Allianz Australia Insurance Ltd v BlueScope Steel Ltd

Deed of indemnity - 10 May 2002 144The deed of indemnity, entered into on 10 May 2002 during the course of the corporate de-merger of BHP Steel Pty Ltd, was entitled "Workers Compensation Deed of Indemnity". It made provision as to the responsibility, as between the BHP Billiton Group and the BHP Steel Group respectively, for workers' compensation claims in respect of the various BHP entities. 145Under clause 4.1, the BHP Billiton Group companies (which included BHP) indemnified BlueScope for any workers' compensation claims in respect of workers at the former John Lysaght plant. However, clause 4.3 obliged BlueScope in effect to use its reasonable endeavours to pursue any insurance or third party claims available to it in respect of any workers' compensation claim referred to in the indemnity. In the event of a shared claim as defined in the deed (as Mr Jackson's claim was), clause 6 provided for responsibility to be apportioned according to the respective parties' contributions to the worker's condition, incapacity or death. 146Although there was a suggestion that the deed of indemnity itself precluded a cross-claim by BlueScope for contribution from BHP in relation to liability for Mr Jackson's claim, there appears to be no express provision in the deed to that effect. Rather, clause 10.3 required that there be notification of the dispute, and consultation as to whether the dispute could be resolved informally, before the institution of proceedings. The solicitor on the record for BlueScope at the time of the settlement (Ms Brewster) appears to have understood the effect of the deed in this way. In cross-examination during the hearing of BlueScope's cross-claim, Ms Brewster said that in order for her to have objected to the verdict in favour of BHP "that the plaintiff was keen to enter into" she would have had to issue a cross-claim; that she did not feel that the evidence was there to pursue such a cross-claim; and that she was not in a position to issue a cross-claim at that time as the deed of indemnity required that a dispute resolution process first be followed. 147Allianz contends that, from the moment of the deed of indemnity, the interests of BHP and those of Allianz (in its capacity as BlueScope's workers' compensation insurer) were directly in conflict with each other in relation to claims such as that of Mr Jackson's claim. This is clearly the case since, to the extent that Allianz bore liability for the claim, BHP was spared the obligation to indemnify under the deed, something well understood by the lawyers acting for both BHP and BlueScope at the commencement of the proceedings.

Settlement of Mr Jackson's claim 148Ms Brewster gave evidence in the proceedings before his Honour as to the circumstances in which BlueScope entered into the settlement of the proceedings (affidavit sworn 23 September 2010). Ms Brewster was not present at Court during the negotiations but gave instructions based on Counsel's advice as relayed to her on the day. Her recollection was that she recommended that BlueScope resolve the proceedings based on her belief that the plaintiff would establish liability against BlueScope and that she had reviewed the transcript of Mr Jackson's cross-examination in coming to that belief ([25]). 149As to the position with BHP, Ms Brewster deposed that she had recommended BlueScope consenting to a verdict being entered in favour of BHP because she had serious doubts that the plaintiff would establish liability against BHP, noting that the deceased had given evidence under cross-examination that the work he did with another contractor (Simon Carves) at the premises of BHP was "acid work", which did not involve the use of asbestos rope or millboard ([26]). Ms Brewster also considered that the allegation of exposure as a result of being at BHP's site whilst employed by BlueScope would have been strongly challenged by the material received from Piper Alderman on 13 December 2006 (i.e., Mr Harvey's investigation report which included the statement from Mr Powell). 150Ms Brewster did not consider BlueScope's position with respect to Allianz in recommending settlement of the proceedings, noting that Allianz had expressly denied liability (at [28]). (In cross-examination Ms Brewster said that she had turned her mind to the question of any potential claim against BHP for contribution (Black 57J) and considered it did not have reasonable prospects based on the evidence.) She deposed that she was satisfied that the agreement negotiated with BHP at the time of settlement would result in her client being indemnified by BHP in respect of the conduct and settlement of the Tribunal proceedings and any further proceedings against Allianz. 151Ms Brewster said that it was the plaintiff who was pressing for consent judgment in favour of BHP (Black 66W), though it is not immediately apparent why that would have been the case and this is not consistent with the contemporaneous report Ms Brewster gave to her client. She confirmed that it was her belief that, even if there had been strong evidence that the plaintiff had been exposed to intense asbestos fibre and dust at BHP's premises, any cross-claim would have been precluded by the deed of indemnity and she accepted that this was to the insurer's disadvantage (Black 67L-M).

Cross-claim by BlueScope in Tribunal proceedings 152As noted above, following the resolution of Mr Jackson's claim, BlueScope filed a cross-claim against Allianz in the Tribunal proceedings. In that cross-claim, BlueScope contended (at [22]) that Allianz had breached its obligation of utmost good faith in failing, upon notification of Mr Jackson's claim "to consider in good faith and with proper expedition and reasonably" whether: to grant indemnity; to take over the conduct of the claim; and/or (if consent to the incurring of reasonable defence costs had not already been given) to consent to the incurring by BlueScope of reasonable costs in defending the claim. It further contended that the expenses incurred in defending and settling the claim resulted from one or more of the alleged breaches by Allianz and/or from steps taken by BlueScope to mitigate the losses resulting therefrom [(22(c)]. 153BlueScope contended (at [14] of the cross-claim) that Allianz had intimated (by failing or refusing to grant indemnity from 14 July 2006 onwards) that BlueScope should act as a prudent uninsured with respect to the claim. Allianz (at [3] of its defence to cross-claim) admitted that it had indicated that BlueScope needed to act as a "prudent uninsured", though it is not clear by what means the intimation that it was accepted had been given had been made. 154Allianz denied liability based on the breach by BlueScope of conditions 2 and 3 of the policy conditions and of its duty of good faith. 155As to the breach of condition 2 of the policy (now not disputed by BlueScope), Allianz contended ([10(b)] of Allianz' defence to cross-claim): first, that BlueScope should have given it notice of Mr Jackson's claim on or about 5 July 2006 and "forthwith and before filing a notice of intention to act and/or brief counsel to take the plaintiff's evidence" and, then, that BlueScope was in breach in not forwarding the statement of claim to it on 6 July 2006. 156As to the alleged breach of condition 3, this is pleaded (at [10(c)]) as being that BlueScope had: (i) incurred the expense of litigation without the written authority of the insurer and (ii) made a payment, settlement or admission of liability in respect of the claim without the written authority of the insurer. On appeal, Allianz disavowed any defence based on the first of those allegations, i.e., incurring of litigation expenses without written authority (Appeal transcript 6.36-39), on the basis that this was not an issue that had been explored in the proceedings before the primary judge. As to the settlement alleged to have been made by BlueScope in breach of condition 3, this was identified in oral submissions on the appeal as being the settlement between BlueScope and the plaintiff. It was not contended on appeal that BlueScope had breached condition 3 of the policy by consenting to the entry of judgment in favour of BHP. 157Apart from the breaches of conditions 2 and 3 of the policy, Allianz also alleged (at [10(d)]) that BlueScope had acted contrary to the interests of Allianz (and, by inference, in breach of its obligation of utmost good faith) in that: (i) it was represented by solicitors who also acted for BHP, whose interests were inimical to BlueScope, in a situation of conflict of interest between those parties; (ii) its solicitors instructed a single Counsel to represent both defendants when there was a clear conflict of interest; (v) it was clearly in the interest of BHP that it be exculpated and that liability in the Jackson proceedings be attributed instead to BlueScope as the insured entity; (vi) questions asked by Counsel appearing for the two parties were designed to achieve that outcome; (vii) BlueScope had a duty to endeavour to obtain evidence from Mr Jackson that would assist in the prosecution of cross-claims against BHP and Counsel, properly instructed as to the conflict of interest, should not have asked questions directed to Mr Jackson having had heavier exposure to asbestos while an apprentice at BlueScope; (viii) Piper Alderman continued to act for BHP in of breach of the solicitors' obligation not to use confidential information obtained on behalf of a client against that client and in breach of BlueScope's duty to protect its insurer; and (ix) contrary to the interests of Allianz and in breach of obligation owed to Allianz, BlueScope consented to Piper Alderman continuing to act against it in the proceedings. There was no reference (at [10(d)]) to BlueScope's conduct in relation to the entry of judgment in favour of BHP. 158BlueScope's reply denied each of the alleged breaches. In further answer to the claim, it pleaded that Allianz had breached its obligation uberrimae fidei, between 14 and 20 July 2006 to consider in good faith, or as quickly as reasonably possible, whether to grant indemnity; whether to authorise the incurring of legal expenses and whether to assume the conduct of the defence on behalf of BlueScope as quickly as reasonably practicable ([4.1.2] and [4.1.3]). It further pleaded ([4.1.4]) that Allianz breached its obligations under the policy by denying indemnity on 20 July 2006 and thereafter maintaining that denial. 159BlueScope contended that the denial of indemnity was an intimation that BlueScope need not thereafter comply with the obligations pleaded in [10(c)] and [10(d)] of the defence to cross-claim (i.e., both the obligation under condition 3 of the policy and the obligation of utmost good faith) ([4.1.5]). It further alleged (at [4.1.6]) that, by virtue of the conduct of Allianz (thereby presumably referring to the matters earlier pleaded in [4.1]), BlueScope was thereafter discharged from the said obligations. 160If, and to the extent that, BlueScope was found to have breached any of the obligations pleaded in [10(b)], [10(c)], or [10(d)] of the defence to cross-claim, BlueScope relied upon s 18 of the Insurance Act and moved the court for an order that any such breach be excused.

Policy provisions 161The opening words of the statutory workers' compensation policy under which BlueScope claimed indemnity contain an express agreement that the indemnity is subject to the due and proper observance and fulfilment by the employer (BlueScope) of the policy conditions. Those policy conditions include, relevantly: 2. The employer shall give notice to the Insurer of any personal injury as soon as practicable after information as to the happening of such, or of any incapacity arising therefrom, comes to the knowledge of the Employer or of the Employer's representative for the time being, and shall forward to the Insurer forthwith after receipt thereof, every written notice of claim or proceedings, and all information as to any verbal notice of claim or proceedings. 3. The Employer shall not, without the written authority of the Insurer, incur any expense of litigation, or make any payment, settlement, or admission of liability in respect of any injury to or claim made by any worker. 4. The Insurer shall in respect of anything indemnified under this Policy, including the bringing, defending, enforcing or settling of legal proceedings for the benefit of the Insurer, be entitled to use the name of the Employer. The Employer shall give all necessary information and assistance, and forward all documents to enable the Insurer to settle or resist any claim as the Insurer may think fit.

