Associated Forest Holdings Pty Ltd v Gordian Runoff Limited [2015] TASFC 6

Associated Forest Holdings Pty Ltd v Gordian Runoff Limited [2015] TASFC 6 | Case summary | Zoe

[18]

This appeal concerns the scope of the cover provided by an insurer to an employer pursuant to a policy of insurance against losses sustained as a result of workplace accidents. It also concerns a question whether an employer was obliged by the Workers' Compensation Act 1927 ("the Act"), which was repealed long ago, to pay the costs of expenditure incurred in providing an injured worker with full-time attendant care.
On 28 May 1987 a tree feller named Stephen John Lowrie was catastrophically injured by accident in the course of his employment. His employer was Associated Forest Holdings Pty Ltd ("AFH"). That company was a subsidiary of North Limited. On the day of the accident the 1927 Act was still in force. Under s 34 of that Act, employers were required to maintain policies of insurance that indemnified them in respect of workers compensation and common law liabilities in respect of personal injuries. Under s 34(4) an exemption from that requirement could be granted to an adequately resourced employer. North Limited (then named North Broken Hill Holdings Limited) and AFH each had such an exemption. They and some other companies had entered into an agreement, inaccurately described as a "Reinsurance Agreement", with the Government Insurance Office of New South Wales ("the GIO") which provided cover for losses in excess of $1,000,000 per accident. The respondent, Gordian Runoff Limited, is responsible for the liabilities of the GIO pursuant to an order made under the Government Insurance Office (Privatisation) Act 1991 (NSW).
AFH, North and Mr Lowrie brought an action against Gordian, contending that the threshold of $1,000,000 had been passed, and claiming damages for breach of contract on the basis that Gordian had refused to pay monies that were due to them pursuant to the policy by way of indemnity in respect of sums paid to Mr Lowrie and for his benefit. That action failed. It was tried and dismissed by Tennent J: Associated Forest Holdings Pty Ltd v Gordian Runoff Limited [2014] TASSC 3. This is an appeal by AFH, North and Mr Lowrie from that judgment.
At the time of the trial Mr Lowrie was living in his own home, and payments were being made for him to be looked after by carers there 24 hours per day, seven days per week. Substantial amounts had been paid for the provision of such attendant care. At trial the appellants contended that those expenses were required to be paid pursuant to s 8A of the 1927 Act, and that they constituted part of the loss in respect of which an indemnity was available under the policy. Gordian contended that the 1927 Act did not impose an obligation to pay such expenses, and that the policy provided no cover in respect of them.
Another of the appellants' contentions at the trial was based on s 13 of the 1927 Act. That section permitted claims for compensation "and questions arising in connection therewith, or incidental thereto" to be settled by agreement. The appellants contended that there had been a settlement agreement within the scope of s 13 in relation to the expenses for Mr Lowrie's care, and that all sums paid and payable pursuant to that agreement constituted part of the loss in respect of which an indemnity was available under the policy. Gordian contended that there had been no such agreement.
It was common ground that, if the policy provided no cover in respect of the expenses for Mr Lowrie's attendant care, then the $1,000,000 threshold, which was subject to an indexation clause based on increases in average weekly earnings, had not been reached and that the action therefore would have to fail.
The learned trial judge reached conclusions to the following effect, each of which is challenged in this appeal:
- That the costs of Mr Lowrie's attendant care were not the costs of "medical services" for the purposes of the 1927 Act, and were therefore to be ignored when calculating the loss resulting from his accident for the purposes of the policy.
- That the costs of Mr Lowrie's attendant care were not costs payable pursuant to an agreement within the meaning of s 13 of the 1927 Act.
- That the indemnity under the policy was confined to payments required to be made under the 1927 Act and to common law liabilities.
- That the costs of Mr Lowrie's attendant care were not to be taken into account when calculating the loss covered by the policy on the basis that they were costs reasonably incurred to minimise loss.
Gordian contends that, even if the learned trial judge erred in reaching any of those four conclusions, this appeal should still fail, for two reasons:
- It contends that AFH stopped making payments in respect of Mr Lowrie in 1999, before the indexed threshold figure was reached; that all payments thereafter were made by other entities; and that the terms of the policy require those payments by other entities to be disregarded when determining whether the threshold figure has been reached, or when it was reached.
- It contends that the action brought by the appellants was not commenced until after the expiry of the applicable limitation period.
These two contentions were not addressed by the learned trial judge. It was agreed by the parties at the hearing of the appeal that, in the event that any of the appellants' grounds of appeal were successful, this Court would determine those matters on the material that was before her Honour. After the hearing of the appeal, counsel provided the Court with substantial written submissions as to those contentions.

