HEARING DATE: 4, 5, 6, 7, 13, 14, 15, 18 and 19 March 2013

Insurance - Reinsurance - Construction of document described as "Reinsurance Agreement" - Scope of agreement - Whether it confined to obligations under Workers Compensation Act 1927 (Tas) - Construction of provisions in that Act - Obligation of insured to minimize loss.

Workers Compensation Act 1927 (Tas), ss5, 6, 8A and 13.

Johnson v American Home Assurance Co [1998] HCA 14; (1998) 192 CLR 266; Tasmanian Contracting Services Pty Ltd v Young [2011] TASSC 49; Orr v State of Tasmania [2010] TASSC 28; Denehy v Nominal Insurer [1991] TASSC 167; Cox v Attorney-General [1986] TASSC 66; Lamont v Commissioner for Railways [1964] NSWR 406; Thomas v Ferguson Transformers Pty Ltd (1979) 1 NSWLR 216; Hudson v Nuroo (1940) 35 Tas LR 120; Guardian Assurance Co Ltd v Underwood Constructions Pty Ltd (1974) 48 AJJR 307; EJ Hampson & Others Syndicate 1204 v Mining Technologies Australia Pty Ltd (1997) 10 ANZ Ins Cas 61-389; A.F.G. Insurances Ltd v Mayor, Councillors and Citizens of the City of Brighton [1972] HCA 70; (1972) 126 CLR 655, referred to.

ASSOCIATED FOREST HOLDINGS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) and NORTH LIMITED and STEPHEN JOHN LOWRIE (By his Administrator The Public Trustee) v GORDIAN RUNOFF LIMITED

1 On 28 May 1987, Stephen John Lowrie ("SL") was injured in an accident while working as a tree faller in the north-west of Tasmania. As a consequence, he has been rendered permanently physically and mentally disabled, and will require a level of 24 hour care for the rest of his life. He was 28 years old at the time of the accident, and is now 54. He lives in private accommodation in the form of a unit at Wynyard, which has been adapted for his use.

2 When the accident occurred, SL was working as part of a small team. The other members of that team were employees of Associated Forest Holdings Pty Ltd ("AFH"), and were using equipment owned by that company.

3 At the time of the accident, the relevant workers' compensation legislation was the Workers Compensation Act 1927 ("the Act). Section s34 relevantly provided that an employer was required to maintain a policy of insurance which indemnified that employer in respect of its liabilities to pay compensation under the Act, and "any other liabilities incurred by him in respect of personal injury by accident, or disease, suffered by any worker that arises out of, and in the course of, the employment of that worker with him". However, s34(4) provided that the relevant authority could grant an exemption from that requirement "upon proof to his satisfaction that an employer has adequate resources, or has made other sufficient arrangement for the payment of compensation under this Act".

4 On 18 June 1986, such an exemption was granted to North Broken Hill Holdings Ltd ("NBHH") and named associated subsidiary companies. One of those was AFH. AFH became, as a consequence, what was described as a "self-insurer". However, what was described as a reinsurance agreement had been entered into between NBHH and "Subsidiary and Associated Companies ..." and others of the one part and what was then the government insurance office of New South Wales, now the defendant, of the other part ("the Policy"). In very general terms, because this was also an issue to be determined on this trial, the Policy provided that, once AFH had incurred a liability of $1,000,000 indexed for inflation in respect of any particular loss to which the Policy might relate, it could look to the re-insurer, the defendant, to cover any liability exceeding that amount.

5 On 2 May 1990, on the application of SL's mother under the Mental Health Act 1963, the Public Trustee issued a certificate to the effect that it was satisfied SL was incapable, by reason of mental disorder, of managing his property and affairs. On 21 May 1990, SL, by his next friend the Public Trustee, issued two sets of proceedings out of this Court. Both named AFH as the defendant. By one, SL sued AFH for workers compensation pursuant to the Act, asserting that AFH was his employer at the time of the accident. By the second, SL essentially sought damages at common law. That is as far as either set of proceedings ever progressed.

6 Over the years since the accident, the cost of SL's care, including the cost of what is now described as attendant care, has been paid for by various entities. The plaintiffs, who are named as AFH, North Limited ("North") and SL, generally assert that the payments made in respect of SL's care have resulted in a loss of the type referred to in the Policy, that loss has now exceeded the million dollar threshold, and are seeking from the reinsurer, the defendant, that it be responsible for all costs already incurred above that threshold, and any continuing costs.

7 The defendant's position is that any liability under the Policy only arises when the million dollar threshold is reached. It says that threshold has not been reached, and therefore there is no liability. There are a number of bases for the argument. In general terms they are:

• That the defendant only has an obligation to re-insure in respect of obligations of an insured which are covered by the Policy. If an insured has chosen to make payments to SL on a "moral" basis, they are not relevant for the purpose of calculating whether the million dollar threshold may have been reached.
• That, if SL was a worker, and, as a consequence entitled to workers compensation, the Act did not entitle him to the benefit of paid attendant care. Since that cost forms a large part of what the plaintiffs have calculated as part of their liabilities and, without it, the threshold has not been reached, there is no liability.

8 The dispute between the parties has been complicated to a degree by:

• Numerous changes over the years of company names, corporate structures and share ownership.
• A share sale agreement dated 19 March 2001 entered into between North and NBH Ltd and Gunns Limited involving the sale of shares in North Forest Products Limited ("the 2001 share sale agreement").
• A second agreement apparently entered into between North and the receivers of Gunns and others, the basis of which is outlined in a letter dated 30 November 2102 from Rio Tinto to the receivers of Gunns, which proposal was accepted on 28 February 2013. The existence of this arrangement was only disclosed the Friday before the trial commenced ("the February 2013 agreement").

9 The claims of the plaintiffs are dependent upon their satisfying the Court that the circumstances of this case engage the terms of the Policy. That necessarily requires an examination of the terms of the Policy, a determination as to who is entitled to make a claim under the Policy and in respect of what. It also becomes necessary to determine what the circumstances of this case are. To do that, a number of issues need to be considered. These are:

- Identification of who are the persons or entities insured (or reinsured) under the Policy.

- Identification of what the obligations of the re-insurer under the Policy are, and to whom they relate.

- Whether SL was, at the time of his accident, an employee of AFH or a contractor.

- Whether, depending on SL's status at the time of the accident, he was entitled to benefits by reference to the Act.

- If SL was entitled to benefits under that Act, did those benefits include the cost of attendant care.

- If SL was entitled to any benefits under the Act, whether there was any "settlement" of SL's claims under the Act by reference to s13.

- If SL was not entitled to the cost of attendant care by reference to the Act, were the payments for that care made pursuant to a liability at common law.

- If so, was there a settlement of that common law claim.

10 If the above issues are determined in a manner which could be said to be favourable to the plaintiffs, other issues need to be addressed. These are:

- the extent of the payments made for the benefit of SL and by whom;

- whether, and if so, when the $1,000,000 threshold under the Policy was reached;

- whether any part of the plaintiffs' claim is statute barred.

11 Other issues which will need to be addressed are the effect of the 2001 share sale agreement, the effect of the February 2013 agreement, and the interrelationship between various corporate entities referred to in the pleadings and during the course of the trial.

12 One of the difficulties on this trial was that pleadings, documents and witnesses made reference to various corporate and other entities. However, evidence as to the correct names of various entities, and precisely what the relationship between many of them was, was not easy to follow.

13 The starting point is perhaps the pleadings. The plaintiffs were AFH, North and SL. On behalf of AFH, as first plaintiff, it was pleaded in par1(b) of the statement of claim, but not admitted by the defendant, that, at all material times until on or about 28 May 2001:

- AFH was a subsidiary of North,

- North was formerly North Broken Hill Holdings Limited (I have assumed although there is no evidence to that effect that this is the same company as North Broken Hill Holdings Ltd which I have used the initials NBHH for), and

- AFH was a member of the North Group of companies.

14 It was pleaded at par1(c), but not admitted, that, from on or about 28 May 2001, AFH was a subsidiary of Gunns Limited.

15 It was pleaded at par1(d) that, at all material times, AFH was wholly owned by North Forest Products Pty Limited which became Gunns Forest Products Pty Limited from May 2001. By its defence, the defendant admitted that since May 2001, Gunns Forest Products Limited had owned all the shares in AFH, that, before that, all the shares in AFH were owned by North Forest Products Ltd and that, for about the last few weeks (it seems before May 2001), all the shares in AFH were owned by North Forest Products Pty Limited. The defendant did not otherwise admit par1(d).

16 The situation became more confused as a consequence of par2 of the statement of claim. That was a pleading on behalf of North. It was pleaded at par2(b), but not admitted by the defendant, that North was a subsidiary of Rio Tinto Limited, that North was part of the RIO Tinto Group and that North was a related company of Rio Tinto Services Limited. It was then pleaded, and admitted by the defendant, at pars2(c) and (d) that:

- up to 30 November 1988, North was known as North Broken Hill Holdings Limited,

- between 1 December 1988 and 30 October 1994, North was known as North Broken Hill Peko Limited, and

- North was at all material times the sole shareholder of NBH Ltd.

However it was also pleaded, and denied by the defendant, that until May 2001, North and NBH Ltd owned all the shares in AFH. It was further pleaded, but not admitted, that for the same period, North was the holding company of AFH.

17 Exhibit P120 was entitled "Relevant Corporate history-from ASIC Historical Company Extracts" and was tendered without objection after both parties had closed their cases in an attempt to clarify corporate relationships. It disclosed:

- North Limited remained a registered company and had been so under that name since 31/10/94;

- North Limited was formerly known as North Broken Hill Holdings Limited (3/9/76 to 30/11/88) and North Broken Hill Peko Limited (1/12/88 to 30/10/94);

- its ultimate holding company was Rio Tinto Limited.

- NBH Pty Ltd remained currently registered and had been so under that name since 2/12/04;

- NBH Pty Ltd was formerly known as North Broken Hill Limited (4/12/1912 to 15/7/84) and NBH Ltd (16/7/84 to 1/12/04);

- its ultimate holding company was Rio Tinto Limited. Its former ultimate holding company was North Limited.

- This company was currently registered and had been so under this name since 30/5/01;

- the company was formerly registered as Associated Pulp and Paper Mills Limited (18/4/34 to 15/7/84), North Broken Hill Limited (16/7/84 to 1/2/96), North Forest Products Limited (2/2/96 to 5/4/01) and North Forest Products Pty Ltd (6/4/01 to 29/5/01);

- the ultimate holding company to May 2001 was North Limited, and since then had been Gunns Limited;

- the shareholders up to May 2001 were North Limited and NBH Pty Ltd, and since then had been Gunns Limited.

Associated Forest Holdings Proprietary Limited (AFH)

- This company remained registered under this name and had been so since 1/3/56;

- all shares were held by Gunns Forest Products Pty Limited;

- the ultimate holding company had been Gunns Limited since May 2001 and was North Limited prior to that.

18 A share sale agreement dated 19 March 2001, which became exhibit P113, provided some assistance. It recited that North and NBH Ltd were the owners of all the shares in North Forest Products Limited and that the "NFP Group" consisted of North Forest Products Limited and, amongst other entities, AFH. It did not assist with any assertion that North and NBH Ltd owned all the shares in AFH.

19 As to any other evidence which might have assisted to resolve some of the denied or not admitted assertions as to the interrelationship between corporate entities, there was that of Mr Brian Hayes, general manager of "Gunns Forest Products", Mr Robert MacAulay, a retired employee of "Gunns", and Ms Fiona Williams, a chartered accountant for Rio Tinto Services Limited.

20 As to Mr Hayes, he said he began with "the company" in 1972 when it was called Associated Pulp & Paper Mills ("APPM"). He then moved in about 1982 or 1983 to an entity called APPM Forest Products. He recalled that APPM was taken over at some stage by North Broken Hill Peko Ltd. Around 1987, he moved to Burnie, and worked for AFH. He said it was then known as North Forest Products, of which AFH was a wholly owned subsidiary. In about 1994, after other moves, he moved back to Burnie to North Forests Burnie. (Correspondence from May 1996 on the letterhead of "North Forests Burnie" describes it as "An enterprise of Associated Forest Holdings Pty Ltd"). In May 2001, North Forest Products was sold by its then owner Rio Tinto to Gunns. Mr Hayes said that, in July 2009, he became general manager of Gunns Forest Products.

21 Counsel for the defendant tried to clarify the situation in cross-examination. What emerged was the following:

- APPM was sold in the mid-1990s.

- AFH was a wholly owned subsidiary of North Forest Products Limited.

- North Forest Products Limited then became North Forest Products Pty Limited.

- North Forest Products Pty Limited then became Gunns Forest Products Pty Limited.

- North became Gunns Forest Products Pty Limited as a result of the 2001 share sale agreement.

- AFH remained a trading company as a property holding entity treated separately from "its parent company" North Forest Products Pty Limited.

- He was employed by Gunns Forest Products Pty Limited not Gunns.