Mr Jackson's evidence 162His Honour's reasons for judgment commence by setting out the background to the Tribunal proceedings. His Honour had before him transcript of the bedside hearing on 12 July 2006, as well as a tape recording of the evidence given by Mr Jackson. Having listened to the recording, with the assistance of the transcript, his Honour observed (at [15]) that "Mr Jackson spoke in a quite indistinct voice" and that at times appeared "not to be entirely clear about some of the answers he was giving" and on many occasions "indicated he could not remember". His Honour referred in this regard to evidence given by Mr Jackson (that his Honour noted was of potential relevance to the claim against BHP) as to his employment with Simon Carves. His Honour considered (at [16]) that it was clear as the cross-examination progressed that Mr Jackson was becoming "weaker and weaker and less and less clear"; that he was not sure about some of the matters in his affidavit and that on a number of occasions his voice trailed off and Mr Jackson's wife had intervened. 163His Honour noted (at [26]): As I have recounted earlier in this judgment, I have heard a tape recording of the plaintiff's evidence and it is evident that he was very ill and quite weak at the time of the hearing. At times his voice trailed off and at times it was not easy to understand what he said. At other times he appeared to be quite clear in what he said. The evidence of the plaintiff stopped when it was clear he was not really responding meaningfully to the questions of counsel. (my emphasis) 164His Honour (at [60]) took issue with the statement by Mr Little on 20 July 2006 that the notification had been at a "late stage" of the proceedings, saying that: The case had barely started and it must have been clear to Mr Little and to his instructing solicitors that the plaintiff's case would need to have much more evidence called than merely his affidavit and oral evidence, if the plaintiff were to succeed against either or both defendants. The oral evidence of the plaintiff also seemed to make the case against BHP rather tenuous as he claimed he worked the acid bricks and failed to confirm that he did any work involving asbestos when working at BHP premises. This was a different claim to the one he made in his affidavit. 165At [88], his Honour made a number of findings of fact, including that Mr Jackson was gravely ill during the hearing and at times was unresponsive to questions, at times was obviously ill and unable to say very much at all, and that some of his oral evidence contradicted his written evidence. His Honour found also, that, because of Mr Jackson's advanced state of illness, he ceased to be able to give any meaningful evidence before Mr Morgan had completed his cross-examination. 166His Honour included, as a finding of fact (at [88]), that Mr Little had claimed, when he appeared on 20 July 2006, that the conduct of BlueScope and its lawyers had "irretrievably prejudiced" the defence of the claim by the insurer and had made it clear that the insurer would not take over the action. With respect, that is not clear from the transcript of what had been said on that occasion, but nothing turns on whether or not Mr Little did make any such statement.

Assessment of Mr Jackson's claim against BHP 167In the course of his Honour's outline of the facts, his Honour made various observations as to the strength of Mr Jackson's claim against BHP, based on the material before him. 168At [61], his Honour said: There could be no doubt in my mind that [Mr Jackson's] case against BHP would have had little chance of success if he did not have more evidence from other persons and perhaps, supporting documentary evidence, to establish that he did work on BHP premises, that he was exposed to asbestos on those premises and that BHP, in breach of its duty of care to him, exposed him to that asbestos. 169In the proceedings before his Honour, Allianz had relied, among other things, on an affidavit from the solicitor acting on behalf of Allianz in relation to Mr Jackson's claim (Mr Prentice). Mr Prentice deposed (at [25]) that, having read Mr Jackson's affidavit, he would, if instructed to act on BlueScope's behalf, have had an expectation of obtaining a contribution from BHP of a minimum of 25% towards the settlement or judgment in favour of Mr Jackson. His Honour was of the view (at [80]) that Mr Prentice was wrong when he expressed the opinion that Allianz, in the name of BlueScope, could have brought a cross-claim against BHP. His Honour said he was of this view without needing to consider the terms of the de-merger indemnity deed. His Honour went on to say (at [81]): The plain fact of the matter is that if the plaintiff wanted to discontinue his case against BHP, BlueScope had no entitlement to object. Indeed, it had no standing at all to do so. If the plaintiff was unwilling to present evidence that he worked at BHP premises in Newcastle at any time during which he was exposed to asbestos, there was no possibility for BlueScope to prove that he had done so. There was evidence before me of an affidavit of Mr Joseph Abercrombie who did work for BHP at Newcastle that exposed him to asbestos, but Mr Abercrombie did not claim that the plaintiff worked with him, nor did he claim that he worked at any time in the BHP premises in Newcastle with anyone from [BlueScope]. The plaintiff in his affidavit and in his oral evidence gave contradictory evidence about working at BHP premises in Newcastle, but that evidence did not show any exposure of a provable type to asbestos. His written evidence was vague about his working at BHP. (my emphasis) 170His Honour noted (at [82]) that an affidavit had been tendered from a person who had brought proceedings against BHP and BlueScope in 2011 relating to exposure to asbestos while working in the BHP blast furnaces in Newcastle in the 1970's and that the deponent (Mr Fischer) gave no evidence of having worked with Mr Jackson or anyone from BlueScope. His Honour concluded (at [83]) that the evidence of Mr Abercrombie (referred to in the extract above) and Mr Fischer could not have been relied upon by Mr Jackson to establish his case against BHP. 171His Honour concluded (at [84]) that, as far as he could determine, Mr Jackson had no realistic prospect of establishing a case against BHP. 172His Honour then considered a submission by Allianz that the evidence of Mr Powell could be relied on as establishing that Mr Jackson may have been present at BHP (at [86]) but was of the view that, at best, this established evidence of a possibility (at [87]), saying that: Even if Mr Jackson had been working at various times as a [BlueScope] employee at the BHP steelworks in Newcastle, he would have had to prove exactly what work he was doing, that it subjected him to asbestos exposure and that someone from BHP was directing him in what to do. Mr Powell's affidavit would have been of no assistance.

Consideration of legal and factual issues 173His Honour then set out his consideration of the legal and factual issues enumerated in his reasons at [98]-[113].

Alleged breach of condition 2 174As to the alleged breach by BlueScope of condition 2 of the policy, his Honour noted the cross-examination of Mr Hay to the effect that Mr Hay's knowledge of BlueScope's insurance position in 2004 derived from information obtained when he had acted for BlueScope in earlier proceedings in the Tribunal ([29]) and from Mr Miller at BHP ([32]). 175At [42], his Honour found that both Mr Hay and BlueScope had actual knowledge on 4 November 2004 of the existence of a policy of insurance putting Allianz at risk for claims by employees of BlueScope in respect of their pre-30 September 1979 employment. 176While it is not clear from his Honour's reasons the basis of his Honour's finding of knowledge on the part of BlueScope (if not some imputed knowledge derived from its solicitor), there is no challenge to the finding that BlueScope had actual knowledge on or from 4 November 2004 of the existence of a policy of insurance putting Allianz on risk for the relevant claim. Indeed, it is clear, from evidence filed in the proceedings before his Honour, that BlueScope (known from 10 January 1994 to 7 February 2002 as BHP Steel (JLA) Ltd and from then until 17 November 2003 as BHP Steel Ltd) was on notice of this even earlier, the company having claimed indemnity from Allianz under the relevant statutory workers' compensation policy in February 2001 and again in April 2003 (see affidavit of Mr Prentice sworn 16 October 2012 (at [8]-[9]) annexing copies of correspondence in that regard). 177At [98], his Honour found that Mr Hay had an obligation to inform the insurer and its solicitors before the bedside hearing on 12 July 2006 of the plaintiff's claim; that both BlueScope and Mr Hay knew or ought to have known of the existence of insurance before the bedside hearing, and that Mr Hay's failure to inform Allianz was in breach of clause 2 of the insurance policy. As noted, this finding is not now challenged. 178It is not clear from his Honour's judgment as to when his Honour found the breach of condition 2 occurred. There is no express finding that the breach occurred at the time alleged by Allianz (5 or 6 July 2006). At [98], his Honour referred to there being an obligation to inform "before" the bedside hearing on 12 July 2006. His Honour elsewhere seems to suggest that the giving of information to Mr Hay as to the insurance position on 10 July 2006 meant that there was a failure to inform from that date. No issue is taken with the precise date of the breach, though Allianz nevertheless points out that the date of breach of this condition gives content to the putative prejudice (Appeal Transcript 2.48).

Alleged breach of condition 3 179As to the alleged breach of condition 3 of the policy, his Honour (at [110]) accepted the submissions of BlueScope that Allianz had no entitlement to be consulted in relation to the policy since it had declined indemnity "without any reason"; thereby implicitly finding no breach of that condition. His Honour did not otherwise address this issue.

Alleged breach of utmost good faith obligation 180As to the alleged breach by BlueScope of the obligation of utmost good faith (pleaded at [10(d)] of the defence to cross-claim), his Honour does not seem to have made any express finding. His Honour did, however, advert to certain of the matters alleged (at [10(d)]), as giving rise to that breach (summarised at [157] above). 181His Honour did not expressly address the allegation that the interests of the two defendants were in conflict (the substance of what was pleaded at [10(d)(i)-(vii)]), though expressing the opinion (at [12]) that if there was no insurer involved for either party it would have been "entirely appropriate" in light of the BHP indemnity for one solicitor to represent both (a non-sequitur since here there was an insurer present). However, his Honour did address other aspects of the matters pleaded at [10(d)(i) - (vii)]. 182His Honour referred to, and accepted, Mr Morgan's evidence: that he had understood that there was a possibility that there might be an insurer and that he had to be very careful in cross-examination ([23]); that his instructions were to the effect that BHP was fully liable for injuries to employees of BlueScope and any third parties arising from any exposure at the Newcastle Steelworks and that he was to be impartial as between the two defendants ([23]). His Honour accepted that Mr Morgan's instructions were not to put anything to Mr Jackson that would implicate specifically either BHP or BlueScope; and that Mr Morgan's conclusion during the cross-examination was that Mr Jackson "was not really in a position to give any real detail about anything" ([24]). His Honour accepted (at [25]) that Mr Morgan had tried to obtain "in chronological fashion" Mr Jackson's employment history. His Honour said that it was clear that Mr Morgan had asked questions about Mr Jackson's employment with BHP but that he had obtained answers on this topic and others that were not entirely clear and some that were contradictory of what was in Mr Jackson's affidavit. 183At [99], his Honour said that he did not accept that Mr Morgan had acted to prejudice the insurer by deliberately refraining from asking any questions about BHP and that Mr Jackson did not give any "certain evidence" that would enable anybody to conclude that BHP had exposed him at any time to asbestos. (Allianz takes issue with the latter observation, given what was said in Mr Jackson's affidavit and in the sworn particulars of claim. Allianz also maintains that it is not to the point that Mr Morgan acted impartially as between the respective defendants; maintaining that it was in the interests of Allianz, as BlueScope's insurer, that Mr Morgan seek to obtain information from Mr Jackson to inculpate BHP and that he did not do so.) 184The only other aspect of the breach of good faith allegation to which his Honour adverted was that pleaded at [10(d)(viii)]. At [106], his Honour said that BlueScope suffered no detriment "whatsoever" by reason of the fact that Mr Hay was privy to information and results of investigations undertaken for both the defendants and did not pass the information on in a timely matter, since the only affidavit in question was that of Mr Powell and it contained no information about the employment of Mr Jackson by BlueScope at the BHP Steelworks.

Prejudice suffered by breach of condition 2 185As to whether any prejudice was suffered by Allianz as a result of the breach of condition 2, at [100] his Honour said that, although Mr Hay did not inform Allianz of the policy or make any claim until 14 July 2006, nothing had happened between 12 and 14 July 2006 that changed the position of the parties "at all". While that may be the case, it does not address the contention by Allianz that it suffered prejudice by loss of the opportunity to attend the bedside hearing on 12 July 2006 and to cross-examine (first) Mr Jackson. 186At [102], his Honour seems to have addressed the question of prejudice by reference to whether an advantage had been conferred on BHP to BlueScope's prejudice, saying that: In my opinion, [Allianz] was entitled to regard BlueScope as being in breach of condition 2 of the policy for its failure to notify as soon as practicable. However, it did not suffer any "irretrievable prejudice" as a result of the conduct of the hearing by Mr hay [sic] and Mr Morgan. Contrary to the claims it made in its pleadings, the fact that Mr Hay represented both parties at the bedside hearing did not confer any advantage on BHP ... nor did this joint representation give BHP ... access to documents or information to the prejudice of BlueScope. The fact was that the claim concerned events so far distant that neither defendant had any records by the time of the bedside hearing of Mr Jackson's employment. Nothing that Mr Hay obtained during the time up to 18 and 19 July enabled [BHP] to gain some unfair advantage over [BlueScope]. It did not get access to confidential documents it otherwise might not have had. 187His Honour further noted (at [103]) that, by the giving of the Browne v Dunn undertaking, either or both of the defendants was able to call evidence to add to, or contradict anything, said in the bedside hearing or in Mr Jackson's affidavit. 188At [104], his Honour made clear that he rejected the claim that Mr Hay and Mr Morgan had acted improperly at the bedside hearing to the prejudice of Allianz' interests and the advantage of BHP. 189At [106], his Honour rejected the submission that BlueScope had suffered prejudice as a result of the late provision of Mr Powell's affidavit, on the basis that it contained no information about Mr Jackson's employment by BlueScope at the BHP Steelworks. His Honour went on to say that "[t]he claim by Mr Jackson that he did work at the steelworks was of no evidentiary value unless he could make it plain that he was significantly exposed to asbestos". (Allianz takes issue with this as being an incorrect statement of the test for causation in relation to asbestos claims.) 190His Honour then in effect repeated the finding at [102] in his conclusion at [107] that Allianz could justifiably claim that BlueScope was in breach of condition 2 for not informing it of the claim at the earliest opportunity but went on to say that Allianz could not point to any prejudice, apart from a "theoretical" one, that it had suffered as a result of the late failure to notify. His Honour said that from that point onwards BlueScope was entitled to act as a prudent uninsured. His Honour also concluded that Allianz had declined to take over the proceedings "for reasons that lacked substance".