[32]

There was evidence at the trial as follows. Mr Lowrie takes prescribed medication three times per day to control his behaviour and to prevent epileptic seizures. The medicine is delivered to his home from a pharmacy every Wednesday, accepted by the carer on duty, and given to him by carers. He is incapable of taking that medication without assistance. His carers also arrange appointments and take him to see his general practitioner and treating specialists. They change his incontinence pads, change his clothing, attend to his toilet needs, wash him, treat his skin, prepare his food, and supervise his eating so that he does not choke.
On the basis of those facts, the appellants contend that the care provided to Mr Lowrie amounts to "maintenance", and that that maintenance is necessary and reasonable for him to obtain medical services.
As a general rule, because workers compensation legislation is beneficial legislation, any doubt as to its meaning ought to be resolved by adopting an interpretation that is favourable to the class of persons intended to be benefited by the legislation, namely workers: McDermott v Owners of SS Tintoretto [1911] AC 35 at 46; Wilson v Wilson's Tile Works Pty Ltd (1960) 104 CLR 328 at 335; Bird v Commonwealth (1988) 165 CLR 1 at 9. The appellants rely on that proposition, and contend that par (e) of the definition of "medical service" ought to be given a wide interpretation, favourable to workers. However that proposition applies only when there is some doubt as to the meaning of a legislative provision, and cannot be relied upon to give a provision an overly strained meaning that is inconsistent with the text of the provision.
The text of par (e) strongly suggests that the word "maintenance" refers to meals and other means of subsistence. If a worker has to travel some distance to see a medical practitioner, he or she might have to spend money on fares, petrol, accommodation, food and drink. The mention of maintenance in the context of "the cost to a worker of any fares, travelling expenses, and maintenance necessarily and reasonably incurred by him in obtaining any medical service" strongly suggests that a wider interpretation of the word, extending to cover assistance with daily living, would be inappropriate.
When it was first enacted, the 1927 Act did not include s 8A or the definition of "medical service". Clause 5(1) of the Schedule to the Act originally provided:

[42]

The appellants contend that an agreement within the scope of s 13(1) was made on or about 23 May 1997 between Mr Lowrie's mother and a representative of AFH named Bob MacAulay to the effect that, if Mr Lowrie went to live in a unit in Wynyard, AFH would pay for attendant care to be provided to him in that unit, and would do so in consideration of him paying for the unit.
The learned trial judge took the view that s 13(1) applied only to agreements for the settlement of claims for compensation, and not to agreements solely for the settlement of questions arising in connection with, or incidental to, claims for compensation. Since any agreement between the mother and Mr MacAulay did not relate to the entirety of Mr Lowrie's claim for compensation under the 1927 Act, her Honour held that there could not have been an agreement to which s 13(1) applied. Gordian contends that there was no error in that reasoning.
When the 1927 Act was in force, there were various sorts of disputes that could arise in relation to claims for compensation. There were disputes as to whether claimants were entitled to compensation at all. Such disputes sometimes involved questions as to whether claimants were employees or independent contractors, or whether injuries arose out of and in the course of their employment, or whether the claimants had been injured at all. There were also situations in which there was no dispute as to the existence of an entitlement to compensation, but the amount of compensation was disputed. And there were also disputes as to questions arising in connection with claims for compensation, or incidental to claims for compensation. For example, there could be a dispute as to what weekly amount a worker was entitled to receive by way of compensation. A resolution of that question would not entirely dispose of a worker's claim because questions might remain unresolved as to how long weekly payments were to continue, or what was payable by way of medical expenses. An interpretation of s 13(1) permitting connected and incidental questions to be settled by agreement, without there being a total and final settlement of every aspect of a worker's claim, would have a number of advantages. It would promote the purpose or object of the legislation, namely the provision of compensation for the benefit of injured workers. It would be consistent with the authorities as to workers compensation legislation being beneficial legislation, and the adoption of an interpretation favourable to the class of persons intended to be benefited thereby. It would facilitate settlements as an alternative to litigation. It would be consistent with the notion of freedom of contract.
Counsel for the appellants argued that the word "and" in its ordinary and natural meaning is not a disjunctive conjunction. That is to say, they argued to the effect that the words "claims for compensation ... and questions arising in connection therewith, or incidental thereto" referred to "claims including questions arising in connection therewith, or incidental thereto", not "claims and/or questions arising in connection therewith, or incidental thereto". I disagree. There is no reason for "and" not to be read as "and/or" in the context of s 13(1).
Counsel for the appellants relied on the judgment of Morris CJ in Hudson v Nuroo (1940) 35 Tas LR 120 as supporting the interpretation adopted by the learned trial judge, but the remarks of Morris CJ in that case were plainly inconsistent with such an interpretation. Those remarks were obiter. His Honour was asked to review an agreement whereby a worker's claims for weekly compensation and medical expenses were settled for £5. The worker wanted more money. She applied for the review of the agreement by which her whole claim was settled. At 122, Morris CJ made the following comments in relation to s 13:

[64]

If one were to ignore Article III and item 3 of the schedule, and to read Articles V, VI and VII together, one would have to conclude that the ultimate net loss, for the purpose of the indemnity under Article V, included all sums actually paid by the so-called Reinsured in respect of an employee's accident. But Article III and item 3 of the schedule seem to say that the classes of business and/or perils covered were limited to "self insurance ... in respect of Workers Compensation including employers [sic] common law liability". Does it follow that the loss covered by the indemnity clause, Article V, was limited to liabilities under the 1927 Act and at common law? Or did the indemnity cover all payments, or perhaps all payments reasonably made, in respect of an accident that gave rise to liabilities to pay compensation under the 1927 Act or to pay common law damages to an employee?
In my view, these questions can be resolved very simply by considering the words used by the parties. In the relevant provisions of the policy, the parties used the words "the sum actually paid", "loss" and "losses", but not "liability" or "liabilities". In the context of employers' liability insurance, "loss" is a wider term than "liability". An employer at the relevant time could have no liabilities in relation to a workplace accident other than a liability to pay compensation pursuant to the 1927 Act, a common law liability to pay damages, and a liability to pay costs if a court so ordered. However an employer could suffer financial losses in consequence of a workplace injury in other ways. For example, an employer could incur expense in investigating claims, assessing them, negotiating with a view to settling them, and defending court proceedings. Those sorts of expenses were recognised by the parties and expressly included in the definition of "ultimate net loss" in Article VII, where they used the words "... 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 the definition is wider than that. It provides that "The term 'ultimate net loss' shall mean the sum actually paid by the Reinsured in respect of any loss occurrence ...".
Sometimes it makes sense to spend some money in order to avoid having to spend a great deal more money. If, for example, an injured worker needed nursing services, and the required services could be adequately provided by a trained auxiliary nurse more cheaply than if they were provided by a registered nurse, then it would make sense to adopt the cheaper alternative. Under the 1927 Act, as I have observed, compensation was payable for services rendered by registered nurses. However no compensation was payable for nursing services provided, otherwise than in a hospital, by unregistered nurses. If an employer, acting reasonably, economised by spending money on the services of a nurse who was not a registered nurse, that expenditure could properly be regarded as a loss for the purposes of this policy.
The evidence at the trial established that the expenditure on attendant care services for Mr Lowrie was in a similar situation. But for the provision of attendant care services at the expense of his employer, it would have been necessary for him to be cared for in a hospital. The cost of the hospital services provided for his benefit would have exceeded the costs of attendant care. His employer would have been liable under the 1927 Act to pay the cost of his hospital services but, for the reasons stated above, there was and is no such liability in relation to the cost of attendant care. It must follow, for the purposes of the policy, that the money paid for his attendant care is to be regarded as part of the ultimate net loss suffered by the employer.
Counsel for Gordian presented a number of arguments against this interpretation of the provisions of the policy. First of all it was submitted that, because the policy used words appropriate to a policy of reinsurance, it followed that the GIO was not intended to have any greater liabilities than it would have had under a similarly worded policy of reinsurance, and that such liabilities would have been limited to liabilities to pay compensation under the 1927 Act and/or common law damages. I reject that submission. A policy of reinsurance could well provide cover in respect of losses and expenses other than the liabilities which s 34(1) of the 1927 Act required compulsory workers compensation insurance policies to cover.
It was argued that the description of the "Classes of Business Covered" in the policy schedule as "The Reinsured's self insurance fund in respect of Workers Compensation including employers [sic] common law liability" provided support for Gordian's suggested interpretation of the policy provisions. I reject that proposition. Although it may be inferred that the parties intended the policy to provide cover similar to that provided by a policy of reinsurance, there is no reason to infer that a policy of reinsurance would not have provided cover in respect of expenditure, reasonably incurred, for the purpose of avoiding a statutory liability for greater expenditure. The reference to the self-insurance fund was a reference to the activity in respect of which cover was provided, not to the perils or classes of expenditure in respect of which cover was provided.
Counsel for Gordian relied on the initials "WCA" in the heading of the policy document. In my view the heading of the policy adds no strength to Gordian's arguments. Plainly the policy was intended to provide cover, subject to a large excess, in respect of accidents to which workers compensation legislation applied. It does not follow that it was not intended to provide cover in respect of a particular class of expenditure in connection with such accidents.
Counsel for Gordian relied on Article I of the policy, which related to the period during which cover was provided. It applied for a period of 12 months commencing at 4pm on 31 March 1987. The Article included this provision:

[66]

Clearly Article I adds nothing to Gordian's arguments as to the scope of the cover provided by the policy. The effect of this provision was that its applicability or inapplicability depended upon the date when an employee first became entitled to a benefit. Thus, for example, if an employee suffered an injury while the policy was in force, but did not become incapacitated or incur any expense in relation to that injury until after the 12 months expired, but later became entitled to compensation under the 1927 Act, then the policy would not apply in respect of that injury. In this case, the policy did apply because Mr Lowrie became entitled to compensation whilst the policy was in force. But that fact is irrelevant to the question whether the policy provided cover in respect of expenditure on services outside the scope of the 1927 Act.
Counsel for Gordian also relied on Article II of the policy, which related to the places covered by the policy. That Article said that it applied to "losses occurring in respect of cover issued by the Reinsured in the Territories stated in item 2 of the Schedule". That item read, "In accordance with the New South Wales & Tasmanian Workers Compensation Act [sic]". Mr Lowrie was injured in Tasmania. But that makes no difference to the question whether expenses outside the scope of the 1927 Act were covered by the policy.
Counsel for Gordian relied on Article XI of the policy. That Article specified circumstances in which the insured were required to notify the GIO of claims, and to the course to be taken in connection with the defence or settlement of large claims. It contains nothing of relevance to the question whether the policy covered expenditure outside the scope of the 1927 Act.
Counsel for Gordian relied on the words "in respect of" in the definition of "ultimate net loss" in Article VII. They relied on the High Court's decision in Workers' Compensation Board of Queensland v Technical Products Pty Ltd [1988] HCA 49; (1988) 165 CLR 642 as authority for the proposition that those words gather meaning from their context. I am sure they do. This Court needs to consider the meaning of the words, "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 ...". The amounts paid by AFH for Mr Lowrie's attendant care must surely form part of the sum actually paid by AFH in respect of Mr Lowrie's accident. There is no basis for concluding that that expenditure by AFH did not form part of "the sum actually paid by the Reinsured [AFH] in respect of any loss occurrence".
Gordian pleaded that Article XII of the policy restricted the cover granted by the policy to the 1927 Act; that any benefits outside the Act were to be covered at terms to be agreed; and that there was no agreement as to benefits outside that Act. The article in question read as follows:

[73]