22 As to Mr MacAulay, he said he started off with "North Broken Hill Holdings" in Western Australia. He came to Tasmania and worked in various entities under the North umbrella which included some work for North Forest Products and later AFH. He did not give any evidence about the interrelationship between corporate entities. He signed letters early in 1996 as the safety and environment manager for North Forests Burnie. In August 1996, he signed a letter on letterhead of "North Forest Products". That appears to be a business name. Underneath it on the letterhead the name North Forest Products Limited appeared, described as an enterprise of North Limited.

23 As to Ms Williams, she was employed by Rio Tinto Services Limited between March 2008 and December 2012. She had worked for other entities within the Rio Tinto Group between 2001 and 2008, and was presently commercial manager for Rio Tinto Melbourne. Rio Tinto Services Limited is a subsidiary of Rio Tinto Ltd. That is a publicly listed entity. She said in relation to that:

"... we like to keep them as clean as possible, so there's another company that would be set up that operates what we refer to as the service arm of the publicly listed entity. So that entity provides - it's the employing entity that holds the legal functions, the compliance functions, the accounting functions, treasury functions, HR, health safety environment, etcetera etcetera. So that service entity provides services to Rio Tinto Ltd and more broadly to the Rio Tinto Group."

She estimated there were about 800 entities falling within that group. North was one of them. As far as the actual connection between Rio Tinto Ltd and North, she said North was a subsidiary of Hamersley Holdings Pty Ltd, and that company was a subsidiary of Rio Tinto Ltd.

24 Rio Tinto Services Limited performed all North's accounting and finance functions. It maintained bank accounts and paid bills. North had no capacity itself to pay bills. So in relation to SL, Gunns provided invoices and Rio Tinto Services Limited paid them. Rio Tinto Services Limited would then invoice North for the payment, and North would repay Rio Tinto Services Limited. The payments would appear in North's accounts. Ms Williams was shown some invoices which showed that, as at December 2001 and January 2004, invoices had been rendered not by Gunns Limited but by Gunns Forest Products Pty Ltd.

25 As far as I have been able to establish, the following reflects the interrelationship between various entities referred to on the trial:

- AFH has at all relevant times been a registered company and remains so.

- All its shares are owned by Gunns Forest Products Limited.

- Gunns Forest Products Limited (prior to 30/5/01) was known as:

- Associated Pulp and Paper Mills Limited (18/4/34 to 15/7/84)

- North Forest Products Limited (or Ltd) (2/12/96 to 5/4/01)

- North Forest Products Pty Limited (6/4/01 to 29/5/01).

- All the shares in Gunns Forest Products Limited have, since May 2001, been owned by Gunns Limited.

- Prior to May 2001, the shares in Gunns Forest Products Limited, then known as North Forest Products Pty Limited, were owned by North and NBH Ltd. As from 2/12/04, NBH Ltd became NBH Pty Ltd.

- NBH Pty Ltd was also formerly known as North Broken Hill Limited (4/12/1912 to 15/7/84), becoming NBH Ltd on 16/7/84.

- Since 31 October 1994, North Limited has been a registered company under that name. It was formerly:

- North Broken Hill Holdings Limited (3/9/76 to 30/11/88)

- North Broken Hill Peko Limited (1/12/88 to 30/10/94)

- Rio Tinto Limited is described as the "Ultimate Holding Company" of North Limited and NBH Pty Ltd.

26 The title of the Policy (exhibit P46) is "WCA Excess of Loss Cover". Given the contents of the document, that can only be interpreted as workers compensation act cover. The Policy is described as a reinsurance agreement. It was made between NBHH "and Subsidiary and Associated Companies and Sub-contractors and Employees of their Contractors and Sub-contractors", which were all together defined as "the Reinsured" of the one part, and the Government Insurance Office of New South Wales, defined as "the Reinsurer", of the other part. There is no dispute that the currently named defendant is the present day incarnation of the named reinsurer.

27 Article I provides that it was intended the agreement "apply to all claims arising under which the Employee's first entitlement to benefit applies from a date during the period" of the agreement.

28 Article III is entitled "CLASSES OF BUSINESS AND/OR PERILS COVERED" and provides:

"This Agreement shall apply to the business specified in item 3 of the Schedule."

The class of business set out in item 3 of the Schedule is:

"The Reinsured's self insurance fund in respect of Workers Compensation including employers common law liability"

The Reinsurer hereby agrees to indemnify the Reinsured for that part of its ultimate net loss which exceeds the amount stated in item 4 of the Schedule on account of each and every loss, accident/event. The sum recoverable under this Agreement shall be up to but not exceeding the amount stated in item 5 of the Schedule ultimate net loss on account of each every loss, accident/event.

The underlying loss stated in item 4 of the Schedule shall be retained net by the Reinsured and not reinsured in any way other than under the underlying reinsurances as specified in item 6 of the Schedule each and every loss occurrence, recoveries under which shall be disregarded in computing the underlying loss and ultimate net loss hereunder."

30 Article VI defines the term "Loss Occurrence". It relevantly provides:

"The words 'loss occurrence' shall mean all individual losses arising out of and directly occasioned by any accident or occurrence or series of accidents or occurrences arising out of one and the same event ..."

31 Article VII defines what is an ultimate net loss. It provides:

1. The term 'ultimate net loss' shall mean the sum actually paid by the Reinsured in respect of any loss occurrence, including expenses of litigation if any, and all other expenses of the 'Reinsured (excluding, however, office expenses and salaries of officials of the Reinsured) but recoveries, including recoveries from all other reinsurances other than underlying reinsurances provided for herein, shall be first deducted from such loss to arrive at the amount of liability, if any, attaching hereunder.

However, the liability of the Reinsurer shall not be increased by reason of the inability of the Reinsured to recover from any other reinsurer (whether specific or general) any amounts which may have become due from them, whether such inability arises from the insolvency of such other reinsurers or otherwise.

1. All recoveries or payments recovered or received subsequent to any loss settlement hereunder shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto. Nothing in this Article shall be construed to mean that a recovery cannot be made hereunder until the Reinsured's ultimate net loss has been ascertained."

32 Article VIII of the agreement is entitled "INDEX". It provides:

"(a) It is the intention of this Agreement that the underlying loss and the limit of indemnity shall retain their values relative to those which existed at 31st March 1987 and any subsequent renewal at 31st March of that policy year.

(b) At the time of payment of any claim the change in relative monetary value shall be ascertained from the Table of Average Weekly Earnings of all Male Employees - Australia - as published by the Australian Bureau of Statistics, Canberra.

(c) The underlying loss and the limit of indemnity shall be increased or decreased in proportion to the difference between the Average Weekly Earnings figure at 31st March 1987 (and any subsequent renewal at 31st March of that policy year) and that at the time of payment by the Reinsured of any claim. The Average Weekly Earnings figure at the date of payment of the claim by the Reinsured shall be that for the 31st March immediately preceding the date on which the claim is settled.

(d) The time of payment of any claim for the purpose of this Agreement shall be deemed to be as follows:

(i) Where no award is made by a Court, the actual date upon which payment is made by the Reinsured.

(ii) The date an award is made by a Court, if no appeal is made, or if the Appeal Court reduces or leaves unchanged the original award.

(iii) The date an award is made by the Appeal Court if this increases the award made by the original Court.

(iv) In the event of the Appeal Court not making an award, the date of the final award made by the Court to which the case has been returned, if such final award is in excess of the original award.

(v) In the event of a loss being settled in more than one payment, any advance payment in respect of any claimant shall be added to the final or any subsequent payment to that claimant and the Average Weekly Earnings figure used at the time of the final payment shall be that employed to ascertain the underlying loss and the limit of indemnity in respect of all payments to that claimant.

(vi) Notwithstanding (d) (v) above, in the event of a workers' compensation claim involving continuing weekly payments, the time of payment for the determination of the Average Weekly Earnings figure shall be the date from which weekly payments commence. This Average Weekly Earnings figure shall apply to all subsequent weekly payments until legislative changes are made to the level of workers' compensation weekly payments, in which case the Average Weekly Earnings figure at the date of the first payment of the new weekly payment shall apply to all future payments. This procedure shall apply to subsequent legislative changes in worker's compensation weekly payments."

The Reinsured shall immediately notify the Reinsurer of any claim or claims which are likely to exceed an amount equal to the amount stated in item 9 of the Schedule and, in addition, shall advise the Reinsurer of all claims, regardless of initial reserve involving brain damage, spinal injury, paraplegia and accidents resulting or likely to result in the death of two or more persons. The Reinsured undertakes to furnish the Reinsurer with all available information regarding such claim or claims. Solely for the purpose of reporting claims or accidents the Reinsured shall in all instances consider itself legally liable.

Whenever the claim or claims arising out of any one accident appear likely to exceed the underlying loss, the course to be adopted by the reinsured in connection with the defence or settlement of such a claim shall be determined by agreement between the Reinsured and Reinsurer or their representatives and the Reinsured shall not, without the consent of the Reinsurer or their representatives, litigate any such claim or claims.

In the event of a difference of opinion arising between the Reinsured and the Reinsurer in respect of an opportunity whereby a settlement of a particular loss can be attained by the acceptance of a judgement, or transaction agreed by the Claimant, the Reinsurer shall retain the right to liberate their obligation in respect of their proportion of the particular loss by paying to the reinsured the amount equivalent to their liability under the agreement, according to the said judgement of proposed transaction.

If so requested by the Reinsured, the Reinsurer shall remit their share of any claim immediately after receiving advice of settlement, either total or partial, by the Reinsured and shall be entitled to receive in course of post should they so desire certified copies of vouchers proving payment of such claim without, however, delaying payment pending receipt of the required documents.

The Reinsured shall furnish to the Reinsurer at the 30th September and 31st March each year a list of any unsettled claim of which it is aware and which may cause a claim under this agreement together with an estimate of liability."

12 months effective 4 pm, 31st March 1987 subject to annual resigning

In accordance with the New South Wales & Tasmanian Workers Compensation Act

The reinsured's self insurance fund in respect of Workers Compensation including employers common law liability

The first $ 1,000,000 of any one claim or series of claims arising out of any one accident/event

Minimum $ 540,000 - adjustable at 0.257% on actual wages

Renewal for a further 12 months from 31st March 1988 at same adjustable rate applied to the 1988/89 year if no incurred claim exceeds 65% of any one event deductible as at 31st March 1988.

INDEMNITY IN RESPECT OF EMPLOYER'S LIABILITY AS 'PRINCIPAL'

It is agreed and declared that this Policy is, subject to its terms and conditions, hereby extended to indemnify the Employer against any liability as a principal under or by virtue of Sub-Section (3) of Section 6 of the New South Wales Workers' Compensation Act, 1926 and Subsequent amendments.

INDEMNITY IN RESPECT OF PRINCIPAL'S LIABILITY UNDER CONTRACT WITH EMPLOYER

It is further agreed and declared that if the Employer executes any work under contract with a principal then this Policy will subject to its terms and conditions, extend to indemnify the principal against any liability under or by virtue of Sub-Section (3) of Section 6 of the New South Wales Workers' Compensation Act, 1926 and subsequent amendments in respect of the aforementioned work.

INDEMNITY UNDER SECTION 6 - CONTRACTORS AND/OR SUB-CONTRACTORS

The Insured having requested that their liability under Section 6 of 'The Workers' Compensation Act 1927' to the Workers of Contractors and/or Contractors shall be included in this Insurance, it is hereby agreed that the Indemnity granted to the Insured by this Policy shall be extended to cover such liability, subject to the terms and conditions of the Policy.

It is agreed and declared that the company will indemnify the Insured in respect of his liability to pay damages (including costs and expenses incurred with the consent of the Company) at Common Law or under any Statute or Ordinance (other than any workers' or Workmen's compensation Act or Ordinance) in respect of personal injury suffered or disability or death as a result of any disease contracted by any persons included in indemnity who are directly employed by the Insured under a contract of service or apprenticeship made in Tasmania in the performance whether in Tasmania or elsewhere of a duty incidental to the business described in the Schedule when the injury was sustained or the disease was contracted.

Provided always that the wrongful act or omission giving rise to such legal liability is actionable in a Court of Law in Tasmania.

Provided further that such indemnity shall apply only to those claims in respect of which the Insured is not indemnified or is not required by any Law in force at the date on which the event or events occurred giving rise to the liability to have indemnity under any other policy or contract of Insurance subject otherwise to the Terms, Conditions and Memoranda or the Policy."

35 As earlier noted, the Policy is described as a reinsurance agreement. A reinsurance arrangement is usually one which is underpinned by the existence of a primary policy of insurance which imposes obligations on the primary insurer. The primary insurer then reinsures himself in respect of his obligations. In this case, no such primary policy exists. Despite the fact that the situation with which the Policy was dealing may not have been a conventional reinsurance arrangement, by its very name, it seems that the parties may have obviously intended their arrangement be one in the nature of a reinsurance arrangement.