Allianz' position in relation to the claim 191In the course of his Honour's reasons, his Honour referred to the position Allianz had taken in relation to the claim. 192At [55], his Honour said that the solicitors for Allianz had made it clear on 18 and 19 July 2006 "that they would not agree to indemnify BlueScope Steel". Later, at [88(9)], his Honour again referred to the position as being that Mr Anderson had "declined to agree to an indemnity". 193Since up to May 2007 there was no communication of any decision not to indemnify, his Honour must have there been referring (at least at [55]) to there being at that stage no decision as to whether or not Allianz would indemnify, not that there had been a positive decision by Allianz to decline indemnity. 194At [101], his Honour said that when, on 18 and 19 July 2006, Allianz: ... declined to take over conduct of the proceedings and declined to indemnify, it could rely on two matters only in taking these decisions, namely the delay by Mr Hayes [sic] in notifying it of the claim and the "irretrievable prejudice" it claimed to suffer as a result of conduct of the bedside hearing. 195Pausing there, there had been no refusal of indemnity as at 20 July 2006, nor had there been any notification of a decision not to assume conduct of the proceedings at that date (though at that stage Allianz had not taken up the opportunity to do so). Allianz says that [101] is, in effect, a finding by his Honour that, by declining to take over conduct of the proceedings, it was in breach of the policy. Certainly, the manner in which [101] is worded leads to the conclusion that his Honour perceived there to be a need for Allianz to be able to rely on something as justifying a decision to decline to assume the conduct of proceedings, such that if there were no justification for not taking over conduct of the proceedings it was in breach of some obligation to do so. (Allianz further emphasises that there was no finding by his Honour that, by declining indemnity, it had repudiated the policy.) 196His Honour noted (at [109]) the submission of BlueScope that Allianz had no entitlement to be consulted in relation to the policy, having declined indemnity without any reason. His Honour accepted that submission (at [110]) without explaining his reason for so doing, saying that: It is clear to me that Allianz firstly declined to take over the proceedings [something Allianz maintains was always the insurer's right] and then more than a year later, declined indemnity substantially relying on the claim that it was "irretrievably prejudiced" by the conduct of Mr Hay and Mr Morgan at the bedside hearing. I have rejected Allianz [sic] submissions about this and it follows that Allianz could rely only on late notification of the claim. 197At [111], his Honour said that that breach (i.e., late notification of the claim) "in the circumstances, was not sufficient to entitle Allianz to decline to take over the proceedings, much less to decline indemnity" (my emphasis). Again, the manner in which this conclusion is expressed suggests that his Honour considered that Allianz was obliged to take over conduct of the proceedings unless it had a justifiable reason not to do so. His Honour also seems to have considered that Allianz was not entitled to decline indemnity as a result of a breach of condition 2 of the policy without adequate reason. However, that is precisely the effect of condition 2, subject only to the possibility that the breach might ultimately be excused pursuant to s 18 of the Insurance Act.

His Honour's conclusion 198At [112], his Honour concluded that "Allianz was in breach of its contract to indemnify and that its breach entitled BlueScope to act as a prudent uninsured and to settle the claim of Mr Jackson". The "breach" to which his Honour then referred seems, in context, to be Allianz' refusal to take over the conduct of the proceedings and its declining of indemnity on 6 July 2007 (see [101], [108] and [111]). 199His Honour had earlier noted (at Red 113L) that Allianz did not contend that the quantum of the verdict paid to Mr Jackson was unreasonable nor that the amount of costs paid was unreasonable. That position was maintained on appeal: what Allianz instead contends is that what was unreasonable was for no contribution to have been sought from BHP to that settlement sum. 200His Honour then said that, if the conclusion at [112] was incorrect, then the failure of BlueScope to give notice as soon as possible caused no prejudice to Allianz and might reasonably be excused on that ground (at [113]). His Honour ordered that the failure be excused and found for BlueScope.

Appeal 201By notice of appeal filed 11 June 2013, Allianz appeals from his Honour's decision pursuant to s 32 of the Dust Diseases Tribunal Act 1989 (NSW) and s 48(2)(f) of the Supreme Court Act 1970 (NSW). Such an appeal is limited to errors in point of law. 202Not all of the appeal grounds set out in the notice of appeal were ultimately pressed by Allianz. Those that were pressed may be summarised as being that his Honour erred: 1. in determining to excuse BlueScope's breaches of condition 2 of the policy, in: i. misconstruing s 18(1) by taking the term "prejudice" to mean "irretrievable prejudice"; ii. wrongly deciding that the statutory requirement of no prejudice occasioned by reason of the breaches was satisfied on the evidence; iii. (impliedly) deciding that no evidence of actual (or non-theoretical) prejudice had been adduced by Allianz; and v. wrongly deciding, in the context of an indivisible claim against two defendants for damages in respect of mesothelioma, that no prejudice for the purpose of s 18(1) of the Act could be demonstrated unless it could be inferred that if the plaintiff had been cross-examined at the hearing on 12 July 2006, in the interest of the insurer, that evidence (alone or in combination with other evidence) would have made "it plain that he was significantly exposed to asbestos" at the BHP premises. 2. in relation to the alleged breach of condition 3, in: (a) finding that Allianz was obliged at law to take over conduct of the defence of the proceedings on 20 July 2006; (b) finding, or impliedly finding, that Allianz' communication on 6 July 2007 that it declined to indemnify BlueScope with respect to Mr Jackson's claim was a repudiation of the policy by Allianz with the consequence that BlueScope was thereafter free to enter judgment in favour of BHP without giving prior notice to Allianz contrary to condition 3 of the policy; and (c) failing to exercise jurisdiction by finding, or impliedly finding, without providing reasons therefor that in consenting to the entry of the judgment in favour of BHP without prior notice to Allianz, BlueScope breached its obligation of utmost good faith to Allianz. 203BlueScope pressed only three of the grounds in its notice of contention filed 10 July 2013, those being, in summary, that: 3. Allianz' conduct in confirming its denial of indemnity of 6 July 2007 was such as to discharge BlueScope from compliance with any obligation to obtain Allianz' consent under condition 3 in accordance with the principle in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235 5. any breach of condition 3 was such that it ought to be excused under s 18 of the Insurance Act 1902; and 6. Allianz' conduct from 20 July 2006 onwards in declining indemnity without any substantial reason was such as to amount to a breach of its obligations as insurer under the policy, and thereby to entitle BlueScope to recover its loss on the claim as damages for such breach.

Ground 1 of notice of appeal - alleged error in excusing breaches of condition 2 of the policy 204What is put in issue by ground 1 of the notice of appeal is the order excusing BlueScope's breach of condition 2 of the policy by reason of its late notification to Allianz of the claim. 205Section 18 of the Insurance Act provides that: (1) In any proceedings taken in a court in respect of a difference or dispute arising out of a contract of insurance, if it appears to the court that a failure by the insured to observe or perform a term or condition of the contract of insurance may reasonably be excused on the ground that the insurer was not prejudiced by the failure, the court may order that the failure be excused. (2) Where an order of the nature referred to in subsection (1) has been made, the rights and liabilities of all persons in respect of the contract of insurance concerned shall be determined as if the failure the subject of the order had not occurred. 206Allianz accepts that what is required to enliven the discretion to excuse a breach of the policy is that it establish that real (not speculative or theoretical) prejudice was occasioned by the relevant breach(es) (referring to what was said in McPherson and Davies Shopfitters Pty Ltd v Mercantile Mutual Insurance Ltd (Supreme Court (NSW), Wood J, 26 June 1986, unrep)). 207In essence, there are three errors to which Allianz points in its four sub-grounds of appeal. I deal with those in turn.

Ground 1(i) - meaning of "prejudice" in s 18(1) 208The first criticism is that his Honour misconstrued the meaning of "prejudice" in s 18(1) by taking it to mean "irretrievable" prejudice and hence misapprehended the scope of the s 18(1) jurisdictional threshold to enliven the power to determine whether breach of condition 2 of the policy could reasonably be excused. 209Allianz points to the various places in his Honour's judgment where the word "prejudice" or "prejudiced" is qualified by the adjective "irretrievable" or the corresponding adverb (see [88(10)], [101], [102] and [110]). Insofar as his Honour was there repeating submissions made to him on behalf of Allianz, Allianz says that the submission that was made by it to the primary judge was not that irretrievable prejudice was what was required by s 18; rather the submission emphasised the seriousness of the prejudice it had suffered (Appeal Transcript 10.15). 210Other than at [102], the context in which his Honour referred to the quality of the prejudice as "irretrievable" or otherwise was expressly by reference to a claim or submission made by or on behalf of Allianz to that effect. At [102], having referred in the previous paragraph to the quality of prejudice Allianz claimed to have suffered as a result of the conduct of the bedside hearing, his Honour stated his conclusion that Allianz had not suffered any "irretrievable prejudice" as a result of the conduct of the hearing by BlueScope's then legal representatives. Read in context, his Honour was there addressing the assertion that had been made by Allianz; not formulating a test of "no irretrievable prejudice". 211It is significant, in this regard, that in each of the paragraphs in which his Honour used the expression "irretrievable prejudice" (or its equivalent) his Honour employed inverted commas, consistent with this being a reference back to the claim Allianz had made. There is no other ready explanation for the use of inverted commas. 212By contrast, when his Honour (at [113]) directly addressed the question whether the failure of BlueScope to give notice as soon as possible should be excused pursuant to s 18 of the Insurance Act, and concluded that no prejudice had thereby been caused to Allianz, his Honour did not qualify the word "prejudice" by use of the adjective "irretrievable". 213True it is, that his Honour addressed in his reasons matters going to whether any prejudice that had been suffered by the late notification of the claim could be said as a practical matter to be irretrievable. His Honour made, both as a finding of fact ([88(5)]) and elsewhere (at [103]) in reference to the Browne v Dunn undertaking that had been given, the observation that the defendants were not precluded from later adducing evidence as to matters to add to or contradict anything in Mr Jackson's affidavit or oral evidence. However, there again, his Honour seems to have been addressing the particular submissions that had been made as to prejudice which were noted at [101]. 214Although his Honour clearly had regard to the possibility that evidence might have been obtained from other sources (see [88(5)]) and in that sense considered that liability to attend the bedside hearing had not caused irretrievable prejudice, his Honour's ultimate conclusion was that no prejudice had been suffered by late notification. 215When addressing (and rejecting) at [99] what Allianz submits was a false issue (namely whether counsel had deliberately refrained from asking questions about BHP) his Honour repeated his observation that Mr Jackson's answers in cross-examination were "far from clear" and "quite contradictory". 216Neither the earlier references to "irretrievable prejudice", which in effect did no more than quote the proposition that had been asserted by Allianz' solicitors in their earlier correspondence, nor the reasoning that his Honour employed in considering whether there was prejudice, persuades me that his Honour misconstrued the threshold test in s 18(1) of the Insurance Act. This ground of appeal is not made out.

