Liberty Mutual Insurance Company ARBN 086 083 605 trading as Liberty International Underwriters v Swashplate Pty Ltd [2021] HCATrans 64 (12 April 2021)

Last Updated: 13 April 2021

[2021] HCATrans 064

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S161 of 2020

B e t w e e n -

LIBERTY MUTUAL INSURANCE COMPANY ARBN 086 083 605 TRADING AS LIBERTY INTERNATIONAL UNDERWRITERS

Applicant

and

SWASHPLATE PTY LTD ACN 102 223 272

Respondent

Application for special leave to appeal

KIEFEL CJ
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON MONDAY, 12 APRIL 2021, AT 10.51 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 T.W. MARSKELL, for the applicant. (instructed by Mills Oakley)

MR J.T. GLEESON, SC: May it please the Court, I appear with MS K.I.H. LINDEMAN for the respondent. (instructed by Norton White)

KIEFEL CJ: Yes, Mr Walker.

MR WALKER: Your Honours, the question whether so‑called contexts, in this case, a sequence of negotiation, including the participation of persons who do not become parties, in the material which raises a so‑called ambiguity or constructional choice for the purposes of making clear the use of extrinsic material otherwise not to be taken into account, is one which has not yet received definitive guidance in this Court.

By way of illustration of that, with respect to the guidance for the courts of the country on an important matter and, by way of example, as you have seen in our written submissions, we have drawn to attention the recent judgment of Justice Riordan in the Supreme Court of Victoria in Siemens Gamesa v Bulgana Wind Farm, which, in the supporting cases, book 1, is found, a passage at 288, 289 - I do not need to dwell on it in detail. It suffices to say that using the language of the cases this aspect of the so‑called true rule has not yet received, in our submission, a determination by this Court after the full consideration which would follow from it being an issue in argument.

KIEFEL CJ: So much may be accepted, Mr Walker. The question is whether this is such a case.

MR WALKER: Of course, your Honour, yes, that is the carriage to follow the horse, yes. Can I try ‑ ‑ ‑

KIEFEL CJ: It is put against you, this is not a Mount Bruce Mining - it is not the question that was left unresolved by Mount Bruce Mining.

MR WALKER: For the following reasons, in our submission, it either is or it is sufficiently cognate with it as to throw up exactly that point of doctrine that is principle.

GORDON J: You mean a question of fact.

MR WALKER: Well, at the end of the day ‑ ‑ ‑

GORDON J: I raise that for this reason. You have a master slip, you have a policy and you have a placement slip - I am showing my age here -, what we used to call Lloyds‑type documents, for purposes of insurance.

MR WALKER: That is evergreen, your Honour.

GORDON J: A broker has gone out with the policy slip, master slip, and consistent with the terms set out, they have been able to ‑ ‑ ‑

MR WALKER: The master slip says nothing about period of insurance. It simply gives a terminal terminus date to a binding, which is one of the reasons why having clarity as to a date in this case, so close to that terminus date, has evident contextual force.

GORDON J: But what it does is it reinforces that there are a number of documents that are to be read together because they are referred together.

MR WALKER: No, with respect. The master slip says nothing concerning what I am going to call binding date, or inception, or the period of insurance. That is left for truly contractual documents, of which the placement slip is the relevant one, together with the incorporated policy. It is for those reasons, in our submission, that this is a case that does throw up whether the master slip, that no one says is contractual, is part of the negotiating context, whether the master slip is capable of giving rise to some doubt with respect to the meaning of the very plain and very clear words, using a date, 19 May, following the legend, period of insurance.

That, after all, is the rather counterintuitive response to the facts, of themselves of a kind almost certain to recur, that is, that familiar suite of documents involved in negotiation, prior commercial dealings between parties, including brokers, with respect to the meaning of words of contractual import at the policy as eventually made.

This is not turning upon particular facts unlikely to recur, this is seeking to impose the self‑evidently significant discipline of restricting recourse that can be had to documents or conversations which precede the making of a binding contract intended to be recorded completely in writing, as is in this case.

KIEFEL CJ: Mr Walker, did the primary judge point out that it was common ground that the master slip was part of the surrounding circumstances?

