation which would have denied that use of a structure.  Equitable principles apply to that to, as it were, replenish the fund but they do not apply or would not apply to deplete the fund if the timing had been different.

MR JACKSON:   That does not sound much like fairness or fairness in equitable context, your Honours, but may I come to that a little later.  What I was going to say, your Honours, was this.  If one goes to the terms of the trust deed, one sees, as your Honours have seen, the object set out in clause 2 in very broad terms.  It speaks of qualifying individuals and so on.  Then your Honours will see the second sentence of clause 2 which says:

That assistance will be paid by the trustee of the Trust and the Commonwealth is to fund the Trust under the terms of the Commonwealth Management Agreement.

One sees then, your Honours, in paragraph 5, or clause 5, the beneficial interest in the trust was to lie with the Commonwealth.  Your Honours will see in clause 6 that the trustee’s powers and duties in clause 6.1 were limited to those expressly provided under the:

Deed, the Commonwealth Management Agreement and any Claims Management Agreement.

Then your Honours will see in clause 6.2 ‑ ‑ ‑

GUMMOW ACJ:   What is the force of the opening words of 6.1?

MR JACKSON:   Your Honour, if one sees that there is some apparent limitation which otherwise would not exist, then it may well be that any limitation relied on would not be effective.

GUMMOW ACJ:   Is there any provision for investment to this fund?

MR JACKSON:   Yes, there is, your Honour.

HAYNE J:   Only in the accounts, is it not, the investment power?  Clause 10, page 72:

not, without the prior written approval of the Commonwealth, invest or reinvest any part of the Trust Fund except by deposit into the relevant accounts –

MR JACKSON:   Yes.  I think that is it, your Honour, the provision for there to be required prior written approval.  Your Honours, could I just say that in clause 6.2 at page 69 it says:

The Trustee must not perform any act that is outside the scope of its duties and obligations under this Deed, the Commonwealth Management Agreement and any Claims Management Agreement.

Your Honours will see then that there is established by clause 3.1 the trust fund.  Your Honours will see that the “trust fund” is defined by clause 1.1, or that term is defined by clause 1.1 at page 68 to mean “the settled sum”, that is the $10.  The “Commonwealth fund”, a term which is defined at page 64 about halfway down the page to mean –

all cash and other amounts provided to the Trustee under the Commonwealth Management Agreement.

Then there are recoveries.  “Recoveries” is defined also on page 66 and, in our submission, it is an important definition because it says that it: 

means sums recovered by the Trustee –

and then your Honours one then sees why –

as a result of the assignment of rights under an insurance policy by Applicants to the Trustee, including:

(a)	sums recovered from third parties; and

(b)	sums recovered pursuant to the exercise by the Trustee of rights to prove in the liquidation of any HIH Company.

Your Honours, the term is defined in that way as referring to amounts that are recovered by the trustee as a result of the assignments, not of the rights of the HIH companies, the insurers, but the rights of the insured under the policies.  So that if one is looking at a source for a claim to contribution, it has to be found atypically in double insurance cases in the right of the insured, not in the right of the insurer having paid to recover contribution from another insurer.  

	Of course, your Honours – perhaps I can give your Honours a reference to this after lunch – a claim for contribution is a claim made by one of the persons liable.  It is not a claim made by an insurer who is paid by way of subrogation – paid in the name of the insured by way of subrogation.  It is a claim by the two persons having the obligation to pay one against the other.  So one sees the two classes of items contemplated by the term “recoveries” in that definition and they are, and it is the rights of two classes, the assignment of rights under the insurance policy by the applicants, including sums recovered under the exercise of those rights, in our submission.

GUMMOW ACJ:   Where is the definition of “recoveries” picked up?

MR JACKSON:   Your Honour, I was just going to say that.  The position is, your Honours, that that terms is not used elsewhere in the trust document, but your Honours will see that clause 6.1 has referred to two other documents, the Commonwealth Management Agreement, this is at page 69, and any Claims Management Agreement.  Could I say, your Honours, if I could go to the Claims Management Agreement at page 88, you will see that under clause 5.1 of that document, which is at page 94, you will see that the Commonwealth appoints the appellant to administer and manage the scheme.  Then you will see that the obligations of the appellant include those referred to on the next page in clause 5.3, letters (j) and (k).  Sorry, page 95, your Honour.  Each of those refers to recoveries, and you will see, your Honours, that paragraph (j) authorises:

Claims Mangers to pursue all Recoveries referred to in paragraph (a) of the definition of Recoveries –

May I invite your Honours to hold, as it were, page 95, and go to the definition of “recoveries” in this document, which is at page 91, and it is in the same terms.  You will see that it refers to, this is about line 37:

Recoveries means sums recovered by HCSL as a result of the assignment of rights under a Relevant Policy by Applicants to HCSL ‑

Your Honours, “applicant” is defined itself at the bottom of page 88.  They are applicants “for assistance under the Scheme”.  What one sees, your Honours, if I could invite your Honours to hold on for a moment to page 91 and the definition of “recoveries” and go back to page 95 and to clause 5.3(j), one of the functions of the appellant is to:

authorise Claims Managers to pursue all Recoveries referred to in paragraph ‑ ‑ ‑

GUMMOW ACJ:   Sorry, where are you now, Mr Jackson?

MR JACKSON:   I am sorry, page 95, your Honour, about line 20.  It is clause 5.3(j).

GUMMOW ACJ:   Yes.

MR JACKSON:   It is to:

authorise Claims Managers to pursue all Recoveries referred to in paragraph (a) of the definition of –

that term, and pay the amounts as there set out.  Then if one goes also to the next subparagraph on page 95, they are to:

pursue all Recoveries referred to in paragraph (b) of the definition of Recoveries –

and that your Honours will see from page 91 is moneys recovered from the liquidation of the HIH companies and to deal with them similarly.  Now, could I just say, your Honours, that the definition of “recoveries” makes it apparent, in our submission, when one is looking at the rights of the insured being the rights that are to be exercised, to put it loosely, by the appellant – and your Honours will see they fall into the two categories that one sees referred to otherwise in the actual documents, their applications in the scheme, and that is they are the rights which the insured would have had under its policy and the rights to get to prove in the liquidation of the HIL ‑ ‑ ‑

GUMMOW ACJ:   It looks something like a subrogation situation.

MR JACKSON:   Yes, your Honour, it is very similar.  It is effectively saying what rights you have – I am sorry, I will start again – what it is saying is that these are the types of recoveries that are to be pursued.  Your Honours, could I just say – and, your Honours, I see the time – but may I say one thing before I conclude and it is just this, that it is apparent that it refers to insured, and if I could just say one thing, one further thing, if one goes to the Claims Management Agreement – that commences at page 144 – and your Honours will see in relation to that that at page 157 the claims manager – and this is clause 2.6 and the second paragraph of that, the bottom of page 157 – the appellant:

shall only be required to perform any obligation under this agreement to the extent that it is authorised by the Commonwealth to do so under the terms of the Commonwealth Management Agreement.  Any obligation or responsibility imposed on HCSL under or in respect of this agreement shall be void and unenforceable to the extent that HCSL is not authorised by the terms of the Commonwealth Management Agreement to assume or to undertake or to carry out such obligations and responsibilities.