Grounds 1(ii) and 1(iii) - finding (or implicit finding) of no prejudice (or no evidence of actual or non-theoretical prejudice) arising from late notification 217These grounds of appeal maintain that his Honour's finding of no prejudice (or implicit finding of no evidence of actual or non-theoretical prejudice) was infected by the error of law identified in ground 1(i). To that extent, these sub-grounds necessarily suffer from the conclusion I have reached on ground 1(i), namely that his Honour did not misconstrue the threshold test in s 181(1) of the Insurance Act. However, against the possibility that the conclusion above is incorrect, I consider together these two sub-grounds of appeal.

Lack of opportunity to cross-examine 218Allianz contends that the evidence established that it had suffered real (and non-theoretical) prejudice by reason of the lack of the opportunity to cross-examine Mr Jackson at the bedside hearing on 12 July 2006. Perhaps somewhat inconsistently, it argues that it is speculation for BlueScope to say that nothing could have been obtained from Mr Jackson which would have corroborated or reinforced the sworn particulars (Appeal Transcript 9/45-50). 219Allianz further contends that, in the position of the first defendant in the proceedings, it is likely that what it was denied was the forensic opportunity of questioning Mr Jackson first. The significance of this is that Allianz points to his Honour's assessment of Mr Jackson's condition during the course of cross-examination (at [15]-[16]; [26]) and notes that his Honour did not find as a fact that Mr Jackson's oral evidence was of "entirely no value". 220Mr Prentice deposed (at [24] of his affidavit) that had he been instructed to act on behalf of BlueScope in relation to Mr Jackson's claim prior to Mr Jackson's death, he would have sought to obtain evidence from Mr Jackson in cross-examination about his work at the BHP Steelworks, in particular as to the supervision of his work by officers of BHP, the identity of such officers, the provision of materials containing asbestos by BHP leading to the exposure, the circumstances, duration and extent of exposure to asbestos in the BHP premises, and the names of any fellow workers with whom Mr Jackson worked at the BHP premises. 221It is submitted that Mr Jackson was uniquely placed to give evidence of his own exposure and circumstances at the various places of work and that it was fundamental, in the interests of the insurer, that his evidence as to Mr Jackson's exposure at the BHP premises in the relevant period be adduced at its highest. Reference was made to Mr Hay's note of 11 July 2006, listing topics for inquiry of Mr Jackson, which referred to his "exposure with other employers" but which did not refer to Mr Jackson's work at the BHP steelworks (whether while employed by Simon Carves or BlueScope). Allianz also points to Mr Jackson's affidavit evidence as to his participation in asbestos lagging works to rebuild the coke ovens at the BHP Steelworks as highlighting the prejudice suffered by the lack of opportunity to cross-examine him on such matters. 222His Honour (at [78]) accepted Mr Prentice's evidence that he would have made arrangements for someone to be present to represent Allianz at the bedside hearing even if he had only had a few hours' notice. There was no issue as to whether Allianz would have made use of the opportunity to cross-examine Mr Jackson had it been notified of the claim in time. 223However, his Honour, relevantly, concluded: that Mr Jackson was at times not entirely clear about some of the answers he was giving (there referring to the cross-examination at Blue 1/203O-204C) ([15]); that Mr Jackson was not sure about some of the matters that appeared in his affidavit (there expressly referring to questions later in the cross-examination at p5 of the transcript - Blue 1/206) ([16]); that some of the answers given by Mr Jackson (both on the topic of his employment with BHP and on other topics) were not entirely clear and others were contradictory of his affidavit ([25]); and that at times it was not easy to understand what he said but at other times he appeared to be quite clear in what he said ([26]). His Honour's ultimate finding at [88(3)] was that Mr Jackson was "at times" unresponsive and "unable to say very much at all". 224At [99], his Honour stated that Mr Jackson's answers, when questioned as to his affidavit evidence were "far from clear" and "contradictory". His Honour concluded that Mr Jackson "did not give any certain evidence that would enable anybody to conclude that BHP exposed him to asbestos". By this, I understand his Honour to be referring to Mr Jackson's oral evidence and describing the quality of that evidence as uncertain, consistent with his Honour's other observations drawn from hearing the tape recording. 225Allianz accepts that if his Honour's finding was to the effect that the bedside hearing was too late to enable anyone to obtain any useful information then that would be the end of its complaint about prejudice as a result of late notification. However, it is submitted that the fact that there was some evidence obtained at the bedside hearing precludes any such conclusion. 226The window of opportunity to obtain any cogent evidence from Mr Jackson at the bedside hearing can only have been small. The only cross-examination of Mr Jackson prior to the passage of transcript to which his Honour referred at [15] comprised taking Mr Jackson through what he had said in his affidavit about working with BlueScope as an apprentice, as to which it appears, from my review of the transcript, that Mr Jackson's answers, beyond simply agreeing with propositions put to him, were by no means expansive. Even at that early point in his cross-examination, there were matters as to which he expressed uncertainty. Indeed, about the only thing Mr Jackson did seem clear about during his cross-examination was that he had worked at BHP and other premises while he was an apprentice with BlueScope, something that contradicted the contents of his sworn affidavit but that was, in any event, favourable to the conclusion that Allianz would no doubt have sought to press, namely that the relevant exposure was at BHP's premises. 227It does not appear that Mr Jackson was asked any questions during his cross-examination about the names of persons with whom he had worked or by whom he was supervised while at BlueScope or at BHP, so it is impossible to form a view as to whether, had he been asked such questions at the outset of the cross-examination, and before he became as unresponsive as he was at the conclusion of the cross-examination, Mr Jackson would have been likely to recall any such information. The highest that this can be put is that Allianz lost the opportunity to test Mr Jackson's recollection on matters that might potentially have uncovered lines of enquiry as to his employment history. 228Similarly, insofar as complaint is made in Allianz' written submissions as to the lack of evidence sought from Mr Jackson as to asbestos suppliers or the particular asbestos products used at BHP, on the basis that it could have facilitated cross-claims against suppliers, there is little from which it could be concluded that Mr Jackson would have been able at any stage to give useful evidence as to such matters. Mr Jackson did give evidence that he was using refractory bricks, but not asbestos rope or millboard, when working with Simon Carves at BHP but then seemed to contradict that by saying that he was doing acid work, with a different type of brick. Hence, his recollection of the products he had worked with, even at an early stage in his cross-examination, was not apparently reliable. 229Having regard to the whole of the transcript, and his Honour's findings as to the manner in which Mr Jackson gave his oral evidence, the conclusion to be drawn is that any evidence Mr Jackson might have given on the topics Allianz says it would have wished to explore with him was not likely to have been particularly reliable and was unlikely to have been clear. Hence, the opportunity which Allianz undoubtedly lost of cross-examining Mr Jackson (even had it been able to cross-examine him first) was of uncertain value. In those circumstances, there was no error in his Honour's finding that there was no prejudice as a result of the loss of opportunity to cross-examine Mr Jackson, whatever the order in which that cross-examination might have occurred.

Appointment of contributions assessor 230For completeness, I note that in Allianz' written submissions, reference is made to the claims resolution process under the Dust Diseases Tribunal Regulation 2007, in the context of a submission that, had the matter been referred to a contributions assessor for determination (an obligation to which it is submitted the defendants failed to draw to the Tribunal's attention) there would have been a presumption that BHP was liable to contribute to the claim and the onus would then have been on BHP to rebut that presumption at the hearing or on any cross-claim between BHP and BlueScope. Allianz suggests that the failure of the defendants to advise the registrar of a lack of agreement as to contribution may have been due to a presumption that no apportionment issue arose due to the operation of the de-merger deed of indemnity. 231Clauses 48 and 49 of the 2007 Regulation require co-defendants who are alleged to be liable to contribute to any damages recovered by the plaintiff to agree among themselves as to the contribution each is liable to make to the damages claimed by the plaintiff, failing which the matter is to be referred to a contributions assessor for determination in accordance with clause 49. 232This was not the subject of any oral submissions on the appeal and did not appear to be pressed as amounting to prejudice due to the late notification of the claim. Nor was it pleaded as a breach by BlueScope of its obligation of good faith as an insured. Given that Allianz was advised of the claim well within the period in which, under the 2007 Regulation, the co-defendants were required to seek to reach agreement as to apportionment, and the fact that intervening death of Mr Jackson did not suspend the operation of the apportionment process under the 2007 Regulation unless the parties so agreed (see clause 20(3)), any prejudice or potential prejudice arising from the failure to pursue the contributions assessment process cannot have been due to late notification of the claim.

Additional considerations 233Allianz' written submissions also contend that the fact that real prejudice was occasioned from late notification of the claim was clear by 17 and 18 July 2006, since it was on 17 July 2006 (at 8.19pm) that Mr Harvey advised Mr Hay that exposure at the BHP premises might be able to be disputed and Mr Jackson died the following day. However, it does not appear to be suggested that, as at the evening of 17 July 2006, BlueScope would have been in a position to re-convene the hearing in order to obtain oral evidence from Mr Jackson on this point; nor is there any suggestion that this information was available to BlueScope, or could have been obtained by Allianz, at an earlier stage. In those circumstances, the fact that BHP subsequently defended the Tribunal proceedings on the basis that Mr Jackson had not been exposed at the BHP premises, using information subsequently (in August 2006) obtained from Mr Harvey pursuant to the joint retainer, does not demonstrate prejudice arising from the late notification of the claim to Allianz. Nor does the fact that all the material annexed to Mr Harvey's report was not immediately provided to BlueScope's lawyers.

Conclusion 234BlueScope argues that the breaches of condition 2 did not result in anything more than theoretical prejudice to Allianz. I agree. What it lost was an opportunity to cross-examine Mr Jackson (or, perhaps, the opportunity to cross-examine him before BHP's representatives had BHP been separately represented). From my review of the transcript and his Honour's assessment of the tape recording of that evidence as events transpired on 12 July 2006, this was an opportunity of no more than speculative value. 235His Honour's observation (at [103]) that it was open to Allianz to seek to obtain evidence elsewhere of Mr Jackson's work history and exposure to asbestos, insofar as it suggests that there was no irretrievable prejudice (responding to the submission that had been made by Allianz of irretrievable prejudice), does not bespeak error in the finding that there was no prejudice caused by the late notification. Such a finding was open whether or not Allianz could have obtained such evidence elsewhere. 236Similarly, insofar as his Honour took into account his view of the prospects of success of Mr Jackson's claim against BHP (a view which Allianz maintains could not have been reached on the evidence before the Tribunal, which included Mr Jackson's sworn pleading and particulars), the conclusion that there was no prejudice arising from late notification is one that was open irrespective of the prospects of the claim against BHP. 237Grounds 1(ii) and (iii) are not made out.