MR WALKER: It is common ground and the primary judge certainly did not regard it as beyond any proper consideration. That is why we are concentrating on using it to give rise to doubts that do not exist on the face of the contractual language and then using it in a way which we would seek to draw to attention by illustrating an argument of our learned friends in writing. Could I take your Honours, please ‑ ‑ ‑

GORDON J: Can I ask one more question – just one more question? Do you challenge the Full Court’s finding at 23, that:

the Master Slip is a document referred to in the Placement Slip ‑ ‑ ‑

MR WALKER: No, it is not worth me challenging that, that is there are arguments that could be had about it but that is a perfectly sensible commercial conclusion given the suite of documents which are of a familiar kind.

GORDON J: Thank you - which is my point I was making to you at the outset. We have this suite, we have them referring to each other ‑ ‑ ‑

MR WALKER: I appreciate that.

GORDON J: ‑ ‑ ‑ including, as I understand, you take no challenge to the fact that the other terms and conditions that are referred to are picked up as well. Not just the policy but also the institute wording as well.

MR WALKER: The policy and institute wording – yes, all of that. That is what I mean by “suite”. We accept all of that. But the master slip does not tell you about getting insurance and, bearing in mind what the master slip does tell you about a different period, a period beyond which there will not be this binding, then all the more reason ‑ taking it into account as one can for that purpose, all the more reason to understand the significance of the stipulation for period of insurance.

KIEFEL CJ: Mr Walker, to elevate this contractual question to one of general principle, how would you state the question which you say arises here in terms of the Codelfa question that Mount Bruce Mining said was left unresolved?

MR WALKER: The resort to material extrinsic to the punitive contractual wording in order to give rise to some constructional choice sometimes called ambiguity of a kind which exceptionally permits reports for the interpretative task to extrinsic material.

KIEFEL CJ: But this is not truly a case where extrinsic material has been used to create or to identify the ambiguity, is it? It was never argued like that below.

MR WALKER: With respect, the argument below concerned the significance to be given in light of the master slip’s reference to the policy wording, including the institute clause, in light particularly of the static cover extension and the – what I will call the preloading origin of damage - those are the matters in tension that govern indemnity.

The reasoning below, that is, in the Full Court, calls in aid - that aspect of the master slip is calling up the policy wording and calling up the institute with the exception, with the extension, in order to cast doubt on the clarity of the period of insurance commencing with a date in this hybrid policy, made hybrid by the particular dealings, but is not made hybrid by a master slip, made hybrid by the particular dealings in the sense, partly time, partly voyage.

When the terms of the contract are looked at – there being no doubt the master clause – the master slip is not part of the contractual documentation – there is nothing on its face, nor on any of its incorporated terms, to cast doubt on what “period of insurance” means. That is not a term which conveys any ambiguity or presents any constructional choice.

This was not an Article 11 case. That only, in effect, really signifies that a period of insurance is intended to have contractual stipulation. It can, after all, be a period predating the binding contract. It was not a case where there was any further dealing, special, for example, to the static cover extension. So, we just had the standard wording made binding by documents both recording and constituting the contractual dealing which has the plain words “period of insurance” with a date.

Now, if I could take your Honours to the argument against us which, as it were, runs, for the purpose of argument, with the hypothesis that I advance, namely that the proper state of the law is you cannot look to the master slip to raise an ambiguity ‑ ‑ ‑

GORDON J: No, you cannot look to it to raise an ambiguity, but you can, here, where you have in effect three things – you have the master slip constituting the facility under which the policy was entered into, you have the policy executed pursuant to the master slip, the master slip grounds the entry of, in effect, the placement slip, and the placement slip refers to the master slip. So, it is not creating an ambiguity.

MR WALKER: No.

GORDON J: It is looking to the suite of documents to work out the proper construction.

MR WALKER: Perhaps, if I could have a third go, I think ‑ ‑ ‑

GORDON J: Yes, please.

MR WALKER: ‑ ‑ ‑ a suite of documents – my expression – needs to be understood. Zhu, after all, had a suite of documents.

GORDON J: Yes, it did.

MR WALKER: They are not always between the same parties. There can be an understanding where there is a question of a stipulation and an antecedent obligation for what later engagements, perhaps, with third parties should mean – which is the Zhu Case – which has no resemblance here at all.