HEYDON J:   Is your submission that this is, in effect, an exclusion of the right to contribution?

MR JACKSON:   Yes, your Honour.

GUMMOW ACJ:   It is an exhaustive charter, as it were.

MR JACKSON:   I was about to say that, your Honour, yes, it is the charter of the company.

HEYDON J:   But it is a trustee and under the general law trustees have rights of protection, property protection of the interests of the fund.

MR JACKSON:   Well, your Honour, yes, of course, depending, of course, on the terms of the trust.

GUMMOW ACJ:   That brings us back, does it not, to the trust deed itself where it talked about the general law?

HEYDON J:   Clause 6.1 on page 69.

MR JACKSON:   Yes.  Your Honours, the point I am seeking to make is that this is a trust set up for particular defined purposes.  It sets out in its terms what are the items that either constitute the trust fund.  One of the items is the item that is apposite for present purposes, namely, recoveries.  The term “recoveries” is defined in a specific and limited way and, your Honours, it does, in a way, put the company in the position of the insured.  The insured would have been entitled had there not been a liquidation to recover from the HIH company.

	It is the rights that the insured has, including the – are assigned to the appellant company as is the right to prove in the liquidation, but there is nothing to suggest, your Honours, that the appellant is to have greater rights than that.  When one comes to the Claims Management Agreement to which it is a party, which I just mention very briefly, there is a reference to contribution, but it is in circumstances where the HIH companies themselves have become parties to the document.

GUMMOW ACJ:   Perhaps you better take a minute to look at that now.

MR JACKSON:   Yes, certainly, your Honour.  Could I just say this, I need to go in that regard first to the Commonwealth Management Agreement.  You will see in the Commonwealth Management Agreement that there is a definition at page 89 about line 22 of the ‑ ‑ ‑

GUMMOW ACJ:   Sorry, just before we leave the trust itself, clause 6.1 has to be read with 5 you would say, I think.  In other words, the phrase “To the extent permissible by law and equity” in 6.1 has to accommodate the paramountcy, if you like, of the terms and conditions of the deed in 5.  That would be right, would it not?

MR JACKSON:   Yes, your Honour, it would have to be, with respect.  One has to the read the document as a whole.  Could I just say, your Honour, just for a reason of ‑ ‑ ‑

GUMMOW ACJ:   Sorry, I interrupted you.  You were going to page ‑ ‑ ‑

MR JACKSON:   Yes.  Your Honour, I was just going to say one thing while your Honour took me to that.  The date of that document, the trust deed, is 6 July 2001.  The Commonwealth Management Agreement, to which I will now come, has the same date, but the other agreement, the third agreement, does not.  It is later, in August or September.  The reason why I mention that, your Honours, is that if one goes to the Commonwealth Management Agreement itself, you will see at page 89, about line 23 or 24, that it speaks of the Claims Management Agreement as meaning:

an agreement in the terms of or substantially similar to the terms of the agreement at Schedule 1.

If one goes to Schedule 1, the cupboard, at page 120, is somewhat bare, somewhat bare in the sense, your Honours, that although it contemplated that there would have been that schedule, the schedule appears to have been not at that point completed.  As we understand the position, you will see, your Honours, that at the bottom of the right‑hand corner of each page in that document – and if I could go to page 119, you will see it is the execution page and you will see at the bottom of the page “page 33”.  Then you see “page 34”, which is the schedule 1, which has really nothing in it.  Schedule 2 seems to have been an inserted – this is pages 121 and 122 – seems to be a version which is perhaps a copy that has been reinserted.  If you go to page 123, which sets out schedule 3, the page number of it is “page 36”, which seems to suggest that there was in fact no text in schedule 1.  I am sorry, your Honour, it is a long way of putting it, but that is what I am trying to suggest.

GUMMOW ACJ:   Well, something called a pro forma agreement was somehow incorporated in this reference.

MR JACKSON:   Yes.  In fact, the document, that management agreement, was not, in fact, made until, as I said, 4 September.  You will see that on page 143.  Your Honours, the point I was seeking to make about it was this, that the parties to the Claims Management Agreement appear at page 144.  They are the HIH companies, the appellant and QBE.  The HIH companies had not been parties to the Commonwealth Management Agreement and one sees, your Honours, the background at page 150 to which my learned friend took you.  It says, in effect, these things, that the desire of the appellant was to appoint QBE to provide payment management and recovery services.  QBE agreed to provide those services.  “Payment management and recovery services” is the term which is defined at page 154, about line 49.  They are the services set out in schedule 10.  Your Honours, may I take your Honours to schedule 10 in just a moment.

	The HIH Companies, on the other hand, wanted to appoint QBE to provide claims management services.  Your Honours, in saying that I am paraphrasing what is in the background at page 150.  Your Honours will see then that the “claims management services” was defined at page 151, at the bottom of the page, to mean those set out in schedule 11.  Those two schedules, 10 and 11, your Honours will see at pages 204 through to 206.  In schedule 10 you will see that there is, particularly in paragraphs 5 and 6, reference to:

5.	Identification, pursuit and settlement of Recoveries where the manager considers such action appropriate . . . 

6.	Accounting to HCSL and the Insurer for their relevant proportions of the sums –

Then you will see at page 205 “Claims Management Services” and these are the claims management services which are to be provided to the HIH companies.

GUMMOW ACJ:   We have already looked at clause 9.

MR JACKSON:   Yes.  Your Honours will see the opening words of it and you will see paragraph 7 at page 205.  In the case of this document, one sees that the term “recoveries” is defined at page 155, about line 8 it includes:

any action by the Manager on behalf of HCSL and/or the Insurer in respect of an HIH Scheme Claim which may reduce the gross loss or liability paid or payable under the relevant HIH Policy including . . . recovery against a liable third party or insurer of that third party, other insurers for dual insurance and/or contribution ‑

Now, your Honours, that is the point at which, if one is to find anything about contribution, that is where it comes from.  The point that we seek to make, your Honours, is that it is the first document to have the HIH insurers as parties and we would submit that the operative provisions of the Claims Management Agreement do not suggest that the appellant has gained any rights other than those contemplated under the trust deed and the Commonwealth Management Agreement, and I referred your Honours in that regard to page 157 and clause 2.6.

CRENNAN J:   That cannot imply an obligation to pay under the scheme?

MR JACKSON:   I am sorry, your Honour?

CRENNAN J:   Cannot imply an obligation or duty to pay under the scheme having regard to the points you identify?

MR JACKSON:   In our submission, no.  Your Honour, I would answer with a qualification.  The implication of an obligation to pay arises, in our submission, at a point later and the point at which it arises is when the first payment is made in respect of an accepted application.

GUMMOW ACJ:   Is this covered by a notice of contention?  It does not seem to be in the forefront of the Court of Appeal.