Ground 1(v) - finding re evidence necessary to support mesothelioma claim 238As noted earlier, at [106], his Honour said that the claim by Mr Jackson that he had done work at the BHP premises was of no "evidentiary value" unless Mr Jackson could make it plain that he was "significantly exposed" to asbestos (at the BHP premises). 239Allianz submits that his Honour's finding that Mr Jackson's claim was of no evidentiary value was made absent any foundational evidence; that his Honour mistakenly assumed that causation could only in law be demonstrated where the frequency and/or intensity of asbestos was "significant"; and that his Honour misunderstood the cumulative exposure theory of mesothelioma induction (referring to what was said in Amaca Pty Ltd v Booth [2011] HCA 53; (2011) 246 CLR 36 at [18] to [26] and [51] per French CJ). 240It is submitted that his Honour misapprehended the accepted mode of demonstrating causation and contribution by reference to all known exposures within an acceptable latency period. In this regard, Allianz refers to decisions of the Tribunal to the effect that all asbestos exposure within an acceptable latency period makes a material contribution to the cause of mesothelioma (in particular, the judgment of Kearns DDTJ in King v Caltex Petroleum Pty Ltd [2013] NSWDDT 4 at [26], citing O'Meally P (DDT) in Eaton v Carrier Air Conditioning Pty Ltd [2004] 1 DDCR 716 at [8]). BlueScope takes issue with this statement of principle insofar as it does not take into account the exception made for exposures that are trivial or de minimis (Booth v Amaca Pty Ltd [2010] NSWDDT 8 at [59]) BlueScope points out that the onus remains on a plaintiff to establish that there has been an exposure that is more than trivial or de minimis. 241In King v Caltex Petroleum, Kearns DTTJ said at [28] that if exposure is de minimis it will not be material for the purposes of considering whether the proposition that all asbestos exposure within an acceptable latency period makes a material contribution to the cause of mesothelioma. Curtis DTTJ in Booth v Amaca said at [62] that all exposures to Chrysotile asbestos other than trivial or de minimis exposure occurring in the relevant latency period materially contributed to the cause of mesothelioma. 242It is submitted by BlueScope that what his Honour was saying (at [106]) was that, as a starting point, there would need to be evidence of some sort of exposure to elevated levels of asbestos and that the evidence before his Honour did not go that far. If that is what his Honour was addressing at [106] then the conclusion of no evidentiary value suffers from the fact that, at least in the verified pleadings and particulars, there was an allegation of exposure to asbestos dust at the BHP premises that could not on its face be dismissed as no more than trivial or de minimis. 243What his Honour was there addressing was the complaint by Allianz that Mr Hay had continued to act for BHP in the proceedings (after ceasing to act for BlueScope) and had not passed on the results of the Harvey investigation in a timely manner to BlueScope, part of the circumstances relied on by Allianz as amounting to the alleged breach by BlueScope of its obligation of utmost good faith. His Honour found that there was no detriment to BlueScope by the late provision of Mr Powell's affidavit. 244Allianz maintains that on the material before his Honour it could be established that Mr Jackson had worked as a BlueScope employee at BHP with asbestos rope and that this was not precluded by Mr Powell's evidence. 245The same particulars of negligence were alleged against both defendants. In the Statement of Particulars, Mr Jackson's alleged exposure to asbestos was particularised by reference to each of the defendants as follows: 4.5 How often were you exposed to asbestos during the period of exposure (including the number of occasions and/or the frequency with which this occurred)? A. At the Lysaghts works the Plaintiff was exposed to asbestos on many occaisions [sic] whenever he was required to do shutdown or repair work on the furnaces in the mills and/or the pots in galvanising area. B. At the BHP Steelworks the Plaintiff was exposed on a daily basis when doing the flanges around the coke oven doors. 4.6 Describe the level of intensity of exposure as you perceived it (including whether you considered the level or intensity was low, medium or high) ... A. The intensity of asbestos exposure was medium to high during shutdown or repair work at the Lysaghts work. B. The intensity of asbestos exposure was high during the rebuild of the coke oven at the BHP Steelworks. 246In the particulars (answer to question 4.7), Mr Jackson estimated that at least 90% of asbestos fibres he had inhaled throughout his life were probably inhaled during his work as a refractory bricklayer at the Lysaghts (i.e., BlueScope) works and BHP Steelworks. He described the asbestos products to which he had been exposed as: Asbestos rope. Insulation bricks often with marking "Newbolds" and often white and soft. Raw asbestos. Millboard. 247The particulars stated that the asbestos products were provided to Mr Jackson by BlueScope and/or BHP. Mr Jackson identified BHP as the occupier of the Newcastle Steelworks and stated that "in particular [BHP] provided direct supervision and instruction during the rebuild of the coke ovens" (answer to question 4.17). 248In his affidavit (at [25]-[26], [28]-[40]), Mr Jackson described the work that he had performed while employed by BlueScope, in the period from 1957 to 1961 and then from 1962 to 1966. He deposed (at [12]) that during that period he was sent by BlueScope to other premises, including BHP Steelworks and Commonwealth Steel, and that most of his work for BlueScope related to either "shutdowns" or scheduled maintenance and that when he was sent to work at other premises this was usually breakdown work caused by the failure of refractory brickwork ([13]). Mr Jackson deposed (at [36]) that he did not really recall the number of occasions he attended Commonwealth Steel because by far the majority of his time was spent either at BlueScope or BHP during the later years (presumably referring there to the time from 1962 to 1966). Mr Jackson also deposed at [36] that he did not handle much asbestos rope during those later years because he was principally working as a refractory brickworker when sent to other companies. 249At [37], Mr Jackson deposed that the work at BHP Steelworks, in addition to re-bricking, included considerable work on the coke ovens. He described that work in some detail and said that the dirtiest part of the work he undertook on the coke ovens, leaving aside the coal dust, was the replacement of the asbestos seals around the doors. Mr Jackson described how the asbestos rope had to be dug out of the groove around the doors; that this produced a considerable amount of asbestos dust and fibre in his breathing area whilst he was undertaking the task with his arms bent; and that for the part of the time he was working with his arms overhead when the dust fell directly on his face. Mr Jackson deposed that he used asbestos rope of the same type there as he had used at BlueScope. Mr Jackson's affidavit also referred to his having worked at Simon Carves as a refractory bricklayer at the new acid plant being constructed by BHP at the Newcastle steelworks (at [10]). 250BlueScope argues that for there to have been a substantial case against BHP it would have been necessary to establish more than that there had been a "more than trivial" exposure at BHP, it would have been necessary to establish that BHP was responsible in law for any disease resulting from such exposure. Nevertheless, insofar as the complaint by Allianz is that his Honour could not, on the evidence then before him, have come to the conclusion that Mr Jackson's claim to have worked at BHP was of no evidentiary value, I agree that such a finding was not open on the evidence before his Honour. 251That said, as I read what his Honour said at [106], it goes no further than a finding that the late provision of Mr Powell's statement (a matter relied upon by Allianz as one of the circumstances by reference to which breach of the obligation of utmost good faith should be found) did not prejudice BlueScope. 252Even if his Honour did wrongly conclude, when assessing whether there was prejudice as a result of the late notification of the claim, that the evidentiary value of Mr Jackson's claim to have worked at the BHP premises, for the reasons set out earlier, I am of the opinion that no more than theoretical prejudice was suffered as a result of the loss of opportunity to cross-examine Mr Jackson at the bedside hearing and hence that the conclusion as to there being no prejudice for the purposes of s 18(1) is correct. 253Ground 1(v) is not in my opinion made out.

Ground 2 of notice of appeal 254Ground 2 of the notice of appeal relates to the findings by his Honour in relation to Allianz' defence on the ground of breach of condition 3 of the policy by BlueScope. 255As to condition 3, BlueScope submits that his Honour's position can be supported on three grounds: first, that Allianz' conduct discharged BlueScope from any obligation to seek its consent or otherwise that Allianz was not entitled to refuse indemnity by reason of any failure to comply with the condition; second, that there was no prejudice to Allianz from the failure to consult and that any breach should be excused; and, third, that Allianz' conduct was such as to amount to a breach of its own obligations of good faith to BlueScope, which enabled BlueScope to recover the amount of the settlement by way of damages for breach of contract. I deal with the first two of those submissions when considering grounds 2(a) and (b); the third when dealing with BlueScope's sixth ground of contention. 256Allianz raises 3 issues in relation to the alleged breach of condition 3.

Ground 2(a) - obligation to take over conduct of proceedings? 257Ground 2(a) of the notice of appeal relates to his Honour's finding (at [101], [110] and [111]) that Allianz was in breach of an obligation to take over the conduct of the proceedings either upon notification of the claim or at least by 20 July 2006 (at least to the extent that it declined to do so without substantial reasons). Allianz submits that there was an implicit consequential finding that this conduct (whether alone or which breach of the obligation to indemnify) represented a contravention of the insurer's obligation of utmost good faith, entitling BlueScope to settle the proceedings without further reference to Allianz ([112]). 258It is clear, from the passages at [101] and [110] of his Honour's reasons, and from his Honour's statement at [107] that Allianz had declined to take over the proceedings for reasons that "lacked substance", that his Honour considered that there was either an obligation on Allianz' part to assume conduct of the defence on notification of the claim or that it was required, as part of its obligation of good faith as an insurer, to do so unless there were reasons of substance for it not to do so. 259However, there was no contractual obligation on the part of Allianz to assume the conduct of the defence, whether or not it agreed to accept liability to indemnify under the policy. BlueScope did not, on appeal, suggest otherwise. Condition 4 of the policy clearly confers an entitlement on the insurer, it does not purport to impose any obligation on the insurer. 260Allianz further maintains that the good faith obligation on an insurer does not impose on the insurer a prima facie obligation to take over the conduct of the insured's defence and submits that, if this were so, it would convert a right into an obligation. I agree. 261In Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1, Stephen J said (at 24), of a public risks insurance policy containing a clause that provided that the insured "shall not without the consent in writing of the Company make any admission, offer, promise or payment in connection with any accident or claim, and the Company if it so desires shall be entitled to take over and conduct in the name of the Insured the defence or settlement of any claim", the following: The present policy, like other policies which have come before English courts, allows the insurer to stand by, neither accepting nor declining liability; it also casts upon him no obligation to defend claims made against the insured. 262That is equally the case here. 263His Honour erred in my opinion in approaching the matter on the basis that there was a contractual obligation on the part of Allianz to assume the conduct of the defence. His Honour also erred to the extent that he implicitly found that there was any breach of the obligation of good faith in declining to take over the conduct of the defence without any, or any substantial, reason. 264The allegation by BlueScope in this regard was that Allianz was in breach of the obligation of utmost good faith in failing to consider in good faith, expeditiously and reasonably, whether to take over the conduct of the claim. There was no contractual obligation to give reasons for a decision not to assume conduct of the defence; nor would that necessarily be required as part of an obligation of good faith. In any event, the reasons indicated at the time were that Allianz considered its position to have been prejudiced. It does not appear to have been suggested that there was any collateral purpose indicating a lack of bona fides in Allianz' decision not to take over conduct of the defence. It must have been entitled to take a commercial decision in its own interests not to do so, having regard to its view as to the prejudice suffered as a result of BlueScope's late notification of the claim. 265As to the allegation that it failed to consider the case expeditiously, while there was no notification of a decision as to the running of the case until 9 May 2007 it is difficult to see what damages could have been said to have flowed from the delay in notification. BlueScope's defence of the proceedings was clearly motivated by its concern to preserve its position under the deed of indemnity with BHP. It is not suggested that it would not have incurred those costs had it been aware at an earlier stage that Allianz would exercise its rights not to take over conduct of the defence. 266Ground 2(a) is in my opinion made out.