As I have said, in Article VII of the policy, the term "ultimate net loss" was defined to mean "the sum actually paid by the Reinsured in respect of any loss occurrence ...". Counsel for Gordian submitted that none of the sums paid after 1999 by AFH were sums "actually paid" by AFH for the purposes of that definition, even if the entity making a payment did so as the agent of AFH, or was entitled to reimbursement from AFH. Counsel for the appellants argued that payments made in such circumstances would constitute sums "actually paid" by AFH for the purposes of Article VII.
In Charter Reinsurance Co Ltd v Fagan [1997] AC 313, the House of Lords considered the meaning of the words "actually paid" in three contracts of reinsurance. Their Lordships held unanimously that, in the policies to which that case related, an exposure to a liability to pay was all that was required, as distinct from payment in the strict sense, since the words in question were there "for the purpose of measurement": per Lord Mustill at 386.
However that case concerned transactions in the London reinsurance market, and this case does not. It is necessary to consider the text of the policy, and also "the surrounding circumstances known to the parties, and the purposes and object of the transaction": Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2014) 219 CLR 165 at [40]. When this policy was taken out in 1987, there was no reason for the GIO to be concerned about the mechanism by which the "Reinsured" arranged for payments to be made. If, as now suggested by counsel for Gordian, the policy applied only to payments made by an injured worker's employer, and not to payments made by a related entity which the employer was obliged to reimburse, then appropriate arrangements could very easily have been made so that the benefits conferred by the policy were not lost. Such a restriction on the availability of cover under the policy would therefore have been pointless. In contrast, the GIO might have had good reasons only to pay money out by way of reimbursement of past payments. Such an arrangement could have had advantages in relation to cash flow and interest charges. There might also have been advantages in the GIO not getting involved in the making of payments to their ultimate recipients. Rather than making multiple small payments to workers, doctors, hospitals and so forth, it could simply reimburse employers for payments already made. Such an arrangement is consistent with the ordinary meaning of the words "actually paid". In my view those words should be interpreted as referring to sums that have been paid, as distinct from sums that an insured entity has a liability to pay, or is proposing to pay. And they should be interpreted as including sums paid by an agent of a "Reinsured". Any other interpretation would be inconsistent with commercial common sense.

[74]

As at 1 January 2000, all the shares in AFH were owned by a company then named North Forest Products Limited. Its shares were in turn owned by North Limited and NBH Limited. The ultimate holding company of all those entities was Rio Tinto Limited. It had another subsidiary named Rio Tinto Services Limited which provided financial services to companies in the Rio Tinto group.
There was uncontroversial evidence at trial that AFH's bank account was closed in late 1999 or early 2000. I infer that it was because of that closure that North Forest Products Limited started to make the payments relating to Mr Lowrie on 1 January 2000 in place of AFH.
Evidence was given at the trial by a Mr Butt, who was employed as an accountant during the relevant years, first by North Forest Products Limited and subsequently by Gunns Limited. He gave uncontroversial evidence to the effect that payments made in respect of the liabilities of AFH were initially the subject of inter-company loan account transactions, but that a decision was made to replace that arrangement by a series of management charges, whereby AFH would make "all encompassing" payments to its parent company. There was no evidence as to precisely when the system of management charges was introduced. I infer from Mr Butt's evidence that it was some time between 1 January 2000, when North Forest Products Limited commenced making payments, and 19 March 2001, that being the date of an agreement by which Gunns Limited agreed to purchase from North Limited and NBH Limited all the shares in North Forest Products Limited.
The share sale agreement contained clauses relating to liabilities arising from Mr Lowrie's injury, but treated such liabilities as liabilities of North Forest Products Limited, not AFH. By cl 15.1, North Limited agreed to indemnify North Forest Products Limited against any liability incurred or sustained by Gunns arising from Mr Lowrie's injury. The existence of the GIO policy was acknowledged. The parties to the agreement envisaged that North Limited could require the GIO to make payments pursuant to the policy. Gunns agreed that North Forest Products Limited would take action in good faith and with due diligence at the direction and expense of North Limited in relation to Mr Lowrie's workers compensation matter. The vendor companies agreed to indemnify Gunns against liability in respect of such action. Neither the GIO, nor Gordian, nor any other entity replacing the GIO, was a party to that agreement.