MR JACKSON:   No, your Honour.  I think it is quite right to say that this aspect of the matter, I think, is not referred to specifically in the judgments below.  We would submit it is a development of the contention we have been making that what has been assigned is the right of the insured.

GUMMOW ACJ:   Perhaps over lunchtime you could formulate a specific ground that would be attached to your notice of contention so that we have it clearly in our heads.

MR JACKSON:   Yes, your Honour.  Your Honours, could I just say that the argument has developed a little in light of what has been said this morning.

GUMMOW ACJ:   Yes, indeed.  We will adjourn until 2.00 pm.

AT 1.00 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.00 PM:

GUMMOW ACJ:   Yes, Mr Jackson.

MR JACKSON:   Your Honours should have a draft amendment to a notice of contention.  Your Honours will shortly have a draft amendment to the notice of contention and your Honours will see the proposed paragraph 3 and we would seek leave to amend the notice of contention in that way.

GUMMOW ACJ:   Thank you.  Is leave to amend opposed?

MR WALKER:   No, your Honour.

MR JACKSON:   Your Honours, I was going to the terms of the Claims Management Agreement and may I take your Honours to page 157.  Your Honours have seen from the earlier parts of the document that it is a document in which the appellant and also the HIH company, HIH insurers, give rights and obligations to QBE in the particular case.  Could I just take your Honours to paragraph 2 on page 156, first of all.  Your Honours will see in 2.1 the appointment by the appellant.  You will see in 2.2 the agreement with the appellant.  You will see the relationship referred to in 2.3 and then in 2.4 and 2.5 there is dealt with the position as between the several insurers and QBE.  Your Honours will see also then the provisions of clause 2.6, particularly the second paragraph to which I have taken the Court already. 

	Your Honours, in our submission, if one looks at the document, there is nothing to suggest, in our submission, that even if it could legally – if I can use that expression perhaps a little neutrally – be done, that the appellant rather than the relevant HIH company has a right to contribution for double insurance.  Your Honours, could I go then to the offer documents and to page 140.  Your Honours will see that the offer document on page 140 in the left column says the same thing.  It says that it is an assignment to the appellant of:

(a)	all rights to receive or to demand the receipt of any benefit arising from any claim which you have made or make under your HIH policy, where the claim is the subject of the payment of a benefit under the Scheme; and

(b)	any rights, however arising, which you may have or obtain against any person or organisation other than the HIH insurer, in connection with the matters –

So what is being spoken about, your Honours, if one looks at that document, is that they are the assignment to HCS Limited of the rights of the insured person.  Your Honours, if I could go over to page 138 to which our learned friends referred, what you will see at about line 30 there:

If HCS Limited accepts your offer, this will mean that –

and your Honours will see the reference to the payment of 90 per cent.  You will see in the next dot point about line 38:

•	you will no longer have a right to recover any funds from HIH . . . 

•	you will no longer have a right –

Now, it is right to say, if one looks at the top half of that column on page 138, that one of the terms of obtaining the 90 per cent is that – perhaps hardly surprisingly in a scheme of this kind – there is a requirement that there be compliance with the obligations which – compliance with which would have been required if a claim were being pursued under the HIH policy, but it does not mean that the claim that is being made is a claim under the HIH policy.

	Your Honours, could I go also to the notes for applicant at page 226.  Your Honours have been taken to various parts of this, but your Honours will see paragraph 1 in the left column on page 226 there is an indication of those who may qualify to apply for the scheme.  There is the reference in paragraph 3 to the time when the event has to occur and your Honours will see in paragraph 5 on page 227 that:

Subject to one exception . . . only an HIH policyholder or insured who falls within the categories identified in paragraph 1 . . . may apply for assistance under the Scheme.

Now, if one goes back over to paragraph 1, your Honours will see that you have to be:

a policy holder or insured who has a claim under an insurance policy –

So the persons who may claim are the persons who are policyholders or who otherwise fit within that term.  Your Honours, if one goes over then to – I am sorry, I just lost the reference which I was about to give, but could I say, and I will come back to it – the point I was going to make was that it is made apparent in, I think, the offer document at page 140 and shortly afterwards – I should say page 138 in the right column it is then said, halfway down:

The only method which HCS Limited may use to accept your offer is payment of a benefit under the Scheme . . . the first payment of the series constitutes acceptance –

by it of a claim under the scheme.  Your Honours, there are several features, in our submission, which are features which should lend themselves to a conclusion that there is no right of contribution as sought in the present case.  The first, your Honours, is, in our submission, the absence of an ability for us to claim and, your Honours, as was said in Friend v Brooker 239 CLR 148, paragraph 39, your Honours, I am paraphrasing this, the equity to seek contribution arises because of the exercise by a creditor of rights and that the exercise by the creditor of rights ought not to disadvantage some of those bearing a common burden.  

	Your Honours, inherent in the nature of contribution, in our submission, is the notion that there is a right to contribution in each of the parties which is to bear the common burden.  That seems to lie – the very notion underlying the whole thing is that each of them should bear part of the common burden, but that, in our submission, cannot have an application here and it cannot have an application here because, as we submit, if Mr Steele had claimed on our policy and been paid, he would not have had a claim under the scheme.  The position would simply be that the loss had been paid and the only claim we would have would be for contribution by proving in the HIH liquidation, assuming we were able to do that.

	Your Honours, it is quite clear, we would submit with respect, from the notes for applicants to which I have referred at, for example, page 227, that we were not persons who could claim against the appellant or in some way claim against the scheme.  We could not do so because, if one goes to page 226, lines 25 to 30 in the left column, we were not an HIH policyholder or insured falling within paragraph 1 of those notes.  Your Honours, certainly we, as the respondent insurer, would have been entitled to use the name of Steele if we had paid up.  We would have an entitlement to be subrogated but then subrogated in a sense to what?  

	Any claim by and in the name of Steele would be a claim by a person whose liabilities had already been satisfied.  So that any claim that we would or could make on the scheme, would or could seek to make on the scheme, would be one that would be immediately answered by saying, “We do not owe you anything.  You do not have a claim under the scheme for any loss.”

GUMMOW ACJ:   The right of the subrogated party cannot rise higher than the right of that to which it is subrogated.

MR JACKSON:   Quite, your Honour.  Yes, quite.  Many cases on subrogation where there were defences available against the person who was the insured, for example, apply equally against the insurer using the name of the insured.  Now, your Honours, if I could just say something about the discharge in this sense, that it is right to say in the abstract that payments made by the appellant under the scheme have discharged the obligation of the respondent, our company, under its policy insurance, but, your Honours, to proceed from that as a kind of starting premise does lead one into the area discussed by the plurality in Friend 239 CLR 129 at page 150, paragraphs 47 to 48 where the Court observed that, in paragraph 47:

it is true to say that here, as elsewhere, equity looks to substance and not merely to legal form when it fixes upon the legal situation of the parties –

Then the Court went on to say, your Honours, when one goes to paragraph 48:

	So it is, as French J put it, that rights of contribution are not attracted to obligations “merely because they are owed to the same party and related to the same transaction or otherwise connected in time or circumstance”.