36 It is necessary in the circumstances to look at the terms of the Policy, and determine just what the parties intended it to achieve. If the Policy was intended, as it states, to be a reinsurance arrangement, it will be necessary to determine who are the "primary insurers" (or reinsured for the purpose of this case), and what were the obligations of those re-insured which they were seeking to re-insure. In reaching my conclusions about the interpretation of the Policy, I am mindful of the authorities to which counsel for the plaintiffs referred me in relation to the interpretation of insurance contracts. One passage relied upon came from Johnson v American Home Assurance Co [1998] HCA 14; (1998) 192 CLR 266 at 272 where Kirby J said at par[19]:

"I accept the following principles as assisting in the approach which is to be taken to discovering the meaning of the disputed words of the insurance policy:

1. An insurance policy is a species of commercial contract. It must be interpreted so as to give the words used their ordinary meaning. The primary duty of a court is to discern from the language, structure and apparent purpose of the document what it means. Subject to any special statutory rules governing the approach to interpretation and any interpretative rules lawfully contained in the policy itself, a court should give the words used their ordinary operation. But it should be an operation which takes into account the commercial and social purposes of an insurance policy. Wherever possible, an absurd or manifestly unjust result will be avoided upon the hypothesis that such would not have been intended by the parties. Because the primary search is for the ordinary and fair meaning to be attributed to the words used, no court is authorised, under the guise of construction, to make a new contract for the parties which is at odds with the terms of the contract to which they have agreed. In this respect, the primary rule for the construction of insurance contracts is no different from that which governs other written instruments. Maxims and rules of construction, developed by courts as tools to aid in the task of elucidation, are subordinate to the primary duty of construction. This is always to search for meaning of the words used. If, in those words, there is only one meaning, a court may not reject it simply because it regards the result as unfair or otherwise undesirable.

2. Insurance is substantially a national, even an international, market. Many insurers, including the insurer in this case, are associated with international corporations offering the same or similar policies in a number of jurisdictions. Particular words and phrases in policies are often the subject of elucidation by courts in different jurisdictions. Although competition, legislation and public policy encourage variations in the writing of policies, so that they address the particular needs of the particular insured, insurance is commonly offered in standard form policies which have a national or international provenance. Courts recognise this fact and the consequence that risks may be assessed, and re-insurance procured, on the footing that settled interpretations of commonly used language will not be disturbed without good reason. There are many illustrations of cases where a phrase, recurring in insurance documents, is taken by the courts to have a 'well settled' meaning conformably with the commercial purposes of the document. If a settled meaning is demonstrated, given the nature of the insurance market and its function, courts will hesitate before substituting a meaning which is at odds with that which is settled by past decisions.

3. The foregoing principles, combined with the practical approach which is ordinarily adopted to the construction of words in insurance documents, are relevant to the phrase 'loss of use' in sickness and accident policies, such as the one in question here. That phrase could connote, especially where qualified by adjectives such as 'total' and 'permanent', a complete and entire loss of any use of the limb in question, equivalent to severance. However, over a very long period of time, and in many jurisdictions, the phrase has been construed to mean loss of use as a matter of practical utility. It is not necessary for the insured, in effect, to demonstrate complete severance of the limb in question, whether the phrase used is 'permanent and total loss of use' or 'loss of the entire' limb. In this respect, a meaning has commonly been given to the phrase which takes into account 'the purpose to which, in its normal condition, [the limb] is susceptible to application, in the absence of more specific definition in the policy'. This test of practicalities has long been accepted, not only in Australia and England but also in the United States of America. It was not contested by the insurer in this case. It was accepted by all of the judges who have passed on the present policy. It demonstrates at once the willingness of courts to pay regard to shared jurisprudence in this area and the practical approach adopted to the construction of contracts of this kind.

4. Notwithstanding the primary rule, it has long been recognised that a liberal approach should be adopted in giving meaning to words in the special field of insurance contracts and insurance documentation. In part, this approach to problems of construction may have derived from an attempt by courts to balance the scales ordinarily unequal as between the insurer and the insured, at least in sickness and accident policies. In part, it may have arisen from points taken by insurers which seemed unmeritorious in particular cases. In part, it doubtless derived from a recognition of the standard forms used in most insurance documentation and the control which insurers generally have over such forms, at least in the case of consumer insurance. Recognition of these characteristics of insurance contracts has led to two principles, often invoked. The first is that a fair and reasonable construction should be adopted which would take into account the variety of persons entering an insurance contract and the entitlement of such persons to know the bargain which they have secured. The second may be traced to a bundle of maxims collected in Coke Litt 36a one of which is the maxim verba chartarum fortius accipiuntur contra proferentem. Insurance policies, containing words that are intractably ambiguous, will be construed so as strongly to favour the resolution of the ambiguity in a way advantageous to the insured. This maxim, like many others commonly expressed in earlier times, is now not so much in favour. Courts today accept the duty to endeavour to find the meaning, even of ambiguous expressions, from the language and logic of the document rather than by resort to maxims and other rules of thumb. Even a century ago, the utility of the maxim contra proferentem was doubted in Taylor v Corporation of St Helens. So also in decisions given in the early years of this Court. Nevertheless, even then the principle was accepted as applicable 'as the last resort in construction' so far as it required that 'a document written by A is to be read as outsiders would read it, and not as A would read it'. More recently, it has been accepted that the contra proferentem principle may still be useful where each of the competing constructions is strongly supported by argumentation and where dictionaries and logic alone cannot readily carry the day for either party. Then, it is not unreasonable for an insured to contend that, if the insurer proffers a document which is ambiguous, it and not the insured should bear the consequences of the ambiguity because the insurer is usually in the superior position to add a word or a clause clarifying the promise of insurance which it is offering.

5. The giving of meaning to words of ordinary usage in a policy of insurance, as of another written document, is generally a question for the tribunal of fact; in earlier times ordinarily a jury. In many of the reported cases on the disputed words of insurance contracts, the insurer has (as in this case) effectively demurred to the construction which the insured placed upon the language of the policy. Commonly, the insurer has sought to have the judge instruct the jury that one meaning only is open upon the words used or, alternatively, to take the matter from the jury on the basis that the policy does not, in law, respond to the uncontested facts. In the present case, where the tribunal of fact was the primary judge sitting without a jury, he was obliged to direct himself as to the application of the words of the policy to the facts as found. The meaning of the words of the policy, read in their context, was one for the tribunal of fact, just as it was in former times a jury question - not a question for the judge. Yet if the judge misdirected a jury on the meaning to which the words were susceptible and, equally, where a judge sitting alone misdirected himself or herself as to that meaning, appellate relief is available. The object of such relief is to ensure that the correct question is addressed. Even on the appellant's case in this appeal, it would be open to the judge finally determining his claim, to decide that 'total' and 'permanent' 'loss of use' of the foot was not established in the evidence. However, the purpose of the appeal was the insured's effort to have the tribunal of fact address itself to the condition of the foot alone, and not, as the judges below thought, to that limb supplemented by artificial aids."

37 It would be fair to say at the outset that the Policy is poorly drafted. Whether that be as a result of poor drafting per se, or an attempt to use a form not particularly well suited to its purpose, is unclear.

Who are the reinsured under the Policy and what is the scope of the defendant's obligations to them under the Policy?

38 I will deal with these issues together because many of the arguments raised overlap.

39 By reference to the pleadings, there is no dispute that AFH and North are each a reinsured under the Policy. Counsel for the plaintiffs submitted that, because of the wording of the Policy as to who was a reinsured, even SL was a reinsured in his own right, and it did not matter whether he was an employee of, or a contractor to, AFH. Counsel submitted that each of the following was a reinsured:

- North,

- any subsidiary companies of and companies associated with North,

- sub-contractors and employees of contractors to North and any of its subsidiary and associated companies, and

- sub-contractors of North and any of its subsidiary and associated companies.

40 With respect, I am unable to see from that analysis that, if SL is found to have been an employee of AFH, he could be a reinsured in his own right. None of the four categories identified above deals with employees of AFH. The only category into which SL might fall is as a sub-contractor or contractor to AFH. Even, however, if he were found to be a contractor, I am unpersuaded for the reasons which follow that he could be a reinsured in his own right.

41 Counsel for the plaintiffs, in developing his argument, acknowledged that SL's being considered a reinsured in his own right created a potential anomaly if this were a reinsurance agreement confined to entitlements under the Act. However, he argued that the Policy was not so confined, and that any such consideration fell away when you looked at the indemnity provision in the Policy. The indemnity provision contained in Article V provides that the reinsured were to be indemnified for that part of "its ultimate net loss...on account of each and every loss, accident/event". Neither that provision nor the definitions of "ultimate net loss" and "loss occurrence" made any reference to indemnity being linked in some way with a claim by a worker against an employer. The reference was only to losses.

42 Counsel for the plaintiffs, in his written closing submissions, made a number of submissions about the commercial purpose of the Policy, and how the Policy should be interpreted. He submitted:

"9. It is apparent from the contents of the Policy, that its commercial purpose is to indemnify numerous corporate entities and individuals in respect of a wide range of losses relating to compensation of workers, including but not limited to claims made by workers under the Workers' Compensation Act 1927 (Tas) 1927 and claims made at common law.

11. Perhaps the most striking example of the Defendant urging the Court to construe the Policy in a way that is inconsistent with the commercial purpose of the Policy is its technical arguments about the identity of the party paying for FBCA care and its attempts to rely on complicated arguments about the double indemnity and an insured having suffered no loss.

12. The clear intent of the parties to avoid such technical and unrealistic arguments is apparent from the broad range of insured entities named in the opening paragraph of the Policy. Not only is North named as an insured party, but so to is every one of its subsidiary and associated companies, contractors, subcontractors and employees. The only sensible conclusion that can be drawn from this is that the parties agreed that all companies within the North group would be covered and technical distinctions between those corporate entities were irrelevant for the purpose of the operation of the Policy."

43 Counsel for the plaintiffs expanded upon that in his oral submissions. He said that the Policy was not confined to indemnity in respect of payments made under the Act. He submitted that it extended to any payments by any of the reinsured on account of any loss, accident or event being a loss occurrence arising out of and directly occasioned by an accident or occurrence. Any payment made out of a reinsured's self-insurance fund could give rise to a claim against the Policy. This argument depended however on the interpretation given by counsel for the plaintiffs to what was a self-insurance fund. Counsel's submission in relation to self-insurance funds was that a private corporation's self-insurance fund was not either typically or necessarily confined to being a fund for the purpose of making payments under the Act.

44 Counsel for the plaintiffs argued that his position, that the Policy was not confined to payments made under the Act, was also supported by the use of the words "in respect of" in item 3 of the Schedule to the Policy. He argued that cover under the Policy was not expressed to be compensation paid or payable under the Act. Rather the use of the phrase "in respect of" before "Workers' Compensation" in item 3 was a broadening phrase. By reference to that, and the definitions of ultimate net loss and loss occurrence, what the reinsurer was providing indemnity for was anything which had been paid by a reinsured in respect of losses arising out of an accident. It mattered not whether it was a payment a reinsured was obliged to make under the Act or not.

45 It is necessary, in the circumstances, to look at the whole of the wording of the Policy, and at the relevant provisions of the Act.

46 The Policy, as I have said, bears the title "WCA Excess of Loss Cover". While the initials "WCA" are not defined, it must be inferred they refer to the Act. As a starting point that gives a good indication of what this document is all about, that is it relates to losses arising in respect of workers' compensation act obligations. Article 1 provides that the Policy is to apply to losses which occur during a particular period. It then goes on to further confine the ambit of the Policy. The second paragraph in this article provides that it is the intention of the Policy that it apply "to all claims arising under which the Employee's first entitlement to benefit applies". These words indicate clearly that it was anticipated that losses would arise from claims made by employees. They also indicate that what was anticipated was that a claim would result in an entitlement to a benefit. The use of the words "entitlement to benefit" does not suggest the agreement was intended to provide indemnity in respect of any payment made to an injured worker, but rather indemnity for payments to which a worker might be entitled by reference to legislation such as the Act or, perhaps, at common law.

47 Article III deals with the "Classes of Business and/or Perils Covered" by the Policy. It provides that the Policy is to apply to the "business specified in item 3 of the Schedule". It must be inferred that the reference to the business in Article III is a reference to the business of those who are the reinsured. That business is described in item 3 as "The Reinsured's self-insurance fund in respect of Workers Compensation including common law liability".

48 As to what constituted a self-insurance fund, counsel submitted that the evidence of former employees of AFH and other related entities was to the effect that any fund held to deal with payments to injured workers, whether they be employees or contractors, was not confined to obligations under the Act, and there was no evidence to suggest otherwise. Counsel referred me to parts of the evidence of former employees which he said supported his contention.

49 The first reference was to the evidence of Mr Hayes at 242 to 243 of the transcript. At 242, Mr Hayes was being questioned about payments made in the nature of workers compensation to SL before the accident the subject of these proceedings. Mr Hayes said:

"... the way the scheme worked was that APPM had extended to its harvesting contractors and their employees our self-insurance arrangements and so we either paid directly if we were given the invoice from a hospital or whatever, or if a contractor had paid wages, in this case to Stephen ... the company reimbursed him for the period he was on workers compensation. So effectively we did not require principal contractors to have workers compensation insurance for themselves or their employees, they were covered under an umbrella of APPM."