The provisions relating to Mr Lowrie's expenses appear to have been affected by a misconception. AFH was Mr Lowrie's employer. North Limited was not. The learned trial judge made a finding that, while North Limited was a "Reinsured" under the policy, it had no claim arising against Gordian under the policy, either in its own right or pursuant to the share sale agreement. That finding has not been challenged in the grounds of appeal.
It appears from exhibits tendered at the trial that the share sale transaction was completed on or about 29 May 2001. As from 30 May 2001, North Forest Products Limited was renamed Gunns Forest Products Limited, and was controlled by Gunns Limited, its sole shareholder.
There was uncontroversial evidence at the trial that after the sale to Gunns, and until 30 April 2002, the following arrangements were in place in relation to expenditure for the benefit of Mr Lowrie:
- Gunns Forest Products Limited would make the payments.
- That company would then send an invoice to Rio Tinto Services Limited, which would reimburse it.
- Rio Tinto Services Limited would then invoice North Limited, which would reimburse it.
- Management charges continued to be paid by AFH to Gunns Forest Products Limited. There is no evidence as to whether or not those management charges continued to contain any component relating to expenditure for the benefit of Mr Lowrie. There is no reason why they should have contained any such component, since Gunns Forest Products Limited was being fully reimbursed by Rio Tinto Services Limited in respect of that expenditure.
The evidence establishes that Gunns Forest Products Limited ceased to operate a bank account. That appears to explain why Gunns Limited started to make the payments for the benefit of Mr Lowrie as from 1 May 2002. In other respects, the financial arrangements did not change at that time. After making payments, Gunns Limited invoiced Rio Tinto Services Limited, which reimbursed it, invoiced North Limited, and obtained reimbursement from North Limited.
On 30 November 2012, a new arrangement was agreed to. By then receivers, managers and administrators had been appointed in relation to Gunns Limited, Gunns Forest Products Limited, and AFH. It was agreed that North Limited would fund Mr Lowrie's future care costs and conduct the action against Gordian. The agreement provided for payments to be made to AFH if the action was successful, but AFH did not promise to bear any expenses in relation to Mr Lowrie after the making of that agreement.
With effect from the next day, 1 December 2012, Rio Tinto Services Limited commenced paying Mr Lowrie's expenses. I infer that it did so on behalf of North Limited, not AFH.
Prior to the introduction of the payment of all encompassing management charges by AFH, it is clear that the payments by North Forest Products Limited were made by it as an agent of AFH, and that it was reimbursed, or entitled to be reimbursed, by AFH. It follows that the payments made at that stage were, for the purposes of the policy, sums "actually paid" by AFH.
The evidence as to the arrangement that existed after AFH commenced paying management charges is very vague. At its strongest, that evidence might be taken to establish that the management charges contained identifiable components relating to Mr Lowrie's expenses, but there was no evidence as to whether the management charges exceeded, did not exceed, or bore any relationship at all to Mr Lowrie's expenses. However I infer that, whether AFH was getting a good deal, a fair deal, or a bad deal, North Forest Products Limited was still paying Mr Lowrie's expenses as its agent until the completion of the sale of shares to Gunns. It follows that, from the commencement of the management charge arrangement until the completion of the share sale, the sums paid by North Forest Products Limited for the benefit of Mr Lowrie were, for the purposes of the policy, sums "actually paid" by AFH.
However I think the position became entirely different once the share sale was completed at the end of May 2002. Thereafter the burden of the expenditure for Mr Lowrie's benefit was ultimately borne by North Limited, a member of the Rio Tinto group of companies, not AFH, which had become a member of the Gunns group of companies. See [83] above. It seems surprising that such an arrangement was made.
The arrangement made on 30 November 2012 did not significantly change the situation. The burden of the expenditure for the benefit of Mr Lowrie was thereafter ultimately borne by a member of the Rio Tinto group of companies, not AFH. It follows that, since the completion of the share sale on or about 29 May 2001, none of the payments relating to Mr Lowrie have constituted sums "actually paid" by AFH for the purposes of the policy.