Ground 2(b) of notice of appeal; grounds 3 and 6 of notice of contention - was there an obligation to indemnify? Was BlueScope discharged from compliance with condition 3 of the policy? Was Allianz in breach of its obligations in declining indemnity "without any substantial reason"? 267As Allianz notes, under an indemnity policy the insurer's indemnity obligation arises on the happening of the insured event: namely, the insurer becoming legally liable to pay damages in response to the claim (Kodak Australasia Pty Ltd v Retail Traders Association (1942) SR(NSW) 231 at 233.9; Distillers Co Bio-Chemical v Ajax Insurance at 26 and CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1 at [4] and [5]). 268The present policy is akin to that considered in Distillers where (at 25-26) Stephen J likened the policy to that considered in Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 as one where the right to indemnity arose only upon the liability of the insured to the injured person being established by judgment of the court, award of an arbitrator or by agreement between the insured and the third party. 269In Distillers, the policy was to indemnify the insured against all sums which the insured shall become legally liable to pay as compensation in respect of loss of or damage in respect of accidental death, bodily injury and/or damage to property arising out of an accident happening during the continuance of the policy. Stephen J said at 26: In the present case the insurer is thus on good legal ground in asserting, as it has in correspondence, that as yet no obligation to indemnify has arisen; no event against which ... to indemnify has occurred; the insurer not yet having become legally liable for any sum by way of damages. Accordingly, its failure to admit liability to indemnify can in no view amount to any breach of contract. Moreover, since it is under no obligation under the policy to take over and conduct the defence of any claim against the insured its failure to do so is likewise no breach of the policy capable of excusing the insured from observance of the terms of condition 2(a). (my emphasis) 270There was no contractual obligation on Allianz to acknowledge a liability to indemnify upon notification to it of the claim. The contractual obligation to indemnify arose, subject to BlueScope's due and proper observance and fulfilment of the conditions of the policy, upon BlueScope being "liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of such Employer or to pay any other amount ... in respect of his liability independently of the Act for any injury to any such person". Such liability would therefore only arise on a judgment, or settlement, of Mr Jackson's claim under which BlueScope was liable to pay damages for his injury. 271It has been recognised that an insurer is permitted, consistent with its obligation of good faith to the insured, to put the insured to proof under a contract of indemnity insurance (CGU v AMP per Kirby J at [72]). Allianz, correctly, in my opinion, contends that there is no breach of policy by an indemnity insurer bona fide so doing. 272What BlueScope (at [22] of its cross-claim) had pleaded was that Allianz had breached its obligation of good faith in failing, between 14 and 20 July 2006 to consider "in good faith and with proper expedition and reasonably" whether to grant indemnity. However, in its reply, it went further in alleging that Allianz had breached its obligations under the policy by denying indemnity on 20 July 2006 and thereafter maintaining that denial ([4.1.4]). 273As to BlueScope's contention in its cross-claim that Allianz had failed to consider expeditiously whether to indemnify it, it seems unlikely that BlueScope could have succeeded on an assertion that Allianz was in breach of an obligation of good faith in not considering or making a decision as to indemnity by 20 July 2006, a mere 6 days after notification of the claim. To the extent that BlueScope's complaint related to the period up to May 2007 when a decision was finally made, his Honour made no finding that this delay amounted to a breach of an obligation expeditiously to consider whether to indemnify. It is not necessary to determine that issue on the present appeal since, even if there was a breach of an obligation of good faith expeditiously to consider whether to make a determination as to indemnity some time earlier than May 2007, it was not suggested that any damages were suffered as a result. As previously noted, BlueScope's decision to defend the proceedings seems to have been made as a consequence of its desire to act as a prudent uninsured vis a vis BHP so as to preserve its claim under the de-merger deed of indemnity. 274As to the allegation that Allianz breached an obligation to act reasonably in making the relevant decision, his Honour again did not make a finding of unreasonableness on the part of Allianz but did find that the refusal to indemnify was "without reason" or without substantial reason. It cannot be said in my opinion that Allianz made the decision not to indemnify without any, or any substantial, reason. Its letter of 6 July 2007 made clear that its refusal to indemnify was based on its belief that it was not obliged to do so having regard to what it contended was BlueScope's breach of the policy conditions. Allianz was correct in its contention that breach of condition 2 (at least until excused pursuant to s 18 of the Insurance Act) meant that it was not liable to indemnify BlueScope under the terms of the policy. In those circumstances it is difficult to see the basis on which a finding that Allianz had not acted reasonably could have been made. 275As to the allegation that Allianz was in breach of an obligation to consider in good faith whether to indemnify, it must be noted that as at both May and July 2007 no contractual obligation to indemnify had arisen. It is not clear the basis on which a lack of good faith was asserted but it was not the subject of any finding by his Honour nor was any reason (other than, perhaps, the lack of a substantial reason to decline indemnity - which cannot be maintained in the face of the finding as to breach of condition 2) given for the implicit finding that there was a breach of the obligation of good faith in denying liability to indemnify and maintaining that denial up to the hearing. 276BlueScope submitted at the Tribunal hearing, in effect, that a wrongful denial of indemnity to pay a claim denied an insurer any legal entitlement thereafter to insist on compliance with condition 3 of the policy (BlueScope there citing Edwards v Insurance Office of Australia Ltd (1933) 34 SR(NSW) 88, Distillers Co Bio-Chemicals v Ajax Insurance and, in the alternative, referring to Peter Turnbull and Co Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1953) 90 CLR 235 at 246-247 and 251). Allianz disputed this contention. 277Allianz contends that where a contract of insurance is not repudiated by the insurer but, rather, the insurer (relying on the contract terms and perceiving that the insured's conduct, in breach of clause 2 of the policy, has prejudiced its position) puts the insured to proof, the insured remains under a duty of good faith to the insurer when effecting any settlement with the claimant (referring to Kirby J, in CGU v AMP). It is submitted that discharge of that obligation required BlueScope to have the interests of the insurer in mind (which I note Ms Brewster agreed she had not done) and to comply with condition 3. 278BlueScope did not plead (nor did his Honour find) that any conduct by Allianz in denying liability to indemnify amounted to anticipatory breach or repudiation of the contract of insurance. Insofar as there might have been contended to have been repudiatory conduct on its part, Allianz notes that BlueScope's cross-claim proceeded on the premise that that it had affirmed the policy, by seeking relief referable to its claimed entitlement to indemnity under the policy (there referring to [21(e)] of the cross-claim and order 1). 279In Distillers, Menzies J said (at 9-10): The insured may make a reasonable settlement where the insurer breaches the contract by denying liability and refusing to defend or settle ... But such is not the case here for the insurer has not repudiated its obligations and is not, so far as I can see, in breach of its obligations. By acting as it has it may be that the insurer is forcing the insured to defend claims that it would prefer to settle at the partial expense of the insurer. However it seems to me that the condition is directed to giving the insurer such an advantage for its own protection. 280Stephen J (at 24) identified the dilemma for an insured when faced with a refusal by the insured to acknowledge in advance liability to indemnify, as follows: This construction of condition 2(a) [that there is conferred upon an insurer who has declined either to defend a claim or to acknowledge any liability to indemnify in respect of that claim, a power arbitrarily to withhold consent to a settlement] is prone to leave the insured in a dilemma; if he defends the action brought against him a verdict much in excess of the insurer's limit of liability may result and the insurer may ultimately turn out not to be liable to indemnify; if he settles the action, albeit for a reasonable sum, the insurer may then rely, as the present insurer has said it will, upon the fact of that unauthorized settlement as a breach of condition excusing it from all liability to indemnify. 281It was equally BlueScope's dilemma in the present case. 282As noted, BlueScope relied on what was said in Edwards v Insurance Office Australia, where Halse Rogers J found at 98 that the insured plaintiff was in the position that it had proved at trial "what is practically an anticipatory breach of contract on the part of the defendant". There, the defendant had wrongly disclaimed liability under an insurance policy on the basis of a perceived failure of the insured to notify it of certain court proceedings at the time of the motor vehicle accident the subject of the claim. His Honour concluded that the plaintiff was then clearly entitled to recover the damages resulting from the defendant's breach. In that case however, the pleading had alleged repudiation of liability and had claimed loss of the benefit of the insurance policy. His Honour said at 98: It is clear, on my reading of the evidence, that the plaintiff's evidence, as it stood at the close of his case, established the contract, the breach, and the consequent loss of the benefit of the policy, and there was a complete case to go to the jury, so long as that evidence was not cut down, for the assessment of such damages as was shown to flow from the breach. In my opinion, the plaintiff, having been put in the position of having to take all steps in connection with the litigation of the claims against him at his own risk, is entitled to recover, as damages, such sums as he paid to settle those actions, provided that he shows that he acted reasonably in making the settlement. 283In the present case, however, there was no finding by his Honour of anticipatory breach or repudiatory conduct by Allianz, nor was there any such plea. 284Allianz submits that its conduct in invoking condition 2 to decline indemnify is inconsistent with any repudiation by it of the contract because the insurer is (correctly, as it transpired, subject only to the insured being excused pursuant to s 18) invoking its contractual rights. Allianz maintains that it is not repudiatory conduct to stand on one's legal rights. Thus Allianz submits that its reliance on breach by BlueScope of condition 2 in the May/July 2007 correspondence shows that the insurer was not saying it would not indemnify whatever might be the outcome of the proceedings; it was, in effect, simply saying that there was no present obligation to do so. 285The terms of the notification of Allianz' refusal to indemnify did not add the rider that, if the breach of policy conditions were later to be excused or if it were found that it was incorrect as to its construction of the contract, it would then acknowledge liability to indemnify. However, it must be implicit in the reliance by Allianz on breach of the policy conditions for its refusal to indemnify that Allianz was objectively acting in accordance with what it understood to be its legal rights under the contract, not repudiating the contract. 286The question is as to the objective intention to be discerned from the relevant conduct when determining whether there has been an intention to renounce or repudiate a contract. By way of analogy, it is clear that if a party, objectively viewed, is willing to perform the contract on its proper construction, then the fact that it proceeded on a mistaken interpretation of the contract will not evince an intention to repudiate the contract (see DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, where the respondent's case was pleaded as one of rescission for repudiation and renunciation for "anticipatory breach"; Kweifio-Okai v RMIT University [1999] FCA 1686, (1999) 47 AILR 4-223 at [61] per Dowsett J; Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277; Australian Stratacore Holdings Ltd (in liq) v Sanwa Australia Securities Ltd [1994] NSWCA 11). 287In Woodar, Lord Wilberforce observed (at 283) that: it would be a regrettable development of the law of contract to hold a party who bona fide relies upon an express stipulation in a contract in order to rescind or terminate a contract should, by that fact alone, be treated as having repudiated his obligations if he turns out to be mistaken as to his rights. Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations. 288BlueScope made it clear in the course of submissions, on the appeal that it does not contend that Allianz' conduct was repudiatory of the policy as a whole (Appeal Transcript 30/37). However, it argues that there was an anticipatory breach and that the communication by Allianz of its decision not to indemnify meant that BlueScope was not thereafter bound to obtain its consent to a settlement of the proceedings. There was no pleading of anticipatory breach. It is difficult to discern from the communications in May/July 2007 an intention on the part of Allianz not to be bound by and perform the contract of insurance according to its terms. Without an intention of that kind being evinced by the correspondence, there could be no finding of anticipatory breach. The position seems, instead, to be that Allianz did not repudiate its obligations under the insurance policy; rather, it acted on what was ultimately proven to be a correct view as to the consequence of BlueScope's breach of condition 2 of the policy (albeit that the Tribunal considered this was a breach that should be excused). 289The only question then is whether in some other fashion Allianz' conduct could be said to have dispensed BlueScope from its obligations under condition 3. 290BlueScope relies on the Peter Turnbull case at (246-247 and 251) for the proposition that, where a party to a contract repudiates its obligations, further performance of some or all of the other party's obligations may not be required and in that event the other party would be discharged from compliance. It is on this basis that it is asserted that Allianz' denial of indemnity discharged BlueScope's obligation to seek consent to the settlement. Allianz says that Turnbull case can be explained as one that shows that an antecedent breach may dispense a party from compliance with a subsequent obligation conditional for its performance on the earlier breached obligation but maintains that, here, there was no antecedent breach. 291In Turnbull, the plaintiff had claimed damages for non-performance by the defendant of an agreement under which the plaintiff was to purchase oats at a particular price FOB Sydney. To the knowledge of the defendant, the purchase by the plaintiff was for the purpose of re-sale. The trial judge found that the contract was subject to a condition as to delivery, namely that the oats were to be loaded, on a ship (or ships) nominated by the plaintiff, during a particular period. The plaintiff gave a tentative indication of a shipping date within the relevant period, which the trial judge inferred had become absolute. The defendant then informed the plaintiff that it could not supply the oats from Sydney but could probably supply them from Melbourne. There was some correspondence between the parties as to the possibility that the oats could be loaded from Melbourne. Ultimately, however, the defendant advised that it would not be able to load the oats from Melbourne; the plaintiff insisted on the oats being loaded from Sydney (but did not nominate another ship or shipping date); and the defendant responded to the effect, "we have not got the oats here. You cannot get blood out of a stone". The plaintiff then purchased the oats at a greater cost, losing the benefit of the agreement and the profits expected to be made under the agreement and sued the defendant. 292The trial judge found that the plaintiff was not in default at the time when the defendant stated that it would not load the oats in Sydney and that the plaintiff was entitled to accept that repudiation of the contract by the defendant and to maintain the action for a breach. An initial appeal from that decision was successful but the High Court ultimately reinstated the verdict for the plaintiff. 293In the High Court, Dixon CJ (at 240) framed the question for decision as being whether, under the terms of the contract for the sale and purchase of oats FOB Sydney, the buyer was disentitled to recover from the seller for non-delivery of the oats because the buyer had failed in the fulfilment of the condition precedent to nominate a ship. His Honour said at 243: It appears to me that by buying the oats ... against the defendant's contract and by informing the defendant of the fact, ... the plaintiff fixed or crystallized the rights under the contract, whatever they may be, of the respective parties. The plaintiff treated the refusal or failure of the defendant to deliver the oats as a breach going to the root of the contract and intimated an intention on the part of the plaintiff to regard the contract as at an end. 294As to the failure of the plaintiff to name a ship available for loading in the relevant period and to give 14 days' notice of the ship and the shipping date, at 245-247, Dixon CJ said But however this may be, I think that the plaintiff is entitled to succeed on the ground that, in so far as there was a non-fulfilment of the condition requiring the nomination of a February ship and the giving of fourteen days' notice of the ship and shipping date, the defendant dispensed the plaintiff from such fulfilment. In the Supreme Court the plaintiff failed because the case was treated as one in which the contract had been kept open by the plaintiff notwithstanding the defendant's intimation of its inability to perform it, with the consequence that the plaintiff was bound to fulfil the conditions on its part to be fulfilled. But this is not a case confined to a simple anticipatory refusal to perform or declaration of inability to perform on the part of one party followed by an election by the other not to treat the contract as discharged by breach. The course taken by the defendant involved something more than that and the additional element brings into application other principles of law. The defendant persisted up to 2nd March that it could perform the contract only in one way, namely by substituting a shipment by the same vessel in Melbourne for that in Sydney contracted for. By seeking the plaintiff's help in an attempt to effect this substitution and at the same time persisting that it could not perform the contract according to its terms the defendant clearly intimated to the plaintiff that it was useless to pursue the conditions of the contract applicable to shipment in Sydney and that the plaintiff need not do so. The fact that under the rules of law governing anticipatory breach of contract, the plaintiff might have elected to treat the defendant's intimation as a discharge by breach may be disregarded. The plaintiff did not do so and that left the contract on foot. But it left it on foot subject to a continued intimation that only by a substituted performance could the defendant carry it out, an intimation involving an attempt by all parties to effect the substitution... Now long before the doctrine of anticipatory breach of contract was developed it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied, it was equal to performance thereof: Hotham v. East India Co [(1787) 1 TR 638; 99 ER 1295]. But a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so. If the plaintiff acts upon the intimation it is just as effectual as actual prevention... The party must shew he was ready; but, if the other stops him on the ground of an intention not to perform his part, it is not necessary for the first to go farther, and do a nugatory act. (my emphasis, footnotes omitted) 295His Honour considered that the defendant had unmistakeably intimated to the plaintiff that it was useless to take the steps required for the defendant to deliver the oats FOB Sydney and that the plaintiff (at 248): was excused from literal compliance with the clause requiring a February ship and fourteen days' notice thereof and was so excused at and from a time when the plaintiff could still have fulfilled it. What excused the plaintiff was the defendant's persistently maintaining that it could not ship the goods from Sydney as distinguished from Melbourne. 296Kitto J said at 250-251: The principle, which applies whenever the promise of one party, A, is subject to a condition to be fulfilled by the other party, B, may, I think, be stated as follows. If, although B is ready and willing to perform the contract in all respects on his part, A absolutely refuses to carry out the contract, and persists in the refusal until a time arrives at which performance of his promise would have been due if the condition had been fulfilled by B, A is liable to B in damages for breach of his promise although the condition remains unfulfilled. The doctrine of anticipatory breach is, of course, applicable as soon as A has communicated to B his refusal to carry out the contract. Under that doctrine B is put to his election. He may, if he chooses, treat the contract as brought to an end in consequence of A's default, and recover damages from A for loss of the benefit of the contract. Alternatively, he may treat the contract as continuing on foot, in which case it will remain in force for the benefit of both parties, just as it would if the refusal had never been declared. If A persists in his refusal, B may at any time while the refusal continues elect to treat the contract as at an end and sue for damages; but unless and until he does so the contract remains on foot, and A may withdraw his refusal and require B to perform the contract on his part, subject only to giving B reasonable notice of his change of intention ... or he may take advantage of any supervening circumstances of such a character as to discharge the contract ... But suppose that A's refusal is never retracted; that B does not elect while the period specified by the contract for performance is unexpired to treat the contract as determined by reason of the refusal; and that no event occurs during that period to discharge the contract. I am supposing, of course, a case like the present where in all the circumstances the refusal necessarily conveys to B that he need not trouble to fulfil a condition to which A's obligations under the contract are subject, because even if he does A will still not perform his obligations. ... the inescapable fact is that A's refusal was a continuing intimation that the condition need not be observed, and it did not become any the less an intimation to that effect because B chose not to determine the contract before its time. The intimation having continued until the time came when A would certainly have been in default if the condition had been fulfilled, the law, as I understand it, treats A's obligation as absolute, and holds B entitled to damages for not having got what A promised he should have in the event of the condition being fulfilled. (my emphasis) 297At 252, his Honour continued: What is meant, however, by saying that fulfilment of the condition has been dispensed with is that A's conditional obligation is to be treated, for the purposes of an action for non-performance, as if it had been made absolute by a fulfilment of the condition ... the defendants having discharged the plaintiff from doing what he had to do, he was substantially in the same position as if he had done it, not indeed for the purpose of recovering the whole purchase money, but for the purpose of recovering damages for the non-payment thereof.