Your Honours will see also the reference there to Justice McHugh in Burke v LFOT.  Your Honours, could I just say this, that the reality of the scheme in this case, in our submission, is that a scheme has been established in which new rights are created, but to use the term “rights” can perhaps be a little illusory.  The existence of those rights depends on exercise of discretion by the appellant, although, your Honours, we would accept that once the discretion was exercised and a payment made that there was an enforceable entitlement to further payments.

	But, your Honours, assuming that there be a right, the question arises, what is the nature of the right, and it is, we would submit, to put it shortly, a right to be paid 90 per cent of the amount of a claim that might be made or might have been made against an insurer and in return for that, the insured assigns to the person paying the 90 per cent the rights of the insured.  It is a right, in our submission, directly against the appellant and it is different from, although, of course, it has similarities to any right that exists against HIH.

	Your Honours, a further matter is the existence of the appellant’s right to prove in the HIH liquidation.  Your Honours, as is apparent from, for example, page 140 in the left column, the agreement between the appellant and an insured was that the insured assigned to the appellant all the insured’s rights in respect of any claim under the relevant HIH policy and those rights included the right to participate in the distribution upon liquidation.  It was then estimated, your Honours, as appears at page 137, at being less than 50 cents in the dollar, but of course it might be more, and, as your Honours are aware, the amount actually distributed in liquidations can vary, often very low, but sometimes with increases in property value, it can equal or exceed the amount of the debt.  Not so often, of course, but it sometimes does.

	Your Honours, the right of the appellant to distributions from the liquidation of HIH in consequence of the assignment of the insured’s rights to the appellant is, in our submission, another factor which illustrates the difference between the present case and any ordinary case of contribution.  The benefits and burdens are not equal.  Your Honours, may I just say this, that it is true that there are some cases where an amount which has been obtained by way of contribution may have to be refunded.  For example, if an amount was obtained by way of contribution in order to satisfy a judgment but the judgment is set aside or reduced on appeal, then it may well be that there has to be a payment back.  

GUMMOW ACJ:   That would be particularly true when a contribution was quia timet, as it were.

MR JACKSON:   Yes, of course, your Honour.  But that is something that really one would think is similar to a situation where money is paid in satisfaction of a judgment, or part satisfaction of a judgment, judgment set aside on appeal, money has to be refunded with interest.  But the point I was seeking to make about this is this, your Honours, that whilst one recognises the possibility of refunds in some circumstances, it is a rather curious thing to be starting off with saying there is a right of contribution, and not just a right of contribution.  We might get more from somewhere else, maybe, maybe not, but if we do, we will pay it back.  It does seem to be a little curiosity in circumstances where the right of contribution is being sought.

	Your Honours, what we would say is that this is a case where the course which has been adopted in establishing the scheme is one where the Commonwealth is to bear, through the appellant, the difference between 90 per cent of a claim and the amount ultimately recovered in the liquidation.  Could I come then to a question of timing.  I suspect that in the end this is an issue that the Court may not need to decide, but may I say this that, in our submission, there is a substantial argument to the effect that in order to have an entitlement to contribution the obligation to indemnify, if ones takes the simple case of double insurance, but the obligation to indemnify must in each case exist at the time of the event giving rise to the loss and, of course, in this case, to put it shortly, the appellant did not exist at the time of the events giving rise to the loss.

	May I refer your Honours to two decisions in that regard.  The first is a decision of the New South Wales Court of Appeal in AMP Workers’ Compensation Insurance v QBE Insurance Limited, (2001) 53 NSWLR 35, at page 38.  There is a lengthy discussion, your Honours, by Justice Handley of the entitlement to contribution.  It commences, your Honours, I think, at paragraph 13 where he said that:

	If the submission on behalf of AMP that the question of double insurance must be considered when the claim for contribution is made were to be fully accepted the right would be lost in every case.

The contention that was being advanced was that you looked relevantly at the time when the claim for contribution was made.

GUMMOW ACJ:   The last sentence of paragraph 13 does not allow for quia timet, does it?

MR JACKSON:   Your Honour, I think that is right.  I think also some observations can be made that in some cases where you have got policies that are claims made and affect policies that there may be difficulties, but the general proposition, in our submission, which goes through to paragraph 21 and, in particular, is, in our submission, correct.  Could I go to paragraph 17 at page 39.  His Honour said in the first sentence that:

in Albion Insurance, when properly understood, require the question of double insurance to be determined at the time of the casualty.

Your Honours will see that elaborated upon through that paragraph.  Your Honours, I think it goes through to paragraph 21.  Your Honours, the point that we would seek to make is that that does, we would submit with respect, correctly set out the general proposition and it was adverted to in the second case to which I wish to refer, QBE Insurance (Australia) Ltd v Lumley General Insurance Ltd, which is (2009) 23 VR 326, in particular, at page 339.  Now, your Honours will see at paragraph 66 their Honours agreeing that:

AMP v QBE that determination of whether double insurance exists at the time of the casualty giving rise to the insured’s loss or liability rather than at a later time is more consistent with the underlying rationale and purpose of the contribution principles because it prevents an insurer from being unjustly enriched at the expense of another insurer as a result of deliberate or fortuitous events occurring after the casualty.

Your Honours will then see that, I think, two qualifications are referred to at the top of page 340.  One is in relation to claims made and reported policies and then if one goes to paragraph 69, it said:

	The second qualification relates to whether the issue of double insurance must always be determined at the time of the insuring clause event without being affected by any subsequent events.  While we agree that, ordinarily, subsequent events will not affect rights of contribution, we would prefer to leave open the possibility that a departure from this position may be warranted in cases where its adoption would subvert rather than promote the underlying rationale and purpose of the contribution principles.  

Your Honours, all that is being said in relation to the qualification is that an accrued right may be affected by subsequent events, the first sentence of paragraph 69, and, your Honours, in our submission, no more than that, simply the Court leaving open a possibility, but when one comes to the present case – and, your Honours, one has to bear in mind this is a scheme the funding for which is statutory, but it is not a statutory scheme.  There is nothing affecting rights in the sense of any compulsion brought about by statute.  In our submission, there is no reason in a case such as this to depart from the general proposition to which I have referred.  Could I come then, your Honours, to the question of co‑ordinate liability in the sense of there being different levels and, your Honours, it is the issue that ‑ ‑ ‑

GUMMOW ACJ:   Just before you do that, paragraph 11 of the reply, third sentence of paragraph 11 on page 4 of the reply:

It is axiomatic that the relevant date for the inquiry is the date of payment said to found the equity.

MR JACKSON:   Yes.  Your Honour, could I say this.  I appreciate this is the final Court of Appeal and that it is necessary for some things sometimes to be said in a declamatory fashion, but there is a great deal of declamation in that sense in our learned friend’s submissions, if I may say so, with respect.  It is not axiomatic, in our submission, that the relevant date is the date for payment found to have found the inquiry and the date for payment, of course, plays a part, but as reflecting the fact that a payment was made.  