With respect, that evidence does not support the contention put by counsel for the plaintiffs. It clearly confines the obligations the company met to workers compensation obligations, it must be inferred under the Act, to employees and employees of contractors. Counsel also referred to the evidence of Mr MacAulay at 308. That does not assist either. The third reference was to the evidence of Mr Chapman at 353. With respect, in my view, that did not assist counsel either.

50 In my view, counsel's submissions on this point ignore completely how an employer comes to even have a self-insurance fund. While I have briefly referred to the Act, s34(1), in par[3] of these reasons, I now set it out in full. It provides:

"Subject to this section, an employer shall maintain in force with an insurer approved by the Governor a policy of insurance -

(a) that indemnifies him in respect of liabilities to pay compensation under this Act;

(b) that indemnifies him in respect of any other liabilities incurred by him in respect of personal injury by accident, or disease, suffered by any worker that arises out of, and in the course of, the employment of that worker with him; and

(c) that indemnifies each person employed by him in respect of the liabilities incurred by that person in respect of any such injury or disease as is referred to in paragraph (b)."

51 An employer is defined in the Act to mean "the person with whom a worker has entered into a contract of service..". It is also relevant to note that s34(1) refers to liabilities, that is something an employer is liable to pay, and not just any payments an employer makes following an injury to a worker.

52 The Act, s5(1), sets out an employer's primary obligation to pay compensation. It provides that, if in any employment, a worker suffers personal injury by accident arising out of or in the course of his employment, his employer shall, subject to the Act, be liable to pay compensation in accordance with the Act. What an employer is liable to pay is set out in Schedule I. The Act, s6, extends that liability to workers employed by contractors to an employer. Absent a certificate of exemption, AFH, as an employer, had an obligation to have insurance in terms of s34(1) in relation to any of its workers or the workers of its contractors.

53 The Act, s34(4), which I have also referred to in par[3], then provides that in certain circumstances an employer may apply for an exemption from the obligation to insure. Those circumstances are where an employer has satisfied the relevant authority that it has "adequate resources, or has made other sufficient arrangement for the payment of compensation under this Act". That is what occurred in the present case. North Broken Hill Holdings Ltd and others, which included AFH, were granted such an exemption. That is, as employers, they each became self-insurers, rather than having to have an approved policy of insurance.

54 It must be accepted that an employer's self-insurance fund exists as a consequence of the provisions of the Act, and relates to the liabilities of an employer by reference to the Act. As far therefore as the class of business referred to in item 3 is concerned, it must relate to a self-insurance fund held by an employer arising by virtue of the Act. Item 3 also expressly includes, in respect of a reinsured, "employers common law liability". In the context of this case, SL has neither a self-insurance fund as an employer, nor any common law liability to anyone as an employer. The impact of Article III and item 3 cannot simply be ignored, which is what would be required were counsel for the plaintiffs' interpretation of who are the reinsured and the scope of the defendant's obligations to them to be correct.

55 The wording of the endorsement is also important. The reinsured (described there as the insured) has obviously sought an extension to what was otherwise intended to be covered by the Policy. It has been agreed that the Policy be extended to cover their liability under the Act, s6, and to liability to pay damages for personal injury. It is trite to say that SL has no such liability.

56 While obviously the person who drafted the Policy included in the definition of persons or entities who were "the reinsured" a wide range of persons and entities, that list, for the foregoing reasons, is inconsistent with the description of the Policy, the nature of it, and its contents generally, and it would be illogical, and to ignore the rest of the Policy, to interpret that definition literally, and in the manner sought by counsel for the plaintiffs. With respect, the person who drafted the opening words of the Policy appears to have confused two groups. The definition appears to include not only those persons or entities who could actually have obligations for which they could be indemnified, but also a second group, that is a class of persons whose claims against a person in the first group might trigger the operation of the Policy.

57 I do not accept, in the circumstances, that SL is a reinsured in his own right.

58 What is the position of North? As I have already said, there is no dispute North is a reinsured in its own right. It follows that, if there was a claim against it as an employer by a worker for compensation arising out of a work related accident, and its liability in respect of that claim exceeded the threshold in the Policy, it could make a claim in respect of the excess. However, the submissions of counsel for the plaintiffs appeared to suggest that there did not need to be any underlying employer/worker relationship between a reinsured and an employee who had made a claim before an entitlement might arise to seek indemnity under the Policy. As long as the entity seeking indemnity was a reinsured under the Policy, and it had made payments in respect of a liability to an injured worker, it did not matter the worker had no direct relationship with the reinsured. I do not accept that can ever have been intended.

59 If on the other hand, North has made a payment on behalf of AFH, and as a consequence such a payment is to be considered a payment of AFH's, or North has acquired rights in some other way to be indemnified in this particular matter, the situation may be different.

60 As to the scope of the obligations of the defendant, I have already canvassed the various articles in the Policy and provisions in the Act. In my view, it is clear, having regard to the entirety of the terms of the Policy when considered against the background of the Act, that the primary purpose of the Policy was to provide reinsurance to AFH and others in respect of certain of their liabilities arising in their capacity as self-insurers under the Act and common law liabilities as employers.

Does North have any rights under the Policy by virtue of the 2001 share sale agreement?

61 The 2001 share sale agreement became exhibit P113. It was dated 19 March 2001. The vendor in the agreement is described as North and NBH Ltd. The purchaser is identified as Gunns Limited. The agreement recites that the vendor is the beneficial owner of all the shares in "the Company", and that the parties agreed to, inter alia, sell those shares to Gunns Limited. In the definition section of the agreement, the term "Company" is defined to mean North Forest Products Limited. The term "NFP Group" is defined to mean "the Company and the Subsidiaries". The term "Subsidiaries" is defined to mean, amongst others, AFH. The agreement contains a specific provision relating to SL. That is as follows:

The Vendor indemnifies the Company against any Liability incurred or sustained by it arising from the injury of Mr Stephen Lowrie on 22 May 1987 (the Workers Compensation Matter), to the extent that the Liability has not been satisfied as at the Completion Date. The Purchaser acknowledges on behalf of the Company that the Vendor may require the Government Insurance Office of New South Wales to pay any amounts payable under the insurance agreement referred to in Clause 15.3 directly to or for the benefit of Mr Stephen Lowrie.

(a) The Purchaser must procure that the Company will, at the Vendor's expense, take all action (including legal proceedings) in good faith and with due diligence that the Vendor (acting reasonably and in consultation with the Purchaser) directs in relation to the Workers Compensation Matter. The Vendor will indemnify the Company against any liability incurred by it in respect of action taken by it at the direction of the Vendor under this paragraph (a).

(b) The Purchaser must procure that the Company does not make any admission of liability, agreement or compromise in relation the Workers Compensation Matter without first consulting with and obtaining the approval of the Vendor.

(c) The Purchaser must give the Vendor and its professional advisers such access to:

(i) the personnel and premises of the Purchaser and the Company; and

(ii) relevant chattels, accounts, documents and records within the power, possession or control of the Purchaser and the Company,

As is reasonably required to enable the Vendor or its professional advisers to take any action in respect of the Workers Compensation Matter."

62 According to the recitals in the share sale agreement, North and NBH Ltd owned all the shares in North Forest Products Limited. By cl 15.1, North and NBH Ltd agreed to indemnify North Forest Products Limited (not the NFP Group and not any subsidiary of North Forest Product Limited) in respect of any liability incurred or sustained by it arising from SL's injury. That is, it provided for a contractual relationship between North and NBH Ltd on the one hand and North Forest Products Limited on the other. Any obligation to indemnify was to indemnify North Forest Products Limited and arose by virtue of that agreement. The indemnity related to any liability North Forest Products Limited incurred arising from SL's injury.

63 North Forest Products Limited is now Gunns Forest Products Limited which owns all the shares in AFH. There was no evidence to suggest that SL was ever an employee of, or contractor to, North Forest Products Limited. SL had no rights against North Forest Products Limited. SL had no claim against North Forest Products Limited arising from his accident. It follows that North Forest Products Limited could not incur or sustain any liability as a result of SL's injury. At best, North Forest Products Limited, in its current form Gunns Forest Products Limited, may have made payments in respect of SL's care which were made on behalf of AFH. However, that does not provide North itself with any rights under the Policy by reference to the 2001 share sale agreement.

"... any person who has entered into, or works under, a contract of service or apprenticeship with an employer, whether by way of manual labour, clerical work, or otherwise, and whether the contract is express or implied, or is oral or in writing ..."

65 Counsel for all parties accepted that a determination as to whether SL was an employee or a contractor was one which depended on a consideration of the facts in this case. Evans J in Tasmanian Contracting Services Pty Ltd v Young [2011] TASSC 49 dealt with the appropriate test when he said at par[7]:

"7 It is well established that the test for establishing whether a contract of service exists involves many factors. In this regard I adopt the following passage from the decision of Crawford J (as he then was), agreed with by Blow J in Protective Security Pty Ltd v Bedelph [2004] TASSC 128; (2004) 13 Tas R 354 at pars[31] - [34]:

'A prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former is entitled to exercise over the latter, not merely in regard to what the latter will do, but also in regard to how it is to be done. But the existence of control, whilst significant, is not the sole criterion by which to gauge the matter. It is merely one of a number of indicia. "Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision of holidays, the deduction of income tax and the delegation of work by the putative employee". Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 at 24. It is the totality of the relationship between the parties which must be considered. Op cit at 29. Criteria "suggesting a contract of service rather than a contract for services include the right to have a particular person do the work, the right to suspend or dismiss the person engaged, the right to the exclusive services of the person engaged and the right to dictate the place of work, hours of work and the like. Those which indicate a contract for services include work involving a profession, trade or distinct calling on the part of the person engaged, the provision of him by his own place of work or of his own equipment, the creation by him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion and the payment to him of the remuneration without deduction for income tax. None of these leads to any necessary inference, however, and the actual terms and terminology of the contract will always be of considerable importance." Op cit at 36 - 37. However, having regard to a variety of criteria "is not without its difficulties because not all of the accepted criteria provide a relevant test in all circumstances and none is conclusive. Moreover, the relationship itself remains largely undefined as a legal concept except in terms of the various criteria, the relevance of which may vary according to the circumstances." Op cit at 35. "Any attempt to list the relevant matters, however incompletely, may mislead because they can be no more than a guide to the existence of the relationship of master and servant. The ultimate question will always be whether a person is acting as the servant of another or on his own behalf and the answer to that question may be indicated in ways which are not always the same and which do not always have the same significance." Op cit at 37.

It is obvious that the signed agreement between the parties required careful consideration because it expressly provided that the deceased was an independent contractor and it denied the existence of a relationship of master and servant. It was couched generally on that basis and many of its terms were consistent with that. The Tribunal determined that it was not persuaded that the deceased was performing his duties consequent upon a contract of service so as to be a worker within the meaning of the Act, largely because of what the agreement provided, although at the same time it found that the material provisions of the agreement to that effect were supported by other circumstances.

The learned judge referred to a number of authorities concerning the influence that an express agreement may have on the question that arose in this case. In Ferguson v John Dawson & Partners (Contractors) Ltd [1976] EWCA Civ 7; [1976] 1 WLR 1213 it was made clear by Megaw LJ at 1222 - 1223, upon reference to authorities, that the nature of the relationship is determined by the law and not by the label which parties choose to put on it, and it is not necessary to go so far as to find the contractual document containing the label to be a sham. The expression of the parties' intention will be a relevant factor, but is certainly not a conclusive factor, in deciding what is the true nature of the contract. In Global Plant Ltd v Secretary of State for Social Services [1972] 1 QB 139, Lord Widgery said at 152: "One must not overlook that the intention of the parties was that the relationship should be that of an independent contractor, and although the parties cannot by intention make a transaction into something which it is not, yet it is recognised that such intention is a factor for consideration in these cases." That principle was applied at first instance in this State in Johns Perry Hayward Pty Ltd v Greaves A72/1990 at 17 - 18 and Thompson v Cooee Point Abattoirs Pty Ltd [2002] TASSC 41; (2002) 10 Tas R 412 at 419.

That circumstances other than the express provisions of the written agreement should be considered in this case, is also supported by what was said by Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ in Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 at 33: "It should be added that the relationship between the parties, for the purposes of this litigation, is to be found not merely from these contractual terms. The system which was operated thereunder and the work practices imposed by Vabu go to establishing 'the totality of the relationship' between the parties; it is this which is to be considered. Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 at 29"'."

66 SL of course was not able to give evidence at trial about his status at the time of the accident. There was no written agreement which defined his status by reference to AFH. The Court was dependent upon the evidence of Mr Brian Hayes who, at the time of the trial, was the general manager for Gunns Forest Products, and SL's mother, Mrs Janice Margaret Lowrie. In substance, the evidence of Mr Hayes was in the following terms.