Conclusion 298As pointed out by Meagher JA (at [92]), the primary judge did not make findings necessary to answer the question whether Allianz had dispensed with the requirement for BlueScope to comply with condition 3. There was not a finding that Allianz had intimated that it was useless for BlueScope to comply with condition 3 because, come what may, Allianz would not indemnify it. 299Allianz was not obliged to confirm its agreement to indemnify this particular claim until a liability to indemnify was established. The fact that Allianz did not advise BlueScope, on notification of the claim or by 20 July 2006 (or indeed thereafter) that it accepted liability to indemnify under the policy, would not of itself dispense BlueScope from its obligation to comply with condition 3. For such a conclusion to follow there would need to be further factual findings, of the kind to which Meagher JA refers, that this Court is not in a position to address. Absent such findings the position appears to be akin to that considered in Distillers. 300Allianz contends that his Honour failed to address the above issues. I agree. Allianz further contends that, if his Honour did so implicitly, then his Honour failed to comply with his duty to give reasons in relation to the competing arguments that were presented on this issue (Soulemezis v Dudley Holdings Pty Ltd (1987) 10 NSWLR 247; Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430 at 431, 436 to 437 and 439 to 441). Again, I agree. 301Ground 2(b) in my opinion is made out and ground 3 of the notice of contention is not made out. I consider ground 6 of the notice of contention later in these reasons.

Ground 2(c) - failing to exercise jurisdiction in failing to determine allegation of breach by BlueScope of obligation of utmost good faith in relation to consent to entry of judgment in favour of BHP

302What Allianz contends in this ground of appeal (as I read it) is, in effect, that his Honour should have found that, in consenting to the entry of judgment in favour of BHP without providing prior notice to Allianz, BlueScope breached its obligation of utmost good faith to it. However, no such breach was in terms pleaded at [10(d)] of the defence to cross claim. Rather, what was pleaded (at [10(d)(viii)]) was that Piper Alderman continued to act for BHP "securing an advantageous outcome for it to the detriment of [Allianz]". 303In oral submissions, Allianz maintained that ground 2(c) focuses, not on the obligation of utmost good faith, but on condition 3 of the policy. It complains that his Honour failed to consider the defence pleaded at [10(c)(ii)] of the defence to cross-claim and hence failed to engage in the jurisdictional task of fact finding or a constructive failure to exercise jurisdiction (referring to Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; (2010) 240 CLR 611 as explained in Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 at [9]). 304Allianz' written submissions ([57]) focus in this regard on consent to entry of a judgment that exonerated BHP but Allianz does not seek to maintain such an argument on appeal. Instead, it contends that the breach of condition 3 was entry into the settlement with the plaintiff without notice. There is, therefore, some disjunction between the way in which Allianz pleaded its defence, the grounds of appeal, the written submissions and the oral submissions. As this particular breach was not pleaded and seems not to be pressed on appeal, it is not necessary here to deal with it.