	If a payment is not made, there is no issue that arises, but if the payment is made or it is made on a certain date as payments tend to be – however, if one takes the ordinary case, what reason is there for saying that there is any date other than the date at which the event happened and the issue which arises is whether at that point there were obligations undertaken by two parties in relation to each of which the injured party might have made a claim.  So, your Honours, if I may say so with respect, it does rather overstate the position.

GUMMOW ACJ:   What is your response, can I ask, to paragraph 7 of the appellant’s reply as to legal form?

MR JACKSON:   Well, your Honour, could I put it this way.  Your Honours will see what is put in paragraph 7, speaking in terms leading to a conclusion, “to obscure the fact” and so on, but we would say this.  The issues which arise in relation to contribution are issues which arise in an equitable fashion, but they arise because there are various transactions which have taken place and the transactions which have taken place are ones which one should not leave out of account and treat as if they had no legal effect.  Nor cannot it be really suggested that anything that took place here was other than in accordance with the requirements of the scheme, and if one goes really to the heart of the matter, what you see is that what took place and what was required to take place was that there be an assignment to the appellant of, to put it shortly, two things.  

	One is the rights under the policy against HIH, the insured’s rights on the one hand, and relevantly and in connection with that, the right to a distribution.  That is what it is and there is nothing to suggest anything more than that.  If I could go back to paragraph 7, it just is not correct, with respect, to say – and if I take the third line of paragraph 7 – it just is not correct to say “that the appellant was paying on the HIH policy”.  It is right to say that the obligation was one that was calculated by reference to the terms of the HIH policy and that entitlements to payment required compliance with the terms of the HIH policy.  Your Honours, the fact of the matter was that it was a payment pursuant to the scheme which was established and it was a payment under that scheme, and with respect, nothing more.

	Now, your Honours, once one goes really beyond that and says, well, it was good enough, good enough is near enough, or near enough is good enough perhaps I should have said, in our submission, that does not really answer the matter because this is a scheme for the application of Commonwealth moneys and in which Commonwealth moneys are paid under a particular basis and the basis should be taken into account.  One just does not disregard it if it had not happened.....was a kind of unpleasantness in the room about which one did not speak.

	Your Honours, can I come then to the question of co‑ordinate liability and liability at, in a sense, different levels.  It is the issue which is raised by ground 2 of our notice of contention at page 316 and, your Honours, it is the issue which was referred to by the primary judge at page 283, a long passage, paragraphs 131 to 167.  Your Honours, the contention which we advance is set out in our written submissions in paragraphs 49 to 62 and, to put it shortly, it is that in order for there to be co‑ordinate liability, the two rights must be at the same “level”.  I put the term “level” in inverted commas.  

	The agreement between the appellant and Steele that resulted in a payment by the appellant to him was not itself a contract of insurance.  Certainly, as I have submitted earlier, the obligations of the appellant might be quantified by reference to Steele’s policy with HIH, but the obligation to pay him was an obligation which was undertaken directly.  On the other hand, the obligation under our policy, a policy of insurance, was one which, we would submit, is appropriate to describe as secondary.  Now, your Honours, those terms or the use of the terms “primary” and “secondary” is, in a sense, really saying no more than another way of saying the liabilities were not co‑ordinate.  

	The issue was one that was discussed by your Honour Justice Gummow in the Federal Court in Street v Retravision NSW Pty Ltd (1995) 56 CLR 588, and I will come to what your Honour said in just a moment, but may I say that the issue arose there because guarantors of a company’s indebtedness to Retravision sought to claim contribution from persons who had a statutory liability as directors pursuant to the then section 592 of the Corporations Law.  That provision is actually set out at a page of the same number, 592, and you will see section 592(1) commencing about letter D on that page.  So it created a statutory liability.  The reasons discuss the effect of that provision at page 594 and, your Honour, about letter F on the page, and your Honours will see, said:

	The effect of s 592(1) is to add to those primarily liable for the debt and to do so by creating a class of persons who, with the company, are jointly and severally liable.

Your Honours, that goes through to, I think, the top of the next page to about letter B.  So what your Honour held was that there was a primary liability created in those persons.  Your Honour at page 597 about letter C on the page turned to the issue of contribution and then at about letter C discussed the law relating to the issue generally and your Honour then discussed some decisions on the issue.  Your Honour then, at 599 at about letter A, in the passage which goes through to page 600 about letter C, dealt with the application of the principles.  Your Honours will see the top of page 599, “The same point may be expressed,” et cetera, and then when one comes to about letter E on that page, it was said:

	As I have indicated earlier . . . the effect of s 592(1) is to render the respondents jointly and severally liable . . . to the creditor.  This is a matter of primary obligation . . . There is no right to exoneration by the debtor.

	On the other hand, the liabilities of the applicants under the instruments of guarantee were not primary obligations in that sense.  Clause 1 of both guarantees obliged the applicants to pay to Retravision on demand by Retravision all moneys which Terry’s might become liable to pay to Retravision.

Your Honours, the discussion goes on through to the bottom of that page and then when comes to letter A on page 600:

	However that may be, in either case cl 1 of the guarantee places the applicants on a level of liability . . . which is conceptually distinct, as a matter of basic legal principle, from that of those having a direct primary liability, joint and severable, to the creditor –

Your Honour then said in the next paragraph “no common interest and no common burden,” and accordingly, no right to contribution.  Our learned friends referred this morning to the decision of the House of Lords in Caledonia North Sea v BT Plc [2002] Lloyd’s Rep IR 261.  May I take your Honours to it for just a few moments.  In that case, your Honours, the House of Lords dealt with three issues arising from an explosion on an oil platform called Piper Alpha.  Many persons died, many were injured.  The victims were employees of the operator of the oil platform or were contractors to it who worked on or around it or who were involved in attempted rescues.  

	The operator had paid out on the claims made upon it and sought to recover the amounts paid pursuant to an indemnity provision in the contract between the operator and the contractor.  The indemnity provision was a clause 15.1(c), which your Honours will see at page 272 in the right column towards the bottom of the page, and it relates back to the paragraph at about point 2 or 3 page:

	Without prejudice to the foregoing generality, the contractor shall indemnify –

et cetera, the company and its parent, subsidiary, et cetera, against loss, expense, et cetera, by reason of, and then your Honours will see the matter in paragraph (c):

Injury to or death of persons employed by . . . the contractor or its parent ‑

Now your Honours, there was an agreement by the contractor to indemnify the operator.  The indemnity was in respect of liability in respect of injury to the employees of the contractor.  The operator had also, although not obliged to do so, taken out its own insurance and its insurer had paid out and then sought, in the name of the operator, to recover against the contractor on the contractual indemnity, and the issue relevant for present purposes was identified by Lord Bingham at page 268 in paragraph 12, the bottom of the right column, where your Honours will see he has discussed, “The right of an insurer”, et cetera.

GUMMOW ACJ:   Do you have the citation of the Inner House?

MR JACKSON:   I can give it to your Honour in just a moment.