67 In the Burnie area of operations in the 1980s, most of the forest harvesting equipment was owned by the company and people were employed on wages to operate the equipment. In the early 1980s a program was commenced to move "company owned capacity" across to contractors to have them doing the work. There were companies that were set up as principal contractors. They purchased equipment for either harvesting or log-haulage and they then employed operators for that equipment and tree fallers and provided services. In 1986, when Mr Hayes moved to AFH to work, there were established contractors and those who were still employees.

68 SL had initially been working for a couple of principal contractors. However, he was recruited by AFH to do what was called scrubbing. He was offered a job to work with the company as effectively a trainee hardwood faller. For the first couple of months he was paid on a piecework basis. He then had discussions with his supervisor to the effect he was struggling to make wages and so he was put on an hourly rate. In about May 1987, because of the better area in which he was then working, SL agreed with his supervisor to transfer back to a piece rate. He provided his own chainsaw for the work he was doing and got himself to and from worksites. Consumables for his chainsaw were provided by AFH, and SL worked as part of a team with others who were employees of the company and who were using company equipment.

69 AFH had the right to sack or suspend SL and controlled the hours of work he did and where and how he did it. He was subject to regular visits by an experienced employee of the company for training purposes. It was not clear whether tax was deducted from his wages by AFH. He was entitled to, and had been paid workers compensation payments in the past, but under insurance arrangements he would have been paid whether he was an employee or contractor.

70 Mr Hayes prepared a report following the accident and in that described SL as a contract tree faller. He explained that was how piecework fallers who were working for the company on a piecework rate were described. His understanding was that SL was employed by AFH. He had, he said, signed off on SL's employment. Mr Hayes believed that SL was entitled to benefits such as sick leave.

71 I am satisfied that, at the time of his accident, SL was a worker within the meaning of the Act pursuant to a contract of service with AFH. I conclude that because of his status as a trainee, the fact that he was only the holder of a provisional licence, that he was being trained by AFH employees, that his supervisor was an AFH employee, that he worked as part of a team of AFH employees who were using company equipment, that he could be sacked or suspended from his role by AFH and that the nature of his work was controlled by AFH. I accept that, despite the fact there were aspects of his work arrangements which might suggest he was an independent contractor, those aspects were more likely than not to have been the product of the transitional arrangements being undertaken by AFH as described by Mr Hayes, and not truly reflective of a role as a contractor.

Was SL entitled to benefits under the Act, and if so what was the scope of those benefits?

"5 - (1) If in any employment a worker suffers personal injury by accident, or is disabled or dies as the result of a disease, arising out of and in the course of the employment, his employer shall, subject to this Act, be liable to pay compensation in accordance with the provisions of Schedule 1."

Once there is a determination that SL was a worker at the time of his accident, there can be no dispute that the injuries he suffered arose out of or in the course of his employment. He was therefore entitled to benefits as provided for in the Act. There was no dispute on the trial that SL was totally and permanently disabled as a consequence of his accident.

73 At the time of trial, SL was living in his unit at Wynyard. A service known as Family Based Care Association Inc ("FBCA") had been engaged to have a worker at the unit on a 24 hour basis, seven days a week. The duties of that worker were to look after SL's personal hygiene, deal with his incontinence, provide his meals, ensure he ate those meals without difficulty, launder his clothes, ensure he took necessary medication he was required to take daily, arrange if needed the attendance of a general practitioner, get him in and out of bed each day, ensure he had some exercise each day and generally be there in case SL needed assistance. The primary issue relating to the cost of this care was whether it was a cost for which AFH was liable by reference to the Act. The second issue, with which I will deal under a later heading, is whether, if is not a cost which AFH was liable to meet by reference to the Act, was it nevertheless a cost, the payment of which might trigger the operation of the Policy?

74 Dealing with the first issue, the Act, s8A, sets out what an employer is obliged to pay for in addition to usual compensation. It relevantly provides:

"8A - (1) In any case where a worker suffers injury by accident, or is disabled or dies as the result of any disease, arising out of and in the course of his employment, and the worker or his dependants is or are entitled to compensation under section 5 in respect of such injury or disease, the employer shall, subject to this section, be liable to pay, in addition to the compensation, if any, otherwise payable by the employer in accordance with this Act -

(a) the reasonable costs of any medical, hospital, nursing, and ambulance services reasonably incurred by the worker by reason of the injury or, in the case of disablement caused by disease, by reason of the disease, on and after the date of disablement; and

(b) where death results from the injury or disease, the reasonable costs of burial or cremation.

(1A) For the purposes of subsection (1), 'medical services' include the repair or replacement of crutches, artificial members, eyes, or teeth, spectacles, or hearing aids destroyed or damaged in the accident giving rise to the claim, but no sum in excess of $300 shall be payable in respect of the repair or replacement."

75 The term "medical service" is defined in the Act, s3, in the following terms:

(a) attendance, examination, or treatment of any kind by a medical practitioner, dentist, optician, masseur, or chiropodist;

(b) the provision of skiagrams or crutches, or of artificial members, eyes, or teeth, or of spectacles or hearing aids;

(c) the provision to or for a worker, otherwise than as a patient in a hospital, of medical or surgical aids to rehabilitation, or of curative or apparatus;

(d) the provision by a pharmaceutical chemist of medicines or curative apparatus, appliances, or materials; and

(e) the cost to a worker of any fares, travelling expenses, and maintenance necessarily and reasonably incurred by him in obtaining any medical service; ..."

76 The plaintiffs contend that the care provided by FBCA to SL is a medical service for the purpose of s8A, and, as such, the cost of it is a cost AFH is obliged to meet under the Act. The defendant contends that it is not. It therefore becomes necessary to consider the scope of the term "medical service".

77 Counsel for the plaintiffs submits that the definition of the term "medical service", as set out above, is not an exhaustive definition of what such a service is. He refers to the use of word "includes" in the definition. If regard is had to all the definitions which appear in the Act, s3, there are only two which use the word "includes" as opposed to the word "means". The other definition which uses the word "includes" is that of "hospital service". Counsel submits that the use of the word "includes" indicates that it was parliament's intention that the term "medical service" be interpreted as broadly, and with as much flexibility, as possible. If such an approach were adopted here, medical service must extend to attendant care. No authority was relied on by counsel for the plaintiffs for this proposition.

78 There was a second limb to the plaintiffs' argument in the event that that general approach was not accepted. That was that, in any event, the attendant care fell within subpar (e) of the definition of "medical service" in that it was "maintenance necessarily and reasonably incurred by" SL "in obtaining any medical service". No authority was provided for this proposition either. However, counsel for the plaintiffs did refer to a number of authorities relating generally to the interpretation of statutes. He submitted that workers compensation legislation was remedial in nature. It was enacted to benefit workers and therefore, where two constructions were possible, that which was favourable to the worker should be adopted. Counsel also referred to the Acts Interpretation Act 1931, s8A, which provides that an interpretation that promotes the purpose or object of an Act is to be preferred to one which does not.

79 The stated purpose of the Act in this case does not assist. However, I accept that the Act was intended to provide a system of compensation for workers injured during the course of their employment, and to provide for a range of costs for which a worker could be compensated that they might otherwise have not been able to claim.

80 In Orr v State of Tasmania [2010] TASSC 28, Blow J (as he then was) said at par[20]:

"20 The sub-regulation that I have to construe is contained in some regulations that constitute workers compensation legislation. As a general rule workers compensation legislation, as beneficial legislation, should be given an interpretation that is favourable to workers: McDermott v Owners of SS Tintoretto [1911] AC 35 at 46; Wilson v Wilson's Tiles Works Pty Ltd (1960) 104 CLR 328 at 335; Bird v Commonwealth [1988] HCA 23; (1988) 165 CLR 1 at 9; Odlin Shop Fitting International Pty Ltd v Kaljanac (1993) 29 NSWLR 632 at 639 - 640; Dodd v Executive Air Services Ltd [1975] VicRp 66; [1975] VR 668 at 679, 682; Loizos v Carlton & United Breweries Ltd [1994] NTSC 24; (1994) 94 NTR 31 at 33. There is no reason to depart from that principle in this case."

I do not cavil with that general principle. However, with respect, it does not extend to ignoring a plain reading of the section under consideration, and allowing an interpretation favourable to a worker where there may be no ambiguity in the section as it stands.

81 Counsel for the plaintiffs referred to Denehy v Nominal Insurer [1991] TASSC 167, which, he submitted, was an example of an interpretation of the Act, s8A, in a manner consistent with the purpose of the legislation, and that was favourable to the worker. With respect, the case does not, in my view, assist the plaintiffs. Crawford J (as he then was) determined that literacy and numeracy training for an injured worker, which took place in a hospital facility as part of the services offered in that hospital, constituted an hospital service for the purpose of that particular definition. That was a perfectly logical conclusion based on the facts of that case, and did not involve any detailed examination of the interpretation of the statute.

82 Counsel for the defendant, on the other hand, referred to a decision of Neasey J in a matter of Cox v Attorney-General [1986] TASSC 66 in which exactly the same issue as that here arose. His Honour in that matter was required to consider the definition of "medical service" in the Act. In that case, the cost of additions to the plaintiff's home undertaken on medical advice was in issue. His Honour said at pars[3] - [4]:

"3 For the purpose of deciding the issue, it does not matter whether or not the word 'includes', in the definition of 'medical service' in s.3, should be read as 'means and includes', so as to be exhaustive, as it was held to be in a similar provision by the Full Court of the Supreme Court of New South Wales in Thomas v Ferguson Transformers Pty Ltd (1979) 1 NSWLR 216, following an earlier decision in that Court. Even if 'includes' should be so read in our definition, which I should be inclined to doubt, the question remains whether an expression contained within that definition applies to the items under review. Counsel on both sides informed me that their thorough researches have not revealed any relevant authority, even though there are similar expressions in Workers' Compensation Acts elsewhere - eg, s.26(2)(d) of the Workers' Compensation Act 1958 of Victoria see Anderson and Rendit, Workers' Compensation Victoria, 3rd edn, p910.10.

4 The case is therefore one of first impression. The aid to rehabilitation must be a medical or surgical aid. In my opinion, 'medical' and 'surgical' must be given their ordinary, common meanings (for which, see the Shorter Oxford English Dictionary), so that a medical aid to rehabilitation must be of its own nature one which pertains or relates to, or has to do with, medicine in some material way; and 'surgical aid' will have a similar meaning in relation to surgery. Upon that basis, none of the services under review qualifies as a medical or surgical aid to rehabilitation, because none has any material relationship or connection with medicine or surgery. It would be unwise to mention any but the simplest and most obvious examples which would come within the description; so I shall say only that a pharmaceutical remedy, if it were not already specifically covered by the definition, and a heart pacemaker, would qualify respectively as a medical and a surgical aid to rehabilitation. Thus, the fact that a particular means of aiding a sick or injured person's recovery of health may have been ordered or prescribed by a medical practitioner or a surgeon will not necessarily bring it within the category; and in this case does not. The defendant should have judgment."

83 Although neither counsel referred to it in this case, and nor did Neasey J, the Full Court of the Supreme Court of New South Wales dealt with the same argument raised by counsel for the plaintiffs in this case about whether the word "includes" was exhaustive or not in the context of New South Wales legislation. In Lamont v Commissioner for Railways [1964] NSWR 406, the court dealt with the definition of medical treatment in the New South Wales workers compensation legislation. The term "medical treatment" in that legislation was followed by the word "includes". The court determined that the term "includes", as used, was used in the exhaustive and not expansive sense. That decision was followed in Thomas v Ferguson Transformers Pty Ltd (above) to which Neasey J did refer. I suspect Neasey J was aware of the Lamont case because he used a phrase from it which was a little unusual.

84 In any event, with respect, the approach taken by Neasey J is, in my view, entirely logical. The Act, s8A(1), provides that a worker is entitled, in addition to compensation otherwise payable, to the reasonable costs of any medical services. Section 8A(1A) lists a number of things which are included in the term "medical services". Section 3 then defines what a medical service may include. Section 8A does not provide that a worker is entitled to claim for any service rendered as a consequence of an accident. It confines any service for which costs are to be allowed to "medical" services. The word "medical" must therefore have some meaning and have been intended to limit what could be claimed. The word is defined in the Macquarie Dictionary to mean "of or relating to the science or practice of medicine; curative; medicinal, therapeutic". With respect, none of the services provided by workers with FBCA would come within that framework.

85 The second argument of the plaintiffs effectively involves a question, do the words in subpar(e) of the definition of medical services mean that any service ancillary to the provision of a medical service is claimable? Counsel for the plaintiffs submitted that the tasks performed by FBCA workers were properly characterised as "maintenance" required to obtain medical services. Were the workers not available, SL could not obtain medical services. For example, SL would not know when he might need a doctor, and could not make any necessary arrangements to see one in any event. He would not be able to arrange to get necessary prescriptions, have them filled and know when to take what. It was submitted that the workers attended to SL's needs in order to assist the medical care provided by his general practitioner. It was submitted that the care provided was therefore necessarily and reasonably incurred by SL in obtaining medical services.