Ground 5 - order under s 18(1) to excuse breach of condition 3 of the policy 305His Honour did not deal expressly with the claim, in reply, by BlueScope that any breach of condition 3 should reasonably be excused under s 18(1) of the Insurance Act. 306His Honour did express the view that there was no basis for Mr Prentice's opinion that he could have expected to obtain a 25% contribution from BHP to the settlement, even on the assumption that he could have successfully objected to the plaintiff consenting to judgment in favour of BHP. His Honour also inferred that the plaintiff's counsel would not have advised that there be agreement to a judgment in favour of BHP, and an order that the plaintiff pay a defined sum of the costs of BHP, unless counsel had considered that there was no chance of success of the case against BHP ([85]). 307It is accepted by Allianz that there was no basis given by Mr Prentice for his estimate of 25% contribution but notes that this evidence was not challenged. BlueScope submits in this regard that his Honour's finding that rejection of Mr Prentice's evidence asserting a 25% contribution is a factual one and was clearly open, given his finding that Mr Jackson's claim against BHP lacked proper evidentiary basis. For the reasons explained above, that finding was itself not maintainable having regard to the verified pleading and particulars. 308Allianz contends that prejudice was occasioned by the breach of condition 3 and therefore that s 18 is not available to BlueScope. The prejudice identified in Allianz' written submissions ([59]) was the loss of the ability for Allianz to bring a claim in BlueScope's name against BHP for indemnity or contribution by way of subrogation, on the basis that the entry of the consent judgment against the plaintiff in favour of BHP had the effect of transferring the whole of BHP's liability to BlueScope (with the aim, it is contended, of sheeting that liability home to Allianz). BlueScope's response was to question whether an insured's obligation not to impair rights to which the insurer is subrogated extends to circumstances where the insurer has denied liability but that, if it does so extend, it must be limited to conduct which is unreasonable in the circumstances of the case. 309On the appeal, the prejudice was identified as the loss of an opportunity, in the context of the settlement negotiations, to seek a contribution by BHP to the settlement sum that the plaintiff accepted. Allianz maintains that it is immaterial whether or not it could have brought a cross-claim; rather its prejudice was that it was deprived of the opportunity to seek contribution as part of a commercial settlement (Appeal Transcript 3.45); to encourage BHP to contribute something towards the settlement sum that the plaintiff had agreed to accept (Appeal Transcript 4.5). 310Allianz accepts that, from 20 July 2006, BlueScope was required to act as a prudent uninsured, since it was seeking indemnity under the policy. It accepts that a prudent uninsured may arrive at an objectively reasonable settlement in light of its potential liability and pay accordingly (AMP Financial Planning Pty Ltd v CGU Insurance Ltd [2005] FCAFC 185; (2005) 146 FCR 447 at [161] per Gyles J) but it contends that reasonableness of a settlement is not dictated solely by the sum. Allianz submits that Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603 does not stand as support for the proposition that BlueScope was entitled to settle, and accede to the entry of judgment on terms that assumed full liability to the plaintiff and exculpated BHP, without regard to condition 3 of the policy and without regard to Allianz' interests. 311BlueScope argues that the exercise of power under s 18 would take into account the conduct of Allianz in response to the request for participation in relation to settlement discussions (see the correspondence referred to earlier above). That may well be a relevant factor. 312However, the claim to be excused under s 18(1) required his Honour to address the question whether no prejudice was caused by any breach of condition 3 and, if there were found to be no prejudice, to consider whether the breach should reasonably be excused. 313Insofar as his Honour implicitly held that no prejudice was occasioned by such a breach, with the result that the breach could reasonably be excused under s 18(1) of the Insurance Act, and went on implicitly to decide that such a breach should be excused, his Honour did so without providing reasons for those conclusions. 314The application for relief the subject of ground 5 of the notice of contention should be remitted to the Tribunal to consider.

Ground 6 - alleged breach by Allianz by declining indemnity without any substantial reason 315This ground relates to BlueScope's claim for damages for breach of an alleged condition of the policy (namely, whether to consider in good faith and with reasonable expedition, whether to grant indemnity, and whether to take over the conduct of the claim and whether to consent to the insured incurring defence costs). It was not expressly dealt with by his Honour. 316BlueScope places emphasis on what was said in Distillers by Menzies J and by Stephen J, respectively, as to the obligation of an insurer when considering whether to withhold consent to a settlement by its insured. Menzies J said at 10, after the passage extracted earlier above: In these proceedings, there has been no argument upon the question whether in the circumstances the refusal of the insurer to give its consent in writing to the insured making any admission, offer, promise or payment in connexion without any claim lacks bona fides or is unreasonable and, if so, whether the insurer is under an obligation to consent. These are important questions of law depending on findings of fact which have not been made and which require full consideration after argument. [His Honour expressed no opinion on those issues]. 317In that case, Stephen J said at 26-27: However in my view the declaration tells but half the story; the consent to which condition 2(a) refers is not one which the insurer may arbitrarily withhold. Its power of restraining settlement by the insured must be exercised in good faith having regard to the interests of the insured as well as to its own interests and in the exercise of its power to withhold consent the insurer must not have regard to considerations extraneous to the policy of indemnity. 318His Honour noted that it was important that the making of that declaration should not be thought to confer any arbitrary power of refusal of consent upon the insurer, saying at 29: On the contrary I regard the power of the insurer as so hedged around with safeguards for the legitimate interests of the insured as to result in a situation in which the insured may be little worse off as a result of the declaration than it would have been had it been held that it might settle claims without the insurer's consent. 319At 31, his Honour said that the duty of good faith and fair dealing controlled the actions of the insurer who has taken over the insured's defence but would apply equally to the insurer's exercise of its power of granting or withholding consent to the making of admissions even if it elects not to take over the defence. (Reliance is also sought to be placed on this by BlueScope, as I apprehend it, for an argument that Allianz could not have reasonably refused consent to the settlement had that consent been sought.) 320Reference is made by BlueScope to Mr Prentice's evidence that, ordinarily, his firm would advise Allianz not to decline indemnity unless breach had given rise to irremediable prejudice (Black 150-151V, 152R). It is noted that the approach was that claims would not be refused even if there was a failure to notify promptly unless the matter had first been investigated and it had been established that the failure to notify had actually caused prejudice. It is submitted that Allianz made no attempts to demonstrate it followed those procedures before the final refusal of indemnity in May 2007. 321BlueScope submits that Mr Prentice's evidence shows that the insurer did not in good faith put the insured to proof, rather the evidence showed that Allianz considered itself to be under an obligation to give proper and reasonable consideration to taking over the conduct of the defence but did not do so. This is said to be a breach by Allianz of its obligation of good faith. 322BlueScope further submits that, in retaining Sparke Helmore to act for it after settling the proceedings, BlueScope acted reasonably so as to mitigate the loss flowing from that breach by Allianz. It is said that this allows BlueScope to recover the amounts paid to Sparke Helmore and the amount of the settlement as damages for breach of the contract. It points to his Honour's findings that the refusal of liability was wrongful and that BlueScope's actions in settling fell within the scope of acting as a prudent uninsured (at [107], [111] and [112]). 323Allianz in response submits that there was no obligation on it to investigate the consequence of the prejudice flowing from the insured's breach and that Mr Prentice's evidence in this regard was on a wrong premise. 324His Honour seems to have considered that Allianz had an obligation not to decline indemnity without giving reasons or without a substantial reason so to do. Under the policy there was no express obligation to provide reasons; nor was a failure to do so pleaded as giving rise to a breach of the obligation of good faith. However, in any event, there was a sufficient reason to decline indemnity if Allianz bona fide considered that it had been prejudiced by late notification of the claim. There is no suggestion that its statements to this effect were untrue or that its belief as to prejudice was not genuinely held. While I have difficulty seeing any breach of the obligation of good faith in this regard, it is a matter that should be determined having regard to factual findings that this Court does not have jurisdiction to make. 325The issues raised by ground 6 of the notice of contention illustrate the need for the matter to be remitted to the Tribunal.

Conclusion 326His Honour did not err in his construction of the test to be applied under s 18(1) of the Insurance Act nor in its application to the breach of condition 2 of the policy. However, his Honour did not make the necessary factual findings that would have permitted a conclusion that BlueScope was dispensed from its obligation to comply with condition 3 of the policy and failed to consider, or give adequate reasons for any implicit consideration of, the consequences of such a breach, including BlueScope's claim to be excused therefrom. His Honour also failed to deal with the respective allegations of breach of the parties' corresponding obligations of utmost good faith. 327Allianz submits that the question whether prejudice was suffered by the breach of condition 3 takes the matter beyond this Court's jurisdiction under s 32. BlueScope contends that it is open to the Court to grant relief based on the findings that were made by his Honour without the need for the matter to be remitted. 328In my opinion the matter must be remitted for determination of those issues that were not determined by his Honour. If a question of law can be determined on facts found by the Dust Diseases Tribunal, then this Court can adjudicate the question. However, if there is an operative error of law, but the factual findings necessary for this Court to determine that question of law have not been made by the Tribunal, then the question should be remitted to the Tribunal, where the requisite factual findings can be made. 329Insofar as BlueScope submits that this Court can determine the issue in relation to condition 3, this is based on the fact that, the appellate jurisdiction having been invoked by the appellant in respect of alleged errors in point of law, it is open to this Court to make "such other order in relation to the appeal" as the Court thinks fit. BlueScope contends that this extends to the relief sought under the notice of contention. It was submitted that such a broad power should not be read down. 330The High Court has on a number of occasions declined to enter into the debate as to whether this Court's jurisdiction on an appeal such as this is limited to the adjudication of questions of law or, once an error in point of law has been identified, has power to decide any other matter in issue (see Amaca Pty Ltd v New South Wales [2003] HCA 44; (2003) 77 ALJR 1509 at [22], [26]; Vetter v Lake Macquarie City Council [2001] HCA 12 at [14]; (2001) 202 CLR 439 at 447; Dasreef v Hawchar [2011] HCA 21; (2011) 243 CLR 588 at [48]-[49]). 331The issue has also been considered in this Court (Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649; CSR Ltd v Amaca Pty Ltd [2009] NSWCA 338; Downes v Amaca Pty Ltd [2010] NSWCA 76; (2010) 78 NSWLR 451). 332In Caltex Refineries, Allsop P, as his Honour then was, said at [11] that the consequence of the limitation under s 32(1) of the Act was that: ... the task of this Court (prior to consideration of relief) is limited to the assessment of a question of law dealt with by the Tribunal, and, in practical terms, whether there is an error of law: North Broken Hill Ltd v Tumes [1999] NSWCA 309; 18 NSWCCR 412 at 421 [24]-[25]; ICM Agriculture Pty Ltd v Perry [2002] NSWCA 257 at [19]; Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208; 3 DDCR 1 at 49 [148]-[166]; Patrick Operations Pty Ltd v Comcare (2006) 68 NSWLR 131 at 142 [39]-[59]; and B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2009) 74 NSWLR 481. though his Honour continued at [16] to note that if, on the facts displayed by the Tribunal's reasoning unaffected by legal error, this Court was not persuaded that any other error of the Tribunal was operative in relation to the particular question of law, this Court could reach a conclusion as to the relevant question of law (there, the existence of a duty of care). However, if the facts necessary for the correct undertaking of the analysis had not been found, the matter would need to be remitted to the Tribunal for rehearing. See also the analysis of Basten JA at [239]-[240]. 333In CSR, Allsop P noted at [32] that it was not this Court's place to make factual findings (on which the final legal conclusion there depended), a conclusion echoed by Hodgson JA at [53]. Basten JA addressed the issue at [86]-[91], noting the lack of clarity as to the scope of phrases such as "question of law", "point of law" and "error of law". 334In the present case, there have not been factual findings on a number of matters relevant to whether BlueScope was dispensed from the requirement to comply with condition 3 and to the application by BlueScope to be excused from any breach of condition 3 (the threshold test as to whether there was no prejudice, as well as matters going to the exercise of the discretion to excuse any breach if there were no prejudice); nor have there been factual findings as to the alleged breach by Allianz of its duty of good faith, for which BlueScope claims damages. 335It is not a case where, on the facts as found (assuming them to be unaffected by any operative legal error), relief can be granted based on a conclusion as to the legal effect of those findings. The matter must be remitted, though in my opinion the remitter should not include the issues relating to the breach of condition 2 (as to which there was no error of law established by Allianz). 336As to the costs of the appeal, Allianz has had mixed success. It has obtained an order for the matter to be remitted on some, but not all, of the issues on which it contended the Tribunal had erred. The ultimate outcome of the dispute remains to be seen. In the circumstances there should be no order as to the costs of the appeal. 337I would therefore propose the following orders: (1)Appeal allowed in part. (2)Set aside the orders of the Dust Diseases Tribunal made on 30 May 2013. (3)Remit the cross-claim to the Tribunal for the purpose of determining: (a)whether BlueScope was dispensed from compliance with condition 3 of the Policy; (b)whether, if not, BlueScope should be excused under s 18(1) of the Insurance Act 1902 (NSW) from any breach of condition 3 of the Policy; and (c)if necessary, BlueScope's claim to damages for breach of Allianz' obligation of utmost good faith in the respects alleged in par 22(b) of BlueScope's cross-claim. (4)No order as to the costs of the appeal.

Amendments 22 August 2014 - Representation - Solicitor for the Respondent Amended paragraphs: Coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 August 2014