GUMMOW ACJ:   I think your junior has it.

MR JACKSON:   Yes.  It is referred to in the West Australian decision.  The citation, your Honour, is [2000] Lloyd’s Rep 249, Part 4.  It is on the list of authorities, I understand, your Honour.  It was the decision that was followed in the West Australian case.

GUMMOW ACJ:   Yes, we have it.

MR JACKSON:   Now, your Honours, returning to the House of Lords, page 269 in the left column, the latter part of paragraph 12, his Lordship said:

The question at the heart of this issue in the appeal is, as it seems to me, this:  is the present claim, as the operator contends, a subrogated claim properly made in its name by its insurer (who has indemnified it under a policy of insurance) to enforce a contractual right of the operator against the contractor? or is it, as the contractor contends, a claim for contribution by one party liable to indemnify the operator against another?

Your Honours, I will come to the reasons in just a moment, but it was held that the obligation of the contractors to the operator was primary under the indemnity, whereas that of the insurer was secondary and they were not at the same level for the purposes of contribution.  No doubt they once had been both secondary, but – in the present case, if I could just divert to this for a moment, no doubt the obligations of both HIH and our company had once both been secondary, but we would submit that HCSL’s new obligation was primary.  It was direct and depended on loss already suffered.  Your Honours, could I go to the reasons first of Lord Mackay at page 277.  Your Honours will see his relevant reasoning is paragraphs 59 to 66.  You will see in the first long sentence at paragraph 59 he said that:

if the indemnities granted by the contractor and the operator’s insurers were truly to be regarded as on an equal footing or co‑ordinate I think the result for which counsel argued might be appropriate . . . an equally persuasive argument in which the principles –

et cetera, were raised.  He then said, your Honours, that –

The doctrine of subrogation with its incidents available against third parties in both situations in which the claims of the assured arise in contract and in tort or delict were illustrated by authorities in England, Scotland and the Unites States of America, as well as in Australia.

Then, your Honours, if one goes, I think, to paragraph 62 immediately after reference to Speno he said:

	These cases show that generally liabilities incurred in tort or delict, or in contract will be primary while the liability of the indemnity insurer of the injured party will be secondary.

Your Honours, if one goes to paragraph 64:

	The absence of any case directly deciding the present question is because I believe it has always been assumed that a contractual indemnity will be the primary indemnity in situations where the other indemnity is provided by an insurer of a party to a contract where there is no obligation on the party to make any insurance arrangement, and where in consequence the insurance arrangements are res inter alios acta so far as the other parties to the contract are concerned.

Your Honours will see then paragraphs 65 and 66.  Lord Hoffman, at page 281, in paragraphs 93 to 97 dealt with the issue and your Honours will see, if one goes particularly to paragraph 94, he said:

	The liability of the hundred –

from the case to which he is referring –

was held to be primary and therefore not discharged by the insurance payment.

That is in reference to Mason v Sainsbury.  Your Honours, if one goes to paragraph, I think, 97 at page 282 he said:

	Likewise in this case, I am of opinion that the indemnity under Clause 15.1.c. was not secondary to or co‑ordinate with any insurance that the operators might choose to obtain in respect of the same losses.

Your Honours will see that dealt with through the remainder of that paragraph.  Finally, your Honours, Lord Bingham at page 269, paragraphs ‑ ‑ ‑

GUMMOW ACJ:   If we look in the Inner House at page 277, right‑hand column, in a very thorough judgment, I think ‑ ‑ ‑

MR JACKSON:   I am sorry?

GUMMOW ACJ:   Lord Sutherland says on 277 in the first paragraph at about line 12, “Contribution, however, is a two‑way exercise.”  That seems to underlie what you have been putting to us really.

MR JACKSON:   Yes, it does, your Honour.  You cannot have one without the other, in our submission.  

GUMMOW ACJ:   No.

HAYNE J:   Someone should put those words to music.

MR JACKSON:   Your Honour, I have a distinct suspicion that is not the first time I have used them in a court and maybe here.  It rather reminds one of our learned friend’s submissions today compared with those in Friend v Brooker that one sees.  Your Honours, could I just say Lord Bingham – your Honours will see page 269 paragraphs 12 to 16 to the same effect.  Your Honours, one of their cases to which reference was made in that case was, of course, was the decision of the Western Australian Court of Appeal in Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron (2000) 23 WAR 291.  Could I go particularly to Justice Wheeler who discusses the issue at pages 326, 327 and paragraphs 161 through to 167 on page 327.  At paragraph 167, she said:

	It appears to me that the status of a policy of insurance as res inter alios acta so far as third parties are concerned, and the cases to which the Court of Session refers where a right of subrogation has been held to exist, suggest that where, as here, there is a contract for services which contains within itself an indemnity provision, together with insurance which may also cover the events the subject of the indemnity, it is generally appropriate to regard the insurance as a secondary rather than a co-ordinate obligation.

Now, your Honours, I note immediately that in paragraph 168 she refers to there being a possible quantification and I think it would be right to say that in a case factually such as this where the liability undertaken by the appellant is one that is quantified by reference to the existence of the policy of insurance which itself had been a secondary obligation that the temptation to say they are of the same level is greater.  The reality of the matter is that whilst at the time of the loss there were the two policies, each of which one could regard as a secondary obligation, the true position, in our submission, is that there has been the creation of a new obligation by the entry into the scheme and the approval of the application of Steele.  

	Your Honours, may I just give another reference without taking your Honours to it.  It is Cockburn v GIO Finance Ltd [No 2] (2001) 51 NSWLR 624 and could I refer particularly to page 634, paragraph 42 and page 640, paragraph 74.  Your Honours, could I come then to, in effect, the concluding things we want to say and they are these.  Your Honours, we have submitted that the case is one that does not fall within the current understanding of the notion of contribution and then the question then arises, should the notion of co‑ordinate liability be extended to fit this case?  The first thing we would say, your Honours, is that the last sentence of paragraph 47 of Friend 239 CLR 129 at page 151 suggests that one should be at least careful about doing so.  It said that:

In a case such as the present, to proceed in this way –

and that is the reference as to the earlier part of that paragraph –

may too easily produce an outcome in a given case which is no more than an idiosyncratic exercise of discretion.

So that, your Honours, there does need, in our submission, to be a rather compelling reason for extending the notion.  In our submission, there is not such a reason.  In the first place, there is no reason, in our submission, why Parliament might not have enacted legislation which made provision for HIH’s rights to contribution to go to the appellant if the appellant had paid an insured in circumstances where the HIH company would have been liable.  There is no reason why Parliament could not have created a new right.  There may be, of course, that there be some question about just terms, but if the payments were being made, in effect, on behalf of HIH, as the contention would be, then the terms are likely to have been just.  I will just pause at that point.  The scheme that has been adopted is the one that there is.  Different things might have been done, but they were not. 