86 Counsel for the defendant argued that this interpretation was far too wide and ignored the context in which the words relied upon appear. He pointed additionally to the fact that in workers compensation legislation introduced in 1988, which resulted in the repeal of the Act, a specific provision was inserted which dealt with attendant care. Counsel for the plaintiffs rejected both these arguments.

87 The Act was repealed by the workers compensation legislation introduced in 1988. That new Act, commencing at s74, contained a division headed "Medical and Other Services". Within that division, there is a definition of medical services, and a new, and separate, definition of "constant attendance services". A reading of that division makes it clear that the range of services for which a worker might claim costs is significantly broader than that covered by the Act. That definition, constant attendance services, would clearly cover the type of care being provided to SL in this case. However, that legislation does not apply to SL, and SL's entitlements are limited to those allowed by the Act. As to any argument about the impact of the new provision specifically allowing for attendant care, it must be accepted that the new legislation was a very different animal to the Act, and that it is not possible to necessarily conclude that what parliament intended by introducing the concept of attendant care was to broaden the range of costs which could be claimed from those provided for in the Act. However, the fact of the matter is that the costs of such care are now specifically referred to, and they were not in the Act.

88 Returning to the words of subpar(e) of the definition of "medical service" in the Act, counsel for the plaintiffs has extracted part only of it and, in my view, has sought to interpret it in a manner which is not consistent with the context in which the words relied on appear. The subparagraph allows for "the cost to a worker of any fares, travelling expenses, and maintenance" but then qualifies the extent of such costs to those "necessarily and reasonably incurred by him in obtaining any medical service". A clear example would be costs associated with travel to a specialist's appointment. That is the costs associated with obtaining the services of that specialist.

89 In the present case, one of the roles the carers undertake is to sort medication in tablet form, which is prescribed by SL's doctor and delivered to the home by a pharmacy. They ensure that SL takes the medication prescribed when he needs to. However, it cannot possibly be a service which is required on a 24 hours basis and, in my view, could not be characterised as "obtaining" a medical service.

90 A general practitioner visits SL on a regular basis. I accept that there may be occasions when, between regular scheduled visits, a general practitioner's attendance may be needed, and that this may be as a result of an observation by a carer as to the need for the attendance, and a telephone call by a carer to arrange it. While it might be argued that the cost of a carer doing that would fall within the definition, there was no evidence that SL's condition was such that his general practitioner was often called for visits other than scheduled ones. I have some difficulty with the concept that, where the bulk of a carer's role falls outside the definition, the fact that one limited possible aspect might not, entitles SL to claim for the whole of the care. That is an all or nothing approach. Counsel for the plaintiffs did not seek to suggest that any costs of attendant care be apportioned and there was no evidence to allow me to do so in any event.

91 There was no other aspect of the attendant care actually rendered which counsel argued could be related to "obtaining" a medical service. I am not satisfied in all the circumstances that the care provided by FBCA is care "necessarily and reasonably incurred" in obtaining a medical service.

92 The consequence of these findings is that the costs associated with the care provided by FBCA are not costs which AFH has a liability to pay by reference to the Act, s8A. If that were the only basis upon which the plaintiffs asserted the Policy provisions were triggered, then it must follow from findings that I have already made about the scope of the obligations of the defendant under the Policy that they are not costs which could trigger the operation of the Policy. The reason for that is that a large part of the claim by the plaintiffs is said to arise from the fact that payments made for SL's benefit in the form of attendant care costs have reached a total which exceeds $1,000,000 and hence the Policy must be engaged. If the attendant care costs are not costs which could have been claimed under the Act, then that threshold has not been reached.

93 Counsel for the plaintiffs however argues that there is a further avenue by which it could be said that the payments for attendant care were made under the Act, and that is that they have been made pursuant to an agreement to settle under the Act, s13.

Was there any "settlement" of any claim by SL by reference to the Act, s13?

"(1) Subject to subsection (1A), claims for compensation under this Act and questions arising in connection therewith, or incidental thereto, may be settled by agreement or by proceedings before a judge as provided by this Part.

(1A) An agreement for the payment of a lump sum in settlement of a claim for compensation under this Act has no force or effect unless and until it has been registered as prescribed with the Secretary.

(2) Every such agreement as aforesaid shall be subject to review by a judge upon application by any party interested therein, made either before the agreement is registered under subsection (1A) or within 3 months after it was so registered."

95 In May 1990, two sets of proceedings were commenced by the Public Trustee as next friend for SL. By the first, SL sued AFH for "Workers' Compensation pursuant to the provisions of the Workers' Compensation Act 1927". The claim was for an amount of $126,775.60. The grounds and particulars asserted that AFH had paid weekly compensation until SL's entitlement to such payments was exhausted. By the proceedings, SL sought an order that SL's incapacity be treated as total and permanent, and that AFH pay his costs of medical, hospital and travelling expenses, and any lump sum to which SL was entitled by reference to Rules 5 or 6 in Schedule 1 of the Act. The second set of proceedings was for damages for negligence at common law. I infer from the date upon which the proceedings were filed that they were filed to preserve causes of action in the face of limitation periods.

96 No steps were taken in either set of proceedings beyond their commencement. There was no evidence of any court sanctioned settlement of either set of proceedings, and no evidence of any agreement registered with the "Secretary" as provided for in s13(1A).

- there was an agreement to settle SL's claims for compensation;

- the agreement was that, in consideration for SL paying for his unit at Wynyard, AFH would pay for care to be provided to SL in that unit;

- the agreement was oral constituted by a conversation between SL's mother and a representative of AFH;

- the agreement was partly express and partly to be implied;

- it was an express term of the agreement that SL would pay rent for his unit at Wynyard and AFH would pay for care to be provided to him there;

- it was an implied term that, provided SL's medical condition permitted him to reasonably remain in accommodation at the unit, he would do so and would not claim compensation in the nature of the costs of hospital or nursing home care.

98 Leaving aside the issue of whether the evidence relied upon allows the Court to find there was an agreement of some sort, the defendant's position is that s13 can only relate to an agreement in respect of claims for amounts to which a claimant was entitled under the Act and that, since attendant care was not a cost to which SL was entitled under the Act, if there was an agreement to pay for attendant care, it was not a settlement of a claim for compensation under the Act or of a question arising in connection therewith or incidental thereto.

99 The Act, Pt VI, where s13 appears, is entitled "Procedure for Claiming Compensation and settling questions under the Act". There is no doubt that, following his accident, SL claimed and was paid weekly compensation payments under the Act. The proceedings instituted in 1990 sought the payment of medical, hospital and travelling expenses and a lump sum. The issue of the costs of attendant care and who was liable to pay for it had not, it seems, then arisen. From the correspondence tendered to the Court covering the period 1996 and 1997, it is apparent there was a dispute as to the extent of the care for which AFH was liable under the Act. Mr MacAulay's position throughout was that the "company" would pay for "reasonable" care for SL, but not costs which were outside the Act. The Public Trustee, while at times suggesting that AFH was obliged to pay the costs of attendant care under the Act, seemed to be pursuing more the line that AFH should pay the costs, and that, not to do so would place a much higher financial burden on AFH in the form of the cost of hospital care. Mrs Lowrie just wanted her son settled, and for attendant care costs to be met by someone other than her son.

100 There is no reference in any correspondence to the proceedings launched in 1990, or to the possibility of having any dispute as to the level of care for which AFH was responsible under the Act, determined by the Court. There is no suggestion in any correspondence which followed in reasonable proximity to the asserted 1997 agreement to the effect that any such agreement was an agreement pursuant to s13. There is no express reference to what was discussed between Mr MacAulay and Mrs Lowrie being a settlement of all or any part of any claims for compensation SL might have under the Act. There was no express reference to SL giving up any rights by this asserted agreement to pursue outstanding proceedings or make any other sort of claim.

101 Counsel for the plaintiffs nevertheless asserts there was an agreement in the form identified, and that it was an agreement pursuant to s13. He submitted that the essence of every agreement to settle is that there is a claim advancing a position and a denial of that claim. That, he argues, is what happened here.

102 For the purpose of determining whether there was an agreement and the nature of it, it is necessary to canvass the correspondence and evidence. While it is not strictly necessary for the purpose of this issue, but may be for the purpose of determining another, I propose to canvass a range of correspondence at this point in the judgment simply to keep events in a chronological order.

103 The Public Trustee wrote to AFH in March 1996 advising that SL was then in a psychiatric unit and had been in a nursing home. AFH had it seems been paying for the nursing home. It was proposed that a unit be purchased and that care be provided in that. Confirmation was sought from AFH that it would "meet the costs associated with that the same being part of its obligation under the provisions of the Workers' Compensation Act 1927". In a letter dated 21 May 1996, the Public Trustee wrote again, obviously as a consequence of some discussions. On that occasion no reference was made to workers compensation. The proposal put was that SL would purchase his own unit if AFH met the costs of care. By this stage the correspondence was addressed to an entity described as "North Forest Burnie - An Enterprise of Associated Forest Holdings Pty Ltd". The person dealing with the matter was Mr Bob MacAulay.

104 On 28 May 1996, Mr MacAulay wrote to the brokers for the company insurers. He was seeking a written commitment "from our insurer that they will be accepting liability for ongoing care and management on the reaching of incurred costs by North Limited of One Million Dollars". That was clearly a reference to the reinsurance threshold in the Policy. At that time, FBCA was already providing a level of care for SL while he was in the psychiatric clinic.

105 On 13 June 1996, the insurance broker wrote to the defendant advising of the existence of the claim, and indicating that since it may be called upon, it was felt it might want to be involved in the management of the claim. The response was a request for a range of information.

106 On 26 June 1996, Mr MacAulay wrote to the Public Trustee. He said:

"We write to advise that at this time we cannot agree to the proposal of making alteration to a residence or the ongoing care of Stephen for an indefinite time.

This is due to the fact that the proposals are outside the requirements of the Workers Compensation Act 1927, but more to the point is that soon North Limited will have expended an amount of self insurance which will necessitate our insurers of the time of Stephen's accident to become liable for the ongoing costs of the claim.

The reinsurer has confirmed with me today 26 June, 1996 that they were in fact the insurer at that time and have asked for more comprehensive documentation showing how and under what circumstances the accident occurred etc before fully assessing the case. To this end the writer will be going to Melbourne on Wednesday 3 July, 1996 with the file to attempt having the reinsurer (GIO) accept the proposal as put by yourself on Stephen's behalf.

In the interim we advise that we will continue to fund the current level of care to meet Stephen's needs (without prejudice) until we can obtain some direction from GIO."

The Public Trustee acknowledged that letter, and basically pointed out that the hospital where SL was then accommodated was likely to charge a significantly higher daily rate in the near future and it might be more cost effective for both AFH and its insurer to reconsider the proposal put. Mr MacAulay responded by letter dated 30 July. He reiterated that what was proposed was outside the Act, and that they could not agree to it without the approval of the reinsurers, which at that time was not forthcoming. In another letter written on 15 August, Mr MacAulay indicated "The company did acknowledge that it is liable to pay the costs associated with reasonable care for Stephen". He also indicated that, if SL chose to buy a unit, the company would not, and could not, be held responsible for any modifications or renovations to it. Another letter written shortly after said that "North Forests Burnie will meet all reasonable costs for medical and hospital services associated with the reasonable care as required under the Workers Compensation Act 1927".

107 The Public Trustee's response to that letter did not join issue with the fact what was sought might be outside the parameters of the Act. He simply indicated he wanted an answer one way or the other to the proposition that "the care required and its associated costs are reasonable in a private residence environment and that such costs will be borne by your company?"

108 On 8 July 1996, the broker provided a range of information to the defendant. She said:

"Associated Forest Holdings have calculated that they will reach their $1million liability under the policy within 18 months and would like to involve GIO in the current claim management to assure Mr Lowrie and his family that there will be some continuity in the claims management, can you confirm whether you wish to be involved. Further, we would like confirmation in writing that GIO will take over the responsibility of the claim and the ongoing care of Mr Lowrie. It would also be appreciated if you are able to confirm whether you wish to participate in Mr Lowrie's current claim management and in particular the issue of appropriate accommodation."

From a practical point of view the defendant's response was unhelpful.

109 On 23 September 1996, Mr MacAulay wrote to the brokers. He said:

"The question The Public Trustee's office continue to ask is will we accept liability beyond the boundary of the Workers Compensation Act 1927. In that the Act specifies medical, hospital and registered Nurses. The care being contemplated does not fall under any of the three categories, and as such we cannot formally agree on behalf of our reinsured."

110 Correspondence continued, and, throughout, Mr MacAulay reiterated that he could not go outside the Act. On 9 May 1997, the broker advised Mr MacAulay that legal advice was to the effect that the costs of attendant care being sought did not fall within the costs payable under the Act. It was suggested to Mr MacAulay that the options for North Forest Products were to negotiate with a nursing facility to accommodate SL, to obtain the assistance of a registered nurse at private accommodation, or the company could act outside the Act on the basis of an agreed solution "with all relevant stakeholders". That advice clearly addressed the dilemma that AFH faced. At that point quite clearly a relevant stakeholder was the defendant.