We, rather, are looking to a suite of documents and seeking to discriminate between those, the language in which falls to be construed for the contractual effect and those which – being extrinsic – classically being negotiating documents – negotiating documents are the very documents which the Court should, in our submission, be astute to remove from interpretative tasks – except when they happen – as they will from time to time – to be the ready source to demonstrate that which is objectively known between the parties. That is not this case.

KIEFEL CJ: You say that the error is calling it surrounding circumstances but treating them as contractually binding.

MR WALKER: Yes.

KIEFEL CJ: But that is not – we are not in Codelfa territory, then.

MR WALKER: But that is a breach of the true rule to treat documents which are not contractual as if their language produces cruces or inconsistencies or ambiguities when one comes to the contractual language. That is how it clashes with the salutary principle in Codelfa, which is intended to focus, not to diffuse, the forensic contests about contracts.

If your Honours go to application book 85, this is the argument our friends venture, with respect, with ingenuity, on the basis, against themselves, in their primary contention, that the master slip could not be as it were looked at to create ambiguity. On that basis – on that premise, at page 85 in paragraph 26, it is said that an ambiguity has arisen “on the text of the Policy”, and then one sees that the possibility they venture, which found favour of course, in general terms, in the Full Court, is that a “Period of Insurance” date instead constituted not a promise, my word, but theirs, a:

representation as to when it was –

presumably, by those binding on behalf of the insurer:

expected or believed that the risk covered by the Policy would commence.

That raises more questions than it answers in relation to why that would be a commercial understanding of a binding where the end of the master slip period was looming – just a few days away. But then in paragraph 27, the so‑called ambiguity, a “constructional choice”, is said there – is said to be

at least two –

with respect, one should not take from that that there might be 17 or so – at least the alternative constructions:

on the text of the Policy alone –

and we submit that the Court should be astute to the old‑fashioned clarity of:

the text of the Policy alone, namely the construction of the “Period of Insurance” notation as identifying” –

and then you see that the two that dominate the reasoning of the chief Justice at first instance:

the earliest possible date –

Now that comes about because of the static cover extension, that is his Honour gave full play to that which the parties must be taken objectively to have intended by the interaction of a stipulated date for a period of insurance of the operation of static cover extension, and the uncertainty of the time and day of loading and preloading.

The other possibility is “specific date” and your Honours know that, apart from the relatively extreme factual position of a period longer than the period for static cover extension expiring before actual loading commences – but apart from that relatively extreme possibility, they will be the same, as the Chief Justice obviously understood and as commercial people would understand – the “earliest possible date” and “specific date” will be the same.

What, oddly, one finds – the argument against us, we submit, spuriously treating the master slip as somehow bringing in its train a doubt about the plain language of a date following the legend “period of
insurance” and the placement slip, curiously what happens is, instead of a constructional choice as to what contractually binding words mean, one or the other, lo and behold they are now not contractually binding at all. They are merely representational, and merely representational in a way which has nothing to do, obviously, commercially with anything that is reasonable as between insured and insurer.

It is for those reasons, in our submission, that one can see that this is, as it were, a Trojan horse use of the master slip, whereby, oddly, a constructional choice is said by reference to “it”, and what is called up by “it”, a constructional choice emerges as to the plain meaning of the language “a date of period of insurance” and, lo and behold, it ceases to be contractual at all. No other “earliest possible date” nor “specific date”, those are the two obvious alternatives said to be the constructional choice. When one looks at the master slip, entirely counterintuitively, one has it relegated to doing neither of those things, but to merely conveying this anomalous representation.

It is for those reasons, in our submission, your Honours, that in a well‑ploughed field, here is the furrow that needs, as it were, straightening for guidance, which this case demonstrates will have real effect on many, many commercial disputes where so‑called suites of documents in particular antecedent arrangements between brokers and the like, fall to be considered as what is far too often, at first instance, airily called context. So, the objection to relevance is made, and the hand is waived – context. Your Honours, in our submission there needs to and should be more discipline than that, and in this case this Court would have the opportunity to create it. May it please the Court.

KIEFEL CJ: We need not trouble you, Mr Gleeson.

In our view this application for special leave raises no question of general principle. It turns upon the terms of a particular contract between the parties. Special leave is refused with costs.

MR WALKER: If it please the Court.

MR GLEESON: May it please the Court.

AT 11.11 AM THE MATTER WAS CONCLUDED