	The second point we would make is that in relation to the scheme, the terms of the trust and the Commonwealth Management Agreement only adopt a limited view of recoveries, namely, that recoveries are limited to rights of the insured which have been transferred to the appellant.  When one comes to the Claims Management Agreement, we would submit, it is fairly clear that whilst is does refer to claims for contribution, they are claims for contribution which might be made by HIH because it may well have paid out sums before the time of liquidation, rather than claims made by the appellant itself – the appellant now created.

	Your Honours in these circumstances, we would submit, what is the imperative for changing the law in favour of the appellant?  To do so, we would submit, does introduce a rather significant element of future uncertainty and, with respect, for no very good reason.  Future uncertainty, because the requirement for what could be described perhaps loosely as mutuality would have gone and, your Honours, it would become rather a question of seeking instance after instance in dealing with what amounts to contribution.

	In reality, your Honours, if one looks at the situation, we would submit, that the only ground – and that may, with respect, rather guild the lily in calling it that – advanced by the appellant for extending the principles regarding contribution is that we may enjoy a windfall if the appellant fails.  Well, now “windfall” is an easy expression to select and use, of course, but it is clear that not every circumstance in which a claimant’s payment has benefited or relieved the other party financially gives rise to a right to contribution.  

	Your Honours have seen the observation of Justice McHugh in Burke 209 CLR 282 in paragraphs 44 to 45.  I do not think I need to take your Honours back to that because it is a passage that appears to have been adopted by the plurality in Friend v Brooker 239 CLR 129 at page 151, paragraph 48.  Your Honours, as we have submitted earlier, we submit there is no imperative for extending the law to, in effect, fit this case and those are our submissions certainly to one thing and that is that we rely on the terms of our written submissions.

GUMMOW ACJ:   The windfall argument would cut both ways anyway, would it not, because in a case where there had been double insurance and the order of payment had been reversed, the fund would obtain a windfall in a sense?

MR JACKSON:   Your Honour, arguments of this kind usually but not necessarily arise where there has been someone insolvent.  It may be the debtor, it may be another person who is guaranteed the debt, it may be another insurer and so sometimes ‑ ‑ ‑

GUMMOW ACJ:   All I am putting to is that insofar as Mr Walker asserts against you that there would be a windfall, you could assert against him there could be a windfall.

MR JACKSON:   Yes, your Honour, quite.  Your Honour, those are our submissions.

GUMMOW ACJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, as to the mutuality matter, which includes as well the interchangeable windfall last mentioned by my learned friend, it is true that in a striking way Lord Sutherland in Caledonia, the passage drawn to attention by Justice Gummow, page 277 of [2000] Lloyd’s Rep IR, describes contribution as being a two‑way exercise; you cannot have contribution from one without contribution from the other, but, in our submission, there ought to be recognised cases where, for reasons such as we have tried to develop in‑chief, there may be a controlled departure from that as a general prescription and that to that end a more basal principle is to be seen in the statement by the plurality in Friend v Brooker 239 CLR 129, page 148, paragraph 39, which concentrates upon a disadvantage which would continue, or continue to exist, unless equity were to intervene because of the way in which an exercise has arisen.  That there does not speak in terms of mutuality.

	Similarly, in Albion 121 CLR 342 at 346 in the reasons of the Chief Justice and Justices McTiernan and Menzies the conclusory description of the equity in question found at the foot of page 346 is in these two sentences:

He had received all that he was entitled to receive under both policies so the payment by one insurer would discharge both.  Thus, payment by one is made for the benefit of both, and, contribution is equity.

A concentration, we would submit, on the actual payment that had occurred in that case.  Now, it is idle for me to contend that exploration of the opposite hypothesis, what would happen if the boot were on the other foot, has not played a part in the reasoning for hundreds of years; it has, but, in our submission, the equity is sufficiently flexible to encompass what occurs in a case of the present kind.  May I, while with Albion, answer another question.  It seemed to be suggested at one stage in my learned friend’s address that the 90 per cent, differing from 100 per cent, was one of the differences that ought defeat the equity application in this case.  

	The fact that putative contributors are liable to the creditor or claimant for different amounts does not defeat them being on the same level or the same kind or, indeed, the same extent within the meaning of the authorities.  That much is, and has been, clear for a long time.  In Albion you will find a reference to that in relation to sureties at the foot of page 345 to the top of – insurers I should say, the foot of page 345 to the top of page 346.  You find it of course also in Lord Eldon’s statement of the matter in Craythorne v Swinburne (1807) 14 Ves Jun 160, at 169, which is found in the reprint at 33 ER 482.  So the amount discrepancy would not defeat the application of the equity.

	In relation to the oddity or novelty – my words, not my friend’s – that seem to be suggested by the argument against us in relation to the condition we volunteer for relief, namely, that there be the sharing as between contributors of any dividend in the liquidation relevant to the recovery, in our submission, that is nothing more than, and no more remarkable than, the perennial capacity and obligation in equity to shape orders to the particular exigencies.

	In relation to the timing question, in our submission, there needs to be distinction observed between what is described in perhaps excessively general terms as the question of co‑insurance and then the distinct if related matter of the question of contribution.  That which is whether by colourful rhetoric or otherwise said by us in our paragraph 11 of written reply to be axiomatic is, we think with respect, conceded in the argument against us this afternoon, namely, that of course it goes without saying that there has to be a payment or a quia timet case, the imminent demand in order that there be an equity arise, that is, the sine qua non, it is the occasion when the equity first becomes available.  It is in that sense that it is, with great respect, properly described as axiomatic.

	Of course there needs to be a co‑ordinate liability so as to have the payment by one discharge the other, that which was tested and demonstrated and has been held by judicial decision to be so in this very case, but those co‑ordinate liabilities, as has been established for a long time – see the reference by your Honour Justice Gummow in Street v Retravision to – this is one of the very points established in Dering v Winchelsea – and I am making a reference here to 56 FCR 588 at 597 between letters C to D – so that the liabilities may arise from obligations incurred at disparate times and with insurance, in particular, not least because of the different ways in which the event or liability insured against may be defined, it is to be borne in mind that insurance and insurance obligation may be incurred by reference to events that have already passed.  

	Not only is there the difference between claims made and other forms of insurance, there is also after the event insurance.  What matters in relation to contribution is that the liability is, in the subject of an indemnity obligation, by the two insurers.  The fact that it arises under different kinds of policies is not to the point, as has been held repeatedly.  The fact that the policies are entered into at different times is not to the point, held repeatedly.  The fact that the policies may one be unlimited and the other limited, or with different limits, again is not to the point.  The same level, kind and extent requirements are supplied by the fact that both answer to the liability of the insured in question.  

	Now, that occurred in this case in relation, obviously, to SGIC and HIH.  It would be odd if, otherwise our claim for equity was good, it was to be defeated simply because the vehicle for the rescue by government funds naturally did not exist until after the rescue became a matter of government policy.  So it is for those reasons, in our submission, that there is nothing fundamental or elementary to produce defeat of our claim by referring to the fact that the party, the entity, that makes the payment for which it seeks contribution did not exist until after the event in question.  