111 Then, on 23 May 1997, Mr MacAulay had a telephone conversation with SL's mother. Mrs Lowrie said that several days later she made a note of that conversation in the following terms:

"I spoke to Mr Bob McCauley on his mobile phone on 23/5/97 at approx. 9.45am.

I asked if he could put care into a unit at Dodgin St Wynard that Stephen wants to live in.

He advised me that the Company would fund care at the Unit & had no problems with it (He also asked about the wheelchair)

He also advised us to get written confirmation from the P/Trust saying that they will pay rent on Stephen's behalf."

Mr MacAulay, in a facsimile to the broker on 27 May 1997, confirmed that he had spoken to Mrs Lowrie who had told him a unit in Wynyard had been found and asked if the company would transfer the care from the TAFE unit. He said he told Mrs Lowrie the company would do "what was reasonable".

112 Mrs Lowrie, in an affidavit she swore on 11 November 1997, said that Mr MacAulay told her North would pay for care regardless of wherever SL was living.

113 Mr MacAulay was shown Mrs Lowrie's handwritten note, and asked if his recollection of the conversation was consistent with or inconsistent with the substance of what was recorded. He responded, "No, that's what it would have been, yes." He then repeated after a query, "That would have been the substance of the conversation, yes. We're talking about ongoing care."

114 Mr MacAulay was cross-examined at some length about his dealings with this case. He had clearly had legal advice about what was covered by the Act, and what was not, and that the attendant care being proposed for SL was not covered by the Act. When pressed however, he continued to respond that "we" were required to supply "reasonable care". Finally, he acknowledged that part of what was on his mind was that there was a moral obligation to SL "along with my responsibilities to the organization". There was no evidence that Mr MacAulay had an agreement from the defendant before he spoke with Mrs Lowrie about what he could agree to.

115 There can be little doubt that, up until the discussion with Mrs Lowrie, Mr MacAulay had been authorizing the payment of attendant care in various facilities, and that, after SL moved to the Wynard unit, Mr MacAulay continued to do so. I am satisfied that, when he did that, and despite his mantra that he was simply paying for reasonable care, he must have realized that he was authorizing payment for costs he had been told were not claimable under the Act.

116 There can also be little doubt that Mr MacAulay agreed, in the course of the discussion he had with Mrs Lowrie on or about 23 May 1997, that AFH would pay the costs of attendant care for SL, were he to be living in his own unit, provided it was not also paying for the provision of the accommodation itself.

117 The question however is, was that an agreement pursuant to the Act, s13(1)? That is, was there an agreement to settle a claim for compensation under the Act and any question arising in connection with it or incidental to it. The plaintiffs contend that there was an agreement, and that it settled a question arising in connection with or incidental to SL's claim for compensation. That question was whether AFH would pay the costs of attendant care for SL in his own accommodation.

118 Counsel for the plaintiffs submitted that the agreement was partly oral and partly to be implied, and that the basis for both the oral and implied terms of the agreement was the discussion between Mr MacAulay and Mrs Lowrie which occurred on or about 23 May 1997. He further submitted that s13(1) did not specify any requirement for the form of an agreement, and that it did not require that any agreement necessarily settle all claims for compensation. Questions could be settled which were not confined to issues of legal liability, quantification or terms of any payments. An agreement could include a requirement that an employer make payments which it might not otherwise be liable to make under the Act. He also submitted that it did not matter that the settlement embodied in the asserted agreement was not formally approved in any way. It was still binding on the employer. It is perhaps relevant to note that there is a difference between the question of whether such an agreement was binding on AFH and whether, even if it were, it constituted an agreement under the Act which might engage the terms of the Policy.

119 The first issue to be determined is whether an agreement, for it to be an agreement for the purpose of s13(1), must be in writing or be in any particular form. In construing s13(1), in the context that Parliament did not see fit to do so, there is no reason to limit the form of any agreement to one in writing in a particular form. I accept that an agreement for the purpose of s13 may be an oral agreement, and if appropriate, have terms which are implied.

120 The second issue is the scope of any asserted agreement. Counsel for the plaintiffs submitted that such an agreement did not need to settle all claims of SL. He did not however rely on any authority for that proposition.

121 The issue of what could constitute a settlement under the Act, s13, was considered in Hudson v Nuroo (1940) 35 Tas LR 120. In that case, a young woman injured her wrist at work. A claim was made for compensation in a fixed amount which was said to represent a number of weeks' wages to cover an asserted period of incapacity plus an amount for some medical expenses. The solicitor for the employer offered an amount less than that claimed which the woman's solicitor accepted. In doing so, he wrote a receipt which recorded that the amount agreed upon was "in full settlement of Miss Hudson's claim against your client in respect of the injury sustained by her on the 3rd November last". Miss Hudson sought to have that agreement varied. The Court dealt with a preliminary question of whether in fact the Act allowed for a compensation claim to be compromised by agreement. After dealing with that the Court dealt with s13.

"Turning to our own Act, the Section authorising agreements is Section 13, which reads -

(1) Claims for compensation under this Act and questions 'arising in connection therewith, or incidental thereto, may be 'settled' by agreement or by proceedings before a Judge as provided by this Part.

(2) Every such agreement as aforesaid shall be subject to review 'by a Judge upon application by any party interested therein, 'made within three months after the date of such agreement.'

The power to make agreements given by this section is much wider than that under consideration in Russell v Rudd (supra). It is not limited to questions relating to liability, or the amount, or duration of compensation, but extends to every question arising in connection with or incidental to a claim for compensation, but that is not all, not only is there power given to settle these questions by agreement, but the claim itself may be settled by agreement.

The word 'settle' when used in relation to actions or claims has a well accepted meaning and that meaning includes the putting an end to the action or claim by compromise between the parties.

But it may be argued that the alternative to agreement under the section is proceedings which can in the case of incapacity not resulting in death or certain specified injuries only result in a weekly payment and that therefore on the analogy of Russell v Rudd you can only achieve by agreement what you can achieve by proceedings, and an agreement for settlement cannot be an agreement for a lump sum.

I do not think this is so. I think you can settle the claim by agreement with an entirely different result from that which you would obtain if you settled it by proceedings. There is nothing to regulate what the agreement shall contain; an agreement of whatever nature which settles the claim is permissible subject, of course, to the power of review given to a judge.

It is well in applying judgments given upon particular enactments to pay close regard to differences in context. The whole language of Section 1, sub-section (3) of 6 Ed. VII., C. 58, which I have quoted above made it clear that nothing more than a weekly payment was being contemplated. The reference to 'duration' is only consistent with a continuing periodical payment and the words 'subject to the provisions of the schedule' also underline this point.

In that section 'settled' is used in relation to questions and the meaning given to it was 'resolved'.

I do not think the same meaning should be given to it when applied to a claim, and it is important to notice that the Tasmanian Section speaks of claims and questions.

A claim may involve many questions which may be resolved one way or another, but the Act contemplates the settlement of the claim itself, apart from the questions, and, as I have said, there is no restriction upon the agreement which settles it. If the parties do not settle it by agreement it may be settled by proceedings. In each case it is settled, and I think it is immaterial that the nature of the actual monetary payment is in each case different."

123 There have been other cases where, in the context of different legislation, the concept of agreements to settle has been considered. However, they have usually related to situations where employers have commenced weekly payments of compensation, and have then stopped them, and an argument has arisen whether there was an agreement to settle a claim for weekly payments which was final, or the parties retained an entitlement to take further steps in the relevant tribunal.

124 Morris CJ clearly accepted that s13 allowed for the settlement of a claim by an agreement with an entirely different result from that which could be obtained by proceedings, subject of course to the power of a judge to review such a settlement. He also took the view, as he said, that a claim for compensation might involve many questions which needed to be resolved, but the Act contemplated a settlement of the claim itself, that is putting an end to the claim by compromise. I infer from that interpretation that he contemplated the section as allowing for an agreement which not only resolved questions in connection with or incidental to a claim for compensation, but also settled the claim.

125 If this interpretation is accepted, then, with respect, it puts an end to the argument that what took place between Mr MacAulay and Mrs Lowrie gave rise to an agreement pursuant to s13, because on no basis is it contended that there was an agreement to settle any compensation claim of SL in its entirety. Having considered the facts in this matter, and the remarks of Morris CJ, I accept that, for an agreement to be an agreement for the purpose of s13, it must involve more than the resolution of a question in connection with or incidental to a claim for compensation. It must involve a settlement of a claim. Any agreement which might arise by reference to the conversation between Mr MacAulay and Mrs Lowrie did not do that. I am satisfied, in all the circumstances, that whatever passed between Mr MacAulay and Mrs Lowrie did not amount to an agreement pursuant to the Act, s13.

Was any agreement between Mr MacAulay and Mrs Lowrie a settlement of a common law claim of SL's

126 At par14 of the statement of claim, it was pleaded that the payments in respect of attendant care for SL were being made in satisfaction of AFH's common law liability to SL. Further or in the alternative to that, at par15, it was pleaded that the payments for attendant care were being made pursuant to an agreement (being that arising from the discussion between Mr MacAulay and Mrs Lowrie dealt with above) by which SL's workers compensation claim and his common law claim were compromised insofar as they related to those payments. At par16, the s13 agreement issue was pleaded, which I have already determined.

127 This claim, that is an asserted settlement of common law liabilities, was not dealt with either in opening or closing of his case by counsel for the plaintiffs and yet not specifically abandoned.

128 Notwithstanding the lack of reference to it, I am satisfied that the payments for attendant care, even if made pursuant to an agreement reached between Mr MacAulay and Mrs Lowrie, were not ones made pursuant to a compromise of any common law claim by SL. Common law proceedings were instituted in 1990 but there is no evidence anything at all was done in relation to them after that step was taken. There is no evidence of any concession by AFH nor court determination to the effect AFH had such a common law liability. There has been no correspondence produced relating to any negotiations to settle such a claim, nor any document which might indicate the payments for attendant care were being made pursuant to a settlement of such a claim. There is simply no evidence to support this assertion.

Are the payments made by AFH and others recoverable from the defendant on the basis they were reasonably incurred to minimise a loss?

129 This claim falls to be considered effectively because the other bases for recovery by reference to the Policy have failed. The plaintiffs assert that AFH always knew that the costs associated with hospital care for SL would be far higher than the costs of attendant care. The costs of hospital care would have been covered by the Policy. AFH, the plaintiffs assert, agreed to pay the costs of attendant care because, to fail to do so, would have resulted in the higher costs of hospital care being incurred. Counsel submitted that:

"The authorities establish that costs incurred by an insured in those circumstances fall within an indemnity under the policy as an implied term."

130 In support of that proposition, counsel for the plaintiffs referred to two authorities, Guardian Assurance Co Ltd v Underwood Constructions Pty Ltd (1974) 48 AJJR 307 and EJ Hampson & Others Syndicate 1204 v Mining Technologies Australia Pty Ltd (1997) 10 ANZ Ins Cas 61-389.

131 If the plaintiffs are to succeed on this argument, they will need to establish that AFH and North had an obligation to do what they did, that is agree to, and pay, the costs of attendant care, to minimize any loss to the defendant, and that the steps taken were to fulfil that obligation which was either contractual or pursuant to a duty. Starting with the pleadings, par17AE of the statement of claim asserts that the costs of FBCA care were costs reasonably incurred by AFH and North pursuant to a contractual obligation or in the fulfilment of their duty to prevent or minimize liability to the defendant, and fell within the indemnity in the Policy. There is no pleading as to the terms of that asserted contractual obligation to prevent or minimize loss, and there is no pleading as to the terms of the asserted duty. There is no pleading as to the existence of any implied term in the Policy.

132 The Policy contains no provision which requires a reinsured to mitigate any potential loss. It does contain a provision, Article XII, which permits the parties to renegotiate increased benefits should legislation alter after the inception date. That article is not a general provision which deals with circumstances where a reinsured wishes to make payments outside the Act and wants coverage for such payments. Article XV does provide for alterations which it must be assumed would allow for changes to the cover. There was no evidence any such alteration to cover was ever sought by AFH. There is nothing in articles V, VI or VII which imposes an obligation on a reinsured to minimize loss.

133 Counsel for the plaintiffs did not address the pleadings in relation to this matter. He concentrated on the cases to which I have referred, and referred to a further case of A.F.G. Insurances Ltd v Mayor, Councillors and Citizens of the City of Brighton [1972] HCA 70; (1972) 126 CLR 655, and commentary in Halsburys Laws of Australia and Kelly & Ball, Principles of Insurance Law.

134 I will firstly consider the Guardian case. A brewery engaged a builder to excavate part of its site and construct new buildings. The site where the work was to be performed was about 20 feet from existing buildings. The excavations caused a fall of rock and earth which imperilled an existing building. The builder had to perform remedial work to underpin the foundations of the building. The builder held a policy of insurance. The policy of insurance contained a provision under the heading "Material Damage" which required the insurer to indemnify the builder against accidental loss of or damage to the property insured whilst the builder was on site. There was a proviso limiting the liability of the insurer to the reasonable cost of replacing or repairing the property lost or damaged. There was also a public liability clause which required the insurer to indemnify the builder against all sums which the builder might become legally liable to pay as damages consequent upon any accidental loss of or damage to property occurring in connection with the performance of the contract and happening on the contract site. There was also a specific provision which provided that the builder was required to take all reasonable precautions to prevent loss, damage or liability.