[75]

As I have said, no money was payable pursuant to the policy until the sums paid by the so-called reinsured exceeded a threshold of $1,000,000, that figure being subject to indexation. Actuarial evidence at the trial established that, if the attendant care expenses were within the scope of the policy, the indexed threshold figure was exceeded in or about May 2000. The limitation period for an action founded on a contract is six years from the date on which the cause of action accrued: Limitation Act 1974, s 4(1)(a). AFH did not commence its action against Gordian until 18 August 2010. North and Mr Lowrie were added as plaintiffs on 30 January 2013. Gordian contends that, if any of the appellants has a cause of action in contract, then that cause of action accrued in 2000 and became statute barred in 2006, before the writ was issued.
The appellants contend that no cause of action arose until Gordian denied liability, and that it first denied liability on 24 March 2005. They contend that any causes of action were merely contingent until that time.
Counsel for the appellants relied on the High Court's decision in Wardley Australia Limited v Western Australia [1992] HCA 55; (1992) 175 CLR 514, particularly on comments made by Mason CJ, Dawson, Gaudron and McHugh JJ at 530-531. However that case was concerned with a cause of action for damages in respect of misleading and deceptive conduct under the provisions of the Trade Practices Act 1974 (Cth). Such a cause of action was not complete until damage was suffered. The High Court held that when a person enters into a contract as a result of misleading and deceptive conduct, and the suffering of damage is no more than a possibility at the time of the making of the contract, then no cause of action accrues until damage is actually suffered. The passage relied on at 530-531 involved a review of English decisions about contracts entered into when plaintiffs are induced to do so by negligent misrepresentations. Wardley is plainly distinguishable because it did not concern an action for damages for breach of contract. The suffering of damage is not a prerequisite to the accrual of a cause of action for breach of contract: Luna Park (NSW) Limited v Tramways Advertising Pty Ltd [1938] HCA 66; (1938) 61 CLR 286.
The fundamental question raised by the appellants' contentions in relation to the limitation issue is whether a demand for payment or a refusal to pay was a prerequisite to the accrual of a cause of action based on this particular insurance contract. We were referred to the decision of Giles J in Penrith City Council v Government Insurance Office of New South Wales (1991) 24 NSWLR 564, but that case is also distinguishable because it concerned a different factual situation. A claim against the Penrith City Council was made in court proceedings by a party who sought damages for the wrongful lodgement of a caveat and for negligent misrepresentation. The council was insured by the GIO. In 1983 it gave the GIO notice of the claim, but the GIO advised that it would not provide indemnity. The claim was settled by the claimant and the council in 1990. Giles J held that no breach of contract occurred until the insurer failed to do what was required of it, and that it was not required to do anything prior to the settlement of the claim. This case is different because, if Gordian had an enforceable obligation to pay money by way of indemnity as alleged, any such obligation arose in or about May 2000, more than six years before the issue of the first writ.
In Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415; (2000) 23 WAR 159, the Full Court of the Supreme Court of Western Australia considered whether a cause of action against an insurer accrued at the time when it became liable to pay money pursuant to a policy, or whether no such cause of action accrued until a demand for payment was made. That case concerned a policy of personal accident insurance. The insured was entitled to a lump sum payment upon becoming totally and permanently disabled. That occurred no later than 30 August 1988. He did not commence proceedings until 27 August 1998. He contended that his cause of action did not accrue until the insurer rejected his claim by a letter dated 30 April 1993. The Full Court held that, on a proper construction of the policy, liability was not dependent on the insured making a claim, and that the insured's cause of action therefore accrued at the time when he suffered total permanent disablement. For present purposes, the critical point is that liability was not dependent upon making a claim. Pidgeon J reviewed the relevant authorities at [79]-[93] and concluded at [94]:

[78]

The policy considered by the Full Court in that case required the insured to give notice of any event in respect of which a claim was to be made, but did not say that the giving of that notice was a condition precedent to the bringing of an action. Similarly, the policy with which we are concerned required the "Reinsured" to give notice of any claim or claims likely to exceed the $1,000,000 threshold, and to advise the GIO of all claims involving brain damage, spinal injury or paraplegia, and of accidents resulting or likely to result in the death of two or more persons. Like the policy considered by the Full Court in Cigna, it did not make the giving of notice a condition precedent to the bringing of an action. In the light of the Full Court's decision in Cigna, it is clear that a cause of action in contract accrued to AFH as soon as the payments made in respect of Mr Lowrie's accident passed the indexed threshold figure in or about May 2000.
Gordian therefore has a good limitation defence, but it is not as simple as that. The policy in this case required payments to be made from time to time, perhaps for the rest of Mr Lowrie's life. A new payment was required every time money was paid out in circumstances entitling AFH to an indemnity. In my view a new cause of action arose every time the GIO or its successors became liable to pay an additional sum by way of indemnity. For limitation purposes, the situation is akin to that which exists when a lease requires periodical payments of rent. A new cause of action arises every time a periodical payment becomes payable and is not paid: Archbold v Scully [1861] EngR 510; (1861) 9 HL Cas 360; 11 ER 769.
It follows that Gordian has a good limitation defence against AFH's claim, but only in respect of payments made by AFH prior to 18 August 2004 - six years before the issue of AFH's writ. Since I have concluded that AFH was entitled to be indemnified pursuant to the policy only in respect of payments from about May 2000, when the threshold figure was reached, until about 29 May 2001, when the share transfer transaction was completed, it follows that all of AFH's causes of action are statute barred.

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Judgment (84 paragraphs)

Associated Forest Holdings Pty Ltd v Gordian Runoff Limited [2015] TASFC 6 (9 June 2015)

Parties

Legislation Cited (1)

Cases Cited (11)