	In paragraph 13 of AMP Workers’ & QBE, to which my learned friend referred, 53 NSWLR 35 at 38, Justice Handley does observe in relation to the right of contribution, last sentence, that it “arises when and because one of the insurers has paid”.  Now, inserting the possibility of quia timet there as a necessary qualification which does not alter the thrust of what his Honour was saying, in our submission, it therefore can be seen that the relevant event for the balancing of the natural justice considerations which is at the heart of the equity must come from the payment or the threat of payment and the application for fear of its effect.

	In relation to the primary, secondary levels analysis that my learned friend referred to, the conclusion of the reasoning advanced in that argument was that, using that language, my client’s liability was the primary one because assumed by direct contract with Mr Steele.  It does not seem the point is being taken that Mr Steele is merely one of the named insureds rather than the premium payer in relation to SGIC.  That has not been taken as a point in either this or other cases so far we have seen, particularly in relation to contribution between co‑insurers.  Rather, it seems to be that there was a contract directly to pay.  Indeed, unless there were instalments in question, there was a contract of payment, as it were.  

	In our submission, there is no real rationale advanced or available in the authorities as to why one would call that primary.  Some of the other possibilities are as follows.  In temporal terms it is plainly secondary or tertiary or even later.  Tertiary, perhaps might be correct, if one treats the insurers as both being secondary in the nomenclature my learned friend was adopting from the authorities and reserving primary for someone like a tortfeasor or contractor who, by conduct, had rendered themselves liable for the plaintiff’s loss, but, in our submission, to reverse the order so that SGIC remains secondary as an insurer, and HIH of course would have been secondary as an insurer, but that an obligor such as the Commonwealth trustee creating obligations explicitly reflecting the HIH obligations becoming thereby primary rather than either remaining secondary or being at one further remove is, in our submission, without any logical support.

	Your Honours, finally there was the reference to the possibility of Parliament having done things otherwise.  Without 78B notices there is a limit to how far I can follow my friend’s argument here.  There was a glancing reference to 51(xxxi) problems involved in calling upon co‑insurers to help fund the Commonwealth scheme.  It suffices perhaps to mention that to make good the point that the Court should not necessarily approach this as a case where a lesson, as it were, can be learned by the Commonwealth about taking more time, perhaps more advice, in relation to setting up a scheme complete in all the possibilities of the leakage of funds or the replenishment of funds.

	In our submission, the scheme is what it appears to be on its face and how it appears to have operated on the facts of this case, a method by which taxpayer’s funds from consolidated revenue were made available in order to meet what was considered to be a social need but of a commercial kind administered by reference to the commercial obligations which were no longer likely to be performed or to be performed timeously or in full.  That is a situation which is sufficiently special not to threaten the fabric of basic equitable doctrine which was the warning, as it were, coupled with the reference to the possibilities of different perhaps better legislation having accompanied the promulgation of this scheme.  In our submission, the position is so special that were we to succeed it would present no broad front of threat to any of the necessary doctrinal underpinnings of the equity, particularly those that are pointed up in, as I have said before, paragraph 39 of Friend v Booker.  If it please the Court.

	I am sorry, your Honours, there is another topic I should give your Honours some references.  There were questions asked of my friend and me, particularly of my friend, just before lunch concerning the position under the suite of documents we have both taken you to, capacity to seek contribution or capacity to pay contribution as a matter of power.  I also, as I have informed my friend, not by way of reply but to supplement something I did not answer in‑chief, I could not find a reference I told your Honours to a requirement of an eligible person suffering financial loss.  It is no wonder I could not find it, it was not in the documents that set up the scheme but it is – I do not know whether this is embarrassing or not, it is certainly odd – it is to be found in the Act.  That is what I had in mind.  The definition of “eligible person”, as I drew to attention in opening the appeal has, has the second of the two requisites of characteristic that a person has suffered financial loss.  

	Now, as both of us told your Honours, one does not find in any straightforward way, I think that is probably could also be rendered, you do not find at all, the incorporation of the statutory definitions in the various documents from the trust deed onwards to which we have both taken you.  On the other hand, it would be with trepidation, as counsel appearing for a trustee for the Commonwealth, for me to say that your Honours should, as it were, see some severance.  I do not put that you can or should ignore that definition.  It would appear to have some part to play.  So that completes something that I had left incomplete when I earlier sat down.  

	In reply, could I simply add these references to what my learned friend has already given you.  I think there will be some overlap, but there is a little bit extra and perhaps in a different order.  The order starts, as I did and my friend did with, of course, the trust deed clause 2 on page 67 where there is a reference to the assistance to be paid “under the terms of the Commonwealth Management Agreement.”  In the trust deed page 69 under 6.1 the phrase already drawn to attention raised by Justice Gummow with my friend:

To the extent permissible by law and equity, the Trustee’s duties and responsibilities are limited to those expressly provided under this Deed –

et cetera.  This deed includes on page 71, as you have already been shown, the establishment of the two accounts to comprise the trust fund including in 9.5:

In connection with the management and investment of the Trust Fund . . . all of the powers of a natural person –

In the management agreement, which is thus called up, one has at page 94 in the long list of HCSL obligations to which you have been taken, I think, as to many of them already, on page 95, paragraphs (g) and (h), and that then brings in another link which introduces, I think as my friend has put it, the Claims Management Agreement via the Commonwealth Management Agreement into the administration of the trust.  Can I draw to particular attention paragraph (h) which talks about:

exercise and enforce rights available to HCSL under each Claims Management Agreement in accordance with the terms and conditions of those Agreements –

That then in the Claims Management Agreement, as my friend I think has already shown you, there is at 157 in 2.6 under the heading “Capacity”, particularly the second paragraph, there is a reference to a limitation of requirement, but it is by reference to an extent of authorising under the terms of the Commonwealth Management Agreement, which is why I went to 5.3(g) to (i) in that.  In short, there may be some measure of exhaustiveness referred to in 2.6 but it is exhaustive in a way that contains by incorporated reference the breadth of power to which I have already referred.  

	On page 154 there is a definition of the portmanteau phrase “Payment Management and Recovery Services” and they include the schedule 10 matters on page 204 to which you have been referred and they include, as my friend told you, the recoveries which in this document is defined on 155 to include “other insurers for dual insurance and/or contribution”.  Now, that is the way in which, in our submission, not with an excess of elegance, I accept, notwithstanding those are matters of power.  As to the question of form of order involving interest raised by Justice Heydon, we would seek leave to spend a short time seeking to agree that with the respondent.

GUMMOW ACJ:   Yes.  That should be done within seven days.

MR WALKER:   Thank you, your Honour.

GUMMOW ACJ:   If it cannot be agreed, each should put in their relevant suggestion within the seven days.

MR WALKER:   May it please the Court.

GUMMOW ACJ:   Is that convenient?

MR WALKER:   Yes, your Honour.

GUMMOW ACJ:   We will reserve our decision in this matter.  The Court will adjourn until 10.15 am on Tuesday, 7 June 2011.

AT 3.16 PM THE MATTER WAS ADJOURNED