135 The builder claimed the cost of the necessary remedial work. It was held that the amounts claimed were recoverable under the promise to indemnify the insured in respect of material damage. The headnote further records:

"The question whether costs reasonably incurred by an insured person pursuant to a contractual obligation or in fulfilment of a duty to prevent or minimize liability to a third person should be regarded as falling within an indemnity against liability to others ... referred to but not decided."

136 I have read the judgment of Mason J, with whom Barwick CJ, Menzies and Stephen JJ agreed. With respect, it is not authority for the proposition for which counsel for the plaintiffs contend. Counsel has been extremely selective in the portion of the judgment which he extracted in his written closing submissions. What his Honour said at 309 was the following:

"What is to my mind decisive is that the evidence establishes that the damage to the installations and office block disturbed the physical integrity and the enduring quality of the excavation itself. Unless and until the damage to the building and the installations was remedied the excavation was as susceptible to further collapse as it would have been had its walls not been secured. Had the work under consideration not been undertaken the excavation could not have been restored to its former condition. The costs in question therefore in my view reflect loss or damage sustained by the insured to the property insured.

The appellant seeks to escape this conclusion by contending that the work in question was undertaken, not to avoid further damage to the excavation, but to avoid a liability on the part of the respondent to the brewery for the collapse of the building and other damage. The appellant conceded that had the office block fallen into the excavation the respondent would have been liable in damages to the brewery and that the liability would have come within s II of the policy, subject to the limit therein contained. The submission in all its unattractive simplicity is that, although the respondent would be indemnified if it stood by and allowed the office block to collapse, it is not indemnified when it incurs expense in preventing or minimizing damage or liability.

A compelling answer to this submission is that on the evidence it is proper to infer that the work in question was undertaken to protect and restore the excavation. No doubt it was also undertaken to prevent or minimize a liability to the brewery in the event of a collapse of the building, but this is not to deny that it was also undertaken to protect and restore the excavation. This accords with the finding of the primary judge.

It may be that costs reasonably incurred by an insured person pursuant to a contractual obligation or in fulfilment of a duty to prevent or minimize liability to a third party should be regarded as falling within an indemnity against liability to others. However, in view of the conclusion which I have reached as to the application of s I of the policy, there is no occasion for me to explore the possible application of s II.

137 As to the Hampson case, it involved a situation where a company which supplied mining services to a mining company lost a number of "addcars" in a mining collapse. The particular mining operation involved the use of specialized equipment to tunnel, called a continuous miner, into the face of an existing open cut mine. Quantities of coal were recovered which were automatically conveyed back to a vehicle. That vehicle towed a lead car and a series of other addcars to form a train of cars following the continuous miner into the mine. There was a tunnel collapse which resulted in the continuous miner, the lead car and 19 addcars being trapped. The company undertook an operation which resulted in 16 of the addcars being recovered. The cost of recovery of the addcars was $725,000. The value of the recovered addcars was $1.82 million.

138 The company had insurance which included a provision to the effect that the insurer would provide insurance against loss damage or liability. The company undertook the recovery operation without informing the insurer. The insurer covered the cost of the continuous miner, lead car and the three addcars which were not recovered. It denied liability in respect of the recovery costs of the additional 16 addcars.

139 At first instance, the company was successful on the basis that it was obliged under the policy to mitigate its loss and the expense it incurred was incurred in meeting that obligation. The court held that the miner was entitled to recover on the basis of an implied term in the relevant insurance policy to the effect that expenses incurred in performing the duty to mitigate were recoverable from the insurer. The insurer appealed unsuccessfully. Pincus J would have allowed the appeal because he was not satisfied that the implied term found by the judge at first instance was appropriate. Davies JA agreed that the implied term found by the judge at first instance was inappropriate as being too wide. However, he found that it was appropriate to imply a term which enabled the recovery of the costs in this case. Davies JA said at 74 - 123 about the type of term he would imply:

"I would, like the learned primary judge, imply a term which required indemnity in this case. However contrary to the reasons of Pincus JA, it would be one which provides for indemnity only in respect of expenditure incurred which avoided (that is prevented) the occurrence of loss or damage."

140 McPherson JA also dismissed the appeal. His Honour did not feel it was necessary to imply any term in the insurance contract. He found that the company was entitled to recover as for a partial loss (specifically provided for in the policy), and this included the costs of recovery of the addcars. His Honour referred to the Guardian decision at 74,136 . After quoting from the reasons of Mason J at 309 col.3, he said:

"The decision is authority that expenses incurred in averting or warding off the imminent happening of an insured risk or peril are capable of being considered within the indemnity of the cover afforded against the loss itself. The fact that, in incurring the expense of rescuing the equipment, the insured MTA may have had it own interests in view as well as those of the respondent insurer is, as the decision in Guardian Assurance shows, no bar to recovery under the policy. In that and other respects the case may be compared to Leebov v United States Fidelity & Guaranty Co (1960) 165 A 2d 82, which it resembles both as regards the facts and the decision arrived at."

141 The extracts provided by counsel from Halsbury's Laws of Australia and Kelly & Ball largely mirror each other. Both refer to the AFG case and comments by Mason J at 661 to 662. Those comments were as follows:

"It has often been said that the insured owes a general duty to his insurer to avert or minimize loss. The nature and extent of this duty have not been explored. Sometimes it is put that the duty is but an instance of the duty of the insured to the insurer to observe good faith (see Welford & Otter-Barry, Fire Insurance, 4th ed p 275). At other times the opinion is expressed that a breach of the duty will, or may, amount to a cause of loss which is independent of the fire (see Preston & Colinvaux, Law of Insurance, 4th ed (1970) pp 78-79, 326). In City Taylors Ltd v Evans (1), Scrutton LJ drew a distinction between the cause of the fire and the loss, acknowledging that the insurer was responsible even if the fire were caused by the negligence of the insured, but expressing the view that once the fire occurred, 'the insured must do his best to extinguish it and to carry on his output' at the insured premises.

The present case does not call for a comprehensive examination of the extent of the insured's duty to avert or minimize loss and the consequence of a breach of that duty. It is sufficient to point to the very considerable differences between the circumstances in which the duty has been said to arise and the operation which the appellant now seeks to give it, an operation which falls significantly short of the full indemnity to which the respondent is entitled.

To say, as it has been said, that the insured should take reasonable steps to extinguish the fire, to allow firemen access to the fire, to remove his property to a place of safety and (in the case of an insurance against loss of profits) to keep up his output is to say no more than that the insured should take those practical and reasonable steps as a matter of self-help which his own self-interest would dictate."

The comments in this passage were in response to a submission made by counsel in the case and were not determinative of the case itself.

142 Consideration of the cases and the extracts from Halsbury's Laws of Australia and Kelly & Ball referred to do not lead to a conclusion that in every case where a claim is made against an insurance policy, absent a specific provision to that effect, a term will be implied in a policy which imposes a general duty on an insured to take any step which might reduce its ultimate claim against the insurer.

143 Counsel for the defendant argued that, in the polices in both Guardian and Hampson, there was an express requirement that the insured take precautions to prevent further loss or damage. I have already referred to that in the Guardian case. In Hampson, the relevant clause, extracted at 74 - 134, the first column, provided that the insured had to take precautions to prevent further damage to the machinery. The insurer was not to be liable for any damage resulting from further use of the machinery until it was repaired. Counsel for the defendant submitted that the reasoning in these cases was inapplicable to the facts of the present case. Counsel for the plaintiffs replied in relation to the defendant's submissions that:

"The Defendant's attempts to distinguish Guardian and Hampson must fail. The asserted basis for distinguishing those authorities is that the policies in those matters contained a provision requiring the insured to act reasonably to prevent loss to the insurer. The absence of such an express clause in the subject policy is irrelevant because it is well established that it is an implied term of all insurance policies that the insured has a duty to minimise loss to the insurer: (Halsbury's Laws of Australia at [235-789]; Kelly & Ball, Principles of Insurance Law at [8.0090]); A.F.G Insurances Ltd v Mayor, Councillors and Citizens of the City of Brighton [1972] HCA 70; (1972) 126 CLR 655 at 661-662".

144 There was evidence which demonstrated that both AFH and the defendant, via its broker, were aware that the costs of hospital care for SL on a long-term basis would be high, and that such hospital care in general terms was not the ideal option. Counsel for the plaintiffs submitted that it was clear that at all times AFH was conscious of the need to minimize, insofar as was reasonably possible, the amount paid in respect of SL's care. He submitted it was also clear that the defendant urged AFH to take all reasonable steps to ensure that this occurred. In support of those submissions, counsel referred to various pieces of correspondence. With respect, the correspondence referred to, and in particular that extracted in the written submissions, does not, in my view, support either of those propositions.

145 In July 1996, the defendant urged AFH to manage the claim by SL and confirmed the defendant would meet its obligations pursuant to Article VII. The defendant urged AFH to act in a prudent manner and to take action "to meet its obligations to the injured worker under the legislation whilst protecting its own position and that of the Reinsurer". This is repeated in December 1996 when the defendant said:

"If the claimant's accommodation costs escalate because the Reinsured has not taken prompt or reasonable steps to deal with the issue, GIO will not be responsible for these extra costs. Any further delay in dealing with this accommodation problem will not only affect the claimant's long term care but GIO's liability for the costs of such care."

146 The difficulty which exists in interpreting this correspondence, as counsel for the plaintiffs has, is that it is against a background of correspondence where AFH was being told that the costs of attendant care were outside the Act, AFH had no confirmation from the defendant as to precisely what it would pay for, and in particular that it would pay for accommodation options outside the Act, and it was under pressure from both the Public Trustee and Mrs Lowrie and others directly involved in SL's care to resolve matters. There was a perception that not to agree to what was being proposed could have ramifications for the company from a public point of view. Against that background, and some months after the correspondence to which counsel referred, Mr MacAulay agreed to pay the attendant care costs.

147 There was no direct evidence from Mr MacAulay or anyone else that the reason why Mr MacAulay did what he did was because he was conscious of an obligation to minimize losses to the defendant. Indeed, from a consideration of the correspondence in particular, and having heard Mr MacAulay, the view I have reached is Mr MacAulay was under pressure, he had been involved with this matter for many years and felt an obligation to do what he thought was right by SL. He simply reached a point when he was contacted by Mrs Lowrie in May 1997 that he had to do something.

148 I am not satisfied that the evidence supports a conclusion that AFH agreed to pay attendant care costs:

- because, if it did not it, and as a consequence the defendant, would be liable for much higher costs, and

- in the knowledge it had an obligation to minimize loss and pursuant to that obligation.

149 There can be no dispute that the overall costs of care were probably reduced as a consequence of what Mr MacAulay did. However, the plaintiffs, to succeed on this argument, need to prove that AFH had an obligation to minimize loss and that the payments were made for the purpose of satisfying that obligation. Even if I were to be satisfied that some sort of implied term should be read into this Policy as counsel for the plaintiffs asserts there should be in some ill-defined way, which I am not, I am not satisfied that what AFH did was in any way for the purpose of satisfying that obligation. Mr MacAulay had been told the cost of attendant care was outside the Act, the correspondence clearly reveals he was sticking to the line that he could not agree to payments being made outside the Act, and he had no confirmation from the defendant it would meet costs outside the Act. With respect, Mr MacAulay was, to use a colloquial phrase, between a rock and a hard place, and did what he thought was right.

151 The conclusions I have already reached dispose of this matter. While I am mindful there is a view that all issues raised at a trial should be canvassed, to continue with issues which are now irrelevant will only delay the finalization of this matter, and I therefore do not propose to deal with them.

(a) SL was, at the time of the accident, a worker employed by AFH.

(b) SL was not a reinsured in his own right under the Policy.

(c) The Policy was intended to be a reinsurance arrangement to reinsure certain liabilities of those who were reinsured arising in respect of their obligations as self-insurers under the Act and at common law to their employees who were injured in a work related accident. The Policy was not intended to cover payments for expenses not so confined.

(d) The costs of attendant care were not costs payable by AFH, as the employer of SL at the time of his accident, pursuant to the Act, s8A.

(e) The costs of attendant care were not costs payable pursuant to a settlement under the Act, s13.

(f) The costs of attendant care were not costs payable pursuant to any common law obligation of AFH and were not paid pursuant to any settlement of any claim at common law.

(g) While North is a reinsured under the Policy, it has no claim arising against the defendant under the Policy, either as a reinsured in its own right, or pursuant to the 2001 share sale agreement.

153 As a consequence of those conclusions, absent the costs of attendant care, the threshold of $1,000,000 required to be reached to trigger the Policy, has not been reached and therefore the defendant has no obligation to make any payment to any reinsured under the Policy. The plaintiffs' claims must fail. There will be judgment for the defendant against the plaintiffs.